Exhibit 10.2

 

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LIMITED LIABILITY PARTNERSHIP

 

CONFORMED COPY

 

DATED 6 DECEMBER 2004

 

 

ARCH REINSURANCE LTD.
AS OBLIGOR

 

WITH

 

BARCLAYS BANK PLC
AS LENDER

 

 

AMENDMENT AGREEMENT
RELATING TO A
LETTER OF CREDIT AND REIMBURSEMENT
AGREEMENT
DATED AS OF 25 NOVEMBER 2003

 

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THIS AGREEMENT is dated as of December 6, 2004 and is made effective as of the
Effective Date (as defined below) between:

 

(1)                            ARCH REINSURANCE LTD., a corporation organized
and existing under the laws of Bermuda (the “Obligor”); and

 

(2)                            BARCLAYS BANK PLC (the “Lender”).

 

IT IS AGREED as follows:

 

1.                                 DEFINITIONS AND INTERPRETATION

 

1.1                           DEFINITIONS

 

In this Agreement:

 

“Effective Date” means the date on which the Lender confirms to the Obligor that
it has received each of the documents listed in Schedule 1 (Conditions
Precedent) in a form and substance satisfactory to the Lender.

 

“Original Facility Agreement” means the Letter of Credit and Reimbursement
Agreement dated as of November 25, 2003 between Arch Reinsurance Ltd., as the
Obligor and the Lender, as amended and restated on August 19, 2004 and as
further amended on November 24, 2004.

 

“Restated Agreement” means the Original Facility Agreement, as amended by this
Agreement, the terms of which are set out in Schedule 2 (Restated Agreement).

 

1.2                           INCORPORATION OF DEFINED TERMS

 

(A)                                      UNLESS A CONTRARY INDICATION APPEARS, A
TERM USED IN ANY OTHER FUNDAMENTAL DOCUMENT OR IN ANY NOTICE GIVEN UNDER OR IN
CONNECTION WITH ANY FUNDAMENTAL DOCUMENT HAS THE SAME MEANING IN THAT
FUNDAMENTAL DOCUMENT OR NOTICE AS IN THIS AGREEMENT.

 

(B)                                     THE PRINCIPLES OF CONSTRUCTION SET OUT
IN THE ORIGINAL FACILITY AGREEMENT SHALL HAVE EFFECT AS IF SET OUT IN THIS
AGREEMENT.

 

1.3                           CLAUSES

 

(A)                                      IN THIS AGREEMENT ANY REFERENCE TO A
“CLAUSE” OR “SCHEDULE” IS, UNLESS THE CONTEXT OTHERWISE REQUIRES, A REFERENCE TO
A CLAUSE OR SCHEDULE OF THIS AGREEMENT.

 

(B)                                     CLAUSE AND SCHEDULE HEADINGS ARE FOR
EASE OF REFERENCE ONLY.

 

2.                                 AMENDMENT

 

With effect from the Effective Date, the Original Facility Agreement shall be
amended and restated so that it shall be read and construed for all purposes as
set out in Schedule 2 (Restated Agreement).

 

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3.                                 REPRESENTATIONS

 

The Obligor makes the representations specified in clause 4 of the Original
Facility Agreement as if each reference in those representations to “this
Agreement” or “the Fundamental Documents” includes a reference to (a) this
Agreement and (b) the Restated Agreement.

 

4.                                 CONTINUITY AND FURTHER ASSURANCE

 

4.1                           CONTINUING OBLIGATIONS

 

The provisions of the Fundamental Documents shall, save as amended in this
Agreement, continue in full force and effect.

 

4.2                           FURTHER ASSURANCE

 

The Obligor shall, at the request of the Lender and at its own expense, do all
such acts and things necessary or desirable to give effect to the amendments
effected or to be effected pursuant to this Agreement.

 

5.                                 FEES, COSTS AND EXPENSES

 

5.1                           TRANSACTION EXPENSES

 

The Obligor shall promptly on demand pay the Lender the amount of all costs and
expenses (including legal fees) reasonably incurred by the Lender in connection
with the negotiation, preparation, printing and execution of this Agreement and
any other documents referred to in this Agreement.

 

5.2                           ENFORCEMENT COSTS

 

The Obligor shall, within three Business Days of demand, pay to the Lender the
amount of all costs and expenses (including legal fees) incurred by the Lender
in connection with the enforcement of, or the preservation of any rights under
this Agreement.

 

5.3                           STAMP TAXES

 

The Obligor shall pay and, within three Business Days of demand, indemnify the
Lender against any cost, loss or liability the Lender incurs in relation to all
stamp duty, registration and other similar Taxes payable in respect of this
Agreement.

 

6.                                 MISCELLANEOUS

 

6.1                           INCORPORATION OF TERMS

 

The provisions of clause 7.1 (Amendments and Waivers), clause 7.6 (Governing
Law), clause 7.7 (Consent to Jurisdiction) and clause 7.8 (Waiver of Jury Trial)
of the Restated Agreement shall be incorporated into this Agreement as if set
out in full in this Agreement and as if references in those clauses to “this
Agreement” are references to this Agreement.

 

6.2                           DESIGNATION AS FUNDAMENTAL DOCUMENT

 

The Obligor and the Lender designate this Agreement as a Fundamental Document by
execution of this Agreement for the purposes of the definition of Fundamental
Document in the Original Facility Agreement.

 

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6.3                           COUNTERPARTS

 

This Agreement may be executed in any number of counterparts, and this has the
same effect as if the signatures on the counterparts were on a single copy of
this Agreement.

 

THIS AGREEMENT has been entered into on the date stated at the beginning of this
Agreement.

 

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SCHEDULE 1

 

CONDITIONS PRECEDENT

 

1.                                 Obligor

 

1.1                           A director’s certificate certifying that there
have been no changes to its constitutional documents since November 24, 2004

 

1.2                           A copy of the resolutions of the board of
directors:

 

1.2.1                            approving the terms of, and the transactions
contemplated by, this Agreement and resolving that it execute this Agreement;

 

1.2.2                            authorizing a specified person or persons to
execute this Agreement on its behalf; and

 

1.2.3                            authorizing a specified person or persons, on
its behalf, to sign and/or despatch all documents and notices to be signed
and/or despatched by it under or in connection with this Agreement.

 

1.3                           A specimen of the signature of each person
authorized by the resolution referred to in paragraph (b) above.

 

1.4                           A certificate of the Corporate Secretary, or the
equivalent thereof, certifying that each copy document relating to it specified
in this Schedule 1 is correct, complete and in full force and effect as at a
date no earlier than the date of this Agreement.

 

2.                                 Legal Opinions

 

2.1                           A legal opinion of Clifford Chance LLP, as special
New York counsel to the Lender.

 

2.2                           A legal opinion of the Bermudan legal adviser to
the Obligor in form and substance satisfactory to the Lender.

 

3.                                 Other documents and evidence

 

A copy of any other authorisation or other document, opinion or assurance which
the Lender considers to be necessary or desirable (if it has notified the
Obligor accordingly) in connection with the entry into and performance of the
transaction contemplated by this Agreement or for the validity and
enforceability of this Agreement.

 

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SCHEDULE 2

 

RESTATED AGREEMENT

 

5

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SIGNATURES

 

The Obligor

 

 

 

ARCH REINSURANCE LTD.

 

 

 

 

 

/S/ MARC GRANDISSON

 

 

 

 

By:

Marc Grandisson, as President, Deputy Chairman and Chief Operating Officer

 

 

 

 

 

The Lender

 

 

 

BARCLAYS BANK PLC

 

 

 

/S/ RICHARD ASKEY

 

 

 

 

By:

Richard Askey

 

 

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LIMITED LIABILITY PARTNERSHIP

 

 

DATED AS OF NOVEMBER 25, 2003

 

(AS AMENDED AND RESTATED ON AUGUST 19, 2004 AND ON NOVEMBER 24,

2004 AND AMENDED AND RESTATED ON DECEMBER 6, 2004)

 

AND

 

ARCH REINSURANCE LTD.

as Obligor

 

and

 

BARCLAYS BANK PLC

as Lender

 

 

AMENDED AND RESTATED LETTER OF CREDIT

AND

REIMBURSEMENT AGREEMENT

 

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CONTENTS

 

Clause

 

 

 

 

 

1.

Definitions And Interpretation

 

 

 

 

2.

Terms Of The Letter Of Credit Facility

 

 

 

 

3.

Conditions Of Issuance Of Letters Of Credit

 

 

 

 

4.

Representations And Warranties

 

 

 

 

5. [a04-14408_2ex10d2.htm#Covenants]

Covenants [a04-14408_2ex10d2.htm#Covenants]

 

 

 

 

6. [a04-14408_2ex10d2.htm#EventsOfDefaultAndRemedies]

Events Of Default And Remedies
[a04-14408_2ex10d2.htm#EventsOfDefaultAndRemedies]

 

 

 

 

7. [a04-14408_2ex10d2.htm#Miscellaneous]

Miscellaneous [a04-14408_2ex10d2.htm#Miscellaneous]

 

 

 

 

Schedule 1

EXISTING ENCUMBRANCES

 

 

 

 

Schedule 2

EXISTING INDEBTEDNESS

 

 

 

 

Schedule 3

DISPOSITIONS

 

 

 

 

Exhibit A-1 - Form of Tranche A Letters of Credit

 

 

 

 

Exhibit A-2 - Form of Tranche B Letters of Credit

 

 

 

 

Exhibit B - Arch Reinsurance Security Agreement

 

 

 

 

Exhibit C - Form of Standby Letter of Credit Application

 

 

 

 

Exhibit D - Form of Adjusted Collateral Value Certificate

 

 

 

 

Exhibit E - Form of Compliance Certificate

 

 

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LETTER OF CREDIT
AND REIMBURSEMENT AGREEMENT

 

LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT dated as of November 25, 2003 (as
amended and restated on August 19, 2004, and on November 24, 2004 and amended
and restated on December 6, 2004 and otherwise amended and supplemented from
time to time, this “Agreement”) by and among Arch Reinsurance Ltd., a Bermuda
company (the “Obligor”), and Barclays Bank PLC (the “Lender”).

 

1.          DEFINITIONS AND INTERPRETATION

 

1.1        DEFINITIONS

 

Unless the context clearly otherwise requires, the following terms shall have
the following respective meanings:

 

“Adjusted Collateral Value” means, with respect to the Obligor and at any date
of determination, an amount equal to the sum of (A) (i) to the extent that such
Investments are comprised solely of U.S. Government Securities, 90% of the
market value of the aggregate Investments in the Custodial Account, or (ii) to
the extent that such Investments are not comprised solely of U.S. Government
Securities, 86.96% of the market value of the aggregate Investments in the
Custodial Account, and (B) 100% of the amount of the aggregate cash deposits in
the Custodial Account.  The Investments shall be “marked to market” by the
Custodian on a daily basis but the Custodian shall provide only monthly
reporting.

 

“Affiliate” means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by, such
Person.  As used in this definition, “control” (including, with its correlative
meanings, “controlled by” and “under common control with”) shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), provided that, in any
event: (i) any Person which owns directly or indirectly 20% or more of the
securities having ordinary voting power for the election of directors or other
governing body of a corporation or 20% or more of the partnership or other
ownership interests of any other Person (other than as a limited partner of such
other Person) will be deemed to control such corporation or other Person.

 

“Applicable Insurance Regulatory Authority” means the insurance department or
similar administrative authority or agency that has the principal regulatory
jurisdiction over the Obligor or other Person.

 

“Beneficiary” means any Person designated a beneficiary of a Letter of Credit
issued pursuant to this Agreement.

 

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“Business Day” means any day other than a Saturday, Sunday or any other day on
which commercial banks in London and Bermuda are authorized or required to
close.

 

“Capital Lease” means any lease which has been or should be capitalized on the
books of the lessee in accordance with GAAP.

 

“Capital Lease Obligations” means, for any Person, all obligations of such
Person to pay rent or other amounts under a Capital Lease.  For purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.

 

“Closing” means the delivery of the executed Fundamental Documents by the
parties thereto on the Closing Date.

 

“Closing Date” means the date on which all of the conditions set forth in Clause
‎3.1 shall have been satisfied or waived by the Lender.

 

“Code” means the U. S. Internal Revenue Code of 1986, as amended from time to
time, and any rule or regulation issued thereunder.

 

“Collateral” has the definition set forth in Clause ‎2.8 (Collateral Security).

 

“Compliance Certificate” means a compliance certificate delivered to the Lender
pursuant to sub-clause ‎5.1.2(i) (Compliance Certificate) of Clause ‎5.1
substantially in the form set out in Exhibit E hereto.

 

“Constituent Documents” means, with respect to any Corporation, such
Corporation’s certificate of incorporation, memorandum of association or other
similar document concerning the formation, organization and existence of such
Corporation required under the laws of the jurisdiction of organization of such
Corporation, and such Corporation’s by-laws or other similar document required
under the laws of such jurisdiction of organization.

 

“Controlled Group” means all members of a controlled group of corporations or
other business entities and all trades or businesses (whether or not
incorporated) under common control which are treated as a single employer under
Section 414 of the Code.

 

“Consolidated Net Income” means, for any Person, for any period, net income (or
loss) after income taxes of such Person and its Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.

 

“Corporation” includes companies, associations, corporations, partnerships,
limited liability companies and other legal entities of all kinds.

 

“Custodial Account” shall have the meaning set forth in the Security Agreements
executed and delivered by the Obligor.

 

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“Custodian” shall have the meaning set forth in the Custodian Agreement.

 

“Custodian Agreements” means the Custody Agreement dated 24 November 2003,
between Fleet National Bank, as Custodian, and Arch Reinsurance as the same may
be amended, supplemented, restated or otherwise modified from time to time.

 

“Default” means any event or condition specified in Clause ‎6.1, which, upon the
giving of notice, the lapse of time, or the happening of any further condition,
would become an Event of Default.

 

“Dollar Equivalent” means, with respect to any monetary amount in a currency
other than United States Dollars, at any date of determination thereof, the
amount of United States Dollars obtained by converting such currency involved in
such computation into United States Dollars at the spot rate for the purchase of
United States Dollars with the applicable currency as published in the Financial
Times (or any successor thereto) on the date of such determination.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and any rule or regulation issued thereunder.

 

“ERISA Affiliate” has the meaning given to it in Clause ‎4.12( ERISA)

 

“Event of Default” has the definition set forth in Clause ‎6.1.

 

“Facility” means the Letters of Credit that the Lender is willing to issue under
this Agreement as determined in its sole and absolute discretion in an amount
(including all Letter of Credit Obligations and Reimbursement Obligations for
the Obligors) not to exceed at the time of issuance of any Letter of Credit
$175,000,000 (United States Dollars or the foreign currency Dollar Equivalent of
any of the following G7 nations: Canada, the European Union, and United Kingdom)
in the aggregate.

 

“Facility Availability Date” means December 31, 2005.

 

“Facility Termination Date” means December 31, 2008.

 

“Federal Funds Rate” means, for any period, the rate per annum (rounded upwards,
if necessary, to the nearest 1/100 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 Business Day next succeeding such
day, provided that (a) if the day for which such rate is to be determined is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (b) if such rate is not so published for any
Business Day, the Federal Funds Rate for such Business Day shall be the average
rate charged to the Lender on such Business Day on such transactions as
determined by the Lender.

 

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“Fundamental Documents” means and includes each of the following for the time
being in force:

 

(a)             this Agreement;

 

(b)            the Letters of Credit;

 

(c)             the Security Agreement;

 

(d)            the Custodian Agreement; and

 

(e)             any other Security Document.

 

“GAAP” shall mean U.S. generally accepted accounting principles in effect from
time to time.

 

“Group” means the Parent and its Subsidiaries from time to time.

 

“GUARANTEE” OF OR BY ANY PERSON (THE “GUARANTOR”) MEANS ANY OBLIGATION
GUARANTEEING OR INTENDED TO GUARANTEE ANY INDEBTEDNESS, LEASES, DIVIDENDS OR
OTHER OBLIGATIONS (“PRIMARY OBLIGATIONS”) OF ANY OTHER PERSON (THE “PRIMARY
OBLIGOR”) IN ANY MANNER, WHETHER DIRECTLY OR INDIRECTLY, INCLUDING, WITHOUT
LIMITATION, ANY OBLIGATION OF SUCH PERSON, WHETHER OR NOT CONTINGENT, (A) TO
PURCHASE ANY SUCH PRIMARY OBLIGATION OR ANY PROPERTY CONSTITUTING DIRECT OR
INDIRECT SECURITY THEREFOR, (B) TO ADVANCE OR SUPPLY FUNDS (I) FOR THE PURCHASE
OR PAYMENT OF ANY SUCH PRIMARY OBLIGATION OR (II) TO MAINTAIN WORKING CAPITAL OR
EQUITY CAPITAL OF THE PRIMARY OBLIGOR OR OTHERWISE TO MAINTAIN THE NET WORTH OR
SOLVENCY OF THE PRIMARY OBLIGOR, (C) TO PURCHASE PROPERTY, SECURITIES OR
SERVICES PRIMARILY FOR THE PURPOSE OF ASSURING THE OWNER OF ANY SUCH PRIMARY
OBLIGATION OF THE ABILITY OF THE PRIMARY OBLIGOR TO MAKE PAYMENT OF SUCH PRIMARY
OBLIGATION OR (D) OTHERWISE TO ASSURE OR HOLD HARMLESS THE OWNER OF SUCH PRIMARY
OBLIGATION AGAINST LOSS IN RESPECT THEREOF; PROVIDED, HOWEVER, THAT THE TERM
GUARANTEE SHALL NOT INCLUDE (X) ENDORSEMENTS OF INSTRUMENTS FOR DEPOSIT OR
COLLECTION IN THE ORDINARY COURSE OF BUSINESS OR (Y) OBLIGATIONS OF THE OBLIGOR
UNDER INSURANCE CONTRACTS, REINSURANCE AGREEMENTS OR RETROCESSION AGREEMENTS. 
THE AMOUNT OF ANY GUARANTEE SHALL BE DEEMED TO BE AN AMOUNT EQUAL TO THE STATED
OR DETERMINABLE AMOUNT OF THE PRIMARY OBLIGATION IN RESPECT OF WHICH SUCH
GUARANTEE IS MADE OR, IF NOT STATED OR DETERMINABLE, THE MAXIMUM REASONABLY
ANTICIPATED LIABILITY IN RESPECT THEREOF (ASSUMING SUCH PERSON IS REQUIRED TO
PERFORM THEREUNDER) AS DETERMINED BY SUCH PERSON IN GOOD FAITH.

