EXECUTION COPY
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement"), dated as of December 18,
2001, made by XL Investments Ltd, a company organized under the laws of Bermuda
("XL Investments"), XL Re Ltd, a company organized under the laws of Bermuda
("XL Re"), XL Insurance (Bermuda) Ltd, a company organized under the laws of
Bermuda ("XL Insurance") and XL Europe Ltd, a company organized under the laws
of Ireland ("XL Europe", XL Investments, XL Re and XL Insurance and XL Europe
being referred to collectively herein as the "Grantors" and individually as a
"Grantor" and XL Europe, XL Investments and XL Insurance being collectively
referred to herein as the "Guarantors") in favor of Citibank, N.A. (the "Bank").
RECITALS:
A. XL Re has entered into (i) a Master Agreement--London Market
Letter of Credit Scheme, dated as of October 21, 1996 and (ii) an Insurance
Letters of Credit--Master Agreement, dated as of May 19, 1993 (each as amended
from time to time, the "Reimbursement Agreements") in favor of the Bank pursuant
to which XL Re has agreed to, among other things, reimburse the Bank in
connection with the issuance by the Bank from time to time of letters of credit
for its account (the "Letters of Credit"). Each of XL Investments, XL Europe and
XL Insurance is an affiliate of XL Re. XL Re is the account party for the
account of which Letters of Credit may be issued on behalf of any of the
Grantors. Accordingly, each Grantor will derive substantial direct and indirect
benefit from the issuance of Letters of Credit and the transactions contemplated
by the Reimbursement Agreements.
B. Each Guarantor shall execute, on even date herewith, a
guarantee agreement (the "Guarantee Agreement"), pursuant to which the
Guarantors guarantee, jointly and severally, the payment in full of the
obligations of XL Re under the Reimbursement Agreements.
C. In order to (i) provide collateral security for the Letters of
Credit and the obligations under the Guarantee Agreement, and to induce the Bank
to extend credit under the Reimbursement Agreements and (ii) replace and
terminate the pledge of existing collateral by XL Re under the Security
Agreement (Form 15) dated August 7, 1998 (the "Security Agreement"), the
Grantors wish to execute and deliver this Agreement.
D. Each Grantor acknowledges that the Bank will rely on this
Agreement in issuing Letters of Credit. Each Grantor further acknowledges that
it has, independently and without reliance upon the Bank or any representation
by or other information from the Bank, made its own credit analysis and decision
to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, the Grantors hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1. DEFINITIONS.
(a) CERTAIN DEFINITIONS. Capitalized terms not otherwise defined
herein shall have the meanings given in the Reimbursement Agreements. In
addition to the other terms defined elsewhere in this Agreement, as used herein
the following terms shall have the following meanings:
"Business Day" shall mean any day that is not a Saturday, Sunday
or other day on which commercial banks in New York, New York, Bermuda or
London, England are authorized or required by law to remain closed.
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"Custodian" shall mean Mellon Bank, N.A., or any successor, or any
successor custodian appointed in accordance with the terms of Section
6.11 hereof.
"Custody Agreement" shall mean the Master Custody Agreement, dated
June 30, 1998, among XL Capital Ltd (f/k/a/ EXEL Limited), the Principals
named therein (of which each of the Grantors is one) and Mellon Bank,
N.A., as custodian, as it may be amended, restated or otherwise modified
from time to time with the consent of the Bank or as entered into between
the Grantors and a successor custodian in connection with the appointment
of a successor custodian in accordance with the terms of Section 6.11
hereof.
"Designated Accounts" shall mean, collectively, (a) with respect
to XL Investments the following custodial securities account maintained
by XL Investments with the Custodian pursuant to terms of the Custody
Agreement: XLIF0804002; (b) with respect to XL Re the following custodial
securities accounts maintained by XL Re with the Custodian pursuant to
terms of the Custody Agreement: XLRF0800452 and XLRF0803572; and (c) such
custodial securities account(s) maintained by a Grantor with the
Custodian as are designated on a Supplemental Document as "Designated
Accounts" from time to time by such Grantor; PROVIDED, HOWEVER, that no
custodial securities account may be a Designated Account if any party to
the Custody Agreement other than the Grantor maintaining such account has
any interest therein or in any securities entitlements or other financial
assets credited thereto.
"Distributions" shall mean all property, rights and interests of
any kind or nature (whether cash, securities or other) from time to time
received, receivable or otherwise distributed with respect to or in
exchange for any Collateral, including all cash, securities or other
property received or receivable as dividends, or as a result of any stock
splits, reclassifications, mergers or consolidations, or as any other
distributions (whether similar or dissimilar to the foregoing), or as a
result of exercise of any options, warrants or rights included in or
associated with any Collateral, or as principal, interest or premium.
"Dollar Equivalent Amount" of any Qualifying Security shall mean
(i) with respect to any Qualifying Security denominated in a currency
other than U.S. Dollars, the amount of U.S. Dollars that would be
required to purchase the amount of such currency, based upon the then
prevailing spot selling rate at which the Bank offers to sell such
currency for U.S. Dollars in the relevant foreign exchange market and
(ii) with respect to a Qualifying Security denominated in U.S. Dollars,
the market value of such Qualifying Security as most recently determined
at the time in question in accordance with Section 2.2(b).
"Event of Default" shall mean (a) a Grantor's failure to pay when
due any obligation owing by it to the Bank under either Reimbursement
Agreement or this Agreement, (b) a Grantor's failure to perform or
observe any other term or covenant of either Reimbursement Agreement or
this Agreement or deliver any document required to be delivered by it
under either Reimbursement Agreement or this Agreement, if such failure
(other than a failure to comply with the requirements of Section 2.2
hereof) shall not be remedied for a period of twenty (20) days after
written notice thereof to such Grantor from the Bank, (c) any
representation or warranty made by any Grantor in or in connection with
either Reimbursement Agreement or this Agreement or any amendment or
modification of either Reimbursement Agreement or this Agreement, or in
any certificate or financial statement furnished pursuant to the
provisions of either Reimbursement Agreement or this Agreement, shall
prove to have been false or misleading in any material respects as of the
time made or furnished, (d) a decree or order by a court having
jurisdiction in the premises shall have been entered adjudging any
Grantor a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization of such Grantor under the Bermuda
Companies Law or the Irish Bankruptcy Act 1988 or any other similar
applicable law, and such decree or order shall have continued
undischarged or unstayed for a period of 60 days; or a decree or order of
a court having jurisdiction in the premises for the appointment of an
examiner, receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of such Grantor or a substantial part of its property, or for
the winding up or liquidation of its affairs, shall have been entered,
and such decree or order shall have continued undischarged and unstayed
for a period of 60 days, (e) any Grantor shall institute proceedings to
be adjudicated a
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voluntary bankrupt, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent
seeking reorganization under the Bermuda Companies Law or the Irish
Bankruptcy Act 1988 or any other similar applicable law, or shall consent
to the filing of any such petition, or shall consent to the appointment
of an examiner, receiver or liquidator or trustee or assignee in
bankruptcy or insolvency of it or a substantial part or its property, or
shall make an assignment for the benefit of the creditors, or shall admit
in writing its inability to pay its debts generally as they become due,
or corporate or other action shall be taken by such Grantor in
furtherance of any of the aforesaid purposes, or (f) any Grantor or any
of its Subsidiaries shall default (i) in any payment of principal of or
interest on any other obligation for borrowed money in principal amount
of $50,000,000 or more, or any payment of any principal amount of
$50,000,000 or more under Hedging Agreements, in each case beyond any
period of grace provided with respect thereto, or (ii) in the performance
of any other agreement term condition contained in any such agreement
(other than Hedging Agreements), under which any such obligation in
principal amount of $50,000,000 or more is created, if the effect of such
default is to cause or permit the holder or holders of such obligation
(or trustee on behalf of such holder or holders) to cause such obligation
to become due prior to its stated maturity or to terminate its commitment
under such agreement; PROVIDED that this clause (f) shall not apply to
secured indebtedness that becomes due as a result of the voluntary sale
or transfer of the property or assets securing such indebtedness.
