(Pounds)75,000,000
REIMBURSEMENT AGREEMENT
dated as of
November 22, 1996
among
A.C.E. Insurance Company, Ltd.,
The Banks Listed Herein
and
▇▇▇▇▇▇ Guaranty Trust Company of New York,
as Issuing Bank and Agent
TABLE OF CONTENTS/*/
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions......................... 1
SECTION 1.02. Accounting Terms and
Determinations...................... ▇
▇▇▇▇▇▇▇ ▇.▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ Dollars and English
Pounds Sterling..................... 7
ARTICLE II
THE LETTERS OF CREDIT
SECTION 2.01. Commitments to Issue Letters of
Credit; Extension................... 8
SECTION 2.02. Notice of Issuance.................. 9
SECTION 2.03. Drawings under Letters of Credit;
Reimbursement....................... 10
SECTION 2.04. Obligations Absolute................ 11
SECTION 2.05. Indemnification..................... 12
SECTION 2.06. Fees................................ 13
SECTION 2.07. Increased Costs; Reduced Return..... 14
SECTION 2.08. Payments and Computations........... 15
ARTICLE III
CONDITIONS
SECTION 3.01. Conditions Precedent to Closing..... 15
SECTION 3.02. Conditions Precedent to Issuance of
the Letters of Credit............... 17
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power....... 18
SECTION 4.02. Corporate and Governmental
Authorization; No Contravention..... 18
SECTION 4.03. Binding Effect...................... 18
SECTION 4.04. Financial Information............... 18
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/*/The Table of Contents is not a part of this Agreement.
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Page
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SECTION 4.05. Litigation............................................... 19
SECTION 4.06. ERISA.................................................... 19
SECTION 4.07. Taxes.................................................... 19
SECTION 4.08. Not an Investment Company................................ 19
SECTION 4.09. Full Disclosure.......................................... 20
SECTION 4.10. Compliance with Laws..................................... 20
SECTION 4.11. Lien..................................................... 20
ARTICLE V
COVENANTS
SECTION 5.01. Information.............................................. 22
SECTION 5.02. Payment of Obligations................................... 23
SECTION 5.03. Maintenance of Property; Insurance....................... 24
SECTION 5.04. Conduct of Business and Maintenance of Existence......... 24
SECTION 5.05. Compliance with Laws..................................... 24
SECTION 5.06. Inspection of Property, Books and Records................ 25
SECTION 5.07. Leverage................................................. 25
SECTION 5.08. Subsidiary Debt.......................................... 25
SECTION 5.09. Minimum Tangible Net Worth............................... 25
SECTION 5.10. Negative Pledge.......................................... 25
SECTION 5.11. Consolidations, Mergers and Sales of Assets.............. 27
SECTION 5.12. No Amendments............................................ 27
SECTION 5.13. ERISA.................................................... 27
SECTION 5.14. Termination Of Existing Letter Of Credit................. 27
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default........................................ 27
SECTION 6.02. Notice of Default........................................ 31
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization............................ 31
SECTION 7.02. Agent and Affiliates..................................... 31
SECTION 7.03. Action by Agent.......................................... 31
SECTION 7.04. Consultation with Experts................................ 31
SECTION 7.05. Liability of Agent....................................... 31
SECTION 7.06. Indemnification.......................................... 32
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Page
SECTION 7.07. Credit Decision........................................... 33
SECTION 7.08. Successor Agent........................................... 33
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Notices.................................................. 33
SECTION 8.02. No Waivers............................................... 34
SECTION 8.03. Expenses; Indemnification................................ 34
SECTION 8.04. Sharing of Set-Offs...................................... 35
SECTION 8.05. Amendments and Waivers................................... 35
SECTION 8.06. Successors and Assigns................................... 36
SECTION 8.07. Collateral............................................... 37
SECTION 8.08. Governing Law............................................ 37
SECTION 8.09. Counterparts; Integration; Effectiveness................. 38
SECTION 8.10. Judicial Proceedings..................................... 38
SECTION 8.11. Judgment Currency........................................ 39
SECTION 8.12. WAIVER OF JURY TRIAL..................................... 40
SECTION 8.13. Taxes.................................................... 40
SECTION 8.14. Confidential Information................................. 41
Schedule I - Participation of Banks
Exhibit A - Form of Letter of Credit
Exhibit B - Opinion of ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇, special Bermuda counsel for
the Custodian
Exhibit C - Opinion of ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇, special Bermuda counsel for
the Company
Exhibit D - Opinion of ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇, New York counsel for the Company
Exhibit E - Opinion of ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, special United States counsel
for the Issuing Bank and the Agent
Exhibit F - Letter from CT Corporation System
Exhibit G - Form of Letter of Credit Request
Exhibit H - Form of Pledge Agreement
Exhibit I - Form of Custodian Agreement
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REIMBURSEMENT AGREEMENT
REIMBURSEMENT AGREEMENT dated as of November 22, 1996 among A.C.E.
INSURANCE COMPANY, LTD., the BANKS listed on the signature pages hereof and
▇▇▇▇▇▇ GUARANTY TRUST COMPANY OF NEW YORK, as Issuing Bank and Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"ACE Limited" means ACE Limited, a Cayman Islands company limited by
shares, and its successors.
"Agent" means ▇▇▇▇▇▇ Guaranty Trust Company of New York in its
capacity as agent for the Banks hereunder, and its successors in such capacity.
"Applicant" means ACE Capital Limited, a corporation incorporated
under the laws of England and Wales, and its successors.
"Assignee" has the meaning set forth in Section 8.06(c).
"Bank" means each bank listed on the signature pages hereof, each bank
or other financial institution which becomes a Bank pursuant to Section
2.01(b)(iii) and each Assignee which becomes a Bank pursuant to Section 8.06(c),
and their respective successors.
"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"Bermuda Companies Law" means The Companies Act 1981 of Bermuda, as
amended, and the regulations promulgated thereunder.
"Bermuda Insurance Law" means The Insurance ▇▇▇ ▇▇▇▇ of Bermuda, as
amended, and the regulations promulgated thereunder.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City or London are authorized or required by
law to close.
"Closing Date" means the date on or after the Effective Date on which
the Agent shall have received the documents specified in or pursuant to Section
3.01.
"CODA" means Corporate Officers & Directors Assurance Ltd., a Bermuda
limited liability company, and its successors.
"Collateral" has the meaning set forth in the Pledge Agreement.
"Company" means A.C.E. Insurance Company, Ltd., a Bermuda limited
liability company, and its successors.
"Confirmation Agreement" means the Confirmation and Agreement of The
Bank of Bermuda Limited dated November 22, 1996, as amended, between the
Custodian and the Agent, substantially in the form of Exhibit B to the Pledge
Agreement.
"Consolidated Debt" means at any date the Debt of the Company and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Company in
its consolidated financial statements if such statements were prepared as of
such date.
"Consolidated Tangible Net Worth" means at any date the consolidated
stockholder's equity of the Company and its Consolidated Subsidiaries less their
consolidated Intangible Assets, all determined as of such date. For purposes of
this definition "Intangible Assets" means the amount (to the extent reflected in
determining such consolidated stockholder's equity) of (i) all write-ups (other
than write-ups resulting from foreign currency translations and write-ups of
assets of a going concern business made within twelve months after the
acquisition of such business) subsequent to June 30, 1996 in the book value of
any asset owned by the Company or a Consolidated Subsidiary and (ii) all
unamortized debt discount and
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expense, unamortized deferred charges, deferred acquisition costs, goodwill,
patents, trademarks, service marks, trade names, anticipated future benefit of
tax loss carry-forwards, copyrights, organization or developmental expenses and
other intangible assets.
"Custodian" means The Bank of Bermuda Limited in its capacity as
Custodian under the Custodian Agreement.
"Custodian Agreement" means the Custodian Agreement dated as of
November 20, 1996, as amended, between the Custodian and the Company.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all non-contingent
obligations (and, solely for purposes of Section 5.10 and the definitions of
Material Debt and Material Financial Obligations, all contingent obligations) of
such Person to reimburse any bank or other Person in respect of amounts paid
under a letter of credit or similar instrument, (vi) all Debt secured by a Lien
on any asset of such Person, whether or not such Debt is otherwise an obligation
of such Person, and (vii) all Debt of others Guaranteed by such Person, provided
that the term "Debt" shall not include obligations of an insurance company under
insurance policies or surety bonds issued by it.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an 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.
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"Effective Date" means the date this Agreement becomes effective in
accordance with Section 8.09.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means, with respect to any Person, such Person, any
Subsidiary and all members of a controlled group of corporations and all trades
or businesses (whether or not incorporated) under common control which, together
with such Person or any such Subsidiary, are treated as a single employer under
Section 414 of the Internal Revenue Code.
"Event of Default" has the meaning set forth in Section 6.01.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to ▇▇▇▇▇▇ Guaranty Trust Company of New
York on such day on such transactions as determined by the Agent.
"Financing Documents" means this Agreement, the Letters of Credit, the
Pledge Agreement, the Notice of Pledge, the Confirmation Agreement and the
Custodian Agreement, and any agreement, instrument or document executed and
delivered in connection with or relating to any Letter of Credit.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt (whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement
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conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the holder of such Debt of the payment thereof or to protect such
holder against loss in respect thereof (in whole or in part), provided that the
term Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Indemnitee" has the meaning set forth in Section 8.03(b).
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Issuing Bank" means ▇▇▇▇▇▇ Guaranty Trust Company of New York as
issuer of the Letters of Credit hereunder.
"Letters of Credit" means the standby letters of credit to be issued
by the Issuing Bank pursuant to Section 2.01.
"Letter of Credit Commitment" means (Pounds)75,000,000.
"Letter of Credit Liabilities" means, for any Bank and at any time,
the sum of (x) the amounts then owing to such Bank (including in its capacity as
the Issuing Bank) by the Company to reimburse it in respect of amounts drawn
under the Letters of Credit, including in respect of participations purchased by
such Bank pursuant to Section 2.02(a) and (y) such Bank's ratable participation
in the aggregate amount then available for drawing under the Letters of Credit.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest 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
Company 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.
"Material Debt" means Debt of the Company 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 $10,000,000.
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"Material Financial Obligations" means a principal or face amount of
Debt and/or current payment obligations in respect of Derivatives Obligations of
the Company and/or one or more of its Subsidiaries, arising in one or more
related or unrelated transactions, exceeding in the aggregate $10,000,000.
"Notice of Issuance" has the meaning set forth in Section 2.02.
"Notice of Pledge" means the Notice of Pledge dated November 22, 1996,
as amended, between the Company and the Custodian, substantially in the form of
Exhibit A to the Pledge Agreement.
"Parent" has the meaning set forth in Section 2.08(b).
"Participation Percentage" means, with respect to each Bank, the
percentage of participation by such Bank in the Letters of Credit issued
hereunder as set forth in Schedule I, as modified as a result of an assignment
pursuant to Section 8.06.
"Pledge Agreement" means the Pledge Agreement dated as of November 22,
1996, as amended, between the Company and the Agent, substantially in the form
of Exhibit H hereto.
"Prime Rate" means the rate of interest publicly announced by ▇▇▇▇▇▇
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"Reimbursement Obligation" has the meaning set forth in Section
2.03(b).
"Required Banks" means at any time Banks having at least 66 2/3% of
the aggregate Letter of Credit Liabilities.
"Revolving Credit Agreement" means the Credit Agreement dated as of
November 15, 1996, as amended, among ACE Limited, the Company and CODA, as
guarantors, the Banks listed therein and ▇▇▇▇▇▇ Guaranty Trust Company of New
York, as Agent.
"Subparticipant" has the meaning set forth in Section 8.06(b).
"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
6
majority of the board of directors or other persons performing similar functions
are at the time directly or indirectly owned by such Person; unless otherwise
specified, "Subsidiary" means a Subsidiary of the Company.
"Termination Date" means, with respect to each Letter of Credit, the
initial expiry date of such Letter of Credit or, if it is extended, the date to
which such Letter of Credit is so extended.
"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 Company.
Capitalized terms used but not otherwise defined herein shall have the
respective meanings set forth in the Revolving Credit Agreement.
SECTION 1.02. 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, applied
on a basis consistent (except for changes concurred in by the Company's
independent public accountants) with the most recent audited consolidated
financial statements of the Company and its Consolidated Subsidiaries delivered
to the Banks; provided that, if the Company notifies the Agent that the Company
wishes to amend any covenant in Article V to eliminate the effect of any change
in generally accepted accounting principles on the operation of such covenant
(or if the Agent notifies the Company that the Required Banks wish to amend
Article V for such purpose), then the Company'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 accounting
principles became effective, until either such notice is withdrawn or such
covenant is amended in a manner satisfactory to the Company and the Required
Banks.
SECTION 1.03. United States Dollars and English Pounds Sterling.
Each reference herein to "dollars" or "$" or "Pounds Sterling" or "(Pounds)"
shall refer to United States Dollars or English Pounds, as the case may be.
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ARTICLE II
THE LETTERS OF CREDIT
SECTION 2.01. Commitments to Issue Letters of Credit; Extension.
(a)(i) Subject to the terms and conditions hereof, the Issuing Bank agrees to
issue one or more letters of credit, substantially in the form of Exhibit A
hereto, from time to time upon the request of the Applicant (the "Letters of
Credit"); provided that, immediately after each Letter of Credit is issued, the
aggregate amount of the Letter of Credit Liabilities shall not exceed the Letter
of Credit Commitment. Upon the date of issuance by the Issuing Bank of a Letter
of Credit, the Issuing Bank shall be deemed, without further action by any party
hereto, to have sold to each Bank, and each Bank shall be deemed, without
further action by any party hereto, to have purchased from the Issuing Bank, a
participation in such Letter of Credit and the related Letter of Credit
Liabilities ratably in accordance with its Participation Percentage.
(ii) Only one Letter of Credit can be issued hereunder, which must be
issued on or before November 29, 1996, unless such Letter of Credit is extended
as provided in subsection (b) below or this Agreement is amended as provided in
Section 8.05; references herein to Letters of Credit and other similar
references are contained herein only to accommodate the possibility that this
Agreement may be amended to permit the issuance of multiple Letters of Credit.
