Exhibit 10.1
October 12, 2005
Greenlight Reinsurance,
Ltd.
Strathvale House
90 North Church Street
P.O. Box 1109 GT
Georgetown, Grand Cayman, Cayman
Islands
Re: US$200,000,000 Letter of
Credit Facility
Gentlemen
:
We are pleased to confirm that we
have established for the account of Greenlight Reinsurance, Ltd.
(“Greenlight”) a letter of credit facility (the
“Facility”) in a maximum amount of US$200,000,000,
available for use by Greenlight until October 11, 2006, as such
date may be extended in accordance with the following sentence (the
“Facility Termination Date”). The Facility Termination
Date shall be extended by 364 days beyond the then effective
Facility Termination Date unless we or Greenlight delivers a
written notice of cancellation to the other party at least 120 days
before the then effective Facility Termination Date. Availments
under the Facility shall be in the form of letters of credit
(“Letters of Credit”).
The issuance of each Letter of
Credit will be governed by our standard form of Application and
Agreement for Standby Letter of Credit, a form of which is annexed
hereto as Exhibit A (each as amended, supplemented or otherwise
modified, a “Letter of Credit Agreement”). Greenlight
will be required to pay us (i) with respect to any issuance or
amendment of each Letter of Credit during any calendar month, $250
per each such issuance or amendment payable on the 10 th
day of the next following calendar month and (ii) a commission
equal to 1.15% per annum of the outstanding amount of each Letter
of Credit, payable quarterly in advance. Each Letter of Credit
shall be issued solely to support Greenlight’s reinsurance or
insurance obligations incurred in its ordinary course of business
and shall be for the duration set forth in the applicable Letter of
Credit Agreement, but in no event shall the expiration date of any
Letter of Credit be more than three years after the date on which
it was issued, subject to extensions (not to exceed three years so
long as the remaining tenor of such Letter of Credit does not
exceed three years at any time) at any time prior to the Facility
Termination Date, provided that no Event of Default (as defined in
the Hypothecation Agreement referred to below) has occurred and is
continuing. Letters of Credit may be cancelled at any time, without
penalty, upon request by Greenlight and with the applicable
beneficiary’s prior written consent. Upon any such
termination of a Letter of Credit, we shall refund to Greenlight
the unearned portion of the commission received by us with respect
thereto. We agree that, within two Business Days (as defined in a
Letter of Credit Agreement) of our receipt of a Letter of Credit
Agreement, duly completed with respect to the Credit (as defined in
such Letter of Credit Agreement) and executed by Greenlight, we
will issue the Credit so long as no Event of Default has occurred
and is continuing. Letters of Credit may be denominated in U.S.
Dollars, Canadian Dollars, Cayman Dollars, Bermuda Dollars, Pounds
Sterling, Swiss Francs, Euros, Japanese Yen or such other currency
requested by Greenlight as is reasonably acceptable to
us.
Availability under the Facility will
be subject to the advance rates and value ascribed to the
securities and other financial assets pledged by Greenlight as
security under the Hypothecation Agreement referred to below. At
all times after the Facility Termination Date, we shall have the
option to require Greenlight to pledge, under the Hypothecation
Agreement, cash
Greenlight Reinsurance,
Ltd.
October 12, 2005
Page 2
collateral in an amount not less
than 100% of the outstanding amount of each Letter of Credit having
an expiration date longer than one year following the first
anniversary of the date of issuance of such Letter of
Credit.
As a condition to the effectiveness
of the Facility, Greenlight shall furnish us with each of the
following, each dated as of the date hereof or as of another date
satisfactory to us:
(a) a hypothecation agreement (the
“Hypothecation Agreement”), a form of which is annexed
hereto as Exhibit B, duly executed by Greenlight, pledging to us
Greenlight’s Collateral Account number 522-96812 (the
“Account”) maintained by Citigroup Global Markets Inc.
