EXHIBIT 10.12

 

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SECOND AMENDED AND RESTATED

 

LETTER OF CREDIT REIMBURSEMENT AGREEMENT

 

dated as of August 15, 2002

 

among

 

MAX RE LTD.

 

as the Borrower,

 

VARIOUS FINANCIAL INSTITUTIONS,

 

as the Lenders,

 

FLEET NATIONAL BANK

 

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

 

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TABLE OF CONTENTS

 

        

Page

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ARTICLE I.

 

DEFINITIONS

  

1

            SECTION 1.1

 

Definitions

  

1

            SECTION 1.2

 

Other Interpretive Provisions

  

16

            SECTION 1.3

 

Accounting Principles

  

17

ARTICLE II.

 

AMOUNT AND TERMS OF COMMITMENT

  

17

            SECTION 2.1

 

Letter of Credit Commitment

  

17

            SECTION 2.2

 

Issuance, Amendment and Renewal of Letters of Credit

  

18

            SECTION 2.3

 

Drawings and Reimbursements

  

20

            SECTION 2.4

 

Repayment of LC Advances

  

23

            SECTION 2.5

 

Role of the Lenders

  

23

            SECTION 2.6

 

Obligations Absolute

  

24

            SECTION 2.7

 

Existing Letters of Credit

  

25

            SECTION 2.8

 

Applicability of ISP98

  

25

            SECTION 2.9

 

Interest

  

25

            SECTION 2.10

 

Payments by the Borrower

  

25

            SECTION 2.11

 

Warranty

  

26

            SECTION 2.12

 

Termination or Reduction of Commitments

  

26

            SECTION 2.13

 

Mandatory Reduction/Cash Collateralization of Letters of Credit

  

26

            SECTION 2.14

 

Fees

  

27

            SECTION 2.15

 

Computation of Fees and Interest

  

28

            SECTION 2.16

 

Sharing of Payments, Etc.

  

29

            SECTION 2.17

 

Commitment Termination Date Extension

  

29

            SECTION 2.18

 

Optional Increase in LC Commitments

  

30

ARTICLE III.

 

TAXES, YIELD PROTECTION AND ILLEGALITY

  

31

            SECTION 3.1

 

Taxes

  

31

            SECTION 3.2

 

Illegality

  

32

            SECTION 3.3

 

Increased Costs and Reduction of Return

  

33

            SECTION 3.4

 

Certificates of Lenders

  

34

            SECTION 3.5

 

Substitution of Lenders

  

34

            SECTION 3.6

 

Survival

  

34

 

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ARTICLE IV.

 

REPRESENTATIONS AND WARRANTIES

  

34

            SECTION 4.1

 

Due Organization, Authorization, etc.

  

34

            SECTION 4.2

 

Litigation and Contingent Liabilities

  

35

            SECTION 4.3

 

Employee Benefit Plans

  

35

            SECTION 4.4

 

Regulated Entities

  

35

            SECTION 4.5

 

Regulations U and X

  

35

            SECTION 4.6

 

Proceeds

  

35

            SECTION 4.7

 

Business Locations

  

36

            SECTION 4.8

 

Accuracy of Information

  

36

            SECTION 4.9

 

Subsidiaries

  

36

            SECTION 4.10

 

Insurance Licenses

  

36

            SECTION 4.11

 

Taxes

  

36

            SECTION 4.12

 

Securities Laws

  

37

            SECTION 4.13

 

Compliance with Laws

  

37

            SECTION 4.14

 

Financial Condition

  

37

            SECTION 4.15

 

Insurance Act

  

37

            SECTION 4.16

 

First Priority Security Interest

  

37

ARTICLE V.

 

AFFIRMATIVE COVENANTS

  

37

            SECTION 5.1

 

Reports, Certificates and Other Information

  

38

            SECTION 5.2

 

Corporate Existence; Foreign Qualification

  

41

            SECTION 5.3

 

Books, Records and Inspections

  

41

            SECTION 5.4

 

Insurance

  

41

            SECTION 5.5

 

Taxes and Liabilities

  

41

            SECTION 5.6

 

Compliance with Laws

  

41

            SECTION 5.7

 

Maintenance of Permits

  

42

            SECTION 5.8

 

Conduct of Business

  

42

            SECTION 5.9

 

Use of Letters of Credit

  

42

            SECTION 5.10

 

Further Assurances

  

42

ARTICLE VI.

 

NEGATIVE COVENANTS

  

42

            SECTION 6.1

 

Net Worth

  

42

            SECTION 6.2

 

Unencumbered Reserve Requirement

  

42

 

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            SECTION 6.3

 

Debt

  

42

            SECTION 6.4

 

Mergers, Consolidations and Sales

  

43

            SECTION 6.5

 

Other Agreements

  

43

            SECTION 6.6

 

Transactions with Affiliates

  

43

            SECTION 6.7

 

Liens

  

43

            SECTION 6.8

 

Restrictions On Negative Pledge Agreements

  

44

            SECTION 6.9

 

Dividends, Etc.

  

44

            SECTION 6.10

 

Eligible Investments

  

44

ARTICLE VII.

 

EVENTS OF DEFAULT AND THEIR EFFECT

  

45

            SECTION 7.1

 

Events of Default

  

45

            SECTION 7.2

 

Effect of Event of Default

  

47

            SECTION 7.3

 

LC Collateral Account

  

47

ARTICLE VIII.

 

CONDITIONS

  

48

            SECTION 8.1

 

Conditions to Occurrence of the Amendment Effective Date

  

48

            SECTION 8.2

 

Conditions to All Credit Extensions

  

48

ARTICLE IX.

 

THE ADMINISTRATIVE AGENT

  

50

            SECTION 9.1

 

Appointment and Authorization

  

50

            SECTION 9.2

 

Delegation of Duties

  

50

            SECTION 9.3

 

Liability of Administrative Agent

  

50

            SECTION 9.4

 

Reliance by Administrative Agent

  

51

            SECTION 9.5

 

Notice of Default

  

51

            SECTION 9.6

 

Credit Decision

  

51

            SECTION 9.7

 

Indemnification

  

52

            SECTION 9.8

 

Administrative Agent in Individual Capacity

  

52

            SECTION 9.9

 

Successor Administrative Agent

  

52

            SECTION 9.10

 

Withholding Tax

  

53

            SECTION 9.11

 

Co-Agents

  

54

ARTICLE X.

 

MISCELLANEOUS

  

54

            SECTION 10.1

 

Amendments and Waivers

  

54

            SECTION 10.2

 

Notices

  

55

            SECTION 10.3

 

No Waiver; Cumulative Remedies

  

56

 

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            SECTION 10.4

 

Costs and Expenses

  

56

            SECTION 10.5

 

Indemnity

  

56

            SECTION 10.6

 

Payments Set Aside

  

57

            SECTION 10.7

 

Successors and Assigns

  

57

            SECTION 10.8

 

Assignments, Participations, etc.

  

57

            SECTION 10.9

 

Confidentiality

  

59

            SECTION 10.10

 

Set-off

  

59

            SECTION 10.11

 

Notification of Addresses, Lending Offices, Etc.

  

60

            SECTION 10.12

 

Counterparts; Facsimile

  

60

            SECTION 10.13

 

Severability

  

60

            SECTION 10.14

 

No Third Parties Benefitted

  

60

            SECTION 10.15

 

Governing Law and Jurisdiction

  

60

            SECTION 10.16

 

Waiver of Jury Trial

  

61

            SECTION 10.17

 

Currency Indemnity

  

61

            SECTION 10.18

 

Service of Process

  

62

            SECTION 10.19

 

Entire Agreement

  

62

 

 

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            SCHEDULE 1.1

  

Concentration Limits

    

            SCHEDULE 2.1

  

Commitments

    

            SCHEDULE 4.1

  

Jurisdictions

    

            SCHEDULE 4.2

  

Litigation

    

            SCHEDULE 4.7

  

Locations

    

            SCHEDULE 4.9

  

Subsidiaries

    

            SCHEDULE 4.10

  

Insurance Licenses

    

            SCHEDULE 6.7

  

Liens

    

            SCHEDULE 10.2

  

Addresses

    

            EXHIBIT A

  

Form of Compliance Certificate

    

            EXHIBIT B

  

Form of Borrowing Base Certificate

    

            EXHIBIT C

  

Form of Assignment and Acceptance

    

            EXHIBIT D

  

Form of Security Agreement

    

            EXHIBIT E

  

Form of Letter of Credit

    

            EXHIBIT F

  

Form of Commitment Increase Request

    

 

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SECOND AMENDED AND RESTATED

LETTER OF CREDIT REIMBURSEMENT AGREEMENT

 

THIS SECOND AMENDED AND RESTATED LETTER OF CREDIT REIMBURSEMENT AGREEMENT, dated
as of                 , 2002, 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 various financial institutions party
thereto (the “Original Lenders”) entered into that certain Amended and Restated
Letter of Credit Reimbursement Agreement dated as of April 3, 2001 (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 Original Lenders severally issued letters of credit and/or Bank of
America, National Association issued (and the Original Lenders participated in)
letters of credit, in each case to counterparties to support the Borrower’s
obligations under Reinsurance Agreements;

 

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 outstanding immediately prior to the Amendment
Effective Date 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:

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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 Amended and Restated Letter of Credit Reimbursement
Agreement.

 

2

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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(d).

 

Base Rate means, for any day, a fluctuating rate per annum equal to the higher
of (a) Federal Funds Rate plus ½ 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.

 

3

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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;

 

4

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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 Parent that represent 51% or
more of the combined voting power of 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 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 Parent’s Board of Directors then in office; or (d)
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) April 4, 2003 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.

 

5

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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.

 

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 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.

 

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.

 

6

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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 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.

 

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

 

Department is defined in Section 4.2.

 

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

 

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(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.

 

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.

 

Equity Proceeds means the proceeds of any issuance or sale of stock of the
Borrower net of attorneys’ fees, accountants’ fees and brokerage, consultation,
underwriting and other fees and expenses actually incurred in connection with
such issuance or sale and net of taxes paid or payable as a result thereof.

 

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

 

8

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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.

 

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

 

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.

 

9

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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.

 

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.

 

10

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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.

 

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 (and, with respect to the Existing Letters of Credit, each
Lender’s participation interest therein) 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.

 

11

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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

 

(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 held in the Custody Account 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 Inc. as either its manager or

 

12

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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.

 

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 4.4.

 

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 ING Bank N.V., London Branch and each other Lender as
the Fronting Bank may from time to time agree may become a Participating Bank.

 

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.

 

13

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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.

 

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 60% of the
aggregate amount of the Commitments or, if the Commitments have been terminated,
Lenders then holding at least 60% 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 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.

 

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.

 

14

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

 

Statutory Financial Statements is defined in Section 4.2(a).

 

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 $375,000,000 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 plus (b) an amount equal to the difference between the Tranche A
Borrowing Base and the Tranche A LC Obligations.

 

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.

 

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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 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.

 

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

 

(ii) 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.

 

(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

 

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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;

 

(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

 

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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 presented by the Beneficiary in case of any
drawing thereunder; (vii) whether such Letter of

 

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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 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

 

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Administrative Agent has received a copy of the LC Application or LC Amendment
Application from the Borrower.

 

(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, (A) 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 (B) 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 the 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.

 

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
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

 

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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 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.

 

 

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(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
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

 

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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 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 or LC Administrator, and the Administrative
Agent or LC Administrator 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 willful misconduct or gross negligence or the LC
Administrator’s willful failure to pay under any Letter of Credit

 

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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;

 

(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 the Issuers 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

 

24

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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 Existing Letters of Credit. On and after the Amendment Effective
Date, the Existing 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.

 

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 such later
revision as may be published by the International Chamber of Commerce shall
apply to each Letter of Credit; provided, that with respect to the Existing
Letters of Credit, such Letters of Credit shall be governed by the rules of the
International Chamber of Commerce set forth therein.

 

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 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

 

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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 to any prepayments or cash
collateralization of LC Obligations to be made on the effective date thereof,
the then-outstanding LC Obligations would exceed the amount of the Total
Commitments then in effect. 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
Commitment may not be reduced to an amount less than five times the Tranche B
Commitment.

 

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 deposit into the
Custody Account Eligible

 

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Investments or reduce the Tranche A LC Obligations, or a combination of the
foregoing, in an amount sufficient to eliminate such excess or (ii) the Tranche
B LC Obligations exceed the combined Tranche B Commitments on such day or the
Tranche B LC Obligations exceed the Tranche B Borrowing Base on such day, the
Borrower shall immediately deposit into the Custody Account MDS Shares or reduce
the Tranche B LC Obligations, or a combination of the foregoing, in an amount
sufficient to eliminate such excess or (iii) the Total Outstanding Amount
exceeds the Total Commitments on such day, the Borrower shall immediately
deposit into the Custody Account Eligible Investments and/or to the extent that
Tranche B Obligations exceed the Tranche B Borrowing Base, MDS Shares or reduce
the Tranche A LC Obligations or reduce the Tranche B LC Obligations, or a
combination of the foregoing, in an amount sufficient to eliminate such excess.

 

(b) On the Final Maturity Date or, if earlier, the date the Obligations are
accelerated pursuant to Section 7.2, and until the final expiration date of any
Letter of Credit and thereafter so long as any Obligations are payable
hereunder, the Borrower shall immediately cash collateralize such Letters of
Credit with Cash and Cash Equivalents in an amount equal to 102% of the
outstanding LC Obligations and such collateral shall be placed in a special
collateral account pursuant to arrangements satisfactory to the Administrative
Agent (the “LC Collateral Account”) at the Administrative Agent’s office in the
name of the Borrower but under the sole dominion and control of the
Administrative Agent, for the benefit of the LC Administrator and the Lenders
and the Borrower shall have no interest therein except as set forth in Section
7.3. The Borrower hereby pledges, assigns and grants to the Administrative
Agent, for the benefit of the LC Administrator and the Lenders, a security
interest in all of the Borrower’s right, title and interest in and to the LC
Collateral Account, all funds and Cash Equivalents which may from time to time
be on deposit in the LC Collateral Account to secure the prompt and complete
payment and performance of the Obligations. The Administrative Agent may invest
any funds on deposit from time to time in the LC Collateral Account in Cash
Equivalents having a maturity not exceeding 30 days. Funds earned on such Cash
Equivalents shall be deposited into the LC Collateral Account.

