LETTER OF CREDIT FACILITY AGREEMENT

EXHIBIT 10.23.4

 

 

CONFORMED COPY

 

EXHIBIT

 

DATED 19 NOVEMBER 1999

(as (a) amended and restated pursuant to the First Restatement Agreement

dated 17 November 2000, (b) amended pursuant to the Amendment Agreement dated

23 October 2001, (c) amended and restated pursuant to the Second Restatement Agreement

dated 21 November 2001, (d) amended and restated pursuant to the Third Restatement

Agreement dated 19 November 2002), and (e) amended and restated pursuant to the Fourth

Amendment and Restatement Agreement dated 14 November 2003)

 

ACE LIMITED

as Account Party

 

ACE BERMUDA INSURANCE LTD.

and

ACE TEMPEST REINSURANCE LTD.

as Guarantors

 

CITIGROUP GLOBAL MARKETS LIMITED

and

BARCLAYS CAPITAL

as Lead Arrangers

 

ING BANK, N.V., LONDON BRANCH

as Co-Arranger

 

CITIBANK INTERNATIONAL plc

as Agent and Security Trustee

 

and

 

OTHERS

 

 

£380,000,000

LETTER OF CREDIT FACILITY AGREEMENT

 

 

CONTENTS

 

 

 

THIS AGREEMENT originally dated 19 November 1999, as (a) amended and restated pursuant to the First Restatement Agreement dated 17 November 2000, (b) amended by an Amendment Agreement dated 23 October 2001, (c) further amended and restated pursuant to the Second Restatement Agreement dated 21 November 2001, (d) further amended and restated pursuant to the Third Restatement Agreement dated 19 November 2002, and (e) further amended and restated pursuant to the Fourth Amendment and Restatement Agreement dated 14 November 2003, is made between:

 

(1)	ACE LIMITED as account party (the “ Account Party ”);

 

(2)	ACE BERMUDA INSURANCE LTD . and ACE TEMPEST REINSURANCE LTD. as guarantors (the “ Guarantors ”);

 

(3)	CITIGROUP GLOBAL MARKETS LIMITED and BARCLAYS CAPITAL (the investment banking division of Barclays Bank PLC) as lead arrangers of the Facility (the “ Lead Arrangers ”);

 

(4)	ING BANK, N.V., LONDON BRANCH as co-arranger of the Facility (the “ Co-Arranger ”);

 

(5)	CITIBANK INTERNATIONAL plc as agent and trustee for the banks (when acting in such capacities the “ Agent ” and the “ Security Trustee ” respectively); and

 

(6)	THE BANKS as defined below.

 

IT IS AGREED as follows.

 

1.	DEFINITIONS AND INTERPRETATION

 

1.1	Definitions

 

In this Agreement:

 

“ ACE INA ” means ACE INA Holdings Inc., a Delaware company and its successors.

 

“ ACE US ” means ACE US Holdings, Inc., a Delaware company and its successors.

 

“ Adjusted Consolidated Debt ” means, at any time, an amount equal to (a) the then outstanding Consolidated Debt of the Account Party and its Subsidiaries plus (b) to the extent exceeding an amount equal to 15 per cent. of Total Capitalisation, the then issued and outstanding amount of Preferred Securities (other than any Mandatorily Convertible Preferred Securities).

 

“ Affiliate ” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For the purposes of this definition, the term “control” (including the terms “controlling”, “controlled by” and “under common control with”) of a Person means the possession, direct or indirect, of the power to vote 5 per cent. or more of the Voting Interests of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Interests, by contract or otherwise.

 

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“ Amendment Agreement ” means the amendment agreement dated 23 October 2001 which amends the First Restatement Agreement.

 

“ Applicant ” means each of ACE Capital Limited, ACE Capital IV Limited, ACE Capital V Limited, ACE Capital VI Limited and ACE Capital VII Limited and their successors and substitutes within the Group from time to time.

 

“ Approved Credit Institution ” means a credit institution within the meaning of the First Council Directive relating to the taking up and pursuit of the business of credit institutions (No. 2000/12 EC) which has been approved by the Council of Lloyd’s for the purpose of providing guarantees and issuing or confirming letters of credit comprising a member’s Funds at Lloyd’s.

 

“ Approved Investment ” means any Investment that was made by the Account Party or any of its Subsidiaries pursuant to investment guidelines set forth by the board of directors of the Account Party which guidelines are consistent with past practices.

 

“ Arrangers ” means the Lead Arrangers and the Co-Arranger.

 

“ Authorised Signatory ” means, in relation to an Obligor, any person who is duly authorised (in such manner as may be reasonably acceptable to the Agent) and in respect of whom the Agent has received a certificate signed by a director or another Authorised Signatory of such Obligor setting out the name and signature of such person and confirming such person’s authority to act.

 

“ Availability Period ” means the period from the Commencement Date to the Commitment Termination Date (or such other date which Lloyd’s may specify as the Funds Date for 2003) inclusive.

 

“ Available Commitment ” means, in relation to a Bank at any time and save as otherwise provided herein its Commitment less its share of the Sterling Amount of Outstandings at such time provided that such amount shall not be less than zero.

 

“ Available Facility ” means, at any time, the aggregate of the Available Commitments adjusted, in the case of a proposed utilisation pursuant to a Utilisation Request, so as to take into account:-

 

(a)

any reduction in the Commitment of a Bank pursuant to the terms hereof; and

 

(b)

any Letter of Credit which pursuant to any other Utilisation Request, is to be issued; and

 

(c)

any Letter of Credit which is due to expire,

 

on or before the proposed Utilisation Date relating to such utilisation.

 

“ Bank ” means any financial institution:

 

(a)

named in Schedule 1 ( The Banks ); or

 

(b)

which has become a party hereto in accordance with Clause 27.4 ( Assignments by Banks ) or Clause 27.5 ( Transfers by Banks ),

 

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and which has not ceased to be a party hereto in accordance with the terms hereof.

 

“ Bermuda Companies Law ” means The Companies Act 1981 of Bermuda, as amended, and the regulations promulgated thereunder.

 

“ Bermuda Insurance Law ” means The Insurance Act 1978 of Bermuda, as amended, and the regulations promulgated thereunder.

 

“ Business Day ” means a day (other than a Saturday or Sunday) on which banks generally are open for business in London and Bermuda and, in the case of payments to be made in dollars, New York.

 

“ Capitalised Leases ” means all leases that have been or should be, in accordance with GAAP, recorded as capitalised leases.

 

“ Cash Collateral ” means, in relation to any Bank’s L/C Proportion of any Letter of Credit, a deposit in such interest-bearing account or accounts as such Bank or, as the case may be, the Agent may specify, such deposit and account to be secured in favour of, and on terms and conditions acceptable to, such Bank.

 

“ Charge Agreement ” means the charge agreement dated on or about the date of the Second Restatement Agreement, in substantially the form set out in Schedule 10 ( Form of Charge Agreement ).

 

“ Charged Portfolio ” has the meaning ascribed to it in the Charge Agreement.

 

“ Commencement Date ” has the meaning given to it in the Fourth Amendment and Restatement Agreement.

 

“ Commitment ” means, in relation to a Bank at any time and save as otherwise provided herein, the amount set opposite its name under the heading “ Commitment ” in Schedule 1 (The Banks) .

 

“ Commitment Termination Date ” means 16 December 2003.

 

“ Consolidated ” refers to the consolidation of accounts in accordance with GAAP.

 

“ Consolidated Debt ” means at any date the Debt of the Account Party and its Consolidated Subsidiaries, determined on a Consolidated basis as of such date.

 

“ Consolidated Net Income ” means, for any period, the net income of the Account Party and its Consolidated Subsidiaries, determined on a Consolidated basis for such period.

 

“ Consolidated Net Worth ” means at any date the Consolidated stockholder’s equity of the Account Party and its Consolidated Subsidiaries determined as of such date, provided that such determination for the purposes of Clause 16.7 ( Adjusted Consolidated Debt to Total Capitalisation Ratio ), Clause 16.8 ( Consolidated Net Worth ) and Clause 16.9 ( Liens ) shall be made without giving effect to adjustments pursuant to Statement No. 115 of the Financial Accounting Standards Board of the United States of America.

 

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“ Consolidated Subsidiary ” means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Account Party in its consolidated financial statements if such statements were prepared as of such date.

 

“ Contingent Obligation ” means, with respect to any Person, any obligation or arrangement of such Person to guarantee or indemnify or intended to guarantee or indemnify any Debt, leases, dividends or other payment obligations (“ primary obligations ”) of any other Person (the “ primary obligor ”) in any manner, whether directly or indirectly, including, 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 the obligation of a primary obligor;

 

(b)

the obligation to make take-or-pay or similar payments, if required, regardless of non-performance by any other party or parties to an agreement; or

 

(c)

any obligation of such Person, whether or not contingent:

 

(i)

to purchase any such primary obligation or any property constituting direct or indirect security therefor;

 

(ii)

to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor;

 

(iii)

to purchase property, assets, 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

 

(iv)

otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof,

 

provided, however, that Contingent Obligations shall not include any obligations of any such Person arising under insurance contracts entered into in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) 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.

 

“ Custodian ” means (at the date of the Charge Agreement) State Street Bank and Trust Company, or such other entity or entities as may be agreed from time to time between the Account Party and the Security Trustee (each acting reasonably), provided that such

 

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other Custodian has entered into Security Documents in a form reasonably acceptable to the Security Trustee.

 

“ Custodian’s Undertaking ” means the undertaking delivered to the Security Trustee by the Custodian in respect of the Charged Portfolio as contemplated by the Charge Agreement.

 

“ Debenture ” means debt securities issued by the Account Party or ACE INA to a Special Purpose Trust in exchange for proceeds of Preferred Securities and common securities of such Special Purpose Trust.

 

“ Debt ” of any Person means, without duplication for purposes of calculating financial ratios:

 

(a)

all indebtedness of such Person for borrowed money:

 

(b)

all obligations of such Person for the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of such Person’s business);

 

(c)

all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments;

 

(d)

all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property);

 

(e)

all obligations of such Person as lessee under Capitalised Leases (excluding imputed interest);

 

(f)

all obligations of such Person under acceptance, letter of credit or similar facilities;

 

(g)

all obligations of such Person (except for Approved Investments) to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interests (except for obligations to pay for Equity Interests within customary settlement periods) in such Person or any other Person or any warrants, rights or options to acquire such capital stock (excluding payments under a contract for the forward sale of ordinary shares of such Person issued in a public offering), valued, in the case of Redeemable Preferred Interests, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends;

 

(h)

all obligations of such Person under Guaranteed Investment Contracts issued by such Person;

 

(i)

all Contingent Obligations of such Person in respect of Debt (of the types described above) of any other Person;

 

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(j)

all indebtedness and other payment obligations referred to in paragraphs (a) through (i) above of another Person secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness or other payment obligations;

 

provided, however, that the amount of Debt of such Person under paragraph (j) above shall, if such Person has not assumed or otherwise become liable for any such Debt, be limited to the lesser of the principal amount of such Debt or the fair market value of all property of such Person securing such Debt; provided further that “ Debt ” shall not include obligations in respect of insurance or reinsurance contracts entered into in the ordinary course of business; provided further that, solely for the purposes of Clause 16.7 ( Adjusted Consolidated Debt to Total Capitalisation Ratio ) and Clause 16.8 ( Consolidated Net Worth ) and the definitions of “ Adjusted Consolidated Debt ” and “ Total Capitalisation ”, “ Debt ” shall not include (x) any contingent obligations of any Person under or in connection with acceptance, letter of credit or similar facilities, or (y) obligations of the Account Party or ACE INA under any Debentures or under any subordinated guarantee or any Preferred Securities or obligations of a Special Purpose Trust under any Preferred Securities or (z) obligations of such Person under Guaranteed Investment Contracts in an aggregate amount not to exceed $2,000,000,000 outstanding at any time.

