Exhibit 10.21 iii
BEAR XXXXXXX
DATE: December 23, 2002
TO: Penn-America Group, Inc.
ATTENTION: Mr. Xxx Xxxxxx
TELEPHONE: 000-000-0000
FACSIMILE: 000-000-0000
FROM: Derivatives Documentation
TELEPHONE: 353-1-402-6225
FACSIMILE: 353-1-402-6223
SUBJECT: Fixed Income Derivatives Confirmation
REFERENCE NUMBER(S): BXNE111220
The purpose of this letter agreement is to confirm the terms and conditions of
the Transaction entered into on the Trade Date specified below (the
"Transaction") between Bear Steams Bank plc ("Bear Xxxxxxx") and Penn-America
Group, Inc. ("Counterparty"'). This letter agreement constitutes the sole and
complete "Confirmation," as referred to in the Master Agreement specified below,
with respect to this Transaction.
1. This Confirmation is subject to and incorporates the 2000 ISDA Definitions
(the "Definitions"), as published by the International Swaps and
Derivatives Association, Inc. ("ISDA"). This Confirmation supplements,
forms a part of and is subject to the ISDA Master Agreement dated as of
December 16, 2002 between Bear Xxxxxxx and Counterparty (the agreement, as
amended and supplemented from time to time, being referred to herein as the
"Master Agreement"). All provisions contained in, or incorporated by
reference to, the Master Agreement shall govern the Transaction referenced
in this Confirmation except as expressly modified herein. In the event of
any inconsistency between this Confirmation and the Definitions or Master
Agreement, this Confirmation shall prevail.
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
Notional Amount: USD 15,000,000
Trade Date: December 19, 2002
Effective Date: December 23, 2002
Termination Date: December 4, 2007, subject to adjustment in accordance
with the Business Day Convention.
Reference Number: BXNE111220
Penn-America Group, Inc.
December 23, 2002
Page 2 of 6
Fixed Amounts:
Fixed Rate Payer: Counterparty
Fixed Rate Payer
Payment Dates: The fourth calendar day of each March, June,
September and December during the Term of this
Transaction, commencing March 4, 2003 and ending on
the Termination Date, subject to adjustment in
accordance with the Business Day Convention.
Fixed Rate: 7.40000%
Fixed Rate Day
Count Fraction: 30/360
Floating Amounts:
Floating Rate Payer: Bear Xxxxxxx
Floating Rate Payer
Payment Dates: Same as Fixed Rate Payer Payment Dates.
Floating Rate for initial
Calculation Period: 1.4106%
Floating Rate: For the avoidance of doubt, with respect to any
Calculation Period, the Floating Rate inclusive of
Spread shall be capped at 12.5%.
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: 3 months
Spread: Plus 400 basis points
Floating Rate Day
Count Fraction: Actual/360
Reset Dates: The first day of each Calculation Period
Compounding: Inapplicable
Business Days: New York and London
Business Day Convention: Modified Following
Reference Number: BXNE111220
Penn-America Group, Inc.
December 23, 2002
Page 3 of 6
Deferral of
Swap Payments: In the event that Counterparty invokes its right to
enter into an extension period for the payment of
dividends on its Trust Preferred Securities, as
specified in the preferred prospectus for such
securities, then, Counterparty shall have the right
(an "Election"), to defer payments of Fixed Amounts
and Floating Amounts hereunder at any time and from
time to time during the term of this Transaction and
without causing an Event of Default,, in respect of
up to twenty consecutive Floating Rate Payer Payment
Dates (and accordingly, in respect of up to 20
consecutive Fixed Rate Payer Payment Dates). An
Election shall be considered validly made and such
election shall be irrevocable by either party hereto,
if Counterparty delivers a notice of exercise to Bear
Steams by no later than 4:00 p.m. New York time on
the 5th Business Day preceding the first of the up to
twenty consecutive Floating Rate Payer Payment Dates
to which such Election Relates (the "Initial
Extension Date"). The notice of exercise may be given
orally and must include the "Final Intended Extension
Date" (which must occur on a Floating Rate Payer
Payment Date on or prior to the Termination Date and
which does not cause the relevant Election to relate
to more ten consecutive Floating Rate Payer Payment
Dates). Such notice should be confirmed in writing
within one Business Day, provided that the failure of
Bear Steams to provide such writing shall not affect
the validity of any notice of exercise that was
delivered orally pursuant to the terms set forth
herein. With respect to any Election, the "Final
Extension Date" shall mean the earlier to occur of
(i) the Final Intended Extension Date, (ii) the
Floating Rate Payer Payment Date, if any, on which
the Calculation Agent is aware that Counterparty pays
the deferred dividends to which the Election relates
on the Counterparty Trust Preferred Securities and
(iii) the Termination Date (including, for the
avoidance of doubt, the Optional Termination Date, if
applicable).
