EXHIBIT 10.15
SCOTTISH ANNUITY & LIFE INSURANCE COMPANY
(CAYMAN) LTD.
XXXXXX HOUSE, 113 SOUTH CHURCH STREET
XXXXXX TOWN, GRAND CAYMAN
CAYMAN ISLANDS, BRITISH WEST INDIES
October 23, 1998
Westport Partners (Bermuda), Ltd.
X/X Xxxxxxxx-Xxxxx & Xxxxx
X.X. Xxx XX 0000
Hamilton, HMFX Bermuda
Gentlemen:
This letter will serve as our agreement regarding your company's serving as
a non-exclusive distribution partner for variable life insurance products of
Scottish Annuity & Life Insurance Company (Cayman) Ltd. ("Scottish"), a wholly-
owned subsidiary of Scottish Annuity & Life Holdings, Ltd. ("Scottish
Holdings").
Your company agrees to serve as a non-exclusive distribution source for
variable life insurance products offered by Scottish. All activities conducted
by your company pursuant to this agreement will be conducted outside the United
States and will be required to be conducted in compliance with the marketing and
distribution guidelines of Scottish and Scottish Holdings, which in general
prohibit the conduct of any insurance related activities in the United States or
the payment of compensation by Scottish or Scottish Holdings to any person with
respect to such conduct in the United States.
In consideration of your company's activities, Scottish Holdings will issue
up to any aggregate of 750,000 warrants to purchase 750,000 Ordinary Shares of
Scottish Holdings at an exercise price equal to the initial price per share to
the public (expected to be $15.00) in the proposed initial public offering of
such shares by Scottish Holdings (the "Warrants"). The warrants will be
exercisable for a period of ten years from the date of such initial public
offering (the "IPO") and shall contain the same terms as are contained in the
currently outstanding Series A Warrants and Series B Warrants of Scottish
Holdings.
The Warrants will be issued annually in accordance with the following
formula:
. As soon as practical following January 1, 2000 and each January 1
thereafter to and including January 1, 2003, the parties will
determine the annualized "Gross Profit" (as defined below) to Scottish
for all variable life insurance policies issued by Scottish in the 12
months preceding calendar year to customers identified and referred by
your company to Scottish (the "Business Production"). For purposes of
this agreement, the period from the date of the IPO to January 1,
2000, shall be deemed a "calendar year".
. An amount equal to 25% of such Gross Profit shall then be divided by
the "Warrant Value" (as defined below) to determine the number of
Warrants that will be issued to your company.
. The term "Gross Profit" shall mean the annualized first year revenues
determined in accordance with generally accepted accounting principles
applicable in the United States and attributable to the Business
Production for any period, less an amount equal to the amortization
for such period of any deferred acquisition costs payable by Scottish
(but not including loads or other expenses charged to the customer) to
any persons other than your company for the identification or referral
of such Business Production.
. The term "Warrant Value" shall mean (i) $2.50 plus (ii) an amount
equal to the positive difference between the exercise price of the
Warrants and the market price of the Ordinary Shares on the applicable
anniversary date divided by (iii) 15.
. By way of example, if the annualized Gross Profit for Business
Production for a year is $350,000 and the market price of the Ordinary
Shares at the applicable anniversary date is $20, then the Warrant
Value will equal $7.50 divided by 15 (equals $0.50) and the number of
Warrants that will vest will be 25% of $350,000 ($87,500) divided by
the Warrant Value (equals 175,000 Warrants).
This agreement will terminate and all Warrants not vested will be returned
to Scottish Holdings on January 1, 2003. In addition, this agreement will
terminate on January 1, 2001 if the Business Production for the prior two
calendar years does not have an annualized average Gross Profit of at least
$200,000 per year, and will also terminate on January 1, 2002 if the average
annualized Gross Profit for the preceding two calendar years is less than
$250,000; provided, however, that Warrants will vest for the calendar year
preceding such termination to the extent required by the above formula for the
annualized Gross Profits for the Business Production for such year.
In the event any third party is identified by your company to Scottish as
being involved with your company in identifying and referring potential Business
Production, and thereafter that third party seeks to identify and refer
customers directly to Scottish without involving your company, any variable
insurance policies issued by Scottish to such customers shall nevertheless be
deemed Business Production within the meaning of our agreement.
Your company will provide or arrange for the administration of any variable
life insurance policies issued by Scottish as part of the Business Production if
requested to do so by Scottish. Such administration shall be on terms no less
favorable to Scottish than those your company or its affiliates make available
to other insurance companies for similar products.
In the event the Business Production over the term of the arrangement is
such that all or substantially all of the Warrants vest, then it is the current
intention of Scottish and Scottish Holdings to renew the arrangement upon
similar terms with new warrants based on the then market price of the Ordinary
Shares, although no agreements can be made to do so at this time.
If this letter sets forth our agreement, please so acknowledge in the space
provided below.
Sincerely,
Scottish Annuity & Life Insurance
Agreed: Company (Cayman), Ltd.
Scottish Annuity & Life Holdings, Ltd.
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By: By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
President and CEO
