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Exhibit 10.18
Execution Copy
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PUT OPTION AGREEMENT
between
RAM REINSURANCE COMPANY LTD.
and
BLUE WATER TRUST I
Dated as of December 23, 2003
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PUT OPTION AGREEMENT dated as of December 23, 2003
(this "Agreement"), between RAM Reinsurance Company Ltd., a
company organized under the laws of Bermuda (the "Company"),
and Blue Water Trust I, a Delaware statutory trust (the
"Trust").
WHEREAS, the Company is authorized to issue 500.01 shares of
non-cumulative, redeemable, perpetual preference shares, par value
U.S. $1,000
per share, designated as "Class B Preference Shares" (the
"Preference Shares"),
which shares have not been and will not be registered with the
Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended
(the "Securities Act"); and
WHEREAS, the Company and the Trust desire to enter into this
Agreement
pursuant to which the Company will have the right to sell, at its
option, the
Preference Shares to the Trust, and the Trust will have an
obligation to
purchase the Preference Shares upon the Company's exercise of its
option and
upon the other terms and conditions agreed upon by the parties and
set forth
herein.
NOW, THEREFORE, in consideration of the foregoing and for other
valuable consideration, the adequacy of which is hereby
acknowledged, the
parties hereto agree as follows:
Section 1. Definitions; Interpretation
1.1
The words "herein," "hereof" and "hereunder" and other words of
similar
import refer to this Agreement as a whole and not to any particular
section,
clause or other subdivision, and references to "Sections" refer to
sections of
this Agreement except as otherwise expressly provided.
1.2
In this Agreement the following terms have such meanings as set
forth
below:
"1940 Act" means the Investment Company Act of 1940, as
amended.
"Agreement" has the meaning set forth above in the Preamble.
"Auction Date"
has the meaning set forth in the General Terms.
"Auction Rate" has the meaning set forth in the General Terms.
"Broker-Dealer" has the meaning set forth in the Declaration.
"Business Day" has the meaning set forth in the Declaration.
"Class A Preference Shares" means such Class A Preference Shares
of
the Company as issued and outstanding from time to time.
"Company" has the meaning set forth above in the preamble.
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"Company Bye-laws" means the bye-laws of the Company, a copy of
which
is attached hereto as Annex C.
"CPS Securities" has the meaning set forth in the Declaration.
"Declaration" means the Amended and Restated Declaration of
Trust
governing the Trust and dated as of the date hereof, as the same
may be amended
or restated from time to time under the terms thereof and
hereof.
"Delaware Statutory Trust Act" means the Delaware Statutory Trust
Act,
12 Del. C. ss. 3801, et seq.
"Delayed
Auction" has the meaning set forth in the General Terms.
"Delayed Auction Date" has the meaning set forth in the General
Terms.
"Delayed Auction Period" has the meaning set forth in the
General
Terms.
"Delayed Auction Rate" has the meaning set forth in the General
Terms.
"Delayed Put Option Premium" has the meaning set forth in Section
5.2.
"Delayed Put Option Premium Certificate" has the meaning set forth
in
Section 5.3.
"Distribution Payment Date" has the meaning set forth in the
General
Terms.
"Distribution Period" has the meaning set forth in the General
Terms.
"Dividend" has the meaning set forth in the Preference Share
Designation.
"Eligible Assets" means, as applicable, (i) commercial paper and
any
other investments that conform to the guidelines set forth in
Exhibit I to the
Declaration, (ii) Preference Shares, (iii) this Agreement, (iv) the
Property
Account (as defined in the Declaration), and (v) any and all
distributions of
principal and interest and any other payments made on the
foregoing.
"Expense Reimbursement Agreement" has the meaning set forth in
Section
3.2(a).
"Federal Funds Effective Rate" has the meaning set forth in the
Declaration.
"Fixed-Rate Distribution Event" has the meaning set forth in
the
Preference Share Designation.
"Fixed-Rate Election" means an election by the Company to pay
Dividends on the Preference Shares at the rate described in clause
(iii) of the
definition of "Dividend Rate" set forth in the Preference Share
Designation.
