Document:

Exhibit 10.2

 

FORM OF LEVEL 3 COMMUNICATIONS, INC.

RESTRICTED STOCK UNIT AND PERFORMANCE RESTRICTED STOCK UNIT AWARD AGREEMENT

 

THIS RESTRICTED STOCK UNIT AND PERFORMANCE RESTRICTED STOCK UNIT AWARD AGREEMENT (the “Agreement”) is dated as of June 2, 2014 (the “Effective Date”) between Level 3 Communications, Inc., a Delaware corporation (the “Company”), and the individual whose name appears on the signature page to this Agreement (the “Consultant”).  This Agreement shall incorporate, to the extent applicable, provisions of the Level 3 Communications, Inc. Stock Plan (as amended from time to time) (the “Plan”).

 

WHEREAS, pursuant to the terms of a Consulting Agreement dated February 16, 2011 (as amended, the “Consulting Agreement”), the Company is obligated to grant to the Consultant Restricted Stock Units (also referred to as “RSUs”) and Performance Restricted Stock Units (also referred to as “PRSUs” and referred to as “Performance Units” in the Plan) (each such grant an “Award”), as described below, pursuant to the Plan.  Capitalized terms used but not expressly defined in this Agreement will have the meanings ascribed to them in the Plan.

 

NOW, THEREFORE, the parties agree as follows:

 

1.                                      Definitions.  The following capitalized terms as used in this Agreement shall have the meanings set forth below:

 

“Successor” means any person, firm, corporation, or business entity that at any time, whether by merger, purchase or otherwise, acquires all or substantially all of the assets, stock or business of the Company.

 

2.                                      Grants of Awards. Pursuant to the provisions of the Plan, the Company, on July 1, 2014, shall grant Awards to the Consultant of 15,596 RSUs and 15,596 PRSUs that, under certain circumstances and in accordance with the terms hereof, may result in the Consultant having the right to acquire shares of common stock of the Company, par value $.01 per share (the “Shares”). Each Award will be evidenced by a letter evidencing the Award (the “Award Letter”) attached as Exhibit A (with respect to RSUs) and Exhibit B (with respect to PRSUs).

 

3.                                      Vesting of Awards.

 

(a)                                 Time Based Vesting Conditions. Subject to the terms and conditions of this Agreement, the RSUs and PRSUs shall satisfy the applicable time-based vesting conditions on the date or dates set forth in each Award Letter (each such date, a “Scheduled Vesting Date”).

 

(b)                                 Performance-Based Vesting Criteria.  The performance-based vesting criteria (if any) shall be set forth in the Award Letter for the award of PRSUs.  For PRSUs, as soon as practicable following the end of the Performance Period, the Committee shall make a determination of the level of attainment of the Performance Objective.  The Committee may, in its sole discretion, adjust any Performance Objective as described in Section 8.5.3 of the Plan, and such adjustments, if made, shall be applied to determine not only the minimum acceptable level of achievement of the Performance Objective, but all levels of achievement for any

 

 

Performance Objective specified in the Award Letter (from the minimum to the maximum level of achievement).

 

(c)                                  Death or Disability.  In the event of Consultant’s death or permanent total disability, all RSUs and PRSUs associated with any outstanding Award shall immediately vest and settle and be delivered to Consultant (or his or her estate) as soon as administratively feasible following such event (and in all events no later than the March 15 of the calendar year following the calendar year in which such death or permanent total disability occurs).  For purposes of calculating the number of Shares to be delivered in such event based on any Award of PRSUs where the Performance Period has not expired prior to the date of such event, the Performance Objective for any outstanding Awards for PRSUs shall be set at the target level (100%) set forth in each Award Letter.  In the event that such event occurs after the Performance Period for any PRSU Award has expired, the Performance Objective shall be measured in accordance with the terms set forth in the Award Letter and the Award shall vest and settle in full as soon as practicable after the determination of the satisfaction of the Performance Objective.

 

4.                                      Settlement of Awards.  Except as otherwise set forth in this Agreement or an Award Letter, within thirty (30) days following the applicable Scheduled Vesting Date for an RSU or PRSU granted hereunder, the Consultant shall receive the number of Shares associated with the RSUs and PRSUs covered by and determined in accordance with each Award Letter.  Notwithstanding the foregoing, the Committee shall have the sole discretion to pay cash equal to the Fair Market Value of the Shares on the Scheduled Vesting Date that would otherwise be delivered to Consultant.

 

5.                                      Nonassignability.  Except as specifically allowed by the Committee in writing, an Award shall not be transferable other than by will or the laws of descent and distribution.  More particularly (but without limiting the generality of the foregoing), except as provided above an Award may not be assigned, transferred, pledged or hypothecated in any way, shall not be assignable by operation of law, and shall not be subject to execution, attachment or similar process.  Any attempted assignment, transfer, pledge, hypothecation or other disposition of an Award contrary to the provisions hereof and the levy of any execution, attachment or similar process upon an Award shall be null and void and without effect.

 

6.                                      General.  Subject to the provisions of Section 4 with respect to the form of the payment for any Award settlement, the Company shall at all times during the term of this Agreement reserve and keep available such number of Shares, as determined by the Committee from time to time, as will be sufficient in the Committee’s good faith determination to satisfy the requirements of this Agreement, shall pay all original issue and transfer taxes with respect to the issue and transfer of Shares pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection therewith, and will from time to time use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Company, shall be applicable thereto.

 

7.                                      Successors.  The Company will require any Successor (whether direct or indirect, by purchase, merger, consolidation, operation of law or otherwise) to unconditionally assume all of the obligations of the Company hereunder.  In the event that the Committee determines that a

 

2

 

Successor will not unconditionally assume all of the Company’s obligations hereunder, the Committee may, in its sole discretion, determine to accelerate the Scheduled Vesting Dates and settlement of (and/or determine in its discretion the Performance Objective measurement for all PRSUs) all Awards granted hereunder as of a date prior to the effective date of any change in control (in which event Consultant shall not have a cause of action against the Company for a violation of this Section).

 

8.                                      No Stockholder Rights.  The Consultant shall not have any of the rights of a stockholder with respect to the Award Shares resulting from any Award prior to the issuance of Stock, if any, to the Consultant on the Scheduled Vesting Date.  Notwithstanding the foregoing, with respect to any Award granted hereunder, the Consultant shall receive delivery of cash equal to the amount of the aggregate cash dividends (without interest), if any, that the Consultant did not receive but would have received if, for the period beginning on the Award Date and ending on the applicable settlement date, the Consultant had owned all of the Shares delivered (or that would have been delivered in the case of a cash payment) to the Consultant on the applicable settlement date

 

9.                                      The Plan.  The terms and provisions set forth in the Plan are incorporated herein by reference as if they were set forth herein; provided, however, that in the event of a direct conflict between the terms of the Plan and the terms of this Agreement, the terms of this Agreement shall govern, and provided, further, that any provision of the Plan that applies to Company employees receiving grants of RSUs or PRSUs shall be amended with respect to Consultant to be appropriate to Consultant’s status as a consultant and not an employee of Company.  Reference to provisions of the Plan are to such provisions as they shall be subsequently amended or renumbered; provided that no amendment to the Plan which adversely affects an Award shall be effective as to that Award without the written consent of the Consultant.

 

10.                               Plan, Agreement and Award Letters Govern.  Although any information sent to or made available to the Consultant concerning the Plan and this Agreement is intended to be an accurate summary of the terms and conditions of any Award, this Agreement, the Plan and the Award Letters are the authoritative documents governing the Award and any inconsistency between the Agreement, the Plan and the Award Letter, on one hand, and any other summary information, on the other hand, shall be resolved in favor of the Agreement, the Plan and the Award Letter.

 

	
LEVEL 3   COMMUNICATIONS, INC.
    	
THOMAS C. STORTZ
    
	
(“Company”)
    	
(“Consultant”)
    
	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
By:
    	
/s/ Laurinda Y. Pang
    	
 
    	
By:
    	
/s/ Thomas C. Stortz
    
	
 
    	
 
    	
 
    	
 
    
	
Title:
    	
Executive   Vice President
    	
 
    	
 
    

 

3

 

EXHIBIT A

RSU Award Letter

 

Personal & Confidential

 

Thomas C. Stortz

[Address]

[Address]

 

Dear Tom:

 

This Award Letter is delivered to you (the “Participant) pursuant to the Restricted Stock Unit and Performance Restricted Stock Unit Master Award Agreement (the “Master Agreement”) dated as of                                 , as well as the Plan (as defined in the Master Agreement).

 

The terms and conditions of this Award are set forth below and in the Master Agreement and the Plan, the provisions of which are incorporated herein by reference.

 

A.                                    The date of grant of this Award is                      (the “Award Date”).

 

B.                                    The number of RSUs subject to this Award is                   .

 

C.                                    The Scheduled Vesting Date(s) for this Award are:

 

 

	
 
    	
LEVEL 3 COMMUNICATIONS, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
BY:
    	
 
    
	
 
    	
ITS:
    	
 
    
	
 
    	
 
    

 

	
 
    	
PARTICIPANT:
    	
 
    

 

4

 

EXHIBIT B

PRSU Award Letter

 

Personal & Confidential

 

Thomas C. Stortz

[Address]

[Address]

 

Dear Tom:

 

This Award Letter is delivered to you (the “Participant) pursuant to the Restricted Stock Unit and Performance Restricted Stock Unit Master Award Agreement (the “Master Agreement”) dated as of                                 , as well as the Plan (as defined in the Master Agreement).

 

The terms and conditions of this Award are set forth below and in the Master Agreement and the Plan, the provisions of which are incorporated herein by reference.

 

A.                                    The date of grant of this Award is                      (the “Award Date”).

 

B.                                    The number of PRSUs subject to this Award is                   .

 

C.                                    The Scheduled Vesting Date(s) for this Award are:

 

[To be determined by the Committee for each Award Letter]

 

D.                                    The Performance Period begins on                                  and ends on                                             .

 

E.                                     The Performance Objective:

 

[To be determined by the Committee for each Award Letter]

 

 

	
 
    	
LEVEL 3 COMMUNICATIONS, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
BY:
    	
 
    
	
 
    	
ITS:
    	
 
    
	
 
    	
 
    

 

	
 
    	
PARTICIPANT:
    	
 
    

 

5Exhibit 10.1

 

Execution Version

 

 

CREDIT AGREEMENT

 

DATED AS OF MAY 28, 2014

 

AMONG

 

RLI CORP.,

 

THE LENDERS

AND

 

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,
 AS AGENT

 

 

J.P. MORGAN SECURITIES LLC,
 AS LEAD ARRANGER AND SOLE BOOKRUNNER

 

 

Table of Contents

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I
    	
DEFINITIONS
    	
1
    
	
 
    	
 
    	
 
    
	
ARTICLE II
    	
THE   CREDITS
    	
17
    
	
 
    	
 
    	
 
    
	
2.1
    	
Commitment
    	
17
    
	
 
    	
 
    	
 
    
	
2.2
    	
Termination
    	
17
    
	
 
    	
 
    	
 
    
	
2.3
    	
Ratable   Loans
    	
17
    
	
 
    	
 
    	
 
    
	
2.4
    	
Types   of Advances
    	
17
    
	
 
    	
 
    	
 
    
	
2.5
    	
Commitment   Fee; Reductions and Increases in Aggregate Commitment
    	
17
    
	
 
    	
 
    	
 
    
	
2.6
    	
Minimum   Amount of Each Advance
    	
18
    
	
 
    	
 
    	
 
    
	
2.7
    	
Optional   Principal Payments
    	
18
    
	
 
    	
 
    	
 
    
	
2.8
    	
Method   of Selecting Types and Interest Periods for New Advances
    	
18
    
	
 
    	
 
    	
 
    
	
2.9
    	
Conversion   and Continuation of Outstanding Advances
    	
19
    
	
 
    	
 
    	
 
    
	
2.10
    	
Changes   in Interest Rate, etc
    	
19
    
	
 
    	
 
    	
 
    
	
2.11
    	
Rates   Applicable After Default
    	
20
    
	
 
    	
 
    	
 
    
	
2.12
    	
Method   of Payment
    	
20
    
	
 
    	
 
    	
 
    
	
2.13
    	
Noteless   Agreement; Evidence of Indebtedness
    	
20
    
	
 
    	
 
    	
 
    
	
2.14
    	
Telephonic   Notices
    	
21
    
	
 
    	
 
    	
 
    
	
2.15
    	
Interest   Payment Dates; Interest and Fee Basis
    	
21
    
	
 
    	
 
    	
 
    
	
2.16
    	
Notification   of Advances, Interest Rates, Prepayments and Commitment Reductions
    	
21
    
	
 
    	
 
    	
 
    
	
2.17
    	
Lending   Installations
    	
22
    
	
 
    	
 
    	
 
    
	
2.18
    	
Non-Receipt   of Funds by the Agent
    	
22
    
	
 
    	
 
    	
 
    
	
ARTICLE III
    	
INCREASED   COSTS; TAXES
    	
22
    
	
 
    	
 
    	
 
    
	
3.1
    	
Increased   Costs
    	
22
    
	
 
    	
 
    	
 
    
	
3.2
    	
Alternate   Rate of Interest
    	
23
    
	
 
    	
 
    	
 
    
	
3.3
    	
Funding   Indemnification
    	
24
    
	
 
    	
 
    	
 
    
	
3.4
    	
Taxes
    	
24
    
	
 
    	
 
    	
 
    
	
 
    	
3.4.1
    	
Payments   Free of Taxes
    	
24
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.4.2
    	
Payment   of Other Taxes by the Borrower
    	
24
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.4.3
    	
Evidence   of Payments
    	
24
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.4.4
    	
Indemnification   by the Borrower
    	
24
    
					

 

i

 

Table of Contents

(continued)

 

	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.4.5
    	
Indemnification   by the Lenders
    	
25
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.4.6
    	
Status   of Lenders
    	
25
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.4.7
    	
Treatment   of Certain Refunds
    	
27
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.4.8
    	
Survival
    	
27
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.4.9
    	
Defined   Terms
    	
27
    
	
 
    	
 
    	
 
    	
 
    
	
3.5
    	
Lender   Statements; Survival of Indemnity
    	
28
    
	
 
    	
 
    	
 
    
	
3.6
    	
Substitution   of Lender
    	
28
    
	
 
    	
 
    	
 
    
	
3.7
    	
Defaulting   Lenders
    	
28
    
	
 
    	
 
    	
 
    
	
ARTICLE IV
    	
CONDITIONS   PRECEDENT
    	
29
    
	
 
    	
 
    	
 
    
	
4.1
    	
Effectiveness
    	
29
    
	
 
    	
 
    	
 
    
	
4.2
    	
Each   Advance
    	
30
    
	
 
    	
 
    	
 
    
	
ARTICLE V
    	
REPRESENTATIONS   AND WARRANTIES
    	
30
    
	
 
    	
 
    	
 
    
	
5.1
    	
Existence   and Standing
    	
30
    
	
 
    	
 
    	
 
    
	
5.2
    	
Authorization   and Validity
    	
30
    
	
 
    	
 
    	
 
    
	
5.3
    	
No   Conflict; Consent
    	
30
    
	
 
    	
 
    	
 
    
	
5.4
    	
Financial   Statements
    	
31
    
	
 
    	
 
    	
 
    
	
5.5
    	
Taxes
    	
31
    
	
 
    	
 
    	
 
    
	
5.6
    	
Material   Adverse Change
    	
31
    
	
 
    	
 
    	
 
    
	
5.7
    	
Litigation   and Contingent Obligations
    	
31
    
	
 
    	
 
    	
 
    
	
5.8
    	
Subsidiaries
    	
32
    
	
 
    	
 
    	
 
    
	
5.9
    	
ERISA
    	
32
    
	
 
    	
 
    	
 
    
	
5.10
    	
Accuracy   of Information
    	
32
    
	
 
    	
 
    	
 
    
	
5.11
    	
Regulation   U
    	
32
    
	
 
    	
 
    	
 
    
	
5.12
    	
Material   Agreements
    	
32
    
	
 
    	
 
    	
 
    
	
5.13
    	
Compliance   With Laws
    	
32
    
	
 
    	
 
    	
 
    
	
5.14
    	
Plan   Assets; Prohibited Transactions
    	
32
    
	
 
    	
 
    	
 
    
	
5.15
    	
Investment   Company Act
    	
33
    
	
 
    	
 
    	
 
    
	
5.16
    	
Insurance   Licenses
    	
33
    
	
 
    	
 
    	
 
    
	
5.17
    	
Solvency
    	
33
    
	
 
    	
 
    	
 
    
	
5.18
    	
Labor   Controversies; Union Contracts, Etc
    	
33
    
					

 

ii

 

Table of Contents

(continued)

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
5.19
    	
Surety   Obligations; Financial Assurances
    	
33
    
	
 
    	
 
    	
 
    
	
5.20
    	
Business   Relations
    	
34
    
	
 
    	
 
    	
 
    
	
5.21
    	
Hazardous   Materials
    	
34
    
	
 
    	
 
    	
 
    
	
5.22
    	
Ranking
    	
34
    
	
 
    	
 
    	
 
    
	
5.23
    	
Intellectual   Property
    	
34
    
	
 
