AND
THE LETTER OF CREDIT MUST MEET ALL OF THE CONDITIONS SET FORTH IN SECTION 79.4
OF NEW YORK INSURANCE REGULATION 133.
3.
THE REINSURER AND THE COMPANY AGREE THAT THE COMPANY MAY DRAW
UPON THE LETTER(S) OF CREDIT AT ANY TIME, NOTWITHSTANDING ANY OTHER PROVISIONS
IN THE AGREEMENT, PROVIDED SUCH ASSETS ARE APPLIED AND UTILIZED BY THE COMPANY
OR ANY SUCCESSOR OF THE COMPANY BY OPERATION OF LAW, INCLUDING, WITHOUT
LIMITATION, ANY LIQUIDATOR, REHABILITATOR, RECEIVER OR CONSERVATOR OF THE
COMPANY, WITHOUT DIMINUTION BECAUSE OF THE INSOLVENCY OF THE COMPANY OR THE
REINSURER, ONLY FOR THE FOLLOWING PURPOSES:
(I)
TO REIMBURSE THE COMPANY FOR THE REINSURER'S SHARE OF PREMIUMS
RETURNED TO THE OWNERS OF POLICIES REINSURED UNDER THIS AGREEMENT ON ACCOUNT OF
CANCELLATIONS OF SUCH POLICIES;
(II)
TO REIMBURSE THE COMPANY FOR THE REINSURER'S SHARE OF SURRENDERS
AND BENEFITS OR LOSSES PAID BY THE COMPANY UNDER THE TERMS AND PROVISIONS OF THE
POLICIES REINSURED UNDER THIS AGREEMENT;
12
(iii)
to fund an account with the Company in an amount at least equal
to the deduction, for reinsurance ceded, from the Company's liabilities for
policies ceded under this Agreement. Such amount shall include, but not be
limited to, amounts for policy reserves for claims and losses incurred
(including losses incurred but not reported), loss adjustment expenses, and
unearned premiums; and
(IV)
TO PAY ANY OTHER AMOUNTS THE COMPANY CLAIMS ARE DUE UNDER THIS
AGREEMENT.
4.
THE COMPANY SHALL IMMEDIATELY RETURN TO THE REINSURER ANY AMOUNTS
DRAWN DOWN ON THE LETTER OF CREDIT THAT ARE SUBSEQUENTLY DETERMINED NOT TO BE
DUE.
5.
THE ISSUING BANK SHALL HAVE NO RESPONSIBILITY WHATSOEVER IN
CONNECTION WITH THE PROPRIETY OF WITHDRAWALS MADE BY THE COMPANY OF THE
DISPOSITION OF FUNDS WITHDRAWN, EXCEPT TO ENSURE THAT WITHDRAWALS ARE MADE ONLY
UPON THE ORDER OF PROPERLY AUTHORIZED REPRESENTATIVES OF THE COMPANY.
E.
TO THE EXTENT THAT THE REINSURER ELECTS TO ESTABLISH A TRUST
ACCOUNT, THE FOLLOWING SHALL APPLY.
1.
IT IS AGREED THAT THE REINSURER SHALL ENTER INTO A TRUST
AGREEMENT (THE "TRUST AGREEMENT") IN A FORM ACCEPTABLE TO THE COMPANY AND
ESTABLISH A TRUST ACCOUNT (THE "TRUST ACCOUNT") FOR THE SOLE BENEFIT OF THE
COMPANY WITH A TRUSTEE (THE "TRUSTEE"), WHICH SHALL BE AT THE TIME THE TRUST IS
ESTABLISHED, AND SHALL CONTINUE TO BE, EITHER A MEMBER OF THE FEDERAL RESERVE
SYSTEM OR A NEW YORK STATE CHARTERED BANK AND WHICH SHALL NOT BE A PARENT,
SUBSIDIARY OR AFFILIATE OF THE REINSURER OR THE COMPANY.
2.
THE REINSURER AGREES TO DEPOSIT AND MAINTAIN IN SAID TRUST
ACCOUNT ASSETS TO BE HELD IN TRUST BY THE TRUSTEE FOR THE BENEFIT OF THE COMPANY
AS SECURITY FOR THE PAYMENT OF THE REINSURER'S OBLIGATIONS TO THE COMPANY UNDER
THE AGREEMENT. SUCH ASSETS SHALL BE MAINTAINED IN THE TRUST ACCOUNT BY THE
REINSURER AS LONG AS THE REINSURER CONTINUES TO REMAIN LIABLE FOR SUCH
OBLIGATIONS.
3.
THE REINSURER AGREES THAT THE ASSETS DEPOSITED INTO THE TRUST
ACCOUNT SHALL BE VALUED ACCORDING TO THEIR CURRENT FAIR MARKET VALUE AND SHALL