TRUST AGREEMENT
THIS AGREEMENT ("Trust Agreement") is made and entered into as of
this 1st day of January, 2002 by and among American Capitol Insurance
Company, a Texas corporation with its principal office in Houston, Texas
(the "Grantor") and Republic-Vanguard Life Insurance Company, a Texas
Corporation with its principal office in Dallas, Texas (the
"Beneficiary"), and JPMorgan Chase Bank, a New York State bank with
offices in Houston, Texas (the "Trustee"), as trustee and custodian for
the benefit of the Beneficiary.
WHEREAS, the Beneficiary has assumed certain rights, liabilities,
and obligations of the Grantor under a certain agreement entitled
"Reinsurance Agreement" entered into by the Beneficiary and the Grantor
and dated January 1, 1998, (herein referred to as the "Reinsurance
Agreement"), a copy of which is attached hereto as Exhibit A, pursuant
to which the Grantor ceded, and the Beneficiary agreed to reinsure,
certain insurance liabilities of the Grantor in respect to life
insurance policies which had been assumed or reinsured by the Grantor
and identified in the Reinsurance Agreement (herein referred to as the
"Policies"); and
WHEREAS, it was the purpose and intent of such Reinsurance
Agreement that the Grantor would receive credit as an asset or as a
deduction from liability for the reinsurance of insurance reserves ceded
to the Beneficiary under the Reinsurance Agreement; and
WHEREAS, at the inception of the Reinsurance Agreement, Grantor
paid to Beneficiary a certain amount equal to the "Required Reserve"
(hereinafter defined) at that time which has been held by the
Beneficiary as a segregated asset in a segregated asset account as
provided in the Reinsurance Agreement; and
WHEREAS, the parties hereto amended the Reinsurance Agreement by
entering into an Amendment of Reinsurance Agreement (referred to herein
as the "Amendment," and which Amendment and Reinsurance Agreement are
collectively referred to herein as the "Amended Reinsurance Agreement"),
a copy of which Amendment is attached hereto as Exhibit B; and
WHEREAS, the Grantor has agreed to establish a Trust (hereinafter
defined) under this Trust Agreement, for the sole use and benefit of the
Beneficiary, subject to the terms and conditions hereof; and
WHEREAS, pursuant to the Amended Reinsurance Agreement the
Beneficiary agreed to transfer the segregated assets (as modified in
accordance with the Amended Reinsurance Agreement) to the Grantor by
paying same into the Trust to be held in trust for the benefit of the
Beneficiary under this Trust Agreement; and
WHEREAS, the Grantor and the Beneficiary desire the services of a
trustee to supervise and manage in an independent, professional manner
the assets deposited into the Trust and any and all income accumulations
thereon and to provide related custodial services for securities in
which such assets are from time to time invested, all for the benefit of
the Beneficiary; and
WHEREAS, the Trustee is willing to provide such services in
accordance with the terms hereof and for the consideration herein
stated;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the Beneficiary has transferred, or shall transfer, as the case
may be, to the Trustee on behalf of the Grantor the assets that are
listed in Exhibit C attached hereto, receipt of which shall be
acknowledged by the Trustee in writing when received, to be held by the
Trustee in trust ("Trust") for the uses and purposes and upon the terms
and conditions set forth in this Trust Agreement, and the parties hereby
agree that the foregoing recitations are correct and further agree as
follows:
1. Deposit of Assets
1.1 The Trustee shall accept for deposit into the Trust assets
consisting only of the assets identified and set forth in Exhibit C
attached hereto, and other assets which may hereafter be deposited into
the Trust ("Trust Assets"). All of the Trust Assets shall be maintained
in pledge for the Beneficiary in the Trust separate and distinct from all
other assets, and the Grantor hereby grants a first priority security
interest in all assets now or hereafter held in the Trust in favor of the
Beneficiary to secure the obligations of the Grantor under the Amended
Reinsurance Agreement. This Agreement constitutes a pledge and security
agreement for such purpose. The Beneficiary shall have all the rights,
remedies and powers accorded to a secured party under applicable law
including without limitation the Uniform Commercial Code.
