SECURITIES ISSUANCE AGREEMENT between and STONEHEATH RE Dated December 12, 2006
Exhibit
10.2
EXECUTION
COPY
between
and
STONEHEATH
RE
Dated
December 12, 2006
Preamble
This
Securities Issuance Agreement, dated as of December 12, 2006 (the “Agreement”),
is by
and between XL CAPITAL LTD, a Cayman Islands exempted company (including its
permitted successors and assigns, “XL
Capital”),
and
STONEHEATH RE, a Cayman Islands exempted company (“Stoneheath”).
Recitals
WHEREAS,
XL Capital is authorized to and has reserved for issue an aggregate of 350,000
Series D Preference Ordinary Shares, liquidation preference of U.S. $1,000
per
share, having an aggregate liquidation preference as of the date hereof of
U.S.
$350,000,000 (“XL
Preferred Securities”),
which
XL Preferred Securities shall not be registered under the Securities Act of
1933, as amended (the “Securities
Act”),
on or
before the date on which XL Preferred Securities are issued and delivered
pursuant to the terms of this Agreement, and may, but are not required to be,
so
registered thereafter;
WHEREAS,
Stoneheath has entered into that certain Excess of Loss Reinsurance Agreement,
dated as of the date hereof (as amended, supplemented or otherwise modified
from
time to time in accordance with its terms, the “Reinsurance
Agreement”),
with
XL Insurance (Bermuda) Ltd (“XLIB”)
and the
other Ceding Insurers (as defined below) from time to time party thereto,
pursuant to which Stoneheath has agreed to indemnify the Ceding Insurers against
net paid, payable and incurred losses from certain covered perils, subject
to
certain limitations; and
WHEREAS,
in consideration for Stoneheath entering into the Reinsurance Agreement and
other transactions relating thereto and the payment by Stoneheath on the date
hereof of U.S. $350,000,000 in respect of the par value of the XL Preferred
Securities that are issuable hereunder, XL Capital and Stoneheath desire to
enter into a binding agreement pursuant to which (i) XL Capital shall issue
and
deliver to Stoneheath certain XL Preferred Securities upon the payment by
Stoneheath of certain amounts under the Reinsurance Agreement or upon the
occurrence of certain events and (ii) XL Capital shall have the option to issue
and deliver to Stoneheath certain XL Preferred Securities upon the occurrence
of
certain other events.
NOW
THEREFORE, for good and valuable consideration the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
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:
“Account
Trustee”
means
the Trustee under the Trust Agreement and any successor trustee appointed in
accordance with the terms thereof.
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“Administration
Agreement” means
that
certain Administrative Services Agreement, dated as of the date hereof, between
Stoneheath and HSBC Financial Services (Cayman) Limited, as amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof.
“Agreement”
has
the
meaning set forth above in the Preamble.
“Asset
Swap Agreement”
means
that certain 1992 ISDA Master Agreement (Multicurrency-Cross Border), as
supplemented by a schedule and confirmation thereto, dated as of the date
hereof, between Stoneheath and the Asset Swap Counterparty, and as further
amended, supplemented or otherwise modified from time to time in accordance
with
the terms thereof and hereof.
“Asset
Swap Counterparty”
means
▇▇▇▇▇▇▇ ▇▇▇▇▇ International, as the initial counterparty under the Asset Swap
Agreement, and any permitted successor, assign or replacement counterparty
which
assumes the obligations of the initial counterparty in accordance with the
terms
thereof and hereof.
“Business
Day”
means
a
day on which commercial banks and foreign exchange markets settle payments
and
are open for general business (including dealings in foreign exchange and
foreign currency deposits) in Bermuda, the Cayman Islands, New York City and
London.
“Ceding
Insurers”
means
XLIB and such other insurance and reinsurance subsidiaries of XL Capital that
are party to the Reinsurance Agreement from time to time.
“Closing
Date”
means
the date of this Agreement.
“Covered
Expenses”
means all
expenses incurred by Stoneheath from time to time except for (i) amounts payable
by Stoneheath under the Asset Swap Agreement, (ii) amounts payable by Stoneheath
under the Interest Rate Swap Agreement, (iii) amounts payable by Stoneheath
under the Reinsurance Agreement, (iv) Extraordinary Expenses, (v) amounts
distributable under the Trust Agreement (other than to the Account Trustee),
(vi) any dividends or distributions declared or paid, or redemption or
liquidation payment made, on any of Stoneheath’s securities including, without
limitation, the Issuer Preferred Securities and (vii) any expenses reimbursable
pursuant to Section
3.3
which
have previously been paid to Stoneheath by XL Capital.
“Dividend
Payment Date”
means,
with respect to any outstanding Issuer Preferred Securities, the date on which
a
divided is scheduled to be paid. During the Fixed Rate Period, dividends on
the
Issuer Preferred Securities will be payable semi-annually on April 15 and
October 15 of each year, commencing on April 15, 2007. In the event that a
Dividend Payment Date during the Fixed Rate Period is not a Business Day, any
dividend then due and payable will instead be paid on the immediately following
Business Day and no further sum will be payable in respect of such delay. During
the Floating Rate Period, dividends on the Issuer Preferred Securities will
be
payable quarterly on January 15, April 15, July 15 and October 15 of each year,
commencing on January 15, 2012. In the event that a Dividend Payment Date during
the Floating Rate Period would otherwise fall on a day that is not a Business
Day, such Dividend
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Payment
Date will be postponed to the immediately following Business Day and the
applicable Dividend Period will end on, but exclude, such immediately following
Business Day.
“Dividend
Period”
means,
with respect to any Issuer Preferred Securities issued and outstanding, the
period from and including a Dividend Payment Date (or the date of the original
issuance if there has not been a Dividend Payment Date) to but excluding the
immediately succeeding Dividend Payment Date.
“Early
Termination”
has the
meaning set forth in Section
6.1.
“Extraordinary
Expenses” means
(i)
any fees and expenses (and any judgment, damages, penalties and interest thereon
or settlement related thereto) relating to the investigation, defense or
assertion of any claim which arises out of, relates to or results from any
dispute by or among any one or more of Stoneheath, one or more holders of
Stoneheath’s securities, the Asset Swap Counterparty, the Interest Rate Swap
Counterparty, the Account Trustee, XL Capital and one or more Ceding Insurers,
(ii) any interest on unpaid amounts, if any, under the Interest Rate Swap
Agreement or the Asset Swap Agreement, (iii) any interest on collateral posted,
if any, by the Interest Rate Swap Counterparty or the Asset Swap Counterparty
under the Interest Rate Swap Agreement or the Asset Swap Agreement, as the
case
may be, (iv) any fees, expenses or other amounts relating to or arising out
of
any breach by Stoneheath of any contract, agreement, commitment or undertaking
to which it is a party, (v) any Loss Verification Agent Expenses to be borne
by
Stoneheath pursuant to Section
3.3,
(vi) any
withholding or other taxes and (vii) any losses on investments made with the
assets held in the Trust Account.