    	
 
    	
 
    
	
5.24
    	
Sanctions   Laws and Regulations
    	
34
    
	
 
    	
 
    	
 
    
	
ARTICLE VI
    	
COVENANTS
    	
34
    
	
 
    	
 
    	
 
    
	
6.1
    	
Financial   Reporting
    	
35
    
	
 
    	
 
    	
 
    
	
6.2
    	
Other   Reports
    	
35
    
	
 
    	
 
    	
 
    
	
6.3
    	
Use of   Proceeds
    	
36
    
	
 
    	
 
    	
 
    
	
6.4
    	
Notice   of Default
    	
36
    
	
 
    	
 
    	
 
    
	
6.5
    	
Taxes
    	
36
    
	
 
    	
 
    	
 
    
	
6.6
    	
Insurance
    	
36
    
	
 
    	
 
    	
 
    
	
6.7
    	
Compliance   with Laws
    	
37
    
	
 
    	
 
    	
 
    
	
6.8
    	
Maintenance   of Properties
    	
37
    
	
 
    	
 
    	
 
    
	
6.9
    	
Inspection
    	
37
    
	
 
    	
 
    	
 
    
	
6.10
    	
Conduct   of Business
    	
37
    
	
 
    	
 
    	
 
    
	
6.11
    	
Dividends
    	
38
    
	
 
    	
 
    	
 
    
	
6.12
    	
Merger
    	
38
    
	
 
    	
 
    	
 
    
	
6.13
    	
Sale of   Assets
    	
38
    
	
 
    	
 
    	
 
    
	
6.14
    	
Investments   and Acquisitions
    	
39
    
	
 
    	
 
    	
 
    
	
6.15
    	
Liens
    	
39
    
	
 
    	
 
    	
 
    
	
6.16
    	
Reinsurance
    	
41
    
	
 
    	
 
    	
 
    
	
6.17
    	
Affiliates
    	
41
    
	
 
    	
 
    	
 
    
	
6.18
    	
Financial   Covenants
    	
41
    
	
 
    	
 
    	
 
    
	
 
    	
6.18.1
    	
Leverage   Ratio
    	
41
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
6.18.2
    	
Risk-Based   Capital
    	
41
    
	
 
    	
 
    	
 
    	
 
    
	
6.19
    	
Sanctions   Laws and Regulations
    	
42
    
	
 
    	
 
    	
 
    
	
ARTICLE VII
    	
DEFAULTS
    	
42
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII
    	
ACCELERATION,   WAIVERS, AMENDMENTS AND REMEDIES
    	
44
    
					

 

iii

 

Table of Contents

(continued)

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
8.1
    	
Acceleration
    	
44
    
	
 
    	
 
    	
 
    
	
8.2
    	
Amendments
    	
44
    
	
 
    	
 
    	
 
    
	
8.3
    	
Preservation   of Rights
    	
45
    
	
 
    	
 
    	
 
    
	
ARTICLE IX
    	
GENERAL   PROVISIONS
    	
45
    
	
 
    	
 
    	
 
    
	
9.1
    	
Survival   of Representations
    	
45
    
	
 
    	
 
    	
 
    
	
9.2
    	
Governmental   Regulation
    	
45
    
	
 
    	
 
    	
 
    
	
9.3
    	
Headings
    	
46
    
	
 
    	
 
    	
 
    
	
9.4
    	
Entire   Agreement
    	
46
    
	
 
    	
 
    	
 
    
	
9.5
    	
Several   Obligations; Benefits of this Agreement
    	
46
    
	
 
    	
 
    	
 
    
	
9.6
    	
Expenses;   Indemnification
    	
46
    
	
 
    	
 
    	
 
    
	
9.7
    	
Numbers   of Documents
    	
47
    
	
 
    	
 
    	
 
    
	
9.8
    	
Accounting
    	
47
    
	
 
    	
 
    	
 
    
	
9.9
    	
Severability   of Provisions
    	
47
    
	
 
    	
 
    	
 
    
	
9.10
    	
Nonliability   of Lenders
    	
47
    
	
 
    	
 
    	
 
    
	
9.11
    	
Confidentiality
    	
47
    
	
 
    	
 
    	
 
    
	
9.12
    	
Nonreliance
    	
48
    
	
 
    	
 
    	
 
    
	
9.13
    	
Disclosure
    	
48
    
	
 
    	
 
    	
 
    
	
9.14
    	
USA   Patriot Act
    	
48
    
	
 
    	
 
    	
 
    
	
ARTICLE X
    	
THE   AGENT
    	
48
    
	
 
    	
 
    	
 
    
	
10.1
    	
Appointment;   Nature of Relationship
    	
48
    
	
 
    	
 
    	
 
    
	
10.2
    	
Powers
    	
48
    
	
 
    	
 
    	
 
    
	
10.3
    	
General   Immunity
    	
49
    
	
 
    	
 
    	
 
    
	
10.4
    	
No   Responsibility for Loans, Recitals, etc
    	
49
    
	
 
    	
 
    	
 
    
	
10.5
    	
Action   on Instructions of Lenders
    	
49
    
	
 
    	
 
    	
 
    
	
10.6
    	
Employment   of Agents and Counsel
    	
49
    
	
 
    	
 
    	
 
    
	
10.7
    	
Reliance   on Documents; Counsel
    	
49
    
	
 
    	
 
    	
 
    
	
10.8
    	
Agent’s   Reimbursement and Indemnification
    	
50
    
	
 
    	
 
    	
 
    
	
10.9
    	
Notice   of Default
    	
50
    
	
 
    	
 
    	
 
    
	
10.10
    	
Rights   as a Lender
    	
50
    
	
 
    	
 
    	
 
    
	
10.11
    	
Lender   Credit Decision
    	
50
    
				

 

iv

 

Table of Contents

(continued)

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
10.12
    	
Successor   Agent
    	
51
    
	
 
    	
 
    	
 
    
	
10.13
    	
Delegation   to Affiliates
    	
51
    
	
 
    	
 
    	
 
    
	
ARTICLE XI
    	
SETOFF;   RATABLE PAYMENTS
    	
51
    
	
 
    	
 
    	
 
    
	
11.1
    	
Setoff
    	
51
    
	
 
    	
 
    	
 
    
	
11.2
    	
Ratable   Payments
    	
52
    
	
 
    	
 
    	
 
    
	
ARTICLE XII
    	
BENEFIT   OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
    	
52
    
	
 
    	
 
    	
 
    
	
12.1
    	
Successors   and Assigns
    	
52
    
	
 
    	
 
    	
 
    
	
12.2
    	
Participations
    	
53
    
	
 
    	
 
    	
 
    
	
 
    	
12.2.1
    	
Permitted   Participants; Effect
    	
53
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
12.2.2
    	
Voting   Rights
    	
53
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
12.2.3
    	
Benefit   of Certain Provisions
    	
53
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
12.2.4
    	
Participant   Register
    	
54
    
	
 
    	
 
    	
 
    	
 
    
	
12.3
    	
Assignments
    	
54
    
	
 
    	
 
    	
 
    
	
 
    	
12.3.1
    	
Permitted   Assignments
    	
54
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
12.3.2
    	
Consents
    	
54
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
12.3.3
    	
Effect;   Effective Date
    	
54
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
12.3.4
    	
Register
    	
55
    
	
 
    	
 
    	
 
    	
 
    
	
12.4
    	
Dissemination   of Information
    	
55
    
	
 
    	
 
    	
 
    
	
12.5
    	
Tax   Treatment
    	
55
    
	
 
    	
 
    	
 
    
	
ARTICLE XIII
    	
NOTICES
    	
56
    
	
 
    	
 
    	
 
    
	
13.1
    	
Notices
    	
56
    
	
 
    	
 
    	
 
    
	
13.2
    	
Change   of Address
    	
56
    
	
 
    	
 
    	
 
    
	
ARTICLE XIV
    	
COUNTERPARTS
    	
56
    
	
 
    	
 
    	
 
    
	
ARTICLE XV
    	
CHOICE   OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
    	
56
    
					

 

v

 

	
EXHIBITS
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Exhibit A
    	
 
    	
Form of   Compliance Certificate
    
	
Exhibit B
    	
 
    	
Form of   Assignment Agreement
    
	
Exhibit C
    	
 
    	
Form of   Note
    
	
Exhibit D
    	
 
    	
Form of   Tax Certificate
    
	
 
    	
 
    	
 
    
	
SCHEDULES
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Schedule   5.8
    	
 
    	
Subsidiaries
    
	
Schedule   5.9
    	
 
    	
Employee   Plans
    
	
Schedule   5.19
    	
 
    	
Financial   Assurance
    

 

vi

 

CREDIT AGREEMENT

 

This Credit Agreement, dated as of May 28, 2014 is among RLI Corp., an Illinois corporation, the Lenders and JPMorgan Chase Bank, National Association, a national banking association, as Agent.  The parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

As used in this Agreement:

 

“Acquisition” means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which the Borrower or any of its Subsidiaries (a) acquires any going business or all or substantially all of the assets of any firm, corporation or limited liability company, or division thereof, whether through purchase of assets, merger or otherwise or (b) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding ownership interests of a partnership or limited liability company.

 

“Act” means, collectively, the Laws of any Governmental Authority which apply to the conduct of business by the Borrower.

 

“Adjusted LIBO Rate” means, with respect to any Eurodollar Advance for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the sum of (a)(i) the LIBO Rate for such Interest Period multiplied by (ii) the Statutory Reserve Rate plus (b) the Applicable Rate.

 

“Advance” means a borrowing hereunder, (a) made by the Lenders on the same Borrowing Date, or (b) converted or continued by the Lenders on the same date of conversion or continuation, consisting, in either case, of the aggregate amount of the several Loans of the same Type and, in the case of Eurodollar Loans, for the same Interest Period.

 

“Affiliate” of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person.  A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise.

 

“Agent” means JPMorgan Chase Bank, National Association, in its capacity as contractual representative of the Lenders pursuant to Article X, and not in its individual capacity as a Lender, and any successor Agent appointed pursuant to Article X.

 

 

“Aggregate Commitment” means the aggregate of the Commitments of all the Lenders, as reduced from time to time pursuant to the terms hereof.

 

“Agreement” means this credit agreement, as it may be amended or modified and in effect from time to time.

 

“Agreement Accounting Principles” means generally accepted accounting principles as in effect from time to time, applied in a manner consistent with those used in preparing the financial statements referred to in Section 6.1.

 

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 1⁄2 of 1% and (c) the Adjusted LIBO Rate for a one month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1% less the Applicable Rate, provided that, for the avoidance of doubt, the Adjusted LIBO Rate for any day shall be based on the rate appearing on the Reuters Screen LIBOR01 Page (or on any successor or substitute page of such page) at approximately 11:00 a.m. London time on such day.  Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate, respectively.

 

“Annual Statement” means the annual statutory financial statement of any Insurance Subsidiary required to be filed with the insurance commissioner (or similar authority) of its jurisdiction of incorporation, which statement shall be in the form required by such Insurance Subsidiary’s jurisdiction of incorporation or, if no specific form is so required, in the form of financial statements permitted by such insurance commissioner (or such similar authority) to be used for filing annual statutory financial statements and shall contain the type of information permitted by such insurance commissioner (or such similar authority) to be disclosed therein, together with all exhibits or schedules filed therewith.

 

“Applicable Rate” means, for any day, with respect to any Floating Rate Loan or Eurodollar Loan, or with respect to the commitment fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption “Floating Rate Spread”, “Eurodollar Spread” or “Commitment Fee Rate”, as the case may be, based upon the Moody’s Rating and the S&P Rating applicable on such date to the Index Debt:

 

	
Index Debt Ratings:
    	
 
    	
Floating Rate Spread
    	
 
    	
Eurodollar Spread
    	
 
    	
Commitment Fee Rate
    	
 
    
	
Level I Status
    	
 
    	
0.125
    	
%
    	
1.125
    	
%
    	
0.150
    	
%
    
	
Level II Status
    	
 
    	
0.250
    	
%
    	
1.250
    	
%
    	
0.175
    	
%
    
	
Level III Status
    	
 
    	
0.375
    	
%
    	
1.375
    	
%
    	
0.225
    	
%
    

 

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For the purposes of this definition:

 

“Level I Status” exists at any date if, on such date, the Borrower’s Moody’s Rating is A3 or better or the Borrower’s S&P Rating is A- or better.

 

“Level II Status” exists at any date if, on such date, (i) the Borrower has not qualified for Level I Status and (ii) the Borrower’s Moody’s Rating is Baa1 or better or the Borrower’s S&P Rating is BBB+ or better.

 

“Level III Status” exists at any date if, on such date, the Borrower has not qualified for Level I Status or Level II Status.

 

“Moody’s Rating” means, at any time, the rating issued by Moody’s and then in effect with respect to the Index Debt.

 

“S&P Rating” means, at any time, the rating issued by S&P and then in effect with respect to the Index Debt.

 

“Status” means Level I Status, Level II Status or Level III Status.

 

For purposes of the foregoing, (i) if the ratings established or deemed to have been established by Moody’s and S&P for the Index Debt shall fall within different Levels, the Applicable Rate shall be based on the higher of the two ratings unless one of the two ratings is two or more Levels lower than the other, in which case the Applicable Rate shall be determined by reference to the rating which is one Level above the lower of the two ratings, and (ii) if the ratings established or deemed to have been established by Moody’s and S&P for the Index Debt shall be changed (other than as a result of a change in the rating system of Moody’s or S&P, as applicable), such change shall be effective as of the date on which it is first announced by the applicable rating agency, irrespective of when notice of such change shall have been furnished by the Borrower to the Agent and the Lenders pursuant to Section 6.1 or otherwise.  Each change in the Applicable Rate shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change.  If the rating system of Moody’s or S&P shall change, if either Moody’s or S&P shall cease to be in the business of rating corporate debt obligations or if neither Moody’s nor S&P shall have in effect a rating for the Index Debt, then the Borrower, the Agent and the Required Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such ratings agency and, pending the effectiveness of any such amendment, the Applicable Rate shall be determined by reference to the rating most recently in effect prior to any such change or cessation.

 

“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

 

“Arranger” means J.P. Morgan Securities LLC, a Delaware limited liability company, and its successors, in its capacity as Lead Arranger and Sole Bookrunner.

 

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“Article” means an article of this Agreement unless another document is specifically referenced.

 

“Authorized Officer” means any of the CEO/President, Chief Operating Officer, Chief Financial Officer or Treasurer of the Borrower, acting singly, or any other Person to whom such authority may be delegated by such named officer from time to time following prior notice to the Agent.

 

“Bankruptcy Event” means, with respect to any Person, such Person becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or, in the good faith determination of the Agent, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment, provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person by a Governmental Authority or instrumentality thereof, provided, further, that such ownership interest does not result in or provide such Person with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Person (or such Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.

 

“Board” means the Board of Governors of the Federal Reserve System of the United States (or any successor).

 

“Borrower” means RLI Corp., an Illinois corporation, and its successors and assigns.

 

“Borrowing Date” means a date on which an Advance is made hereunder.

 

“Borrowing Notice” is defined in Section 2.8.

 

“Business Day” means (a) with respect to any borrowing, payment or rate selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago and New York City for the conduct of substantially all of their commercial lending activities, interbank wire transfers can be made on the Fedwire system and dealings in United States dollars are carried on in the London interbank market and (b) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago for the conduct of substantially all of their commercial lending activities and interbank wire transfers can be made on the Fedwire system.

 

“Capitalized Lease” of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles.

 

“Capitalized Lease Obligations” of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles.

 

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“Cash Equivalents” means (a) short-term obligations of, or fully guaranteed by, the United States of America, (b) commercial paper rated A-1 or better by S&P or P-1 or better by Moody’s, (c) demand deposit accounts maintained in the ordinary course of business, and (d) certificates of deposit issued by and time deposits with commercial banks (whether domestic or foreign) having capital and surplus in excess of $100,000,000; provided in each case that the same provides for payment of both principal and interest (and not principal alone or interest alone) and is not subject to any contingency regarding the payment of principal or interest.

 

“CBIC” means Contractors Bonding and Insurance Co., a Washington insurance company.

 

“Change in Control” means (a) a “change in control,” as defined in any applicable state law Insurance Holding Company System Regulatory Act or similar legislation, regulation, applicable insurance commission or department order, with respect to RLIC or MHIC; (b) any “Person” or “group” (as such terms are used in Sections 13d and 14d of the 1934 Act, is or shall become the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the 1934 Act) directly or indirectly, of 25% or more on a fully diluted basis of the voting capital stock interest of the Borrower; (c) during any period of 12 consecutive calendar months, commencing on the date hereof, the ceasing of those individuals (the “Continuing Directors”) who (i) were directors of the Borrower on the first day of each such period or (ii) subsequently became directors of the Borrower and whose initial election or initial nomination for election subsequent to that date was approved by a majority of the Continuing Directors then on the board of directors of the Borrower, to constitute a majority of the board of directors of the Borrower; (d) the Borrower shall cease to own beneficially and of record, free and clear of all Liens, other encumbrances or voting agreements, restrictions or trusts of any kind, 100% of the outstanding shares of voting stock of RLIC on a fully diluted basis; or (e) RLIC shall cease to own beneficially and of record, free and clear of all Liens, other encumbrances or voting agreements, restrictions or trusts of any kind, 100% of the outstanding shares of voting shock of MHIC on a fully diluted basis.

