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EXHIBIT 10.4
SECOND AMENDMENT TO LETTER OF CREDIT AGREEMENT
THIS SECOND AMENDMENT TO LETTER OF CREDIT AGREEMENT, dated as of
March 31, 2000 (the "Amendment"), amends the Letter of Credit Agreement, dated
as of January 27, 1998 (as heretofore amended, the "Credit Agreement"), among
Oracle Reinsurance Company, Ltd., a Bermuda insurance company (the "Company"),
the various financial institutions parties thereto (collectively, the "Banks")
and Bank of America, National Association (formerly known as Bank of America
National Trust and Savings Association), as letter of credit administrator and
as agent (the "Agent"), The Bank of New York, as co-agent, Deutsche Bank AG, as
co-agent, Dresdner Bank AG, New York Branch as co-agent and Fleet National Bank,
as co-agent. Terms defined in the Credit Agreement are, unless otherwise defined
herein or the context otherwise requires, used herein as defined therein.
WHEREAS, the parties hereto have entered into the Credit Agreement,
which provides for the Bank to extend certain credit facilities to the Company
from time to time; and
WHEREAS, the parties hereto desire to amend the Credit Agreement in
certain respects as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
SECTION 1 AMENDMENTS. Effective as of the date hereof, the Credit
Agreement shall be amended in accordance with Sections 1.1 through 1.10 below.
1.1 Adjusted Asset Value. The definition of "Adjusted Asset Value" in
Section 1.1 is amended to state in its entirety as follows:
Adjusted Asset Value means, without duplication, on any date an amount
equal to the sum of (i) the Fair Market Value of the Investments Pledged by the
Parent or the Company listed in column (a) below multiplied by the factor
specified in column (b) below and (ii) the Fair Market Value of the Investments
Pledged by the Subsidiary Pledgor listed in column (a) below multiplied by the
factor specified in column (b) below multiplied by the Subsidiary Pledgor
Factor:
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(a) Type of Pledged Investment (b) Multiplication Factor
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(i) Cash and Cash Equivalents 1.500
(or the Borrowing Base Factor
then applicable, if less)
(ii) Money Market Mutual Fund Shares 1.470
(or .980 times the Borrowing
Base Factor then applicable,
if such product is less)
(iii) Commercial Paper rated at 1.470
least "A-1" by S&P or "P-1" by Xxxxx'x (or .980 times the Borrowing
Base Factor then applicable,
if such product is less)
(iv) Commercial Paper rated "A-2" by 1.425
S&P or "P-2" by Xxxxx'x (or .950 times the Borrowing
Base Factor then applicable,
if such product is less)
(v) U.S. Government Mutual Fund Shares 1.425
(or .950 times the Borrowing
Base Factor then applicable,
if such product is less)
(vi) Securities issued or directly 1.450
and fully guaranteed or insured by (or .967 times the Borrowing
the United States of America or any Base Factor then applicable,
agency or instrumentality thereof if such product is less)
(provided that the full faith and
credit of the United States of
America is pledged in support thereof)
(vii) Industry Bonds rated at least 1.400
"AA-" by S&P or "Aa3" by Xxxxx'x (or .933 times the Borrowing
Base Factor then applicable,
if such product is less)
(viii) Industry Bonds rated at least 1.380
"A-" (but not higher than "A+") (or .920 times the Borrowing
by S&P or "A3" (but not higher than Base Factor then applicable,
"A1") by Xxxxx'x if such product is less)
(ix) Industry Bonds rated at least 1.350
"BBB-" (but not higher than "BBB+") by (or .900 times the Borrowing
S&P or "Baa3" (but not higher than Base Factor then applicable,
"Baa1") by Xxxxx'x if such product is less)
(x) Industry Bonds rated at least 1.050
"BB-" (but not higher than "BB+") (or .700 times the Borrowing
by S&P or "Ba3" (but not Base Factor then applicable,
higher than "Ba1") by Xxxxx'x if such product is less)
(xi) Industry Bonds rated at least 0.825
"B-" (but not higher than "B+") by (or .550 times the Borrowing
S&P or "B3'" (but not higher Base Factor then applicable,
than "B1") by Xxxxx'x if such product is less)
(xii) ABS rated "AAA" by S&P or 1.425
"Aaa" by Xxxxx'x (or .950 times the Borrowing
Base Factor then applicable,
if such product is less)
(xiii) MBS (Agency Pass-Throughs 1.350
and Agency CMOs) rated at least (or .900 times the Borrowing
"A" by S&P or "A2" by Xxxxx'x Base Factor then applicable,
if such product is less)
(xiv) MBS (Non-Agency CMOs) 1.275
rated at least "A" by S&P (or .850 times the Borrowing
or "A2" by Xxxxx'x Base Factor then applicable,
if such product is less)
(xv) Equity Mutual Fund Shares, 1.200
Foreign Equity Mutual Fund Shares, (or .800 times the Borrowing
Bond Mutual Fund Shares and Base Factor then applicable,
High Yield Mutual Fund Shares if such product is less)
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(a) Type of Pledged Investment (b) Multiplication Factor
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(xvi) Fund Investments, Managed Accounts, 1.000
Structured Notes and Investment Subsidiaries, the
stock of which is Pledged
Notwithstanding the foregoing, if the total Fair Market Value of any of
the following categories of Pledged Investments exceeds the applicable
percentage of the total Fair Market Value of all Pledged Investments, as set