“Final
Redemption Date”
means the
date specified in the notice of redemption by Stoneheath to the holders of
record of the outstanding Issuer Preferred Securities following (i) the date
of
termination of the Reinsurance Agreement (whether upon its expiry or as a result
of the occurrence of an Early Termination of this Agreement) and (ii) the date
when, if required by the terms of the Reinsurance Agreement, the commutation
of
the rights and obligations of Stoneheath and the Ceding Insurers under the
Article entitled “Commutation and Quantum Dispute Resolution” of the Reinsurance
Agreement occurred.
“Fixed
Rate”
means
6.868% per annum.
“Fixed
Rate Period”
means
the period from and including the Closing Date to but excluding October 15,
2011.
“Floating
Rate”
means,
with respect to any Dividend Period, a per annum rate equal to the sum of (i)
the Three-Month LIBOR Rate for such Dividend Period plus (ii) the Floating
Rate
Spread Percentage.
“Floating
Rate Period”
means
the period from and after October 15, 2011.
“Floating
Rate Spread Percentage”
means
3.120%.
“Interest
Rate Swap Agreement”
means
that certain long form transaction confirmation incorporating by reference
the
1992 ISDA Master Agreement (Multicurrency-Cross Border), dated as of the date
hereof, between Stoneheath and the Interest Rate Swap Counterparty, as
3
amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof.
“Interest
Rate Swap Counterparty”
means
IXIS Financial Products Inc., as the initial counterparty under the Interest
Rate Swap Agreement, and any permitted successor, assign or replacement
counterparty which assumes the obligations of the initial counterparty in
accordance with the terms thereof and hereof.
“Investment
Account”
means the
“Investment Account” as such term is defined in the Trust
Agreement.
“Issuer
Preferred Securities”
means
the non-cumulative perpetual preferred shares, liquidation preference U.S.
$1,000 per share, of Stoneheath.
“LIBOR
Business Day”
means
any day on which commercial banks are open for general business (including
dealings in deposits in U.S. dollars) in London.
“LIBOR
Determination Date”
means,
with respect to any Dividend Period, the date that is two LIBOR Business Days
prior to the first day of such period.
“Lien”
means
any mortgage, pledge, hypothecation, deposit, encumbrance, lien (statutory
or
otherwise), charge, security interest or preference, priority or other security
agreement or preferential arrangement of any kind or nature
whatsoever.
“Liquidation
Date”
means
the date on which Stoneheath is liquidated and its assets, if any, distributed
in accordance with its Memorandum and Articles of Association, the Stoneheath
Board Resolutions and applicable law.
“Loss
Verification Agent”
means the
“Loss Verification Agent” as such term is defined in, and determined in
accordance with the provisions of, the Reinsurance Agreement.
“Loss
Verification Agent Expenses”
has the
meaning set forth in Section
3.3.
“Make
Whole Amount”
means the
“Make Whole Amount” as such term is defined in, and determined in accordance
with the provisions of, the XL Capital Board Resolutions.
“Moody’s”
means
▇▇▇▇▇’▇ Investors Service, Inc. or any successor thereto.
“Paying
Agency Agreement”
means
that certain Paying Agency Agreement, dated as of the date hereof, among
Stoneheath, as Issuer, XL Capital, as Third Party, and The Bank of New York,
as
Preferred Security Paying Agent and Preferred Security Registrar, as amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof.
“Person”
means any
person, firm, partnership, corporation, limited liability company or other
entity.
4
“Policy
Aggregate Limit”
means
the “Policy Aggregate Limit” as such term is defined in, and determined in
accordance with the provisions of, the Reinsurance Agreement.
“Put
Premium”
has
the
meaning set forth in Section
3.1(a).
“Put
Premium Certificate”
has
the
meaning set forth in Section
3.2.
“Put
Premium Payment Date”
has
the
meaning set forth in Section
3.1(a).
“Put
Premium Payment Period”
has
the
meaning set forth in Section
3.1(a).
“Register
of Members”
means
XL
Capital’s Register of Members.
“Reimbursement
Notice”
has the
meaning set forth in Section
3.3.
“Reimbursement
Payment Date”
has the
meaning set forth in Section
3.3.
“Reinsurance
Agreement”
has
the
meaning set forth in the Recitals to this Agreement.
“Reinsurance
Premium”
means
the “Reinsurance Premium” as such term is defined in, and determined in
accordance with the provisions of, the Reinsurance Agreement.
“Remaining
Aggregate Limit”
means, on
any date, an amount equal to the Policy Aggregate Limit as reduced as of such
date by any payments made by Stoneheath under the Reinsurance Agreement and
any
distributions from the Trust Account made to Stoneheath to permit it to pay
Extraordinary Expenses.
“Replacement
Cost”
means the
“Replacement Cost” as such term is defined in, and determined in accordance with
the provisions of, the Asset Swap Agreement or the Interest Rate Swap Agreement,
as the case may be.
“Replacement
Cost Funding Date”
has the
meaning set forth in Section
3.4.
“Replacement
Cost Funding Notice”
has the
meaning set forth in Section
3.4.
“Replacement
Cost Payment Date”
means the
day on which any Replacement Cost payment is due and payable to the Asset Swap
Counterparty or the Interest Rate Swap Counterparty.
“S&P”
means
Standard & Poor’s Ratings Services, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies,
Inc., or any successor thereto.
“Securities
Act”
has
the
meaning set forth in the Recitals to this Agreement.
“Shareholder
Proposal Redemption Event”
means
the occurrence of an event that would permit XL Capital to redeem XL Preferred
Securities pursuant to Section 3(d)(ii) (Redemption upon Submission of Certain
Shareholder Proposals) of the XL Capital Board Resolutions.
5
“Stoneheath”
has
the
meaning set forth in the Preamble to this Agreement.
“Stoneheath
Board Resolutions”
means the
resolutions adopted by Stoneheath, attached hereto as Annex
D,
establishing the terms and preferences of the Issuer Preferred
Securities.
“Tax
Redemption Event”
means
the occurrence of an event that would permit XL Capital to redeem XL Preferred
Securities pursuant to Section 3(d)(iii) (Redemption on Tax Event) of the XL
Capital Board Resolutions.
