MASTER ASSET PURCHASE AGREEMENT BY AND AMONG SCOTTISH RE GROUP LIMITED, SCOTTISH HOLDINGS, INC., SCOTTISH RE (U.S.), INC, SCOTTISH RE LIFE (BERMUDA) LIMITED, SCOTTISH RE (DUBLIN) LIMITED, AND HANNOVER LIFE REASSURANCE COMPANY OF AMERICA, HANNOVER LIFE...

Exhibit 10.19

EXECUTION VERSION

MASTER ASSET PURCHASE AGREEMENT

BY AND AMONG

SCOTTISH RE GROUP LIMITED,

SCOTTISH HOLDINGS, INC.,

SCOTTISH RE (U.S.), INC,

SCOTTISH RE LIFE (BERMUDA) LIMITED,

SCOTTISH RE (DUBLIN) LIMITED,

AND

HANNOVER LIFE REASSURANCE COMPANY OF AMERICA,

HANNOVER LIFE REASSURANCE (IRELAND) LIMITED,

AND

SECURITY LIFE OF DENVER INSURANCE COMPANY,

SECURITY LIFE OF DENVER INTERNATIONAL LIMITED

DATED AS OF JANUARY 22, 2009

TABLE OF CONTENTS



ARTICLE I DEFINITIONS		2

Section 1.1.	Definitions	2

ARTICLE II PURCHASE AND SALE		15

Section 2.1.	Purchase and Sale	15

Section 2.2.	Payments at Closing	16

Section 2.3.	Additional Payment with respect to Novations of Certain ING Retrocession Agreements	19

Section 2.4.	Closing	19

Section 2.5.	Deliveries by the Sellers	20

Section 2.6.	Deliveries by the Buyers	21

Section 2.7.	Deliveries by the ING Companies	22

Section 2.8.	Post Effective Time Amounts Received and Paid	23

Section 2.9.	Consents; Administration Pending Consent	25

Section 2.10.	Treatment of Sale and Reinsurance Transactions	27

Section 2.11.	Additional Post Closing Payments	27

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLERS TO THE BUYERS		27

Section 3.1.	Organization, Standing and Corporate Power	28

Section 3.2.	Authority	28

Section 3.3.	Noncontravention; Consents	28

Section 3.4.	Financial Statements	29

Section 3.5.	The Model	29

Section 3.6.	Absence of Certain Changes or Events	29

Section 3.7.	Benefit Plans	30

Section 3.8.	Compliance with Applicable Laws	30

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Section 3.9.	Litigation	30

Section 3.10.	Reserves	31

Section 3.11.	Contracts	31

Section 3.12.	Acquired Assets; Investment Assets	33

Section 3.13.	Intellectual Property	34

Section 3.14.	Regulatory Matters	36

Section 3.15.	Brokers	36

Section 3.16.	Properties; Absence of Liens	36

Section 3.17.	No Other Representations or Warranties	37

Section 3.18.	Sufficiency of Assets	38

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLERS TO THE ING COMPANIES		38

Section 4.1.	Organization, Standing and Corporate Power	38

Section 4.2.	Authority	38

Section 4.3.	Noncontravention; Consents	39

Section 4.4.	Litigation	39

ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BUYERS		39

Section 5.1.	Organization, Standing and Corporate Power	40

Section 5.2.	Authority	40

Section 5.3.	Noncontravention; Consents	40

Section 5.4.	Litigation	41

Section 5.5.	Brokers	41

Section 5.6.	No Additional Representations	41

ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE ING COMPANIES		42

Section 6.1.	Organization, Standing and Corporate Power	42

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Section 6.2.	Authority	42

Section 6.3.	Noncontravention; Consents	43

Section 6.4.	Litigation	43

Section 6.5.	Brokers	43

Section 6.6.	Investment Assets	44

ARTICLE VII COVENANTS		44

Section 7.1.	Conduct of Business of the Sellers	44

Section 7.2.	Access to Information; Confidentiality	45

Section 7.3.	Consents, Approvals and Filings	46

Section 7.4.	Public Announcements	47

Section 7.5.	Further Assurances	47

Section 7.6.	Notification of Certain Matters	47

Section 7.7.	Insurance	48

Section 7.8.	Certain Collateral Facilities	48

Section 7.9.	ING Facility and Related Issues	49

Section 7.10.	IBNR Trust Agreements	51

Section 7.11.	Retrocession Agreements	52

Section 7.12.	Employee Matters	53

Section 7.13.	Expenses	55

Section 7.14.	Books and Records	55

Section 7.15.	Noncompetition; Nonsolicitation	55

Section 7.16.	Financial Statements	57

Section 7.17.	Use of Names	56

Section 7.18.	Data Room Documents	57

Section 7.19.	Leases	57

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Section 7.20.	Restricted Payments	58

Section 7.21.	Commercially Reasonable Efforts	58

Section 7.22.	Post Closing Transfers of Assets	58

Section 7.23.	Industry Risk Retrocession Agreements	58

Section 7.24.	OM Treaties	58

ARTICLE VIII CONDITIONS PRECEDENT		59

Section 8.1.	Conditions to Each Party’s Obligations	59

Section 8.2.	Conditions to Obligations of the Buyers	60

Section 8.3.	Conditions to Obligations of the Sellers	61

Section 8.4.	Conditions to Obligations of the ING Companies	62

ARTICLE IX TERMINATION PRIOR TO CLOSING		64

Section 9.1.	Termination of Agreement	64

Section 9.2.	Procedure Upon Termination and Consequences	64

ARTICLE X INDEMNIFICATION		65

Section 10.1.	Survival	65

Section 10.2.	Indemnification by the Parent	65

Section 10.3.	Indemnification by the Buyer	66

Section 10.4.	Certain Limitations on Indemnification	66

Section 10.5.	Third Party Claim Procedures	67

Section 10.6.	Additional Indemnification Obligations	68

ARTICLE XI GENERAL PROVISIONS		70

Section 11.1.	Fees and Expenses	70

Section 11.2.	Notices	70

Section 11.3.	Interpretation	72

Section 11.4.	Entire Agreement; No Third Party Beneficiaries	72

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Section 11.5.	Governing Law	72

Section 11.6.	Assignment	72

Section 11.7.	Amendments	73

Section 11.8.	Enforcement	73

Section 11.9.	Severability	74

Section 11.10.	Counterparts	74

Section 11.11.	Waiver of Jury Trial	74

Section 11.12.	No Conflict	75

Section 11.13.	Bulk Sales	75


EXHIBIT A-1		- Acquired Assets
EXHIBIT A-2		- Excluded IP Assets
EXHIBIT B		- Assumed Liabilities
EXHIBIT C-1		- ING Administrative Services Agreement
EXHIBIT C-2		- ING-Ballantyne Administrative Services Agreement
EXHIBIT D		- ING Asset Management Services Agreement
EXHIBIT E		- ING Retrocession Agreements
EXHIBIT F		- Scottish Re Administrative Services Agreement
EXHIBIT G		- Scottish Retrocession Agreements
EXHIBIT H		- SLD-HLRUS Reinsurance Agreements
EXHIBIT I		- SLD-SRUS Reinsurance Agreements
EXHIBIT J		- SLDI-HLRI Reinsurance Agreement
EXHIBIT K		- SLDI-SRLB Reinsurance Agreements
EXHIBIT L		- Transition Services Agreement
EXHIBIT M		- Flow of Funds Matrix
EXHIBIT N-1		- List of Investment Assets
EXHIBIT N-2		- List of Ballantyne Recapture Assets
EXHIBIT O		- Retrocession Net Amount at Risk
EXHIBIT P		- ▇▇▇▇ of Sale, Assignment and Assumption
EXHIBIT Q		- Other Required Transfer Documents
EXHIBIT R		- Amendments to UHRL Transaction Documents
EXHIBIT S		- Amendments to Indemnity Reinsurance Agreement between SLD and Ballantyne
EXHIBIT T-1		- Amended SLD-SLDI Agreement
EXHIBIT T-2		- Amended SLD-SLDI Agreement