(b) (i) The extension or renewal of any Letter of Credit shall, for
all purposes hereof (other than clause (i) of Section 3.02), be deemed to be an
issuance of such Letter of Credit. On or before November 10 of each year, the
Issuing Bank shall give notice of termination of each Letter of Credit, unless
(x) it has theretofore timely received Notice of Issuance in respect of the
Letters of Credit, (y) all of the other conditions contained in Section 3.02 are
then satisfied and (z) each Bank party to this Agreement has theretofore agreed
in writing to a one year extension in respect of such Letters of Credit,
confirming the Participation Percentage of such Bank in such Letters of Credit;
provided that no failure by the Issuing Bank to give any such notice of
termination and no delay in giving any such notice shall affect the obligations
of (i) the Company to reimburse the Issuing Bank for any drawing under any
Letters of Credit or (ii) any Banks to pay to the Issuing Bank an amount in
respect of such Bank's ratable share of any such drawing.
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(ii) Each Bank party to this Agreement agrees that it will give
notice to the Agent and the Company on or before September 15 of each year as to
whether it agrees to a one year extension of the Letters of Credit, effective
from the next succeeding January 1, provided that the failure of any Bank to
give such notice or any delay in giving the same shall be deemed to be a notice
from such Bank by September 15 that it does not agree to such a one year
extension, and no such Bank shall incur any obligation or liability as a result
of any such failure or delay.
(iii) If any Bank party to this Agreement gives (or is deemed to have
given) notice that it does not agree to a one year extension as contemplated by
subsection (ii), then the Company may designate by October 20 of such year a
bank or other financial institution which is willing to assume all of the rights
and obligations of such Bank under this Agreement and the other Financing
Documents, such bank or other financial institution to be subject to the written
consent of the Issuing Bank (such consent not to be unreasonably withheld by the
Issuing Bank in its good faith business judgment). In that case such Bank
agrees to assign such rights and obligations to such designated bank or other
financial institution and enter into an agreement therefor with such other bank
or financial institution pursuant to which such bank or other financial
institution agrees to pay to such Bank all amounts then due and owing (and all
fees accrued to but excluding the date of such agreement) to such Bank hereunder
and under each other Financing Document, in which case such Bank shall no longer
be a party hereto (except as to Sections 2.05, 2.07 and 8.03 for the period
prior to the date of such agreement) and such bank or other financial
institution shall become a Bank party hereto.
SECTION 2.02. Notice of Issuance. (a) The Applicant shall give the
Issuing Bank notice, by a Letter of Credit Request in the form of Exhibit G
hereto, by November 1 of each year (or, in the case of 1996, by November 22,
1996), specifying the date the applicable Letter of Credit is to be issued or
extended and setting forth the terms of such Letter of Credit which are to be
completed (including, without limitation, the beneficiary thereof, which must be
the Society and Corporation of Lloyd's (such notice, including any such notice
given in connection with the extension of a Letter of Credit, a "Notice of
Issuance").
(b) Upon receipt of a Notice of Issuance, the Issuing Bank shall
promptly notify each Bank of the contents thereof and of the amount of such
Bank's participation in the applicable Letter of Credit. The issuance by the
Issuing Bank of each Letter of Credit shall, in addition to
9
the conditions precedent set forth in Article III, be subject to the conditions
precedent that (i) such Letter of Credit shall be substantially in the form of
Exhibit A hereto, or in such other form and contain such terms as shall be
satisfactory to the Company and the Issuing Bank and the Required Banks and (ii)
the Company shall have executed and delivered such other instruments and
agreements relating to such Letter of Credit as the Issuing Bank shall have
reasonably requested.
SECTION 2.03. Drawings under Letters of Credit; Reimbursement. (a)
Upon receipt from the beneficiary of any Letter of Credit of any notice of a
drawing under such Letter of Credit, the Issuing Bank shall promptly notify the
Company and each other Bank as to the amount to be paid as a result of such
drawing and the payment date. The Company shall be irrevocably and
unconditionally obligated forthwith to reimburse the Issuing Bank for any
amounts paid by the Issuing Bank upon any drawing under any Letter of Credit
(each, a "Reimbursement Obligation"), without presentment, demand, protest or
other formalities of any kind. All such amounts paid by the Issuing Bank and
remaining unpaid by the Company shall bear interest, payable on demand, for each
day until paid at a rate per annum equal to the sum of the Base Rate plus 2%.
(b) In addition, each Bank will pay to the Issuing Bank immediately
upon the Issuing Bank's demand at any time during the period commencing after
such drawing until reimbursement therefor in full by the Company, an amount
equal to such Bank's ratable share of such drawing (in proportion to its
participation therein), together with interest on such amount for each day from
the date of the Issuing Bank's demand for such payment (or, if such demand is
made after 12:00 Noon (New York City time) on such date, from the next
succeeding Business Day) to the date of payment by such Bank of such amount at a
rate of interest per annum equal to the Base Rate plus 2%. Each Bank shall also
be liable for its pro rata share of any amounts paid by the Company that are
subsequently rescinded or avoided, or are otherwise restored or returned. Such
liability shall be unconditional and without regard to the occurrence of any
Default or the compliance by the Company with any of its obligations under this
Agreement or any other Financing Document. The Issuing Bank will pay to each
Bank ratably all amounts received from the Company for application in payment of
its reimbursement obligations in respect of any Letter of Credit, but only to
the extent such Bank has made payment to the Issuing Bank in respect of such
Letter of Credit pursuant hereto.
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SECTION 2.04. Obligations Absolute. The obligations of the Company
and each Bank under Section 2.03 shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement, under all circumstances whatsoever, including without limitation
the following circumstances:
(i) any lack of validity or enforceability of this Agreement or any
Letter of Credit or any other Financing Document;
(ii) any amendment or waiver of or any consent to departure from all
or any of the provisions of this Agreement or any Letter of Credit or any
other Financing Document;
(iii) the use which may be made of any Letter of Credit by, or any
acts or omission of, a beneficiary of a Letter of Credit (or any Person for
whom such beneficiary may be acting);
(iv) the existence of any claim, set-off, defense or other rights
that the Company may have at any time against a beneficiary of a Letter of
Credit (or any Person for whom such beneficiary may be acting), the Banks
(including the Issuing Bank) or any other Person, whether in connection
with this Agreement or any Letter of Credit or any other Financing Document
or any unrelated transaction;
(v) any statement or any other document presented under a Letter of
Credit proving to be forged, fraudulent or invalid in any respect or any
statement therein being untrue or inaccurate in any respect whatsoever;
(vi) payment under a Letter of Credit against presentation to the
Issuing Bank of a draft or certificate that does not comply with the terms
of such Letter of Credit, provided that the Issuing Bank's determination
that documents presented under such Letter of Credit comply with the terms
thereof shall not have constituted gross negligence or willful misconduct
of the Issuing Bank; or
(vii) any other act or omission to act or delay of any kind by any
Bank (including, without limitation, the Issuing Bank), the Agent or any
other Person or any other event or circumstance whatsoever that might, but
for the provisions of this clause (vii), constitute a
11
legal or equitable discharge of the Company's or the Bank's obligations
hereunder.
SECTION 2.05. Indemnification. (a) The Company hereby indemnifies
and holds harmless each Bank (including the Issuing Bank) and the Agent from and
against any and all claims, damages, losses, liabilities, costs or expenses
which such Bank or the Agent may incur hereunder or under any other Financing
Document or in connection with any transaction contemplated hereby or thereby
(including, without limitation, any claims, damages, losses, liabilities, costs
or expenses which the Issuing Bank may incur by reason of or in connection with
the failure of any other Bank to fulfill or comply with its obligations to the
Issuing Bank hereunder (but nothing herein contained shall affect any rights the
Company may have against such defaulting Bank)), and none of the Banks
(including the Issuing Bank) nor the Agent nor any of their officers or
directors or employees or agents shall be liable or responsible, by reason of or
in connection with the execution and delivery or transfer of or payment or
failure to pay under any Letter of Credit, including without limitation any of
the circumstances enumerated in Section 2.04, as well as (i) any error,
omission, interruption or delay in transmission or delivery of any message, by
mail, cable, telegraph, telex or otherwise, (ii) any loss or delay in the
transmission of any document required in order to make a drawing under a Letter
of Credit and (iii) any consequences arising from causes beyond the control of
the Issuing Bank, including without limitation any government acts; provided
that the Company shall not be required to indemnify the Issuing Bank for any
claims, damages, losses, liabilities, costs or expenses, and the Company shall
have a claim against the Issuing Bank for direct (but not consequential) damage
suffered by it, to the extent found by a court of competent jurisdiction to have
been caused by (x) the willful misconduct or gross negligence of the Issuing
Bank in determining whether a request presented under any Letter of Credit
complied with the terms of such Letter of Credit or (y) the Issuing Bank's
failure to pay under any Letter of Credit after the presentation to it of a
request strictly complying with the terms and conditions of such Letter of
Credit except as a direct result of court orders prohibiting such payment; and
provided further that the Company shall not be required to indemnify any Bank
(other than the Issuing Bank the indemnification of which under this Section
2.05 is governed by the preceding proviso) or the Agent for any claims, damages,
losses, liabilities, costs or expenses suffered by it to the extent found by a
court of competent jurisdiction to have been caused by its willful misconduct or
gross negligence. Nothing in this
12
Section 2.05 is intended to limit the obligations of the Company under any other
provision of this Agreement. To the extent the Company does not indemnify the
Issuing Bank as required by this subsection, the Banks agree to do so ratably in
accordance with their Participation Percentage.
(b) The parties hereto agree that in making any payment under any Letter
of Credit by the Issuing Bank none of the following shall constitute or be
deemed to constitute the wilful misconduct or gross negligence of the Issuing
Bank: (i) the Issuing Bank's exclusive reliance on any document (including
without limitation any draft) presented to it under such Letter of Credit as to
any and all matters set forth therein, including reliance on the amount of any
draft presented thereunder, whether or not the amount due to the beneficiary
thereof equals the amount of such draft, and whether or not any document
presented thereunder proves to be inaccurate or otherwise insufficient in any
respect, if such document on its face appears to be in order and whether or not
such document or any statement contained therein proves to be forged or invalid
or inaccurate or untrue in any respect whatsoever and (ii) any non-material,
non-compliance by the documents (including without limitation any draft)
presented under any Letter of Credit with the terms thereof.
SECTION 2.06. Fees. (a) Ticking Fee. On the earlier of the date of
first issuance of a Letter of Credit and January 1, 1997, the Company shall pay
to the Agent, for the account of each Bank (including the Issuing Bank), a
ticking fee with respect to such Letter of Credit on the Letter of Credit
Commitment, at a rate per annum equal to .09 of 1%, calculated on a 360-day
basis, for the period from and including the Effective Date to but excluding
January 1, 1997.
(b) Letter of Credit Fee. The Company agrees to pay to the Agent,
for the account of each Bank (including the Issuing Bank), a letter of credit
fee with respect to each Letter of Credit, at a rate per annum equals to .15 of
1%, calculated on a 360-day basis, for the period from and including January 1,
1997 to but excluding the Termination Date of such Letter of Credit, on such
Bank's share of the daily average amount available at any time to be drawn under
such Letter of Credit. The letter of credit fees shall be payable quarterly,
with respect to each Letter of Credit, in arrears on the last Business Day of
each March, June, September and December and on its Termination Date.
(c) Fronting Fee. The Company agrees to pay to the Issuing Bank for
its own account, as compensation for
13
its services hereunder, a fronting fee for each issuance of a Letter of Credit
in the amounts and at the times agreed upon by the Company and the Issuing Bank.
SECTION 2.07. Increased Costs; Reduced Return. (a) If, on or after
the date of this Agreement, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency, (i) shall impose, modify or deem applicable any reserve
(including, without limitation, any such requirement imposed by the Board of
Governors of the Federal Reserve System), special deposit, insurance assessment
or similar requirement against letters of credit issued by, or assets of, or
deposits with or for the account of, or credit extended by, any Bank or (ii)
shall impose on any Bank any other condition regarding this Agreement or any
Letter of Credit and the result of any of the foregoing is to increase the cost
to such Bank of issuing or maintaining such Letter of Credit (or its
participation therein), or funding any drawings thereunder, or reduce the amount
of any sum received or receivable by such Bank under this Agreement, by an
amount deemed by such Bank to be material, then, within 45 days after demand by
such Bank (with a copy to the Agent), the Company shall pay to such Bank all
additional amounts which are necessary to compensate such Bank for such
increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any applicable law, rule or regulation, or any change
in the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Bank (or any Person controlling such Bank (a "Parent")) as a
consequence of its obligations hereunder or under any Letter of Credit to a
level below that which such Bank (or its Parent) could have achieved but for
such adoption, change, request or directive (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by such Bank to
be material, then from time to time, within 45 days after demand by such Bank,
the Company agrees to pay to such
14
Bank such additional amount or amounts as will compensate such Bank for such
reduction.
(c) Each Bank will promptly notify the Company of any event of which
it has knowledge, occurring after the date hereof, which will entitle such Bank
to compensation pursuant to this Section 2.07. A certificate of any Bank
claiming compensation under this Section 2.07 and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive in the absence
of manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
SECTION 2.08. Payments and Computations.
(a) The Company shall make each payment of Reimbursement Obligations, fees,
interest and other amounts payable hereunder to the Agent, as provided herein,
not later than 2:00 P.M. (New York City time) on the day when due in English
Pounds in the case of Reimbursement Obligations or in United States Dollars in
the case of fees, interest or other amounts payable hereunder immediately
available at an address of the Agent specified in writing to the Company by the
Agent. The Agent will promptly distribute to each Bank its ratable share of
each such payment received by the Agent for the account of such Bank. Each
payment shall be made without any set-off, counterclaim or deduction.
