FOURTH AMENDED AND RESTATED LETTER OF CREDIT REIMBURSEMENT AGREEMENT

Exhibit 10.12

 

 

FOURTH AMENDED AND RESTATED

 

LETTER OF CREDIT REIMBURSEMENT AGREEMENT

 

dated as of June 4, 2004

 

among

 

MAX RE LTD.

 

as the Borrower,

 

VARIOUS FINANCIAL INSTITUTIONS,

 

as the Lenders,

 

ING BANK N.V., LONDON BRANCH

 

and

 

CITIBANK, NA

 

as Co-Agents,

 

and

 

BANK OF AMERICA, NATIONAL ASSOCIATION,

 

as Fronting Bank and as Administrative Agent,

 

and LC Administrator for the Lenders

 

 

i

 

ii

 

iii

 

iv

 

 

v

FOURTH AMENDED AND RESTATED

LETTER OF CREDIT REIMBURSEMENT AGREEMENT

 

THIS FOURTH AMENDED AND RESTATED LETTER OF CREDIT REIMBURSEMENT AGREEMENT, dated as of June 4, 2004, is entered into by and among Max Re Ltd., a Bermuda company (the “Borrower”), various financial institutions which are parties hereto (the “Lenders”), Bank of America, National Association, as fronting bank (in such capacity, the “Fronting Bank”), Bank of America, National Association, as letter of credit administrator (in such capacity, the “LC Administrator”) and Bank of America, National Association, as administrative agent for the Lenders (in such capacity, the “Administrative Agent”).

 

W I T N E S S E T H:

 

WHEREAS, the Borrower, Bank of America, National Association, as LC Administrator and Administrative Agent, and the Lenders entered into that certain Third Amended and Restated Letter of Credit Reimbursement Agreement dated as of June 5, 2003 (as amended or modified at and in effect immediately prior to the Amendment Effective Date, the “Existing Credit Agreement”) whereby Bank of America, National Association and the Lenders severally issued letters of credit and/or Bank of America, National Association issued (and the Lenders participated in) letters of credit, in each case to counterparties to support the Borrower’s obligations under Reinsurance Agreements Primary Policies;

 

WHEREAS, the Borrower has requested the Lenders to amend and restate the Existing Credit Agreement on the terms and conditions set forth in this Agreement, to set forth, among other things, the terms and conditions under which the Lenders hereafter will make credit extensions to the Borrower; it being the intention of the Borrower, the Lenders, the Administrative Agent and the LC Administrator that this Agreement and the Credit Documents executed in connection herewith shall not effect the novation of the obligations of the Borrower under the Existing Credit Agreement but be merely a restatement and, where applicable, an amendment of and substitution for the terms governing such obligations hereafter; and

 

WHEREAS, the Credit Extensions listed on Schedule 2.7 pursuant to the Existing Credit Agreement shall deem to be issued and outstanding hereunder for all purposes hereof and of the Credit Documents after giving effect to the Amendment Effective Date;

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows:

 

ARTICLE I.

 

DEFINITIONS

 

SECTION 1.1 Definitions . When used herein the following terms shall have the following meanings:

 

ABS means any fixed-income instrument which is rated AAA/Aaa by S&P or Moody’s or the equivalent rating from another nationally recognized rating agency that entitles the holder of, or beneficial owner under, the instrument to the whole or any part of the rights or entitlements of a holder of a receivable or other asset and any other rights or entitlements in respect of a pool of receivables or other assets or any money payable by obligors under those receivables or other assets (whether or not the money is payable to the holder of, or beneficial owner under, the instrument on the same terms and conditions as under the receivables or other assets) in relation to receivables or other assets; provided however , such receivables or assets shall be limited to automobile loans, credit card receivables and home equity loans and such other ABS assets as may be acceptable to the Administrative Agent.

 

Administrative Agent means (a) BofA, in its capacity as administrative agent for the Lenders, and (b) each other Person as shall have subsequently been appointed as the successor Administrative Agent pursuant to Section 9.9 .

 

Adjusted Fair Market Value means, with respect to any Eligible Investments, an amount equal to the product of the Fair Market Value of such Eligible Investments and the applicable percentage with respect to such Eligible Investment as set forth on Schedule 1.2 .

 

Affiliate of any Person means any other Person which, directly or indirectly, controls or is controlled by or is under common control with such Person (excluding any trustee under, or any committee with responsibility for administering, any Plan). A Person shall be deemed to be:

 

(a) “controlled by” any other Person if such other Person possesses, directly or indirectly, power:

 

(i) to vote 20% or more of the securities having at the time of any determination hereunder voting power for the election of directors of such Person; or

 

(ii) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise; or

 

(b) “controlled by” or “under common control with” such other Person if such other Person is the executor, administrator, or other personal representative of such Person.

 

Agent-Related Persons means the Fronting Bank, the Administrative Agent, the LC Administrator (and any successor administrative agent or letter of credit administrator arising under Section 9.9 ), together with its Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Person and Affiliates.

 

Agent’s Payment Office means the address for payments set forth on Schedule 10.2 in relation to the Administrative Agent, or such other address as the Administrative Agent may from time to time specify.

 

Agreement means this Fourth Amended and Restated Letter of Credit Reimbursement Agreement.

 

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Amendment Effective Date means the date on which the conditions precedent for the effectiveness of this Agreement specified in Section 8.1 shall be met.

 

Annual Statement means, as to any Person, the annual financial statement of such Person as required to be filed with the Minister (or similar Governmental Authority) of such Person’s domicile, together with all exhibits or schedules filed therewith, prepared in conformity with SAP.

 

Assignee is defined in Section 10.8(a) .

 

Assignment and Acceptance is defined in Section 10.8(a) .

 

Attorney Costs means and includes all fees and disbursements of any law firm or other external counsel, the allocated cost of internal legal services and all disbursements of internal counsel.

 

Authorized Officers means those officers of the Borrower whose signatures and incumbency shall have been certified to the Administrative Agent pursuant to Section 8.1(c) .

 

Base Rate means, for any day, a fluctuating rate per annum equal to the higher of (a) Federal Funds Rate plus  ¹ / 2 of 1%; and (b) the rate of interest in effect for such day as publicly announced from time to time by BofA as its prime commercial lending rate for Dollar loans made in the United States. The “prime rate” is a rate set by BofA based upon various factors including BofA’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in the “prime rate” announced by BofA shall take effect at the opening of business on the day specified in the public announcement of such change.

 

Beneficiary means each Person for whose benefit a Letter of Credit has been issued hereunder.

 

BofA means Bank of America, National Association, a national banking association.

 

Borrower is defined in the Preamble .

 

Borrowing Base Certificate means a certificate substantially in the form of Exhibit B with such changes therein as the Administrative Agent may request from time to time.

 

Business Day means any day other than a Saturday, Sunday or other day on which commercial banks in New York City, Chicago, or Hamilton, Bermuda are authorized or required by law to close.

 

Capital Adequacy Regulation means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any Person controlling a bank.

 

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Capital Stock means, as to any Person, any and all shares, interests, partnership interest, participations, rights in or other equivalents (however designated) of such Person’s equity interest (however designated).

 

Capitalized Lease means, as to any Person, any lease which is or should be capitalized on the balance sheet in accordance with GAAP, together with any other lease which is in substance a financing lease, including, without limitation, any lease under which (a) such Person has or will have an option to purchase the property subject thereto at a nominal amount or an amount less than a reasonable estimate of the fair market value of such property as of the date the lease is entered into or (b) the term of the lease approximates or exceeds the expected useful life of the property leased thereunder.

 

Cash shall mean Dollars held by the Borrower in the Custody Account.

