EXHIBIT 10.16
MASTER REPURCHASE AGREEMENT
Effective as of July 1, 2000 by and between United States Fire Insurance
Company ("U.S. Fire") and Fairfax Financial Holdings Limited ("Fairfax").
WHEREAS, U.S. Fire, in the normal course of its business, may from time to
time agree to pay claims to policyholders that require it to sell or otherwise
liquidate certain securities or other invested assets in order to raise
sufficient cash to make such payments; and
WHEREAS, U.S. Fire typically pays policyholder claims prior to receiving
reimbursement for such claims from its reinsurers, requiring U.S. Fire to make
cash payments on claims that can greatly exceed its ultimate net liability for
such claims and creating a timing gap between payments by U.S. Fire and recovery
from its reinsurers; and
WHEREAS, Fairfax, as the indirect owner of U.S. Fire, has an interest in
maximizing the return on invested assets of U.S. Fire; and
WHEREAS, Fairfax seeks to assist U.S. Fire in managing its cash flow to
eliminate or minimize investment losses resulting from the sale or liquidation
of securities in order to cover short-term cash requirements.
NOW, THEREFORE, for due and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
1. TRANSACTIONS
From time to time, the parties hereto may enter in to transactions (each a
"Transaction") in which U.S. Fire agrees to transfer to Fairfax certain
securities ("Securities") against the transfer of an amount in United States
dollars equal to the fair market value of such Securities on the date of
transfer, such amount not to exceed U.S. $25,000,000 singly or, when
combined with amounts then outstanding from any other Transaction, in the
aggregate (the "Purchase Price") by Fairfax to U.S. Fire and Fairfax agrees
to transfer to U.S. Fire such Securities on a date to be agreed by Fairfax
and U.S. Fire and which shall be on or before December 31 of the year during
which such transfer is made (the "Repurchase Date"), against the transfer of
funds by U.S. Fire.
2. REPURCHASE
U.S. Fire shall repurchase the Securities from Fairfax on or before the
Repurchase Date for an amount not to exceed the sum of the Purchase Price
and the aggregate amount obtained by daily application of the stated
interest rate of each Security to the Purchase Price paid for such Security
on a 360 day per year basis for the actual number of days during the period
commencing on the (and including) the Purchase Date and ending on (but
excluding) the Repurchase Date.
3. INCOME PAYMENTS
U.S. Fire shall be entitled to receive, with respect to any Security at any
time, an amount equal to any principal thereof and all interest, dividends
or other distributions thereon ("Income") paid or distributed in respect of
the Securities that are not otherwise received by U.S. Fire to the full
extent it would be so entitled if the Securities had not been sold to
Fairfax. Fairfax shall, as the parties may agree (or, in the absence of any
such agreement, as Fairfax shall reasonably determine in its discretion), on
the date such Income is paid or distributed either (i) transfer to or credit
to the accounts of U.S. Fire such Income with respect to any Securities or
(ii) with respect to Income paid in cash, apply the Income payment or
payments to reduce the amount, if any, to be transferred to Fairfax by U.S.
Fire upon termination of the Transaction.
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4. SECURITY INTEREST
Although the parties intend that the Transaction be a sale and purchase and
not a loan, in the event the Transaction is deemed to be a loan, U.S. Fire
shall be deemed to have pledged to Fairfax as security for the performance
by U.S. Fire of its obligations under the Transaction, and shall be deemed
to have granted to Fairfax a security interest in, all of the Securities and
all income thereon and other proceeds thereof.
5. PAYMENT AND TRANSFER
Unless otherwise mutually agreed, all transfers of funds hereunder shall be
in immediately available funds. All Securities transferred by one party
hereto to the other party (i) shall be in suitable form for transfer or
shall be accompanied by duly executed instruments of transfer or assignment
in blank and such other documentation as the party receiving possession may
reasonably request, (ii) shall be transferred on the book-entry system of a
Federal Reserve Bank, or (iii) shall be transferred by any other method
mutually acceptable to U.S. Fire and Fairfax.