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MASTER ASSET PURCHASE AGREEMENT, dated as of January 22, 2009 (this “Agreement”), by and among SCOTTISH RE GROUP LIMITED, an exempted company limited by shares organized and existing under the laws of the Cayman Islands (the “Parent”), SCOTTISH HOLDINGS, INC., a Delaware corporation (“SHI”), SCOTTISH RE (U.S.), INC., a Delaware insurance company (“SRUS”), SCOTTISH RE LIFE (BERMUDA) LIMITED, a Bermuda insurance company (“SRLB”), SCOTTISH RE (DUBLIN) LIMITED, an Ireland insurance company, (“SRD,” and together with the Parent, SHI, SRUS and SRLB each a “Seller” and collectively the “Sellers”), and HANNOVER LIFE REASSURANCE COMPANY OF AMERICA, a Florida insurance company (“HLRUS”) and HANNOVER LIFE REASSURANCE (IRELAND) LIMITED, an Ireland insurance company (“HLRI,” and together with HLRUS, the “Buyers”), and SECURITY LIFE OF DENVER INSURANCE COMPANY, a Colorado insurance company (“SLD”), and SECURITY LIFE OF DENVER INTERNATIONAL LIMITED, a Bermuda insurance company (“SLDI,” and together with SLD, the “ING Companies”).

WHEREAS, the Parent, SRUS and SRLB acquired the individual life reinsurance business of the ING Companies (the “ING Block”) pursuant to an Asset Purchase Agreement dated October 17, 2004, as amended (the “ING APA”);

WHEREAS, the ING Insurance Contracts (as defined below) are ceded as of the date hereof on an indemnity reinsurance basis from the ING Companies to SRUS and SRLB;

WHEREAS, on the terms and subject to the conditions set forth herein, the Buyers, the Sellers and the ING Companies desire for the Buyers to replace SRUS and SRLB as the reinsurers of the ING Insurance Contracts in a transaction whereby the ING Companies shall (a) recapture the Recaptured Liabilities (as defined below) from SRUS and SRLB, and (b) immediately cede the Reinsured Liabilities (as defined below) to the Buyers on an indemnity reinsurance basis;

WHEREAS, on the terms and subject to the conditions set forth herein, the Sellers and the ING Companies shall novate the UHRL Liabilities to the Buyers pursuant to the UHRL Novation Documents;

WHEREAS, simultaneously with the consummation of the recapture and reinsurance transactions, the Sellers wish to sell, transfer, assign and delegate to the Buyers, and the Buyers shall purchase, accept and assume from the Sellers certain assets and liabilities, which are primarily used with or relate to the administration of the ING Insurance Contracts;

WHEREAS, simultaneously with the consummation of the recapture and reinsurance transactions, the parties wish for the Buyers to enter into certain administrative servicing arrangements with the Sellers and the ING Companies;

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the parties agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1. Definitions. For purposes of this Agreement, the following terms shall have the respective meanings set forth below:

“2005 Inuring Reinsurance Advance” means an amount equal to (i) the quota share of the business ceded by SLD under the Ballantyne Reinsurance Agreement as of December 31, 2008 multiplied by (ii) $5,905,000.

“Acquired Asset Value” shall mean $18,000,000.

“Acquired Assets” means each of the assets described on Exhibit A-1 hereto. Notwithstanding the foregoing or any omission on Exhibit A-1, the Acquired Assets include (a) all of the Sellers’ material assets relating to premium accounting, client data management, business support, treaty audits, external third party retrocession administration, claims and administration systems and furniture, fixtures and equipment relating to such operations, in each case in respect of the Sellers’ U.S. mortality risk reinsurance business which is known as “Traditional Solutions” and which includes the Reinsured Liabilities and (b) all Seller Intellectual Property relating to the administration of the Reinsured Liabilities or the provision of services pursuant to the Scottish Re Administrative Services Agreement, including the SAGE administrative system (including associated applications such as RADAR, ▇▇▇▇▇, ▇▇▇ and ReView), the SUMMIT pricing system, the ASCENT underwriting system, the Mortality Research Center, Documentum, Moses, CIC and QIS, any supporting software or infrastructure relating to these systems; provided that the Acquired Assets shall not include any Excluded IP Assets. For the avoidance of doubt, if an asset is listed on Exhibit A-1 and also is an Excluded Asset, only that portion of the asset to be retained by the Sellers pursuant to Exhibit A-2 shall be excluded from the Acquired Assets.

“Acquired Business” means the (a) the Acquired Assets, (b) the Assumed Liabilities and the reinsurance business conducted with respect thereto, but shall not mean, in any case, any Excluded Liabilities, (c) Premiums due to be paid on or after the Effective Time and prior to the Closing Date with respect to the ING Insurance Contracts, and (d) reinsurance recoverables with respect to the ING Insurance Contracts under the ING Retrocession Agreements and the Scottish Retrocession Agreements for losses incurred on or after the Effective Time and prior to the Closing Date.

“Affiliate” of any Person means: (i) with respect to any Seller, the Parent and each Subsidiary of the Parent, and (ii) with respect to any other Person, another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person.

“Agreement” shall have the meaning set forth in the introductory paragraph.

“Amended SLD-SLDI Agreements” means the SLD-SLDI Agreements, as amended at Closing to be substantially in the form of Exhibits T-1 and T-2 hereto.

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“Assessment Date” shall have the meaning set forth in Section 2.3(a).

“Assumed Liabilities” means (a) the Reinsured Liabilities, and (b) each of the liabilities and obligations set forth on Exhibit B hereto.

“Ballantyne” means Ballantyne Re plc.

“Ballantyne Q4 Recapture” means the recapture, if any, prior to the Closing by SLD of a quota share of the business ceded under the Ballantyne Reinsurance Agreement effective as of December 31, 2008.

“Ballantyne Q4 Recapture Adjustment” means the aggregate market value of the Ballantyne Recapture Assets as of the Closing Date.

“Ballantyne Recapture” shall have the meaning set forth in Section 7.9(f).

“Ballantyne Recapture Assets” shall have the meaning set forth in Section 2.2(d).

“Ballantyne Reinsurance Agreement” means the Amended and Restated Indemnity Reinsurance Agreement between SLD and Ballantyne, effective as of October 1, 2008, as amended from time to time.

“▇▇▇▇ of Sale, Assignment and Assumption” shall have the meaning set forth in Section 2.5(a)(i).

“Books and Records” shall mean all records (in any type of storage medium) in the possession or control of the Sellers with respect to the Acquired Business, including, without limitation, customer lists, sales records, records relating to regulatory matters, financial and accounting records, reinsurance records, administrative records, underwriting and/or pricing databases, and compliance records. For the avoidance of doubt, if any such records contain information which does not relate to the Acquired Business, such information shall not constitute “Books and Records.”

“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in the City of New York.

“Business Employee” means each Employee whose work primarily relates to the Acquired Business, which Persons are set forth on Section 1.1(a) of the Sellers Disclosure Letter.

“Buyer Indemnitees” shall have the meaning set forth in Section 10.2.

“Buyer Indicative Market Valuation List” shall have the meaning set forth in Section 2.2(c)(ii).

