LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT dated as of June 5, 2009 between FLAGSTONE REASSURANCE SUISSE SA, as the Company, and BNP PARIBAS, as the Issuing Bank
Exhibit
99.1
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dated
as of
June
5, 2009
between
FLAGSTONE
REASSURANCE SUISSE SA,
as
the Company,
and
BNP
PARIBAS,
as
the Issuing Bank
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Table of Contents
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PRELIMINARY
STATEMENTS:
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4
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ARTICLE
I DEFINITIONS
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4
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SECTION 1.01. Certain Defined
Terms
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4
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SECTION 1.02. Computation of Time
Periods.
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14
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SECTION 1.03. Accounting
Terms
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14
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ARTICLE
II AMOUNT AND TERMS OF THE LETTERS OF CREDIT
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15
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SECTION 2.01. Issuance of the
Letters of Credit.
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15
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SECTION 2.02.
Fees.
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16
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SECTION 2.03.
Reimbursement.
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16
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SECTION 2.04. Increased
Costs.
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16
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SECTION 2.05. Payments;
Interest.
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17
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SECTION 2.06. Obligations
Absolute
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18
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SECTION 2.07. Grant of Security
Interest.
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19
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ARTICLE
III CONDITIONS OF ISSUANCE
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19
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SECTION 3.01. Condition Precedent
to Closing Date
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19
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SECTION 3.02. Condition Precedent
to Issuance of Letters of Credit.
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20
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ARTICLE
IV REPRESENTATIONS AND WARRANTIES
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21
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SECTION 4.01. Corporate
Status
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21
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SECTION 4.02. Corporate Power and
Authority
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21
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SECTION
4.03. No Contravention of Laws, Agreements or
OrganizationalDocuments
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21
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SECTION 4.04. Litigation and
Contingent Liabilities
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22
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SECTION 4.05. Use of Proceeds;
Margin Regulations
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22
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SECTION 4.06.
Approvals
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22
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SECTION 4.07. Investment Company
Act
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22
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SECTION 4.08. True and Complete
Disclosure; Projections and Assumptions
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22
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SECTION 4.09. Financial
Condition; Financial Statements
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22
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SECTION 4.10. Tax Returns and
Payments
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23
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SECTION 4.11. Compliance with
ERISA
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23
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SECTION 4.12.
Subsidiaries
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24
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SECTION 4.13.
Capitalization
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24
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SECTION 4.14.
Indebtedness
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24
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SECTION 4.15. Compliance with
Statutes, etc.
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24
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SECTION 4.16. Insurance
Licenses
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24
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SECTION 4.17. Insurance
Business
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25
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SECTION 4.18. Security
Documents
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25
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Page
i of 44
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SECTION 4.19. Properties;
Liens
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25
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SECTION 4.20.
Solvency
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25
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SECTION 4.21. Certain Insurance
Regulations, Orders, Consents, etc.
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25
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SECTION 4.22. License under the
Swiss Insurance Supervision Act (ISA)
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26
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ARTICLE
V AFFIRMATIVE COVENANTS OF THE COMPANY
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26
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SECTION 5.01. Information
Covenants
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26
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SECTION 5.02. Books, Records and
Inspection
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27
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SECTION 5.03.
Insurance
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28
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SECTION 5.04. Payment of
Taxes
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28
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SECTION 5.05. Maintenance of
Existence
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28
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SECTION 5.06. Compliance with
Statutes, etc.
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28
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SECTION 5.07.
ERISA
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28
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SECTION 5.08. Maintenance of
Property
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29
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SECTION 5.09. Maintenance of
Licenses and Permits
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29
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SECTION 5.10. End of Fiscal
Years; Fiscal Quarters
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29
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SECTION 5.11. Borrowing Base
Requirement
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29
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SECTION 5.12. Further
Assurances
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29
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ARTICLE
VI NEGATIVE COVENANTS OF THE COMPANY
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30
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SECTION 6.01. Changes in
Business
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30
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SECTION 6.02. Consolidations,
Mergers, Sales of Assets and Acquisitions
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30
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SECTION 6.03.
Liens
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30
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SECTION 6.04.
Indebtedness
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32
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SECTION 6.05. Issuance of
Stock
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33
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SECTION 6.06.
Dissolution
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33
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SECTION 6.07. Restricted
Payments
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33
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SECTION 6.08. Transactions with
Affiliates
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33
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SECTION 6.09. Maximum Leverage
Ratio
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34
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SECTION 6.10. Minimum
Consolidated Tangible Net Worth
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34
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SECTION 6.11. Limitation on
Certain Restrictions on Subsidiaries
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34
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SECTION 6.12. Private
Act
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34
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SECTION 6.13. Claims Paying
Ratings
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34
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SECTION 6.14. Defaults under
ISA
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34
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ARTICLE
VII EVENTS OF DEFAULT
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35
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SECTION 7.01. Events of
Default.
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35
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SECTION 7.02.
Remedies
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37
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ARTICLE
VIII MISCELLANEOUS
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37
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SECTION 8.01. Amendments,
Etc.
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37
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SECTION 8.02. Notices,
Etc..
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37
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SECTION 8.03. No Waiver;
Remedies
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38
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Page
ii of 44
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SECTION 8.04. Right of
Set-off.
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38
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SECTION 8.05.
Indemnification.
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38
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SECTION 8.06. No Liability of the
Issuing Bank.
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38
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SECTION 8.07. Sales of
Participations
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39
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SECTION 8.08. Costs, Expenses and
Taxes.
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39
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SECTION 8.09. Binding
Effect
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39
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SECTION 8.10.
Severability.
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40
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SECTION 8.11. Certain
Instructions Regarding Account.
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40
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SECTION 8.12. GOVERNING LAW,
JURISDICTION, SERVICE OFPROCESS, WAIVER OF SOVEREIGN IMMUNITY, WAIVER OF
JURY TRIAL
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40
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SECTION 8.13.
Confidentiality.
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42
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SECTION 8.14.
Headings.
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43
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SECTION 8.15. USA Patriot
Act
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43
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SCHEDULES:
Schedule
4.12 -- Subsidiaries
Schedule
4.13 -- Capitalization
Schedule
4.14 -- Indebteness
Schedule
4.16 -- Insurance
Licenses
Schedule
6.03 -- Existing
Liens
EXHIBITS:
Exhibit
A -- Form
of Notice of LC Request
Exhibit
B -- Form
of Account Control Agreement
Exhibit
C -- Form
of Borrowing Base Certificate
Exhibit
D -- Form
of Guaranty
Page
iii of 44
This
Letter of Credit and Reimbursement Agreement (this “Agreement”), dated as
of June 5, 2009, between Flagstone Reassurance Suisse SA, a société anonyme
organized and existing under the laws of Switzerland (the “Company”), and BNP
Paribas (“BNP”
or, in its capacity as issuing bank, the “Issuing
Bank”).
PRELIMINARY
STATEMENTS:
WHEREAS,
the Company has requested that the Issuing Bank provide, for the account of the
Company, a revolving letter of credit facility on the terms and conditions set
forth herein; and
WHEREAS,
the Issuing Bank is willing to provide a revolving letter of credit facility on
the terms and conditions set forth herein;
NOW,
THEREFORE, in consideration of the premises and in order to induce the Issuing
Bank to issue Letters of Credit (as hereinafter defined), the parties hereto
agree as follows:
ARTICLE
I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As
used in this Agreement, the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
“Account” means the securities account
of the Company held at the Custodian with the Account
Name: Securities Custody Account, and Account Number
G12040.
“Account Control
Agreement” means the account control agreement, attached as Exhibit B attached
hereto, dated the date hereof, among the Custodian, the Company and the Issuing
Bank, as amended, restated, modified and/or supplemented and as in effect
from time to time.
“Advance Rate” means,
for any category of Cash or obligation or investment specified below in the
column entitled “Cash and U.S. Government Securities”, the percentage set forth
opposite such category of Cash or U.S. Government Securities below in the column
entitled “Advance Rate” and, in each case, subject to the original term to
maturity criteria set forth therein:
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Cash and
U.S.Government
Securities:
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Advance
Rate:
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Cash
(Dollars only).
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100%
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U.S.
Government Securities (with maturities of 2 years or less from the date of
determination)
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95%
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U.S.
Government Securities (with maturities of more than 2 years but less than
10 years from the date of determination)
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90%
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U.S.
Government Securities (with maturities of more than 10 years from the date
of determination)
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85%
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All
other investments, obligations or securities.
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0%
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The value
of U.S. Government Securities at any time shall be determined daily based
on the marked-to-market value for such U.S. Government Securities provided by
the Custodian.
4
“Affiliate” means, as
to any Person, any Subsidiary of such Person and any other Person which,
directly or indirectly, controls, is controlled by or is under common control
with such Person and includes each officer or director or general partner or
member of such Person, and (except as to the Guarantor) each Person who is the
beneficial owner of 5% or more of any class of voting securities of such
Person. For the purposes of this definition, “control” means the
possession of the power to direct or cause the direction of management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
“Agency Securities”
means United States Dollar-denominated fixed rate, non-amortizing,
non-mortgage-backed, senior debt book entry securities of fixed maturity issued
directly by Government National Mortgage Association and rated Aaa by Moody’s
and AAA by S&P.
“Applicable Insurance
Regulatory Authority” means, when used with respect to any Regulated
Insurance Company, (x) the insurance department or similar administrative
authority or agency located in each state or jurisdiction (foreign or
domestic) in which such Regulated Insurance Company is domiciled or (y) to the
extent asserting regulatory jurisdiction over such Regulated Insurance Company,
the insurance department, authority or agency in each state or jurisdiction
(foreign or domestic) in which such Regulated Insurance Company is licensed, and
shall include any Federal or national insurance regulatory department, authority
or agency that may be created and that asserts insurance regulatory jurisdiction
over such Regulated Insurance Company.
“Authorized Officer”
means, as to any Person, the Chief Executive Officer, the President, the Chief
Operating Officer, any Vice President, the Secretary, or the Financial Officer
of such Person.
“Availability Period”
means the period of time beginning on the Closing Date and ending on the
Termination Date.
“Available Credit”
means, as of any date, an amount equal to the difference between (a) the lesser
of (i) the LC Commitment Amount and the (ii) the Borrowing Base, in each case,
as of such date and (b) the sum of (i) the aggregate undrawn Stated Amounts of
all Letters of Credit outstanding hereunder as of such date and (ii) the
aggregate drawn but unreimbursed amount of all Letters of Credit as of such
date.
“Bankruptcy Code” has
the meaning assigned thereto in Section
7.01(e).
“Beneficiary” means
the Person for whose benefit a Letter of Credit is issued
hereunder.
“Bermuda Companies
Law” means the Companies Xxx 0000 of Bermuda and other relevant Bermuda
law.
“Board” means the
Board of Governors of the Federal Reserve System of the United States of
America.
“Borrowing Base”
means, at any time, the aggregate amount of Cash and U.S. Government Securities
held in the Account under the Account Control Agreement at such time multiplied
in each case by the respective Advance Rates for Cash and such U.S. Government
Securities; provided that all
Cash and U.S. Government Securities in respect of any Borrowing Base shall only
be included in such Borrowing Base to the extent same are subject to a first
priority perfected security interest in favor of the Issuing Bank pursuant to
the Account Control Agreement.
5
“Borrowing Base
Certificate” means a Borrowing Base Certificate substantially in the form
of Exhibit C
attached hereto.
“Business Day” means a
day of the year on which banks are not required or authorized to close in New
York City.
“Capitalized Lease”
means, as to the Loan Parties, any lease of property by such Person or any of
their Subsidiaries as lessee which would be capitalized on a balance sheet of
the Company prepared in conformity with GAAP.
“Capitalized Lease
Obligations” means, as to the Loan Parties, the capitalized amount of all
obligations of such Person or any of their Subsidiaries under Capitalized
Leases, as determined on a consolidated basis in conformity with
GAAP.
“Capital Markets
Product” means, as to any Person, any security, commodity, derivative
transaction or other financial product purchased, sold or entered into by such
Person for the purpose of undertaking one or more risks assumed by such Person
or any of its Subsidiaries in the ordinary course of business or managing one or
more risks otherwise assumed by such Person or any of its Subsidiaries,
including (i) any structured insurance product, catastrophe bond, rate swap
transaction, swap option, basis swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap, equity or equity index option,
bond option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option transaction, credit
protection transaction, credit swap, credit default swap, credit default option,
equity default swap, total return swap, credit spread transaction, repurchase
transaction, reverse repurchase transaction, buy/sellback transaction,
securities lending transaction, weather index transaction, emissions allowance
transaction, or forward purchase or sale of a security, commodity or other
financial instrument or interest (including any option with respect to any of
these transactions), (ii) which is a type of transaction that is similar to any
transaction referred to in clause (i) above that is currently, or in the future
becomes, recurrently entered into in the financial markets, (iii) any
combination of the transactions referred to in clauses (i) and (ii) above and
(iv) any master agreement relating to any of the transactions referred to in
clauses (i), (ii) and (iii) above.
“Change of Control”
means (x) during any period of two consecutive years, directors who at the
beginning of such period constituted a majority of the Board of Directors of the
Company (together with any new directors whose election by such Board or whose
nomination for election by the stockholders of the Company was approved by a
vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office or (y) any
“person” or “group” (as such terms are defined in Section 13(d) of the
Securities Exchange Act of 1934, as amended) shall become the beneficial owner,
directly or indirectly of shares representing more than 51% of the aggregate
voting power represented by the issued and outstanding capital stock of the
Company.
“Closing Date” means
the date on which each of the conditions precedent set forth in Article III have been
satisfied.
“Code” means the
Internal Revenue Code of 1986, as amended from time to time.
“Collateral” has the
meaning assigned thereto in Section
2.07.
6
“Company” has the
meaning assigned thereto in the preamble.
“Consolidated
Indebtedness” means, for any Person, as of any date of determination, all
Indebtedness (other than (a) Indebtedness described in clause (i) of the
definition thereof that does not constitute bonds, debentures, notes or similar
instruments that are generally recourse with respect to the Guarantor and its
Subsidiaries, (b) obligations in respect of undrawn letters of credit and (c)
Indebtedness that is non-recourse with respect to such Person and its
Subsidiaries) of such Person and its Subsidiaries. For the avoidance
of doubt, “Consolidated Indebtedness” shall not include Contingent Obligations
of such Person or its Subsidiaries as an account party or applicant in respect
thereof unless such Contingent Obligation supports an obligation that
constitutes Indebtedness.
“Consolidated Net
Worth” means, for any Person, as of any date of determination, the Net
Worth of such Person and its Subsidiaries as of such date, determined on a
consolidated basis in accordance with GAAP after appropriate deduction for any
minority interests in subsidiaries including for the avoidance of doubt the
aggregate principal amount of all outstanding preferred (including without
limitation trust preferred) or preference securities or hybrid capital of the
company and its subsidiaries; provided that the
aggregate outstanding amount of such preferred or preference securities or
hybrid capital of the company and its subsidiaries shall only be included in
consolidated net worth to the extent such amount would be included in a
determination of the consolidated net worth of such Person and its Subsidiaries
under the applicable procedures and guidelines of S&P as of the date
hereof.
“Consolidated Tangible Net
Worth” means, for any Person, as of the date of any determination,
Consolidated Net Worth of such Person and its Subsidiaries on such date less the
amount of all intangible items included therein, including, without limitation,
goodwill, franchises, licenses, patents, trademarks, trade names, copyrights,
service marks, brand names and write-ups of assets (it being understood and
agreed that in no event shall deferred acquisition costs or deferred taxes
constitute intangible items for purposes of this definition).
“Consolidated Total
Capital” means, for any Person, as of any date of determination the sum
of (i) Consolidated Indebtedness and (ii) Consolidated Net Worth of such Person
at such time.