“Three-Month
LIBOR Rate”
means,
with respect to any Dividend Period, a rate determined by the applicable
calculation agent on the basis of the offered rates for U.S. dollar deposits
for
a period of three months, as applicable, commencing on the first day of such
Dividend Period, which appears on US LIBOR Telerate Page 3750 as of
approximately 11:00 a.m., London time, on the LIBOR Determination Date for
such
Dividend Period. If on any LIBOR Determination Date no rate appears on US LIBOR
Telerate Page 3750 as of approximately 11:00 a.m., London time, the applicable
calculation agent will on such LIBOR Determination Date request four major
banks
in the London interbank market selected by the calculation agent to provide
the
calculation agent with a quotation of the rate at which U.S. dollar deposits
for
a three-month period, commencing on the first day of such Dividend Period,
are
offered by them to prime banks in the London interbank market as of
approximately 11:00 a.m., London time, on such LIBOR Determination Date and
in a
principal amount equal to U.S. $1 million or more. If at least two such
quotations are provided, LIBOR for such Dividend Period will be the arithmetic
mean (rounded upward, if necessary, to the nearest .00001 of 1%) of such
quotations as calculated by the calculation agent. If fewer than two quotations
are provided, LIBOR for such Dividend Period will be the arithmetic mean
(rounded upward, if necessary, to the nearest .00001 of 1%) of the rates quoted
as of approximately 11:00 am., New York time, on the first day of such Dividend
Period by major banks in New York City, New York selected by the calculation
agent for loans in U.S. dollars to leading European banks, for a three-month
period commencing on the first day of such Dividend Period and in a principal
amount of not less than U.S. $1 million.
“Trust
Account”
means
the “Trust Account” as such term is defined in the Trust Agreement.
“Trust
Agreement”
means
that certain Trust Agreement, dated as of the date hereof, among Stoneheath,
as
grantor and beneficiary, the Asset Swap Counterparty, the Ceding Insurers and
XL
Capital, as beneficiaries, and the Account Trustee, as trustee, as amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof.
“U.S.
Person”
has the
meaning given to such term in Regulation S under the Securities
Act.
“XL
Capital”
has
the
meaning set forth in the Preamble to this Agreement.
“XL
Capital Board Resolutions”
means
the resolutions adopted by XL Capital, attached hereto as Annex
E,
establishing the terms and preferences of the XL Preferred
Securities.
“XL
Preferred Securities”
has
the
meaning set forth in the Recitals to this Agreement.
6
“XLIB”
has
the
meaning set forth in the Recitals to this Agreement.
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.
1.3. 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.
1.4. In
this
Agreement, any definition shall be equally applicable to both the singular
and
plural forms of the defined terms.
2. Issuance
of XL Preferred Securities
2.1. Aggregate
Number of XL Preferred Securities.
The
maximum amount of XL Preferred Securities that may be issued pursuant to this
Agreement shall have an aggregate liquidation preference, upon issuance, of
U.S. $350,000,000.
2.2. Mandatory
Issuance.
(a) Subject
to
applicable legal requirements, XL Capital hereby agrees to issue and deliver
XL
Preferred Securities to Stoneheath as follows:
(i) on
each
date on which a Ceding Insurer receives a distribution of funds from the Trust
Account (other than pursuant to clause (ii) of this Section
2.2(a)
or
pursuant to Section
2.3(a)),
XL
Capital shall issue and deliver to Stoneheath (against such distribution from
the Trust Account) an amount of XL Preferred Securities having an aggregate
liquidation preference that is equal to the amount of funds so distributed
from
the Trust Account; and
(ii) upon
the
occurrence of any of the following events, XL Capital shall issue and deliver
to
Stoneheath an amount of XL Preferred Securities having an aggregate liquidation
preference that is equal to the lesser of (x) the Remaining Aggregate Limit
under the Reinsurance Agreement at such time and (y) the cash proceeds of the
assets in the Trust Account available for distribution to XLIB or its designee
(such issuance and delivery to be made only against the distribution to or
as
directed by XLIB of an amount of funds from the Trust Account equal to the
aggregate liquidation preference of the XL Preferred Securities so issued and
delivered):
7
(A) a
failure
by a Ceding Insurer to pay any Reinsurance Premium owed by it (and any interest
accrued thereon) when due and such payment default is not cured within five
Business Days thereafter; provided,
that no
XL Preferred Securities shall be issued pursuant to this clause (ii)(A) if
XL
Capital shall have paid to Stoneheath within such five Business Day period
an
equivalent amount of Put Premium (and accrued interest thereon) in accordance
with Section
3.1(b)(ii)
of this
Agreement;
(B) a
failure
by XL Capital to pay any Put Premium (and any interest accrued thereon) or
other
amounts, if any, payable by it under this Agreement when due and such payment
default is not cured within five Business Days thereafter;
(C) a
failure
by the Account Trustee to (1) make distributions to the Asset Swap Counterparty,
the Interest Rate Swap Counterparty or Stoneheath in accordance with the Trust
Agreement or (2) effect a purchase or sale of an asset in the Investment Account
in accordance with any notice received from the Asset Swap Counterparty and
the
investment guidelines set forth in the Trust Agreement, in each case within
the
period specified in the Asset Swap Agreement;
(D) a
breach
of Section
4.1
of this
Agreement;
(E) a
termination of the Asset Swap Agreement, unless Stoneheath shall have, at the
time of termination, (1) entered into a new asset swap with a permitted
successor, assign or replacement Asset Swap Counterparty that has terms that
are
identical in all material respects to the then-applicable terms of the Asset
Swap Agreement (other than the counterparty thereto) and (2) paid to the Asset
Swap Counterparty all amounts due under the Asset Swap Agreement;
(F) a
termination of the Interest Rate Swap Agreement prior to October 15, 2011,
unless Stoneheath shall have, at the time of termination, (1) entered into
a new
interest rate swap with a permitted successor, assign or replacement Interest
Rate Swap Counterparty that has terms that are identical in all material
respects to the then-applicable terms of the Interest Rate Swap Agreement (other
than the counterparty thereto) and (2) paid to the Interest Rate Swap
Counterparty all amounts due under the Interest Rate Swap Agreement;
or
(G) a
downgrading of the rating assigned to the senior unsecured indebtedness of
XL
Capital to below “BBB-” by S&P or below “Baa3” by Moody’s.
(b) Upon
the
occurrence of an event described in Section
2.2(a)(ii)(D) or (G), XL
Capital
shall promptly, but no later than one Business Day after obtaining knowledge
thereof, notify Stoneheath, the Asset Swap Counterparty, the Interest Rate
Swap
8
Counterparty
and the Account Trustee in writing of the occurrence of such event stating
the
date on which the event occurred. Upon the occurrence of an event described
in
Section 2.2(a)(ii)(A),
(B),
(C), (E)
or
(F),
Stoneheath shall promptly, but no later than one Business Day after obtaining
knowledge thereof, notify XL Capital, the Asset Swap Counterparty, the Interest
Rate Swap Counterparty and the Account Trustee in writing of the occurrence
of
such event stating the date on which the event occurred.
2.3. Optional
Issuance.