1.2 All assets deposited in the Trust shall be held in trust for
the benefit of the Beneficiary and valued according to "Book Value"
(hereinafter defined). The total Book Value of the assets in the Trust
shall at all times be not less than the "Required Reserve" which shall be
calculated as of the end of each month and shall be the amount equal to:
(i) gross policy "reserves" (as said term is defined in Section 10.01 of
the Amended Reinsurance Agreement), (ii) less reserves ceded to other
reinsurers who either reinsured the Policies as of the date of the
Amended Reinsurance Agreement or who are approved in writing by the
Beneficiary, (iii) less an amount equal to loans against the Policies (as
defined in Section 3.08 of the Amended Reinsurance Agreement) as of the
end of such month for which this calculation is being made, (iv) less the
amount of the due and deferred asset (net of advance premium liability)
as of the end of such month for which this calculation is being made, (v)
and less the absolute value of the negative experience refund
carryforward (as defined in Section C.02 of the Amended Reinsurance
Agreement). Initially the Trust Assets shall consist of the assets
transferred to the Trust by the Beneficiary as provided herein, and shall
be deemed to have been transferred on January 1, 2002. The "Book Value"
of the Trust Assets as of January 1, 2002 shall be the book value of the
assets that are transferred to the Trust by the Beneficiary that existed
on the books of the Beneficiary at December 31, 2001, and thereafter said
Book Value of an asset shall mean the value at which such asset is
required to be valued for purposes of page 3 of the Annual Statement as
promulgated by the Texas Department of Insurance for use by life
insurance companies in filing their financial reports. The Trustee
shall invest and reinvest the deposit in the Fidelity Prime #76 Money
Market Fund, unless otherwise instructed in writing by Grantor. The
Trustee or any of its affiliates may receive compensation with respect to
any investment directed hereunder. It is expressly agreed and understood
by the parties hereto that Trustee shall not in any way whatsoever be
liable for losses on any investments, including, but not limited to,
losses from market risks due to premature liquidation or resulting from
other actions taken pursuant to this Trust Agreement.
1.3. In this Section 1.3, reference is made to Article V (entitled
"Accounting and Settlement") of the Amended Reinsurance Agreement, which
sets forth required reporting and settlements involving the Grantor
(referred to therein as the Company) and the Beneficiary (referred to
therein as the Reinsurer), except that in accordance with Section 3(e)
of the Amendment such reporting shall be made by the Grantor to the
Beneficiary and the Trustee, and the monthly cash settlements shall be
made between the Grantor and the Trustee (in lieu of the Beneficiary),
as follows: Within ten (10) working days after the end of each calendar
month the Grantor and the Trustee shall make a monthly cash settlement
as follows: the Grantor shall pay to the Trustee, for the use and
benefit of the Trust, the amounts that Grantor is required to pay to the
Beneficiary under Section 5.03 (a) - (e) of the Amended Reinsurance
Agreement, and the Trustee shall pay to the Grantor the amounts that the
Beneficiary is required to pay to the Grantor pursuant to Section 5.03
(a) - (h) of the Amended Reinsurance Agreement. In addition to the
amounts to be paid by the Grantor and the Beneficiary to each other as
set forth in Section 5.03 as aforesaid, the following shall be included
in the monthly cash settlement: (a) the Grantor shall pay to the
Beneficiary each month the Net Investment Income (as defined in Section
10.16 of the Amended Reinsurance Agreement) on the Trust Assets by
leaving same in the Trust for the benefit of the Beneficiary as it is
collected by the Trustee, and (b) on behalf of the Beneficiary, the
Trustee shall pay to the Grantor each month the amount of the investment
expenses calculated pursuant to Section 10.16 of the Amended Reinsurance
Agreement, which will include the fees incurred by Grantor for an
outside investment management service, subject to the limitation set
forth in said Section 10.16. (In the event the "net" amount of any such
monthly cash settlement constitutes a payment by the Trustee to the
Grantor, such payment shall be deemed a permitted withdrawal from the
Trust by the Grantor, and the payment by the Trustee to the Grantor
pursuant thereto shall be made within the time permitted in said Article
V of the Amended Reinsurance Agreement, irrespective of any objection by
the Beneficiary, and the Trustee shall incur no liability on account of
such payment.) Section 5.01 and Section 5.04 - Section 5.06 shall apply
to the monthly cash settlements between the Grantor and the Trustee. In
lieu of Section 5.02 of the Reinsurance Agreement which was deleted by
the Amendment, within ten (10) working days after the end of each
calendar month the Grantor shall submit to the Beneficiary and the
Trustee the monthly accounting report which shall include the Required
Reserve, the book value of the Trust Assets after adjusting for the net
change effected by the aforesaid monthly cash settlement, and the
resulting excess or deficiency of the Required Reserve over the book
value of the Trust Assets. In the event that the Required Reserve
determined by the Grantor exceeds the book value of the Trust Assets
held in the Trust, the Beneficiary shall forward to the Trustee, within
twelve (12) working days after the close of such month, sufficient cash
to increase the book value of the Trust Assets in the Trust to at least
the amount of the Required Reserve. The Trustee shall have no liability
or responsibility at any time to determine the book value of the Trust
Assets held in the Trust or the Required Reserve.