“Contingent
Obligation” means, as applied to any Person, any direct or indirect
liability, contingent or otherwise, of such Person with respect to any
Indebtedness or Contractual Obligation of another Person, if the purpose or
intent of such Person in incurring the such liability is to provide assurance to
the obligee of such Indebtedness or Contractual Obligation that such
Indebtedness or Contractual Obligation will be paid or discharged, or that any
agreement relating thereto will be complied with, or that any holder of such
Indebtedness or Contractual Obligation will be protected (in whole or in part)
against loss in respect thereof. Contingent Obligations of a Person
include, without limitation, (a) the direct or indirect guarantee,
endorsement (other than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of an obligation of another Person, and (b) any liability of such
Person for an obligation of another Person through any agreement (contingent or
otherwise) (i) to purchase, repurchase or otherwise acquire such obligation
or any security therefor, or to provide funds for the payment or discharge of
such obligation (whether in the form of a loan, advance, stock purchase, capital
contribution or otherwise), (ii) to maintain the solvency or any balance
sheet item, level of income or financial condition of another Person,
(iii) to make take-or-pay or similar payments, if required, regardless of
non-performance by any other party or parties to an agreement, (iv) to
purchase, sell or lease (as lessor or lessee) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment of
such obligation or to assure the holder of such obligation against loss, or
(v) to supply funds to or in any other manner invest in such other Person
(including, without limitation, to pay for property or services irrespective of
whether such property is received or such services are rendered), if in the case
of any agreement described under subclause (i), (ii), (iii), (iv) or (v) of this
sentence the primary purpose or intent thereof is as described in the preceding
sentence. The amount of any Contingent Obligation shall be equal to
the lesser of (a) the amount of the obligation so guaranteed or otherwise
supported and (b) any enforceable contractual limitation or other cap in respect
of such Contingent Obligation.
7
“Contractual
Obligation” of any Person means any obligation, agreement, undertaking or
similar provision of any security issued by such Person or of any agreement,
undertaking, contract, lease, indenture, mortgage, deed of trust or other
instrument (excluding a Related Document) to which such Person is a party or by
which it or any of its property is bound or to which any of its properties is
subject.
“Credit Event” means
the issuance of any Letter of Credit (or any increase of the Stated Amount
thereof).
“Custodian” means
JPMorgan Chase Bank, NA.
“Default” means any
event which with the passing of time or the giving of notice or both would
become an Event of Default.
“Default Rate” means a
fluctuating interest rate equal to the sum of (i) 2.00% per annum plus (ii) the rate of
interest announced from time to time by the Issuing Bank as its “prime
rate”.
“Dividend” has the
meaning assigned thereto in Section
6.07.
“Drawing Payment” has
the meaning assigned thereto in Section
2.03(b).
“Equity Interests”
means, with respect to any Person, shares of capital stock of (or other
ownership or profit interests in) such Person, warrants, options or other
rights for the purchase or other acquisition from such Person of shares of
capital stock of (or other ownership or profit interests in) such Person,
securities convertible into or exchangeable for shares of capital stock of (or
other ownership or profit interests in) such Person or warrants, rights or
options for the purchase or other acquisition from such Person of such shares
(or such other interests), and other ownership or profit interests in such
Person (including, without limitation, partnership, member or trust
interests therein), whether voting or nonvoting, and whether or not such shares,
warrants, options, rights or other interests are authorized or otherwise
existing on any date of determination.
“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time
and the regulations promulgated and rulings issued
thereunder. Section references to ERISA are to ERISA, as in effect at
the date of this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
“ERISA Affiliate”
means any corporation or trade or business which is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Code) as the Guarantor or any of its Subsidiaries or is under common control
(within the meaning of Section 414(c) of the Code) with the Guarantor or any of
its Subsidiaries.
“Event of Default” has
the meaning assigned thereto in Section
7.01.
“Financial Officer”
means, as to any Person, the chief financial officer, principal accounting
officer, treasurer or controller thereof.
“Foreign Pension Plan”
means any plan, fund (including, without limitation, any superannuation fund) or
other similar program established or maintained outside the United States of
America by the Company or any one or more of its Subsidiaries primarily for the
benefit of employees of the Company or such Subsidiaries residing outside
the United States of America, which plan, fund or other similar program
provides, or results in, retirement income, a deferral of income in
contemplation of retirement or payments to be made upon termination of
employment, and which plan is not subject to ERISA or the Code.
8
“Fronting Arrangement”
means an agreement or other arrangement by a Regulated Insurance Company
pursuant to which an insurer or insurers agree to issue insurance policies at
the request or on behalf of such Regulated Insurance Company and such Regulated
Insurance Company assumes the obligations in respect thereof pursuant a
Reinsurance Agreement or otherwise.
“GAAP” means generally
accepted accounting principles in the United States of America or other
jurisdiction where the Company or the Guarantor are incorporated (as applicable)
as in effect from time to time set forth in the opinions and pronouncements of
the Accounting Principles Board and the American Institute of Certified Public
Accountants and the statements and pronouncements of the Financial Accounting
Standards Board or other governing Accounting Boards in Switzerland or Bermuda
(as applicable), or in such other statements by such other entity as may be in
general use by significant segments of the accounting profession, which are
applicable to the circumstances as of the date of determination.
“Governmental
Authority” means any nation or government, any state or other political
subdivision thereof and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government.
“Guarantee” of or by
any Person (the “guarantor”) means any
obligation guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations (“primary obligations”)
of any other Person (the “primary obligor”) in
any manner, whether directly or indirectly, including, without limitation, any
obligation of such Person, whether or not contingent, (a) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (b) to advance or supply funds (i) for the purchase or payment of any
such primary obligation or (ii) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of
the primary obligor, (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation or (d) otherwise to assure or hold harmless the owner of
such primary obligation against loss in respect thereof; provided, however, that the
term Guarantee shall not include (w) endorsements of instruments for
deposit or collection in the ordinary course of business, (x)
obligations of any Regulated Insurance Company under Insurance Contracts,
Reinsurance Agreements, Fronting Arrangements or Retrocession Agreements
(including any Liens with respect thereto) and (y) obligations under
indemnities incurred in the ordinary course of business or under stock purchase
or asset purchase or sale agreements, or which do not cover Indebtedness of the
type described in clauses (a) through (i) of the definition of
Indebtedness. The amount of any Guarantee shall be deemed to be an
amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as
determined by such Person in good faith.
“Guarantor” means
Flagstone Reinsurance Holdings Limited, a reinsurance holding company organized
and existing under the laws of Bermuda.
“Guaranty” means the
Guaranty made by the Guarantor in favor of the Issuing Bank, substantially in
the form of Exhibit
D attached hereto.
“Indebtedness” of any
Person means (without duplication) (a) all obligations of such Person for
borrowed money or with respect to deposits or advances of any kind, (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such Person upon which interest charges are
customarily paid and treated as interest expense under GAAP, (d) all obligations
of such Person under conditional sale or other title retention agreements
relating to property acquired by such Person, (e) all
9
obligations
of such Person in respect of the deferred purchase price of property or services
(excluding current ordinary course trade accounts payable), (f) all Indebtedness
of other Persons secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien on property
owned or acquired by such Person, whether or not the Indebtedness secured
thereby has been assumed; provided that the
amount of Indebtedness of such Person shall be the lesser of (i) the fair market
value of such property at such date of determination (determined in good faith
by the Company) and (ii) the amount of such Indebtedness of such other Person,
(g) all Contingent Obligations of such Person, (h) all Capital Lease Obligations
of such Person, (i) all obligations (or to the extent netting is permitted under
the applicable agreement governing such Capital Markets Products and such
netting is limited with respect to the counterparty or counterparties of such
agreement, all net termination obligations) of such Person under transactions in
Capital Markets Products (including, without limitation, hedging, swap and other
derivative transactions) and (j) all reimbursement obligations of such Person in
respect of letters of credit, letters of guaranty, bankers’ acceptances and
similar credit transactions; provided that
indebtedness shall not include any preferred (including without limitation trust
preferred) or preference securities or hybrid capital to the extent such
preferred or preference securities or hybrid capital would be treated as equity
under the applicable procedures and guidelines of S&P as of the date
hereof. The Indebtedness of any Person shall include the Indebtedness
of any other entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefore as a result of such
Person’s ownership interest in or other relationship with such entity, except to
the extent the terms of such Indebtedness provide that such Person is not liable
therefore. For the avoidance of doubt, indebtedness shall not include (v)
current trade payables (including current payables under insurance contracts and
current reinsurance payables) and accrued expenses, in each case arising in the
ordinary course of business, (w) obligations and guarantees of regulated
insurance companies with respect to policies, (x) obligations and guarantees
with respect to products underwritten by regulated insurance companies in the
ordinary course of business, including insurance and reinsurance policies,
annuities, performance and surety bonds, assumptions of liabilities and any
related contingent obligations and (y) reinsurance agreements and fronting
arrangements and guarantees thereof entered into by any Regulated Insurance
Company in the ordinary course of business.
“Insurance Business”
means one or more aspects of the business of selling, issuing or underwriting
insurance or reinsurance.
“Insurance Contract”
means any insurance contract or policy issued by a Regulated Insurance Company
but shall not include any Reinsurance Agreement, Fronting Arrangement or
Retrocession Agreement.
“Insurance Licenses”
has the meaning assigned thereto in Section
4.16.
“Issuing Bank” has the
meaning assigned thereto in the preamble.
“LC Commitment Amount”
means $50,000,000.
“Legal Requirements”
means all applicable laws, rules and regulations and interpretations thereof
made by any governmental body or regulatory authority (including, without
limitation, any Applicable Insurance Regulatory Authority) having jurisdiction
over any Loan Party or any of their respective Subsidiaries.
“Letter of Credit” has
the meaning assigned thereto in Section
2.01(a).
“Leverage Ratio”
means, for any Person, as of any date of determination, the ratio of (i)
Consolidated Indebtedness to (ii) Consolidated Total Capital of such Person at
such time.
10
“Lien” means any
mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), security interest or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever intended to assure payment of any Indebtedness or other
obligation, including, without limitation, any conditional sale or other title
retention agreement, the interest of a lessor under a Capitalized Lease
Obligation, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing, under the UCC or comparable law of any
jurisdiction, of any financing statement naming the owner of the asset to which
such Lien relates as debtor.
“Loan Parties” means,
collectively, the Company and the Guarantor.
“Margin Stock” has the
meaning assigned thereto in Regulation U.
“Material Adverse
Change” means a change that results in or causes, or has a reasonable
likelihood of resulting in or causing, a Material Adverse Effect.
“Material Adverse
Effect” means a material adverse effect on any of (a) the condition
(financial or otherwise), business, performance, operations or properties of the
Company and its Subsidiaries, taken as a whole, (b) the legality, validity
or enforceability of any Related Document, (c) the perfection or priority
of the Liens granted pursuant to the Related Documents, (d) the ability of
the Loan Parties to repay the Obligations or of the Loan Parties to perform
their obligations under any Related Document, or (e) the rights and
remedies of the Issuing Bank under the Related Documents.
“Multiemployer Plan”
means any multiemployer plan as defined in Section 4001(a)(3) of ERISA,
which is maintained or contributed to by (or to which there is an
obligation to contribute of) any Loan Party, any of their respective
Subsidiaries or any of their respective ERISA Affiliates, and each such plan for
the five year period immediately following the latest date on which such
Loan Party, such Subsidiary or such ERISA Affiliate contributed to or had an
obligation to contribute to such plan.
“Notice of LC Request”
has the meaning assigned thereto in Section
2.01(b).
“Obligations” means
all advances to, and debts, liabilities, obligations, covenants and duties of,
any Loan Party arising under any Related Document or otherwise with respect to
any Letter of Credit, whether direct or indirect (including those acquired by
assumption), absolute or contingent, due or to become due, now existing or
hereafter arising and including interest and fees that accrue after the
commencement by or against any Loan Party or any Affiliate thereof of any
proceeding under any Debtor Relief Laws naming such Person as the debtor in such
proceeding, regardless of whether such interest and fees are allowed claims in
such proceeding.
“Organization
Documents” means, (a) with respect to any corporation, the certificate or
articles of incorporation and the bylaws; (b) with respect to any limited
liability company, the certificate or articles of formation or organization and
operating agreement; (c) with respect to any partnership, joint venture, trust
or other form of business entity, the partnership, joint venture or other
applicable agreement of formation or organization and any agreement, instrument,
filing or notice with respect thereto filed in connection with its formation or
organization with the applicable Governmental Authority in the jurisdiction of
its formation or organization; and (d) with respect to a Bermuda limited
liability company, the certificate of incorporation, memorandum of association
and the bye-laws, and, if applicable, any certificate or articles of formation
or organization of such entity; or in each case, the equivalent or comparable
constitutive documents with respect to any non-U.S. jurisdiction.
“Participant” has the
meaning assigned thereto in Section
8.07.
“Patriot Act” has the
meaning assigned thereto in Section
8.15.
11
“PBGC” means the
Pension Benefit Guaranty Corporation referred to and defined in ERISA and any
successor entity performing similar functions.
“Permitted
Indebtedness” means:
(a) Indebtedness
of the Company or any Subsidiary of the Company existing on the date hereof and
listed on Schedule
4.14 and refinancings by the Company or such Subsidiary thereof; provided that the
aggregate principal amount of any such refinancing Indebtedness is not greater
than the aggregate principal amount of the Indebtedness being refinanced plus
the amount of any premiums required to be paid thereon and fees and expenses
associated therewith;
(b) Indebtedness
of the Company or any Subsidiary of the Company incurred in the ordinary course
of business in connection with any Capital Markets Product;
(c) any
Indebtedness owed by Subsidiaries of the Company to the Company or any other
Subsidiary of the Company or owed by the Company to any of its
Subsidiaries;
(d) Indebtedness
in respect of purchase money obligations and Capital Lease Obligations of the
Company or any Subsidiary of the Company, and refinancings thereof; provided that the
aggregate principal amount of all such Capital Lease Obligations does not exceed
at any time outstanding $10,000,000 at the time of incurrence of any new
Indebtedness under this clause
(d);
(e) Indebtedness
of the Company or any Subsidiary of the Company in respect of letters of credit
issued to reinsurance cedents, or to lessors of real property in lieu of
security deposits in connection with leases of the Company or any Subsidiary of
the Company, in each case in the ordinary course of business;
(f) Indebtedness
of the Company or any Subsidiary of the Company incurred in the ordinary course
of business in connection with workers’ compensation claims, self-insurance
obligations, unemployment insurance or other forms of governmental
insurance or benefits and pursuant to letters of credit or other security
arrangements entered into in connection with such insurance or
benefit;
(g) Indebtedness
arising from Guarantees made by the Company or any Subsidiary of the Company of
Indebtedness of the type described in clauses (a) through
(f) of this
definition; and
(h) without
duplication, additional Indebtedness of the Company or any Subsidiary of the
Company not otherwise permitted under clauses (a) through
(g) of this
definition which, when added to the aggregate amount of all outstanding
obligations secured by liens incurred by the Company pursuant to Section 6.03(v),
shall not exceed at any time outstanding 5% of Consolidated Net Worth of the
Company at the time of incurrence of any new Indebtedness under this clause
(h).
“Person” means an
individual, partnership, corporation, limited liability company, business trust,
joint stock company, trust unincorporated association, joint venture, or other
entity of whatever nature.
“Plan” means any
pension plan as defined in Section 3(2) of ERISA and subject to Title IV of
ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) any Loan Party or any of their respective
Subsidiaries or any of their respective ERISA Affiliates, and each such plan for
the five year period immediately following the latest date on which such Loan
Party, such Subsidiary or such ERISA Affiliates maintained, contributed to or
had an obligation to contribute to such plan.
“Private Act” means
separate legislation enacted in Bermuda with the intention that such legislation
apply specifically to any Loan Party, in whole or in part.
12
“Protected Cell
Company” means a Subsidiary that has created segregated accounts pursuant
to the provisions of the Segregated Account Companies Xxx 0000 of
Bermuda.