"Hedging Agreement" shall mean any interest rate protection
agreement, foreign currency exchange agreement, commodity price
protection agreement or other interest or currency exchange rate or
commodity price hedging arrangement.
"Investment Manager" shall mean, with respect to each Designated
Account, any investment manager appointed by the applicable Grantor to
manage investment decisions with respect to such Designated Account.
"Lien of this Agreement" shall mean the security interest granted
by this Agreement.
"Pledge Supplement" shall mean a supplement to this Agreement
setting forth such additional Designated Account(s) constituting
Collateral.
"Qualifying Securities" shall have the meaning set forth in
Section 2.2(a) hereof.
"Required Qualifying Securities" shall mean, at any time,
Qualifying Securities 90% of the market value of which (expressed as a
Dollar Equivalent Amount) is equal to, but not greater than, the sum of
the aggregate unreimbursed drawings under all Letters of Credit
(determined as a Dollar Equivalent Amount) at such time and the aggregate
undrawn availability under all Letters of Credit at such time.
"Secured Obligations" shall mean, collectively, (i) all
obligations (whether or not constituting future advances) from time to
time of XL Re to the Bank under or in connection with either
Reimbursement Agreement, (ii) all obligations from time to time of any
Grantor to the Bank under or in connection with this Agreement, in each
case including all obligations to pay reimbursement obligations,
principal, interest, fees, indemnities or other amounts, and in each case
whether such obligations are direct or indirect, secured or unsecured,
joint or several, absolute or contingent, due or to become due, whether
for payment or performance, now existing or hereafter arising (including
interest and other obligations arising or accruing after the commencement
of any bankruptcy, insolvency, reorganization or similar proceeding with
respect to any Grantor or any other Person, or which would have arisen or
accrued but for the commencement of such proceeding, even if such
obligation or the claim therefor is not enforceable or allowable in such
proceeding) and (iii) all obligations from time to time of any Guarantor
in respect of the Guarantee Agreement.
"Supplemental Document" shall mean a supplement to this Agreement
in the form of Exhibit B hereto, executed by a Grantor for the purpose of
designating one or more securities accounts maintained by such Grantor
with the Custodian as Designated Accounts hereunder.
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Any Supplemental Document delivered under this Agreement may be delivered
by telecopier, with an original copy sent by regular mail.
"UCC" shall mean the Uniform Commercial Code as in effect in the
State of New York on the date hereof.
(b) CERTAIN CROSS-REFERENCES. The following terms are defined in
this Agreement in the Section or other place indicated: "Collateral" in Section
2.1; "Grantor", "Grantors" and "Guarantors" in the Preamble; "notices" in
Section 6.3; and "Reimbursement Agreements" in the Recitals.
1.2. UCC DEFINITIONS. Unless otherwise defined herein, terms
defined in Articles 8 or 9 of the UCC shall have the same meanings in this
Agreement.
ARTICLE II
THE SECURITY
2.1. GRANT OF SECURITY. (a) As security for the full and timely
payment and performance of the Secured Obligations, each Grantor hereby assigns
and pledges to the Bank, and grants to the Bank, a security interest in, all
right, title and interest of such Grantor in, to and under the following,
whether now or hereafter existing or acquired (the "Collateral"):
(i) the Designated Account with respect to such Grantor and each
security entitlement (as such term is defined in Section 8-102(a)(17) of
the UCC) from time to time credited to such Designated Account and all
financial assets (as such term is defined in Section 8-102(a)(9) of the
UCC) from time to time deposited therein;
(ii) all claims and rights of whatever nature which such Grantor
may now have or hereafter acquire against any third party(ies) in respect
of any of the Collateral described in this Section 2.1(a) (including any
claims or rights in respect of any security entitlements credited to an
account of the Custodian maintained at The Depository Trust Company or
any other clearing corporation) or any other securities intermediary (as
such terms are defined in Section 8-102(a) of the UCC);
(iii) all rights which such Grantor may now have or hereafter
acquire against the Custodian in respect of its holding and managing all
or any part of the Collateral; and
(iv) all proceeds (as such term is defined in Section 9-102(a) of
the UCC) of any of the foregoing.
(b) Concurrently with the execution of this Agreement, (i) each of
the Grantors will execute and deliver or cause to be delivered to the Bank a
Control and Consent Acknowledgment and Agreement Concerning Designated Accounts
for each Designated Account (collectively referred to herein as the "Custodian's
Acknowledgment") in the form attached as Exhibit A hereto and (ii) the Bank
hereby notifies XL Re that, simultaneously with the execution and delivery of
the Custodian's Acknowledgment and this Agreement and the grant of the security
interest hereunder, the security interest granted to the Bank pursuant to the
Security Agreement is terminated. The Custodian's Acknowledgment shall not be
amended, modified, revoked or withdrawn without the prior written consent of the
Bank.
(c) Each Grantor acknowledges that the Custodian is a securities
intermediary (as such term is defined in Section 8-102(a) of the UCC) for such
Grantor; each Grantor agrees with the Bank that notwithstanding any provision of
this Agreement or any other circumstance, the Bank shall have at all times
control (as defined in Section 8-106 of the UCC) of each Designated Account and
the Collateral, as confirmed in the Custodian's Acknowledgment, and shall be
authorized to direct the Custodian to comply with, and the Custodian shall
comply with, entitlement orders (as such term is defined in Section 8-102(a) of
the UCC) originated by the Bank with respect to the Collateral without further
consent of any Grantor or any Investment Manager or any other person acting or
purporting to act for such Grantor. The
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Bank agrees that such entitlement orders referred to in the first sentence of
this Section 2.1(c) will be issued by the Bank to the Custodian in respect of
the Collateral only (i) in connection with the Bank's exercise of remedies upon
the occurrence and continuation of an Event of Default or (ii) to the extent
necessary to prevent the withdrawal of Collateral from a Designated Account or
release of Collateral from the Lien of this Agreement if such withdrawal or
release would cause noncompliance with, or result in noncompliance with, the
Collateral Value Requirement.