 

“ Default ” means an Event of Default or a Potential Event of Default.

 

“ Derivatives Obligations ” of any Person means all obligations of such Person in respect of any rate swap transaction, 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 or other similar transaction (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions.

 

“ Effective Date ” means, in respect of each Letter of Credit, 21 November 2003.

 

“ 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 authorised or otherwise existing on any date of determination.

 

“ Event of Default ” means any circumstance described as such in Clause 17 ( Events of Default ).

 

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“ Facility ” means the sterling and dollar letter of credit facility granted to the Account Party in this Agreement.

 

“ Facility Office ” means, in relation to the Agent, the office identified with its signature below or such other office as it may select by notice and, in relation to any Bank, the office notified by it to the Agent in writing prior to the date hereof (or, in the case of a Transferee, at the end of the Transfer Certificate to which it is a party as Transferee) or such other office as it may from time to time select by notice to the Agent.

 

“ Final Expiration Date ” means the date on which a Letter of Credit terminates in accordance with its terms.

 

“ Finance Documents ” means this Agreement and each Security Document and any other document or documents as may be agreed by the Agent and the Account Party.

 

“ Finance Parties ” means the Agent, the Security Trustee, the Arrangers and the Banks.

 

“ First Restatement Agreement ” means the amendment and restatement agreement dated 17 November 2000 made between (amongst others) the Account Party, the Guarantor named therein, the Agent and the Banks named therein.

 

“ Fourth Amendment and Restatement Agreement ” means the amendment and restatement agreement dated 14 November 2003 made between (amongst others) the Account Party, the Guarantors, the Agent and the Banks named therein.

 

“ Funds at Lloyd’s ” has the meaning given to it in paragraph 4 of the Membership Bylaw (No. 17 of 1993).

 

“ Funds at Lloyd’s Requirements ” means, in respect of any member, the amount required to be maintained by that member as Funds at Lloyd’s.

 

“ Funds Date ” means, in relation to any year, the date notified by Lloyd’s as being the latest date in that year by which Funds at Lloyd’s can be placed with Lloyd’s in order to satisfy Funds at Lloyd’s Requirements in respect of the year of account next following that date, such date notified by Lloyd’s in respect of the 2004 year of account being 21 November 2003.

 

“ GAAP ” has the meaning specified in Clause 1.7 ( Accounting Terms and Determinations ).

 

“ Group ” means the Account Party and its Subsidiaries for the time being.

 

“ Guaranteed Investment Contract ” means, with respect to any Person, a guaranteed investment contract or funding agreement or other similar agreement issued by such Person that guarantees to a counterparty a rate of return on the invested capital over the life of such contract or agreement.

 

“ Hedge Agreements ” means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other hedging agreements.

 

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“ Internal Revenue Code ” means the Internal Revenue Code of 1986 of the United States of America, as amended, or any successor statute, and includes regulation promulgated and rulings issued thereunder.

 

“ Investment ” in any Person means any loan or advance to such Person, any purchase or other acquisition of any Equity Interests or Debt or the assets comprising a division or business unit or a substantial part or all of the business of such Person, any capital contribution to such Person or any other direct or indirect investment in such Person, including, without limitation, any acquisition by way of a merger or consolidation and any arrangement pursuant to which the investor incurs Debt of the types referred to in paragraph (i) or (j) of the definition of “ Debt ” in respect of such Person; provided, however, that any purchase by any US Facility Agreement Loan Party or any Subsidiary of any catastrophe-linked instruments which are (x) issued for the purpose of transferring traditional reinsurance risk to the capital markets and (y) purchased by such US Facility Agreement Loan Party or any Subsidiary in accordance with its customary reinsurance underwriting procedures, or the entry by any US Facility Agreement Loan Party or any Subsidiary into swap transactions relating to such instruments in accordance with such procedures, shall be deemed to be the entry by such Person into a reinsurance contract and shall not be deemed to be an Investment by such Person.

 

“ L/C Commission Rate ” means the rate per annum determined in accordance with Clause 18.1 (Letter of Credit Commission) or Schedule 8 ( Pricing Schedule ), as the case may be.

 

“ L/C Proportion ” means, in relation to a Bank in respect of any Letter of Credit and save as otherwise provided herein, the proportion (expressed as a percentage) borne by such Bank’s Available Commitment to the Available Facility immediately prior to the issue of such Letter of Credit.

 

“ L/C Valuation Date ” means the first Business Day which falls six months after the Commencement Date and each day falling at six monthly intervals thereafter.

 

“ Letter of Credit ” means a letter of credit issued or to be issued pursuant to Clause 3 ( Utilisation of the Facility ) substantially in the form set out in Schedule 5 ( Form of Letter of Credit ) or in such other form requested by the Account Party which is approved by the Banks (such approval not to be unreasonably withheld or delayed).

 

“ Letter of Credit Commission ” means the letter of credit commission described in Clause 18.1 ( Letter of Credit Commission ).

 

“ LIBOR ” means, in relation to any Unpaid Sum on which interest for a given period is to accrue, the percentage rate per annum equal to the offered quotation which appears on the page of the Telerate Screen which displays an average British Bankers Association Interest Settlement Rate for the currency of the relevant amount (being currently “3740” or, as the case may be, “3750”) for such period as of 11.00 a.m. London time on the Quotation Date for such period or, if such page or such service shall cease to be available, such other page or such other service for the purpose of displaying an average British Bankers Association Interest Settlement Rate for such currency as the Agent, after consultation with the Banks and the Account Party, shall select, acting reasonably.

 

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“ Lien ” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement that has the practical effect of creating a security interest, in respect of such asset. For the purposes of this Agreement, the Account Party shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.

 

“ Lloyd’s ” means the Society incorporated by Lloyd’s Act 1871 by the name of Lloyd’s.

 

“ Majority Banks ” means, save as otherwise provided herein:

 

(a)

whilst there are no Outstandings, a Bank or Banks whose Commitments amount (or, if each Bank’s Commitment has been reduced to zero, did immediately before such reduction to zero, amount) in aggregate to sixty-six and two thirds per cent. or more (or for the purposes of Clause 17.18 ( Acceleration and Cancellation ) to more than fifty per cent.) of the Total Commitments; and

 

(b)

whilst there are Outstandings a Bank or Banks to whom in aggregate more than sixty-six and two thirds per cent. (or for the purposes of Clause 17.18 ( Acceleration and Cancellation ) more than fifty per cent.) of the Outstandings is owed,

 

provided that , in respect of a Letter of Credit issued by a Declining Bank pursuant to sub-clause 4.5.2 of Clause 4.5 ( Replacement Letters of Credit ), an amount equal to the amount of its Outstandings in respect thereof multiplied by the Reduction Percentage applicable at that time shall be excluded in determining the amount of Outstandings owed to such Bank for the purposes of this definition only.

 

“ Mandatorily Convertible Preferred Securities ” means units comprised of (i) Preferred Securities or preferred shares of the Account Party and (ii) a contract for the sale of ordinary shares of the Account Party (including “Feline Prides ^TM ”, “Rhinos ^TM” or any substantially similar securities).

 

“ Mandatory Liquid Asset Costs Rate ” in relation to any Unpaid Sum shall bear the meaning given to it in Schedule 6 ( Mandatory Liquid Asset Costs Rate ).

 

“ Material Debt ” means Debt of the Account Party and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, in an aggregate principal or face amount exceeding US$25,000,000.

 

“ Material Financial Obligations ” means a principal amount of Debt and/or current payment obligations in respect of Derivatives Obligations of the Account Party and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, exceeding in the aggregate US$25,000,000.

 

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“ Material Subsidiary ” means any Subsidiary having:

 

(a)

assets (after inter company eliminations) in excess of 10 per cent. of the total assets of the Account Party and its Subsidiaries determined on a Consolidated basis; or

 

(b)

annual net income constituting 10 per cent. or more of the total annual net income of the Account Party and its Subsidiaries on a Consolidated basis,

 

in each case determined as of the end of the most recently ended fiscal year, and in any event ACE UK Limited shall be construed as a Material Subsidiary.

 

“ Net Proceeds ” means, with respect to any issuance of Equity Interests by any Person, the amount of cash received by such Person in connection with such transaction after deducting therefrom the aggregate, without duplication, of the following amounts to the extent properly attributable to such transactions:

 

(a)

reasonable brokerage commissions, attorney’s fees, finders’ fees, financial advisory fees, financial advisory fees, accounting fees, underwriting fees, investment banking fees, and other similar commissions, and reasonable fees and expenses and disbursements of any of the foregoing, in each case to the extent paid or payable by such Person;

 

(b)

reasonable printing and related expenses of filing and recording or registration fees or charges or similar fees or charges paid by such Person; and

 

(c)

taxes paid or payable by such Person to any governmental authority or regulatory body as a result of such transaction.

 

“ Notice of Charge ” means the notice of charge of the Charged Portfolio to be delivered by the Obligors to the Custodian pursuant to the terms of the Charge Agreement.

 

“ Obligors ” means the Account Party and the Guarantors.

 

“ Original Agreement ” means this Agreement as:

 

(a)

amended and restated pursuant to the First Restatement Agreement,

 

(b)

amended by the Amendment Agreement;

 

(c)

amended and restated pursuant to the Second Restatement Agreement; and

 

(d)

amended and restated pursuant to the Third Restatement Agreement,

 

but prior to its amendment and restatement on the Commencement Date.

 

“ Original Letters of Credit ” means the letters of credit issued under the Original Agreement.

 

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“ Original Sterling Amount ” means:

 

(a)

in relation to a Letter of Credit denominated in sterling, the amount specified as the amount of the Letter of Credit in the Utilisation Request relating thereto; and

 

(b)

in relation to a Letter of Credit denominated in dollars, the amount of sterling which could be purchased with the dollar amount of such Letter of Credit at the spot rate of exchange quoted by the Agent at or about 11.00 a.m. London time on the day falling three Business Days before the Utilisation Date for the purchase of sterling with dollars for delivery two Business Days thereafter.

 

“ Outstandings ” means, at any time, the aggregate of the Sterling Amounts of the maximum actual and contingent liabilities of the Banks in respect of each outstanding Letter of Credit.