 

“Indebtedness” means, for any Person: (a) obligations created, issued or
incurred by such Person for borrowed money (whether by loan, the issuance and
sale of debt securities or the sale of Property to another Person subject to an
understanding or agreement, contingent or otherwise, to repurchase such Property
from such Person); (b) obligations of such Person to pay the deferred purchase
or acquisition price of Property or services, other than trade accounts payable
(other than for borrowed money) arising, and accrued

 

4

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expenses incurred, in the ordinary course of business; (c) indebtedness of
others secured by a Lien on the Property of such Person, whether or not the
respective indebtedness so secured has been assumed by such Person; (d)
reimbursement obligations of such Person in respect of letters of credit or
similar instruments issued or accepted by banks and other financial institutions
for account of such Person; (e) Capital Lease Obligations of such Person; (f)
Guarantees by such Person of Indebtedness of others; (g) Rate Hedging
Obligations of such Person; and (h) any other obligation for borrowed money or
other financial accommodation which in accordance with GAAP or SAP, as
applicable, would be shown as a liability on the consolidated balance sheet of
such Person.  For the avoidance of doubt, Indebtedness shall not include (v)
trade payables (including payables under insurance contracts and reinsurance
payables) and accrued expenses in each case arising in the ordinary course of
business, (w) obligations of the Obligor with respect to Policies, (x)
obligations arising under deferred compensation plans of the Obligor and its
Subsidiaries in effect on the date hereof or which have been approved by the
board of directors of the Obligor, (y) obligations with respect to products
underwritten by the Obligor in the ordinary course of business, including
insurance policies, annuities, performance and surety bonds and any related
contingent obligations and (z) reinsurance agreements entered into by the
Obligor in the ordinary course of business.

 

“Interest Rate” means the rate of interest per annum equal to two percentage
points (2%) above the LIBOR from time to time in effect, not to exceed the
maximum rate of interest permitted by applicable law.

 

“Investment” means (i) U.S. Government Securities and (ii) debt securities of
corporate issuers which (x) are denominated in United States Dollars, (y) in the
aggregate have an average weighted minimum rating of not less than AA- by S&P
and Aa3 by Moody’s and (z) individually have a minimum rating of not less than
BBB by S&P and Baa2 by Moody’s, provided, however, that, for purposes of the
foregoing paragraph (ii), no more than 10% of the aggregate Investments
maintained in the Custodial Account established in the name of the Obligor may
consist of debt securities of corporate issuers with a rating of A or lower by
S&P and Aa3 by Moody’s.

 

“ISP” means the International Standby Practices (ISP 1998), International
Chamber of Commerce Publication No. 590.

 

“Issue Date” means the date on which a Letter of Credit is issued.

 

“Lender” means Barclays Bank PLC.

 

“Letter(s) of Credit” means either a Tranche A Letter of Credit and/or a
Tranche B Letter of Credit.

 

“Letter of Credit Obligations” means, as at any date of determination thereof,
on an aggregate basis for all Letters of Credit issued at the request of the
Obligor, the maximum amount that could be drawn by the Beneficiaries of such
Letters of Credit (assuming,

 

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notwithstanding any provision of a Letter of Credit to the contrary, that such
Beneficiary was then entitled to draw the full amount remaining available
thereunder) but which has not been drawn as of that date (for purposes of any
Letters of Credit denominated in the currency of Canada, the European Union, or
the United Kingdom, the maximum amount that could be drawn by the Beneficiaries
of such Letters of Credit shall be deemed to be the Dollar Equivalent of such
amount as of such date).

 

“LIBOR” means,

 

(a)             the applicable Screen Rate; or

 

(b)             (if no Screen Rate is available for the applicable currency) the
arithmetic mean of the rates (rounded upwards to four decimal places) as
supplied to the Lender at its request quoted by the Reference Banks to leading
Banks in the London interbank market,

 

as of the relevant time on the quotation date in accordance with market practice
for the offering of deposits in such currency and for the specified period.

 

“Lien” means, with respect to any Property, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such Property.  For
purposes of this Agreement, a Person shall be deemed to own subject to a Lien
any Property that 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 (other than an operating lease) relating to such Property.

 

“Margin Stock” means margin stock or “margin security” within the meaning of
Regulations T, U and X.

 

“Material Adverse Effect” means an event or circumstance which has or could
reasonably be expected to have a material adverse effect on:

 

(a)             the ability of the Obligor to meet the obligations of this
Agreement;

 

(b)            the business assets or financial condition of the Obligor or the
Parent; or

 

(c)             the validity or enforceability of the rights and remedies of the
Lender under the Fundamental Documents.

 

“Moody’s” means Moody’s Investor Service, Inc. or any successor thereto.

 

“Multiemployer Plan” means a “multiemployer plan” (as defined in Section (3)(37)
of ERISA) contributed to for any employees of any Affiliate of the Obligor.

 

“Net Worth” means the excess of total assets over total liabilities of the Group
which shall be determined on a consolidated basis in accordance with GAAP.

 

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“Obligor” means Arch Reinsurance Ltd., a Bermuda company.

 

“Parent” means Arch Capital Group Ltd., a Bermuda company.

 

“Person” means and includes an individual, a partnership, trust, estate,
corporation, company, unincorporated organization, limited liability company and
a government or any agency, instrumentality or political subdivision thereof.

 

“Plan” means an employee pension benefit plan which is covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the Code
as to which any Credit Party or any member of the Controlled Group may have any
liability.

 

“Property” means any right or interest in or to property of any kind whatsoever,
whether real, personal or mixed and whether tangible or intangible.

 

“Policies” means all insurance policies, annuity contracts, guaranteed interest
contracts and funding agreements (including riders to any such policies or
contracts, certificates issued with respect to group life insurance or annuity
contracts and any contracts issued in connection with retirement plans or
arrangements) and assumption certificates issued or to be issued (or filed
pending current review by applicable governmental authorities) by the Obligor
and any coinsurance agreements entered into or to be entered into by the
Obligor.

 

“Rate Hedging Obligations” means, for any Person, any and all net obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any agreements,
devices or arrangements designed to protect at least one of the parties thereto
from the fluctuations of interest rates, exchange rates or forward rates
applicable to such party’s assets, liabilities or exchange transactions,
including but not limited to, dollar-denominated or cross-currency interest rate
exchange agreements, forward currency exchange agreements, interest rate cap or
collar protection agreements, forward rate currency or interest rate options,
puts and warrants, or any similar derivative transactions, and (b) any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.

 

“Reference Banks” means the principal London office of Barclays Bank PLC or such
other banks as may be appointed by the Lender.

 

“Regulations T, U and X” means, respectively, Regulations T, U and X of the
Board of Governors of the Federal Reserve System of the United States (or any
successor) as now and from time to time hereafter in effect from the date of
this Agreement.

 

“Reimbursement Obligations” means with respect to the Obligor, all of its
obligations pursuant to Clause ‎2.2 to reimburse the Lender for payments made by
the Lender upon any drawings under any Tranche A Letter of Credit or any Tranche
B Letter of Credit issued at the request of the Obligor and to pay to the Lender
all other amounts that are

 

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payable by the Obligor to the Lender pursuant to this Agreement and the other
Fundamental Documents.  For purposes of drawings under any Letters of Credit
denominated in the currency of Canada, the European Union or the United Kingdom,
the amount of such drawing shall be deemed to be the Dollar Equivalent of such
amount as of the date of repayment of such drawing, provided, however, that,
solely for the purpose of determining the Obligor’s compliance with the
requirements of Clause ‎5.1.3 hereof and Clause 1 of either Security Agreement
on any given date, the amount of any such unreimbursed drawing shall be deemed
to be the Dollar Equivalent of such amount as of such date.

 

“Repeating Representations” means the representations which are set out in
Clause ‎4.1 to Clause ‎4.15 inclusive.

 

“SAP” means the accounting procedures and practices prescribed or permitted by
the Applicable Insurance Regulatory Authority, applied on a basis consistent
with those that are to be used in making the calculations for purposes of
determining compliance with this Agreement.

 

“SAP Financial Statements” means the financial statements of the Obligor which
have been submitted or are required to be submitted to the Applicable Insurance
Regulatory Authority.

 

“S&P” shall mean Standard & Poor’s Rating Services, a division of The McGraw
Hill Companies, Inc. or any successor thereto.

 

“Screen Rate” means the British Bankers’ Association Interest Settlement Rate
for the relevant currency period, displayed on the appropriate page of the
Telerate screen.  If the agreed page is replaced or service ceases to be
available, the Lender may specify another page or service displaying the
appropriate rate.

 

“Security” means a mortgage, pledge, Lien or other security interest securing
any obligation of any person or any other agreement or arrangement having a
substantially similar effect.

 

“Security Agreement” means the Security Agreement, dated November 25, 2003, in
the form of Exhibit B hereto, between the Lender and the Obligor, as the same
may be amended, supplemented, restated or otherwise modified from time to time,
securing the obligations of the Obligor under this Agreement and the relevant
Letters of Credit.

 

“Security Documents” means, collectively, the Security Agreement and each other
instrument or agreement that secures or guarantees the Reimbursement
Obligations.

 

“Single Employer Plan” means a Plan maintained any member of the Controlled
Group for employees of any member of the Controlled Group.

 

“Subsidiary” of a Person means:

 

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(a)             any corporation more than 50% of the outstanding securities
having ordinary voting power of which shall at the time be owned or controlled,
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries; or

 

(b)            any partnership, association, joint venture, limited liability
company or similar business organization more than 50% of the ownership
interests having ordinary voting power of which shall at the time be so owned or
controlled.  Unless otherwise expressly provided, all references herein to a
“Subsidiary” shall mean a Subsidiary of the Obligor.

 

“Tax” means any present or future tax, rate, duty, impost, governmental charge
or levy, including, without limitation thereto, any corporation, income (other
than any taxes imposed on or measured by the gross income or profits of the
Lender), value added, capital gains, sales, transfer, use, excise, occupation,
franchise, property, stamp or other tax or duty and any license, registration
and recording fee and all penalties, fines, interest imposed, assessed or
otherwise payable in respect of any of the foregoing and all deductions or
withholdings required to be made in respect of any of the foregoing levied,
assessed, charged or required by any government or taxing authority in any
country.

 

“Tranche A Letter(s) of Credit” means the irrevocable standby letters of credit
issued for the benefit of The Society and Council of Lloyds or its affiliates or
the managing agents of any Lloyds’ syndicate reinsured by the Obligor under this
Agreement having an expiry date up to five (5) years from the date of issue in
the aggregate issued amount at any one time when aggregated with any other
outstanding Letters of Credit under this Agreement not to exceed a face amount
of $175,000,000.00 (United States Dollars).

 

“Tranche B Letter(s) of Credit” means the irrevocable standby letters of credit
issued to a Beneficiary under this Agreement having an expiry date 364 days from
the date of issue in the aggregate issued amount at any one time when aggregated
with any other outstanding Tranche B Letters of Credit under this Agreement not
to exceed a face amount of $25,000,000.00 (United States Dollars).

 

“U.S. Government Securities” means securities that are direct obligations of,
and obligations the timely payment of principal and interest on which is fully
guaranteed by, the United States, or any agency or instrumentality of the United
States the obligations of which are backed by the full faith and credit of the
United States and in the form of conventional bills, bonds, and notes.  In no
event shall U.S. Government Securities include any security providing for the
payment of interest only.

 

1.2         INTERPRETATION

 

1.2.1         THE TERMS “HEREOF,” “HEREUNDER” AND “HEREIN” REFER TO THIS
AGREEMENT AS A WHOLE.

 

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1.2.2         REFERENCES BY NUMBER TO CLAUSES, SCHEDULES AND EXHIBITS REFER TO
THE CLAUSES, SCHEDULES AND EXHIBITS OF THIS AGREEMENT UNLESS OTHERWISE STATED.

 

1.2.3         THE SINGULAR FORM OF ANY WORD ALSO REFERS TO THE PLURAL FORM OF
SUCH WORD, AND VICE VERSA, AND ANY WORD OF ANY PARTICULAR GENDER INCLUDES THE
CORRELATIVE WORDS OF THE OTHER GENDERS.

 

1.2.4         ANY REFERENCES IN THIS AGREEMENT TO ONE OR MORE ITEMS PRECEDED BY
THE WORD “INCLUDING” SHALL NOT BE DEEMED LIMITED TO THE STATED ITEMS BUT SHALL
BE DEEMED WITHOUT LIMITATION.

 

2.           TERMS OF THE LETTER OF CREDIT FACILITY

 

2.1         THE LETTERS OF CREDIT

 

2.1.1         ON THE TERMS AND SUBJECT TO THE FURTHER CONDITIONS HEREINAFTER SET
FORTH AND UPON SATISFACTION OF THE CONDITIONS SET FORTH IN CLAUSE ‎3, THE LENDER
HEREBY AGREES TO ISSUE ON AND AFTER THE CLOSING DATE TRANCHE A LETTERS OF CREDIT
AND TRANCHE B LETTERS OF CREDIT, EACH DATED THE DATE OF ITS ISSUANCE,
SUBSTANTIALLY IN THE FORM OF EXHIBIT A-1 AND EXHIBIT A-2 RESPECTIVELY HERETO AND
IN THE AGGREGATE ISSUED AT ANY ONE TIME IN A FACE AMOUNT NOT TO EXCEED
$175,000,000.00 (UNITED STATES DOLLARS) AND SO LONG AS (AFTER GIVING EFFECT TO
THE ISSUANCE OF THE REQUESTED LETTER OF CREDIT) THE ADJUSTED COLLATERAL VALUE IS
NOT LESS THAN THE SUM OF ALL AMOUNTS THEN OUTSTANDING WITH RESPECT TO THE LETTER
OF CREDIT OBLIGATIONS AND REIMBURSEMENT OBLIGATIONS, AS MORE SPECIFICALLY SET
FORTH BELOW IN SUB-CLAUSE ‎2.1.2.  SO LONG AS ANY LETTER OF CREDIT IS
OUTSTANDING AND HAS NOT EXPIRED, THIS AGREEMENT SHALL CONTINUE TO BE IN FULL
FORCE AND EFFECT WITH RESPECT TO SUCH LETTER OF CREDIT, PROVIDED, HOWEVER, THAT
NO TRANCHE A LETTER OF CREDIT SHALL BE RENEWED, NOR SHALL ANY TRANCHE A LETTER
OF CREDIT BE ISSUED, ON OR AFTER THE FACILITY AVAILABILITY DATE.

 

2.1.2         THE OBLIGOR MAY, FROM TIME TO TIME, REQUEST THAT THE LENDER ISSUE
IN THE CASE OF TRANCHE A LETTERS OF CREDIT DURING THE PERIOD FROM THE DATE
HEREOF TO BUT NOT INCLUDING THE FACILITY AVAILABILITY DATE AND, IN THE CASE OF
TRANCHE B LETTERS OF CREDIT, DURING THE PERIOD FROM THE DATE HEREOF ENDING 364
DAYS PRIOR TO THE FACILITY TERMINATION DATE, IN AN AGGREGATE FACE AMOUNT
(TOGETHER WITH THE LETTER OF CREDIT OBLIGATIONS AND REIMBURSEMENT OBLIGATIONS
FOR THE OBLIGOR) AT ANY TIME ISSUED UP TO BUT NOT EXCEEDING, IN THE CASE OF
TRANCHE B LETTERS OF CREDIT, A FACE AMOUNT OF $25,000,000 AND, IN THE CASE OF
TRANCHE A LETTERS OF CREDIT, WHEN AGGREGATED WITH ALL OUTSTANDING TRANCHE B
LETTERS OF CREDIT, THE AMOUNT OF THE FACILITY; PROVIDED HOWEVER, (I) THE
AGGREGATE AMOUNT OF LETTER OF CREDIT OBLIGATIONS AND REIMBURSEMENT OBLIGATIONS
AT ANY TIME ISSUED SHALL NOT EXCEED THE ADJUSTED COLLATERAL VALUE AND (II) THE
AGGREGATE FACE AMOUNT OF ALL TRANCHE A AND TRANCHE B LETTERS OF CREDIT ISSUED
UNDER THIS AGREEMENT, SHALL NOT EXCEED $175,000,000.  THE OBLIGOR SHALL MAKE
SUCH REQUEST BY EXECUTING AND DELIVERING

 

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TO THE LENDER THE LENDER’S THEN STANDARD FORM STANDBY LETTER OF CREDIT
APPLICATION AND RELATED DOCUMENTATION (IN HARDCOPY AND/OR ELECTRONIC FORMAT
ACCEPTABLE TO THE LENDER).  THE CURRENT STANDARD FORM STANDBY LETTER OF CREDIT
APPLICATION IS ATTACHED AS EXHIBIT C HERETO.  IF THERE SHALL EXIST ANY
INCONSISTENCY BETWEEN THE TERMS OF THIS AGREEMENT (AND THE SECURITY DOCUMENTS)
AND ANY SUCH DOCUMENTATION RELATING TO A LETTER OF CREDIT ISSUED UNDER THIS
SUB-CLAUSE ‎2.1.2, THE TERMS OF THIS AGREEMENT (AND THE SECURITY DOCUMENTS)
SHALL CONTROL.

 

2.1.3         UPON WRITTEN REQUEST FROM THE OBLIGOR SUBMITTED NO EARLIER THAN
120 DAYS, BUT NO LATER THAN 45 DAYS BEFORE THE FACILITY AVAILABILITY DATE, AND
IN THE LENDER’S SOLE DISCRETION, THIS AGREEMENT SHALL BE EXTENDED FOR SUCH
PERIOD AND ON THE TERMS AND CONDITIONS AS THE OBLIGOR AND THE LENDER MAY AGREE.

 

2.1.4         LENDER AGREES TO USE ITS BEST ENDEAVOURS TO REVIEW THE SUSPENSION
OF CERTAIN COVENANTS AND EVENTS OF DEFAULTS WHILE CASH DEPOSITS AND/OR CASH
EQUIVALENTS IN THE CUSTODIAN ACCOUNT EXCEED THE FACE AMOUNT OF OUTSTANDING
LETTERS OF CREDIT OR SUCH LETTERS OF CREDIT ARE SUPPORTED BY BACK-TO-BACK
LETTERS OF CREDIT FROM ACCEPTABLE BANKING INSTITUTIONS THE TERMS AND CONDITIONS
OF WHICH ARE ACCEPTABLE TO THE LENDER.

 

2.2         REIMBURSEMENT; LENDER’S RESPONSIBILITY

 

2.2.1         THE LENDER SHALL NOTIFY THE OBLIGOR OF A DRAWING UNDER ANY LETTER
OF CREDIT ISSUED AT THE REQUEST OF THE OBLIGOR ON OR PRIOR TO THE DATE OF
PAYMENT OF SUCH DRAWING BY CONTACTING THE OBLIGOR TELEPHONICALLY.  REIMBURSEMENT
BY THE OBLIGOR OF THE AMOUNT OF EACH SUCH DRAWING IS DUE AND PAYABLE IN FULL (I)
ON THE SAME DAY THAT THE LENDER HONOURS SUCH DRAWING, IF THE FOREGOING NOTICE IS
RECEIVED BEFORE 1:00 P.M. (LONDON TIME) ON THE DATE OF SUCH DRAWING OR (II) ON
THE BUSINESS DAY IMMEDIATELY FOLLOWING THE DATE OF SUCH DRAWING, IF THE
FOREGOING NOTICE IS RECEIVED AFTER 1:00 P.M. (LONDON TIME) ON THE DATE OF SUCH
DRAWING, AND THE OBLIGOR ABSOLUTELY AND UNCONDITIONALLY AGREES TO PAY OR CAUSE
TO BE PAID TO THE LENDER, ON SUCH DATE, WITHOUT DEMAND, THE AMOUNT OF ANY
DRAWING UNDER A LETTER OF CREDIT ISSUED AT THE REQUEST OF THE OBLIGOR.