 

Cash Equivalents means, at any time:

 

(a) Government Debt, maturing not more than one year after such time;

 

(b) commercial paper, maturing not more than one year from the date of issue, which is issued by

 

(i) a corporation (except an Affiliate of the Borrower) rated at least A-1 by S&P or P-1 by Moody’s or the equivalent rating from another nationally recognized agency, or

 

(ii) any Lender (or its holding company);

 

(c) any certificate of deposit or bankers’ acceptance or eurodollar time deposit, maturing not more than one year after the date of issue, which is issued by either

 

(i) a financial institution which is rated at least BBB- by S&P or Baa3 by Moody’s or 2 or above by the National Association of Insurance Commissioners, or

 

(ii) any Lender; or

 

(d) any repurchase agreement with a term of one year or less which

 

(i) is entered into with

 

(A) any Lender, or

 

(B) any other commercial banking institution of the stature referred to in clause (c)(i) , and

 

(ii) is secured by a fully perfected Lien in any obligation of the type described in any of clauses (a) through (c) that has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such Lender (or other commercial banking institution) thereunder;

 

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(e) investments in money market funds that invest solely in Cash Equivalents described in clauses (a) through (d) ; and

 

(f) investments in short-term asset management accounts offered by any Lender for the purpose of investing in loans to any corporation (other than an Affiliate of the Borrower) organized under the laws of any state of the United States or of the District of Columbia and rated at least A-1 by S&P or P-1 by Moody’s.

 

Change in Control shall be deemed to have occurred if (a) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of Parent or the Borrower occurs; (b) any “person” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is or becomes, directly or indirectly, the “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of securities of the Parent that represent 51% or more of the combined voting power of the Parent’s then outstanding securities other than Moore Holdings and Capital Z Partners, (c) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Borrower (together with any new directors whose election by the Board of Directors or whose nomination by the stockholders of Parent was approved by a vote of the directors of the Parent then still in office who are either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Parent’s Board of Directors then in office; or (d) the Parent ceases to own, directly or indirectly, 100% of the Capital Stock of and beneficial interest in the Borrower entitled to vote upon general matters submitted to shareholders including election of the board of directors.

 

Code means the Internal Revenue Code of 1986, as amended and any successor statute of similar import, together with the regulations thereunder, as amended, reformed or otherwise modified and in effect from time to time. References to sections of the Code shall be construed to also refer to successor sections.

 

Collateral means all property and assets that are from time to time subject to the Security Agreement.

 

Commitment means the Tranche A Commitments and the Tranche B Commitments.

 

Commitment Termination Date means the earliest to occur of (a) June 3, 2005 as such date may be extended pursuant to Section 2.17 or (b) the date on which any Commitment Termination Event occurs.

 

Commitment Termination Event means (a) the occurrence of a Default described in Section 7.1(e) or (b) the occurrence and continuance of any other Event of Default and either (i) the Obligations are declared to be due and payable pursuant to Section 7.2 , or (ii) in the absence of such declaration, the Administrative Agent, acting at the direction of the Required Lenders, gives notice to the Borrower that the Commitments have been terminated.

 

Compliance Certificate means a certificate substantially in the form of Exhibit A but with such changes as the Administrative Agent may from time to time request for purposes of monitoring the Borrower’s compliance herewith.

 

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Concentration Limits means the limitations on issuers and other investment parameters set forth on Schedule 1.1 .

 

Contingent Liability means any agreement, undertaking or arrangement by which any Person (outside the ordinary course of business) guarantees, endorses, acts as surety for or otherwise becomes or is contingently liable for (by direct or indirect agreement, contingent or otherwise, to provide funds for payment by, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the Debt, obligation or other liability of any other Person (other than by endorsements of instruments in the course of collection), or for the payment of dividends or other distributions upon the shares of any other Person or undertakes or agrees (contingently or otherwise) to purchase, repurchase, or otherwise acquire or become responsible for any Debt, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain solvency, assets, level of income, or other financial condition of any other Person, or to make payment or transfer property to any other Person other than for fair value received; provided , however , that obligations of the Borrower and its Subsidiaries under Reinsurance Agreements and Primary Policies which are entered into in the ordinary course of business shall not be deemed to be Contingent Liabilities for the purposes of this Agreement. The amount of any Person’s obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount (or maximum permitted principal amount, if larger) of the Debt, obligation or other liability guaranteed or supported thereby.

 

Continuing Letters of Credit is defined in Section 2.7 .

 

Contractual Obligation means, relative to any Person, any obligation, commitment or undertaking under any agreement or other instrument to which such Person is a party or by which it or any of its property is bound or subject.

 

Corporate/Municipal Securities means publicly traded securities (other than preferred stock) issued by a corporation organized in the United States or by any state or municipality located in the United States.

 

Credit Documents means this Agreement, each LC Application, each LC Amendment Application, the Security Agreement and all other agreements, instruments, certificates, documents, schedules or other written indicia delivered by the Borrower in connection with any of the foregoing.

 

Credit Extension means the issuance of any Letter of Credit or the amendment or extension of the stated expiry date of any existing Letter of Credit.

 

Custody Account means account no. MRLF0010302 at Mellon Bank N.A. as to which Mellon Bank N.A. and the Administrative Agent have entered into that certain Control Agreement dated as of February 25, 2000, as amended by Amendment to Account Control Agreement as of July 30, 2001.

 

Debt means, with respect to any Person, at any date, without duplication, (a) all obligations of such Person for borrowed money or in respect of loans or advances; (b) all

 

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obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) all obligations in respect of letters of credit which have been drawn but not reimbursed by the Person for whose account such letter of credit was issued, and bankers’ acceptances issued for the account of such Person; (d) all obligations in respect of Capitalized Leases of such Person; (e) all net Hedging Obligations of such Person; (f) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services; (g) Debt of such Person secured by a Lien on property owned or being purchased by such Person (including Debt arising under conditional sales or other title retention agreements) whether or not such Debt is limited in recourse; (h) any Debt of another Person secured by a Lien on any assets of such first Person, whether or not such Debt is assumed by such first Person (it being understood that if such Person has not assumed or otherwise become personally liable for any such Debt, the amount of the Debt of such person in connection therewith shall be limited to the lesser of the face amount of such Debt and the fair market value of all property of such Person securing such Debt); (i) any Debt of a partnership in which such Person is a general partner unless such Debt is nonrecourse to such Person; and (j) all Contingent Liabilities of such Person whether or not in connection with the foregoing; provided that, notwithstanding anything to contrary contained herein, Debt shall not include (x) contingent liabilities arising out of endorsements of checks and other negotiable instruments for deposit or collection in the ordinary course of business or, (y) unsecured current liabilities incurred in the ordinary course of business and paid within 90 days after the due date (unless contested diligently in good faith by appropriate proceedings and, if requested by the Administrative Agent, reserved against in conformity with GAAP) other than liabilities that are for money borrowed or are evidenced by bonds, debentures, notes or other similar instruments (except as described in clause (x) above) or (z) any obligations of such Person under any Reinsurance Agreement or Primary Policy.

 

Default means any condition or event, which, after notice or lapse of time or both, would constitute an Event of Default.

 

Dollar(s) and the sign “ $ ” means lawful money of the United States of America.

 

Drawing Request is defined in Section 2.3(a) .

 

Drawing Request Date is defined in Section 2.3(a) .

 

Eligible Assignee means a Person who is(a) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $250,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the “OECD”), or a political subdivision of any such country, and having a combined capital and surplus of at least $250,000,000, provided that such bank is acting through a branch or agency located in the United States; (c) a Person that is primarily engaged in the business of commercial banking and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person of which a Lender is a Subsidiary, or (iii) a Person of which a Lender is a Subsidiary; or (d) mutual funds, pension funds and other institutional investors (except an Affiliate of the Borrower) regularly engaged in the making of commercial loans.

