EXHIBIT 10.1
C L I F F O R D LIMITED LIABILITY PARTNERSHIP
C H A N C E
EXECUTION COPY
DATED AS OF
JUNE 25, 2004
PXRE REINSURANCE LTD.
AS BORROWER
BARCLAYS BANK PLC
AS ISSUER
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$100,000,000
LETTER OF CREDIT FACILITY AGREEMENT
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CONTENTS
CLAUSE PAGE
1. Definitions............................................................1
2. The Letter Of Credit Facility..........................................9
3. Change In Circumstances...............................................13
4. Conditions Precedent..................................................16
5. Representations And Warranties........................................18
6. Covenants.............................................................22
7. Defaults..............................................................26
8. Acceleration, Waivers, Amendments And Remedies........................28
9. General Provisions....................................................29
10. Set-Off...............................................................32
11. Benefit Of Agreement..................................................32
12. Notices...............................................................33
SCHEDULE 1 AUTHORIZED OFFICERS OF THE BORROWER...............................34
EXHIBIT A FORM OF LETTER OF CREDIT...........................................35
EXHIBIT B FORM OF LC APPLICATION.............................................37
EXHIBIT C FORM OF COMPLIANCE CERTIFICATE.....................................39
EXHIBIT D FORM OF ADJUSTED COLLATERAL VALUE CERTIFICATE......................40
SIGNATURES
THIS CREDIT AGREEMENT dated as of June 25, 2004
BETWEEN:
(1) PXRE REINSURANCE LTD., a corporation organized under the laws of Bermuda,
as Borrower; and
(2) BARCLAYS BANK PLC, as Issuer.
RECITALS:
(A) The Borrower has requested the Issuer to make available to the Borrower a
standby letter of credit issuance facility in the aggregate principal amount
of up to $100,000,000 to support the reinsurance of business of the Borrower
in the United States.
(B) The Issuer is willing to extend such standby letter of credit issuance
facility on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Issuer hereby
agree as follows:
1. DEFINITIONS
As used in this Agreement:
"ACCOUNT CONTROL AGREEMENT" means the Account Control Agreement dated June ,
2004 among the Borrower, the Issuer and the Custodian, or any other account
control agreement among the Borrower, the Issuer and a custodian approved by
the Issuer, as it may be amended, modified or restated and in effect from
time to time.
"ADJUSTED COLLATERAL VALUE" means the amount calculated as follows:
(i) OECD Government Bonds: 95% of market value;
(ii) MBS Securities: 90.9% of market value;
(iii) Corporate Bonds: 90.9% of market value; and
(iv) Cash: 100%
Notwithstanding the above, no more than 50% of the Adjusted Collateral Value
may be comprised of Corporate Bonds and no more than 10% of Adjusted
Collateral Value may be from any one corporate issuer or any Affiliate of
such corporate issuer.
"AFFILIATE" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person.
"AGGREGATE FACILITY LC COMMITMENT" means the commitment of the Issuer to
issue Facility LCs from time to time issued or outstanding under Clause 2
(The Letter of Credit Facility), in an aggregate amount not to exceed
$100,000,000 at any time outstanding, as such amount may be decreased from
time to time pursuant to the terms hereof.
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"AGREEMENT" means this credit agreement, as it may be amended, modified or
restated and in effect from time to time.
"AGREEMENT ACCOUNTING PRINCIPLES" means (x) with respect to the Borrower's
parent holding company, the U.S. generally accepted accounting principles as
in effect from time to time, (y) with respect to the Borrower, Bermuda
statutory accounting principles and (z) with respect to any Subsidiary, the
accounting principles which such Subsidiary is required by law or regulation
to apply to the preparation of its financial statements.
"AUTHORIZED OFFICER" means, with respect to the Borrower, any two of the
individuals, acting jointly, listed on Schedule 1 (Authorized Officers) as
such Schedule may be supplemented or modified from time to time by the
Borrower.
"BORROWER" means PXRE Reinsurance Ltd., a corporation organized under the
laws of Bermuda, and its successors and assigns.
"BUSINESS DAY" means a day (other than a Saturday or Sunday) on which banks
are open in London for the conduct of substantially all of their commercial
lending activities, interbank wire transfers can be made on the Fedwire
system and dealings in Dollars are carried on in the London interbank
market.
"CASH" means immediately available funds denominated in Dollars and credited
to an account in the name of the Borrower at the New York branch of the
Issuer and to which the Borrower is alone beneficially entitled and for so
long as the Issuer has a perfected security interest thereon under security
documents satisfactory to the Issuer.
"CEDING COMPANY" means an insurance or reinsurance company (including,
without limitation, any reinsurance or insurance company that is a
Wholly-Owned Subsidiary of the Borrower) that has, pursuant to an Insurance
Contract or a Reinsurance Contract with the Borrower, agreed with the
Borrower that the Borrower, as reinsurer, shall assume certain liabilities
of such insurance or reinsurance company under an Insurance Contract.
"CHANGE" is defined in Clause 3.2 (Changes in Capital Adequacy Regulations).
"CHANGE IN CONTROL" means the acquisition by any Person, or two or more
Persons acting in concert, of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 40% or more of the outstanding shares of voting
stock of the Borrower.
"CHANGE IN LAW" is defined in Clause 3.1 (Yield Protection).
"CLAUSE" means a numbered Clause of this Agreement, unless another document
is specifically referenced.
"CODE" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"COLLATERAL" means at any time Cash, OECD Government Bonds, MBS Securities
and Corporate Bonds.
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"COLLATERAL DOCUMENTS" means all agreements, instruments and other documents
now or hereafter executed and delivered by the Borrower pursuant to which
liens and security interests in collateral are granted to secure the
Obligations, including, without limitation, the Security Agreement, the
Account Control Agreement, the Custody Agreement, UCC-1 Financing
Statements, security documents securing a pledge over Cash in favor of the
Issuer and any documentation delivered pursuant to Clause 2.9 (Facility LC
Collateral Account) with respect to the Facility LC Collateral Account.
"COLLATERAL SHORTFALL AMOUNT" is defined in Clause 8.1 (Acceleration;
Facility LC Collateral Account).
"COMMITMENT" means the Facility LC Commitment.
"CONTINGENT OBLIGATION" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes
or is contingently liable upon, the obligation or liability of any other
Person, or agrees to maintain the net worth or working capital or other
financial condition of any other Person, or otherwise assures any creditor
of any other Person against loss, including, without limitation, any comfort
letter, operating agreement, take or pay contract or application for a
Facility LC or other Letter of Credit, but excluding the Reimbursement
Obligations, obligations in respect of the endorsement of instruments for
deposit or collection in the ordinary course of business, obligations in
respect of Insurance Contracts and Reinsurance Contracts issued or entered
into in the ordinary course of business and obligations in respect of the
extension of guaranties in the ordinary course of business to insureds of
the obligations of insurers under Insurance Contracts and Reinsurance
Contracts.
"CONTROLLED GROUP" means all members of a controlled group of corporations
or other business entities and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
of its Subsidiaries, are treated as a single employer under Section 414 of
the Code.
"CORPORATE BONDS" means debt securities issued by any corporate and which
are rated at least AA by S&P or Aa by Moody's and have a remaining term to
maturity of less than ten years.
"CREDIT DOCUMENTS" means this Agreement, the Facility LC Applications, the
Facility LCs, the Collateral Documents and the other documents and
agreements contemplated hereby and executed by the Borrower pursuant hereto
in favor of the Issuer, as amended, modified or supplemented from time to
time.
"CUSTODIAL ACCOUNT" means the investment securities account of the Borrower
maintained with the Custodian pursuant to the Custody Agreement into which
the Collateral (other than Cash) shall be deposited from time to time and
over which the Issuer has a perfected security interest under the Account
Control Agreement.
"CUSTODIAN" shall mean, initially, JP Morgan Chase and any successor thereto
approved by the Issuer.
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"CUSTODY AGREEMENT" means the Custody Agreement dated as of June , 2004
between the Borrower and JP Morgan Chase or any other custody agreement
between the Borrower and a Custodian approved by the Issuer, as it may be
amended, modified or restated and in effect from time to time.
"DEFAULT" means an event described in Clause 7 (Defaults).
"DOLLARS," "DOLLARS" and "$" each mean lawful money of the United States.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"EUROCURRENCY BASE RATE" means, with respect to any unpaid Reimbursement
Obligation for the relevant Interest Period, the rate per annum determined
by the Issuer by reference to the applicable British Bankers' Association
LIBOR rate for deposits in the applicable agreed currency (as reported by
Reuters, or if Reuters quotations are not available, as reported by
Bloomberg L.P., or if neither is available, as reported by another generally
recognized financial information service selected by the Facility Agent in
its reasonable discretion) as of 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period, and having a maturity equal
to such Interest Period; PROVIDED THAT, if no such British Bankers'
Association LIBOR rate is available to the Issuer, the applicable
Eurocurrency Base Rate for the relevant Interest Period shall instead be the
arithmetic mean (rounded in accordance with normal market practice) of the
rates as the rate at which the Issuer offers to place deposits in Dollars
with first-class banks in the London interbank market at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period, in the approximate amount of the Issuer's unpaid Reimbursement
Obligations and having a maturity equal to such Interest Period.
"EXCLUDED TAXES" means in the case of the Issuer, taxes imposed on its
overall net income, and franchise taxes imposed on it, in each case by:
(a) England and Wales;
(b) the jurisdiction in which the Issuer's principal executive office is
located; or
(c) any jurisdiction in which the Issuer is otherwise doing business.
"FACILITY LC" is defined in sub-clause 2.1.1 of Clause 2.1 (Issuance of
Facility LCs).
"FACILITY LC APPLICATION" is defined in Clause 2.2 (Notice).
"FACILITY LC COLLATERAL ACCOUNT" is defined in Clause 2.9 (Facility LC
Collateral Account).
"FACILITY LC COMMITMENT" means for the Issuer, the obligation to issue
Facility LCs in accordance with the terms hereof.
"FACILITY LC OBLIGATIONS" means, at any time, the sum, without duplication,
of:
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(a) the aggregate undrawn stated amount under all Facility LCs outstanding
at such time; plus
(b) the aggregate unpaid amount at such time of all Reimbursement
Obligations.
"FANNIE MAE" means the Federal National Mortgage Association, a
quasi-government corporation, or any successor thereof.
"FINANCIAL STATEMENTS" is defined in Clause 5.5 (Financial Statements).
"FREDDIE MAC" means the Federal Home Loan Mortgage Corporation, a
quasi-government corporation, or any successor thereof.
"GOVERNMENTAL AUTHORITY" means any government (foreign or domestic) or any
state or other political subdivision thereof or any governmental body,
agency, authority, department or commission (including without limitation,
the Bermuda Monetary Authority, any board of insurance, insurance
department, insurance commission, taxing authority or political subdivision)
or any instrumentality or officer thereof (including without limitation any
court or tribunal) exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government and any
corporation, partnership or other entity directly or indirectly owned or
controlled by or subject to the control of any of the foregoing.
"GINNIE MAE" means the Government National Mortgage Association, a
quasi-government corporation, or any successor thereof.
"INSURANCE CONTRACT" means an insurance contract or Reinsurance Contract
entered into by a Ceding Company.