“Buyer Material Adverse Effect” means with respect to each of the Buyers, any event, change, circumstance or effect that individually or in the aggregate, is, or is reasonably likely to be, materially adverse to the ability of the Buyer to consummate the transactions contemplated by this Agreement or the other Transaction Documents.

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“Buyers” shall have the meaning set forth in the introductory paragraph.

“Buyers Disclosure Letter” shall have the meaning set forth in Article V.

“Buyers Facility” shall have the meaning set forth in Section 7.9(d).

“Change of Control of Parent” means the consummation of any transaction or series of transactions that result in the Parent no longer being under the control of one holder of the Investor Shares as of the date of this Agreement, or both such holders jointly.

“Charlotte Lease Amendments” shall have the meaning set forth in Section 7.19(b).

“Closing” shall have the meaning set forth in Section 2.4.

“Closing Date” shall have the meaning set forth in Section 2.4.

“Closing Payment Amount” shall mean $1,325,000,000 plus (i) the Interim Period Reinsurance Payments Adjustment plus (ii) the Interim Period Earnings Adjustment minus (iii) an amount equal to the accrued and unpaid interest as of and including the Closing Date on the Investment Assets transferred at Closing as contemplated by Section 2.2(c) plus (iv) the 2005 Inuring Reinsurance Advance plus (v) the Ballantyne Q4 Recapture Adjustment, minus (vi) the Lease Assignment Adjustment.

“COBRA” means Section 4980B of the Code and Title I, Subtitle B, Part 6 of ERISA.

“Code” means the United States Internal Revenue Code of 1986, as amended.

“Company Claims” shall have the meaning set forth in Section 7.7(a).

“Company Liabilities” shall have the meaning set forth in Section 7.7(a).

“Computer Programs” means (i) all computer programs, including all object code, code applications, databases, executables, copy books and all modules required to compile programs, (ii) all source code, programming notes, flow charts, descriptions and other materials used to design, plan, organize, develop, compile, support and maintain any of the foregoing, and (iii) all documentation, including operator manuals and training materials, relating to the foregoing.

“Confidentiality Agreement” means the confidentiality agreement entered into prior to the date hereof by the Buyer and the Parent in connection with the transactions contemplated hereby, as amended.

“Contracts” shall have the meaning set forth in Section 3.11(a).

“Copyrights” means all copyrightable works (including Computer Programs, website content, documentation and related items), whether or not published or registered, all copyrights (including the copyrights to any Computer Programs), mask works, derivative works thereof, and all applications, registrations, and renewals in connection therewith.

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“Core Intellectual Property” shall mean the SAGE administrative system (including associated applications such as RADAR, ▇▇▇▇▇, ▇▇▇ and ReView), the SUMMIT pricing system, the ASCENT underwriting system, the Mortality Research Center, Documentum, Moses, CIC and QIS, any supporting software or infrastructure relating to these systems; provided that the Core Intellectual Property shall not include any Excluded IP Assets. For the avoidance of doubt, if an asset is included in the Core Intellectual Property and is also an Excluded Asset, only that portion of the asset to be retained by the Sellers pursuant to Exhibit A-2 shall be excluded from the Core Intellectual Property.

“Covered Amount” shall have the meaning set forth in Section 7.9(b).

“Credit Event” means with respect to any security, (i) the occurrence of a “Bankruptcy” of the issuer of such security (as the term “Bankruptcy” is defined in the 2003 ISDA Credit Derivatives Definitions, published by the International Swaps and Derivatives Association, Inc., determined as if such issuer were a “Reference Entity”) or (ii) a downgrade in the rating of such security in effect on the date of this Agreement by either of ▇▇▇▇▇’▇ Investors Service, Inc. or Standard & Poor’s Ratings Group, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., from investment grade to non-investment grade.

“D&L” shall have the meaning set forth in Section 11.12.

“Data” means (i) all information that is stored or accessible using any computer, network, Computer Program or any combination thereof, and (ii) statistical data, compilations and analyses used or created to support business processes (including underwriting decisions, risk management, pricing and transaction processing) that is stored in or accessible using any computer, network, Computer Program or any combination thereof.

“Data Room” means the electronic data room created by the Sellers, and to which the Buyers have been given access in connection with the transactions contemplated by this Agreement, as supplemented by written correspondence (including documents provided therewith) from the Sellers, or any of their Affiliates or Representatives, to the Buyers, or any of their Representatives (including by electronic mail, facsimile transmission or through the facilities of the electronic data room).

“Database” means any electronic compilation of Data (including any documentation needed to run, modify or interpret the same).

“December SAP Statements” shall have the meaning set forth in Section 3.4.

“Denver Lease Assignment” shall have the meaning set forth in Section 7.19(a).

“Effective Time” means 12:01 a.m. New York time, on January 1, 2009.

“Employee” means each individual who immediately prior to the Closing is employed by the Sellers.

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“Employee Benefit Plan” means (a) each “employee benefit plan” (as defined in Section 3(3) of ERISA); (b) each deferred compensation, profit sharing, equity-based, and non-statutory unemployment scheme, plan, program, agreement, arrangement, commitment and/or practice for the benefit of Business Employees (wherever employed), and/or their dependents and beneficiaries; and (c) each bonus, incentive, fringe benefit (other than a fringe benefit described in Code Section 132(a)), salary continuation, accrued leave, vacation, sick pay, and sick leave plan, program, agreement, arrangement, commitment and/or practice for the benefit of any defined category of Business Employees (wherever employed) ten (10) or more in number, and/or their dependents and beneficiaries, other than any such plan, program, agreement, arrangement, commitment and/or practice the benefits of which do not exceed in fair market value two percent (2%) of each such Business Employee’s taxable compensation during the twelve (12) months immediately preceding the Closing Date.

“Employee Information” shall have the meaning set forth in Section 7.12(a).

“ERISA” means the United States Employee Retirement Income Security Act of 1974, as amended.

“Escrow Agent” shall have the meaning set forth in Section 2.3(b).

“Escrow Agreement” shall have the meaning set forth in Section 2.3(b).

“Escrow Funds” shall have the meaning set forth in Section 2.3(b).

“Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Exchange Act Report” means each publicly available form, report, schedule, statement and other document filed with or furnished to the United States Securities and Exchange Commission by the Parent pursuant to the Exchange Act prior to the date hereof (as such documents have since the time of their filing been amended prior to the date hereof).

“Excluded IP Assets” means the percentage of assets retained by the Sellers, to the extent that such assets are also transferred, in part, to the Buyers, as described in Exhibit A-2 hereto.

“Excluded Liabilities” means all liabilities or obligations of any character or nature (whether known or unknown, absolute or contingent, disclosed or undisclosed) of any of the Sellers that are not Assumed Liabilities, including the Retained Reinsurance Liabilities.

“Extra-Contractual Obligations” means all liabilities and obligations to any Person (including, without limitation, a Governmental Entity) arising out of or relating to ING Insurance Contracts (other than liabilities or obligations arising under the express terms and conditions of ING Insurance Contracts), including any liability for fines, penalties, forfeitures, punitive, special, exemplary or other form of extra-contractual damages, including all legal fees and expenses relating thereto, which liabilities or obligations arise from any act, error or omission, whether or not intentional, negligent, in bad faith or otherwise, relating to: (i) the administration of the ING Insurance Contracts; (ii) the investigation, defense, trial, settlement or handling of claims, benefits, or payments under the ING Insurance Contracts; or (iii) the failure to pay, the delay in payment, or errors in calculating or administering the payment of benefits or claims under or in connection with the ING Insurance Contracts.