(a) At
any
time that XL Capital would be permitted to redeem any XL Preferred Securities
upon the occurrence of (i) a Shareholder Proposal Redemption Event or (ii)
a Tax
Redemption Event (assuming, in each case, that some or all of the XL Preferred
Securities were then outstanding), XL Capital shall have the option to issue
and
deliver to Stoneheath an amount of XL Preferred Securities having an aggregate
liquidation preference that is equal to the lesser of (x) the Remaining
Aggregate Limit under the Reinsurance Agreement at such time and (y) the cash
proceeds of the assets in the Trust Account available for distribution to XLIB
or its designee. Such issuance and delivery of XL Preferred Securities shall
be
made against a distribution to or as directed by XLIB of an amount of funds
from
the Trust Account equal to the aggregate liquidation preference of the XL
Preferred Securities so issued and delivered.
(b) XL
Capital
shall promptly notify Stoneheath, the Asset Swap Counterparty, the Interest
Rate
Swap Counterparty and the Account Trustee if it elects to exercise the option
to
issue and deliver XL Preferred Securities pursuant to this Section
2.3.
A notice
delivered in accordance with this Section
2.3(b)
shall
specify the aggregate liquidation preference of the XL Preferred Securities
to
be issued and the date of issuance. Upon the issuance of XL Preferred Securities
pursuant to this Section
2.3,
XL
Capital shall have the right to redeem such XL Preferred Securities in
accordance with their terms.
2.4. Upon
the
occurrence of any of the events described in Sections
2.2(a)
or
2.3.(a),
XL
Capital shall cause the applicable number of XL Preferred Securities to be
issued and delivered to Stoneheath against the distribution of an amount of
funds from the Trust Account equal to the aggregate liquidation preference
of
the XL Preferred Securities so issued and delivered and shall take all other
actions necessary to issue and deliver such number of XL Preferred Securities,
including the registration of the issuance of such shares in XL Capital’s
Register of Members. The XL Preferred Securities so issued, delivered and
registered in XL Capital’s Register of Members shall be duly authorized, validly
issued, fully paid and non-assessable and 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) and the payment of any
transfer taxes as are necessary to convey title to the XL Preferred Securities
to Stoneheath.
2.5. Prepayment
of Issue Price.
XL
Capital and Stoneheath hereby agree and acknowledge that Stoneheath has fully
paid for the XL Preferred Securities issuable under this Agreement at an issue
price of U.S. $0.01 per security and that such payment was made on the date
hereof. On the second Business Day following an Early Termination, XL Capital
shall pay
9
to
Stoneheath an amount equal to the product of (i) U.S. $0.01 multiplied by
(ii) a fraction, the numerator of which is the difference between U.S. $300
million and the aggregate liquidation preference of the XL Preferred Securities
issued and delivered to Stoneheath under this Agreement and the denominator
of
which is U.S. $1,000.
3. Put
Premium and Other Amounts Payable
3.1. (a)
XL
Capital hereby agrees to pay Stoneheath a cash amount in U.S. dollars (the
“Put
Premium”)
with
respect to (i) each Dividend Period for the Issuer Preferred Securities (other
than a period, if any, contemplated by the following clause (ii)) and (ii)
the
period from and including the Dividend Payment Date for the Issuer Preferred
Securities that immediately precedes the earlier of the Final Redemption Date
and the Liquidation Date to but excluding the Final Redemption Date or the
Liquidation Date, as applicable (each such period, a “Put
Premium Payment Period”).
The
Put Premium payable with respect to any Put Premium Payment Period shall be
paid
on the Business Day immediately preceding each Dividend Payment Date and the
Final Redemption Date or the Liquidation Date, as the case may be (such date,
a
“Put
Premium Payment Date”).
(b) Subject
to
the adjustments made pursuant to Section
3.1(c),
the
amount of the Put Premium payable on each Put Premium Payment Date shall be
equal to the sum of:
(i) the
aggregate amount of any Reinsurance Premiums (including accrued interest
thereon) that are due and payable by the Ceding Insurers under the Reinsurance
Agreement with respect to the applicable Put Premium Payment Period and which
are not paid by the Ceding Insurers on the Put Premium Payment Date;
and
(ii) if
the
Reinsurance Agreement has expired or been terminated prior to the applicable
Put
Premium Payment Date without the Remaining Aggregate Limit being reduced to
zero, the aggregate amount of any Reinsurance Premiums that would have been
payable by the Ceding Insurers with respect to the then-current Put Premium
Payment Period had the Reinsurance Agreement remained in effect during such
period with a Remaining Aggregate Limit equal to the Remaining Aggregate Limit
at the time of the termination or expiration, as applicable, minus the amount
of
distributions, if any, from the Trust Account thereafter made to Stoneheath
to
permit it to pay Extraordinary Expenses.
(c) The
amount
of the Put Premium shall be adjusted at the end of the Fixed Rate Period to
the
extent necessary to provide the Floating Rate to the holders of the Issuer
Preferred Securities during the Floating Rate Period, after giving effect to
(i)
any increase in the Reinsurance Premium occurring during the Floating Rate
Period and (ii) any adjustments applicable to floating rate payments payable
under a new asset swap with a successor or replacement Asset Swap Counterparty.
This adjustment shall not, however, be used to offset any shortfall in the
amount of dividends paid to the holders of Issuer Preferred Securities resulting
from distributions from the Trust Account following
10
a
liquidation of assets in the Investment Account to Stoneheath to permit it
to
pay Extraordinary Expenses.
3.2. Put
Premium Certificate.
The
applicable amount of the Put Premium payable pursuant to Section
3.1
shall be
calculated by Stoneheath and set forth in a certificate substantially in the
form attached hereto as Annex
A
(the
“Put
Premium Certificate”).
Such
Put Premium Certificate shall be delivered to XL Capital no later than 3 p.m.
New York time on the fourth Business Day preceding the applicable Put Premium
Payment Date.
3.3. Payment
of Certain Expenses.
In
addition to the Put Premium, payable to Stoneheath pursuant to Section
3.1,
and any
Replacement Cost payments, payable pursuant to Section
3.4,
XL
Capital hereby agrees to pay (i) the fees and expenses of the Loss Verification
Agent that are payable by Stoneheath from time to time under the Reinsurance
Agreement subject to a limit of U.S. $100,000 in the aggregate with respect
to
each review for which the Loss Verification Agent has been engaged to act in
such capacity (the “Loss
Verification Agent Expenses”)
and (ii)
all Covered Expenses incurred by Stoneheath from time to time until the
Liquidation Date. XL Capital shall pay such amounts to Stoneheath no later
than
20 Business Days (the “Reimbursement
Payment Date”)
following the receipt by XL Capital of a written certificate substantially
in
the form attached hereto as Annex
B
(the
“Reimbursement
Notice”)
specifying the nature and amount of each expense and the date when such expenses
were incurred. Any Reimbursement Notice shall include a true and correct copy
of
the invoice for each expense in respect of which a payment is stated to be
due.