(b) Whenever any payment to be made hereunder shall be stated to be
due on a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in any computation of interest or fees.
(c) In the event that any payment to the Agent hereunder is made
after 2:00 P.M. (London or New York City time, as relevant) on a Business Day,
such payment shall be deemed received on the immediately following Business Day,
and such extension of time shall be included in any computation of interest or
fees.
ARTICLE III
CONDITIONS
SECTION 3.01. Conditions Precedent to Closing. The closing hereunder
shall occur upon satisfaction of the condition described in clause (h) below and
receipt by the Agent of the following documents, each dated the Closing Date
unless otherwise indicated:
15
(a) counterparts hereof signed by each of the parties hereto (or, in
the case of any party as to which an executed counterpart shall not have
been received, receipt by the Agent in form satisfactory to it of
telegraphic, telex or other written confirmation from such party of
execution of a counterpart hereof by such party);
(b) an executed copy of the Pledge Agreement, the Notice of Pledge,
the Confirmation Agreement and the Custodian Agreement;
(c) an opinion of ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇, special Bermuda counsel
for the Custodian, substantially in the form of Exhibit B hereto;
(d) an opinion of ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇, special Bermuda counsel
for the Company, substantially in the form of Exhibit C hereto;
(e) an opinion of ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇, New York counsel for the
Company, substantially in the form of Exhibit D hereto;
(f) an opinion of ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, special United States
counsel for the Agent, substantially in the form of Exhibit E hereto;
(g) a letter from CT System in New York, New York, substantially in
the form of Exhibit F hereto, evidencing CT System's agreement to act as
agent for service of process for the Company pursuant to Section 8.10(b);
(h) receipt by the Agent and the Banks of all fees due to them on or
prior to the Effective Date; and
(i) all documents the Agent may reasonably request prior to the
Closing Date relating to the existence of the Company, the corporate
authority for and the validity of this Agreement and each other Financing
Document, the existence, validity, enforceability and first priority of a
Lien in the Collateral (assuming that the Collateral is delivered at the
time, in the amount and as otherwise provided in the Pledge Agreement) and
any other matters relevant hereto, all in form and substance satisfactory
to the Agent.
16
The Agent shall promptly notify the Company and the Banks of the Closing Date,
and such notice shall be conclusive and binding on all parties hereto.
SECTION 3.02. Conditions Precedent to Issuance of the Letters of
Credit. The obligation of the Issuing Bank to issue any Letter of Credit is
subject to the (i) fact that such Letter of Credit is first issued (as opposed
to extended or renewed) on or prior to November 29, 1996 and (ii) the
satisfaction of the following conditions:
(a) receipt by the Agent of a Notice of Issuance as required by
Section 2.02;
(b) the fact that the aggregate amount of the Letter of Credit
Liabilities immediately after such issuance will not exceed the Letter of
Credit Commitment;
(c) the fact that, immediately before and after such issuance, no
Default shall have occurred and be continuing;
(d) the fact that the representations and warranties of the Company
contained in this Agreement and in each other Financing Document shall be
true on and as of the date of such issuance, except representations and
warranties which expressly refer to an earlier date in which case the same
shall be true on and as of such earlier date; and
(e) the fact that such Letter of Credit is being issued solely as
security to support the Applicant's underwriting business at the Society
and Corporation of Lloyd's provided in accordance with the requirements of
the Society and Corporation of Lloyd's.
Such issuance shall be deemed to be a representation and warranty by the Company
on the date of such issuance as to the facts specified in clauses (b) through
(e), inclusive, of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants on each day during the term of
this Agreement that:
17
SECTION 4.01. Corporate Existence and Power. The Company is a
limited liability company, duly incorporated and validly existing under the laws
of Bermuda. The Company has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted. The Company is a Wholly-Owned Consolidated
Subsidiary of ACE Limited.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Company of this
Agreement and the other Financing Documents to which it is a party are within
its corporate powers, have been duly authorized 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
the Company or of any agreement, judgment, injunction, order, decree or other
instrument binding upon the Company or any of its Subsidiaries or result in the
creation or imposition of any Lien on any asset of the Company or any of its
Subsidiaries.
SECTION 4.03. Binding Effect. Each of this Agreement and the other
Financing Documents to which the Company is a party constitutes a valid and
binding agreement of the Company enforceable in accordance with its terms.
SECTION 4.04. Financial Information.
(a) The consolidated balance sheet of the Company and its
Consolidated Subsidiaries as of September 30, 1995 and the related consolidated
statements of operations and retained earnings and of cash flows for the fiscal
year then ended, all reported on by Coopers & ▇▇▇▇▇▇▇, copies of which have been
delivered to each of the Banks, fairly present, in all material respects, in
conformity with generally accepted accounting principles, the consolidated
financial position of the Company and its Consolidated Subsidiaries as of such
date and their consolidated results of operations and retained earnings and cash
flows for such fiscal year.
(b) Since June 30, 1996 there has been no material adverse change in
the business, financial position or results of operations of the Company and its
Consolidated Subsidiaries, considered as a whole.
(c) The balance sheet of CODA as of September 30, 1995 and the
related statements of operations and retained earnings and of cash flows for the
fiscal year then ended,
18
all reported on by Coopers & ▇▇▇▇▇▇▇, copies of which have been delivered to
each of the Banks, fairly present, in all material respects, in conformity with
generally accepted accounting principles, the financial position of CODA as of
such date and its results of operations and retained earnings and cash flows for
such fiscal year.
(d) Since June 30, 1996 there has been no material adverse change in
the business, financial position or results of operations of CODA and its
Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. Litigation. There is no action, suit or proceeding
pending against, or to the knowledge of the Company threatened against or
affecting, the Company 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 Company 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 Financing Document.
SECTION 4.06. ERISA. Neither the Company nor any member of its
ERISA Group maintains or contributes to, or has within the previous six years
(whether or not while a member of such Person's current ERISA Group) maintained
or contributed to, or been required to maintain or been jointly and severally
liable for contributions to, or has liability upon withdrawal from, any plan or
arrangement subject to (i) the minimum funding standards of ERISA and the
Internal Revenue Code, (ii) Part 3 of Subtitle B of Title I of ERISA or (iii)
Title IV of ERISA.
SECTION 4.07. Taxes. The Company and its Subsidiaries have filed all
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 Company or any Subsidiary. The charges,
accruals and reserves on the books of the Company and its Subsidiaries in
respect of taxes or other governmental charges are, in the opinion of the
Company, adequate.
SECTION 4.08. Not an Investment Company. The Company is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
19
SECTION 4.09. Full Disclosure. All information heretofore furnished
by the Company or on behalf of the Company by ACE Limited to the Agent or any
Bank for purposes of or in connection with this Agreement or any of the other
Financing Documents or any transaction contemplated hereby or thereby is, and
all such information hereafter furnished by the Company or on behalf of the
Company by ACE Limited to the Agent or any Bank will be, true and accurate in
all material respects on the date as of which such information is stated or
certified. The Company has disclosed to the Banks in writing any and all facts
which materially and adversely affect or may affect (to the extent the Company
can now reasonably foresee) the business, operations or financial condition of
the Company and its Consolidated Subsidiaries, taken as a whole, or the ability
of the Company to perform its obligations under this Agreement or any of the
other Financing Documents.
SECTION 4.10. Compliance with Laws. The Company 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.
SECTION 4.11. Lien. (a) Upon delivery of the Collateral to the
Custodian as provided in the Pledge Agreement, the Company will have good and
marketable title in and to the Collateral free and clear of all Liens (except
the Lien created under the Financing Documents) and will hold such title and all
of the Collateral in its own name and not in the name of any nominee or other
Person, except that the Collateral described in clause (i) of the definition of
"Eligible Securities" contained in Section 2(a) of the Pledge Agreement shall be
held in the name of Citibank, N.A. for the account of the Company.
(b) Upon delivery of the Collateral to the Custodian as provided in
the Pledge Agreement, the Pledge Agreement will create in favor of the Agent for
the benefit of the Banks a valid and enforceable first priority Lien on all of
the Collateral, subject to the interest of the Custodian under the Financing
Documents.
(c) Upon delivery of the Collateral to the Custodian as provided in
the Pledge Agreement, the Company will not have outstanding, nor will it be
contractually bound to create, any Lien on or with respect to any of the
Collateral, subject to the interest of the Custodian under the Financing
Documents.
20
(d) The Company is not subject to any agreement, judgment,
injunction, order, decree or other instrument or any law or regulation which
would prevent or otherwise interfere with the Company's obligations to deliver
Collateral in the amounts, at the times and as otherwise provided in the Pledge
Agreement, subject to the interest of the Custodian under the Financing
Documents.
21
ARTICLE V
COVENANTS
The Company agrees that, so long as any Letter of Credit is in effect
or any Letter of Credit Liability remains unpaid:
SECTION 5.01. Information. The Company will deliver to each of the
Banks:
(a) as soon as available and in any event within 90 days after the end
of each fiscal year of the Company, a consolidated balance sheet of the
Company and its Consolidated Subsidiaries as of the end of such fiscal year
and the related consolidated statements of operations and 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 Required Banks by Coopers & ▇▇▇▇▇▇▇ or other independent
public accountants of nationally recognized standing;
(b) 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 ACE Limited,
a consolidated balance sheet of ACE Limited and its Consolidated
Subsidiaries as of the end of such quarter and the related consolidated
statements of operations and cash flows for such quarter and for the
portion of ACE Limited'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 ACE Limited'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 ACE Limited;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
chief financial officer or the chief accounting officer of the Company (i)
setting forth in reasonable detail the calculations required to establish
whether the Company was in compliance with the requirements of Sections
5.07 to 5.10, inclusive, on the date of such financial statements and (ii)
stating whether any Default exists on the date of such certificate and, if
any Default
22
then exists, setting forth the details thereof and the action which the
Company is taking or proposes to take with respect thereto;
(d) within five days after any officer of the Company 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
Company setting forth the details thereof and the action which the Company
is taking or proposes to take with respect thereto;
(e) as soon as available and in any event within 20 days after
submission, each statutory statement of the Company in the form submitted
to the Bermuda Department of Insurance;
(f) promptly upon obtaining knowledge thereof, (i) a copy of any
notice from the Minister of Finance 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 the Company
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, (ii) copies of any
correspondence by, to or concerning the Company relating to an
investigation conducted by the Minister of Finance, whether pursuant to
Section 132 of the Bermuda Companies Law or otherwise and (iii) a copy of
any notice of or requesting or otherwise relating to the winding up or any
similar proceeding of or with respect to the Company; and
(g) from time to time such additional information regarding the
financial position, results of operations or business of the Company or any
of its Subsidiaries as the Agent, at the request of any Bank, may
reasonably request from time to time.
SECTION 5.02. Payment of Obligations. The Company 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.
23
SECTION 5.03. Maintenance of Property; Insurance. (a) The Company
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.
(b) The Company will maintain, and will cause each Subsidiary to
maintain, physical damage insurance on all real and personal property on an all
risks basis (including the perils of flood and quake), covering the repair and
replacement cost of all such property and consequential loss coverage for
business interruption and extra expense. All such insurance shall be provided
by insurers having an A.M. Best policyholders rating of not less than B+ or such
other insurers as the Required Banks may approve in writing. The Company will
deliver to the Banks (i) upon request of any Bank through the Agent from time to
time, full information as to the insurance carried, (ii) within five days of
receipt of notice from any insurer, a copy of any notice of cancellation or
material change in coverage from that existing on the date of this Agreement and
(iii) forthwith, notice of any cancellation or nonrenewal of coverage by the
Company.
SECTION 5.04. Conduct of Business and Maintenance of Existence. The
Company will continue, and will cause each Subsidiary to continue, to engage in
business of the same general type as now conducted by the Company 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 Section 5.04 shall prohibit (i) the merger of a Subsidiary
into the Company or the merger or consolidation of a Subsidiary 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 or (ii) the termination of the existence of any
Subsidiary if the Company in good faith determines that such termination is in
the best interest of the Company and is not materially disadvantageous to the
Banks.
SECTION 5.05. Compliance with Laws. The Company 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
24
compliance therewith is contested in good faith by appropriate proceedings.
SECTION 5.06. Inspection of Property, Books and Records. The Company
will keep, and will cause each Subsidiary to keep, proper books of record and
account 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 and as often as may reasonably be desired.
SECTION 5.07. Leverage. Consolidated Debt will at no time exceed 35%
of Consolidated Tangible Net Worth.
SECTION 5.08. Subsidiary Debt. The Company will not permit any of
its Subsidiaries to create, assume or suffer to exist any Debt, except (i) Debt
under the Financing Documents or the Revolving Credit Agreement, (ii) Debt owing
to the Company or ACE Limited, (iii) Debt of Tripar Partnership, a Bermuda
general partnership, owing to other Subsidiaries or Debt of such other
Subsidiaries owing to Tripar Partnership, (iv) Debt in respect of letters of
credit issued in the ordinary course of business and (v) Debt created by
exercise of overdraft privileges on a basis not more frequent than once each
calendar month for not more than five Business Days in an amount not to exceed
$10,000,000 in the aggregate at any one time.
SECTION 5.09. Minimum Tangible Net Worth. Consolidated Tangible Net
Worth will at no time be less than the sum of (i) $900,000,000 plus (ii) 25% of
the consolidated net income of the Company and its Consolidated Subsidiaries for
the period from September 30, 1996 through the end of the Company's then most
recent fiscal quarter (treated for this purpose as a single accounting period),
provided that, for purposes of calculation under this Section 5.09, such
consolidated net income shall in no event be less than zero.