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“Facility Collateral Change Amount” shall have the meaning set forth in Section 7.9(e).

“GAAP” means generally accepted accounting principles in the United States of America.

“Governmental Entity” shall have the meaning set forth in Section 3.3.

“HLRI” shall have the meaning set forth in the introductory paragraph.

“HLRUS” shall have the meaning set forth in the introductory paragraph.

“IBNR Trust Agreements” shall have the meaning set forth in Section 7.10(d).

“Indemnified Party” shall have the meaning set forth in Section 10.5.

“Indemnifying Party” shall have the meaning set forth in Section 10.5.

“Indemnity Cap” shall have the meaning set forth in Section 10.4(a)(ii).

“Industry Risk Retrocession Agreements” means, collectively, the Industry Risk Retrocession Agreement, dated as of December 31, 2004, by and between SLD and SRUS and the Industry Risk Retrocession Agreement, dated as of December 31, 2004, by and between SLD and SRLB.

“ING Administrative Services Agreement” means the administrative service agreement among HLRUS, SLD and SLDI to be entered into at Closing, substantially in the form of Exhibit C-1 hereto.

“ING APA” shall have the meaning set forth in the recitals.

“ING Asset Management Services Agreement” means the asset management services agreement between HLRUS and SLD to be entered into at Closing, substantially in the form of Exhibit D hereto.

“ING-Ballantyne Administrative Services Agreement” means the administrative services agreement (with respect to Ballantyne) among HLRUS and SLD to be entered into at Closing, substantially in the form of Exhibit C-2 hereto.

“ING Block” shall have the meaning set forth in the recitals.

“ING Companies” shall have the meaning set forth in the introductory paragraph.

“ING Companies Disclosure Letter” shall have the meaning set forth in Article VI.

“ING Companies Material Adverse Effect” means with respect to each of the ING Companies, any event, change, circumstance or effect that individually or in the aggregate, is, or is reasonably likely to be, materially adverse to the ability of either of the ING Companies to consummate the transactions contemplated by this Agreement or the other Transaction Documents.

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“ING Facility” shall have the meaning set forth in Section 7.9(a).

“ING Indemnitees” shall have the meaning set forth in Section 10.6(a).

“ING Insurance Contracts” means the life reinsurance contracts entered into by SLD or SLDI and covered immediately prior to the Effective Time under the SLD-SRUS Reinsurance Agreements and the SLDI-SRLB Reinsurance Agreements.

“ING Letter Agreement” means that certain letter agreement dated December 31, 2004 by and among ING America Insurance Holdings, Inc., the ING Companies, the Parent, SRUS and SRLB relating to certain matters under the ING APA.

“ING Retrocession Agreements” mean the retrocession pool agreements identified on Exhibit E hereto between SLD and/or SLDI, as cedants, and various third-party retrocessionaires.

“Insurance Regulator” shall have the meaning set forth in Section 3.4.

“Intellectual Property” means all intellectual property, including without limitation, all Computer Programs, Data and Databases, Patents, Trademarks, Copyrights and Trade Secrets, and the rights to ▇▇▇ for past, present and future infringement or misappropriation thereof.

“Interim Payments” shall have the meaning set forth in Section 2.8(a).

“Interim Period Earnings Adjustment” shall mean an amount equal to $187,993 per day from the Effective Time to and including the Closing Date.

“Interim Period Financial Statements” shall have the meaning set forth in Section 7.16.

“Interim Period Reinsurance Payments Adjustment” means an amount equal to the aggregate amount of the Interim Receipts minus the aggregate amount of the Interim Payments.

“Interim Receipts” shall have the meaning set forth in Section 2.8(a).

“Investment Assets” shall have the meaning set forth in Section 2.2(c)(i).

“Investor Shares” means the Convertible Cumulative Participating Preferred Shares issued by the Parent, and any securities issued in respect thereof or in exchange therefor.

“Knowledge” means the actual knowledge of (a) with respect to the Sellers, those Persons listed in Section 1.1(c) of the Sellers Disclosure Letter, (b) with respect to the Buyers, those Persons listed in Section 1.1(a) of the Buyers Disclosure Letter and (c) with respect to the ING Companies, those persons listed in Section 1.1(a) of the ING Companies Disclosure Letter.

“Law” means any constitution, statute, law, code, administrative interpretation, regulation, rule, injunction, judgment, order, writ, decree, ordinance, directive judgment, policy, guideline or ruling of any Governmental Entity, including common law.

“Lease” shall have the meaning set forth in Section 3.16(b)(i).

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“Lease Assignment Adjustment” means an amount equal to the portion of any lease payments made by the Sellers with respect to the leases referred to in Sections 7.19(a) and (b) prior to the Closing Date that relate to periods after the Closing Date to the extent the Buyers benefit from such payments.

“Leased Real Property” shall have the meaning set forth in Section 3.16(a).

“Liabilities” means any and all debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured or determined or determinable, including those arising under any Law or Order and those arising under any contract, agreement, arrangement, commitment or undertaking.

“Licensed Computer Programs” shall have the meaning set forth in Section 3.13(g).

“Licensed Intellectual Property” means all Intellectual Property licensed or otherwise used by any Seller or any of their Subsidiaries primarily in, or material to the conduct of, the Acquired Business.

“Liens” means any liens, pledges, charges, claims, security interests, options, mortgages, assignments, hypothecations, preferences, priorities, deposit arrangements, easements, options, proxies, voting trusts or other encumbrances of any nature whatsoever (statutory or otherwise).

“Litigation” shall have the meaning set forth in Section 3.9(a).

“Losses” shall have the meaning set forth in Section 10.2.

“Methodology Related Coinsurance Increase” shall have the meaning set forth in Section 7.9(c).

“Modco Reserve Methodology” shall have the meaning set forth in Section 7.9(c).

“New York Court” shall have the meaning set forth in Section 11.8(a).

“Novated Industry Risk Retrocession Agreements” shall have the meaning set forth in Section 7.23.

“Novation” shall have the meaning set forth in Section 2.3(a).

“NY DOI” shall have the meaning set forth in Section 7.3(b).

“OM Treaties” means (i) the Yearly Renewable Term Retrocession Agreement, effective April 1, 2003, between SLD and Fidelity and Guaranty Life Insurance Company and (ii) the Renewable Term Retrocession Agreement, effective December 31, 2002, between SLD and OMNIA Life Insurance Company.

“Order” shall have the meaning set forth in Section 3.9(a).

“Outside Date” shall have the meaning set forth in Section 9.1(c).

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“Owned Computer Programs” shall have the meaning set forth in Section 3.13(f).

“Owned Intellectual Property” means all Intellectual Property owned in whole or in part by any Seller or any of their Subsidiaries, in each case, constituting an Acquired Asset.

“Parent” shall have the meaning set forth in the introductory paragraph.

“Parent Marks” shall have the meaning set forth in Section 7.17(a).

“Patents” means all patents and patent applications, and all divisions, reissues, continuations, extensions, continuations-in-part thereof.

“Permits” shall have the meaning set forth in Section 3.8(a)(i).

“Permitted Investment Asset Liens” as to any Investment Asset, means (i) Liens for taxes not yet due and payable, (ii) Liens arising under the SLD-SRUS Reinsurance Agreements and related transaction documents that will be released prior to, or concurrent with, the Closing, (iii) Liens arising under the SLDI-SRLB Reinsurance Agreements and related transaction documents that will be released prior to, or concurrent with, the Closing, (iv) Liens arising under or created pursuant to authority granted under any investment management agreement entered into between the ING Companies and any Seller that will be released prior to, or concurrent with, the Closing, (v) Liens in respect of any power-of-attorney granted to any Seller (but not including any Liens created pursuant to any actions taken by such Seller pursuant to such power of attorney, unless such Lien would be included in another clause in this definition) that will be released prior to, or concurrent with, the Closing, and (vi) Liens that arise solely by virtue of this Agreement or any Transaction Document.