 

“ Permitted Liens ” means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced or which are being contested in good faith by appropriate proceedings:

 

(a)

Liens for taxes, assessments and governmental charges or levies not yet due and payable;

 

(b)

Liens imposed by law, such as materialsmen’s, mechanics’, carriers’, workmen’s and repairmen’s Liens and other similar Liens arising in the ordinary course of business securing obligations that are not overdue for a period of more than 90 days;

 

(c)

pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations; and

 

(d)

easements, rights of way and other encumbrances on title to real property that do not render title to the property encumbered thereby unmarketable or materially adversely affect the use of such property for its present purposes.

 

“ Person ” means an individual, a company, a corporation, a partnership, an association, a trust or any other entity or organisation, including a government or political subdivision or an agency or instrumentality thereof.

 

“ Potential Event of Default ” means any event which would reasonably be expected to become (with the passage of time, the giving of notice, the making of any determination hereunder or any combination thereof) an Event of Default.

 

“ Preferred Interests ” means, with respect to any Person, Equity Interests issued by such Person that are entitled to a preference or priority over any other Equity Interests issued by such Person upon any distribution of such Person’s property and assets, whether by dividend or upon liquidation.

 

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“ Preferred Securities ” means:

 

(a)

preferred securities issued by the Special Purpose Trust which shall provide, among other things, that dividends shall be payable only out of proceeds of interest payments on the Debentures; or

 

(b)

other instruments that may be treated in whole or in part as equity for rating agency purposes while being treated as debt for tax purposes.

 

“ Proportion ” means, in relation to a Bank the proportion borne by its Commitment to the Total Commitments (or, if the Total Commitments are then zero, by its Commitment to the Total Commitments immediately prior to their reduction to zero).

 

“ Quotation Date ” means, in relation to any period for which an interest rate is to be determined hereunder, the day on which quotations would ordinarily be given by prime banks in the London interbank market for deposits in the currency in relation to which such rate is to be determined for delivery on the first day of that period, provided that , if, for any such period, quotations would ordinarily be given on more than one date, the Quotation Date for that period shall be the last of those dates.

 

“ Redeemable ” means, with respect to any Equity Interest, any Debt or any other right or obligation, any such Equity Interest, Debt, right or obligation that:

 

(a)

the issuer has undertaken to redeem at a fixed or determinable date or dates, whether by operation of a sinking fund or otherwise, or upon the occurrence of a condition not solely within the control of the issuer; or

 

(b)

is redeemable at the option of the holder.

 

“ Reduction Percentage ” means 20 per cent. x (5 - a); where “a” equals the remaining number of years (and for such purposes any incomplete year shall be treated as one year) for which the relevant Letter of Credit is currently valid.

 

“ Representations ” means each of the representations set out in Clause 15 ( Representations ).

 

“ Required Value ” has the meaning ascribed to it in the Charge Agreement.

 

“ Second Restatement Agreement ” means the agreement dated 21 November 2001 which amends and restates the Original Agreement.

 

“ Securitisation Transaction ” means any sale, assignment or other transfer by the Account Party or any Subsidiary of any accounts receivable, premium finance loan receivables, lease receivables or other payment obligations owing to the Account Party or such Subsidiary or any interest in any of the foregoing, together in each case with any collections and other proceeds thereof, any collection or deposit accounts related thereto, and any collateral, guarantees or other property or claims in favour of the Account Party or such Subsidiary supporting or securing payment by the obligor thereon of, or otherwise related to, any such receivables.

 

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“ Security ” means any security granted over the Charged Portfolio by the Obligors in favour of the Security Trustee pursuant to the Charge Agreement.

 

“ Security Documents ” means the Charge Agreement, the Custodian’s Undertaking and the Notice of Charge.

 

“ Special Purpose Trust ” means a special purpose business trust established by the Account Party or ACE INA of which the Account Party or ACE INA will hold all the common securities, which will be the issuer of Preferred Securities, and which will loan to the Account Party or ACE INA (such loan being evidenced by the Debentures) the net proceeds of the issuance and sale of the Preferred Securities and common securities of such Special Purpose Trust.

 

“ Spot Rate ” means the spot rate of exchange quoted by the Agent at or about 11.00 a.m. London time on the day on which the relevant calculation is to be made for the purchase of sterling with dollars or any other relevant currency for delivery two business days thereafter.

 

“ Sterling Amount ” means:

 

(a)

in relation to a Letter of Credit at any time:

 

(i)

if such Letter of Credit is denominated in sterling, the maximum actual and contingent liability of the Banks thereunder or in respect thereof at such time; and

 

(ii)

if such Letter of Credit is denominated in dollars, the equivalent in sterling of the maximum actual and contingent liability of the Banks thereunder at such time, calculated as at the later of the date which falls (1) two Business Days before its Utilisation Date or (2) the most recent L/C Valuation Date; and

 

(b)

in relation to the Outstandings, the aggregate of the Sterling Amounts of each outstanding Letter of Credit.

 

“ Subsidiary ” means, as to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person and, unless otherwise specified, “ Subsidiary ” means a Subsidiary of the Account Party.

 

“ Substitution Date ” means the date on which a new Letter of Credit will be substituted for an existing Letter of Credit under Clause 5 ( Substitution of Letters of Credit ), as specified in the relevant Substitution Request.

 

“ Substitution Period ” means the period from the Commencement Date to the date falling 48 months prior to the then-applicable Final Expiration Date.

 

“ Substitution Request ” means a request substantially in the form set out in Schedule 11 ( Form of Substitution Notice ).

 

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“ Term ” means, save as otherwise provided herein:

 

(a)

in relation to any Letter of Credit, the period from its Effective Date until its Final Expiration Date; and

 

(b)

in relation to an Unpaid Sum, any of those periods mentioned in Clause 20 ( Default Interest and Break Costs ).

 

“ Termination Notice ” has the meaning specified in Clause 4.1 ( Continuation until Termination ).

 

“ Third Restatement Agreement ” means the amendment and restatement agreement dated 19 November 2002 made between (amongst others) the Account Party, the Guarantor named therein, the Agent and the Banks named therein.

 

“ Total Capitalisation ” means, at any time, an amount (without duplication) equal to:

 

(a)

the then outstanding Consolidated Debt of the Account Party and its Subsidiaries

 

plus

 

(b)

Consolidated stockholders’ equity of the Account Party and its Subsidiaries plus (without duplication)

 

(c)

the then issued and outstanding amount of Preferred Securities (including Mandatorily Convertible Preferred Securities) and (without duplication) Debentures.

 

“ Total Commitments ” means, at any time, the aggregate of the Banks’ Commitments.

 

“ Transfer Certificate ” means a certificate substantially in the form set out in Schedule 2 ( Form of Transfer Certificate ) signed by a Bank and a Transferee under which:

 

(a)

such Bank seeks to procure the transfer to such Transferee of all or a part of such Bank’s rights, benefits and obligations under the Finance Documents upon and subject to the terms and conditions set out in Clause 27.3 ( Assignments and Transfers by Banks ); and

 

(b)

such Transferee undertakes to perform the obligations it will assume as a result of delivery of such certificate to the Agent as contemplated in Clause 27.5 ( Transfers by Banks ).

 

“ Transfer Date ” means, in relation to any Transfer Certificate, the date for the making of the transfer as specified in such Transfer Certificate.

 

“ Transferee ” means a person to which a Bank seeks to transfer by novation all or part of such Bank’s rights, benefits and obligations under the Finance Documents.

 

“ Unpaid Sum ” means the unpaid balance of any of the sums referred to in Clause 20.1 ( Default Interest ).

 

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“ US Facility Agreements ” means each of:

 

(a)

the US$500,000,000 364 day revolving credit facility agreement originally entered into on 11 June 1999 (as amended and restated on (i) 8 May 2000, (ii) 6 April 2001, (iii) 5 April 2002 and (iv) 4 April 2003) and made between, inter alia , ACE Limited and ACE INA as borrowers, the financial institutions named therein and others; and

 

(b)

the US$250,000,000 revolving credit facility agreement originally entered into on 11 June 1999 (as amended and restated on 8 May 2000) and made between, inter alia , ACE Limited and ACE INA as borrowers, the financial institutions named therein and others (the “ Five Year US Facility ”),

 

in each case as the same may be further amended or restated from time to time.

 

“ US Facility Agreement Loan Parties ” means, at any time, any or all of the Account Party, ACE INA, ACE Financial Services Inc., ACE Guaranty Re Inc., ACE Bermuda Insurance Ltd. and ACE Tempest Reinsurance Ltd.

 

“ US Fee Letter ” means the fee letter dated 5 March 2001 and made between, inter alia , the Account Party, the arrangers of the US Facility Agreements, JP Morgan Securities Inc. and others.

 

“ US Letter of Credit Agreements ” means any and all letter of credit agreements entered into by any borrower pursuant to the Five Year US Facility.

 

“ US Loan Documents ” means:

 

(a)

each US Facility Agreement;

 

(b)

the US Notes;

 

(c)

the US Fee Letter; and

 

(d)

each US Letter of Credit Agreement.

 

“ US Notes ” means each promissory note issued or to be issued pursuant to the terms of the US Facility Agreements.

 

“ Utilisation Date ” means the date on which a Letter of Credit is to be issued.

 

“ Utilisation Request ” means a notice substantially in the form set out in Schedule 4 ( Utilisation Request ).

 

“ Voting Interests ” means shares of capital stock issued by a corporation, or equivalent Equity Interest in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency.

 

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“ Wholly-Owned Consolidated Subsidiary ” means any Consolidated Subsidiary all of the shares of capital stock or other ownership interests of which (except directors’ qualifying shares) are at the time directly or indirectly owned by the Account Party.

 

1.2	Interpretation

 

Any reference in this Agreement to:

 

the “ Agent ”, “ Security Trustee ”, any “ Obligor ” or any “ Bank ” shall be construed so as to include its and any subsequent successors and permitted transferees in accordance with their respective interests;

 

“ continuing ”, in the context of an Event of Default shall be construed as a reference to an Event of Default which has not been remedied or waived in accordance with the terms hereof and in relation to a Potential Event of Default, one which has not been remedied within the relevant grace period or waived in accordance with the terms hereof.