"INTEREST PERIOD" means a period of one month, or such other period as the
Issuer and the Borrower may agree, commencing on a Business Day on which a
Reimbursement Obligation commenced but was not immediately paid. Such
Interest Period shall end on the day which corresponds numerically to such
date one month or such other applicable period, thereafter; PROVIDED,
HOWEVER, THAT if there is no such numerically corresponding day in such next
succeeding month, or such other applicable period, such Interest Period
shall end on the last Business Day of such next succeeding month, or such
other applicable period. If an Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the next
succeeding Business Day; PROVIDED, HOWEVER, THAT if said next succeeding
Business Day falls in a new calendar month, such Interest Period shall end
on the immediately preceding Business Day.
"ISSUANCE DATE" means a date on which a Facility LC is issued, renewed or
amended hereunder.
"ISSUANCE REQUEST" is defined in Clause 2.2 (Notice).
"ISSUER" means Barclays Bank PLC, acting in each instance through a branch
or affiliate that qualifies as a financial institution for purposes of the
National Association of Insurance Commissioners credit for reinsurance
regulators.
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"LC FACILITY TERMINATION DATE" means the date falling 364 days after the
date of issuance of a Facility LC (as such date may be extended by amendment
hereto) or any earlier date on which the Aggregate Facility LC Commitment is
reduced to zero or otherwise terminated and/or the Facility LC Obligations
shall become due and payable in accordance with the provisions of this
Agreement.
"LC PAYMENT DATE" is defined in Clause 2.5 (Reimbursement by Borrower).
"LETTER OF CREDIT" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way
liable.
"LICENSE" means any license, certificate of authority, permit or other
authorization which is required to be obtained from any Governmental
Authority in connection with the operation, ownership or transaction of
insurance or reinsurance business.
"LIEN" means any lien (statutory or other) mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever having a similar effect (including, without limitation, the
interest of a vendor or lessor under any conditional sale, capitalized lease
or other title retention agreement).
"MATERIAL ADVERSE EFFECT" means a material adverse effect on:
(a) the business, Property, condition (financial or otherwise), prospects or
results of operations of the Borrower and its Subsidiaries taken as a
whole,
(b) the ability of the Borrower to perform its obligations under the Credit
Documents, or
(c) the validity or enforceability of any of the Credit Documents or the
rights or remedies of the Issuer thereunder.
"MATERIAL INDEBTEDNESS" means indebtedness in an outstanding principal
amount of $10,000,000 or more in the aggregate (or the equivalent thereof in
any currency other than Dollars).
"MATERIAL INDEBTEDNESS AGREEMENT" means any agreement or instrument under
which any Material Indebtedness was created, is evidenced or is governed.
"MBS SECURITIES" means mortgage-backed securities issued by any institution
(including Freddie Mac, Fannie Mae and Ginnie Mae) and which are rated at
least AAA by S&P or Aaa by Moody's and have a remaining term to maturity of
less than eight years.
"MODIFY" and "MODIFICATION" are defined in sub-clause 2.1.1 of Clause 2.1
(Issuance of Facility LCs).
"MOODY'S" means Moody's Investors Service, Inc. and any successor or
successors thereto.
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"MULTIEMPLOYER PLAN" means a "multiemployer plan" (as defined in Section
(3)(37) of ERISA) contributed to for any employees of the Borrower or any
Affiliate of the Borrower.
"OBLIGATIONS" means all unpaid principal and accrued and unpaid interest on
the Facility LC Obligations and all other liabilities, if any, whether
actual or contingent, of the Borrower with respect to Facility LCs, all
accrued and unpaid fees and all expenses, reimbursements, indemnities and
other obligations of the Borrower to the Issuer or any indemnified party
hereunder, in each case arising under any of the Credit Documents.
"OECD COUNTRY" means a country that (a) either (i) is a full member of the
Organization for Economic Cooperation and Development or (ii) has concluded
special lending arrangements with the International Monetary Fund's General
Arrangements to Borrow, and (b) has not rescheduled its external sovereign
debt within the previous five (5) years.
"OECD GOVERNMENT BONDS" means bonds issued by any OECD Country, political
subdivision or agency thereof which are rated at least AAA by S&P or Aaa by
Moody's and have a remaining term to maturity of less than eight years.
"OTHER TAXES" is defined in sub-clause 3.3.2 of Clause 3.3 (Taxes).
"PAYMENT DATE" means the last Business Day of each March, June, September
and December.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"PERSON" means any natural person, corporation, limited liability company,
firm, joint venture, partnership, association, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
"PLAN" means an employee pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of
the Code as to which any Credit Party or any member of the Controlled Group
may have any liability.
"PROPERTY" of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned,
leased or operated by such Person.
"REGULATION U" means Regulation U of the Board of Governors of the U.S.
Federal Reserve System as from time to time in effect and any successor
thereto or other regulation or official interpretation of said Board of
Governors relating to the extension of credit by banks for the purpose of
purchasing or carrying margin stocks applicable to member banks of the
Federal Reserve System.
"REIMBURSEMENT OBLIGATIONS" means, at any time, the aggregate of all
obligations of the Borrower then outstanding under Clause 2 (The Letter of
Credit Facility) to reimburse the Issuer for amounts paid by the Issuer in
respect of any one or more drawings under Facility LCs.
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"REINSURANCE CONTRACT" means a reinsurance contract between the Borrower, as
reinsurer, and a Ceding Company pursuant to which the Borrower, as
reinsurer, assumes certain liabilities of the Ceding Company with respect to
one or more Insurance Contracts and contracts of reinsurance arranged for
the benefit of the Borrower (i.e. reinsuring the borrower). For the
avoidance of doubt, Reinsurance Contracts shall include contracts described
in this definition which do not qualify as reinsurance contracts for
purposes of FAS 113. .
"RISK-BASED CAPITAL GUIDELINES" is defined in Clause 3.2 (Changes in Capital
Adequacy Regulations).
"S & P" means Standard & Poor's Rating Services, a division of the
McGraw-Hill Companies or any successor rating agency thereto acceptable to
the Issuer.
"SCHEDULE" refers to a specific schedule to this Agreement, unless another
document is specifically referenced.
"SECURITY AGREEMENT" means the Security Agreement dated as of June , 2004
between the Borrower and the Issuer, as it may be amended, modified or
restated and in effect from time to time.
"SENIOR FINANCIAL OFFICER" means any of the following officers of the
Borrower: Chief Financial Officer, Treasurer and Assistant Vice President
Finance.
"SINGLE EMPLOYER PLAN" means a Plan maintained by the Borrower or any member
of the Controlled Group for employees of the Borrower or any member of the
Controlled Group.
"SUBSIDIARY" of a Person means:
(a) any corporation more than 50% of the outstanding securities having
ordinary voting power of which shall at the time be owned or controlled,
directly or indirectly, by such Person or by one or more of its
Subsidiaries or by such Person and one or more of its Subsidiaries; or
(b) any partnership, association, joint venture, limited liability company
or similar business organization more than 50% of the ownership
interests having ordinary voting power of which shall at the time be so
owned or controlled. Unless otherwise expressly provided, all references
herein to a "Subsidiary" shall mean a Subsidiary of the Borrower.
"TAXES" means any and all present or future taxes, duties, levies, imposts,
deductions, charges or withholdings, and any and all liabilities with
respect to the foregoing, but excluding Excluded Taxes and Other Taxes.
"TRANSFEREE" is defined in Clause 11.2 (Dissemination of Information).
"UNENCUMBERED PROPERTY" means any combination of assets comprising Cash,
Corporate Bonds, MBS Securities, OECD Government Bonds and commercial paper
with a rating of at least A-1 or P-1, the aggregate value of which at any
given time amounts to no less than $25,000,000.
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"UNFUNDED LIABILITIES" means the amount (if any) by which the present value
of all vested and unvested accrued benefits under all Single Employer Plans
exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans using PBGC actuarial assumptions for single employer plan
terminations.
"UNMATURED DEFAULT" means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms. Any reference herein to a "Section"
or "Article" shall mean a Section or Article of this Agreement unless
explicitly provided to the contrary.
2. THE LETTER OF CREDIT FACILITY
2.1 ISSUANCE OF FACILITY LCS
2.1.1 The Issuer hereby agrees, on the terms and conditions set forth in
this Agreement, promptly to issue standby letters of credit
denominated in Dollars and substantially in the form of Exhibit A
(or in such other form as may be acceptable to the Issuer and the
Borrower) (each, a "FACILITY LC") and to renew, extend, increase,
decrease or otherwise modify each Facility LC ("MODIFY," and each
such action a "MODIFICATION"), from time to time from and including
the date of this Agreement and prior to the LC Facility Termination
Date upon the request of and for the account of the Borrower;
PROVIDED THAT:
(a) immediately after each such Facility LC is issued or Modified,
the aggregate amount of the outstanding Facility LC Obligations
shall not exceed the Aggregate Facility LC Commitment; and
(b) the initial face amount of any Facility LC shall not be less
than $1,000,000. No Facility LC shall have an expiry date later
than the earlier of (i) the one (1) year anniversary of the date
of issuance Facility LC or, as applicable, a Modification, (ii)
the Facility LC Termination Date and (iii) the date notified to
the Issuer pursuant to Section 9.14 of this Agreement.
(c) The Issuer acknowledges that, subject to the terms of this
Agreement, each issued Facility LC shall continue in force
unless the Issuer receives a notice from the Borrower no more
than ninety (90) days and at least seventy (70) days (or such
shorter time as the Issuer may agree in a particular instance)
prior to the anniversary of the issuance of such Facility LC or
Modification, as the case may be, that such Facility LC is to be
cancelled, effective upon the ensuing anniversary of the
issuance of such Facility LC or Modification. Notwithstanding
the foregoing, all outstanding Facility LCs shall automatically
expire on the LC Facility Termination Date.
2.1.2 The Issuer shall not be under any obligation to issue or extend any
Facility LC if any order, judgment or decree of any Governmental
Authority or other regulatory body with jurisdiction over the Issuer
shall purport by its terms to enjoin or restrain the Issuer from
issuing or extending such Facility LC, or any law or governmental
rule, regulation, policy, guideline or directive (whether or not
having the force of law) from any Governmental Authority or other
regulatory body with jurisdiction over the Issuer shall prohibit, or
request that the Issuer refrain from, the issuance or extension of
Facility LCs in particular or shall impose upon the Issuer with
respect to any Facility LC any restriction or reserve or capital
requirement (for which the Issuer is not otherwise compensated) or
any unreimbursed loss, cost or expense which was not applicable and
in effect with respect to the Issuer as of the date of this
Agreement and which the Issuer in good faith deems material to it.
The Issuer shall give the Borrower prompt written notice of its
determination at any time (and from time to time) to exercise its
rights to payment or indemnification under this Section 2.1.2 and a
description in reasonable detail of the event(s) described in this
Section 2.1.2 pursuant to which such rights are being exercised.
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2.1.3 Notwithstanding anything herein, the Borrower and the Issuer may
agree in writing between themselves as to administrative procedures
for the issuance of Facility LCs by the Issuer which are different
than those set forth herein, and such procedures shall govern as
between the Issuer and the Borrower.
2.1.4 Each Facility LC shall be issued by, and shall be an obligation of,
the Issuer.