SECTION 5.10. Negative Pledge. Neither the Company nor any
Subsidiary will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except:
25
(a) Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement in an aggregate principal or face
amount not exceeding $25,000,000;
(b) any Lien existing on any asset of any corporation at the time
such corporation becomes a Subsidiary and not created in contemplation of
such event;
(c) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such asset,
provided that such Lien attaches to such asset concurrently with or within
90 days after the acquisition thereof;
(d) any Lien on any asset of any corporation existing at the time
such corporation is merged or consolidated with or into the Company or a
Subsidiary and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof
by the Company or a Subsidiary and not created in contemplation of such
acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that such Debt is not increased and is
not secured by any additional assets;
(g) Liens arising in the ordinary course of its business which (i) do
not secure Debt or Derivatives Obligations, (ii) do not secure any
obligation in an amount exceeding $10,000,000 and (iii) 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;
(h) Liens on cash and cash equivalents securing Derivatives
Obligations, provided that the aggregate amount of cash and cash
equivalents subject to such Liens may at no time exceed $10,000,000;
(i) Liens on any assets of the Company created pursuant to the
Financing Documents; and
(j) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt in an aggregate principal or face amount at any date
not to exceed 10% of Consolidated Tangible Net Worth.
26
SECTION 5.11. Consolidations, Mergers and Sales of Assets. The
Company will not (i) consolidate with or merge into any other Person or (ii)
sell, lease or otherwise transfer, directly or indirectly, all or any
substantial part of its assets to any other Person.
SECTION 5.12. No Amendments. The Company shall not amend or waive,
or utilize or rely on any waiver of, any provision of the Pledge Agreement or
the Confirmation Agreement without the written consent of the Agent and the
Required Banks.
SECTION 5.13. ERISA. Neither the Company nor any member of its ERISA
Group will maintain or contribute to, or become obligated to maintain or become
jointly and severally liable for contributions to, or have liability upon
withdrawal from, any plan or arrangement subject to (i) the minimum funding
standards of ERISA and the Internal Revenue Code, (ii) Part 3 of Subtitle B of
Title I of ERISA or (iii) Title IV of ERISA.
SECTION 5.14. Termination Of Existing Letter Of Credit. The Company
shall cause the Issuing Bank to receive on January 2, 1997 its Irrevocable
Letter of Credit No. 5250090140, together with evidence satisfactory to the
Issuing Bank from the account party and applicant therefor and the beneficiary
thereof that it has been cancelled on January 1, 1997.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) the Company shall fail (i) to pay when due any Reimbursement
Obligation or (ii) to pay within five Business Days of the due date thereof
any interest or fees or other amounts payable hereunder;
(b) the Company shall fail to observe or perform any covenant (i)
contained in Sections 5.07 through 5.12, inclusive, or Section 5.14 or (ii)
relating to the delivery of the Collateral and the perfection of the first
priority charge and security interest created therein contained in any
other Financing Document;
27
(c) the Company shall fail to observe or perform any covenant or
agreement contained in this Agreement or in any other Financing Document
(other than those covered by clause (a) or (b) above) for 30 days after
notice thereof has been given to the Company by the Agent at the request of
any Bank;
(d) any representation, warranty, certification or statement made by
the Company in this Agreement or any other Financing Document or in any
certificate, financial statement or other document delivered pursuant to
this Agreement or any other Financing Document shall prove to have been
incorrect in any material respect when made (or deemed made);
(e) the Company or any Subsidiary shall fail to make any payment in
respect of any Material Financial Obligations when due or within any
applicable grace period or an Event of Default (as defined in the Revolving
Credit Agreement) shall have occurred and be continuing;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (or, with the
giving of notice or lapse of time or both, would enable) the holder of such
Debt or any Person acting on such holder's behalf to accelerate the
maturity thereof;
(g) (i) any corporate action is taken authorizing the winding up, the
liquidation, any arrangement or the taking of any other similar action of
or with respect to the Company or authorizing any corporate action to be
taken to facilitate any such winding up, liquidation, arrangement or other
similar action or any petition shall be filed seeking the winding up, the
liquidation, any arrangement or the taking of any other similar action of
or with respect to the Company by the Registrar of Companies in Bermuda,
one or more holders of insurance policies or reinsurance certificates
issued by the Company or by any other Person or Persons or any petition
shall be presented for the winding up of the Company to a court of Bermuda
as provided under the Bermuda Companies Law and in either such case such
petition shall remain undismissed and unstayed for a period of 60 days or
any creditors' or members' voluntary winding up of the Company as provided
under the Bermuda Companies Law shall be commenced or any receiver shall be
appointed by a creditor of the Company or by a court of Bermuda on the
application of a creditor of the Company as provided under any
28
instrument giving rights for the appointment of a receiver;
(ii) a proceeding shall be commenced by any Person seeking the
rehabilitation, liquidation, dissolution or conservation of the assets of
the Company or any substantial part thereof or any similar remedy and such
proceedings shall remain undismissed and unstayed for a period of 60 days;
(iii) the Company or any Subsidiary shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of
a trustee, receiver, liquidator, custodian or other similar official of it
or any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing; or
(iv) an involuntary case or other proceeding shall be commenced
against the Company or any Subsidiary seeking liquidation, reorganization
or other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed
for a period of 60 days;
(h) a judgment or order for the payment of money in excess of
$10,000,000 shall be rendered against the Company or any Subsidiary and
such judgment or order shall continue unsatisfied and unstayed for a period
of 30 days; or
(i) any person or group of persons (within the meaning of Section 13
or 14 of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated
by the Securities and Exchange Commission under said Act) of 20% or more of
the outstanding shares of common
29
stock of ACE Limited; or, during any period of 12 consecutive calendar
months, individuals who were directors of ACE Limited on the first day of
such period shall cease to constitute a majority of the board of directors
of ACE Limited; or the Company shall cease to be a Wholly-Owned
Consolidated Subsidiary of ACE Limited;
(j) any court or arbitrator or any governmental body, agency or
official which has jurisdiction in the matter shall decide, rule or order
that any provision of any of the Financing Documents is invalid or
unenforceable in any material respect, or the Company shall so assert in
writing;
(k) the registration of the Company as an insurer shall be revoked,
suspended or otherwise have restrictions or conditions placed upon it
unless, in the case of the placing of any such restrictions or conditions,
such restrictions or conditions could not have a material adverse effect on
the interests of the Issuing Bank or the Agent or the Banks under the
Financing Documents;
(l) the Company shall fail to deliver Collateral at the times, in the
amounts or as otherwise specified in the Financing Documents or the Lien
created pursuant thereto on the Collateral shall at any time or for any
reason cease to be a valid, enforceable or first priority Lien on any of
the Collateral; or
(m) the Company shall terminate, amend or waive, or utilize or rely
on any waiver of, any provision of the Custodian Agreement or the Notice of
Pledge without the written consent of the Agent and the Required Banks;
then, and in every such event, the Agent may, and in the case of clauses (i),
(ii) and (iv) below shall if requested by Banks having more than 50% of the
aggregate amount of Letter of Credit Liabilities, (i) by notice to the Company
terminate the Letter of Credit Commitment and it shall thereupon terminate, (ii)
by notice to the Company declare, to the extent permitted by law, the Letter of
Credit Liabilities to be and the same shall thereupon become immediately due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Company, (iii) take all other actions at law or
in equity permitted to be taken by it and (iv) by notice to the Company, require
that the Company specifically perform, and the Company shall specifically
perform, its
30
obligations to deliver Collateral under the Pledge Agreement and its other
obligations under the Financing Documents.
SECTION 6.02. Notice of Default. The Agent shall give notice to the
Company under Section 6.01(c) promptly upon being requested to do so by any Bank
and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the other Financing Documents
as are delegated to the Agent by the terms hereof and thereof, together with all
such powers as are reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. ▇▇▇▇▇▇ Guaranty Trust Company of
New York shall have the same rights and powers under this Agreement and each
other Financing Document as any other Bank and may exercise or refrain from
exercising the same as though it were not the Agent, and ▇▇▇▇▇▇ Guaranty Trust
Company of New York and its affiliates may accept deposits from, lend money to,
and generally engage in any kind of business with the Company or any affiliate
of the Company as if it were not the Agent hereunder or thereunder.
SECTION 7.03. Action by Agent. The obligations of the Agent under
this Agreement and each other Financing Document are only those expressly set
forth herein or therein. Without limiting the generality of the foregoing, the
Agent shall not be required to take any action with respect to any Event of
Default, except as expressly provided in Article VI.
SECTION 7.04. Consultation with Experts. The Agent may consult with
legal counsel (who may be counsel for the Company or the Custodian or both),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agent. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be liable for
31
any action taken or not taken by it in connection herewith or with any other
Financing Document (i) with the consent or at the request of the Required Banks
or (ii) in the absence of its own gross negligence or willful misconduct.
Neither the Agent nor any of its affiliates nor any of their respective
directors, officers, agents or employees shall be responsible for or have any
duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made hereunder or under any other Financing Document or in
connection herewith or therewith including, without limitation, the authenticity
or accuracy of any draft, certificate, statement or other item presented under a
Letter of Credit, (ii) the performance or observance of any of the covenants or
agreements of the Company; (iii) the satisfaction of any condition specified in
Article III, except receipt of items required to be delivered to the Agent; (iv)
the validity, effectiveness or genuineness of this Agreement or any other
Financing Document or any other instrument or other writing furnished in
connection herewith or therewith; or (v) the existence, validity, enforceability
or priority of the Lien on the Collateral. The Agent shall not incur any
liability by acting in reliance upon any notice, consent, certificate,
statement, or other writing (which may be a bank wire, telex, facsimile
transmission or similar writing) believed by it to be genuine or to be signed by
the proper party or parties.
SECTION 7.06. Indemnification. (a) Each Bank shall, ratably in
accordance with its Participation Percentage, indemnify the Agent, its
affiliates and their respective directors, officers, agents and employees (to
the extent not reimbursed by the Company) against any cost, expense (including
counsel fees and disbursements), claim, demand, action, loss or liability
(except such as result from any indemnitee's gross negligence or willful
misconduct) that such indemnitees may suffer or incur in connection with this
Agreement or any other Financing Document or any action taken or omitted by such
indemnitees hereunder or thereunder.
(b) Without limiting the generality of the foregoing, each Bank
shall, ratably and in accordance with its Participation Percentage, indemnify
the Issuing Bank and its directors, officers, agents and employees (to the
extent not reimbursed by the Company) against any costs, expense (including
counsel fees and disbursements), claim, demand, action, loss or liability that
each such indemnitee may suffer or incur and which results from any failure on
the part of such Bank to pay to the Issuing Bank such Bank's ratable share of
any drawing under any Letter of Credit in accordance with Section 2.03(b).
32
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
SECTION 7.08. Successor Agent. The Agent may resign at any time by
giving notice thereof to the Banks and the Company. Upon any such resignation,
the Required Banks shall have the right to appoint a successor Agent, which
successor Agent shall be reasonably acceptable to the Company. If no successor
Agent shall have been so appointed by the Required Banks, and shall have
accepted such appointment, within 30 days after the retiring Agent gives notice
of resignation, then the retiring Agent may, on behalf of the Banks, appoint a
successor Agent, which shall be a commercial bank organized or licensed under
the laws of the United States of America or of any State thereof and having a
combined capital and surplus of at least $50,000,000. Upon the acceptance of
its appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, facsimile transmission or similar writing) and shall be given to such
party at its address, facsimile number or telex number set forth on the
signature pages hereof or such other address, facsimile number or telex number
as such party may hereafter specify for the purpose by notice to the other
parties hereto. Each such notice, request or other communication shall be
effective (i) if given by telex, when such telex is
33
transmitted to the telex number referred to in this Section and the appropriate
answerback is received, (ii) if given by facsimile transmission, when
transmitted to the facsimile number referred to in this Section and confirmation
of receipt is received, (iii) if given by mail, 10 days after such communication
is deposited in the mails with first class postage prepaid, addressed as
aforesaid or (iv) if given by any other means, when delivered at the address
specified in this Section; provided that notices to the Agent under Article II
shall not be effective until received.
SECTION 8.02. No Waivers. No failure or delay by the Agent or any
Bank in exercising any right, power or privilege under this Agreement or any
other Financing Document shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and remedies
provided in this Agreement and the other Financing Documents shall be cumulative
and not exclusive of any rights or remedies provided by law.
SECTION 8.03. Expenses; Indemnification. (a) The Company shall pay
(i) all out-of-pocket expenses of the Agent, including fees and disbursements of
special United States counsel for the Agent and any special Bermuda counsel to
the Agent or the Custodian, reasonably incurred in connection with the
preparation of this Agreement and the other Financing Documents, any waiver or
consent hereunder or thereunder or any amendment hereof or thereof or any
Default or alleged Default hereunder or thereunder and (ii) if an Event of
Default occurs, all out-of-pocket expenses incurred by the Agent and each Bank,
including (without duplication) the fees and disbursements of outside counsel
and the allocated cost of inside counsel, in connection with such Event of
Default and collection, bankruptcy, insolvency and other enforcement proceedings
resulting therefrom.
(b) The Company agrees to indemnify the Agent and each Bank
(including the Issuing Bank), their respective affiliates and the respective
directors, officers, agents and employees of the foregoing (each an
"Indemnitee") and hold each Indemnitee harmless from and against any and all
liabilities, losses, damages, costs and expenses of any kind, including, without
limitation, the reasonable fees and disbursements of counsel, which may be
reasonably incurred by such Indemnitee in connection with any investigative,
administrative or judicial proceeding (whether or not such Indemnitee shall be
designated a party thereto) brought or threatened relating to or arising out of
the Financing
34
Documents or any actual or proposed use of proceeds of any draft drawn under any
Letter of Credit; provided that no Indemnitee shall have the right to be
indemnified hereunder for such Indemnitee's own gross negligence or willful
misconduct as determined by a court of competent jurisdiction.
SECTION 8.04. Sharing of Set-Offs. Each Bank agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of any Reimbursement Obligation
owing to it which is greater than the proportion received by any other Bank in
respect of the amount of any Reimbursement Obligation owing to such other Bank,
the Bank receiving such proportionately greater payment shall purchase such
participations in the Reimbursement Obligations owing to the other Banks, and
such other adjustments shall be made, as may be required so that all such
payments with respect to such Reimbursement Obligation owing to the Banks shall
be shared by the Banks pro rata; provided that nothing in this Section shall
impair the right of any Bank to exercise any right of set-off or counterclaim it
may have and to apply the amount subject to such exercise to the payment of
indebtedness of the Company other than its indebtedness hereunder. The Company
agrees, to the fullest extent it may effectively do so under applicable law,
that any holder of a participation in a Reimbursement Obligation, whether or not
acquired pursuant to the foregoing arrangements or the arrangements set forth in
Section 2.02(a) or otherwise, may exercise rights of set-off or counterclaim and
other rights with respect to such participation as fully as if such holder of a
participation were a direct creditor of the Company in the amount of such
participation.