 

the “ euro ” means the single currency of participating member states of the European Union;

 

a “ holding company ” of a company or corporation shall be construed as a reference to any company or corporation of which the first-mentioned company or corporation is a Subsidiary;

 

a “ law ” shall be construed as any law (including common or customary law), statute, constitution, decree, judgment, treaty, regulation, directive, bye-law, order or any other legislative measure of any government, supranational, local government, statutory or regulatory body or court;

 

a “ member ” shall be construed (as the context may require) as a reference to an underwriting member of Lloyd’s;

 

a “ month ” is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next succeeding calendar month save that, where any such period would otherwise end on a day which is not a Business Day, it shall end on the next succeeding Business Day, unless that day falls in the calendar month succeeding that in which it would otherwise have ended, in which case it shall end on the immediately preceding Business Day, provided that , if a period starts on the last Business Day in a calendar month or if there is no numerically corresponding day in the month in which that period ends, that period shall end on the last Business Day in that later month (and references to “ months ” shall be construed accordingly);

 

a “ participating member state ” is a reference to a member of the European Communities that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Union relating to European Monetary Union;

 

a Bank’s “ participation ”, in relation to a Letter of Credit, shall be construed as a reference to the rights and obligations of such Bank in relation to such Letter of Credit as are expressly set out in this Agreement;

 

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a “ successor ” shall be construed so as to include an assignee or successor in title of such party and any person who under the laws of its jurisdiction of incorporation or domicile has assumed the rights and obligations of such party under this Agreement or to which, under such laws, such rights and obligations have been transferred;

 

“ tax ” shall be construed so as to include any tax, levy, impost, duty or other charge of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same);

 

“ VAT ” shall be construed as a reference to value added tax including any similar tax which may be imposed in place thereof from time to time; and

 

the “ winding-up ”, “ dissolution ” or “ administration ” of a company or corporation shall be construed so as to include any equivalent or analogous proceedings under the law of the jurisdiction in which such company or corporation is incorporated or any jurisdiction in which such company or corporation carries on business including the seeking of liquidation, winding-up, reorganisation, dissolution, administration, arrangement, adjustment, protection or relief of debtors.

 

1.3	Currency Symbols

 

1.3.1

“ £ ” and “ sterling ” denote lawful currency of the United Kingdom for the time being.

 

1.3.2

“ US$ ” and “ dollars ” denote lawful currency of the United States of America for the time being.

 

1.4	Agreements and Statutes

 

Any

reference in this Agreement to:

 

1.4.1

this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied, novated or supplemented;

 

1.4.2

a statute or treaty shall be construed as a reference to such statute or treaty as the same may have been, or may from time to time be, amended or, in the case of a statute, re-enacted; and

 

1.4.3

a bylaw shall be construed as a reference to a bylaw made under Lloyd’s Acts 1871 to 1982 as the same may have been, or may from time to time be, amended or replaced.

 

1.5

Headings

 

Clause and Schedule headings are for ease of reference only.

 

1.6

Time

 

Any reference in this Agreement to a time of day shall, unless a contrary indication appears, be a reference to London time.

 

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1.7	Accounting Terms and Determinations

 

Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time (“ GAAP ”), applied on a basis consistent (except for changes concurred in by the Account Party’s independent public accountants) with the most recent audited consolidated financial statements of the Account Party and its Consolidated Subsidiaries delivered to the Banks; provided that , if the Account Party notifies the Agent that the Account Party wishes to amend any covenant in Clause 16 ( Covenants ) to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Agent notifies the Account Party that the Majority Banks wish to amend Clause 16 ( Covenants ) for such purpose), then the Account Party’s compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted account principals became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Account Party and the Majority Banks.

 

1.8	Third party rights

 

A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement.

 

2.	THE FACILITY

 

2.1	Grant of the Facility

 

The Banks, upon the terms and subject to the conditions hereof, grant to the Account Party a dual currency letter of credit facility in an aggregate amount of £380,000,000.

 

2.2	Purpose and Application

 

The Facility is intended to support Funds at Lloyd’s, and, accordingly, the Account Party shall apply all Letters of Credit issued hereunder in or towards satisfaction of such purpose and none of the Finance Parties shall be obliged to concern themselves with such application.

 

2.3	Conditions Precedent

 

Save as the Banks may otherwise agree, the Account Party may not deliver any Utilisation Request unless the Agent has confirmed to the Account Party and the Banks (which confirmation the Agent gave on 27 November 2001) that it has received all of the documents and other evidence listed in Schedule 3 ( Conditions Precedent ) and that each is, in form and substance, satisfactory to the Agent.

 

2.4	Several Obligations

 

The obligations of each Bank are several and the failure by a Bank to perform its obligations hereunder and/or under any Letter of Credit issued hereunder shall not affect the obligations of either Obligor towards any other party hereto nor shall any other party be liable for the failure by such Bank to perform its obligations hereunder and/or under such Letter of Credit.

 

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2.5	Several Rights

 

The rights of each Finance Party are several and any debt arising hereunder at any time from an Obligor to any Finance Party shall be a separate and independent debt. Each such party shall be entitled to protect and enforce its individual rights arising out of this Agreement independently of any other party (so that it shall not be necessary for any party hereto to be joined as an additional party in any proceedings for this purpose).

 

2.6	Cancellation of Original Letters of Credit

 

On and with effect from the Effective Date, all outstanding Original Letters of Credit shall be cancelled and replaced by the Letters of Credit issued after the Commencement Date.

 

3.	UTILISATION OF THE FACILITY

 

3.1	Utilisation Conditions for the Facility

 

Save as otherwise provided herein, a Letter of Credit will be issued at the request of the Account Party on behalf of an Applicant if:

 

3.1.1

no later than 10.00 a.m. two Business Days before the proposed Utilisation Date, the Agent has received a duly completed Utilisation Request from the Account Party;

 

3.1.2

the proposed Utilisation Date is a Business Day falling within the Availability Period;

 

3.1.3

the proposed Original Sterling Amount of such Letter of Credit is less than or equal to the Available Facility;

 

3.1.4

the Letter of Credit is substantially in the form set out in Schedule 5 (Form of Letter of Credit) or in such other form requested by the Account Party which is approved by the Banks (such approval not to be unreasonably withheld or delayed);

 

3.1.5

the beneficiary of such Letter of Credit is Lloyd’s;

 

3.1.6

on and as of the proposed Utilisation Date:

 

(a)

no Event of Default or Potential Event of Default has occurred and is continuing; and

 

(b)

the Representations are true in all material respects; and

 

3.1.7

the Agent has received evidence acceptable to it that the Charged Portfolio has been delivered to the Custodian and the amount of the Charged Portfolio is at least equal to the Required Value.

 

3.2	Request for Letters of Credit

 

A single Utilisation Request may be issued in respect of more than one Letter of Credit.

 

3.3	Completion of Letters of Credit

 

The Agent is authorised to arrange for the issue of any Letter of Credit pursuant to Clause 3.1 ( Utilisation Conditions for the Facility ) by:

 

3.3.1

completing the Effective Date of such Letter of Credit;

 

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3.3.2

completing the schedule to such Letter of Credit with the percentage participation of each Bank as allocated pursuant to the terms hereof; and

 

3.3.3

executing such Letter of Credit on behalf of each Bank and following such execution delivering such Letter of Credit to Lloyd’s on the Utilisation Date,

 

provided that the Agent shall not deliver any such Letter of Credit to Lloyd’s unless the Agent is satisfied that:

 

(a)

Lloyd’s has cancelled (or will upon such delivery cancel) the Original Letters of Credit; and

 

(b)

all amounts outstanding in respect of the Original Letters of Credit have been paid in full.

 

3.4	Dollar Option

 

The Account Party may, in a Utilisation Request, request that such Letter of Credit be denominated in dollars in which event such Letter of Credit shall be denominated in dollars.

 

3.5	Amounts of Letters of Credit

 

The amount of a Letter of Credit shall be:

 

3.5.1

the Original Sterling Amount of such Letter of Credit, if such Letter of Credit is to be denominated in sterling; and

 

3.5.2

if such Letter of Credit is to be denominated in dollars, the amount specified in the Utilisation Request relating thereto.

 

3.6	Each Bank’s Participation in Letters of Credit

 

Save as otherwise provided herein, each Bank will participate in each Letter of Credit issued pursuant to this Clause 3 in the proportion borne by its Available Commitment to the Available Facility immediately prior to the issue of such Letter of Credit.

 

3.7	Cancellation of Commitments

 

On the expiry of the Availability Period the Available Facility and each Bank’s Available Commitment shall be reduced to zero.

 

3.8	Final Expiration Date

 

Each Letter of Credit shall expire on its Final Expiration Date.

 

4.	TERMINATION OF LETTERS OF CREDIT

 

4.1	Continuation until Termination

 

Each Bank acknowledges that, subject to the terms of this Agreement, each issued Letter of Credit shall continue in force unless Lloyd’s receives a notice pursuant to clause 3 of the Letter of Credit, giving Lloyd’s not less than four years’ notice in writing terminating such Letter of Credit on the fourth anniversary of its Commencement Date or any subsequent date as specified in such notice (a “ Termination Notice ”). The Agent is not

 

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entitled to give a Termination Notice to Lloyd’s pursuant to clause 3 of the Letter of Credit except as permitted by this Clause 4.

 

4.2	Account Party’s Rights to Terminate a Letter of Credit

 

4.2.1

The Account Party may, by notice to the Agent given no later than 1 August 2004, terminate a Letter of Credit, such termination becoming effective on 30 September 2008. The Agent shall promptly give notice to the Banks and (by way of a Termination Notice) to Lloyd’s of that termination. Following the giving of such Termination Notice by the Agent to Lloyd’s, that Letter of Credit will expire on 30 September 2008.

 

4.2.2

Subject to sub-clause 4.2.3 below, from 1 October 2004, the Account Party may, by notice to the Agent, terminate a Letter of Credit. The Agent shall promptly give notice to the Banks and (by way of a Termination Notice) to Lloyd’s of that termination. Following the giving of such Termination Notice by the Agent to Lloyd’s, that Letter of Credit will expire on the fourth anniversary of the date on which that Termination Notice is given.

 

4.2.3

The Account Party may not, in any year, give notice to the Agent terminating a Letter of Credit between 16 August and 30 September (inclusive) of that year.

 

4.3	Banks’ Rights to Terminate a Letter of Credit

 

4.3.1

Each Bank may in its absolute discretion, by notice to the Agent given no later than 15 August 2004, elect to terminate its participation in a Letter of Credit, such termination becoming effective on 30 September 2008. The Agent shall give notice thereof to the Account Party within two Business Days of notification from such Bank. Provided that the Account Party has not designated a Substitute Bank in accordance with Clause 4.4 ( Substitute Bank ) below and the relevant Bank has not revoked its notification of termination (which it shall be able to revoke up to and including 15 August 2004 and not thereafter), the Agent shall deliver a Termination Notice to Lloyd’s of that termination no earlier than the date which falls three weeks after 15 August 2004. Following the giving of such Termination Notice by the Agent to Lloyd’s, that Letter of Credit will expire on 30 September 2008. Unless notice is given to the Agent as aforesaid each Bank will be deemed automatically to have agreed to continue its participation in each Letter of Credit.

 

4.3.2

Subject to sub-clause 4.3.3 below, from 1 October 2004, each Bank may, in its absolute discretion, by notice to the Agent, terminate its participation in a Letter of Credit. The Agent shall give notice to the Account Party of that termination within two Business Days thereafter. Provided that the Account Party has not designated a Substitute Bank in accordance with Clause 4.4 ( Substitute Bank ) below, the Agent shall deliver a Termination Notice to Lloyd’s of that termination no earlier than the date which falls three weeks after the date on which notice of that termination was received from such Bank by the Agent. Following the giving of such Termination Notice by the Agent to Lloyd’s, that Letter of Credit will expire on the fourth anniversary of the date on which that Termination Notice is given.

 

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4.3.3

A Bank may not, in any year, give notice to the Agent terminating its participation in a Letter of Credit between 16 August and 30 September (inclusive) of that year.