 

2.2.2         THE OBLIGOR, ABSOLUTELY AND UNCONDITIONALLY, AGREES TO PAY, OR
CAUSE TO BE PAID, TO THE LENDER, ON DEMAND, INTEREST AT THE INTEREST RATE ON ANY
AMOUNT (INCLUDING ON OVERDUE INTEREST TO THE EXTENT PERMITTED BY LAW) DUE BY THE
OBLIGOR HEREUNDER THAT IS NOT PAID WHEN DUE, FOR EACH DAY SUCH AMOUNT IS UNPAID.

 

2.3         OBLIGATIONS OF LENDER

 

Whenever the Lender receives a demand for payment under a Letter of Credit, it
will promptly examine the demand to determine whether or not it is in conformity
with such Letter of Credit under which it is presented.

 

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2.4         UNCONDITIONAL OBLIGATIONS OF THE OBLIGORS

 

The Obligor agrees with the Lender that the following provisions shall apply
with respect to each Letter of Credit issued to the Obligor:

 

2.4.1         EXCEPT AS OTHERWISE EXPRESSLY STATED IN ANY LETTER OF CREDIT, BUT
WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT OR ANY LETTER OF CREDIT, THERE
MAY BE ACCEPTED OR HONOURED AS COMPLYING WITH SUCH LETTER OF CREDIT ANY
DOCUMENTS OF ANY CHARACTER THAT COMPLY WITH THE PROVISIONS AND INTERPRETATIONS
CONTAINED IN THE ISP.

 

2.4.2         NEITHER THE LENDER NOR ANY OF ITS CORRESPONDENTS OR AGENTS SHALL
BE RESPONSIBLE FOR: (I) THE TRUTH OR ACCURACY OF ANY STATEMENT CONTAINED IN ANY
DOCUMENT RECEIVED UNDER THE LETTERS OF CREDIT; (II) THE VALIDITY, SUFFICIENCY OR
GENUINENESS OF ANY SUCH DOCUMENT BELIEVED BY THE LENDER IN GOOD FAITH AND IN THE
EXERCISE OF ORDINARY CARE TO BE VALID, EVEN IF WHOLLY FRAUDULENT OR FORGED;
(III) ANY BREACH OF CONTRACT BETWEEN THE OBLIGOR OR ANY OTHER PERSON AND THE
BENEFICIARY OF ANY LETTER OF CREDIT; (IV) INTERRUPTIONS OR DELAYS IN THE
TRANSMISSION OR DELIVERY OF MESSAGES, BY MAIL, COURIER SERVICE OR ELECTRONIC
MEANS, WHETHER IN CIPHER OR NOT; (V) ANY ERRORS OR OMISSIONS IN THE TRANSLATION
OF ANY DOCUMENT; (VI) FAILURE OR DELAY IN GIVING ANY NOTICE OR IN COMPLYING WITH
ANY OTHER FORMALITY; (VII) DELAY IN ARRIVAL OR FAILURE TO ARRIVE OF ANY PROPERTY
OR REQUIRED INSTRUMENT OR DOCUMENT; (VIII) FAILURE OF ANY DOCUMENT TO BEAR
ADEQUATE REFERENCE TO A LETTER OF CREDIT, OR FAILURE OF ANY PERSON TO NOTE THE
AMOUNT OF ANY PAYMENT ON THE REVERSE SIDE OF A LETTER OF CREDIT OR TO SURRENDER
OR TO TAKE UP A LETTER OF CREDIT OR TO SEND FORWARD DOCUMENTS AS REQUIRED BY THE
TERMS OF A LETTER OF CREDIT, EACH OF WHICH PROVISIONS, IF CONTAINED IN A LETTER
OF CREDIT ITSELF, IT IS AGREED MAY BE WAIVED BY THE LENDER; (IX) THE FACT THAT
ANY INSTRUCTIONS, ORAL OR WRITTEN, GIVEN TO THE LENDER PURPORTING TO HAVE BEEN
GIVEN BY OR ON BEHALF OF THE OBLIGOR AND BELIEVED BY THE LENDER IN GOOD FAITH
AND IN THE EXERCISE OF ORDINARY CARE TO BE VALID WHICH PERTAIN TO THE ISSUANCE
OF ANY LETTER OF CREDIT, ANY EXTENSION, INCREASE OR OTHER MODIFICATION OF ANY
LETTER OF CREDIT OR OTHER ACTION TO BE TAKEN OR OMITTED WITH REFERENCE THERETO,
WERE WHOLLY OR PARTLY INSUFFICIENT, ERRONEOUS, UNAUTHORIZED OR FRAUDULENT; OR
(X) ANY OTHER ACT OR OMISSION AS TO WHICH BANKS ARE RELIEVED FROM RESPONSIBILITY
UNDER THE TERMS OF THE ISP, PROVIDED THAT NONE OF THE CONTINGENCIES REFERRED TO
IN SUBPARAGRAPHS (I) THROUGH (X) OF SUB-CLAUSE ‎2.4.2 IS ATTRIBUTABLE TO THE
GROSS NEGLIGENCE OR WILFUL MISCONDUCT OF THE LENDER OR ANY OF ITS CORRESPONDENTS
OR AGENTS.

 

2.4.3         THE OBLIGOR WILL, WITHOUT EXPENSE TO THE LENDER, PROCURE OR CAUSE
TO BE PROCURED PROMPTLY ALL NECESSARY LICENSES WHICH ARE REQUIRED WITH RESPECT
TO THE TRANSACTION(S) WHICH IS/ARE THE SUBJECT OF ANY LETTER OF CREDIT ISSUED
FOR THE OBLIGOR OR TO WHICH ANY SUCH LETTER OF CREDIT RELATES, WILL COMPLY WITH
OR CAUSE TO BE COMPLIED WITH ALL APPLICABLE GOVERNMENTAL REGULATIONS IN REGARD
THERETO, AND WILL FURNISH OR CAUSE TO BE FURNISHED TO THE LENDER SUCH DOCUMENTS
AND CERTIFICATES IN RESPECT THEREOF AS THE LENDER MAY REASONABLY REQUIRE.

 

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2.4.4         THE OBLIGOR HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS THE
LENDER FROM AND AGAINST ALL LIABILITY, LOSS OR EXPENSE (INCLUDING REASONABLE
LEGAL FEES, COURT COSTS AND OTHER EXPENSES WHICH THE LENDER MAY INCUR IN
ENFORCING ITS RIGHTS HEREUNDER) INCURRED AS A CONSEQUENCE OF (I) ANY FAILURE ON
THE PART OF THE OBLIGOR DULY TO PERFORM ITS AGREEMENTS CONTAINED IN THIS CLAUSE
‎2.4, (II) ANY ACTION TAKEN OR OMITTED BY THE LENDER OR ANY OF ITS
CORRESPONDENTS IN RELATION TO ANY LETTER OF CREDIT ISSUED AT THE REQUEST OF OR
ON BEHALF OF THE OBLIGOR, OR (III) ANY CLAIMS ASSERTED BY ANY PARTY TO ANY
TRANSACTION IN CONNECTION WITH WHICH SUCH LETTERS OF CREDIT ARE ISSUED, EXCEPT
SUCH LIABILITY, LOSS OR EXPENSE, IF ANY, AS IS INCURRED AS A RESULT OF THE GROSS
NEGLIGENCE OR WILFUL MISCONDUCT ON THE PART OF THE LENDER OR OF ANY OF ITS
CORRESPONDENTS.

 

2.5         REGULATORY REQUIREMENTS; ADDITIONAL COSTS

 

The Obligor shall pay to the Lender from time to time upon demand such amounts
as the Lender determines in its sole discretion is necessary to compensate the
Lender for any costs attributable to the Lender’s issuing or having outstanding,
or the Lender’s participation in, or the Lender’s making payment under, any
Letter of Credit issued at the request of the Obligor resulting from the
application of any domestic or foreign law or regulation or the interpretation
or administration thereof applicable to the Lender regarding any reserve,
assessment, capitalization (including the cost of maintaining capital sufficient
to permit issuance of the Letters of Credit, provided the cost attributed to the
Letters of Credit is determined in good faith by any reasonable method) or
similar requirement whether existing at the time of issuance of any such Letter
of Credit or adopted thereafter, including, without limitation, any reduction in
amounts receivable hereunder as a result of any change in applicable law,
treaty, regulation, policy or directive, or the imposition of any Tax or
increase in any existing Tax, applicable to the transactions contemplated
hereunder or the commitment of the Lender hereunder.

 

2.6         FEES

 

2.6.1         THE OBLIGOR AGREES TO PAY TO THE LENDER THE FOLLOWING FEES IN
CONNECTION WITH THIS AGREEMENT:

 

(A)       A LETTER OF CREDIT RENEWAL FEE PAYABLE ANNUALLY IN ARREARS (AND
CALCULATED BASED UPON A 360-DAY YEAR AND ACTUAL DAYS ELAPSED) ON THE ANNUAL
ANNIVERSARY OF THE CLOSING DATE IN AN AMOUNT EQUAL TO .05% PER ANNUM OF THE
AMOUNT OF THE FACILITY;

 

(B)       A LETTER OF CREDIT UNUSED FEE PAYABLE QUARTERLY IN ARREARS (AND
CALCULATED BASED UPON A 360-DAY YEAR AND ACTUAL DAYS ELAPSED) ON THE LAST
BUSINESS DAY OF EACH MARCH, JUNE, SEPTEMBER AND DECEMBER, COMMENCING ON DECEMBER
6, 2004 EQUAL TO 0.075% PER ANNUM OF AN AMOUNT EQUAL TO $175,000,000 MINUS THE
TOTAL LETTER OF CREDIT OBLIGATIONS FROM TIME TO TIME OUTSTANDING;

 

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(C)       A LETTER OF CREDIT UPFRONT FEE TO BE PAID TO THE LENDER, PRIOR TO OR
ON THE CLOSING DATE EQUAL TO $180,000; AND

 

2.6.2         THE OBLIGOR AGREES TO PAY TO THE LENDER SEPARATELY, AND FOR ITS
OWN ACCOUNT, THE FOLLOWING FEES WITH RESPECT TO LETTERS OF CREDIT ISSUED AT THE
REQUEST OF THE OBLIGOR:

 

(A)       A LETTER OF CREDIT ISSUANCE FEE PAYABLE QUARTERLY IN ARREARS (AND
CALCULATED BASED UPON A 360-DAY AND ACTUAL DAYS ELAPSED) ON THE LAST BUSINESS
DAY OF EACH MARCH, JUNE, SEPTEMBER AND DECEMBER WITH RESPECT TO EACH LETTER OF
CREDIT ISSUED AT THE REQUEST OF THE OBLIGOR IN AN AMOUNT EQUAL TO .45% PER ANNUM
OF THE MAXIMUM FACE AMOUNT OF SUCH LETTER OF CREDIT OUTSTANDING DURING SUCH
QUARTER PROVIDED THAT, IF THE COLLATERAL INCLUDES, AT THE TIME OF ISSUANCE OF A
REQUESTED LETTER OF CREDIT, CASH DEPOSITS OR US GOVERNMENT SECURITIES THE
ADJUSTED COLLATERAL VALUE OF WHICH EQUALS THE FACE AMOUNT OF THE REQUESTED
LETTER OF CREDIT, THE ISSUANCE FEE SHALL BE REDUCED TO 0.35% PER ANNUM OF THE
MAXIMUM FACE AMOUNT OF THE LETTER OF CREDIT OUTSTANDING DURING SUCH QUARTER;

 

(B)       ALL OTHER CHARGES, COSTS AND FEES CUSTOMARILY IMPOSED BY THE LENDER IN
CONNECTION WITH THE ISSUANCE OF SUCH LETTERS OF CREDIT.

 

2.7         PAYMENTS AND COMPUTATIONS

 

2.7.1         EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, ALL PAYMENTS
TO BE MADE BY OR ON BEHALF OF THE OBLIGOR UNDER THIS AGREEMENT SHALL BE MADE TO
THE LENDER, NOT LATER THAN 4:00 P.M. LONDON TIME, ON THE DATE WHEN DUE, IN
IMMEDIATELY AVAILABLE FUNDS BY FEDERAL FUNDS WIRE TO THE LENDER IN THE
APPLICABLE CURRENCY AT:

 

if United States dollars:

 

Correspondent Bank: Barclays Bank PLC, New York

ABA No.: 026 002 574

SWIFT Code: BARC US33

For Beneficiary Bank: Barclays Bank PLC, 54 Lombard Street, London

Sort Code: 20-00-00

SWIFT Code: BARC GB22

Beneficiary: Arch Reinsurance Ltd.

Account Number: 84560255

 

if Canadian dollars:

 

Correspondent Bank: Canadian Imperial Bank of Commerce, Toronto

SWIFT Code: CIBCCATT

For Beneficiary Bank: Barclays Bank PLC, 54 Lombard Street, London

Sort Code: 20-00-00

 

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SWIFT Code: BARC GB22

Beneficiary: Arch Reinsurance Ltd.

Account Number: 75287566

 

if euro:

 

Beneficiary Bank: Barclays Bank PLC, 54 Lombard Street, London

Sort Code: 20-00-00

SWIFT Code: BARC GB22

Beneficiary: Arch Reinsurance Ltd.

Account Number: 88196666

 

if pounds sterling:

 

Beneficiary Bank: Barclays Bank PLC, 54 Lombard Street, London

Sort Code 20-00-00

SWIFT Code: BARC GB22

Beneficiary: Arch Reinsurance Ltd.

Account Number: 60950777

 

or to such other address or account, or to the attention of such other Person as
the Lender shall notify the Obligor.

 

2.7.2         ALL PAYMENTS MADE BY OR ON BEHALF OF THE OBLIGOR UNDER THIS
AGREEMENT SHALL BE MADE WITHOUT SETOFF OR COUNTERCLAIM AND FREE AND CLEAR OF,
AND WITHOUT DEDUCTION FOR, ANY TAXES (OTHER THAN ANY TAXES IMPOSED ON OR
MEASURED BY THE GROSS INCOME OR PROFITS OF THE LENDER), LEVIES, IMPOSTS, DUTIES,
CHARGES, FEES, DEDUCTIONS, WITHHOLDINGS, COMPULSORY LOANS, RESTRICTIONS OR
CONDITIONS OF ANY NATURE NOW OR HEREAFTER IMPOSED OR LEVIED BY ANY COUNTRY OR
ANY POLITICAL SUBDIVISION THEREOF OR TAXING OR OTHER AUTHORITY THEREIN UNLESS
THE OBLIGOR IS COMPELLED BY LAW TO MAKE SUCH DEDUCTION OR WITHHOLDING.  IF ANY
SUCH OBLIGATION IS IMPOSED UPON THE OBLIGOR WITH RESPECT TO ANY AMOUNT PAYABLE
BY IT HEREUNDER, IT WILL PAY TO THE LENDER, ON THE DATE ON WHICH SUCH AMOUNT
BECOMES DUE AND PAYABLE HEREUNDER AND IN UNITED STATES DOLLARS, SUCH ADDITIONAL
AMOUNT AS SHALL BE NECESSARY TO ENABLE THE LENDER TO RECEIVE THE SAME NET AMOUNT
WHICH IT WOULD HAVE RECEIVED ON SUCH DUE DATE HAD NO SUCH OBLIGATION BEEN
IMPOSED UPON THE OBLIGOR.  IF, AT ANY TIME, THE LENDER, OR ANY PERMITTED
ASSIGNEE OF THE LENDER HEREUNDER (AN “ASSIGNEE”), IS ORGANIZED UNDER THE LAWS OF
ANY JURISDICTION OTHER THAN THE UNITED STATES OR ANY STATE OR OTHER POLITICAL
SUBDIVISION THEREOF, THE LENDER OR THE ASSIGNEE SHALL DELIVER TO THE OBLIGOR,
THROUGH THE LENDER, ON THE DATE IT BECOMES A PARTY TO THIS AGREEMENT, AND AT
SUCH OTHER TIMES AS MAY BE NECESSARY IN THE DETERMINATION OF THE OBLIGOR IN ITS
REASONABLE DISCRETION, SUCH CERTIFICATES, DOCUMENTS OR OTHER EVIDENCE, PROPERLY
COMPLETED AND DULY EXECUTED BY THE LENDER OR THE ASSIGNEE (INCLUDING, WITHOUT
LIMITATION, INTERNAL REVENUE SERVICE

 

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FORM W-8BEN OR W-8ECI, AS APPROPRIATE, OR ANY SUCCESSOR FORM PRESCRIBED BY THE
INTERNAL REVENUE SERVICE) TO ESTABLISH THAT THE LENDER OR THE ASSIGNEE IS NOT
SUBJECT TO DEDUCTION OR WITHHOLDING OF UNITED STATES FEDERAL INCOME TAX UNDER
SECTION 1441 OR 1442 OF THE INTERNAL REVENUE CODE OR OTHERWISE (OR UNDER ANY
COMPARABLE PROVISIONS OF ANY SUCCESSOR STATUTE) WITH RESPECT TO ANY PAYMENTS TO
THE LENDER OR THE ASSIGNEE OF PRINCIPAL, INTEREST, FEES OR OTHER AMOUNTS PAYABLE
HEREUNDER.  THE OBLIGOR SHALL NOT BE REQUIRED TO PAY ANY ADDITIONAL AMOUNT TO
THE LENDER OR ANY ASSIGNEE UNDER THIS SUB-CLAUSE ‎2.7.2 IF THE LENDER OR SUCH
ASSIGNEE SHALL HAVE FAILED TO SATISFY THE REQUIREMENTS OF THE IMMEDIATELY
PRECEDING SENTENCE; PROVIDED THAT IF THE LENDER OR ANY ASSIGNEE SHALL HAVE
SATISFIED SUCH REQUIREMENTS ON THE DATE IT BECAME A PARTY TO THIS AGREEMENT,
NOTHING IN THIS SUB-CLAUSE ‎2.7.2 SHALL RELIEVE THE OBLIGOR OF ITS OBLIGATION TO
PAY ANY ADDITIONAL AMOUNTS PURSUANT TO THIS SUB-CLAUSE ‎2.7.2 IN THE EVENT THAT,
AS A RESULT OF ANY CHANGE IN APPLICABLE LAW, THE LENDER OR SUCH ASSIGNEE IS NO
LONGER PROPERLY ENTITLED TO DELIVER CERTIFICATES, DOCUMENTS OR OTHER EVIDENCE AT
A SUBSEQUENT DATE ESTABLISHING THE FACT THAT THE LENDER OR THE ASSIGNEE IS NOT
SUBJECT TO WITHHOLDING AS DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE.

 

2.7.3         ALL PAYMENTS MADE BY OR ON BEHALF OF THE OBLIGOR UNDER THIS
AGREEMENT SHALL BE APPLIED FIRST TO THE PAYMENT OF ALL FEES, EXPENSES AND OTHER
AMOUNTS DUE TO THE LENDER (EXCLUDING PRINCIPAL AND INTEREST) BY THE OBLIGOR,
THEN TO ACCRUED INTEREST WITH RESPECT TO THE REIMBURSEMENT OBLIGATIONS, AND THE
BALANCE ON ACCOUNT OF OUTSTANDING PRINCIPAL WITH RESPECT TO THE REIMBURSEMENT
OBLIGATIONS; PROVIDED, HOWEVER, THAT UPON THE OCCURRENCE AND DURING THE
CONTINUATION OF AN EVENT OF DEFAULT, PAYMENTS WILL BE APPLIED TO THE OBLIGATIONS
OF THE OBLIGOR TO THE LENDER AS THE LENDER DETERMINES IN ITS SOLE DISCRETION.

