Document:

Exhibit 10.5

 

PLEDGE AGREEMENT

 

PLEDGE AGREEMENT, dated as of 28 August 2006, (this “Agreement”) made among FLAGSTONE
REINSURANCE LIMITED, a
company organized and existing under the laws of Bermuda (the “Pledgor” and Citibank Ireland Financial Services
plc (the “Pledgee”).

 

PRELIMINARY STATEMENTS.

 

(1)                    The Pledgor
and the Pledgee have entered into one or more Master Agreements (as defined in
Annex A) pursuant to which the Pledgee may, from time to time in its sole
discretion, issue for the account of the Pledgor letters of credit or similar
or equivalent instruments (each a “Credit” and, collectively, the “Credits”).

 

(2)                    The Pledgor
has agreed to collateralize its obligations to the Pledgee that result from
time to time under each Master Agreement and in respect of the Credits issued
thereunder, whether now existing or from time to time hereafter incurred or
arising, as such obligations are more fully defined in Section 3 of this
Agreement as the Secured Obligations.

 

(3)                    The Pledgor
and the Pledgee desire to execute and deliver this Agreement for the purpose of
securing the Secured Obligations and subjecting the property hereinafter
described to the Lien of this Agreement as security for the performance of the
Secured Obligations.

 

(4)                    The Pledgor
has opened account number FLGM (together
with any successor account opened and maintained for this purpose, the “Account”)
with STATE STREET BANK AND TRUST COMPANY at
its office at ONE LINCOLN CENTER, 1 LINCOLN
STREET, BOSTON, MA 02111-2900 U.S.A. (“Bank”).

 

NOW, THEREFORE, in consideration of
the premises and in order to induce the Pledgee to enter into transactions with
and to provide services to the Pledgor and its subsidiaries pursuant to
separate agreements or arrangements between such persons and the Pledgee, the
parties hereto hereby agree as follows:

 

Section 1. Defined
Terms. Except as otherwise expressly provided herein, capitalized terms
used herein shall have the meanings assigned to such terms in Annex A.

 

Section 2. Grant of
Security. Subject to and in accordance with the provisions of this
Agreement, the Pledgor hereby assigns, pledges and grants to the Pledgee a
first priority security interest in and a Lien on all of the Pledgor’s right,
title and interest, whether now owned or hereafter acquired, in all of the
following (collectively, the “Collateral”):

 

(i)                      the Account;

 

(ii)                     the Securities and any
Instruments or other Financial Assets credited to the Account or otherwise
acquired by the Pledgee in any manner and under its control as Collateral (the “Pledged
Securities”) including, without limitation Securities of the type and in
the aggregate amounts specified in Schedule 1 hereto and any Securities Account
and Security Entitlement in respect of the Account, the Pledged Securities or
any of them;

 

(iii)                    all additional Investment
Property (including without limitation) Securities, Security Entitlements,
Financial Assets, or other property and all

 

 

funds, cash or cash
equivalents (together with any applicable Account or Securities Account) from
time to time (A) received, receivable or otherwise distributed in respect of or
in exchange or substitution for any other Collateral (all such funds, cash or
cash equivalents to be Financial Assets for the purposes of this Agreement) or
(B) otherwise acquired by the Pledgee in any manner and delivered to the
Pledgee or under the control of the Pledgee as Collateral; and

 

(iv)                    All proceeds (including,
without limitation, cash proceeds) of any or all of the foregoing, including
without limitation, proceeds that constitute property of the types described in
clauses (i), (ii) and (iii) above.

 

Section 3. Security of
Obligations.     This Agreement secures the
payment of all obligations of the Pledgor now or hereafter existing under each
Master Agreement (including all contingent obligations with respect to
credit(s) issued by the Pledgee for the Pledgor’s account) and this Agreement,
whether for principal, interest, fees, expenses or otherwise and the payment of
any and all expenses (including reasonable counsel fees and expenses) incurred
by the Pledgee in enforcing any rights under this Agreement (all such
obligations being the “Secured
Obligations”). This
Agreement is intended to convey to the Pledgee control of all Security
Entitlements in, and the right to direct dispositions of all cash deposits
from, the Account for the purposes of sections 9-106(c) and 9-104(b) of the
NYUCC.

 

Section 4. Delivery of
Security Collateral.

 

(A)                                   On
or prior to the date hereof, the Pledgor shall transfer or credit, or cause to
be transferred or credited, all of the Pledged Securities to the Pledgee or to
an Account or a Securities Account under arrangements acceptable to the Pledgee
in its sole discretion. Pledgor shall deliver all other Collateral to the
Pledgee or to a Securities Intermediary subject to the control of the Pledgee
under arrangements acceptable to the Pledgee in its sole discretion. Upon the
occurrence and during the continuance of an Event of Default (as hereafter
defined), the Pledgee shall have the right, at any time it reasonably
determines is necessary or desirable to enable the Pledgee to better perfect or
protect the security interests granted hereunder, upon notice to the Pledgor,
to transfer to or to register in the name of the Pledgee or any of its nominees
any or all of the Collateral.

 

(B)                                     At
any time and upon thirty (30) days notice, the Pledgee may require the Pledgor
to transfer the Collateral from the Account to an account at Citibank, N.A.
(London, England branch) and to execute a replacement deposit agreement (in
substantially the customary form used by the Pledgee, a copy of which deposit
agreement has been provided to Pledgor) in substitution for this Agreement.

 

Section 5. Use of
Proceeds. Proceeds that are received in respect of any Collateral shall be
held as cash held as Collateral as provided in Section 2 of this Agreement.

 

Section 6. Representations
and Warranties. The Pledgor represents and warrants as follows:

 

(a)                The Pledgor is a corporation
duly organized and validly existing under the laws of its incorporation and has
all requisite corporate power and authority (including, without limitation, all
governmental licenses, permits and other approvals except where such failure
would not have a material adverse effect on the Pledgor’s business), to own or
lease and operate its properties and to carry on its business as now conducted
and as proposed to be conducted.

 

(b)               The execution, delivery and
performance by the Pledgor of this Agreement, and the consummation of the
transactions contemplated hereby, are

 

 

within the Pledgor’s
corporate powers and have been duly authorized by all necessary corporate
action.