1.4 Upon the reasonable request of the Beneficiary, the Grantor
agrees (at Beneficiary's expense) to execute and deliver all such
assignments, certificates, financing statements or other documents and to
give further assurances and to do all other acts and things as the
Beneficiary may reasonably request to perfect the Beneficiary's security
interest in the assets in the Trust, to assure the first priority status
of such perfected security interest, or to protect, enforce, or otherwise
effect the Beneficiary's rights and remedies hereunder.
2. Withdrawal of Assets
2.1 i) The Beneficiary shall have the right to withdraw assets
(which assets may be specified by the Beneficiary in an advance notice to
the Grantor as herein provided) from the Trust at any time and from time
to time, subject only to ten (10) days prior notice from the Beneficiary
to the Grantor and the Trustee, in the event and to the extent any
payment is made by the Beneficiary on account of any liability or
obligation reinsured by the Beneficiary under the Amended Reinsurance
Agreement (provided, however, that prior payment by the Beneficiary is
not required if the Beneficiary is insolvent) and which the Grantor, for
a period of ten (10) days after notice by the Beneficiary, has failed or
refused to repay (or pay in the event the Beneficiary is insolvent) and
discharge. In addition to the foregoing, and not by way of illustration
or limitation, the Beneficiary agrees and covenants that it shall
withdraw assets from the Trust only after 5:00 p.m. Central Standard time
on the tenth (10) calendar day following notice to the Grantor and the
Trustee and only to satisfy amounts due to the Beneficiary (with no
diminution due to insolvency of either the Beneficiary or the Grantor)
for the following purposes only:
(a) to pay or reimburse the Beneficiary for the Grantor's share under
the Amended Reinsurance Agreement regarding any benefits and claims
paid by the Beneficiary but not recovered; or
(b) to make payment to the Beneficiary of any amounts held in the Trust
to the extent that the book value of assets in the Trust exceeds the
Required Reserve based on the monthly accounting report rendered by
the Grantor to the Beneficiary and the Trustee pursuant to Section
1.3 hereof (in respect to which the Trustee shall have no liability
or responsibility at any time to determine the book value of the
Trust Assets or the amount of the Required Reserve, or whether the
Required Reserve equals, is less than, or exceeds the book value of
Trust Assets held in the Trust).
(c) beginning immediately after the retrocession described in Section
C.01 of Schedule C of the Amended Reinsurance Agreement, to make payment
to the Beneficiary of its 15% share of the positive amount produced by
the experience refund as provided in Section C.01 of Schedule C of
the Amended Reinsurance Agreement.
The Grantor agrees and covenants that it shall withdraw assets from the
Trust only after 5:00 p.m. Central Standard Time on the tenth (10th)
calendar day following notice to the Beneficiary and the Trustee and only
to satisfy amounts due to the Grantor (with no diminution due to the
insolvency of either the Beneficiary or the Grantor) only for the
purpose, beginning immediately after the retrocession described in
Section C.01 of Schedule C of the Amended Reinsurance Agreement, to make
payment to the Grantor of its 85% share of the positive amount produced
by the experience refund as provided in Section C.01 of Schedule C of the
Amended Reinsurance Agreement. The notices referred to in this paragraph
(i) shall specify the basis for such withdrawal. No other statement or
document need be presented to the Trustee with the notice and the Trustee
shall transfer assets to the Beneficiary or Grantor, as the case may be,
in compliance with such notice; however, the Beneficiary and the Grantor
shall be required to acknowledge receipt of assets withdrawn from the
Trust. Notwithstanding anything to the contrary contained in this Section
2.1, neither the Beneficiary nor the Grantor shall be entitled to
withdraw assets from the Trust that (A) would reduce the book value of
assets in the Trust below the Required Reserve (in respect to which the
Trustee shall have no liability or responsibility at any time to
determine the book value of the Trust Assets or the amount of the
Required Reserve, or whether the Required Reserve equals, is less than,
or exceeds the book value of the Trust Assets held in the Trust), or (B)
if either the Beneficiary or the Grantor gives notice to the other and
the Trustee of its objection to such withdrawal by the Beneficiary or the
Grantor, as the case may be, and to the Trustee prior to 5:00 p.m.