(d) Each Grantor shall deliver, from time to time, to the Bank
(with a copy to the Custodian) a Pledge Supplement setting forth each additional
Designated Account, if any. Each Pledge Supplement, upon its delivery to the
Bank, shall be deemed to be incorporated in this Pledge Agreement. Any Pledge
Supplement delivered under this Agreement may be delivered by telecopier and
will be effective when so delivered, it being the intention of the parties that
an "ink" copy thereof will be sent (and the Grantors agree that they will send
such "ink" copy) promptly thereafter by regular mail or overnight courier.
2.2. COLLATERAL VALUE, ETC. (a) The Grantors shall maintain
Required Qualifying Securities at all times as security entitlements in the
Designated Accounts (the "Collateral Value Requirement"). The preceding sentence
shall not preclude any Grantor from maintaining in the Designated Accounts
Qualifying Securities or other securities or assets in excess of the Required
Qualifying Securities. Each Grantor agrees that only Qualifying Securities may
be counted towards the Collateral Value Requirement. "Qualifying Securities"
means securities in a Designated Account which are not subject to any security
interest or lien in favor of any person other than the security interest of the
Bank under this Agreement and the Custodian's Acknowledgment and which consist
of: (i) direct claims (including securities, loans and leases) on, and the
portions of claims that are directly and unconditionally guaranteed by, the
central government of any OECD country or any U.S. Government Agency, as such
terms are used in Appendix A, Section III(C), Category I to Regulation H, as
promulgated by the Board of Governors of the Federal Reserve System; and (ii)
claims on, and the portions of claims that are guaranteed by, U. S.
Government-sponsored agencies and claims on, and the portions of claims
guaranteed by, certain multilateral lending institutions in which the U. S.
government is a shareholder or contributing member or shares of money market
mutual funds investing solely in U.S. Government Securities, as such terms are
used in Appendix A, Section III(C), Category II to such Regulation H; provided,
however, that those securities or obligations referred to in clauses (i) and
(ii) above shall not be counted towards the Collateral Value Requirement unless
such securities or obligations have a zero percent risk capital weighting under
such Regulation H, as amended from time to time. If at any time the market value
of the Qualifying Securities is less than the Collateral Value Requirement, the
Grantors shall, within two Business Days of such occurrence, deliver to one or
more Designated Accounts Qualifying Securities sufficient to satisfy the
Collateral Value Requirement.
(b) In determining compliance by the Grantors with the Collateral
Value Requirement, the Bank may use any commercially reasonable valuation or
classification method determined by the Bank to be appropriate.
2.3. SUBSTITUTION AND WITHDRAWAL, ETC. (a) So long as no Event of
Default has occurred and is continuing, and the market value of the Qualifying
Securities satisfies the Collateral Value Requirement, any Grantor (other than
XL Re in the case of clause (v) below) may:
(i) substitute new Collateral for any existing Collateral,
PROVIDED that, after giving effect to any such substitution, any
substituted Collateral (together with other Collateral), satisfies the
Collateral Value Requirement and the substituted Collateral is
transferred to, or already maintained in, Designated Accounts;
(ii) to the extent not inconsistent with the other provisions of
this Agreement, trade, sell, exchange, lend or transfer from a Designated
Account any Collateral so long as the Grantors contemporaneously and
continually provide the Bank with such new or replacement Collateral as
may be necessary to satisfy the Collateral Value Requirement;
(iii) require the Bank to cause partial termination of the pledge
of Collateral to the extent that sufficient Collateral remains after
effecting such termination to satisfy the Collateral
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Value Requirement (such termination to be accomplished by execution and
delivery of a termination agreement signed on behalf of the applicable
Grantor and the Bank);
(iv) subject at all times to compliance with the Collateral Value
Requirement, receive and retain, free of all right, title and interest of
the Bank, all interest and dividend payments made in respect of the
Collateral and exercise any voting rights with respect thereto; and
(v) subject at all times to compliance with the Collateral Value
Requirement, by not less than three days' written notice to the Bank,
remove a securities account from the category of Designated Accounts,
whereupon any financial assets in such securities account shall no longer
be subject to the Lien of this Agreement.
(b) Whenever a Grantor substitutes new Collateral for existing
Collateral (such existing Collateral hereinafter referred to as "Replaced
Collateral") or causes the sale, exchange or transfer of, or causes the
termination of the pledge of, Collateral, in each case pursuant to and in
compliance with the foregoing provisions of Section 2.3(a) hereof, the Bank
shall be deemed to have released all right, title or interest in or to such
Replaced Collateral and such sold, exchanged, transferred or terminated
Collateral (and the proceeds thereof) arising hereunder. The sale, exchange or
transfer of Collateral in accordance with this Section 2.3(b) shall occur upon
the consummation of the sale or other transfer of ownership of such Collateral
by a Grantor to any third party or the consummation of a transfer of Collateral
from a Designated Account to another securities account maintained for such
Grantor.
(c) Upon payment and satisfaction in full of the Secured
Obligations and termination of the Reimbursement Agreements, the Bank shall
promptly release to the Grantors all of the Bank's right, title and interest in
or to the Collateral to the extent arising under or pursuant to this Agreement.
2.4. DELIVERY OF PROPERTY. In the event that a Grantor receives
any new securities, instruments, documents or other property by reason of
ownership of the Collateral (other than payments of a kind described in Section
2.3(a)(iv)), such Grantor shall promptly deliver all such property to the
Custodian, to be held by the Custodian in the Designated Accounts of such
Grantor as part of the Collateral. Promptly upon receipt thereof, each Grantor
agrees to deliver to the Bank all documents evidencing such property, together
with appropriate bond, stock or other powers duly executed by such Grantor.
2.5. INVESTMENT RISK AND TAXES. As between the Bank and the
Grantors, the Grantors shall bear the investment risk with respect to the
Collateral, and the risk of loss of, damage to, or the destruction of the
Collateral, whether in possession of, or maintained as a security entitlement
by, or subject to the control of, the Bank, the Custodian, a Grantor or another
party, PROVIDED, HOWEVER, that nothing contained in this Section 2.5 shall
release or relieve the Custodian of its duties and obligations to Grantors or
any other party under the Custody Agreement or applicable law. Further, the
Grantors shall promptly pay all taxes, fees and charges of whatever kind or
nature with respect to the Collateral, all other taxes payable by any Grantor
which, if unpaid, could become a charge against the Collateral, and any stamp
duty or tax payable with respect to this Agreement. If the Grantors do not make
such payments, then the Bank may (but is in no way obligated to) pay such
amounts for the account of the applicable Grantor and any such amounts paid will
be added to the amount of the Secured Obligations.