SECTION 8.05. Amendments and Waivers. Any provision of this
Agreement or the Letters of Credit or any provision of the other Financing
Documents requiring the consent of the Agent and the Required Banks may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by the Company and the Required Banks (and (x) if the rights or duties of
the Agent are affected thereby, by the Agent and (y) if any Letter of Credit is
being amended or waived, by the beneficiary thereof); provided that no such
amendment or waiver shall, unless signed by all the Banks, (i) increase or
decrease the Letter of Credit Commitment or subject any Bank to any additional
obligation, (ii) reduce the amount of any Reimbursement Obligation or the
default rate of interest payable thereon or the amount of any fees or other
amounts payable hereunder, (iii) postpone the date fixed for any payment of
35
any Reimbursement Obligation or of any interest or fees or other amounts payable
hereunder or postpone the Termination Date of any Letter of Credit, (iv) release
any Collateral furnished pursuant to the Pledge Agreement or otherwise, except
as contemplated by the other Financing Documents or (v) change the Participation
Percentage, or the percentage of the aggregate unpaid principal amount of the
Letter of Credit Liabilities, or the number of Banks, which shall be required
for the Banks or any of them to take any action under this Section or any other
provision of this Agreement or any other Financing Document.
SECTION 8.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Company may not
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Subparticipant") subparticipating interests in its rights
and obligations under this Agreement. In the event of any such grant by a Bank
of a subparticipating interest to a Subparticipant, whether or not upon notice
to the Company and the Agent, such Bank shall remain responsible for the
performance of its obligations hereunder, and the Company and the Agent shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement. Any agreement pursuant to
which any Bank may grant such a subparticipating interest shall provide that
such Bank shall retain the sole right and responsibility to enforce the
obligations of the Company hereunder including, without limitation, the right to
approve any amendment, modification or waiver of any provision of this
Agreement; provided that such subparticipation agreement may provide that such
Bank will not agree to any modification, amendment or waiver of this Agreement
described in clause (i), (ii), (iii), (iv) or (v) of Section 8.05 without the
consent of the Subparticipant. The Company agrees that each Subparticipant
shall, to the extent provided in its subparticipation agreement and subject to
subsection (e) below, be entitled to the benefits of Section 2.07 with respect
to its subparticipating interest. An assignment or other transfer which is not
permitted by subsection (c) or (d) below shall be given effect for purposes of
this Agreement only to the extent of a subparticipating interest granted in
accordance with this subsection (b).
36
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (in an amount not
less than (Pounds)10,000,000 unless the Company shall otherwise consent) of all,
of its rights and obligations under this Agreement and the other Financing
Documents, and such Assignee shall assume such rights and obligations with (and
subject to) the subscribed consent of the Company, which shall not be
unreasonably withheld, and the Issuing Bank, which may consent or not in its
sole discretion; provided that if an Assignee is an affiliate of such transferor
Bank or was a Bank immediately prior to such assignment, no such consent of the
Company shall be required. Upon the consummation of any assignment pursuant to
this subsection (c) and payment by such Assignee to such transferor Bank of an
amount equal to the purchase price agreed between such transferor Bank and such
Assignee, such Assignee shall be a Bank party to this Agreement and shall have
all the rights and obligations of a Bank as set forth in any instrument of
assumption, and the transferor Bank shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by any
party shall be required. In connection with any such assignment, the transferor
Bank shall pay to the Agent an administrative fee for processing such assignment
in the amount of $2,500.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and the other Financing Documents to a Federal Reserve
Bank. No such assignment shall release the transferor Bank from its obligations
hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Sections 2.07 and 8.13
than such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Company's prior written
consent or at a time when the circumstances giving rise to such greater payment
did not exist.
SECTION 8.07. Collateral. Each of the Banks represents to the Agent
and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 8.08. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
37
SECTION 8.09. Counterparts; Integration; Effectiveness. This
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement, together with the other Financing
Documents, constitutes the entire agreement and understanding among the parties
hereto and supersedes any and all prior agreements and understandings, oral or
written, relating to the subject matter hereof. This Agreement shall become
effective upon receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed counterpart
shall not have been received, receipt by the Agent in form satisfactory to it of
telegraphic, telex, facsimile or other written confirmation from such party of
execution of a counterpart hereof by such party).
SECTION 8.10. Judicial Proceedings. (a) Consent to Jurisdiction.
The Company irrevocably submits to the jurisdiction of any federal court sitting
in New York City, and in the event that jurisdiction cannot be obtained or
maintained in a federal court, to the jurisdiction of any New York State court
sitting in New York City over any suit, action or proceeding arising out of or
relating to this Agreement or any other Financing Document. The Company
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding brought in such court and any claim that any suit, action or
proceeding brought in such a court has been brought in an inconvenient forum.
The Company agrees that a final judgment in any such suit, action or proceeding
brought in such a court shall be conclusive and binding upon it and will be
given effect in Bermuda to the fullest extent permitted by applicable law and
may be enforced in any federal or New York State court sitting in New York City
(or any other court to the jurisdiction of which the Company is or may be
subject) by a suit upon such judgment, provided that service of process is
effected upon it in one of the manners specified herein or as otherwise
permitted by law.
(b) Appointment of Agent for Service of Process. The Company hereby
irrevocably designates and appoints CT Corporation System having an office on
the date hereof at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ as its authorized
agent, to accept and acknowledge on its behalf, service of any and all process
which may be served in any suit, action or proceeding of the nature referred to
in subsection (a) above in any federal or New York State court sitting in New
York City. The Company represents and warrants that such agent has agreed in
writing to accept such appointment and
38
that a true copy of such designation and acceptance has been delivered to the
Agent. Said designation and appointment shall be irrevocable until each
Reimbursement Obligation and each other amount payable hereunder shall have been
paid in full in accordance with the provisions hereof. If such agent shall cease
so to act, the Company covenants and agrees to designate irrevocably and appoint
without delay another such agent satisfactory to the Agent and to deliver
promptly to the Agent evidence in writing of such other agent's acceptance of
such appointment.
(c) Service of Process. The Company hereby consents to process being
served in any suit, action or proceeding of the nature referred to in subsection
(a) above in any federal or New York State court sitting in New York City by
service of process upon the agent of the Company for service of process
appointed as provided in subsection (b) above; provided that, to the extent
lawful and possible, notice of said service upon such agent shall be mailed by
registered or certified air mail, postage prepaid, return receipt requested, to
the Company at its address specified on the signature page hereof or to any
other address of which the Company shall have given written notice to the Agent.
The Company irrevocably waives, to the fullest extent permitted by law, all
claims of error by reason of any such service in such manner and agrees that
such service shall be deemed in every respect effective service of process upon
the Company in any such suit, action or proceeding and shall, to the fullest
extent permitted by law, be taken and held to be valid and personal service upon
and personal delivery to the Company.
(d) No Limitation on Service or Suit. Nothing in this Section 8.10
shall affect the right of the Agent or any Bank to serve process in any other
manner permitted by law or limit the right of the Agent or any Bank to bring
proceedings against the Company in the courts of any jurisdiction or
jurisdictions.
SECTION 8.11. Judgment Currency. If, under any applicable law and
whether pursuant to a judgment being made or registered against the Company or
for any other reason, any payment under or in connection with this Agreement or
any other Financing Document is made or satisfied in a currency (the "Other
Currency") other than that in which the relevant payment is due (the "Required
Currency"), then, to the extent that the payment (when converted into the
Required Currency at the rate of exchange on the date of payment or, if it is
not practicable for the party entitled thereto (the "Payee") to purchase the
Required Currency with the Other Currency on the date of payment, at the rate of
39
exchange as soon thereafter as it is practicable for it to do so) actually
received by the Payee falls short of the amount due under the terms of this
Agreement, the Company shall, to the extent permitted by law, as a separate and
independent obligation, indemnify and hold harmless the Payee against the amount
of such short-fall. For the purpose of this Section, "rate of exchange" means
the rate at which the Payee is able on the relevant date to purchase the
Required Currency with the Other Currency and shall take into account any
premium and other costs of exchange.
SECTION 8.12. WAIVER OF JURY TRIAL. THE COMPANY, THE AGENT AND THE
BANKS HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER FINANCING
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 8.13. Taxes. (a) For purposes of this Section 8.13, the
following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings of any nature with respect to any
payment by the Company pursuant to this Agreement or under any Financing
Documents, and all liabilities with respect thereto, excluding in the case of
each Bank and the Agent, taxes imposed on its net income, and franchise or
similar taxes imposed on it, by a jurisdiction under the laws of which such Bank
or the Agent (as the case may be) is organized or in which its principal
executive office is located (all such excluded taxes being hereinafter referred
to as "Domestic Taxes").
"Other Taxes" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to this Agreement or under any Financing
Documents or from the execution, delivery, registration or enforcement of, or
otherwise with respect to, this Agreement or any Financing Documents.
(b) Any and all payments by the Company to or for the account of any
Bank or the Agent hereunder or under any Financing Documents shall be made
without deduction for any Taxes or Other Taxes; provided that, if the Company
shall be required by law to deduct any Taxes or Other Taxes from any such
payments, (i) the sum payable shall be increased as necessary so that after
making all required deductions and withholdings (including deductions or
withholdings applicable to additional sums payable under this Section
40
8.13) such Bank or the Agent (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the
Company shall make such deductions or withholdings, (iii) the Company shall pay
the full amount deducted or withheld to the relevant taxation authority or other
authority in accordance with applicable law and (iv) the Company shall furnish
to the Agent, at its address referred to in Section 8.01, the original or a
certified copy of a receipt evidencing payment thereof.
(c) The Company agrees to indemnify each Bank and the Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section 8.13), whether or not legally or correctly imposed, paid by such
Bank or the Agent (as the case may be) in good faith and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto. In addition, the Company agrees to indemnify each Bank and the Agent
for all Domestic Taxes (calculated based on a hypothetical basis at the maximum
marginal rate for a corporation) and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto to the extent
such Domestic Taxes result from the payment of or indemnification for Taxes,
Other Taxes or Domestic Taxes pursuant to this Section 8.13. This
indemnification shall be paid within 15 days after such Bank or the Agent (as
the case may be) makes demand therefor.
(d) Each Bank and the Agent shall, at the request of the Company, use
reasonable efforts (consistent with applicable legal and regulatory
restrictions) to file any certificate or document requested by the Company if
the making of such a filing would avoid the need for or reduce the amounts
payable to or for the account of such Bank or the Agent (as the case may be)
pursuant to this Section 8.13 which may thereafter accrue and would not, in the
sole judgment of such Bank or the Agent, require such Bank or the Agent to
disclose any confidential or proprietary information or be otherwise
disadvantageous to such Bank or the Agent.
(e) Notwithstanding the foregoing, nothing in this Section 8.13 shall
interfere with the rights of any Bank or the Agent, as the case may be, to
conduct its fiscal or tax affairs in such manner as it deems fit.
SECTION 8.14. Confidential Information. Each Bank agrees to comply
with the terms of Section 21 of the Pledge Agreement as if such terms were
expressly applicable to each Bank and each Bank agrees to notify its auditors
and attorneys of the provisions of Section 21 of the Pledge Agreement prior to
41
providing them with any Confidential Information (as defined therein) and
instruct them to comply with the terms of such Section as if such terms were
expressly applicable to such auditors and attorneys.
42
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
A.C.E. INSURANCE COMPANY, LTD.,
The Common Seal of
A.C.E. Insurance
Company, Ltd. was
hereunto affixed in
the presence of: By ____________________________
Title:
Director ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
___________________ ▇▇▇▇▇▇▇▇ ▇▇ 08, Bermuda
Telex number: 3543ACEILBA
Director/Secretary Facsimile number: (▇▇▇) ▇▇▇-▇▇▇▇
___________________
43
▇▇▇▇▇▇ GUARANTY TRUST COMPANY
OF NEW YORK
By ____________________________
Title:
BANK OF BERMUDA
By ____________________________
Title:
THE BANK OF NEW YORK
By ____________________________
Title:
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
By ____________________________
Title:
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCH
By ____________________________
Title:
By ____________________________
Title:
44
MELLON BANK, N.A.
By ____________________________
Title:
▇▇▇▇▇▇ GUARANTY TRUST COMPANY
OF NEW YORK, as Issuing Bank
and Agent
By___________________________
Title:
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: _________________
Telex number: 177615
Facsimile number: (▇▇▇) ▇▇▇-▇▇▇▇
45
SCHEDULE I
PARTICIPATION OF BANKS
Banks Participation %
----- ---------------
Bank of Bermuda - 13.33%
The Bank of New York - 13.33%
Bank of Tokyo-Mitsubishi - 13.33%
Trust Company
Deutsche Bank AG, New York - 13.33%
and/or Cayman Islands Branch
Mellon Bank, N.A. - 20.00%
▇▇▇▇▇▇ Guaranty Trust Company - 26.67%
of New York
46
EXHIBIT A
FORM OF LETTER OF CREDIT
Credit Operations Department: HW/MW
Direct Dial Number: ▇▇▇▇ ▇▇▇ ▇▇▇▇
__ November 1996
The Society and Corporation of Lloyd's
One ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇ ▇▇▇
Gentlemen
IRREVOCABLE STANDBY LETTER OF CREDIT NO. _____________
RE: ACE CAPITAL LIMITED ("THE APPLICANT")
-------------------------------------------------------------------------------
We are pleased to inform you that by order of the Applicant, we, ▇▇▇▇▇▇ Guaranty
Trust Company of New York, ▇▇ ▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
have opened our Clean Irrevocable Credit No. ____________ in your favour for a
sum not to exceed the aggregate of (Pounds)75,000,000 effective from 01 January
1997. The initial expiry date of this Letter of Credit shall be 31 December
2001.