 

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Eligible Investments means Cash, Cash Equivalents, MBS Investments, ABSs, Corporate/Municipal Securities, Government Securities and G7 Securities which (a) have the required rating as set forth on Schedule 1.2 , (b) are capable of being marked to market on a daily basis and (c) are held in the Custody Account.

 

ERISA means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations promulgated thereunder and under the Code, in each case as in effect from time to time. References to sections of ERISA also refer to successor sections.

 

Event of Default means any of the events described in Section 7.1 .

 

Executive Officer means, as to any Person, the president, the chief financial officer, the chief executive officer or a senior vice president who performs similar functions.

 

Fair Market Value shall mean (a) with respect to any publicly-traded security (other than those set forth in clause (b)) the closing price for such security on the largest exchange on which such security is traded (or if not traded on an exchange, then the average of the closing bid and ask prices quoted over-the-counter) on the date of the determination (as such prices are reported in The Wall Street Journal (Midwest Edition) or if not so reported, in any nationally recognized financial journal or newspaper), (b) with respect to Cash and Cash Equivalents, the amounts thereof, (c) with respect to any Private Fund Investment, on any date of calculation, the amount that would be received with respect thereto if the entire amount of the applicable capital or other similar account relating thereto were withdrawn on such date (regardless of whether a contractual right exists to make any withdrawal on such date) and (d) with respect to any Investment (other than those set forth in clauses (a) , (b) and (c) ), the price for such Investment on the date of calculation obtained from a generally recognized source approved by the Administrative Agent or the most recent bid quotation from such approved source (or, if no generally recognized source exists as to a particular Investment, any other source specified by the Borrower to which the Administrative Agent does not reasonably object).

 

Federal Funds Rate means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, “H.15(519)”) on the preceding Business Day opposite the caption “Federal Funds (Effective)”; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Administrative Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Administrative Agent.

 

Fee Letter is defined in Section 2.14 .

 

Final Maturity Date means the first anniversary of the Commitment Termination Date set forth in clause (a) of the definition thereof as extended from time to time pursuant to Section 2.17 .

 

Fiscal Quarter means any quarter of a Fiscal Year.

 

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Fiscal Year means any period of twelve consecutive calendar months ending on the last day of December.

 

Fleet Agreement is defined in Section 8.1(h) .

 

FRB means the Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions.

 

Fronting Bank means BofA in its capacity as an issuer of Letters of Credit in which the Lenders have a Risk Participation.

 

G7 Government Securities means any evidence of Debt, maturing not more than five years after such time, issued or guaranteed by any country which is a member of the G7 other than the United States.

 

GAAP means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination.

 

Governmental Authority means any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

 

Government Debt means evidence of Debt issued or guaranteed by the United States Government or any agency thereof.

 

Hedging Obligations means, with respect to any Person, (a) the net liability of such Person under any futures contract or options contract (including property catastrophe futures and options), interest rate swap agreements and interest rate collar agreements and all other agreements or arrangements designed to protect such Person against catastrophic events, fluctuations in interest rates or currency exchange rates and (b) Total Return Equity Swaps.

 

Indemnified Liabilities is defined in Section 10.5 .

 

Indemnified Person is defined in Section 10.5 .

 

Individual Commitment means, with respect to any Lender, the amount of such Lender’s Percentage times the Total Commitments, it being understood that each Lender’s Individual Commitment shall be the total amount such Lender is obligated to extend to the Borrower under its Tranche A Commitment and its Tranche B Commitment notwithstanding that the Tranche A Commitment and the Tranche B Commitment of such Lender may exceed its Individual Commitment. The initial amount of the Individual Commitment of each Lender is set forth on Schedule 2.1.

 

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Individual Outstanding Amount means, with respect to any Lender, the sum of (a) such Lender’s Tranche A LC Obligations plus (b) such Lender’s Tranche B LC Obligations.

 

Insurance Code means, with respect to the Borrower and its Subsidiaries, the insurance regulation of such Person’s domicile and any successor statute of similar import, together with the regulations thereunder, as amended or otherwise modified and in effect from time to time. References to sections of the Insurance Code shall be construed to also refer to successor sections.

 

Insurance Policies means policies purchased from insurance companies by the Borrower or any of its Subsidiaries for its own account to insure against its own liability and property loss (including, without limitation, casualty, liability and workers’ compensation insurance).

 

Investment means, as to any Person, any investment of any Person, whether by means of security purchase, capital contribution, loan, time deposit or otherwise, and shall include without limitation Cash and Cash Equivalents.

 

Investment Grade Assets means Cash Equivalents, Government Debt, MBS Investments, ABSs, Corporate/Municipal Securities and G7 Securities which are rated at least BBB- by S&P or Baa3 by Moody’s.

 

IRS means the U.S. Internal Revenue Service, and any Governmental Authority succeeding to any of its principal functions under the Code.

 

Issue means, with respect to any Letter of Credit, to issue, to amend or to extend the expiry of, or to renew or increase the amount of, such Letter of Credit; and the terms “Issued”, “Issuing” and “Issuance” have corresponding meanings.

 

Issuer means, with respect to any Letter of Credit, the Person or Persons who have issued such Letter of Credit.

 

January 7, 2002 Letter Agreement means the January 7, 2002 Letter Agreement whereby the Lenders consented to the pledge of collateral and limited guaranty by MDS of the referenced letter of credit facility.

 

LC Administrator means BofA’s Letter of Credit Operations located at 231 South LaSalle Street, Chicago, Illinois 60697, as letter of credit administrator for the Lenders, together with any replacement LC Administrator arising under Section 9.9 .

 

LC Advance means each Lender’s participation in any LC Borrowing in accordance with its Percentage.

 

LC Advance Date is defined in Section 2.3(c) .

 

LC Amendment Application means an application form for amendment of an outstanding letter of credit as shall at any time be in use by the LC Administrator.

 

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LC Application means an application form for issuances of a letter of credit as shall at any time be in use by the LC Administrator.

 

LC Borrowing means an extension of credit resulting from a drawing under any Letter of Credit which shall not have been reimbursed by the Borrower on the date when made.

 

LC Collateral Account is defined in Section 2.13 .

 

LC Obligations means, at any time, the sum, without duplication, of the Tranche A LC Obligations and the Tranche B LC Obligations.

 

LC Related Documents means the Letters of Credit, the LC Applications and any other document relating to any Letter of Credit, including any of the LC Administrator’s standard form documents for Letter of Credit issuances or amendments.

 

Lenders is defined in the Preamble .

 

Lending Office means, as to any Lender, the office or offices of such Lender specified as its “Lending Office” on Schedule 10.2 , or such other office or offices as such Lender may from time to time notify the Borrower and the Administrative Agent.

 

Letter of Credit means a standby letter of credit having terms and provisions which are permitted by this Agreement and which otherwise are reasonably satisfactory to the LC Administrator issued pursuant to Section 2.2 .

 

License(s) is defined in Section 4.10 .

 

Lien means, when used with respect to any Person, any interest in any real or personal property, asset or other right held, owned or being purchased or acquired by such Person for its own use, consumption or enjoyment which secures payment or performance of any obligation and shall include any mortgage, lien, pledge, encumbrance, charge, retained title of a conditional vendor or lessor, or other security agreement, mortgage, deed of trust, chattel mortgage, assignment, pledge, retention of title, financing or similar statement or notice, or other encumbrance arising as a matter of law, judicial process or otherwise.

 

Margin Stock means “margin stock” as such term is defined in Regulation U or X of the FRB.