 

(c)                The execution, delivery and
performance by the Pledgor of this Agreement and the consummation of the
transactions contemplated hereby, do not and will not (i) violate any provision
of law, rule or regulation applicable to the Pledgor; (ii) conflict with the
charter or by-laws or substantively similar constitutive documents of the
Pledgor; or (iii) conflict with or result in a breach of, or constitute a
default under, or result in the creation or imposition of any Lien (other than
the lien in favour of the Pledgee created hereby) upon any of the property or
assets of the Pledgor or any of its subsidiaries, under any indenture, loan
agreement, mortgage, deed of trust or other instrument or agreement to which
the Pledgor or any of its subsidiaries may be or become a party or by which it
may be or become bound or to which the property or assets of the Pledgor of any
of its subsidiaries may be or become subject.

 

(d)               No consent of any other Person
and no authorization, approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body or other third party is
required either (i) for the grant by the Pledgor of the assignment and security
interest granted hereby, for the pledge by the Pledgor of the Collateral
pursuant hereto or for the execution, delivery or performance of this Agreement
by the Pledgor, (ii) for the perfection or maintenance of the pledge, assignment
and security interest created hereby (including the first priority nature of
such pledge, assignment or security interest) or (iii) for the exercise by the
Pledgee of its rights provided for in this Agreement or the remedies in respect
of the Collateral pursuant to this Agreement, except as may be required in
connection with the disposition of any portion of the Collateral by-laws
affecting the offering and sale of securities generally or as may be applicable
to the Pledgee.

 

(e)                This Agreement has been duly
executed and delivered by the Pledgor. This Agreement constitutes, or when
executed and delivered will constitute, the legal, valid and binding obligation
of the Pledgor enforceable against the Pledgor in accordance with its terms,
subject as to enforceability to applicable bankruptcy, insolvency, and similar
laws affecting creditors’ rights generally.

 

(f)                The Pledgor is the legal and
beneficial owner of the Collateral and the Pledgor has and shall at all times
have rights in, and good and valid title to, the Collateral, free and clear of
all Liens and “adverse claims” (as such term is defined in Section 8-102(a)(1)
of the NYUCC), save as may have been disclosed by the Pledgor to the Pledgee in
writing prior to the date of this Agreement. Liens in favour of Citibank, N.A,
securing the Pledgor’s reimbursement obligations to Citibank, N.A. in
connection with the issuance of letters of credit shall be deemed to have been
disclosed in writing to the Pledgee.

 

(g)               To the best of the Pledgor’s
knowledge, no default has occurred under or with respect to any Collateral as
of the date hereof.

 

(h)               (i) This agreement and the
pledge and assignment of the Collateral pursuant hereto create a valid security
in the Collateral, securing the payment of the Secured Obligations, (ii) this
Agreement and the related Account Control Agreement, dated 28 August 2006, by
and among the Pledgor, the Pledgee and Bank are sufficient to perfect such
security interest, and (iii) assuming the Pledgee has no notice of any Liens or
“adverse claims” (as such terms is defined in Section 8- 102(a)(1) of the
NYUCC) with respect to the Collateral, the Pledgee will take the Collateral
free and clear of any Liens and adverse claims.

 

(i)                 The Pledgor is subject to civil
and commercial law with respect to its obligations hereunder, and the
execution, delivery and performance by the

 

 

Pledgor of its
obligations under this Agreement constitute private and commercial acts rather
than public or governmental acts. Neither the Pledgor or any of its properties
has any immunity from jurisdiction of any court or from set-off or any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) under the laws of its
jurisdiction of organization.

 

(j)                                                          (A)
This Agreement is in proper legal form under all applicable laws of the United
States of America and the Pledgor’s jurisdiction of organization for the
enforcement thereof against the Pledgor in accordance with its terms. To ensure
the legality, validity, enforceability or admissibility into evidence of this
Agreement it is not necessary that this Agreement or any other document be
filed or recorded with any governmental authority of the Pledgor’s jurisdiction
of organization or that any stamp or similar tax be paid on or in respect of
this Agreement or any other document delivered pursuant hereto.

 

(B) It is not necessary
(X) in order for the Pledgee to enforce any rights or remedies under this
Agreement or (Y) solely by reason of the execution delivery and performance of
this Agreement by the Pledgee, that the Pledgee be licensed or qualified with
any governmental authority of the Pledgor’s jurisdiction of organization or of
the United States of America or be entitled to carry on business in the Pledgor’s
jurisdiction of organization or the United States of America.

 

(k)                The Pledgor shall cause
Securities of the type specified in Schedule 1 to be pledged as Collateral so
that at all times the fair market value of such Securities shall equal or
exceed an amount equal to the aggregate amount of the then outstanding Credits
plus the applicable margin for the category of Collateral that has been
provided and as is specified in Schedule 1 hereto (the “Required Account Value”);
and without limiting the foregoing, if at any time the Pledgor is not in
compliance with the requirements of this subsection (k), the Pledgor shall
forthwith cause additional Securities of the type specified in Schedule 1 to be
held as Collateral pursuant to Section 2 to the extent required to cause the
Pledgor to be in compliance with this subsection (k).

 

Section 7. Further
Assurances.

 

(a)                The Pledgor agrees that from
time to time, at the expense of the Pledgor, the Pledgor will promptly make,
execute, endorse, acknowledge, file and/or deliver to the Pledgee all further
Instruments and documents (including, for the avoidance of doubt, confirmatory
assignments, conveyances, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments) and take all further
action, that may be necessary or desirable, or that the Pledgee may reasonably
request, in order to continue, perfect and protect any pledge, assignment or
security interest granted or purported to be granted hereby or to enable the
Pledgee to exercise and enforce its rights and remedies hereunder with respect
to any Collateral and/or other property or rights covered by the security
interest hereby granted. Without limiting the generality of the foregoing, the
Pledgor will execute and file such financing or continuation statements, or
amendments thereto, and such other Instruments or notices, as may be necessary
or desirable, or as the Pledgee may request, in order to perfect, preserve and
protect the pledge, assignment and security interest granted or purported to be
granted hereby including any actions which may be required or advisable as a
result of any amendment or supplement to applicable laws including the NYUCC.

 

 

Section 8. Distributions.