“Regulated Insurance
Company” means the Company or any of its Subsidiaries, whether now owned
or hereafter acquired, that is authorized or admitted to carry on or transact
Insurance Business in any jurisdiction (foreign or domestic) and is regulated by
any Applicable Insurance Regulatory Authority.
“Regulation T” means
Regulation T of the Board as from time to time in effect and any successor to
all or a portion thereof establishing margin requirements.
“Regulation U” means
Regulation U of the Board as from time to time in effect and any successor to
all or a portion thereof establishing margin requirements.
“Regulation X” means
Regulation X of the Board as from time to time in effect and any successor to
all or a portion thereof establishing margin requirements.
“Reinsurance
Agreement” means any agreement, contract, treaty, certificate or other
arrangement whereby any Regulated Insurance Company agrees to transfer, cede or
retrocede to another insurer or reinsurer all or part of the liability assumed
or assets held by such Regulated Insurance Company under a policy or policies of
insurance issued by such Regulated Insurance Company or under a reinsurance
agreement assumed by such Regulated Insurance Company.
“Related Documents”
means this Agreement, the Account Control Agreement, the Guaranty, each Letter
of Credit and any other agreement or instrument relating thereto.
“Relevant Country”
means, as the context may require, Switzerland and Bermuda.
“Relevant Currency”
has the meaning assigned thereto in Section
8.12(e).
“Requirement of Law”
means, as to any Person, the Certificate of Incorporation and By-laws or other
organizational or governing documents of such Person, and all Federal, state,
local and foreign laws, rules and regulations, and all orders, judgments,
decrees or other determinations of any Governmental Authority or arbitrator,
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.
“Retrocession
Agreement” means any agreement, contract, treaty or other
arrangement whereby one or more insurers or reinsurers, as
retrocessionaires, assume liabilities of reinsurers under a Reinsurance
Agreement or other retrocessionaires under another Retrocession
Agreement.
“SAP” means, with
respect to any Regulated Insurance Company, the statutory accounting principles
and accounting procedures and practices prescribed or permitted by the
Applicable Insurance Regulatory Authority of the state or jurisdiction in which
such Regulated Insurance Company is domiciled; it being understood and
agreed that determinations in accordance with SAP for purposes of Article V,
including defined terms as used therein, are subject (to the extent
provided therein) to Section
1.03.
“Service of Process
Agent” has the meaning assigned thereto in Section
8.12(b).
“Solvent” means, with
respect to any Person, that the value of the assets of such Person (both at fair
value and present fair saleable value) is, on the date of determination, greater
than the total amount of liabilities (including, without limitation, contingent
and unliquidated liabilities) of such Person as of such date and that, as of
such date, such Person is able to pay all liabilities of such Person as such
liabilities mature and does not have unreasonably small capital. In
computing the amount of contingent or unliquidated liabilities at any time, such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
13
“Stated Amount” means,
with respect to each Letter of Credit, the total amount available to be drawn at
any time under such Letter of Credit, as such amount may be adjusted in
accordance with Section
2.01(f).
“Statutory Statements”
means, with respect to any Regulated Insurance Company for any fiscal year, the
annual or quarterly financial statements of such Regulated Insurance Company as
required to be filed with the Insurance Regulatory Authority of its
jurisdiction of domicile and in accordance with the laws of such
jurisdiction, together with all exhibits, schedules, certificates and actuarial
opinions required to be filed or delivered therewith.
“Subsidiary” means,
with respect to any Person, any corporation, partnership or other business
entity of which an aggregate of 50% or more of the outstanding securities having
ordinary voting power to elect a majority of the board of directors, managers,
trustees or other controlling persons, is, at the time, directly or indirectly,
owned or controlled by such Person and/or one or more Subsidiaries of such
Person (irrespective of whether, at the time, the Equity Interests of any other
class or classes of such entity shall have or might have voting power by reason
of the happening of any contingency).
“Taxes” has the
meaning assigned in Section
2.04(c).
“Termination Date”
means the date that is 364 calendar days after the Closing Date.
“Treasury Securities”
means United States Dollar-denominated senior debt book-entry securities of the
United States of America issued directly by the U.S. Department of the Treasury
and backed by full faith and credit of the United States of America but
excluding derivatives of such securities and inflation linked securities and
strips.
“UCC” means the
Uniform Commercial Code, as in effect in any applicable
jurisdiction.
“United States
Dollars” means the lawful money of the United States of
America.
“U.S. Government
Securities” means Treasury Securities and Agency Securities.
“Wholly-Owned
Subsidiary” of any Person means any Subsidiary of such Person to the
extent all of the capital stock or other ownership interests in such Subsidiary,
other than directors’ or nominees’ qualifying shares, is owned directly or
indirectly by such Person.
SECTION
1.02. Computation of Time
Periods. In this Agreement, in the computation of a period of
time from a specified date to a later specified date, the word “from” means
“from and including” and the words “to” and “until” each means “to but
excluding”.
SECTION
1.03. Accounting
Terms. Except as otherwise expressly provided herein, all
terms of an accounting or financial nature shall be construed in accordance with
GAAP or SAP, as the case may be, as in effect from time to time.
14
ARTICLE
II
AMOUNT
AND TERMS OF THE LETTERS OF CREDIT
SECTION
2.01. Issuance of the Letters of
Credit.
(a) Letter of Credit
Facility. Subject to the terms and the conditions set forth
herein, the Issuing Bank shall issue one or more letters of credit (each, a
“Letter of
Credit”) for a duration of up to one (1) year from the issuance date at
the request of the Company for the account of the Company from time to time on
any Business Day during the Availability Period specified in a Notice of LC
Request; provided, however, that the
Issuing Bank shall not be under any obligation to issue any Letter of Credit
hereunder if:
(i) any
order, judgment or decree of any governmental authority or arbitrator shall
purport by its terms to enjoin or restrain the Issuing Bank from issuing such
Letter of Credit or any requirement of law applicable to the Issuing Bank or any
request or directive (whether or not having the force of law) from any
governmental authority with jurisdiction over the Issuing Bank shall prohibit,
or request that the Issuing Bank refrain from, the issuance of letters of credit
generally or such Letter of Credit in particular or shall impose upon the
Issuing Bank with respect to such Letter of Credit any restriction or reserve or
capital requirement (for which the Issuing Bank is not otherwise compensated)
not in effect on the Closing Date or result in any unreimbursed loss, cost or
expense which was not applicable, in effect or known to the Issuing Bank as of
the Closing Date and which the Issuing Bank in good xxxxx xxxxx material to
it;
(ii) on
or prior to the Business Day prior to the requested date of issuance of such
Letter of Credit, one or more of the applicable conditions contained in Article III hereof is
not then satisfied;
(iii) the
amount of the Letter of Credit requested exceeds the Available Credit;
or
(iv) fees
due and payable hereunder or under any of the other Related Documents have not
been paid.
(b) Letter of Credit
Request. In connection with the issuance of each Letter of
Credit, the Company shall give the Issuing Bank (x) with respect to Letters of
Credit to be issued on the Closing Date, at least one (1) Business Day’s prior
written notice and (y) with respect to all other Letters of Credit, at least
three (3) Business Days’ prior written notice, of the requested issuance of such
Letter of Credit substantially in the form of Exhibit A hereto (a
“Notice of LC
Request”). Such Notice of LC Request shall be irrevocable and
shall specify (i) the Stated Amount of the Letter of Credit requested, which
Stated Amount shall be denominated in United States Dollars, and shall not be
less than $10,000 (or such lesser amount as the Issuing Bank may agree) or more
than the Available Credit, (ii) the requested date of issuance of such requested
Letter of Credit (which day shall be a Business Day), (iii) the date on which
such Letter of Credit is to expire which is no later than one year from the date
of issuance, (iv) the Beneficiary of such Letter of Credit, and (v) any other
proposed terms of such Letter of Credit. Such notice, to be
effective, must be received by such Issuing Bank not later than 11:00 A.M. (New
York City time) on the last Business Day on which notice can be given under the
immediately preceding sentence.
(c) Letter of Credit
Issuance. Subject to the terms and conditions of this Section 2.01 and
provided that
the applicable conditions set forth in Article III hereof
are satisfied, the Issuing Bank shall, on the requested date, issue a Letter of
Credit to the Beneficiary thereof on behalf of the Company in accordance with
the Issuing Bank’s usual and customary business practices.
(d) Limitations on Outstanding
Letters of Credit. At no time may the sum of (A) the aggregate
undrawn Stated Amounts of the Letters of Credit plus (B) the drawn but
unreimbursed amounts of Letters of Credit exceed the LC Commitment
Amount.
(e) Expiration Date of Letters
of Credit. The expiration date of each Letter of Credit issued
hereunder shall be no later than the date that is one (1) year from the date of
issuance thereof.
15
(f) Stated Amount of Letters of
Credit. The Stated Amount of each Letter of Credit issued
hereunder shall be reduced by the amount of any Drawing Payments made in respect
thereof.
SECTION
2.02. Fees.
(a) The
Company hereby agrees to pay to the Issuing Bank a fee with respect to each
Letter of Credit equal to 0.35% per annum of the face amount of such Letter of
Credit from the date of issuance to the expiration of such Letter of
Credit. Such fee shall be payable quarterly in arrears on the last
Business Day of each fiscal quarter, and on the termination date of such Letter
of Credit.
(b) The
Company hereby agrees to pay to the Issuing Bank a fee with respect to the
amendment or transfer of each Letter of Credit and each drawing made thereunder,
documentary and processing charges in accordance with the Issuing Bank’s
standard schedule for such charges in effect at the time of amendment, transfer
or drawing, as the case may be.
(c) The
Company hereby agrees to pay to the Issuing Bank a facility fee equal to 0.10%
per annum on the LC Commitment Amount. Such fee shall be payable
quarterly in arrears on the last Business Day of each fiscal quarter, and on the
Termination Date.
(d) All
payments required under this Section 2.02 shall be
made by the remittance by the Company by wire transfer of immediately available
funds in the amount of such payment.
(e) Upon
any failure of the Company to make any payment required under this Section 2.02, the
Issuing Bank shall have, and the Company hereby acknowledges, the indisputable
right to withdraw from the Account an amount equal to such payment, and pay such
amount to the Issuing Bank without any further act or action on the part of the
Company.
SECTION
2.03. Reimbursement.
(a) The
Company shall reimburse the Issuing Bank for any amount drawn under any Letter
of Credit, together with any and all reasonable charges and expenses which the
Issuing Bank may pay or incur relative to such letter of credit drawing,
immediately on the date on which the Issuing Bank makes any payment on any
Letter of Credit (such payment by the Issuing Bank, a “Drawing Payment”),
irrespective of any claim, set-off, defense or other right which the Company may
have at any time against the Issuing Bank, the Beneficiary of such Letter of
Credit or any other Person. Such reimbursement shall be made either
(i) by the remittance by the Company by wire transfer of immediately available
funds in the amount of such Drawing Payment or (ii) at the direction of the
Company, the withdrawal by the Issuing Bank of Collateral from the Account in
the amount of such Drawing Payment.
(b) Upon
any failure of the Company to make the payment required to be made thereby in
accordance with clause (a) above, the Issuing Bank shall have, and the Company
hereby acknowledges, the indisputable right of the Issuing Bank to withdraw from
the Account an amount equal to the unreimbursed Drawing Payment and payment of
such amount to the Issuing Bank without any further act or action on the part of
the Company.
(c) Promptly
following receipt of any draw request under a Letter of Credit, the Issuing Bank
shall notify the Company thereof in writing.
SECTION
2.04. Increased
Costs.
(a) If
the adoption of any applicable law, rule or regulation, or any change therein,
or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Issuing Bank with
any request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall impose, modify or deem
applicable any reserve, special deposit or similar
16
requirement
(including, without limitation, any such requirement imposed by the Board of
Governors of the Federal Reserve System) against letters of credit issued by or
assets of, deposits with or for the account of the Issuing Bank or shall impose
on the Issuing Bank any other condition regarding this Agreement or any Letter
of Credit and the result of the foregoing shall be to increase the cost to the
Issuing Bank of issuing or maintaining such Letter of Credit, then, within ten
(10) business days after demand by the Issuing Bank, the Company shall pay to
the Issuing Bank all additional amounts which are necessary to compensate the
Issuing Bank for such increased cost incurred by the Issuing Bank.
(b) If
the Issuing Bank shall have determined that the adoption of any applicable law,
rule or regulation regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Issuing Bank with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the Issuing Bank’s capital as a
consequence of its obligations hereunder to a level below that which the Issuing
Bank could have achieved but for such adoption, change or compliance (taking
into consideration the Issuing Bank’s policies with respect to capital adequacy)
by an amount deemed by the Issuing Bank to be material, then within ten (10)
business days after demand by the Issuing Bank, the Company shall pay to the
Issuing Bank such additional amount or amounts as will compensate the Issuing
Bank for such reduction.
(c) All
payments made by the Company under this Agreement shall be made free and clear
of, and without reduction for or on account of, any stamp or other taxes,
levies, imposts, duties, charges, fees, deductions, withholdings, restrictions
or conditions of any nature whatsoever hereafter imposed, levied, collected,
withheld or assessed by any country (or by any political subdivision or taxing
authority thereof or therein), except for franchise taxes and changes in the
rate of tax on the overall net income of the Issuing Bank (such nonexcluded
taxes being called “Tax” or “Taxes”). If
any Taxes are required to be withheld from any amounts payable to the Issuing
Bank, the amounts so payable to the Issuing Bank shall be increased to the
extent necessary to yield to the Issuing Bank (after payment of all Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement; provided that the
Company shall not be obligated to pay such amounts if the Issuing Bank was not
exempt (or eligible for a complete exemption) from withholding on the date
hereof or with respect to any period in which the Issuing Bank has failed (i) to
file any form or certificate that it was entitled to file which would have
exempted the Issuing Bank from such Taxes or (ii) to take other action which
would entitle the Issuing Bank to an exemption from such Taxes, if such action
would not, in the reasonable judgment of the Issuing Bank, be otherwise
disadvantageous to it. Whenever any Tax is payable by the Company, as
promptly as possible thereafter, the Company shall send the Issuing Bank a
receipt or other evidence of payment thereof.
(d) A
certificate as to the nature of the occurrence giving rise to, and the
calculation of, compensation to the Issuing Bank pursuant to clauses (a), (b) and (c) of this Section 2.04 above
shall be submitted by the Issuing Bank to the Company and shall be conclusive
(absent manifest error) as to the amount thereof.
(e) The
Company agrees that its obligations to pay compensation pursuant to this Section 2.04 shall
inure to the benefit of each Participant and its successors with respect to its
respective participation to the same extent as if such Participant or such
successor were named instead of the Issuing Bank in this Section 2.04, provided that any
certificate presented by the Issuing Bank on behalf of a Participant or its
successor pursuant to Section 2.04 shall
provide the identity of such Participant or its successor and an estimate of the
total additional compensation which would be payable to such Participant or such
successor on an annual basis. The aggregate compensation payable by
the Company to the Issuing Bank, each Participant and any of its successors
shall not exceed the amount payable to the Issuing Bank if the Issuing Bank had
not made any transfer.
17
SECTION
2.05. Payments;
Interest.
(a) All
payments by the Company to the Issuing Bank under this Article II shall be
made in United States Dollars in immediately available funds to the Issuing,
care of BNP Paribas RCC, Inc, New Port Tower, Suite 188, 000 Xxxxxxxxxx
Xxxxxxxxx, Xxxxxx Xxxx, Xxx Xxxxxx 00000; provided that all
payments made in respect of the fees specified in Section 2.02 shall be
made at the Issuing Bank’s principal New York office, which at the date hereof
is located at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. Whenever
any payment under this Article II shall be
due on a day which is not a Business Day, the date for payment thereof shall be
extended to the next succeeding Business Day, and any interest payable thereon
shall be payable for such extended time at the specified rate. Any
payment not paid when due (as such payments may be extended pursuant to the
immediately preceding sentence) shall bear interest at (i) with respect to
reimbursement obligations for Drawing Payments, a rate per annum equal to the
then applicable rate for the applicable Letter of Credit plus 2.00%, and (ii)
all other amounts owing under the Related Documents, a rate per annum equal to
the Default Rate.