 

Material Adverse Effect means, the occurrence of an event (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), which has or could reasonably be expected to have a materially adverse effect on:

 

(a) the assets, business, financial condition, operation or prospects of the Borrower; or

 

(b) the ability of the Borrower to perform any of its payment or other material obligations under any of the Credit Documents; or

 

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(c) the legality, validity, binding effect or enforceability against the Borrower of any Credit Document that by its terms purports to bind the Borrower.

 

MBS (Agency Pass-Throughs) means any instrument, issued by the Federal National Mortgage Association, the Government National Mortgage Association or the Federal Home Loan Mortgage Corporation, that entitles the holder of, or beneficial owner under, the instrument to the whole or any part of the rights or entitlements of a mortgagee and any other rights or entitlements in respect of a pool of mortgages or any money payable by mortgagors under those mortgages in relation to real estate mortgages, and the money payable to the holder of, or beneficiary owner under, the instrument is based on actual or scheduled payments on the underlying mortgages.

 

MBS (Agency CMOs) means collateralized mortgage obligations or real estate mortgage investment conduit pass through securities, in any case issued by the Federal National Mortgage Association, the Government National Mortgage Association or the Federal Home Loan Mortgage Corporation.

 

MBS Investments means MBS (Agency CMOs) and MBS (Non-Agency CMOs) which constitute TACs, PACs and Sequentials (as such terms are defined by Bloomberg Inc.) and shall not include Support Tranches (as such term is defined by Bloomberg Inc.) and MBS (Agency Pass-Throughs). The weighted average duration of such MBS Investments shall be less than or equal to seven years. The maximum weighted average life of any single MBS Investment shall not exceed 12 years. To the extent MBS Investments included within Eligible Investments violate the restrictions set forth herein, the Fair Market Value of such MBS Investments shall be excluded from the Borrowing Base; provided, however, that only those MBS Investments having the lowest aggregate Fair Market Value whose exclusions will result in compliance shall be excluded from the Borrowing Base.

 

MBS (Non-Agency CMOs) means collateralized commercial mortgage obligations or commercial real estate mortgage investment conduit pass through securities, not issued by the Federal National Mortgage Association, the Government National Mortgage Association or the Federal Home Loan Mortgage Corporation.

 

MDS means Max Re Diversified Strategies Ltd.

 

MDS Shares means common shares of MDS so long as (a) MDS is an investment vehicle which is not required to be registered as an investment company under the Investment Company Act of 1940, (b) MDS permits equity withdrawals not less frequently than quarterly, (c) MDS has Moore Capital Management LLC as either its manager or investment advisor, (d) the Borrower possesses directly or indirectly, (x) power to vote the securities having at the time of any determination hereunder more than 51% of the voting power for the election of directors of MDS and (y) power to direct or cause the direction of the management and policies of MDS whether by contract or otherwise, and (e) not less than 85% of MDS’s investments are capable of being marked to market daily.

 

Minister means the Minister of Finance of Bermuda or similar Governmental Authority in the applicable jurisdiction.

 

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Moody’s means Moody’s Investors Service, Inc.

 

Net Worth means, for any Person, shareholders equity calculated in accordance with GAAP.

 

Obligations means all obligations and liabilities of the Borrower to the Administrative Agent, the LC Administrator, the Fronting Bank or any of the Lenders, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, primary or secondary, joint or several, recourse or nonrecourse or now or hereafter existing or due or to become due, whether for LC Advances, interest, fees, expenses, claims, indemnities or otherwise, under or in connection with this Agreement, or any other Credit Document.

 

Ordinary Course Litigation is defined in Section 4.2 .

 

Organization Documents means, for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of preferred shareholders of such corporation, any shareholder rights agreement, and all applicable resolutions of the board of directors (or any committee thereof) of such corporation.

 

Other Taxes means any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Credit Documents.

 

Parent means MaxRe Capital Ltd., a Bermuda company (f/k/a Maximus Capital Holdings, Ltd.).

 

Participating Bank means, from time to time, with respect to Letters of Credit Issued by the Issuers severally based on their respective Percentages, each Lender for whose Percentage the Fronting Bank has agreed to be liable.

 

Participants is defined in Section 10.8(d) .

 

PBGC means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions.

 

Percentage means as to any Lender at any time, the percentage equivalent (expressed as a decimal, rounded to the ninth decimal place) at such time of such Lender’s Commitment divided by the combined Commitments of all Lenders.

 

Permitted Guarantees means (a) guarantees by the Borrower or any of its Subsidiaries of the obligations of another Subsidiary under Reinsurance Agreements and Primary Policies issued by such Subsidiary, (b) the guarantee listed on Schedule 4.2 and (c) agreements by the Borrower in favor of a Subsidiary to maintain the capital of such Subsidiary at 150% of the required regulatory level.

 

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Person means any natural person, corporation, partnership, firm, trust, association, government, governmental agency or other entity, whether acting in an individual, fiduciary or other capacity.

 

Plan means any “employee pension benefit plan” or “employee welfare benefit plan” as such terms are defined in ERISA, and as to which the Borrower has or may have any liability, including any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA for any time within the preceding five years or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA.

 

Primary Policies means any insurance policies issued by the Borrower or any of its Subsidiaries.

 

Purchase Money Debt means and includes (a) Debt (other than the Obligations) for the payment of all or any part of the purchase price of any fixed assets, (b) any Debt (other than the Obligations) incurred at the time of or within ten (10) days prior to or after the acquisition of any fixed assets for the purpose of financing all or any part of the purchase price thereof, and (c) any renewals, extensions, or refinancings thereof, but not any increases in the principal amounts thereof outstanding at such time, but excluding, for purposes of this definition, any such Debt constituting a Capitalized Lease.

 

Purchase Money Lien means a Lien upon fixed assets which secures Purchase Money Debt, but only if such Lien shall at all times be confined solely to the fixed assets the purchase price of which was financed through the incurrence of the Purchase Money Debt secured by such Lien.

 

Reinsurance Agreements means any agreement, contract, treaty, certificate or other arrangement whereby the Borrower or any of its Subsidiaries agrees to assume from or reinsure another insurer or reinsurer all or part of the liability of such insurer or reinsurer under a policy or policies of insurance issued by such insurer or reinsurer.

 

Required Lenders means, at any time, Lenders then having at least 50% of the aggregate amount of the Commitments or, if the Commitments have been terminated, Lenders then holding at least 50% of the then aggregate outstanding Credit Extensions.

 

Requirement of Law for any Person means the Organization Documents of such Person, and any law, treaty, rule, ordinance or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

 

Risk Participation is defined in Section 2.5 .

 

SAP means the statutory accounting practices prescribed or permitted by the Minister (or other similar Governmental Authority) in the Borrower’s or such Subsidiary’s domicile for the preparation of Annual Statements and other financial reports by insurance corporations of the same type as the Borrower or such Subsidiary as the case may be.

 

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Security Agreement means the Security Agreement dated as of February 25, 2000 between the Borrower and the Administrative Agent, as such Security Agreement may be amended, modified or supplemented from time to time.

 

S&P means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.

 

Subsidiary means a corporation of which the indicated Person and/or its other Subsidiaries, individually or in the aggregate, own, directly or indirectly, such number of outstanding shares as have at the time of any determination hereunder more than 50% of the ordinary voting power. Unless otherwise specified, “Subsidiary” shall mean a Subsidiary of the Borrower.

 

Taxes means any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Administrative Agent, such taxes (including income taxes or franchise taxes) as are imposed on or measured by each Lender’s net income by the jurisdiction (or any political subdivision thereof) under the laws of which such Lender or the Administrative Agent, as the case may be, is organized or maintains a lending office.

 

Total Commitments means $300,000,000 as such amount may be increased pursuant to Section 2.18 or decreased pursuant to Section 2.12 .