 

“Change in Law” means the occurrence, after the date of this Agreement or, with respect to any Lender, such later date on which such Lender becomes a party to this Agreement, of (a) the adoption of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the interpretation or application thereof by any Governmental Authority or (c) compliance by any Lender (or, for purposes of Section 3.1, by any lending office of such Lender or by such Lender’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement; provided, that notwithstanding anything herein to the contrary,  (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

 

“Closing Date” means the date on which each of the conditions set forth in Section 4.1 has been satisfied.

 

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“Code” means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time.

 

“Commitment” means, for each Lender, the obligation of such Lender to make Loans not exceeding the amount set forth opposite its signature below, as it may be modified as a result of any assignment that has become effective pursuant to Section 12.3.2 or as otherwise modified from time to time pursuant to the terms hereof.

 

“Connection Income Taxes”  means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

 

“Consolidated Indebtedness” means at any time the Indebtedness of the Borrower and its Subsidiaries calculated on a consolidated basis as of such time.

 

“Consolidated Interest Expense” means, with reference to any period, the interest expense of the Borrower and its Subsidiaries calculated on a consolidated basis for such period.

 

“Consolidated Net Income” means, with reference to any period, the net income (or loss) of the Borrower and its Subsidiaries calculated on a consolidated basis for such period.

 

“Consolidated Net Worth” means at any time the consolidated stockholders’ equity of the Borrower and its Subsidiaries calculated on a consolidated basis as of such time.

 

“Consolidated Total Capitalization” means at any time the sum of Consolidated Indebtedness and Consolidated Net Worth, each calculated at such time.

 

“Contingent Obligation” of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take-or-pay contract or the obligations of any such Person as general partner of a partnership with respect to the liabilities of the partnership.

 

“Conversion/Continuation Notice” is defined in Section 2.9.

 

“Controlled Group” means all members of a controlled group of corporations or other business entities and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code.

 

“Default” means an event described in Article VII.

 

“Defaulting Lender” means any Lender that (a) has failed, within two Business Days of the date required to be funded or paid, to (i) fund any portion of its Loans, or (ii) pay over to the Borrower any other amount required to be paid by it hereunder, unless, in the case of clause (i)

 

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above, such Lender notifies the Agent in writing that such failure is the result of such Lender’s good faith determination that a condition precedent to funding (specifically identified and including the particular default, if any) has not been satisfied, (b) has notified the Borrower in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Lender’s good faith determination that a condition precedent (specifically identified and including the particular default, if any) to funding a loan under this Agreement cannot be satisfied) or generally under other agreements in which it commits to extend credit,  (c) has failed, within three Business Days after request by the Borrower, acting in good faith, to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations (and is financially able to meet such obligations) to fund prospective Advances under this Agreement, provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon the Borrower’s receipt of such certification in form and substance satisfactory to it and the Agent, or (d) has become the subject of a Bankruptcy Event.

 

“Designated Persons” means a person or entity (a) listed in the annex to, or otherwise subject to the provisions of, any Executive Order; (b) named as a “Specially Designated National and Blocked Person” (“SDN”) on the most current list published by OFAC at its official website or any replacement website or other replacement official publication of such list (the “SDN List”) or is otherwise the subject of any Sanctions Laws and Regulations; or (c) in which an entity or person on the SDN List has 50% or greater ownership interest or that is otherwise controlled by an SDN.

 

“Employee Plan” means any pension, retirement, disability, medical, dental or other health plan, life insurance or other death benefit plan, profit sharing, deferred compensation, stock option, bonus or other incentive plan, vacation benefit plan, severance plan, or other employee benefit plan or arrangement, including, without limitation, those pension, profit-sharing and retirement plans of the Borrower described from time to time in the Financial Statements, and any pension plan, welfare plan, Defined Benefit Pension Plans (as defined in ERISA) or any multi-employer plan, maintained or administered by the Borrower or any Affiliate of the Borrower, to which the Borrower or any Affiliate of the Borrower is a party or may have any liability or by which the Borrower or any Affiliate is bound.

 

“Environmental Laws” means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to (a) the protection of the environment, (b) the effect of the environment on human health, (c) emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into surface water, ground water or land, or (d) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rule or regulation issued thereunder.

 

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“Eurodollar Advance” means an Advance which, except as otherwise provided in Section 2.11, bears interest at the applicable Adjusted LIBO Rate.

 

“Eurodollar Loan” means a Loan which, except as otherwise provided in Section 2.11, bears interest at the applicable Adjusted LIBO Rate.

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. Federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 3.6) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 3.4, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender acquired the applicable interest in a Loan or Commitment or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 3.4(f) and (d) any U.S. Federal withholding Taxes imposed under FATCA.

 

“Executive Order” has the meaning assigned to it in the definition of Sanctions Laws and Regulations.

 

“Exhibit” refers to an exhibit to this Agreement, unless another document is specifically referenced.

 

“Facility Termination Date” means May 28, 2018.

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the Code.

 

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion.

 

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“FHLB Agreement” means any loan agreement or other instrument or agreement governing Indebtedness entered into between RLIC or MHIC and the Federal Home Loan Bank of Chicago.

 

“Financial Assurance” means any financial assurance (whether in the form of a bond, letter of credit, cash or otherwise) required pursuant to any Act, other than insurance policies and bonds issued by any Insurance Subsidiary in the ordinary course of business.

 

“Financial Hedge” means a swap, collar, floor, cap or other contract which is intended to reduce or eliminate the risk of fluctuations in interest rates.

 

“Financial Statements” is defined in Section 5.4.

 

“Floating Rate” means, for any day, a rate per annum equal to the Alternate Base Rate for such day, changing when and as the Alternate Base Rate changes, plus the Applicable Rate.

 

“Floating Rate Advance” means an Advance which, except as otherwise provided in Section 2.11, bears interest at the Floating Rate.

 

“Floating Rate Loan” means a Loan which, except as otherwise provided in Section 2.11, bears interest at the Floating Rate.

 

“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

 

“Governmental Authority” means any government (foreign or domestic) or any state or other political subdivision thereof or any governmental body, agency, authority, department or commission (including without limitation any board of insurance, insurance department or insurance commissioner and any taxing authority or political subdivision) or any instrumentality or officer thereof (including without limitation any court or tribunal) exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any corporation, partnership or other entity directly or indirectly owned or controlled by or subject to the control of any of the foregoing.

 

“Hazardous Materials” means and includes (a) any friable asbestos (or asbestos which becomes friable), PCBs or dioxins or insulation or other material composed of or containing friable asbestos (or asbestos which becomes friable), PCBs or dioxins and (b) any petroleum or any fraction thereof and any hazardous or toxic waste, substance or material defined as such in (or for purposes of) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, any applicable so-called “superfund” or “superlien” law, or any other applicable law regulating or pertaining to any such waste, substance or material, as now or at any time hereafter in effect.

 

“Indebtedness” of a Person means such Person’s (a) obligations for borrowed money, including, without limitation, obligations under any FHLB Agreement, (b) obligations representing the deferred purchase price of Property or services (other than accounts payable arising in the ordinary course of such Person’s business payable on terms customary in the trade),

 

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(c) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from Property now or hereafter owned or acquired by such Person, (d) obligations which are evidenced by notes, acceptances, or other instruments, (e) obligations to purchase securities or other Property arising out of or in connection with the sale of the same or substantially similar securities or Property, (f) Capitalized Lease Obligations, (g) obligations arising in respect of reverse repurchase transactions, (h) reimbursement obligations arising in respect of drawn and undrawn Letters of Credit, (i) senior obligations with respect to Financial Hedges, but only following the occurrence of a default under the applicable Financial Hedge or a Default hereunder, (j) senior obligations with respect to debt for which a Person is responsible or liable solely as a guarantor, but only from and after the date demand for payment is made under the applicable guaranty, and (k) any other obligation for borrowed money or other financial accommodation which in accordance with Agreement Accounting Principles would be shown as a liability on the consolidated balance sheet of such Person.

 

“Index Debt” means senior, unsecured, long-term indebtedness for borrowed money of the Borrower that is not guaranteed by any other Person or subject to any other credit enhancement.

 

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by the Borrower under this Agreement and (b) Other Taxes.

 

“Insurance Subsidiary” means any Subsidiary which is engaged in the insurance business.

 

“Interest Period” means, with respect to a Eurodollar Advance or a Eurodollar Loan, a period of one, two, three or six months commencing on a Business Day selected by the Borrower pursuant to this Agreement.  Such Interest Period shall end on the day which corresponds numerically to such date one, two, three or six months thereafter, provided, however, that if there is no such numerically corresponding day in such next, second, third or sixth succeeding month, such Interest Period shall end on the last Business Day of such next, second, third or sixth succeeding month.  If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day.

 

“Investment” of a Person means any loan, advance (other than commission, travel and similar advances to officers and employees made in the ordinary course of business), extension of credit (other than premiums or accounts receivable arising in the ordinary course of business on terms customary in the trade) or contribution of capital by such Person; stocks, bonds, mutual funds, partnership interests, notes, debentures or other securities owned by such Person; any deposit accounts and certificate of deposit owned by such Person; and structured notes, derivative financial instruments and other similar instruments or contracts owned by  such Person.

 

“Investment Grade Obligations” means, as of any date for each Insurance Subsidiary, investments having an NAIC investment rating of 1 or 2, or a Standard & Poor’s rating within the range of ratings from AAA to BBB-, or a Moody’s rating within the range of ratings from Aaa to Baa3.

 

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“JPMCB” means JPMorgan Chase Bank, National Association, a national banking association, in its individual capacity, and its successors.

 

“Laws” means all ordinances, statutes, rules, regulations, codes, orders, injunctions, writs or decrees of any Governmental Authority.

 

“Lenders” means the lending institutions listed on the signature pages of this Agreement and their respective successors and assigns.

 

“Lending Installation” means, with respect to a Lender or the Agent, the office, branch, subsidiary or affiliate of such Lender or the Agent listed on the signature pages hereof or on a Schedule or otherwise selected by such Lender or the Agent pursuant to Section 2.17.

 

“Letter of Credit” of a Person means a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is an account party or for which such Person is in any way liable.

 

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on the Reuters Screen LIBOR01 Page 1 (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period.  In the event that such rate is not available at such time for any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.

 

“License” means any license, certificate of authority, permit or other authorization which is required to be obtained from any Governmental Authority in connection with the operation, ownership or transaction of insurance business.

 

“Lien” means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement).

 

“Loan” means, with respect to a Lender, such Lender’s loan made pursuant to Article II (or any conversion or continuation thereof).

 

“Loan Documents” means this Agreement, any Notes issued pursuant to Section 2.13, and any other document designated as such.

 

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“Material Adverse Effect” means a material adverse effect on (a) the business, Property, condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries taken as a whole, (b) the ability of the Borrower to perform its obligations under the Loan Documents, or (c) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Agent or the Lenders thereunder.

 

“Material Indebtedness” means Indebtedness in an outstanding principal amount of $10,000,000 or more in the aggregate (or the equivalent thereof in any currency other than U.S. dollars).

 

“Material Indebtedness Agreement” means any agreement under which any Material Indebtedness was created or is governed or which provides for the incurrence of Indebtedness in an amount which would constitute Material Indebtedness (whether or not an amount of Indebtedness constituting Material Indebtedness is outstanding thereunder).

 

“MHIC” means Mt. Hawley Insurance Company, an Illinois insurance company.

 

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

 

“NAIC” means the National Association of Insurance Commissioners or any successor thereto, or in lieu thereof, any other association, agency or other organization performing advisory, coordination or other like functions among insurance departments, insurance commissioners and similar Governmental Authorities of the various states of the United States toward the promotion of uniformity in the practices of such Governmental Authorities.

 

“Non-U.S. Lender” means a lender which is not a U.S. Person.

 

“Note” is defined in Section 2.13.

 

“Obligations” means all unpaid principal of and accrued and unpaid interest on the Loans, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Borrower to the Lenders or to any Lender, the Agent or any indemnified party arising under the Loan Documents.

 

“OFAC” means Office of Foreign Assets Control of the United States Department of the Treasury.

 

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

 

“Other Taxes” means any present or future stamp, court, documentary, intangible, recording, filing or similar excise or property Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, or from the registration, receipt or perfection of a security interest under, or otherwise with respect to, this

 

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Agreement, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment under Section 3.6).

 

“Participants” is defined in Section 12.2.1.

 

“Participant Register” has the meaning assigned to such term in Section 12.2.4.

 

“Payment Date” means the first day of each January, April, July and October.

 

“PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.

 

“Person” means any natural person, corporation, firm, joint venture, partnership, limited liability company, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof.

 

“Plan” means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which the Borrower or any member of the Controlled Group may have any liability.

 

“Prime Rate” means the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank, National Association as its prime rate in effect at its office located at 270 Park Avenue, New York, New York; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.

 

“Property” of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person.

 

“Purchasers” is defined in Section 12.3.1.

 

“Quarterly Statement” means the quarterly statutory financial statement of any Insurance Subsidiary required to be filed with the insurance commissioner (or similar authority) of its jurisdiction of incorporation or, if no specific form is so required, in the form of financial statements permitted by such insurance commissioner (or such similar authority) to be used for filing quarterly statutory financial statements and shall contain the type of financial information permitted by such insurance commissioner (or such similar authority) to be disclosed therein, together with all exhibits or schedules filed therewith.

 

“Recipient” means, as applicable, (a) the Agent, and (b) any Lender.

 

“Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System.

 

“Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the

 

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purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System.

 

“Reportable Event” means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code.

 

“Reports” is defined in Section 9.6.

 

“Required Lenders” means Lenders in the aggregate having at least a majority of the Aggregate Commitment or, if the Aggregate Commitment has been terminated, Lenders in the aggregate holding at least a majority of the aggregate unpaid principal amount of the outstanding Advances.

 

“Reserve Requirement” means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on Eurocurrency liabilities.

 

“Response Date” is defined in Section 2.19.

 

“Risk Based Capital Act” means the Risk-Based Capital for Property and Casualty Insurers Model Act and the rules, regulations and procedures prescribed from time to time by the NAIC with respect thereto, in each case as amended, modified or supplemented from time to time by the NAIC.

 

“Risk-Based Capital Guidelines” is defined in Section 3.2.

 

“RLIC” means RLI Insurance Company, an Illinois insurance company.

 

“Sanctions Laws and Regulations” means any sanctions, prohibitions or requirements imposed by any executive order (an “Executive Order”) or by any sanctions program administered by OFAC.

 

“SAP” means, with respect to any Insurance Subsidiary, the statutory accounting practices prescribed or permitted by the insurance commissioner (or other similar authority) in the jurisdiction of such Person for the preparation of annual statements and other financial reports by insurance companies of the same type as such Person in effect from time to time, applied in a manner consistent with those used in preparing the financial statements referred to in Section 6.1.

 

“S&P” means Standard and Poor’s Ratings Group, a division of The McGraw Hill Companies, Inc.

 

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“Schedule” refers to a specific schedule to this Agreement, unless another document is specifically referenced.

 

“Section” means a numbered section of this Agreement, unless another document is specifically referenced.

 

“Single Employer Plan” means a Plan maintained by the Borrower or any member of the Controlled Group for employees of the Borrower or any member of the Controlled Group.

 

“Statutory Net Income” means, with respect to any Insurance Subsidiary at any time, the net income of such Insurance Subsidiary at such time, as determined in accordance with SAP.

 

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentage (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Agent is subject for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board).  Such reserve percentage shall include those imposed pursuant to such Regulation D.  Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation.  The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

 

“Statutory Surplus as Regards Policyholders” means, with respect to any Insurance Subsidiary at any time, the capital and surplus of such Insurance Subsidiary at such time, as determined in accordance with SAP.

 

“Subsidiary” of a Person means (a) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (b) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled.  Unless otherwise expressly provided, all references herein to a “Subsidiary” shall mean a Subsidiary of the Borrower.

 

“Substantial Portion” means, with respect to the Property of the Borrower and its Subsidiaries, Property which represents more than 10% of the consolidated assets of the Borrower and its Subsidiaries or property which is responsible for more than 10% of the consolidated net revenue of the Borrower and its Subsidiaries, in each case, as would be shown in the consolidated financial statements of the Borrower and its Subsidiaries as at the beginning of the twelve-month period ending with the month in which such determination is made (or if financial statements have not been delivered hereunder for that month which begins the twelve-month period, then the financial statements delivered hereunder for the quarter ending immediately prior to that month).

 

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“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

“Total Invested Assets” means, as of any date, as to each Insurance Subsidiary, the amount of such Insurance Subsidiary’s cash and invested assets calculated in accordance with SAP.

 

“Transferee” is defined in Section 12.4.

 

“Type” means, with respect to any Advance, its nature as a Floating Rate Advance or a Eurodollar Advance and with respect to any Loan, its nature as a Floating Rate Loan or a Eurodollar Loan.

 

“Unfunded Liabilities” means the amount (if any) by which the present value of all vested and unvested accrued benefits under all Single Employer Plans exceeds the fair market value of all such Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plans using PBGC actuarial assumptions for single employer plan terminations.