(b) Interest
and fees payable under this Agreement shall be computed on the basis of a year
of 360 days, and paid for the actual number of days lapsed (including the first
day but excluding the last day).
SECTION
2.06. Obligations
Absolute. The Obligations of the Company under this Agreement,
any Related Document and any other agreement or instrument relating to any
Letter of Credit shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement and such other agreement
or instrument under all circumstances, including the following
circumstances:
(a) any
lack of validity or enforceability of any Related Document;
(b) any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Obligations of the Company in respect of any Letter of Credit or
any other amendment or waiver of or any consent to departure from all or any of
the Related Documents (except, in the case of an effective amendment to, waiver
of or consent to a departure from any provision of this Agreement, to the extent
specified herein);
(c) the
existence of any claim, set-off, defense or other right that the Company may
have at any time against the Beneficiary of any Letter of Credit (or any Persons
for whom such Beneficiary may be acting), the Issuing Bank, or any other Person,
whether in connection with this Agreement, the transactions contemplated hereby
or by the Related Documents or any unrelated transaction;
(d) any
statement or any other document presented under any Letter of Credit proving to
be forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;
(e) payment
by the Issuing Bank under any Letter of Credit against presentation of a draft
or document which does not comply with the terms of such Letter of
Credit;
(f) any
exchange, release or non-perfection of any collateral, or any release or
amendment or waiver of or consent to departure from any guarantee, for all or
any of the Obligations of the Company in respect of any Letter of Credit;
or
(g) any
other circumstance or happening whatsoever, whether or not similar to any of the
foregoing, including, without limitation, any other circumstance that might
otherwise constitute a defense available to, or a discharge of, the Company or a
guarantor.
18
SECTION
2.07. Grant
of Security Interest. To secure the timely payment in full in
cash and performance of the Obligations hereunder, the Company does hereby
assign, grant and pledge to, and subject to a continuing security interest in
favor of, the Issuing Bank all the estate, right, title and interest of the
Company in, to and under the Account, all funds from time to time credited
thereto (including, without limitation, all cash equivalents, all interest,
dividends, distributions, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such funds, and all certificates and instruments, if any, from
time to time representing or evidencing such Account) and any and all proceeds
of the Account, whether now owned or hereafter existing or acquired
(collectively, the “Collateral”),
including (i) all rights of the Company to receive moneys due and to become
due under or pursuant to the Collateral, (ii) all claims of the Company for
damages arising out of or for breach of or default under the Account,
(iii) all rights of the Company under the Account to enforce or execute any
checks, or other instruments or orders, to file any claims and to take any
action which may be necessary or advisable in connection with any of the
foregoing, (iv) to the extent not included in the foregoing, all proceeds
receivable or received when any and all of the foregoing Collateral is sold,
collected, exchanged or otherwise disposed of, whether voluntarily or
involuntarily, and (v) any and all additions and accessions to the Collateral,
and all proceeds thereof, including proceeds of the conversion, voluntary or
involuntary, of any of the foregoing into liquidated claims, including all
awards, or of any judgments or settlements made in lieu thereof for damage to or
diminution of the Collateral.
ARTICLE
III
CONDITIONS
OF ISSUANCE
SECTION
3.01. Condition Precedent to
Closing Date. The obligation of the Issuing Bank to issue the
initial Letters of Credit hereunder on the Closing Date is subject to the
fulfillment, in a manner satisfactory to the Issuing Bank in its sole
discretion, of the following conditions precedent:
(a) the
Issuing Bank shall have received on or before the Closing Date the following,
each dated the Closing Date, in form and substance satisfactory to the Issuing
Bank:
(i) a
certified copy of (A) the Organizations Documents of each Loan Party, certified
as of a recent date by the Commercial Registry of Bas-Valais in Martigny,
Switzerland, as far as the Company is concerned (or, in the case of the
Guarantor, such equivalent thereof), together with a certificate of such
official testifying to the good standing of the such Loan Party, (B) the
resolutions of the board of directors (or equivalent) of each Loan Party
approving each Related Document to which it is a party and the matters
contemplated thereby, and (C) all other documents evidencing any other necessary
corporate action;
(ii) copies
of all governmental and regulatory approvals, if any, necessary for each Loan
Party to enter into the Related Documents to which it is a party and the
transactions contemplated thereby;
(iii) a
certificate of the Secretary or an Assistant Secretary of each Loan Party
certifying the names and true signatures of the Authorized Officers of such Loan
Party authorized to sign the Related Documents and the other documents to be
delivered by it hereunder;
19
(iv) a
certificate signed by an Authorized Officer of each Loan Party, dated on the
date hereof, stating that:
(1) the
representations and warranties contained in each Related Document are true and
correct on and as of the Closing Date; and
(2) no
event has occurred and is continuing, or would result from such issuance, which
constitutes a Default or Event of Default;
(v) a
counterpart of this Agreement duly executed on behalf of the
Company;
(vi) an
original, fully executed copy of the Guaranty executed by the Guarantor for the
benefit of the Issuing Bank;
(vii) a
written opinion of Edwards, Angell, Xxxxxx & Dodge LLP, as special New York
counsel to the Company;
(viii) a
written opinion of Xxxxxxxxxxxx Xxxxxxx, as special Swiss counsel to the
Company;
(ix) a
written opinion of Edwards, Angell, Xxxxxx & Dodge LLP,, as special New York
counsel to the Guarantor;
(x)
a written opinion of Xxxxxxx, as special Bermuda counsel to the
Guarantor;
(xi) copies
of (A) the unaudited consolidated financial statements of the Company as of
December 31, 2008 (with audited financial statements for the fiscal year ending
on such date to be delivered in accordance with Section 5.01(a)), and (B) the
unaudited consolidated financial statements of the Company as of March 31,
2009;
(xii)
copies of (A) the audited consolidated financial statements of the Guarantor as
of December 31, 2008, and (B) the unaudited consolidated financial statements of
the Guarantor as of March 31, 2009; and
(xiii) a
letter from the Service of Process Agent, presently located at 000 Xxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Xxxxxx Xxxxxx of America, indicating its
consent to its appointment by the Loan Parties and each of their respective
Subsidiaries as their agent to receive service of process as specified in this
Agreement.
(b) the
Account shall have been established by the Company with the Custodian and the Issuing Bank
shall have received, on or before the Closing Date, the Account Control
Agreement perfecting the Issuing Bank’s security interest in the
Collateral;
(c) all
costs and accrued and unpaid fees and expenses (including, without limitation,
legal fees and expenses) required to be paid to the Issuing Bank on or prior to
the Closing Date shall have been paid in full;
(d) Each
Regulated Insurance Company which has a rating in effect on the Closing Date
shall have an A.M. Best financial strength rating of at least “A-”.
SECTION
3.02. Condition Precedent to
Issuance of Letters of Credit. The obligation of the Issuing
Bank to issue any Letter of Credit hereunder (including the initial Letters of
Credit issued hereunder) is subject to satisfaction of each of the following
conditions precedent:
(a) the
receipt by the Issuing Bank of the following, each in form satisfactory to the
Issuing Bank in its sole discretion:
(i) a
Notice of LC Request in accordance with Section 2.01(b);
and
20
(ii) a
certificate of an authorized officer of the Company certifying to the
following: (A) all representations and warranties set forth in this
Agreement and in each of the other Related Documents are true and correct in all
respects both before and after giving effect to such issuance, and (B) there
exists no Default or Event of Default and the Company is in compliance with all
covenants set forth in this Agreement and in each of the other Related
Documents;
(b) the
Company shall have paid to the Issuing Bank all fees and expenses due and
payable on or prior to the date of such issuance; and
(c) the
Company shall have provided to the Issuing Bank such other documents,
instruments, approvals or opinions as the Issuing Bank may reasonably
request.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES
The
Company represents and warrants to the Issuing Bank that:
SECTION
4.01. Corporate
Status. Each Loan Party and each of their respective
Subsidiaries (i) is a duly organized and validly existing corporation or
business trust or other entity in good standing under the laws of the
jurisdiction of its organization and has the corporate or other organizational
power and authority to own its property and assets and to transact the business
in which it is engaged and presently proposes to engage, and (ii) has been duly
qualified and is authorized to do business and is in good standing in all
jurisdictions where it is required to be so qualified, except, in the case of
this clause (ii), where the failure to be so qualified, authorized or in good
standing could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
SECTION
4.02. Corporate
Power and Authority. Each
Loan Party has the corporate power and authority to execute, deliver and carry
out the terms and provisions of the Related Documents to which it is a party and
has taken all necessary corporate action to authorize the execution, delivery
and performance of such Related Documents. Each Loan Party has duly
executed and delivered each Related Document to which it is a party and each
such Related Document constitutes the legal, valid and binding obligation of
such Loan Party enforceable against such Loan Party in accordance with its
terms, except to the extent that enforceability thereof may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws affecting
creditors’ rights generally and general principles of equity regardless of
whether enforcement is sought in a proceeding in equity or at law.
SECTION
4.03. No
Contravention of Laws, Agreements or Organizational
Documents. Neither the execution, delivery and performance by
any Loan Party of the Related Documents to which it is a party nor compliance
with the terms and provisions thereof, nor the consummation of the transactions
contemplated therein, (i) will contravene any applicable provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any court or
governmental instrumentality, (ii) will conflict or be inconsistent with or
result in any breach of any of the terms, covenants, conditions or provisions
of, or constitute a default under, or result in the creation or imposition of
(or the obligation to create or impose) any Lien (other than Liens in favor the
Issuing Bank pursuant to the Account Control Agreement) upon any of the property
or assets of any Loan Party or any of their respective Subsidiaries pursuant to
the terms of, any indenture, mortgage, deed of trust, loan agreement, credit
agreement or any other material instrument to which such Loan Party or such
Subsidiary is a party or by which it or any of its property or assets are bound
or to which it may be subject or (iii) will violate any provision of the
certificate of incorporation, by-laws or other organizational documents of
such Loan Party or such Subsidiary.
21
SECTION
4.04. Litigation
and Contingent Liabilities. There are no actions, suits or
proceedings pending or threatened in writing involving any Loan Party or
any of their respective Subsidiaries (including, without limitation, with
respect to this Agreement or any other Related Document) that have had, or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.
SECTION
4.05. Use of
Proceeds; Margin Regulations. (a) All Letters of
Credit shall be used to support permitted obligations of the Company incurred in
connection with its reinsurance business.
(b) Neither
the issuance of any Letter of Credit hereunder, nor the use of the proceeds
thereof, will violate or be inconsistent with the provisions of Regulation T, U
or X and no part of the proceeds of any Letter of Credit will be used to
purchase or carry any Margin Stock or to extend credit for the purpose of
purchasing or carrying any Margin Stock.
SECTION
4.06. Approvals. Any
order, consent, approval, license, authorization, or validation of, or filing,
recording or registration with, or exemption by, any foreign or domestic
governmental or public body or authority, or any subdivision thereof, which is
required to authorize or is required in connection with (i) the execution,
delivery and performance of any Related Document by a Loan Party or (ii) the
legality, validity, binding effect or enforceability of any Related Document
against the Loan Parties, has been obtained and is in full force and
effect.
SECTION
4.07. Investment
Company Act. No Loan Party nor any of their respective
Subsidiaries is an “investment company” or a company “controlled” by an
“investment company,” within the meaning of the Investment Company Act of 1940,
as amended.
SECTION
4.08. True
and Complete Disclosure; Projections and Assumptions. All
factual information (taken as a whole) heretofore or contemporaneously furnished
by the Company or any of its Subsidiaries to the Issuing Bank (including,
without limitation, all information contained in the Related Documents) for
purposes of or in connection with this Agreement or any transaction contemplated
herein is, and all other factual information (taken as a whole with all other
such information theretofore or contemporaneously furnished) hereafter furnished
by any such Persons to the Issuing Bank will be, true and accurate in all
material respects on the date as of which such information is dated and not
incomplete by omitting to state any material fact necessary to make such
information (taken as a whole) not misleading at such time in light of the
circumstances under which such information was provided; provided that, with
respect to projections, the Company represents only that the projections
contained in such materials are based on good faith estimates and assumptions
believed by the Company to be reasonable and attainable at the time made, it
being recognized by the Issuing Bank that such projections as to future events
are not to be viewed as facts and are subject to significant uncertainties and
contingencies many of which are beyond the Company’s control and that actual
results during the period or periods covered by any such projections may differ
from the projected results.
SECTION
4.09. Financial
Condition; Financial Statements. (a)(i) The audited
consolidated balance sheet of the Company for the fiscal year ended December 31,
2008 and the related consolidated statements of income, shareholders’ equity and
cash flows, reported on by Deloitte Touche Tohmatsu or one of its member firms,
and the unaudited consolidated balance sheet of the Company for its fiscal
quarter ended March 31, 2009 and the related consolidated statements of income,
shareholders’ equity and cash flows, and (ii) the audited consolidated balance
sheet of the Guarantor for the fiscal year ended December 31, 2008 and the
related consolidated statements of income, shareholders’ equity and cash flows,
reported on by Deloitte Touche Tohmatsu or one of its member firms, and the
unaudited consolidated balance sheet of the Company for its fiscal quarter ended
March 31, 2009 and the related consolidated statements of income, shareholders’
equity and cash flows, in each case, copies of which have been delivered to the
Issuing Bank, fairly present in all material respects, in each case in
conformity with GAAP, consistently applied, the consolidated financial
position of the applicable Loan Party and its Subsidiaries as of such dates and
their consolidated results of operations and cash flows for such periods stated
(subject, in the case of the aforementioned quarterly financial statement to
normal year-end audit adjustments and the absence of full footnote
disclosure).
22
(b) Since
December 31, 2008, nothing has occurred which has had, or could reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect.
(c) Except
(i) for the Letters of Credit, (ii) as set forth in the unaudited consolidated
balance sheet (including the footnote disclosures thereto) of the Company for
its fiscal quarter ended Xxxxx 00, 0000, (xxx) liabilities incurred in the
ordinary course of business after December 31, 2008 or (iv) as set forth on
Schedule 4.14,
on the Closing Date, there are no material liabilities of the Company and its
Subsidiaries.
(d) On
and as of the Closing Date, on a pro forma basis after
giving effect to the Transaction, (i) the fair valuation of all of the assets of
(x) the Company (on an individual basis) and (y) the Company and its
Subsidiaries taken as a whole will, in each case, exceed its debts, (ii) the
Company shall not have incurred or intended to incur debts beyond its ability to
pay such debts as such debts mature and (iii) the Company shall not have
unreasonably small capital with which to conduct its business as conducted on
the Closing Date. For purposes of this Section 4.09, “debt”
means any liability on a claim, and “claim” means any (i) right to payment
whether or not such a right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured; or (ii) right to an equitable remedy for breach of
performance if such breach gives rise to a payment, whether or not such right to
an equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured or unsecured.
SECTION
4.10. Tax
Returns and Payments. The Company and each of its Subsidiaries
(i) have timely filed or caused to be timely filed with the
appropriate taxing authority (taking into account any applicable
extension within which to file) all material income and other material tax
returns (including any statements, forms and reports), domestic and foreign,
required to be filed by the Company or such Subsidiary, and (ii) have timely
paid or caused to have timely paid all material taxes payable by them which have
become due and assessments which have become due, except for those contested in
good faith and adequately disclosed and for which adequate reserves have been
established in accordance with GAAP. There is no action, suit,
proceeding, investigation, audit or claim now pending or, to the best
knowledge of the Company or its Subsidiaries, proposed or threatened by any
authority regarding any income taxes or any other taxes relating to the Company
or its Subsidiaries, which could individually or in the aggregate reasonably be
expected to have a Material Adverse Effect. As of the Closing Date,
neither the Company nor any of its Subsidiaries has entered into an
agreement or waiver or been requested to enter into an agreement or waiver
extending any statute of limitations relating to the payment or collection of
taxes of the Company or any of its Subsidiaries. No tax Liens have
been filed and no claims are pending or, to the best knowledge of the Company or
its Subsidiaries, proposed or threatened with respect to any taxes, fees or
other charges for any taxable period, except for Liens permitted under Section 6.03 and
claims which could not reasonably be expected to have a Material Adverse
Effect.