forth in the table below, the total Fair Market Value of such category shall be
reduced, for the purpose only of the Adjusted Asset Value determination, by the
amount of such excess (with such reduction to be applied as determined by the
Company in any manner consistent with this Agreement):
Type of Percentage of
Pledged Total Fair
Investment Market Value
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I. INDUSTRY BONDS/ HIGH YIELD MUTUAL FUND SHARES
Industry Bonds and High Yield Mutual Fund Shares described in 45%
clauses (viii), (ix), (x), (xi) and (xv) above
Industry Bonds of any single issue described in clauses (vii), (viii) 7.5%
and (ix) above and High Yield Mutual Fund Shares and Bond
Mutual Fund Shares described in clause (xv) above of a particular
portfolio manager
Industry Bonds and High Yield Mutual Fund Shares described in 15%
clauses (x),(xi) and (xv) above
Industry Bonds of any single issue, issuer or Industry described in 3%
clauses (x) and (xi) above
Industry Bonds in any one Industry 10%
Industry Bonds in any three Industries 15%
Industry Bonds in any eight Industries 75%
II. ABS/MBS INVESTMENTS
ABS and MBS Investments described in clauses (xii), (xiii) and 30%
(xiv) above
MBS Investments secured by Commercial Mortgages described in 10%
clauses (xiii) and (xiv) above
MBS Investments described in clause (xiv) above 15%
ABS and MBS Investments of any single issue described in clauses 7.5%
(xii) and (xiii) above
MBS Investments of any single issuer described in clause (xiv) 7.5%
above
MBS Investments of any single issue described in clause (xiv) 5%
above
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III. EQUITY MUTUAL FUND SHARES/FOREIGN EQUITY MUTUAL FUND
SHARES
Equity Mutual Fund Shares and Foreign Equity Mutual Fund 25%
Shares described in clause (xv) above
Foreign Equity Mutual Fund Shares described in clause (xv) above 20%
Equity Mutual Fund Shares described in clause (xv) above of a 7.5%
particular portfolio manager
Notwithstanding the foregoing, to the extent that the Fair
Market Value of Pledged Fund Investments described in clause (xvi)
above which pursue the same Strategy or group of Strategies exceeds the
maximum Fair Market Value contained in any of the following Strategy
concentration limits, the total Fair Market Value of such Pledged Fund
Investments shall without duplication be reduced, for purposes only of
determining the Adjusted Asset Value, by the amount of such excess: (i)
the Fair Market Value of the Pledged Fund Investments which pursue the
same Strategy in excess of 25% of the Fair Market Value of all Pledged
Investments; (ii) the Fair Market Value of the Pledged Fund Investments
in the Sector Long/Short, Statistical Arbitrage, Fixed Income
Arbitrage, and Convertible Securities Arbitrage and Other Strategies in
excess of 40% of the Fair Market Value of all Pledged Investments; and
(iii) the Fair Market Value of the Pledged Fund Investments which
pursue the four Strategies having the largest Fair Market Value of the
Pledged Fund Investment in excess of 80% of the Fair Market Value of
all Pledged Investments. Any such reduction shall be applied as
determined by the Company in any manner consistent with this Agreement.
Notwithstanding the foregoing, the Pledged MBS Investments
described in clauses (xiii) and (xiv) above shall be limited to TACs,
PACs and Sequentials, as defined by Bloomberg and shall not include
IO's, IOettes, PO's, Subordinated Z's and Support Tranches, as defined
by Bloomberg. The weighted average duration of such Pledged MBS
Investments shall be less than or equal to seven years. The maximum
weighted average life of any single Pledged MBS Investment shall not
exceed twelve years. To the extent the Pledged MBS Investments
described in clauses (xiii) and (xiv) above violate the restrictions
set forth in this paragraph, the Fair Market Value of such Pledged MBS
Investments shall be excluded for the purposes of determining the
Adjusted Asset Value; provided, however, that if one or more Pledged
MBS Investments can be excluded for such purposes and thereby permit
compliance with the aforementioned weighted average duration
requirement to be satisfied, only the Pledged MBS Investments having
the lowest aggregate Fair Market Value whose exclusion will result in
compliance shall be excluded for the purposes of determining the
Adjusted Asset Value.
1.2 Cash Equivalents. The definition of "Cash Equivalents" in
Section 1.1 of the Credit Agreement is amended to state in its entirety
as follows:
"Cash Equivalents means (a) securities with maturities of six
(6) months or less from the date of acquisition issued or fully
guaranteed or insured by the United States Government or any agency
thereof, (b) certificates of deposit, Eurodollar time deposits,
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overnight bank deposits, bankers' acceptances and repurchase agreements
of any Bank or any other financial institution whose unsecured
long-term debt obligations are rated at least BBB- by S&P's or Baa3 by
Xxxxx'x having maturities of six months or less from the date of
acquisition, and (c) with respect to the Company, amounts owed by any
Fund to the Company (i) arising in connection with the Company's
redemption of all or any part of the related Fund Investment and (ii)
as reflected on the Company's balance sheet (net of any related
reserve) determined pursuant to GAAP."