 

“Unmatured Default” means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default.

 

“U.S. Person” means a “United States person” within the meaning of Section 7701(a)(30) of the Code.

 

“U.S. Tax Certificate” has the meaning assigned to such term in Section 3.4(f)(ii)(D)(2).

 

“Wholly-Owned Subsidiary” of a Person means (a) any Subsidiary all of the outstanding voting securities of which shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (b) any partnership, limited liability company, association, joint venture or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled.

 

The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms.  References herein to particular columns, lines or sections of any Person’s Annual Statement shall be deemed, where appropriate, to be references to the corresponding column, line or section of such Person’s Quarterly Statement, or if no such corresponding column, line or section exists or if any report form changes, then to the corresponding item referenced thereby.   In the event that the columns, lines or sections of the Annual Statement referenced herein are changed or renumbered, all such references shall be deemed references to such column, line or section as so renumbered or changed.   References herein to the Risk Based Capital Act shall be deemed to be references to such act as in effect on the date of this Agreement; provided, that the Agent, the Lenders and the Borrower agree to make mutually acceptable modifications to Section 6.18 hereof following the request by any thereof upon any modification to such act.  Each accounting term used herein which is not otherwise defined herein shall be defined in accordance with Agreement Accounting Principles or SAP, as applicable, unless otherwise specified. Notwithstanding the foregoing, for purposes of

 

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determining compliance with any covenant (including the computation of any financial covenant) contained herein, Indebtedness of the Borrower and its Subsidiaries shall be deemed to be carried at 100% of the outstanding principal amount thereof, and the effects of FASB ASC 825 and FASB ASC 470-20 on financial liabilities shall be disregarded.

 

ARTICLE II

 

THE CREDITS

 

2.1                               Commitment.  From and including the date of this Agreement and prior to the Facility Termination Date, each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make Loans to the Borrower from time to time in amounts not to exceed in the aggregate at any one time outstanding the amount of its Commitment.  Subject to the terms of this Agreement, the Borrower may borrow, repay and reborrow at any time prior to the Facility Termination Date.  The Commitments to lend hereunder shall expire on the Facility Termination Date.

 

2.2                               Termination.  Any outstanding Advances and all other unpaid Obligations shall be paid in full by the Borrower on the Facility Termination Date.

 

2.3                               Ratable Loans.  Each Advance hereunder shall consist of Loans made from the several Lenders ratably in proportion to the ratio that their respective Commitments bear to the Aggregate Commitment.

 

2.4                               Types of Advances.  The Advances may be Floating Rate Advances or Eurodollar Advances, or a combination thereof, selected by the Borrower in accordance with Sections 2.8 and 2.9.

 

2.5                               Commitment Fee; Reductions and Increases in Aggregate Commitment.

 

(a)                                 The Borrower agrees to pay to the Agent for the account of each Lender a commitment fee at a per annum rate equal to the Applicable Rate on the daily unused portion of such Lender’s Commitment from the date hereof to and including the Facility Termination Date, payable on each Payment Date hereafter and on the Facility Termination Date.  All accrued commitment fees shall be payable on the effective date of any termination of the obligations of the Lenders to make Loans hereunder.

 

(b)                                 The Borrower may permanently reduce the Aggregate Commitment in whole, or in part ratably among the Lenders in integral multiples of $1,000,000, upon at least five Business Days’ written notice to the Agent, which notice shall specify the amount of any such reduction, provided, however, that the amount of the Aggregate Commitment may not be reduced below the aggregate principal amount of the outstanding Advances.

 

(c)                                  The Borrower may, at its option, on up to two occasions, seek to increase the Aggregate Commitment by up to an aggregate amount of $25,000,000 (resulting in a maximum Aggregate Commitment of $65,000,000) upon at least three (3) Business Days’ prior written notice to the Agent, which notice shall specify the amount of any such increase and shall

 

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be delivered at a time when no Default or Unmatured Default has occurred and is continuing. The Borrower shall, after giving such notice, first offer the increase in the Aggregate Commitment on a ratable basis to the Lenders (which may be declined by any Lender in its sole discretion).  If any existing Lender does not accept the offer to increase its Commitment, the Borrower may offer the amount so declined to one or more Lenders and/or to other Lenders or entities reasonably acceptable to the Agent.  No increase in the Aggregate Commitment shall become effective until the existing or new Lenders extending such incremental Commitment amount and the Borrower shall have delivered to the Agent a document in form reasonably satisfactory to the Agent pursuant to which any such existing Lender states the amount of its Commitment increase,  any such new Lender states its Commitment amount and agrees to assume and accept the obligations and rights of a Lender hereunder and the Borrower accepts such incremental Commitments.  The Lenders (new or existing) shall accept an assignment from the existing Lenders, and the existing Lenders shall make an assignment to the new or existing Lender accepting a new or increased Commitment, of a direct or participation interest in each then outstanding Advance such that, after giving effect thereto, all credit exposure hereunder is held ratably by the Lenders in proportion to their respective Commitments.  Assignments pursuant to the preceding sentence shall be made in exchange for the principal amount assigned plus accrued and unpaid interest and facility fees.  The Borrower shall make any payments under Section 3.4 resulting from such assignments.  Any such increase of the Aggregate Commitment shall be subject to receipt by the Agent from the Borrower of resolutions approving the increase in the Aggregate Commitment and such other supplemental opinions, resolutions, certificates and other documents as the Agent may reasonably request.

 

2.6                               Minimum Amount of Each Advance.  Each Eurodollar Advance shall be in an amount of not less than $1,000,000 or any larger amount that is an integral multiple of $500,000, and each Floating Rate Advance shall be in an amount of not less than $500,000 or any larger amount that is an integral multiple of $500,000, provided, however, that any Floating Rate Advance may be in the amount of the unused Aggregate Commitment.

 

2.7                               Optional Principal Payments.  The Borrower may from time to time pay, without penalty or premium, all outstanding Floating Rate Advances, or, in a minimum aggregate amount of $1,000,000 or any integral multiple of $100,000 in excess thereof, any portion of the outstanding Floating Rate Advances upon two Business Days’ prior notice to the Agent.  The Borrower may from time to time pay, subject to the payment of any funding indemnification amounts required by Section 3.4 but without penalty or premium, all outstanding Eurodollar Advances, or, in a minimum aggregate amount of $1,000,000 or any integral multiple of $100,000 in excess thereof, any portion of the outstanding Eurodollar Advances upon three Business Days’ prior notice to the Agent.

 

2.8                               Method of Selecting Types and Interest Periods for New Advances.  The Borrower shall select the Type of Advance and, in the case of each Eurodollar Advance, the Interest Period applicable thereto from time to time.  The Borrower shall give the Agent irrevocable notice (a “Borrowing Notice”) not later than 12:00 noon (Chicago time) on the Borrowing Date of each Floating Rate Advance and two Business Days before the Borrowing Date for each Eurodollar Advance, specifying:

 

(i)                                   the Borrowing Date, which shall be a Business Day, of such Advance,

 

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(ii)                                the aggregate amount of such Advance,

 

(iii)                             the Type of Advance selected, and

 

(iv)                             in the case of each Eurodollar Advance, the Interest Period applicable thereto (which may not end after the Facility Termination Date).

 

Not later than 2:00 p.m. (Chicago time) on each Borrowing Date, each Lender shall make available its Loan or Loans in funds immediately available in Chicago to the Agent at its address specified pursuant to Article XIII.  The Agent will make the funds so received from the Lenders available to the Borrower at the Agent’s aforesaid address.

 

2.9                               Conversion and Continuation of Outstanding Advances.  Floating Rate Advances shall continue as Floating Rate Advances unless and until such Floating Rate Advances are converted into Eurodollar Advances pursuant to this Section 2.9 or are repaid in accordance with Section 2.7.  Each Eurodollar Advance shall continue as a Eurodollar Advance until the end of the then applicable Interest Period therefor, at which time such Eurodollar Advance shall be automatically converted into a Floating Rate Advance unless (x) such Eurodollar Advance is or was repaid in accordance with Section 2.7 or (y) the Borrower shall have given the Agent a Conversion/Continuation Notice (as defined below) requesting that, at the end of such Interest Period, such Eurodollar Advance continue as a Eurodollar Advance for the same or another Interest Period.  Subject to the terms of Section 2.6, the Borrower may elect from time to time to convert all or any part of a Floating Rate Advance into a Eurodollar Advance.  The Borrower shall give the Agent irrevocable notice (a “Conversion/Continuation Notice”) of each conversion of a Floating Rate Advance into a Eurodollar Advance or continuation of a Eurodollar Advance not later than 12:00 noon (Chicago time) at least two Business Days prior to the date of the requested conversion or continuation, specifying:

 

(i)                                   the requested date, which shall be a Business Day, of such conversion or continuation,

 

(ii)                                the aggregate amount and Type of the Advance which is to be converted or continued, and

 

(iii)                             the amount of such Advance which is to be converted into or continued as a Eurodollar Advance and the duration of the Interest Period applicable thereto (which may not end after the Facility Termination Date).

 

2.10                        Changes in Interest Rate, etc.  Each Floating Rate Advance shall bear interest on the outstanding principal amount thereof, for each day from and including the date such Advance is made or is automatically converted from a Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.9, to but excluding the date it is paid or is converted into a Eurodollar Advance pursuant to Section 2.9 hereof, at a rate per annum equal to the Floating Rate for such day.  Changes in the rate of interest on that portion of any Advance maintained as a Floating Rate Advance will take effect simultaneously with each change in the Alternate Base Rate.  Each Eurodollar Advance shall bear interest on the outstanding principal amount thereof from and including the first day of the Interest Period applicable thereto to (but not including) the last day

 

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of such Interest Period at the interest rate determined by the Agent as applicable to such Eurodollar Advance based upon the Borrower’s selections under Sections 2.8 and 2.9 and otherwise in accordance with the terms hereof.  No Interest Period may end after the Facility Termination Date.

 

2.11                        Rates Applicable After Default.  Notwithstanding anything to the contrary contained in Section 2.8, 2.9 or 2.10, during the continuance of a Default or Unmatured Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that no Advance may be made as, converted into or continued as a Eurodollar Advance.  During the continuance of a Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that (i) each Eurodollar Advance shall bear interest for the remainder of the applicable Interest Period at the rate otherwise applicable to such Interest Period plus 2% per annum and (ii) each Floating Rate Advance shall bear interest at a rate per annum equal to the Floating Rate in effect from time to time plus 2% per annum, provided that, during the continuance of a Default under Section 7.6 or 7.7, the interest rates set forth in clauses (i) and (ii) above shall be applicable to all Advances without any election or action on the part of the Agent or any Lender.

 

2.12                        Method of Payment.  All payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in immediately available funds to the Agent at the Agent’s address specified pursuant to Article XIII, or at any other Lending Installation of the Agent specified in writing by the Agent to the Borrower, by noon (local time) on the date when due and shall be applied ratably by the Agent among the Lenders.  Each payment delivered to the Agent for the account of any Lender shall be delivered promptly by the Agent to such Lender in the same type of funds that the Agent received at its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Agent from such Lender.  The Agent is hereby authorized at any time during the continuance of a Default to charge the account of the Borrower maintained with JPMCB for each payment of principal, interest and fees as it becomes due and remains unpaid hereunder, other than any part thereof which is reasonably being disputed by the Borrower.

 

2.13                        Noteless Agreement; Evidence of Indebtedness.  (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

 

(b)                                 The Agent shall also maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period with respect thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Agent hereunder from the Borrower and each Lender’s share thereof.

 

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(c)                                  The entries maintained in the accounts maintained pursuant to paragraphs (a) and (b) above shall be prima facie evidence of the existence and amounts of the Obligations therein recorded; provided, however, that the failure of the Agent or any Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Obligations in accordance with their terms.

 

(d)                                 Any Lender may request that its Loans be evidenced by a promissory note in substantially the form of Exhibit C (a “Note”).  In such event, the Borrower shall prepare, execute and deliver to such Lender such Note payable to the order of such Lender.  Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (prior to any assignment pursuant to Section 12.3) be represented by one or more Notes payable to the order of the payee named therein, except to the extent that any such Lender subsequently returns any such Note for cancellation and requests that such Loans once again be evidenced as described in paragraphs (a) and (b) above.

 

2.14                        Telephonic Notices.  The Borrower hereby authorizes the Lenders and the Agent to extend, convert or continue Advances, effect selections of Types of Advances and to transfer funds based on telephonic notices made by any person or persons the Agent or any Lender in good faith believes to be acting on behalf of the Borrower, it being understood that the foregoing authorization is specifically intended to allow Borrowing Notices and Conversion/Continuation Notices to be given telephonically.  The Borrower agrees to deliver promptly to the Agent a written confirmation, if such confirmation is requested by the Agent or any Lender, of each telephonic notice signed by an Authorized Officer.  If the written confirmation differs in any material respect from the action taken by the Agent and the Lenders, the records of the Agent and the Lenders shall govern absent manifest error.

 

2.15                        Interest Payment Dates; Interest and Fee Basis.  Interest accrued on each Floating Rate Advance shall be payable on each Payment Date, commencing with the first such date to occur after the date hereof and at maturity.  Interest accrued on each Eurodollar Advance shall be payable on the last day of its applicable Interest Period, on any date on which the Eurodollar Advance is prepaid, whether by acceleration or otherwise, and at maturity.  Interest accrued on each Eurodollar Advance having an Interest Period longer than three months shall also be payable on the last day of each three-month interval during such Interest Period.  Interest and commitment fees shall be calculated for actual days elapsed on the basis of a 360-day year.  Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is received prior to noon (local time) at the place of payment.  If any payment of principal of or interest on an Advance shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment.

 

2.16                        Notification of Advances, Interest Rates, Prepayments and Commitment Reductions.  Promptly after receipt thereof, the Agent will notify each Lender of the contents of each Aggregate Commitment reduction notice, Borrowing Notice, Conversion/Continuation Notice, and repayment notice received by it hereunder.  The Agent will notify each Lender of the interest rate applicable to each Eurodollar Advance promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Alternate Base Rate.

 

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2.17                        Lending Installations.  Each Lender may book its Loans at any Lending Installation selected by such Lender and may change its Lending Installation from time to time.  All terms of this Agreement shall apply to any such Lending Installation and the Loans and any Notes issued hereunder shall be deemed held by each Lender for the benefit of any such Lending Installation.  Each Lender may, by written notice to the Agent and the Borrower in accordance with Article XIII, designate replacement or additional Lending Installations through which Loans will be made by it and for whose account Loan payments are to be made.

 

2.18                        Non-Receipt of Funds by the Agent.  Unless the Borrower or a Lender, as the case may be, notifies the Agent prior to the date on which it is scheduled to make payment to the Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal, interest or fees to the Agent for the account of the Lenders, that it does not intend to make such payment, the Agent may assume that such payment has been made.  The Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption.  If such Lender or the Borrower, as the case may be, has not in fact made such payment to the Agent, the recipient of such payment shall, on demand by the Agent, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal to (x) in the case of payment by a Lender, the Federal Funds Effective Rate for such day for the first three days and, thereafter, the interest rate applicable to the relevant Loan or (y) in the case of payment by the Borrower, the interest rate applicable to the relevant Loan.

 

ARTICLE III

 

INCREASED COSTS; TAXES

 

3.1                               Increased Costs.

 

(a)                               If any Change in Law shall:

 

(i)                                   impose, modify or deem applicable any reserve, special deposit, liquidity or similar requirement (including any compulsory loan requirement, insurance charge or other assessment) against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate);

 

(ii)                                impose on any Lender or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Eurodollar Loans made by such Lender; or

 

(iii)                             subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto;

 

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and (x) the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender or such other Recipient hereunder (whether of principal, interest or otherwise), and (y) such Lender or other Recipient, as the case may be, is generally demanding similar compensation from its other similar borrowers in similar circumstances, then the Borrower will pay to such Lender or such other Recipient, as the case may be, such additional amount or amounts as will compensate such Lender or such other Recipient, as the case may be, for such additional costs incurred or reduction suffered.

 

(b)                                 If any Lender reasonably determines that any Change in Law regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement or the Loans made by such Lender, to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy and liquidity), then from time to time the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.

 

(c)                                  A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be promptly delivered to the Borrower and shall be conclusive absent manifest error.  The Borrower shall pay such Lender the amount shown as due on any such certificate within 30 days after receipt thereof.

 

(d)                                 Subject to Section 3.5(b), failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such compensation.

 

3.2                               Alternate Rate of Interest.  If prior to the commencement of any Interest Period for a Eurodollar Advance:

 

(i)                                   the Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period; or

 

(ii)                                the Agent is advised by the Required Lenders that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period;

 

then the Agent shall give notice thereof to the Borrower and the Lenders by telephone or electronic mail as promptly as practicable thereafter and, until the Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any 

 

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Conversion/Continuation Notice that requests the conversion of any Advance to, or continuation of any Advance as, a Eurodollar Advance shall be ineffective and (ii) if any Borrowing Notice requests a Eurodollar Advance, such Advance shall be made as an Floating Rate Advance.