This Letter of Credit will be extended automatically for a further year, without
written amendment, on the first day of January of every future year from the
commencement date, so that it is always valid for a minimum period of four years
unless, at least thirty days prior to 31 December of the first year of the then
current validity period, notice is given in writing, sent by registered mail for
the attention of the Manager, Corporate Membership Department at the above
address, that this Letter of Credit will not be extended beyond the then current
expiry date.
All charges are for the Applicant's account.
Funds under this Letter of Credit are available to you in London upon
presentation of your sight draft(s) drawn on us at the above address, our London
Office, mentioning the issuing Bank's Credit No. ______ and name (▇▇▇▇▇▇
Guaranty Trust Company of New York).
47
This Letter of Credit is subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision) International Chamber of Commerce
Publication No. 500.
This Letter of Credit shall be governed by and interpreted in accordance with
English law and we hereby irrevocably submit to the jurisdiction of the High
Court of Justice in England.
We hereby engage with you that we will honour draft(s) drawn under and in
compliance with the terms and conditions of this Letter of Credit.
Yours faithfully
Authorised Signature Authorised Signature
For and on behalf of for and on behalf of
▇▇▇▇▇▇ Guaranty Trust ▇▇▇▇▇▇ Guaranty Trust
Company of New York Company of New York
48
EXHIBIT F
[CT Corporation System]
[Dated the Closing Date]
To the Persons Identified on
on Schedule A
Dear Sirs:
In respect of the Reimbursement Agreement dated as of November 22,
1996, as amended from time to time (the "Agreement"), among A.C.E. Insurance
Company, Ltd. (the "Company"), the Banks listed therein (the "Banks") and ▇▇▇▇▇▇
Guaranty Trust Company of New York, as Agent and Issuing Bank (the "Agent"), the
undersigned hereby accepts the irrevocable designation and appointment of it as
of the date hereof as agent for the Company to accept and acknowledge service of
any and all process, as contemplated by Section 8.10(b) of the Agreement and
otherwise as provided thereby, such acceptance to remain in effect until the
Agreement shall have been terminated and all obligations thereunder of the
Company shall have been paid in full.
The undersigned agrees to give the Agent or the Company, as
applicable, immediate notice by telephone, fax, telex, cable or any other means
of instant communication upon receipt of all papers served upon the undersigned
pursuant to such appointment and to forward promptly to the Agent or the
Company, as the case may be, all such papers served pursuant to such appointment
by reputable overnight carrier.
Very truly yours,
CT CORPORATION SYSTEM
By:__________________________
Title:
49
SCHEDULE A
▇▇▇▇▇▇ Guaranty Trust Company
of New York, as Agent
▇▇▇▇▇▇ Guaranty Trust Company
of New York, as Issuing Bank
Bank of Bermuda Limited
The Bank of New York
Bank of Tokyo-Mitsubishi Trust Company
Deutsche Bank AG, New York and/or
Cayman Islands Branch
Mellon Bank
A.C.E. Insurance Company, Ltd.
50
EXHIBIT G
FORM OF LETTER OF CREDIT REQUEST
--------------------------------
, 19
------------------ --
▇▇▇▇▇▇ Guaranty Trust Company
of New York, as Agent
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
---------------------
▇▇▇▇▇▇ Guaranty Trust Company
of New York, as Issuing Bank
c/o ▇. ▇. ▇▇▇▇▇▇ Services Inc.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: International Trade Services
Re: Reimbursement Agreement dated as of November 22, 1996, as
amended from time to time (the "Agreement"), among A.C.E. Insurance Company,
Ltd. (the "Company"), the Banks listed therein and ▇▇▇▇▇▇ Guaranty Trust Company
of New York, as Agent and Issuing Bank.
Capitalized terms used herein that are defined in the Agreement shall
have the meanings therein defined.
1. Pursuant to Section 2.02 of the Agreement, ACE Capital Limited
(the "Applicant") hereby requests that the Issuing Bank issue a Letter of Credit
in accordance with the information annexed hereto as Annex A hereto.
2. The Company hereby certifies that on the date hereof and on the
date of issuance set forth in Annex A, in each case both before and after giving
effect to the Letter of Credit requested hereby:
(a) no Default has occurred and is continuing;
(b) each of the representations and warranties of the Company
contained in the Agreement and each other Financing Document is true on the date
hereof, except representations and warranties which expressly refer to an
earlier date in which case the same shall be true on and as of such earlier
date;
51
(c) after giving effect to the Letter of Credit requested hereby, the
aggregate amount of the Letter of Credit Liabilities will not exceed the Letter
of Credit Commitment; and
(d) the Letter of Credit requested hereby is being issued solely as
security to support the Applicant's underwriting business at the Society and
Corporation of Lloyd's provided in accordance with the requirements of the
Society and Corporation of Lloyd's.
IN WITNESS WHEREOF, the Applicant has caused this Certificate to be
executed by its duly authorized officer as of the date and year first written
above.
ACE CAPITAL LIMITED
By:_____________________________________
Name:___________________________________
Title:__________________________________
52
Annex A
LETTER OF CREDIT INFORMATION
1. Name of Beneficiary:
-------------------------------------------------------------------------------.
2. Address of Beneficiary of the Letter of Credit:
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------.
3. Conditions under which a drawing under such Letter of Credit may be made
(specify the required documentation):
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------.
4. Maximum amount to be available under such Letter of Credit: $______________.
5. Requested Date of Issuance: ________________________ __, 199__.
6. Stated Expiration Date: _______________________ __, 199__.
7. Description of Transaction to be supported by such Letter of Credit:
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------.
53
PLEDGE AGREEMENT
----------------
PLEDGE AGREEMENT dated as of November 22, 1996 between A.C.E. INSURANCE
COMPANY, LTD., a company incorporated in and under the laws of Bermuda whose
registered office is at The ACE Building, Woodbourne Avenue, Pembroke, Bermuda
(hereinafter called the "Pledgor") of the first part, and ▇▇▇▇▇▇ GUARANTY TRUST
COMPANY OF NEW YORK, as Issuing Bank (the "Issuing Bank") and as Agent (the
"Bank") for the Participating Banks (as defined below) of the second part.
WHEREAS, as contemplated by the Reimbursement Agreement (the "Reimbursement
Agreement") dated as of November 22, 1996 among the Pledgor, the Banks listed
therein (the "Participating Banks", including ▇▇▇▇▇▇ Guaranty Trust Company of
New York) and ▇▇▇▇▇▇ Guaranty Trust Company of New York, as Issuing Bank and
Agent, the Pledgor has requested that the Issuing Bank from time to time issue
letters of credit for the Pledgor's account, the reimbursement of which and all
other payments related thereto will be secured by the Collateral (as defined
below); and
WHEREAS, the Issuing Bank has agreed to issue such letters of credit
subject to the terms and conditions hereinafter set forth and as set forth in
the Reimbursement Agreement, including without limitation, the automatic
participation of the Participating Banks therein;
NOW, THEREFORE, the parties hereto agree as follows:
1. As inducement for, and in consideration of, inter alia, (i) the
Issuing Bank issuing letters of credit for the Pledgor's account from time to
time (each a "Letter of Credit" and, together, the "Letters of Credit") pursuant
to the Reimbursement Agreement (each defined term used herein, but not otherwise
defined herein, shall have the meaning ascribed to it therein) and (ii) the
participation by the Participating Banks therein, in each case the receipt and
adequacy of which are hereby acknowledged, the Pledgor hereby pledges and
assigns to the Bank and grants to the Bank a security interest and a charge in
the Collateral pursuant to this Agreement as security for all amounts owed from
time to time to the Issuing Bank, the Participating Banks and the Agent by the
Pledgor under the Financing Documents (collectively, the "Secured Obligations").
For purposes hereof, the term "Bank" shall mean ▇▇▇▇▇▇ Guaranty Trust Company of
New
54
York in its capacity as agent for the Participating Banks hereunder.
2. (a) As stated above, as collateral security for the performance of the
Secured Obligations, the Pledgor hereby pledges and assigns to the Bank, and
grants to the Bank a security interest and a charge in, all Eligible Securities
(as defined below) and cash held in the Pledge Account (as defined in the
Custodian Agreement dated as of November 19, 1996 between The Bank of Bermuda
Limited (the "Custodian") and the Pledgor (the "Custodian Agreement")), as set
forth in a written addendum hereto signed by the Pledgor and the Bank, which may
be amended from time to time by the Pledgor and the Bank, along with all
proceeds and products thereof, accessions thereto and substitutions therefor and
any other property of the Pledgor held by the Bank or the Custodian expressly
for this purpose (the "Collateral"). The Pledgor covenants to deliver to the
Custodian, on or before December 31, 1996, Eligible Securities the Value (as
defined below) of which shall equal the Minimum Collateral Amount (as defined
below). For purposes hereof, the term "Eligible Securities" shall mean "direct
claims (including securities, loans, and leases) on, and the portions of claims
that are directly and unconditionally guaranteed by, the central governments of
the OECD countries and U.S. Government agencies", as used in Appendix A, Section
III(C), Category I to Regulation H, as promulgated by the Board of Governors of
the Federal Reserve System, but only so long as no risk weight is attached
thereto and the same are either (i) uncertificated and governed by the
provisions of 31 C.F.R. Part 306 and, after January 1, 1997, 31 C.F.R. Part 357
or such similar provisions of the Code of Federal Regulations, applicable to
United States agency securities as are acceptable to the Bank or (ii)
certificated. So long as no Default has occurred and is continuing, the Pledgor
may from time to time withdraw portions of the Collateral and substitute other
Eligible Securities and/or cash therefor, which substituted property shall then
be deemed to constitute a portion of the Collateral, provided that at no time
shall the Value of the Collateral in the Pledge Account following any such
withdrawal be less than the Minimum Collateral Amount. For purposes of this
Agreement, the "Value" of an Eligible Security shall be the fair market value
thereof as determined by the Custodian.
(b) The Pledgor agrees that, if on the 15th Business Day of any calendar
month (commencing with January, 1997) or at other times as notified by the Bank,
the Value of the Collateral is less than an amount equal to 115% (the "Minimum
Collateral Amount") of the then existing Letter of Credit Liabilities, the
Pledgor shall deposit with the Custodian such additional Eligible Securities
and/or cash as is necessary so that the Value of the Collateral is equal to or
exceeds the Minimum Collateral Amount. If the Pledgor does not deposit such
additional Collateral within five Business Days after receiving a notice from
the
55
Bank stating that the Value of the Collateral has become less than the Minimum
Collateral Amount, the Pledgor agrees that the Bank may sell the Collateral and
retain the proceeds as security for the performance of the Secured Obligations.
(c) The Pledgor shall forthwith upon the execution and delivery of this
Agreement register this Agreement and each other Financing Document which
creates a charge, lien or security interest in the Register of Charges with the
Registrar of Companies in Bermuda in accordance with Section 55 of the Companies
▇▇▇ ▇▇▇▇, as amended, and pay the registration fee applicable thereon.
(d) (i) The Pledgor will faithfully preserve and protect the Bank's
security interest and charge in the Collateral and will do all such acts and
things and execute and deliver all such documents and instruments, including
without limitation, the execution and delivery of a Notice of Pledge in the form
of Exhibit A hereto (the "Notice of Pledge"), along with such further pledges,
assignments, financing statements and continuation statements, as the Bank in
its reasonable discretion may deem necessary or advisable from time to time in
order to preserve, protect and perfect such pledge and assignment and security
interest and charge and the priority thereof. The Pledgor hereby authorizes the
Bank to sign and file financing statements and continuation statements without
the signature of the Pledgor. The Bank shall promptly furnish copies of any such
financing statements and continuation statements to the Pledgor.
(ii) The Pledgor will not permit any liens, security interests,
charges or adverse claims (other than in favor of the Bank) to exist upon any of
the Collateral except for the interest of the Custodian arising under the
Custodian Agreement.
3. The Pledgor represents and warrants:
(a) that it is a company duly organized and is empowered under its
memorandum of association and by-laws to enter into and perform this Agreement,
the Notice of Pledge and the Custodian Agreement and any other documents related
hereto or thereto and has taken all necessary actions to authorize the
execution, delivery and performance of this Agreement, the Notice of Pledge and
the Custodian Agreement and any other documents related hereto or thereto;
(b) (i) that, upon delivery of the Collateral to the Custodian and the
crediting thereof to the Pledge Account, all of the Collateral will be validly
and duly pledged and assigned to the Bank and that a security interest or charge
therein will exist in favor of the Bank in accordance with law, and agrees to
defend the Bank's right, title, lien, charge and security interest in and to the
Collateral against the claims and
56
demands of all Persons whomsoever and (ii) that upon such delivery and
crediting, the Bank will have a valid security interest and charge in the
Collateral, free and clear of all claims, mortgages, pledges, assignments,
liens, encumbrances, charges and security interests of every nature whatsoever
except for the interest of the Custodian arising under the Custodian Agreement;
(c) that no consent or approval by, and no notice to or filing with, any
governmental or regulatory authority or other Person is required for the due and
valid execution, delivery and performance of this Agreement, the Notice of
Pledge and the Custodian Agreement by the Pledgor or to establish or maintain
this pledge and assignment as a first priority pledge of the Collateral, other
than the registration of this Agreement in the Register of Charges in accordance
with Section 55 of the Companies ▇▇▇ ▇▇▇▇, as amended and such other consent,
approval, notice and filing as has been obtained; and
(d) that none of the execution, delivery or performance of this Agreement,
the Notice of Pledge or the Custodian Agreement, nor the registration of this
Agreement or any other Financing Document which creates a charge, lien or
security interest, will be subject to ad valorem stamp duty in Bermuda.