6. SEGREGATION OF SECURITIES
To the extent required by applicable law, all Securities in the possession
of Fairfax shall be segregated from other securities in its possession and
shall be identified as subject to this Agreement. Segregation may be
accomplished by appropriate identification on the books and records of the
holder, including a financial or securities intermediary or a clearing
corporation. All of U.S. Fire's interest in the Securities shall pass to
Fairfax on the Purchase Date and, unless otherwise agreed by Fairfax and
U.S. Fire, nothing in this Agreement shall preclude Fairfax from engaging in
repurchase transactions with the Securities or otherwise selling,
transferring, pledging or hypothecating the Securities, but no such
transaction shall relieve Fairfax of its obligations to transfer Securities
to U.S. Fire pursuant to Paragraph 2 hereof, or of Fairfax's obligation to
credit or pay Income to, or apply Income to the obligations of, U.S. Fire
pursuant to Paragraph 3 hereof.
7. NOTICES AND OTHER COMMUNICATIONS
Any and all notices or other communications hereunder shall be given by mail
or facsimile as follows:
To Fairfax: Fairfax Financial Holdings Limited
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
To U.S. Fire: United States Fire Insurance Company
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▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
8. ENTIRE AGREEMENT; SEVERABILITY
This Agreement shall supersede any existing agreements between the parties
concerning the subject matter hereof. Each provision and agreement herein
shall be treated as separate and independent from any other provision or
agreement herein and shall be enforceable notwithstanding the
unenforceability of any such other provision or agreement.
9. GOVERNING LAW
This Agreement shall be governed by the laws of the State of
New York
without giving effect to the conflict of law principles thereof.
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10. COUNTERPARTS
This Agreement may be executed in two counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the
same instrument.
FAIRFAX FINANCIAL HOLDINGS LIMITED
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
UNITED STATES FIRE INSURANCE COMPANY
By: /s/ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Executive Vice President,
CFO and Treasurer
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Secretary
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AMENDMENT NUMBER ONE
TO THE
MASTER REPURCHASE AGREEMENT
This Amendment Number One ("Amendment") to the
Master Repurchase Agreement
("Agreement") is entered into as of September 11, 2001, by and between United
States Fire Insurance Company ("U. S. Fire") and Fairfax Financial Holdings
Limited ("Fairfax").
WHEREAS, U. S. Fire and Fairfax entered into the Agreement effective as of
July 1, 2000;
WHEREAS, defined terms used herein but not otherwise defined shall have the
meanings set forth in the Agreement;
NOW, THEREFORE, in consideration of the foregoing and for good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
I. Section 1 of the Agreement is hereby replaced in its entirety with the
following:
1. TRANSACTIONS
From time to time, the parties hereto may enter in to transactions (each a
"Transaction") in which U.S. Fire agrees to transfer to Fairfax certain
securities ("Securities") against the transfer of an amount in United States
dollars equal to the fair market value of such Securities on the date of
transfer, such amount not to exceed U.S. one hundred million dollars
($100,000,000) singly or, when combined with amounts then outstanding from
any other Transaction, in the aggregate (the "Purchase Price") by Fairfax to
U.S. Fire and Fairfax agrees to transfer to U.S. Fire such Securities on a
date to be agreed by Fairfax and U.S. Fire and which shall be on or before
December 31 of the year during which such transfer is made (the "Repurchase
Date"), against the transfer of funds by U.S. Fire.
II. Except as otherwise provided in its Amendment, all of the terms and
conditions of the Agreement will remain unamended and shall continue to be,
and shall remain, in full force and effect in accordance with their
respective terms. In the event of any conflict or inconsistency between the
Agreement and this Amendment, this Amendment will prevail.
III. This Amendment shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
IV. This Amendment may be executed simultaneously in two or more counterparts,
each of which shall be deemed to be an original and all of which shall
constitute together but one and the same instrument.
V. This Amendment shall be governed by the laws of the State of
New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered as of the date first set forth above.
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FAIRFAX FINANCIAL HOLDINGS LIMITED
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
UNITED STATES FIRE INSURANCE COMPANY
By: /s/ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Executive Vice President,
Chief Financial Officer and
Treasurer
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President & Secretary
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