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"General Terms" means the General Terms of the CPS Securities
attached
to the Declaration as Appendix A.
"Holder" has the meaning set forth in the Declaration.
"Liquidation Preference" has the meaning set forth in the
Preference
Share Designation.
"Maximum Rate" has the meaning set forth in the Preference
Share
Designation.
"Moody's" means Moody's Investors Service, Inc., and its
successors.
"Overnight Rate of Return" means the rate earned on the interest
and
on the principal of the Eligible Assets during the period from each
Auction Date
until the related Distribution Payment Date and during any Delayed
Auction
Period, which rate shall be equal to the Federal Funds Effective
Rate then in
effect (as adjusted to reflect any applicable reserve
requirement).
"Preference Share Designation" means the Certificate of
Designation,
Preferences and Rights of Class B Preference Shares of the Company,
as set forth
in the Company Bye-laws.
"Preference Shares" has the meaning set forth above in the
recitals.
"Preference Shares Payment Date" has the meaning set forth in
Section
3.2(a).
"Preference Shares Purchase Price" has the meaning set forth in
Section 4.1.
"Proceedings" has the meaning set forth in Section 16.
"Put Notice" means a written notice substantially in the form
attached
hereto as Annex A.
"Put Option Premium" has the meaning set forth in Section 5.1.
"Put Option Premium Certificate" has the meaning set forth in
Section
5.3.
"Ratings Agencies" means collectively Moody's and Standard &
Poor's.
"Redemption Price" has the meaning set forth in the Preference
Share
Designation.
"Redemption Proceeds" has the meaning set forth in Section
3.2(d).
"SEC" has the meaning set forth above in the recitals.
"Securities Act" has the meaning set forth above in the
recitals.
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"Senior Note Issuance" means the initial issuance of senior notes
of
the Company substantially on the terms described in the preliminary
offering
memorandum of the Company dated October 2003, as the same may be
amended or
modified.
"Standard & Poor's" means Standard & Poor's Ratings
Services, a
division of The McGraw-Hill Companies, Inc., and its
successors.
"Stated Yield" means all amounts of interest (including
accreted
interest) and other payments due and payable (upon maturity or
otherwise) on the
principal amount of the Eligible Assets (excluding any repayment of
principal)
held by the Trust during a Distribution Period, plus the amount of
interest to
be earned based on the Overnight Rate of Return, as calculated on
or prior to
11:00 a.m. on the Auction Date for each respective Distribution
Period.
"Tax Matters Partner" has the meaning set forth in the
Declaration.
"Trust" has the meaning set forth above in the preamble.
"Trustee" has the meaning set forth in the Declaration.
1.3
In this Agreement, any reference to a "company" shall be construed
so
as to include any corporation, trust, partnership, limited
liability company or
other legal entity, wheresoever incorporated or established.
1.4
In this Agreement, save where the contrary is indicated, any
reference
to:
(a)
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 in accordance with
its
terms; and
(b) a statute shall be construed as a reference to such statute as
the
same
may have been, or may from time to time be, amended or
re-enacted.
1.5
In this Agreement, any definition shall be equally applicable to
both
the singular and plural forms of the defined terms.
Section 2. Put Option; Agreement Term
2.1
In consideration of the payment of the Put Option Premium, or
the
Delayed Put Option Premium, as the case may be, the Trust hereby
grants to the
Company the right to cause the Trust to purchase the Preference
Shares on the
terms set forth herein.
2.2
The put option created hereby shall remain in effect and be
exercisable
by the Company at any time prior to termination of this
Agreement.