 

4.4	Substitute Bank

 

4.4.1

If any Bank (a “ Declining Bank ”) gives notice in accordance with the provisions of Clause 4.3 ( Banks’ Rights to Terminate a Letter of Credit ) that it intends to terminate its participation in a Letter of Credit in accordance with that Clause, then the Account Party may designate:

 

(a)

in respect of notice given in accordance with sub-clause 4.3.1, by the date which falls three weeks prior to 30 September 2004; and

 

(b)

in respect of notice given in accordance with sub-clause 4.3.2, by the date which falls three weeks after the date on which such notice was given, (each date referred to in (a) and (b) above being a “ Substitute Date ”),

 

an Approved Credit Institution (the “ Substitute Bank ”) which is willing to assume all of the rights and obligations of the Declining Bank in respect of its participation in the relevant Letter of Credit (the “ Old Letter of Credit ”).

 

4.4.2

If the Account Party has designated a Substitute Bank, it shall promptly notify the Agent and the Declining Bank thereof and shall procure the release by Lloyd’s of the Old Letter of Credit from the Funds at Lloyd’s of the relevant Applicant.

 

4.4.3

The Declining Bank shall, with effect from the relevant Substitute Date, transfer its rights and obligations hereunder to the Substitute Bank in accordance with the provisions of Clause 27.5 ( Transfers by Banks ).

 

4.4.4

The Substitute Bank shall pay to the Declining Bank all amounts then due and owing (and all fees accrued to but excluding the date of such transfer) to the Declining Bank in respect of its participation in the Old Letter of Credit.

 

4.5	Replacement Letters of Credit

 

4.5.1

If a Substitute Bank has become party hereto pursuant to Clause 4.4 ( Substitute Bank) , then, subject to the provisions of Clause 4.6 ( Continuation Conditions Precedent ), the Banks who are deemed to have agreed to the continuation of the Old Letter of Credit in any year (the “ Extending Banks ”) shall, together with the Substitute Bank, issue, with effect from the relevant Substitute Date, and participate in, a new Letter of Credit (the “ New Letter of Credit ”) which shall:

 

(a)

replace the Old Letter of Credit, and

 

(b)

be in an amount equal to the Old Letter of Credit.

 

4.5.2

If a Substitute Bank has not been designated, then:

 

(a)

the Account Party shall procure the release by Lloyd’s of the Old Letter of Credit from the Funds at Lloyd’s of the relevant Applicant;

 

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(b)

subject to the provisions of Clause 4.6 ( Continuation Conditions Precedent ), the Extending Banks shall issue, with effect from the relevant Substitute Date, and participate in, a new Letter of Credit (the “ Reduced Letter of Credit ”) which shall:

 

(i)

replace their participation in the Old Letter of Credit; and

 

(ii)

be in an amount equal to the Old Letter of Credit less the amount of the Declining Bank’s participation therein; and

 

(c)

the Declining Bank shall issue, with effect from the relevant Substitute Date, and participate in, a separate Letter of Credit (a “ Bilateral Letter of Credit ”) which shall:

 

(i)

replace its participation in the Old Letter of Credit;

 

(ii)

be in an amount equal to the Declining Bank’s participation in the Old Letter of Credit; and

 

(iii)

have a Final Expiration Date which is the fourth anniversary of the date on which the relevant Termination Notice was given by the Agent to Lloyd’s after that Declining Bank first gave its notice of termination pursuant to Clause 4.3 ( Banks’ Rights to Terminate a Letter of Credit ).

 

4.6	Continuation Conditions Precedent

 

4.6.1

On or prior to the date of the delivery of each set of financial statements referred to in sub-clause 16.1.1 of Clause 16.1 ( Information ) the Account Party shall promptly notify the Agent if (as of the date of such delivery):

 

(a)

an Event of Default or Potential Event of Default occurs which is continuing;

 

(b)

any of the representations and warranties of the Obligors contained in this Agreement or in the Charge Agreement cease to be correct in all material respects, or become misleading in any material respect; or

 

(c)

any Letter of Credit ceases solely to be used to support the relevant Applicant’s underwriting business at Lloyd’s which has been provided in accordance with the requirements of Lloyd’s applicable to it.

 

4.6.2

Subject to due notification to Lloyd’s in accordance with the provisions of the relevant Letter of Credit, the Banks shall be entitled to terminate their participations in all or any Letters of Credit at any time if any of the events specified in sub-clause 4.6.1 above occurs. Such Bank shall promptly give notice thereof to the Agent and the Agent shall provide a copy thereof to the Account Party within two Business Days of such notification from that Bank.

 

4.7	Cancellation of Bilateral Letters of Credit

 

At any time after the issue of a Bilateral Letter of Credit by a Declining Bank the Account Party may give the Agent and the Declining Bank not less than fourteen days’

 

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prior written notice of its intention to procure that the liability of the Declining Bank under such Letter of Credit is reduced to zero (whereupon it shall do so).

 

4.8	Mandatory Collateralisation

 

If any of the events specified in sub-clause 4.6.1 of Clause 4.6 ( Continuation Conditions Precedent ) has occurred, the Agent may (and, if so instructed by the Majority Banks participating in such Letter of Credit, shall) require the Account Party to procure that the liabilities of each of the Banks under such Letter of Credit are reduced to zero and/or provide Cash Collateral for each Bank’s L/C Proportion under such Letter of Credit.

 

4.9	Revised Letters of Credit

 

In the event that the Funds at Lloyd’s Requirements of an Applicant change at or around the time of any given Funds Date in terms of amount and/or the identity of the Applicant, then, subject to the approval of Lloyd’s and subject to each Bank’s Outstandings under the Letters of Credit issued hereunder not being increased other than in accordance with Clause 6 ( Increase of the Facility ), the Banks shall co-operate with the Account Party to ensure to the extent reasonably possible that the Letters of Credit provide for the revised Funds at Lloyd’s Requirements of the Applicants.

 

5.	SUBSTITUTION OF LETTERS OF CREDIT

 

5.1	Request For Substitution

 

At any time prior to the end of the Substitution Period, the Account Party may request the cancellation of any existing Letter(s) of Credit and the substitution therefor of one or more new Letters of Credit in accordance with this Clause 5.

 

5.2	Substitution Request

 

If the Account Party wishes to substitute one or more new Letters of Credit under Clause 5.1 ( Request For Substitution ), the Account Party shall give the Agent notice, by way of a duly signed and completed Substitution Request, no later than the date falling 30 Business Days prior to the proposed Substitution Date.

 

5.3	Substitution of a Letter of Credit

 

5.3.1

Upon receipt of a Substitution Request, the Agent shall promptly notify each Bank of the contents thereof and of the amount of such Bank’s participation in the proposed substitute Letter(s) of Credit and, subject to the provisions of Clause 5.4 ( Substitution Conditions Precedent) and to the acceptance of the proposed substitution by Lloyd’s, there shall be substituted for the existing Letter(s) of Credit the subject of the relevant Substitution Request new Letter(s) of Credit in accordance with the terms of this Clause 5.

 

5.3.2

If a new Letter of Credit (the “ Substitute Letter of Credit ”) is to be substituted for one or more existing Letters of Credit (the “ Existing Letters of Credit ”) pursuant to sub-clause 5.3.1 above, the Banks shall issue, with effect from the Substitution Date, and participate in, a Substitute Letter of Credit which shall:

 

(a)

replace the Existing Letter(s) of Credit; and

 

(b)

be in an amount equal to or less than the aggregate of all the Existing Letters of Credit.

 

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5.4	Substitution Conditions Precedent

 

5.4.1

On or prior to close of business on the Substitution Date immediately following the delivery of any Substitution Request, the Account Party shall promptly notify the Agent if:

 

(a)

an Event of Default or Potential Event of Default occurs which is continuing;

 

(b)

any of the representations and warranties of the Obligors contained in this Agreement or in the Charge Agreement cease to be correct in all material respects, or become misleading in any material respect; or

 

(c)

any Letter of Credit which is the subject of such Substitution Request ceases solely to be used to support the relevant Applicant’s underwriting business at Lloyd’s which has been provided in accordance with the requirements of Lloyd’s applicable to it.

 

5.4.2

The Banks shall not be obliged to agree to any substitution requested if the Account Party fails to comply with its obligations under this Clause 5 ( Substitution of Letters of Credit ) or if any of the events specified in sub-clause 5.4.1 above occurs.

 

6.	INCREASE OF THE FACILITY

 

6.1	Request for Increase

 

In the event that the Funds at Lloyd’s Requirements of an Applicant increases at or around the time of any given Funds Date and, as a result of such increase, the aggregate amount of the Funds at Lloyd’s Requirements of the Applicants on such Funds Date would exceed the aggregate amount of the Banks’ Outstandings under the Letters of Credit, the Account Party shall be entitled to request an increase of the amount of the Letter of Credit of such Applicant by giving notice to the Agent no later than eight weeks prior to the Funds Date for such year (the “ Increase Request ”). The Increase Request shall be made in writing and shall be unconditional and irrevocable and shall specify:

 

6.1.1

which Letters of Credit and Applicants the Increase Request relates to;

 

6.1.2

the additional amount of commitments required by the Account Party from the Banks; and

 

6.1.3

any other information relevant to the Increase Request.

 

6.2	Notification of Increase Request

 

The Agent shall forward a copy of the Increase Request to the Banks as soon as practicable, and in any event no later than two Business Days after receipt thereof, together with notification of the amount of such Banks’ pro rata participation in any such increased Letter of Credit.

 

6.3	Response to Increase Request

 

If a Bank, in its sole discretion, agrees to the increase requested by the Account Party pursuant to the Increase Request, it shall give notice to the Agent (a “ Notice of

 

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Increase ”) accordingly not less than three weeks prior to the Increase Date. If a Bank does not give such Notice of Increase by such date, then such Bank shall be deemed to have refused such increase. Nothing shall oblige a Bank to agree to the Increase Request.

 

6.4	Notification of Response to Increase Request

 

The Agent shall notify the Account Party in writing of each Bank’s decision in relation to the Increase Request (specifying which Banks have given a Notice of Increase, which Banks have actually refused the Increase Request and which Banks are deemed to have refused the Increase Request) no less than two weeks prior to the Increase Date.

 

6.5

Increase

 

6.5.1

If one or more of the Banks does not give a Notice of Increase (hereinafter referred to as “ Refusing Banks ”), then the Refusing Banks shall not participate in any increase pursuant to the Increase Request but shall continue to participate in the Letters of Credit to the extent of their existing participation.

 

6.5.2

If one or more Banks agree to the Increase Request, such Banks’ participation in the relevant Letter(s) of Credit shall, subject to satisfaction of any conditions precedent which may be specified in connection therewith, be increased in accordance with the terms of the Increase Request.

 

6.5.3

The Account Party shall co-operate with the Agent, the Banks and Lloyd’s with respect to the replacement of any Letters of Credit required as a result of an Increase Request, and all parties hereto shall agree on any necessary replacement Letters of Credit in the context of any replacement Letters of Credit required in accordance with Clause 4.5 ( Replacement Letters of Credit ).