 

Total Outstanding Amount means, on any date, the sum of (a) the Tranche A LC Obligations plus (b) the Tranche B LC Obligations as of such date.

 

Total Return Equity Swap shall mean any total return equity swap entered into by the Borrower in connection with the common shares of MDS.

 

Tranche A Borrowing Base means, on any date, an amount equal to the sum of the Adjusted Fair Market Value of all Eligible Investments.

 

Tranche A Commitment means, as to any Lender, the commitment of such Lender to issue Tranche A Letters of Credit for the account of the Company pursuant to Section 2.1 . The initial amount of the Tranche A Commitment of each Lender is set forth on Schedule 2.1 .

 

Tranche A LC Obligations means, at any time, the sum, without duplication, of (a) the aggregate undrawn stated amount of all outstanding Tranche A Letters of Credit plus (b) the aggregate unpaid amount of all LC Advances with respect to Tranche A Letters of Credit.

 

Tranche A Letter of Credit means a Letter of Credit issued pursuant to the Tranche A Commitment.

 

Tranche B Borrowing Base means, the sum of (a) 50% of the Fair Market Value of all MDS Shares held in the Custody Account plus (b) an amount equal to the difference between the Tranche A Borrowing Base and the Tranche A LC Obligations.

 

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Tranche B Commitment means, as to any Lender, the commitment of such Lender to issue Tranche B Letters of Credit for the account of the Company pursuant to Section 2.1 . The initial amount of the Tranche B Commitment of each Lender is set forth on Schedule 2.1 .

 

Tranche B LC Obligations means, at any time, the sum, without duplication, of (a) the aggregate undrawn stated amount of all outstanding Tranche B Letters of Credit plus (b) the aggregate unpaid amount of all LC Advances with respect to Tranche B Letters of Credit.

 

Tranche B Letter of Credit means any Letter of Credit issued under the Tranche B Commitment.

 

Unencumbered Asset Reserve Requirement is defined in Section 6.2 .

 

Unencumbered Assets means Investment Grade Assets of the Borrower and MDS Shares which are not subject to any Liens.

 

SECTION 1.2 Other Interpretive Provisions .

 

(a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.

 

(b) The words “hereof”, “herein”, “hereunder” and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.

 

(c) (i) The term “documents” includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced.

 

(ii) The term “including” is not limiting and means “including without limitation.”

 

(iii) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including.”

 

(d) Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Credit Document, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation.

 

(e) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.

 

(f) This Agreement and other Credit Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms.

 

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(g) This Agreement and the other Credit Documents are the result of negotiations among and have been reviewed by counsel to the Administrative Agent, the Borrower and the other parties, and are the products of all parties. Accordingly, they shall not be construed against the Lenders or the Administrative Agent merely because of the Administrative Agent’s or Lenders’ involvement in their preparation.

 

SECTION 1.3 Accounting Principles . Unless otherwise defined or the context otherwise requires, all financial and accounting terms used herein or in any of the Credit Documents or any certificate or other document made or delivered pursuant hereto shall be defined in accordance with GAAP or SAP, as the context may require. When used in this Agreement, the term “financial statements” shall include the notes and schedules thereto. In addition, when used herein, the terms “best knowledge of” or “to the best knowledge of” any Person shall mean matters within the actual knowledge of such Person (or an Executive Officer of such Person) or which should have been known by such Person after reasonable inquiry.

 

ARTICLE II.

 

AMOUNT AND TERMS OF COMMITMENT

 

SECTION 2.1 Letter of Credit Commitment .

 

(a) Upon and subject to the terms and conditions hereof, (i) the Fronting Bank hereby agrees to issue Letters of Credit at the request of and for the account of the Borrower from time to time before the Commitment Termination Date, (ii) each Issuer hereby agrees to issue Letters of Credit at the request of and for the account of the Borrower from time to time before the Commitment Termination Date in such Issuer’s Percentage of such aggregate stated amounts of Letters of Credit as the Borrower may from time to time request, (iii) each Lender hereby agrees to purchase Risk Participations in the obligations of the Fronting Bank under Letters of Credit Issued by the Fronting Bank, and (iv) with respect to Letters of Credit Issued by the Issuers severally based on their respective Percentages, the Fronting Bank shall be severally (and not jointly) liable for an amount equal to its Percentage plus each Participating Bank’s Percentage and each Participating Bank hereby agrees to purchase Risk Participations in the obligations of the Fronting Bank under any such Letter of Credit in an amount equal to such Participating Bank’s Percentage; provided that no Issuer shall be obligated to issue (and no Participating Bank shall be obligated to participate in) any Letter of Credit if as of the date of issuance of such Letter of Credit (A) in the case of a Tranche A Letter of Credit, the Tranche A LC Obligations outstanding shall exceed the lesser of (x) the combined Tranche A Commitments and (y) the Tranche A Borrowing Base, (B) with respect to any Tranche B Letter of Credit, the aggregate amount of Tranche B LC Obligations outstanding shall exceed the lesser of (x) the combined Tranche B Commitments and (y) the Tranche B Borrowing Base, (C) after giving effect to the issuance of such Letter of Credit, the Total Outstanding Amount would exceed the Total Commitments or (D) the conditions in Section 2.1(b) are not met.

 

(b) No Issuer shall be under any obligation to Issue any Letter of Credit and no Participating Bank shall have any obligation to participate in any Letter of Credit if:

 

(i) such issuance would be prohibited under Section 3.2 ;

 

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(ii) the Administrative Agent or LC Administrator has received written notice from the Fronting Bank or the Required Lenders, as the case may be, or the Borrower, on or prior to the Business Day prior to the requested date of Issuance of such Letter of Credit, that one or more of the applicable conditions contained in Section 8.2 is not then satisfied;

 

(iii) the expiry date of such Letter of Credit is less than five Business Days prior to the Final Maturity Date, unless all of the Lenders have approved such expiry date in writing;

 

(iv) in the case of Letters of Credit issued by the Lenders (other than a Participating Bank), such Letter of Credit is not substantially in the form of Exhibit E hereto, or is not otherwise in form and substance reasonably acceptable to the Administrative Agent, the LC Administrator and the Fronting Bank; provided that the Administrative Agent and the LC Administrator can and will, agree to reasonable changes to such form, not adverse to the interests of the Lenders, requested by applicable insurance regulators; or

 

(v) such Letter of Credit is denominated in a currency other than Dollars; or

 

(vi) after giving effect to issuance of such Letter of Credit, any Lender’s Individual Outstanding Amount would exceed such Lender’s Individual Commitment; or

 

(vii) a Default or Event of Default has occurred and is continuing.

 

(c) The Letters of Credit Issued by and the Risk Participations of each Lender and the reimbursement obligations with respect thereto shall be evidenced by one or more accounts or records maintained by such Lender in the ordinary course of business. The accounts or records maintained by the Administrative Agent shall be conclusive (absent manifest error) as to the amount of the LC Advances made to the Borrower and the Letters of Credit Issued for the account of the Borrower, and the amounts of principal, interest and fees owing hereunder. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to any LC Advance or any Letter of Credit.