2.6. CONTINUING AGREEMENT. This Agreement creates a continuing
security interest in the Collateral and shall continue in full force and effect
until all Secured Obligations have been paid in cash and performed in full and
all Letters of Credit have terminated, subject in any event to reinstatement in
accordance with Section 2.9. Without limiting the generality of the foregoing,
each Grantor hereby irrevocably waives any right to terminate or revoke this
Agreement. Upon the payment in cash and performance in full of all Secured
Obligations and termination of all Letters of Credit, the security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
the applicable Grantor. Upon any such termination, the Bank will, at the
Grantors' request and expense, return to the applicable Grantor, without any
representations, warranties or recourse of any kind whatsoever, such of the
Collateral as then may be held by the Bank hereunder, and execute and deliver to
the applicable Grantor such documents as the such Grantor may reasonably request
to evidence such termination.
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2.7. RIGHTS AND INTERESTS OF BANK ABSOLUTE. The obligations of
each Grantor under this Agreement are independent of the Secured Obligations,
and a separate action or actions may be brought and prosecuted against any
Grantor regardless of whether action is brought against any other Grantor or any
other Person or whether any other Grantor or any other Person is joined in any
such action or actions. The security interest granted hereby shall secure
payment and performance of the Secured Obligations strictly in accordance with
the terms of hereof, regardless of any law, regulation or order now or hereafter
in effect in any jurisdiction affecting the Secured Obligations (or the rights
of the Bank or any other Person with respect thereto). The security interest of
the Bank hereunder shall be absolute, unconditional and irrevocable and all
other rights and interests of the Bank hereunder, and all obligations of each
Grantor hereunder, shall be absolute and irrevocable, irrespective of any of the
following:
(a) any lack of legality, validity, enforceability, allowability
(in a bankruptcy, insolvency, reorganization, dissolution or similar
proceeding, or otherwise), or any avoidance or subordination, in whole or
in part, of any of the Secured Obligations;
(b) any change in the amount, nature, time, place or manner of
payment or performance of, or in any other term of, any of the Secured
Obligations (specifically including any increase in the Secured
Obligations, whether resulting from the extension of additional credit or
otherwise);
(c) any taking, exchange, release, impairment or nonperfection of
any Collateral, or any taking, release, impairment or amendment or waiver
of or consent to departure from any guaranty or other direct or indirect
security for any of the Secured Obligations (it being understood that a
release of Collateral in accordance with the terms of this Agreement is
not rendered ineffective by reason of this Section 2.7(c));
(d) any manner of application of Collateral or other direct or
indirect security for any of the Secured Obligations, or proceeds
thereof, to any of the Secured Obligations, or any manner of sale or
other disposition of any Collateral for any of the Secured Obligations or
any other assets of any Grantor;
(e) any impairment by the Bank or any other Person of any recourse
of any Grantor against the Bank or any other Person, or any other
impairment by the Bank or any other Person of the suretyship status of
either Grantor;
(f) any bankruptcy, insolvency, reorganization, dissolution or
similar proceeding with respect to, or any change, restructuring or
termination of the corporate structure or existence of, any Grantor or
any other Person;
(g) any failure of the Bank or any other Person to disclose to any
Grantor any information pertaining to the business, operations, condition
(financial or otherwise) or prospects of the other Grantors or any other
Person, or to give any other notice, disclosure or demand; or
(h) any other event or circumstance (including any right of set
off, defense of failure of consideration, breach of representation or
warranty, statute of frauds, bankruptcy, lack of capacity, statute of
limitations, release, accord and satisfaction or usury, and excluding
only the defense of full, strict and indefeasible payment and
performance) that might otherwise constitute a defense available to, a
discharge of, or a limitation on the obligations of, any Grantor or a
guarantor or surety.
2.8. WAIVERS, ETC. Each Grantor hereby irrevocably waives any
defense to or limitation on its obligations under this Agreement arising out of
or based upon any matter referred to in Section 2.7 and, without limiting the
generality of the foregoing, any requirement of promptness, diligence or notice
of acceptance, any other notice, disclosure or demand with respect to any of the
Secured Obligations and this Agreement, any requirement of acceptance hereof,
reliance hereon or knowledge hereof by the Bank, and any requirement that the
Bank protect, secure, perfect or insure any lien or any property subject thereto
or exhaust any right or take any action against any other Grantor or any other
Person or any direct or indirect security for any of the Secured Obligations.
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2.9. REINSTATEMENT. This Agreement shall continue to be effective,
or be automatically reinstated, as the case may be, if at any time payment of
any of the Secured Obligations is avoided, rescinded or must otherwise be
returned by the Bank for any reason, all as though such payment had not been
made.
2.10. NO STAY. Without limiting the generality of any other
provision of this Agreement, if any acceleration of the time for payment or
performance of any Secured Obligation, or any condition to any such
acceleration, shall at any time be stayed, enjoined or prevented for any reason
(including stay or injunction resulting from the pendency against any Grantor or
any other Person of a bankruptcy, insolvency, reorganization, dissolution or
similar proceeding), each Grantor agrees that, for purposes of this Agreement
and its obligations hereunder, at the option of the Bank such Secured Obligation
shall be deemed to have been accelerated and such condition to acceleration
shall be deemed to have been met.
2.11. SUBROGATION, ETC. Any rights which any Grantor may have or
acquire by way of subrogation, reimbursement, restitution, exoneration,
contribution or indemnity, and any similar rights (whether arising by operation
of law, by agreement or otherwise), against any other Grantor or any other
Person, arising from the existence, payment, performance or enforcement of any
of the obligations of any Grantor under or in connection with this Agreement,
shall be subordinate in right of payment to the Secured Obligations, and such
Grantor shall not exercise any such rights until all Secured Obligations have
been paid in cash in full and all Letters of Credit shall have terminated. If,
notwithstanding the foregoing, any amount shall be received by any Grantor on
account of any such rights at any time prior to the time at which all Secured
Obligations shall have been paid in cash and performed in full and all Letters
of Credit shall have terminated, such amount shall be held by such Grantor in
trust for the benefit of the Bank, segregated from other funds held by such
Grantor, and shall be forthwith delivered to the Bank in the exact form received
by such Grantor (with any necessary endorsement), to be held as additional
Collateral. The forgoing will not, so long as no Event of Default has occurred
and is continuing, preclude any Grantor from receiving and retaining amounts
paid to it by a Person pursuant to a separate agreement between such Grantor and
such Person, which separate agreement provides to such Grantor no subrogation
rights under any document referred to herein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each Grantor hereby represents and warrants to the Bank as
follows:
3.1. TITLE. Such Grantor is the legal and beneficial owner of the
Collateral (other than the Collateral of which any other Grantor is the legal
and beneficial owner), free and clear of any lien, security interest, option or
other charge or encumbrance, except for the security interest under this
Agreement in favor of the Bank securing the Secured Obligations and the
Custodian's right of set-off described in Section 4 of the Custodian's
Acknowledgment. No effective financing statement or other item similar in
effect, and no control agreement, in each case covering any Collateral is or
will be on file in any recording office or otherwise in effect, except such as
may be filed or made in favor of the Bank relating to this Agreement.