SECTION
4.11. Compliance
with ERISA. (a) Except as could not reasonably be
expected to result, individually or in the aggregate, in a Material Adverse
Effect, the Company or its Subsidiaries and ERISA Affiliates (i) have fulfilled
their respective obligations under the minimum funding standards of ERISA and
the Code with respect to each Plan and are in compliance with the applicable
provisions of ERISA and the Code, and (ii) have not incurred any liability to
the PBGC or any Plan or Multiemployer Plan (other than to make contributions in
the ordinary course of business).
(b) Except
as could not reasonably be expected to result, individually or in the aggregate,
in a Material Adverse Effect, (i) each Foreign Pension Plan has been maintained
in compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities,
(ii) all contributions required to be made with respect to a Foreign Pension
Plan have been timely made, (iii) neither the Company nor any of its
Subsidiaries has incurred any obligation in connection with the termination of,
or withdrawal from, any Foreign Pension Plan and (iv) the present value of the
accrued benefit liabilities (whether or not vested) under each Foreign Pension
Plan that is required to be funded, determined as of the end of the Company’s
most recently ended fiscal year on the basis of actuarial assumptions, each of
which is reasonable, did not exceed the current value of the assets of such
Foreign Pension Plan allocable to such benefit liabilities.
23
SECTION
4.12. Subsidiaries. (a) Set
forth on Schedule
4.12 is a complete and correct list of all of the Subsidiaries of the
Company as of the Closing Date, together with, for each such Subsidiary, (i) the
jurisdiction of organization of such Subsidiary, (ii) each Person holding
direct ownership interests in such Subsidiary and (iii) the percentage ownership
of such Subsidiary represented by such ownership interests. Except as
disclosed on Schedule
4.12, as of the Closing Date, the Company and each of its Subsidiaries
owns, free and clear of Liens, and has the unencumbered right to vote, all
outstanding ownership interests in each Person shown to be held by it on
Schedule
4.12.
(b) As
of the Closing Date, there are no restrictions on the Company or any of its
Subsidiaries which prohibit or otherwise restrict the transfer of cash or other
assets from any such Subsidiary to the Company, other than (i) prohibitions or
restrictions existing under or by reason of this Agreement or the other Related
Documents, (ii) prohibitions or restrictions existing under or by
reason of Legal Requirements, (iii) prohibitions and restrictions permitted by
Section 6.11
and (iv) other prohibitions or restrictions which, either individually
or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
SECTION
4.13. Capitalization. As
of the Closing Date, (i) the authorized capital stock of the Guarantor consists
of 150,000,000 common shares, $0.01 par value per share, 84,864,844 of which
shares were issued and outstanding as of March 31, 2009 and; and (ii) the
authorized capital stock of the Company consists of 72,974,417 common shares
with a par value of CHF 1 per share, all of which shares are issued, fully
paid-in and outstanding. As of the Closing Date, neither the
Guarantor nor any of the Company’s Subsidiaries has outstanding any securities
convertible into or exchangeable for its capital stock or outstanding any
rights to subscribe for or to purchase, or any options for the purchase of,
or any agreements providing for the issuance (contingent or otherwise)
of, or any calls, commitments or claims of any character relating to, its
capital stock except for options, warrants and grants outstanding in the
aggregate amounts set forth on Schedule
4.13.
SECTION
4.14. Indebtedness. Neither
the Company nor any of its Subsidiaries have any Indebtedness on the Closing
Date other than (i) the Letters of Credit and (ii) the Indebtedness listed on
Schedule
4.14.
SECTION
4.15. Compliance
with Statutes, etc. The Company and each of
its Subsidiaries is in compliance with all applicable statutes, regulations,
rules and orders of, and all applicable restrictions imposed by, and has filed
or otherwise provided all material reports, data, registrations, filings,
applications and other information required to be filed with or otherwise
provided to, all governmental bodies, domestic or foreign, in respect of the
conduct of its business and the ownership of its property (including compliance
with all applicable environmental laws), except where the failure to comply or
file or otherwise provide could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. All
required regulatory approvals are in full force and effect on the date hereof,
except where the failure of such approvals to be in full force and effect could
not reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.
SECTION
4.16. Insurance
Licenses. Schedule 4.16 lists
with respect to each Regulated Insurance Company, as of the Closing Date, all of
the jurisdictions in which such Regulated Insurance Company holds licenses
(including, without limitation, licenses or certificates of authority from
Applicable Insurance Regulatory Authorities), permits or authorizations to
transact insurance and reinsurance business (collectively, the “Insurance Licenses”),
and indicates the type or types of insurance in which each such Regulated
Insurance Company is permitted to be engaged with respect to each Insurance
License therein listed. There is (i) no such Insurance License that
is the subject of a proceeding for suspension, revocation or limitation or any
similar proceedings, (ii) no sustainable basis for such a suspension, revocation
or limitation, and (iii) no such suspension, revocation or limitation
threatened by any Applicable Insurance Regulatory Authority, that, in each
instance under (i), (ii) and (iii) above, has had, or could reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect. As of the Closing Date, no Regulated Insurance Company
transacts any insurance business, directly or indirectly, in any jurisdiction
other than those listed on Schedule 4.16, where
such business requires any Insurance License of an Applicable Insurance
Regulatory Authority or such jurisdiction.
24
SECTION
4.17. Insurance
Business. All insurance policies issued by any Regulated
Insurance Company are, to the extent required under applicable law, on forms
approved by the insurance regulatory authorities of the jurisdiction where
issued or have been filed with and not objected to by such authorities within
the period provided for objection, except for those forms with respect to which
a failure to obtain such approval or make such a filing without it being
objected to, could not reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect.
SECTION
4.18. Security
Documents. The Account Control Agreement creates, as security
for the obligations hereunder of the Company, valid and enforceable security
interests in and Liens on all of the Collateral, superior to and prior to the
rights of all third persons and subject to no other Liens. No filings
or recordings are required in order to ensure the enforceability,
perfection or priority of the security interests created hereunder or under the
Account Control Agreement, except for filings or recordings which shall have
been previously made.
SECTION
4.19. Properties;
Liens. (a) The Company and each its
Subsidiaries have good title to, or valid leasehold interests in, all real and
personal property material to their respective businesses. There
exists no Lien (including any Lien arising out of any attachment, judgment or
execution), nor any segregation or other preferential arrangement of
any kind, on, in or with respect to any of the property of the Loan Parties or
any of their respective Subsidiaries, in each case except as expressly permitted
by Section
6.03.
(b) The
Company and each its Subsidiaries own, or are licensed to use, all trademarks,
trade names, copyrights, patents and other intellectual property material to
their respective business, and the use thereof by the Company or such
Subsidiary, as applicable, does not infringe upon the rights of any other
Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
SECTION
4.20. Solvency. On
the Closing Date and upon the occurrence of each Credit Event, both before and
after giving effect thereto, (i) the Company, taken individually, and (ii) the
Company and its Subsidiaries, taken as a whole, are, in each case,
Solvent.
SECTION
4.21. Certain
Insurance Regulations, Orders, Consents, etc. Without limiting the
generality of any provision contained in this Agreement, immediately after
giving effect to the pledging of any asset hereunder or under the Account
Control Agreement, each Credit Event (and the satisfaction of all Borrowing Base
requirements in connection therewith), the Company will be in compliance with
the applicable provisions of any insurance law, statute, rule, regulation or
order of any governmental agency, public body or authority, or any subdivision
thereof, regulating the activities of the Company with respect to any
limitations on Liens granted on any Collateral by the Company to the Issuing
Bank to the extent the Company is subject thereto and any other similar law,
regulation, order or statute of any other jurisdiction to which the Company is
subject; provided that such
failure to comply could adversely affect the validity, perfection or priority of
any such Lien or the rights or remedies of the Issuing Bank or the ability of
the Company to perform their respective obligations to the Issuing Bank under
this Agreement or any other Related Document.
25
SECTION
4.22. License
under the Swiss Insurance Supervision Act (ISA). Without
limiting the generality of any provision contained in this Agreement, the
Company validly holds a license to transact reinsurance business in accordance
with Article 3 of the Swiss Insurance Supervision Act (ISA) of December 17,
2004. The Company meets the requirements and conditions of Chapter 2,
Section 2 of ISA regarding the holding of such license. The Company’s
reinsurance business has been executed and transacted in accordance with the
provisions of Chapter 3 of ISA, subject, however, to the specific limitations
applying to reinsurance companies.
ARTICLE
V
AFFIRMATIVE
COVENANTS OF THE COMPANY
SECTION
5.01. Information
Covenants. The Company shall furnish to the Issuing
Bank:
(a) Annual Financial
Statements. As soon as available and in any event within (i)
ninety (90) days after the close of each fiscal year of the Guarantor and (ii)
one hundred thirty five (135) days after the close of each fiscal year of the
Company, the consolidated balance sheet of such Loan Party and its Subsidiaries
as at the end of such fiscal year and the related consolidated statements
of income, changes in shareholders’ equity and cash flows of such Loan Party and
its Subsidiaries for such fiscal year, setting forth in comparative form
the consolidated figures for the previous fiscal year, all in reasonable detail
and accompanied by a report thereon of Deloitte Touche Tohmatsu or one of
its member firms or other independent public accountants of recognized
national standing selected by such Loan Party, which report shall state that
such consolidated financial statements present fairly in all material respects
the consolidated financial position of such Loan Party and its Subsidiaries
as at the dates indicated and their consolidated results of operations and
cash flows for the periods indicated in conformity with GAAP and that the audit
by such accountants in connection with such consolidated financial statements
has been made in accordance with generally accepted auditing
standards.
(b) Quarterly Financial
Statements. As soon as available and in any event within
forty-five (45) days after the close of each of the first three quarterly
accounting periods in each fiscal year of each Loan Party, consolidated balance
sheets of such Loan Party and its Subsidiaries as at the end of such period and
the related consolidated statements of income, changes in shareholders’ equity
and cash flows of such Loan Party and its Subsidiaries for such period and
(in the case of the second and third quarterly periods) for the period from the
beginning of the current fiscal year to the end of such quarterly period,
setting forth in each case in comparative form the consolidated figures for the
corresponding periods of the previous fiscal year, all in reasonable detail and
certified by the chief financial officer of such Loan Party as presenting fairly
in all material respects, in accordance with GAAP, the information contained
therein, subject to changes resulting from normal year-end audit adjustments and
the absence of full footnote disclosure.
(c) Officer’s
Certificates. At the time of the delivery of the financial
statements provided for in Sections 5.01(a) and
(b), a
certificate of a Financial Officer of the Company to the effect that no Default
or Event of Default exists or, if any Default or Event of Default does exist,
specifying the nature and extent thereof, which certificate shall set forth the
calculations required to establish whether the Company and its Subsidiaries were
in compliance with the provisions of Sections 6.09 and
6.10, as at the
end of such fiscal year or quarter, as the case may be.
(d) Notice of Default or
Litigation. (x) Within five (5) Business Days after
any Loan Party becomes aware of the occurrence of any Default and/or any event
or condition constituting, or which could reasonably be expected to have, a
Material Adverse Effect, a certificate of an Authorized Officer of the Company
setting forth the details thereof and the actions which the Loan Parties are
taking or proposes to take with respect thereto and (y) promptly after any
Loan Party knows of the commencement thereof, notice of any litigation,
dispute or proceeding involving a claim against such Loan Party and/or any
Subsidiary thereof which claim could reasonably be expected to have a Material
Adverse Effect.
26
(e) Other Statements and
Reports. Promptly upon the mailing thereof to the security
holders of any Loan Party generally, copies of all financial statements, reports
and proxy statements so mailed.
(f) SEC
Filings. Promptly upon the filing thereof, copies of (or, to
the extent same is publicly available via the SEC’s “XXXXX” filing system,
written notification of the filing of) all registration statements (other
than the exhibits thereto and any registration statements on Form S-8 or
its equivalent) and annual or quarterly reports which any Loan Party shall have
filed with the SEC or any national securities exchange.
(g) Insurance Reports and
Filings.
(i) Promptly
after the filing thereof, a copy of each Statutory Statement filed by each
Regulated Insurance Company.
(ii) Promptly
following the delivery or receipt, as the case may be, by any Regulated
Insurance Company or any of their respective Subsidiaries, copies of (a) each
material registration, filing or submission made by or on behalf of any
Regulated Insurance Company with any Applicable Insurance Regulatory Authority,
except for policy form or rate filings, (b) each material examination and/or
audit report submitted to any Regulated Insurance Company by any Applicable
Insurance Regulatory Authority, (c) all material information which the Issuing
Bank may from time to time request with respect to the nature or status of any
deficiencies or violations reflected in any examination report or other
similar report, and (d) each material report, order, direction,
instruction, approval, authorization, license or other notice which any
Regulated Insurance Company may at any time receive from any Applicable
Insurance Regulatory Authority.
(iii) As
soon as available and in any event within one hundred-twenty (120) days after
the end of each fiscal year of each Loan Party, a report by an independent
actuarial consulting firm of recognized national standing reviewing the adequacy
of loss and loss adjustment expense reserves as at the end of the last fiscal
year of such Loan Party and its Subsidiaries on a consolidated basis,
determined in accordance with SAP and stating that the Regulated Insurance
Companies have maintained adequate reserves, it being agreed that in each case
such independent firm will be provided access to or copies of all relevant
valuations relating to the insurance business of each such Regulated Insurance
Company in the possession of or available to such Loan Party or its
Subsidiaries.
(iv) Promptly
following notification thereof from a Governmental Authority, notification
of the suspension, limitation, termination or non-renewal of, or the taking of
any other materially adverse action in respect of, any material Insurance
License.
(h) Borrowing Base
Certificate. (i) No later than 11:00 A.M. (New York City time)
on each Business Day, a computer generated account statement with respect to the
Account from the Custodian (including a daily xxxx-to-market valuation of the
Collateral) and (ii) no later than the tenth (10th)
Business Day of each month, a Borrowing Base Certificate from the Company as of
the last day of the immediately preceding month, executed by an Authorized
Officer of the Company.
(i) Other
Information. With reasonable promptness, such other
information or existing documents (financial or otherwise) as the Issuing Bank
may reasonably request from time to time.
SECTION
5.02. Books,
Records and Inspections. The
Company shall, and shall cause each of its Subsidiaries to, (i) keep proper
books of record and account in which full, true and correct entries in
conformity with GAAP or SAP, as applicable, shall be made of all dealings and
transactions in relation to its business and activities; and (ii) permit
representatives of the Issuing Bank (at the Issuing Bank’s expense prior to the
occurrence of an Event of Default and at the Company’s expense after an
Event of Default has occurred
27
and is
continuing) to visit and inspect any of their respective properties, to
examine their respective books and records and to discuss their respective
affairs, finances and accounts with their respective officers, employees and
independent public accountants, in each case at such reasonable times
(which shall be, unless an Event of Default has occurred and is continuing,
during business hours, upon reasonable prior notice to the Company) and as often
as may reasonably be desired. The Company agrees to cooperate and
assist, and to cause each of its Subsidiaries to cooperate and assist, in such
visits and inspections.