 

SECTION 2.2 Issuance, Amendment and Renewal of Letters of Credit

 

(a) Each Letter of Credit shall be Issued upon the irrevocable written request of the Borrower received by the LC Administrator at least 5 Business Days (or such shorter time as the Administrative Agent, the LC Administrator and the Issuer may agree in a particular instance in their sole discretion) prior to the proposed date of issuance. The LC Administrator shall promptly advise the Administrative Agent of any such request. Each such request for issuance of a Letter of Credit shall be by facsimile, confirmed immediately in an original writing, in the form of an LC Application, and shall specify in form and detail satisfactory to the LC Administrator: (i) the proposed date of issuance of the Letter of Credit (which shall be a Business Day); (ii) the face amount of the Letter of Credit; (iii) the expiry date of the Letter of Credit; (iv) the name and address of the Beneficiary thereof; (v) the documents to be presented by the Beneficiary of the Letter of Credit in case of any drawing thereunder; (vi) the full text of any certificate to be

 

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presented by the Beneficiary in case of any drawing thereunder; (vii) whether such Letter of Credit is to be issued by the Fronting Bank or by the Issuers (it being agreed that in the event an Issuer advises the LC Administrator that such Issuer is unable (due to regulatory restrictions or other legal impediments) to Issue a Letter of Credit because of its relationship to the Beneficiary, such Letter of Credit will be issued by the Fronting Bank); (viii) whether such Letter of Credit is to be a Tranche A Letter of Credit or a Tranche B Letter of Credit; and (ix) such other matters as the LC Administrator may require. The LC Administrator is hereby authorized to execute and deliver each Letter of Credit to be Issued by the Issuers on behalf of the Issuers provided, that at the request of the Borrower, such Letter of Credit will be executed by each of the Issuers. In the event of a conflict between the provisions of this Agreement and the provisions of an LC Application, this Agreement shall govern. The LC Administrator shall use each Issuer’s Percentage as its “Commitment Share” under each Letter of Credit Issued by the Issuers provided that the Fronting Bank shall be severally (and not jointly) liable for an amount equal to its Percentage plus the Percentage of each Participating Bank. The LC Administrator shall not amend any Letter of Credit Issued by the Issuers to change the “Commitment Shares” or add or delete an Issuer liable thereunder unless such amendment is done in connection with an assignment pursuant to Section 10.8 or in connection with the addition of an Issuer or a Participating Bank pursuant to Section 2.18 .

 

(b) From time to time while a Letter of Credit is outstanding and prior to the Commitment Termination Date, the Issuer will, upon the written request of the Borrower received by the LC Administrator at least 5 Business Days (or such shorter time as the Administrative Agent, the LC Administrator and the Issuer may agree in a particular instance in their sole discretion) prior to the proposed date of amendment, amend any Letter of Credit Issued by them. The LC Administrator shall promptly advise the Administrative Agent of any such request. Each such request for amendment of a Letter of Credit shall be made by facsimile, confirmed immediately in an original writing, made in the form of an LC Amendment Application and shall specify in form and detail satisfactory to the LC Administrator: (i) the Letter of Credit to be amended; (ii) the proposed date of amendment of such Letter of Credit (which shall be a Business Day); (iii) the nature of the proposed amendment; and (iv) such other matters as the LC Administrator may require. No Issuer shall have any obligation to amend any Letter of Credit if: (A) such Issuer would have not been obligated at such time to Issue or participate in such Letter of Credit in its amended form under the terms of this Agreement; or (B) the Beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit. The Issuers and the Fronting Bank agree, upon the request of the Borrower and as long as no Event of Default or Default shall have occurred and be continuing, to amend any Letter of Credit to extend the expiry date thereof to a date not later than five Business Days prior to the Final Maturity Date. The LC Administrator is hereby authorized to execute and deliver each amendment to a Letter of Credit Issued by the Issuers on behalf of the Issuers provided that, upon request of the Borrower, such amendment will be executed by each Issuers.

 

(c) The Administrative Agent shall promptly notify each Lender of the receipt of a written request from the Borrower for the issuance of or an amendment to a Letter of Credit and, with respect to the issuance of or Risk Participation in a Letter of Credit, the amount of such Lender’s share of such Letter of Credit which shall equal its Percentage thereof. In addition, at least two Business Days prior to the issuance or amendment of any Letter of Credit, the Administrative Agent will confirm to the Lenders (by telephone or in writing) that the Administrative Agent has received a copy of the LC Application or LC Amendment Application from the Borrower.

 

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(d) With respect to a request to Issue a Letter of Credit, unless the Administrative Agent has received, on or before the Business Day immediately preceding the date on which such Letter of Credit will be Issued, (i) notice from the Fronting Bank or the Required Lenders, as the case may be, or the Borrower directing the Administrative Agent not to permit the issuance of such Letter of Credit because such issuance is not then permitted under Section 2.1(a) as a result of the limitations set forth therein or (ii) a notice described in Section 2.1(b)(ii) , then, subject to the terms and conditions hereof, the LC Administrator shall, on the requested date, cause a Letter of Credit to be Issued by the Fronting Bank or by the Issuers in accordance with their Percentages (provided that the Fronting Bank shall be severally (and not jointly) liable for an amount equal to its Percentage plus the Percentage of each Participating Bank), as the case may be, for the account of the Borrower in accordance with the LC Administrator’s usual and customary business practices.

 

(e) The LC Administrator may, at its election (or at the direction of the Administrative Agent, the Fronting Bank or the Required Lenders, as the case may be), deliver any notices of termination or other communications to any Beneficiary or transferee, and take any other action as necessary or appropriate, at any time and from time to time, in order to cause the expiry date of such Letter of Credit to be a date not later than five Business Days prior to the Final Maturity Date.

 

(f) This Agreement shall control in the event of any conflict with any LC Related Document (other than any Letter of Credit).

 

(g) The LC Administrator, concurrently or promptly following the delivery of a Letter of Credit, or amendment to or renewal of a Letter of Credit, to a Beneficiary, shall send to the Administrative Agent and the Lenders a true and complete copy of each such Letter of Credit or amendment to or renewal of a Letter of Credit. After giving effect to the Issuance of any Letter of Credit, there shall be no more than 25 Letters of Credit outstanding.

 

(h) The status of a Lender as a Participating Bank at any time shall be determined solely by the Fronting Bank and such Lender. In the event a Lender becomes a Participating Bank or ceases to be a Participating Bank, the LC Administrator is authorized to amend each Letter of Credit to reflect such change in status and fees owed by any Participating Bank pursuant to Section 2.14(c)(i) shall accrue only during such period as such Lender is a Participating Bank with respect to any such Letter of Credit.

 

SECTION 2.3 Drawings and Reimbursements .

 

(a) With respect to each Letter of Credit for which the LC Administrator receives a request for a drawing which is in form and substance reasonably satisfactory to the LC Administrator (a “Drawing Request”), if such Drawing Request is received prior to 10:00 a.m. (Chicago time) on any Business Day, such Business Day shall be the “Drawing Request Date” and if such Drawing Request is received after 10:00 a.m. (Chicago time) on any Business Day, the following Business Day shall be the “Drawing Request Date.” Upon receiving a Drawing

 

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Request, the LC Administrator shall promptly notify the Borrower of such Drawing Request (which notice may be oral if immediately confirmed in writing (including by facsimile)) and upon receipt of such notification, the Borrower shall promptly reimburse the Administrative Agent on behalf of the Issuer for the amount of such drawing by delivering to the LC Administrator in immediately available funds the amount of the Drawing Request. Nothing herein stated shall be deemed a waiver by the Lenders of the obligation of the Borrower to make such prompt reimbursement. To the extent that funds are received by the LC Administrator prior to 3:00 p.m. (Chicago time) on the first Business Day after the Drawing Request Date, the LC Administrator shall promptly, on behalf of the Issuer, make an equivalent amount available to the Beneficiary of the related Letter of Credit on such first Business Day after the Drawing Request Date and shall reimburse itself for such amount with the funds provided by the Borrower.