Stoneheath hereby agrees to apply any amounts that it receives from XL Capital
pursuant to this Section
3.3
to pay
its expenses promptly upon receiving such amounts from XL Capital.
3.4. Payment
of Replacement Cost.
In
addition to the Put Premiums, payable pursuant to Section
3.1,
and any
Loss Verification Agent Expenses or Covered Expenses, payable pursuant to
Section
3.3,
XL
Capital hereby agrees to pay to Stoneheath an amount equal to any Replacement
Cost payments (including any accrued interest thereon) that Stoneheath is
required to make to the Asset Swap Counterparty or the Interest Rate Swap
Counterparty. Such payments by XL Capital shall be due on the second Business
Day immediately preceding the Replacement Cost Payment Date (the “Replacement
Cost Funding Date”).
Stoneheath shall promptly provide to XL Capital a written certificate
substantially in the form attached hereto as Annex
C
(the
“Replacement
Cost Funding Notice”)
setting
forth the amount of Replacement Cost payments (including any accrued interest
thereon) that is payable to the Asset Swap Counterparty or the Interest Rate
Swap Counterparty, as applicable. In exchange for XL Capital’s agreement to make
payments to Stoneheath pursuant to this Section
3.4,
Stoneheath hereby agrees to pay to XL Capital any Replacement Cost payments
(including any accrued interest thereon) that Stoneheath receives from the
Asset
Swap Counterparty or the Interest Rate Swap Counterparty, as applicable, upon
receipt thereof.
3.5. Accrual
of Interest on Unpaid Amounts.
Interest
on any due and unpaid Put Premium and other amounts, if any, due under this
Agreement shall accrue and be payable from and including the original date
on
which such amounts were due to but excluding the date such unpaid amounts are
paid by XL Capital (i) during the Fixed Rate Period, at the Fixed Rate and
(ii)
during the Floating Rate Period, at the Floating Rate, in each case calculated
on the basis of daily compounding and the actual number of days elapsed;
provided,
however,
that
with respect
11
to
past
due amounts payable under Section
3.3
or
Section
3.4,
the rate
of interest on past due amounts relating to any Covered Expenses, Loss
Verification Agent Expenses and Replacement Cost payments shall be that stated
on the applicable agreement pursuant to which the same is payable.
Notwithstanding the foregoing, interest shall not accrue or be payable with
respect to any portion of the Put Premium that is payable pursuant to
Section
3.1(b)(ii)
to the
extent that such portion of the Put Premium is attributable to interest accrued
and unpaid on any unpaid Reinsurance Premiums.
3.6. Resolution
of Disputed Amounts.
In the
event that XL Capital disputes in good faith any portion of the Put Premium,
Loss Verification Agent Expenses, Covered Expenses or Replacement Cost payments
reflected in any Put Premium Certificate, Reimbursement Notice or Replacement
Cost Funding Notice, XL Capital shall pay the undisputed portion of the Put
Premium, Loss Verification Agent Expenses, Covered Expenses or Replacement
Cost
payments and shall provide written notice to Stoneheath identifying the disputed
portion of such Put Premium, Loss Verification Agent Expenses, Covered Expenses
or Replacement Cost payments and the nature of the dispute no later than the
Put
Premium Payment Date, the Reimbursement Payment Date or the Replacement Cost
Funding Date, as applicable. The parties will consult with one another in an
attempt to resolve the dispute and, in the event that the dispute cannot be
resolved within 20 Business Days following such Put Premium Payment Date,
Reimbursement Payment Date or Replacement Cost Funding Date, as applicable,
the
parties shall appoint an arbitrator in accordance with Section
3.7
to
resolve the dispute. The disputed portion of such Put Premium, Loss Verification
Agent Expenses, Covered Expenses or Replacement Cost payments shall not be
deemed due and payable for purposes of Section
3.5
until the
Business Day following the date on which the parties resolve the dispute or
such
dispute is resolved by a court of competent jurisdiction (in each case, to
the
extent that the dispute is resolved in favor of Stoneheath). To the extent
that
any such dispute is resolved in favor of Stoneheath, interest shall be deemed
to
have accrued on such unpaid amount pursuant to Section
3.5
from and
after the applicable Put Premium Payment Date, Reimbursement Payment Date or
Replacement Cost Funding Date, and such interest shall be payable by XL
Capital.
3.7. Notwithstanding
any other provision contained in this Agreement, any controversy or claim
arising out of or relating to Sections
3.1,
3.3,
3.4
or
3.5
shall be
resolved by binding arbitration administered by the American Arbitration
Association, pursuant to its Commercial Arbitration Rules. This agreement to
arbitrate shall be enforceable under the Federal Arbitration Act, 9 U.S.C.
§1 et
seq. The arbitration shall be held in New York, New York before three
arbitrators selected in accordance with the Commercial Arbitration Rules, with
one selected by Stoneheath, one selected by XL Capital and the third selected
by
such two arbitrators or, in the absence of their agreement, by the American
Arbitration Association in accordance with Section 12 of the Commercial
Arbitration Rules. The arbitrators may hear and rule on dispositive motions
as
part of the arbitration proceeding, including motions for judgment on the
pleadings, summary judgment and partial summary judgment. The arbitration award
shall be in writing and shall state the findings of fact and conclusions of
law
upon which it is based. Judgment upon the award rendered by the arbitrators
may
be entered in any court having competent jurisdiction. The parties covenant
that
they will participate in the arbitration in good faith and that they will share
equally its costs (which, in the case of Stoneheath, shall constitute
Extraordinary Expenses). The provisions of this Section
3.7
shall be
enforceable in any court of competent jurisdiction, and the parties hereto
shall
bear their own costs (which, in the case of
12
Stoneheath,
shall constitute Extraordinary Expenses) in the event of any proceeding to
enforce Sections
3.1,
3.3,
3.4
or
3.5
of this
Agreement. The decision of the arbitrators shall be final and conclusive and
shall not be subject to appeal absent manifest error. In no event shall the
arbitrators award any party punitive, special, consequential or exemplary
damages. By agreeing to arbitration, the parties hereto do not intend to deprive
any court with jurisdiction of its ability to issue a preliminary injunction,
attachment or other form of provisional remedy in aid of the arbitration and
a
request for such provisional remedies by a party to a court shall not be deemed
a waiver of this agreement to arbitrate, and in addition to the authority
conferred upon the panel by the rules specified above, the panel shall also
have
the authority to grant provisional remedies, including injunctive
relief.