 

SECTION 2.14 Fees.

 

(a) Agency Fees. The Borrower shall pay fees to the Administrative Agent for the
Administrative Agent’s own account, as required by the letter agreement (“Fee
Letter”) between the Borrower and the Administrative Agent dated May 15, 2002
and as the Borrower and the Administrative Agent may agree from time to time.

 

(b) Non-Use Fees. The Borrower shall pay to the Administrative Agent for the
account of each Lender a non-use fee on the actual daily unused portion of such
Lender’s Commitment, computed on a quarterly basis in arrears on the last
Business Day of each calendar quarter based upon the daily utilization for that
quarter as calculated by the Administrative Agent, equal to (i) 0.15% per annum
on an amount equal to (x) the Total Commitments minus (y) the Tranche A LC
Obligations minus (z) the Tranche B Commitment and (ii) 0.30% per annum on an
amount equal to (x) the lesser of (A) the Tranche B Commitment and (B) (the
Total Commitments minus the Tranche A LC Obligations) minus (y) the Tranche B LC
Obligations. Such non-use fee shall accrue from the Amendment Effective Date to
the Commitment Termination Date and shall be due and payable quarterly in
arrears on the last Business Day of each March, June, September

 

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and December commencing on September 30, 2002 through the Commitment Termination
Date, with the final payment to be made on the Commitment Termination Date. The
non-use fees provided in this Section shall accrue at all times after the
above-mentioned commencement date, including at any time during which one or
more conditions in Article VIII are not met.

 

(c) Letter of Credit Fees.

 

(i) The Borrower shall pay to the Administrative Agent for the account of each
Lender a letter of credit fee for each Letter of Credit requested by the
Borrower in an amount per annum of the average maximum stated amount of such
Letter of Credit during such period (less any LC Advance with respect thereto)
equal to (x) 0.45% per annum with respect to Tranche A Letters of Credit and (y)
0.90% per annum with respect to Tranche B Letters of Credit; provided that a
portion of the letter of credit fee equal to 0.125% per annum otherwise payable
to each Participating Bank shall be payable to the Fronting Bank with respect to
Letters of Credit for which a fee is not paid to the Fronting Bank pursuant to
Section 2.14(c)(ii) Such letter of credit fees shall be computed on a quarterly
basis in arrears on the last Business Day of each calendar quarter, and shall be
due and payable quarterly in arrears on the last Business Day of each March,
June, September and December commencing on September 30, 2002 through the Final
Maturity Date with the final payment to be made on the Final Maturity Date.

 

(ii) In addition, with respect to each Letter of Credit issued by the Fronting
Bank, the Borrower shall pay to the Fronting Bank a fronting fee in an amount
per annum on the average maximum stated amount of such Letter of Credit during
such period (less any LC Advance with respect thereto) equal to 0.125% per
annum. Such fronting fees shall be computed on a quarterly basis in arrears on
the last Business Day of each calendar quarter and shall be due and payable
quarterly in arrears on the last Business Day of each March, June, September and
December commencing on September 30, 2002 through the Final Maturity Date with
the final payment to be made on the Final Maturity Date.

 

(iii) In addition, with respect to each Letter of Credit requested by the
Borrower or any amendment or extension thereof, the Borrower agrees to pay to
the LC Administrator such fees and expenses as the LC Administrator customarily
requires in connection with the issuance, amendment, transfer, negotiation,
processing and/or administration of letters of credit.

 

(d) Upfront Fees. On the Amendment Effective Date, the Borrower shall pay to
each Lender such upfront fees as may have been agreed to by the Borrower and
such Lender.

 

SECTION 2.15 Computation of Fees and Interest.

 

(a) All computations of fees shall be made on the basis of a 360-day year and
actual days elapsed. Interest on LC Advances shall be computed on the basis of a
365/366-day year and actual days elapsed. Interest and fees shall accrue during
each period during which interest or such fees are computed from the first day
thereof to the last day thereof.

 

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(b) Each determination of an interest rate by the Administrative Agent shall be
conclusive and binding on the Borrower and the Lenders in the absence of
manifest error.

 

(c) 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 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 2.16 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Lender shall obtain on account of the LC Obligations any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its Percentage, such Lender shall
immediately (a) notify the Administrative Agent of such fact, and (b) purchase
from the other Lenders such participations in the Obligations held by them as
shall be necessary to cause such purchasing Lender to share the excess payment
pro rata with each of them; provided, however, that if all or any portion of
such excess payment is thereafter recovered from the purchasing Lender, such
purchase shall to that extent be rescinded and each other Lender shall repay to
the purchasing Lender the purchase price paid therefor, together with an amount
equal to such paying Lender’s ratable share (according to the proportion of (i)
the amount of such paying Lender’s required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another
Lender may, to the fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off, but subject to Section 10.10) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation. The Administrative
Agent will keep records (which shall be conclusive and binding in the absence of
manifest error) of participations purchased under this Section and will in each
case notify the Lenders following any such purchases or repayments.

 

SECTION 2.17 Commitment Termination Date Extension.

 

(a) The Borrower may, by notice to the Administrative Agent given not more than
60 days and not less than 45 days prior to the then scheduled Commitment
Termination Date, request that the Lenders extend the Commitment Termination
Date for 364 days after the then scheduled Commitment Termination Date and
extend the Final Maturity Date for one year after the then scheduled Final
Maturity Date. The Administrative Agent shall notify the Lenders of its receipt
of any notice (the “Extension Request Date”) given pursuant to this Section
2.17(a) within two Business Days after the Administrative Agent’s receipt
thereof. Each Lender (a “Consenting Lender”) may, by irrevocable notice to the
Borrower and the Administrative Agent delivered to the Borrower and the
Administrative Agent not later than 45 days after the Extension Request Date
(the “Consent Period”), consent to such extension of the Commitment Termination
Date and the Final Maturity Date, which consent may be given or withheld by each
Lender in its absolute and sole discretion. Subject to Section 2.17(c), any such
extensions shall take effect on and as of the then scheduled Commitment
Termination Date.

 

 

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(b) Withdrawing Lenders. No extension pursuant to Section 2.17(a) shall be
effective with respect to a Lender that either (i) by a notice (a “Withdrawal
Notice”) delivered to the Borrower and the Administrative Agent, declines to
consent to such extension or (ii) has failed to respond to the Borrower and the
Administrative Agent within the Consent Period (each such Lender giving a
Withdrawal Notice or failing to respond in a timely manner being “Withdrawing
Lender”).

 

(c) Replacement of Withdrawing Lender. The Borrower shall have the right during
the 60 day period following the end of the Consent Period to replace the
Withdrawing Lender with an existing Lender or a new Lender who consents to the
extension of the Commitment Termination Date (a “Replacement Lender”). In the
event the Borrower has not replaced the Withdrawing Lender within said 60 day
period, the Borrower may request the Consenting Lenders to reduce the
Commitments by the amount of the Withdrawing Lender’s Commitment and extend the
Commitment Termination Date and the Final Maturity Date which consent may be
given or withheld by each Consenting Lender in its sole discretion. In the event
all of the Consenting Lenders agree to such reduction and extension then,
subject to compliance with Section 2.2, on and as of the then scheduled
Commitment Termination Date (x) the Commitment shall be reduced by an amount
equal to the Commitment of the unreplaced Withdrawing Lender, (y) such
Withdrawing Lender shall cease to be a Lender under this Agreement and (z) the
Commitment Termination Date and the Final Maturity Date shall be extended. In
the event the Withdrawing Lender has not been replaced or all of the Consenting
Lenders have not consented to reduction of the Commitment pursuant to this
Section 2.17(c), the Commitment Termination Date and the Final Maturity Date
shall not be extended.

 

(d) Assignment by Withdrawing Lender. A Withdrawing Lender shall be obliged, at
the request of the Borrower and subject to the Withdrawing Lender receiving
payment in full of all amounts owing to it under this Agreement concurrently
with the effectiveness of an assignment, to assign, without recourse or warranty
and by an Assignment and Acceptance, all of its rights and obligations hereunder
to any Replacement Lender nominated by the Borrower and willing to accept such
assignment; provided that such assignee satisfies all the requirements of this
Agreement and such assignment is consented to by the Administrative Agent, which
consent shall not be withheld or delayed unreasonably.

 

(e) Scheduled Commitment Termination Date. If the scheduled Commitment
Termination Date and the Final Maturity Date shall have been extended in respect
of Consenting Lenders and any Replacement Lender in accordance with Section
2.17(a), all references herein to the “Commitment Termination Date” and the
“Final Maturity Date” shall refer to the Commitment Termination Date or the
Final Maturity Date as so extended.

 

SECTION 2.18 Optional Increase in LC Commitments. The Borrower may at any time,
by means of a letter to the Administrative Agent and each Lender substantially
in the form of Exhibit F, request that the Lenders increase the Total
Commitments by $10,000,000 or an even multiple thereof; provided that (i) such
letter shall be accompanied by a certificate of the Secretary or an Assistant
Secretary of the Borrower as to resolutions of the board of directors of the
Borrower approving such increase, (ii) in no event shall the of the Total
Commitments exceed $500,000,000 (or such lesser amount as determined pursuant
Section 2.12) without the written consent of all Lenders, (iii) such increase
shall either be an increase of the Tranche A

 

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Commitments or shall be a pro rata increase of the Tranche A Commitments and the
Tranche B Commitments and (iv) after giving effect to any such increase, the
Tranche B Commitments shall not be more than 20% of the Total Commitments. Each
Lender shall have the option (in its sole and complete discretion) to subscribe
for its proportionate share (or more or less than its proportionate share) of
such increase, according to its then-existing Percentage. Each Lender shall
respond to the Borrower’s request within 20 Business Days by submitting a
response in the form of Attachment 1 to Exhibit F to the Administrative Agent
(and any Lender not responding within such period shall be deemed to have
declined such request). At the option of the Borrower, any part of the proposed
increase not proportionately subscribed may be assumed, within 10 Business Days
after all Lenders have responded to (or, by not responding, are deemed to have
declined) such request, by one or more existing Lenders and/or by one or more
Persons meeting the qualifications of an Eligible Assignee, in amounts which are
acceptable to the Borrower; it being understood that any assumption by a Person
which is not an existing Lender shall be subject to consent of the
Administrative Agent (which consent shall not be unreasonably withheld or
delayed) provided that after giving effect to any such increase, each Lender
shall have the same percentage under the Tranche A Commitments and the Tranche B
Commitments. Any increase in the combined Commitments pursuant to this Section
2.18 shall become effective on the earliest to occur of (a) the date on which
the proposed increase has been fully subscribed and (b) the date, which shall
not be earlier than the date on which all Lenders have responded to (or are
deemed to have declined) the Borrower’s request for an increase, on which the
Borrower notifies the Administrative Agent that the Borrower accepts an increase
in the combined Commitments which is less than the full amount of the requested
increase. The Administrative Agent shall promptly notify the Borrower and the
Lenders of any increase in the amount of the Total Commitments pursuant to this
Section 2.18 and of the Commitments and Percentage of each Lender after giving
effect thereto.

 

ARTICLE III.

 

TAXES, YIELD PROTECTION AND ILLEGALITY

 

SECTION 3.1 Taxes.

 

(a) Any and all payments by the Borrower to each Lender, the Fronting Bank or
the Administrative Agent under this Agreement and any other Credit Document
shall be made free and clear of, and without deduction or withholding for any
Taxes except as required by law. In addition, the Borrower shall pay all Other
Taxes.

 

(b) The Borrower agrees to indemnify and hold harmless the LC Administrator, the
Fronting Bank, each Lender and the Administrative Agent for the full amount of
Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section) paid by the Lenders, the
Fronting Bank or the Administrative Agent and any liability (including
penalties, interest, additions to tax and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. Payment under this indemnification shall be made within 30
days after the date such Lender, the Fronting Bank or the Administrative Agent
makes written demand therefor.

 

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(c) If the Borrower shall be required by law to deduct or withhold any Taxes or
Other Taxes from or in respect of any sum payable hereunder to any Lender, the
Fronting Bank or the Administrative Agent, provided that such Person has
provided the forms required in Section 9.10, then:

 

(i) the sum payable shall be increased as necessary so that after making all
required deductions and withholdings (including deductions and withholdings
applicable to additional sums payable under this Section) such Lender, the
Fronting Bank or the Administrative Agent, as the case may be, receives an
amount equal to the sum it would have received had no such deductions or
withholdings been made;

 

(ii) the Borrower shall make such deductions and withholdings;

 

(iii) the Borrower shall pay the full amount deducted or withheld to the
relevant taxing authority or other authority in accordance with applicable law;
and

 

(iv) the Borrower shall also pay, without duplication, each Lender, the Fronting
Bank or the Administrative Agent for the account of such Person, at the time
interest is paid, all additional amounts which such Person specifies as
reasonably necessary to preserve the after-tax yield such Person would have
received if such Taxes or Other Taxes had not been imposed.

 

(d) Within 30 days after the date of any payment by the Borrower of Taxes or
Other Taxes, the Borrower shall furnish the Administrative Agent the original or
a certified copy of a receipt evidencing payment thereof, or other evidence of
payment satisfactory to the Administrative Agent.

 

(e) If the Borrower is required to pay additional amounts to any Lender, the
Fronting Bank or the Administrative Agent pursuant to Section 3.1(c), then such
Person shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office so as to
eliminate any such additional payment by the Borrower which may thereafter
accrue, if such change in the judgment of such Person is not otherwise
disadvantageous to such Person or inconsistent with such Person’s internal
policies.