Central Standard time on the tenth (10) calendar day following delivery
to the Grantor of Beneficiary's advance notice of intent to withdraw as
aforesaid, delivery to the Beneficiary of Grantor's advance notice of
intent to withdraw as aforesaid, as the case may be. In such case, the
Trustee shall continue to hold the assets that are the subject of such
notice of withdrawal pending the resolution of the objection as provided
in Section 2.1 (ii). The Grantor's notice of objection, or the
Beneficiary's notice of objection, as the case may be, shall set forth in
detail the basis for its objection.
(ii) If the Grantor gives notice to the Beneficiary, or if the
Beneficiary gives notice to the Grantor, of its objection to the proposed
withdrawal from the Trust as aforesaid, the Grantor or the Beneficiary
shall have the right, exercised by notice to the other party, to require
arbitration of whether the other party was entitled to make the
withdrawal which is in question from the Trust. The arbitration shall be
conducted pursuant to Article VII of the Amended Reinsurance Agreement.
If the finding of the arbitrators is that the party seeking to make a
withdrawal was entitled to make a withdrawal pursuant to Section 2.1(i),
then the Trustee shall pay to such party the amount of the subject
withdrawal (including the earnings thereon from the date of such notice
of withdrawal previously given by the Beneficiary to the date of payment
of same by the Trustee to the Beneficiary). If the finding of the
arbitrators is that the party seeking to make a withdrawal was not
entitled to make a withdrawal pursuant to Section 2.1(i), then the
Trustee shall continue to hold such assets in the Trust under the terms
of this Agreement. The judgment of the arbitration shall be final and
binding and may be enforced by any court having jurisdiction.
(iii) The Beneficiary's or the Grantor's notice of withdrawal may
designate a third party to whom the assets shall be transferred or it may
direct the Trustee to sell, assign, convey or otherwise transfer the
assets for the account of the Beneficiary or Grantor, as the case may be.
(iv) Upon notice by the Beneficiary or the Grantor under this
Section 2.1 (and in the absence of receiving a notice from the
Beneficiary or the Grantor, as the case may be, of its objection to such
withdrawal as aforesaid), the Trustee shall immediately take any and all
steps necessary to transfer absolutely and unequivocally all right, title
and interest in the assets held in the Trust to the Grantor or the
Beneficiary or its designee, as the case may be, and deliver physical
custody thereof to the Beneficiary or its designee, as the case may be.
(v) In the absence of receiving a notice from the Grantor or the
Beneficiary of its objection to such withdrawal as aforesaid, the Trustee
shall rely solely on notice from the Beneficiary or the Grantor, as the
case may be, and shall have no responsibility to determine whether the
circumstances described in Section 2.1(i) have occurred.
2.2 The Trustee shall not be liable to the Grantor or to the
Beneficiary or to their successors or any creditors thereto or to any
other party having an interest in the Trust for any transfer of assets
pursuant to the Beneficiary's or Grantor's notice made in accordance
with this Section 2.
2.3 The Trustee shall notify Grantor and the Beneficiary within ten
(10) days following each withdrawal from the Trust.
3. Holding and Transfer of Assets
3.1 The Trustee, or its custodian, as the case may be, shall
receive assets and hold all assets in the Trust in a secure location
segregated in trust for the benefit of the Beneficiary.
3.2 The Beneficiary, prior to depositing assets with the Trustee,
shall execute and deliver to the Trustee special powers of attorney,
assignments or endorsements in b1ank of all assets in the Trust which
require assignment in order to effect a transfer thereof, in such form
that the Trustee may request in order to negotiate any such assets
without further consent or signature from the Beneficiary or any other
Person. It is the duty of the Trustee to determine that the requirements
of this Section 3.2 have been complied with by the Beneficiary.
3.3 The Grantor and the Beneficiary agree that when the Trustee is
instructed to deliver an asset of the Trust against payment, it may
deliver said asset before receiving payment and that, as a matter of
bookkeeping convenience, the Trustee may credit the Trust with
anticipated proceeds of sales prior to actual receipt of final payment.
All credits to the Trust of the anticipated proceeds of sales and
redemptions of assets of the Trust shall be conditional upon receipt by
the Trustee or final payment and may be reversed to the extent final
payment is not received.
4. Records and Statement of Account
4.1 The Trustee shall prepare and submit to the Grantor and to the
Beneficiary a statement of all assets in the Trust upon its inception and
within five (5) days after the end of each calendar month thereafter
until this Trust Agreement is terminated.
4.2 The Trustee shall keep full and complete records of the
administration of the Trust created hereby. The Grantor and/or the
Beneficiary, upon reasonable notice to the Trustee, may examine such
records at any time during business hours by any person or persons duly
authorized in writing by the Grantor or the Beneficiary, as the case may
be.