 

(b) With respect to any Drawing Request, if immediately available funds are not received by the LC Administrator from the Borrower prior to 3:00 p.m. (Chicago time) on the first Business Day after the Drawing Request Date in the amount of such Drawing Request, the LC Administrator shall promptly notify the Administrative Agent and the Administrative Agent shall notify each Lender on the first Business Day after the Drawing Request Date of such Drawing Request and such Lender’s share of such Drawing Request (which shall be an amount equal to (i) such Lender’s Percentage multiplied by the lesser of (ii)(A) the maximum amount available to be drawn under such Letter of Credit and (B) the amount of such drawing which was not reimbursed by the Borrower pursuant to Section 2.3(a) ) and the Borrower shall be deemed to have requested an LC Borrowing in an amount equal to the amount of such drawing which was not reimbursed by the Borrower pursuant to Section.3(a). Any notice given by the Administrative Agent to the Lenders pursuant to this Section 2.3(b) may be oral if immediately confirmed in writing (including by facsimile); provided that (i) the failure of the Administrative Agent to give any such notice in sufficient time to enable any Lender to effect such payment at the time required under Section 2.3(c) or (ii) the failure of the Administrative Agent to deliver an immediate confirmation of such notice shall not affect the conclusiveness or binding effect of such notice or relieve any Lender from its obligations under this Section 2.3 .

 

(c) Upon receiving a Drawing Request, each Lender shall make available to the Administrative Agent for the account of LC Administrator at the Administrative Agent’s Payment Office by 3:00 p.m. (Chicago time) in immediately available funds on the second Business Day after the Drawing Request Date (such date, an “LC Advance Date”) its share of such request; provided that in the case of a Letter of Credit issued by the Fronting Bank, if a Lender shall fail to make such funds so available, the Fronting Bank shall make such funds available and provided further that if a Participating Bank shall fail to make such funds so available, the Fronting Bank shall make such funds available. Upon delivering such funds to the Administrative Agent pursuant to this Section 2.3(c) , such Lender (or the Fronting Bank, if the Fronting Bank has made such funds available after the failure of such Lender to do so) shall be deemed to have made an LC Advance to the Borrower in such amount. To the extent that immediately available funds are received by the Administrative Agent from the Lenders prior to 3:00 p.m. (Chicago time) on any LC Advance Date, the Administrative Agent shall notify the LC Administrator and the LC Administrator shall promptly make such funds available to the Beneficiary of the related Letter of Credit on such date. To the extent that the LC Administrator has not delivered funds to any Beneficiary on behalf of a Lender pursuant to the first sentence of Section 2.3(d) and that immediately available funds are received by the Administrative Agent

 

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from such Lender: (i) after 3:00 p.m. on any LC Advance Date, the LC Administrator shall make such funds available to such Beneficiary on the next Business Day following such LC Advance Date; (ii) prior to 3:00 p.m. on any Business Day after the LC Advance Date, the LC Administrator shall make those funds available to such Beneficiary on such Business Day; and (iii) after 3:00 p.m. on any Business Day after the LC Advance Date, the LC Administrator shall make those funds available to such Beneficiary on the next Business Day following such Business Day.

 

(d) Unless the Administrative Agent or LC Administrator receives notice from a Lender prior to any LC Advance Date that such Lender will not make available as and when required hereunder to the Administrative Agent for the account of the Borrower the amount of such Lender’s LC Advance on such LC Advance Date, the Administrative Agent and the LC Administrator may assume that such Lender has made such amount available to the Administrative Agent in immediately available funds on the LC Advance Date and the LC Administrator may (but shall not be required), in reliance upon such assumption, make available to the Beneficiary of the related Letter of Credit on such date such Lender’s LC Advance. If and to the extent (i) any Lender shall not have made its full amount available to the Administrative Agent in immediately available funds and (ii) the LC Administrator in such circumstances has made available to the Beneficiary such amount, then such Lender shall, on the Business Day following such LC Advance Date, make such amount available to the Administrative Agent, together with interest thereon until the date made available (i) at the Federal Funds Rate for the period ending two Business Days after such LC Advance Date and (ii) at the Base Rate plus 2.00% thereafter; provided, however, that if a Lender has failed to make such an amount available with respect to a Letter of Credit issued by the Fronting Bank, the Fronting Bank shall make such amount available and provided further that if a Participating Bank has failed to make such an amount available with respect to a Letter of Credit, the Fronting Bank shall make such amount available. If a Participating Bank fails to make such amount available, it shall pay interest to the Fronting Bank. If the Fronting Bank shall fail to make such amount available, it shall pay such interest to the LC Administrator and if a Lender fails to make such amount available, it shall pay such interest to the Fronting Bank. A notice of the Administrative Agent submitted to a Lender with respect to amounts owing under Section 2.3(b) shall be conclusive, absent manifest error. If such amount is so made available, together with interest thereon, such payment to the Administrative Agent shall constitute such Lender’s LC Advance on the LC Advance Date for all purposes of this Agreement. If such amount, together with interest thereon, is not made available to the Administrative Agent on the Business Day following the LC Advance Date, the Administrative Agent will notify the Borrower of such failure to fund and, upon demand by the Administrative Agent, the Borrower shall pay such amount to the Administrative Agent for the LC Administrator’s account, together with interest thereon for each day elapsed since the date of such LC Borrowing, at a rate per annum equal the Base Rate plus 2.00%.

 

(e) The failure of any Lender to make any LC Advance on any LC Advance Date shall not relieve any other Lender of any obligation hereunder to make an LC Advance on such LC Advance Date, and neither the Administrative Agent, the LC Administrator nor any Lender shall be responsible for the failure of any other Lender to make any LC Advance on any LC Advance Date. Each Lender’s obligation in accordance with this Agreement to make LC Advances, as contemplated by this Section 2.3 , as a result of a drawing under a Letter of Credit, shall be

 

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absolute and unconditional and without recourse to the Administrative Agent, the Fronting Bank or the LC Administrator and shall not be affected by any circumstance, including (i) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Administrative Agent, the LC Administrator, the Fronting Bank, the Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of an Event of Default, an Default or a Material Adverse Effect; or (iii) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; provided the LC Administrator shall exercise the same care in examining documents and determining whether or not to honor a Drawing Request as it would exercise if the LC Administrator had Issued such Letter of Credit for its own account. Nothing contained in this Agreement, and no actions taken by the Lenders, the LC Administrator, the Fronting Bank or the Administrative Agent pursuant hereto or in connection with a Letter of Credit shall be deemed to constitute the Lenders, together or with the Administrative Agent, the Fronting Bank and the LC Administrator, a partnership, association, joint venture or other entity.

 

SECTION 2.4 Repayment of LC Advances . Upon (and only upon) receipt by the Administrative Agent of immediately available funds from the Borrower in repayment of any LC Advances, the Administrative Agent (i) shall deduct and retain from such repayment an amount not to exceed the aggregate unreimbursed payments, if any, which were made by the LC Administrator pursuant to the first sentence of Section 2.3(d) , and then (ii) shall pay to each Lender, in the same funds as those received by the Administrative Agent, such Lender’s Percentage of any funds remaining after giving effect to clause (i) above; provided, that if the Fronting Bank has advanced funds on behalf of a Lender, the Fronting Bank shall be repaid out of such funds in full before any payment shall be made to such Lender. The Borrower shall repay any LC Advances on the date such LC Advances were made.

 

SECTION 2.5 Role of the Lenders . Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, neither the LC Administrator nor any Issuer shall have any responsibility to obtain any document (other than any sight draft and certificate expressly required by such Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document; provided that the LC Administrator and the Issuers shall exercise that standard of care customarily exercised by them in the review and processing of drawings under letters of credit issued by them.

 

(a) No Agent-Related Person nor any of their respective correspondents, participants or assignees shall be liable to any Lender for: (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders (including the Required Lenders, as applicable); (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any LC Related Document.