 

2.7.4         ALL PAYMENTS WHICH SHALL BE DUE HEREUNDER ON A DAY THAT IS NOT A
BUSINESS DAY SHALL BE EXTENDED TO THE NEXT SUCCEEDING BUSINESS DAY, AND INTEREST
SHALL ACCRUE DURING SUCH EXTENSION.

 

2.7.5         COMPUTATIONS OF INTEREST HEREUNDER AND COMPUTATIONS OF FEES STATED
TO BE ON AN ANNUAL BASIS SHALL BE MADE ON THE BASIS OF A YEAR OF 360 DAYS FOR
THE ACTUAL NUMBER OF DAYS ELAPSED (INCLUDING THE FIRST DAY BUT EXCLUDING THE
LAST DAY).

 

2.8         COLLATERAL SECURITY

 

All of the obligations of the Obligor to the Lender under this Agreement and the
other Fundamental Documents shall be secured by a security interest and pledge
granted by the Obligor, as security for the Obligor’s obligations under this
Agreement and the Letters of Credit issued at the request of the Obligor, in
favour of the Lender, in the securities and other collateral described in each
Security Agreement (together with all property or interests therein and all
income therefrom and proceeds thereof, collectively, the “Collateral”).

 

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3.           CONDITIONS OF ISSUANCE OF LETTERS OF CREDIT

 

3.1         CONDITIONS PRECEDENT TO CLOSING AND ISSUANCE OF INITIAL LETTERS OF
CREDIT

 

The obligations of the Lender (in its sole and absolute discretion) to issue any
Letter of Credit under this Agreement on or after the Closing Date are subject
to the satisfaction, prior to or concurrently with the issuance of any such
Letter of Credit, of the following conditions precedent:

 

3.1.1         FUNDAMENTAL DOCUMENTS:  THE OBLIGOR SHALL HAVE EXECUTED AND
DELIVERED TO THE LENDER EACH FUNDAMENTAL DOCUMENT REQUIRED HEREUNDER, WHICH
SHALL BE IN FULL FORCE AND EFFECT.

 

3.1.2         PROOF OF CORPORATE ACTION:.  THE LENDER SHALL HAVE RECEIVED A
CERTIFICATE OF THE SECRETARY OR AN ASSISTANT SECRETARY, OR THE EQUIVALENT
THEREOF, FROM THE OBLIGOR, DATED THE DATE HEREOF, SETTING FORTH RESOLUTIONS OF
THE BOARD OF DIRECTORS, OR THE EQUIVALENT THEREOF, OF THE OBLIGOR APPROVING THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE OTHER FUNDAMENTAL DOCUMENTS
AND AUTHORIZING THE EXECUTION, DELIVERY AND PERFORMANCE BY SUCH PERSON OF THIS
AGREEMENT AND THE OTHER FUNDAMENTAL DOCUMENTS TO WHICH SUCH PERSON IS A PARTY,
WHICH CERTIFICATES SHALL STATE THAT SUCH RESOLUTIONS ARE IN FULL FORCE AND
EFFECT WITHOUT AMENDMENT.

 

3.1.3         INCUMBENCY CERTIFICATES: THE LENDER SHALL HAVE RECEIVED A
CERTIFICATE OF THE SECRETARY OR ASSISTANT SECRETARY, OR THE EQUIVALENT THEREOF,
FROM THE OBLIGOR, DATED THE DATE HEREOF, SETTING FORTH THE NAMES AND CONTAINING
A SPECIMEN SIGNATURE OF EACH OFFICER AND DIRECTOR OF SUCH PERSON AUTHORIZED TO
SIGN THIS AGREEMENT AND THE OTHER FUNDAMENTAL DOCUMENTS TO WHICH SUCH PERSON IS
A PARTY AND TO GIVE NOTICES AND TO TAKE OTHER ACTION ON BEHALF OF THE OBLIGOR
HEREUNDER AND IN RELATION TO THE COLLATERAL.

 

3.1.4         BERMUDA REQUIREMENTS:  THE LENDER SHALL HAVE RECEIVED A
CERTIFICATE OF COMPLIANCE ISSUED BY THE BERMUDA REGULATORY AUTHORITY (REGISTRAR
OF COMPANIES AND THE BERMUDA MONETARY AUTHORITY) FOR EACH OF THE PARENT AND THE
OBLIGOR IN FORM AND SUBSTANCE SATISFACTORY TO THE LENDER.

 

3.1.5         LEGAL OPINIONS: THE LENDER SHALL HAVE RECEIVED SIGNED LEGAL
OPINION OF COUNSEL FOR THE OBLIGOR IN FORM AND SUBSTANCE SATISFACTORY TO THE
LENDER, WHICH OPINION SHALL BE ADDRESSED TO AND ALLOW RELIANCE THEREON BY THE
LENDER AND ITS RESPECTIVE SUCCESSORS AND PERMITTED ASSIGNS.

 

3.1.6         PROCEEDINGS AND DOCUMENTS:  ALL CORPORATE AND OTHER PROCEEDINGS
AND ALL OTHER MATTERS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT (INCLUDING, WITHOUT LIMITATION, ALL REGULATORY AND THIRD PARTY
APPROVALS), THE OTHER FUNDAMENTAL DOCUMENTS AND ALL OTHER DOCUMENTS INCIDENTAL
HERETO AND THERETO, INCLUDING ALL OPINIONS OF COUNSEL, SHALL BE REASONABLY
SATISFACTORY IN FORM AND SUBSTANCE TO THE LENDER.

 

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3.1.7         FINANCIAL INFORMATION:  THE LENDER IS SATISFIED THAT THE FINANCIAL
DATA AND OTHER INFORMATION FURNISHED TO THE LENDER BY THE OBLIGOR IS ACCURATE
AND COMPLETE IN ALL MATERIAL RESPECTS AND FAIRLY PRESENTS IN ALL MATERIAL
RESPECTS THE FINANCIAL POSITION AND THE RESULTS OF OPERATIONS FOR THE PERIOD
INDICATED THEREIN.

 

3.1.8         LITIGATION:  THE LENDER IS SATISFIED THAT THERE ARE NO LEGAL OR
ARBITRAL PROCEEDINGS, OR ANY PROCEEDINGS BY OR BEFORE ANY GOVERNMENTAL OR
REGULATORY AUTHORITY OR AGENCY, NOW PENDING OR THREATENED AGAINST THE PARENT OR
THE OBLIGOR, THAT ARE REASONABLY LIKELY (EITHER INDIVIDUALLY OR IN THE
AGGREGATE) TO HAVE A MATERIAL ADVERSE EFFECT.

 

3.1.9         REGULATIONS AND POLICIES:  THERE HAVE BEEN NO MATERIAL CHANGES IN
GOVERNMENTAL REGULATION OR POLICY AFFECTING THE LENDER IN RESPECT OF THIS
AGREEMENT OR THE OBLIGOR.

 

3.1.10       CONSENTS AND APPROVALS:  THE OBLIGOR AND THE LENDER HAVE OBTAINED
ALL NECESSARY CONSENTS AND APPROVALS.

 

3.1.11       COLLATERAL REQUIREMENTS:  THE LENDER IS SATISFIED WITH THE
CUSTODIAN AGREEMENT, THE SECURITY AGREEMENT, SUBORDINATION OF CUSTODIAN LIENS
AND ANY OTHER RELEVANT DOCUMENTATION REQUIRED IN RESPECT OF COLLATERAL
REQUIREMENTS.

 

3.2         ADDITIONAL CONDITIONS PRECEDENT TO THE ISSUANCE OF LETTERS OF CREDIT

 

The obligations of the Lender to issue any Letter of Credit under this Agreement
on or after the Closing Date (including pursuant to sub-clause ‎2.1.1) are
subject to the further conditions precedent that, both immediately prior to the
issuance of such Letter of Credit and also after giving effect thereto:

 

3.2.1         NO DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING;

 

3.2.2         THE REPRESENTATIONS AND WARRANTIES MADE BY THE OBLIGOR IN THIS
AGREEMENT AND EACH OF THE FUNDAMENTAL DOCUMENTS SHALL BE TRUE AND COMPLETE IN
ALL MATERIAL RESPECTS ON AND AS OF THE DATE OF THE ISSUANCE OF SUCH LETTER OF
CREDIT WITH THE SAME FORCE AND EFFECT AS IF MADE ON AND AS OF SUCH DATE (OR, IF
ANY SUCH REPRESENTATION OR WARRANTY IS EXPRESSLY STATED TO HAVE BEEN MADE AS OF
A SPECIFIC DATE, AS OF SUCH SPECIFIC DATE);

 

3.2.3         THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN THE FINANCIAL
CONDITION, OPERATIONS, PROPERTIES, BUSINESS OR PROSPECTS OF THE PARENT (TAKEN AS
A WHOLE) OR THE OBLIGOR (TAKEN AS A WHOLE) SINCE THE DATE OF THIS AGREEMENT;

 

3.2.4         THE LENDER SHALL HAVE RECEIVED A REQUEST FOR A LETTER OF CREDIT AS
PROVIDED IN SUB-CLAUSE ‎2.1.2;  AND

 

3.2.5         THE LENDER SHALL HAVE RECEIVED EVIDENCE SATISFACTORY TO IT (I)
THAT THE ADJUSTED COLLATERAL VALUE REQUESTING THE ISSUANCE OF THE LETTER OF
CREDIT IS NOT LESS THAN THE

 

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SUM OF ALL AMOUNTS THEN OUTSTANDING WITH RESPECT TO LETTER OF CREDIT OBLIGATIONS
AND REIMBURSEMENT OBLIGATIONS, TAKING INTO ACCOUNT THE AMOUNT OF THE REQUESTED
LETTER OF CREDIT, (II) THAT EACH OF THE INVESTMENTS UTILIZED IN THE CALCULATION
OF ADJUSTED COLLATERAL VALUE HAS BEEN DEPOSITED INTO THE CUSTODIAL ACCOUNT, AND
(III) THAT THE AGGREGATE FACE AMOUNT OF TRANCHE A AND TRANCHE B LETTERS OF
CREDIT ISSUED UNDER THIS AGREEMENT (TAKING INTO ACCOUNT THE REQUESTED LETTER OF
CREDIT) DOES NOT EXCEED $175,000,000 (UNITED STATES DOLLARS).

 

Each request for a Letter of Credit hereunder shall constitute a certification
by the Obligor to the effect set forth in the preceding sentence (both as of the
date of such notice and, unless the Obligor otherwise notifies the Lender prior
to the date of such Letter of Credit issuance, as of the date of such issuance).

 

4.           REPRESENTATIONS AND WARRANTIES

 

In order to induce the Lender to enter into this Agreement and to issue the
Letters of Credit, the Obligor for itself hereby represents and warrants that:

 

4.1         CORPORATE EXISTENCE AND POWER

 

The Obligor (a) is a company or corporation duly organized, validly existing
without limitation of its corporate existence and in good standing under the
laws of its jurisdiction of organization and (b) has adequate power and
authority and legal right to own or hold under lease the properties it purports
to own or to hold under lease and to carry on the business in which it is
engaged or presently proposes to engage.  The Obligor has adequate power and
authority to enter into this Agreement and each of the other Fundamental
Documents to which it is a party, to borrow hereunder, to create the Collateral
for the Reimbursement Obligations contemplated by this Agreement and the
Security Documents and to perform its obligations under this Agreement and each
of the other Fundamental Documents to which it is or is to become a party as
contemplated by this Agreement.

 

4.2         AUTHORITY

 

The execution and delivery by the Obligor of this Agreement and each other
Fundamental Document to which it is or is to become a party as contemplated
hereby, the obtaining of Letters of Credit hereunder, the pledging of the
Collateral for the Reimbursement Obligations contemplated by this Agreement and
the Security Documents and the performance by the Obligor of its obligations in
respect of this Agreement and the other Fundamental Documents in accordance with
their respective terms, have been duly authorized by all necessary corporate
action on the part of the Obligor and do not and will not (a) contravene any
provision of the Constituent Documents of the Obligor, (b) conflict with, or
result in a breach of the terms, conditions or provisions of, or constitute a
default under or, except as contemplated by this Agreement, result in the
creation or imposition of any Lien pursuant to the terms of any, mortgage,
indenture, deed of trust, security agreement, pledge agreement, charge or other
instrument to which the Obligor or any of its respective property is bound, (c)
violate any law, governmental rule, regulation, order

 

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or decree of any court or administrative agency or governmental officer
applicable to and binding upon the Obligor, (d) require any waiver, consent or
other action by any governmental or regulatory authority or by any trustee or
holder of any Indebtedness or obligations of the Obligor or (e) require the
approval of the shareholders of the Obligor.

 

4.3         BINDING EFFECT OF AGREEMENT AND OTHER FUNDAMENTAL DOCUMENTS

 

4.3.1         THIS AGREEMENT HAS BEEN DULY EXECUTED AND DELIVERED BY THE OBLIGOR
AND THE AGREEMENTS CONTAINED HEREIN CONSTITUTE, AND THE AGREEMENTS CONTAINED IN
EACH OTHER FUNDAMENTAL DOCUMENT TO WHICH THE OBLIGOR IS OR IS TO BECOME A PARTY
WILL, WHEN EACH SUCH OTHER FUNDAMENTAL DOCUMENT IS EXECUTED AND DELIVERED,
CONSTITUTE VALID AND LEGALLY BINDING OBLIGATIONS FOR THE OBLIGOR ENFORCEABLE IN
ACCORDANCE WITH THEIR RESPECTIVE TERMS, EXCEPT AS SUCH ENFORCEABILITY MAY BE
LIMITED BY (I) APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM, OR
OTHER SIMILAR LAWS AFFECTING THE ENFORCEMENT OF CREDITORS’ RIGHTS GENERALLY, AND
(II) GENERAL PRINCIPLES OF EQUITY (REGARDLESS OF WHETHER SUCH ENFORCEABILITY IS
CONSIDERED IN A PROCEEDING IN EQUITY OR AT LAW).

 

4.3.2         EACH SECURITY DOCUMENT EXECUTED AND DELIVERED ON OR AFTER THE DATE
HEREOF WILL EFFECTIVELY CREATE THE LIENS PURPORTED TO BE CREATED THEREBY AND
SUCH LIENS WILL BE FIRST-PRIORITY LIENS ON THE COLLATERAL COVERED THEREBY,
SUBJECT TO NO OTHER LIENS (EXCEPT LIENS IN FAVOUR OF THE CUSTODIAN).

 

4.4         FINANCIAL INFORMATION

 

The Parent and the Obligor have heretofore furnished to the Lender accurate and
complete financial data and other information in all material respects based on
its operations in previous years, and said financial data furnished to the
Lender is accurate and complete and fairly presents in all material respects the
financial position and the results of operations for the period indicated
therein in all material respects.

 

4.5         PARI PASSU RANKING

 

The Obligor’s payment obligations under the Finance Documents rank at least pari
passu with the claims of all its other unsecured and unsubordinated creditors,
except for obligations mandatorily preferred by law applicable to the Obligor.

 

4.6         MATERIAL ADVERSE CHANGE; NO DEFAULT

 

There has been no material adverse change in the condition, financial or
otherwise, of the Parent or the Obligor since the date of the most recent
financial statement and no Default or Event of Default exists with respect to
the Obligor.

 

4.7         EXISTING SECURITY INTEREST

 

No Security exists on or over the assets of the Obligor except as permitted by
sub-clause ‎5.2.1.

 

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4.8         LITIGATION

 

There are no legal or arbitral proceedings, or any proceedings by or before any
governmental or regulatory authority or agency, now pending or (to the knowledge
of the Obligor) threatened against the Parent or the Obligor that are reasonably
likely (either individually or in the aggregate) to have a Material Adverse
Effect.

 

4.9         COMPLIANCE WITH LAWS AND AGREEMENTS

 

The Obligor is in compliance with laws, regulations and orders of any
governmental agency or authority applicable to it or its Properties and all
indentures, agreements and other instruments binding upon it or its Property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.

 

4.10       WINDING-UP

 

No meeting has been convened for the winding-up, administration, dissolution or
liquidation of the Obligor, no such step is intended by the Obligor and, so far
as it is aware, no petition, application or equivalent or analogous procedure
under the law of the jurisdiction of the Obligor’s incorporation is outstanding
for its winding-up, administration, dissolution or liquidation (save where such
petition, application or equivalent or analogous procedure is frivolous or
vexatious in nature).

 

4.11       REORGANIZATIONS

 

No step is intended or has been taken by the Obligor for the reorganization,
reconstruction, merger, amalgamation or consolidation (or any equivalent or
analogous procedure) of the Obligor save where (i) it will survive such
procedure as a separate legal entity and such step or procedure will not have or
be likely to have a Material Adverse Effect or (ii) where all the Lenders have
provided their prior written consent to such procedure.

 

4.12       ERISA

 

The Obligor contributes to Single Employer Plans maintained by its ERISA
Affiliate but does not contribute to a Multiemployer Plan.  There exists no
Unfunded Pension Liability with respect to any Single Employer Plans, except as
would not have a Material Adverse Effect.

 

For the purposes of this Clause ‎4.12, “Unfunded Pension Liability” means the
excess of an Employee Plan’s liabilities under Section 4001(a)(16) of ERISA,
over the current value of that plan’s assets, determined in accordance with the
assumptions used for funding an Employee Plan pursuant to Section 412 of the
Code for the applicable plan year and “ERISA Affiliate” means, with respect to a
company, any Person that would be deemed at any relevant time to be a single
employer with the company pursuant to Section 414(b), (c), (m) or (o) of the
Code or Section 4001 of ERISA.

 

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4.13       MARGIN STOCK

 

4.13.1       THE OBLIGOR IS NOT ENGAGED NOR WILL IT ENGAGE PRINCIPALLY, OR AS
ONE OF ITS IMPORTANT ACTIVITIES, IN THE BUSINESS OF OWNING OR EXTENDING CREDIT
FOR THE PURPOSE OF “BUYING” OR “CARRYING” ANY MARGIN STOCK.

 

4.13.2       NONE OF THE EXTENSIONS OF CREDIT UNDER THIS AGREEMENT WILL BE USED,
DIRECTLY OR INDIRECTLY, FOR THE PURPOSE OF BUYING OR CARRYING ANY MARGIN STOCK,
FOR THE PURPOSE OF REDUCING OR RETIRING ANY INDEBTEDNESS THAT WAS ORIGINALLY
INCURRED TO BUY OR CARRY ANY MARGIN STOCK OR FOR ANY OTHER PURPOSE WHICH MIGHT
CAUSE ALL OR EXTENSIONS OF CREDIT UNDER THIS AGREEMENT TO BE CONSIDERED A
“PURPOSE CREDIT” WITHIN THE MEANING OF REGULATION U OR REGULATION X.

 

4.13.3       NEITHER THE OBLIGOR NOR ANY AGENT ACTING ON ITS BEHALF HAS TAKEN OR
WILL TAKE ANY ACTION WHICH MIGHT CAUSE THE FINANCE DOCUMENTS TO VIOLATE ANY
REGULATION OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM OF THE UNITED
STATES.