2.2 NOTICE
Subject to Clause 2.1 (Issuance of Facility LCs), the Borrower shall,
through an Authorized Officer or authorized attorney in fact, give the
Issuer notice (an "ISSUANCE REQUEST") prior to 11:00 a.m. (London time)
at least two (2) Business Days prior to the proposed date of issuance or
Modification of each Facility LC, specifying the account party, the
beneficiary, the proposed date of issuance (or Modification) and the
expiry date of such Facility LC. If the Issuance Request requests the
issuance of a Facility LC, it shall be accompanied by a completed
standby letter of credit application substantially in the form of
Exhibit B (or such other form as from time to time is customarily
utilized by the Issuer) executed by the Borrower and related
documentation reasonably required by the Issuer (collectively, a
"FACILITY LC APPLICATION"). The issuance or Modification by the Issuer
of any Facility LC shall be subject to the conditions precedent set
forth in Clause 4 (Conditions Precedent) (the satisfaction of which the
Issuer shall have no duty to ascertain except with respect to
sub-clauses 4.2.3 of Clause 4.2 (Continuantion Conditions Precedent). In
the event of any conflict between the terms of this Agreement and the
terms of any Facility LC Application, the terms of this Agreement shall
control.
2.3 FACILITY LC FEES
The Borrower shall pay to the Issuer a letter of credit fee with respect
to each Facility LC for each day from and including the date of issuance
thereof until (and excluding) the date such Facility LC is fully drawn,
cancelled or expired (the "EXPIRY DATE") equal to 0.30% per annum
multiplied by the aggregate outstanding face amount thereof at the close
of business on such day, payable (in arrears) until the applicable
Expiry Date of such Facility LC on each Payment Date and, if any such
fees are accrued and unpaid on the LC Facility Termination Date, on such
date. Notwithstanding anything contained in this Clause 2.3 to the
contrary, during the continuance of a Default, the letter of credit fee
rate shall be increased to 2.00% per annum. The Borrower shall also pay
to the Issuer (i) until the earlier of such date as this Agreement
terminates or the obligation of the issuer to issue or Modify any
Facility LC terminates or is suspended (whether pursuant to Section
2.1.2 or Section 8.1 or otherwise), a facility fee on the average daily
amount equal to the difference between the Aggregate Facility LC
Commitment and the aggregate undrawn stated amount under all Facility
LCs outstanding from time to time, in an amount equal to 0.15% per
annum, such fee to be payable (in arrears) on each Payment Date and, if
any such fees are accrued and unpaid on the LC Facility Termination
Date, on such date; (ii) a one-time upfront fee equal to 0.075% per
annum of the Aggregate Facility LC Commitment, such fee to be payable
(in advance) on or before the date of execution of this Agreement; and
(iii) documentary and processing charges in connection with the issuance
or Modification of and draws under Facility LCs, in an amount separately
agreed upon between the Issuer and the Borrower in writing, payable at
the time of issuance of each Facility LC. Interest and fees under this
Agreement shall be calculated for actual days elapsed on the basis of a
360-day year. If any payment shall become due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business
Day and, in the case of a payment of a Reimbursement Obligation, such
extension of time shall be included in computing interest in connection
with such payment.
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2.4 ADMINISTRATION; REIMBURSEMENT BY LC PARTICIPANTS.
Upon receipt from the beneficiary of any Facility LC of any demand for
payment under such Facility LC, the Issuer shall promptly notify the
Borrower as to the amount to be paid by the Issuer as a result of such
demand and the proposed payment date thereof. The responsibility of the
Issuer to the Borrower shall be only to determine that the documents
(including each demand for payment) delivered under each Facility LC in
connection with such presentment shall be in conformity in all material
respects with such Facility LC.
2.5 REIMBURSEMENT BY BORROWER
(a) The Borrower shall be irrevocably and unconditionally obligated to
reimburse the Issuer for any amounts paid by the Issuer upon any
drawing under any Facility LC, without presentment, demand, protest
or other formalities of any kind, not later than 3:00 p.m. (London
time) on the second Business Day after the date notice of such
payment is transmitted to the Borrower in accordance with Clause
12.1 (Giving Notice) and confirmation of receipt is received or such
notice is otherwise received by the Borrower (such second Business
Day being the "LC PAYMENT DATE"); PROVIDED THAT any such notice that
is transmitted to the Borrower after 12:00 noon (London time) on any
Business Day shall be deemed to have been transmitted on the
immediately following Business Day.
(b) All such amounts paid by the Issuer and remaining unpaid by the
Borrower shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the sum of the Eurocurrency Base
Rate for such day plus 2.00% per annum.
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Such interest shall accrue from and including the date of the applicable
drawing (unless the drawing is reimbursed in full prior to 3:00 p.m.
(London time) on such date) to and including the date of payment (unless
such payment in full is made prior to 3:00 p.m. (London time) on such
payment date).
2.6 OBLIGATIONS ABSOLUTE
The Borrower's obligations under this Clause 2 shall be absolute and
unconditional under any and all circumstances and irrespective of any
setoff, counterclaim or defence to payment which the Borrower may have
or have had against the Issuer or any beneficiary of a Facility LC. The
Borrower further agrees with the Issuer that the Borrower shall not be
responsible for, and the Borrower's Reimbursement Obligation in respect
of any Facility LC shall not be affected by, among other things, the
validity or genuineness of documents or of any endorsements thereon,
even if such documents should in fact prove to be in any or all respects
invalid, fraudulent or forged, or any dispute between or among the
Borrower, the beneficiary of any Facility LC or any financing
institution or other party to whom any Facility LC may be transferred or
any claims or defences whatsoever of the Borrower against the
beneficiary of any Facility LC or any such transferee, provided,
however, that this Section 2.6 shall not limit any rights of the
Borrower under applicable law (including, without limitation, Section
5-109 of the Uniform Commercial Code in effect in the State of New
York). The Issuer shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any
message or advice, however transmitted (except for the Issuer's bad
faith, gross negligence or wilful misconduct) that, in connection with
any Facility LC; PROVIDED FURTHER, that the Borrower agrees that any
action taken or omitted by the Issuer under or in connection with each
Facility LC and the related drafts and documents, if done without bad
faith, gross negligence or wilful misconduct, shall be binding upon the
Borrower and shall not put the Issuer under any liability to the
Borrower.
2.7 ACTIONS OF ISSUER
The Issuer shall be entitled to rely, and shall be fully protected in
relying, upon any Facility LC, draft, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document believed by the Issuer
in good faith to be genuine and correct and to have been signed, sent or
made by the proper Person or Persons set forth on Schedule 1 (Authorized
Officers) attached hereto, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Issuer.
2.8 INDEMNIFICATION
The Borrower hereby agrees to indemnify and hold harmless the Issuer and
its directors, officers, agents and employees from and against any and all
claims and damages, losses, liabilities, reasonable costs or expenses which
the Issuer may incur (or which may be claimed against the Issuer by any
Person whatsoever) by reason of or in connection with the issuance,
execution and delivery or transfer of or payment or failure to pay under
any Facility LC or any actual or proposed use of any Facility LC,
including, without limitation, any claims, damages, losses, liabilities,
costs or expenses which the Issuer may incur by reason of or on account of
the Issuer issuing any Facility LC which specifies that the term
"BENEFICIARY" included therein includes any successor by operation of law
of the named Beneficiary, but which Facility LC does not require that any
drawing by any such successor Beneficiary be accompanied by a copy of a
legal document, satisfactory to the Issuer, evidencing the appointment of
such successor Beneficiary; PROVIDED THAT the Borrower shall not be
required to indemnify any such indemnitee for any claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent,
caused by (a) the bad faith, wilful misconduct or gross negligence of such
indemnitee (including officers and employees of such indemnities) or (b)
the Issuer's failure to pay under any Facility LC after the presentation to
it of a request strictly complying with the terms and conditions of such
Facility LC.
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2.9 FACILITY LC COLLATERAL ACCOUNT
The Borrower agrees that it will (to the extent required by Clause 8.1
(Acceleration; Facility LC Collateral Account), upon the request of the
Issuer and until the final expiration date of any Facility LC and
thereafter as long as any amount is payable to the Issuer in respect of any
Facility LC, maintain a special collateral account pursuant to
documentation (including, without limitation, legal opinions) reasonably
satisfactory to the Issuer (the "FACILITY LC COLLATERAL ACCOUNT") at the
Issuer's office at the address specified pursuant to Clause 12, in the name
of the Borrower but under the sole dominion and control of the Issuer and
in which the Borrower shall have no interest other than as set forth in
Clause 8.1 (Acceleration; Facility LC Collateral Account). The Borrower
hereby pledges, assigns and grants to the Issuer a security interest in all
of the Borrower's right, title and interest in and to all funds which may
from time to time be on deposit in the Facility LC Collateral Account to
secure the prompt and complete payment and performance of the Obligations.
2.10 REDUCTIONS IN AGGREGATE FACILITY LC COMMITMENT
2.10.1 The Borrower may permanently reduce the Aggregate Facility LC
Commitment in whole or in part in a minimum aggregate amount of
the lesser of (i) $25,000,000 (or any integral multiple of
$5,000,000 in excess thereof) and (ii) the total amount of the
unused Aggregate Facility LC Commitment, upon at least three (3)
Business Days' written notice to the Issuer, which notice shall
specify the amount of any such reduction; PROVIDED, HOWEVER, THAT
the amount of the Aggregate Facility LC Commitment may not be
reduced below the aggregate amount of the outstanding Facility LC
Obligations (and if, at any time, the aggregate outstanding
amount of the Facility LC Obligations exceeds the Aggregate
Facility LC Commitment, then the Issuer shall immediately deposit
an amount equal to such excess in the Facility LC Collateral
Account in accordance with Clause 8.1 (Acceleration; Facility LC
Collateral Account)).
3. CHANGE IN CIRCUMSTANCES
3.1 YIELD PROTECTION
If, after the date of this Agreement, the adoption of or any change in any
law or any governmental or quasi governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law), or any
change in the interpretation or administration thereof by any governmental
or quasi-governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by the
Issuer with any request or directive (whether or not having the force of
law) of any such authority, central bank or comparable agency (each of the
foregoing being a "CHANGE IN LAW"):
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3.1.1 subjects the Issuer to any Taxes, or changes the basis of taxation
of payments (except for Taxes covered by Clause 3.3 (Taxes) and
changes in the rate of tax on the overall net income of the
Issuer) to the Issuer in respect of its interest in the Facility
LCs or other amounts due it hereunder; or
3.1.2 imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit
extended by the Issuer; or
3.1.3 imposes any other condition the result of which is to increase the
cost to the Issuer of issuing in Facility LCs or reduces any
amount receivable by the Issuer in connection with any Facility
LC, or requires the Issuer to make any payment calculated by
reference to the amount of the Issuer Facility LCs issued or
interest received by it, in each case, by an amount reasonably
deemed material by the Issuer,
and the result of any of the foregoing is to increase the cost to the
Issuer of funding or maintaining its interest in the Facility LCs and its
Commitment or to reduce the return received by it in connection with its
interest in the Facility LCs and its Commitment, then, within five (5) days
of demand by the Issuer, the Borrower shall pay the Issuer such additional
amount or amounts as will compensate the Issuer for such increased cost or
reduction in amount received.