 

(f) If the Administrative Agent, the Fronting Bank or any Lender receives a
refund in respect of Taxes or Other Taxes paid by the Borrower pursuant to this
Section 3.1, which in the good faith judgment of such Person is allocable to
such payment, it shall promptly pay such refund to the Borrower, net of all
out-of-pocket expenses of such Person incurred in obtaining such refund,
provided, however, that the Borrower agrees to promptly return such refund to
the applicable Person if it receives notice from such Person that such Person is
required to repay such refund. Nothing contained herein shall require the
Administrative Agent or any Lender to make its tax returns (or any other
information relating to its taxes which it deems confidential) available to the
Borrower.

 

SECTION 3.2 Illegality.

 

(a) If the Fronting Bank or any Lender determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or

 

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administration of any Requirement of Law, in each case after the date hereof,
has made it unlawful, or that any central bank or other Governmental Authority
has asserted that it is unlawful, for the Fronting Bank or any Lender or its
applicable Lending Office to make or participate in any Credit Extensions, then,
on notice thereof by the Fronting Bank or such Lender to the Borrower through
the Administrative Agent, the obligation of all Lenders to make or participate
in Credit Extensions shall be suspended until the Fronting Bank or such Lender
notifies the Administrative Agent and the Borrower that the circumstances giving
rise to such determination no longer exist.

 

(b) Before giving any notice to the Administrative Agent under this Section, the
Fronting Bank or the affected Lender shall designate a different Lending Office
with respect to its Credit Extensions if such designation will avoid the need
for giving such notice or making such demand and will not, in the judgment of
such Person, be illegal or otherwise disadvantageous to such Person or
inconsistent with such Person’s internal policies.

 

SECTION 3.3 Increased Costs and Reduction of Return.

 

(a) If the Fronting Bank or any Lender determines that, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation, in each case after the date hereof, or (ii) the compliance by the
Fronting Bank or Lender with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law) after the
date hereof, there shall be any increase in the cost to the Fronting Bank or
such Lender of agreeing to make or making, funding or maintaining any Credit
Extensions, then the Borrower shall be liable for, and shall from time to time,
upon demand (with a copy of such demand to be sent to the Administrative Agent),
pay to the Administrative Agent for the account of the Fronting Bank or such
Lender, additional amounts as are sufficient to compensate such Lender for such
increased costs; provided that, to the extent such increased costs are not
specifically related to the Obligations, the Fronting Bank or such Lender is
charging such amounts to its customers on a non-discriminatory basis, provided
further that the Borrower shall not be obligated to pay any additional amounts
which were incurred by the Fronting Bank or such Lender more than 90 days prior
to the date of such request.

 

(b) If the Fronting Bank or any Lender shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration of
any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
compliance by the Fronting Bank or such Lender (or its Lending Office) or any
corporation controlling the Fronting Bank or such Lender with any Capital
Adequacy Regulation, in each case after the date hereof, affects or would affect
the amount of capital required or expected to be maintained by the Fronting Bank
or such Lender or any corporation controlling the Fronting Bank or such Lender
and (taking into consideration the Fronting Bank’s or such Lender’s or such
corporation’s policies with respect to capital adequacy and the Fronting Bank’s
or such Lender’s desired return on capital) determines that the amount of such
capital is increased or its rate of return is decreased as a consequence of its
Commitment, Credit Extensions, or obligations under this Agreement, then, upon
demand of the Fronting Bank or such Lender to the Borrower through the
Administrative Agent, the Borrower shall pay to the Fronting Bank or such
Lender, from time to time as specified by the Fronting Bank or such

 

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Lender, additional amounts sufficient to compensate the Fronting Bank or such
Lender for such increase; provided that to the extent such increased costs are
not specifically related to the Obligations, the Fronting Bank or such Lender is
charging such amounts to its customers on a non-discriminatory basis, provided
further that the Borrower shall not be obligated to pay any additional amounts
which were incurred by the Fronting Bank or such Lender more than 90 days prior
to the date of such request.

 

SECTION 3.4 Certificates of Lenders. Any Person claiming reimbursement or
compensation under this Article III shall deliver to the Borrower (with a copy
to the Administrative Agent) a certificate setting forth in reasonable detail
the amount payable to such Person hereunder and such certificate shall be
conclusive and binding on the Borrower in the absence of manifest error.

 

SECTION 3.5 Substitution of Lenders. Upon the receipt by the Borrower from the
Fronting Bank or any Lender (an “Affected Lender”) of a claim for compensation
under Section 3.1, 3.2 or 3.3 the Borrower may: (a) request the Affected Lender
to use its reasonable efforts to obtain a replacement bank or financial
institution satisfactory to the Borrower to acquire and assume all or a ratable
part of all of such Affected Lender’s Credit Extensions and Commitment (a
“Substitute Lender”); (b) request one more of the other Lenders to acquire and
assume all or part of such Affected Lender’s Credit Extensions and Commitment;
or (c) designate a Substitute Lender. Any such designation of a Substitute
Lender under clause (a) or (b) shall be subject to the prior written consent of
the Administrative Agent (which consent shall not be unreasonably withheld).

 

SECTION 3.6 Survival. The agreements and obligations of the Borrower in this
Article III shall survive the payment of all other Obligations.

 

ARTICLE IV.

 

REPRESENTATIONS AND WARRANTIES

 

To induce the Lenders to enter into this Agreement and to make Credit Extensions
hereunder, the Borrower represents and warrants to each Lender that:

 

SECTION 4.1 Due Organization, Authorization, etc. The Borrower and each of its
Subsidiaries (a) is a company duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, (b) is duly
qualified to do business and in good standing in each jurisdiction where,
because of the nature of its activities or properties, such qualification is
required except where the failure to qualify would not have a Material Adverse
Effect, which jurisdictions are set forth with respect to the Borrower and each
of its Subsidiaries on Schedule 4.1 as revised from time to time by the Borrower
pursuant to Section 5.1(m), (c) has the requisite company power and authority
and the right to own and operate its properties, to lease the property it
operates under lease, and to conduct its business as now and proposed to be
conducted, and (d) has obtained all material licenses, permits, consents or
approvals from or by, and has made all filings with, and given all notices to,
all Governmental Authorities having jurisdiction, to the extent required for
such ownership, operation and conduct (including, without limitation, the
consummation of the transactions contemplated by this Agreement) as to each of

 

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the foregoing, except where the failure to do so would not have a Material
Adverse Effect. The execution, delivery and performance by the Borrower of this
Agreement and the consummation of the transactions contemplated hereby and
thereby are within its corporate powers and have been duly authorized by all
necessary corporate action (including, without limitation, shareholder approval,
if required). The Borrower has received all other material consents and
approvals (if any shall be required) necessary for such execution, delivery and
performance, and such execution, delivery and performance do not and will not
contravene or conflict with, or create a Lien (other than pursuant to the Loan
Documents) or right of termination or acceleration under, any Requirement of Law
or Contractual Obligation binding upon the Borrower. This Agreement and each of
the Credit Documents is (or when executed and delivered will be) the legal,
valid, and binding obligation of the Borrower enforceable against the Borrower
in accordance with its respective terms subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors’ rights and general equity
principles.

 

SECTION 4.2 Litigation and Contingent Liabilities. Except (a) as set forth
(including estimates of the dollar amounts involved) in Schedule 4.2 hereto, (b)
for claims which are covered by Insurance Policies, coverage for which has not
been denied in writing, (c) for claims which relate to Reinsurance Agreements
issued by the Borrower or its Subsidiaries which involve a potential liability
which does not exceed 10% of the Borrower’s Net Worth, and (d) for claims which
related to Reinsurance Agreements to which it is a party entered into by the
Borrower or its Subsidiaries in the ordinary course of business (referred to
herein as “Ordinary Course Litigation”), no claim, litigation (including,
without limitation, derivative actions), arbitration, governmental investigation
or proceeding or inquiry is pending or, to the knowledge of the Borrower,
threatened against the Borrower or its Subsidiaries (i) which would, if
adversely determined, have a Material Adverse Effect or (ii) which relates to
any of the transactions contemplated hereby. Other than any liability incident
to such claims, litigation or proceedings, the Borrower and its Subsidiaries
have no material Contingent Liabilities.

 

SECTION 4.3 Employee Benefit Plans. The Borrower has no Plans.

 

SECTION 4.4 Regulated Entities. Neither Parent nor the Borrower is an
“investment company” or a company “controlled by an investment company,” for the
purpose of the Investment Company Act of 1940, as amended. The Borrower is not
subject to regulation under the Public Utility Holding Act of 1935, the Federal
Power Act, the Interstate Commerce Act, any public utilities code, or any other
Requirement of Law limiting its ability to incur Debt.

 

SECTION 4.5 Regulations U and X. The Borrower is not engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock. None of the Borrower, any
Affiliate or any Person acting on its behalf has taken or will take action to
cause the execution, delivery or performance of this Agreement, the making or
existence of the Credit Extensions or the use of proceeds of the Credit
Extensions to violate Regulations U or X of the FRB.

 

SECTION 4.6 Proceeds. Letters of Credit issued hereunder will be used solely to
secure the Borrower’s obligations under Reinsurance Agreements. None of the
proceeds of such Letters of Credit will be used in violation of applicable law,
and none of such proceeds will be used,

 

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directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of buying or carrying any margin stock as defined in Regulation U of
the FRB.

 

SECTION 4.7 Business Locations. Schedule 4.7 as revised from time to time by the
Borrower pursuant to Section 5.1(m) lists each of the locations where the
Borrower and its Subsidiaries maintain an office, a place of business.

 

SECTION 4.8 Accuracy of Information. All factual written information furnished
heretofore or contemporaneously herewith by or on behalf of the Borrower or
Parent to the Administrative Agent or the Lenders for purposes of or in
connection with this Agreement or any of the transactions contemplated hereby,
as supplemented to the date hereof, is and all other such factual written
information hereafter furnished by or on behalf of the Borrower or Parent to the
Administrative Agent or the Lenders will be, true and accurate in every material
respect on the date as of which such information is dated or certified and not
incomplete by omitting to state any material fact necessary to make such
information not misleading under the circumstances in which given.

 

SECTION 4.9 Subsidiaries. The Borrower has no Subsidiaries other than those
specified on Schedule 4.9..

 

SECTION 4.10 Insurance Licenses. Schedule 4.10 as revised from time to time by
the Borrower pursuant to Section 5.1(m) lists all of the jurisdictions in which
the Borrower and its Subsidiaries hold licenses (including, without limitation,
licenses or certificates of authority from applicable insurance departments),
permits or authorizations to transact insurance and reinsurance business
(collectively, the “Licenses”). Except as set forth on Schedule 4.10, to the
best of the Borrower’s knowledge, no such License is the subject of a proceeding
for suspension or revocation or any similar proceedings, there is no sustainable
basis for such a suspension or revocation, and no such suspension or revocation
is threatened by the Department. Schedule 4.10 as revised from time to time by
the Borrower pursuant to Section 5.1(m) indicates the line or lines of insurance
which the Borrower and its Subsidiaries is permitted to be engaged in with
respect to each License therein listed. Neither the Borrower nor any of its
Subsidiaries transact any insurance business, directly or indirectly, in any
jurisdiction other than those enumerated on Schedule 4.10 as revised from time
to time by the Borrower pursuant to Section 5.1(m) hereto, where such business
requires that the Borrower or any of its Subsidiaries obtain any license,
permit, governmental approval, consent or other authorization.

 

SECTION 4.11 Taxes. The Borrower and its Subsidiaries have filed by the required
filing date all tax returns that are required to be filed by it, and has paid or
provided adequate reserves for the payment of all material taxes, including,
without limitation, all payroll taxes and federal and state withholding taxes,
and all assessments payable by it that have become due, other than (a) those
that are not yet delinquent and are being contested in good faith by appropriate
proceedings and with respect to which reserves have been established, and are
being maintained, in accordance with GAAP or (b) those which the failure to file
or pay would not have a Material Adverse Effect. On the Amendment Effective Date
there is no ongoing audit by a taxing authority or, to the Borrower’s knowledge,
other governmental investigation of the tax liability of the Borrower and there
is no unresolved claim by a taxing authority concerning the Borrower’s tax
liability, for any period for which returns have been filed or were due. As used
in

 

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this Section 4.11, the term “taxes” includes all taxes of any nature whatsoever
and however denominated, including, without limitation, excise, import,
governmental fees, duties and all other charges, as well as additions to tax,
penalties and interest thereon, imposed by any government or instrumentality,
whether federal, state, local, foreign or other.

 

SECTION 4.12 Securities Laws. Neither the Borrower nor any Affiliate, nor to the
Borrower’s knowledge anyone acting on behalf of any such Person, has directly or
indirectly offered any interest in the Credit Extensions or any other Obligation
for sale to, or solicited any offer to acquire any such interest from, or has
sold any such interest to any Person that would cause the issuance or sale of
the Credit Extensions to be required to be registered under the Securities Act
of 1933, as amended.

 

SECTION 4.13 Compliance with Laws. Neither the Borrower nor any of its
Subsidiaries is in violation of any law, ordinance, rule, regulation, order,
policy, guideline or other requirement of any Governmental Authority, where the
effect of such violation could reasonably be expected to have a Material Adverse
Effect on the Borrower and, to the best of the Borrower’s knowledge, no such
violation has been alleged and the Borrower and each of its Subsidiaries (i) has
filed in a timely manner all reports, documents and other materials required to
be filed by it with any Governmental Authority, if such failure to so file could
reasonably be expected to have a Material Adverse Effect; and the information
contained in each of such filings is true, correct and complete in all material
respects and (ii) has retained all records and documents required to be retained
by it pursuant to any law, ordinance, rule, regulation, order, policy, guideline
or other requirement of any Governmental Authority, if the failure to so retain
such records and documents could reasonably be expected to have a Material
Adverse Effect.

 

SECTION 4.14 Financial Condition. The audited consolidated financial statements
of the Borrower as at December 31, 2001 and the unaudited consolidated financial
statements of the Borrower as at March 31, 2002, copies of which have been
delivered to the Lenders, are true and correct in all material respects, have
been prepared in accordance with GAAP consistently applied throughout the
periods involved (except as disclosed therein) and present fairly the
consolidated financial condition of the Borrower and its Subsidiaries at such
date and the result of its operations for the periods then ended.