 

6.5.4

The Facility, save as amended pursuant to the Increase Request, shall continue to operate in accordance with its terms.

 

7.	NOTIFICATION

 

7.1	Letters of Credit

 

On or before each Utilisation Date, the Agent shall notify each Bank of the Letter of Credit that is to be issued by the Agent on behalf of the Banks, the name of the Applicant in respect of whom the Letter of Credit is being issued, the proposed length of the relevant Term and the aggregate principal amount of the relevant Letter of Credit allocated to such Bank pursuant to this Agreement.

 

7.2	Demands under Letters of Credit

 

If a demand is made by Lloyd’s under a Letter of Credit, the Agent shall promptly make demand upon the Account Party in accordance with this Agreement and notify the Banks accordingly.

 

8.	THE ACCOUNT PARTY’S LIABILITIES IN RELATION TO LETTERS OF CREDIT

 

8.1	The Account Party’s Indemnity to Banks

 

The Account Party shall irrevocably and unconditionally, as a primary obligation, indemnify (on demand by the Agent) each Bank against:

 

8.1.1

any sum paid or due and payable by such Bank in accordance with the terms of any Letter of Credit requested by the Account Party; and

 

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8.1.2

all liabilities, costs (including, without limitation, any costs incurred in funding any amount which falls due from such Bank in connection with such Letter of Credit), claims, losses and expenses which such Bank may at any time properly incur or sustain (and not as a result of such Bank’s gross negligence or wilful misconduct) in connection with any Letter of Credit.

 

8.2	Preservation of Rights

 

Neither the obligations of the Account Party set out in this Clause 8 nor the rights, powers and remedies conferred on any Bank by this Agreement or by law shall be discharged, impaired or otherwise affected by:

 

8.2.1

the winding-up, dissolution, administration or re-organisation of any Bank or any other person or any change in its status, function, control or ownership;

 

8.2.2

any of the obligations of any Bank or any other person hereunder or under any Letter of Credit or under any other security taken in respect of the Account Party’s obligations hereunder or otherwise in connection with any Letter of Credit being or becoming illegal, invalid, unenforceable or ineffective in any respect;

 

8.2.3

time or other indulgence being granted or agreed to be granted to any Bank or any other person in respect of its obligations hereunder or under or in connection with any Letter of Credit or under any such other security;

 

8.2.4

any amendment to, or any variation, waiver or release of, any obligation of any Bank or any other person under any Letter of Credit or this Agreement; or

 

8.2.5

any other act, event or omission which, but for this Clause 8, might operate to discharge, impair or otherwise affect any of the obligations of the Account Party set out in this Clause 8 or any of the rights, powers or remedies conferred upon any Bank by this Agreement or by law.

 

The obligations of the Account Party set out in this Clause 8 shall be in addition to and independent of every other security which any Bank may at any time hold in respect of the Account Party’s obligations hereunder.

 

8.3	Settlement Conditional

 

Any settlement or discharge between the Account Party and a Bank shall be conditional upon no security or payment to such Bank by the Account Party or any other person on behalf of the Account Party, being avoided or reduced by virtue of any laws relating to bankruptcy, insolvency, liquidation or similar laws of general application and, if any such security or payment is so avoided or reduced, such Bank shall be entitled to recover the value or amount of such security or payment from the Account Party subsequently as if such settlement or discharge had not occurred.

 

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8.4	Right to make Payments under Letters of Credit

 

Each Bank shall be entitled to make any payment in accordance with the terms of the relevant Letter of Credit without any reference to or further authority from the Account Party or any other investigation or enquiry. The Account Party irrevocably authorises each Bank to comply with any demand under a Letter of Credit which is valid on its face.

 

8.5	Revaluation of Outstandings

 

On each L/C Valuation Date, the Agent shall calculate the amount of the Outstandings (having regard to changes in the Sterling Amounts of the Letters of Credit which may arise as a result of currency fluctuations), and the Agent shall notify the Account Party of the amount, if any (the “ Excess Amount ”), by which the Outstandings exceed 105 per cent. of the aggregate Commitments of the Banks on such date, and the Account Party shall secure such Excess Amount by providing Cash Collateral in an amount not less than the Excess Amount, provided that if the Account Party provides Cash Collateral as aforesaid and, on any succeeding L/C Valuation Date, the Excess Amount as determined on such date (the “ New Excess Amount ”) is:

 

8.5.1

less than the amount of the Cash Collateral provided at such time, the Agent shall deliver to the Account Party an amount equal to the difference between the amount of such Cash Collateral and the New Excess Amount; or

 

8.5.2

greater than the amount of Cash Collateral provided at such time, the Account Party shall deliver to the Agent an amount equal to the amount by which the New Excess Amount exceeds the amount of such Cash Collateral.

 

9.	CANCELLATION AND COLLATERALISATION

 

9.1	Cancellation/Cash Collateralisation of Letters of Credit

 

The Account Party may give the Agent not less than fourteen days’ prior notice of its intention to procure that the liability of each Bank under a Letter of Credit requested by it is reduced to zero (whereupon it shall do so) or provide Cash Collateral for each Bank’s L/C Proportion under such Letter of Credit (whereupon it shall do so).

 

9.2	Notice of Cancellation or Collateralisation

 

Any notice of cancellation or collateralisation given by the Account Party pursuant to this Clause 9 shall be irrevocable, shall specify the date upon which such cancellation or collateralisation is to be made and the amount of such cancellation or collateralisation and shall oblige the Account Party to procure such cancellation or collateralisation on such date.

 

9.3	Notice of Removal of a Bank

 

If:

 

9.3.1

any sum payable to any Bank by the Account Party is required to be increased pursuant to Clause 10.1 ( Tax Gross-up ); or

 

9.3.2

any Bank claims indemnification from the Account Party under Clause 10.2 ( Tax Indemnity ) or Clause 12.1 ( Increased Costs ),

 

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the Account Party may, whilst such circumstance continues, give the Agent at least ten Business Days’ notice (which notice shall be irrevocable) of its intention to cancel, and/or provide Cash Collateral in respect of the Commitment of such Bank.

 

9.4	Removal of a Bank

 

On the day the notice referred to in Clause 9.3 ( Notice of Removal of a Bank) expires, the Account Party shall procure either that such Bank’s L/C Proportion of each relevant Letter of Credit be reduced to zero (by reduction of the amount of such Letter of Credit in an amount equal to such Bank’s L/C Proportion) or that Cash Collateral be provided in an amount equal to such Bank’s L/C Proportion of such Letter of Credit.

 

9.5	No Further Availability

 

A Bank for whose account a repayment is to be made under Clause 9.3 ( Notice of Removal of a Bank) shall not be obliged to participate in the making of any Letter of Credit on or after the date upon which the Agent receives the Account Party’s notice of its intention to procure the repayment of such Bank’s share of the Outstandings, and such Bank’s Available Commitment shall be reduced to zero.

 

9.6	No Other Repayments or Cancellation

 

The Account Party shall not repay or cancel all or any part of the Outstandings except at the times and in the manner expressly provided for in this Agreement.

 

10.

TAXES

 

10.1	Tax Gross-up

 

All payments to be made by an Obligor to any Finance Party hereunder shall be made free and clear of and without deduction for or on account of tax unless such Obligor is required to make such a payment subject to the deduction or withholding of tax, in which case the sum payable by such Obligor (in respect of which such deduction or withholding is required to be made) shall be increased to the extent necessary to ensure that such Finance Party receives a sum net of any deduction or withholding equal to the sum which it would have received had no such deduction or withholding been made or required to be made.

 

10.2	Tax Indemnity

 

Without prejudice to Clause 10.1 ( Tax Gross-up ), if any Finance Party is required to make any payment of or on account of tax on or in relation to any sum received or receivable hereunder (including any sum deemed for purposes of tax to be received or receivable by such Finance Party whether or not actually received or receivable) or if any liability in respect of any such payment is asserted, imposed, levied or assessed against any Finance Party, the Account Party shall, upon demand of the Agent, promptly indemnify the Finance Party which suffers a loss or liability as a result against such payment or liability, together with any interest, penalties, costs and expenses payable or incurred in connection therewith, provided that this Clause 10.2 shall not apply to:

 

10.2.1

any tax imposed on and calculated by reference to the net income actually received or receivable by such Finance Party by the jurisdiction in which such Finance Party is incorporated; or

 

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10.2.2

any tax imposed on and calculated by reference to the net income of the Facility Office of such Finance Party actually received or receivable by such Finance Party by the jurisdiction in which its Facility Office is located.

 

10.3	Claims by Banks

 

A Bank intending to make a claim pursuant to Clause 10.2 ( Tax Indemnity ) shall notify the Agent of the event giving rise to the claim, whereupon the Agent shall notify the Account Party thereof.

 

11.	TAX RECEIPTS

 

11.1	Notification of Requirement to Deduct Tax

 

If, at any time, an Obligor is required by law to make any deduction or withholding from any sum payable by it hereunder (or if thereafter there is any change in the rates at which or the manner in which such deductions or withholdings are calculated), such Obligor shall promptly, upon becoming aware of the same, notify the Agent.

 

11.2	Evidence of Payment of Tax

 

If an Obligor makes any payment hereunder in respect of which it is required to make any deduction or withholding, it shall pay the full amount required to be deducted or withheld to the relevant taxation or other authority within the time allowed for such payment under applicable law and shall deliver to the Agent for each Bank, within thirty days after it has made such payment to the applicable authority, an original receipt (or a certified copy thereof) issued by such authority evidencing the payment to such authority of all amounts so required to be deducted or withheld in respect of that Bank’s share of such payment.

 

11.3	Tax Credit Payment

 

If an additional payment is made under Clause 10 ( Taxes ) by an Obligor for the benefit of any Finance Party and such Finance Party, in its sole discretion, determines that it has obtained (and has derived full use and benefit from) a credit against, a relief or remission for, or repayment of, any tax, then, if and to the extent that such Finance Party, in its sole opinion, determines that:

 

11.3.1

such credit, relief, remission or repayment is in respect of or calculated with reference to the additional payment made pursuant to Clause 10 ( Taxes) ; and

 

11.3.2

its tax affairs for its tax year in respect of which such credit, relief, remission or repayment was obtained have been finally settled,

 

such Finance Party shall, to the extent that it can do so without prejudice to the retention of the amount of such credit, relief, remission or repayment, pay to such Obligor such amount as such Finance Party shall, in its sole opinion, determine to be the amount which will leave such Finance Party (after such payment) in no worse after-tax position than it would have been in had the additional payment in question not been required to be made by such Obligor.

 

11.4	Tax Credit Clawback

 

If any Finance Party makes any payment to an Obligor pursuant to Clause 11.3 ( Tax Credit Payment ) and such Finance Party subsequently determines, in its sole opinion,

 

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that the credit, relief, remission or repayment in respect of which such payment was made was not available or has been withdrawn or that it was unable to use such credit, relief, remission or repayment in full, the Obligor shall reimburse such Finance Party such amount as such Finance Party determines, in its sole opinion, is necessary to place it in the same after-tax position as it would have been in if such credit, relief, remission or repayment had been obtained and fully used and retained by such Finance Party.