4. Dividends (other than liquidating dividends), distributions and
interest declared, made or paid upon any of the Collateral shall be credited to
the account of the Pledgor until the Bank notifies the Custodian in writing that
a Default has occurred and is continuing.
5. If any of the Secured Obligations shall not be performed as and when
due pursuant to the Reimbursement Agreement, the Bank may cause all or any part
of the Collateral to be transferred to or registered in its name, as agent for
the Participating Banks, or the name of its nominee or nominees. The Bank shall
promptly notify the Pledgor of any such action it shall have taken, provided
that the failure to do so shall not affect the validity of such action. If any
of the Secured Obligations shall not be performed as and when due pursuant to
the Reimbursement Agreement, upon notice to the Custodian, the Bank shall be
entitled to exercise all voting power with respect to the Collateral.
6. If any of the Secured Obligations shall not be performed as and when
due pursuant to the Reimbursement Agreement, the Bank, without obligation to
resort to other security, shall have the right at any time and from time to time
to sell, resell, assign and deliver, in its discretion, all or any of the
Collateral, in one or more parcels at the same or different times, and all
right, title and interest, claim and demand therein and right of redemption
thereof, on any securities exchange on which the Collateral or any of it may be
listed, or at public
57
or private sale, for cash, upon credit or for future delivery, and in connection
therewith the Bank may grant options, the Pledgor hereby waiving and releasing
any and all equity or right of redemption. If any of the Collateral is sold by
the Bank upon credit or for future delivery, the Bank and the Participating
Banks shall not be liable for the failure of the purchaser to purchase or pay
for the same and, in the event of any such failure, the Bank may resell such
Collateral. In no event shall the Pledgor be credited with any part of the
proceeds of sale of any Collateral until cash payment thereof has actually been
received by the Bank.
7. No demand, advertisement or notice, all of which are hereby expressly
waived, shall be required in connection with any sale or other disposition of
any part of the Collateral which threatens to decline speedily in value or which
is of a type customarily sold on a recognized market; otherwise the Bank shall
give the Pledgor at least five Business Days' prior notice of the time and place
of any public sale and of the time after which any private sale or other
disposition is to be made, which notice the Pledgor agrees is reasonable, all
other demands, advertisements and notices being hereby waived. The Bank shall
not be obligated to make any sale of Collateral if it shall determine not to do
so, regardless of the fact that notice of sale may have been given. The Bank
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In the case of all sales of
Collateral, public or private, the Pledgor shall pay all reasonable costs and
expenses of every kind for sale or delivery, including brokers' and attorneys'
fees, and after deducting such costs and expenses from the proceeds of sale, the
Bank shall apply any residue to the payment of the Secured Obligations as
follows: first, to the payment to the Agent of any other costs or expenses
incurred by it under the Financing Documents, second, to the payment of all
default interest on the Reimbursement Obligations, third to the reimbursement of
all Reimbursement Obligations and fourth to the payment of any other amounts
then due and payable to the Bank, the Participating Banks or the Agent under the
Financing Documents. The balance, if any, remaining after payment in full of all
such amounts and the termination of the Letters of Credit and the Reimbursement
Agreement shall be paid to the Pledgor, subject to any duty of the Bank imposed
by law to the holder of any subordinate security interest or charge in the
Collateral known to the Bank.
8. The Pledgor recognizes that the Bank may be unable to effect a public
sale of all or a part of the Collateral by reason of, among other things,
certain prohibitions contained in United States securities laws or the
securities laws of the various States of the United States, as now or hereafter
in effect, but may be compelled to resort to one or more private sales to a
restricted group of
58
purchasers who will be obliged to agree, among other things, to acquire such
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. The Pledgor agrees that private sales so made
may be at prices and other terms less favorable to the seller than if such
Collateral were sold at public sales, and that the Bank has no obligation to
delay sale of any such Collateral for the period of time necessary to permit
such Collateral to be sold at public sale. The Pledgor agrees that private sales
made under the foregoing circumstances shall be deemed to have been made in a
commercially reasonable manner.
9. The remedies provided herein in favor of the Bank shall not be deemed
exclusive, but shall be cumulative, and shall be in addition to all other
remedies in favor of the Bank existing at law or in equity.
10. The Bank shall have the right, for and in the name, place and stead of
the Pledgor, to execute endorsements, assignments or other instruments of
conveyance or transfer with respect to all or any of the Collateral.
11. The Bank shall have no duty as to the collection or protection of the
Collateral or any income thereon or as to the preservation of any rights
pertaining thereto, beyond the safe custody of any thereof actually in its own
physical possession. With respect to any maturities, calls, conversions,
exchanges, redemptions, offers, tenders or similar matters relating to any of
the Collateral (herein called "events"), the Bank's duty shall be fully
satisfied if (a) the Bank exercises reasonable care to ascertain the occurrence
and to give reasonable notice to the Pledgor of any events applicable to any
Collateral which is registered and held in the name of the Bank or its nominee,
(b) the Bank gives the Pledgor reasonable notice of the occurrence of any
events, of which the Bank has received actual knowledge, as to any Collateral
which is in bearer form or is not registered and held in the name of the Bank or
its nominee or the Custodian or its nominee (the Pledgor agreeing to give the
Bank reasonable notice of the occurrence of any events applicable to any
Collateral of which the Pledgor has received knowledge), and (c) in the exercise
of its sole discretion (i) the Bank endeavors to take such action with respect
to any of the events as the Pledgor may reasonably and specifically request in
writing in sufficient time for such action to be evaluated and taken as long as
after the taking of any such action, the Value of the Collateral is not less
than the Minimum Collateral Amount or (ii) if the Bank determines that the
action requested might adversely affect the value of the Collateral as
collateral, the collection of the Secured Obligations, or otherwise prejudice
the interests of the Bank, the Bank gives reasonable notice to the Pledgor that
any such requested action will not be taken and if the Bank makes such
determination or if the Pledgor fails to make such timely request, the Bank
59
may take such other action as it deems reasonably advisable in the
circumstances. Except as hereinabove specifically set forth, the Bank shall have
no further obligation to ascertain the occurrence of, or to notify the Pledgor
with respect to, any events and shall not be deemed to assume any such further
obligation as a result of the establishment by the Bank of any internal
procedures with respect to any Collateral. The Pledgor releases the Bank from
any claims, causes of action and demands that do not arise as a result of the
negligence or willful misconduct of the Bank at any time arising out of or with
respect to this Agreement or any other Financing Document or the Collateral
and/or any actions, taken or omitted to be taken by the Bank with respect hereto
or thereto, and the Pledgor hereby agrees to hold the Bank harmless from and
with respect to any and all such claims, causes of action and demands of other
Persons.
12. The Pledgor hereby irrevocably appoints the Bank as the Pledgor's
attorney-in-fact for the purpose of carrying out the provisions of this
Agreement and the Notice of Pledge and taking any action and executing any
instrument which either may deem necessary or advisable to accomplish the
purposes hereof or thereof. Without limiting the generality of the foregoing,
the Bank shall have the right and power to receive, endorse and collect all
checks and other orders for the payment of money made payable to the Pledgor
representing any interest or dividend or other distribution payable in respect
of the Collateral or any part thereof and to give full discharge for the same.
13. No delay on the part of the Bank in exercising any of its options,
powers or rights, or partial or single exercise thereof, shall constitute a
waiver thereof.
14. Upon the repayment in full of all Secured Obligations and the
termination of the Letters of Credit and all other Financing Documents except
the Custodian Agreement, the Pledgor shall be entitled to the return of all of
the Collateral and of all other property and cash which has not been used or
applied toward the payment thereof. The assignment by the Bank to the Pledgor of
such Collateral and other property shall be without representation or warranty
of any nature whatsoever and wholly without recourse.
15. Any notice or demand upon the Pledgor shall be deemed to have been
sufficiently given for all purposes thereof if sent by overnight courier or by
telecopy, with receipt acknowledged, to the Pledgor at the address specified
below, or at such other address as the Pledgor may theretofore have designated
in writing and given in like manner to the Bank.
60
16. Any waiver, permit, consent or approval of any kind or character on
the part of the Bank of any breach or default under this Agreement or any such
waiver of any provision or condition of this Agreement must be in writing and
shall be effective only to the extent specifically set forth in such writing.
Each of the provisions contained in this Agreement shall be severable and
distinct from one another and if at any time one or more of such provisions is
or becomes invalid, illegal or unenforceable, the validity, legality, and
enforceability of each of the remaining provisions of this Agreement shall not
in any way be affected, prejudiced or impaired thereby.
17. This Agreement and the rights and obligations of the Bank and the
Pledgor hereunder shall be construed in accordance with and governed by the laws
of New York, cannot be changed orally and shall bind and inure to the benefit of
the Pledgor and the Bank and their respective successors and permitted assigns.
18. This Agreement may be executed in counterparts, each of which shall be
deemed an original and all of which taken together shall constitute but one and
the same instrument.
19. This Agreement is in addition to and not in limitation of any other
agreement between the parties. In the event of any conflict between the
provisions of this Agreement and those of any other such agreement, the
provisions of this Agreement shall prevail.
20. The Pledgor agrees to pay the Bank on demand all reasonable costs,
including legal fees, incurred by the Bank in connection with the administration
and enforcement of this Agreement.
21. The Bank shall not, unless compelled to do so by any court of
competent jurisdiction or regulatory authority, or unless in response to a
request from Bank regulators, disclose to any Person (other than the
Participating Banks and their auditors and attorneys, who shall be subject to
the terms of Section 8.14 of the Reimbursement Agreement) not expressly
authorized in writing by the Pledgor or pursuant to the terms hereof any non-
public information relating to the Pledgor and to the affairs of the Pledgor of
which the Bank shall have become possessed during the period of this Agreement
(the "Confidential Information"). Without limiting the generality of the
foregoing, the existence of this Agreement and the other Financing Documents,
the relationship hereunder between the Pledgor and the Bank, the nature, value
and the location of any assets of the Pledgor (including without limitation, the
Collateral), and the identity of the Pledgor are to be regarded by the Bank as
Confidential Information which the
61
Bank and persons under its control may not disclose except in accordance with
the terms of this Section 21. In any such event the Bank will furnish a copy of
this Section to any Person (other than the Participating Banks and their
auditors and attorneys) to whom the Bank is required to make such disclosure
and, if permitted to do so by law, the Bank will advise the Pledgor prior to
making such disclosures. Notwithstanding the foregoing, Confidential Information
shall not include information that is or becomes publicly available, information
that was available to the Bank prior to its disclosure hereunder and information
which becomes available to the Bank on a non-confidential basis from a source
that is not, to the Bank's knowledge, subject to a confidentiality agreement
with the Pledgor.
If an attempt is made through a subpoena, attachment, execution, levy or
other legal proceeding to obtain Confidential Information, the Bank shall, if
permitted to do so by law, immediately notify the Pledgor so that the Pledgor
may attempt to resist such disclosure.
62
IN WITNESS WHEREOF, the Pledgor and the Bank have caused this Agreement to
be duly executed by their respective officers duly authorized as of the day and
year first above written.
A.C.E. INSURANCE COMPANY, LTD.
The Common Seal of
A.C.E. Insurance
Company, Ltd. was By:_____________________________
heretofore affixed in Title:
the presence of:
Address:
Director The A.C.E. Building
Woodbourne Avenue
__________________ Pembroke, Bermuda
Attention:______________________
Director/Secretary
__________________
▇▇▇▇▇▇ GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By:_____________________________
Title:
Address:
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. Dell'Aquila
63
Exhibit A
to Pledge Agreement
[LETTERHEAD OF PLEDGOR]
[Closing Date]
The Bank of Bermuda Limited
Bank of Bermuda Building
6 Front Street
▇▇▇▇▇▇▇▇, Bermuda
NOTICE OF PLEDGE
----------------
Re: Pledge and assignment to ▇▇▇▇▇▇ Guaranty Trust Company of New York, as
agent, of Securities Owned by A.C.E. Insurance Company, Ltd. and Held
by The Bank of Bermuda Limited, as Custodian
Dear Sirs:
This letter is to notify The Bank of Bermuda Limited (the "Custodian") that
A.C.E. Insurance Company, Ltd. (the "Pledgor") has agreed from time to time to
pledge and assign certain securities and the proceeds thereof (including cash)
(the "Eligible Securities") owned by it and specified in the Pledge Agreement
(as hereinafter defined) to ▇▇▇▇▇▇ Guaranty Trust Company of New York, as agent
(the "Bank"), pursuant to and on the terms and conditions set forth in the
Pledge Agreement dated as of November 22, 1996 (the "Pledge Agreement"), a copy
of an executed copy of which is attached hereto, to secure certain obligations
incurred by the Pledgor to the Bank and (as defined therein) the Participating
Banks and the Agent. The Pledgor unconditionally agrees to indemnify and hold
the Custodian harmless against all loss or damages (including reasonable legal
fees) that the Custodian may suffer as a result of or in connection with such
pledge and assignment or the performance of its obligations under this Agreement
or the Confirmation and Agreement attached as Exhibit B to the Pledge Agreement
(the "Confirmation and Agreement") which are not suffered as a result of the
negligence or willful misconduct of the Custodian or that of its officers,
employees or agents.
The Custodian is hereby irrevocably authorized and directed to do the
following: (i) hold the Eligible Securities as the agent of and subject to the
sole written order or instructions of the Bank in accordance with the Pledge
Agreement in the Pledge Account
64
(as defined in the Custodian Agreement dated November 19, 1996 (the "Custodian
Agreement") between the Pledgor and the Custodian), following deposit of the
Eligible Securities in the Pledge Account by the Pledgor; (ii) make appropriate
entries on its books to evidence that the Pledge Account and all of the Eligible
Securities are held by it for the account of the Bank as agent for the
Participating Banks and to send notice thereof to the Bank; (iii) on or before
11:00 a.m. (New York City time) on the 15th Business Day of each calendar month
(commencing with January, 1997) or at such other times as the Bank may
reasonably request, the Custodian will provide the Bank and the Pledgor an
account valuation statement, identifying all Eligible Securities and their Value
(as defined in the Pledge Agreement) as of the last Business Day of the
preceding calendar month or as of such other times and the amount of cash held
in the Pledge Account on such last Business Day or as of such other times, and
any other information about the Eligible Securities which the Bank may
reasonably request; (iv) follow the instructions of the Bank, without the
consent of the Pledgor, with respect to the Pledge Account and the Eligible
Securities (including, without limitation, instructions to sell or transfer the
Eligible Securities or instructions to hold dividends, distributions and
interest declared, made or paid upon any of the Eligible Securities as
additional collateral for the Bank, Participating Banks and the Agent or to
deliver Eligible Securities to the Bank); and (v) enter into a Confirmation and
Agreement.
