EXHIBIT 10.4
MASTER REPURCHASE AGREEMENT
Effective as of January 8, 2004 by and between The North River Insurance Company
("North River") and Fairfax Financial Holdings Limited ("Fairfax").
WHEREAS, North River, in the normal course of its business, may from time to
time agree to pay claims to policyholders that require it to sell or otherwise
liquidate certain securities or other invested assets in order to raise
sufficient cash to make such payments; and
WHEREAS, North River typically pays policyholder claims prior to receiving
reimbursement for such claims from its reinsurers, requiring North River to make
cash payments on claims that can greatly exceed its ultimate net liability for
such claims and creating a timing gap between payments by North River and
recovery from its reinsurers; and
WHEREAS, Fairfax, as the indirect owner of North River, has an interest in
maximizing the return on invested assets of North River; and
WHEREAS, Fairfax seeks to assist North River in managing its cash flow to
eliminate or minimize investment losses resulting from the sale or liquidation
of securities in order to cover short-term cash requirements.
NOW, THEREFORE, for due and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties agree as follows:
1. TRANSACTIONS
From time to time, the parties hereto may enter into transactions (each
a "Transaction") in which North River agrees to transfer to Fairfax
certain securities ("Securities") against the transfer of an amount in
United States dollars equal to the fair market value of such Securities
on the date of transfer, such amount not to exceed U.S. $25,000,000
singly or, when combined with amounts then outstanding from any other
Transaction, in the aggregate (the "Purchase Price") by Fairfax to
North River and Fairfax agrees to transfer to North River such
Securities on or before one hundred eighty-three (183) days after the
transfer is made (the "Repurchase Date"), against the transfer of funds
by North River. From the date of the transfer of the Securities from
North River to Fairfax until such time that the Securities are returned
by Fairfax to North River, the Securities will be held by The Bank of
New York. The transactions pursuant to the Agreement shall be reported
on accordance with SSAP 45.
2. REPURCHASE
North River shall repurchase the Securities from Fairfax on or before
the Repurchase Date for an amount not to exceed the sum of the Purchase
Price and the aggregate amount obtained by daily application of the
stated interest rate of
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each Security to the Purchase Price paid for such Security on a 360 or
365 day per year basis depending on the interest period of the
underlying security for the actual number of days during the period
commencing on the (and including) the Purchase Date and ending on (but
excluding) the Repurchase Date.
3. INCOME PAYMENTS
North River shall be entitled to receive, with respect to any Security
at any time, an amount equal to any principal thereof and all interest,
dividends or other distributions thereon ("Income") paid or distributed
in respect of the Securities that are not otherwise received by North
River to the full extent it would be so entitled if the Securities had
not been sold to Fairfax. Fairfax shall, as the parties may agree (or,
in the absence of any such agreement, as Fairfax shall reasonably
determine in its discretion), on the date such Income is paid or
distributed either (i) transfer to or credit to the accounts of North
River such Income with respect to any Securities or (ii) with respect
to Income paid in cash, apply the Income payment or payments to reduce
the amount, if any, to be transferred to Fairfax by North River upon
termination of the Transaction.
4. SECURITY INTEREST
Although the parties intend that the Transaction be a sale and purchase
and not a loan, in the event the Transaction is deemed to be a loan,
North River shall be deemed to have pledged to Fairfax as security for
the performance by North River of its obligations under the
Transaction, and shall be deemed to have granted to Fairfax a security
interest in, all of the Securities and all income thereon and other
proceeds thereof.
5. PAYMENT AND TRANSFER
Unless otherwise mutually agreed, all transfers of funds hereunder
shall be in immediately available funds. All Securities transferred by
one party hereto to the other party (i) shall be in suitable form for
transfer or shall be accompanied by duly executed instruments of
transfer or assignment in blank and such other documentation as the
party receiving possession may reasonably request, (ii) shall be
transferred on the book-entry system of a Federal Reserve Bank, or
(iii) shall be transferred by any other method mutually acceptable to
North River and Fairfax.
6. SEGREGATION OF SECURITIES
To the extent required by applicable law, all Securities in the
possession of Fairfax shall be segregated from other securities in its
possession and shall be identified as subject to this Agreement.
Segregation may be accomplished by appropriate identification on the
books and records of the holder, including a financial or securities
intermediary or a clearing corporation.