5. Investment of Assets
5.1 The Grantor and/or its duly appointed third party asset manager
shall have the sole right, power and authority to manage the Trust Assets
("management right") with respect to the purchase, sale, retention,
substitution, or reinvestment of all such Trust Assets, and to make
appropriate contractual arrangements with a custodial agent to act for
the Trustee as provided in Section 5.2 below. All such assets acquired by
the Trust as a result of the exercise of said management right shall, at
the time of such acquisition, comply with the investment guidelines set
forth in Exhibit 5.1 attached hereto. The Beneficiary shall have the
right to object to any asset acquired by the exercise of said management
right by giving notice thereof to the Grantor and the Trustee within five
(5) working days after the Beneficiary first receives a report revealing
any asset so acquired. Any such notice of objection by the Beneficiary
shall state the reason for such objection and shall not be unreasonably
made, but if the Beneficiary elects to challenge any such asset, the
Grantor shall replace such asset with an asset acceptable to the
Beneficiary, which acceptance shall not be unreasonably withheld. The
proceeds of any sale, exchange or substitution of any Trust Asset shall
belong to and be paid to the Trustee for the use and benefit of the
Trust. The then current market value of any asset so acquired shall not
be less than the then current market value of the asset or assets
withdrawn.
5.2 The Grantor may make appropriate contractual arrangements with
a custodial agent to act for the Trustee for the purpose of safekeeping
the Trust Assets, to collect income therefrom as the same becomes due and
payable in respect of the Trust Assets, and otherwise to perform services
that are customarily performed by such custodians, provided that the
custodian shall by contract be accountable to the Trustee and pay to the
Trustee such income amounts as the same are collected by the custodian,
and further provided that the Trustee and the Beneficiary shall first
approve the custodian selected, and the contractual terms between the
Trustee and the custodian. The Grantor, Beneficiary or the Trustee shall
have the right to require that the Grantor make arrangements to replace
the custodian then serving, which right to approve the replacement
custodian so selected by the Grantor and said contractural terms shall
not be unreasonably exercised. Such replacement custodian shall likewise
be subject to prior approval by the Beneficiary and the Trustee, along
with the contractual terms between the Trustee and the custodian, which
right shall not be unreasonably exercised. When a custodian is serving as
herein provided, the Trustee shall not be responsible for the actions or
omissions of the custodian, and shall receive the income or other
payments from the custodian for deposit in the Trust, and shall accept
any reports and accounting provided by the custodian to the Trustee
without any duty as to the completeness or accuracy of any such payments,
accounting or reports. The Beneficiary shall be solely responsible for
paying the fees and expenses due to the custodian. The initial custodian
shall be JPMorgan Chase Bank who is acting as custodian as well as
trustee hereunder, which is hereby approved by the Grantor and
Beneficiary. The statement of fees and other expenses to be incurred by
the Beneficiary as a result of the trustee and custodian services as set
forth herein are set forth in the "Schedule of Fees" attached hereto as
Schedule I.
5.3 The Trustee shall have no liability or responsibility at any
time in respect to any exercise of said management right, the performance
of the custodian, the determination of the book value of any asset so
acquired, or the book value of the Trust Assets, or the amount of the
Required Reserve, or whether the Required Reserve equals, is less than,
or exceeds the book value of the Trust Assets held in the Trust.
6. Appointment and Compensation of Trustee
6.1 The Trustee hereby agrees to act as trustee and, in the absence
of a duly appointed custodian, as custodian and bailee for the benefit of
the Beneficiary pursuant to the provisions of this Trust Agreement. If a
custodian is duly appointed and serving as custodian as provided herein,
the Trustee shall have no responsibility for the custodial
responsibilities that have been delegated to such custodian. For any
period during which no custodian is appointed and serving, the Trustee
shall assume such custodial duties and shall be entitled to receive from
the Beneficiary as an expense the usual and customary fees and expenses
that would be charged by a custodian for performing such services.
6.2 The Beneficiary hereby agrees to pay the Trustee reasonable
compensation as may be agreed from time to time between the Beneficiary
and the Trustee for the services to be rendered hereunder as shown on
Schedule I hereto and will pay or reimburse the Trustee upon request for
all expenses, disbursements and advances, including custodial fees,
reasonable attorney's fees, incurred or made by it in connection with
carrying out its duties hereunder and costs and expenses of defending
itself against any claim of liability except a claim made by the Trustee.