4. Covenants
by XL Capital
4.1. XL
Capital
hereby covenants and agrees that, at all times prior to the Final Redemption
Date, neither (i) XL Capital’s Memorandum and Articles of Association nor (ii)
the XL Capital Board Resolutions will be amended in a manner that would
adversely affect the rights of the holders of XL Preferred Securities, without
the prior consent of Stoneheath given in accordance with the Paying Agency
Agreement. If any such amendment is made other than with the prior consent
of
Stoneheath given in accordance with the Paying Agency Agreement, XL Capital
shall immediately notify Stoneheath of such action in writing. Upon the issuance
of XL Preferred Securities as a result of such amendment, the holders of XL
Preferred Securities (including Stoneheath, to the extent that it holds XL
Preferred Securities, but in such case acting at the direction of the holders
of
the Issuer Preferred Securities) will have the right (subject to applicable
legal requirements) to have their XL Preferred Securities redeemed by XL Capital
for cash at a redemption price per security equal to the Make Whole Amount,
plus
any accrued but unpaid dividends with respect to the then-current dividend
period (whether or not declared) to the date of redemption, without interest
on
such unpaid dividends and without accumulation of dividends for any prior
dividend period to the extent not declared and payable in respect of such
dividend period, and the XL Preferred Securities will have the additional
rights, preferences, limitations and other terms contained in, and shall be
subject to, the XL Capital Board Resolutions. XL Capital and Stoneheath agree
that, for the purpose of this Section
4.1,
the
issuance by XL Capital of one or more series of preference ordinary shares
that
rank pari passu with or junior to the XL Preferred Securities (as set forth
in
the terms of issuance of such preference ordinary shares and the XL Capital
Board Resolutions) shall not constitute such an amendment.
4.2. XL
Capital
hereby covenants and agrees that it will not register any XL Preferred
Securities under the Securities Act before the date on which any XL Preferred
Securities are issued and delivered and will maintain an adequate reserve of
XL
Preferred Securities for the issuance and delivery thereof in connection with
this Agreement.
4.3. XL
Capital
hereby covenants and agrees that any XL Preferred Securities issued and
delivered to Stoneheath under this Agreement shall rank, at the time of delivery
and issuance, (a) senior to the ordinary shares of XL Capital and (b) pari
passu
with the most senior preference ordinary shares of XL Capital then issued and
outstanding (as set forth in the terms of issuance of such preference ordinary
shares and the XL Capital Board Resolutions).
13
4.4. XL
Capital, by entering into this Agreement, hereby covenants and agrees that
it
will not at any time institute against Stoneheath, or join in any institution
against Stoneheath of, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings, or other proceedings under U.S. federal or state
or
any non-U.S. bankruptcy or similar law in connection with any obligations
hereunder until the expiration of one year and one day (or, if longer, the
applicable preference period then in effect (plus one day) under any applicable
law) from the effective date of the termination of this Agreement. The
provisions of this Section
4.4
shall
survive the termination of this Agreement.
5. Covenants
by Stoneheath
5.1. Stoneheath
hereby covenants and agrees that, at all times prior to the Final Redemption
Date:
(a) it
shall
not amend, restate, revise or otherwise alter the rights, terms and preferences
of the Issuer Preferred Securities whether by operation of merger,
reorganization or otherwise, other than in accordance with Stoneheath’s
Memorandum and Articles of Association, and it will not register the Issuer
Preferred Securities under the Securities Act;
(b) it
shall
not amend, modify or supplement, or waive any right or remedy available to
it
under, or fail to enforce, the Asset Swap Agreement, the Interest Rate Swap
Agreement, the Paying Agency Agreement, the Trust Agreement or the
Administration Agreement;
(c) it
shall
provide, as promptly as possible, to XL Capital and XLIB, but no later than
two
Business Days following receipt thereof, a copy of all notices and
correspondence addressed to it from any of the parties to the Asset Swap
Agreement, the Interest Rate Swap Agreement, the Paying Agency Agreement or
the
Administration Agreement, except to the extent such notices have otherwise
been
provided to XL Capital and XLIB;
(d) no
amendment shall be made to its Memorandum and Articles of Association, without
the prior consent of XL Capital; and if any such amendment is made other than
with the prior consent of XL Capital, Stoneheath shall immediately notify XL
Capital of such action in writing;
(e) it
shall
provide to XL Capital (i) copies of its annual and quarterly financial
statements promptly upon such statement becoming available, (ii) upon request
by
XL Capital, to the extent not included in such financial statements or otherwise
provided to XL Capital by the Account Trustee, a report, dated as of the end
of
the most recent fiscal quarter or fiscal year, of the Remaining Aggregate Limit
under the Reinsurance Agreement and a description of the assets in the Trust
Account that includes a statement of their fair market value and (iii) such
other information as XL Capital may reasonably request from time to time;
and
14
(f) it
shall
hold any XL Preferred Securities issued and delivered to Stoneheath pursuant
to
Section
2
of this
Agreement until the Final Redemption Date; provided
that
Stoneheath shall be permitted to (i) redeem XL Preferred Securities at any
time
in accordance with their terms, (ii) dispose of XL Preferred Securities at
any
time to the extent necessary to pay Extraordinary Expenses and (iii) dispose
of
XL Preferred Securities at any time to the extent necessary to avoid the
distribution of fractional XL Preferred Securities in connection with a
redemption of the outstanding Issuer Preferred Securities on the Final
Redemption Date.
5.2. Stoneheath
hereby covenants and agrees that it will redeem the Issuer Preferred Securities
in accordance with their terms, as in effect on the date hereof, and that it
will use its commercially reasonable efforts to commence a liquidation
proceeding as soon as is reasonably practicable after the Final Redemption
Date.
6. Term
6.1. This
Agreement shall terminate upon the Liquidation Date for Stoneheath, except
that
the provisions of Section
2
shall
each terminate (an “Early
Termination”)
on the
earliest of:
(a) the
issuance and delivery, under this Agreement, to Stoneheath by XL Capital of
an
amount of XL Preferred Securities having an aggregate liquidation preference
of
U.S. $350,000,000;
(b) the
expiration of the Reinsurance Agreement in accordance with its terms and, if
required under the Reinsurance Agreement, the commutation of the rights and
obligations of Stoneheath and the Ceding Insurers thereunder in accordance
with
the procedures set forth in the Article entitled “Commutation and Quantum
Dispute Resolution” thereof;
(c) the
commencement of any proceeding for the winding up, liquidation, dissolution
or
insolvency-related reorganization of XL Capital or Stoneheath; and
(d) the
reduction of the Remaining Aggregate Limit to zero.
6.2. XL
Capital
shall promptly notify Stoneheath in writing of the occurrence of an Early
Termination.