7. NOTICES AND OTHER COMMUNICATIONS
Any and all notices or other communications hereunder shall be given by
mail or facsimile as follows:
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To Fairfax: Fairfax Financial Holdings Limited
00 Xxxxxxxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Facsimile: 000-000-0000
Attention: Chief Financial Officer
To North River: The North River Insurance Company
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Facsimile: 000-000-0000
Attention: Chief Financial Officer
8. ENTIRE AGREEMENT; SEVERABILITY; AMENDMENT; MODIFICATION; AND
TERMINATION
This Agreement shall supersede any existing agreements between the
parties concerning the subject matter hereof. Each provision and
agreement herein shall be treated as separate and independent from any
other provision or agreement herein and shall be enforceable
notwithstanding the unenforceability of any such other provision or
agreement. No amendment, assignment, modification or termination of
this Agreement shall be effective unless such amendment, assignment,
modification or termination is (i) filed with the New Jersey Department
of Banking and Insurance ("NJDBI") at least 30 days prior to the
proposed effective date, (ii) not disapproved by the NJDBI, (iii) made
in writing, and (iv) signed by the parties hereto.
9. GOVERNING LAW
This Agreement shall be governed by the laws of the State of New Jersey
without giving effect to the conflict of law principles thereof.
10. COUNTERPARTS
This Agreement may be executed in two counterparts, each of which shall
be deemed an original, but all of which together shall constitute one
and the same instrument.
FAIRFAX FINANCIAL HOLDINGS LIMITED
---------------------------------------
By:
Title:
THE NORTH RIVER INSURANCE COMPANY
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/s/ XXXXXX XXXXXX
---------------------------------------
By: Xxxxxx XxXxxx
Title: Vice President
/s/ XXXXXXX X. XXXXXXXX
---------------------------------------
By: Xxxxxxx X. Xxxxxxxx
Title: Vice President
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AMENDMENT NUMBER ONE
TO THE
MASTER REPURCHASE AGREEMENT
This Amendment Number One ("Amendment") to the Master Repurchase Agreement
("Agreement") is entered into as of January 8, 2004, by and between The North
River Insurance Company ("North River") and Fairfax Financial Holdings Limited
("Fairfax").
WHEREAS, North River and Fairfax entered into the Agreement effective as of
January 8, 2004;
WHEREAS, defined terms used herein but not otherwise defined shall have the
meanings set forth in the Agreement;
NOW, THEREFORE, in consideration of the foregoing and for good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
I. Section 1 of the Agreement is hereby replaced in its entirety with the
following:
1. TRANSACTIONS
From time to time, the parties hereto may enter into transactions (each a
"Transaction") in which North River agrees to transfer to Fairfax certain
securities ("Securities") against the transfer of an amount in United States
dollars equal to the fair market value of such Securities on the date of
transfer, such amount not to exceed U.S. one hundred million dollars
($100,000,000) singly or, when combined with amounts then outstanding from any
other Transaction, in the aggregate (the "Purchase Price") by Fairfax to North
River and Fairfax agrees to transfer to North River such Securities on or before
one hundred eighty-three (183) days after the transfer is made (the "Repurchase
Date"), against the transfer of funds by North River. From the date of the
transfer of the Securities from North River to Fairfax until such time that the
Securities are returned by Fairfax to North River, the Securities will be held
by The Bank of New York. The transactions pursuant to the Agreement shall be
reported on accordance with SSAP 45.
II. Except as otherwise provided in its Amendment, all of the terms and
conditions of the Agreement will remain unamended and shall continue to
be, and shall remain, in full force and effect in accordance with their
respective terms. In the event of any conflict or inconsistency between
the Agreement and this Amendment, this Amendment will prevail.
III. This Amendment shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
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IV. This Amendment may be executed simultaneously in two or more
counterparts, each of which shall be deemed to be an original and all
of which shall constitute together but one and the same instrument.
V. This Amendment shall be governed by the laws of the State of New
Jersey.
VI. The transactions pursuant to the Agreement and this Amendment shall be
reported in accordance with SSAP 45.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
and delivered as of the date first set forth above.
FAIRFAX FINANCIAL HOLDINGS LIMITED
---------------------------------------
By:
Title:
THE NORTH RIVER INSURANCE COMPANY
/s/ XXXXXX XXXXXX
---------------------------------------
By: Xxxxxx XxXxxx
Title: Vice President
/s/ XXXXXXX X. XXXXXXXX
---------------------------------------
By: Xxxxxxx X. Xxxxxxxx
Title: Vice President
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