3.2 CHANGES IN CAPITAL ADEQUACY REGULATIONS
If the Issuer reasonably determines the amount of capital required or
expected to be maintained by the Issuer or any corporation controlling the
Issuer is increased as a result of a Change, then, within five (5) Business
Days of demand by the Issuer, the Borrower shall pay the Issuer the amount
necessary to compensate for any shortfall in the rate of return on the
portion of such increased capital which the Issuer reasonably determines is
attributable to this Agreement, its interest in the Facility LCs or its
obligation to issue Facility LCs hereunder (after taking into account the
Issuer's policies as to capital adequacy). "CHANGE" means (a) any change
after the date of this Agreement in the Risk Based Capital Guidelines, or
(b) any adoption of or change in any other law, governmental or
quasi-governmental rule, regulation, policy, guideline, interpretation, or
directive (whether or not having the force of law but in each instance
binding on the Issuer) after the date of this Agreement which affects the
amount of capital required to be maintained by the Issuer or corporation
controlling the Issuer. "RISK BASED CAPITAL GUIDELINES" means rules and
regulations applicable to the Issuer and promulgated by relevant
authorities implementing the July 1988 report of the Basle Committee on
Banking Regulations and Supervisory Practices entitled "International
Convergence of Capital Measurement and Capital Standards" (including,
without limitation, the Final Risk-Based Capital Guidelines of the Board of
Governors of the Federal Reserve System (12 CFR Part 208, Appendix A; 12
CFR Part 225, Appendix A) and the Final Risk-Based Capital Guidelines of
the Office of the Comptroller of the Currency (12 CFR Part 3, Appendix A)),
including transition rules and any amendments thereto adopted prior to the
date of this Agreement.
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3.3 TAXES
3.3.1 All payments by or on behalf of the Borrower to or for the account
of the Issuer hereunder shall be made free and clear of and
without deduction for any and all Taxes. If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum
payable hereunder to the Issuer, (a) the sum payable by the
Issuer shall be increased as necessary so that after making all
required deductions (including deductions applicable to
additional sums payable under this Clause 3.3) the Issuer
receives an amount equal to the sum it would have received had no
such deductions been made, (b) the Borrower shall make such
deductions, (c) the Borrower shall pay the full amount deducted
to the relevant authority in accordance with applicable law and
(d) the Borrower shall furnish to the Issuer the original copy of
a receipt evidencing payment thereof or other evidence of such
payment reasonably satisfactory to the Issuer within thirty (30)
days after such payment is made. The Borrower shall not be
required to increase any amounts payable to the Issuer's
hereunder with respect to any United States withholding Taxes to
the extent that such Taxes are imposed on the Issuer on the date
of this Agreement.
3.3.2 In addition, the Borrower hereby agrees to pay any present or future
stamp or documentary taxes and any other excise or property
taxes, charges or similar levies which arise from any payment
made hereunder or from the execution or delivery of, or otherwise
with respect to, any Credit Document ("OTHER TAXES").
3.3.3 The Borrower hereby agrees to indemnify the Issuer for the full
amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed on amounts payable under this Clause
3.3) paid by the Issuer as a result of its Commitment, its interest
in Facility LCs, or otherwise in connection with its participation
in this Agreement and any liability (including penalties, interest
and expenses) arising therefrom or with respect thereto. Payments
due under this indemnification shall be made within fifteen (15)
days of the date the Issuer makes demand therefor pursuant to Clause
3.4 (Issuer Statements); PROVIDED THAT the Issuer shall contest such
Taxes or Other Taxes and liabilities, at the Borrower's expense, if
(a) the Borrower furnishes to it an opinion of reputable tax counsel
acceptable to the Issuer to the effect that such Taxes or Other
Taxes and liabilities were wrongfully or illegally imposed and (b)
the Issuer determines in its sole good faith discretion that it
would not be disadvantaged or prejudiced in any manner as a result
of such contest.
3.3.4 If the Issuer receives a refund in respect of any Taxes or Other
Taxes as to which it has been indemnified by the Borrower or with
respect to which the Borrower has paid additional amounts pursuant
to sub-clause 3.3.1, it shall, within thirty (30) days from the date
of such receipt, pay over the amount of such refund to the Borrower,
net of all reasonable out-of-pocket expenses of the Issuer and
without interest (other than interest paid by the relevant
Governmental Authority with respect to such refund); PROVIDED THAT
the Borrower, upon the request of the Issuer, agrees to repay the
amount paid over to the Borrower (plus penalties, interest or other
reasonable charges) to the Issuer in the event the Issuer is
required to repay such refund to such Governmental Authority.
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3.4 ISSUER STATEMENTS AND NOTICES
3.4.1 To the extent reasonably possible, the Issuer shall designate an
alternate issuing office to reduce any liability of the Borrower to
the Issuer under Clause 3.1 (Yield Protection), Clause 3.2 (Changes
in Capital Adequacy Regulations) and Clause 3.3 (Taxes) so long as
such designation is not, in the judgment of the Issuer,
disadvantageous to the Issuer. The Issuer shall deliver a written
statement to the Borrower as to the amount due, if any, under Clause
3.1 (Yield Protection), Clause 3.2 (Changes in Capital Adequacy
Regulations) and Clause 3.3 (Taxes). Such written statement shall
set forth in reasonable detail the calculations upon which the
Issuer determined such amount and shall be binding on the Borrower
in the absence of manifest error. Unless otherwise provided herein,
the amount specified in the written statement of the Issuer shall be
payable on demand and in any event no later than within fifteen (15)
days after receipt by the Borrower of such written statement. The
obligations of the Issuer under Clause 3.1 (Yield Protection),
Clause 3.2 (Changes in Capital Adequacy Regulations) and Clause 3.3
(Taxes) shall survive payment of the Obligations and termination of
this Agreement.
3.4.2 The Issuer shall give the Borrower prompt written notice of its
determination at any time (and from time to time) to exercise its
rights to payment or indemnification under Clause 3.1 (Yield
Protection)or Clause 3.2 (Changes in Capital Adequacy Regulations)
and a description in reasonable detail of the event(s) described in
Clause 3.1 (Yield Protection) or Clause 3.2 (Changes in Capital
Adequacy Regulations) pursuant to which such rights are being
exercised.
3.5 FUNDING INDEMNIFICATION
If any payment of any default interest occurs on a date which is not the
last day of the applicable Interest Period the Borrower will indemnify the
Issuer for any loss or cost incurred by it resulting therefrom, including,
without limitation, any loss or cost in liquidating or employing deposits
acquired.
3.6 SURVIVAL
The agreements and obligations of the Issuer in this Clause 3 shall survive
the payment of the Obligations and termination of this Agreement.
4. CONDITIONS PRECEDENT
4.1 INITIAL EXTENSION OF CREDIT
The Issuer shall not be required to issue any Facility LC hereunder unless
the Borrower has furnished the following to the Issuer in a form
satisfactory to the Issuer and its counsel and the other conditions set
forth below have been satisfied:
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4.1.1 Charter Documents; Good Standing Certificates. Copies of the Clauses
or certificate of incorporation or other similar organizational
document of the Borrower, together with all amendments thereto, and
a good standing certificate (to the extent issued in the ordinary
course in the applicable jurisdiction) as of a recent date, each
certified by the appropriate governmental officer in its
jurisdiction of organization. 4.1.2 By-Laws and Resolutions. Copies,
certified by the Secretary or Assistant Secretary of the Borrower,
of its by-laws or other similar document and of resolutions of its
Board of Directors or other similar governing body (and resolutions
of other bodies, if any are deemed necessary by counsel for the
Issuer) authorizing the execution, delivery and performance of the
Credit Documents to which the Borrower is a party.
4.1.3 Incumbency Certificate. An incumbency certificate, executed by the
Secretary or Assistant Secretary of the Borrower, which shall
identify by name and title and bear the signature of the officers or
attorneys in fact of the Borrower authorized to sign the Credit
Documents to which it is a party and to request the issuance of
Facility LCs hereunder, upon which certificate the Issuer shall be
entitled to rely until informed of any change in writing by the
Borrower.
4.1.4 Officer's Certificate. A certificate, dated the date of this
Agreement, signed by an Authorized Officer of the Borrower, in form
and substance satisfactory to the Issuer, to the effect that: (a) on
the date of this Agreement (after giving effect to the issuance of
any Facility LCs hereunder) no Default or Unmatured Default has
occurred and is continuing; (b) each of the representations and
warranties set forth in Clause 5 (Representations and Warranties) of
this Agreement is true and correct in all material respects on and
as of the date of the Agreement (except to the extent such
representation and warranty is given as of a different specified
date); (c) on the date of this Agreement (both before and after
giving effect to this Agreement and the issuance of any Facility LCs
hereunder) the Borrower is not in breach of any borrowing limit
applicable to the Borrower; and (d) since 31 December 2003, no event
or change has occurred that has caused or evidences a Material
Adverse Effect with regard to the Borrower or its parent.
4.1.5 Legal Opinions. Written opinions of external Bermuda and New
York counsel to the Borrower, both addressed to the Issuer in form
and substance reasonably acceptable to the Issuer and its counsel.
4.1.6 Credit Documents. Executed originals of this Agreement and
each of the other Credit Documents, which shall be in full force and
effect, together with all schedules, exhibits, certificates,
instruments, documents and financial statements required to be
delivered pursuant hereto and thereto.
4.1.7 Regulatory Matters. Receipt of any required regulatory
approvals from any Governmental Authority with respect to the
transactions contemplated by the Credit Documents, including all
hearing orders, if any, issued by insurance regulatory authorities.
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4.1.8 Other. Such other documents as the Issuer or its counsel may
have reasonably requested, including any such information as the
Issuer may reasonably request to enable it to carry out and be
satisfied with the result of its "know your customer" checks.
4.2 CONTINUATION CONDITIONS PRECEDENT
The following conditions will be deemed to have been confirmed by the
Borrower on 31 December of each year and on each date of Modification or
issuance of a Facility LC (each such date, a "REPETITION DATE"):
4.2.1 there exists no Default or Unmatured Default and none would
result from such issuance or Modification of such Facility LC;
4.2.2 the representations and warranties (deemed to be made by
reference to the facts and circumstances existing on each Repetition
Date) contained in Clause 5 (Representations and Warranties) (other
than Clause 5.6 (Material Adverse Change), paragraph (a) of Clause
5.8 (Litigation and Contingent Obligations) and sub-clause 5.14.1 of
Clause 5.14 (Material Agreements)) are true and correct in all
material respects as of such Issuance Date except to the extent any
such representation or warranty is stated to relate solely to an
earlier date, in which case such representation or warranty shall be
true and correct on and as of such earlier date; and
4.2.3 with respect to the issuance of Facility LCs, an Issuance
Request shall have been properly submitted.
Each Issuance Request (with respect to each such Facility LC) shall
constitute a representation and warranty by the Borrower that the
conditions contained in Clause 4.2 (Continuantion Conditions Precedent)
have been satisfied.
5. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Issuer that on the date hereof:
5.1 CORPORATE EXISTENCE AND STANDING
The Borrower is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has
all requisite authority to conduct its business in each jurisdiction in
which its business is conducted.