The Grantor has no responsibility to the Trustee for the payment of any
of the Trustee's fees or expenses arising under this Trust Agreement and
the Beneficiary hereby agrees to indemnify the Grantor and to hold the
Grantor harmless with respect thereto. The Trustee shall be entitled to
deduct its compensation and expenses from payments of dividends, interest
and other income in respect of the Assets held in the Trust Account prior
to the deposit thereof to the Income Account, and in the event of any
such deduction by the Trustee, the Beneficiary shall immediately pay into
the Trust an amount of cash equal to any such deduction made by the
Trustee.
6.3 The Trustee is entitled to receive its compensation and other
expenses from the Trust assets prior to the payment thereof to the
Beneficiary or the Grantor, and any such compensation and other expenses
so received by the Trustee shall be immediately reimbursed by the
Beneficiary.
7. Trustee's Reliance and Liability
7.1 The Trustee shall be liable only for the administration (and,
in the absence of a duly appointed and serving custodian as herein
provided, the safekeeping) of the Trust assets and income therefrom in
accordance with the provisions of this Trust Agreement, and the duties
and responsibilities of the Trustee hereunder shall be determined solely
by the express provisions of this Trust Agreement and no other or further
duties or responsibilities shall be implied, and the Trustee shal1 not be
liable or responsible for any action taken by it in good faith and
believed by it to be authorized and within the rights or powers conferred
upon it by this Trust Agreement unless the same be caused by its own
negligence, willful misconduct, breach of fiduciary duty or lack of good
faith. Grantor and Beneficiary hereby jointly and severally agree to
indemnify Trustee, its officers, directors, partners, employees and agents
(each herein called an "Indemnified Party") against, and to hold each
Indemnified Party harmless from, any and all expenses, including, without
limitation, attorneys' fees and court costs, losses, costs, damages and
claims, including, but not limited to, costs of investigation, litigation
and arbitration, tax liability and loss on investments suffered or
incurred by any Indemnified Party in connection with or arising from or
out of this Trust Agreement, except such acts or omissions as may result
from the willful misconduct or gross negligence of such Indemnified Party.
7.2 The Trustee shall be protected in acting upon any statement,
notice, resolution, request, consent, order, certificate, report,
appraisal, opinion, telegram, cablegram, radiogram, letter or other paper
or document reasonably believed by the Trustee to be genuine and which
purports to have been signed, sent or presented by the custodian or a
party hereto.
7.3 Except when otherwise expressly provided herein, whenever in
the administration of the Trust the Trustee shall deem it necessary or
desirable that a matter prescribed herein be proved or established prior
to taking, suffering or omitting any action hereunder, such matter may be
deemed by the Trustee to be conclusively proved and established by
statement or certificate purported to be signed by or on behalf of the
Beneficiary and by the Grantor and delivered to the Trustee and said
statement or certificate shall be full warrant to the Trustee for any
action taken, suffered or omitted by it on the good faith thereof, but
this provision is not intended to imply any duty or responsibility on the
part or the Trustee beyond what is specifically provided for in this
Trust Agreement.
7.4 Except when otherwise expressly provided herein, any statement,
certificate, notice, request, consent, approval, or other instrument to
be delivered or furnished by the Grantor or the Beneficiary shall be
sufficiently executed if it purports to be executed in the name of the
respective party by an ("Authorized Signer") as shown on Schedule II
hereto of Grantor or Beneficiary or by such other agent or agents,
provided notice of designation of such agency shall be filed with the
Trustee by the Grantor or the Beneficiary, as the case may be.
7.5 The Trustee may consult with counsel of its own choice. The
opinion of said counsel shall be full and complete authority and
protection for the Trustee with respect to any action taken suffered or
omitted by it in good faith and in accordance with the written opinion of
said counsel.
7.6 The Trustee shall be entitled to obtain a receipt from an
appropriate person with respect to any particular action the Trustee
takes hereunder, if the Trustee requests such a receipt.
8. Resignation or Removal of Trustee
8.1 The Trustee and any successor Trustee shall be a bank or trust
company that is a member of the Federal Reserve System and shall not be a
parent, subsidiary or Affiliate of the Grantor or the Beneficiary.
8.2 The Trustee may resign at any time by notice to the Beneficiary
and the Grantor, with or without cause, or the Grantor and the
Beneficiary may jointly remove the Trustee, with or without cause, at any
time, such resignation or removal to be effective upon the date specified
in said notice no less than the thirtieth (30th) day following the date
said notice is received by the Beneficiary and the Grantor (in the case
of resignation by the Trustee) or by the Trustee (in the case of removal
by the Beneficiary and the Trustee); provided, however, Trustee's sole
responsibility after such 30-day notice period expires shall be to hold
the Assets (without any obligation to reinvest the same) and to deliver
the same to a designated substitute escrow agent, if any, or in accordance
with the directions of a final order or judgment of a court of competent
jurisdiction, at which time of delivery Trustees obligations hereunder
shall cease and terminate.