“Permitted Liens” as to any asset, means (i) Liens for taxes not yet due and payable, (ii) Liens arising by operation of law in the ordinary course of business that do not in the aggregate materially detract from or impair the value or materially interfere with the present use of such asset in the Acquired Business, (iii) Liens that arise solely by virtue of this Agreement or any Transaction Document, (iv) other Liens that do not in the aggregate materially detract from or impair the value or materially interfere with the present use of such asset in the Acquired Business.

“Person” means an individual, corporation, limited liability company, partnership, joint venture, association, trust, unincorporated organization or other entity.

“Premium” means premiums, consideration, deposits and similar receipts.

“Proceeding” shall have the meaning given in Section 7.1(b)(iv).

“Quarterly SAP Statements” shall have the meaning set forth in Section 3.4(ii).

“Recapture Agreements” shall have the meaning set forth in Section 2.1(a)(i).

“Recapture Subaccount” shall have the meaning set forth in Section 2.2(d).

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“Recaptured Liabilities” shall mean the liabilities and obligations reinsured under the terms and conditions of the SLD-SRUS Reinsurance Agreements and the SLDI-SRLB Reinsurance Agreements, other than the Retained Reinsurance Liabilities and the UHRL Liabilities.

“Reinsured Liabilities” shall mean the liabilities and obligations reinsured under the terms and conditions of the SLD-HLRUS Reinsurance Agreements and the SLDI-HLRI Reinsurance Agreement; it being understood by the parties hereto that the Reinsured Liabilities shall not include any Retained Reinsurance Liabilities.

“Representatives” shall mean, with respect to any Person, such Person’s Affiliates, officers, directors, employees, agents, consultants, financial advisors, legal advisors and other representatives.

“Requesting Party” shall have the meaning set forth in Section 7.22.

“Required Novating Insurer” shall have the meaning set forth in Section 8.1(d).

“Responding Party” shall have the meaning set forth in Section 7.22.

“Retained Reinsurance Liabilities” means (a) any liabilities or obligations under the SLD-SRUS Reinsurance Agreements or the SLDI-SRLB Reinsurance Agreements (without giving effect to the Recapture Agreements) with respect to (i) losses incurred or amounts due to be paid prior to the Effective Time by SRUS or SRLB, as applicable, including obligations with respect to pending claims and claims incurred but not yet reported or (ii) experience refunds payable by SRUS or SRLB, as applicable, that relate solely to an accounting period completed prior to the Effective Time, (b) any Extra-Contractual Obligations arising from or relating to the acts, errors or omissions by Sellers or their Representatives after January 1, 2005 and prior to the Closing Date, (c) reinsurance premiums due to be paid prior to the Effective Time with respect to the ING Insurance Contracts under the ING Retrocession Agreements and any other Retroceded Reinsurance Agreement (as defined in the ING APA) or the Scottish Retrocession Agreements, (d) any Taxes due to the extent such Taxes relate to Premiums received by or accrued by the Sellers or the ING Companies prior to the Effective Time, (e) assessments and similar charges in connection with participation by the Sellers or the ING Companies whether voluntary or involuntary in any guaranty association established or governed by any U.S. state or other jurisdiction to the extent such assessments and charges relate to periods beginning prior to the Effective Time, (f) commissions payable with respect to the ING Insurance Contracts to or for the benefit of producers or intermediaries who marketed or produced the ING Insurance Contracts to the extent such commissions relate to periods beginning prior to the Effective Time, (g) liabilities for returns or refunds of Premiums to the extent such returns or refunds relate to Premiums received by or accrued by the Sellers or the ING Companies prior to the Effective Time, and (h) expense allowances payable under the ING Insurance Contracts to the extent such allowances relate to periods beginning prior to the Effective Time.

“Retrocession Agreements” means the ING Retrocession Agreements and the Scottish Retrocession Agreements.

“Retrocession Net Amount at Risk” shall have the meaning set forth in Section 2.3(a).

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“SALIC” means Scottish Annuity & Life Insurance Company (Cayman) Ltd.

“SAP” shall have the meaning set forth in Section 3.4.

“Scottish Re Administrative Services Agreement” means the administrative service agreement between HLRUS and Parent to be entered into at the Closing substantially in the form of Exhibit F hereto.

“Scottish Retrocession Agreements” mean the retrocession agreements identified on Exhibit G between SRUS, SRLB, SRD and/or SALIC, as cedants, and various third-party retrocessionaires, as such retrocession agreements relate to Reinsured Liabilities.

“Segregated Account” means the segregated account established by SLD pursuant to Section 5.25 of the ING APA.

“Seller Financial Statements” means the December SAP Statements and the Quarterly SAP Statements.

“Seller Indemnitees” shall have the meaning set forth in Section 10.3.

“Seller Intellectual Property” means all Owned Intellectual Property and all Licensed Intellectual Property.

“Seller Material Adverse Effect” means (a) any event, change, circumstance or effect that individually or in the aggregate is or is reasonably likely to be materially adverse to the ability of any Seller to consummate the transactions contemplated by this Agreement or the other Transaction Documents or perform their obligations hereunder or thereunder, or (b) any event, change, circumstance or effect that individually or in the aggregate is or is reasonably likely to be materially adverse on the financial condition, assets, liabilities, properties, business or results of operations of the Acquired Business, taken as a whole, but shall exclude, only in the case of clause (b) above, any such effect resulting from, relating to or arising out of: (i) general economic, political (including national and international political conditions) or market conditions (including changes in interest rates), so long as such conditions do not have a materially disproportionate effect on the Acquired Business, taken as a whole, compared to similar business reinsured by other United States life reinsurance companies; (ii) any change or proposed change in Law or accounting or actuarial principles required in any jurisdiction, so long as such change or proposed change does not have a materially disproportionate effect on the Acquired Business, taken as a whole, compared to similar business reinsured by other United States life reinsurance companies; (iii) any failure of any of the Sellers or the Acquired Business to achieve internal financial or other projections or budgets (it being the understanding of the parties hereto that the underlying cause for such failure may constitute a Seller Material Adverse Effect if such event is not otherwise excluded from the definition of Seller Material Adverse Effect); and (iv) any occurrence or condition arising out of the negotiation and execution of this Agreement, the consummation of the transactions contemplated hereby, or the public announcement thereof (including any occurrence or condition arising out of the identity of or facts relating to the Buyers or any ratings action taken by one or more of the nationally recognized statistical rating organizations with respect to the rating of any of the Sellers).

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“Sellers” shall have the meaning set forth in the introductory paragraph.

“Sellers Disclosure Letter” shall have the meaning set forth in Article III.

“Sellers’ Insurance Policies” shall have the meaning set forth in Section 7.7(a).

“SHI” shall have the meaning set forth in the introductory paragraph.

“SLD” shall have the meanings set forth in the introductory paragraph.

“SLD-HLRUS Reinsurance Agreements” mean the reinsurance agreements pursuant to which SLD shall cede certain ING Insurance Contracts to HLRUS and which shall be entered into at Closing substantially in the form of Exhibits H hereto.

“SLD-SLDI Agreements” means Treaty 2774 between SLD, as ceding company, and SLDI, as reinsurer, effective July 1, 2000, and Treaty 2962 between SLD, as ceding company, and SLDI, as reinsurer, effective June 1, 2002.