5.2 AUTHORIZATION AND VALIDITY
The Borrower has all requisite power and authority and legal right to
execute and deliver each of the Credit Documents to which it is a party and
to perform its obligations thereunder. The execution and delivery by the
Borrower of the Credit Documents to which it is a party and the performance
of its respective obligations thereunder have been duly authorized by
proper corporate proceedings and the Credit Documents constitute legal,
valid and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally and general principles of equity.
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5.3 NO CONFLICT
Neither the execution and delivery by the Borrower of the Credit Documents,
nor the consummation of the transactions therein contemplated, nor
compliance with the provisions of the Credit Documents, including the
application of the proceeds of the Facility LCs, will violate any law,
rule, regulation, order, writ, judgment, injunction, decree or award
binding on the Borrower or any of its Subsidiaries or the Borrower's or any
of its Subsidiaries' Clauses or certificate of incorporation or by-laws or
the provisions of any indenture, instrument or agreement to which the
Borrower or any of its Subsidiaries is a party or is subject, or by which
it or its Property is bound, or conflict with or constitute a default
thereunder, or result in the creation or imposition of any Lien in, of or
on the Property of the Borrower or any of its Subsidiaries pursuant to the
terms of any such indenture, instrument or agreement. Neither the Borrower
nor any Subsidiary is subject to any charter or other corporate restriction
that would conflict with the terms or the intent of this Agreement.
5.4 GOVERNMENTAL CONSENTS
No order, consent, approval, license, authorization, or validation of, or
filing, recording or registration with, or exemption by, any Governmental
Authority is required to authorize, or is required in connection with the
execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, any of the Credit Documents, the application
of the proceeds of the Facility LCs or the consummation of any other
transaction contemplated by the Credit Documents except for those which
have been obtained and are in full force and effect.
5.5 FINANCIAL STATEMENTS
The 31 December 2003 audited financial statements of the Borrower and the
31 March 2004 unaudited financial statements of the Borrower heretofore
delivered to the Issuer (the "FINANCIAL STATEMENTS") were prepared in
accordance with Agreement Accounting Principles in effect on the date such
statements were prepared, consistently applied, and fairly present the
financial condition and operations of the Borrower at such dates and the
consolidated results of their operations for the periods then ended.
5.6 MATERIAL ADVERSE CHANGE
Since 31 December 2003, there has been no change in the business, Property,
condition (financial or otherwise), prospects or results of operations of
the Borrower and its Subsidiaries taken as a whole which could reasonably
be expected to have a Material Adverse Effect.
5.7 TAXES
The Borrower and its Subsidiaries have filed all material tax returns
(domestic or foreign) which are required to be filed and have paid all
taxes due pursuant to said returns or pursuant to any assessment received
by the Borrower or any of its Subsidiaries, except (a) such taxes, if any,
as are being contested in good faith and as to which, in the good faith
judgment of the Borrower, adequate reserves have been provided and (b)
taxes the failure of which to pay could not reasonably be expected to have
a Material Adverse Effect. Except for liens and claims of which the
executive officers of the Borrower are unaware or which are immaterial, no
tax liens have been filed and no claims against the Borrower or its
Subsidiaries are being asserted with respect to any such taxes except
claims being contested in good faith and as to which, in the good faith
judgment of the Borrower, adequate reserves have been provided. The
charges, accruals and reserves on the books of the Borrower and its
Subsidiaries in respect of any taxes or other governmental charges are
adequate in the good faith judgment of the Borrower.
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5.8 LITIGATION AND CONTINGENT OBLIGATIONS
Except as disclosed or filed by PXRE Group in any of its periodic public
filings or notices with the Securities and Exchange Commission, there is no
litigation, arbitration, governmental investigation, proceeding or inquiry
pending or, to the knowledge of any of their officers, threatened against
or affecting the Borrower or any of its Subsidiaries which could reasonably
be expected to (a) have a Material Adverse Effect or (b) prevent, enjoin or
unduly delay the issuance of Facility LCs under this Agreement. As of the
date hereof, the Borrower has no material Contingent Obligations not
provided for or disclosed in the Financial Statements.
5.9 SUBSIDIARIES
The Borrower does not have any Subsidiaries except PXRE Solutions, S.A., a
Belgian reinsurance intermediary.
5.10 ERISA
Neither the Borrower nor any Affiliate of the Borrower contributes to a
Multiemployer Plan and the only Single Employer Plan maintained by the
Borrower or any Affiliate thereof is the PXRE Reinsurance Company
Retirement Plan. The Single Employer Plan is in compliance in form and
operation with ERISA and the Code and all other applicable laws and
regulations save where any failure to comply would not reasonably be
expected to have a Material Adverse Effect, and there exists no Unfunded
Pension Liability with respect thereto, except as would not have a Material
Adverse Effect.
For the purposes of this Section 5.10, "CODE" means, at any date, the US
Internal Revenue Code of 1986 and the regulations promulgated and the
judicial and administrative decisions rendered under it, all as the same
may be in effect at such date; and "UNFUNDED PENSION LIABILITY" means the
excess of an Employee Plan's liabilities under Section 4001(a)(16) of
ERISA, over the current value of that plan's assets, determined in
accordance with the assumptions used for funding an Employee Plan pursuant
to Section 412 of the Code for the applicable plan year.
5.11 DEFAULTS
No Default or Unmatured Default has occurred and is continuing.
5.12 ACCURACY OF INFORMATION
No information, exhibit or report furnished by the Borrower or any of its
Subsidiaries to the Issuer in connection with the negotiation of, or
compliance with, the Credit Documents (as modified or supplemented by other
information so furnished) contained any material misstatement of fact,
omitted to state a material fact or omitted to state any fact necessary to
make the statements contained therein, in light of the circumstances under
which they were made, not misleading in any material respect; provided,
that with respect to projected financial information, the Borrower
represents only that such information was prepared in good faith upon
assumptions believed to be reasonable at the time prepared.
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5.13 REGULATION U
Margin stock (as defined in Regulation U) constitutes less than 25% of
those assets of the Borrower and its Subsidiaries which are subject to any
limitation on sale, pledge or other restriction hereunder. Neither the
Borrower nor any Subsidiary is engaged, directly or indirectly,
principally, or as one of its important activities, in the business of
extending, or arranging for the extension of, credit for the purpose of
purchasing or carrying margin stock. No part of any Facility LC, or the
proceeds thereof, will be used in a manner which would violate, or result
in a violation of, Regulation U.
5.14 MATERIAL AGREEMENTS
5.14.1 Neither the Borrower nor any Subsidiary is a party to any agreement
or instrument which could conflict with the Borrower's entry and
performance by it of, and the transactions contemplated by, this
Agreement except for (x) such agreements or instruments as are
disclosed or filed by PXRE Group in any of its periodic public
filings or notices with or to the Securities and Exchange Commission
or other public or governmental agencies and (y) Insurance
Contracts, Reinsurance Contracts and retrocessional contracts.
5.14.2 Neither the Borrower nor any Subsidiary is in default in the
performance, observance or fulfilment of any of the obligations,
covenants or conditions contained in any agreement to which it is a
party, which default could reasonably be expected to have a Material
Adverse Effect.
5.15 INSURANCE
The Borrower and each of its Subsidiaries maintain, with financially sound
and reputable insurance companies, insurance on their Property in such
amounts and covering such risks as is consistent with sound business
practice.
5.16 INSURANCE LICENSES
No material license, permit or authorization of the Borrower or any
material Subsidiary to engage in the business of insurance, reinsurance or
insurance-related activities is the subject of a proceeding for suspension
or revocation, except where such suspension or revocation would not
individually or in the aggregate have a Material Adverse Effect.
5.17 COMPLIANCE WITH LAWS
The Borrower and each of its Subsidiaries have complied with all applicable
statutes, rules, regulations, orders and restrictions of any domestic or
foreign government or any instrumentality or agency thereof, having
jurisdiction over the conduct of their respective businesses or the
ownership of their respective Property, except where the failure to so
comply could not reasonably be expected to have a Material Adverse Effect.
5.18 OWNERSHIP OF PROPERTIES
On the date of this Agreement the Borrower and each of its Subsidiaries
have good title to all of the Property and assets reflected in the
Financial Statements as owned by it, free of all Liens other than those
permitted by this Agreement, except for assets sold, transferred or
otherwise disposed of in the ordinary course of business since the date of
such Financial Statements.
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5.19 INVESTMENT COMPANY ACT
Neither the Borrower nor, to the extent such status would have a Material
Adverse Effect, any of its Subsidiaries, is an "investment company" which
is registered or required to be registered under the Investment Company Act
of 1940, as amended, or is "controlled" by an "investment company" which is
registered or required to be registered under such Act (all quoted terms in
this Clause 5.19 having the meaning ascribed to them by such Act).
5.20 PUBLIC UTILITY HOLDING COMPANY ACT
Neither the Borrower nor any of its Subsidiaries is a "holding company" or
a "subsidiary company" of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company",
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
5.21 PARI PASSU RANKING
The Borrower's payment obligations under this Agreement rank at least pari
passu with the claims of all its other unsecured and unsubordinated
creditors, except obligations mandatorily preferred by Bermuda insurance
law.
5.22 REPRESENTATION OF THE ISSUER
The Issuer confirms that the obligations expressed to be assumed by it
under this Agreement are valid and enforceable against it.
6. COVENANTS
While the Aggregate Facility LC Commitment remains outstanding and until
the payment in full of any outstanding Obligations (other than contingent
Obligations in respect of claims for indemnification) unless the Issuer
shall otherwise consent in writing:
6.1 FINANCIAL REPORTING
The Borrower will maintain a system of accounting established and
administered in accordance with Bermuda statutory accounting principles,
and the Borrower will furnish to the Issuer:
6.1.1 As soon as available, but, in any event, no later than within 120
days after the close of each of its fiscal years, an unqualified
audit report certified by independent certified public accountants,
reasonably acceptable to the Issuer, prepared in accordance with
Agreement Accounting Principles for the Borrower and, on a
consolidated basis, for the Borrower's parent company and its
consolidated Subsidiaries, including balance sheets as of the end of
such period, related profit and loss and reconciliation of surplus
statements, and a statement of cash flows.
6.1.2 As soon as available, but, in any event, no later than within 45
days after the end of each quarterly reporting period of each of its
fiscal years, for the Borrower and, on a consolidated basis, for the
Borrower's parent company and its consolidated Subsidiaries,
unaudited balance sheets as at the close of each such period and
consolidated profit and loss statements for the period from the
beginning of such fiscal year to the end of such period, all
certified by the senior financial officer or senior accounting
officer of the Borrower.
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6.1.3 Together with the financial statements required under sub-clause
6.1.1 and 6.1.2, a compliance certificate in substantially the form
of Exhibit C hereto signed by a Senior Financial Officer showing the
calculations necessary to determine compliance with this Agreement
and stating that no Default or Unmatured Default exists, or if any
Default or Unmatured Default exists, stating the nature and status
thereof.