 

SECTION 4.15 Insurance Act. The Borrower has not received any direction or other
notification by the Minister pursuant to Section 32 of Insurance Act, 1978 of
Bermuda.

 

SECTION 4.16 First Priority Security Interest. The Administrative Agent, for the
benefit of the Lenders, has a first priority perfected security interest in the
collateral pledged by the Borrower pursuant to the Security Agreement.

 

ARTICLE V.

 

AFFIRMATIVE COVENANTS

 

Until the LC Obligations and all other Obligations are paid in full, and until
the Final Maturity Date, the Borrower agrees that, unless at any time the
Required Lenders shall otherwise expressly consent in writing, it will:

 

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SECTION 5.1 Reports, Certificates and Other Information. Furnish or cause to be
furnished to the Administrative Agent and the Lenders:

 

(a) GAAP Financial Statements:

 

(i) Within 45 days after the close of each of the first three Fiscal Quarters of
each Fiscal Year (A) of the Borrower, a copy of the unaudited consolidated
balance sheets of the Borrower and its Subsidiaries, as of the close of such
quarter and the related statements of income and cash flows for that portion of
the Fiscal Year ending as of the close of such Fiscal Quarter, all prepared in
accordance with GAAP (subject to normal year-end adjustments) and accompanied by
the certification of an Executive Officer of the Borrower that all such
financial statements are complete and correct and present fairly in accordance
with GAAP (subject to normal year-end adjustments) the consolidated results of
operations and cash flows of the Borrower and its Subsidiaries as at the end of
such Fiscal Quarter and for the period then ended and (B) of the Parent, a copy
of the unaudited consolidated and consolidating balance sheets of the Parent, as
of the close of such quarter and the related consolidated and consolidating
statements of income and cash flows for that portion of the Fiscal Year ending
as of the close of such Fiscal Quarter, all prepared in accordance with GAAP
(subject to normal year-end adjustments) and accompanied by the certification of
an Executive Officer of the Parent that all such financial statements are
complete and correct and present fairly in accordance with GAAP (subject to
normal year-end adjustments) the consolidated results of operations and cash
flows of the Parent as at the end of such Fiscal Quarter and for the period then
ended.

 

(ii) Within 90 days after the close of each Fiscal Year (A) of the Borrower, a
copy of the annual audited consolidated financial statements of the Borrower and
its Subsidiaries consisting of balance sheets and statements of income and
retained earnings and cash flows, setting forth in comparative form in each case
the figures for the previous Fiscal Year, which financial statements shall be
prepared in accordance with GAAP, certified without material qualification by
KPMG Peat Marwick or any other firm of independent certified public accountants
of recognized national standing selected by the Borrower and reasonably
acceptable to the Required Lenders that all such financial statements are
complete and correct and present fairly in accordance with GAAP the financial
position and the results of operations and cash flows of the Borrower and its
Subsidiaries as at the end of such year and for the period then ended and (B) of
the Parent, a copy of the annual audited financial statements of the Parent
consisting of consolidated and consolidating balance sheets and consolidated and
consolidating statements of income and retained earnings and cash flows, setting
forth in comparative form in each case the figures for the previous Fiscal Year,
which financial statements shall be prepared in accordance with GAAP, certified
without material qualification by KPMG Peat Marwick or any other firm of
independent certified public accountants of recognized national standing
selected by the Parent and reasonably acceptable to the Required Lenders that
all such financial statements are complete and correct and present fairly in
accordance with GAAP the financial position and the results of operations and
cash flows of the Parent as at the end of such year and for the period then
ended.

 

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(b) Tax Returns. If requested by the Administrative Agent, copies of all
federal, state, local and foreign tax returns and reports in respect of income,
franchise or other taxes on or measured by income (excluding sales, use or like
taxes) filed by the Borrower and its Subsidiaries.

 

(c) SAP Financial Statements. Within 5 days after the date filed with the
Minister for each of its Fiscal Years, but in any event within 120 days after
the end of each Fiscal Year of the Borrower a copy of the Annual Statement of
the Borrower and each of its Subsidiaries for such Fiscal Year prepared in
accordance with SAP and accompanied by the certification of an Executive Officer
of the Borrower that such financial statement is complete and correct and
presents fairly in accordance with SAP the financial position of the Borrower or
such Subsidiary for the period then ended.

 

(d) Monthly Report and Borrowing Base Certificate. As soon as available, but in
any event within 10 days after the end of each calendar month of each Fiscal
Year, (i) a report listing each of the Borrower’s Eligible Investments and
Private Fund Investments, (ii) a report listing each of Borrower’s Unencumbered
Assets and calculating the Unencumbered Asset Reserve Requirement and (iii) a
Borrowing Base Certificate executed by an Executive Officer. For purposes of
such report and of completing the Borrowing Base Certificate, each Eligible
Investment and Private Fund Investment shall be valued based on its Fair Market
Value as at the last Business Day of the calendar month for which such report or
Borrowing Base Certificate is being delivered.

 

(e) Projections. As soon as available, but not later than March 31 of each year,
commencing with the year 2002, a three-year projection of the Borrower’s results
covering the then-current Fiscal Year and each of the next two Fiscal Years.

 

(f) Reports to Shareholders. Promptly upon the filing or making thereof copies
of (i) all financial statements and reports that Parent or the Borrower sends to
its shareholders or its other holders of Debt; (ii) copies of all financial
statements and regular, periodic or special reports that Parent or the Borrower
may make to, or file with, any Government Authority.

 

(g) Additional Borrowing Base Certificates. Promptly, at the request of the
Administrative Agent, a Borrowing Base Certificate for any given Business Day
executed by an Executive Officer of the Borrower.

 

(h) Notice of Default, etc. Immediately after an Executive Officer of the
Borrower knows or has reason to know of the existence of any Default, or any
development or other information which would have a Material Adverse Effect,
telephonic or telegraphic notice specifying the nature of such Default or
development or information, including the anticipated effect thereof, which
notice shall be promptly confirmed in writing within two (2) Business Days.

 

(i) Other Information. The following certificates and other information related
to the Borrower:

 

 

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(i) Within five (5) Business Days of receipt, a copy of any financial
examination reports by a Governmental Authority with respect to the Borrower or
any of its Subsidiaries relating to the insurance business of the Borrower
(when, and if, prepared); provided, the Borrower shall only be required to
deliver any interim report hereunder at such time as Borrower has knowledge that
a final report will not be issued and delivered to the Administrative Agent
within 90 days of any such interim report.

 

(ii) Copies of all filings (other than nonmaterial filings) with Governmental
Authorities by the Borrower or any of its Subsidiaries not later than five (5)
Business Days after such filings are made, including, without limitation,
filings which seek approval of Governmental Authorities with respect to
transactions between the Borrower or any of its Subsidiaries and its Affiliates.

 

(iii) Within five (5) Business Days of such notice, notice of proposed or actual
suspension, termination or revocation of any material License of the Borrower or
any of its Subsidiaries by any Governmental Authority or of receipt of notice
from any Governmental Authority notifying the Borrower or any of its
Subsidiaries of a hearing relating to such a suspension, termination or
revocation, including any request by a Governmental Authority which commits the
Borrower or any of its Subsidiaries to take, or refrain from taking, any action
or which otherwise materially and adversely affects the authority of the
Borrower or any of its Subsidiaries to conduct its business.

 

(iv) Within five (5) Business Days of such notice, notice of any pending or
threatened investigation or regulatory proceeding (other than routine periodic
investigations or reviews) by any Governmental Authority concerning the
business, practices or operations of the Borrower or any of its Subsidiaries.

 

(v) Promptly, notice of any actual or, to the best of the Borrower’s knowledge,
proposed material changes in the Insurance Code governing the investment or
dividend practices of the Borrower.

 

(vi) Promptly, such additional financial and other information as the
Administrative Agent may from time to time reasonably request.

 

(j) Compliance Certificates. Concurrently with the delivery to the
Administrative Agent of the GAAP financial statements under Sections 5.1(a)(i)
and 5.1(a)(ii), for each Fiscal Quarter and Fiscal Year of the Borrower, and at
any other time no later than ten (10) Business Days following a written request
of the Administrative Agent, a duly completed Compliance Certificate, signed by
the chief financial officer, treasurer or controller of the Borrower.

 

(k) Notice of Litigation, License, etc. Promptly upon learning of the occurrence
of any of the following, written notice thereof, describing the same and the
steps being taken by the Borrower with respect thereto: (i) the institution of,
or any adverse determination in, any litigation, arbitration proceeding or
governmental proceeding which could, if adversely determined, be reasonably
expected to have a Material Adverse Effect and which is not Ordinary Course
Litigation, (ii) the institution of , or any adverse determination in, any
litigation or arbitration proceeding with respect to a Reinsurance Agreement
issued by the Borrower or any of

 

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its Subsidiaries involving unreserved claims in excess of 10% of the Borrower’s
Net Worth, (iii) the commencement of any dispute which might lead to the
modification, transfer, revocation, suspension or termination of this Agreement
or any Credit Document or (iv) any event which could be reasonably expected to
have a Material Adverse Effect.

 

(l) Insurance Reports. Within five (5) Business Days of receipt of such notice
by the Borrower, written notice of any cancellation or material adverse change
in any material Insurance Policy carried by the Borrower.

 

(m) Updated Schedules. From time to time, and in any event concurrently with
delivery of the financial statements under Section 5.1(a)(i) and (ii), revised
Schedules 4.1, 4.7, and 4.10, if applicable, showing changes from the Schedules
previously delivered.

 

(n) Other Information. From time to time such other information concerning the
Borrower as the Administrative Agent or any Lender through the Administrative
Agent may reasonably request.

 

SECTION 5.2 Corporate Existence; Foreign Qualification. Do and cause to be done
at all times all things necessary to (a) maintain and preserve the corporate
existence of the Borrower and each of its Subsidiaries, (b) be, and ensure that
the Borrower and each of its Subsidiaries is, duly qualified to do business and
be in good standing as a foreign corporation in each jurisdiction where the
nature of its business makes such qualification necessary unless the failure to
be so qualified would not have a Material Adverse Effect, and (c) do or cause to
be done all things necessary to preserve and keep in full force and effect the
Borrower’s corporate existence.

 

SECTION 5.3 Books, Records and Inspections. (a) Maintain, and cause its
Subsidiaries to maintain materially complete and accurate books and records in
accordance with GAAP and SAP, (b) permit access at reasonable times by the
Administrative Agent to its books and records, (c) permit the Administrative
Agent or its designated representative to inspect at reasonable times its
properties and operations, and (d) permit the Administrative Agent to discuss
its business, operations and financial condition with its officers and its
independent accountants.

 

SECTION 5.4 Insurance. Maintain Insurance Policies to such extent and against
such hazards and liabilities as is required by law.

 

SECTION 5.5 Taxes and Liabilities. Pay, and cause each Subsidiary to pay, when
due all material taxes, assessments and other material liabilities except as
contested in good faith and by appropriate proceedings with respect to which
reserves have been established, and are being maintained, in accordance with
GAAP if and so long as such contest could not reasonably be expected to have a
Material Adverse Effect.

 

SECTION 5.6 Compliance with Laws. Comply, and cause each Subsidiary to comply
(a) with all federal and local laws, rules and regulations related to its
businesses (including, without limitation, the establishment of all insurance
reserves required to be established under SAP and applicable laws restricting
the investments of the Borrower and its Subsidiaries), and

 

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(b) with all Contractual Obligations binding upon it, except where failure to so
comply would not in the aggregate have a Material Adverse Effect on the
Borrower.

 

SECTION 5.7 Maintenance of Permits. Maintain, and cause each Subsidiary to
maintain, all permits, licenses and consents as may be required for the conduct
of its business by any federal or local government agency or instrumentality
except where failure to maintain the same could not reasonably be expected to
have a Material Adverse Effect.

 

SECTION 5.8 Conduct of Business. Engage, and cause each Subsidiary to engage,
primarily in the same business or businesses described in the Borrower’s 2000
Annual Report.

 

SECTION 5.9 Use of Letters of Credit. The Borrower shall request letters of
credit only to support its obligations under Reinsurance Agreements.

 

SECTION 5.10 Further Assurances. Promptly upon the request of the Administrative
Agent, the Borrower shall execute, acknowledge, deliver and record and do any
and all such further acts and deeds as the Administrative Agent may reasonably
request from time to time in order to insure that the obligations of the
Borrower hereunder are secured by a first priority perfected interest in the
assets of the Borrower stated to be pledged pursuant to the Security Agreement
and to perfect and maintain the validity, effectiveness and priority of the
Security Agreement and the Liens intended to be created thereby.

 

ARTICLE VI.

 

NEGATIVE COVENANTS

 

Until the LC Obligations and all other Obligations are paid in full and until
the Final Maturity Date, the Borrower agrees that, unless at any time the
Required Lenders shall otherwise expressly consent in writing, it will:

 

SECTION 6.1 Net Worth. Not permit the Net Worth of (a) the Borrower to be less
than $540,000,000 and (b) the Parent to be less than $470,000,000.

 

SECTION 6.2 Unencumbered Reserve Requirement. Not permit the Fair Market Value
of the Unencumbered Assets to be less than the greater of (x) $35,000,000 and
(y) an amount equal to the amount which would represent the impact of a 100
basis point increase in the interest rates on the Borrower’s Investments.

 

SECTION 6.3 Debt. Not, and not permit any Subsidiary to, incur any Debt other
than (a) Debt under this Agreement; (b) Purchase Money Debt provided the
aggregate principal amount outstanding at any time does not exceed $500,000; (c)
Debt pursuant to Capitalized Leases provided such Leases do not cover any
property other than property acquired in connection therewith and the aggregate
principal amount of all such Debt outstanding at any time does not exceed
$1,500,000; (d) Hedging Obligations entered into in the ordinary course of
business in order to hedge currency, commodity or interest rate risks, and not
for purposes of speculation; (e) Debt for standby letters of credit which have
been, or may be from time to time in the future, issued to insurance or
reinsurance cedents in the ordinary course of business; (f) Debt in connection
with Total Return Equity Swaps provided the proceeds of such Debt is

 

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invested in assets of the type described in the definition of Eligible
Investments; and (g) Debt not included in paragraphs (a) through (f) which does
not exceed at any time; in the aggregate, $1,000,000.