SECTION
5.03. Insurance. The
Company shall, and shall cause each of its Subsidiaries to, maintain (either in
the Company’s name or in such other Person’s own name) with financially sound
and reputable insurance companies, insurance on all their property in at least
such amounts and against at least such risks as are usually insured against in
the same general area by companies of established repute engaged in the same or
similar businesses.
SECTION
5.04. Payment
of Taxes. The Company shall, and shall cause each of
its Subsidiaries to, pay and discharge all income taxes and all other material
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits, or upon any properties belonging to it, in each case, on
a timely basis prior to the date on which penalties attach thereto, and all
lawful claims which, if unpaid, might become a Lien or charge upon any
properties of the Company or any of its Subsidiaries; provided that neither
the Company nor any of its Subsidiaries shall be required to pay any such tax,
assessment, charge, levy or claim which is being contested in good faith
and by proper proceedings if it has maintained adequate reserves with respect
thereto in accordance with GAAP.
SECTION
5.05. Maintenance
of Existence. The Company shall, and shall cause each of its
Subsidiaries to, maintain its existence; provided that the
Company shall not be required to maintain the existence of any of its
Subsidiaries if the Company shall determine in good faith that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
its Subsidiaries taken as a whole. The Company shall, and shall cause
each of its Subsidiaries to, qualify and remain qualified, as a foreign
corporation in each jurisdiction where the Company or such Subsidiary, as
applicable, is required to be qualified, except in those jurisdictions in which
the failure to receive or retain such qualifications would not reasonably
be expected to have, either individually or in the aggregate, a Material Adverse
Effect.
SECTION
5.06. Compliance
with Statutes, etc. The Company shall, and
shall cause each of its Subsidiaries to, comply with all applicable
statutes, regulations and orders of, and all applicable restrictions imposed by,
all governmental bodies, domestic or foreign, in respect of the conduct of
its business and the ownership of its property (including applicable
statutes, regulations, orders and restrictions relating to
environmental standards and controls) other than those the
non-compliance with which would not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.
SECTION
5.07. ERISA. Promptly
after any Loan Party, any of their respective Subsidiaries or, in the case of
clauses (a)
through (e)
below, any of its ERISA Affiliates knows or has reason to know that any of the
events or conditions specified below with respect to any Plan or Multiemployer
Plan or Foreign Pension Plan has occurred or exist, the Company shall deliver to
the Issuing Bank a certificate of an Authorized Officer of the Company setting
forth details in respect of such event or condition and the action if any, that
such Loan Party, such Subsidiary or such ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed with or
given to the PBGC or an applicable foreign governmental agency by such Loan
Party, such Subsidiary or such ERISA Affiliate with respect to such event or
condition):
(a) any
reportable event, as defined in subsections (c)(1), (2), (5) and (6), and
subsection (d)(2) of Section 4043 of ERISA and the regulations issued
thereunder, with respect to a Plan;
28
(b) the
filing under Section 4041(c) of ERISA of a notice of intent to terminate any
Plan under a distress termination or the distress termination of any
Plan;
(c) the
institution by the PBGC of proceedings under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, or the
receipt by any Loan Party, any of their respective Subsidiaries or any of its
ERISA Affiliates of a notice from a Multiemployer Plan that such action has been
taken by the PBGC with respect to such Multiemployer Plan which could reasonably
be expected to result in a liability to such Loan Party or any of its
Subsidiaries in excess of $10,000,000.
(d) the
receipt by any Loan Party, any of their respective Subsidiaries or any of its
ERISA Affiliates of notice from a Multiemployer Plan that such Loan Party, any
of its Subsidiaries or any of its ERISA Affiliates has incurred withdrawal
liability under Section 4201 of ERISA in excess of $15,000,000 or that such
Multiemployer Plan is in reorganization or insolvency pursuant to Section 4241
or 4245 of ERISA or that it intends to terminate or has terminated under Section
4041A of ERISA whereby a deficiency or additional assessment is levied or
threatened to be levied in excess of $10,000,000 against such Loan Party, any of
its Subsidiaries or any of its ERISA Affiliates;
(e) the
institution of a proceeding by a fiduciary of any Plan or Multiemployer Plan
against any Loan Party, any of their respective Subsidiaries or any of its ERISA
Affiliates to enforce Section 515 or 4219(c)(5) of ERISA asserting liability in
excess of $10,000,000, which proceeding is not dismissed within 30 days;
and
(f) that
any material contribution required to be made with respect to a Foreign Pension
Plan has not been timely made, or that any Loan Party or any of their respective
Subsidiaries may incur any material liability pursuant to any Foreign Pension
Plan (other than to make contributions in the ordinary course of
business).
SECTION
5.08. Maintenance
of Property. The
Company shall, and shall cause each of its Subsidiaries to, maintain all of
their properties and assets in good condition, repair and working order,
ordinary wear and tear excepted, except where failure to maintain the same would
not reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.
SECTION
5.09. Maintenance
of Licenses and Permits. The Company shall, and shall cause
each of its Subsidiaries to, maintain all permits, licenses and consents as may
be required for the conduct of its business by any state, federal or local
government agency or instrumentality, except where failure to maintain the same
would not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
SECTION
5.10. End of
Fiscal Years; Fiscal Quarters. The Company shall cause (i)
each of its Subsidiaries’ fiscal years to end on December 31 of each year and
(ii) each of its Subsidiaries’ fiscal quarters to end on dates which are
consistent with a fiscal year end as described above.
SECTION
5.11. Borrowing
Base Requirement. Subject to Section 2.01, the
Company shall at all times cause its Borrowing Base to equal or exceed the sum
of (A) the aggregate undrawn Stated Amounts of the Letters of Credit plus (B) the drawn but
unreimbursed amounts of Letters of Credit, outstanding at such
time.
SECTION
5.12. Further
Assurances. The Company shall promptly and duly execute and
deliver to the Issuing Bank such documents and assurances and take such further
action as the Issuing Bank may from time to time reasonably request in order to
carry out more effectively the intent and purpose of the Related Documents and
to establish, protect and perfect the rights and remedies created or intended to
be created in favor of the Issuing Bank pursuant to the Related
Documents.
29
ARTICLE
VI
NEGATIVE
COVENANTS OF THE COMPANY
SECTION
6.01. Changes
in Business. The Company will not, and will not permit any of
its Subsidiaries to, engage (directly or indirectly) in any business other than
(a) businesses in which they are engaged as of the Closing Date and reasonable
extensions thereof, (b) other specialty insurance and structured risk insurance
and reinsurance product lines, and (c) and other businesses that are
complementary or reasonably related thereto and the conduct of business
incidental thereto, including political risk products, financial guaranty
products, trade credit risk products, life surplus relief products, closed block
mortality risk products and life settlement products.
SECTION
6.02. Consolidations,
Mergers, Sales of Assets and
Acquisitions. (a) The Company will not, and
will not permit any of its Subsidiaries to, consolidate or merge with or
into any other Person; provided that (i) the
Company may merge with another Person, if (x) the Company is the entity
surviving such merger and (y) immediately after giving effect to such merger, no
Default or Event of Default shall have occurred and be continuing, (ii) any
Subsidiary may merge with another Person, if (x) such Subsidiary is the entity
surviving such merger and (y) immediately after giving effect to such merger, no
Default or Event of Default shall have occurred and be continuing, and
(iii) Wholly-Owned Subsidiaries of the Company may merge with one
another. In addition, the Company will not and will not permit any of
its Subsidiaries to, sell, convey, assign, lease, abandon or otherwise transfer
or dispose of, voluntarily or involuntarily, all or substantially all
of its properties or assets, tangible or intangible, except (I) such
dispositions by the Company or any of its Subsidiaries of any of their
respective properties or assets to the Company or any Wholly-Owned Subsidiary of
the Company and (II) sales, transfers or other dispositions of the assets of any
Subsidiary which in the aggregate do not exceed in any fiscal year of the
Company 5% or more of the lesser of the book or fair market value of the
property and assets of the Company determined on a consolidated basis as of the
last day of the previous fiscal year of the Company.
(b) The
Company will not, and will not permit any of its Subsidiaries to, acquire all or
substantially all of the capital stock or assets of another Person unless at
such time and immediately after giving effect thereto no Default or Event of
Default exists or would result therefrom.
SECTION
6.03. Liens. The
Company will not, and will not permit any of its Subsidiaries to, permit,
create, assume, incur or suffer to exist any Lien on any asset tangible or
intangible now owned or hereafter acquired by it, except:
(a) Liens
existing on the Closing Date and listed on Schedule
6.03;
(b) Liens
securing repurchase agreements constituting a borrowing of funds by the Company
and its Subsidiaries in the ordinary course of business for liquidity purposes
and in no event for a period exceeding ninety (90) days in each case;
(c) Liens
arising pursuant to purchase money mortgages, capital leases or security
interests securing Indebtedness representing the purchase price (or financing of
the purchase price within ninety (90) days after the respective purchase) of
assets acquired by the Company or any of its Subsidiaries;
30
(d) Liens
on any asset of any Person existing at the time such Person is merged or
consolidated with or into the Company and its Subsidiaries or at the time of
acquisition of such asset by the Company or such Subsidiary and not created in
contemplation of such event;
(e) Liens
securing obligations owed by the Company to any of its Subsidiaries or owed by
any Subsidiary of the Company to the Company or another Subsidiary of the
Company, in each case solely to the extent that such Liens are required by an
Applicable Insurance Regulatory Authority for such Person to maintain such
obligations;
(f) Liens
securing insurance or reinsurance obligations of Subsidiaries of the Company
owed by any Subsidiary of the Company to the Company or any Subsidiary of the
Company, in each case solely to the extent that such Liens are required or
requested by rating agencies, regulatory agencies, clients or brokers for such
Person to maintain such insurance or reinsurance obligations;
(g) Liens
on investments and cash balances of any Regulated Insurance Company securing
obligations of such Regulated Insurance Company in respect of trust or similar
arrangements formed, letters of credit issued or funds withheld balances
established, in each case, in the ordinary course of business for the
benefit of policyholders or cedents to secure insurance or reinsurance
recoverables owed to them by such Regulated Insurance Company;
(h) Inchoate
Liens for taxes, assessments or governmental charges or levies not yet due or
Liens for taxes, assessments or governmental charges or levies being contested
in good faith and by appropriate proceedings for which adequate reserves have
been established in accordance with GAAP;
(i) Liens
in respect of property or assets of the Company or any of its Subsidiaries
imposed by law, which were incurred in the ordinary course of business and do
not secure Indebtedness for borrowed money, such as carriers’, warehousemen’s,
materialmen’s and mechanics’ liens and other similar Liens arising in the
ordinary course of business, and (x) which do not in the aggregate materially
detract from the value of the Company’s or such Subsidiary’s property or assets
or materially impair the use thereof in the operation of the business of the
Company or such Subsidiary or (y) which are being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing the
forfeiture or sale of the property or assets subject to any such
Lien;
(j) Licenses,
sublicenses, leases, or subleases granted to other Persons not materially
interfering with the conduct of the business of the Company or any of its
Subsidiaries;
(k) easements,
rights-of-way, restrictions, encroachments and other similar charges or
encumbrances, and minor title deficiencies, in each case not securing
Indebtedness and not materially interfering with the conduct of the business of
the Company or any of its Subsidiaries;
(l) Liens
arising out of the existence of judgments or awards not constituting an Event of
Default under Section
7.01(g);
(m) Liens
(other than Liens imposed under ERISA) incurred in the ordinary course of
business in connection with workers compensation claims, unemployment
insurance and social security benefits and Liens securing the performance
of bids, reinsurance obligations, tenders, leases and contracts in the ordinary
course of business, statutory obligations, surety bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business
and consistent with past practice (exclusive of obligations in respect of the
payment for borrowed money);
(n) Bankers’
Liens, rights of setoff and other similar Liens existing solely with respect to
cash and cash equivalents on deposit in one or more accounts maintained by the
Company or any of its Subsidiaries, in each case granted in the ordinary course
of business in favor of the bank or banks with which such accounts are
maintained;
31
(o) Liens
arising out of the refinancing, extension, renewal or refunding of any
Indebtedness secured by any Lien permitted by any of the clauses of this Section 6.03; provided that such
Indebtedness is not increased and is not secured by any additional
assets;
(p) Liens
created pursuant to the Related Documents;
(q) Liens
in respect of property or assets of the Company or any of its Subsidiaries
securing Indebtedness of the type described in clause (e) of the definition of
“Permitted Indebtedness”;
(r) Liens
in respect of property or assets of the Company or any of its Subsidiary
securing Indebtedness of the type described in clause (h) of the definition of
“Permitted Indebtedness”; provided that the
aggregate amount of the Indebtedness secured by such Liens shall not, when added
to the aggregate amount of all outstanding obligations of the Company secured by
Liens incurred pursuant to Section 6.03(v),
exceed at any time 10% of Consolidated Net Worth of the Company at the time of
incurrence of any new Liens under this clause (r);
(s) Liens
on assets received by or of the Company or its Subsidiaries and held in trust in
respect of, or deposited or segregated to secure, liabilities assumed in the
course of the reinsurance business or under any Insurance Contracts, Reinsurance
Agreements, Fronting Arrangements or other indemnity arrangements entered in the
ordinary course of business;
(t) Liens
on cash and securities securing Indebtedness under, or otherwise granted in
accordance with the terms of, transactions in Capital Markets Products, (i) in
the case of the Company, entered into in the ordinary course of business of the
Company, and (ii) in the case of the Company or its Subsidiary, of the type
described in clause (b) of the definition of “Permitted Indebtedness”; provided that the
aggregate amount of cash and securities pledged under this clause (t) shall not
exceed 10% of Consolidated Net Worth of the Company at the time of incurrence of
any Liens under this clause
(t);
(u) Liens
not securing indebtedness for borrowed money on cash and securities
arising in the ordinary course of business in connection with the
structured risk insurance and reinsurance product lines of the Company and its
Subsidiaries; and
(v) in
addition to the Liens described in clauses (a) through
(u) above,
Liens securing obligations of the Company; provided that the
aggregate amount of the obligations secured by such Liens shall not, when added
to the aggregate amount of outstanding Indebtedness incurred pursuant to clause
(i) of the definition of “Permitted Indebtedness”, exceed at any time 20% of
Consolidated Net Worth of the Company at the time of incurrence of any new Liens
under this clause
(v).
Notwithstanding
anything to the contrary contained herein, the Company will not, and will not
permit the Guarantor or any of their respective Subsidiaries to, create or
suffer to exist any Lien upon or with respect to any of the Collateral, except
for Liens granted under, or contemplated by, the Related Documents.
SECTION
6.04. Indebtedness. The
Company will not, and will not permit any of its Subsidiaries to, create, incur,
assume or permit to exist any Indebtedness, or agree, become or remain liable
(contingent or otherwise) to do any of the foregoing, except:
(a)
Indebtedness under the Related Documents and other Indebtedness which is either
pari passu with, or subordinated in right of payment to, the Obligations (it
being understood that unsecured Indebtedness is not subordinate to secured
Indebtedness solely because it is unsecured, and Indebtedness that is not
guaranteed by a particular Person is not deemed to be subordinate to
Indebtedness that is so guaranteed solely because it is not so guaranteed);
and
32
(b) Permitted
Indebtedness.
SECTION
6.05. Issuance
of Stock. The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly issue, sell, assign, pledge, or
otherwise encumber or dispose of any shares of its preferred or preference
equity securities or options to acquire preferred or preference equity
securities, except the issuance of preferred or preference equity securities, so
long as (i) (x) no part of such preferred or preference equity securities is
mandatorily redeemable (whether on a scheduled basis or as a result of the
occurrence of any event or circumstance) prior to the date occurring eighteen
months after the Termination Date or (y) all such preferred or preference equity
securities or options therefor are issued to and held by the Company and its
Wholly-Owned Subsidiaries and (ii) such preferred or preference equity
securities do not contain any financial performance related covenants or
incurrence covenants which restrict the operations of the issuer thereof; provided that such
preferred or preference securities may contain financial performance related
covenants or incurrence covenants which are no more restrictive than the terms,
provisions and covenants contained herein.