 

3.3                               Funding Indemnification.  If any payment of a Eurodollar Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a Eurodollar Advance is not made on the date specified by the Borrower for any reason other than default by the Lenders, the Borrower will indemnify each Lender for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain such Eurodollar Advance.

 

3.4                               Taxes.

 

3.4.1                     Payments Free of Taxes.  Any and all payments by or on account of any obligation of the Borrower under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable law.  If any applicable law (as determined in the good faith discretion of an applicable withholding agent) requires the deduction or withholding of any Tax from any such payment by a withholding agent, then the applicable withholding agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the Borrower shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 3.4) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.

 

3.4.2                     Payment of Other Taxes by the Borrower.  The Borrower shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Agent timely reimburse it for, Other Taxes.

 

3.4.3                     Evidence of Payments.  As soon as practicable after any payment of Taxes by the Borrower to a Governmental Authority pursuant to this Section 3.4, the Borrower shall deliver to the Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Agent.

 

3.4.4                     Indemnification by the Borrower.  The Borrower shall indemnify each Recipient, within 10 days after delivery by such Recipient of the certificate referenced below, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Agent), or by the 

 

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Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

 

3.4.5                     Indemnification by the Lenders.  Each Lender shall severally indemnify the Agent, within 10 days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that the Borrower has not already indemnified the Agent for such Indemnified Taxes and without limiting the obligation of the Borrower to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 12.2.4 relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to any Lender by the Agent shall be conclusive absent manifest error.  Each Lender hereby authorizes the Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Agent to the Lender from any other source against any amount due to the Agent under this Section 3.4.5.

 

3.4.6                     Status of Lenders.  (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Agent, at the time or times reasonably requested by the Borrower or the Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Agent as will permit such payments to be made without withholding or at a reduced rate of withholding.  In addition, any Lender, if reasonably requested by the Borrower or the Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Agent as will enable the Borrower or the Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.  Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 3.4.6(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

 

(ii)                                  Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Person,

 

(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. Federal backup withholding tax;

 

(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Agent (in such number of copies as shall be requested by the 

 

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recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Agent), whichever of the following is applicable:

 

(1)  in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. Federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. Federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

 

(2)  executed originals of IRS Form W-8ECI;

 

(3) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit D-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Certificate”) and (y) executed originals of IRS Form W-8BEN; or

 

 (4) to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, a U.S. Tax Compliance Certificate substantially in the form of Exhibit D-2 or Exhibit D-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit D-4 on behalf of each such direct and indirect partner;

 

(C)  any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Agent), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. Federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Agent to determine the withholding or deduction required to be made; and

 

(D)  if a payment made to a Lender under any Loan Document would be subject to U.S. Federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained 

 

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in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Agent as may be necessary for the Borrower and the Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.  Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

 

Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Agent in writing of its legal inability to do so.

 

3.4.7                     Treatment of Certain Refunds.  If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 3.4 (including by the payment of additional amounts pursuant to this Section 3.4), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 3.4 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund).  Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this Section 3.4.7  (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority.  Notwithstanding anything to the contrary in this Section 3.4.7, in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this Section 3.4.7  the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid.  This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

 

3.4.8                     Survival.  Each party’s obligations under this Section 3.4 shall survive the resignation or replacement of the Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.

 

3.4.9                     Defined Terms.  For purposes of this Section 3.4, the term “applicable law” includes FATCA.

 

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3.5                               Lender Statements; Survival of Indemnity.  (a) To the extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Eurodollar Loans to reduce any liability of the Borrower to such Lender under Sections 3.1  and 3.4 or to avoid the unavailability of Eurodollar Advances under Section 3.2, so long as such designation is not, in the judgment of such Lender, disadvantageous to such Lender.  Each Lender shall deliver a written statement of such Lender to the Borrower (with a copy to the Agent) as to the amount due, if any, under Section 3.1, 3.3 or 3.4.  Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrower in the absence of manifest error.  Determination of amounts payable under such Sections in connection with a Eurodollar Loan shall be calculated as though each Lender funded its Eurodollar Loan through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the Adjusted LIBO Rate applicable to such Loan, whether in fact that is the case or not.  Unless otherwise provided herein, the amount specified in the written statement of any Lender shall be payable on demand after receipt by the Borrower of such written statement.  The obligations of the Borrower under Sections 3.1, 3.3 and 3.4 shall survive payment of the Obligations and termination of this Agreement.

 

(b)                                 Notwithstanding any other provision of this Agreement, if any Lender fails to notify the Borrower of any event or circumstance which would entitle such Lender to compensation pursuant to this Article III within 120 days after such Lender obtains knowledge of such event or circumstance, then such Lender shall not be entitled to compensation from the Borrower for any amount arising prior to the date that is 120 days before the date on which such Lender notifies the Borrower of such event or circumstance.

 

3.6                               Substitution of Lender.  Upon the receipt by the Borrower from any Lender  of a claim for compensation under Section 3.1 or 3.4 or a notice in accordance with Section 3.2 regarding the unavailability of a Type of Advance or if any Lender becomes a Defaulting Lender (such Lender, in any such event, an “Affected Lender”), the Borrower may: (a) request the Affected Lender to use commercially reasonable efforts to obtain a replacement bank or other entity satisfactory to the Borrower to acquire and assume all or a ratable part of all of such Affected Lender’s Loans and Commitment at the face amount thereof (a “Replacement Lender”); (b) request one or more of the other Lenders to acquire and assume all or part of such Affected Lender’s Loans and Commitment (which request each such other Lender may decline or agree to in its sole discretion); or (c) designate a Replacement Lender.  Any such designation of a Replacement Lender under clause (a) or (c) shall be subject to the prior written consent of the Agent (which consent shall not unreasonably be withheld).  Any transfer of Loans or Commitment pursuant to this Section shall be made in accordance with Section 12.3 and Section 3.3, if applicable.

 

3.7                               Defaulting Lenders.  Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:

 

(a)                                 fees shall cease to accrue on the unfunded portion of the Commitment of such Defaulting Lender pursuant to Section 2.5;

 

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(b)                                 the Commitment and Advances of such Defaulting Lender shall not be included in determining whether the Required Lenders have taken or may take any action hereunder (including any consent to any amendment, waiver or other modification pursuant to Section 8.2); provided, that this clause (b) shall not apply to the vote of a Defaulting Lender in the case of an amendment, waiver or other modification requiring the consent of such Lender or each Lender affected thereby; and

 

(c)                                  in the event that the Agent and the Borrower each agree that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then on such date such Lender shall purchase at par such of the Loans of the other Lenders as the Agent shall determine may be necessary in order for such Lender to hold such Loans in accordance with its pro rata share of the Commitments.

 

ARTICLE IV

 

CONDITIONS PRECEDENT

 

4.1                               Effectiveness.  This Agreement shall become effective when the Borrower has furnished each of the following to the Agent with sufficient copies for the Lenders:

 

(a)                                 Copies of the articles of incorporation of the Borrower, together with all amendments, and a certificate of good standing, each certified by the appropriate governmental officer in its jurisdiction of incorporation.

 

(b)                                 Copies, certified by the Secretary or Assistant Secretary of the Borrower, of its by-laws and of its Board of Directors’ resolutions and of resolutions or actions of any other body authorizing the execution of the Loan Documents to which the Borrower is a party.

 

(c)                                  An incumbency certificate, executed by the Secretary or Assistant Secretary of the Borrower, which shall identify by name and title and bear the signatures of the Authorized Officers and any other officers of the Borrower authorized to sign the Loan Documents to which the Borrower is a party, upon which certificate the Agent and the Lenders shall be entitled to rely until informed of any change in writing by the Borrower.

 

(d)                                 A certificate, signed by an Authorized Officer of the Borrower, stating that on the Closing Date no Default or Unmatured Default has occurred and is continuing.

 

(e)                                  A written opinion of Daniel O. Kennedy, Esquire, general counsel of the Borrower, in form and substance acceptable to the Agent and its counsel.

 

(f)                                   Executed originals of this Agreement, the Note, and all other Loan Documents, together with all schedules, exhibits, certificates, instruments, opinions, documents and financial statements required to be delivered pursuant hereto and thereto.

 

(g)                                  Such other documents as any Lender or its counsel may have reasonably requested.

 

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4.2                               Each Advance.  The Lenders shall not be required to make any Advance unless on the applicable Borrowing Date:

 

(a)                                 There exists no Default or Unmatured Default.

 

(b)                                 The representations and warranties contained in Article V are true and correct as of such Borrowing Date except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct on and as of such earlier date.

 

(c)                                  All legal matters incident to the making of such Advance shall be satisfactory to the Lenders and their counsel.

 

Each Borrowing Notice with respect to each such Advance shall constitute a representation and warranty by the Borrower that the conditions contained in Sections 4.2(a) and (b) have been satisfied.  Any Lender may require a duly completed compliance certificate in substantially the form of Exhibit A as a condition to making an Advance.

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES

 

The Borrower represents and warrants to the Lenders that:

 

5.1                               Existence and Standing.  Each of the Borrower and its Subsidiaries is a corporation, partnership (in the case of Subsidiaries only) or limited liability company duly and properly incorporated or organized, as the case may be, validly existing and (to the extent such concept applies to such entity) in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority to conduct its business and (to the extent such concept applies to such entity) is in good standing in each jurisdiction in which its business is conducted, the failure of which could reasonably be expected to have a Material Adverse Effect.

 

5.2                               Authorization and Validity.  The Borrower has the power and authority and legal right to execute and deliver the Loan Documents to which it is a party and to perform its obligations thereunder.  The execution and delivery by the Borrower of the Loan Documents to which it is a party and the performance of its obligations thereunder have been duly authorized by proper corporate proceedings, and the Loan Documents to which the Borrower is a party constitute legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally.

 

5.3                               No Conflict; Consent.  Neither the execution and delivery by the Borrower of the Loan Documents to which it is a party, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate (a) any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Borrower or any of its Subsidiaries or (b) the Borrower’s or any Subsidiary’s articles or certificate of incorporation, partnership agreement, certificate of partnership, articles or certificate of organization, by-laws,

 

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or operating or other management agreement, as the case may be, or (c) the provisions of any indenture, instrument or agreement to which the Borrower or any of its Subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in, or require, the creation or imposition of any Lien in, of or on the Property of the Borrower or a Subsidiary pursuant to the terms of any such indenture, instrument or agreement, which in any such case could reasonably be expected to have a Material Adverse Effect.  No order, consent, adjudication, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action in respect of any Person (including any governmental or public body or authority, or any subdivision thereof), which has not been obtained by the Borrower or any of its Subsidiaries, is required to be obtained by the Borrower or any of its Subsidiaries in connection with the execution and delivery of the Loan Documents, the borrowings under this Agreement, the payment and performance by the Borrower of the Obligations or the legality, validity, binding effect or enforceability of any of the Loan Documents.

 

5.4                               Financial Statements.  The Borrower has heretofore furnished to each of the Lenders (a) the December 31, 2013 audited consolidated financial statements of the Borrower and its Subsidiaries and (b) the December 31, 2013 Annual Statement of each of RLIC and MHIC (collectively, the “Financial Statements”).  Each of the Financial Statements was prepared in accordance with Agreement Accounting Principles or SAP, as applicable, and such Financial Statements fairly present the consolidated (to the extent applicable) financial condition and operations of the Borrower and its Subsidiaries or such Insurance Subsidiary, as applicable, at such dates and the consolidated results of their operations for the respective periods then ended (except, in the case of such unaudited statements, for normal year-end audit adjustments).

 

5.5                               Taxes.  The Borrower and its Subsidiaries have filed all United States federal tax returns and all other tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Borrower or any of its Subsidiaries, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided in accordance with Agreement Accounting Principles and as to which no Lien exists.  To the Borrower’s knowledge, no tax Liens have been filed and no claims are being asserted with respect to any such taxes.

 

5.6                               Material Adverse Change.  Since December 31, 2013, there has been no change in the business, Property, condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries which could reasonably be expected to have a Material Adverse Effect.

 

5.7                               Litigation and Contingent Obligations.  There is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting the Borrower or any of its Subsidiaries which, if adversely determined, could reasonably be expected to have a Material Adverse Effect or which seeks to prevent, enjoin or delay the making of any Loans.  The Borrower has no material contingent obligations not provided for or disclosed in the financial statements referred to in Section 5.4, other than any liabilities which could not reasonably be expected to have a Material Adverse Effect.

 

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5.8                               Subsidiaries.  Schedule 5.8 contains an accurate list of all Subsidiaries of the Borrower as of the date of this Agreement, setting forth their respective jurisdictions of organization and the percentage of their respective capital stock or other ownership interests owned by the Borrower or other Subsidiaries.  All of the issued and outstanding shares of capital stock or other ownership interests of such Subsidiaries have been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and are fully paid and non-assessable.

 

5.9                               ERISA.  The Unfunded Liabilities of all Single Employer Plans do not in the aggregate exceed $250,000.  Each Plan complies in all material respects with all applicable requirements of law and regulations, no Reportable Event has occurred with respect to any Plan, neither the Borrower nor any other member of the Controlled Group has withdrawn from any Plan or initiated steps to do so, and no steps have been taken to reorganize or terminate any Plan.  All of the Borrower’s Employee Plans as of the date of this Agreement are listed on Schedule 5.9 hereto.  No proceedings have been instituted by any Governmental Authority to terminate or appoint a trustee to administer any such Employee Plans.

 

5.10                        Accuracy of Information.  No information, exhibit or report furnished by the Borrower or any of its Subsidiaries to the Agent or to any Lender in connection with the negotiation of, or compliance with, the Loan Documents contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading.

 

5.11                        Regulation U.  Margin stock (as defined in Regulation U) constitutes less than 25% of the value of those assets of the Borrower and its Subsidiaries which are subject to any limitation on sale, pledge, or other restriction hereunder.

 

5.12                        Material Agreements.  Neither the Borrower nor any Subsidiary is a party to any agreement or instrument or subject to any charter or other corporate restriction which could reasonably be expected to have a Material Adverse Effect.  Neither the Borrower nor any Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (a) any agreement to which it is a party, which default could reasonably be expected to have a Material Adverse Effect or (b) any agreement or instrument evidencing or governing Indebtedness.

 

5.13                        Compliance With Laws.  The Borrower and its Subsidiaries have complied with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property except for any failure to comply with any of the foregoing which could not reasonably be expected to have a Material Adverse Effect.

 

5.14                        Plan Assets; Prohibited Transactions.  The Borrower is not an entity deemed to hold “plan assets” within the meaning of 29 C.F.R. § 2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan (within the meaning of Section 4975 of the Code), and neither the execution of this Agreement nor the

 

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making of Loans hereunder gives rise to a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code.

 

5.15                        Investment Company Act.  Neither the Borrower nor any Subsidiary is an “investment company” or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.

 

5.16                        Insurance Licenses.  No license (including, without limitation, licenses or certificates of authority from applicable insurance departments), permit or authorization to transact insurance business held by any Insurance Subsidiary, the loss of which could reasonably be expected to have a Material Adverse Effect, is the subject of a proceeding for suspension or revocation.  To the Borrower’s knowledge, there is no sustainable basis for such suspension or revocation, and no such suspension or revocation has been threatened by any Governmental Authority.

 

5.17                        Solvency.  Immediately after the consummation of the transactions to occur on the date hereof and immediately following the making of each Loan, if any, made on the date hereof and after giving effect to the application of the proceeds of such Loans, (a) the fair value of the assets of the Borrower and its Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, subordinated, contingent or otherwise, of the Borrower and its Subsidiaries on a consolidated basis; (b) the present fair saleable value of the Property of the Borrower and its Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay the probable liability of the Borrower and its Subsidiaries on a consolidated basis on their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) the Borrower and its Subsidiaries on a consolidated basis will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) the Borrower and its Subsidiaries on a consolidated basis will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted after the date hereof.

 

5.18                        Labor Controversies; Union Contracts, Etc.  There are no labor controversies pending or, to the knowledge of the Borrower, threatened against the Borrower, which if adversely determined could have a Material Adverse Effect.  There are no pending or, to the Borrower’s knowledge, threatened or anticipated (a) employment discrimination charges or complaints against or involving the Borrower before any governmental Person or (b) unfair labor practice charges or complaints, disputes or grievances or arbitration proceedings or controversies affecting the Borrower, which, in any such case, if adversely determined, could have a Material Adverse Effect.  There are no collective bargaining agreements covering any of the employees of the Borrower.

 

5.19                        Surety Obligations; Financial Assurances.  The Borrower is not obligated as surety or indemnitor under any surety or similar bond or other contract and has not issued or entered into any agreement to assure payment, performance or completion of performance of any undertaking or obligation of any Person, except, in any such case, in the ordinary course of business.  As of the date of this Agreement, the Borrower has not posted or placed any Financial Assurance except as indicated in Schedule 5.19 hereto.

 

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5.20                        Business Relations.  There exists no actual or threatened termination, cancellation, or adverse limitation of, or any adverse modification or change in, the contractual and/or business relationship between the Borrower and any owner/lessor of any facility utilized in the Borrower’s business, municipality, customer and/or supplier, and there exists no present condition or state of facts or circumstances in such relations, which in each case would have a Material Adverse Effect.