 

SECTION 6.4 Mergers, Consolidations and Sales. Not, and not permit any
Subsidiary to, (a) merge or consolidate, (b) purchase or otherwise acquire all
or substantially all of the assets or stock of any class of, or any partnership
or joint venture interest in, any other Person provided that the Borrower may
make any such purchase or acquisition provided (i) no Default or Event of
Default has occurred and is continuing or would result from such purchase or
acquisition, (ii) the Borrower provides the Lenders with a pro forma Compliance
Certificate giving effect to such purchase or acquisition and (iii) the
aggregate purchase price of all such purchases and acquisitions after the date
hereof does not exceed $75,000,000, or (c) sell, transfer, convey or lease all
or any substantial part of its assets, other than (i) any sale, transfer,
conveyance or lease in the ordinary course of business, (ii) any sale or
assignment of receivables, (iii) any sale, transfer, conveyance or lease not in
the ordinary course of business provided the aggregate fair market value of all
such sales, transfers, conveyances or leases after the date hereof does not
exceed $75,000,000 and (iv) Total Return Equity Swaps permitted under Section
6.3(f).

 

SECTION 6.5 Other Agreements. Not enter into any agreement containing any
provision which would be violated or breached by the performance of obligations
hereunder or under any instrument or document delivered or to be delivered by it
hereunder or in connection herewith.

 

SECTION 6.6 Transactions with Affiliates. Not, and not permit any Subsidiary to,
enter into, or cause, suffer or permit to exist, directly or indirectly, any
arrangement, transaction or contract with any of its Affiliates other than that
described in the January 7, 2002 Agreement unless such arrangement, transaction
or contract is on an arm’s length basis.

 

SECTION 6.7 Liens. Not create or permit to exist, nor allow any of its
Subsidiaries to create or permit to exist, any Lien with respect to any assets
now or hereafter existing or acquired, except the following: (i) Liens for
current taxes not delinquent or for taxes being contested in good faith and by
appropriate proceedings and with respect to which adequate reserves have been
established, and are being maintained, in accordance with GAAP, (ii) easements,
party wall agreements, rights of way, restrictions, minor defects or
irregularities in title and other similar Liens not interfering in any material
respect with the ordinary course of the business of such Person; (iii) Liens
incurred in the ordinary course of business in connection with workers’
compensation, unemployment insurance or other forms of governmental insurance or
benefits and Liens pursuant to letters of credit or other security arrangements
in connection with such insurance or benefits, (iv) mechanics’, workers’,
materialmen’s, landlord liens and other like Liens arising in the ordinary
course of business in respect of obligations which are not delinquent or which
are being contested in good faith and by appropriate proceedings and with
respect to which adequate reserves have been established, and are being
maintained, in accordance with GAAP, (v) Liens listed on Schedule 6.7 in effect
on the date hereof; (vi) attachments, judgments and other similar Liens for sums
not exceeding $5,000,000 (excluding any portion thereof which is covered by
insurance so long as the insurer is reasonably likely to be able to pay and has
accepted a tender of defense and indemnification without reservation of rights);
(vii) attachments, judgments and other similar Liens for sums of $5,000,000 or
more

 

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(excluding any portion thereof which is covered by insurance so long as the
insurer is reasonably likely to be able to pay and has accepted a tender of
defense and indemnification without reservation of rights) provided the
execution or other enforcement of such Liens is effectively stayed and claims
secured thereby are being actively contested in good faith and by appropriate
proceedings and have been bonded off; (viii) Liens on cash and Investments
(other than Collateral) pursuant to trusts or other security arrangements in
connection with Reinsurance Agreements and Liens securing Debt permitted under
Section 6.3(e); (ix) Liens in connection with Debt permitted under Section
6.3(f); (x) Liens in favor of the Administrative Agent for the benefit of the
Lenders; (xi) Purchase Money Liens securing Purchase Money Debt permitted under
Section 6.3(b); (xii) any interest or title of a lessor in assets subject to any
Capitalized Lease or operating lease which is permitted under this Agreement;
and (xiii) Liens not permitted by any other clause of this Section 6.7 securing
Debt in an aggregate amount not to exceed $250,000, provided any Liens granted
(other than Liens pursuant to Section 6.7(x)) do not extend to any Collateral
and after giving effect to all Liens under clauses (viii) through (xiii), there
are Unencumbered Assets sufficient to ensure compliance with Section 6.2.

 

SECTION 6.8 Restrictions On Negative Pledge Agreements. Not create, incur or
assume any agreement to which it is a signatory, other than this Agreement which
places any restrictions upon the right of the Borrower to sell, pledge or
otherwise dispose of any material portion of its properties now owned or
hereafter acquired (other than with respect to property secured by Liens
permitted under Section 6.7) except for such restrictions imposed under this
Agreement or by federal or state laws upon the right of the Borrower to sell,
pledge or otherwise dispose of securities owned by it.

 

SECTION 6.9 Dividends, Etc. Not (a) declare or pay any dividends on any of its
Capital Stock, (b) purchase or redeem any Capital Stock of Parent or any of its
Subsidiaries or any warrants, options or other rights in respect of such stock,
or (c) set aside funds for any of the foregoing, except that the Borrower may
declare or pay dividends on any of its Capital Stock provided no Default or
Event of Default has occurred and is continuing on the date of or would result
from such declaration or payment.

 

SECTION 6.10 Eligible Investments. The Borrower shall not permit:

 

(a) the minimum weighted average credit quality rating of the Eligible
Investments to be less than AA/Aa2 or the equivalent; or

 

(b) the Eligible Investments to exceed the Concentration Limits;

 

provided, however, that the Borrower shall not be in violation of this Section
6.10 if such violation occurs as a result of a change in the Fair Market Value
or ratings of such Eligible Investments (as opposed to a change in the makeup of
such Eligible Investments) unless such deficiency exists for thirty days.

 

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ARTICLE VII.

 

EVENTS OF DEFAULT AND THEIR EFFECT

 

SECTION 7.1 Events of Default. Each of the following shall constitute an Event
of Default under this Agreement:

 

(a) Non-Payment of Credit Extension. Default in the payment when due of any
Reimbursement Obligation.

 

(b) Non-Payment of Interest, Fees, etc. Default, and continuance thereof for
three (3) Business Days, in the payment when due of fees or of any other amount
payable hereunder or under the Credit Documents.

 

(c) Non-Payment of Other Debt. (i) Default in the payment when due (subject to
any applicable grace period), whether by acceleration or otherwise, of any other
Debt of, or guaranteed by, the Borrower if the aggregate amount of Debt of the
Borrower which is accelerated or due and payable, or which (subject to any
applicable grace period) may be accelerated or otherwise become due and payable,
by reason of such default or defaults is $5,000,000 or more, or (ii) default in
the performance or observance of any obligation or condition with respect to any
such other Debt of, or guaranteed by, the Borrower if the effect of such default
or defaults is to accelerate the maturity (subject to any applicable grace
period) of any such Debt of $5,000,000 or more in the aggregate or to permit the
holder or holders of such Debt of $5,000,000 or more in the aggregate, or any
trustee or agent for such holders, to cause such Debt to become due and payable
prior to its expressed maturity.

 

(d) Other Material Obligations. Except for obligations covered under other
provisions of this Article VII, default in the payment when due, or in the
performance or observance of, any material obligation of, or material condition
agreed to by, the Borrower with respect to any material purchase or lease
obligation of $5,000,000 or more (unless the existence of any such default is
being contested by the Borrower in good faith and by appropriate proceedings and
the Borrower has established, and is maintaining, adequate reserves therefor in
accordance with GAAP) which default continues for a period of 30 days.

 

(e) Bankruptcy, Insolvency, etc. (i) Parent or the Borrower becomes insolvent or
generally fails to pay, or admits in writing its inability to pay, debts as they
become due; (ii) there shall be commenced by or against any of such Persons any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
supervision, conservatorship, liquidation, reorganization or relief of debtors,
seeking to have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
rehabilitation, conservation, supervision, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, obligations or liabilities, or (B) seeking appointment of a receiver,
trustee, custodian, rehabilitator, conservator, supervisor, liquidator or other
similar official for it or for all or any substantial part of its assets, in
each case which (1) results in the entry of an order for relief or any such
adjudication or appointment or (2) if filed against such Person, remains
undismissed, undischarged or unstayed for a period of 60 days; or (iii) there
shall be

 

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commenced against any of such Persons any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in the
entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the entry
thereof; or (iv) any of such Persons shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in clause(ii) or (iii) above; or (v) any Governmental Authority shall
issue any order of conservation, supervision or any other order of like effect
relating to any of such Persons.

 

(f) Financial Statements. Failure by the Borrower to comply with its covenants
set forth in Section 5.1 and continuance of such failure for five Business Days
after notice thereof from the Administrative Agent.

 

(g) Specific Defaults. Failure by the Borrower to comply with its covenants set
forth in Sections 5.9, 6.1, 6.3, 6.4, 6.6, 6.7(viii), 6.7(ix), 6.7(x), 6.7(xi),
6.7(xii), 6.7 (xiii),6.8 or 6.9.

 

(h) Non-compliance With Other Provisions. Failure by the Borrower to comply with
or to perform any provision of this Agreement or the other Credit Documents (and
not constituting an Event of Default under any of the other provisions of this
Article VII) and continuance of such failure for 30 days after notice thereof
from the Administrative Agent to the Borrower.

 

(i) Warranties and Representations. Any warranty or representation made by or on
behalf of the Borrower herein or in any Credit Document is inaccurate or
incorrect or is breached or false or misleading in any material respect as of
the date such warranty or representation is made; or any schedule, certificate,
financial statement, report, notice, or other instrument furnished by or on
behalf of Borrower to the Administrative Agent or the Lenders is false or
misleading in any material respect on the date as of which the facts therein set
forth are stated or certified.

 

(j) Employee Benefit Plans. The Borrower establishes any Plan.

 

(k) Credit Documents. The Security Agreement or any other Credit Document shall
cease to be in full force and effect with respect to the Borrower, the Borrower
shall fail (subject to any applicable grace period) to comply with or to perform
any applicable provision of the Security Agreement, any action shall be taken by
or on behalf of the Borrower or any Affiliate thereof to discontinue any of the
Credit Documents or to contest the validity, binding nature or enforceability of
any thereof or the Administrative Agent shall fail to have a first priority
perfected Lien on any collateral granted under the Security Agreement.

 

(l) Change in Control. A Change in Control occurs.

 

(m) Judgments. A final judgment or judgments which exceed an aggregate of
$5,000,000 (excluding any portion thereof which is covered by insurance so long
as the insurer is reasonably likely to be able to pay and has accepted a tender
of defense and indemnification without reservation of rights) shall be rendered
against the Borrower and shall not have been discharged or vacated or had
execution thereof stayed pending appeal within 60 days after entry or filing of
such judgment(s).

 

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SECTION 7.2 Effect of Event of Default. If any Event of Default described in
Section 7.1(e) shall occur, all Obligations shall become immediately due and
payable, and the Borrower shall become immediately obligated to deliver to the
Administrative Agent cash collateral in an amount equal to the outstanding LC
Obligations all without notice of any kind; and, in the case of any other Event
of Default, the Administrative Agent may, and upon the written request of the
Required Lenders shall, terminate the Commitments hereunder and declare all or
any portion of the Obligations to be due and payable, and/or demand that the
Borrower immediately deliver to the Administrative Agent Cash and Cash
Equivalents in an amount equal to 102% of the outstanding LC Obligations
whereupon the Commitments shall terminate and all or such portion of the
Obligations shall become immediately due and payable, and/or demand that the
Borrower immediately deliver to the Administrative Agent Cash and Cash
Equivalents in an amount equal to the outstanding LC Obligations all without
further notice of any kind. The Administrative Agent shall promptly advise the
Borrower of any such declaration but failure to do so shall not impair the
effect of such declaration. Notwithstanding the foregoing, the effect as an
Event of Default of any event described in Section 7.1(a) may not be waived
except by consent of all of the Lenders and acknowledged by the Administrative
Agent in writing.

 

SECTION 7.3 LC Collateral Account.

 

(a) If at any time after the Borrower has been required to deposit amounts in
the LC Collateral Account pursuant to Section 2.13, the Administrative Agent
determines that the amount on deposit in the LC Collateral Account is less than
the amount of the outstanding LC Obligations at such time, the Administrative
Agent may demand the Borrower to deposit, and the Borrower shall, upon such
demand and without any further notice, pay to the Administrative Agent for
deposit in the LC Collateral Account, funds necessary to cure any shortfall.

 

(b) The Administrative Agent may, at any time or from time to time, after funds
are deposited in the LC Collateral Account apply such funds to the payment of
the Obligations then due and payable by the Borrower to the Fronting Bank, the
Lenders or the Administrative Agent under the Credit Documents.

 

(c) Neither the Borrower nor any Person claiming on behalf of or through the
Borrower shall have any right to withdraw any of the funds held in the LC
Collateral Account until all of the Obligations have been indefeasibly paid in
full, the Commitments have been terminated and all Letters of Credit have been
terminated or expired, at which time any funds remaining in the LC Collateral
Account shall be returned by the Administrative Agent to the Borrower.

 

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ARTICLE VIII.

 

CONDITIONS

 

SECTION 8.1 Conditions to Occurrence of the Amendment Effective Date. The
occurrence of the Amendment Effective Date shall be subject to receipt by the
Administrative Agent of all of the following, each duly executed and dated the
Amendment Effective Date (or such earlier date as shall be satisfactory to the
Administrative Agent), each in form and substance satisfactory to the
Administrative Agent (with sufficient copies for each Lender):

 

(a) This Agreement. This Agreement executed by each party thereto.

