EXHIBIT 10.5
MASTER REPURCHASE AGREEMENT
Effective as of January 8, 2004 by and between Xxxx and Xxxxxxx Insurance
Company ("C&F Insurance") and Fairfax Financial Holdings Limited ("Fairfax").
WHEREAS, C&F Insurance, 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, C&F Insurance typically pays policyholder claims prior to receiving
reimbursement for such claims from its reinsurers, requiring C&F Insurance 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 C&F Insurance and
recovery from its reinsurers; and
WHEREAS, Fairfax, as the indirect owner of C&F Insurance, has an interest in
maximizing the return on invested assets of C&F Insurance; and
WHEREAS, Fairfax seeks to assist C&F Insurance 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 C&F Insurance 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. $5,000,000
singly or, when combined with amounts then outstanding from any other
Transaction, in the aggregate (the "Purchase Price") by Fairfax to C&F
Insurance and Fairfax agrees to transfer to C&F Insurance 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 C&F Insurance. From the date of the transfer of the Securities from
C&F Insurance to Fairfax until such time that the Securities are
returned by Fairfax to C&F Insurance, the Securities will be held by
The Bank of New York. The transactions pursuant to the Agreement shall
be reported in accordance with SSAP 45.
2. REPURCHASE
C&F Insurance 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 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
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commencing on the (and including) the Purchase Date and ending on (but
excluding) the Repurchase Date.
3. INCOME PAYMENTS
C&F Insurance 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 C&F Insurance 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 C&F Insurance 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
C&F Insurance 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,
C&F Insurance shall be deemed to have pledged to Fairfax as security
for the performance by C&F Insurance 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
C&F Insurance 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:
To Fairfax: Fairfax Financial Holdings Limited
00 Xxxxxxxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Facsimile: 000-000-0000
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Attention: Chief Financial Officer
To C&F Insurance: Xxxx and Xxxxxxx 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
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By:
Title:
XXXX AND XXXXXXX INSURANCE COMPANY
/s/ XXXXXX XXXXXX
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By: Xxxxxx XxXxxx
Title: Vice President
/s/ XXXXXXX X. XXXXXXXX
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By: Xxxxxxx X. Gasprik
Title: Vice President
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