 

(a)                Other than upon and during the
continuance of an Event of Default (as hereinafter defined), the Pledgor shall
be entitled to receive and retain any and all distributions paid in respect of
the Pledged Securities; provided, however, that any and all:

 

(i) distributions paid or
payable other than in cash in respect of, and Instruments, Financial Assets and
other property received, receivable or otherwise distributed in respect of, or
in exchange for, any Collateral; and

 

(ii) cash paid, payable
or otherwise distributed in respect of principal of, or in redemption of, or in
exchange for, any Collateral,

 

shall be forthwith
delivered to the Pledgee to hold as Collateral subject to the Pledgor’s right
to withdraw all Collateral in excess of the Required Account Value as Provided
in Section 3 of the Account Control Agreement and shall, if received by the
Pledgor, be received in trust for the benefit of the Pledgee, be segregated
from the other property or funds of the Pledgor and be forthwith delivered to
the Pledgee as Collateral in the same form as so received (with any necessary
endorsement) to the extent the Collateral is less than the Required Account
Value.

 

(b)               For the purposes of this section
8 and Sections 4 and 14 hereof, the terms “Events of Default” shall mean a
failure of the Pledgor to perform in any in any material respect any of its
obligations under each Master Agreement or this Agreement, which failure shall
continue unremedied for five (5) Business Days after written notice thereof
shall have been given by the Pledgee to the Pledgor.

 

(c)                The Pledgee shall execute and
deliver (or cause to be executed and delivered) to the Pledgor all such proxies
and other instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to receive the interest payments that it is authorized to
receive and retain pursuant to paragraph (a) above.

 

Section 9. Transfer
and Other Liens. The Pledgor shall not (i) sell, assign or otherwise
dispose of, or grant any option with respect to, any of the Collateral, or (ii)
create or suffer to exist any Lien upon or with respect to any of the
Collateral, including any right to give any Entitlement Order with respect to
the Collateral, except for the pledge, assignment and security interest created
by this Agreement.

 

Section 10. Pledgee
Appointed Attorney-in-Fact. The Pledgor hereby irrevocably appoints the
Pledgee as the Pledgor’s attorney-in-fact, with full authority upon failure to
perform any of the obligations under each Master Agreement or this Agreement in
the place and stead of the Pledgor and in the name of the Pledgor or otherwise,
from time to time to take any action and to execute any instrument that the
Pledgee may deem necessary or advisable to accomplish the purposes of this
Agreement.

 

Section 11. Pledgee
May Perform. If the Pledgor fails to perform any agreement contained
herein, after receipt of a written request from the Pledgee to do so, the
Pledgee may (but shall have no obligation to) itself perform, or cause
performance of, such agreement, and the reasonable expenses of the Pledgee
incurred in connection therewith shall be payable by the Pledgor under Section
15(b) hereof.

 

Section 12. The
Pledgee’s Duties. The powers conferred on the Pledgee hereunder are solely
to protect its interest in the Collateral and shall not impose any duty upon it
to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder. Pledgee shall have no duty as to any
Collateral, as to ascertaining or taking action with

 

 

respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Collateral, whether or not the Pledgee has or is deemed to have knowledge of
such matters, or as to the taking of any necessary steps to preserve rights
against any parties or any other rights pertaining to any Collateral. The
Pledgee shall be deemed to have exercised reasonable care in the custody and
preservation of any Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which the Pledgee accords its own
property.

 

Section 13. Security
Interest Absolute. The obligations of the Pledgor under this Agreement are
independent of the Secured Obligations and any agreement with respect to the
Secured Obligations, and a separate action or actions may be brought and
prosecuted against the Pledgor to enforce this Agreement, irrespective of
whether any action is brought against the Pledgor or whether the Pledgor is
joined in any such action or actions. All rights of the Pledgee and the pledge,
assignment and security interest hereunder, and all obligations of the Pledgor
hereunder, shall be absolute and unconditional, irrespective of:

 

(a)               any lack of validity or
enforceability of each Master Agreement or any other agreement or instrument
relating thereto;

 

(b)              any change in the time, manner or
place of payment of, or in any other term of, all or any of the Secured
Obligations or any other amendment or waiver of or any consent to any departure
from this Agreement or each Master Agreement, including, without limitation,
any increase in the Secured Obligations;

 

(c)               any taking, exchange, release or
non-perfection of any other collateral, or any taking, release or amendment or
waiver of or consent to departure from any guaranty for all or any of the
Secured Obligations;

 

(d)              any manner of application of the
Collateral, or proceeds thereof, to all or any of the Secured Obligations, or
any manner of sale or other disposition of any Collateral for all or any of the
Secured Obligations or any other assets of the Pledgor or any of its
subsidiaries;

 

(e)               any change, restructuring or
termination of the corporate structure or existence of the Pledgor or any of
its subsidiaries; or

 

(f)               any other circumstance that might
otherwise constitute a defence available to, or a discharge of, the Pledgor or
a third party grantor of a security interest.

 

Section 14. Remedies.
If an Event of Default shall occur and be continuing:

 

(a)               The Pledgee may exercise in
respect of the Collateral, in addition to other rights and remedies provided
for herein or otherwise available to it, all the rights and remedies of a
secured party upon default under the NYUCC and also may without notice except
as specified below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any of the Pledgee’s offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Pledgee may deem commercially reasonable. The Pledgor agrees that,
to the extent notice of sale shall be required by law, at least ten days’
notice to the Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Pledgee shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Pledgee may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.

 

 

(b)              All cash proceeds received by the
Pledgee in respect of any sale of, collection from, or other realization upon
all or any part of the Collateral may, in the discretion of the Pledgee, be
held by the Pledgee as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to the Pledgee pursuant to
Section 15) in whole or in part by the Pledgee against all or any part of the
Secured Obligations in such order as the Pledgee shall elect. Any surplus of
such cash or cash proceeds held by the Pledgee and remaining after payment in
full of all the Secured Obligations shall be paid over to the Pledgor or to
whomsoever may be lawfully entitled to receive such surplus.

 

(c)               The Pledgee may, without notice
to the Pledgor, except as required by law and at any time or from time to time,
charge, set-off and otherwise apply all or any part of the Secured Obligations
against the Collateral or any part thereof.

 

Section 15. Indemnity
and Expenses.

 

(a)               The Pledgor agrees to indemnify
the Pledgee and its affiliates and its (and its affiliates’) officers,
directors, employees, agents, attorneys and advisors from and against any and
all claims, damages, losses and liabilities growing out of or resulting from
this Agreement (including, without limitation, enforcement of this Agreement),
except claims, damages, losses or liabilities resulting from the Pledgee’s
gross negligence or wilful misconduct.