 

(b) Organization Documents, Resolutions. Certified copies of the Organization
Documents of the Borrower (or a statement that such Organization Documents have
not been amended since February 25, 2000) and resolutions of the Board of
Directors of the Borrower authorizing the execution, delivery and performance,
respectively, of those documents and matters required of it with respect to this
Agreement or the other Credit Documents.

 

(c) Incumbency and Signatures. A certificate of an Authorized Officer certifying
the names of the individual or individuals authorized to sign this Agreement and
the other Credit Documents, together with a sample of the true signature of each
such individual. (The Lenders may conclusively rely on each such certificate
until formally advised by a like certificate of any changes therein.)

 

(d) Opinion of Counsel. An opinion of counsel of the Borrower, addressed to the
Administrative Agent, the Fronting Bank, the LC Administrator and the Lenders
from each of (i) Akin, Gump, Strauss, Hauer & Feld, L.L.P., New York counsel to
the Borrower and (ii) Conyers, Dill and Pearman, Bermuda counsel to the
Borrower, each in form and substance satisfactory to the Administrative Agent.

 

(e) Certificate. Certificate of an Executive Officer dated as of the Amendment
Effective Date stating that: (i) that there are no material insurance regulatory
proceedings pending or threatened against the Borrower in any jurisdiction; (ii)
no Default or Event of Default exists or will result from the initial Credit
Extension; and (iii) there has occurred since December 31, 2001, no event or
circumstance that has resulted or in the judgment of such Executive Officer
could reasonably be expected to result in a Material Adverse Effect.

 

(f) Other. Such other documents as the Administrative Agent may reasonably
request.

 

SECTION 8.2 Conditions to All Credit Extensions. The obligation of the Lenders
to make all Credit Extensions shall be subject to the prior or concurrent
satisfaction (in form and substance satisfactory to the Administrative Agent) of
each of the conditions precedent set forth below:

 

(a) LC Application/Borrowing Base Certificate. The Borrower shall have delivered
a Borrowing Base Certificate calculated as of the most recent Business Day.

 

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(b) No Default. No Default shall have occurred and be continuing or will result
from the making of the Credit Extensions and no Default shall have occurred and
be continuing under the Credit Documents or will result from the making of the
Credit Extensions.

 

(c) Warranties and Representations. (i) All warranties and representations
contained in this Agreement (other than Section 4.2 except in the case of the
initial Credit Extension) shall be true and correct in all material respects as
of the date of any Credit Extension, with the same effect as though made on the
date of and concurrently with the making of such Credit Extension (except where
such representation speaks as of specified date) and (ii) all covenants
contained herein and in such documents to be performed by each of the parties
thereto (other than the Administrative Agent or the Lenders) prior to the date
of any Credit Extension shall have been performed.

 

(d) Litigation. (i) No litigation (including, without limitation, derivative
actions), arbitration, governmental investigation or proceeding or inquiry shall
be, on the date of any Credit Extension, pending, or to the knowledge of the
Borrower, threatened which seeks to enjoin or otherwise prevent the consummation
of, or to recover any damages or to obtain material relief as a result of, the
transactions contemplated hereunder or, in the reasonable opinion of the
Required Lenders, could be reasonably expected to be materially adverse to any
of the parties to this Agreement and which is not Ordinary Course Litigation,
and (ii) in the reasonable opinion of the Required Lenders, no material adverse
development shall have occurred in any litigation (including, without
limitation, derivative actions), arbitration, government investigation or
proceeding or inquiry with respect to any Reinsurance Agreement issued by the
Borrower or its Subsidiaries in which the unreserved potential liability is in
excess of 10% of the Borrower’s Net Worth or disclosed in Schedule 4.2 which is
likely to have a Material Adverse Effect.

 

(e) Fees. The fees referred to in Section 2.14 which are due and payable on or
prior to the Amendment Effective Date or the date of any Credit Extension shall
have been paid to the Administrative Agent, where applicable, for the benefit of
the Lenders.

 

(f) Material Adverse Effect. There shall not have occurred any event which, in
the reasonable judgment of the Required Lenders, constitutes a Material Adverse
Effect.

 

 

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ARTICLE IX.

 

THE ADMINISTRATIVE AGENT

 

SECTION 9.1 Appointment and Authorization.

 

(a) Each Lender hereby irrevocably (subject to Section 9.9) appoints, designates
and authorizes the Administrative Agent to take such action on its behalf under
the provisions of this Agreement and each other Credit Document and to exercise
such powers and perform such duties as are expressly delegated to it by the
terms of this Agreement or any other Credit Document, together with such powers
as are reasonably incidental thereto. Notwithstanding any provision to the
contrary contained elsewhere in this Agreement or in any other Credit Document,
the Administrative Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall the Administrative Agent have or be
deemed to have any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Credit Document or otherwise exist
against the Administrative Agent.

 

(b) The LC Administrator shall act on behalf of the Lenders with respect to any
Letters of Credit issued by the Lenders and the documents associated therewith
and shall have all of the benefit and immunities provided to the Agent in this
Article IX with respect to any acts taken or omissions suffered by such LC
Administrator in connection with Letters of Credit issued by the Lenders or
proposed to be issued by the Lenders and the application and agreements for
letters of credit pertaining to the Letters of Credit as fully as if the term
“Administrative Agent”, as used in this Article IX, included the LC
Administrator with respect to such acts or omissions.

 

SECTION 9.2 Delegation of Duties. The Administrative Agent may execute any of
its duties under this Agreement or any other Credit Document by or through
agents, employees or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.

 

SECTION 9.3 Liability of Administrative Agent. None of the Agent-Related Persons
shall (a) be liable for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or any other Credit Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct), or (b) be responsible in any manner to any of the Lenders for any
recital, statement, representation or warranty made by the Borrower or Affiliate
of the Borrower, or any officer thereof, contained in this Agreement or in any
other Credit Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Administrative Agent
under or in connection with, this Agreement or any other Credit Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Credit Document, or for any failure of the Borrower or
any other party to any Credit Document to perform its obligations hereunder or
thereunder. No Administrative Agent-Related Person shall be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any
other Credit Document, or to inspect the properties, books or records of the
Borrower or any of the Borrower’s Affiliates

 

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SECTION 9.4 Reliance by Administrative Agent.

 

(a) The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Borrower), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Credit
Document unless it shall first receive such advice or concurrence of the
Required Lenders (and all the Lenders if required pursuant to Section 10.1) as
it deems appropriate and, if it so requests, it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
The Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement or any other Credit Document in
accordance with a request or consent of the Required Lenders and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all of the Lenders.

 

(b) For purposes of determining compliance with the conditions specified in
Section 8.1, each Lender that has executed this Agreement shall be deemed to
have consented to, approved or accepted or to be satisfied with, each document
or other matter either sent by the Administrative Agent to such Lender for
consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Lender.

 

SECTION 9.5 Notice of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of LC Advances, interest and fees
required to be paid to the Administrative Agent for the account of the LC
Administrator, the Fronting Bank or the Lenders, unless the Administrative Agent
shall have received written notice from a Lender or the Borrower referring to
this Agreement, describing such Default or Event of Default and stating that
such notice is a “notice of default”. The Administrative Agent will notify the
Lenders of its receipt of any such notice. The Administrative Agent shall take
such action with respect to such Default or Event of Default as may be requested
by the Required Lenders in accordance with Article VII; provided, however, that
unless and until the Administrative Agent has received any such request, the
Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable or in the best interest of the Lenders.

 

SECTION 9.6 Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Administrative Agent hereinafter taken, including any review of the
affairs of the Borrower, shall be deemed to constitute any representation or
warranty by any Agent-Related Person to any Lender. Each Lender represents to
the Administrative Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Borrower, and all applicable bank regulatory laws
relating to the transactions contemplated

 

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hereby, and made its own decision to enter into this Agreement and to extend
credit to the Borrower hereunder. Each Lender also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Credit Documents, and to
make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly herein required to be furnished to the Lenders by the
Administrative Agent, the Administrative Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Borrower which may come into the possession
of any of the Agent-Related Persons.

 

SECTION 9.7 Indemnification. Whether or not the transactions contemplated hereby
are consummated, the Lenders shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of the Borrower and
without limiting the obligation of the Borrower to do so), pro rata, from and
against any and all Indemnified Liabilities; provided, however, that no Lender
shall be liable for the payment to the Agent-Related Persons of any portion of
such Indemnified Liabilities resulting solely from such Person’s gross
negligence or willful misconduct. Without limitation of the foregoing, each
Lender shall reimburse the Administrative Agent upon demand for its ratable
share of any costs or out-of-pocket expenses (including Attorney Costs) incurred
by the Administrative Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, any other Credit
Document, or any document contemplated by or referred to herein, to the extent
that the Administrative Agent is not reimbursed for such expenses by or on
behalf of the Borrower. The undertaking in this Section shall survive the
payment of all Obligations hereunder and the resignation or replacement of the
Administrative Agent.

 

SECTION 9.8 Administrative Agent in Individual Capacity. BofA and its Affiliates
may make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with the Borrower and
its Affiliates as though BofA were not the Administrative Agent or the LC
Administrator hereunder and without notice to or consent of the Lenders. The
Lenders acknowledge that, pursuant to such activities, BofA or its Affiliates
may receive information regarding the Borrower or its Affiliates (including
information that may be subject to confidentiality obligations in favor of the
Borrower) and acknowledge that the Administrative Agent shall be under no
obligation to provide such information to them. With respect to its Credit
Extensions, BofA shall have the same rights and powers under this Agreement as
any other Lender and may exercise the same as though it were not the
Administrative Agent or the LC Administrator, and the terms “Lender” and
“Lenders” include BofA in its individual capacity.

 

SECTION 9.9 Successor Administrative Agent. The Administrative Agent may, and at
the request of the Required Lenders shall, resign as Administrative Agent upon
30 days’ notice to the Lenders. If the Administrative Agent resigns under this
Agreement, the Required Lenders

 

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shall appoint from among the Lenders a successor agent for the Lenders which
successor agent shall be approved by the Borrower. If no successor agent is
appointed prior to the Amendment Effective Date of the resignation of the
Administrative Agent, the Administrative Agent may appoint, after consulting
with the Lenders and the Borrower, a successor agent from among the Lenders.
Upon the acceptance of its appointment as successor agent hereunder, such
successor agent shall succeed to all the rights, powers and duties of the
retiring Administrative Agent and the term “Administrative Agent” shall mean
such successor agent and the retiring Administrative Agent’s appointment, powers
and duties as Administrative Agent shall be terminated. After any retiring
Administrative Agent’s resignation hereunder as Administrative Agent, the
provisions of this Article IX and Sections 10.4 and 10.5 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement. If no successor agent has accepted
appointment as Administrative Agent by the date which is 30 days following a
retiring Administrative Agent’s notice of resignation, the retiring
Administrative Agent’s resignation shall nevertheless thereupon become effective
and the Lenders shall perform all of the duties of the Administrative Agent
hereunder until such time, if any, as the Required Lenders appoint a successor
agent as provided for above. Notwithstanding the foregoing, however, BofA may
not be removed as the Administrative Agent unless BofA shall also simultaneously
be replaced as “LC Administrator” hereunder pursuant to documentation in form
and substance reasonably satisfactory to BofA.

 

SECTION 9.10 Withholding Tax. Each of the Lenders and the Administrative Agent
(i) represents and warrants that on the date hereof (or, if later, the date it
becomes a party to this Agreement) that under applicable law and treaties no
U.S. withholding tax will be required to be withheld with respect to any
payments to be made by the Borrower hereunder, (ii) agrees to furnish to the
Administrative Agent and the Borrower on or before the first scheduled payment
date after the Amendment Effective Date, a United States Internal Revenue
Service Form W-8BEN and W-9 or Form W-8ECI and W-8, as appropriate (or successor
forms) properly completed and executed and (iii) agrees to comply with all
applicable U.S. laws and regulations with regard to such withholding tax
exemption.

 

(a) If any Lender claims exemption from, or reduction of, withholding tax under
a United States tax treaty by providing IRS Form W-8BEN and such Lender sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of the Borrower to such Lender, such Lender agrees to notify the
Administrative Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of the Borrower to such Lender. To the extent of
such percentage amount, the Administrative Agent will treat such Lender’s IRS
Form 1001 as no longer valid.

 

(b) If any Lender claiming exemption from United States withholding tax by
filing IRS Form W-8EC1 with the Administrative Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of the
Borrower to such Lender, such Lender agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.

 

(c) If any Lender is entitled to a reduction in the applicable withholding tax,
the Administrative Agent may withhold from any interest payment to such Lender
an amount equivalent to the applicable withholding tax after taking into account
such reduction. If the

 

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forms or other documentation required by Section 9.10 (a) are not delivered to
the Administrative Agent, then the Administrative Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.

 

(d) If the IRS or any other Governmental Authority of the United States or other
jurisdiction asserts a claim that the Administrative Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify the Administrative Agent of a change in circumstances
which rendered the exemption from, or reduction of, withholding tax ineffective,
or for any other reason) such Lender shall indemnify the Administrative Agent
fully for all amounts paid, directly or indirectly, by the Administrative Agent
as tax or otherwise, including penalties and interest, and including any taxes
imposed by any jurisdiction on the amounts payable to the Administrative Agent
under this Section, together with all costs and expenses (including Attorney
Costs). The obligation of the Lenders under this Section shall survive the
payment of all Obligations and the resignation or replacement of the
Administrative Agent.

 

SECTION 9.11 Co-Agents. None of the Lenders identified on the facing page or
signature pages of this Agreement as a “co-agent” shall have any right, power,
obligation, liability, responsibility or duty under this Agreement other than
those applicable to all Lenders as such. Without limiting the foregoing, none of
the Lenders so identified as a “co-agent” shall have or be deemed to have any
fiduciary relationship with any Lender. Each Lender acknowledges that it has not
relied, and will not rely, on any of the Lenders so identified in deciding to
enter into this Agreement or in taking or not taking action hereunder.