“SLD-SLDI Retroceded Business” shall have the meaning set forth in Section 7.9(b).

“SLD-SRUS Reinsurance Agreements” mean the reinsurance agreements listed on Exhibit I.

“SLD-SRUS UHRL Reinsurance Agreement” means the Coinsurance Agreement between SLD and SRUS dated December 22, 2005.

“SLDI” shall have the meaning set forth in the introductory paragraph.

“SLDI-HLRI Reinsurance Agreement” means the reinsurance agreement pursuant to which SLDI shall cede certain ING Insurance Contracts to HLRI and which shall be entered into at Closing substantially in the form of Exhibit J hereto.

“SLDI-SRLB Reinsurance Agreements” mean the reinsurance agreements between SLDI and SRLB listed on Exhibit K.

“SRD” shall have the meaning set forth in the introductory paragraph.

“SRLB” shall have the meaning set forth in the introductory paragraph.

“SRLB IBNR Trust Required Balance” shall have the meaning set forth in Section 7.10(b).

“SRLB Subject Claims” shall have the meaning set forth in Section 7.10(b).

“SRUS” shall have the meaning set forth in the introductory paragraph.

“SRUS IBNR Trust Required Balance” shall have the meaning set forth in Section 7.10(a).

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“SRUS Subject Claims” shall have the meaning set forth in Section 7.10(a).

“Subsidiary” of any Person means another Person fifty percent (50%) or more of the total combined voting power of all classes of capital stock or other voting interests of which, or fifty percent (50%) or more of the equity securities of which, is owned directly or indirectly by such first Person.

“Taxes” means all income, property, sales, excise, employment, payroll, withholding and other taxes, tariffs or governmental charges of any nature whatsoever imposed by any Governmental Entity (together with any interest or penalty, addition to Tax or additional amount imposed with respect thereto).

“Third Party Claim” shall have the meaning set forth in Section 10.5.

“Threshold” shall have the meaning set forth in Section 10.4(a)(i).

“Trade Secrets” shall mean all trade secrets and confidential business information including all inventions, compositions, methodologies, processes and techniques (in each case whether or not patentable), discoveries, developments, ideas, concepts, research and development, Data and Databases, designs, formulae, methods, processes, designs, drawings, specifications, technology, items of proprietary know-how, information or data, prospect lists, customer lists, supplier lists, projections, analyses and market studies, pricing and cost information, business and marketing plans and proposals, and all other proprietary items; provided, that “Trade Secrets” does not include non-proprietary information, know-how or processes otherwise available to the industry or the public.

“Trademarks” means all trademarks, service marks, certification marks, trade dress, logos and other indicators of source, trade names, internet domain names, and corporate names, together with all translations, adaptations, derivations and combinations thereof, including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith.

“Transaction Documents” shall mean, collectively, this Agreement, the documents to be delivered at Closing pursuant to Sections 2.5, 2.6 and 2.7, and all other documents, instruments, certificates or agreements otherwise executed in connection herewith.

“Transfer Account” shall have the meaning set forth in Section 2.2(c).

“Transferred Employees” shall have the meaning set forth in Section 7.12(a).

“Transition Services Agreement” means the transition services agreement between HLRUS and SRUS to be entered into at Closing substantially in the form of Exhibit L hereto.

“UHRL” shall mean Union ▇▇▇▇▇▇▇▇ Reinsurance, Ltd.

“UHRL Liabilities” shall mean the liabilities and obligations reinsured under the terms and conditions of the SLD-SRUS UHRL Reinsurance Agreement.

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“UHRL Novation Documents” shall have the meaning set forth in Section 7.8(a).

“UHRL Transaction Documents” shall mean (i) the Reinsurance Agreement, effective as of December 22, 2005, between SRUS and UHRL, (ii) the Stop Loss Reinsurance Agreement, effective as of December 22, 2005, between SRUS and SRD, (iii) the Stop Loss Retrocession Agreement, effective as of December 22, 2005, between UHRL and SRD, (iv) the Reinsurance Trust Agreement, dated as of December 22, 2005, between UHRL, SRUS and US Bank National Association, as Trustee, (v) the Security Trust Agreement, effective as of December 22, 2005, among UHRL, SRD, SALIC, the Parent and The Bank of New York, as Trustee, (vi) the Guarantee, effective as of December 22, 2005, by Wachovia Corporation in favor of the Company, (vii) the Side Letter, dated December 22, 2005, between SALIC, the Parent, SRD and UHRL, and all other instruments, agreements and certificates delivered in connection therewith.

“WARN” shall mean the Worker Adjustment and Retraining Notification Act of 1988, as

ARTICLE II

PURCHASE AND SALE

Section 2.1. Purchase and Sale.

(a) As contemplated by, and subject to the consummation of, this Agreement, effective as of the Effective Time:

(i) SLD and SLDI, respectively, shall enter into recapture agreements and agreements to be mutually agreed between the Sellers and the ING Companies prior to the Closing that terminate certain other agreements associated with the ING Block, including the ING Letter Agreement, with SRUS and SRLB, respectively, pursuant to the terms of which SLD and SLDI will recapture one hundred percent (100%) of the Recaptured Liabilities ceded under the SLD-SRUS Reinsurance Agreements and the SLDI-SRLB Reinsurance agreements (collectively, the “Recapture Agreements”);

(ii) SLD and SLDI, respectively, shall enter into the SLD-HLRUS Reinsurance Agreements and the SLDI-HLRI Reinsurance Agreement with HLRUS and HLRI pursuant to the terms of which SLD and SLDI will cede one hundred percent (100%) of the Reinsured Liabilities to HLRUS and HLRI, respectively.

(iii) SLD and SLDI shall enter into the Amended SLD-SLDI Agreements.

(iv) The Sellers, the Buyers and the ING Companies shall enter into the UHRL Novation Documents.

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(b) Upon the terms and subject to the conditions of this Agreement, at the Closing:

(i) The Buyers shall assume from the applicable Sellers, and be obligated to pay, perform and discharge all of, the Assumed Liabilities other than the Reinsured Liabilities;

(ii) Each Seller shall transfer, assign and deliver to the applicable Buyer, and such Buyer shall purchase, acquire and accept from such Seller, the Acquired Assets owned by such Seller, free and clear of all Liens, other than Permitted Liens.

(c) On or prior to the Closing Date, each Seller shall exercise all rights, and take all such other actions, necessary to effect the conveyance of the Acquired Assets, free and clear of all Liens, other than Permitted Liens, to the Buyers on the Closing Date.

Section 2.2. Payments at Closing.

(a) At the Closing, the Sellers, the Buyers and the ING Companies shall make the following payments (in cash and/or transfer of securities (whether direct or through the transfer of rights to accounts holding cash and/or securities), in accordance with Section 2.2(c) below), as more specifically detailed on Exhibit M hereto, it being understood and agreed among the parties that as provided on Exhibit M, the payment obligations set forth below may be settled with net payments between parties, and by the direction of payments by the intended recipient of such payments to other parties.

(i) Pursuant to the terms of the Recapture Agreements, SRUS and SRLB shall make recapture payments to SLD and SLDI, respectively, in an aggregate amount equal to the Closing Payment Amount;

(ii) Pursuant to the terms of the SLD-HLRUS Reinsurance Agreements and the SLDI-HLRI Reinsurance Agreement, SLD and SLDI shall make initial premium payments to HLRUS and HLRI, respectively, in an aggregate amount equal to the Closing Payment Amount;

(iii) The Buyers shall make payments to the Sellers in an aggregate amount equal to the Acquired Asset Value, which the Buyers and Sellers agree is the value of the Acquired Assets.