1.3 Change of Control. The definition of "Change of Control" in Section
1.1 of the Credit Agreement is amended to state in its entirety as follows:
(a) with respect to the Company, the failure by the Parent to own,
beneficially and of record, 100% of each class of common stock of the Company;
(b) with respect to the Subsidiary Pledgor, the failure by the Company
and a Related Party to own, beneficially and of record, 100% of each class of
membership interests of the Subsidiary Pledgor;
(c) Xxxxxx Xxxxxxxxxx or any other Standby Purchaser shall sell,
transfer or otherwise dispose of any shares of common stock of the Parent, if
upon such disposition the value of the stock held by Xxxxxx Xxxxxxxxxx and the
other Standby Purchasers in the aggregate shall be less than $5,000,000;
(d) any Person shall own greater voting power in the Parent than Xxxxxx
Xxxxxxxxxx and members of management of the Parent; or
(e) Xxxxxx Xxxxxxxxxx, an entity directly or indirectly beneficially
owned by Xxxxxx Xxxxxxxxxx and, if applicable, one or more Related Parties of
the Company, or a Related Party of the Company shall cease to act as investment
advisor to the Company or the Subsidiary Pledgor.
1.4 Fair Market Value. The definition of "Fair Market Value" in Section
1.1 of the Credit Agreement is amended to state in its entirety as follows:
"Fair Market Value shall mean (a) with respect to any publicly-traded
security (other than those set forth in clause (b)) the closing price
for such security on the largest exchange on which such security is
traded (or if not traded on an exchange, then the average of the
closing bid and ask prices quoted over-the-counter) on the date of the
determination (as such prices are reported in The Wall Street Journal
(Midwest Edition) or if not so reported, in any nationally recognized
financial journal or newspaper), (b) with respect to any Fund
Investment, other than a Managed Account, on any date of calculation,
the amount that would be received with respect thereto if the entire
amount of the applicable capital or other similar account relating
thereto were withdrawn on
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such date (regardless of whether a contractual right exists to make any
withdrawal on such date), (c) with respect to Cash and Cash Equivalents, the
amounts thereof, (d) with respect to Bond Mutual Fund Shares, U.S. Equity Mutual
Fund Shares, Foreign Equity Mutual Fund Shares, High Yield Mutual Fund Shares,
Money Market Mutual Fund Shares and U.S. Government Mutual Fund Shares, the
closing net asset value per share provided by the issuer of the applicable
shares on the date of determination and (e) with respect to any Investment
(other than those forth in clauses (a), (b), and (d)), the price for such
Investment on the date of calculation obtained from a generally recognized
source approved by the Agent or the most recent bid quotation from such approved
source (or, if no generally recognized source exists as to a particular
Investment, any other source specified by the Company to which the Agent does
not reasonably object). The Fair Market Value of a Managed Account shall equal
the sum of the value of the different kinds of Investments held therein less the
amount of any Indebtedness secured by the assets of, or otherwise financing
assets in, any Managed Account. The Fair Market Value of any Structured Note
shall equal the sum of the value of the different kinds of Investments held by
the issuers of such Structured Notes. The Fair Market Value of an Investment
Subsidiary shall equal the Fair Market Value of the Managed Accounts, Cash
Equivalents and Cash held by it.
1.5 Interim Borrowing Base. The definition of "Interim Borrowing Base"
in Section 1.1 of the Credit Agreement is amended to state in its entirety as
follows:
Interim Borrowing Base means, on any date, an amount equal to the
result of (a) the Adjusted Asset Value divided by (b) the Borrowing
Base Factor; provided, however, that for the purpose of the calculation
of the Interim Borrowing Base only, the assets described in clause
(xvi) of the definition of "Adjusted Asset Value" shall be divided by
1.35 instead of by the Borrowing Base Factor.
1.6 Additional Definitions. The following definitions are added to
Section 1.1 of the Credit Agreement in proper alphabetical order:
ABS means any fixed-income instrument that entitles the holder of, or
beneficial owner under, the instrument to the whole or any part of the
rights or entitlements of a holder of a receivable or other asset and
any other rights or entitlements in respect of a pool of receivables or
other assets or any money payable by obligors under those receivables
or other assets (whether or not the money is payable to the holder of,
or beneficial owner under, the instrument on the same terms and
conditions as under the receivables or other assets) in relation to
receivables or other assets; provided however, such receivables or
assets shall be limited to automobile loans, credit card receivables
and home equity loans.
Bond Mutual Fund Shares means shares (including shares held in a
brokerage account) in an open-end diversified investment
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company registered under the Investment Company Act of 1940, as
amended, the investment objective of which is to invest its assets in
investment grade debt securities more than 50% of which are issued by
companies organized in the United States and none of the assets for any
such company are Emerging Market Securities.
Commercial Mortgage means a mortgage related to properties utilized to
conduct business operations rather than residential properties.
Emerging Market Securities means securities issued by entities
organized in nations not named by Morningstar Inc. on its list of
developed markets, as in effect from time to time. The Company agrees
to give prompt written notice to the Agent in the event that this
definition requires it to take into account, for purposes of any
calculation under this Agreement, any addition to, or subtraction from,
Morningstar Inc.'s list of developed markets that is made subsequent to
the date of this Agreement.
Foreign Equity Mutual Fund Shares means shares (including shares held
in a brokerage account) in an open-end diversified investment company
registered under the Investment Company Act of 1940, as amended, the
investment objective of which is to invest its assets primarily in
equity securities issued by companies organized in or outside the
United States (including Emerging Market Securities); provided that
Emerging Market Securities shall not constitute more than 35% of any
such investment company's asset portfolio determined based on the
complete statement of net assets most recently made publicly available
by the Company.
High Yield Mutual Fund Shares means shares (including shares held in a
brokerage account) in an open-end diversified investment company
registered under the Investment Company Act of 1940, as amended, the
investment objective of which is to invest primarily in non-investment
grade bonds issued by companies organized in the United States.