3.2. VALIDITY, PERFECTION AND PRIORITY. This Agreement creates a
valid security interest in the Collateral in favor of the Bank securing the
Secured Obligations, which security interest has been duly perfected and is, and
will be, prior to all other liens, security interests, options or other charges
or encumbrances subject, however, to the Custodian's right of set-off described
in Section 4 of the Custodian's Acknowledgment. Except for the filing of this
Agreement with the Registrar of Companies in Bermuda and with the Irish
Registrar of Companies, no filing or other action is or will be necessary or
desirable to perfect or protect such security interest in favor of the Bank.
3.3. GOVERNMENTAL APPROVALS AND FILINGS. Other than the filing of
this Agreement with the Registrar of Companies in Bermuda and with the Irish
Registrar of Companies, no authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is or
will be necessary (a) for the grant by such Grantor of the security interest in
the Collateral
8
hereunder or for the execution, delivery or performance of this Agreement by
such Grantor, (b) to ensure the validity, perfection or priority of the security
interest in the Collateral granted hereunder, or (c) for the exercise by the
Bank of any of its rights or remedies hereunder, except as may be required in
connection with a disposition of Collateral constituting securities by laws
affecting the offering and sale of securities generally.
3.4. POWERS; ENFORCEABILITY; ETC. Such Grantor has, and will at
all times have, the necessary power to enable it to execute and deliver this
Agreement and perform the obligations expressed to be assumed by it under this
Agreement and its execution, delivery and performance of this Agreement do not
violate its charter or by-laws or any applicable law or regulation or any
contract or agreement to which it is a party. This Agreement constitutes the
legal, valid and binding obligation of such Grantor, enforceable in accordance
with its terms, except that (A) the enforceability thereof may be subject to
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights or remedies generally and (B) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and the discretion of the court before which any proceeding
therefor may be brought.
3.5. NAMES, ETC. During the one year period ending on the date
hereof, no Grantor nor any of its direct or indirect predecessors by merger,
consolidation or other corporate reorganization is or has been known by or used
any corporate or fictitious name or trade name (other than the corporate name of
such Grantor as of the date hereof and other than, in the case of XL
Investments, the name "X.L. Investments Ltd.", other than, in the case of XL
Europe the name "XL Europe" and "X.L. Europe Insurance", other than, in the case
of XL Insurance, the name "XL Insurance Ltd" and other than, in the case of XL
Re, the names "X.L. Mid Ocean Reinsurance Company Ltd" and the name "X.L. Global
Reinsurance Company, Ltd."), nor has such Grantor or any such predecessor been
the subject of any merger, consolidation or other corporate reorganization, nor
has such Grantor or any such predecessor otherwise changed its name (except as
aforesaid), identity or corporate structure.
3.6. MARGIN STOCK. None of the Collateral constitutes "margin
stock," as that term is used in Regulations T, U or X of the Board of Governors
of the Federal Reserve System, as amended from time to time.
ARTICLE IV
COVENANTS
4.1. BOOKS AND RECORDS. Each Grantor shall, and shall cause the
Custodian to (a) keep complete and accurate books and records concerning the
Collateral and, at the request of the Bank from time to time, permit the Bank or
its representatives to inspect and copy such books and records, (b) at the
request of the Bank from time to time, permit the Bank or its representatives to
inspect any Collateral not in the possession of the Bank, and (c) furnish to the
Bank such information and reports in connection with the Collateral at such
times and in such form as the Bank may reasonably request. The Bank shall have
the right to examine and verify the Collateral from time to time, and such
Grantor shall, and shall cause the Custodian to, cooperate with the Bank in such
examination.
4.2. TRANSFERS AND OTHER LIENS.
(a) TRANSFERS. No Grantor shall sell, assign, transfer or
otherwise dispose of any Collateral (voluntarily or involuntarily, by operation
of law or otherwise), except as permitted by Section 2.3 hereof.
(b) OTHER LIENS. No Grantor shall create or permit to exist any
lien, security interest, option or other charge or encumbrance on any Collateral
(voluntarily or involuntarily, by operation of law or otherwise), except for the
security interest under this Agreement in favor of the Bank securing the Secured
Obligations and the Custodian's right of set-off described in Section 4 of the
Custodian's Acknowledgment.
9
4.3. CHANGE IN NAME, OFFICE, ETC. Each Grantor shall (a) not,
without at least 30 days prior written notice to the Bank, have, use or be known
by any corporate or fictitious name or trade name (other than its corporate name
as of the date hereof), nor be the subject of any merger, consolidation or other
corporate reorganization, nor otherwise change its name, identity or corporate
structure, (b) give 30 days notice to the Bank of any change in its chief
executive office (which on the date hereof is with respect to XL Europe, La
Touche House, International Financial Services Centre, Dublin 1, Republic of
Ireland, and, with respect to XL Re, XL Insurance and XL Investments, XL House,
One Bermudiana Road, Hamilton HM11 Bermuda) and the offices (whether maintained
by such Grantor or otherwise) where books and records relating to the Collateral
are kept (which on the date hereof are such Grantor's office at the aforesaid
address and the office of the Custodian at One Mellon Bank Center, Pittsburgh,
PA 15258) and (c) with respect to XL Investments, XL Insurance and XL Re,
maintain its jurisdiction of incorporation and its chief executive office in
Bermuda and with respect to XL Europe, maintain its jurisdiction of
incorporation and its chief executive office in Ireland.
4.4. CERTAIN COVENANTS.
(a) VOTING RIGHTS.
(i) GENERAL. Subject to Section 4.4(a)(ii), each Grantor shall be
entitled to exercise all voting and other consensual rights pertaining to the
Collateral; provided, that no Grantor shall exercise or refrain from exercising
any such right if such action would (A) conflict with any provision of this
Agreement, or (B) impair the value of any Collateral or impair the interest or
rights of any Grantor or the Bank.
(ii) CERTAIN RIGHTS OF BANK. If an Event of Default has occurred
and is continuing, the Bank may from time to time give notice to the Grantors
revoking in whole or in part the rights of the Grantors under Section 4.4(a)(i).
If and to the extent such notice has been given, all voting and other consensual
rights pertaining to the Collateral shall thereupon be vested in the Bank, who
shall thereafter have the sole right to exercise or refrain from exercising such
rights.