(b) For the avoidance of doubt, the Buyers, the Sellers and the ING Companies agree that as a result of the Sellers making the payments described on Exhibit M, (i) the Sellers shall be credited with having paid to the ING Companies the full recapture payments owed with respect to the recapture transactions contemplated by the Recapture Agreements, and (ii) the ING Companies shall be credited with having paid to the Buyers the full amount of the initial reinsurance premiums in connection with the reinsurance transactions contemplated by the SLD-HLRUS Reinsurance Agreements and the SLDI-HLRI Reinsurance Agreement.

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(c) The payments contemplated by Section 2.2(a) and Exhibit M shall be made on the Closing Date by a combination of transfers of cash, transfers of Investment Assets (as defined below) and a transfer of the Ballantyne Recapture Assets. Such Investment Assets shall have an aggregate market value as of the Closing Date equal to the Closing Payment Amount, minus the aggregate amount of cash transferred (excluding any cash in the Recapture Subaccount), minus the Ballantyne Q4 Recapture Adjustment. As set forth on Exhibit M, transfers of cash may be effected by one or more wire transfers of immediately available funds or by transfer of rights to one or more accounts holding cash, and transfers of Investment Assets may be effected by a direct transfer of such Investment Assets or by a transfer of rights to one or more accounts holding such Investment Assets (including by way of a recapture and cession of reinsurance obligations pursuant to a reinsurance agreement) and transfer of Ballantyne Recapture Assets shall be effected by an indirect transfer of rights in the Recapture Subaccount, which shall be effected by a transfer of rights in the Segregated Account. Any account in which the Sellers’ rights will be transferred to the Buyers at Closing as described in the preceding sentence is referred to herein as a “Transfer Account.” At least three (3) Business Days prior to the Closing Date, the Buyers shall specify to the Sellers and the ING Companies the account or accounts to which all payments or transfers on the Closing Date shall be made (other than payments to be made by way of a Transfer Account). Any transfer of Investment Assets shall be on the following terms:

(i) Prior to the date of this Agreement, the Buyers and the Sellers have agreed to a list of securities (the “Investment Assets”), which list is attached hereto as Exhibit N-1 (which exhibit specifies the principal amount of each Investment Asset, the December 31, 2008 market value of each such Investment Asset, as determined by the Sellers, and a description of the valuation methodology used to determine such market values). For the avoidance of doubt, Ballantyne Recapture Assets shall not be considered Investment Assets for the purposes of this Agreement.

(ii) Seven (7) Business Days prior to the anticipated Closing Date, the Buyers shall provide to the Sellers the Buyers’ determination of the market value of each of the Investment Assets as of the immediately preceding Business Day (the “Buyer Indicative Market Valuation List”), using a valuation methodology consistent with the valuation methodology described in Exhibit N-1. In addition, at the time of delivery of the Buyer Indicative Market Valuation List, the Buyers may deliver to the Sellers a list of securities to be excluded from the list of Investment Assets set forth on Exhibit N-1 that have become unacceptable to the Buyers in their reasonable judgment. Any security so excluded shall no longer be deemed an Investment Asset for purposes of this Agreement. If the Buyers exclude securities from the list of Investment Assets as contemplated by this Section 2.2(c)(ii), the Sellers shall be entitled to delay the Closing for a reasonable number of days to permit the Sellers to liquidate in an orderly manner sufficient securities to fund the related increase to the cash portion of the Closing Payment Amount.

(iii) Three (3) Business Days prior to the Closing Date, the Buyers may deliver an additional list of securities to be excluded from the list of Investment Assets set forth on Exhibit N-1; provided, that such list may only include securities that have experienced a Credit Event. Any security so excluded shall no longer be deemed an Investment Asset for purposes of this Agreement.

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(iv) The market value as of the Closing Date of each of the Investment Assets shall be determined by the Buyers based on the closing market prices of the Investment Assets on the Business Day immediately preceding the Closing Date, using a valuation methodology consistent with the valuation methodology described in Exhibit N-1. The Buyers shall deliver to the Sellers a list of such market values prior to the Closing as promptly as practicable after such market values are determined.

(v) The Sellers shall have the right to determine, in their sole discretion, whether any Investment Assets will be transferred in satisfaction of the Sellers’ payment obligations, and if so, which Investment Assets will be so transferred. In furtherance of the foregoing, the ING Companies hereby consent to exchanges of cash and securities into and out of any Transfer Account by the Sellers on or after the tenth (10^th) Business Day preceding the anticipated Closing Date in order to comply with this Section 2.2; provided, that such exchanges do not result in the reduction in the aggregate value of cash or securities held in such Transfer Account.

(d) In the event that the Ballantyne Q4 Recapture occurs, the ING Companies shall concurrently with such Ballantyne Q4 Recapture deposit cash or securities acceptable to the Buyers into a subaccount (the “Recapture Subaccount”) established within the Segregated Account, with a market value, valued as of the day of transfer, equal to the market value of the assets released by Ballantyne to SLD in connection with the Ballantyne Q4 Recapture. Prior to the occurrence of the Ballantyne Q4 Recapture, the Buyers and the ING Companies shall cooperate to prepare a list of the securities to initially be deposited into the Recapture Subaccount, which list shall be designated Exhibit N-2, and such list shall specify the principal amount of each such security and the issuer thereof. The Recapture Subaccount shall be used exclusively for such cash and the securities listed on Exhibit N-2, plus any interest, earnings, proceeds or payments on, with respect to or in respect of such cash and securities (collectively, the “Ballantyne Recapture Assets”) and all Ballantyne Recapture Assets shall be held in the Recapture Subaccount. The Buyers shall have the sole right to direct SRUS as to the management of the Ballantyne Recapture Assets, subject to compliance with any applicable investment guidelines, and no Ballantyne Recapture Assets may be withdrawn from the Recapture Subaccount prior to the earlier of (i) the Closing or (ii) the termination of this Agreement in accordance with its terms; provided that Ballantye Recapture Assets may be withdrawn from the Recapture Subaccount in connection with the investment management of such account, so long as any securities purchased, and the proceeds of any sales, are deposited in the Recapture Subaccount. For the avoidance of doubt, the transfer of the Ballantyne Recapture Assets at the Closing shall be deemed to satisfy any obligation to make a payment in an amount equal to the Ballantyne Q4 Recapture Adjustment.

(e) The Buyers, the Sellers and the ING Companies acknowledge and agree that the payments, asset transfers and assumptions of liabilities described in this Section 2.2 and below in Section 2.3 are all integral parts of the same transaction and that such payments constitute sufficient consideration for the performance of each party’s obligations hereunder and under the other Transaction Documents.

(f) From the date of this Agreement until the Closing Date, the Buyers, the Sellers and the ING Companies each agree to cooperate and to work in good faith and to use commercially reasonable efforts to finalize Exhibit M in anticipation of the Closing in a form reasonably acceptable to each of the parties hereto.

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Section 2.3. Additional Payment with respect to Novations of Certain ING Retrocession Agreements. With respect to the Novations (as defined below) of the ING Retrocession Agreements listed on Exhibit O obtained as contemplated by Section 7.11(b):

(a) If the Sellers have received executed novations or partial novations or any other form of agreement reasonably acceptable to the Buyers (any such novation, partial novation or agreement, a “Novation”) from participants representing less than ninety percent (90%) of the net amount at risk shown on Exhibit O (the “Retrocession Net Amount at Risk”) by the later of (i) the date that is thirty (30) days after the Closing Date and (ii) April 30, 2009 (such date, the “Assessment Date”), then the Sellers shall pay to the Buyers an additional amount equal to the sum of the amounts set forth on Exhibit O opposite the names of the participants from which the Sellers have not received executed Novations. Such payment shall be made by the Sellers to the Buyers within ten (10) Business Days following the Assessment Date and shall be made by wire transfer of immediately available funds to such account or accounts as the Buyers may specify not later than three (3) Business Days after the Assessment Date.