7. Representations
and Warranties
7.1. Stoneheath
represents and warrants to XL Capital that, as of the date hereof:
(a) it
is duly
organized and validly existing as an exempted company under the laws of the
Cayman Islands and has full corporate power and authority to own its assets
and
to conduct the activities which it conducts;
(b) its
entry
into, exercise of its rights, performance of, or compliance with its obligations
under this Agreement do not and will not violate (i) any law to which it is
15
subject,
(ii) any of its constitutional documents or (iii) any agreement to which it
is a
party or which is binding on it or its assets;
(c) it
has the
corporate power to enter into, exercise its rights and perform and comply with
its obligations under this Agreement and has taken all necessary action to
authorize the execution, delivery and performance of this
Agreement;
(d) it
will
obtain and maintain in effect and comply with the terms of all necessary
consents, registrations and the like of or with any government or other
regulatory body or authority applicable to this Agreement;
(e) it
has
duly authorized, executed and delivered this Agreement and the Agreement is
fully enforceable against it, except that the enforceability thereof is subject
to (i) the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors’ rights generally, (ii) general equitable principles (whether
considered in a proceeding in equity or at law) and
(iii)
an implied covenant of good faith and fair dealing;
(f) its
obligations under this Agreement are valid, binding and enforceable at
law;
(g) it
is not
in default under any agreement to which it is a party or by which it or its
assets is or are bound or under its Memorandum and Articles of Association
and
no litigation, arbitration or administrative proceedings are pending, which
default, litigation, arbitration or administrative proceedings would materially
and adversely affect its ability to perform its obligations under this
Agreement;
(h) it
is not
necessary or advisable in order to ensure the validity, effectiveness,
performance or enforceability of this Agreement that any document be filed,
registered or recorded in any public office or elsewhere; and
(i) no
consent, approval, authorization or order of any court or governmental
authority, agency, commission or commissioner or other regulatory authority
is
required for the consummation by Stoneheath of the transactions contemplated
by
this Agreement.
7.2. Stoneheath
further represents and warrants to and agrees with XL Capital that:
(a) the
XL
Preferred Securities have not been registered under the Securities Act and
may
not and will not be registered under the Securities Act prior to the time any
XL
Preferred Securities are issued and delivered to Stoneheath;
(b) XL
Capital
will not be required to register any XL Preferred Securities under the
Securities Act at any time;
(c) Stoneheath
will not offer, sell, pledge, distribute or otherwise dispose of any XL
Preferred Securities, except in a transaction that complies with, or is exempt
from, the registration requirements of the Securities Act;
16
(d) Stoneheath
has not offered or sold, and will not offer or sell, the Issuer Preferred
Securities at any time, except (i) in an offshore transaction in accordance
with
Regulation S under the Securities Act and (ii) to persons who are not U.S.
Persons and who are not acting for the account or benefit of a U.S. Person;
(e) Stoneheath
will cause each certificate representing an Issuer Preferred Security to bear
a
legend stating that such Issuer Preferred Securities have not been, and will
not
be, registered under the Securities Act and may not be offered or sold within
the United States or to, or for the account or benefit of, U.S. Persons at
any
time; and
(f) Stoneheath
shall not register the transfer of any Issuer Preferred Securities to the name
of any Person that it knows is a U.S. Person.
7.3. XL
Capital
represents and warrants to Stoneheath that, as of the date hereof:
(a) it
is duly
organized and validly existing as an exempted company under the laws of the
Cayman Islands and has full corporate power and authority to own its assets
and
to conduct the activities which it conducts;
(b) its
entry
into, exercise of its rights, performance of, or compliance with its obligations
under this Agreement do not and will not violate (i) any law, rule, regulation
or order to which it is subject, (ii) any of its constitutional documents or
(iii) any agreement to which it is a party or which is binding on it or its
assets;
(c) it
has the
corporate power to enter into, exercise its rights and perform and comply with
its obligations under this Agreement and has taken all necessary action to
authorize the execution, delivery and performance of this
Agreement;
(d) it
will
obtain and maintain in effect and comply with the terms of all necessary
consents, registrations and the like of or with any government or other
regulatory body or authority applicable to this Agreement;
(e) it
has
duly authorized, executed and delivered this Agreement and the Agreement is
fully enforceable against it except that the enforceability thereof is subject
to (i) the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors’ rights generally, (ii) general equitable principles (whether
considered in a proceeding in equity or at law) and
(iii)
an implied covenant of good faith and fair dealing;
(f) its
obligations under this Agreement are legal, valid, binding and enforceable
at
law;
(g) it
is not
in default under any agreement to which it is a party or by which it or its
assets is or are bound or under its Memorandum and Articles of Association
and
no litigation, arbitration or administrative proceedings are pending, which
default, litigation, arbitration or administrative proceedings would materially
and adversely affect its ability to perform its obligations under this
Agreement;
17
(h) it
is not
necessary or advisable in order to ensure the validity, effectiveness,
performance or enforceability of this Agreement that any document be filed,
registered or recorded in any public office or elsewhere;
(i) no
consent, approval, authorization or order of any court or governmental
authority, agency, commission or commissioner or other regulatory authority
is
required for the consummation by XL Capital of the transactions contemplated
by
this Agreement and the issuance and delivery of the XL Preferred Securities
to
Stoneheath pursuant to the terms hereof; and
(j) as
of the
date hereof XL Capital has, and as of any date on which XL Preferred Securities
will be issued under this Agreement, XL Capital will have, sufficient authorized
share capital to comply with this Agreement, the XL Preferred Securities will
be
duly authorized for issuance and delivery to Stoneheath pursuant to this
Agreement and, when issued, delivered and registered in XL Capital’s Register of
Members by XL Capital pursuant to this Agreement, as prescribed in Section
2.4,
the XL
Preferred Securities will be validly issued, fully paid and nonassessable;
the
XL Preferred Securities will conform in all respects to the terms of the XL
Preferred Securities set forth in XL Capital’s Memorandum and Articles of
Association and the XL Capital Board Resolutions; and the XL Preferred
Securities will not be subject to preemptive or other similar
rights.
8. Payments
8.1. Any
amounts payable or distributable under this Agreement shall not be due from
any
party until it has received written notice thereof and any time for payment
shall begin to run on the date specified in such notice. In addition, any such
amounts due and payable shall be paid in U.S. dollars free and clear of any
Liens (other than the Trust Agreement) and be made by wire transfer of
immediately available funds to or as directed from time to time by the party
entitled thereto.
9. Severability
9.1. Any
provision of this Agreement which is or becomes illegal, invalid or
unenforceable in any jurisdiction may be severed from the other provisions
of
this Agreement without invalidating the remaining provisions hereof; and any
such illegality, invalidity or unenforceability shall not invalidate or render
illegal or unenforceable such provision in any other jurisdiction.
10. Notices
10.1. Except
as
otherwise provided, all notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received when delivered against receipt
or upon actual receipt of (i) personal delivery, (ii) delivery by reputable
overnight courier, (iii) delivery by facsimile transmission with telephonic
confirmation or (iv) delivery by registered or certified mail, postage prepaid,
return receipt requested, addressed as set forth below:
18
If
to XL
Capital at:
▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇:
Executive Vice President-General Counsel
-Corporate
Affairs-Secretary
Facsimile:
(▇▇▇)-▇▇▇-▇▇▇▇
If
to
Stoneheath:
Stoneheath
Re
c/o
HSBC
Financial Services (Cayman) Limited
▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
P.O.