SECTION
6.06. Dissolution. The
Company will not, and will not permit any of its Subsidiaries to, suffer or
permit dissolution or liquidation either in whole or in part, except through
corporate reorganization to the extent permitted by Section
6.02.
SECTION
6.07. Restricted
Payments. The Company will not, and will not permit any of its
Subsidiaries to, declare or pay any dividends, purchase, redeem, retire, defease
or otherwise acquire for value any of its Equity Interests now or hereafter
outstanding, return any capital to its stockholders, partners or members (or the
equivalent Persons thereof) as such, make any distribution of assets, Equity
Interests, obligations or securities to its stockholders, partners or members
(or the equivalent Persons thereof) as such, or permit any of its Subsidiaries
to purchase, redeem, retire, defease or otherwise acquire for value any Equity
Interests in the Company or to sell any Equity Interests therein (each of the
foregoing a “Dividend” and,
collectively, “Dividends”); provided that, so
long as no Event of Default has occurred and is continuing or would result
therefrom, this Section 6.07 shall
not prohibit (a) the purchase, redemption, retirement, defeasement or other
acquisition of Equity Interest of the Company in connection with the termination
of employment of an employee of the Company or any of its Subsidiaries, (b) the
issuance of Equity Interests in exchange for or cancellation of any Equity
Interests of the Company, (c) the purchase, redemption, retirement, defeasement
or other acquisition of Equity Interest issued by the Company with the proceeds
received from the substantially concurrent issue of new shares of its common
stock or other common Equity Interests of the Company, (d) the declaration and
dividend payments or other distributions payable solely in the common stock or
other common Equity Interests of the Company, (e) the payment of cash Dividends
in respect of Existing Preferred Stock, as and to the extent required by the
respective Existing Preferred Stock Documents, (f) the declaration and dividend
payments or other distributions by a Subsidiary of the Company payable to the
Company or another wholly owned Subsidiary of the Company or (g) payments, loans
or other similar transfers by the Company or any of its Subsidiaries to a wholly
owned Subsidiary of the Company.
SECTION
6.08. Transactions
with Affiliates. The Company will not, and will not permit any
of its Subsidiaries to, enter into or be a party to, a transaction with any
Affiliate of a Loan Party or any Subsidiary of a Loan Party (which Affiliate is
not a Loan Party or a Subsidiary of a Loan Party), except (i) transactions with
Affiliates on terms (x) no less favorable to such Loan Party or such Subsidiary
than those that could have been obtained in a comparable transaction on an
arm’s length basis from an unrelated Person or (y) approved by the audit
committee or a majority of the disinterested members of the board of directors
of such Loan Party, (ii) Dividends not prohibited by Section 6.07, (iii)
fees and compensation paid to and indemnities provided on behalf of officers and
directors of such Loan Party or any of its Subsidiaries as reasonably determined
in good faith by the board of directors, the audit committee or senior
management of such Loan Party, (iv) the issuance of common stock of such Loan
Party and (v) transactions with Affiliates by a Regulated Insurance Company
approved by its Applicable Insurance Regulatory Authority.
33
SECTION
6.09. Maximum
Leverage Ratio. The Company will not permit the Guarantor’s
Leverage Ratio at any time to be greater than 0.35:1.00.
SECTION
6.10. Minimum
Consolidated Tangible Net Worth. The Company will not permit
the Guarantor’s Consolidated Tangible Net Worth at any time to be less than
$749,000,000.
SECTION
6.11. Limitation
on Certain Restrictions on Subsidiaries. Except in accordance
with Section 6.07, the Company will not, and will not permit its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or consensual restriction on the
ability of any such Subsidiary to (a) pay dividends or make any other
distributions on its capital stock or any other interest or participation in its
profits owned by any Loan Party or any of their respective Subsidiaries, or pay
any Indebtedness owed to any Loan Party or any of their respective Subsidiaries,
(b) make loans or advances to any Loan Party or any of their respective
Subsidiaries or (c) transfer any of its properties or assets to any Loan Party
or any of their respective Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (i) applicable Legal Requirements,
including any Applicable Insurance Regulatory Authority, (ii) this Agreement and
the other Related Documents, (iii) customary provisions restricting subletting
or assignment of any lease governing any leasehold interest of any Loan Party or
any of their respective Subsidiaries, (iv) customary provisions restricting
assignment of any licensing agreement (in which any Loan Party or any of their
respective Subsidiaries is the licensee) or other contract (including leases)
entered into by the any Loan Party or any of their respective Subsidiaries in
the ordinary course of business, (v) restrictions on the transfer of
any asset pending the close of the sale of such asset,
(vi) restrictions on the transfer of any asset subject to a Lien
permitted by Section
6.03, (vii) agreements entered into by a Regulated Insurance Company
with an Applicable Insurance Regulatory Authority, (viii) customary
provisions in partnership agreements, limited liability company
organizational governance documents, joint venture agreements and
other similar agreements entered into in the ordinary course of business that
restrict the transfer of ownership interests in such partnership, limited
liability company, joint venture or similar Person, (ix) restrictions on cash or
other deposits or net worth imposed by customers under contracts (including
Insurance Contracts, Fronting Arrangements and Reinsurance Agreements) entered
into in the ordinary course of business, pursuant to an agreement or
instrument relating to any Permitted Subsidiary Indebtedness of the type
described in clause (d) of the definition thereof (1) if the encumbrances
and restrictions contained in any such agreement or instrument taken as a
whole are not materially less favorable to the Issuing Bank than the
encumbrances and restrictions contained in this Agreement or (2) if such
encumbrance or restriction is not materially more disadvantageous to the Issuing
Bank than is customary in comparable financings and such encumbrance or
restriction will not materially affect the Company’s ability to make payments on
the Obligations, (x) any encumbrances or restrictions imposed by any
amendments or refinancings of the contracts, instruments or obligations
referred to in clause
(ix) above; provided that such
amendments or refinancings are no more materially restrictive with respect
to such encumbrances and restrictions that those prior to such amendment or
refinancing, and (xi) restrictions placed in accordance with the Segregated
Account Companies Act 2000 of Bermuda on the transfer of any asset held, carried
or deposited in a segregated account of a Protected Cell Company.
SECTION
6.12. Private
Act. The Company will not, and will not permit the Guarantor
or any of their respective Subsidiaries to, become subject to a Private
Act.
SECTION
6.13. Claims
Paying Ratings. The Company shall not permit at any time the
financial strength rating of any Regulated Insurance Company which has a rating
in effect at any time on or after the Closing Date to be less than
“A-” from A.M. Best & Co. (or its successor).
SECTION
6.14. Defaults
under ISA. The Company shall not permit at any time that,
following a violation of any provision of ISA, protective measures be taken by
the Swiss Financial Market Supervisory Authority (FINMA) in accordance with
Chapter 5, Section 2 of ISA. The Company shall in addition not permit
at any time its license to be suspended, limited, terminated or not renewed in
accordance with the provisions of the Swiss Financial Market Supervisory Act of
June 22, 2007 (FINMASA).
34
ARTICLE
VII
EVENTS
OF DEFAULT
SECTION
7.01. Events
of Default. The occurrence of any of the following events
shall be an “Event of Default” hereunder:
(a) Payments. The
Company shall (i) default in the payment when due of any Unpaid Drawing, or (ii)
default, and such default shall continue for three (3) or more Business Days, in
the payment when due of any interest on any Unpaid Drawing or any fees or any
other amounts payable hereunder or pursuant to any other Related Document;
or
(b) Representations,
etc. Any representation,
warranty or statement made (or deemed made) by the Company herein or by any Loan
Party in any other Related Document or in any certificate or statement
delivered or required to be delivered pursuant hereto or thereto shall prove to
be untrue in any material respect on the date as of which made or deemed made;
or
(c) Covenants. The
Company shall (i) default in the due performance or observance by it of any
term, covenant or agreement contained in Section 5.01, 5.05 (but only with
respect to the first sentence thereof), 5.11 or Article VI, or (ii)
default in the due performance or observance by it of any other term, covenant
or agreement contained in this Agreement or any Related Document (other than
those referred to in Section 7.01(a) or in
subclause (i)
above) and such default shall continue unremedied for a period of 10 days after
written notice to the Company from the Issuing Bank; or
(d) Default
under other Agreements. (a) Any Loan Party or any
of their respective Subsidiaries shall (i) default in any payment with respect
to Indebtedness (other than obligation incurred under this Agreement or any
other Related Document) in an amount in excess of 25% of total shareholder
equity, individually or in the aggregate, for the Loan Parties and their
respective Subsidiaries, beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness was created or (ii)
default in the observance or performance of any agreement or condition relating
to any such Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause, or
to permit the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause (determined without regard to
whether any notice of acceleration, or any lapse of time prior to the
effectiveness of any notice of acceleration, is required), any such
Indebtedness to become due prior to its stated maturity; or
(b) Indebtedness of any Loan Party or any of their respective Subsidiaries
in excess of $20,000,000 shall be declared to be due and payable or required to
be prepaid, other than by a regularly scheduled required prepayment or as a
mandatory prepayment (unless such required prepayment or mandatory
prepayment results from a default thereunder or an event of the type that
constitutes an Event of Default), prior to the stated maturity thereof;
or
(e) Bankruptcy,
etc. Any Loan Party or any
of the Company’s Subsidiaries shall commence a voluntary case concerning itself
under Title 11 of the United States Code entitled “Bankruptcy,” as now or
hereafter in effect, or any successor thereto (the “Bankruptcy Code”); or
an involuntary case is commenced against any Loan Party or any of the
Company’s Subsidiaries and the petition is not controverted within 10 days, or
is not dismissed within thirty (30) days, after commencement of the case; or a
custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge
of, all or substantially all of the property of any Loan Party or any of
the Company’s Subsidiaries or any Loan Party or
35
any of
the Company’s Subsidiaries commences (including by way of applying for or
consenting to the appointment of, or the taking of possession by, a
rehabilitator, receiver, custodian, trustee, conservator or liquidator
(collectively, a “conservator”) of itself or all or any substantial portion
of its property) any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency, liquidation, rehabilitation, supervision, conservatorship or similar
law of any jurisdiction or the Swiss Bankruptcy and Debt Collection Act,
Swiss Company Law or the Bermuda Companies Law whether now or hereafter in
effect relating to any Loan Party or any of the Company’s Subsidiaries; or any
such proceeding is commenced against (a) any Regulated Insurance Company which
is engaged in the business of underwriting insurance and/or reinsurance, or (b)
any Loan Party or any of the Company’s Subsidiaries, and in the case of either
clause (a) or (b) such proceeding is not controverted within ten (10) days, or
is not dismissed within thirty (30) days; or any Loan Party or any of the
Company’s Subsidiaries is adjudicated insolvent or bankrupt; or any order
of relief or other order approving any such case or proceeding is entered; or
(x) any Regulated Insurance Company which is engaged in the business of
underwriting insurance and/or reinsurance suffers any appointment
of any conservator or the like for it or any substantial part of its
property, or (y) any Loan Party or any of the Company’s Subsidiaries suffers any
appointment of any conservator or the like for it or any substantial part
of its property which continues undischarged or unstayed for a period of thirty
(30) days; or any Loan Party or any of the Company’s Subsidiaries makes a
general assignment for the benefit of creditors; or any corporate action is
taken by any Loan Party or any of the Company’s Subsidiaries for the purpose of
effecting any of the foregoing; or
(f) ERISA. (i)
An event or condition specified in Section 5.07 shall
occur or exist with respect to any Plan or Multiemployer Plan or Foreign Pension
Plan, (ii) the Company, any of its Subsidiaries or any of its ERISA Affiliates
shall fail to pay when due any amount which they shall have become liable to pay
to the PBGC or to a Plan or a Multiemployer Plan under Title IV of ERISA, or
(iii) a condition shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any Plan must be terminated, and as a result
of such event, failure or condition, together with all such other events,
failures or conditions, the Company, any of its Subsidiaries or any of its ERISA
Affiliates shall be reasonably likely to incur a liability to a Plan, a
Multiemployer Plan, a Foreign Pension Plan or PBGC (or any combination of the
foregoing) in an aggregate amount of $20,000,000 or more; or
(g) Judgments. One
or more judgments or decrees shall be entered against any Loan Party or any of
the Company’s Subsidiaries involving a liability, net of undisputed insurance
and reinsurance, of $20,000,000 or more in the case of any one such judgment or
decree or in the aggregate for all such judgments and decrees for any Loan Party
or any of the Company’s Subsidiaries and any such judgments or decrees shall not
have been vacated, discharged, satisfied, stayed or bonded pending appeal within
thirty (30) days from the entry thereof; or
(h) Insurance
Licenses. Any one or more Insurance Licenses of any Regulated
Insurance Company shall be suspended, limited or terminated or shall not be
renewed, or any other action shall be taken by any Governmental Authority, and
such suspension, limitation, termination or non-renewal could reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect; or
(i) Change
of Control. A Change of Control shall occur; or
(j) Security
Documents. The Account Control Agreement shall cease to be in
full force and effect, or shall cease to give the Issuing Bank the Liens,
rights, powers and privileges purported to be created thereby (including,
without limitation, a first priority security interest in, and Lien on, all of
the Collateral subject thereto, in favor of the Issuing Bank, superior to and
prior to the rights of all third Persons and subject to no other Liens); or any
Loan Party or any other pledgor thereunder shall default in the due performance
or observance of any term, covenant or agreement on its part to be performed or
observed pursuant to the Account Control Agreement; or
36
(k) Guaranty. The
Guaranty or any provision thereof shall cease to be in full force or effect, or
any Person acting by or on behalf of the Guarantor shall deny or disaffirm the
Guarantor’s obligations under the Guaranty, or the Guarantor shall default in
the due performance or observance of any term, covenant or agreement on its part
to be performed or observed pursuant to the Guaranty; or
(l) Issuing
of measures by FINMA. The issuing of any protective measures
by FINMA in accordance with Chapter 5, Section 2 of ISA or the suspension,
limitation, termination or non-renewal by FINMA of the Company's license in
accordance with the provisions of FINMASA, and such protective measures or
license suspension, limitation, termination or non-renewal could reasonably be
expected to have a Material Adverse Effect.
SECTION
7.02. Remedies. If
there shall occur and be continuing any Event of Default, the Issuing Bank may
(a) by notice to the Company, declare the obligation of the Issuing Bank to
issue Letters of Credit to be terminated, whereupon the same shall forthwith
terminate, (b) by notice to the Company, declare all the Obligations payable
under this Agreement to be forthwith due and payable, whereupon the Obligations
shall become and be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by the Company, (c) terminate the Letters of Credit as provided therein, and (d)
apply any and all funds and other Collateral held in the Account in accordance
with Section
2.03(b); provided, however, that upon
the occurrence of the Event of Default specified in Section 7.01(e), (i)
the obligation of the Issuing Bank to issue Letters of Credit shall
automatically be terminated and (ii) the Obligations shall automatically become
and be due and payable, without presentment, demand, protest or any notice of
any kind, all of which are hereby expressly waived by the Company. In
addition to the remedies set forth above, the Issuing Bank may exercise any
remedies provided for by the other Related Documents in accordance with the
terms thereof or any other remedies provided by applicable law.