(iii) PROXIES, ETC. The Bank shall, if necessary, execute and
deliver to the Grantors such proxies and other instruments as the Grantors may
reasonably request for the purpose of enabling each Grantor to exercise the
voting and other consensual rights which it is entitled to exercise pursuant to
Section 4.4(a)(i). Each Grantor hereby grants the Bank an irrevocable proxy,
with full power of substitution, coupled with an interest, to exercise all
voting and other consensual rights pertaining to the Collateral, exercisable if
and to the extent that the Bank is entitled to exercise such rights pursuant to
Section 4.4(a)(ii). All third parties are entitled to rely conclusively on a
representation by the Bank that it is entitled to exercise such power of
attorney.
(b) DISTRIBUTIONS.
(i) GENERAL. Subject to Section 4.4(b)(ii), the Grantors shall be
entitled to receive and retain all Distributions.
(ii) CERTAIN RIGHTS OF BANK. If an Event of Default has occurred
and is continuing, all rights of any Grantor to receive and retain the
Distributions that it would otherwise be authorized to receive and retain
pursuant to Section 4.4(b)(i) shall automatically cease, and all such rights
shall thereupon vest in the Bank. Such Distributions shall be Collateral, and
shall be forthwith delivered to the Custodian to hold as such.
(iii) PAYMENT OVER. If any Grantor receives any payment or
property which, pursuant to Section 4.4(b)(ii), it is not entitled to retain,
such payment or property shall be received in trust for the benefit of the Bank,
shall be segregated from other funds and property of such Grantor, and shall be
forthwith delivered to the Custodian as Collateral in the same form as so
received (with any necessary endorsement).
10
4.5. FURTHER ASSURANCES.
(a) GENERAL. Each Grantor shall from time to time, at its expense,
promptly execute and deliver all further instruments and agreements, and take
all further actions, that may be necessary or appropriate, or that the Bank may
reasonably request, in order to perfect or protect any assignment, pledge or
security interest granted or purported to be granted hereby or to enable the
Bank to exercise or enforce its rights and remedies hereunder. Without limiting
the generality of the foregoing, each Grantor will execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as the Bank may
request, in order to perfect and preserve any assignment, pledge or security
interest granted or purported to be granted hereby.
(b) FILINGS, ETC. Each Grantor hereby authorizes the Bank to file
this Agreement with the Registrar of Companies in Bermuda and the Irish
Registrar of Companies and to file one or more financing or continuation
statements, and amendments thereto, relating to any Collateral without the
signature of such Grantor where permitted by law. A photocopy or other
reproduction of this Agreement or any financing statement covering any
Collateral shall be sufficient as a financing statement or other filing required
to perfect a security interest in the Collateral where permitted by law, it
being understood that the filing of an original of this Agreement or a certified
copy thereof with the Registrar of Companies in Bermuda and the Irish Registrar
of Companies is required to perfect the security interest granted hereunder.
ARTICLE V
CERTAIN RIGHTS AND REMEDIES OF THE BANK
5.1. BANK MAY PERFORM. If any Grantor fails to perform any
obligation under or in connection with this Agreement, the Bank may itself
perform or cause performance of such obligation, and the expenses of the Bank
incurred in connection therewith shall be payable by the Grantors pursuant to
Section 6.4. The Bank may from time to time take any other action which the Bank
deems necessary or appropriate for the maintenance, preservation or protection
of any of the Collateral or of its security interest therein.
5.2. NO DUTY TO EXERCISE POWERS. The powers of the Bank under and
in connection with this Agreement are solely to protect its interest in the
Collateral and shall not impose any duty upon it to exercise any such powers.
5.3. DUTIES OF BANK. Except for exercise of reasonable care in the
custody and preservation of any Collateral in its possession and accounting for
moneys received by it pursuant to this Agreement, the Bank (in its capacity as
such) shall have no duty as to any Collateral. In any event the Bank (a) shall
have no duty to take any steps to preserve rights against prior parties or any
other rights pertaining to any Collateral, (b) shall have no duty as to
ascertaining or taking action with respect to calls, conversions, exchanges,
tenders, maturities or other matters pertaining to any Collateral, whether or
not the Bank has any knowledge of such matters, and (c) shall not be liable for
any action, omission, insolvency or default on the part of any agent or
custodian (other than the Bank) appointed by the Bank in good faith. The Bank
shall be deemed to have exercised reasonable care in the custody and
preservation of Collateral in its possession if it takes such action for such
purpose as the Grantors request in writing from time to time (but failure to
take any such action shall not in itself be deemed a failure to exercise
reasonable care or evidence of such failure). Subject only to the performance by
the Bank of its duties set forth in this Section 5.3, risk of loss, damage and
diminution in value of the Collateral, of whatever nature and however caused,
shall be on the Grantors.
5.4. REMEDIES. Upon the occurrence of an Event of Default, the
Bank shall have all the rights and remedies available to it under law or at
equity, including those of a secured party under the UCC (whether or not, to the
extent permitted by applicable law, the UCC is in effect in the jurisdiction
where the rights and remedies are asserted) or applicable commercial or other
law, and may immediately exercise any and all such rights and remedies whether
or not the Bank has made any demand of the Grantors, taken any action of any
nature against the Grantors or resorted to any other collateral which the Bank
may have with respect to the Secured Obligations, all as the Bank shall, in its
sole discretion,
11
determine. Upon the occurrence of an Event of Default, the Bank shall have the
right to cause the Collateral to be reregistered in the Bank's sole name or the
name of it's nominee and shall have the right, to the fullest extent permitted
by applicable law, to direct the Custodian to sell all or any part of the
Collateral in a commercially reasonable manner upon any exchange or at any
public or private sale at the option of the Bank at any time or times without
advertisement or demand or notice to the Grantors (all of which are hereby
waived), except such notice as is required by applicable statute and cannot be
waived; with the right on the part of the Bank or its nominee to become the
purchaser thereof at any such sale (unless prohibited by statute). Without
limiting the generality of the foregoing, it is contemplated that the Bank will
use good faith efforts to refrain from causing the Custodian to liquidate
substantially more securities constituting Collateral than the Bank determines
or estimates are necessary to generate the cash amounts referred to in the
second sentence of Section 5.6 hereof, it being understood that, without
limiting the generality of Section 5.3 or the preceding sentence, the Bank shall
have no obligation or liability to any Grantor on account of liquidations of
such securities yielding proceeds in excess of such cash amounts and the Bank
shall not have responsibility to marshal assets or otherwise refrain from
exercising its sole and absolute discretion in determining when to sell
Collateral and which Collateral to sell. If any notification of intended sale of
any of the Collateral is required by law, such notification shall be deemed
reasonable if made in accordance with Section 6.3 hereof at least five days
before such sale. It is understood that the Bank may cause the Custodian to
dispose of the Collateral or any of it through any of the Bank's securities
brokerage affiliates. The Bank shall be deemed to have exercised reasonable care
in the custody and preservation of the Collateral if the Collateral is accorded
treatment substantially equal to that which the Bank accords its own property,
it being understood that the Bank shall not have any responsibility for taking
any necessary steps to preserve rights against parties with respect to the
Collateral. In no event shall the Bank be deemed a trustee of or fiduciary in
respect of the Collateral. The proceeds of each collection, sale or other
disposition under this Section 5.4 shall be promptly applied in accordance with
Section 5.6 hereof. Each of the Grantors recognizes that, by reason of certain
prohibitions contained in the Securities Act of 1933, as amended, and applicable
state securities laws, the Bank may be compelled, with respect to any sale of
all or any part of the Collateral, to limit purchasers to those who will agree,
among other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof.