6.1.4 Within five (5) Business Days after the end of each month (or at any
time while any Default (or breach of Clause 6.3 (Adjusted Collateral
Value)) is continuing), a certificate of a Senior Financial Officer,
substantially in the form of Exhibit D, as to (a) the aggregate fair
market value of all amounts deposited in the Facility LC Collateral
Account and the Custodial Account and (b) the Collateral Shortfall
Amount, if any, each as of the end of such month. In addition, the
Issuer shall receive all the information (or rights to access such
information) as set out in the Account Control Agreement, including,
in particular, Section 5 (Statements, Confirmations and Notices of
Adverse Claims) of the Account Control Agreement.
6.1.5 Such other information (including, without limitation, non financial
information) as the Issuer may from time to time reasonably request;
PROVIDED, HOWEVER, THAT the Borrower shall not be obligated to
provide information pursuant to this sub-clause 6.1.5 to the extent
that disclosure thereof is prohibited by any existing customary
confidentiality agreement restricting the dissemination of such
information.
6.2 USE OF FACILITY LCS
The Borrower will use the Facility LCs only to secure its
reinsurance-related obligations to Ceding Companies or third party
reinsurers in the ordinary course of business. The Borrower will not
request the issuance of any Facility LC, the proceeds of which are to be
used to purchase or carry any "margin stock" (as defined in Regulation U).
6.3 CERTAIN NOTICES
The Borrower will give prompt notice in writing to the Issuer of the
occurrence of any (i) Default or Unmatured Default and (ii) litigation,
arbitration, governmental investigation, proceeding or inquiry pending or
threatened against or affecting the Borrower that would need to be
disclosed or filed by PXRE Group in any of its periodic public filings or
notices with the Securities and Exchange Commission. Any such notice shall
state that it is given pursuant to this Clause 6.3 and describe in
reasonable detail the occurrence that is being notified.
6.4 CONDUCT OF BUSINESS
The Borrower will (a) carry on and conduct its business in the fields of
enterprise of insurance, reinsurance and financial services and similar and
ancillary activities, (b) do all things necessary to remain duly
incorporated, validly existing and in good standing in its jurisdiction of
formation, and (c) do all things necessary to renew, extend and continue in
effect all Licenses which may at any time and from time to time be
necessary to operate its insurance business in compliance with all
applicable laws and regulations (except where the failure to so comply
could not reasonably be expected to have a Material Adverse Effect). The
Borrower will not change its jurisdiction of domicile without the prior
written consent of the Issuer, which shall not be unreasonably withheld.
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6.5 TAXES
The Borrower will, and will cause each of its Subsidiaries to, pay when due
all taxes, assessments and governmental charges and levies upon it or its
income, profits or Property, except those which are being contested in good
faith by appropriate proceedings and with respect to which adequate
reserves have been set aside and those the failure of which to pay could
not reasonably be expected to have a Material Adverse Effect.
6.6 INSURANCE
The Borrower will, and will cause each of its Subsidiaries to, maintain
with financially sound and reputable insurance companies insurance on all
or substantially all of its Property, or shall maintain self-insurance, in
such amounts and covering such risks as is consistent with sound business
practice for Persons in substantially the same industry as such the
Borrower or such Subsidiary, and the Borrower will furnish to the Issuer
upon request full information as to the insurance carried.
6.7 COMPLIANCE WITH LAWS
The Borrower will, and will cause each of its Subsidiaries to, comply with
all laws, rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it may be subject (including, without
limitation, environmental laws), except where the failure to so comply
could not reasonably be expected to have a Material Adverse Effect.
6.8 MERGER
The Borrower will not, nor will it permit any Subsidiary to, merge or
consolidate with or into any other Person, except that (a) a Subsidiary may
merge with the Borrower or a Wholly Owned Subsidiary, (b) the Borrower and
any Subsidiary may merge or consolidate with or into any other Person
PROVIDED THAT either (1) the Borrower or such Subsidiary shall be the
continuing or surviving corporation or (2) such other Person shall be the
continuing or surviving corporation and agrees in writing to assume the
liabilities and rights of the Borrower (or such Subsidiary, as applicable)
under this Agreement, and in each instance after giving effect to such
merger or consolidation, no Default or Unmatured Default shall exist and
(c) a material Subsidiary may merge or consolidate with or into another
Person as a means of effecting a disposition otherwise permitted by this
Agreement.
6.9 SALE OF ASSETS
Neither the Borrower will, nor will it permit any of its Subsidiaries to,
lease, sell, transfer or otherwise dispose of, by one or more transactions
or series of transactions (whether related or not), all or a portion of its
Property to any other Person(s) except for:
6.9.1 sales, transfers and other dispositions of Property in the ordinary
course of business;
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6.9.2 sales or other dispositions of obsolete Property in the ordinary
course of business;
6.9.3 transfers of assets and liabilities in connection with Reinsurance
Contracts in the ordinary course of business (including, without
limitation, such transfers to secure obligations under Reinsurance
Contracts to the extent permitted under this Agreement);
6.9.4 sales, transfers or other dispositions made to the Borrower or
between the Wholly-Owned Subsidiaries of the Borrower;
6.9.5 sales of assets (excluding any sales of all or substantially all the
assets of such Person) upon fair and reasonable terms in an
arms-length transaction; and
6.9.6 leases, sales or other dispositions of its Property that, together
with all other Property of the Borrower and its Subsidiaries
previously leased, sold or disposed of pursuant to this sub-clause
6.9.6 during the twelve (12) month period ending with the month in
which any such lease, sale or other disposition occurs, do not
constitute exceed $75,000,000;
provided, in the case of sub-clauses 6.9.1 through 6.9.6, any lease, sale,
transfer or other disposition of cash deposited in the Facility LC
Collateral Account may only be made in accordance with the terms of this
Agreement and any related Collateral Document.
6.10 LIENS
Neither the Borrower will, nor will it permit any of its Subsidiaries to,
create, incur, or suffer to exist any Lien in, of or on any of the
Collateral or any Unencumbered Property.
6.11 ADJUSTED COLLATERAL VALUE
The Borrower shall at all times maintain Collateral in the Custodial
Account (or, in the case of Cash, in an account with the Issuer) in an
amount such that the Adjusted Collateral Value of such Collateral (taking
into account the value of Collateral, if any, held on deposit in the
Facility LC Collateral Account), is not less than the Obligations
outstanding from time to time, it being understood that no such Collateral
shall include any Unencumbered Property.
6.12 INCONSISTENT AGREEMENTS
Neither the Borrower nor any of its Subsidiaries shall enter into any
indenture, agreement, instrument (or amendment thereto) or other
arrangement which, (a) directly or indirectly prohibits or restrains, or
has the effect of prohibiting or restraining, or imposes materially adverse
conditions upon, the incurrence or repayment of the Obligations, the
amendment of the Credit Documents, or the ability of any Subsidiary to pay
dividends or make other distributions on its capital stock (other than
restrictions on the payment of dividends or other distributions imposed
under subordinated debt obligations entered into for purposes of having
such Indebtedness treated as capital for rating agency or regulatory
purposes) or (b) contains any provision which would be violated or breached
by the issuance of Facility LCs or by the performance by the Borrower of
any of its obligations under any Credit Document.
6.13 CUSTODY AGREEMENT
The Borrower shall not agree to any waiver or amendment of the Custody
Agreement without first obtaining the written consent of the Issuer.
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7. DEFAULTS
The occurrence of any one or more of the following events shall constitute
a Default:
7.1 Any representation or warranty made or deemed made by or on behalf of the
Borrower to the Issuer under or in connection with this Agreement, any
other Credit Document, any Facility LC or any certificate or information
delivered in connection with this Agreement or any other Credit Document
shall be materially false or misleading on the date as of which made or
deemed made.
7.2 Non-payment of any principal of any Reimbursement Obligation when due or
non-payment of any interest or any fee or other obligation owing by the
Borrower under any of the Credit Documents within five (5) Business Days
after the same becomes due.
7.3 The breach by the Borrower of any of the terms or provisions of Clause 6.2
(Use of Facility LCs), Clause 6.3 (Certain Notices), Clause 6.8 (Merger),
Clause 6.9 (Sale of Assets), Clause 6.10 (Liens), Clause 6.12 (Inconsistent
Agreements) or Clause 5.21 (Pari Passu Ranking) or Clause 6.11 (Adjusted
Collateral Value).
7.4 The breach by the Borrower (other than a breach which constitutes a Default
under Clause 7.1, 7.2 or 7.3 of this Clause 7) of any of the terms or
provisions of this Agreement which is not remedied within thirty (30) days
after written notice from the Issuer.
7.5 Failure of the Borrower or any of its Subsidiaries to pay when due (beyond
the applicable grace period or deferral with respect thereto, if any) any
indebtedness constituting in the aggregate Material Indebtedness; or the
default by the Borrower or any of its Subsidiaries in the performance
(beyond the applicable grace period with respect thereto, if any) of any
material term, provision or condition contained in any Material
Indebtedness Agreement, or any other event shall occur or condition exist,
the effect of which default, event or condition is to cause, or to permit
the lender(s) under any Material Indebtedness Agreement to cause, Material
Indebtedness thereunder to become due prior to its stated maturity; or any
Material Indebtedness of the Borrower or any of its Subsidiaries shall be
declared to be due and payable or required to be prepaid or repurchased
(other than by a regularly scheduled payment or prepayment not associated
with a contractual breach) prior to the stated maturity thereof; PROVIDED
THAT it shall not constitute a Default if the relevant Indebtedness arises
under a derivative or structured finance transaction entered into in the
ordinary course of business and (a) the failure to pay is caused by a
technical or administrative failure and is remedied within three (3)
Business Days or (b) such Indebtedness becomes due prior to its stated
maturity or is prepaid pursuant to unwind or termination provisions not
associated with performance defaults.
7.6 The Borrower or any of its Subsidiaries shall:
7.6.1 have an order for relief entered with respect to it under any state,
federal or foreign bankruptcy or similar laws as now or hereafter in
effect;
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7.6.2 make an assignment for the benefit of creditors;
7.6.3 apply for, seek, consent to, or acquiesce in, the appointment of a
receiver, custodian, trustee, examiner, liquidator or similar
official for it or any of its assets;
7.6.4 institute any proceeding seeking an order for relief under any
state, federal or foreign bankruptcy or similar laws as now or
hereafter in effect or seeking to adjudicate it a bankrupt or
insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or its
debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or
other pleading denying the material allegations of any such
proceeding filed against it;
7.6.5 take any corporate action to authorize or effect any of the
foregoing actions set forth in this Clause 7.6;
7.6.6 fail to contest in good faith within thirty (30) days any
appointment or proceeding described in Clause 7.7; or
7.6.7 not pay, or admit in writing its inability to pay, its debts
generally as they become due.
7.7 Without the application, approval or consent of the Borrower or any of its
Subsidiaries, a receiver, trustee, examiner, liquidator or similar official
shall be appointed for the Borrower or any of its Subsidiaries, or a
proceeding described in sub-clause 7.6.4 of Clause 7.6 shall be instituted
against the Borrower or any of its Subsidiaries and such appointment
continues undischarged or such proceeding continues undismissed or unstayed
for a period of sixty (60) consecutive days.
7.8 The Borrower or any of its Subsidiaries shall fail within 45 days to pay,
bond or otherwise discharge any judgment or order for the payment of money,
either singly or in the aggregate, in excess of $20,000,000, which is not
stayed on appeal or otherwise being appropriately contested in good faith.