 

(b)              The Pledgor will upon demand pay
to the Pledgee the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents that
the Pledgee may incur in connection with (i) the custody, preservation, use or
operation of, or the sale of, collection from or other realization upon, any of
the Collateral, (ii) the exercise or enforcement (whether through negotiations,
legal proceedings or otherwise) of any of the rights of the Pledgee hereunder
or (iii) the failure by the Pledgor to perform or observe any of the provisions
hereof. In addition, the Pledgor will upon demand pay to the Pledgee the amount
of any and all reasonable out-of-pocket expenses it may incur in connection
with the administration of this Agreement.

 

Section 16. Amendments;
Waivers; Etc. No amendment or waiver of any provision of this Agreement,
and no consent to any departure by the Pledgor herefor, shall in any event be
effective unless the same shall be in writing and signed by the Pledgor and the
Pledgee, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given (such agreement
to amend or waiver, and consent to any departure shall not be unreasonably
withheld). No failure on the part of the Pledgee to exercise, and no delay in
exercising any right hereunder, shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right.

 

Section 17. Addresses
for Notices. All notices and other communications provided for hereunder
shall be in writing (including telecopier, telegraphic, telex or cable
communication) and, mailed, telegraphed, telecopied, telexed, cabled or
delivered if to the Pledgor (attn: Chief Financial Officer) at Crawford House,
23 Church Street, Hamilton HM 11, Bermuda, Telephone (441)-296-8272 Facsimile
(441) 296-9879 or, as to either party, at such other address as shall be
designated by such party in a written notice to each other party complying as
to delivery with the terms of this Section 17. All such notices and
communications shall, when mailed, telecopied, telegraphed or telexed, be
effective five Business Days after deposit in the mail, or when telecopied,
delivered to the telegraph company or confirmed by telex answerback,
respectively, except that notices and communications to the Pledgee shall not
be effective until received by the Pledgee. Delivery by telecopier of an
executed counterpart of any amendment or waiver of any provision of this
Agreement or of any Exhibit hereto to be

 

 

executed and delivered
hereunder shall be effective as delivery of a manually executed counterpart
thereof.

 

Section 18. Continuing
Security Interest; Assignments. This Agreement shall create a continuing
security interest in the Collateral and shall (a) remain in full force and
effect until the payment in full in cash of the Secured Obligations, (b) be
binding upon the Pledgor and the Pledgee and their respective successors and
permitted assigns and (c) inure, together with the rights and remedies of the
Pledgee and its respective successors, transferees and assigns. Without
limiting the generality of the foregoing clause (c), the Pledgee may assign or
otherwise transfer to any other Person all or any portion of its rights and
obligations under this Agreement to any other Person, and such other Person
shall thereupon become vested with all the benefits in respect thereof granted
to the Pledgee herein or otherwise.

 

Section 19. Release
and Termination. Upon the later of the payment in full in cash of the
Secured Obligations or any termination as provided in each Master Agreement,
the pledge, assignment and security interest granted hereby shall terminate and
all rights to the Collateral shall revert to the Pledgor. Upon any such
termination, the Pledgee will, at the Pledgor’s expense execute and deliver to
the Pledgor such documents as the Pledgor shall reasonably request to evidence
such termination.

 

Section 20. Governing
Law; Terms. This Agreement shall be governed by and construed in accordance
with the laws of the state of New York, except to the extent that the validity
or perfection of the security interest hereunder in respect of any particular
collateral is mandatorily governed by the laws of a jurisdiction other than the
state of New York, in which case the laws of such other jurisdiction shall
govern such matters.

 

Section 21. Jurisdiction,
Venue.

 

(a)                The Pledgor hereby irrevocably
and unconditionally submits, for itself and its property, to the non-exclusive
jurisdiction of any New York State or Federal court (to the extent such court
has subject matter jurisdiction) sitting in New York City and any appellate
court from any thereof in any action or proceeding arising out of or relating
to this Agreement or for the recognition and enforcement of any judgment, and
the Pledgor hereby irrevocably and unconditionally agrees that all claims in
respect of such action or proceeding may be heard and determined in such New
York State court or in such Federal court. The Pledgor hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. The Pledgor hereto irrevocably and unconditionally waives, to
the fullest extent it may legally
and effectively do so, any objection that it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Agreement in any New York State or federal court. The Pledgor hereby
irrevocably waives, to the fullest extent it may effectively do so, the defence
of an inconvenient forum to the maintenance of such action or proceeding in any
such court. The Pledgor irrevocably consents to the service of any and all
process in any such action or proceeding by the mailing of copies of such
process to such Pledgor at its address specified in Section 17. The Pledgor
agrees that a final judgment in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by applicable law.

 

(b)               Nothing in this Section 21 shall
affect the right of the Pledgee to serve legal process in any other manner
permitted by applicable law or affect any right which the Pledgee would
otherwise have to bring any action or proceeding against the Pledgor or its
property in the courts of any other jurisdiction.

 

(c)                To the extent that the Pledgor
has or hereafter may acquire any immunity from jurisdiction of any court or
from any legal process (whether

 

 

through service or
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property, the Pledgor, to the
extent permitted by law hereby irrevocably waives such immunity in respect of
its obligations under this Agreement and, without limiting the generality of
the foregoing, agrees that the waives set forth in this subsection (c) shall
have the fullest scope permitted under the United States Foreign Sovereign
Immunities Act of 1976, as amended, and are intended to be irrevocable for
purposes of such Act.

 

SECTION 22.         WAIVER OF JURY TRIAL. EACH OF
THE PLEDGOR AND THE PLEDGEE HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT
OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREBY OR THE ACTIONS OF THE PLEDGEE IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.

 

Section 23. Execution
in Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Agreement by telecopier shall be
effective as delivery of a manually executed counterpart of this Agreement.

 

Section 24. Severability.
If any term or provision of this Agreement is or shall become illegal, invalid
or unenforceable in any jurisdiction, all other terms and provisions of this
Agreement shall remain legal, valid and enforceable in such jurisdiction and
such illegal, invalid or unenforceable provision shall be legal, valid and
enforceable in any other jurisdiction.

 

Section 25. Termination
of Prior Agreement. The parties agree that any prior pledge agreement with
respect to the Collateral is terminated as of the effective date of this
Agreement.

 

 

IN
WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed and delivered by
its officer thereunto duly authorized as of the date first above written.

