STANDBY LETTER OF CREDIT AGREEMENT
THIS STANDBY LETTER OF CREDIT AGREEMENT is made and entered into as of February 27, 2004 by and among:
XL CAPITAL LTD, a company incorporated under the laws of the Cayman Islands,
XL AMERICA, INC., a Delaware corporation,
XL INSURANCE (BERMUDA) LTD, a Bermuda limited liability company, and
XL RE LTD, a Bermuda limited liability company (each an “Applicant” and, collectively, the “Applicants”),
KEYBANK NATIONAL ASSOCIATION, a national banking association (the “Bank”).
A. The Applicants have requested that the Bank issue its irrevocable standby letter of credit (the “Credit”) substantially in the form of Exhibit A hereto in favor of the Beneficiary identified therein (as defined in the Credit, the “Beneficiary”).
B. Subject to the terms and conditions of this Agreement, the Bank has agreed to issue the Credit to the Beneficiary.
NOW, THEREORE, in consideration of the foregoing Recitals and of other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Applicants and the Bank hereby agree as follows:
1. Agreement of the Bank to Issue the Credit. The Bank agrees to issue the Credit to the Beneficiary at any time on or prior to June 28, 2004 upon the written request of an Applicant (in form specified by the Bank), so long as, on the date of issuance, and after giving effect to
such issuance, (i) no Event of Default (defined below) would then exist and (ii) the Applicants’ representations in Paragraph 8, below, would be true and correct in all material respect.
2. Agreement to Pay; Interest. The Applicants unconditionally, and jointly and severally, agree to pay to the Bank, on demand in immediately available funds (in United States Dollars), on each date on which a disbursement is made by the Bank pursuant to the Credit, an amount equal to such disbursement. If payment is not made on the date of disbursement, the Applicants shall pay to the Bank interest on such amount, also payable on demand, at a per annum rate equal to the Base Rate, plus two percent (2%) from the date of disbursement until paid in full, but excluding the date on which payment is made. Such interest shall be computed by obtaining a daily interest factor based upon a 360-day year and multiplying such factor by the actual number of days elapsed in any interest computation period. As used in this Agreement, (a) the term “Base Rate” shall mean, for any day, a rate per annum equal to the greater of (i) the Prime Rate in effect on such day and (ii) the Federal Funds Effective Rate in effect on such day plus one-half percent (0.50%); (b) the term “Prime Rate” shall mean, for any day, the rate of interest per annum then most recently publicly announced by the Bank as its “prime” rate (or equivalent rate otherwise named) in effect at its principal office in Cleveland, Ohio, which prime rate is not necessarily the lowest rate of interest charged by the Bank to commercial borrowers; and (c) the term “Federal Funds Effective Rate” shall mean, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding business day by the Federal Reserve Bank of Cleveland, or, if