7.9 Any Change in Control shall occur in respect of the Borrower or the
Borrower's Parent shall cease to own, directly or indirectly, 100% of the
outstanding shares of capital stock of the Borrower.
7.10 The occurrence of any default or breach of its material obligations under,
or any "event of default" as defined in, any Credit Document (other than
this Agreement) on the part of or relating to the Borrower, which default,
breach or "event of default" continues beyond any period of grace therein
provided.
7.11 Any Collateral Document delivered by the Borrower pursuant to this
Agreement shall for any reason fail to create a valid and perfected first
priority security interest in any collateral purported to be covered
thereby, except as permitted by the terms of any such Collateral Document
(and save for any failure of the Issuer to cause the filing of any relevant
financing statement to perfect the security interest), or any Collateral
Document shall fail to remain in full force or effect or any action shall
be taken by the Borrower or any Governmental Authority to discontinue or to
assert the invalidity or unenforceability of any Collateral Document.
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8. ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1 ACCELERATION; FACILITY LC COLLATERAL ACCOUNT
8.1.1 If any Default described in Clause 7.6 or Clause 7.7 of Clause 7
(Defaults) occurs with respect to the Borrower, the obligation of
the Issuer to issue Facility LCs shall automatically terminate and
the Obligations shall immediately become due and payable without any
election or action on the part of the Issuer and the Borrower will
be and become thereby unconditionally obligated, without any further
notice, act or demand, to pay or transfer to the Issuer an amount in
immediately available funds, which funds shall be held in the
Facility LC Collateral Account, equal to the difference of (i) the
amount of Facility LC Obligations at such time, less (ii) the amount
on deposit in the Facility LC Collateral Account or under any
Collateral Document at such time which is free and clear of all
rights and claims of third parties and has not been applied against
the Obligations (such difference, the "COLLATERAL SHORTFALL
AMOUNT"). If any other Default occurs and is continuing, the Issuer
may (i) terminate or suspend the obligation of the Issuer to issue
Facility LCs, or declare the Obligations to be due and payable, or
both, whereupon the Obligations shall become immediately due and
payable, without presentment, demand, protest or notice of any kind,
all of which the Borrower hereby expressly waives, and (ii) upon
notice to the Borrower and in addition to the continuing right to
demand payment of all amounts payable under this Agreement, make
demand on the Borrower, and the Borrower will, forthwith upon such
demand and without any further notice or act, to pay or transfer to
the Issuer an amount in immediately available funds, the Collateral
Shortfall Amount, which funds shall be deposited in the Facility LC
Collateral Account.
8.1.2 If at any time while any Default is continuing, the Issuer
determines that the Collateral Shortfall Amount at such time is
greater than zero, the Issuer may, make demand on the Borrower to,
and the Borrower will, forthwith upon such demand and without any
further notice or act, pay or transfer to the Issuer an amount in
immediately available funds the Collateral Shortfall Amount, which
funds shall be deposited in the Facility LC Collateral Account.
8.1.3 The Issuer may at any time or from time to time after funds are
deposited in the Facility LC Collateral Account, apply such funds to
the payment of the Facility LC Obligations and any other amounts as
shall from time to time have become due and payable by the Borrower
to the Issuer under the Credit Documents.
8.1.4 At any time while any Default (or breach of Clause 6.11 (Adjusted
Collateral Value)) is continuing neither the Borrower nor any Person
claiming on behalf of or through the Borrower shall have any right
to withdraw any of the funds held in the Facility LC Collateral
Account. After all of the Obligations have been indefeasibly paid in
full (other than contingent Obligations in respect of claims for
indemnification hereunder) and the Aggregate Facility LC Commitment
has been terminated, any funds remaining in the Facility LC
Collateral Account shall be returned by the Issuer to the Borrower
or paid to whomever may be legally entitled thereto at such time.
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8.2 AMENDMENTS
Subject to the provisions of this Clause 8.2, the Issuer and the Borrower
may enter into agreements supplemental hereto for the purpose of adding or
modifying any written provisions to the Credit Documents or changing in any
manner the rights of the Issuer or the Borrower hereunder or waiving any
Default or Unmatured Default hereunder.
8.3 PRESERVATION OF RIGHTS
No delay or omission of the Issuer to exercise any right under the Credit
Documents shall impair such right or be construed to be a waiver of any
Default or an acquiescence therein, and the issuance or Modification of a
Facility LC notwithstanding the existence of a Default or the inability of
the Borrower to satisfy the conditions precedent to such issuance or
Modification shall not constitute any waiver or acquiescence. Any single or
partial exercise of any such right shall not preclude other or further
exercise thereof or the exercise of any other right, and no waiver,
amendment or other variation of the terms, conditions or provisions of the
Credit Documents whatsoever shall be valid unless in writing signed by the
Issuer and then only to the extent in such writing specifically set forth.
All remedies contained in the Credit Documents or by law afforded shall be
cumulative and all shall be available to the Issuer until the Obligations
have been paid in full.
9. GENERAL PROVISIONS
9.1 SURVIVAL OF REPRESENTATIONS
All representations and warranties of the Borrower contained in this
Agreement or in any other Credit Document shall survive the issuance of the
Facility LCs herein contemplated.
9.2 INTEREST LIMITATION
Anything in this Agreement or any other Credit Document to the contrary
notwithstanding, the Borrower shall not be required to pay interest at a
rate in excess of the highest lawful rate, and if the effective rate of
interest that would otherwise be payable under this Agreement or any other
Credit Document would exceed the highest lawful rate, or if any Issuer
shall receive monies that are deemed to constitute interest which would
increase the effective rate of interest payable under this Agreement or any
other Credit Document to a rate in excess of the highest lawful rate, then
(a) the amount of interest that would otherwise be payable under this
Agreement and the other Credit Documents shall be reduced to the amount
allowed under applicable law, and (b) any interest paid in excess of the
highest lawful rate shall, at the option of the Issuer, be either refunded
to the payor or credited to the payment of the Obligations.
9.3 HEADINGS
Clause headings in the Credit Documents are for convenience of reference
only and shall not govern the interpretation of any of the provisions of
the Credit Documents.
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9.4 ENTIRE AGREEMENT
The Credit Documents embody the entire agreement and understanding between
the Issuer and the Borrower and supersede all prior agreements and
understandings between the Issuer and the Borrower relating to the subject
matter thereof.
9.5 EXPENSES; INDEMNIFICATION
The Borrower shall reimburse the Issuer for any reasonable and documented
costs and out-of-pocket expenses (including reasonable attorneys' fees)
paid or incurred by the Issuer in connection with the preparation,
negotiation, execution, delivery, review, amendment, modification, and
administration of the Credit Documents. The Borrower also agrees to
reimburse the Issuer, for any reasonable costs and out-of-pocket expenses
(including attorneys' fees) paid or incurred by the Issuer in connection
with the collection of the Obligations or the enforcement of the Credit
Documents. The Borrower further agrees to indemnify the Issuer its
affiliates, and each of its directors, officers and employees against all
losses, claims, damages, penalties, judgments, liabilities and expenses
(including, without limitation, all expenses of litigation or preparation
therefor whether or not the Issuer, or any affiliate is a party thereto)
which any of them may pay or incur arising out of or relating to this
Agreement or the other Credit Documents, the transactions contemplated
hereby or thereby or the use or intended use of any Facility LC, except to
the extent that they are determined in a final non-appealable judgment by a
court of competent jurisdiction to have resulted from the bad faith, gross
negligence or wilful misconduct of the party seeking indemnification. The
obligations of the Borrower under this Clause 9.5 incurred prior to the
termination of this Agreement shall survive the termination of this
Agreement.
9.6 ACCOUNTING
Except as provided to the contrary or otherwise defined herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement
Accounting Principles.
9.7 SEVERABILITY OF PROVISIONS
Any provision in any Credit Document that is held to be inoperative,
unenforceable, or invalid in any jurisdiction shall, as to that
jurisdiction, be inoperative, unenforceable, or invalid without affecting
the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction,
and to this end the provisions of all Credit Documents are declared to be
severable.
9.8 NON-LIABILITY OF ISSUER
The relationship between the Borrower on the one hand and the Issuer on the
other shall be solely that of debtor/account party and creditor. The Issuer
shall not have any fiduciary responsibilities to the Borrower. The Issuer
undertakes no responsibility to the Borrower to review or inform the
Borrower of any matter in connection with any phase of the Borrower's
business or operations. The Borrower agrees that the Issuer shall have no
liability to the Borrower (whether sounding in tort, contract or otherwise)
for losses suffered by the Borrower in connection with, arising out of, or
in any way related to, the transactions contemplated and the relationship
established by the Credit Documents, or any act, omission or event
occurring in connection therewith, unless it is determined in a final
non-appealable judgment by a court of competent jurisdiction that such
losses resulted from the gross negligence or wilful misconduct of the party
from which recovery is sought. The Issuer shall not have any liability with
respect to, and the Borrower hereby waives, releases and agrees not to sue
for, any special, indirect, consequential or punitive damages suffered by
the Borrower in connection with, arising out of, or in any way related to
the Credit Documents or the transactions contemplated thereby.
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9.9 CHOICE OF LAW
THE CREDIT DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE
OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS
(WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF NEW
YORK.
9.10 CONSENT TO JURISDICTION
THE BORROWER AND THE ISSUER HEREBY IRREVOCABLY SUBMIT TO THE NON EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING
IN NEW YORK CITY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
ANY CREDIT DOCUMENT AND EACH SUCH PARTY HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. ANY
JUDICIAL PROCEEDING BY A PARTY HERETO AGAINST THE OTHER PARTY INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH ANY CREDIT DOCUMENT SHALL BE BROUGHT ONLY IN A FEDERAL
COURT IN NEW YORK, NEW YORK OR WITH RESPECT TO JUDGMENT ENFORCEMENT
PROCEEDINGS ONLY, IN ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE
BORROWER AGAINST THE ISSUER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY CREDIT
DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.
9.11 WAIVER OF JURY TRIAL
THE BORROWER AND THE ISSUER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING
IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH ANY CREDIT DOCUMENT OR THE RELATIONSHIP ESTABLISHED
THEREUNDER.
9.12 COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Borrower and
the Issuer.
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9.13 CONFIDENTIALITY
The Issuer and each Transferee agrees to hold any confidential information
which it may receive from the Borrower pursuant to this Agreement in
confidence, except for disclosure (a) to its Affiliates in connection with
the transactions contemplated by the Credit Documents, (b) to legal
counsel, accountants, and other professional advisors to the Issuer or to a
Transferee, (c) to regulatory officials, (d) to any Person as requested
pursuant to or as required by law, regulation, or legal process, (e) to any
Person in connection with any legal proceeding arising in connection with
this Agreement to which the Issuer is a party, (f) permitted by Clause 11.2
(Benefit of Certain Provisions) and (g) which is otherwise made publicly
available through no fault of the Issuer. Notwithstanding anything herein
to the contrary, the Issuer, the Borrower and any Transferee (and each
employee, representative, or other agent of any of the foregoing) may
disclose to any and all Persons, without limitation of any kind, the tax
treatment and tax structure of the transactions contemplated hereby, and
all materials of any kind (including opinions or other tax analyses) that
are provided to such Person related to such tax treatment and tax
structure.