 

	
   

  	
  FLAGSTONE
  REINSURANCE LIMITED

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  BY:

  	
     /s/ David A. Brown

  	
   

  	
   

  	
  /s/ James O'Shaughnessy
  

  
	
   

  	
  Name:

  	
  David A. Brown

  	
   

  	
   

  	
  James O’Shaughnessy

  
	
   

  	
  Title:

  	
  CEO

  	
   

  	
   

  	
  CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CITIBANK
  IRELAND FINANCIAL SERVICES PLC

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  BY:

  	
  /s/ Peadar Mac Canna

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Peadar Mac Canna

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  	
   

  
										

 

 

SCHEDULE 1

 

AGREEMENT AS REGARDS THE COMPOSITION OF COLLATERAL
TO BE PROVIDED REMAINS TO BE FINALISED, SUBJECT HOWEVER TO THE FOLLOWING (1)
THAT THE FINANCIAL ASSETS PROVIDED ARE INCLUDED IN ONE OR MORE OF THE
CATEGORIES BELOW WITH RELEVANT MARGINS APPLIED AND (2) THAT CATEGORY C
FINANCIAL INSTRUMENTS SHALL AT NO TIME COMPRISE MORE THAN 10% IN VALUE OF THE
OVERALL REQUIRED ACCOUNT VALUE.

 

Securities or Other Assets Acceptable as Financial Assets:

 

A.

 

Securities issued by Corporations, each rated AA or AA equivalent or
better (and not more than 10% by value of the Charged Portfolio shall be
represented by Securities issued by any one issuer and each bond within the
Charged Portfolio shall mature not more than 10 years after the date on which
it comes within the Charged Portfolio).

 

Margin Applied for Determining Required Account Value: 15%

 

B.

 

Securities issued by the US government or its agencies (whose debt
obligations are fully and explicitly guaranteed as to the timely payment of
principal and interest by the full faith and credit of the US government) or
the central government of an OECD (Organisation for Economic Co-operation and
Development) country, in each case rated AA or AA equivalent or better.

 

Margin Applied for Determining Required Account Value: 10%

 

C.

 

Securities issued by Corporations, each rated A or A equivalent or
better (and not more than 10% by value of the Charged Portfolio shall be
represented by Securities issued by any one issuer and each bond within the
Charged Portfolio shall mature not more than 10 years after the date on which
it comes within the Charged Portfolio);

 

Margin Applied for Determining Required Account Value: 17.5%

 

 

The initial Required Account Value is:   USD$200,000,000 (Two Hundred Million United
States Dollars)

 

 

ANNEX A

 

CERTAIN DEFINED TERMS

 

Capitalized terms used herein shall have the respective meanings
ascribed to them below:

 

“Business Day” means a day (other than a
Saturday or Sunday) on which the banks are generally open for business in London.

 

“Collateral” has the meaning specified therefor in
Section 2 hereof.

 

“Entitlement Holder” means a Person that (i) is an “entitlement holder” as defined in Section 8-102(a)(7) of the
NYUCC (except in respect of a Book-entry Security); and (ii) in respect of any
book-entry Security, is an “entitlement holder” as defined in 31 C.F.R. 357.2
(or, as applicable to such book-entry Security, the corresponding Federal
Book-Entry Regulations governing such book-entry Security) which, to the extent
required or permitted by the Federal Book-Entry Regulations, is also an “entitlement
holder” as defined in Section 8-102(a)(7) of the NYUCC.

 

“Entitlement Order” shall
have the meaning set forth in Section 8-102(a)(8) of the NYUCC and shall
include, without limitation, any notice or related instructions from the
Pledgee directing the transfer or redemption of the Collateral or any part
thereof.

 

“Federal Book-Entry Regulations” means
the federal regulations contained in Subpart B (“Treasury/Reserve Automated Debt Entry System (TRADES)” governing book-entry securities
consisting of United States Treasury securities, U.S. Treasury bonds, notes and
bills) and Subpart D (“Additional Provisions”) of 31 C.F.R. Part
357, 31 C.F.R. 357.10 through 357.14 and 357.41 through 357.44 (including
related defined terms in 31 C.F.R. 357.2), as amended by regulations published
at 61 Fed. Reg. 43626 (August 23, 1996) and as amended by an subsequent
regulations.

 

“Master Agreement” means each agreement (as from time to time amended,
varied supplemented, novated or assigned) between the Pledgor (or by any person
for or on behalf of the Pledgor) and the Pledgee, pursuant to which the Pledgee
has established, maintained, amended, renewed or substituted or arranged for
the establishment, maintenance, amendment, renewal or substitution of a Credit

 

“Lien” means any mortgage, pledge, attachment,
lien, charge, claim, encumbrance, lease or security interest, easement, right
of first or last refusal, right of first offer or other option or contingent purchase
right.

 

“NYUCC” means the Uniform Commercial Code from
time to time in effect in the State of New York.

 

“Person” means any individual, corporation,
partnership, joint venture, foundation, association, joint-stock company,
trust, unincorporated organization, government or any political subdivision
thereof or any agency or instrumentality of any thereof.

 

“Secured Obligations” has the meaning specified therefor in
Section 3 hereof.

 

“Secured Intermediary” means
a Person that (i) is a “securities intermediary” as defined in Section 8-102(a)(14) of the
NYUCC and (ii) in respect of any U.S. Government Obligations, is also a “securities intermediary as defined in 31
C.F.R. 357.2.

 

“Security Control” means “control” as defined in Section 9-115(1)(e)
of the NYUCC.

 

“Security Entitlement” means
(i) security entitlement” as defined in Section 8-102(a)(17) of the NYUCC
(except in respect of a U.S. Government Obligation); and (ii) in respect

 

 

of any U.S. Government Obligation, a “security
entitlement” as defined
in 31 C.F.R. 357.2 which, to the extent required or permitted by the Federal
Book-Entry Regulations, is also a “security
entitlement” as
defined in Section 8-102(a)(17) of the NYUCC.

 

“STRIPS” shall have the meaning thereof set forth
in Section 357.2 of the Federal Book-Entry Regulations.

 

“U.S. Government Obligations” means all of the United States Treasury
securities (including STRIPS) maintained in the commercial book-entry system
entitled Treasury/Reserve Automated Debt Entry System (“TRADES”) pursuant to the Federal
Book-Entry Regulations or pursuant to a successor system.