 

5.21                        Hazardous Materials.  The Borrower has not caused or permitted any Hazardous Material to be disposed of or incorporated into, either on or under real property legally or beneficially owned or operated by the Borrower, and no such real property has ever been used as a dump site or long-term storage site for any Hazardous Materials which would be reasonably likely to (a) give rise to present or future legal liability, and (b) have a material adverse effect on the business or financial condition of the Borrower.  The failure, if any, of the Borrower in connection with the operation of their business, to obtain or be in compliance with any permit, certificate, license, approval and other authorization, or to file any notification or report relating to chemical substances, air emissions, effluent discharges and Hazardous Material storage, treatment, transport and disposal has not had, nor will it have, a Material Adverse Effect, and no facts or circumstances exist which could give rise to liabilities with respect to Hazardous Materials on the business or financial condition of the Borrower which would be reasonably likely to have a Material Adverse Effect.

 

5.22                        Ranking.  The Obligations will rank at least pari passu with all Indebtedness of the Borrower, except Indebtedness secured by Liens permitted under Section 6.15.

 

5.23                        Intellectual Property.  The Borrower owns or has sufficient and legally enforceable rights to use all material licenses, patents, patent applications, copyrights, service marks, trademarks, trademark applications, and trade names necessary to continue to conduct its businesses as heretofore conducted by it, now conducted by it, and now proposed to be conducted by it, the lack of which could reasonably be expected to have a  Material Adverse Effect.  The Borrower is conducting its business without infringement or claim of infringement of any license, patent, copyright, service mark, trademark, trade name, trade secret, or other intellectual property right of others, other than any such infringements or claims which, if successfully asserted against or determined adversely to the Borrower, could not, individually or collectively reasonably be expected to have a Material Adverse Effect.

 

5.24                        Sanctions Laws and Regulations.  Neither the Borrower, nor, to the best of its knowledge, any of its directors, officers, or any brokers or other agents acting or benefiting in any capacity in connection with this Agreement or any other capital raising transaction involving any Lender, or any of its Affiliates is a Designated Person.

 

ARTICLE VI

 

COVENANTS

 

During the term of this Agreement, unless the Required Lenders shall otherwise consent in writing:

 

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6.1                               Financial Reporting.  The Borrower will maintain, for itself and each Subsidiary, a system of accounting established and administered in accordance with generally accepted accounting principles, and furnish to the Lenders:

 

(a)                                 Within ninety (90) days after the close of each of its fiscal years, an audit report (without a “going concern” or like qualification, commentary or exception and without any qualification or exception as to the scope of such audit) issued by an independent registered public accounting firm acceptable to the Lenders, prepared in accordance with Agreement Accounting Principles on a consolidated basis for itself and its Subsidiaries, including balance sheets as of the end of such period, related profit and loss, retained earnings and reconciliation of surplus statements, and a statement of cash flows, accompanied by any management letter prepared by said accountants, and within one hundred fifty (150) days after the close of each of its fiscal years, a certificate of said accountants that, in the course of their examination necessary for their certification of the foregoing, they have obtained no knowledge of any Default or Unmatured Default, or if, in the opinion of such accountants, any Default or Unmatured Default shall exist, stating the nature and status thereof.

 

(b)                                 Within sixty (60) days after the close of the first three quarterly periods of each of its fiscal years, for itself and its Subsidiaries, consolidated unaudited balance sheets as at the close of each such period and consolidated profit and loss, retained earnings and reconciliation of surplus statements and a statement of cash flows for the period from the beginning of such fiscal year to the end of such quarter, all certified by its chief financial officer.

 

(c)                                  Together with the financial statements required under Sections 6.1(a) and (b), a compliance certificate in substantially the form of Exhibit A signed by its chief financial officer or treasurer showing the calculations necessary to determine compliance with this Agreement and stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof.

 

6.2                               Other Reports.  The Borrower will and will cause each Subsidiary to deliver to furnish to the Lenders the following:

 

(a)                                 As soon as possible and in any event within 10 days after the Borrower knows that any Reportable Event has occurred with respect to any Plan, a statement, signed by the chief financial officer or treasurer of the Borrower, describing said Reportable Event and the action which the Borrower proposes to take with respect thereto.

 

(b)                                 Within ninety (90) days after the close of each fiscal year of each of RLIC and MHIC, copies of the unaudited Annual Statement of such Insurance Subsidiary, certified by the chief financial officer or the treasurer of such Insurance Subsidiary, all such statements to be prepared in accordance with SAP consistently applied throughout the periods reflected therein.

 

(c)                                  Within sixty (60) days after the close of each of the first three (3) fiscal quarters of each fiscal year of each of RLIC and MHIC, copies of the unaudited Quarterly Statement of each of the Insurance Subsidiaries, certified by the chief financial officer or the treasurer of RLIC or MHIC, as applicable, all such statements to be prepared in accordance with SAP consistently applied through the period reflected therein.

 

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(d)                                 Promptly and in any event within ten (10) days after (i) learning thereof, notification of any changes after the date of this Agreement in the rating given by A.M. Best & Co. in respect of any Insurance Subsidiary and (ii) receipt thereof, copies of any ratings analysis by A.M. Best & Co. relating to any Insurance Subsidiary.

 

(e)                                  Promptly after Moody’s or S&P shall have announced a change in the rating established or deemed to have been established for the Index Debt, written notice of such rating change.

 

(f)                                   Such other information (including, without limitation, the annual Best’s Advance Report Service report prepared with respect to each Insurance Subsidiary rated by A.M. Best & Co. and non-financial information) as the Agent or any Lender may from time to time reasonably request.

 

6.3                               Use of Proceeds.  The Borrower will, and will cause each Subsidiary to, use the proceeds of the Advances for working capital and general corporate purposes.  The Borrower will not, nor will it permit any Subsidiary to, use any of the proceeds of the Advances to purchase or carry any “margin stock” (as defined in Regulation U).

 

6.4                               Notice of Default.  The Borrower will, and will cause each Subsidiary to, give prompt notice in writing to the Lenders of the occurrence of (a) any Default or Unmatured Default, (b) of any other event or development, financial or other, relating specifically to the Borrower or any of its Subsidiaries (and not of a general economic or political nature) which could reasonably be expected to have a Material Adverse Effect, (c) their receipt of any notice from any Governmental Authority of the expiration without renewal, revocation or suspension of, or the institution of any proceedings to revoke or suspend, any License now or hereafter held by any Insurance Subsidiary which is required to conduct insurance business in compliance with all applicable laws and regulations and the expiration, revocation or suspension of which could reasonably be expected to have a Material Adverse Effect, (d) their receipt of any notice from any Governmental Authority of the institution of any disciplinary proceedings against or in respect of any Insurance Subsidiary, or the issuance of any order, the taking of any action or any request for an extraordinary audit for cause by any Governmental Authority which, if adversely determined, could reasonably be expected to have a Material Adverse Effect, (e) any material judicial or administrative order of which they are aware limiting or controlling the insurance business of any Insurance Subsidiary (and not the insurance industry generally) which has been issued or adopted or (f) the commencement of any litigation of which they are aware which could reasonably be expected to create a Material Adverse Effect.

 

6.5                               Taxes.  The Borrower will, and will cause each Subsidiary to, timely file complete and correct United States federal and other material foreign, state and local tax returns required by law and pay when due all taxes, assessments and governmental charges and levies upon it or its income, profits or Property, except those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside in accordance with Agreement Accounting Principles.

 

6.6                               Insurance.  The Borrower will, and will cause each Subsidiary to, maintain with financially sound and reputable insurance companies insurance on all their Property in such

 

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amounts and covering such risks as is consistent with sound business practice, and the Borrower will furnish to any Lender upon request full information as to the insurance carried.  The Borrower shall retain all incidents of ownership of the insurance maintained pursuant hereto and shall not borrow upon or otherwise impair its rights to receive the proceeds of such insurance.  In the event the Borrower either fails to provide the Agent with evidence of the insurance coverage required by this Section 6.6 or at any time hereafter shall fail to obtain or maintain any of the policies of insurance required above, or to pay any premium in whole or in part relating thereto, then the Agent, without waiving or releasing any obligation or default by the Borrower hereunder, may at any time (but shall be under no obligation to act), obtain and maintain such policies of insurance and pay such premium and take any other action with respect thereto, which the Agent deems advisable.  The Borrower may later cancel any such insurance purchased by the Agent, but only after providing the Agent with evidence that the Borrower has obtained the insurance coverage required by this Section.  The costs of such insurance obtained by the Agent, through and including the effective date such insurance coverage is canceled or expires, shall be payable on demand by the Borrower to the Agent, together with interest at the default rate provided for in Section 2.11 on such amounts until repaid and any other charges by the Agent in connection with the placement of such insurance.  The costs of such insurance, which may be greater than the cost of insurance which the Borrower may be able to obtain on its own, together with interest thereon at the default rate provided for in Section 2.11 and any other charges by the Agent in connection with the placement of such insurance may be added to the total Obligations due and owing.

 

6.7                               Compliance with Laws.  The Borrower will, and will cause each Subsidiary to, comply with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject including, without limitation, all Environmental Laws, the failure to comply with which could reasonably be expected to have a Material Adverse Effect.

 

6.8                               Maintenance of Properties.  The Borrower will, and will cause each Subsidiary to, do all things necessary to maintain, preserve, protect and keep its Property in good repair, working order and condition, and make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times.

 

6.9                               Inspection.  The Borrower will, and will cause each Subsidiary to, upon reasonable notice permit the Agent and the Lenders, by their respective representatives and agents, to inspect any of the Property, corporate books and financial records of the Borrower and each Subsidiary, to examine and make copies of the books of accounts and other financial records of the Borrower and each Subsidiary, and to discuss the affairs, finances and accounts of the Borrower and each Subsidiary with, and to be advised as to the same by, their respective officers at such reasonable times and intervals as the Lenders may designate.  The Borrower will keep or cause to be kept, and cause each Subsidiary to keep or cause to be kept, appropriate records and books of account in which complete entries are to be made reflecting its and their business and financial transactions, such entries to be made in accordance with Agreement Accounting Principles or SAP, as applicable, consistently applied.

 

6.10                        Conduct of Business.  The Borrower will, and will cause each Subsidiary to, (a) carry on and conduct its business in substantially the same manner and in substantially the same

 

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fields of enterprise as it is presently conducted, (b) do all things necessary to remain duly incorporated, validly existing and in good standing as a domestic corporation in its jurisdiction of incorporation and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted except where the failure to maintain such authority could not reasonably be expected to have a Material Adverse Effect and (c) do all things necessary to renew, extend and continue in effect all Licenses which may at any time and from time to time be necessary for any Insurance Subsidiary to operate its insurance business in compliance with all applicable laws and regulations except for any License the loss of which could not reasonably be expected to have a Material Adverse Effect; provided, that any Insurance Subsidiary may withdraw from one or more states (other than its state of domicile) as an admitted insurer if such withdrawal is determined by the such Insurance Subsidiary’s Board of Directors to be in the best interest of such Insurance Subsidiary and could not reasonably be expected to have a Material Adverse Effect.  No Insurance Subsidiary shall change its state of domicile or incorporation without the prior written consent of the Required Lenders; provided that CBIC and any other Insurance Subsidiary may change its state of domicile and/or incorporation to Illinois.  Each Wholly-Owned Subsidiary in existence as of the date of this Agreement shall continue to be a Wholly-Owned Subsidiary; provided, that (x) the Borrower may sell all of the capital stock of any Subsidiary, subject to Section 6.13 hereof, and (y) the Borrower may cause or permit the dissolution or winding up of any such Wholly-Owned Subsidiary so long as the assets or revenues thereof, taken together with all other Wholly-Owned Subsidiaries dissolved or wound up since the date hereof, do not constitute a Substantial Portion.

 

6.11                        Dividends.  The Borrower will not, nor will it permit any Subsidiary to, declare or pay any dividends or make any distributions on its capital stock (other than dividends payable in its own capital stock) or redeem, repurchase or otherwise acquire or retire any of its capital stock at any time outstanding, except that (a) any Subsidiary may declare and pay dividends or make distributions to the Borrower or to a Wholly-Owned Subsidiary, and (b) the Borrower may declare and pay dividends on its capital stock or redeem, repurchase or otherwise acquire or retire any of its capital stock at any time outstanding; provided, that no Default or Unmatured Default shall exist before or after giving effect to such dividends, redemptions, repurchases or other acquisitions or be created as a result thereof.

 

6.12                        Merger.  The Borrower will not, nor will it permit any Subsidiary to, merge or consolidate with or into any other Person; provided, that, (x) any Person may merge with or into the Borrower so long as (i) no Event of Default will result therefrom, (ii) the Borrower has provided written notice at least twenty days prior to the proposed effective date, (iii) the aggregate consideration paid in such transaction does not exceed $100,000,000 and (iv) the Borrower is the surviving entity, and (y) subject to Section 6.14, a Subsidiary may merge into the Borrower or a Wholly-Owned Subsidiary.

 

6.13                        Sale of Assets.  The Borrower will not, nor will it permit any Subsidiary to, lease, sell, transfer or otherwise dispose of its Property to any other Person except for (a) sales of Investments in the ordinary course of business, (b) the sale by the Borrower on commercially reasonable terms of its Investment in Maui Jim, Inc. and (c) leases, sales, transfers or other dispositions of its Property (including capital stock of Subsidiaries) that, together with all other Property of the Borrower and its Subsidiaries leased, sold or disposed of (other than sales

 

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permitted pursuant to clauses (a) and (b) of this Section 6.13) as permitted by this Section 6.13 since the date hereof do not constitute a Substantial Portion.

 

6.14                        Investments and Acquisitions.  The Borrower and its Subsidiaries may make Investments (including, without limitation, loans and advances to, and other Investments in, its Subsidiaries) and commitments therefor, create Subsidiaries, become a partner in any partnership or joint venture and make Acquisitions, subject to the following:

 

(a)                                 The Borrower and its Subsidiaries may make Acquisitions so long as (i) such transactions (A) consist exclusively of Acquisitions of businesses or entities engaged in the property and casualty business, (B) do not constitute hostile takeovers and (C) do not require the payment of an aggregate consideration in excess of $100,000,000 after the date of this Agreement, (ii) the Borrower provides the Agent and each Lender with written notice of such transactions at least 20 days prior to the effective date thereof, and (iii) no Default or Unmatured Default has occurred and is continuing or would occur after giving effect thereto.

 

(b)                                 The Borrower and its Subsidiaries may make Investments in debt securities so long as at least 85% of the principal amount outstanding of all such Investments  constitutes an Investment in Investment Grade Obligations.

 

(c)                                  Any Investments made by any Insurance Subsidiary must be of a quality acceptable to the insurance commissioner in the respective domiciliary state of such Insurance Subsidiary.

 

(d)                                 The Borrower and its Subsidiaries may make loans to and extend guarantees of loans made to employees of the Borrower and its Subsidiaries to purchase stock of the Borrower pursuant to an employee stock purchase plan, so long as the aggregate principal amount outstanding of all such loans and guaranteed loans shall not exceed $20,000,000 in the aggregate.

 

(e)                                  The Borrower and its Subsidiaries may become a partner in a partnership or joint venture or similar Person in a transaction which does not constitute an Acquisition; provided, that after giving effect to such transaction, the aggregate fair market value of the partnership, joint venture and other interests so obtained shall not exceed at any time 20% of the aggregate statutory surplus of the Insurance Subsidiaries at such time; provided, further, that (x) interests in joint ventures which are limited liability companies engaging in the same lines of business as the Insurance Subsidiaries and (y) interests in partnerships, to the extent that such investments are insurance company portfolio investments made by an Insurance Subsidiary in the ordinary course of business, shall not count toward such limitation.

 

6.15                        Liens.  The Borrower will not, nor will it permit any Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the Property of the Borrower or any of its Subsidiaries, except:

 

(a)                                 Liens for taxes, assessments or governmental charges or levies on its Property if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings and for which adequate

 

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reserves in accordance with Agreement Accounting Principles shall have been set aside on its books.

 

(b)                                 Liens imposed by law, such as carriers’, warehousemen’s and mechanics’ liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or which are being contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on its books.

 

(c)                                  Liens arising out of pledges or deposits under worker’s compensation laws, unemployment insurance, pension plans, or other social security or retirement benefits, or similar legislation.

 

(d)                                 Utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in any material way affect the marketability of the same or interfere with the use thereof in the business of the Borrower or its Subsidiaries.

 

(e)                                  Purchase money Liens upon or in real property or equipment acquired or held by the Borrower or any Subsidiary in the ordinary course of business to secure the purchase price of such property or equipment or to secure Indebtedness incurred solely for the purpose of financing the acquisition, construction or improvement of any such property or equipment to be subject to such Liens, or Liens existing on any such property or equipment at the time of acquisition or within 180 days following such acquisition (other than any such Liens created in contemplation of such acquisition that do not secure the purchase price), or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount; provided that no such Lien shall extend to or cover any property other than the property or equipment being acquired, constructed or improved, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Lien being extended, renewed or replaced.

 

(f)                                   Liens arising in connection with Capitalized Leases; provided that no such Lien shall extend to or cover any assets other than the assets subject to such Capitalized Leases.

 

(g)                                  Liens securing Financial Hedges arising in the ordinary course of business.