The Pledgor hereby represents and warrants to, and agrees with, the
Custodian as follows:
(a) The execution, delivery and performance by the Pledgor of this
Agreement, the Pledge Agreement and the Custodian Agreement are (i) within
its powers, (ii) have been duly authorized by all necessary action and
(iii) will not (A) contribute to or result in a breach of or default under
or conflict with any existing law, order, regulation or ruling of any
governmental or regulatory agency or authority, any order, writ, injunction
or ruling of any court or other tribunal or any indenture, lease,
agreement, instrument or other undertaking to which the Pledgor is a party
or by which it or its property or assets may be bound or affected, or (B)
result in the imposition of any lien or encumbrance on any property or
assets of the Pledgor (other than as contemplated by this Agreement) or (C)
require any approval or consent of, or filing with, any governmental or
regulatory or any other Person (as defined in the Reimbursement Agreement)
or (D) violate any provision of the Pledgor's certificate of incorporation,
memorandum of association or by-laws or any amendment thereof;
(b) This Agreement is a legally valid and binding obligation of the
Pledgor, enforceable against the Pledgor in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization.
65
moratorium or other laws or equitable principles relating to or limiting
the rights of creditors generally;
(c) It shall forthwith upon the delivery of the Eligible Securities
register the Pledge Agreement and the Custodian Agreement (as an exhibit to
the Reimbursement Agreement dated as of November 22, 1996 among the
Pledgor, the Banks listed therein and the Bank, as Issuing Bank and as
Agent) in the Register of Charges with the Registrar of Companies in
Bermuda in accordance with Section 55 of the Companies ▇▇▇ ▇▇▇▇, as
amended, and pay the registration fee applicable thereon; and
(d) None of the execution, delivery or performance of this Agreement
or the Pledge Agreement or the Custodian Agreement, nor the registration
thereof will be subject to ad valorem stamp duty in Bermuda.
The Custodian agrees that it shall exercise reasonable care and diligence
in performing all of its obligations hereunder; provided, however, that, as
between the Pledgor and the Custodian:
(a) The Custodian shall be entitled to rely upon the authenticity of,
and the truth of the statements in, any certificate, opinion of counsel,
evidence of indebtedness, notice, consent, instruction or other document
reasonably believed by the Custodian to be genuine and to be signed by the
proper party or parties;
(b) The Custodian shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in reliance upon the advice of
its legal counsel;
(c) The Custodian shall not be liable with respect to any action taken
or omitted to be taken by it in good faith at the instruction of the Bank,
provided that such action is in accordance with the terms and conditions of
this Agreement; and
(d) The Custodian shall be entitled to request the written consent or
instructions of the Bank for the Custodian prior to taking any action
hereunder requiring the exercise of its discretion and may refrain from
taking such action until it shall have received such written consent or
instructions.
Subject to the terms of the Pledge Agreement, the Custodian is authorized
to follow and rely upon all instructions given by the Pledgor by tested telex,
or facsimile transmission with receipt confirmed, or written instrument signed
by any officer of the Pledgor or any one of the individuals and officers
identified from time to time in resolutions contained in a certificate signed by
an officer of the Pledgor.
66
This Agreement may not be amended except by a writing signed by both the
parties hereto and the Bank and no provision of the Pledge Agreement which
affects the obligations or responsibilities of the Custodian may be amended
without the prior, written consent of the Custodian. This Agreement may be
signed in any number of counterparts with the same effect as if the signatures
thereto and hereto were upon the same instrument and shall be binding upon and
inure to the benefit of the parties hereto and the Bank, their successors and
permitted assigns. The parties hereto agree that the Pledgor's agreement with
the Custodian governing custody of the Pledgor's assets shall be deemed to be
modified or superseded in the manner set forth in the Pledge Agreement, this
Agreement and Exhibit B to the Pledge Agreement with respect to the Eligible
Securities and other collateral subject to the Pledge Agreement.
The Pledgor agrees that it will pay all of the fees and expenses of the
Custodian properly and reasonably incurred in connection with the execution and
performance of the Pledge Agreement and the other agreements attached thereto as
exhibits.
All obligations performed by the Custodian under this Agreement shall be
performed in the capacity of agent for the Bank.
This Agreement shall be construed in accordance with and governed by the
laws of Bermuda.
67
If you are in agreement with the foregoing, please sign and return the
enclosed copy of this letter to ▇▇▇▇▇▇ Guaranty Trust Company of New York
at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇
Dell'Aquila.
Very truly yours,
A.C.E. INSURANCE COMPANY, LTD.
The Common Seal of
A.C.E. Insurance
Company, Ltd. was
hereunto affixed in By:______________________________________
the presence of:
Director
____________________
Director/Secretary
____________________
Receipt of the above Notice of Pledge
is hereby acknowledged this ____ day of
November, 1996.
THE BANK OF BERMUDA LIMITED
By:____________________________________
Title:
68
[LETTERHEAD OF CUSTODIAN]
EXHIBIT B
to Pledge Agreement
[Closing Date]
▇▇▇▇▇▇ Guaranty Trust Company
of New York , as agent
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
CONFIRMATION AND AGREEMENT OF THE BANK OF BERMUDA LIMITED
Re: Pledge and assignment to ▇▇▇▇▇▇ Guaranty Trust Company of New York, as
agent, of Securities Owned by A.C.E. Insurance Company, Ltd. and Held by
The Bank of Bermuda Limited, as Custodian
Dear Sirs:
Reference is made to the pledge and assignment to ▇▇▇▇▇▇ Guaranty Trust
Company of New York, as agent (the "Bank"), by A.C.E. Insurance Company, Ltd.
(the "Pledgor") of certain securities and the proceeds thereof (including cash)
of the Pledgor (the "Eligible Securities") held by The Bank of Bermuda Limited
(the "Custodian") pursuant to a Pledge Agreement (the "Pledge Agreement") dated
as of November 22, 1996, a list of which is set forth in a written addendum
thereto, which may be amended from time to time by the Pledgor and the Bank. It
is understood that the Eligible Securities are to be held by the Custodian as
the Bank's agent subject to a pledge and assignment and charge in the Bank's
favor as hereinafter set forth, as security for all amounts owed to the Bank and
(as defined in the Pledge Agreement) the Participating Banks and the Agent by
the Pledgor from time to time in connection with letters of credit issued by the
Bank for the Pledgor's Account (as hereinafter defined) pursuant to the
Reimbursement Agreement (as defined therein).
The Eligible Securities will be held in the Pledge Account (as defined in
the Custodian Agreement dated as of November 19, 1996 (the "Custodian
Agreement") between the Pledgor and the Custodian), following deposit of such
Eligible Securities in the Pledge Account by the Pledgor.
69
The Custodian hereby confirms that (i) it is holding all of the Eligible
Securities as agent for and subject to the sole written order or instructions of
the Bank; (ii) it will make appropriate entries on its books to evidence that
the Pledge Account and all of the Eligible Securities are being held by it for
the benefit of the Bank and to send notice thereof to the Bank and will
additionally do so with regard to any securities which at any time and for any
reason become Eligible Securities or any funds which become additional
collateral subject to the charge and pledge and assignment in the Bank's favor
pursuant to the Pledge Agreement; (iii) on or before 11:00 a.m. (New York City
time) on the 15th Business Day of each calendar month (commencing with January,
1997) or at such other times as the Bank may reasonably request, it will provide
the Bank and the Pledgor an account valuation statement, identifying all
Eligible Securities and their Value (as defined in the Pledge Agreement) as of
the last Business Day of the preceding calendar month or as of such other times
and the amount of cash held in the Pledge Account on such last Business Day or
as of such such other times, and any other information about the Eligible
Securities which the Bank may reasonably request; and (iv) it will follow the
instructions of the Bank, without the consent of the Pledgor, with respect to
the Pledge Account and the Eligible Securities (including, without limitation,
instructions to sell or transfer the Eligible Securities or instructions to hold
dividends, distributions and interest declared, made or paid upon any of the
Eligible Securities as additional collateral for the Bank, the Participating
Banks and the Agent or to deliver Eligible Securities to the Bank) without any
duty of inquiry to determine whether such instructions are in accordance with
the Pledge Agreement. The Custodian will credit all dividends (other than
liquidating dividends), distributions and interest declared, made or paid upon
any of the Eligible Securities to the account of the Pledgor until the Bank
notifies the Custodian in writing that a Default (as defined in the
Reimbursement Agreement) has occurred and is continuing. The Custodian agrees
that, upon the liquidation or dissolution (in whole or in part) of the issuer of
any of the Eligible Securities, any sum paid as a liquidating dividend or
otherwise upon or with respect to any of the Eligible Securities shall be held
by the Custodian as additional collateral for the benefit of the Bank.
The Custodian agrees as follows with respect to the Eligible Securities:
(a) it will have no right of compensation from the Bank; (b) it will look solely
to the Pledgor for payment of its expenses and charges, if any, in connection
with the pledge and assignment to the Bank of the Eligible Securities and the
Bank's instructions with regard thereto; (c) the Eligible Securities will be
maintained free and clear of all liens, safekeeping or other charges and demands
and claims of any nature whatsoever, whether now or hereafter existing, on the
part of the Custodian or in favor of the Custodian or of anyone claiming by,
through or under the Custodian; and (d) if certificates shall at any time be
issued with regard to any of the Eligible Securities which were formerly in
uncertificated form, the Custodian shall hold such certificates as the Bank's
agent.
The Custodian shall have no duty to require any cash or securities be
delivered to it or to determine that the amount and form of assets constituting
Collateral complies with any applicable requirements under the Pledge Agreement,
nor shall the Custodian be responsible for any Collateral not delivered to or
held by it. Subject to the provisions herein, the Custodian may hold the
securities in nominee, book entry or other form and in
70
any depository or clearing corporation established for the purpose of clearing
and settling such securities.
The Custodian agrees that it shall exercise reasonable care and diligence
in performing all of its obligations hereunder; provided, however, that:
(a) The Custodian shall be entitled to rely upon the authenticity
of, and the truth of the statements in, any certificate, opinion of
counsel, evidence of indebtedness, notice, consent, instruction or other
document reasonably believed by the Custodian to be genuine and to be
signed by the proper party or parties;
(b) The Custodian shall be entitled to rely upon the written
advice of its legal counsel;
(c) The Custodian shall not be liable with respect to any action
taken or omitted to be taken by it in good faith at the instruction of the
Bank, provided that such action is in accordance with the terms and
conditions of this Agreement;
(d) The Custodian shall be entitled to request the written consent or
instructions of the Bank prior to the Custodian's taking any action
hereunder requiring the exercise of its discretion and to refrain from
taking such action until it shall have received such written consent or
instructions;
(e) As between the Pledgor and the Custodian, the terms of the
Custodian Agreement shall apply with respect to any losses or liabilities
of such parties arising out of matters covered by this Agreement;
(f) With respect to Eligible Securities held by a central
depository or clearing corporation, it is understood that the Custodian
shall have no liability to the Bank in respect of any action or omission of
the central depository or clearing corporation; and
(g) To the extent any conflict exists between the obligations of
the Custodian to perform under the Custodian Agreement and the obligations
of the Custodian to perform hereunder, the obligations hereunder shall
supersede any conflicting obligations under the Custodian Agreement.
All obligations performed by the Custodian under this Agreement shall be
performed in the capacity of agent for the Bank.
71
The Custodian is authorized to follow and rely upon all instructions given
by the Bank by tested telex or facsimile transmission with receipt confirmed or
by written instrument and signed by any officer or designated representative of
the Bank notified to the Custodian in writing. Forthwith after execution of the
Custodian Agreement the Bank will certify to the Custodian the names and
signatures of the persons authorized to sign any proper instructions and
generally to give instructions hereunder to the Custodian and shall deliver to
the Custodian appropriate evidence of such authority. The Bank shall promptly
notify the Custodian of any changes that may be made from time to time in the
persons so authorized.
This Agreement may not be amended except by a writing signed by both of the
parties hereto and no provision of the Pledge Agreement which affects the
obligations or responsibilities of the Custodian may be amended without the
prior, written consent of the Custodian. This Agreement may be signed in any
number of counterparts with the same effect as if the signatures thereto and
hereto were upon the same instrument and shall be binding upon and inure to the
benefit of the parties hereto, their successors and assigns.
The Custodian hereby represents and warrants to the Bank as follows:
(a) The execution, delivery and performance by the Custodian of this
Agreement are (i) within its corporate powers and (ii) have been duly
authorized by all necessary corporate action;
(b) This Agreement is a legally valid and binding obligation of the
Custodian, enforceable against the Custodian in accordance with its terms;
and
(c) No authorization, approval or other action by, and no notice to or
filing with any shareholder of the Pledgor, creditor or governmental or
regulatory agency or authority is required for the due and valid execution,
delivery and performance of this Agreement by the Custodian.
This Agreement shall be construed in accordance with and governed by the
law of Bermuda. The parties hereby consent to the jurisdiction of a state or
federal court situated in New York City, New York in connection with any
disputes arising hereunder.
72
If the foregoing is agreeable to you, please indicate your acceptance by
signing in the space provided below.
Very truly yours,
THE BANK OF BERMUDA LIMITED
By:___________________________________
Title:
ACCEPTED AND AGREED TO:
▇▇▇▇▇▇ GUARANTY TRUST COMPANY
OF NEW YORK, as agent
By:__________________________________
Title:
73