Industry means any sector described on Schedule 1.1C hereto.
Industry Bonds means bonds issued by corporations; provided however
that Emerging Market Securities shall not be Industry Bonds.
MBS (Agency Pass-Through) means any instrument, issued by the Federal
National Mortgage Association, the Government National
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Mortgage Association or the Federal Home Loan Mortgage Corporation,
that entitles the holder of, or beneficial owner under, the instrument
to the whole or any part of the rights or entitlements of a mortgagee
and any other rights or entitlements in respect of a pool of mortgages
or any money payable by mortgagors under those mortgages in relation to
real estate mortgages, and the money payable to the holder of, or
beneficial owner under, the instrument is based on actual or scheduled
payments on the underlying mortgages.
MBS (Agency CMOs) means collateralized mortgage obligations or real
estate mortgage investment conduit pass through securities, in any case
issued by the Federal National Mortgage Association, the Government
National Mortgage Association or the Federal Home Loan Mortgage
Corporation.
MBS (Non-Agency CMOs) means collateralized mortgage obligations or real
estate mortgage investment conduit pass through securities, not issued
by the Federal National Mortgage Association, the Government National
Mortgage Association or the Federal Home Loan Mortgage Corporation.
Money Market Mutual Fund Shares means shares (including shares held in
a brokerage account) in an open-end diversified investment company
registered under the Investment Company Act of 1940, as amended, the
investment objective of which is to invest in Cash, Cash Equivalents
(other than the amounts referenced in clause (d) of the definition
thereof) and similar instruments and which seeks to maintain a constant
net asset value of $1.00 per share.
Subsidiary Pledgor Factor means the fraction (expressed as a decimal)
of all classes of membership interests of the Subsidiary Pledgor owned
by the Company.
U.S. Equity Mutual Fund Shares means shares (including shares held in a
brokerage account) in an open-end diversified investment company
registered under the Investment Company Act of 1940, as amended, the
investment objective of which is to invest its assets in equity
securities more than 50% of which are issued by companies organized in
the United States and not more than 25% of which assets for any such
company, determined based on the complete statement of net assets most
recently made publicly available by the Company, are Emerging Market
Securities.
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U.S. Government Mutual Fund Shares means shares (including shares held
in a brokerage account) in an open-end diversified investment company
registered under the Investment Company Act of 1940, the investment
objective of which is to invest primarily in fixed income securities
issued or guaranteed by the United States, its agencies and
instrumentalities.
1.7 Investments Available for Withdrawal. Section 7.13 of the Credit
Agreement is hereby amended to state in its entirety as follows:
"7.13 Investments Available for Withdrawal. The Company shall not
permit the aggregate Fair Market Value of all Investments Pledged by the
Company, the Parent and the Subsidiary Pledgor and Investments made by a Pledged
Investment Subsidiary on any day which are available for withdrawal, sale or use
by the Parent, the Company, the Subsidiary Pledgor or the Pledged Investment
Subsidiary, as the case may be, (i) on at least a quarterly basis to be less
than 65% of the aggregate Fair Market Value of all Investments Pledged by the
Company, the Parent and the Subsidiary Pledgor or owned by a Pledged Investment
Subsidiary on such day, and (ii) on an immediate basis to be less than 4% of the
aggregate Fair Market Value of all Investments Pledged by the Company, the
Parent and the Subsidiary Pledgor and Investments owned by a Pledged Investment
Subsidiary on such day; provided, however, that if said Investments are less
than said 65% limit solely because of appreciation, the Company shall not be in
violation of this Section 7.13 if (i) all Investments thereafter Pledged by the
Company, the Parent or the Subsidiary Pledgor to the Agent or made by a Pledged
Investment Subsidiary are subject to withdrawal on at least a quarterly basis
until the Company, the Parent, the Subsidiary Pledgor and the Pledged Investment
Subsidiary shall be in compliance with such limit, (ii) no Investments so
Pledged subject to such quarterly or more frequent withdrawal are withdrawn or
have been withdrawn during the quarter in which the limit was exceeded until the
Company, Parent, the Subsidiary Pledgor and Investment Subsidiary are in
compliance and (iii) the Company, the Parent and the Subsidiary Pledgor shall be
in compliance with such limit at the end of each fiscal year. For the purpose of
this covenant, all Investments held by issuers of Structured Notes shall be
treated as if held by the Company."
1.8 Deletion of Section 7.14 and Section 7.15. Sections 7.14 and 7.15
of the Credit Agreement are hereby deleted in their entirety.
1.9 Schedule 1.1B, Exhibit A and Exhibit B. Schedule 1.1B, Exhibit A and
Exhibit B of the Credit Agreement are hereby amended and restated in their
entirety to read as set forth on Schedule 1.1B, Exhibit A and Exhibit B hereof,
respectively.
1.10 Addition of Schedule 1.1C. Schedule 1.1C attached hereto is added
as Schedule 1.1C to the Credit Agreement.
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SECTION 2 CONDITIONS PRECEDENT. This Amendment shall become effective as
of the date hereof when each of the conditions precedent set forth in this
Section 2 shall have been satisfied, and notice thereof shall have been given by
the Agent to the Company and the Banks.
2.1 Receipt of Documents. The Agent shall have received all of the
following documents duly executed, dated the date hereof or such other date as
shall be acceptable to the Agent, and in form and substance satisfactory to the
Agent:
(a) Amendment. This Amendment, duly executed by the Company, the Agent
and the Required Banks.