 

4.14       ANTI-TERRORISM LAWS

 

4.14.1       NEITHER THE OBLIGOR NOR ANY OF ITS AFFILIATES, IS IN VIOLATION OF
ANY LAWS RELATING TO TERRORISM OR MONEY LAUNDERING (“ANTI-TERRORISM LAWS”),
INCLUDING EXECUTIVE ORDER NO. 13224 ON TERRORIST FINANCING, EFFECTIVE SEPTEMBER
24, 2001 (THE “EXECUTIVE ORDER”), AND THE UNITING AND STRENGTHENING AMERICA BY
PROVIDING APPROPRIATE TOOLS REQUIRED TO INTERCEPT AND OBSTRUCT TERRORISM ACT OF
2001, PUBLIC LAW 107-56.

 

4.14.2       NEITHER THE OBLIGOR NOR ANY OF ITS AFFILIATES IS ANY OF THE
FOLLOWING:

 

(A)       A PERSON OR ENTITY THAT IS LISTED IN THE ANNEX TO, OR IS OTHERWISE
SUBJECT TO THE PROVISIONS OF, THE EXECUTIVE ORDER;

 

(B)       A PERSON OR ENTITY OWNED OR CONTROLLED BY, OR ACTING FOR OR ON BEHALF
OF, ANY PERSON OR ENTITY THAT IS LISTED IN THE ANNEX TO, OR IS OTHERWISE SUBJECT
TO THE PROVISIONS OF, THE EXECUTIVE ORDER;

 

(C)       A PERSON OR ENTITY WITH WHICH ANY LENDER IS PROHIBITED FROM DEALING OR
OTHERWISE ENGAGING IN ANY TRANSACTION BY ANY ANTI-TERRORISM LAW;

 

(D)       A PERSON OR ENTITY THAT COMMITS, THREATENS OR CONSPIRES TO COMMIT OR
SUPPORTS “TERRORISM” AS DEFINED IN THE EXECUTIVE ORDER; OR

 

(E)       A PERSON OR ENTITY THAT IS NAMED AS A “SPECIALLY DESIGNATED NATIONAL
AND BLOCKED PERSON” ON THE MOST CURRENT LIST PUBLISHED BY THE U.S. TREASURY
DEPARTMENT OFFICE OF FOREIGN ASSET CONTROL AT ITS OFFICIAL WEBSITE OR ANY
REPLACEMENT WEBSITE OR OTHER REPLACEMENT OFFICIAL PUBLICATION OF SUCH LIST.

 

4.14.3       THE OBLIGOR DOES NOT (I) TO THE BEST OF ITS KNOWLEDGE, CONDUCT ANY
BUSINESS OR ENGAGE IN MAKING OR RECEIVING ANY CONTRIBUTION OF FUNDS, GOODS OR
SERVICES TO OR FOR THE BENEFIT OF ANY PERSON DESCRIBED IN PARAGRAPH (B) ABOVE,
(II) TO THE BEST OF

 

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ITS KNOWLEDGE ,DEAL IN, OR OTHERWISE ENGAGE IN ANY TRANSACTION RELATING TO, ANY
PROPERTY OR INTERESTS IN PROPERTY BLOCKED PURSUANT TO THE EXECUTIVE ORDER, OR
(III) ENGAGE IN OR CONSPIRE TO ENGAGE IN ANY TRANSACTION THAT EVADES OR AVOIDS,
OR HAS THE PURPOSE OF EVADING OR AVOIDING, OR ATTEMPT TO VIOLATE, ANY OF THE
PROHIBITIONS SET FORTH IN ANY ANTI-TERRORISM LAW.

 

4.15       CUSTODIAN

 

Fleet National Bank has not resigned as Custodian without a successor Custodian
being appointed.

 

4.16       REPEATED REPRESENTATIONS

 

Each of the Repeated Representations will be correct and complied with in all
material respects on the Issue Date, each date that a Letter of Credit is
renewed, reissued and extended as if repeated then by reference to the then
existing circumstances.

 

5.           COVENANTS

 

5.1         AFFIRMATIVE COVENANTS

 

The Obligor for itself covenants and agrees that so long as any Letter of Credit
is outstanding:

 

5.1.1         MAINTENANCE OF CORPORATE EXISTENCE: THE OBLIGOR SHALL MAINTAIN ITS
CORPORATE EXISTENCE.

 

5.1.2         REPORTING REQUIREMENTS:  THE OBLIGOR SHALL FURNISH TO THE LENDER:

 

(A)       ANNUAL GAAP FINANCIAL STATEMENTS:  WITHIN ONE HUNDRED TWENTY (120)
DAYS FOLLOWING THE END OF THE PARENT’S FISCAL YEAR (OR, IF A REGISTERED COMPANY,
SUCH EARLIER DATE AS THE PARENT’S FORM 10-K IS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION) COPIES OF:

 

(I)        THE CONSOLIDATED AND CONSOLIDATING BALANCE SHEET OF THE PARENT AS AT
THE CLOSE OF SUCH FISCAL YEAR, AND

 

(II)       THE CONSOLIDATED AND CONSOLIDATING STATEMENTS OF INCOME, CHANGES IN
SURPLUS AND CASH FLOWS OF THE PARENT FOR SUCH FISCAL YEAR,

 

in each case setting forth in comparative form the figures for the preceding
fiscal year and prepared in accordance with GAAP, all in reasonable detail and
accompanied by an opinion thereon of PricewaterhouseCoopers LLP or other firm of
independent public accountants of recognized national standing selected by the
Parent and reasonably acceptable to the Lender, to the effect that the financial
statements have been prepared in accordance with GAAP (except for changes in
application in which such accountants concur) and present fairly in all material
respects in accordance with GAAP the financial condition of the Parent as of the
end of such fiscal year and the results of

 

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operations of the Parent for the fiscal year then ended and that the examination
of such accountants in connection with such financial statements has been made
in accordance with generally accepted auditing standards and, accordingly,
included such tests of the accounting records and such other auditing procedures
as were considered necessary under the circumstances.

 

(B)       QUARTERLY GAAP FINANCIAL STATEMENTS:  AS SOON AS AVAILABLE, AND IN ANY
EVENT WITHIN SIXTY (60) DAYS AFTER THE END OF EACH QUARTERLY FISCAL PERIOD OF
THE PARENT (OTHER THAN THE FOURTH FISCAL QUARTER OF ANY FISCAL YEAR), COPIES OF:

 

(I)        THE BALANCE SHEET OF THE PARENT AS AT THE END OF SUCH FISCAL QUARTER,
AND

 

(II)       THE STATEMENTS OF INCOME, CHANGES IN SURPLUS AND CASH FLOWS OF THE
PARENT FOR SUCH FISCAL QUARTER AND THE PORTION OF SUCH FISCAL YEAR ENDED WITH
SUCH FISCAL QUARTER,

 

in each case setting forth in comparative form the figures for the preceding
fiscal year and prepared in accordance with GAAP, all in reasonable detail and
certified as presenting fairly in accordance with GAAP the financial condition
of the Parent as of the end of such period and the results of operations for
such period by a senior officer of the Parent, subject only to normal year-end
accruals and audit adjustments and the absence of footnotes.

 

(C)       ANNUAL/QUARTERLY REPORTS:  CONCURRENTLY WITH THE DELIVERY OF THE
FINANCIAL STATEMENTS REQUIRED PURSUANT TO PARAGRAPHS (A), (B), (F) AND (G) OF
THIS CLAUSE, COPIES OF ALL REPORTS REQUIRED TO BE FILED WITH ANY APPLICABLE
INSURANCE REGULATORY AUTHORITY IN CONNECTION WITH THE FILING OF SUCH FINANCIAL
STATEMENTS.

 

(D)       MANAGEMENT LETTERS:  SUBJECT TO THE CONSENT OF THE INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANT IN CONNECTION WITH AN EXAMINATION OF THE FINANCIAL
STATEMENTS OF THE PARENT OR THE OBLIGOR, PROMPTLY UPON RECEIPT THEREOF, COPIES
OF ANY REPORTS OR MANAGEMENT LETTERS RELATING TO THE INTERNAL FINANCIAL CONTROLS
AND PROCEDURES DELIVERED TO THE PARENT AND THE OBLIGOR BY ANY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANT IN CONNECTION WITH AN EXAMINATION OF THE FINANCIAL
STATEMENTS OF THE PARENT OR THE OBLIGOR, AS APPLICABLE.

 

(E)       ADDITIONAL INFORMATION:  SUCH ADDITIONAL INFORMATION AS THE LENDER,
MAY REASONABLY REQUEST CONCERNING THE PARENT OR THE OBLIGOR AND FOR THAT PURPOSE
ALL PERTINENT BOOKS AND OTHER DOCUMENTS RELATING TO ITS BUSINESS, AFFAIRS AND
PROPERTIES, INCLUDING INVESTMENTS AS SHALL FROM TIME TO TIME BE DESIGNATED BY
THE LENDER.

 

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(F)        ANNUAL OBLIGOR FINANCIAL STATEMENTS:  AS SOON AS AVAILABLE, AND IN
ANY EVENT WITHIN 90 DAYS AFTER THE CLOSE OF EACH FISCAL YEAR OF THE OBLIGOR, THE
SUMMARY CONSOLIDATED BALANCE SHEET OF THE OBLIGOR AND ITS SUBSIDIARIES AS AT THE
END OF SUCH FISCAL YEAR AND THE RELATED SUMMARY CONSOLIDATED STATEMENT OF INCOME
OF THE OBLIGOR AND ITS SUBSIDIARIES FOR SUCH FISCAL YEAR, SETTING FORTH IN
COMPARATIVE FORM THE CONSOLIDATED FIGURES FOR THE FISCAL YEAR, ALL IN FORM AND
SCOPE CONSISTENT IN ALL MATERIAL RESPECTS WITH THE FINANCIAL STATEMENTS OF THE
OBLIGOR PREVIOUSLY DELIVERED AND CERTIFIED BY THE CHIEF FINANCIAL OFFICER OR
CONTROLLER OF THE OBLIGOR, WHICH CERTIFICATE SHALL STATE THAT SUCH CONSOLIDATED
FINANCIAL STATEMENTS PRESENT FAIRLY IN ALL MATERIAL RESPECTS THE CONSOLIDATED
FINANCIAL POSITION OF THE OBLIGOR AND ITS SUBSIDIARIES AS AT THE DATES INDICATED
(SUBJECT TO NORMAL YEAR-END AUDIT ADJUSTMENTS AND THE ABSENCE OF FULL FOOTNOTE
DISCLOSURE).  AS SOON AS AVAILABLE AND IN ANY EVENT WITHIN 90 DAYS AFTER THE
CLOSE OF EACH FISCAL YEAR OR SUCH LATER DATE AS MAY BE REQUIRED BY THE BERMUDA
COMPANIES LAW, THE SAP FINANCIAL STATEMENTS FOR THE OBLIGOR FOR SUCH FISCAL
YEAR.

 

(G)       QUARTERLY OBLIGOR STATEMENTS:  AS SOON AS AVAILABLE, AND IN ANY EVENT
WITHIN SIXTY (60) DAYS AFTER THE CLOSE OF EACH OF THE FIRST THREE QUARTERLY
ACCOUNTING PERIODS IN EACH FISCAL YEAR OF THE OBLIGOR, A SUMMARY CONSOLIDATED
BALANCE SHEET OF THE OBLIGOR AND ITS SUBSIDIARIES AS AT THE END OF SUCH PERIOD
AND THE RELATED SUMMARY CONSOLIDATED STATEMENT OF INCOME OF THE OBLIGOR AND ITS
SUBSIDIARIES FOR SUCH PERIOD AND (IN THE CASE OF THE SECOND AND THIRD QUARTERLY
PERIODS) FOR THE PERIOD FROM THE BEGINNING OF THE CURRENT FISCAL YEAR TO THE END
OF SUCH QUARTERLY PERIOD, SETTING FORTH IN EACH CASE IN COMPARATIVE FORM THE
CONSOLIDATED FIGURES FOR THE CORRESPONDING PERIODS OF THE PREVIOUS FISCAL YEAR,
ALL IN FORM AND SCOPE CONSISTENT IN ALL MATERIAL RESPECTS WITH THE FINANCIAL
STATEMENTS OF THE OBLIGOR PREVIOUSLY PROVIDED AND CERTIFIED BY THE CHIEF
FINANCIAL OFFICER OR CONTROLLER OF THE OBLIGOR, AS PRESENTING FAIRLY IN ALL
MATERIAL RESPECTS, ON A BASIS CONSISTENT WITH SUCH PRIOR FISCAL PERIODS, THE
INFORMATION CONTAINED THEREIN, SUBJECT TO CHANGES RESULTING FROM NORMAL YEAR-END
AUDIT ADJUSTMENTS AND THE ABSENCE OF FULL FOOTNOTE DISCLOSURE.

 

(H)       QUARTERLY CUSTODIAL ACCOUNT CERTIFICATE:  THE OBLIGOR SHALL FURNISH TO
THE LENDER QUARTERLY A CUSTODIAL ACCOUNT CERTIFICATE SUBSTANTIALLY IN THE FORM
OF EXHIBIT D HERETO.

 

(I)        COMPLIANCE CERTIFICATE: THE OBLIGOR SHALL SUPPLY TO THE LENDER, WITH
EACH SET OF FINANCIAL STATEMENTS DELIVERED PURSUANT TO PARAGRAPHS (A), (B) (F)
AND (G) OF THIS CLAUSE, A COMPLIANCE CERTIFICATE SETTING OUT (IN REASONABLE
DETAIL) COMPUTATIONS AS TO COMPLIANCE WITH SUB-CLAUSES ‎6.1.5 AND ‎6.1.6 AS AT
THE DATE AS AT WHICH THOSE FINANCIAL STATEMENTS WERE DRAWN UP.  EACH

 

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COMPLIANCE CERTIFICATE SHALL BE SIGNED BY THE CHIEF FINANCIAL OFFICER OR
CONTROLLER OF THE OBLIGOR.

 

(J)        NOTIFICATION OF DEFAULT:  THE OBLIGOR SHALL NOTIFY THE LENDER OF THE
OCCURRENCE OF ANY DEFAULT (AND OF ANY ACTION TAKEN OR PROPOSED TO BE TAKEN TO
REMEDY IT) PROMPTLY AFTER BECOMING AWARE OF IT.

 

(K)       MATERIAL LITIGATION:  THE OBLIGOR SHALL NOTIFY THE LENDER OF ANY
LITIGATION PROCEEDINGS CURRENT, OR TO ITS KNOWLEDGE, PENDING OR THREATENED IN
WRITING WHICH ARE LIKELY TO HAVE A MATERIAL ADVERSE EFFECT.

 

5.1.3         MINIMUM RATING:  THE OBLIGOR SHALL AT ALL TIMES MAINTAINS A
MINIMUM AM BEST FINANCIAL STRENGTH RATING OF B++.

 

5.1.4         MAINTENANCE OF ADJUSTED COLLATERAL VALUE:  THE OBLIGOR SHALL AT
ALL TIMES MAINTAIN COLLATERAL IN THE CUSTODIAL ACCOUNT MAINTAINED IN ITS NAME IN
AN AMOUNT SUCH THAT THE ADJUSTED COLLATERAL VALUE IS NOT LESS THAN THE SUM OF
ALL AMOUNTS THEN OUTSTANDING WITH RESPECT TO THE SUM OF THE LETTER OF CREDIT
OBLIGATIONS AND REIMBURSEMENT OBLIGATIONS.  IF THE OBLIGOR REQUESTS THAT THE
LENDER ISSUE LETTER(S) OF CREDIT IN A CURRENCY OTHER THAN US DOLLARS, THE
OBLIGOR SHALL DEPOSIT ADDITIONAL COLLATERAL IN THE CUSTODIAL AMOUNT THE ADJUSTED
COLLATERAL VALUE OF WHICH SHALL BE NO LESS THAN 120% OF THE DOLLAR EQUIVALENT OF
THE FACE AMOUNT OF THE REQUESTED NON-US DOLLAR LETTER(S) OF CREDIT.  THE OBLIGOR
AGREES THAT IF THE ADJUSTED COLLATERAL VALUE OF THE COLLATERAL IN THE CUSTODIAL
ACCOUNT IS LESS THAN THE SUM OF THE LETTER OF CREDIT OBLIGATIONS AND THE
REIMBURSEMENT OBLIGATIONS, THE LENDER MAY REQUIRE THE OBLIGOR TO PAY TO THE
CUSTODIAN THE AMOUNT OF ANY SUCH DEFICIENCY, WHICH AMOUNT SHALL BE PAYABLE BY NO
LATER THAN 5:00 P.M. (NEW YORK TIME) ON THE BUSINESS DAY IMMEDIATELY FOLLOWING
THE DATE OF NOTICE BY THE LENDER AND WHICH PAYMENT SHALL BE DEPOSITED BY THE
CUSTODIAN INTO THE APPLICABLE CUSTODIAL ACCOUNT IN THE FORM OF CASH OR
INVESTMENTS.  AT ANY TIME, OTHER THAN AFTER THE OCCURRENCE AND DURING THE
CONTINUATION OF A DEFAULT OR AN EVENT OF DEFAULT, THE OBLIGOR MAY SUBSTITUTE
COLLATERAL TO THE EXTENT SUCH SUBSTITUTION ARISES FROM NORMAL TRADE ACTIVITIES
WITHIN THE CUSTODIAL ACCOUNT IN ACCORDANCE WITH THE PROVISIONS OF CLAUSE 1 OF
THE SECURITY AGREEMENT BETWEEN THE OBLIGOR AND THE LENDER.

 

5.1.5         ERISA:  THE OBLIGOR SHALL NOT:

 

(a)       allow, or permit any of its ERISA Affiliates which are Subsidiaries of
the Obligor to allow (i) any Single Employer Plan with respect to which the
Obligor or its ERISA Affiliates which are Subsidiaries of the Obligor may have
any liability to terminate, (ii) the Obligor or any of its ERISA Affiliates
which are Subsidiaries of the Obligor to withdraw from any Single Employer Plan
and, if applicable, a Multiemployer Plan, or (iii) any

 

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Accumulated Funding Deficiency (as defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, to exist involving any of its Single
Employer Plans, to the extent that any of the events described in (i), (ii) or
(iii), singly or in the aggregate, could have a Material Adverse Effect; or

 

(b)       fail, or permit any of its ERISA Affiliates which are Subsidiaries of
the Obligor to fail, to comply with ERISA or other related provisions of the
Code, if any such non-compliance, singly or in the aggregate, would be
reasonably likely to have a Material Adverse Effect.

 

5.1.1         FINANCIAL TESTING: THE FINANCIAL COVENANT SET OUT IN THIS
SUB-CLAUSES ‎6.1.5 AND ‎6.1.6 BELOW SHALL BE TESTED BY REFERENCE TO EACH OF THE
FINANCIAL STATEMENTS AND/OR EACH COMPLIANCE CERTIFICATE DELIVERED PURSUANT TO
SUB-CLAUSE ‎5.1.2(I) (COMPLIANCE CERTIFICATE).

 

5.2         NEGATIVE COVENANTS

 

5.2.1          NEGATIVE PLEDGE:

 

(A)       NEITHER THE OBLIGOR NOR ANY OF ITS SUBSIDIARIES WILL PERMIT, CREATE,
ASSUME, INCUR OR SUFFER TO EXIST ANY LIEN ON ANY ASSET TANGIBLE OR INTANGIBLE
NOW OWNED OR HEREAFTER ACQUIRED BY IT, EXCEPT AS SET OUT IN PARAGRAPH (B) BELOW.