Box
1109
Georgetown
Grand
Cayman ▇▇▇-▇▇▇▇
▇▇▇▇▇▇
Islands
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention:
The Directors
If
to the
Asset Swap Counterparty at:
▇▇▇▇▇▇▇
Sachs International
Peterborough
Court
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇
Facsimile:
▇▇-(▇▇)-▇▇▇▇-▇▇▇▇
Attention:
IBD Legal
If
to the
Interest Rate Swap Counterparty at:
IXIS
Financial Products Inc.
▇
▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ 10019
United
States of America
Facsimile:
▇▇▇-(▇▇▇)-▇▇▇-▇▇▇▇
Attention:
Swaps Administration
Each
party
hereto may alter the address to which notices, requests, demands and other
communications are to be sent to such party by giving notice of such change
of
address in conformity with the provisions of this Section
10.1.
10.2. No
failure
or delay of Stoneheath or XL Capital to deliver a written notice required under
the terms of this Agreement shall relieve either party of any of its obligations
under this Agreement or operate as a waiver of its rights hereunder and, subject
to the
19
termination
of this Agreement not having occurred, XL Capital and Stoneheath may continue
to
exercise their rights hereunder at any time.
11. Counterparts
11.1. This
Agreement may be executed in any number of counterparts and by the different
parties hereto on separate counterparts each of which when executed and
delivered shall constitute an original, but all the counterparts shall together
constitute but one and the same instrument.
12. Benefit
of Agreement and Disclaimer
12.1. This
Agreement shall inure to the benefit of each party hereto, and each of their
respective permitted successors and assigns and transferees.
13. Amendment
and Assignment
13.1. This
Agreement may not be amended or modified in any respect, nor may any provision
be waived, without the written consent of both parties hereto, the Asset Swap
Counterparty and the Interest Rate Swap Counterparty. Any consent by Stoneheath
to an amendment, modification or waiver shall be effective only if given in
accordance with the Paying Agency Agreement. No waiver by one party of any
obligation of the other hereunder shall be considered a waiver of any other
obligation of such party. No failure or delay by XL Capital or Stoneheath in
exercising its rights hereunder shall operate as a waiver of its rights
hereunder and, subject to the termination of this Agreement not having occurred,
XL Capital and Stoneheath may continue to exercise their rights hereunder at
any
time.
13.2. Neither
Stoneheath nor XL Capital may assign its respective rights or obligations under
this Agreement to any other person, except that XL Capital may assign its rights
and obligations under this Agreement to another person as a result of a merger,
consolidation or amalgamation of XL Capital with or into such other person,
if
such person is the surviving entity, or as a result of a sale of all or
substantially all of the assets of XL Capital to such other person if such
other
person expressly assumes all of the rights and obligations of XL Capital under
this Agreement at such time; and immediately following the merger,
consolidation, amalgamation or sale of all or substantially all of its assets,
the rating of the preferred stock or the unsecured debt obligations of the
other
person is at least as high as the credit rating of the XL Preferred Securities
or the senior unsecured debt obligations of XL Capital, as the case may be,
immediately prior to the merger or sale.
14. Limited
Recourse
14.1. All
obligations of, and any claims against, Stoneheath under this Agreement shall
be
with recourse solely to the assets of Stoneheath (other than its ordinary share
capital of U.S. $5,000, the amount equal to U.S. $1,500 paid to Stoneheath
as a
transaction fee, any interest income earned on such excluded amounts and the
Cayman Islands bank account in which such amounts are held) for satisfaction
of
Stoneheath’s obligations hereunder.
20
All
obligations of and any claims against Stoneheath under this Agreement shall
be
extinguished and shall not thereafter revive in the event that, at any time,
Stonheath’s assets (other than the cash amounts representing its ordinary share
capital of U.S. $5,000, the amount equal to U.S. $1,500 paid to
Stoneheath as a transaction fee, any interest income earned on such excluded
amounts and the Cayman bank account in which such amounts are held) are
exhausted. XL Capital shall have no further claim thereafter against Stoneheath,
its directors, officers or shareholders for any shortfall.
The
provisions of this Section
14.1
shall
survive the termination of this Agreement.
15. Governing
Law
15.1. THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF
THE STATE OF NEW YORK.
16. Jurisdiction
16.1. Each
of
the parties hereto irrevocably and unconditionally submits to the exclusive
jurisdiction of the courts of the State of New York or the courts of the United
States of America located in the Southern District of New York in New York
County, Borough of Manhattan in respect of any action or proceeding arising
out
of or in connection with this Agreement (and the parties agree not to commence
any proceedings except in such courts). Each of the parties hereto irrevocably
and unconditionally waives, to the fullest extent permitted by applicable law,
any objection that it may now or hereafter have to the laying of the venue
of
any such proceedings in the courts of the State of New York or the courts of
the
United States of America located in the Southern District of New York and any
claim that any Proceeding brought in any such court has been brought in an
inconvenient forum. Each of Stoneheath and XL Capital agrees that it shall
at
all times have an authorized agent in the State of New York upon whom process
may be served in connection with any proceedings, and each of Stoneheath and
XL
Capital hereby authorizes and appoints CT Corporation, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ of America, to accept service of all legal
process arising out of or connected with this Agreement in the State of New
York
and service on such person (or substitute) shall be deemed to be service on
Stoneheath or XL Capital, as the case may be. Except upon such a substitution,
Stoneheath and XL Capital shall not revoke any such authority or appointment
and
shall at all times maintain an agent for service of process in the State of
New
York. If for any reason such person shall cease to act as agent for the service
of process, Stoneheath and XL Capital shall promptly appoint another such agent,
and shall forthwith notify each other of such appointment.
[Remainder
of page intentionally left blank.]
21
IN
WITNESS
WHEREOF the parties hereto have caused this Agreement to be duly executed on
the
day and year first above written.
Executed
for and on behalf of
STONEHEATH
RE
By:
/s/
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Name:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title:
Director
Executed
for and on behalf of
By:
/s/
▇▇▇▇▇ de St. Paer
Name:
▇▇▇▇▇ de St. Paer
Title:
EVP, CFO
22
ANNEX
A
Put
Premium Certificate
Series
D Preference Ordinary Shares
23
ANNEX
B
Form
of
Reimbursement Notice for Reimbursement of
Loss
Verification Agent Expenses and Covered Expenses
24
ANNEX
C
Form
of
Replacement Cost Funding Notice
for
the
Payment of Replacement Cost
25
ANNEX
D
Stoneheath
Board Resolutions
26
ANNEX
E
XL
Capital Board Resolutions
27