(b) Secretary's Certificate. A certificate of the Secretary or an
Assistant Secretary of the Company, as to (i) resolutions of the executive
committee of the Company then in full force and effect authorizing the
execution, delivery and performance of this Amendment and each other document
described herein, and (ii) the incumbency and signatures of those officers of
the Company authorized to act with respect to this Amendment and each other
document described herein.
(c) Opinion of Counsel. An opinion, addressed to the Agent and the
Banks, from Xxxxxxx Xxxx & Xxxxxxx, counsel to the Company in form satisfactory
to the Agent.
(d) Consent. A consent of the Parent and the Subsidiary Pledgor in the
form attached hereto.
(e) Fees. Evidence of payment by the Company of all fees payable under
the letter agreement between the Company and the Agent dated as of March 16,
2000.
2.2 Compliance with Warranties, No Default, etc. Both before and after
giving effect to the effectiveness of this Amendment, the following statements
by the Company shall be true and correct (and the Company, by its execution of
this Amendment, hereby represents and warrants to the Agent and each Bank that
such statements are true and correct as at such times):
(a) the representations and warranties set forth in Article V of the
Credit Agreement, as hereby amended, shall be true and correct with the same
effect as if then made (unless stated to relate solely to an earlier date, in
which case such representations and warranties shall be true and correct as of
such earlier date); and
(b) no Event of Default or Unmatured Event of Default shall have then
occurred and be continuing.
2.3 Satisfactory Legal Form. All documents executed or submitted
pursuant hereto by or on behalf of the Company or the Subsidiary Pledgor shall
be satisfactory in form and substance to the Agent and its counsel; and the
Agent and its counsel shall have received all
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information, approvals, opinions, documents or instruments as the Agent or its
counsel may reasonably request.
SECTION 3 REPRESENTATIONS AND WARRANTIES. To induce the Banks and the
Agent to enter into this Amendment, the Company hereby represents and warrants
to the Agent and each Bank as follows:
3.1 Due Authorization, Non-Contravention, etc. The execution, delivery
and performance by the Borrower of this Amendment are within the Company's
powers, as applicable, have been duly authorized by all necessary action, and do
not
(a) contravene the Company's Organization Documents;
(b) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on or
affecting the Company; or
(c) result in, or require the creation or imposition of, any
Lien on any of the Company's properties except for the benefit of the
Agent and the Banks.
3.2 Government Approval, Regulation, etc. No authorization or approval
or other action by, and no notice to or filing with, any governmental authority
or regulatory body or other Person is required for the due execution, delivery
or performance by the Company of this Amendment.
3.3 Validity, etc. This Amendment constitutes the legal, valid and
binding obligation of the Company enforceable in accordance with their
respective terms.
SECTION 4 MISCELLANEOUS.
4.1 Continuing Effectiveness, etc. This Amendment shall be deemed to be
an amendment to the Credit Agreement, and the Credit Agreement, as amended
hereby, shall remain in full force and effect and is hereby ratified, approved
and confirmed in each and every respect. After the effectiveness of this
Amendment in accordance with its terms, all references to the Credit Agreement
in the Loan Documents or in any other document, instrument, agreement or writing
shall be deemed to refer to the Credit Agreement as amended hereby.
4.2 Payment of Costs and Expenses. The Company agrees to pay on demand
all reasonable expenses of the Agent (including the reasonable fees and
out-of-pocket expenses of counsel to the Agent) in connection with the
negotiation, preparation, execution and delivery of this Amendment.
4.3 Severability. Any provision of this Amendment which is prohibited
or unenforceable in any jurisdiction shall, as to such provision and such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining
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provisions of this Amendment or affecting the validity or enforceability of
such provision in any
other jurisdiction.
4.4 Headings. The various headings of this Amendment are inserted for
convenience only and shall not affect the meaning or interpretation of this
Amendment or any provisions hereof.
4.5 Execution in Counterparts. This Amendment may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
4.6 Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS.
4.7 Successors and Assigns. This Amendment shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
ORACLE REINSURANCE COMPANY, LTD.
By:
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Title:
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S-1
14
BANK OF AMERICA, National Association,
as Agent, L/C Administrator, Fronting
Bank and a Bank
By:
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Title:
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S-2
15
THE BANK OF NEW YORK, as Co-Agent and as a
Bank
By:
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Title:
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X-0
00
XXXXXXXX BANK AG, New York and/or Cayman
Islands Branches, as Co-Agent and as a Bank
By:
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Title:
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By:
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Title:
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S-4
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DRESDNER BANK AG, New York Branch and
Grand Cayman Branch, as Co-Agent and as a Bank
By:
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Title:
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By:
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Title:
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S-5
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FLEET NATIONAL BANK, as Co-Agent and as a
Bank
By:
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Title:
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S-6
19
THE BANK OF BERMUDA LTD., as a Bank
By:
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Title:
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S-7
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AGREEMENT AND CONSENT
The undersigned hereby agree and consent to the terms and provisions of
the foregoing Second Amendment to Credit Agreement, and agree that the Loan
Documents executed by the undersigned shall remain in full force and effect
notwithstanding the provisions of the foregoing Second Amendment to Credit
Agreement.
Dated: March , 2000
DELPHI INTERNATIONAL LTD.
By:
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Title:
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XXXXX PARTNERS LLC
By: Chestnut Investors II,Inc.,
its Managing Member
By:
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Title:
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SCHEDULE 1.1B
STRATEGIES
Strategy General Description
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Hedged Equity The purchase and sale (short) of securities
in portfolios which tend to have a low
correlation to the U.S. stock market. In
general, managers of Funds in this category
will have a correlation with the S&P 500
stock index of less than .4, indicating that
historically, less than 16% of their
performance can be explained by the
fluctuations of the market.