 

(B)       PARAGRAPH (A) ABOVE DOES NOT APPLY TO:

 

(I)        LIENS CREATED PURSUANT TO THE SECURITY DOCUMENTS;

 

(II)       LIENS EXISTING ON THE DATE HEREOF AND LISTED ON SCHEDULE 1 (EXISTING
ENCUMBRANCES) HERETO;

 

(III)      LIENS SECURING REPURCHASE AGREEMENTS CONSTITUTING A BORROWING OF
FUNDS BY THE OBLIGOR OR ANY OF ITS SUBSIDIARIES IN THE ORDINARY COURSE OF
BUSINESS FOR LIQUIDITY PURPOSES AND IN NO EVENT FOR A PERIOD EXCEEDING 90 DAYS
IN EACH CASE;

 

(IV)     LIENS ARISING PURSUANT TO PURCHASE MONEY MORTGAGES, CAPITAL LEASES OR
SECURITY INTERESTS SECURING INDEBTEDNESS REPRESENTING THE PURCHASE PRICE (OR
FINANCING OF THE PURCHASE PRICE WITHIN 90 DAYS AFTER THE RESPECTIVE PURCHASE) OF
ASSETS ACQUIRED AFTER THE CLOSING DATE;

 

(V)      LIENS (X) ON ANY ASSET OF ANY PERSON EXISTING AT THE TIME SUCH PERSON
IS MERGED OR CONSOLIDATED WITH OR INTO THE OBLIGOR OR ANY OF ITS SUBSIDIARIES
AND NOT CREATED IN CONTEMPLATION OF SUCH EVENT OR (Y) SECURING ACQUIRED
INDEBTEDNESS SO LONG AS SUCH LIEN EXISTED PRIOR TO THE CONTEMPLATED ACQUISITION,
WAS NOT CREATED IN CONTEMPLATION OF SUCH ACQUISITION AND ONLY RELATES TO ASSETS
OF THE PERSON SO ACQUIRED;

 

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(VI)     LIENS SECURING OBLIGATIONS OWED BY THE OBLIGOR OR ANY OF ITS
SUBSIDIARIES TO THE PARENT OR ANY OTHER SUBSIDIARY OF THE PARENT, IN EACH CASE
SOLELY TO THE EXTENT THAT SUCH LIENS ARE REQUIRED BY AN APPLICABLE INSURANCE
REGULATORY AUTHORITY FOR SUCH PERSON TO MAINTAIN SUCH OBLIGATIONS;

 

(VII)    LIENS SECURING INSURANCE OBLIGATIONS OF THE OBLIGOR OR ANY OF ITS
SUBSIDIARIES OWED TO THE PARENT OR ANY OTHER SUBSIDIARY OF THE PARENT, IN EACH
CASE SOLELY TO THE EXTENT THAT SUCH LIENS ARE REQUIRED OR REQUESTED BY RATINGS
AGENCIES, CLIENTS OR BROKERS FOR SUCH PERSON TO MAINTAIN SUCH INSURANCE
OBLIGATIONS;

 

(VIII)   LIENS ON INVESTMENTS AND CASH BALANCES OF THE OBLIGOR OR ANY OF ITS
SUBSIDIARIES SECURING OBLIGATIONS OF THE OBLIGOR OR ANY OF ITS SUBSIDIARIES IN
RESPECT OF TRUST OR SIMILAR ARRANGEMENTS FORMED, LETTERS OF CREDIT ISSUED OR
FUNDS WITHHELD BALANCES ESTABLISHED, IN EACH CASE, IN THE ORDINARY COURSE OF
BUSINESS FOR THE BENEFIT OF CEDENTS TO SECURE REINSURANCE RECOVERABLES OWED TO
THEM BY THE OBLIGOR OR ANY OF ITS SUBSIDIARIES;

 

(IX)      INCHOATE LIENS FOR TAXES, ASSESSMENTS OR GOVERNMENTAL CHARGES OR
LEVIES NOT YET DUE OR LIENS FOR TAXES, ASSESSMENTS OR GOVERNMENTAL CHARGES OR
LEVIES BEING CONTESTED IN GOOD FAITH AND BY APPROPRIATE PROCEEDINGS FOR WHICH
ADEQUATE RESERVES HAVE BEEN ESTABLISHED IN ACCORDANCE WITH GAAP;

 

(X)       LIENS IN RESPECT OF PROPERTY OR ASSETS OF THE OBLIGOR OR ANY OF ITS
SUBSIDIARIES IMPOSED BY LAW, WHICH WERE INCURRED IN THE ORDINARY COURSE OF
BUSINESS AND DO NOT SECURE INDEBTEDNESS FOR BORROWED MONEY, SUCH AS CARRIERS’,
WAREHOUSEMEN’S, MATERIALMEN’S AND MECHANICS’ LIENS AND OTHER SIMILAR LIENS
ARISING IN THE ORDINARY COURSE OF BUSINESS, AND (X) WHICH DO NOT IN THE
AGGREGATE MATERIALLY DETRACT FROM THE VALUE OF THE OBLIGOR’S OR ANY SUCH
SUBSIDIARY’S PROPERTY OR ASSETS OR MATERIALLY IMPAIR THE USE THEREOF IN THE
OPERATION OF THE BUSINESS OF THE OBLIGOR OR ANY SUBSIDIARY OF THE OBLIGOR OR (Y)
WHICH ARE BEING CONTESTED IN GOOD FAITH BY APPROPRIATE PROCEEDINGS, WHICH
PROCEEDINGS HAVE THE EFFECT OF PREVENTING THE FORFEITURE OR SALE OF THE PROPERTY
OR ASSETS SUBJECT TO ANY SUCH LIEN;

 

(XI)      LICENSES, SUBLICENSES, LEASES, OR SUBLEASES GRANTED TO OTHER PERSONS
NOT MATERIALLY INTERFERING WITH THE CONDUCT OF THE BUSINESS OF THE OBLIGOR OR
ANY OF ITS SUBSIDIARIES;

 

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(XII)          EASEMENTS, RIGHTS-OF-WAY, RESTRICTIONS, ENCROACHMENTS AND OTHER
SIMILAR CHARGES OR ENCUMBRANCES, AND MINOR TITLE DEFICIENCIES, IN EACH CASE NOT
SECURING INDEBTEDNESS AND NOT MATERIALLY INTERFERING WITH THE CONDUCT OF THE
BUSINESS OF THE OBLIGOR OR ANY OF ITS SUBSIDIARIES;

 

(XIII)         LIENS ARISING OUT OF THE EXISTENCE OF JUDGMENTS OR AWARDS NOT
CONSTITUTING AN EVENT OF DEFAULT UNDER CLAUSE ‎6.1;

 

(XIV)        LIENS (OTHER THAN LIENS IMPOSED UNDER ERISA) INCURRED IN THE
ORDINARY COURSE OF BUSINESS IN CONNECTION WITH WORKERS COMPENSATION CLAIMS,
UNEMPLOYMENT INSURANCE AND SOCIAL SECURITY BENEFITS AND LIENS SECURING THE
PERFORMANCE OF BIDS, TENDERS, LEASES AND CONTRACTS IN THE ORDINARY COURSE OF
BUSINESS, STATUTORY OBLIGATIONS, SURETY BONDS, PERFORMANCE BONDS AND OTHER
OBLIGATIONS OF A LIKE NATURE INCURRED IN THE ORDINARY COURSE OF BUSINESS AND
CONSISTENT WITH PAST PRACTICE (EXCLUSIVE OF OBLIGATIONS IN RESPECT OF THE
PAYMENT FOR BORROWED MONEY);

 

(XV)         BANKERS’ LIENS, RIGHTS OF SETOFF AND OTHER SIMILAR LIENS EXISTING
SOLELY WITH RESPECT TO CASH AND CASH EQUIVALENTS ON DEPOSIT IN ONE OR MORE
ACCOUNTS MAINTAINED BY THE OBLIGOR OR ANY OF ITS SUBSIDIARIES, IN EACH CASE
GRANTED IN THE ORDINARY COURSE OF BUSINESS IN FAVOR OF THE BANK OR BANKS WITH
WHICH SUCH ACCOUNTS ARE MAINTAINED;

 

(XVI)        LIENS ARISING OUT OF THE REFINANCING, EXTENSION, RENEWAL OR
REFUNDING OF ANY INDEBTEDNESS SECURED BY ANY LIEN PERMITTED BY ANY OF THE
SUB-PARAGRAPHS OF THIS SUB-CLAUSE ‎5.2.1, PROVIDED THAT SUCH INDEBTEDNESS IS NOT
INCREASED AND IS NOT SECURED BY ANY ADDITIONAL ASSETS;

 

(XVII)       LIENS IN RESPECT OF PROPERTY OR ASSETS OF THE OBLIGOR OR ANY OF ITS
SUBSIDIARIES SECURING INDEBTEDNESS OF THE TYPE DESCRIBED IN SUB-PARAGRAPHS (VI)
OR (X) OF THE DEFINITION OF “PERMITTED INDEBTEDNESS”;

 

(XVIII)      LIENS IN RESPECT OF PROPERTY OR ASSETS OF ANY SUBSIDIARY OF THE
OBLIGOR SECURING INDEBTEDNESS OF THE TYPE DESCRIBED IN PARAGRAPH (IX) OF THE
DEFINITION OF “PERMITTED INDEBTEDNESS”; PROVIDED THAT THE AGGREGATE AMOUNT OF
THE INDEBTEDNESS SECURED BY SUCH LIENS SHALL NOT, WHEN ADDED TO THE AGGREGATE
AMOUNT OF ALL OUTSTANDING OBLIGATIONS OF THE PARENT SECURED BY LIENS INCURRED
PURSUANT TO PARAGRAPH (B)(XX) OF SUB-CLAUSE ‎5.2.1 EXCEED AT ANY TIME 5% OF NET
WORTH OF THE PARENT AT THE TIME OF INCURRENCE OF ANY NEW LIENS UNDER THIS
PARAGRAPH (XVIII);

 

(XIX)         LIENS IN RESPECT OF PROPERTY OR ASSETS OF THE OBLIGOR SECURING
INDEBTEDNESS OF THE OBLIGOR IN RESPECT OF LETTERS OF CREDIT ISSUED TO
REINSURANCE CEDENTS, OR TO LESSORS OF REAL PROPERTY IN LIEU OF SECURITY

 

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DEPOSITS IN CONNECTION WITH LEASES OF THE OBLIGOR, IN EACH CASE IN THE ORDINARY
COURSE OF BUSINESS; AND

 

(XX)     IN ADDITION TO THE LIENS DESCRIBED IN SUB-PARAGRAPHS (I) THROUGH (XIX)
ABOVE, LIENS SECURING OBLIGATIONS OF THE PARENT; PROVIDED THAT THE AGGREGATE
AMOUNT OF THE OBLIGATIONS SECURED BY SUCH LIENS SHALL NOT, WHEN ADDED TO THE
AGGREGATE AMOUNT OF OUTSTANDING INDEBTEDNESS OF THE OBLIGOR OR ANY OF ITS
SUBSIDIARIES PURSUANT TO PARAGRAPH (IX) OF THE DEFINITION OF “PERMITTED
INDEBTEDNESS”, EXCEED AT ANY TIME 5% OF NET WORTH OF THE PARENT AT THE TIME OF
INCURRENCE OF ANY NEW LIENS UNDER THIS PARAGRAPH (XX).

 

5.2.2         DISPOSALS:

 

(A)       THE OBLIGOR SHALL NOT NOR WILL IT PERMIT ANY OF ITS SUBSIDIARIES TO
SELL, CONVEY, ASSIGN, LEASE, ABANDON OR OTHERWISE TRANSFER OR DISPOSE OF,
VOLUNTARILY OR INVOLUNTARILY (ANY OF THE FOREGOING BEING REFERRED TO IN THIS
PARAGRAPH (A) AS A “DISPOSITION” AND ANY SERIES OF RELATED DISPOSITIONS
CONSTITUTING BUT A SINGLE DISPOSITION), ANY OF ITS PROPERTIES OR ASSETS,
TANGIBLE OR INTANGIBLE (INCLUDING BUT NOT LIMITED TO SALE, ASSIGNMENT, DISCOUNT
OR OTHER DISPOSITION OF ACCOUNTS, CONTRACT RIGHTS, CHATTEL PAPER OR GENERAL
INTANGIBLES WITH OR WITHOUT RECOURSE), EXCEPT AS SET FORTH IN PARAGRAPH (B)
BELOW.

 

(B)       PARAGRAPH (A) ABOVE DOES NOT APPLY TO:

 

(I)        ANY DISPOSITION OF USED, WORN OUT, OBSOLETE OR SURPLUS PROPERTY OF
THE OBLIGOR OR ANY OF ITS SUBSIDIARIES IN THE ORDINARY COURSE OF BUSINESS; OR

 

(II)       LICENSE (AS LICENSOR) OF INTELLECTUAL PROPERTY SO LONG AS SUCH
LICENSE DOES NOT MATERIALLY INTERFERE WITH THE BUSINESS OF THE OBLIGOR OR ANY OF
ITS SUBSIDIARIES; OR

 

(III)      THE DISPOSITION OF CASH, CASH EQUIVALENTS AND INVESTMENT SECURITIES;
OR

 

(IV)     THE RELEASE, SURRENDER OR WAIVER OF CONTRACT, TORT OR OTHER CLAIMS OF
ANY KIND AS A RESULT OF THE SETTLEMENT OF ANY LITIGATION OR THREATENED
LITIGATION; OR

 

(V)      THE GRANTING OR EXISTENCE OF LIENS (AND FORECLOSURE THEREON) NOT
PROHIBITED BY THIS AGREEMENT; OR

 

(VI)     THE LEASE OR SUBLEASE OF REAL PROPERTY SO LONG AS SUCH LEASE OR
SUBLEASE DOES NOT MATERIALLY INTERFERE WITH THE BUSINESS OF THE OBLIGOR OR ANY
OF ITS SUBSIDIARIES; OR

 

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(VII)    DIVIDENDS; OR

 

(VIII)   ANY CEDING OF INSURANCE OR REINSURANCE IN THE ORDINARY COURSE OF
BUSINESS; OR

 

(IX)      ANY DISPOSITION BY THE OBLIGOR OR ANY OF ITS SUBSIDIARIES OF ANY
NON-CORE ASSET (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) OR AS SET FORTH IN
SCHEDULE 3 (DISPOSITIONS); OR

 

(X)       DISPOSITIONS BY THE OBLIGOR OR ANY OF ITS SUBSIDIARIES OF PROPERTIES
OR ASSETS HAVING AN AGGREGATE FAIR VALUE (AS DETERMINED IN GOOD FAITH BY THE
BOARD OF DIRECTORS OF THE OBLIGOR) OF LESS THAN $1,000,000; OR

 

(XI)      DISPOSITIONS BY THE OBLIGOR OR ANY OF ITS SUBSIDIARIES OF ANY OF ITS
RESPECTIVE PROPERTIES OR ASSETS TO THE PARENT, TO ANY WHOLLY-OWNED SUBSIDIARY OF
THE PARENT OR (EXCEPT AS TO PROPERTY OR ASSETS CONSISTING OF THE CAPITAL STOCK
OF SUBSIDIARIES) TO ALTERNATIVE RE HOLDINGS LIMITED; OR

 

(XII)     OTHER DISPOSITIONS TO THE EXTENT THAT THE FAIR MARKET VALUE OF THE
ASSETS THE SUBJECT THEREOF (AS DETERMINED IN GOOD FAITH BY THE BOARD OF
DIRECTORS OR SENIOR MANAGEMENT OF THE OBLIGOR), WHEN ADDED TO THE FAIR MARKET
VALUE OF THE ASSETS THE SUBJECT OF ANY SUCH OTHER DISPOSITION OR DISPOSITIONS
UNDER THIS PARAGRAPH (XII) PREVIOUSLY CONSUMMATED DURING THE SAME FISCAL YEAR OF
THE OBLIGOR (AS DETERMINED IN GOOD FAITH BY THE BOARD OF DIRECTORS OR SENIOR
MANAGEMENT OF THE OBLIGOR), DOES NOT CONSTITUTE MORE THAN 10% OF THE
CONSOLIDATED ASSETS OF THE GROUP AS OF THE LAST DAY OF THE MOST RECENTLY ENDED
FISCAL YEAR OF THE GROUP.

 

5.2.3         FINANCIAL INDEBTEDNESS:  THE OBLIGOR SHALL NOT INCUR OR PERMIT TO
SUBSIST, AND SHALL NOT PERMIT ANY OF ITS SUBSIDIARIES TO INCUR OR SUBSIST, ANY
INDEBTEDNESS EXCEPT PERMITTED INDEBTEDNESS.

 

5.2.4         DEFINITIONS:  IN THIS CLAUSE ‎5.2 THE FOLLOWING TERMS HAVE THE
FOLLOWING MEANINGS.

 

(A)       “ACQUIRED INDEBTEDNESS” MEANS INDEBTEDNESS OF THE OBLIGOR OR ANY OF
ITS SUBSIDIARIES ACQUIRED PURSUANT TO AN ACQUISITION NOT PROHIBITED UNDER THIS
AGREEMENT (OR INDEBTEDNESS ASSUMED AT THE TIME OF SUCH ACQUISITION OF AN ASSET
SECURING SUCH INDEBTEDNESS), PROVIDED THAT SUCH INDEBTEDNESS WAS NOT INCURRED IN
CONNECTION WITH, OR IN ANTICIPATION OR CONTEMPLATION OF, SUCH ACQUISITION.