 

(b) NYUCC Terms. Terms defined or referenced in the NYUCC and not
otherwise defined or referenced herein are used herein as therein defined or
referenced. In particular, the following terms are used herein as defined or
referenced in the respective NYUCC sections indicated below: “Account”: Section 9-106; “Entitlement Order”: Section 8-102(a)(8); “Financial Asset”: Section 8-102(a)(9); “Instrument”:
Section 9-105(l)(i); “Investment Property”: Section 9-115(1)(f); “Person”: Section 1-201(30); “Securities
Account”: Section
8-501 (a); “Security”: Section 8-102(a)(15).Exhibit 10.6

 

ACCOUNT CONTROL AGREEMENT

 

Date:                      28 August 2006

 

Parties

 

Citibank Ireland Financial Services plc, as “Secured Party”

 

FLAGSTONE REINSURANCE LIMITED, a company organized and existing under the
laws of Bermuda as “Pledgor”

 

STATE STREET BANK AND TRUST, as  “Bank”

 

Account Number:                FLGM

 

(this “Agreement”)

 

Background

 

Pledgor has granted Secured Party a security interest in the financial
assets in the securities account identified above (the “Account”), maintained by Bank for Pledgor, (including any security entitlement)
and in the Account. The parties are entering into this Agreement to provide for
the control of the Account as a means to perfect the security interest of
Secured Party. Bank has no responsibility to Secured Party in respect to the
validity or perfection of such security interest otherwise than to act in
accordance with the terms and conditions of this Agreement.

 

Agreement

 

1.             The
Account

Bank represents and warrants to Secured Party that Bank maintains the
Account. Bank represents and warrants that except for the claim and interest of
Pledgor, Secured Party, or the claim of Bank as provided in Section 4 of this
Agreement, Bank does not know of any claim to or interest in the Account or any
financial assets credited thereto. Bank, Pledgor and Secured Party agree that
the Account is a “Securities Account” as that term is defined In Section
8-501(a) of the Uniform Commercial Code as in effect from time to time in the
State of New York (the “NYUCC”). Bank, Pledgor and Secured Party agree that
each item of property (whether investment property, financial asset, security,
instrument) credited to the Account shall be treated as a “Financial Asset” within the meaning of Section 8-102(a)(9) of the NYUCC. For
the avoidance of doubt, cash shall not be included within the definition of “Financial Asset” for the
purposes of the Section 1.

 

2.             Control
by Secured Party

Bank will comply with all notifications it receives directing it to
transfer or redeem any Financial Assets credited to the Account (each an Entitlement Order as defined in Section
8-102(a)(8) of the NYUCC) originated by Secured Party and shall otherwise treat
Secured Party as entitled to exercise the rights in respect of any Financial
Asset credited to the Account without further consent by Pledgor. This
provision is intended to grant Secured Party control of all Security
Entitlements in the Account for the purposes of section 9-106(c) of the NYUCC.

 

3.             Pledgor’s
Rights in Account

Subject to this Section 3, until Bank receives an Entitlement Order
from the Secured Party, Bank may accept and comply with any “Entitlement Order”
from Pledgor with regard to the Account or any Financial Asset as follows:

 

3.01                                                Until
Bank receives an Entitlement Order from Secured Party, Bank shall distribute to
Pledgor all cash distributions received in regard to Financial Assets in the
Account. Cash distributions do not include any principal received upon

 

 

sale, redemption or
maturity of a Financial Asset, and any such cash will be held for the benefit
of Secured Party.

 

3.02                                                Bank
shall provide Secured Party with electronic access to view holdings and
activity in the Account.

 

3.03                                                Pledgor
shall not direct Bank to release any of the Financial Assets in the Account or
to close the Account and Bank agrees that it will not release any of the
Financial Assets in the Account or close the Account without Secured Party’s
consent. For this purpose the term “release” shall be broadly construed to
include release for any purpose, including (without limitation) release for
settlement of a sale, release for the purposes of substituting new Financial
Assets, release “free” without consideration and any other manner of leaving
the Account. Secured Party will consent to the release of the Financial Assets
provided that with respect to such Financial Assets, the following procedure is
adhered to:

 

(a)                     Pledgor will
determine (the “Determination”) that the Financial Assets remaining in the
Account will be equal to or exceed the aggregate value determined by Secured
Party from time to time (the “Required Account Value”) and to determine this
shall diligently and in good faith:

 

(i)                       determine
that the remaining Financial Assets are eligible as collateral as specified in
Exhibit A hereto; and

 

(ii)                    use the
mark-to-market value provided by pricing services used by Bank in connection
with the valuation of Financial Assets under similar account control
arrangements or for Bank’s trust accounts; provided that in determining if the
remaining Financial Assets are sufficient Pledgor shall use the mark-to-market
values of the Financial Assets reported by such services not more than the Bank
Business Day (as defined below) prior to the withdrawal or distribution of any
Financial Asset. Any Financial Asset that cannot be valued as provided herein
and any Financial Asset subject to Bank’s lien specified in Section 4 shall
have no value in determining if the Financial Assets to remain in the Account
are sufficient for the purposes of meeting the Required Account Value.

 

(b)                    If following
the Determination, Pledgor has come to the reasonable conclusion that by
requesting a Financial Asset to be released, the Financial Assets remaining in
the Account will be equal to or in excess of the Required Account Value (a “Positive
Determination”), Pledgor will fax:

 

(i)                       the
instruction relating to the Financial Assets that it wishes to be released (the
“Instruction”); and

 

(ii)                    the value of
the Financial Assets that are currently in the Account (in the form of a
portfolio valuation statement compiled by Bank and in a form acceptable to
Secured Party) and the value of the Financial Asset (and if applicable any
Financial Asset which will be substituted for such Financial Asset) that it
wishes to be released (all as calculated in accordance with the methodology in
Subsection 3.03(a)),

 

to Secured Party for the
attention of its Collateral Monitoring Unit on +44 207 500 2345 (or such other
number as Secured Party may notify Pledgor of from time to time) so that it is
received by Secured Party (unless Secured Party agrees otherwise) at least
three Business Days (excluding the day upon which it is received and the day
upon which such instruction is intended to take effect) before the day upon
which such instruction is intended to take effect;

 

 

(c)                     Secured Party
will then consider the Positive Determination and if it agrees with it, will
approve the Instruction (by the affixing of the signatures of two of the
persons who appear in Exhibit B hereto (each being an “Authorised Signatory”)
as amended and advised in writing to Pledgor by Secured Party from time to
time) and will return it by fax to Pledgor on +1 (441) 296-9879 (or such other
number as Pledgor may notify Secured Party of from time to time) within 48
hours of receipt. Once signed in this manner by Secured Party, the Instruction
becomes an “Endorsed Instruction”.