2.3
This Agreement shall terminate upon the earliest to occur of any of
the
following events:
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(a) the Company delivers a written termination notice to the
Trust
while the Trust is holding Eligible Assets, stating that the
Company is
electing not to pay the Put Option Premium for the next
succeeding
Distribution Period that follows the termination notice by at least
three
Business Days and indicating the Distribution Payment Date on which
the
termination shall become effective (delivery of such a termination
notice
by
the Company shall be irrevocable);
(b) the Company fails to pay the Put Option Premium or the Delayed
Put
Option Premium, if any, for a Distribution Period on the
related
Distribution Payment Date, and such failure has not been cured
within three
Business Days following notice thereof;
(c) the Company makes a Fixed-Rate Election;
(d) the Company fails to pay Dividends on the Preference Shares,
or
the
fees and expenses of the Trust pursuant to the Expense
Reimbursement
Agreement for a Distribution Period on the related Distribution
Payment
Date
and such failure continues for three Business Days following
notice
thereof;
(e) the Company fails to pay the Redemption Price and such failure
has
not
been cured within three Business Days following notice thereof;
(f) the aggregate face amount of the outstanding CPS Securities
is
less
than Twenty million U.S. dollars (U.S. $20,000,000);
(g) at any time that the Trust owns any Preference Shares, the
aggregate Liquidation Preference thereof is less than Twenty
million U.S.
dollars (U.S. $20,000,000); or
(h) at any time that the Trust owns any Eligible Assets within
the
meaning of clause (i) of the definition thereof, the principal
amount
thereof is less than Ten million U.S. dollars (U.S.
$10,000,000).
Section 3. Exercise of Put Option; Redemption
3.1
The Trust agrees that it shall, upon exercise of the put option
as
provided in Section 3.2, purchase the Preference Shares from the
Company for a
purchase price equal to the Preference Shares Purchase Price, which
Preference
Shares Purchase Price shall be payable on the Preference Shares
Payment Date in
accordance with Section 4.
3.2
(a) The Company may exercise the put option (with respect to all or
a
portion of the Preference Shares covered thereby) at any time by
delivering
(i)
a Put Notice to the Trustee, specifying (x) the number of
Preference
Shares with respect to which the put option is exercised and (y) a
payment
date
(the "Preference Shares Payment Date"), which shall be the next
succeeding Distribution Payment Date after the date on which the
Put Notice
is
delivered to the Trustee, and (ii) the Expense Reimbursement
Agreement
to
the Trust in the form attached hereto as Annex E (the "Expense
Reimbursement
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Agreement"), in either case not more than fifteen days but not less
than
ten
days prior to the next succeeding scheduled Distribution Payment
Date.
(b) On the Preference Shares Payment Date, after payment of the
Put
Option Premium by the Company to the Trust and payment of the
distribution
amount by the Trust to the Holders of the CPS Securities, in each
case for
the
immediately preceding Distribution Period, the Company shall issue
and
deliver to the Trust, or its designee, Preference Shares with an
aggregate
Liquidation Preference equal to the applicable Preference Shares
Purchase
Price. The Preference Shares shall be delivered free and clear of
any
defect in title, together with all transfer and registration
documents (or
all
notices, instructions or other communications) as are necessary
to
convey title to the Preference Shares to the Trust (or its
nominee).
(c) For the avoidance of doubt, (i) any cash received by the Trust
as
interest or other payments earned on the principal amount of the
Eligible
Assets (net of fees and expenses and excluding any repayment of
principal)
and
not previously distributed to the Holders of CPS Securities shall
be
distributed to the Holders of CPS Securities prior to payment by
the Trust
of
the Preference Shares Purchase Price, and shall not be used to
purchase
Preference Shares, (ii) the aggregate Liquidation Preference of
Preference
Shares purchased from the Company shall be reduced by the amount,
if any,
by
which the aggregate face amount of CPS Securities is reduced as a
result
of
losses of principal of or interest on Eligible Assets as required
by
Section 6.01(g) of the Declaration and Section 6(b) of the General
Terms,
and
(iii) the maximum aggregate amount of proceeds which the Company
shall
receive upon exercise of the put option hereunder, in whole or in
part,
shall not exceed the aggregate face amount of CPS Securities
then
outstanding reduced, as applicable, as a result of losses of
principal of
or
interest on Eligible Assets as required by Section 6.01(g) of
the
Declaration and Section 6(b) of the General Terms (taking into
account
aggregate Redemption Proceeds received by the Trust).