 

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(B)       “PERMITTED INDEBTEDNESS” MEANS:

 

(I)        INDEBTEDNESS OF THE OBLIGOR OR ANY OF ITS SUBSIDIARIES INCURRED
PURSUANT TO THIS AGREEMENT OR THE JPMORGAN CREDIT AGREEMENT (AS DEFINED IN ITEM
3 OF SCHEDULE 1 (EXISTING INDEBTEDNESS));

 

(II)       INDEBTEDNESS OF THE OBLIGOR OR ANY OF ITS SUBSIDIARIES EXISTING ON
THE DATE HEREOF AND LISTED ON SCHEDULE 2 (EXISTING INDEBTEDNESS) AND
REFINANCINGS BY THE OBLIGOR OR ANY OF ITS SUBSIDIARIES THEREOF; PROVIDED THAT
THE AGGREGATE PRINCIPAL AMOUNT OF ANY SUCH REFINANCING INDEBTEDNESS IS NOT
GREATER THAN THE AGGREGATE PRINCIPAL AMOUNT OF THE INDEBTEDNESS BEING REFINANCED
PLUS THE AMOUNT OF ANY PREMIUMS REQUIRED TO BE PAID THEREOF AND FEES AND
EXPENSES ASSOCIATED THEREWITH;

 

(III)      INDEBTEDNESS OF THE OBLIGOR OR ANY OF ITS SUBSIDIARIES UNDER ANY RATE
HEDGING OBLIGATIONS, IN EACH CASE ENTERED INTO TO PROTECT THE OBLIGOR OR SUCH
SUBSIDIARY AGAINST FLUCTUATIONS IN INTEREST RATES, CURRENCY EXCHANGE RATES OR
OTHER RATE FLUCTUATIONS AND NOT ENTERED INTO FOR SPECULATIVE PURPOSES;

 

(IV)     ANY INDEBTEDNESS OWED BY THE OBLIGOR OR ANY OF ITS SUBSIDIARIES TO THE
PARENT OR ANY OF ITS SUBSIDIARIES;

 

(V)      INDEBTEDNESS IN RESPECT OF PURCHASE MONEY OBLIGATIONS AND CAPITAL LEASE
OBLIGATIONS OF THE OBLIGOR OR ANY OF ITS SUBSIDIARIES, AND REFINANCINGS THEREOF;
PROVIDED THAT THE AGGREGATE PRINCIPAL AMOUNT OF ALL SUCH CAPITAL LEASE
OBLIGATIONS DOES NOT EXCEED AT ANY TIME OUTSTANDING $25,000,000 AT THE TIME OF
INCURRENCE OF ANY NEW INDEBTEDNESS UNDER THIS SUB-PARAGRAPH (V);

 

(VI)     INDEBTEDNESS OF THE OBLIGOR OR ANY OF ITS SUBSIDIARIES IN RESPECT OF
LETTERS OF CREDIT ISSUED TO REINSURANCE CEDENTS, OR TO LESSORS OF REAL PROPERTY
IN LIEU OF SECURITY DEPOSITS IN CONNECTION WITH LEASES OF THE OBLIGOR OR SUCH
SUBSIDIARY, IN EACH CASE IN THE ORDINARY COURSE OF BUSINESS;

 

(VII)    INDEBTEDNESS OF THE OBLIGOR OR ANY OF ITS SUBSIDIARIES INCURRED IN THE
ORDINARY COURSE OF BUSINESS IN CONNECTION WITH WORKERS’ COMPENSATION CLAIMS,
SELF-INSURANCE OBLIGATIONS, UNEMPLOYMENT INSURANCE OR OTHER FORMS OF
GOVERNMENTAL INSURANCE OR BENEFITS AND PURSUANT TO LETTERS OF CREDIT OR OTHER
SECURITY ARRANGEMENTS ENTERED INTO IN CONNECTION WITH SUCH INSURANCE OR BENEFIT;

 

(VIII)   ACQUIRED INDEBTEDNESS OF THE OBLIGOR OR ANY OF ITS SUBSIDIARIES;

 

(IX)      ADDITIONAL INDEBTEDNESS OF THE OBLIGOR OR ANY OF ITS SUBSIDIARIES NOT
OTHERWISE PERMITTED UNDER SUB-PARAGRAPH (I) THROUGH (VIII) OF THIS

 

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DEFINITION WHICH, WHEN ADDED TO THE AGGREGATE AMOUNT OF ALL OUTSTANDING
INDEBTEDNESS OBLIGATIONS SECURED BY LIENS INCURRED BY THE OBLIGOR OR ANY OF ITS
SUBSIDIARIES PURSUANT TO PARAGRAPH ‎5.2.1(B)(XX), SHALL NOT EXCEED AT ANY TIME
OUTSTANDING 5% OF THE GROUP’S NET WORTH AT THE TIME OF INCURRENCE OF ANY NEW
INDEBTEDNESS UNDER THIS PARAGRAPH (IX).

 

(X)       INDEBTEDNESS ARISING FROM GUARANTEES MADE BY THE OBLIGOR OR ANY OF ITS
SUBSIDIARIES OF INDEBTEDNESS OF THE TYPE DESCRIBED IN SUB-PARAGRAPHS (I) THROUGH
(IX) OF THIS DEFINITION.

 

(C)       “SUBSCRIPTION AGREEMENT” MEANS THE SUBSCRIPTION AGREEMENT, DATED AS OF
OCTOBER 24, 2001, AS AMENDED AS OF NOVEMBER 20, 2001, BY AND AMONG THE PARENT
AND THE OTHER PARTIES THERETO.

 

6.           EVENTS OF DEFAULT AND REMEDIES

 

6.1         EVENTS OF DEFAULT DEFINED

 

With respect to the Obligor, each of the following is an “Event of Default:”

 

6.1.1         FAILURE BY THE OBLIGOR TO PAY ANY AMOUNT PAYABLE BY IT HEREUNDER
ON THE DATE DUE;

 

6.1.2         IF THE VALIDITY OR ENFORCEABILITY OF ANY SECURITY DOCUMENT TO
WHICH THE OBLIGOR IS A PARTY SHALL BE CONTESTED BY ANY PERSON;

 

6.1.3         IF ANY REPRESENTATION OR WARRANTY MADE BY OR ON BEHALF OF THE
OBLIGOR IN THIS AGREEMENT, IN ANY OTHER FUNDAMENTAL DOCUMENT OR IN ANY
CERTIFICATE, REPORT OR FINANCIAL OR OTHER STATEMENT FURNISHED TO THE LENDER AT
ANY TIME UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY OTHER FUNDAMENTAL
DOCUMENT OR ANY OTHER SUCH DOCUMENT OR AGREEMENT SHALL HAVE BEEN UNTRUE IN ANY
MATERIAL RESPECT WHEN MADE OR DEEMED TO HAVE BEEN MADE;

 

6.1.4         DEFAULT BY THE OBLIGOR IN THE OBSERVANCE OR PERFORMANCE OF ITS
COVENANTS SET FORTH IN (I) CLAUSE ‎5; OR (II) DEFAULT BY THE OBLIGOR IN THE
OBSERVANCE OR PERFORMANCE OF ITS OBLIGATION TO MAINTAIN THE VALUE OF THE
CUSTODIAL ACCOUNT MAINTAINED IN ITS NAME IN ACCORDANCE WITH CLAUSE 1 OF THE
SECURITY AGREEMENT BETWEEN IT AND THE LENDER;

 

6.1.5         FAILURE BY THE PARENT TO MAINTAIN A MINIMUM NET WORTH THAT IS AT
ANY TIME LESS THAN THE SUM OF: (I) $1,400,000,000; (II) THE NET CASH PROCEEDS OF
ANY COMMON OR PREFERRED EQUITY RAISED BY THE PARENT AFTER THE DATE OF THIS
AGREEMENT; AND (III) 40% (FORTY PERCENT) OF CONSOLIDATED NET INCOME FOR EACH
FINANCIAL YEAR OF THE PARENT:

 

(A)       IN THIS SUB-CLAUSE ‎(A) THE FOLLOWING TERM HAS THE FOLLOWING MEANING.

 

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(I)        “NET CASH PROCEEDS” MEANS FOR ANY ISSUANCE OF EQUITY, THE GROSS CASH
PROCEEDS (INCLUDING ANY CASH RECEIVED BY WAY OF DEFERRED PAYMENT PURSUANT TO A
PROMISSORY NOTE, RECEIVABLE OR OTHERWISE, BUT ONLY AS AND WHEN RECEIVED)
RECEIVED FROM SUCH ISSUANCE, NET OF REASONABLE TRANSACTION COSTS (INCLUDING, AS
APPLICABLE, ANY UNDERWRITING, BROKERAGE OR OTHER CUSTOMARY COMMISSIONS AND
REASONABLE LEGAL, ADVISORY AND OTHER FEES AND EXPENSES ASSOCIATED THEREWITH).

 

6.1.6         THE PARENT LEVERAGE RATIO ON THE LAST DAY OF ANY FISCAL QUARTER OR
FISCAL YEAR OF THE PARENT IS GREATER THAN 0.35:1.00.  FOR PURPOSES OF THIS
SUB-CLAUSE ‎6.1.6:

 

(A)       “PARENT LEVERAGE RATIO” MEANS, AT ANY TIME, THE RATIO OF (I)
CONSOLIDATED INDEBTEDNESS AT SUCH TIME TO (II) CONSOLIDATED TOTAL CAPITAL AT
SUCH TIME;

 

(B)       “CONSOLIDATED INDEBTEDNESS” MEANS, AS OF ANY DATE OF DETERMINATION,
(I) ALL INDEBTEDNESS OF THE GROUP WHICH AT SUCH TIME WOULD APPEAR ON THE
LIABILITY SIDE OF A BALANCE SHEET OF SUCH PERSONS PREPARED ON A CONSOLIDATED
BASIS IN ACCORDANCE WITH GAAP PLUS (II) ANY INDEBTEDNESS FOR BORROWED MONEY OF
ANY OTHER PERSON (OTHER THAN ANY MEMBER OF THE GROUP) AS TO WHICH ANY MEMBER OF
THE GROUP HAS CREATED A GUARANTEE (BUT ONLY TO THE EXTENT OF SUCH GUARANTEE). 
FOR THE AVOIDANCE OF DOUBT, “CONSOLIDATED INDEBTEDNESS” SHALL NOT INCLUDE ANY
GUARANTEES OF ANY PERSON UNDER OR IN CONNECTION WITH LETTERS OF CREDIT OR
SIMILAR FACILITIES SO LONG AS NO UNREIMBURSED DRAWINGS OR PAYMENTS HAVE BEEN
MADE IN RESPECT THEREOF; AND

 

(C)       “CONSOLIDATED TOTAL CAPITAL” MEANS, AS OF ANY DATE OF DETERMINATION,
THE SUM OF (I) CONSOLIDATED INDEBTEDNESS AND (II) NET WORTH OF THE PARENT AT
SUCH TIME;

 

6.1.7         THE PARENT PERMITS, CREATES, ASSUMES, INCURS OR SUFFERS TO EXIST
ANY LIEN ON ANY ASSET, TANGIBLE OR INTANGIBLE, NOW OWNED OR HEREAFTER ACQUIRED,
OTHER THAN IN THE SAME MANNER, AND SUBJECT TO THE SAME LIMITATIONS, AS OTHERWISE
PERMITTED UNDER SUB-CLAUSE (B) OF CLAUSE ‎5.2.1 (NEGATIVE PLEDGE) AND EXCEPT AS
SET OUT ON SCHEDULE 1 (EXISTING ENCUMBRANCES); FOR THE AVOIDANCE OF DOUBT FOR
THIS PURPOSE, REFERENCE TO “SUBSIDIARIES”  (INCLUDING IN THE DEFINITION OF
“PERMITTED INDEBTEDNESS”) SHALL INCLUDE SUBSIDIARIES OF THE PARENT;

 

6.1.8         THE PARENT MAKING A DISPOSITION (AS DEFINED IN SUB-CLAUSE 5.2.2
(A)) OF ANY OF ITS PROPERTIES OR ASSETS, TANGIBLE OR INTANGIBLE, OTHER THAN IN
THE SAME MANNER, AND SUBJECT TO THE SAME LIMITATIONS, AS OTHERWISE PERMITTED
UNDER SUB-CLAUSE (B) OF CLAUSE ‎5.2.2 (DISPOSALS) AND EXCEPT AS SET OUT IN
SCHEDULE 3 (DISPOSITIONS); FOR THE AVOIDANCE OF DOUBT FOR THIS PURPOSE,
REFERENCES TO “SUBSIDIARIES” INCLUDES SUBSIDIARIES OF THE PARENT;;

 

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6.1.9         NON-COMPLIANCE BY THE PARENT OR ITS ERISA AFFILIATES OF THE
COVENANT SET FORTH IN CLAUSE ‎5.1.5 (ERISA);

 

6.1.10       DEFAULT BY THE OBLIGOR IN THE OBSERVANCE OR PERFORMANCE OF ANY
OTHER COVENANT OR AGREEMENT CONTAINED IN THIS AGREEMENT OR ANY OTHER FUNDAMENTAL
DOCUMENT AND THE CONTINUANCE THEREOF UNREMEDIED FOR 10 DAYS AFTER RECEIPT BY THE
OBLIGOR OF WRITTEN NOTICE OF THE DEFAULT FROM THE LENDER;

 

6.1.11       AN ORDER SHALL BE MADE BY A COMPETENT COURT OR A RESOLUTION SHALL
BE PASSED FOR THE WINDING UP OR DISSOLUTION OR REHABILITATION OF THE PARENT OR
THE OBLIGOR SAVE FOR THE PURPOSES OF AMALGAMATION, MERGER, CONSOLIDATION,
REORGANIZATION OR OTHER SIMILAR ARRANGEMENT ON TERMS APPROVED BY THE LENDER (NOT
INVOLVING THE INSOLVENCY OF THE PARENT OR THE OBLIGOR) AND SAVE THAT IF ANY SUCH
ORDER OR RESOLUTION IS SOUGHT IN AN INVOLUNTARY PROCEEDING AGAINST ANY THE
PERSON, SUCH PERSON SHALL HAVE THIRTY (30) DAYS FROM THE COMMENCEMENT OF SUCH
PROCEEDING TO OBTAIN AN ORDER STAYING, VACATING OR DISMISSING SUCH PROCEEDINGS,
OR A PETITION SHALL BE PRESENTED TO, OR AN ORDER SHALL BE MADE BY A COMPETENT
COURT FOR THE APPOINTMENT OF, AN ADMINISTRATOR OF THE PARENT OR THE OBLIGOR AND
SUCH PETITION OR ORDER SHALL NOT HAVE BEEN STAYED, VACATED OR DISMISSED WITHIN
THIRTY (30) DAYS AFTER THE PRESENTATION OF SUCH PETITION OR THE MAKING OF SUCH
ORDER;

 

6.1.12       THE PARENT OR THE OBLIGOR SHALL CEASE TO CARRY ON THE WHOLE OR
SUBSTANTIALLY THE WHOLE OF ITS BUSINESS, SAVE FOR THE PURPOSES OF AMALGAMATION,
MERGER, CONSOLIDATION, REORGANIZATION OR OTHER SIMILAR ARRANGEMENT (NOT
INVOLVING OR ARISING OUT OF THE INSOLVENCY OF THE PARENT OR THE OBLIGOR) WHICH
IS PERMITTED HEREUNDER, OR THE PARENT OR THE OBLIGOR SHALL SUSPEND PAYMENT OF
ITS DEBTS GENERALLY OR SHALL BE UNABLE TO, OR SHALL ADMIT INABILITY TO, PAY ITS
DEBTS AS THEY FALL DUE, OR SHALL BE ADJUDICATED OR FOUND BANKRUPT OR INSOLVENT
BY ANY COMPETENT COURT IN A VOLUNTARY OR INVOLUNTARY BANKRUPTCY OR INSOLVENCY
PROCEEDING AND, IN THE CASE OF AN INVOLUNTARY PROCEEDING, SUCH ADJUDICATION OR
FINDING IS NOT STAYED, VACATED OR DISMISSED FOR THIRTY (30) DAYS, OR SHALL ENTER
INTO ANY COMPOSITION OR OTHER SIMILAR ARRANGEMENT WITH ITS CREDITORS GENERALLY;

 

6.1.13       A RECEIVER, ADMINISTRATOR, LIQUIDATOR OR OTHER SIMILAR OFFICIAL
SHALL BE APPOINTED IN RELATION TO THE PARENT OR THE OBLIGOR OR IN RELATION TO
THE WHOLE OR A SUBSTANTIAL PART OF ITS ASSETS OR TO THE COLLATERAL OR A
DISTRESS, EXECUTION OR OTHER PROCESS SHALL BE LEVIED OR ENFORCED UPON OR OUT
AGAINST, OR ANY ENCUMBRANCE SHALL TAKE POSSESSION OF, THE WHOLE OR A SUBSTANTIAL
PART OF ITS ASSETS OR THE COLLATERAL AND IN ANY OF THE FOREGOING CASES, SUCH
ACTION OR PERSON SHALL NOT BE DISCHARGED, DISMISSED, VACATED, STAYED OR BONDED
WITHIN THIRTY (30) DAYS;

 

6.1.14       ANY SEIZURE, VESTING OR INTERVENTION BY OR UNDER AUTHORITY OF A
GOVERNMENT OCCURS, BY WHICH THE PARENT’S OR THE OBLIGOR’S MANAGEMENT IS
DISPLACED OR ITS AUTHORITY IN THE CONDUCT OF ITS BUSINESS IS CURTAILED;

 

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6.1.15       DEFAULT BY THE PARENT OR THE OBLIGOR IN (I) ANY PAYMENT OF
PRINCIPAL OF OR INTEREST OF ANY INDEBTEDNESS BEYOND THE PERIOD OF GRACE, IF ANY,
PROVIDED IN THE INSTRUMENT OR AGREEMENT UNDER WHICH SUCH INDEBTEDNESS WAS
CREATED; OR (II) DEFAULT IN THE OBSERVANCE OR PERFORMANCE OF ANY OTHER AGREEMENT
OR CONDITION RELATING TO ANY SUCH INDEBTEDNESS OR CONTAINED IN ANY INSTRUMENT OR
AGREEMENT EVIDENCING, SECURING OR RELATING THERETO, OR ANY OTHER EVENT SHALL
OCCUR OR CONDITION EXIST, THE EFFECT OF WHICH DEFAULT OR OTHER EVENT OR
CONDITION IS TO CAUSE, OR TO PERMIT THE HOLDER OR HOLDERS OF SUCH INDEBTEDNESS
(OR A TRUSTEE OR AGENT ON BEHALF OF SUCH HOLDER OR HOLDERS) TO CAUSE, WITH THE
GIVING OF NOTICE IF REQUIRED, SUCH INDEBTEDNESS TO BECOME DUE PRIOR TO ITS
STATED MATURITY, PROVIDED THAT THE AGGREGATE PRINCIPAL AMOUNT OF ALL
INDEBTEDNESS UNDER PARAGRAPHS (I) AND (II) OF THIS SUB-CLAUSE ‎6.1.15 WHICH
WOULD THEN BECOME DUE AND PAYABLE WOULD EQUAL OR EXCEED, IN THE CASE OF THE
PARENT OR THE OBLIGOR, $15,000,000; OR

 

6.1.16       ONE OR MORE JUDGMENTS OR DECREES SHALL BE ENTERED AGAINST THE
PARENT OR THE OBLIGOR INVOLVING IN THE AGGREGATE A LIABILITY (TO THE EXTENT NOT
PAID OR COVERED BY INSURANCE) OF, IN THE CASE OF THE PARENT OR THE OBLIGOR,
$15,000,000 OR MORE, AND ALL SUCH JUDGMENTS OR DECREES SHALL NOT HAVE BEEN
VACATED, DISCHARGED, STAYED OR BONDED PENDING APPEAL WITHIN 60 DAYS AFTER THE
ENTRY THEREOF.

 

6.2         REMEDIES

 

6.2.1         WITHOUT LIMITING ANY OTHER RIGHTS OR REMEDIES OF THE LENDER
PROVIDED FOR ELSEWHERE IN THIS AGREEMENT OR ANY OTHER FUNDAMENTAL DOCUMENT, OR
BY APPLICABLE LAW, OR IN EQUITY, OR OTHERWISE, (I) IF ANY EVENT OF DEFAULT SHALL
OCCUR AND BE CONTINUING WITH RESPECT TO THE OBLIGOR, THE LENDER MAY, BY NOTICE
TO THE OBLIGOR, DECLARE ALL AMOUNTS OWING UNDER THIS AGREEMENT AND ANY LETTERS
OF CREDIT (WHETHER OR NOT SUCH LETTER OF CREDIT OBLIGATIONS BE CONTINGENT OR
UNMATURED) ISSUED AT THE REQUEST OF THE OBLIGOR TO BE FORTHWITH DUE AND PAYABLE,
WHEREUPON ALL SUCH AMOUNTS SHALL BECOME AND BE FORTHWITH DUE AND PAYABLE,
WITHOUT PRESENTMENT, DEMAND, PROTEST OR FURTHER NOTICE OF ANY KIND, ALL OF WHICH
ARE HEREBY EXPRESSLY WAIVED BY THE OBLIGOR, AND (II) IF ANY EVENT OF DEFAULT
SHALL OCCUR AND BE CONTINUING WITH RESPECT TO THE PARENT, THE LENDER MAY, BY
NOTICE TO THE OBLIGOR, DECLARE ALL AMOUNTS OWING UNDER THIS AGREEMENT AND ANY
LETTERS OF CREDIT (WHETHER OR NOT SUCH LETTER OF CREDIT OBLIGATIONS BE
CONTINGENT OR UNMATURED) ISSUED AT THE REQUEST OF THE OBLIGOR TO BE FORTHWITH
DUE AND PAYABLE, WHEREUPON ALL SUCH AMOUNTS SHALL BECOME AND BE FORTHWITH DUE
AND PAYABLE, WITHOUT PRESENTMENT, DEMAND, PROTEST OR FURTHER NOTICE OF ANY KIND,
ALL OF WHICH ARE HEREBY EXPRESSLY WAIVED BY THE OBLIGOR.  THE LENDER MAY
IMMEDIATELY TAKE ANY AND ALL REMEDIES WITH RESPECT TO THE COLLATERAL PERMITTED
BY THE SECURITY DOCUMENTS.