(“CGMI”) as security for, among other things,
Greenlight’s reimbursement obligations under the Letter of
Credit Agreements;
(b) a control agreement (the
“Control Agreement”), a form of which is annexed hereto
as Exhibit C, duly executed by Greenlight and CGMI;
(c) an agreement with Corporation
Service Company providing for it to serve as agent for the service
of process under the Letter of Credit Agreements, the Hypothecation
Agreement and the Control Agreement;
(d) a certificate of the Secretary
or an Assistant Secretary of Greenlight certifying:
(i)
that attached thereto are true and
complete copies of:
(A)
the Amended and Restated Articles of
Association of Greenlight;
(B)
the Amended and Restated Memorandum
of Association of Greenlight; and
(C)
resolutions of the board of
directors of Greenlight approving the Facility and authorizing the
execution, delivery and performance by Greenlight of this letter
agreement, the Letter of Credit Agreements, the Hypothecation
Agreement and the Control Agreement and the transactions
contemplated hereby and thereby; and
(ii)
the incumbency of the officers of
Greenlight authorized to execute and deliver this letter agreement,
the Letter of Credit Agreements, the Hypothecation Agreement, the
Control Agreement and the documents delivered in connection
herewith and therewith;
(e) a Certificate of Good Standing
for each of Greenlight and Greenlight Capital Re, Ltd. issued by
the Registrar of
Companies; and
(f) opinions of New York and Cayman
Islands counsel to Greenlight, in form and substance reasonably
satisfactory to us.
Greenlight Reinsurance,
Ltd.
October 12, 2005
Page 3
You shall also pay or reimburse us
for the costs and reasonable out-of-pocket expenses (including,
without limitation, attorneys’ fees and expenses) of the
preparation, negotiation, execution and delivery of this letter
agreement, the Letter of Credit Agreements, the Hypothecation
Agreement, the Control Agreement and the agreements and other
documents executed and delivered in connection herewith and
therewith.
Each of the parties hereto agrees
that if CGMI materially breaches its duties under the Prime Broker
Agreement, dated August 12, 2005, between Greenlight and CGMI,
Greenlight may transfer the Account and all of the collateral
therein into a cash securities account with The Goldman Sachs
Group, Inc., Bank of America, N.A. or any of their respective
affiliates, or any other financial institution reasonably
satisfactory to us, subject to such financial institution entering
into a control agreement, in substantially the form of Exhibit A
hereto, with Greenlight and us before or concurrently with such
transfer.
This letter agreement shall be
governed by and construed in accordance with the laws of the State
of New York (without giving effect to the conflicts of law
principles thereof).
Greenlight Reinsurance,
Ltd.
October 12, 2005
Page 4
Please acknowledge your acceptance
of the terms and conditions hereof by signing this letter agreement
in the signature block below.
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Sincerely,
CITIBANK, N.A.
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By:
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/s/ Michael Lonie
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Michael Lonie
Vice President
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Attachments
ACKNOWLEDGED AND ACCEPTED
AS OF THE DATE FIRST SET FORTH
ABOVE:
GREENLIGHT REINSURANCE,
LTD.
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By:
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/s/ Leonard Goldberg
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Leonard Goldberg
Chief Executive Officer
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EXHIBIT A
CITIBANK, N.A.
NEW YORK
APPLICATION FOR STANDBY LETTER OF
CREDIT
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Citibank, N.A., New York, NY
10043
Attn: Standby Letter of Credit
Dept., FLA-1, 2/A
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Letter of Credit Reference
No.
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Advising Bank (Name and
Address)
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Applicant:
Greenlight Reinsurance,
Ltd.
Strathvale House
90 North Church Street
P.O. Box 1109 GT
Georgetown, Grand Cayman, Cayman
Islands
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Beneficiary (Name and
Address)
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Amount (In specific
currency):
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Expiry Date and Place:
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This Application is for the issuance
of a standby letter of credit under and subject to the terms and
conditions of (select one):