 

(b) The Borrower hereby assumes all risks of the acts or omissions of any Beneficiary or transferee with respect to its use of any Letter of Credit; provided that this assumption is not intended to, and shall not, preclude the Borrower’s pursuing such rights and remedies as it may have against the Beneficiary or transferee at law or under any other agreement. Neither any Agent-Related Person, any Issuer nor any of their respective correspondents, participants or

 

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assignees shall be liable or responsible for any of the matters described in clauses (i) through (vii) of Section 2.6 ; provided that, anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against the Administrative Agent, the LC Administrator or any Lender, and the Administrative Agent, the LC Administrator or any Lender may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower, in a final judgment of a court of competent jurisdiction, proves were caused primarily by the Administrative Agent’s or LC Administrator’s or such Lender’s willful misconduct or gross negligence or the LC Administrator’s or such Lender’s willful failure to pay under any Letter of Credit after the presentation to it by the Beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of such Letter of Credit. In furtherance and not in limitation of the foregoing: (i) the LC Administrator may accept documents that appear on their face to be in order, without responsibility for further investigation; and (ii) neither the LC Administrator nor any Issuer shall be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.

 

(c) Concurrently with the issuance by the Fronting Bank of any Letter of Credit and any amendment thereto, the Fronting Bank shall be deemed to have sold and transferred to each other Lender, and each other Lender shall be deemed irrevocably and unconditionally to have purchased and received from the Fronting Bank, without recourse or warranty, an undivided interest and participation (a “Risk Participation”), to the extent of such Lender’s Percentage, in such Letter of Credit and the Borrower’s reimbursement obligations with respect thereto.

 

SECTION 2.6 Obligations Absolute . The obligations of the Borrower under this Agreement and any LC Related Document to reimburse the Administrative Agent, the LC Administrator, the Fronting Bank and the Lenders for a drawing under a Letter of Credit and to repay any LC Borrowing shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement and each such other L/C-Related Document under all circumstances, including the following:

 

(i) any lack of validity or enforceability of this Agreement or any LC Related Document;

 

(ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations of the Borrower in respect of any Letter of Credit or any other amendment or waiver of or any consent to departure from all or any of the LC Related Documents;

 

(iii) the existence of any claim, set-off, defense or other right that the Borrower may have at any time against any Beneficiary or any transferee of any Letter of Credit (or any Person for whom any such Beneficiary or any such transferee may be acting), the Administrative Agent, the LC Administrator, the Fronting Bank, any Lender or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by the LC Related Documents or any unrelated transaction;

 

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(iv) any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit;

 

(v) any payment by an Issuer under any Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the Issuers under any Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any Beneficiary or any transferee of any Letter of Credit, including any arising in connection with any Insolvency Proceeding;

 

(vi) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any guarantee, for all or any of the obligations of the Borrower in respect of any Letter of Credit; or

 

(vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or a guarantor.

 

SECTION 2.7 Continuing Letters of Credit . On and after the Amendment Effective Date, the Letters of Credit listed on Schedule 2.7 (the “ Continuing Letters of Credit ”) shall be deemed to be Letters of Credit issued under this Agreement for all purposes, including for purposes of the fees to be collected pursuant to Section 2.14 and reimbursement of costs and expenses to the extent provided herein. On the Amendment Effective Date, the Risk Participation of each Lender in the Continuing Letters of Credit which, as shown on Schedule 2.7 , were issued by the Fronting Bank on behalf of the Lenders (the “Fronted Letters of Credit”) shall be equal to each Lender’s Percentage.

 

SECTION 2.8 Applicability of ISP98 . Unless otherwise agreed by the Issuer and the Borrower when a Letter of Credit is issued and subject to applicable laws, the rules of the “International Standby Practices 1998” (ISP98) or the “Uniform Customs and Practices for Documentary Credits (1993) (ICC Publication 500)” or such later revision as may be published by the International Chamber of Commerce shall apply to each Letter of Credit.

 

SECTION 2.9 Interest . LC Advances shall bear interest (after as well as before entry of judgment thereon to the extent permitted by law) on the outstanding principal amount thereof from the applicable LC Advance Date at a rate per annum equal to the Base Rate plus 2.00% and shall be immediately due and payable. To the extent that any LC Advances are made on an LC Advance Date pursuant to Section 2.3(c) and such LC Advances are repaid with immediately available funds by the Borrower on the LC Advance Date prior to 1:00 p.m. (Chicago time), no interest shall be payable on such LC Advances.

 

(a) Anything herein to the contrary notwithstanding, the obligations of the Borrower to any Lender hereunder shall be subject to the limitation that payments of interest shall not be

 

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required for any period for which interest is computed hereunder to the extent (but only to the extent) that contracting for or receiving such payment by such Lender would be contrary to the provisions of any law applicable to such Lender limiting the highest rate of interest that may be lawfully contracted for, charged or received by such Lender, and in such event the Borrower shall pay such Lender interest at the highest rate permitted by applicable law.

 

SECTION 2.10 Payments by the Borrower .

 

(a) All payments to be made by the Borrower shall be made without set-off, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments by the Borrower shall be made to the Administrative Agent for the account of the Lenders at the Administrative Agent’s Payment Office, and shall be made in dollars and in immediately available funds, no later than 1:00 p.m. (Chicago time) on the date specified herein. Except as otherwise expressly provided herein, the Administrative Agent will promptly distribute, in like funds as received, to each Lender its Percentage of any portion of such payment. Any payment received by the Administrative Agent later than 1:00 p.m. (Chicago time) shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue.

 

(b) Whenever any payment is due on a day other than a Business Day, such payment shall be made on the following Business Day (unless such following Business Day is the first Business Day of a calendar month, in which case such payment shall be made on the preceding Business Day), and such extension of time shall in such case be included in the computation of interest or fees, as the case may be.

 

(c) Unless the Administrative Agent receives notice from the Borrower prior to the date on which any payment is due to the Lenders that the Borrower will not make such payment in full as and when required, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date in immediately available funds and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower has not made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent on demand such amount distributed to such Lender, together with interest thereon until the date repaid (i) at the Federal Funds Rate for period commencing on the date such amount is distributed to such Lender and ending two days after demand by the Administrative Agent for such amount and (ii) at the Base Rate plus 2.00% thereafter.

 

SECTION 2.11 Warranty . The delivery of each Letter of Credit Application pursuant to Section 2.3 and each request for amendment or extension of an existing Letter of Credit shall automatically constitute a warranty by the Borrower to the Administrative Agent and each Lender to the effect that on the date of such requested Credit Extension that the conditions of Section 8.2 have been satisfied.

 

SECTION 2.12 Termination or Reduction of Commitments . The Borrower may, upon not less than five Business Days’ prior notice to the Administrative Agent, terminate the Commitments, or permanently reduce the Commitments by an aggregate minimum amount of $5,000,000 or any multiple of $500,000 in excess thereof; unless , after giving effect thereto and

 

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to any prepayments or cash collateralization of LC Obligations to be made on the effective date thereof, (i) the LC Obligations would exceed the amount of the Total Commitments then in effect, (ii) the Tranche A Obligations would exceed the Tranche A Borrowing Base, or (iii) the Tranche B Obligations would exceed the Tranche B Borrowing Base. Once reduced in accordance with this Section, the Commitments may not be increased. Any reduction of the Commitments shall be applied to each Lender according to its Percentage; provided that the Tranche A Commitments may not be reduced to an amount less than ten times the Tranche B Commitments.

 

SECTION 2.13 Mandatory Reduction/Cash Collateralization of Letters of Credit .

 

(a) If on any day (i) the Tranche A LC Obligations exceed the combined Tranche A Commitments on such day or the Tranche A LC Obligations exceed the Tranche A Borrowing Base on such day, the Borrower shall immediately