8.3 In the case of the resignation or removal of the Trustee, the
Trustee shall have the right to a settlement of its accounts. Upon
completion of such accounting, the Trustee shall transfer, pay and
deliver to the successor trustee the assets held in and comprising the
Trust as they may be then constituted. The payment to the Trustee of its
fees and expenses shall be exclusively the responsibility of the
Beneficiary and shall not be a condition precedent to the transfer,
payment or delivery or the assets held in and comprising the Trust as
they may then be constituted to the successor trustee as described in the
preceding sentence.
8.4 Any corporation or banking association into which the Trustee
in its individual capacity may be merged or converted or with which it
may be consolidated, resulting from any merger, conversion, or
consolidation to which the Trustee in its individual capacity shall be a
party, or any corporation or banking association succeeding to all or
substantially all of the assets or the corporate trust business of the
Trustee in its individual capacity, shall be the successor Trustee under
this Trust Agreement without further act, provided that such successor
shall comply with the standards required of the Trustee hereunder. If
such successor shall not comply with such standards, then the Trustee or
its unqualified successor, shall be required to give notice of
resignation to the Beneficiary and the Grantor pursuant to Section 8.2
hereof no later than the effective date of such merger, consolidation,
conversion or succession, and the resignation shall become effective
pursuant to Section 8.2 hereof.
9. Effective Date
9.1 This Trust Agreement and the Trust created hereby shall become
effective when this Trust Agreement has been duly executed and delivered
by the parties hereto, each to the others, whereupon it shall be
effective as of January 1, 2002 (the "Effective Date").
10. Termination
10.1 Subject to Section 10.2 hereof, the Trust created hereby
shall continue until terminated as provided in Section 9 of the Amended
Reinsurance Agreement upon notice by the Grantor to the Trustee. The
Trustee shall be entitled to rely solely on the notice by the Grantor to
the Trustee described in this Section 10.1. Upon receipt of notice of
termination from the Grantor, the Trustee shall, at least 30 days prior
to termination of the Trust, deliver a copy thereof via certified mail
to the Beneficiary and to the Reinsurance Division of the Texas
Department of Insurance.
10.2 The Trust shall terminate on such date no less than thirty
(30) days nor more than forty-five (45) days after the Trustee has
received notice from the Grantor of the Beneficiary's intention to
terminate the Trust and this Trust Agreement pursuant to Section 10.1.
10.3 Upon termination of the Trust and this Trust Agreement the
Trustee shall transfer, pay over and deliver to the Grantor, all of the
assets then held in the Trust. If the Trustee makes such payment,
transfer and delivery as set forth above, such actions shall constitute
a full and sufficient discharge and release of the Trustee in respect
thereof, subject to a final accounting. Prior to making any payments
under this Section 10.3 the Trustee may deduct its fees and expenses
from any undistributed income attributable to moneys held in the Trust,
and such amount, if any, shall thereby become a debt owed by the
Beneficiary to the Grantor, payable immediately.
10.4 Within thirty (30) days after the termination of this Trust
Agreement, the Trustee
shall deliver to the Beneficiary and to the Grantor a signed affidavit
of an officer of the Trustee stating that all assets have been
distributed from the Trust and stating the assets so distributed and the
party or parties to whom they were so distributed.
11. Governing Law
11.1 The provisions of and the validity and construction of this
Trust Agreement and any amendments or supplements hereto shall be subject
to and governed by the laws of the State of Texas.
11.2 In the event the parties conduct an arbitration hearing
hereunder, such hearing shall be convened in Houston, Texas. All other
disputes between the Beneficiary and the Grantor arising hereunder shall
be handled consistent with the applicable terms set forth in the this
Trust Agreement.
12. Entire Agreement
12.1 This Trust Agreement, including the Exhibits and Schedules
attached hereto, constitutes the entire agreement of the parties hereto
with respect to the Trust, and this Trust Agreement is not subject to any
conditions or qualifications not expressed herein.
13. Severability
13.1 In case any provision of this Trust Agreement shall be held
invalid, illegal or unenforceable for any reason, such invalidity,
illegality or unenforceability shall not affect or impair the remaining
parts of this Trust Agreement; and this Trust Agreement shall be
construed and enforced as if such provision had never been inserted
herein, but shall be construed so as to confer the rights and obligations
established hereby on the parties hereto in accordance with the actual
intent of such parties.
14. Binding Agreement; No Third Party Beneficiaries
14.1 This Trust Agreement shall be binding upon the successors and
assigns of the parties hereto, present and future.
