October 1, 1999
PXRE Reinsurance Ltd.
00 Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx
Re: Investment Advisory Services
Dear Xx. Xxxxx:
This letter will serve to confirm our agreement that Mariner Investment
Group, Inc. ("Mariner") will provide investment advisory, trade execution and
related services to PXRE Reinsurance Ltd. (the "Client") on the terms, and
subject to the conditions, set forth herein.
SCOPE OF RESPONSIBILITIES
Mariner will perform the services and have the authority set forth
herein with respect to the cash, securities and other investment assets of the
Client specified in writing by the Client and all proceeds thereof and additions
thereto (the "Account"). Mariner will supervise and direct the investment of the
Account in accordance with, and subject to, the investment guidelines provided
by the Client in writing (a copy of the initial guidelines being annexed as
Exhibit A), as the same may be amended, revised or replaced from time to time by
the Client (the "Investment Guidelines"); provided, however, that Mariner shall
not invest, or permit the investment of, the Account directly or indirectly in
any partnership or other "flow-through" entity without first having received a
written description of the policies and practices of such entity to prevent
investors in the entity from being treated as engaged in a trade or business in
the United States by virtue of the activities of the entity itself or
partnerships or other "flow-through" entities in which it invests, which
policies and practices have been accepted in writing by Client. Subject to the
foregoing, Xxxxxxx, as agent and attorney-in-fact with respect to the Account
may, when it deems appropriate, buy, sell, exchange, retain, reinvest or
otherwise trade in securities of the types specified in the Investment
Guidelines and place orders for the execution of such investment transactions
with or through such brokers, dealers or other persons as Mariner may select.
Mariner shall deliver, or shall cause to be delivered, to Client or to such
custodian as Client may direct in writing to Mariner, all assets in the Account,
as Client may direct from time to time, and Mariner shall not retain any assets
in
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the Account. Client may make any addition to or withdrawal from the Account
at any time and in any amount that Client determines, so long as Client promptly
notifies the Manager in writing of any addition to the Account and the amount of
the addition, and so long as Client makes no withdrawal (and such withdrawal
does not cause the Account or Mariner to be in violation of applicable law,
regulation or order of a competent authority, of Bermuda) from the Account
without first delivering to the Manager within a reasonable time prior to the
withdrawal, written notice of intended withdrawal and the amount of the
withdrawal. Mariner will comply with all legal requirements and rules of
securities exchanges applicable to its duties in connection with the execution
of transactions.
Mariner will provide or cause to be provided to the Client such
periodic reports concerning the status of the Account (including a valuation
thereof based upon such valuation method(s) agreed with Client) as the Client
may reasonably request. Mariner will provide to the Client on request, and not
less frequently than quarterly, a report of Account transactions effected by
Mariner since the date of the most recent such report. Mariner will preserve its
records relating to the Account for no less than six years and shall make such
records available for inspection at reasonable times during normal business
hours, upon the request of the Client, to the Client, its auditors or any
pertinent regulatory authority. Prior to discarding or destroying any such
records, Mariner will give the Client reasonable opportunity, at the Client's
expense, to review them and to take all or such portion of them as the Client
wishes to retain. All information and advice furnished by either party to the
other hereunder will be treated as confidential and will not be disclosed to
third parties except as provided in this paragraph or as required by law.
FEES
Client agrees to pay Mariner a fee, or defer such fee pursuant to an
arrangement agreed to in writing by both parties, payable or deferred quarterly
in advance, calculated, based on the valuation of the Account as at the end of
the previous quarter, using the fee schedule below for the assets under
management.
Asset Class Annual fee %
Traditional Equities .25%
Non-Mariner Hedge Funds 1.25%
Mariner Hedge Funds 0%
High Yield Public Debt .25%
Private Securities .50%
The methodology for valuing the Account for fee calculation purposes shall be as
agreed in writing by Mariner and Client. If Mariner shall serve for less than
the whole of any calendar quarter, its compensation shall be payable on a pro
rata basis for the period of the calendar quarter for which it has served as
manager hereunder, and Mariner shall promptly reimburse Client accordingly in
respect of any advance payment.
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EXPENSES
Client shall reimburse Mariner for any reasonable investment-related
out-of-pocket costs and expenses incurred in monitoring the Account of a type
previously agreed in writing by the Client upon presentation of appropriate
supporting documentation.
INDEMNITY
Client shall indemnify and hold harmless Mariner, its directors,
officers, employees and agents ("Indemnified Parties"), individually and
collectively, against any losses (including financial results poorer than
expected by Client), claims, damages, liabilities or expenses, including
reasonable attorneys' fees (collectively, "Losses") to which Mariner may become
subject in so far as such Losses arise out of or are based upon any activities
undertaken by, or inaction of, Mariner as investment advisor, unless such Losses
arise out of the gross negligence, willful misfeasance or bad faith of the
Indemnified Parties.
Mariner shall give Client written notice as soon as practicable after
it becomes aware of any fact, condition or event which may give rise to Losses
for which indemnification hereunder may be sought. If any lawsuit or enforcement
action is filed against any Indemnified Parties which may give rise to any
indemnification Losses, written notice thereof shall be given to Client as
promptly as practicable (and in any event, within 10 days after the service of
the citation or summons); provided, that the failure to give such notice shall
not relieve Client from its indemnification obligations hereunder, except and
only to the extent that such failure increases the indemnified Losses. Client
shall be entitled, if it so elects, to take control of the defense and
investigation of any such lawsuit or action and to employ and engage attorneys
of its choice (and at its expense) to handle and defend the same. No settlement
relating to any Losses shall be made unless Mariner gives its written consent to
such settlement which consent shall not be unreasonably delayed or withheld.