Specialized Trading/ Investing in common stock and other
Common Stocks instruments, selling short and opportunistic
trading. In general, the portfolio tend to
be more highly correlated to the U.S. stock
market than hedged equity portfolios. Some
managers are growth oriented, or value
investors while others are opportunistic
traders and investors.
Short Selling Selling securities prior to their purchase
by borrowing the shares from a broker in
anticipation of being able to purchase the
securities at a later date at a lower price.
Risk Arbitrage The purchase of securities which are
expected to become the subject of tender
offers, exchange offers or mergers or other
types of corporate reorganizations and then
tendering these securities for cash or other
securities. This strategy also includes
special situations and other event-driven
transactions.
Distressed Securities Opportunistic trading in the securities of
distressed companies and countries. This
strategy includes, among others, financially
troubled companies, those in bankruptcy
proceedings, reorganizations or liquidation.
Commodities, Financial Investing, trading and speculating in
Instruments and commodity futures contracts on both domestic
Foreign Currencies and foreign exchanges, forward contracts on
foreign currencies and other commodities,
options on futures contracts and physical
commodities and cash commodities, or other
investments that have a risk-reward profile
of commodity trading.
Foreign Portfolio Investing in common stocks and debt
instruments of non-U.S. issuers.
1
22
Sector Long/Short The purchase and sale (short) of equities
within specific industries frequently
equally weighted, e.g. banks, utilities.
Statistical Arbitrage Quantative forecasting models following
long/short strategies in individual country
stocks, stock and bond indices, currencies,
etc.
Fixed Income Arbitrage Relative value trading strategies in fixed
income securities. Offsetting positions are
taken to exploit a deviation from the
historical mathematical relation between two
securities.
Convertible Securities The purchase of convertible bonds,
Arbitrage and Other convertible preferred stock, etc. and the
sale (short) of the underlying equity
securities. This strategy also includes
pairs trading and other long/short
strategies.
2
23
Schedule 1.1C
INDUSTRIES
Aerospace & Defense
Automobiles
Banking, Financing & Real Estate
Broadcasting and Media
Buildings & Materials
Cable
Chemicals
Computers & Electronics
Consumer Products
Energy
Environmental Services
Farming & Agriculture
Food, Beverage & Tabasco
Gaming, Lodging and Restaurants
Healthcare & Pharmaceuticals
Industrial/Manufacturing
Insurance
Leisure & Entertainment
Metals & Mining
Miscellaneous
1
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Paper & Forest Products
Retail
Sovereign
Supermarkets and Drug Stores
Telecommunications
Textiles & Furniture
Transportation
Utilities
2
25
EXHIBIT A
FORM OF BORROWING BASE CERTIFICATE
To: Bank of America, N.A.,
as Agent
000 X. XxXxxxx Xx.
Xxxxxxx, Xxxxxxxx 00000
Re: Oracle Reinsurance Company, Ltd.
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of January 27, 1998 (as
amended or otherwise modified from time to time, the "Credit Agreement") among
Oracle Reinsurance Company, Ltd. (the "Company"), various financial institutions
from time to time party thereto (the "Banks"), and Bank of America, N.A.
(formerly known as Bank of America National Trust and Savings Association), as
agent for the Banks (the "Agent"). This certificate (this "Certificate"),
together with supporting calculations attached hereto set forth in reasonable
detail, is delivered to you pursuant to the terms of the Credit Agreement.
Capitalized terms used but not otherwise defined herein and in the Schedule
hereto shall have the same meanings herein as in the Credit Agreement.
We hereby certify and warrant to the Agent and the Banks that at the
close of business on ___________ , _____________ (the "Borrowing Base
Calculation Date"), the Borrowing Base was $______________, computed as set
forth on the schedule attached hereto.
We hereby further certify and warrant to the Agent and the Banks that
the information and computations contained herein are true and correct in all
material respects as of the Borrowing Base Calculation Date.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
executed and delivered by a Responsible Officer this _____ day of __________,
_____.
ORACLE REINSURANCE COMPANY, LTD.