5.5. APPOINTMENT OF BANK AS ATTORNEY-IN-FACT. Each Grantor hereby
appoints and constitutes the Bank, its successors and assigns, as such Grantor's
agent and attorney-in-fact for the purpose of effecting, perfecting, and
continuing the grant of security interest in the Collateral to the Bank under
this Agreement and the exercise of the Bank's rights and remedies upon the
occurrence of an Event of Default hereunder and taking any action or executing
any document or instrument that the Bank deems necessary or convenient for such
purpose, including the power to endorse and deliver checks, notes and other
instruments for the payment of money in the name of and on behalf of such
Grantor, to endorse and deliver in the name of and on behalf of such Grantor
securities or other certificates and execute and deliver in the name of or on
behalf of such Grantor instruments to the issuers of uncertificated securities
and to execute and file in the name of and on behalf of such Grantor financing
statements, mortgages, charges or similar documents and continuations and
amendments thereto. This appointment is coupled with an interest and is
irrevocable and will not be affected by the bankruptcy or insolvency of such
Grantor or any circumstances whatsoever. Each Grantor agrees that the Custodian,
each Investment Manager, the issuers of any Collateral or any registrar or
transfer agent shall be entitled to accept the provisions hereof as conclusive
evidence of the Bank's rights to effect any transfer pursuant to this Agreement
and the authority granted to the Bank hereunder, notwithstanding any other
notice as direction to the contrary heretofore or hereinafter given by such
Grantor or any other party.
5.6. APPLICATION OF PAYMENTS. All cash held by the Bank as
Collateral and all cash proceeds received by the Bank in respect of any sale of,
collection from, or other realization upon any of the Collateral, may in the
discretion of the Bank be held by the Bank as collateral for the Secured
Obligations, or then or at any time thereafter applied (after payment of any
amounts payable to the Bank pursuant to Section 6.4) in whole or part by the
Bank to the Secured Obligations (whether or not then due) in such order as the
Bank may elect, but not in contravention of the express terms hereof. If and
when all Secured Obligations shall have been paid in cash in full and all
Letters of Credit shall have terminated, any surplus of such cash or cash
proceeds held by the Bank shall be paid over to the Grantors or as otherwise
required by law. If the proceeds of sale, collection or other realization of or
upon the Collateral pursuant to this Section 5.6 hereof are insufficient to
cover the costs and expenses of such
12
realization and the payment in full of the Secured Obligations, the Grantors
shall remain liable for any deficiency.
ARTICLE VI
MISCELLANEOUS
6.1. AMENDMENTS, ETC. No amendment to or waiver of any provision
of this Agreement, and no consent to any departure by any Grantor herefrom,
shall in any event be effective unless in a writing manually signed by the Bank.
Any such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
6.2. NO IMPLIED WAIVER; REMEDIES CUMULATIVE. No delay or failure
of the Bank in exercising any right or remedy under this Agreement shall operate
as a waiver thereof; nor shall any single or partial exercise of any such right
or remedy preclude any other or further exercise thereof or the exercise of any
other right or remedy. The rights and remedies of the Bank under this Agreement
are cumulative and not exclusive of any other rights or remedies available
hereunder, under any other agreement, at law, or otherwise.
6.3. NOTICES. Unless otherwise specified in this Agreement,
notices shall be in writing and shall be effective, if to a Grantor, when
received by such Grantor c/o XL Capital Ltd. at XL House, One Bermudiana Road,
Hamilton HM11, Bermuda Attn: General Counsel and, if to the Bank, when received
at 388 Greenwich Street, 22nd Floor, New York, NY 10013 Attn: Mike Taylor, or,
in any case, such other address as the Bank, on the one hand, or any of the
Grantors, on the other hand, may notify the other in writing. The Grantors and
the Bank further agree that, if any notice given by a party triggers an
obligation on the part of the party receiving the notice which requires an
affirmative action to be taken by such receiving party within five Business Days
of the receipt of such notice, then such notice shall be given by telecopier.
6.4. INDEMNITY AND EXPENSES.
(a) INDEMNITY. Each Grantor agrees, jointly and severally, to
indemnify the Bank from and against any and all claims, losses, liabilities and
expenses (including reasonable attorney's fees and expenses) arising out of or
resulting from this Agreement (including, without limitation, enforcement of
this Agreement), except claims, losses, liabilities and expenses resulting
solely from the gross negligence or willful misconduct of the Bank.
(b) EXPENSES. Each Grantor agrees, jointly and severally, to pay
upon demand to the Bank the amount of all reasonable fees and expenses,
including the reasonable fees and expenses of its counsel (which, in any event,
shall be limited to one counsel in any one jurisdiction) and of any experts and
agents, which the Bank may incur in connection with (i) the administration of
this Agreement, (ii) any Event of Default and any enforcement or collection
proceeding resulting therefrom, including, without limitation, all manner of
participation in or other involvement with (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, or any actual
or attempted sale, or any exchange, enforcement, collection, compromise or
settlement in respect of any of the Collateral, and for the care of the
Collateral and defending or asserting rights and claims of the Bank in respect
thereof, by litigation or otherwise, (y) judicial or regulatory proceedings and
(z) workout, restructuring or other negotiations or proceedings (whether or not
the workout, restructuring or transaction contemplated thereby is consummated),
(iii) the enforcement of this Section 6.4 or (iv) the failure by any Grantor to
perform or observe any of the provisions hereof; PROVIDED that the Grantors
shall not be liable for any fees and expenses resulting solely from the gross
negligence or willful misconduct of the Bank. All such fees and expenses shall
be Secured Obligations entitled to the benefits of the collateral security
provided pursuant to Section 2.1 hereof. Without limiting the foregoing, the
Grantors shall pay and reimburse the Bank on demand for all reasonable fees and
expenses incurred by them in liquidating the Collateral pursuant hereto.
13
6.5. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior and contemporaneous understandings and agreements.