If an Election is validly made, then (i) Counterpart'
shall not pay the Floating Amount(s) that would
otherwise be payable on each Floating Rate Payer
Payment Date from and including the Initial Extension
Date to which such Election relates through and
including the Final Extension Date to which such
Election relates (the "Election Period"), (ii) Bear
Xxxxxxx shall not pay the Fixed Amount(s) that would
otherwise be payable on each Fixed Rate Payer Payment
Date during the Election Period to which such
Election relates, (iii) Counterparty shall pay~ the
Counterparty Extension Amount (as defined herein) to
Bear Xxxxxxx on the Final Extension Date to which
such Election relates and (iv) Bear Steams shall pay
the Bear Steams Extension Amount (as defined
Reference Number: BXN7E1 11220
Penn-America Group, Inc.
December 23, 2002
Page 4 of 6
herein) to Counterparty on the Final Extension Date
to which such Election relates.
The "Counterparty Extension Amount" means, in respect
of the relevant Election, the amount calculated in
accordance with Section 6.1(c) of the Definitions,
determined as if (i) the Calculation Period were the
Election Period, (ii) the Compounding Dates were each
Floating Rate Payer Payment Date commencing on the
Floating Rate Payer Payment Date immediately
following the Initial Extension Date and ending on
the Floating Rate Payer Payment Date immediately
preceding the Final Extension Date, (iii) the
Notional Amount, Floating Rate Option, Floating Rate
Day Count Fraction, Designated Maturity, Spread,
Floating Rate Day Count Fraction had the meanings set
forth under Floating Amounts above and (iv) Reset
Dates were the first day of each Compounding Period.
The "Bear Steams Extension Amount" means, in respect
of the relevant Election, the sum of the Fixed
Amounts that would otherwise be payable on each Fixed
Rate Payer Payment Date during the Election Period to
which such Election relates through and including the
Final Extension Date to which such Election relates
plus the sum of the Fixed Compounding Period Amounts
(as defined herein) determined in respect of each
Fixed Rate Calculation Period during the Extension
Period. The "Fixed Compounding Period Amount" means,
for any Fixed Rate Calculation Period during the
Extension Period, the product of (a) the Reference
Amount (as defined herein) and (b) the Compounding
Rate (as defined herein) and (c) Actual/360. The
"Reference Amount" means, (i) in respect of the first
Fixed Rate Calculation Period in the Extension
Period, zero and (ii) in respect of each succeeding
Fixed Rate Calculation Period in the Extension
Period, an amount equal to the sum of the Fixed
Amounts that would otherwise be payable for each of
the previous Fixed Rate Calculation Periods plus the
sum of the Fixed Compounding Period Amounts
determined for each of the previous Fixed Rate
Calculation Periods. The "Compounding Rate" means, in
respect of the related Fixed Rate Calculation Period
in the Extension Period, the rate determined as if it
were a Floating Rate for such Calculation Period, the
first day of such Calculation Period were a Reset
Date, USD-LIBOR-BBA were the Floating Rate Option and
three months were the Designated Maturity.
Reference Number: BXNEI 11220
Penn-America Group, Inc.
Deccmber 23, 2002
Page 5 of 6
3. Account Details and
Settlement Information: Payments to Bear Xxxxxxx:
Payments to Counterparty:
Please provide to expedite payment:
Additional Provisions:
Non-Reliance. Each party represents to the other party that (a) it has not
received and is not relying upon any legal, tax, regulatory, accounting or other
advice (whether written or oral) of the other party regarding this Transaction,
other than representations expressly made by that other party in this
Confirmation and in the Master Agreement and (b) in respect of this Transaction,
(i) it has the capacity to evaluate (internally or through independent
professional advice) this Transaction and has made its own decision to enter
into this Transaction and (ii) it understands the terms, conditions and risks of
this Transaction and is willing to assume (financially and otherwise) those
risks. Counterparty acknowledges that Bear Xxxxxxx has advised Counterparty to
consult its own tax, accounting and legal advisors in connection with this
Transaction evidenced by this Confirmation and that the Counterparty has done
so.
This Confirmation may be executed in several counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the
same instrument.
Counterparty hereby agrees to check this Confirmation and to confirm that the
foregoing correctly sets forth the terms of the Transaction by signing in the
space provided below and returning to Bear Steams a facsimile of the
fully-executed Confirmation to 000-000-0000. For inquiries regarding U.S.
Transactions, please contact Xxxxx Xxxxxx by telephone at 000-000-0000. For all
other inquiries please contact Xxxxx Xxxxxx by telephone at 000-0-000-0000.
Originals will be provided for your execution upon your request.
Reference Number: BXNE111220
Penn-America Group, Inc.
December 23, 2002
Page 6 of 6
We are very pleased to have executed tins Transaction with you and we look
forward to completing other transactions with you in the near future.
Very truly yours.
BEAR XXXXXXX BANK PLC
By: /s/ Xxxxxx Xxxxxxx
Name: Xxxxxx Xxxxxxx
Title: Authorized signatory
Counterparty, acting through its duly authorized signatory, hereby agrees to,
accepts and confirms the terms of the foregoing as of the Trade Date.
PENN-AMERICA GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------------------
As authorized agent or officer for Penn-America Group, Inc.
Title: SVP, CFO & Treasurer
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