 

11.5	Tax and Other Affairs

 

No provision of this Agreement shall interfere with the right of any Finance Party to arrange its tax or any other affairs in whatever manner it thinks fit, oblige any Finance Party to claim any credit, relief, remission or repayment in respect of any payment under Clause 10.1 ( Tax Gross-up ) in priority to any other credit, relief, remission or repayment available to it nor oblige any Finance Party to disclose any information relating to its tax or other affairs or any computations in respect thereof.

 

12.	INCREASED COSTS

 

12.1	Increased Costs

 

If, by reason of (a) any change in law or in its interpretation or administration and/or (b) compliance with any request or requirement relating to the maintenance of capital or any other request from or requirement of any central bank or other fiscal, monetary or other authority (being a request or requirement with which banks are accustomed to comply) and/or (c) the introduction of, changeover to or operation of the euro in any participating member state:

 

12.1.1

a Bank or any holding company of such Bank is unable to obtain the rate of return on its capital which it would have been able to obtain but for such Bank’s entering into or assuming or maintaining a commitment, issuing or performing its obligations under this Agreement or any Letter of Credit;

 

12.1.2

a Bank or any holding company of such Bank incurs a cost as a result of such Bank’s entering into or assuming or maintaining a commitment, issuing or performing its obligations under this Agreement or any Letter of Credit; or

 

12.1.3

there is any increase in the cost to a Bank or any holding company of such Bank of funding or maintaining such Bank’s share of any Unpaid Sum or any Letter of Credit,

 

then the Account Party shall, from time to time on demand of the Agent, promptly pay to the Agent for the account of that Bank amounts sufficient to indemnify that Bank or to enable that Bank to indemnify its holding company from and against, as the case may be, (a) such reduction in the rate of return of capital, (b) such cost or (c) such increased cost.

 

12.2	Increased Costs Claims

 

A Bank intending to make a claim pursuant to Clause 12.1 ( Increased Costs ) shall notify the Agent as soon as reasonably practicable of the event giving rise to such claim and the amount of such claim and the basis for calculation of such amount in reasonable detail whereupon the Agent shall notify the Account Party thereof.

 

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12.3	Exclusions

 

Notwithstanding the foregoing provisions of this Clause 12, no Bank shall be entitled to make any claim under this Clause 12 in respect of:

 

12.3.1

any cost, increased cost or liability as referred to in Clause 12.1 ( Increased Costs ) to the extent the same is compensated by the Mandatory Liquid Asset Costs Rate; or

 

12.3.2

any cost, increased cost or liability compensated by (or the recovery of which is precluded under) Clause 10 ( Taxes ).

 

13.	ILLEGALITY

 

If, at any time, it is or will become unlawful or prohibited pursuant to any request from or requirement of any central bank or other fiscal, monetary or other authority (being a request or requirement with which banks are accustomed to comply) for a Bank to fund, issue, participate in or allow to remain outstanding all or part of its share of the Letters of Credit, then that Bank shall, promptly after becoming aware of the same, deliver to the Account Party through the Agent a notice to that effect and:

 

13.1.1

such Bank shall not thereafter be obliged to participate in any Letter of Credit or issue any Letter of Credit (whichever shall be so affected) and the amount of its Available Commitment shall be immediately reduced to zero; and

 

13.1.2

if the Agent on behalf of such Bank so requires, the Account Party shall on such date as the Agent shall have specified ensure that the liabilities of such Bank under or in respect of each affected Letter of Credit are reduced to zero or otherwise secured by providing Cash Collateral in an amount equal to such Bank’s L/C Proportion of such Letters of Credit or such Bank’s maximum actual or contingent liabilities under such Letter of Credit.

 

14.	MITIGATION

 

If, in respect of any Bank, circumstances arise which would or would upon the giving of notice result in:

 

14.1.1

an increase in any sum payable to it or for its account pursuant to Clause 10.1 ( Tax Gross-up );

 

14.1.2

a claim for indemnification pursuant to Clause 10.2 ( Tax Indemnity ) or Clause 12.1 ( Increased Costs ); or

 

14.1.3

the reduction of its Available Commitment to zero or any repayment to be made pursuant to Clause 13 ( Illegality ),

 

then, without in any way limiting, reducing or otherwise qualifying the rights of such Bank or the obligations of the Obligors under any of the Clauses referred to in sub-clauses 14.1.1, 14.1.2 and 14.1.3 such Bank shall promptly upon becoming aware of such circumstances notify the Agent thereof and, in consultation with the Agent and the Account Party and to the extent that it can do so lawfully and without prejudice to its own position, take reasonable steps (including a change of location of its Facility Office

 

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or the transfer of its rights, benefits and obligations hereunder to another financial institution which is an Approved Credit Institution and which is acceptable to the Account Party and willing to participate in the Facility) to mitigate the effects of such circumstances, provided that such Bank shall be under no obligation to take any such action if, in the opinion of such Bank, to do so might have any adverse effect upon its business, operations or financial condition (other than any minor costs and expenses of an administrative nature).

 

15.	REPRESENTATIONS

 

The Obligors jointly and severally represent and warrant on the Commencement Date that:

 

15.1	Corporate Existence and Power

 

The Account Party is a company limited by shares, and each Guarantor is a limited liability company, and in each case, is duly incorporated and validly existing under the laws of its jurisdiction of incorporation and the Account Party is in good standing under the laws of the Cayman Islands. Each of the Obligors has all corporate powers and all material governmental licenses, authorisations, consents and approvals required to carry on its respective business as now conducted. Each Guarantor is a Wholly-Owned Consolidated Subsidiary of the Account Party.

 

15.2	Corporate and Governmental Authorisation; No Contravention

 

The execution, delivery and performance by each Obligor of this Agreement and the other Finance Documents to which it is a party are within its corporate powers, have been duly authorised by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the memorandum of association, articles of association or bye-laws (or any comparable document) of any Obligor or of any agreement, judgment, injunction, order, decree or other instrument binding upon any Obligor or any of their respective Subsidiaries or result in the creation or imposition of any Lien (excluding the provision of Security pursuant to this Agreement) on any asset of any Obligor or any of their respective Subsidiaries.

 

15.3	Binding Effect

 

Each of this Agreement and the other Finance Documents to which any Obligor is a party constitutes a valid and binding agreement of each Obligor enforceable in accordance with its terms, subject to bankruptcy, insolvency or other laws of general application affecting the enforcement of creditors rights, the application of equitable principles and the non-availability of the equitable remedies of specific performance or injunctive relief.

 

15.4	Financial Information

 

15.4.1

The consolidated balance sheet of the Account Party and its Consolidated Subsidiaries as of 31 December 2002, and the related consolidated statements of operations and of cash flows for the fiscal year then ended, reported on by PricewaterhouseCoopers LLP, copies of which have been delivered to each of the Banks prior to the Commencement Date, fairly present, in all material

 

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respects, in conformity with GAAP, the consolidated financial position of the Account Party and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year.

 

15.4.2

The unaudited consolidated balance sheet of the Account Party and its Consolidated Subsidiaries as of 30 June 2003, and the related unaudited consolidated statements of operations and of cash flows for the six months then ended, copies of which have been delivered to each of the Banks prior to the Commencement Date, fairly present, in all material respects, in conformity with GAAP (except for the absence of footnotes) applied on a basis consistent with the financial statements referred to in sub-clause 15.4.1, the consolidated financial position of the Account Party and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such six month period (subject to normal year-end adjustments).

 

15.4.3

Since 30 June 2003, there has been no material adverse change in the business, financial position or results of operations of the Account Party and its Consolidated Subsidiaries, considered as a whole.

 

15.4.4

The consolidated balance sheet of each Guarantor and its Consolidated Subsidiaries as of 31 December 2002, and the related consolidated statements of operations and retained earnings and of cash flows for the fiscal year then ended, all reported on by PricewaterhouseCoopers LLP, copies of which have been delivered to each of the Banks prior to the Commencement Date, fairly present, in all material respects in conformity with GAAP, the consolidated financial position of each Guarantor and its Consolidated Subsidiaries as of such date and their consolidated results of operations and retained earnings and cash flows for such fiscal year.

 

15.4.5

Since 31 December 2002, there has been no material adverse change in the business, financial position or results of operations of each Guarantor and its Consolidated Subsidiaries, considered as a whole.

 

15.5	Litigation

 

Except as disclosed in the notes to the financial statements referred to in sub-clause 15.4.1 of Clause 15.4 ( Financial Information ), and except for insurance claims made in the context of the ordinary course of business of the Group, there is no action, suit or proceeding pending against, or to the knowledge of the Account Party threatened against or affecting, the Account Party or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable likelihood of an adverse decision which could materially adversely affect the business, consolidated financial position or consolidated results of operations of the Account Party and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity or enforceability of this Agreement or any other Finance Document.

 

15.6

Taxes

 

The Account Party and its Subsidiaries have filed all material income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Account

 

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Party or any Subsidiary. The charges, accruals and reserves on the books of the Account Party and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Account Party, adequate.

 

15.7	Written Information

 

All written information supplied by any member of the Group under the Finance Documents which is factual, is true, complete and accurate in all material respects as at the date it was given and is not misleading in any material respect and all financial projections so supplied have been prepared on the basis of recent historical information and on the basis of reasonable assumptions.

 

15.8	Compliance with Laws

 

The Account Party and each Subsidiary are in compliance, in all material respects, with all applicable laws, ordinances, rules, regulations, guidelines and other requirements of governmental authorities except where the necessity of compliance therewith is contested in good faith by appropriate proceedings and any reserves required under generally accepted accounting principles with respect thereto have been established and except where any such failure could not reasonably be expected to materially adversely affect the business, consolidated financial position or consolidated results of operations of the Account Party and its Consolidated Subsidiaries, considered as a whole.

 

15.9

Lien

 

15.9.1

Each Obligor has good and marketable title in and to its portion of the Security free and clear of all Liens (except the Lien created under the Finance Documents and subject to the interest of the Custodian under the Finance Documents and to “Permitted Liens” as defined in the Charge Agreement).

 

15.9.2

The Charge Agreement creates in favour of the Security Trustee, for the benefit of the Banks, a valid and enforceable first priority Lien on all of the Security, subject to the interest of the Custodian under the Finance Documents.

 

15.9.3

Neither Obligor has outstanding, nor is any Obligor contractually bound to create, any Lien on or with respect to any of the Security, subject to the interest of the Custodian under the Finance Documents and to “Permitted Liens” as defined in the Charge Agreement.

 

15.9.4

Neither Obligor is subject to any agreement, judgment, injunction, order, decree or other instrument or any law or regulation which would prevent or otherwise interfere with such Obligor’s obligations to deliver Security in the amounts, at the times and as otherwise provided in the Charge Agreement, subject to the interest of the Custodian under the Finance Documents.

 

The representations contained in this Clause 15.9 shall only be made on the date hereof and shall only be repeated on each day commencing on the date on which the Pricing Level is Level V.