By:__________________________
Title:_______________________
26
Oracle Reinsurance Company
Schedule to Borrowing Base Certificate
I. Borrowing Base Calculation
"BBF" = Borrowing Base Factor in effect on the date to which this
Certificate relates
"SPF" = Subsidiary Pledgor Factor in effect on the date to which this
Certificate relates
Fair Market Value
Pledged and Included in Adjusted Asset
Type of Pledged Investment Adjusted Asset Value ($)(*) Multiplication Factor (x) Value ($)
-------------------------- --------------------------- ------------------------- ---------
Oracle Re/Parent BBF
(i) Cash and Cash Equivalents
(ii) Money Market Mutual Fund Shares .98 x BBF
(iii) Commercial Paper rated "A-1" by S&P
or "P-1" by Xxxxx'x .98 x BBF
(iv) Commercial Paper rated "A-2" by S&P
or "P-2" by Xxxxx'x .95 x BBF
(v) U.S. Government Mutual Fund Shares .95 x BBF
(vi) U.S. Government Securities .967 x BBF
(vii) Industry Bonds rated at least "AA-"
by S&P or "Aa3" by Xxxxx'x .933 x BBF
(viii) Industry Bonds rated at least "A-"
(but not higher than "A+") by S&P or
"A3" (but not higher than "A1") by Xxxxx'x .92 x BBF
-----------
* After giving effect to any applicable reduction therein pursuant to the
diversification calculations in Section II below
2
27
Oracle Reinsurance Company
Schedule to Borrowing Base Certificate
Fair Market Value
Pledged and Included in Adjusted Asset
Type of Pledged Investment Adjusted Asset Value ($)(*) Multiplication Factor (x) Value($)
-------------------------- --------------------------- ------------------------- --------
(ix) Industry Bonds rated at least .90 x BBF
"BBB-" (but not higher
than "BBB+") by S&P or "Baa3" (but not higher
than "Baa1") by Xxxxx'x
(x) Industry Bonds rated at least "BB-" 70 x BBF
(but not higher than "BB+") by S&P or "Ba3"
(but not higher than "Ba1") by Xxxxx'x
(xi) Industry Bonds rated at least "B-" .55 x BBF
(but not higher than "B+") by S&P
or "B3" (but not higher than "B1")
by Xxxxx'x
(xii) ABS rated "AAA" by S&P or "Aaa" by .95 x BBF
Xxxxx'x
(xiii) MBS (Agency Pass-Throughs and
Agency CMOs) rated at least "A" by
S&P or "A2" by Xxxxx'x .90 x BBF
(xiv) MBS (Non-Agency CMOs) rated "A" by S&P or .85 x XXX
"X0" by Xxxxx'x
(xv) Equity Mutual Fund Shares, Foreign Equity Mutual .80 x BBF
Fund Shares, Bond Mutual Fund Shares and High
Yield Mutual Fund Shares
(xvi) Fund Investments, Managed Accounts, Structured 1.0
Notes and Investment Subsidiaries the Stock of
which is pledged
----------------------- ---------
Total - Oracle Re/Parent
======================= ==========
Subsidiary Pledgor
(i) Cash and Cash Equivalents SPF x BBF
3
28
Oracle Reinsurance Company
Schedule to Borrowing Base Certificate
Fair Market Value
Pledged and Included in Adjusted Asset
Type of Pledged Investment Adjusted Asset Value ($)(*) Multiplication Factor (x) Value($)
-------------------------- --------------------------- ------------------------- --------
(ii) Money Market Mutual Fund Shares SPF x. 98 x BBF
(iii) Commercial Paper rated "A-1" by S&P
or "P-1" by Xxxxx'x SPF x. 98 x BBF
(iv) Commercial Paper rated "A-2" by S&P
or "P-2" by Xxxxx'x SPF x .95 x BBF
(v) U.S. Government Mutual Fund Shares SPF x .95 x BBF
(vi) U.S. Government Securities SPF x .967 x BBF
(vii) Industry Bonds rated at least "AA-" SPF x .933 x BBF
by S&P or "Aa3" by Xxxxx'x
(viii) Industry Bonds rated at least "A-" SPF x .92 x BBF
(but not higher than "A+") by S&P or
"A3" (but not higher than "A1") by Xxxxx'x
(ix) Industry Bonds rated at least "BBB-" SPF x .90 x BBF
(but not higher than "BBB+") by S&P or
"Baa3" (but not higher than "Baa1") by Xxxxx'x
(x) Industry Bonds rated at least "BB-" SPF x .70 x BBF
(but not higher than "BB+") by S&P
or "Ba3" (but not higher than
"Ba1") by Xxxxx'x
(xi) Industry Bonds rated at least "B-" SPF x .55 x BBF
(but not higher than "B+") by S&P
or "B3" (but not higher than "Ba1")
by Xxxxx'x
4
29
Oracle Reinsurance Company
Schedule to Borrowing Base Certificate
Fair Market Value
Pledged and Included in Adjusted Asset
Type of Pledged Investment Adjusted Asset Value ($)(*) Multiplication Factor (x) Value($)
-------------------------- --------------------------- ------------------------- --------
(xii) ABS rated "AAA" by S&P SPF x .95 x BBF
or "Aaa" by Xxxxx'x
(xiii) MBS (Agency Pass-Throughs and
Agency CMOs) rated at least "A" by
S&P or "A2" by Xxxxx'x SPF x. 90 x BBF
(xiv) MBS (Non-Agency CMOs) rated "A" by S&P or SPF x .85 x XXX
"X0" by Xxxxx'x
(xv) Equity Mutual Fund Shares, Foreign
Equity Mutual Fund Shares, Bond
Mutual Fund Shares and High Yield
Mutual Fund Shares SPF x .80 x BBF
(xvi) Fund Investments, Managed Accounts,
Structured Notes and Investment
Subsidiaries, the stock of which is
pledged
Total - Subsidiary Pledgor ------------- -------------
============= =============
Grand Total (Sum of Oracle Reinsurance
Company/Parent and Subsidiary Pledgor
Totals) -------------
BBF -------------
Borrowing Base (Grand Total (divided by) BBF) -------------
Outstanding L/C Obligations -------------
5
30
Oracle Reinsurance Company
Schedule to Borrowing Base Certificate
II. Diversification Calculations
Amount Included
Total Fair Market Percentage of in Determining
Value of Pledged Total Fair Market Maximum Amount of Adjusted Asset
Type of Pledged Investment Investments ($) Value Pledged Percentage Excess ($) Value
-------------------------- --------------- ------------- ---------- ---------- -----
Industrial Bonds and High Yield
Mutual Fund Shares
Industry Bonds and High Yield 45.0%
Mutual Fund Shares in (viii), (ix),