 

(h)                                 Liens on securities arising out of repurchase agreements permitted by the terms of this Agreement.

 

(i)                                     Liens consisting of deposits made by an Insurance Subsidiary with any Governmental Authority or Liens or claims imposed or required by applicable insurance law or regulation against the Property of any Insurance Subsidiary, in each case in favor of policyholders of such Insurance Subsidiary or any Governmental Authority and in the ordinary course of such Insurance Subsidiary’s business.

 

(j)                                    Liens on Investments and cash balances of any Insurance Subsidiary (other than capital stock or any Subsidiary) securing Obligations of the Borrower or any Insurance Subsidiary in respect of (i) letters of credit obtained in the ordinary course of business

 

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and/or (ii) trust arrangements formed in the ordinary course of business for the benefit of cedents to secure reinsurance recoverables owed to them by any Insurance Subsidiary.

 

(k)                                 The replacement, extension or renewal of any Lien permitted by clause (e) or (g) above upon or in the same property theretofore subject thereto or the replacement, extension or renewal (without increase in the amount (other than in respect of fees, expenses and premiums, if any) or change in any direct or contingent obligor) of the Indebtedness secured thereby.

 

(l)                                     Liens securing obligations owed by any Subsidiary to the Borrower or any other Subsidiary.

 

(m)                             Liens incurred in the ordinary course of business in favor of financial intermediaries and clearing agents pending clearance of payments for Investments or in the nature of set-off, banker’s lien or similar rights as to deposit accounts or other funds.

 

(n)                                 Judgment or judicial attachment Liens; provided, that the enforcement of such Liens is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings.

 

(o)                                 Liens securing obligations not to exceed $125,000,000 in the aggregate at any time outstanding under FHLB Agreements.

 

(p)                                 Liens securing Indebtedness or obligations (in addition to that described in clauses (a) through (o) above), in an aggregate amount not to exceed $30,000,000 at any one time outstanding.

 

6.16                        Reinsurance.  After the date of this Agreement, the Borrower will not permit CBIC, RLIC or MHIC to modify its reinsurance arrangements in a manner that could reasonably be expected to have a Material Adverse Effect.

 

6.17                        Affiliates.  The Borrower will not, and will not permit any Subsidiary to, enter into any transaction (including, without limitation, the purchase, exchange or sale of any Property or service) with, or make any payment or transfer to, any Affiliate except (a) transactions between Subsidiaries and/or payments by or transfers from one Subsidiary to another or (b) in the ordinary course of business and pursuant to the reasonable requirements of the Borrower’s or such Subsidiary’s business and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than the Borrower or such Subsidiary would obtain in a comparable arms-length transaction.

 

6.18                        Financial Covenants.

 

6.18.1              Leverage Ratio.  The Borrower will not permit the ratio, determined as of the end of each of its fiscal quarters, of (a) Consolidated Indebtedness to (b) Consolidated Total Capitalization to be greater than 0.30 to 1.0.

 

6.18.2              Risk-Based Capital.  The Borrower will cause each of CBIC, RLIC and MHIC at all times to maintain a ratio of (a) Total Adjusted Capital (as defined in the

 

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Risk-Based Capital Act or in the rules and procedures prescribed from time to time by the NAIC with respect thereto) to (b) Authorized Control Level (as defined in the Risk-Based Capital Act or in the rules and procedures prescribed from time to time by the NAIC with respect thereto) of at least four hundred fifty percent (450%).

 

6.19                        Sanctions Laws and Regulations.

 

(a)                                 The Borrower shall not, directly or indirectly, use the proceeds of the Loans, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other person or entity (i) to fund any activities or business of or with any Designated Person, or in any country or territory, that at the time of such funding is the subject of any sanctions under any Sanctions Laws and Regulations, or (ii) in any other manner that would result in a violation of any Sanctions Laws and Regulations by any party to this Agreement.

 

(b)                                 None of the funds or assets of the Borrower that are used to pay any amount due pursuant to this Agreement shall constitute funds obtained from transactions with or relating to Designated Persons or countries which are the subject of sanctions under any Sanctions Laws and Regulations.

 

ARTICLE VII

 

DEFAULTS

 

The occurrence of any one or more of the following events shall constitute a Default:

 

7.1                               Any representation or warranty made or deemed made by or on behalf of the Borrower or any of its Subsidiaries to the Lenders or the Agent under or in connection with this Agreement, any Loan, or any certificate or information delivered in connection with this Agreement or any other Loan Document shall be materially false on the date as of which made.

 

7.2                               Nonpayment of principal of any Loan when due, or nonpayment of interest upon any Loan or of any commitment fee or other obligations under any of the Loan Documents within five days after the same becomes due.

 

7.3                               The breach by the Borrower of any of the terms or provisions of Sections 6.3, 6.4(a), or 6.10 through 6.18.

 

7.4                               The breach by the Borrower (other than a breach which constitutes a Default under another Section of this Article VII) of any of the terms or provisions of this Agreement  or any other Loan Document which is not remedied within twenty (20) Business Days after written notice from the Agent or any Lender.

 

7.5                               Failure of the Borrower or any of its Subsidiaries to pay when due any Material Indebtedness; or the default by the Borrower or any of its Subsidiaries in the performance (beyond the applicable grace period with respect thereto, if any) of any term, provision or condition contained in any Material Indebtedness Agreement, or any other event shall occur or condition exist, the effect of which default, event or condition is to cause, or to permit the

 

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holder(s) of such Material Indebtedness or the lender(s) under any Material Indebtedness Agreement to cause, such Material Indebtedness to become due prior to its stated maturity or any commitment to lend under any Material Indebtedness Agreement to be terminated prior to its stated expiration date; or any Material Indebtedness of the Borrower or any of its Subsidiaries shall be declared to be due and payable or required to be prepaid or repurchased (other than by a regularly scheduled payment) prior to the stated maturity thereof; or the Borrower or any of its Subsidiaries shall not pay, or admit in writing its inability to pay, its debts generally as they become due.

 

7.6                               The Borrower or any of its Subsidiaries shall (a) have an order for relief entered with respect to it under the Federal bankruptcy laws as now or hereafter in effect, (b) make an assignment for the benefit of creditors, (c) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any Substantial Portion of its Property, (d) institute any proceeding seeking an order for relief under the Federal bankruptcy laws as now or hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment, rehabilitation or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (e) take any corporate or partnership action to authorize or effect any of the foregoing actions set forth in this Section 7.6 or (f) fail to contest in good faith any appointment or proceeding described in Section 7.7.

 

7.7                               Without the application, approval or consent of the Borrower or any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar official shall be appointed for the Borrower or any of its Subsidiaries or any Substantial Portion of its Property, or a proceeding described in Section 7.6(d) shall be instituted against the Borrower or any of its Subsidiaries and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 60 consecutive days.

 

7.8                               Any court, government or governmental agency shall condemn, seize or otherwise appropriate, or take custody or control of, all or any portion of the Property of the Borrower and its Subsidiaries which, when taken together with all other Property of the Borrower and its Subsidiaries so condemned, seized, appropriated, or taken custody or control of, during the twelve-month period ending with the month in which any such action occurs, constitutes a Substantial Portion.

 

7.9                               The Borrower or any of its Subsidiaries shall fail within 30 days to pay (or make arrangements to pay), bond or otherwise discharge one or more judgments which are not stayed on appeal or otherwise being appropriately contested in good faith and which are (a) judgments or orders for the payment of money in excess of $10,000,000 (or the equivalent thereof in currencies other than U.S. Dollars) in the aggregate, or (b) nonmonetary judgments or orders which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

7.10                        The Unfunded Liabilities of all Single Employer Plans shall exceed in the aggregate $1,000,000 or any Reportable Event shall occur in connection with any Plan.

 

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7.11                        Any Change in Control shall occur.

 

7.12                        Any material License of RLIC or MHIC (a) shall be revoked by the Governmental Authority which issued a material License, or any action (administrative or judicial) to revoke a material License shall have been commenced against RLIC or MHIC and shall not have been dismissed within 180 days after the commencement thereof, (b) shall be suspended by such Governmental Authority for a period in excess of thirty (30) days or (c) shall not be reissued or renewed by such Governmental Authority upon the expiration thereof following application for such reissuance or renewal by RLIC or MHIC, as applicable.

 

7.13                        The Insurance Subsidiaries shall be the subject of one or more final non-appealable orders imposing a fine in an amount in excess of $10,000,000 in any single instance or other such orders imposing fines in excess of $35,000,000 in the aggregate after the date of this Agreement by or at the request of one or more state insurance regulatory agencies as a result of the violation by such Insurance Subsidiaries of such states’ applicable insurance laws or the regulations promulgated in connection therewith.

 

7.14                        Any Insurance Subsidiary shall become subject to any conservation, rehabilitation or liquidation order, directive or mandate issued by any Governmental Authority or any Insurance Subsidiary shall become subject to any other directive or mandate issued by any Governmental Authority which could reasonably be expected to have a Material Adverse Effect and which is not stayed within ten (10) days.

 

ARTICLE VIII

 

ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES

 

8.1                               Acceleration.  If any Default described in Section 7.6 or 7.7 occurs with respect to the Borrower, the obligations of the Lenders to make Loans hereunder shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of the Agent or any Lender.  If any other Default occurs, the Required Lenders (or the Agent with the consent of the Required Lenders) may terminate or suspend the obligations of the Lenders to make Loans hereunder, or declare the Obligations to be due and payable, or both, whereupon the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which the Borrower hereby expressly waives.

 

If, within 30 days after acceleration of the maturity of the Obligations or termination of the obligations of the Lenders to make Loans hereunder as a result of any Default (other than any Default as described in Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, the Required Lenders (in their sole discretion) shall so direct, the Agent shall, by notice to the Borrower, rescind and annul such acceleration and/or termination.

 

8.2                               Amendments.  Subject to the provisions of this Section 8.2, the Required Lenders (or the Agent with the consent in writing of the Required Lenders) and the Borrower may enter

 

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into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the Borrower hereunder or waiving any Default hereunder; provided, however, that no such supplemental agreement shall, without the consent of all of the Lenders adversely affected thereby (or in the case of Section 8.2(b), (d) and (e), all of the Lenders):

 

(a)                                 Extend the final maturity of any Loan or forgive all or any portion of the principal amount thereof, or reduce the rate or extend the time of payment of interest or fees thereon.

 

(b)                                 Reduce the percentage specified in the definition of Required Lenders.

 

(c)                                  Extend the Facility Termination Date, or reduce the amount or extend the payment date for, the mandatory payments required under Section 2.2, or increase the amount of the Aggregate Commitment or of the Commitment of any Lender hereunder.

 

(d)                                 Permit the Borrower to assign its rights under this Agreement.

 

(e)                                  Amend this Section 8.2, or Section 10.1 or 10.2.

 

No amendment of any provision of this Agreement relating to the Agent shall be effective without the written consent of the Agent.  The Agent may waive payment of the fee required under Section 12.3.2 without obtaining the consent of any other party to this Agreement.

 

8.3                               Preservation of Rights.  No delay or omission of the Lenders or the Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and the making of a Loan notwithstanding the existence of a Default or the inability of the Borrower to satisfy the conditions precedent to such Loan shall not constitute any waiver or acquiescence.  Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Lenders required pursuant to Section 8.2, and then only to the extent in such writing specifically set forth.  All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Agent and the Lenders until the Obligations have been paid in full.

 

ARTICLE IX

 

GENERAL PROVISIONS

 

9.1                               Survival of Representations.  All representations and warranties of the Borrower contained in this Agreement shall survive the making of the Loans herein contemplated.

 

9.2                               Governmental Regulation.  Anything contained in this Agreement to the contrary notwithstanding, no Lender shall be obligated to extend credit to the Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation.

 

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9.3                               Headings.  Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents.

 

9.4                               Entire Agreement.  The Loan Documents embody the entire agreement and understanding among the Borrower, the Agent and the Lenders and supersede all prior agreements and understandings among the Borrower, the Agent and the Lenders relating to the subject matter thereof other than those contained in the fee letter described in Section 10.13 which shall survive and remain in full force and effect during the term of this Agreement.

 

9.5                               Several Obligations; Benefits of this Agreement.  The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Agent is authorized to act as such).  The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder.  This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns, provided, however, that the parties hereto expressly agree that the Arranger shall enjoy the benefits of the provisions of Sections 9.6, 9.10 and 10.11 to the extent specifically set forth therein and shall have the right to enforce such provisions on its own behalf and in its own name to the same extent as if it were a party to this Agreement.

 

9.6                               Expenses; Indemnification.  (a) The Borrower shall reimburse the Agent and the Arranger for any costs, internal charges and out-of-pocket expenses (including attorneys’ fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent) paid or incurred by the Agent or the Arranger in connection with the preparation, negotiation, execution, delivery, review, amendment, modification, and administration of the Loan Documents.  The Borrower also agrees to reimburse the Agent, the Arranger and the Lenders for any costs, internal charges and out-of-pocket expenses (including attorneys’ fees and time charges of attorneys for the Agent, the Arranger and the Lenders, which attorneys may be employees of the Agent, the Arranger or the Lenders) paid or incurred by the Agent, the Arranger or any Lender in connection with the collection and enforcement of the Loan Documents.

 

(b)                                 The Borrower hereby further agrees to indemnify the Agent, the Arranger, each Lender, their respective affiliates, and each of their directors, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent, the Arranger, any Lender or any affiliate is a party thereto) which any of them may pay or incur arising out of or relating to this Agreement, the other Loan Documents, the transactions contemplated hereby or the direct or indirect application or proposed application of the proceeds of any Loan hereunder except to the extent that they are determined by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the party seeking indemnification.   The obligations of the Borrower under this Section 9.6 shall survive the termination of this Agreement.

 

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9.7                               Numbers of Documents.  All statements, notices, closing documents, and requests hereunder shall be furnished to the Agent with sufficient counterparts so that the Agent may furnish one to each of the Lenders.

 

9.8                               Accounting.  Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with Agreement Accounting Principles or SAP, as applicable except that any calculation or determination which is to be made on a consolidated basis shall be made for the Borrower and all its Subsidiaries, including those Subsidiaries, if any, which are unconsolidated on the Borrower’s audited financial statements, and provided that, if the Borrower notifies the Agent that the Borrower wishes to amend any provision hereof to eliminate the effect of any change in GAAP or SAP (or if the Agent notifies the Borrower that the Required Lenders wish to amend any provision hereof for such purpose), then such provision shall be applied on the basis of GAAP or SAP in effect immediately before the relevant change in GAAP or SAP became effective, until either such notice is withdrawn or such provision is amended in a manner satisfactory to the Borrower and the Required Lenders.

 

9.9                               Severability of Provisions.  Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable.

 

9.10                        Nonliability of Lenders.  The relationship between the Borrower on the one hand and the Lenders and the Agent on the other hand shall be solely that of borrower and lender.  Neither the Agent, the Arranger nor any Lender shall have any fiduciary responsibilities to the Borrower.  Neither the Agent, the Arranger nor any Lender undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower’s business or operations.  The Borrower agrees that neither the Agent, the Arranger nor any Lender shall have liability to the Borrower (whether sounding in tort, contract or otherwise) for losses suffered by the Borrower in connection with, arising out of, or in any way related to, the transactions contemplated and the relationship established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless it is determined in a final non-appealable judgment by a court of competent jurisdiction that such losses resulted from the gross negligence or willful misconduct of the party from which recovery is sought.  Neither the Agent, the Arranger nor any Lender shall have any liability with respect to, and the Borrower hereby waives, releases and agrees not to sue for, any special, indirect, consequential or punitive damages suffered by the Borrower in connection with, arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby.

 

9.11                        Confidentiality.  Each Lender agrees to hold any confidential information which it may receive from the Borrower pursuant to this Agreement in confidence, except for disclosure (i) to its Affiliates and to other Lenders and their respective Affiliates, (ii) to legal counsel, accountants, and other professional advisors to such Lender or to a Transferee, (iii) to regulatory officials, (iv) to any Person as requested pursuant to or as required by law, regulation, or legal process, (v) to any Person in connection with any legal proceeding to which such Lender is a party, (vi) to such Lender’s direct or indirect contractual counterparties in swap agreements or to

 

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legal counsel, accountants and other professional advisors to such counterparties, (vii) permitted by Section 12.4 and (viii) to rating agencies if requested or required by such agencies in connection with a rating relating to the Advances hereunder.

 

9.12                        Nonreliance.  Each Lender hereby represents that it is not relying on or looking to any margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System) for the repayment of the Loans provided for herein.

 

9.13                        Disclosure.  The Borrower and each Lender hereby acknowledge and agree that JPMCB and/or its Affiliates from time to time may hold investments in, make other loans to or have other relationships with the Borrower and its Affiliates.

 

9.14                        USA Patriot Act.  Each Lender that is subject to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”) hereby notifies the Borrower that pursuant to the requirements of the Act, it is required to obtain, verify and record certain information and documentation that identifies the Borrower, which information includes the name and address of the Borrower and such other information that will allow such Lender to identify the Borrower in accordance with the Patriot Act.