 

ARTICLE X. MISCELLANEOUS

 

SECTION 10.1 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Credit Document, and no consent with respect to any
departure by the Borrower therefrom, shall be effective unless the same shall be
in writing and signed by the Required Lenders (or by the Administrative Agent at
the written request of the Required Lenders) and the Borrower and acknowledged
by the Administrative Agent, and then any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no such waiver, amendment, or consent shall,
unless in writing and signed by all the Lenders and the Borrower and
acknowledged by the Administrative Agent, do any of the following:

 

(a) increase or extend the Commitment to issue Letters of Credit or the
Commitment of any Lender (or reinstate any Commitment terminated pursuant to
Section 7.2) or extend the expiry date of any Letter of Credit to a date after
the Final Maturity Date;

 

(b) postpone or delay any date fixed by this Agreement or any other Credit
Document for any payment of LC Advances, interest, fees or other amounts due to
the Lenders (or any of them) hereunder or under any other Credit Document;

 

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(c) reduce the amount of, or the rate of interest specified herein on, any
Reimbursement Obligation, or any fees or other amounts payable hereunder or
under any other Credit Document;

 

(d) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the LC Obligations which is required for the Lenders or any
of them to take any action hereunder;

 

(e) release the Security Agreement or release all or a substantial part of the
Collateral granted thereunder except in accordance with the terms thereof; or

 

(f) amend this Section, or any provision herein providing for consent or other
action by all Lenders;

 

and, provided further, that no amendment, waiver or consent shall, unless in
writing and signed by the Administrative Agent in addition to the Required
Lenders or all the Lenders, as the case may be, affect the rights or duties of
the Administrative Agent under this Agreement or any other Credit Document and
no amendment of any provision relating to the LC Administrator shall be
effective without the written consent of the LC Administrator. Notwithstanding
the foregoing the Fee Letter may be amended, or rights of privileges thereunder
waived, in writing, executed by the parties thereto.

 

SECTION 10.2 Notices. All notices, requests and other communications shall be in
writing (including, unless the context expressly otherwise provides, by
facsimile transmission, provided that any matter transmitted by the Borrower by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on Schedule 10.2, and (ii) shall be followed
promptly by delivery of a hard copy original thereof) and mailed, faxed or
delivered, to the address or facsimile number specified for notices on Schedule
10.2; or, as directed to the Borrower or the Administrative Agent, to such other
address as shall be designated by such party in a written notice to the other
parties, and as directed to any other party, at such other address as shall be
designated by such party in a written notice to the Borrower and the
Administrative Agent.

 

(a) All such notices, requests and communications shall, when transmitted by
overnight delivery, or faxed, be effective when delivered for overnight
(next-day) delivery, or transmitted in legible form by facsimile machine,
respectively, or, if delivered, upon delivery, except that notices pursuant to
Article II or IX shall not be effective until actually received by the
Administrative Agent and/or the LC Administrator, as applicable.

 

(b) Any agreement of the Administrative Agent, the LC Administrator and the
Lenders herein to receive certain notices by telephone or facsimile is solely
for the convenience and at the request of the Borrower. The Administrative
Agent, the LC Administrator and the Lenders shall be entitled to rely on the
authority of any Person purporting to be a Person authorized by the Borrower to
give such notice and the Administrative Agent, the LC Administrator and the
Lenders shall not have any liability to the Borrower or other Person on account
of any action taken or not taken by the Administrative Agent, the LC
Administrator or the Lenders in reliance upon such telephonic or facsimile
notice. The obligation of the Borrower to repay the Obligations shall not be
affected in any way or to any extent by any failure by the Administrative

 

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Agent, the LC Administrator and the Lenders to receive written confirmation of
any telephonic or facsimile notice or the receipt by the Administrative Agent,
the LC Administrator and the Lenders of a confirmation which is at variance with
the terms understood by the Administrative Agent, the LC Administrator and the
Lenders to be contained in the telephonic or facsimile notice.

 

SECTION 10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Administrative Agent, the LC Administrator or
any Lender, any right, remedy, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege.

 

SECTION 10.4 Costs and Expenses. The Borrower shall:

 

(a) whether or not the transactions contemplated hereby are consummated, pay or
reimburse BofA (including in its capacity as Administrative Agent and LC
Administrator) within ten Business Days after demand for all costs and expenses
incurred by BofA (including in its capacity as Administrative Agent and LC
Administrator), in connection with the negotiation, preparation, delivery,
syndication, administration and execution of, and any amendment, supplement,
waiver or modification to (in each case, whether or not consummated), this
Agreement, any Credit Document and any other documents prepared in connection
herewith or therewith, and the consummation of the transactions contemplated
hereby and thereby, including reasonable Attorney Costs incurred by BofA
(including in its capacity as Administrative Agent) with respect thereto; and

 

(b) pay or reimburse the Administrative Agent, the Lenders and the LC
Administrator within ten Business Days after demand for all costs and expenses
(including Attorney Costs) incurred by them in connection with the enforcement,
attempted enforcement, or preservation of any rights or remedies under this
Agreement or any other Credit Document during the existence of an Event of
Default or after acceleration of the Obligations (including in connection with
any “workout” or restructuring regarding the Obligations, and including in any
insolvency proceeding or appellate proceeding) provided that the parties shall
to the extent of common interests use a single counsel.

 

SECTION 10.5 Indemnity. Whether or not the transactions contemplated hereby are
consummated, the Borrower shall indemnify and hold the Agent-Related Persons and
each Lender and each of its respective officers, directors, employees, counsel,
agents and attorneys-in-fact (each, an “Indemnified Person”) harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, charges, expenses and disbursements (including
Attorney Costs) of any kind or nature whatsoever which may at any time
(including at any time following repayment of the Obligations and the
termination, resignation or replacement of the Administrative Agent or
replacement of any Lender) be imposed on, incurred by or asserted against any
such Person in any way relating to or arising out of this Agreement or any
document contemplated by or referred to herein, or the transactions contemplated
hereby, or any action taken or omitted by any such Person under or in connection
with any of the foregoing, including with respect to any investigation,
litigation or proceeding (including any Insolvency Proceeding or appellate
proceeding) related to or arising

 

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out of this Agreement or the Credit Extensions or the use of the proceeds
thereof, whether or not any Indemnified Person is a party thereto (all the
foregoing, collectively, the “Indemnified Liabilities”); provided, that the
Borrower shall have no obligation hereunder to any Indemnified Person with
respect to Indemnified Liabilities resulting solely from the gross negligence or
willful misconduct of such Indemnified Person. The agreements in this Section
shall survive payment of all other Obligations.

 

SECTION 10.6 Payments Set Aside. To the extent that the Borrower makes a payment
to the Administrative Agent, the Fronting Bank or the Lenders, or the
Administrative Agent, the Fronting Bank or the Lenders exercise their right of
set-off, and such payment or the proceeds of such set-off or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any settlement entered into by the
Administrative Agent, the Fronting Bank or such Lender in its discretion) to be
repaid to a trustee, receiver or any other party, in connection with any
Insolvency Proceeding or otherwise, then (a) to the extent of such recovery the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such set-off had not occurred, and (b) each Lender severally agrees to pay to
the Administrative Agent upon demand its Percentage of any amount so recovered
from or repaid by the Administrative Agent.

 

SECTION 10.7 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of the Administrative Agent, the Fronting Bank and each Lender.

 

SECTION 10.8 Assignments, Participations, etc.

 

(a) Any Lender may, with the written consent of the Borrower (at all times other
than during the existence of an Event of Default) and the Administrative Agent,
which consents shall not be unreasonably withheld, and the Fronting Bank, at any
time assign and delegate to one or more Eligible Assignees (provided that no
written consent of the Borrower or the Administrative Agent shall be required in
connection with any assignment and delegation by a Lender to an Eligible
Assignee that is an Affiliate of such Lender) (each an “Assignee”) all, or any
ratable part of all, of the LC Obligations, the Commitments and the other rights
and obligations of such Lender hereunder, provided, however, that (w) the
aggregate principal amount of the Commitment assigned by any Lender to someone
other than another Lender shall be in a minimum amount of $5,000,000 (or if
less, the entire Commitment then held by such Lender), (x) after giving effect
to any such assignment by a Lender, the aggregate amount of the Commitments
and/or LC Obligations held by such assigning Lender is at least $5,000,000
(unless such Lender has assigned the entire Commitment and LC Obligations then
held by it), (y) after giving effect to any such assignment by a Lender, the
Assignee Percentage under the Tranche A Commitment and Tranche B Commitment is
the same and the Percentage of the assignor Lender under the Tranche A
Commitment and the Tranche B Commitment is the same, and (z) the Assignee
provides the Administrative Agent and the Borrower with the form specified in
Section 9.10. The Borrower and the Administrative Agent may continue to deal
solely and directly with such Lender in connection with the interest so assigned
to an Assignee

 

57

--------------------------------------------------------------------------------

until (i) written notice of such assignment, together with payment instructions,
addresses and related information with respect to the Assignee, shall have been
given to the Borrower and the Administrative Agent by such Lender and the
Assignee; (ii) such Lender and its Assignee shall have delivered to the Borrower
and the Administrative Agent an Assignment and Acceptance in the form of Exhibit
C (“Assignment and Acceptance”) and (iii) the assignor Lender or Assignee has
paid to the Administrative Agent a processing fee in the amount of $3,500.

 

(b) From and after the date that the Administrative Agent notifies the assignor
Lender that it has received (and provided its consent with respect to) an
executed Assignment and Acceptance and payment of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Lender under the Credit Documents, and (ii) the assignor Lender shall, to the
extent that rights and obligations hereunder and under the other Credit
Documents have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Documents.

 

(c) Immediately upon each Assignee’s making its processing fee payment under the
Assignment and Acceptance, this Agreement shall be deemed to be amended to the
extent, but only to the extent, necessary to reflect the addition of the
Assignee and the resulting adjustment of the Commitments arising therefrom. The
Commitment allocated to each Assignee shall reduce such Commitments of the
assigning Lender pro tanto.

 

(d) Any Lender may at any time sell to one or more commercial banks or other
Persons not Affiliates of the Borrower (a “Participant”) participating interests
in any LC Obligations, the Commitment of that Lender and the other interests of
that Lender (the “originating Lender”) hereunder and under the other Credit
Documents; provided, however, that (i) the originating Lender’s obligations
under this Agreement shall remain unchanged, (ii) the originating Lender shall
remain solely responsible for the performance of such obligations, (iii) the
Borrower and the Administrative Agent shall continue to deal solely and directly
with the originating Lender in connection with the originating Lender’s rights
and obligations under this Agreement and the other Credit Documents, and (iv) no
Lender shall transfer or grant any participating interest under which the
Participant has rights to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Credit Document, except to the
extent such amendment, consent or waiver would require unanimous consent of the
Lenders as described in the first proviso to Section 10.1. In the case of any
such participation, the Participant shall be entitled to the benefit of Sections
3.1, 3.3 and 10.5 to the extent the Lender selling such participation would be
so entitled as though it were also a Lender hereunder, and if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement. All participations shall be pro rata among such
Lender’s Tranche A Commitment and Tranche B Commitment.

 

(e) Notwithstanding any other provision in this Agreement, any Lender may at any
time create a security interest in, or pledge, all or any portion of its rights
under and interest in this

 

58

--------------------------------------------------------------------------------

Agreement and any LC Obligation held by it in favor of any Federal Reserve
Lender in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31
CFR §203.14, and such Federal Reserve Bank may enforce such pledge or security
interest in any manner permitted under applicable law.

 

SECTION 10.9 Confidentiality. Each Lender agrees to take and to cause its
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as “confidential” or
“secret” by the Borrower and provided to it by the Borrower, or by the
Administrative Agent on such Borrower’s behalf, under this Agreement or any
other Credit Document, and neither it nor any of its Affiliates shall use any
such information other than in connection with or in enforcement of this
Agreement and the other Credit Documents or in connection with other business
now or hereafter existing or contemplated with the Borrower; except to the
extent such information (a) was or becomes generally available to the public
other than as a result of disclosure by the Lender, or (b) was or becomes
available on a non-confidential basis from a source other than the Borrower,
provided that such source is not bound by a confidentiality agreement with the
Borrower known to the Lender; provided, however, that any Lender may disclose
such information (i) at the request or pursuant to any requirement of any
Governmental Authority to which the Lender is subject or in connection with an
examination of such Lender by any such authority; (ii) pursuant to subpoena or
other court process; (iii) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (iv) to the extent reasonably
required in connection with any litigation or proceeding to which the
Administrative Agent, any Lender or their respective Affiliates may be party;
(v) to the extent reasonably required in connection with the exercise of any
remedy hereunder or under any other Credit Document; (vi) to such Lender’s
independent auditors and other professional advisors; (vii) to any Participant
or Assignee, actual or potential, provided that such Person agrees in writing to
keep such information confidential to the same extent required of the Lenders
hereunder; (viii) as to any Lender or its Affiliate, as expressly permitted
under the terms of any other document or agreement regarding confidentiality to
which the Borrower is party or is deemed party with such Lender or such
Affiliate; and (ix) to its Affiliates which are either such Lender’s parent or
it or its parent’s wholly owned Subsidiary or, with the prior written consent of
the Borrower which shall not be unreasonably withheld, its other Affiliates.

 

SECTION 10.10 Set-off. In addition to any rights and remedies of the Lenders
provided by law, if an Event of Default exists or the Obligations have been
accelerated, the Fronting Bank and each Lender is authorized at any time and
from time to time, without prior notice to the Borrower, any such notice being
waived by the Borrower to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held by, and other indebtedness at any time owing by, the
Fronting Bank and such Lender to or for the credit or the account of the
Borrower against any and all Obligations owing to the Fronting Bank and such
Lender, now or hereafter existing, irrespective of whether or not the
Administrative Agent the Fronting Bank and such Lender shall have made demand
under this Agreement or any Credit Document and although such Obligations may be
contingent or unmatured. The Fronting Bank and each Lender agree promptly to
notify the Borrower and the Administrative Agent after any such set-off and
application made by such Person; provided, however, that the failure to give
such notice shall not affect the validity of such set-off and application.