ARTICLE
VIII
MISCELLANEOUS
SECTION
8.01. Amendments,
Etc. No amendment or waiver of any provision of this
Agreement, nor consent to any departure by the Company therefrom, shall in any
event be effective unless the same shall be in writing and signed by the Issuing
Bank and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION
8.02. Notices,
Etc. All notices and other communications provided for
hereunder or under any other Related Document shall be in writing (including
telecopier or telex communication) and mailed, telecopied or telexed to it, if
to the Company, at its address at Xxx xx Xxxxxxx 0, XX-0000 Xxxxxxxx,
Xxxxxxxxxxx, Attention: Xxxxxx Xxxxxxxxxx, Chief Counsel (facsimile: x00 00 000
0000), email: xxxxxxxxxxx@xxxxxxxxxxx.xx;
if to the Guarantor, at its address at 00 Xxxxxx Xxxxxx, Xxxxxxxx XX 00 Xxxxxxx
, Xxxxxxxxx:
37
Xxxxxxx
X. Xxxxxxx, General Counsel (facsimile: x0 000 000 0000), email: xxxxxxxx@xxxxxxxxxxx.xx;
and if to the Issuing Bank, at its address at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, Attention: Xxxxx Xxxx, Director (facsimile: (000) 000-0000), email:
xxxxx.xxxx@xx.xxxxxxxxxx.xxx
with a copy to BNP Paribas, c/o BNP Paribas RCC, Inc., at its address at Newport
Tower, Suite 188, 000 Xxxxxxxxxx Xxxxxxxxx, Xxxxxx Xxxx, Xxx Xxxxxx 00000,
Attention: Xxxxx Albuquerque and Xxxxxx Xxxxx (facsimile: (000) 000-0000, email:
xxxxx.xxxxxxxxxxx@xx.xxxxxxxxxx.xxx
and xxxxxx.xxxxx@xx.xxxxxxxxxx.xxx)
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party. All such notices and
communications shall, when mailed, emailed, telecopied or telexed be effective
when deposited in the mails, emailed, telecopied or confirmed by telex
answerback, respectively, addressed as aforesaid, except that notices to the
Issuing Bank pursuant to the provisions of Article
II shall not be effective until received by the Issuing
Bank.
SECTION
8.03. No
Waiver; Remedies. No failure on the part of the Issuing Bank
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
SECTION
8.04. Right
of Set-off.
(a) Upon
the occurrence and during the continuance of any Event of Default, the Issuing
Bank is hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) including, without limitation,
any and all cash held in the Account, at any time held and other indebtedness at
any time owing by the Issuing Bank to or for the credit or the account of the
Company against any and all of the Obligations of the Company now or hereafter
existing under this Agreement, whether or not the Issuing Bank shall have made
any demand hereunder and although such Obligations may be contingent or
unmatured.
(b) The
Issuing Bank agrees promptly to notify the Company after any such set-off and
application referred to in clause (a) above;
provided that
the failure to give such notice shall not affect the validity of such set-off
and application. The rights of the Issuing Bank under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Issuing Bank may have.
SECTION
8.05. Indemnification.
(a) The
Company hereby indemnifies and holds the Issuing Bank harmless from and against
any and all claims, damages, losses, liabilities, costs or expenses which the
Issuing Bank may incur or which may be claimed against the Issuing Bank by any
Person by reason of or in connection with the execution and delivery of this
Agreement or any of the other Related Documents or the transfer of, or payment
or failure to make payment under, any Letter of Credit; provided that the
Company shall not be required to indemnify the Issuing Bank pursuant to this
Section 8.05
for any claims, damages, losses, liabilities, costs or expenses to the extent
caused by the Issuing Bank’s grossly negligent or willful failure to make lawful
payment under such Letter of Credit after the presentation to it by the
Beneficiary of such Letter of Credit of a draft and certificate strictly
complying with the terms and conditions of such Letter of Credit.
(b) Nothing
in this Section
8.05 is intended to limit the Company’s obligations contained in Article
II. Without prejudice to the survival of any other obligation
of the Company hereunder, the indemnities and obligations of the Company
contained in this Section 8.05 shall
survive the payment in full of amounts payable pursuant to Article II and the
termination of the Letters of Credit.
38
SECTION
8.06. No
Liability of the Issuing Bank. The Company assumes all risks
of the acts or omissions of the Beneficiary of any Letter of Credit with respect
to its use of such Letter of Credit. Neither the Issuing Bank nor any
of its officers or directors shall be liable or responsible for: (a)
the use which may be made of any Letter of Credit or any acts or omissions of
the Beneficiary in connection therewith; (b) the validity, sufficiency or
genuineness of documents, or of any endorsement thereon, even if such documents
should prove to be in any or all respects invalid, insufficient, fraudulent or
forged; (c) payment by the Issuing Bank against presentation of documents that
do not strictly comply with the terms of any Letter of Credit, including failure
of any documents to bear any reference or adequate reference to any Letter of
Credit; or (d) any other circumstances whatsoever in making or failing to make
payment under any Letter of Credit, except that the
Company shall have a claim against the Issuing Bank, and the Issuing Bank shall
be liable to the Company, to the extent of any direct, but not consequential,
damages suffered by the Company which the Company proves were caused by the
Issuing Bank’s grossly negligent or willful failure to make lawful payment under
such Letter of Credit after the presentation to it by the Beneficiary of a draft
and certificate strictly complying with the terms and conditions of such Letter
of Credit. In furtherance and not in limitation of the foregoing, the
Issuing Bank may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary.
SECTION
8.07. Sales
of Participations. The Issuing Bank may grant participations
under this Agreement, the other Relevant Documents and the Letters of Credit
(each person to which a participation is granted being called a “Participant”) and in
such event the Issuing Bank will in its own name and as agent for any
Participant, enforce all rights and interest of any Participant under this
Agreement, and accept all performances required of the Company under this
Agreement; provided that in the
event that a claim for compensation is made pursuant to Section 2.04(e) on
behalf of a Participant, the Company shall have the right, with the assistance
of the Issuing Bank, to seek a substitute participant or participants,
satisfactory to the Issuing Bank, to assume the participation of such
Participant.
SECTION
8.08. Costs, Expenses and
Taxes.
(a) The
Company agrees to pay on demand all reasonable costs and expenses in connection
with the preparation, execution, delivery, filing, recording, administration,
modification and amendment of this Agreement, the other Related Documents and
any other documents which may be delivered in connection hereto or thereto,
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Issuing Bank, and local counsel who may be retained by said
counsel, with respect thereto and with respect to advising the Issuing Bank as
to its rights and responsibilities under this Agreement. The Company
further agrees to pay on demand all costs and expenses (including reasonable
counsel fees and expenses) in connection with (i) the enforcement (whether
through negotiations, legal proceedings or otherwise) of this Agreement and such
other documents which may be delivered in connection with this Agreement,
including, without limitation, reasonable counsel fees and expenses in
connection with the enforcement of rights under this Section 8.08, or (ii)
any action or proceeding relating to a court order, injunction, or other process
or decree restraining or seeking to restrain the Issuing Bank from paying any
amount under any Letter of Credit. In addition, the Company shall pay
any and all stamp and other taxes and fees payable or determined to be payable
in connection with the execution, delivery, filing and recording of this
Agreement or the Letters of Credit or any such other documents, and agrees to
save the Issuing Bank harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes
and fees.
39
SECTION
8.09. Binding
Effect. This Agreement shall become effective when it shall
have been executed by the Company and the Issuing Bank and thereafter shall be
binding upon and inure to the benefit of the Company and the Issuing Bank and
their respective successors and assigns, except that the Company shall not have
the right to assign its rights hereunder or any interest herein without the
prior written consent of the Issuing Bank. The Issuing Bank may
assign to any financial institution all or any part of, or any interest
(undivided or divided) in, the Issuing Bank’s rights and benefits under this
Agreement, and to the extent of that assignment such assignee shall have the
same rights and benefits against the Company hereunder as it would have had if
such assignee were the Issuing Bank issuing or paying under any Letter of Credit
hereunder.
SECTION
8.10. Severability. Any
provision of this Agreement which is prohibited, unenforceable or not authorized
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition, unenforceability or non-authorization without invalidating
the remaining provisions hereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction.
SECTION
8.11. Certain Instructions
Regarding Account. The Issuing Bank hereby agrees that, so
long as no Default or Event of Default has occurred and is continuing or would
result therefrom, during the ten-Business Day period following the date on which
fees are payable pursuant to Section 2.02(a),
(b) and (c), upon the written
request of the Company, the Issuing Bank will release to the Company funds in
the Account in an amount not to exceed interest earned on Collateral credited to
the Account; provided, however, that in no
circumstance shall the Issuing Bank be required at any time to release funds in
the Account in an amount that would reduce the available balance in the Account
to be less than the sum of (x) the aggregate undrawn Stated Amount of the
Letters of Credit plus (y) the aggregate drawn but unreimbursed amount of the
Letters of Credit.
SECTION
8.12. GOVERNING LAW, JURISDICTION,
SERVICE OF PROCESS, WAIVER OF SOVEREIGN IMMUNITY, WAIVER OF JURY
TRIAL. (a) THIS AGREEMENT AND THE OTHER RELATED
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW
PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION)
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK. BY ITS EXECUTION HEREOF, THE GUARANTOR SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS LOCATED IN NEW
YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE
RELATED DOCUMENTS AND HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY THE APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING.
40
(b) THE
COMPANY HEREBY IRREVOCABLY APPOINTS CT CORPORATION SYSTEM (THE “SERVICE OF
PROCESS AGENT”) WITH AN OFFICE ON THE DATE HEREOF AT 000 XXXXXX XXXXXX, XXX
XXXX, XXX XXXX 00000 XXX, AS ITS AGENT TO RECEIVE ON ITS BEHALF AND
ITS PROPERTY SERVICE OF COPIES OF ANY SUMMONS AND COMPLAINT AND ANY OTHER
PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH
SERVICE MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO THE
COMPANY IN CARE OF THE SERVICE OF PROCESS AGENT AT THE SERVICE OF PROCESS
AGENT’S ABOVE ADDRESS, AND THE COMPANY HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS
THE SERVICE OF PROCESS AGENT TO ACCEPT SUCH SERVICE ON ITS BEHALF. AS AN
ALTERNATIVE METHOD OF SERVICE, THE COMPANY ALSO IRREVOCABLY CONSENTS TO THE
SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES OF SUCH PROCESS TO THE COMPANY AT ITS ADDRESS SET FORTH
HEREIN. THE COMPANY AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION
OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PERMITTED BY LAW. NOTHING
IN THIS SECTION
SHALL AFFECT THE RIGHTS OF THE ISSUING BANK TO SERVE LEGAL PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE ISSUING BANK TO BRING ANY
ACTION OR PROCEEDING AGAINST THE COMPANY OR ITS PROPERTY IN THE COURTS OF ANY
OTHER JURISDICTION.
(c) The
rules of the “International Standby Practices 1998” published by the Institute
of International Banking Law and Practice or the "Uniform Customs and Practice
for Documentary Credits" issued by the International Chamber of Commerce,
Publication No. 600 (2008 revision)(in each case, or such later supplement
thereto or revision thereof as shall be in effect at the time of issuance of a
Letter of Credit) as mutually agreed by the Issuing Bank and the Company, shall
apply to each Letter of Credit, except to the extent otherwise set forth
therein.
(d) To
the extent that the Company may be entitled, in any jurisdiction in which
judicial proceedings may at any time be commenced with respect to any Related
Document, to claim for itself or its revenues, assets or properties any immunity
from suit, the jurisdiction of any court, attachment prior to judgment,
attachment in aid of execution of a judgment, set-off, execution of a judgment
or any other legal process, and to the extent that in any such jurisdiction
there may be attributed such immunity (whether or not claimed), the Company
irrevocably agrees not to claim and hereby irrevocably waives such immunity to
the fullest extent permitted by the laws of such jurisdiction and hereby agrees
that the foregoing waiver shall be enforced to the fullest extent permitted
under the Foreign Sovereign Immunities Act of 1976 of the United States of
America, as amended, and is intended to be irrevocable for the purpose of such
act.
(e) EACH
PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THE RELATED DOCUMENTS.
(f) All
amounts due to the Issuing Bank under this Agreement or any other Related
Document shall be paid in United States Dollars in immediately available funds
without offset, deduction or counterclaim. Any payment made to or received by
the Issuing Bank in a currency (the “Relevant Currency”)
other than United States Dollars pursuant to a judgment or order of a court or
tribunal of any jurisdiction or otherwise shall constitute a payment of such
amount only to the extent of the amount in United States Dollars which the
Issuing Bank is able, on the date of receipt by the Issuing Bank of such payment
in the Relevant Currency (or, in the case of any such date which is not a
Business Day, on
41
the next
succeeding Business Day), to purchase with the amount so received by the Issuing
Bank on such date taking into account the costs of any such purchase and any
fees, commissions or brokerage payable in connection therewith. If
the amount of United States Dollars which the Issuing Bank is so able to
purchase is less than the amount expressed to be due hereunder, the Company
shall indemnify and hold the Issuing Bank harmless against any loss or damage
sustained or incurred by it or arising as a result. If the amount in
United States Dollars so purchased exceeds the sum originally due to the Issuing
Bank the Issuing Bank shall remit such excess less any other amounts due and
owing under the Related Documents.
(g) If
the Company is not able to so tender United States Dollars as a result of the
adoption of a law, decree, regulation, judicial or arbitration decision, the
taking of any action by a governmental authority or the occurrence of any other
circumstance which in any such case prohibits, prevents or limits the payment of
United States Dollars, the Company shall, during the continuance of such
prohibition or restriction, make payments hereunder in United States Dollars (y)
by purchasing with Relevant Currency, U.S. Government Security or any other
United States Dollar-denominated public or private securities issued in the
Relevant Country, and transferring and selling the same outside the Relevant
Country for United States Dollars, as determined by the Issuing Bank, or (z) by
any other lawful mechanism for the acquisition of United States Dollars, at the
option of the Company. No form of payment shall be deemed to
constitute payment until receipt by the Issuing Bank of the full amount of
United States Dollars due under the Related Documents. All costs,
expenses and taxes payable in connection with compliance with this paragraph
shall be for the account of the Company.
SECTION
8.13. Confidentiality. The
Issuing Bank agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its Affiliates
and to its and its Affiliates’ respective partners, directors, officers,
employees, agents, advisors and representatives (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information), (b) to the extent requested by any regulatory
authority purporting to have jurisdiction over it (including any self-regulatory
authority, such as the National Association of Insurance Commissioners), (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) in connection with the exercise of any remedies
hereunder or under any other Related Document or any action or proceeding
relating to this Agreement or any other Related Document or the enforcement of
rights hereunder or thereunder, (e) subject to an agreement containing
provisions substantially the same as those of this Section, to (i) any assignee
of or Participant in, or any prospective assignee of or Participant in, any of
its rights or obligations under this Agreement or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
the Borrower and its obligations or (iii) any insurance or reinsurance broker or
insurer or reinsurer in connection with any actual or prospective credit
insurance transaction related to this Agreement, (f) with the consent of the
Company or (g) to the extent such Information (x) becomes publicly available
other than as a result of a breach of this Section or (y)
becomes available to the Issuing Bank or any of its Affiliates on a
nonconfidential basis from a source other than the Company.
42
For
purposes of this Section, “Information” means all information received from any
Loan Party or any of their respective Subsidiaries relating to any Loan Party or
any of their respective Subsidiaries or any of their respective businesses,
other than any such information that is available to the Issuing Bank on a
nonconfidential basis prior to disclosure by any Loan Party or any of their
respective Subsidiaries; provided that, in the
case of information received from any Loan Party or any of their respective
Subsidiaries after the date hereof, such information is clearly identified at
the time of delivery as confidential. Any Person required to maintain
the confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential
information.
SECTION
8.14. Headings. Section
headings in this Agreement are included herein for convenience of reference only
and shall not constitute a part of this Agreement for any other
purpose.
SECTION
8.15. USA
Patriot Act. The Issuing Bank hereby notifies the Company and
the Guarantor that pursuant to the requirements of the USA Patriot Act (Title
III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is
required to obtain, verify and record information that identifies each Loan
Party, which information includes the name and address of each Loan Party and
other information that will allow the Issuing Bank to identify each Loan Party
in accordance with the Patriot Act.
43
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
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FLAGSTONE
REASSURANCE SUISSE SA, as the Company
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BNP
PARIBAS, as the Issuing Bank
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