 

(d)                    Pledgor will
then fax the Endorsed Instruction to Bank for processing on +1 (617) 537 5090
(or such other number as Bank may notify Pledgor of from time to time).

 

(e)                     Secured Party
and Bank shall have no responsibility for any loss or liability of any nature
(direct or indirect) suffered by the Pledgor as a result of any failure to
transmit funds or to sell, purchase, or otherwise dispose of commodities or
securities (or any delay in transmitting funds or selling, purchasing, or
otherwise disposing of commodities or securities) or because the approval given
by Secured Party in this Section 3 is either delivered late or not forthcoming.

 

(f)                       In this
Section a “Business Day” shall be construed as a reference to a day (other than
a Saturday or Sunday) on which the New York Stock Exchange is open for
business.

 

(g)                    Should there
be any difficulties with fax transmissions between any of the Parties, the
relevant Parties will attempt to effect delivery using another method as agreed
between them.

 

3.04                                                Pledgor
and Bank shall be entitled to rely:

 

(a)                     (subject to
Subsection 3.04(b)) upon an Endorsed Instruction which it believes in good
faith to have been signed by any two of the Authorised Signatories; and

 

(b)                    until notified
by Secured Party to the contrary, upon the continued authority of any
Authorised Signatory to endorse an Instruction.

 

3.05                                                If
Secured Party gives Bank an Entitlement Order notifying Bank that Secured Party
will exercise exclusive control over the Account, Bank will cease complying
with Entitlement Orders or other directions concerning the Account originated
by Pledgor.

 

4.                                       Priority
of Secured Party’s Security Interest

Bank subordinates in favor of Secured Party any interest, lien or right
of setoff it may have, now or in the future, against the Account or Financial
Assets credited to the Account; provided, however, Bank will retain its prior
lien on a Financial Asset credited to the Account where Bank has paid for such
Financial Asset but has not received payment therefor from Pledgor and for
payment of its customary fees and expenses pursuant to the agreement under
which the Account is maintained (the “Custody Agreement”), including any
overdraft fees.

 

Bank will not agree with any third party that Bank will accept or
comply with Entitlement Orders originated by the third party in regard to the
Account or any Financial Asset credited to the Account.

 

5.                                       Statements,
Confirmations and Notices of Adverse Claims

 

 

5.01                   (a)     Notwithstanding Subsection 5.02, Bank will
by 9am GMT on every day that banks are generally open for business in the
country where the Financial Assets are deposited (a “Bank Business Day”)
deliver to Secured Party by Swift (or such other method as Secured Party may
reasonably specify) via MT535 to CITIIE2XTRD (or such other address as Secured
Party may notify Bank of from time to time) a statement in a form reasonably
acceptable to Secured Party of the Financial Assets credited to the Account
(including but not limited to detailing the Financial Assets both individually
and in aggregate) as at close of business on the prior Bank Business Day (the “Daily
Statement”).

 

(b)    Bank will also within five Bank Business
Days of the date of this Agreement:

 

(i)                        inform
Secured Party of a further method by which it will deliver the Daily Statement
as a contingency in the case of failure relating to the method by which Bank
will usually deliver the Daily Statement, such contingent method to be agreed
by Secured Party; and

 

(ii)                     provide Secured
Party with a list of persons and their accompanying contact details (which Bank
will update from time to time and provide to Secured Party promptly after such
update) with whom Secured Party may liaise in respect of the Daily Statement.

 

5.02                                                Notwithstanding
the provisions of Subsection 5.01, Bank will send copies of all statements and
confirmations for the Account simultaneously to Pledgor and Secured Party. Upon
initial deposit of Financial Assets into the Account and not less than monthly,
Bank shall provide Secured Party with a report of the valuation of the
Financial Assets in the Account determined as required in Section 3 of this
Agreement. Bank will use reasonable efforts promptly to notify Secured Party
and Pledgor if any other person claims a property interest in the Account or
any Financial Asset credited to the Account. Pledgor shall cause Secured Party
to be provided with current information concerning the Account via an on-line
service of the Bank by designating Secured Party as an Authorized User
thereunder.

 

6.                                                            Bank’s
Responsibility

Bank shall have no responsibility or liability with respect to changes
in any securities in the Account or changes in their value relative to other
currencies or securities, or for any deduction for taxes, levies, or otherwise
from deposits made with any depository, or for any blockage, confiscation or
expropriation, limitation of transferability, or any other action by any
government, de facto or de jure, which affects or could affect the same, or for
any other occurrence beyond its control.

 

Except for permitting a withdrawal or delivery in violation of Section
3, Bank will not be liable to Secured Party for complying with Entitlement
Orders from Pledgor that are received by Bank before Bank receives and has a
reasonable opportunity to act on an Entitlement Order from Secured Party.

 

Bank will not be liable to Pledgor for complying with an Entitlement
Order originated by Secured Party even if Pledgor notifies Bank that Secured
Party is not legally entitled to issue the Entitlement Order or notice of
exclusive control, unless:

 

(a)                     Bank takes
the action after it is served with an injunction, restraining order or other
legal process enjoining it from doing so, issued by a court of competent
jurisdiction, and had a reasonable opportunity to act on the injunction,
restraining order or other legal process; or

 

(b)                    Bank acts in
bad faith with Secured Party in violating Pledgor’s rights.

 

This Agreement does not create any obligation of Bank except for those
expressly set forth in this Agreement. In particular, Bank need not investigate
whether Secured Party is entitled

 

 

under Secured Party’s agreement with Pledgor to give an Entitlement
Order. Bank may rely on notices and communications it believes given by the
appropriate party.

 

Bank will maintain the Account and Financial Assets in the same manner
as it maintains accounts and assets for its custodial customers generally.
During the term of this Agreement, Bank will remain a securities intermediary
within the meaning of such term in Section 8-102(a)(14) of the NYUCC and 31
C.F.R. 357.2.

 

From and after the time Secured Party sends an Entitlement Order to
Bank, Secured Party shall be entitled to direct the Bank with respect to the
Account and the Financial Assets held therein without consent of the Pledgor.

 

7.                                                            Indemnity

Pledgor will indemnify, defend and hold harmless Bank, its partners,
officers, directors, employees and agents against claims, liabilities and
expenses arising out of this Agreement (including reasonable attorney’s fees
and disbursements), except to the extent such claims, liabilities, and expenses
arise from the Bank’s negligence, bad faith or wilful misconduct.