(x), (xi) and (xv) of
Section I above
Industry Bonds of any single issue 7.5%
included in (vii), (viii) and (ix) of
Section I above and High Yield Mutual
Fund Shares and Bond Fund Shares of a
particular portfolio manager included in
(xv) of Section I above
Industry Bonds and High Yield Mutual 15%
Fund Shares included in (x), (xi) and
(xv) of Section I above
Industry Bonds of any single issue, 3%
issuer or Industry included in (x)
and (xi) of Section I above
Industry Bonds in any one Industry included 10%
in (vii) through (xi) of Section I above
Industry Bonds in any three Industries 15%
included in (vii) through (xi) of Section I
above
Industry Bonds in any eight Industries 75%
included in (vii) through (xi) of Section I
above
6
31
Oracle Reinsurance Company
Schedule to Borrowing Base Certificate
Amount Included
Total Fair Market Percentage of In Determining
Value of Pledged Total Fair Market Maximum Amount of Adjusted Asset
Type of Pledged Investment Investments ($) Value Pledged Percentage Excess ($) Value
-------------------------- --------------- ------------- ---------- ---------- -----
ABS/MBS Investments
ABS and MBS Investments described
in (xii), (xiii) and (xiv) of
Section I above 30%
MBS Investments included in (xiii)
and (xiv) which are secured by
Commercial Mortgages included in (vii)
through (xi) of Section I above 10%
MBS Investments included in (xiv) of
Section I above 15%
ABS and MBS Investments of any single
issue included in (xii) and (xiii) of
Section I above 7.5%
MBS Investments of any single issuer
included in (xiv) of Section I above 7.5%
MBS Investment of any single issue
included in (xiv) of Section I above 5%
Equity Mutual Fund Shares/Foreign
Equity
Mutual Fund Shares
Equity Mutual Fund Shares and Foreign
Equity
Mutual Fund Shares included in (xv)
of Section I above 25%
Foreign Equity Mutual Fund Shares
included in (xv) of Section I above 20%
Equity Mutual Fund Shares included in
(xv) of a particular portfolio manager
of Section I above 7.5%
7
32
Oracle Reinsurance Company
Schedule to Borrowing Base Certificate
Amount Included
Total Fair Market Percentage of In Determining
Value of Pledged Total Fair Market Maximum Amount of Adjusted Asset
Type of Pledged Investment Investments ($) Value Pledged Percentage Excess ($) Value
-------------------------- --------------- ------------- ---------- ---------- -----
Investment Strategies of Funds
included in (xvi) of Section I above
Largest Strategy 25.0%
Second Largest Strategy 25.0%
Third Largest Strategy 25.0%
Fourth Largest Strategy 25.0%
Aggregate of Four Largest Strategies 80.0%
Sector Long/Short, Statistical Arbitrage, Fixed 40.0%
Income Arbitrage and Convertible Securities
Arbitrage and Other Strategies
8
33
EXHIBIT B
FORM OF COMPLIANCE CERTIFICATE
To: Bank of America, N.A., as Agent, and the Banks which are party to the
Credit Agreement referred to below
Reference is made to the Credit Agreement dated as of January 27, 1998 (as
amended or otherwise modified from time to time, the "Credit Agreement") among
Oracle Reinsurance Company, Ltd. (the "Company"), various financial institutions
from time to time party thereto (the "Banks"), and Bank of America, N.A.
(formerly known as Bank of America National Trust and Savings Association), as a
Bank and as agent for the Banks (the "Agent"). Terms used but not otherwise
defined herein are used herein as defined in the Credit Agreement.
I. Reports. Enclosed herewith [is] [are] [(i)] a copy of the [annual
audited/quarterly] report of the Company as at ___________________,
__________ (the "Computation Date"), which report fairly presents in all
material respects the financial condition and results of operations
[(subject to normal year-end adjustments)] of the Company as of the
Computation Date and has been prepared in accordance with GAAP consistently
applied [and (ii) a copy of the Annual Statement of the Company as at the
Computation Date which Annual Statement is complete and correct and present
fairly in accordance with SAP the financial position of the Company for the
fiscal year then ended.].
II. Financial Tests. The Company hereby certifies and warrants to you that the
following is a true and correct computation as at the Computation Date of
the following ratios and/or financial restrictions contained in the Credit
Agreement:
[FOR EACH QUARTERLY REPORT AND ANNUAL REPORT]
A. Section 7.12 Statutory Surplus
(1) Company's Statutory Surplus $
-----------------
(2) Parent's Net Worth $
-----------------
(3) Item 1 plus Item 2 $
-----------------
(4) Required Total $40,000,000
-----------------
[If Item 3 is less than Item 4 but greater than or equal to $35,000,000, then
Item 3 must be greater than Item 4 within 45 days]
1
34
B. Section 7.13 Investments Available for Withdrawal
(1) Aggregate Fair Market Value of Investments $
Pledged by Company, Parent and the Subsidiary ------------------
Pledgor plus aggregate Fair Market Value of
Investments owned by Pledged Investment
Subsidiaries
(2) Aggregate Fair Market Value of Investments $
included in Item 1 which are available for -----------------
withdrawal on a quarterly or more frequent
basis
(3) Minimum amount required to be available for $
quarterly or more frequent withdrawal -----------------
(65% of Item 1)
(4) Aggregate Fair Market Value of Investments $
included in Item 1 which are available for -----------------
immediate withdrawal
(5) Minimum amount required to be available for $
immediate withdrawal (4% of Item 1) -----------------
8