 

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15.10

Validity and Admissibility in Evidence

 

All acts, conditions and things required to be done, fulfilled and performed in order:

 

15.10.1

to enable each Obligor lawfully to enter into, exercise its rights under and perform and comply with the obligations expressed to be assumed by it in the Finance Documents to which it is a party,

 

15.10.2

to ensure that the obligations expressed to be assumed by it in the Finance Documents to which it is a party are legal, valid, binding and enforceable; and

 

15.10.3

to make the Finance Documents to which it is a party admissible in evidence in its jurisdiction of incorporation,

 

have been done, fulfilled and performed (subject to any exception contained in the legal opinions provided as conditions precedent).

 

15.11

Claims Pari Passu

 

Under the laws of its jurisdiction of incorporation in force at the date of this Agreement, the claims of the Finance Parties against each Obligor under this Agreement will rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors save those claims which are preferred solely by any bankruptcy, insolvency, liquidation or other similar laws of general application or are mandatorily preferred by law applying to insurance companies generally.

 

15.12

No Filing or Stamp Taxes

 

Under the laws of the jurisdiction of incorporation of each Obligor in force at the date of this Agreement, it is not necessary that the Finance Documents to which it is party be filed, recorded or enrolled with any court or other authority in such jurisdiction or that any stamp, registration or similar tax be paid on or in relation to the Finance Documents to which it is party.

 

15.13

No Winding-up

 

No Obligor or Material Subsidiary has taken any corporate action nor have any other steps been taken or legal proceedings been started or (to the best of its knowledge and belief) threatened against any Obligor or Material Subsidiary for its winding-up, dissolution, administration or re-organisation (whether by voluntary arrangement, scheme of arrangement or otherwise) or for the appointment of a receiver, administrator, administrative receiver, conservator, custodian, trustee or similar officer of it or of any or all of its assets or revenues.

 

15.14

No Default

 

No Default has occurred and is continuing.

 

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16.

COVENANTS

 

The Account Party agrees that, so long as any Original Letter of Credit or any Letter of Credit is in effect or any Outstandings remain unpaid:

 

16.1	Information

 

The Account Party will deliver to the Agent in sufficient copies for the Banks:

 

16.1.1

as soon as available and in any event within 90 days after the end of each fiscal year of the Account Party, a consolidated balance sheet of the Account Party and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of operations and of cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission of the United States of America or otherwise reasonably acceptable to the Majority Banks by PricewaterhouseCoopers LLP or other independent public accountants of internationally recognised standing;

 

16.1.2

as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Account Party, a consolidated balance sheet of the Account Party and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of operations and of cash flows for such quarter and for the portion of the Account Party’s fiscal year ended at the end of such quarter, setting forth in the case of such statements of operations and cash flows in comparative form the figures for the corresponding quarter and the corresponding portion of the Account Party’s previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer or the chief accounting officer of the Account Party;

 

16.1.3

simultaneously with the delivery of each set of financial statements referred to in sub-clauses 16.1.1 and 16.1.2, a certificate of the chief financial officer or the chief accounting officer of the Account Party (a) setting forth in reasonable detail the calculations required to establish whether the Account Party was in compliance with the requirements of Clauses 16.7 ( Adjusted Consolidated Debt to Total Capitalisation Ratio ) to 16.9 ( Liens ), inclusive, on the date of such financial statements and (b) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Account Party is taking or proposes to take with respect thereto;

 

16.1.4

within five days after any executive officer of the Account Party obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer or the chief accounting officer of the Account Party setting forth the details thereof and the action which the Account Party is taking or proposes to take with respect thereto;

 

16.1.5

promptly upon the mailing thereof to the shareholders of the Account Party generally, copies of all financial statements, reports and proxy statements so mailed;

 

16.1.6

promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Account Party shall have filed with the Securities and Exchange Commission of the United States of America;

 

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16.1.7

as soon as available and in any event within 20 days after submission, each statutory statement of each Guarantor in the form submitted to The Insurance Division of the Bermuda Monetary Authority;

 

16.1.8

as soon as available and in any event within 120 days after the end of each fiscal year of each Guarantor, a consolidated balance sheet of such Guarantor and its Consolidated Subsidiaries as of the end of such fiscal year and the related statements of income and changes in financial position for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by the independent public accountants which reported on the financial statements referred to in sub-clause 16.1.1;

 

16.1.9

promptly after any executive officer of the Account Party obtains knowledge thereof:

 

(a)

a copy of any notice from the Supervisor of Insurance or the Registrar of Companies or any other Person of the revocation, the suspension or the placing of any restriction or condition on the registration as an insurer of each Guarantor under the Bermuda Insurance Law or of the institution of any proceeding or investigation which could result in any such revocation, suspension or placing of such a restriction or condition;

 

(b)

copies of any correspondence by, to or concerning a Guarantor relating to an investigation conducted by the Minister of Finance, whether pursuant to Section 132 of the Bermuda Companies Law or otherwise; and

 

(c)

a copy of any notice of or requesting or otherwise relating to the winding up or any similar proceeding of or with respect to a Guarantor; and

 

16.1.10

from time to time such additional information regarding the financial position, results of operations or business of the Account Party or any of its Subsidiaries as the Agent, at the request of any Bank, may reasonably request from time to time except where the furnishing of such information is restricted or prohibited by applicable law or regulation.

 

16.2	Payment of Obligations

 

The Account Party will pay and discharge, and will cause each Subsidiary to pay and discharge, at or before maturity, all their respective material obligations and liabilities, including, without limitation, tax liabilities, except where the same may be contested in good faith by appropriate proceedings, and will maintain, and will cause each Subsidiary to maintain, in accordance with generally accepted accounting principles, appropriate reserves for the accrual of any of the same.

 

16.3	Maintenance of Property; Insurance.

 

16.3.1

The Account Party will keep, and will cause each Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted.

 

16.3.2

The Account Party will maintain, and will cause each Subsidiary to maintain, insurance with responsible and reputable insurance companies or associations in

 

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such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Account Party or such Subsidiary operates (it being understood that the foregoing shall not apply to maintenance of reinsurance or similar matters which shall be solely within the reasonable business judgement of the Account Party and its Subsidiaries). The Account Party will deliver to the Banks upon request of any Bank through the Agent from time to time, full information as to the insurance carried.

 

16.4	Conduct of Business and Maintenance of Existence

 

The Account Party will continue, and will cause each Subsidiary to continue, to engage in business of the same general type as now conducted by the Account Party and its Subsidiaries, and will preserve, renew and keep in full force and effect, and will cause each Subsidiary to preserve, renew and keep in full force and effect, their respective existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in this Clause 16.4 shall prohibit:

 

16.4.1

the merger or amalgamation of a Subsidiary (other than a Guarantor) into the Account Party or the merger or consolidation of a Subsidiary (other than a Guarantor) with or into another Person if the corporation surviving such consolidation or merger is a Subsidiary and if, in each case, after giving effect thereto, no Default shall have occurred and be continuing;

 

16.4.2

any merger or amalgamation of any Obligor permitted by Clause 16.10 ( Consolidations, Mergers and Sale of Assets ); or

 

16.4.3

the termination of:

 

(a)

the corporate existence; or

 

(b)

any rights, privileges and franchises of any Subsidiary (other than a Guarantor),

 

if, in each case, the Account Party in good faith determines that such termination is in the best interest of the Account Party and is not materially disadvantageous to the Banks.

 

16.5	Compliance with Laws

 

The Account Party will comply, and cause each Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, guidelines and other requirements of governmental authorities except where the necessity of compliance therewith is contested in good faith by appropriate proceedings and any reserves required under generally accepted accounting principles with respect thereto have been established and except where any such failure to comply could not reasonably be expected to materially adversely affect the business, consolidated financial position or consolidated results of operations of the Account Party and its Consolidated Subsidiaries, considered as a whole.

 

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16.6	Inspection of Property, Books and Records

 

The Account Party will keep, and will cause each Subsidiary to keep, proper books of records and account in accordance with generally accepted accounting principles in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each Subsidiary to permit, representatives of any Bank at such Bank’s expense to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable times on reasonable notice and as often as may reasonably be desired.

 

16.7	Adjusted Consolidated Debt to Total Capitalisation Ratio

 

The Account Party shall maintain at all times a ratio of Adjusted Consolidated Debt to Total Capitalisation of not more than 0.35 to 1.

 

16.8	Consolidated Net Worth

 

The Account Party shall maintain at all times Consolidated Net Worth in an amount at least equal to the sum of:

 

16.8.1

US$4,400,000,000;

 

plus

 

16.8.2

25 per cent. of Consolidated Net Income for each fiscal quarter of the Account Party ending on and after 31 March 2003 for which such Consolidated Net Income is positive;

 

plus

 

16.8.3

50 per cent. of Net Proceeds of any issuance of Equity Interests (other than the Net Proceeds from any issuance of Equity Interests in substitution and replacement of other Equity Interests to the extent such Net Proceeds do not exceed the amount of a substantially contemporaneous redemption of Equity Interests permitted hereunder) subsequent to 31 March 2003.

 

16.9

Liens

 

Neither the Account Party nor any Subsidiary will create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties of any character (including, without limitation, accounts) whether now owned or hereafter acquired, or assign, or permit any of its Subsidiaries to assign, any accounts or other right to receive income, except:

 

16.9.1

Liens created under the US Loan Documents;

 

16.9.2

Permitted Liens;

 

16.9.3

Liens described in Schedule 9 ( Existing Liens );

 

16.9.4

purchase money Liens upon or in real property or equipment acquired or held by the Account Party or any of its Subsidiaries in the ordinary course of business to secure the purchase price of such property or equipment or to secure

 

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Debt incurred solely for the purpose of financing the acquisition, construction or improvement of any such property or equipment to be subject to such Liens, or Liens existing on any such property or equipment at the time of acquisition or within 180 days following such acquisition (other than any such Liens created in contemplation of such acquisition that do not secure the purchase price), or extensions, renewals or replacements or any of the foregoing for the same or a lesser amount, provided, however, that no such Lien shall extend to or cover any property other than the property or equipment being acquired, constructed or improved, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Lien being extended, renewed or replaced;

 

16.9.5

Liens arising in connection with Capitalised Leases, provided that no such Lien shall extend to or cover any assets other than the assets subject to such Capitalised Leases;

 

16.9.6

(a) any Lien existing on any asset of any Person at the time such Person becomes a Subsidiary and not created in contemplation of such event, (b) any Lien on any asset of any Person existing at the time such Person is merged or consolidated with or into the Account Party or any of its Subsidiaries in accordance with Clause 16.10 ( Consolidations, Mergers and Sales of Assets ) and not created in contemplation of such event and (c) any Lien existing on any asset prior to the acquisition thereof by the Account Party or any of its Subsidiaries and not created in contemplation of such acquisition;

 

16.9.7

Liens securing obligations under credit default swap transactions determined by reference to, or Contingent Obligations in respect of, Debt issued by the Account Party or one of its Subsidiaries; such Debt not to exceed an aggregate principal amount of US$550,000,000;

 

16.9.8

Liens arising in the ordinary course of its business which:

 

(a)

do not secure Debt; and

 

(b)

do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business;

 

16.9.9

Liens on cash and Approved Investments securing Hedge