 

8.                                                            Termination;
Survival

Secured Party may terminate this Agreement by 30 days’ written notice
to Bank and Pledgor. Bank or Pledgor may terminate this Agreement on 30 days’
written notice to all of the other parties. Upon receipt of a notice of
termination from Pledgor, Bank shall cease accepting any Entitlement Order from
Pledgor, as specified in Section 3, and any previous Entitlement Order
delivered by Pledgor but not yet satisfied shall be deemed to be of no further
force and effect.

 

If Secured Party notifies Bank that its security interest in the
Account or all of the Financial Assets therein has terminated, this Agreement
will immediately terminate.

 

Section 6, “Bank’s Responsibility” and 7, “Indemnity,” will survive termination of this
Agreement.

 

9.                                                            Governing
law

This Agreement and the Account (including all interests, duties and
obligations with respect thereto) will be governed by the laws of the State of
New York. Bank may not change the law governing the Account without Secured
Party’s express written agreement.

 

10.                                                      Entire
agreement

This Agreement is the entire agreement and supersedes any prior
agreements and contemporaneous oral agreements, of the parties concerning its
subject matter.

 

11.                                                      Amendments

No amendment of, or waiver of a right under, this Agreement will be
binding unless it is in writing and signed by the party to be charged.

 

12.                                                      Severability

To the extent a provision of this Agreement is unenforceable, this
Agreement will be construed as if the unenforceable provision were omitted.

 

13.                                                      Successors
and assigns

A successor to or assignee of Secured Party’s rights and obligations
under the Pledge Agreement dated 28 August 2006 between Secured Party and
Pledgor will succeed to Secured Party’s rights and obligations under this
Agreement.

 

14.                                                      Notices

A notice or other communication to a party under this Agreement will be
in writing, (including facsimile) (except that Entitlement Orders shall be
given in accordance with procedures as Bank may reasonably specify), will be
sent to the party’s address set forth below or to such other address as the
party may notify the other parties and will be effective on receipt.

 

 

15.                                                      Counterparts

This Agreement may be executed in any number of counterparts, all of
which shall constitute one and the same instrument, and any party hereto may
execute this Agreement by signing and delivering one or more counterparts.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement.

 

16.                                                      Representations

Each party hereto hereby represents and warrants that the individual
executing this Agreement on its behalf has the requisite power and authority to
do so and to bind it to the terms of this Agreement.

 

SIGNATURES

 

 

	
  BY:

  	
  /s/ Peadar Mac Canna

  	
   

  	
   

  
	
   

  	
  For
  and on behalf of

  Citibank Ireland Financial Services plc

  Insurance Letter of Credit Department

  2nd Floor

  1 North Wall Quay

  Dublin 1

  Republic of Ireland

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /a/ David Brown

  	
   

  
	
  BY:

  	
  /s/ James O'Shaughnessy

  	
   

  	
   

  
	
   

  	
  For
  and on behalf of

  Flagstone Reinsurance Limited

  Crawford House

  23 Church Street

  Hamilton HM 11

  Bermuda

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BY:

  	
  /s/ Wayne Persythe

  	
   

  	
   

  
	
   

  	
  For
  and on behalf of

  State Street Bank and Trust

  One Lincoln Center

  1 Lincoln Street

  Boston, MA 02111-2900

  Swift Address: SBOSUS3N

  	
   

  

 

 

EXHIBIT A

 

AGREEMENT AS REGARDS THE COMPOSITION OF COLLATERAL
TO BE PROVIDED REMAINS TO BE FINALISED, SUBJECT HOWEVER TO THE FOLLOWING (1)
THAT THE FINANCIAL ASSETS PROVIDED ARE INCLUDED IN ONE OR MORE OF THE
CATEGORIES BELOW WITH RELEVANT MARGINS APPLIED AND (2) THAT CATEGORY C
FINANCIAL INSTRUMENTS SHALL AT NO TIME COMPRISE MORE THAN 10% IN VALUE OF THE
OVERALL REQUIRED ACCOUNT VALUE.

 

Financial Assets Eligible For Valuation as
Collateral

 

A.

 

Securities issued by Corporations, each rated AA or AA equivalent or
better (and not more than 10% by value of the Charged Portfolio shall be
represented by Securities issued by any one issuer and each bond within the
Charged Portfolio shall mature not more than 10 years after the date on which
it comes within the Charged Portfolio).

 

Margin Applied for Determining Required Account Value: 15%

 

B.

 

Securities issued by the US government or its agencies (whose debt
obligations are fully and explicitly guaranteed as to the timely payment of
principal and interest by the full faith and credit of the US government) or
the central government of an OECD (Organisation for Economic Co-operation and
Development) country, in each case rated AA or AA equivalent or better.

 

Margin Applied for Determining Required Account Value: 10%

 

C.

 

Securities issued by Corporations, each rated A or A equivalent or
better (and not more than 10% by value of the Charged Portfolio shall be
represented by Securities issued by any one issuer and each bond within the
Charged Portfolio shall mature not more than 10 years after the date on which
it comes within the Charged Portfolio);

 

Margin Applied for Determining Required Account Value: 17.5%

 

The initial Required Account Value is: USD$200,000,000 (Two Hundred
Million United States Dollars)

 

 

EXHIBIT B

 

AUTHORISED SIGNATORIES OF
SECURED PARTY FOR THE PURPOSES OF 

ENDORSING AN INSTRUCTION

 

 

	
  FULL NAME

  	
   

  	
  TITLE

  	
   

  	
  TELEPHONE NO

  	
   

  	
  SIGNATURE

  
	
  Andrew Lindsay

  	
   

  	
  Department Manager

  	
   

  	
  00 353 (0) 1 622 0210

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Stephane Jauny

  	
   

  	
  Insurance Letter of Credit/Collateral Monitor
  section Manager

  	
   

  	
  00 353 (0) 1 622 0239

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Paul Greene

  	
   

  	
  Collateral Monitor Manager

  	
   

  	
  00 353 (0) 1 622 2000

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Katerina Moschona

  	
   

  	
  Insurance Letter of Credit Manager

  	
   

  	
  00 353 (0) 1 622 2000

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Peadar Maccanna

  	
   

  	
  Insurance Letter of Credit Product Manager

  	
   

  	
  00 353 (0) 1 622 4567

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