 

ARTICLE X

 

THE AGENT

 

10.1                        Appointment; Nature of Relationship.  JPMCB is hereby appointed by each of the Lenders as its contractual representative (herein referred to as the “Agent”) hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Agent to act as the contractual representative of such Lender with the rights and duties expressly set forth herein and in the other Loan Documents.  The Agent agrees to act as such contractual representative upon the express conditions contained in this Article X.  Notwithstanding the use of the defined term “Agent,” it is expressly understood and agreed that the Agent shall not have any fiduciary responsibilities to any Lender by reason of this Agreement or any other Loan Document and that the Agent is merely acting as the contractual representative of the Lenders with only those duties as are expressly set forth in this Agreement and the other Loan Documents.  In its capacity as the Lenders’ contractual representative, the Agent (i) does not hereby assume any fiduciary duties to any of the Lenders, (ii) is a “representative” of the Lenders within the meaning of the term “secured party” as defined in the Illinois Uniform Commercial Code and (iii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents.  Each of the Lenders hereby agrees to assert no claim against the Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender hereby waives.

 

10.2                        Powers.  The Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto.  The Agent shall have no implied duties to the Lenders, or any obligation to the Lenders to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Agent.

 

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10.3                        General Immunity.  Neither the Agent nor any of its directors, officers, agents or employees shall be liable to the Borrower, the Lenders or any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except to the extent such action or inaction is determined in a final non-appealable judgment by a court of competent jurisdiction to have arisen from the gross negligence or willful misconduct of such Person.

 

10.4                        No Responsibility for Loans, Recitals, etc.  Neither the Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each Lender; (c) the satisfaction of any condition specified in Article IV, except receipt of items required to be delivered solely to the Agent; (d) the existence or possible existence of any Default or Unmatured Default; (e) the validity, enforceability, effectiveness, sufficiency or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; (f) the value, sufficiency, creation, perfection or priority of any Lien in any collateral security; or (g) the financial condition of the Borrower or any guarantor of any of the Obligations or of any of the Borrower’s or any such guarantor’s respective Subsidiaries.  Except as expressly set forth herein, the Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Agent or any of its Affiliates in any capacity.

 

10.5                        Action on Instructions of Lenders.  The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders.  The Lenders hereby acknowledge that the Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement or any other Loan Document unless it shall be requested in writing to do so by the Required Lenders.  The Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action.

 

10.6                        Employment of Agents and Counsel.  The Agent may execute any of its duties as Agent hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care.  The Agent shall be entitled to advice of counsel concerning the contractual arrangement between the Agent and the Lenders and all matters pertaining to the Agent’s duties hereunder and under any other Loan Document.

 

10.7                        Reliance on Documents; Counsel.  The Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or

 

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persons, and, in respect to legal matters, upon the opinion of counsel selected by the Agent, which counsel may be employees of the Agent.

 

10.8                        Agent’s Reimbursement and Indemnification.  The Lenders agree to reimburse and indemnify the Agent ratably in proportion to their respective Commitments (or, if the Commitments have been terminated, in proportion to their Commitments immediately prior to such termination) (i) for any amounts not reimbursed by the Borrower for which the Agent is entitled to reimbursement by the Borrower under the Loan Documents, (ii) for any other expenses incurred by the Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents (including, without limitation, for any expenses incurred by the Agent in connection with any dispute between the Agent and any Lender or between two or more of the Lenders) and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby (including, without limitation, for any such amounts incurred by or asserted against the Agent in connection with any dispute between the Agent and any Lender or between two or more of the Lenders), or the enforcement of any of the terms of the Loan Documents or of any such other documents, provided that (i) no Lender shall be liable for any of the foregoing to the extent any of the foregoing is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Agent and (ii) any indemnification required pursuant to Section 3.5(vii) shall, notwithstanding the provisions of this Section 10.8, be paid by the relevant Lender in accordance with the provisions thereof.  The obligations of the Lenders under this Section 10.8 shall survive payment of the Obligations and termination of this Agreement.

 

10.9                        Notice of Default.  The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Unmatured Default hereunder unless the Agent has received written notice from a Lender or the Borrower referring to this Agreement describing such Default or Unmatured Default and stating that such notice is a “notice of default”.  In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders.

 

10.10                 Rights as a Lender.  In the event the Agent is a Lender, the Agent shall have the same rights and powers hereunder and under any other Loan Document with respect to its Commitment and its Loans as any Lender and may exercise the same as though it were not the Agent, and the term “Lender” or “Lenders” shall, at any time when the Agent is a Lender, unless the context otherwise indicates, include the Agent in its individual capacity.  The Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Subsidiaries in which the Borrower or such Subsidiary is not restricted hereby from engaging with any other Person.

 

10.11                 Lender Credit Decision.  Each Lender acknowledges that it has, independently and without reliance upon the Agent, the Arranger or any other Lender and based on the financial statements prepared by the Borrower and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement

 

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and the other Loan Documents.  Each Lender also acknowledges that it will, independently and without reliance upon the Agent, the Arranger or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents.

 

10.12                 Successor Agent.  The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower, such resignation to be effective upon the appointment of a successor Agent or, if no successor Agent has been appointed, forty-five days after the retiring Agent gives notice of its intention to resign.  Upon any such resignation, the Required Lenders shall have the right to appoint, on behalf of the Borrower and the Lenders, a successor Agent.  If no successor Agent shall have been so appointed by the Required Lenders within thirty days after the resigning Agent’s giving notice of its intention to resign, then the resigning Agent may appoint, on behalf of the Borrower and the Lenders, a successor Agent.  Notwithstanding the previous sentence, the Agent may at any time without the consent of the Borrower or any Lender, appoint any of its Affiliates which is a commercial bank as a successor Agent hereunder.  If the Agent has resigned and no successor Agent has been appointed, the Lenders may perform all the duties of the Agent hereunder and the Borrower shall make all payments in respect of the Obligations to the applicable Lender and for all other purposes shall deal directly with the Lenders.  No successor Agent shall be deemed to be appointed hereunder until such successor Agent has accepted the appointment.  Any such successor Agent shall be a commercial bank having capital and retained earnings of at least $100,000,000.  Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning Agent.  Upon the effectiveness of the resignation of the Agent, the resigning Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents.  After the effectiveness of the resignation or removal of an Agent, the provisions of this Article X shall continue in effect for the benefit of such Agent in respect of any actions taken or omitted to be taken by it while it was acting as the Agent hereunder and under the other Loan Documents.  In the event that there is a successor to the Agent by merger, or the Agent assigns its duties and obligations to an Affiliate pursuant to this Section 10.12, then the term “Prime Rate” as used in this Agreement shall mean the prime rate, base rate or other analogous rate of the new Agent.

 

10.13                 Delegation to Affiliates.  The Borrower and the Lenders agree that the Agent may delegate any of its duties under this Agreement to any of its Affiliates.  Any such Affiliate (and such Affiliate’s directors, officers, agents and employees) which performs duties in connection with this Agreement shall be entitled to the same benefits of the indemnification, waiver and other protective provisions to which the Agent is entitled under Articles IX and X.

 

ARTICLE XI

 

SETOFF; RATABLE PAYMENTS

 

11.1                        Setoff.  In addition to, and without limitation of, any rights of the Lenders under applicable law, if the Borrower becomes insolvent, however evidenced, or any Default occurs, any and all deposits (including all account balances, whether provisional or final and whether or

 

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not collected or available) and any other Indebtedness at any time held or owing by any Lender or any Affiliate of any Lender to or for the credit or account of the Borrower may be offset and applied toward the payment of the Obligations owing to such Lender, whether or not the Obligations, or any part thereof, shall then be due.

 

11.2                        Ratable Payments.  If any Lender, whether by setoff or otherwise, has payment made to it upon its Loans (other than payments received pursuant to Section 3.1, 3.3 or 3.4) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the Loans held by the other Lenders so that after such purchase each Lender will hold its ratable proportion of Loans.  If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral ratably in proportion to their Loans.  In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made.

 

ARTICLE XII

 

BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

 

12.1                        Successors and Assigns.  The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Lenders and their respective successors and assigns permitted hereby, except that (i) the Borrower shall not have the right to assign its rights or obligations under the Loan Documents without the prior written consent of each Lender, (ii) any assignment by any Lender must be made in compliance with Section 12.3, and (iii) any transfer by Participation must be made in compliance with Section 12.2.  Any attempted assignment or transfer by any party not made in compliance with this Section 12.1 shall be null and void, unless such attempted assignment or transfer is treated as a participation in accordance with Section 12.3.2.  The parties to this Agreement acknowledge that clause (ii) of this Section 12.1 relates only to absolute assignments and this Section 12.1 does not prohibit assignments creating security interests, including, without limitation, (x) any pledge or assignment by any Lender of all or any portion of its rights under this Agreement and any Note to a Federal Reserve Bank or (y) in the case of a Lender which is a fund, any pledge or assignment of all or any portion of its rights under this Agreement and any Note to its trustee in support of its obligations to its trustee; provided, however, that no such pledge or assignment creating a security interest shall release the transferor Lender from its obligations hereunder unless and until the parties thereto have complied with the provisions of Section 12.3.  The Agent may treat the Person which made any Loan or which holds any Note as the owner thereof for all purposes hereof unless and until such Person complies with Section 12.3; provided, however, that the Agent may in its discretion (but shall not be required to) follow instructions from the Person which made any Loan or which holds any Note to direct payments relating to such Loan or Note to another Person.  Any assignee of the rights to any Loan or any Note agrees by acceptance of such assignment to be bound by all the terms and provisions of the Loan Documents.  Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the owner of the rights to any Loan (whether or not

 

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a Note has been issued in evidence thereof), shall be conclusive and binding on any subsequent holder or assignee of the rights to such Loan.

 

12.2                        Participations.

 

12.2.1              Permitted Participants; Effect.  Any Lender may at any time sell to one or more banks or other entities (“Participants”) participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender under the Loan Documents.  In the event of any such sale by a Lender of participating interests to a Participant, such Lender’s obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the owner of its Loans and the holder of any Note issued to it in evidence thereof for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under the Loan Documents.

 

12.2.2              Voting Rights.  Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Loan or Commitment in which such Participant has an interest which would require consent of all of the Lenders pursuant to the terms of Section 8.2 or of any other Loan Document.

 

12.2.3              Benefit of Certain Provisions.  The Borrower agrees that each Participant shall be deemed to have the right of setoff provided in Section 11.1 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender shall retain the right of setoff provided in Section 11.1 with respect to the amount of participating interests sold to each Participant.  The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 11.1, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 11.2 as if each Participant were a Lender.  The Borrower further agrees that each Participant shall be entitled to the benefits of Sections 3.1, 3.3 and 3.4 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 12.3, provided that (i) a Participant shall not be entitled to receive any greater payment under Section 3.1 or 3.4 than the Lender who sold the participating interest to such Participant would have received had it retained such interest for its own account, unless the sale of such interest to such Participant is made with the prior written consent of the Borrower, and (ii) any Participant not incorporated under the laws of the United States of America or any State thereof agrees to comply with the provisions of Section 3.4 to the same extent as if it were a Lender.

 

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12.2.4              Participant Register.  Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any Commitments, Advances or other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such Commitment, Advance or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations.  The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.  For the avoidance of doubt, the Agent (in its capacity as Agent) shall have no responsibility for maintaining a Participant Register.

 

12.3                        Assignments.

 

12.3.1              Permitted Assignments.  Any Lender may at any time assign to one or more banks or other entities (“Purchasers”) all or any part of its rights and obligations under the Loan Documents.  Such assignment shall be substantially in the form of Exhibit B or in such other form as may be agreed to by the parties thereto.  Each such assignment with respect to a Purchaser which is not a Lender or an Affiliate of a Lender or an Approved Fund shall either be in an amount equal to the entire applicable Commitment and Loans of the assigning Lender  (unless each of the Borrower and the Agent otherwise consents) be in an aggregate amount not less than $5,000,000.  The amount of the assignment shall be based on the Commitment or outstanding Loans (if the Commitment has been terminated) subject to the assignment, determined as of the date of such assignment or as of the “Trade Date,” if the “Trade Date” is specified in the assignment.

 

12.3.2              Consents.  The consent of the Borrower shall be required prior to an assignment becoming effective unless the Purchaser is a Lender, an Affiliate of a Lender or an Approved Fund, provided that the consent of the Borrower shall not be required if a Default has occurred and is continuing.  The consent of the Agent shall be required prior to an assignment becoming effective unless the Purchaser is a Lender.  The consent of the Issuing Bank shall be required prior to an assignment of a Commitment becoming effective.  Any consent required under this Section 12.3.2 shall not be unreasonably withheld or delayed.

 

12.3.3              Effect; Effective Date.  Upon (i) delivery to the Agent of an assignment, together with any consents required by Sections 12.3.1 and 12.3.2, and (ii) payment of a $4,000 fee to the Agent for processing such assignment (unless such fee is waived by the Agent), such assignment shall become effective on the effective date specified in such assignment.  The assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment and Loans under the applicable assignment agreement constitutes “plan assets” as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan

 

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Documents will not be “plan assets” under ERISA.  On and after the effective date of such assignment, such Purchaser shall for all purposes be a Lender party to this Agreement and any other Loan Document executed by or on behalf of the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party thereto, and the transferor Lender shall be released with respect to the Commitment and Loans assigned to such Purchaser without any further consent or action by the Borrower, the Lenders or the Agent.  In the case of an assignment covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a Lender hereunder but shall continue to be entitled to the benefits of, and subject to, those provisions of this Agreement and the other Loan Documents which survive payment of the Obligations and termination of the applicable agreement.  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 12.3 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 12.2.  Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3.3, the transferor Lender, the Agent and the Borrower shall, if the transferor Lender or the Purchaser desires that its Loans be evidenced by Notes, make appropriate arrangements so that new Notes or, as appropriate, replacement Notes are issued to such transferor Lender and new Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting their respective Commitments, as adjusted pursuant to such assignment.

 

12.3.4              Register.  The Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of its offices in Chicago, Illinois a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

 

12.4                        Dissemination of Information.  The Borrower authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a “Transferee”) and any prospective Transferee any and all information in such Lender’s possession concerning the creditworthiness of the Borrower and its Subsidiaries, including without limitation any information contained in any Reports; provided that each Transferee and prospective Transferee agrees to be bound by Section 9.11 of this Agreement.

 

12.5                        Tax Treatment.  If any interest in any Loan Document is transferred to any Transferee which is not incorporated under the laws of the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 3.4.

 

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ARTICLE XIII

 

NOTICES

 

13.1                        Notices.  Except as otherwise permitted by Section 2.14 with respect to borrowing notices, all notices, requests and other communications to any party hereunder shall be in writing (including electronic transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower or the Agent, at its address set forth on the signature pages hereof, (y) in the case of any Lender, at its address number set forth below its signature hereto or (z) in the case of any party, at such other address number as such party may hereafter specify for the purpose by notice to the Agent and the Borrower in accordance with the provisions of this Section 13.1.  Each such notice, request or other communication shall be effective (i) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, or (ii) if given by any other means, when delivered (or, in the case of electronic transmission, received) at the address specified in this Section; provided that notices to the Agent under Article II shall not be effective until received.

 

13.2                        Change of Address.  The Borrower, the Agent and any Lender may each change the address for service of notice upon it by a notice in writing to the other parties hereto.

 

ARTICLE XIV

 

COUNTERPARTS

 

This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart.  This Agreement shall be effective when it has been executed by the Borrower, the Agent and the Lenders and each party has notified the Agent by electronic mail or telephone that it has taken such action.

 

ARTICLE XV

 

CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

 

15.1                        CHOICE OF LAW.  THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, 735 ILCS SECTION 105/5-1 ET SEQ, BUT OTHERWISE WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

 

15.2                        CONSENT TO JURISDICTION.  THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO

 

56

 

ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.  NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.  ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.

 

15.3                        WAIVER OF JURY TRIAL.  THE BORROWER, THE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

 

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IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed this Agreement as of the date first above written.

 

	
 
    	
RLI   CORP.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Thomas L. Brown
    
	
 
    	
 
    
	
 
    	
Title:
    	
V.P.,   Chief Financial Officer & Treasurer
    
	
 
    	
 
    
	
 
    	
9025   North Lindbergh Drive
    
	
 
    	
Peoria, Illinois   61615-1431
    
	
 
    	
Attention:   Thomas L. Brown
    
	
 
    	
thomas.brown@rlicorp.com
    
	
 
    	
 
    
	
 
    	
 
    
	
Commitments
    	
 
    
	
 
    	
 
    
	
$40,000,000
    	
JPMORGAN   CHASE BANK, NATIONAL ASSOCIATION,
    
	
 
    	
Individually   and as Agent
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Thomas   A. Kiepura
    
	
 
    	
 
    
	
 
    	
Title:
    	
Senior   Credit Executive
    
	
 
    	
 
    
	
 
    	
10 South   Dearborn
    
	
 
    	
9th Floor
    
	
 
    	
Chicago, Illinois   60603
    
	
 
    	
Suite IL1-0364
    
	
 
    	
Attention:   Danielle D. Babine
    
	
 
    	
danielle.d.babine@jpmorgan.com
    

 

 

Aggregate Commitment

 

$40,000,000

 

 

Exhibits, Schedules, and Annexes available upon request.

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