(d) The Company shall have the right to redeem all or a portion of
the
Preference Shares on any Distribution Payment Date upon payment of
the
Redemption Price for
the Preference Shares to be redeemed (the "Redemption
Proceeds"). Notwithstanding the foregoing, the Company shall not
redeem any
Preference Shares if after giving effect to a partial redemption,
the
aggregate Liquidation Preference of the Preference Shares
outstanding
immediately after such partial redemption would be less than Twenty
million
U.S.
dollars (U.S. $20,000,000). Payment of the Redemption Price will
be
made
on the first Distribution Payment Date after the Company elects
to
redeem Preference Shares in accordance with Section 3.2(e).
(e) The Company may redeem all or a portion of the Preference
Shares
at
any time by providing notice to the Trustee, specifying a
redemption
date, which shall be
the next succeeding Distribution Payment Date after
the
date of such notice, not less than twenty days prior to the
next
succeeding scheduled Distribution Payment Date. Notice of any
redemption of
Preference Shares shall be mailed to the holders of the Preference
Shares
not
less than ten days nor more than fifteen days prior to the date
fixed
for
such redemption. At any time before or after a notice of redemption
has
been
given, the Company shall deposit the aggregate Redemption Price of
the
Preference Shares to be
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redeemed with any bank or trust company in New York, New York,
with
directions to pay the holders of the Preference Shares being
redeemed the
Redemption Proceeds in exchange for the Preference Shares.
(f) Upon a partial redemption of the Preference Shares held by
the
Trust prior to a Fixed-Rate Distribution Event, the Trust shall
apply the
Redemption Proceeds to the purchase of Eligible Assets (it being
understood
that
no partial redemption may be made by the Company if after
giving
effect thereto, the aggregate Liquidation Preference of the
Preference
Shares outstanding immediately thereafter would be less than Twenty
million
U.S.
dollars (U.S. $20,000,000)).
(g) Upon a complete redemption of all Preference Shares held by
the
Trust prior to a Fixed-Rate Distribution Event, the Trust shall
apply the
Redemption Proceeds to the purchase of a portfolio of Eligible
Assets.
(h) For the avoidance of doubt, there is no limitation on the
number
of
times the Company may put the Preference Shares to the Trust and
no
limitation on the number of times the Company may redeem Preference
Shares,
in
each case pursuant to and in accordance with the terms of this
Agreement.
(i) Following a Fixed-Rate Distribution Event, the Company shall
not
redeem the Preference Shares for a period of two years
thereafter.
Section 4. Payments for Preference Shares
4.1
On the Preference Shares Payment Date, after payment of the Put
Option
Premium by the Company to the Trust and payment of the distribution
amount by
the Trust to the Holders of the CPS Securities, in each case for
the immediately
preceding Distribution Period, the Trust will deliver in U.S.
dollars to the
Company an amount equal to the product of (x) the proceeds
attributable to
principal received upon the maturity of the Eligible Assets of the
Trust (and,
if applicable, principal proceeds attributable to the liquidation
of defaulted
Eligible Assets), net of fees and expenses of the Trust and after
any principal
is returned to Holders of the CPS Securities pursuant to Section
6.01(g) of the
Declaration and Section 6(b) of the General Terms and (y) a
fraction the
numerator of which is the aggregate Liquidation Preference of the
number of
Preference Shares with respect to which the put option is then
being exercised
and the denominator of which is the aggregate Liquidation
Preference of the
number of Preference Shares the put option would be exercised with
respect to if
the put option were then being exercised in full (the "Preference
Shares
Purchase Price").
4.2
Payment by the Trust of the Preference Shares Purchase Price shall
be
made on or prior to 2:00 p.m. on the Preference Shares Payment Date
and to the
account of the Company as specified in the Put Notice.
4.3
Payment of the Preference Shares Purchase Price by the Trust shall
be
made as provided in Section 4.1 and Section 4.2 without setoff,
claim,
recoupment, deduction or counterclaim; provided, however, that if
the Company
exercises its put option under Section 3 hereof at any time that it
has failed
to pay all or a portion of the Put Option Premium, and such failure
has not been
cured on or before the Preference Shares Payment Date, the Trust
shall be
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entitled to setoff against the Preference Shares Purchase Price
such unpaid
portion of the Put Option Premium.
Section 5.