 

59

--------------------------------------------------------------------------------

 

SECTION 10.11 Notification of Addresses, Lending Offices, Etc. Each Lender shall
notify the Administrative Agent in writing of any changes in the address to
which notices to the Lender should be directed, of addresses of any Lending
Office, of payment instructions in respect of all payments to be made to it
hereunder and of such other administrative information as the Administrative
Agent shall reasonably request.

 

SECTION 10.12 Counterparts; Facsimile. This Agreement may be executed in any
number of separate counterparts, each of which, when so executed, shall be
deemed an original, and all of said counterparts taken together shall be deemed
to constitute but one and the same instrument. Credit Documents may be
transmitted and/or signed by facsimile. The effectiveness of any such documents
and signatures shall, subject to any Requirement of Law, have the same force and
effect as manually-signed originals and shall be binding on the Borrower, the
Lenders, the Fronting Bank, the Administrative Agent and the LC Administrator.
The Administrative Agent, the Fronting Bank and the LC Administrator may also
require that any such documents and signatures be confirmed by a manually-signed
original thereof; provided, however, that the failure to request or deliver the
same shall not limit the effectiveness of any facsimile document or signature.

 

SECTION 10.13 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.

 

SECTION 10.14 No Third Parties Benefitted. This Agreement is made and entered
into for the sole protection and legal benefit of the Borrower, the LC
Administrator, the Fronting Bank, the Lenders, the Administrative Agent and the
Agent-Related Persons, and their permitted successors and assigns, and no other
Person shall be a direct or indirect legal beneficiary of, or have any direct or
indirect cause of action or claim in connection with, this Agreement or any of
the other Credit Documents.

 

SECTION 10.15 Governing Law and Jurisdiction.

 

(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK PROVIDED THAT THE ADMINISTRATIVE AGENT, THE LC
ADMINISTRATOR AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

 

(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT, THE
FRONTING BANK, THE LC ADMINISTRATOR AND THE LENDERS CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH
OF THE BORROWER, THE ADMINISTRATIVE AGENT, THE FRONTING BANK, THE LC
ADMINISTRATOR AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY

 

60

--------------------------------------------------------------------------------

OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. THE BORROWER, THE ADMINISTRATIVE AGENT, THE FRONTING BANK, THE
LC ADMINISTRATOR AND THE LENDERS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS AND IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID OR BY ANY OTHER MEANS PERMITTED BY NEW YORK OR
FEDERAL LAW.

 

SECTION 10.16 Waiver of Jury Trial. THE BORROWER, THE LC ADMINISTRATOR, THE
FRONTING BANK, THE LENDERS AND THE ADMINISTRATIVE AGENT EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS, OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER
PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT
TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWER, THE LC
ADMINISTRATOR, THE FRONTING BANK, THE LENDERS AND THE ADMINISTRATIVE AGENT EACH
AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION
AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER
CREDIT DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT AND THE OTHER CREDIT DOCUMENTS.

 

SECTION 10.17 Currency Indemnity. If, for the purposes of obtaining judgment in
any court in any jurisdiction with respect to any Credit Document, it becomes
necessary to convert into the currency of such jurisdiction (the “Judgment
Currency”) any amount due under any Credit Document in any currency other than
the Judgment Currency (the “Currency Due”), then conversion shall be made at the
rate of exchange prevailing on the Business Day before the day on which judgment
is given. For this purpose, “rate of exchange” means the rate at which the
Administrative Agent is able, on the relevant date, to purchase the Currency Due
with the Judgment Currency in accordance with its normal practice at its main
branch in San Francisco, California. In the event that there is a change in the
rate of exchange prevailing between the Business Day before the day on which the
judgment is given and the date of payment of the amount due, the Borrower will,
on the day of payment, pay such additional amount, if any, or be entitled to
receive reimbursement of such amount, if any, as may be necessary to ensure that
the amount paid on such date is the amount in the Judgment Currency which when
converted at the rate of exchange prevailing on the date of payment is the
amount then due under any Credit Document in the Currency Due. If the amount of
the Currency Due which the Administrative Agent is so able to purchase is less
than the amount of the Currency Due originally due to it, the

 

61

--------------------------------------------------------------------------------

Borrower shall indemnify and save the Administrative Agent harmless from and
against loss or damage arising as a result of such deficiency. This indemnity
shall constitute an obligation separate and independent from the other
obligations contained in any Credit Document, shall give rise to a separate and
independent cause of action, shall apply irrespective of any indulgence granted
by the Administrative Agent from time to time and shall continue in full force
and effect notwithstanding any judgment or order for a liquidated sum in respect
of an amount due under any Credit Document or under any judgment or order.

 

SECTION 10.18 Service of Process. On or prior to the Amendment Effective Date,
the Borrower shall appoint CT Corporation System (the “Process Agent”), with an
office on the date hereof at 111 8th Avenue, New York, New York 10011, United
States, as its agent to receive on its behalf and its property service of copies
of the summons and complaints and any other process which may be served in any
such action or proceeding, provided that a copy of such process is also mailed
by registered or certified mail, postage prepaid, to the Borrower at its address
specified pursuant to Section 10.2. Such service may be made by mailing or
delivering a copy of such process to the Borrower in care of the Process Agent
at the Process Agent’s above address, and the Borrower hereby irrevocably
authorizes and directs the Process Agent to accept such service on its behalf.
The Borrower agrees to indemnify the Process Agent in connection with all
matters relating to its appointment as agent of the Borrower for such purposes,
to enter into any agreement relating to such appointment which such Process
Agent may customarily require, and to pay such Process Agent’s customary fees
upon demand. As an alternative method of service, the Borrower also irrevocably
consents to the service of any and all process in any such action or proceeding
by the mailing of copies of such process to the Borrower at its address
specified pursuant to Section 10.2. Nothing in this Section 10.18 shall affect
the right of the Administrative Agent or any Lender to serve legal process in
any other manner permitted by law or affect the right of the Administrative
Agent or any Lender to bring any action or proceeding against the Borrower, or
any of its properties in the courts of any other jurisdiction.

 

SECTION 10.19 Entire Agreement. This Agreement, together with the other Credit
Documents, embodies the entire agreement and understanding among the Borrower,
the LC Administrator, the Fronting Bank, the Lenders and the Administrative
Agent, and supersedes all prior or contemporaneous agreements and understandings
of such Persons, verbal or written, relating to the subject matter hereof and
thereof.

 

 

62

--------------------------------------------------------------------------------

MAX RE LTD.

By:

 

 

--------------------------------------------------------------------------------

Title:

 

 

--------------------------------------------------------------------------------

 

S-1

--------------------------------------------------------------------------------

BANK OF AMERICA, NATIONAL

ASSOCIATION, as Administrative Agent, LC

Administrator, Fronting Bank and Lender

By:

 

--------------------------------------------------------------------------------

Title:

 

--------------------------------------------------------------------------------

 

S-2

--------------------------------------------------------------------------------

 

FLEET NATIONAL BANK

By:

 

--------------------------------------------------------------------------------

Title:

 

--------------------------------------------------------------------------------

 

S-3

--------------------------------------------------------------------------------

 

CITIBANK, N.A.

By:

 

--------------------------------------------------------------------------------

Title:

 

--------------------------------------------------------------------------------

 

 

S-4

--------------------------------------------------------------------------------

 

ING BANK N.V., LONDON BRANCH

By:

 

--------------------------------------------------------------------------------

Title:

 

--------------------------------------------------------------------------------

By:

 

--------------------------------------------------------------------------------

Title:

 

--------------------------------------------------------------------------------

 

S-5

--------------------------------------------------------------------------------

SCHEDULE 1.1

 

CONCENTRATION LIMITS

 

Eligible Investments)

--------------------------------------------------------------------------------

    

Limitation per Issuer (as Percentage

of all such

Eligible Investments

--------------------------------------------------------------------------------

    

Limitation per

Issue (as Percentage

of all such

Eligible Investments)

--------------------------------------------------------------------------------

ABS

    

7.5%

    

N/A

Corporate/Municipal Securities

    

N/A

    

7.5%

MBS (Non Agency CMOs)

    

5%

    

7.5%

G7 Securities

    

N/A

    

7.5%

 

 

Sch. 1.1-1

--------------------------------------------------------------------------------

SCHEDULE 1.2

 

BORROWING BASE CALCULATION

 

Eligible Investments

--------------------------------------------------------------------------------

    

Applicable Percentage of Fair Market Value

--------------------------------------------------------------------------------

Cash and Cash Equivalents

    

98%

A1/P1 Commercial Paper

    

98%

Government Debt with maturities of more than one year but less than five year

    

98%

Government Debt with maturities of five years or more

    

95%

MBS (Agency Pass-Throughs) rated AA - by S&P or Aa3 by Moody’s or better

    

90%

MBS (Agency CMOs) rated AA - by S&P or Aa3 by Moody’s or better

    

90%

MBS (Non-Agency CMOs) rated AAA by S&P or Aaa by Moody’s

    

90%

MBS (Non-Agency CMOs) rated AA - by S&P or Aa3 by Moody’s or better

    

87.5%

ABS

    

95%

G7 Securities issued by the Governments of Germany or the United Kingdom

    

95%

G7 Securities issued by the Governments of France, Japan or Canada

    

93%

G7 Securities issued by the Government of Italy

    

92%

Corporate/Municipal Securities rated AAA by S&P or Aaa by Moody’s

    

94%

Corporate/Municipal Securities rated at least AA - by S&P or Aa3 by Moody’s

    

93%

Corporate/Municipal Securities rated at A - by S&P or A3 by Moody’s

    

92%

 

Sch. 1.2-1

--------------------------------------------------------------------------------

 

SCHEDULE 2.1

 

COMMITMENTS

 

Lender

--------------------------------------------------------------------------------

  

Individual

Commitment

--------------------------------------------------------------------------------

  

Tranche A

Commitment

--------------------------------------------------------------------------------

  

Tranche B

Commitment

--------------------------------------------------------------------------------

  

Percentage

--------------------------------------------------------------------------------

 

Bank of America, National Association

  

$

100,000,000

  

$

100,000,000

  

$

20,000,000

  

26.666666667

%

Fleet National Bank

  

$

90,000,000

  

$

90,000,000

  

$

18,000,000

  

24.000000000

%

Citibank, NA

  

$

100,000,000

  

$

100,000,000

  

$

20,000,000

  

26.666666667

%

ING Bank N.V., London Branch

  

$

85,000,000

  

$

85,000,000

  

$

17,000,000

  

22.666666666

%

    

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

      

TOTAL

  

$

375,000,000

  

$

375,000,000

  

$

75,000,000

  

100.000000000

%

 

 

Sch. 2.1-1

--------------------------------------------------------------------------------

SCHEDULE 4.1

 

JURISDICTIONS

 

Max Re Ltd

 

Bermuda

 

Max Re Europe Limited

 

Ireland

 

 

Sch.-4.1-1

--------------------------------------------------------------------------------

 

SCHEDULE 4.2

 

LITIGATION

 

None

 

 

Sch. 4.2-1

--------------------------------------------------------------------------------

 

SCHEDULE 4.7

 

LOCATIONS

 

Ascot House

28 Queen Street

P.O. Box HM 2565

Hamilton HM KX, Bermuda

 

Max Re Europe Limited

Commerzbank House

Guild St 1 FFC

Dublin, 1

Ireland

 

 

Sch. 4.7-1

--------------------------------------------------------------------------------

 

SCHEDULE 4.9

 

SUBSIDIARIES

 

Max Re Europe Limited

 

Max Re Diversified Strategies, Ltd.

 

 

Sch. 4.9-1

--------------------------------------------------------------------------------

 

SCHEDULE 4.10

 

INSURANCE LICENSES

 

Bermuda licence for General Business Insurance

 

Borrower is licensed as a Class IV, General and long-term Insurer in Bermuda,
which allows writing of all property, casualty, life, and health lines.

 

Max Re Europe Limited has permit to write business in Ireland.

 

 

Sch. 4.10-1

--------------------------------------------------------------------------------

 

SCHEDULE 6.7

 

LIENS

 

None

 

 

Sch. 6.7-1

--------------------------------------------------------------------------------

SCHEDULE 10.2

 

ADDRESSES

 

LENDING OFFICES,

ADDRESSES FOR NOTICES

 

BANK OF AMERICA, NATIONAL ASSOCIATION,

as Administrative Agent, Fronting Bank,

LC Administrator and Lender

 

Lending Letter of Credit Office:

 

231 South LaSalle Street

Letter of Credit Operations/#1580

Chicago, Illinois 60697

Attention: Manager—Standby Letter of Credit Unit

Facsimile: (312) 987-6828

 

Notices (other than notices of

Credit Extensions):

 

Bank of America, National Association

231 South LaSalle Street

Chicago, Illinois 60697

Attention: Debra Basler

Telephone: (312) 828-3734

Facsimile: (312) 987-0889

 

FLEET NATIONAL BANK

 

Lender Letter of Credit Office and Notices:

 

Fleet National Bank

Mail Code CT MO 0250

777 Main Street

Hartford, CT 06115

Attention: Anson Harris

Telephone: (860) 986-7518

Facsimile: (860) 986-1264

 

Sch. 10.2-1

--------------------------------------------------------------------------------

CITIBANK, N.A.

 

Lender Letter of Credit Office and Notices:

 

Citibank, N.A.

388 Greenwich Street

22nd Floor

New York,

New York 10013

Attention: Mike A. Taylor

Telephone: (212) 816-4033

Facsimile: (212) 816-4144

 

ING BANK N.V.

 

Lender Letter of Credit Office and Notices:

 

60 London Wall

London EC2M 5TQ

United Kingdom

Attention: Robert Miners

Telephone: 011 44 207 767 5908

Facsimile: 011 44 207 767 7507

 

MAX RE LTD.

 

Notices:

 

Max Re Ltd.

P.O. Box HM 2565

Ascot House

28 Queen Street

Hamilton HM KX, Bermuda

Attention: Keith Hynes, Chief Financial Officer

Telephone: (441) 296-8800

Facsimile: (441) 296-8811

 

Sch. 10.2-2