14.2 No person or entity (including without limitation any person
or entity claiming to be a third party beneficiary) other than the
parties to this Trust Agreement shall have any rights or remedies
hereunder.
15. Captions
15.1 The captions in this Trust Agreement are for convenience only
and shall be accorded no weight in the construction of this Trust
Agreement.
16. Counterparts
16.1 This Trust Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and the
counterparts shall constitute but one and the same instrument, which
shall be sufficiently evidenced by any one counterpart. All signatures of
the parties to this Trust Agreement may be transmitted by facsimile, and
such facsimile will, for all purposes, be deemed to be the original
signature of such party whose signature it reproduces, and will be
binding upon such party.
17. Notices
17.1 Any notice or other communication required or permitted to be
given under this Trust Agreement by any party hereto to any other party
hereto shall be considered as properly given if, and only if, it is in
writing, signed by an Authorized Signer of the party giving the notice,
and (a) delivered against receipt therefor, (b) mailed by registered or
certified mail, return receipt requested and postage prepaid or (c) sent
by telefax machine, in each case to the address or telefax number, as the
case may be, set forth below:
If to the Trustee, to: JPMorgan Chase Bank
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxxxxx
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
If to the Grantor, to: American Capitol Insurance Company
00000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: President
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
If to the Beneficiary, to: Republic-Vanguard Life Insurance Company
00000 Xxxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Chief Executive Office
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
or at such other address as any of the above may have furnished to the
other parties hereto in writing by notice given in the manner herein
provided. Any notice or other communication given hereunder shall be
effective when delivered to or received at the specified address.
17.2 Except as may otherwise be provided herein, all reports and
instructions to the Trustee shall be given in writing (including by
telex, telecopy or other electronic transmission). The Grantor and the
Beneficiary shall each furnish the Trustee with a certificate indicating
those persons who are authorized to give the Trustee instructions
hereunder and with specimen signatures of such persons as shown on
Schedule II hereto. The Trustee is authorized to rely on any such
instructions reasonably believed by it to have been sent or given by an
authorized person.
18. Amendment
18.1 This Trust Agreement and the Trust created hereby may be
amended or modified, in whole or in part, as may be agreed upon by the
Grantor and the Beneficiary and evidenced by a writing executed and
delivered by both of such parties; provided, however, that any such
amendment or modification which shall increase the Trustee's duties or
responsibilities hereunder shall not be effective without the Trustee's
written consent, which consent shall not be unreasonably withheld.
19. Definitions
19.1 Capitalized terms not otherwise defined herein shall have the
meanings assigned to them in the Amended Reinsurance Agreement.
20. Arbitration
20.1 THIS TRUST AGREEMENT CONTAINS BINDING ARBITRATION PROVISIONS
WHICH MAY BE ENFORCED BY THE PARTIES HERETO.
21.2 In the event funds transfer instructions are given (other than
in writing at the time of execution of the Agreement), whether in
writing, by telefax, or otherwise, the Trustee is authorized to seek
confirmation of such instructions by telephone call-back to the person or
person designated on Schedule III hereto, and the Trustee may rely upon
the confirmations of anyone purporting to be the person or persons so
designated. The persons and telephone numbers for call-backs may be
changed only in writing actually received and acknowledged by the
Trustee. The parties to this Trust Agreement acknowledge that such
security procedure is commercially reasonable. It is understood that the
Trustee and the beneficiary's bank in any funds transfer may rely solely
upon any account numbers or similar identifying number provided by either
of the other parties hereto to identify (i) the beneficiary, (ii) the
beneficiary's bank, or (iii) an intermediary bank. The Trustee may apply
any of the escrowed funds for any payment order it executes using any
such identifying number, even where its use may result in a person other
than the beneficiary being paid, or the transfer of funds to a bank other
than the beneficiary's bank or an intermediary bank, designated.
IN WITNESS WHEREOF, the Grantor, the Beneficiary and the Trustee
have caused these presents to be executed and delivered to each other by
their duly authorized officers.
AMERICAN CAPITOL INSURANCE COMPANY, Grantor
By: /s/Xxxx X. Xxxxxxx
--------------------------------
Xxxx X. Xxxxxxx, President
Tax Id No.: 00-0000000
--------------------------
REPUBLIC-VANGUARD LIFE INSURANCE COMPANY, Beneficiary
By: /s/Xxxx Xxxxxx
--------------------------------------
Xxxx Xxxxxx, Chief Executive Officer
Tax Id No.: 00-0000000
-------------------------------
JPMORGAN CHASE BANK, Trustee
By: ---------------------------------------