STATUS OF INVESTMENT MANAGER
Mariner will for all purposes herein be deemed to be an independent
contractor and will, except as otherwise expressly provided or authorized by or
under this letter agreement, have no authority to act for or represent the
Client in any way or otherwise be deemed an agent of the Client.
ACTIVITIES OF INVESTMENT MANAGER
Mariner and its affiliates, may engage, simultaneously with the
investment management activities on behalf of the Account, in other businesses
and make investments for their own accounts, and may render services similar to
those described in this agreement for other individuals, companies, trusts or
persons, and shall not by reason of such engaging in other businesses, making
such investments or rendering of services for others be deemed to be acting in
conflict with the interest of the Account.
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TERM
This Agreement is effective from November 1, 1999 and may be terminated
upon ninety-(90) days written notice by Mariner, or upon thirty (30) days
written notice by Client, to the other or upon shorter notice upon the mutual
agreement of the parties; provided, however, Client may terminate this Agreement
without such advance notice if Client pays a termination fee determined as if
the Manager had continued to provide services under this Agreement for a period
of thirty (30) days after the termination date. Termination of this Agreement
for any reason shall not relieve the Manager of liability or responsibility
under this Agreement with respect to the period prior to the effectiveness of
the termination. This letter agreement will be governed by, and construed in
accordance with, the laws of the State of New York, (other than any conflict of
law rule which might result in the application of the law of any other
jurisdiction).
NOTIFICATION
All notices and other communications hereunder shall be in writing and
shall be deemed to have been given when delivered by hand against written
receipt; when confirmation of a fax or email sent during business hours of the
recipient is received by the sender; or upon the fifth day following mailing
which shall be by certified or registered mail, postage paid:
1. If to Mariner at: Mariner Investment Group, Inc.
00 Xxxx 00xx Xxxxxx, 0xx Xxxxx, XX, XX 00000
Fax number: 000 000 0000
Email: xxxxxxxxxxxxx@xxxxxxx.xxx
Attention: Xxxxxxx X. Xxxxxxxxxxxx
2. If to Client at: PXRE Reinsurance Ltd.
Suite 000, 00 Xxxxxx Xxxxxx, Xxxxxxxx XX 00, Xxxxxxx
Attention: Xxxxxx X. Xxxxx
ASSIGNMENT
Without the written consent of the other party, this Agreement may not
be assigned by either of the parties hereto; any such attempted assignment being
void.
AUTHORITY TO PERFORM
Each of the parties to this Agreement hereby represents that it is
duly authorized and empowered to execute, deliver and perform this Agreement and
the transactions contemplated hereby, that such actions do not conflict with or
violate any provision of law, regulation, or contract, deed of trust, agreement
or other instrument to which it is a party or by which it is bound or to which
it is subject and that no consent of any person or government regulatory agency
to such person's performing its obligations under this
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Agreement is required which has not been obtained, and that this Agreement is a
valid and binding obligation upon that party, enforceable in accordance with its
terms.
MISCELLANEOUS
This Agreement is the entire agreement of the parties with respect to
the management of the assets in the Account and may not be amended except in a
writing signed by the parties.
Please confirm your agreement with the terms set forth herein by
signing the enclosed copy of this letter where indicated below and returning it
to Mariner.
Very truly yours,
MARINER INVESTMENT GROUP, INC.
By /s/ Xxxxxxx Xxxxxxxxxxxx
___________________________________
Title: Chairman
AGREED AND ACKNOWLEDGED,
IN XXXXXXXX, BERMUDA
PXRE Reinsurance Ltd.
By /s/ Xxxxxx X. Xxxxx
____________________________________
Title: President
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EXHIBIT A
Investment Policy
Scope: This policy would cover the investment portfolio of PXRE Reinsurance,
Ltd., PXRE Group Ltd. and PXRE (Barbados) Ltd.
Investment Limitations:
1. No more than 5% of opening admitted assets (or Bermuda equivalent) in any
single issuer.
a. except, where a fund or limited partnership consisting of a
diversified portfolio of stocks, bonds, equities or other instruments;
a maximum of up to 10% in such fund or limited partnership.
b. except, there shall be no limit on U.S. Treasury Securities or such
investments guaranteed by the U.S. government (i.e., FNMA, GNMA,
etc).
c. No more than 30% can be invested in securities of any country (other
than the United States) except where such investments are used to
match with liabilities denominated in the same currency.
2. No more than 80% of the portfolio shall be in equity or limited
partnership investments.
3. No more than 20% of the portfolio can be invested in below investment
grade bonds as defined as below Baa S&P or equivalent for other rating
agencies.
4. Exceptions can be made so long as the sum of all exceptions to the above
policy statements does not exceed 15% of opening assets.
5. No more than 25% of the investments should be in mortgage or asset backed
securities.
Other Limitations:
Short Term Investments -- All short term investments should be in instruments
which are A2/P2 or better.