6.6. SURVIVAL. The obligations of each Grantor under Sections 2.5,
2.9 and 6.4 shall survive termination of this Agreement and all other events and
conditions whatever. All representations and warranties of the Grantors
contained in or made in connection with this Agreement shall survive, and shall
not be waived by, the execution and delivery of this Agreement, any
investigation by or knowledge of the Bank, any extension of credit, termination
of this Agreement, or any other event or circumstance whatever.
6.7. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all such
counterparts shall constitute but one and the same agreement.
6.8. SEVERABILITY. If any one or more of the provisions hereof or
in any other related document should for any reason be invalid, illegal, or
unenforceable in any respect, the validity, legality, or enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby, and such invalid, illegal, or unenforceable provision shall be
deemed modified to the extent necessary to render it valid while most nearly
preserving its original intent.
6.9. CONSTRUCTION. In this Agreement, unless the context otherwise
clearly requires, references to the plural include the singular, the singular
the plural, and the part the whole; the neuter case includes the masculine and
feminine cases; and "or" is not exclusive. In this Agreement, any references to
property (and similar terms) include an interest in such property (or other item
referred to); "include," "includes," "including" and similar terms are not
limiting; and "hereof," "herein," "hereunder" and similar terms refer to this
Agreement as a whole and not to any particular provision. Section and other
headings in this Agreement are for reference only and shall not affect the
interpretation of this Agreement in any respect. Section and other references in
this Agreement are to this Agreement unless otherwise specified.
6.10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
each Grantor and its successors and assigns, and shall inure to the benefit of
and be enforceable by the Bank and its successors and assigns.
6.11. SUCCESSOR CUSTODIAN. The Grantors may appoint a successor
Custodian upon no less than 60 days prior written notice to the Bank, which
successor Custodian shall become the Custodian for all purposes of this
Agreement upon establishing securities accounts which will become Designated
Accounts, receiving all Collateral required to be deposited to such securities
accounts and crediting such Collateral to such securities accounts; PROVIDED
that (i) such successor Custodian shall be an institution qualified to maintain
securities accounts for customers or depositors and to perform the functions of
a securities intermediary with respect to the Collateral, of recognized national
standing as a securities intermediary and custodian, and have a capitalization
of not less than $500,000,000, (ii) such successor Custodian shall have its
principal place of business in the United States, which principal place of
business shall be located in, and the securities accounts shall be maintained
in, a jurisdiction which has enacted the 1994 revisions to Article 8 and the
2000 revisions to Article 9 of the Uniform Commercial Code, (iii) such successor
Custodian shall have the ability to, and shall have agreed to, provide
electronic access to the Designated Accounts and/or valuation reports to the
Bank and the Grantors when requested to do so, which may be as frequently as
daily and (iv) such successor Custodian shall have entered into and provided a
custodian acknowledgment in favor of the Bank and such other agreements and
documentation which are reasonably required by the Bank, all in form and
substance reasonably satisfactory to the Bank; PROVIDED FURTHER that upon the
occurrence and during the continuance of an Event of Default, the Bank shall
have the absolute right at any time to appoint itself as successor Custodian. In
the event the Bank appoints itself as successor Custodian as set forth above,
(i) the Grantors shall cause the then current Custodian to transfer all
Collateral in the Designated Accounts at such time to such account(s) as the
Bank shall direct and (ii) the Grantors hereby acknowledge that the Collateral
shall continue to be subject to the security interest created hereby.
14
6.12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCLUSIVE OF
CHOICE OF LAW PRINCIPLES.
6.13. CONSENT TO JURISDICTION; SERVICE OF PROCESS. Each Grantor
irrevocably submits to the non-exclusive jurisdiction of any state or federal
court sitting in New York, New York, for itself and in respect of any of its
property and, if a law other than the law of the State of New York, has been
chosen to govern a Letter of Credit, each Grantor also irrevocably submits to
the non-exclusive jurisdiction of any state or federal court sitting in such
jurisdiction, in each case in connection with any suit, action or proceeding
relating to this Agreement or such Letter of Credit. Each Grantor agrees not to
bring any action or proceeding against the Bank in any jurisdiction not
described in the immediately preceding sentence. Each Grantor irrevocably waives
any objection to venue or any claim of inconvenient forum in connection with any
such action, suit or proceeding. Each Grantor agrees that any service of process
or other notice of legal process may be served upon it by mail or hand delivery
if sent to CT Corporation System at 111 Eighth Avenue, New York, NY 10016 which
the Grantors now designate as their authorized agent for the service of process
in the courts in the State of New York. (If no authorized agent is designated in
the space provided above, each Grantor agrees that process shall be deemed
served if sent to its address given for notices under this Agreement.) Each
Grantor agrees that nothing in this Agreement shall affect the Bank's right to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against any Grantor in any other jurisdiction.
Each Grantor agrees that final judgment against it in any action or proceeding
shall be enforceable in any other jurisdiction within or outside the United
States of America by suit on the judgment, a certified copy of which shall be
conclusive evidence of the judgment.
6.14. WAIVER OF IMMUNITY. To the extent any Grantor now has or
hereafter acquires any immunity from jurisdiction of any court or from suit,
jurisdiction, attachment before or after judgment or execution or from any other
legal process with respect to itself or its property, such Grantor irrevocably
waives such immunity with respect to its obligations under this Agreement.
6.15. SET-OFF. If any Event of Default shall occur and be
continuing, the Bank may set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Bank to or for the credit or the account
of any of the Grantors ("Deposits") against any and all of the Grantors'
obligations under this Agreement, irrespective of whether or not the Bank shall
have made any demand under this Agreement and although such Deposits or
obligations may be unmatured or contingent. The Bank's rights under this section
are in addition to other rights and remedies (including other rights of set-off)
which the Bank may have under this Agreement or applicable law.
15
IN WITNESS WHEREOF, each of the parties hereto has executed and
delivered this Agreement as of the date first above written.
XL INSURANCE (BERMUDA) LTD
By /s/ Christopher Coelho
------------------------------------------------
Name: Christopher Coelho
---------------------------------------------
Title: Senior Vice President & Chief Financial
--------------------------------------------
Officer
--------------
XL RE LTD
By /s/ John Hume
------------------------------------------------
Name: John Hume
---------------------------------------------
Title: Executive Vice President & Chief Financial
--------------------------------------------
Officer
--------------
XL INVESTMENTS LTD
By /s/ Jerry de St. Paer
------------------------------------------------
Name: Jerry de St. Paer
---------------------------------------------
Title: Executive Vice President
--------------------------------------------
XL EUROPE LTD
By /s/ Fiona Muldoon
------------------------------------------------
Name: Fiona Muldoon
---------------------------------------------
Title: Chief Financial Officer
--------------------------------------------
CITIBANK, N.A.
By /s/ Michael A.L. Taylor
------------------------------------------------
Name: Michael A.L. Taylor
---------------------------------------------
Title: Director
--------------------------------------------
16