9.14 TERMINATION
The Borrower may terminate this Agreement upon 90 days' prior written
notice to the Issuer.
10. SET-OFF
10.1 SET-OFF
In addition to, and without limitation of, any rights of the Issuer under
applicable law, if any Default occurs and is continuing, any and all
deposits (including all account balances, whether provisional or final and
whether or not collected or available), in any currency, and any other
Indebtedness at any time held or owing by the Issuer to or for the credit
or account of the Borrower may be offset and applied toward the payment of
the Obligations owing to the Issuer, whether or not the Obligations, or any
part hereof, shall then be due. Such right of setoff shall be without
notice or demand to the Borrower and be without liability to the Issuer.
Any party exercising setoff rights hereunder shall promptly provide the
Borrower with written notice thereof after such setoff; PROVIDED THAT the
failure to provide such notice shall not give rise to liability hereunder.
11. BENEFIT OF AGREEMENT
11.1 SUCCESSORS AND ASSIGNS
The terms and provisions of the Credit Documents shall be binding upon and
inure to the benefit of the Borrower, the Issuer and their respective
successors and assigns, except that neither the Issuer (unless to an
affiliate) nor the Borrower shall have the right to assign its respective
rights or obligations under the Credit Documents without prior written
consent of the other party. Any attempted assignment or transfer by any
party not made in compliance with this Clause 11.1 shall be null and void.
- 32 -
11.2 DISSEMINATION OF INFORMATION
The Borrower authorizes the Issuer to disclose to any subparticipant or
purchaser or any other Person acquiring an interest in the Credit Documents
by operation of law or any counterparty to any swap, securitisation or
derivative transaction referencing or involving any rights or obligations
of the Issuer hereunder (each a "TRANSFEREE") and any prospective
Transferee any and all information in the Issuer's possession concerning
the creditworthiness of the Borrower; PROVIDED THAT each Transferee and
prospective Transferee agrees to be bound by Clause 9.13 (Confidentiality)
of this Agreement.
12. NOTICES
12.1 GIVING NOTICE
All notices, requests and other communications to any party hereunder shall
be in writing (including electronic transmission, facsimile transmission or
similar writing) and shall be given to such party: (a) in the case of the
Borrower and the Issuer at its respective address or facsimile number set
forth on the signature pages hereof or (b) in the case of any party, at
such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the Issuer and the Borrower in accordance with
the provisions of this Clause 12.1. Each such notice, request or other
communication shall be effective (i) if given by facsimile transmission,
when transmitted to the facsimile number specified in this Clause and
confirmation of receipt is received, (ii) if given by recognized courier
service, 72 hours after such communication is deposited with such courier
service with delivery prepaid, addressed as aforesaid, or (iii) if given by
any other means, when delivered (or, in the case of electronic
transmission, received) at the address specified in this Clause; PROVIDED
THAT notices to the Issuer under Clause 2 (The Letter of Credit Facility)
shall not be effective until received.
12.2 CHANGE OF ADDRESS
The Borrower and the Issuer may each change the address for service of
notice upon it by a notice in writing to the other parties hereto.
IN WITNESS WHEREOF, the Borrower and the Issuer have executed this Agreement as
of the date first above written.
- 33 -
SCHEDULE 1
AUTHORIZED OFFICERS OF THE BORROWER
Robert P. Myron, Chief Financial Officer
Guy D. Hengesbaugh, President and Chief Operating Officer
Martin J. Russell, Assistant Vice President - Finance
- 34 -
EXHIBIT A
FORM OF LETTER OF CREDIT
BARCLAYS BANK PLC
FOR INTERNAL IDENTIFICATION PURPOSES ONLY
Date: ................................. Our No. ..................... Issuing Bank No. .................
Clean, Irrevocable, and
Unconditional Letter of
Credit ................................. Accountholder ...............................
Reinsurer
............................... Issuing Bank ...........................................................
............................... Beneficiary .(Reinsured).... Amount ............................
............................... Expiry ..................................................................
...............................State of Domicile ......................................................
Irrevocable Clean Issue
Letter of Credit No. ................................... Date: ................................
To Beneficiary: (Name)
(Address)
We have established this clean, irrevocable, and unconditional Letter of Credit
in your favor as beneficiary for drawing up to U.S.$______ effective
immediately. This Letter of Credit is issued, presentable, and payable at our
office at _________________________, Attn: Standby Letter of Credit Unit or such
other office as we may advise from time to time and expires with our close of
business on __________________. Except when the amount of this Letter of Credit
is increased, this Letter of Credit cannot be modified or revoked without your
consent.
We hereby undertake to promptly honor your sight draft(s) drawn on us,
indicating our Letter of Credit No. __________, for all or any part of this
Letter of Credit upon presentation of your draft drawn on us at our offices on
or before the expiration date hereof or any automatically extended date of
expiration.
The term "Beneficiary" includes any successor by operation of law of the named
Beneficiary including, without limitation, any liquidator, receiver,
conservator, or supervisor.
It is a condition of this Letter of Credit that it is deemed to be automatically
extended without amendment for one (1) year from the initial stated expiry date
hereof, or any future expiration date, unless at least thirty (30) days prior to
any expiration date we notify you that we elect not to consider this Letter of
Credit renewed for any such additional period. Such notice shall be deemed given
upon the earlier of (a) our mailing a written notice to such effect at you at
your address specified above by registered mail and (b) your actual receipt at
such address of such a written notice by any delivery method.
- 35 -
Except as expressly stated herein, this undertaking is not subject to any
agreement, condition or qualification. The obligation of Barclays Bank PLC under
this Letter of Credit is the individual obligation of Barclays Bank PLC and is
in no way contingent upon reimbursement with respect thereto.
This Letter of Credit is subject to and governed by either by the Laws of the
State of New York or the 1993 Revision of the Uniform Customs and Practice for
Documentary Credits of the International Chamber of Commerce (Publication 500)
and, in the event of any conflict the laws of the State of New York, including,
without limitation, Article 5 of the uniform commercial code thereof, shall
control. If this Letter of Credit expires during an interruption of business as
described in Article 17 of said Publication 500, we hereby specifically agree to
effect payment if this Letter of Credit is drawn against within thirty (30) days
after the resumption of business.
--------------------------------------
Authorized Name (typed)
--------------------------------------
Signature
- 36 -
EXHIBIT B
FORM OF LC APPLICATION
BARCLAYS INSURANCE BANKING
LETTER OF CREDIT SCHEME
54 LOMBARD STREET, LONDON EC3V 9EX
TELEPHONE 020 7699 3312
FAX 020 7699 2407
REQUEST FOR A NEW LETTER OF CREDIT:
Beneficiary Name:
Applicant Name:
Beneficiary Domicile:
Intermediary (if applicable):
Address:
Contact:
- --------------------------------------------------------------------------------
We hereby authorise and request you to issue a Clean, Irrevocable and
Unconditional Letter of Credit available by sight Drafts drawn on Barclays Bank
PLC or its correspondents in the value of:
Amount in Figures:
Amount in Words:
Effective Date:
Expiry Date:
Evergreen Notice Period (30/60/90 days):
Letter of Credit Wording Required:
Letter of Credit Type (e.g. OCA, UPR, Special):
- --------------------------------------------------------------------------------
In consideration of your issuing this Letter of Credit:
(a) We authorise you to debit our account with all commission charges and
expenses as and when they become due as provided in the Letter of Credit
Facility Agreement dated June , 2004 between us and Applicant (as amended
from time to time) and with all drawings on their presentation and hereby
undertake to provide you with funds in accordance with such Letter of
Credit Facility Agreement.
(b) It is agreed that this Letter of Credit is subject to U.C.P.500 (1993
Revision) or International Standby Practices 98 (ISP98) as further
provided in such Letter of Credit.
- 37 -
Signed for & on behalf of
By
----------------------- -----------------------
Authorised Signatory Authorised Signatory
- 38 -
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
To: Barclays Bank PLC, as Issuer
From: PXRE Reinsurance Ltd.
PXRE REINSURANCE LTD - LETTER OF CREDIT FACILITY AGREEMENT
DATED AS OF JUNE , 2004 (THE "AGREEMENT")
1. I refer to the Agreement. This is a Compliance Certificate. Terms
defined in the Agreement have the same meaning when used in this
Compliance Certificate unless given a different meaning in this
Compliance Certificate.
2. I confirm that as at [date] (the "CERTIFICATION DATE") PXRE Reinsurance
Ltd is in compliance with the requirements of Clause 6.11 (Adjusted
Collateral Value) of the Agreement.
3. I set out below calculations demonstrating the confirmation given in
paragraph 2 above.
4. I also confirm that, as at the Certification Date, no Default or
Unmatured Default exists.
Signed: ..........................................
Senior Financial Officer
PXRE Reinsurance Ltd.
- 39 -
EXHIBIT D
FORM OF ADJUSTED COLLATERAL VALUE CERTIFICATE
To: Issuer
Re: Custodial Account No. [ ]
Dear Sir/Madam:
This Adjusted Collateral Value Certificate is provided pursuant to the Letter of
Credit Facility Agreement (the "LC FACILITY AGREEMENT") dated as of June , 2004
between PXRE Reinsurance Ltd. and Barclays Bank PLC. Unless otherwise defined
herein, terms and expressions defined in the LC Facility Agreement have the same
meaning when used herein.
The undersigned, hereby certifies that on ___________, 200_, [monthly] the
Custodial Account contains the following Collateral:
- ------------------------------------------------------ ------------------ --------------- ------------------
TYPE OF COLLATERAL AMOUNT (US$) PERMITTED ADJUSTED
PERCENTAGES COLLATERAL VALUE
(%) (US$)
- ------------------------------------------------------ ------------------ --------------- ------------------
1. OECD Government Bonds 95%
- ------------------------------------------------------ ------------------ --------------- ------------------
2. Corporate Bonds 90.9%
- ------------------------------------------------------ ------------------ --------------- ------------------
3. Cash deposits 100%
- ------------------------------------------------------ ------------------ --------------- ------------------
4. MBS Securities 90.9%
- ------------------------------------------------------ ------------------ --------------- ------------------
SUB-TOTAL A
- ------------------------------------------------------ ------------------ --------------- ------------------
OBLIGATIONS:
LETTER OF CREDIT OBLIGATIONS
- ------------------------------------------------------ ------------------ --------------- ------------------
SUB-TOTAL B
- ------------------------------------------------------ ------------------ --------------- ------------------
TOTAL OF B - A
- ------------------------------------------------------ ------------------ --------------- ------------------
PXRE REINSURANCE LTD.
By:
Name:
Title:
- 40 -
SIGNATURES
PXRE REINSURANCE LTD., AS BORROWER
By: /s/ Robert P. Myron
Name: Robert P. Myron
Title: Chief Financial Officer
Address: 2 Clarendon House, , 2 Church Street, Hamilton HM 11, Bermuda
Attention: Robert P. Myron
Telecopy: 1-441-296-6162
Telephone: 1-441-296-5858
BARCLAYS BANK PLC, AS ISSUER
By: /s/ Richard Askey
Name: Richard Askey
Title: Relationship Director
Address: 54 Lombard Street, London EC3V 9EX
Attention: Richard Askey
Telecopy: +44 (0) 20 7699 2407
Telephone: +44 (0) 20 7699 3124