 

6.2.2         UPON DECLARATION AS PROVIDED FOR ABOVE, THE OBLIGOR SHALL, AS
SPECIFIED IN WRITTEN NOTICE BY THE LENDER, EITHER (I) IMMEDIATELY DELIVER TO THE
LENDER, ANY AMOUNTS

 

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REQUIRED TO BE PAID IN ACCORDANCE WITH SUB-CLAUSE ‎6.2.1 HEREOF (THE “LETTER OF
CREDIT AMOUNT”), OR (II) WITH THE CONSENT OF THE BENEFICIARY OR BENEFICIARIES
THEREOF, CAUSE ANY LETTERS OF CREDIT TO BE CANCELLED FORTHWITH IN A MANNER
SATISFACTORY TO THE LENDER.  IN ADDITION TO PROVIDING THE LETTER OF CREDIT
AMOUNT, THE OBLIGOR SHALL PROVIDE THE LENDER WITH ANY DOCUMENTATION AS THE
LENDER MAY FROM TIME TO TIME REQUEST TO PERFECT ITS RIGHTS IN THE LETTER OF
CREDIT AMOUNT, INCLUDING, WITHOUT LIMITATION, PLEDGE AGREEMENTS AND FINANCING
STATEMENTS IN FORM AND SUBSTANCE SATISFACTORY TO THE LENDER.  THE LENDER SHALL
HOLD THE LETTER OF CREDIT AMOUNT IN ITS OWN NAME, FOR THE EXCLUSIVE PURPOSE OF
APPLYING SUCH LETTER OF CREDIT AMOUNT TOWARD THE IMMEDIATE PAYMENT OF AMOUNTS
WHICH ARE THEREAFTER DRAWN UNDER ANY LETTER OF CREDIT, AND, TO THE EXTENT OF
SUCH PAYMENT, THE REIMBURSEMENT OBLIGATIONS SHALL BE DEEMED TO BE SATISFIED. 
UPON THE EXPIRY DATE OF ALL LETTERS OF CREDIT, ANY LETTER OF CREDIT AMOUNT
REMAINING AFTER SATISFACTION OF ALL REIMBURSEMENT OBLIGATIONS SHALL BE REMITTED
TO THE ORDER OF THE RELEVANT OBLIGOR.  THE OBLIGOR SHALL REMAIN LIABLE FOR THE
RELEVANT AMOUNT OF ANY DEFICIENCY IN RESPECT OF ITS LETTER OF CREDIT OBLIGATIONS
AND REIMBURSEMENT OBLIGATIONS.

 

6.2.3         UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY DEFAULT OR
EVENT OF DEFAULT UNDER THIS AGREEMENT, NO LETTER OF CREDIT SHALL BE ISSUED,
RENEWED OR EXTENDED UNDER THIS AGREEMENT WITHOUT THE CONSENT OF THE LENDER.

 

7.           MISCELLANEOUS

 

7.1         AMENDMENTS AND WAIVERS

 

No amendment or waiver of any provision of this Agreement or any other
Fundamental Document nor consent to any departure by the Obligor therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Lender and the Obligor and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.

 

7.2         ADDRESSES FOR NOTICES

 

All notices and other communications provided for hereunder shall be in writing
unless otherwise stated herein and shall be delivered by e-mail, fax, hand
delivery, or recognized courier service that provides delivery within two
Business Days:

 

if to Arch Reinsurance Ltd., at:

 

Wessex House

45 Reid Street

Hamilton HM 12

Bermuda

Attn:  Controller

Telephone:  +1 (441) 278-9200

 

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Facsimile:  +1 (441) 278-9230

E-mail:  michelle.seymour@archreinsurance.bm

 

if to the Lender, at

 

54 Lombard Street

London EC3V 9EX

England

Attn:  Richard Askey/Malcolm Heard/Brendan Mahoney

Telephone:  +44 (0) 207 699 3124/3314 or switchboard +44 (0) 207 699 5000

Facsimile:  +44 (0) 207 699 2407

E-mail: Richard.G.Askey@barclayscorporate.com

Malcolm.Heard@barclayscorporate.com or Brendan.Mahoney@barclayscorporate.com

and shall be effective when delivered at the address specified in or pursuant to
this Clause, or such other address notified to the other party in writing.

 

7.3         SUCCESSORS AND ASSIGNS

 

This Agreement is a continuing obligation of the Obligor and shall, until the
date on which all amounts due and owing hereunder are paid in full (i) be
binding upon the Obligor, its successors and assigns, and (ii) inure to the
benefit of and be enforceable by the Lender and its successors and assigns,
provided that any assignment of this Agreement or any part hereof by the Obligor
shall be void.

 

7.4         PAYMENT OF EXPENSES AND TAXES; INDEMNITIES

 

7.4.1         (I) THE OBLIGOR HEREBY AGREES TO PAY OR REIMBURSE THE LENDER FOR
ALL ITS OUT-OF-POCKET COSTS AND EXPENSES INCURRED IN CONNECTION WITH THE
DEVELOPMENT, PREPARATION AND ATTENTION TO THE EXECUTION OF THE FUNDAMENTAL
DOCUMENTS, AND OF DOCUMENTS EMBODYING OR RELATING TO AMENDMENTS, WAIVERS OR
CONSENTS WITH RESPECT TO ANY OF THE FOREGOING, INCLUDING THE REASONABLE FEES AND
OUT-OF-POCKET COSTS AND EXPENSES OF COUNSEL TO THE LENDER, (II) THE OBLIGOR
AGREES TO PAY AND TO SAVE THE LENDER FROM ALL REGISTRATION, RECORDING AND FILING
FEES AND ALL LIABILITIES WITH RESPECT TO, OR RESULTING FROM, ANY DELAY BY THE
OBLIGOR IN PAYING STAMP AND OTHER TAXES, IF ANY, WHICH MAY BE PAYABLE OR
DETERMINED TO BE PAYABLE IN CONNECTION WITH THE EXECUTION AND DELIVERY OF, ANY
OF THE FUNDAMENTAL DOCUMENTS OR ANY AMENDMENT, WAIVER OR CONSENT WITH RESPECT
THERETO OR THE CONSUMMATION OF ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY,
(III) THE OBLIGOR AGREES TO PAY OR REIMBURSE THE LENDER FOR ALL ITS
OUT-OF-POCKET COSTS AND EXPENSES INCURRED IN CONNECTION WITH THE PREPARATION AND
ATTENTION TO THE EXECUTION AND ISSUANCE OF LETTERS OF CREDIT ISSUED AT THE
REQUEST OF THE OBLIGOR AND (IV) THE OBLIGOR AGREES TO PAY OR REIMBURSE THE
LENDER FOR ALL OUT-OF-POCKET COSTS AND EXPENSES INCURRED BY IT IN CONNECTION
WITH THE ENFORCEMENT OR PRESERVATION OF ANY RIGHTS AGAINST THE OBLIGOR UNDER OR
IN RESPECT OF THIS AGREEMENT AND THE OTHER FUNDAMENTAL DOCUMENTS (INCLUDING THE
FEES AND EXPENSES OF LAWYERS RETAINED BY THE LENDER, INCLUDING THE ALLOCATED
COSTS OF INTERNAL COUNSEL, AND REMUNERATION

 

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PAID TO AGENTS AND EXPERTS NOT IN THE FULL-TIME EMPLOY OF THE LENDER FOR
SERVICES RENDERED ON BEHALF OF THE LENDER) ON A FULL INDEMNITY BASIS.  ALL SUCH
AMOUNTS WILL BE PAID BY THE OBLIGOR ON DEMAND.

 

7.4.2         THE OBLIGOR AGREES TO INDEMNIFY THE LENDER, AND ITS DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS AND AFFILIATES FROM, AND HOLD EACH OF THEM HARMLESS
AGAINST, ANY AND ALL CLAIMS, DAMAGES, LOSSES, LIABILITIES, COSTS AND EXPENSES
(INCLUDING WITHOUT LIMITATION, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL)
ARISING AS A CONSEQUENCE OF (I) ANY FAILURE BY THE OBLIGOR TO PAY THE LENDER, AS
REQUIRED UNDER THIS AGREEMENT, PUNCTUALLY ON THE DUE DATE THEREOF, ANY AMOUNT
PAYABLE BY THE OBLIGOR TO THE LENDER OR (II) THE ACCELERATION, IN ACCORDANCE
WITH THE TERMS OF THIS AGREEMENT, OF THE TIME OF PAYMENT OF ANY OF THE
REIMBURSEMENT OBLIGATIONS, EXCEPT TO THE EXTENT CAUSED BY THE LENDER’S
NEGLIGENCE OR WILFUL MISCONDUCT OR BREACH OF THIS AGREEMENT.  SUCH LOSSES, COSTS
OR EXPENSES MAY INCLUDE, WITHOUT LIMITATION, (I) ANY COSTS INCURRED BY THE
LENDER IN CARRYING FUNDS TO COVER ANY OVERDUE PRINCIPAL, OVERDUE INTEREST, OR
ANY OTHER OVERDUE SUMS PAYABLE BY THE OBLIGOR TO THE LENDER OR (II) ANY LOSSES
INCURRED OR SUSTAINED BY THE LENDER IN LIQUIDATING OR REEMPLOYING FUNDS ACQUIRED
BY THE LENDER FROM THIRD PARTIES.

 

7.4.3         THE OBLIGOR AGREES TO INDEMNIFY THE LENDER, AND ITS DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS AND AFFILIATES FROM, AND HOLD EACH OF THEM HARMLESS
AGAINST, ANY AND ALL CLAIMS, DAMAGES, LIABILITIES, LOSSES, COSTS AND EXPENSES
(INCLUDING WITHOUT LIMITATION, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL)
ARISING OUT OF OR BY REASON OF ANY INVESTIGATION OR LITIGATION OR OTHER
PROCEEDINGS (INCLUDING ANY THREATENED INVESTIGATION OR LITIGATION OR OTHER
PROCEEDINGS) WITH RESPECT TO THE OBLIGOR RELATING TO ANY TRANSACTION
CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER FUNDAMENTAL DOCUMENT, ANY ACTIONS OR
OMISSIONS OF THE OBLIGOR OR ANY OF THE OBLIGOR’S DIRECTORS, OFFICERS, EMPLOYEES
OR AGENTS IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER FUNDAMENTAL DOCUMENT,
INCLUDING WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL
INCURRED IN CONNECTION WITH ANY SUCH INVESTIGATION OR LITIGATION OR OTHER
PROCEEDINGS (BUT EXCLUDING ANY SUCH LOSSES, LIABILITIES, CLAIMS, DAMAGES OR
EXPENSES INCURRED BY REASON OF THE GROSS NEGLIGENCE OR WILFUL MISCONDUCT OF THE
PERSON TO BE INDEMNIFIED).

 

7.5         RIGHT OF SET-OFF

 

The Obligor agrees that, in addition to (and without limitation of) any right of
setoff, banker’s Lien or counterclaim the Lender may otherwise have, the Lender
shall be entitled, at its option, to offset balances (general or special, time
or demand, provisional or final, and regardless of whether such balances are
then due to the Obligor) held by it for the account of the Obligor at any of the
Lender’s offices, in Dollars or in any other currency, against any amount
payable by the Obligor under this Agreement or any Letter of Credit that is not
paid when due, taking into account any applicable grace period, in which case it
shall promptly notify the Obligor thereof, provided that the Lender’s failure

 

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to give such notice shall not affect the validity thereof.  In furtherance
thereof, the Obligor hereby grants to the Lender, a continuing Lien, security
interest and right of setoff as security for all liabilities and obligations to
the Lender, whether now existing or hereafter arising, upon and against all
deposits, credits, collateral and property of the Obligor, now or hereafter in
the possession, custody, safekeeping or control of the Lender or any entity
under the control of Fleet National Bank and its successors and assigns or in
transit to any of them.  At any time after the occurrence of an Event of
Default, without demand or notice (any such notice being expressly waived by the
Obligor), the Lender may setoff the same or any part thereof and apply the same
to any liability or obligation of the Obligor even though unmatured and
regardless of the adequacy of any other collateral securing the Obligor’s
obligations hereunder.  ANY AND ALL RIGHTS TO REQUIRE THE LENDER TO EXERCISE ITS
RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE
OBLIGOR’S OBLIGATIONS HEREUNDER, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH
RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE OBLIGOR, ARE HEREBY
KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.  At the option of the Lender, if
there is a separate revolving line of credit, line of credit, or other credit
facility existing between the Lender and the Obligor, the Lender is irrevocably
authorized to satisfy the Obligor’s reimbursement obligation to the Lender, in
whole or in part, by making an advance under such facility.

 

7.6         GOVERNING LAW

 

This Agreement, and the rights and obligations of the parties hereunder, shall
be governed by, and construed in accordance with the laws of the State of New
York without giving effect to the choice of law or conflicts of law principles
thereof.

 

7.7         CONSENT TO JURISDICTION

 

The Obligor hereby expressly submits to the non-exclusive jurisdiction of all
federal and state courts sitting in the State of New York, and agrees that any
process or notice of motion or other application to any of said courts or a
judge thereof may be served upon the Obligor within or without such court’s
jurisdiction by registered or certified mail, return receipt requested, or by
personal service, at the Obligor’s address (or at such other address as the
Obligor shall specify by a prior notice in writing to the Lender), provided
reasonable time for appearance is allowed.  The Obligor hereby irrevocably
waives any objection which it may now or hereafter have to the laying of venue
to any suit, action or proceeding arising out or relating to this Agreement
brought in any federal or state courts sitting in the State of New York and
hereby further irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum. 
Notwithstanding the foregoing, the Lender may sue the Obligor in any
jurisdiction where the Obligor or any of its assets may be found and may serve
legal process upon the Obligor in any other manner permitted by law.

 

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7.8         WAIVER OF JURY TRIAL

 

THE OBLIGOR AND THE LENDER MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
FUNDAMENTAL DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY
COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE LENDER RELATING TO THE
ADMINISTRATION OF THIS AGREEMENT OR ENFORCEMENT OF THE FUNDAMENTAL DOCUMENTS,
AND AGREE THAT NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.  EXCEPT AS
PROHIBITED BY LAW, THE OBLIGOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.  THE
OBLIGOR CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE LENDER HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE LENDER WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER.  THIS WAIVER CONSTITUTES A
MATERIAL INDUCEMENT FOR THE LENDER TO ENTER INTO THIS AGREEMENT AND THE OTHER
FUNDAMENTAL DOCUMENTS.

 

7.9         INTEREST

 

All agreements between the Lender and the Obligor are hereby expressly limited
so that in no contingency or event whatsoever shall the amount paid or agreed to
be paid to the Lender for the use or the forbearance of the indebtedness
evidenced hereby exceed the maximum permissible under applicable law.  As used
herein, the term “applicable law” shall mean the law in effect as of the date
hereof; provided, however, that in the event there is a change in the law which
results in a higher permissible rate of interest, then this Agreement shall be
governed by such new law as of its effective date.  In this regard, it is
expressly agreed that it is the intent of the Lender and the Obligor in the
execution, delivery and acceptance of this Agreement to contract in strict
compliance with the laws of the State of New York from time to time in effect. 
If, under or from any circumstances whatsoever, fulfilment of any provision
hereof or of any of the agreements executed herewith at the time of performance
of such provision shall be due, shall involve transcending the limit of such
validity prescribed by applicable law, then the obligation to be fulfilled shall
automatically be reduced to the limits of such validity, and if under or from
circumstances whatsoever the Lender should ever receive as interest an amount
which would exceed the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the principal balance evidenced
hereby and not

 

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to the payment of interest.  This provision shall control every other provision
of all agreements between the Obligor and the Lender.

 

7.10       CONFIDENTIALITY

 

The Lender agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its and its Affiliates’
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential in accordance with the terms of
this Agreement, (b) to the extent requested by any regulatory authority or
self-regulatory body, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
to this Agreement, (e) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Agreement or the enforcement
of rights hereunder, (f) with the consent of the Obligor or (h) to the extent
such Information (i) becomes publicly available other than as a result of a
breach of this Clause ‎7.10.  For the purposes of this Clause ‎7.10,
“information” means all information received by the Lender relating to the
Parent or Obligor or any Subsidiary of the Parent or Obligor or their respective
businesses, other than any such information that is available to the Lender on a
non-confidential basis prior to disclosure by the Parent or Obligor.  Any Person
required to maintain the confidentiality of Information as provided in this
Clause ‎7.10 shall be considered to have complied with its obligation to do so
if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information or the Lender has treated such Information in a manner
consistent with banking industry standards for the treatment of confidential
information.  Notwithstanding anything herein to the contrary, each party to
this Agreement (and any employee, representative or other agent of each such
party) may disclose to any and all Persons, without limitation of any kind, the
U.S. federal income tax treatment and the U.S. federal income tax structure of
the transactions contemplated hereby and all materials of any kind (including
opinions or other tax analyses) that are provided to it relating to such tax
treatment and tax structure.  However, no disclosure of any information relating
to such tax treatment or tax structure may be made to the extent nondisclosure
is reasonably necessary in order to comply with applicable securities laws.  The
provisions of this Clause ‎7.10 shall survive the Facility Termination Date and
the Letter of Credit Obligations hereunder.

 

7.11       TABLE OF CONTENTS AND CAPTIONS

 

The Table of Contents hereof and captions herein are included for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.

 

7.12       INTEGRATION

 

This Agreement is intended by the parties as the final, complete and exclusive
statement of the transactions evidenced by this Letter of Credit and
Reimbursement Agreement.  All

 

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prior or contemporaneous promises, agreements and understandings, whether oral
or written, are deemed to be superseded by this Agreement, and no party is
relying on any promise, agreement or understanding not set forth in this
Agreement.

 

7.13       COUNTERPARTS

 

This Agreement may be executed in multiple counterparts each of which shall be
an original and all of which when taken together shall constitute but one and
the same Agreement.

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered by their respective officers, as an instrument under seal, as of
the date first above written.

 

 

ARCH REINSURANCE LTD., as Obligor

 

By:

 

Name:

 

Title:

 

 

BARCLAYS BANK PLC, as Lender

 

By:

 

Name:

 

Title:

 

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