(b) If the Sellers have received executed Novations from participants representing ninety percent (90%) or more of the Retrocession Net Amount at Risk by the Assessment Date, then within ten (10) Business Days following such date, the Sellers shall deliver to The Bank of New York Mellon (the “Escrow Agent”) cash and/or cash equivalents reasonably acceptable to the Buyers, in an aggregate amount equal to the product of one-half (0.5) multiplied by the sum of the amounts set forth on Exhibit O opposite the names of the participants from which the Sellers have not received executed Novations (such amount, together with all accrued interest thereon, the “Escrow Funds”). The Escrow Funds shall be deposited by the Escrow Agent into an account established by the Escrow Agent pursuant to an escrow agreement on terms reasonably acceptable to the Buyers and the Sellers, and based on the customary form of the Escrow Agent for such an agreement (the “Escrow Agreement”). The Escrow Funds shall be held as a trust fund and shall not be subject to any lien, attachment, trustee process or any other judicial process of any creditor of any party. The Escrow Funds shall remain in place through December 31, 2009. To the extent the Sellers receive additional executed Novations after the Assessment Date but prior to December 31, 2009, with respect to each such additional executed Novation received, Escrow Funds shall be immediately disbursed to the Sellers in an amount equal to one-half of the amount set forth on Exhibit O opposite the name of the participant from which such executed Novation is received. After December 31, 2009, any remaining Escrow Funds shall be immediately disbursed to the Buyers.

Section 2.4. Closing. Upon the terms and subject to the conditions of this Agreement, the closing of the transactions contemplated hereby (the “Closing”) shall take place at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ at 10:00 A.M. New York City time on the third (3^rd) Business Day following the satisfaction or waiver of all conditions to the obligations of the parties set forth in Article VIII or such other date and time as to which the parties hereto shall agree. The date on which the Closing actually occurs is herein referred to as the “Closing Date.” The parties shall use their commercially reasonable efforts to cause the Closing to occur on or prior to February 18, 2009.

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Section 2.5. Deliveries by the Sellers.

(a) At the Closing, the applicable Sellers shall execute and deliver or cause to be delivered to the applicable Buyers or their designee:

(i) a ▇▇▇▇ of sale, assignment and assumption, substantially in the form attached hereto as Exhibit P (the “▇▇▇▇ of Sale, Assignment and Assumption”), and any other required transfer documents, substantially in the form attached hereto as Exhibit Q, in each case duly executed by each of the Sellers, transferring to the Buyers, free and clear of all Liens other than Permitted Liens, the Acquired Assets;

(ii) the Scottish Re Administrative Services Agreement;

(iii) the Transition Services Agreement;

(iv) the Charlotte Lease Amendments;

(v) The Denver Lease Assignment;

(vi) the Novated Industry Risk Retrocession Agreements;

(vii) novation of the Scottish Retrocession Agreements pursuant to Section 7.11(a), to the extent obtained prior to the Closing;

(viii) Sellers and their Affiliates, to the extent they are retrocessionaires under the ING Retrocession Agreements, agreement to the novations to the ING Retrocession Agreements contemplated by Section 7.11(b)(ii);

(ix) the UHRL Novation Documents contemplated by Section 7.8(a); and

(x) the certificates and other documents required to be delivered to the Buyers pursuant to Section 8.2.

(b) At the Closing, the applicable Sellers shall execute and deliver or cause to be delivered to the applicable ING Companies or their designee:

(i) Recapture amendments for the SLD-SRUS Reinsurance Agreements;

(ii) Recapture amendments for the SLDI-SRLB Reinsurance Agreements;

(iii) Termination of the Security Trust Agreement dated as of December 31, 2004 between SRUS, SLD, and The Bank of New York;

(iv) Termination of the Security Trust Agreement dated as of December 31, 2004 between SRLB, SLDI and The Bank of New York;

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(v) Termination of the Reinsurance Trust Agreement dated as of December 31, 2004 between SRUS, SLD, and The Bank of New York;

(vi) Termination of the Reinsurance Trust Agreement dated as of December 31, 2004 between SRLB, SLDI, and The Bank of New York;

(vii) Termination of the Administrative Services Agreement dated as of December 31, 2004 between SLD, SLDI and SRUS, as amended;

(viii) Termination of the Asset Management Services Agreement dated as of December 31, 2004 between SRUS and SLD;

(ix) the UHRL Novation Documents contemplated by Section 7.8(a);

(x) the Novated Industry Risk Retrocession Agreements;

(xi) the IBNR Trust Agreements; and

(xii) the certificates and other documents required to be delivered to the ING Companies pursuant to Section 8.4.

Section 2.6. Deliveries by the Buyers.

(a) At the Closing, the applicable Buyers shall execute and deliver or cause to be delivered to the applicable Sellers or their designee:

(i) the ▇▇▇▇ of Sale, Assignment and Assumption;

(ii) the Scottish Re Administrative Services Agreement;

(iii) the Transition Services Agreement;

(iv) the Charlotte Lease Amendment;

(v) The Denver Lease Assignments;

(vi) execution of the novations of the Scottish Retrocession Agreements pursuant to Section 7.11(a);

(vii) execution of the novations to the ING Retrocession Agreements contemplated by Section 7.11(b);

(viii) the UHRL Novation Documents contemplated by Section 7.8(a);

(ix) the Novated Industry Risk Retrocession Agreements; and

(x) the certificates and other documents required to be delivered to the Sellers pursuant to Section 8.3.

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(b) At the Closing, the applicable Buyers shall execute and deliver or cause to be delivered to the applicable ING Companies or their designee:

(i) the SLD-HLRUS Reinsurance Agreements;

(ii) the SLDI-HLRI Reinsurance Agreement;

(iii) the ING Administrative Services Agreement;

(iv) the ING-Ballantyne Administrative Services Agreement;

(v) the ING Asset Management Services Agreement;

(vi) the UHRL-related documents contemplated by Section 7.8(a);

(vii) the Novated Industry Risk Retrocession Agreements; and

(viii) the certificates and other documents required to be delivered to the ING Companies pursuant to Section 8.4.

Section 2.7. Deliveries by the ING Companies.

(a) At the Closing, the applicable ING Companies shall execute and deliver or cause to be delivered to the applicable Buyers or their designee:

(i) the SLD-HLRUS Reinsurance Agreements;

(ii) the SLDI-HLRI Reinsurance Agreement;

(iii) the ING Administrative Services Agreement;

(iv) the ING-Ballantyne Administrative Services Agreement;

(v) the ING Asset Management Services Agreement;

(vi) the agreements/amendments with respect to UHRL contemplated by Section 7.8(a);

(vii) the Novated Industry Risk Retrocession Agreements;

(viii) the agreements/amendments with respect to Ballantyne contemplated by Section 7.8(b);

(ix) the ING Companies and their affiliates, to the extent they are retrocessionaires under the ING Retrocession Agreements, agreement to the novations to the ING Retrocession Agreements contemplated by Section 7.11(b)(ii); and

(x) the certificates and other documents required to be delivered to the Buyers pursuant to Section 8.2.

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(b) At the Closing, the applicable ING Companies shall execute and deliver or cause to be delivered to the applicable Sellers or their designee: