EXHIBIT 10.30
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CREDIT AGREEMENT
among
ENHANCE REINSURANCE COMPANY,
VARIOUS BANKS
and
DEUTSCHE BANK AG,
NEW YORK BRANCH,
as Agent
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Dated as of November 7, 2001
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DEUTSCHE BANC ALEX. BROWN INC.,
as Arranger
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TABLE OF CONTENTS
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SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION...................... 1
Section 1.01 Defined Terms........................................... 1
Section 1.02 Principles of Construction.............................. 10
SECTION 2. AMOUNT AND TERMS OF CREDIT...................................... 10
Section 2.01 The Loans............................................... 10
Section 2.02 Amount of Each Borrowing................................ 11
Section 2.03 Notice of Borrowing..................................... 11
Section 2.04 Disbursement of Funds................................... 11
Section 2.05 Notes................................................... 11
Section 2.06 Interest................................................ 12
Section 2.07 Capital Adequacy........................................ 12
Section 2.08 Obligations of Defaulting Banks......................... 13
SECTION 3. COMMITMENT FEES, FEES; AND TERMINATIONS, EXTENSIONS
AND INCREASES OF COMMITMENTS AND CONTINGENT
COMMITMENTS..................................................... 13
Section 3.01 Fees.................................................... 13
Section 3.02 Voluntary Termination of Unutilized Commitments and
Unutilized Contingent Commitments....................... 14
Section 3.03 Mandatory Termination of Commitments and Contingent
Commitments............................................. 14
Section 3.04 Expiry Date............................................. 14
SECTION 4. PREPAYMENTS; PAYMENTS........................................... 15
Section 4.01 Voluntary Prepayments................................... 15
Section 4.02 Mandatory Prepayments................................... 15
Section 4.03 Method and Place of Payment............................. 15
Section 4.04 Net Payments............................................ 16
Section 4.05 Limitations on Sources of Payment....................... 17
SECTION 5. CONDITIONS PRECEDENT TO EFFECTIVENESS........................... 17
Section 5.01 Execution of Agreement; Notes........................... 18
Section 5.02 No Default; Representations and Warranties.............. 18
Section 5.03 Opinions of Counsel..................................... 18
Section 5.04 Corporate Documents; Proceedings........................ 18
Section 5.05 Security Agreement...................................... 18
Section 5.06 Covered Portfolio, etc.................................. 18
(i)
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Section 5.07 Requisite Approvals..................................... 19
Section 5.08 Litigation.............................................. 19
Section 5.09 Fees, etc............................................... 19
SECTION 6. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS....................... 19
Section 6.01 Loss Threshold Incurrence Date.......................... 19
Section 6.02 Notice of Borrowing..................................... 19
SECTION 7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS...................... 20
Section 7.01 Corporate Status........................................ 20
Section 7.02 Corporate Power and Authority........................... 20
Section 7.03 No Violation............................................ 20
Section 7.04 Governmental Approvals.................................. 20
Section 7.05 Financial Statements; Financial Condition;
Undisclosed Liabilities; etc............................ 21
Section 7.06 Litigation.............................................. 21
Section 7.07 True and Complete Disclosure............................ 21
Section 7.08 Use of Proceeds; Margin Regulations..................... 22
Section 7.09 Tax Returns and Payments................................ 22
Section 7.10 Compliance with ERISA................................... 22
Section 7.11 Capitalization.......................................... 23
Section 7.12 No Subsidiaries......................................... 23
Section 7.13 Compliance with Statutes, etc........................... 23
Section 7.14 Investment Company Act.................................. 23
Section 7.15 Public Utility Holding Company Act...................... 23
Section 7.16 Compliance with Insurance Law........................... 23
Section 7.17 Covered Portfolio....................................... 24
SECTION 8. AFFIRMATIVE COVENANTS........................................... 24
Section 8.01 Information Covenants................................... 24
Section 8.02 Books, Records and Inspections.......................... 26
Section 8.03 Corporate Franchises.................................... 27
Section 8.04 Compliance with Statutes, etc........................... 27
Section 8.05 ERISA................................................... 27
Section 8.06 Performance of Obligations.............................. 27
Section 8.07 Use of Proceeds......................................... 28
Section 8.08 Conduct of Business..................................... 28
Section 8.09 Underwriting Criteria................................... 28
Section 8.10 Collection of Pledged Recoveries and Pledged Premiums... 28
Section 8.11 Pledged Reserve Release Notice.......................... 28
Section 8.12 Registry................................................ 28
SECTION 9. NEGATIVE COVENANTS.............................................. 28
Section 9.01 Liens................................................... 28
(ii)
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Section 9.02 Consolidation, Merger, Sale of Assets, etc.............. 29
SECTION 10. EVENTS OF DEFAULT.............................................. 30
Section 10.01 Payments............................................... 30
Section 10.02 Representations, etc................................... 30
Section 10.03 Covenants.............................................. 30
Section 10.04 Default Under Other Agreements......................... 30
Section 10.05 Bankruptcy, etc........................................ 30
Section 10.06 Security Agreement..................................... 31
Section 10.07 Judgments.............................................. 31
Section 10.08 Change of Control...................................... 31
SECTION 11. THE AGENT...................................................... 31
Section 11.01 Appointment............................................ 31
Section 11.02 Nature of Duties....................................... 32
Section 11.03 Lack of Reliance on the Agent.......................... 32
Section 11.04 Certain Rights of the Agent............................ 32
Section 11.05 Reliance............................................... 33
Section 11.06 Indemnification........................................ 33
Section 11.07 The Agent in Its Individual Capacity................... 33
Section 11.08 Resignation by the Agent............................... 33
SECTION 12. MISCELLANEOUS.................................................. 34
Section 12.01 Payment of Expenses, etc............................... 34
Section 12.02 Right of Setoff........................................ 34
Section 12.03 Notices................................................ 35
Section 12.04 Benefit of Agreement................................... 35
Section 12.05 No Waiver; Remedies Cumulative......................... 37
Section 12.06 Calculations; Computations............................. 38
Section 12.07 Governing Law; Submission to Jurisdiction; Venue;
Waiver of Jury Trial.................................. 38
Section 12.08 Counterparts........................................... 39
Section 12.09 Effectiveness.......................................... 39
Section 12.10 Headings Descriptive................................... 39
Section 12.11 Amendment or Waiver.................................... 39
Section 12.12 Survival............................................... 39
Section 12.13 Exclusions from Covered Portfolio...................... 39
Section 12.14 Confidentiality........................................ 40
Section 12.15 Payments Pro Rata...................................... 41
(iii)
SCHEDULES
Schedule I Commitments
Schedule II Email re Reinsured Obligations
EXHIBITS
Exhibit A Notice of Borrowing
Exhibit B Note
Exhibit C Matters to be Covered by Opinions of
Counsel to the Borrower
Exhibit D Officers' Certificate of the Borrower
Exhibit E Pledge and Security Agreement
Exhibit F Assignment and Assumption Agreement
(iv)
CREDIT AGREEMENT, dated as of November 7, 2001, among ENHANCE
REINSURANCE COMPANY, a New York stock insurance company (the "Borrower"), the
Banks party hereto from time to time, and DEUTSCHE BANK AG, NEW YORK BRANCH,
acting in its capacity as Agent pursuant to Section 11 (in such capacity, the
"Agent").
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions herein set
forth, the Banks are willing to make available to the Borrower the credit
facility provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION.
Section 1.01 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Affiliate" shall mean, with respect to any Person, any other Person
(other than an individual) directly or indirectly controlling, controlled by, or
under direct or indirect common control with, such Person; provided, however,
that an Affiliate of the Borrower shall include any Person that directly or
indirectly owns more than 10% of the Borrower and any officer or director of the
Borrower or any such Person. A Person shall be deemed to control another Person
if such Person possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of such other Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agent" shall mean Deutsche Bank AG, New York Branch, in its
capacity as Agent for the Banks hereunder, and shall include any successor to
the Agent appointed pursuant to Section 11.08.
"Agreement" shall mean this Credit Agreement, as modified,
supplemented or amended from time to time.
"Applicable Margin" shall mean a percentage per annum equal to 2.0%.
"Assignment and Assumption Agreement" shall mean any Assignment and
Assumption Agreement substantially in the form of Exhibit F entered into
pursuant to the terms hereof.
"Authorized Officer" shall mean the president, any vice president,
the chief financial officer or the treasurer of the Borrower.
"Average Annual Debt Service" as of a specified date with respect to
an Insured Obligation shall mean the applicable Retained Percentage times the
sum of (i) the aggregate outstanding principal amount of such Insured Obligation
and (ii) the aggregate amount of interest thereafter required to be paid on such
Insured Obligation (giving effect to all mandatory sinking
fund payments or other regularly scheduled required redemptions, prepayments or
other retirement of principal), divided by the number of whole and fractional
years from the date of determination to the latest maturity date of such Insured
Obligation, and as of a specified date with respect to the Covered Portfolio
shall mean the sum of the Annual Average Debt Service as of such date of all
Insured Obligations contained in the Covered Portfolio. In the event that an
Insured Obligation bears interest at a variable rate, the interest thereon for
purposes of the determination of Average Annual Debt Service shall be calculated
at the rate employed by the Borrower to compute average annual debt service with
respect to such Insured Obligation in accordance with its customary business
practices.
"Bank" shall mean the banks listed on the signature pages hereof on
the Effective Date as well as any institution which becomes a Bank hereunder
pursuant to Section 12.04(b).
"Bankruptcy Code" shall have the meaning provided in Section 10.05.
"Base Rate" shall mean the higher of (i) 1/2 of 1% in excess of the
Federal Funds Rate and (ii) the Prime Lending Rate.
"Borrower" shall have the meaning provided in the first paragraph of
this Agreement.
"Borrower's Rating" shall mean the Borrower's claims-paying ability
rating.
"Borrowing" shall mean the borrowing of Loans on a given date.
"Business Day" shall mean any day except Saturday, Sunday and any
day which shall be in New York City a legal holiday or a day on which banking
institutions are authorized or required by law or other government action to
close.
"Change of Control" shall mean and include the occurrence of any of
the following events: any Person, entity or "group" (within the meaning of
Sections 13(d) or 14(d) of the Securities Exchange Act of 1934) other than
Radian Group Inc. or any Affiliate thereof (i) shall have acquired, directly or
indirectly, beneficial ownership of 20% or more of any outstanding class of
capital stock of the Borrower having ordinary voting power in the election of
directors, provided that any Person, entity or group shall be permitted to
acquire up to 25% of the outstanding capital stock of any such class in a
transaction approved before the consummation of same by a majority of the
directors of the Borrower or (ii) shall have obtained the power (whether or not
exercised) to elect the majority of the Board of Directors of the Borrower.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the date of this
Agreement and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Collateral" shall mean all "Collateral" as defined in the Security
Agreement.
"Collateral Account" shall have the meaning provided in the Security
Agreement.
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"Collateral Agent" shall have the meaning provided in the Security
Agreement.
"Commitment" shall mean, for each Bank, the amount set forth
opposite such Bank's name in Part A of Schedule I hereto directly below the
column entitled "Commitment", as the same may be (i) reduced from time to time
pursuant to Section 3.02 and/or 3.03 and (ii) adjusted from time to time as a
result of assignments to or from such Bank pursuant to Section 3.04 or 12.04.
"Commitment Fees" shall have the meaning provided in Section
3.01(a).
"Commitment Period" initially shall mean the period commencing on
the Effective Date and ending on the Expiry Date and, from and after the date of
any extension of the Expiry Date, shall mean the period commencing on the date
which is seven years prior to the Expiry Date and ending on the Expiry Date.
"Contingent Commitment" shall mean for each Part C Bank the amount
set forth opposite such Part C Bank's name in Part C of Schedule I hereto
directly below the column entitled "Contingent Commitment", as the same may be
(i) reduced from time to time pursuant to Section 3.02 and/or 3.03 and (ii)
adjusted from time to time as a result of assignments to or from such Part C
Bank pursuant to Section 3.04 or 12.04.
"Contingent Obligation" shall mean, as to any Person, any obligation
of such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (a) for the
purchase or payment of any such primary obligation or (b) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the holder of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless the holder
of such primary obligation against loss in respect thereof; provided, however,
that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business or
obligations under insurance or reinsurance contracts entered into in the
ordinary course of business to secure reinsurance obligations. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Covered Portfolio" shall mean and include each Insured Obligation
as of the Effective Date and each Insured Obligation issued thereafter and prior
to the Loss Threshold Incurrence Date other than any Insured Obligation which is
excluded from the Covered Portfolio pursuant to Section 12.13.
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"Credit Documents" shall mean this Agreement, each Note and the
Security Agreement.
"Credit Event" shall mean the making of any Loan.
"Cumulative Losses" for a specified period shall mean the aggregate
Losses of the Borrower determined cumulatively during such period without regard
to Pledged Recoveries.
"Declining Bank" shall have the meaning provided in Section 3.04(b).
"Default" shall mean any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulted Loan" shall mean, with respect to any Bank at any time,
the Loan or portion of any Loan required to be made by such Bank to the Borrower
pursuant to Section 2.01 at or prior to such time that has not been made by such
Bank as of such time.
"Defaulting Bank" shall mean, at any time, any Bank that, at such
time, owes a Defaulted Loan.
"Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States.
"Effective Date" shall have the meaning provided in Section 12.09.
"Eligible Transferee" shall mean and include a commercial bank,
financial institution or other "accredited investor" (as defined in Regulation D
of the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder) assigned, or the parent of which is assigned, an
unsecured senior debt rating (or shadow rating as reflected in a letter) by each
of Moody's and S&P.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect at the
date of this Agreement, and to any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean any person (as defined in Section 3(9)
of ERISA) which together with the Borrower or any of its Subsidiaries would be
deemed to be a "single employer" within the meaning of Section 414(b), (c), (m)
or (o) of the Code.
"Event of Default" shall have the meaning provided in Section 10.
"Expiry Date" shall have the meaning provided in Section 3.04(a).
"Extending Bank" shall have the meaning provided in Section 3.04(b).
"Extension Request" shall have the meaning provided in Section
3.04(a).
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"Federal Funds Rate" shall mean for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal Funds brokers of
recognized standing selected by the Agent.
"Fees" shall mean all amounts payable pursuant to or referred to in
Section 3.01.
"holder of any Note" shall mean any Federal Reserve Bank to which a
Bank has pledged its Note to the extent such Federal Reserve Bank has foreclosed
upon such Note.
"Increasing Extending Bank" shall have the meaning provided in
Section 3.04(b).
"Indebtedness" shall mean, as to any Person, without duplication,
(i) all indebtedness (including principal, interest, fees and charges) of such
Person for borrowed money or for the deferred purchase price of property or
services, (ii) the face amount of all letters of credit issued for the account
of such Person and all drafts drawn thereunder, (iii) all liabilities secured by
any Lien on any property owned by such Person, whether or not such liabilities
have been assumed by such Person, (iv) the aggregate amount required to be
capitalized under leases under which such Person is the lessee and (v) all
Contingent Obligations of such Person.
"Installment Premiums" shall mean any and all premiums which are
required to be paid or claimed to be required to be paid to or for the account
of the Borrower in respect of Insured Obligations in the Covered Portfolio on a
periodic basis rather than by payment in full on the date of the effectiveness
of the relevant Insurance Contract.
"Insurance Contracts" shall have the meaning provided in Section
7.16.
"Insured Obligation" shall mean "municipal obligation bonds",
"special revenue bonds", "industrial development bonds" and "utility first
mortgage obligations" which the Borrower is permitted to insure or reinsure
under the provisions of Section 6904 (b) (1) (A), (B) or (C) of the New York
Insurance Law (without regard to clause (J) thereof) as in effect on the
Effective Date and issued by the United States, a state thereof or the District
of Columbia, a municipality or governmental unit or other political subdivision
of the foregoing or any public agency or instrumentality, in any event to the
extent that the payment of principal thereof and/or interest thereon is insured,
reinsured or otherwise guaranteed by the Borrower, and which, as of the
Effective Date (with respect to Insured Obligations in the Covered Portfolio as
of the Effective Date), or at the time it so insured, reinsured or otherwise
guaranteed (with respect to Insured Obligations which are added to the Covered
Portfolio after the Effective Date), has an investment grade rating (either
directly or by a shadow rating) from Moody's, S&P or Fitch, Inc.
"Lending Office" shall mean the office of the Agent located at 31
West 52nd Street, New York, New York 10019 or such other office, Subsidiary or
Affiliate of the Agent as the Agent may from time to time specify as such to the
Borrower.
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"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), preference,
priority or other security agreement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the UCC or
any other similar recording or notice statute, and any lease having
substantially the same effect as any of the foregoing).
"Loan" shall have the meaning provided in Section 2.01(a).
"Loss" shall mean at any time the aggregate sum of (i) the amount
paid by the Borrower at such time or required at such time to be paid by the
Borrower on claims under an Insurance Contract with respect to an Insured
Obligation in the Covered Portfolio by reason of the failure by the issuer
thereof or other obligor with respect thereto to pay insured amounts on such
Insured Obligations when due (including adjustment expenses with respect to such
claims), plus (ii) Permitted Reserves at such time, minus (iii) amounts paid at
such time or reasonably expected by the Borrower at such time to be paid to the
Borrower under reinsurance agreements (whether facultative or treaty) and
similar arrangements with respect to the claims referred to in clause (i), minus
(iv) any amount received prior to the Loss Threshold Incurrence Date which if
received after the Loss Threshold Incurrence Date would constitute a Pledged
Recovery, provided that, without limiting the generality of the foregoing, the
term "Loss" shall not include any damages or penalties required to be paid by
the Borrower in respect of an Insurance Contract by reason of the breach by the
Borrower of its obligations thereunder or the cancellation or termination
thereof other than in accordance with its terms.
"Loss Threshold Incurrence Date" shall mean the date on which the
Borrower has Cumulative Losses (net of recoveries) during the relevant
Commitment Period equal to the greater of $200,000,000 and 7% of Average Annual
Debt Service as of any date of determination thereof.
"Majority Banks" shall mean at any time Banks owed at least 51% of
the aggregate principal amount of the Loans outstanding at such time or, if no
Loans are outstanding at such time, Banks holding at least 51% of the aggregate
Commitments at such time; provided, however, that if any Bank shall be a
Defaulting Bank at such time, there shall be excluded from the determination of
Majority Banks at such time (i) the aggregate principal amount of the Loans
owing to such Bank and outstanding at such time and (ii) the Commitment of such
Bank at such time.
"Majority Participants" shall have the meaning provided in Section
12.04(a).
"Margin Stock" shall have the meaning provided in Regulation U of
the Board of Governors of the Federal Reserve System.
"Moody's" shall mean Moody's Investors Service, Inc.
"Multiemployer Plan" shall mean any multiemployer plan as defined in
Section 4001(1)(3) of ERISA, which is contributed to by (or to which there is an
obligation to contribute
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of) the Borrower, a Subsidiary of the Borrower or an ERISA Affiliate, and each
such plan for the five-year period immediately following the latest date on
which the Borrower, a Subsidiary of the Borrower or an ERISA Affiliate
contributed to or had an obligation to contribute to such plan.
"Note" shall have the meaning provided in Section 2.05.
"Notice of Borrowing" shall have the meaning provided in Section
2.03.
"Notice Office" shall mean the office of the Agent located at 31
West 52nd Street, New York, New York 10019, or such other office as the Agent
may hereafter designate in writing as such to the Borrower.
"Obligations" shall mean all amounts owing to the Agent, Collateral
Agent or any Bank pursuant to the terms of this Agreement or any other Credit
Document.
"Part B Bank" shall mean each Bank listed on Part B of Schedule I
hereto.
"Part C Bank" shall mean each Bank listed on Part C of Schedule I
hereto.
"Part C Loan" shall have the meaning provided in Section 2.08.
"Payment Office" shall mean the office of the Agent located at 31
West 52nd Street, New York, New York 10019, or such other office as the Agent
may hereafter designate in writing as such to the Borrower.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA or any successor thereto.
"Permitted Liens" shall have the meaning provided in Section 9.01.
"Permitted Reserves" shall mean, with respect to any Insured
Obligation, an amount equal to the reserves established in accordance with the
Borrower's statutory accounting practices which are deemed necessary or prudent
in the reasonable judgment of the Borrower by reason of the failure or
anticipated failure by the issuer of such Insured Obligation or other obligor
with respect thereto to pay such Insured Obligation when due, all as reflected
on the Borrower's books and which are or will be reported by the Borrower in its
statutory financial statements.
"Person" shall mean any individual, partnership, limited liability
company, joint venture, firm, corporation, association, trust or other
enterprise or any government or political subdivision or any agency, department
or instrumentality thereof.
"Plan" shall mean 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, which is maintained or contributed to by (or to which there is
an obligation to contribute of), or at any time during the five calendar years
preceding the date of this Agreement was maintained or
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contributed to by (or to which there was an obligation to contribute of), the
Borrower or an ERISA Affiliate.
"Pledged Premiums" shall mean at any time on and after the Loss
Threshold Incurrence Date (i) any and all Installment Premiums which are paid or
payable to the Borrower (it being understood that the Borrower is required to
remit only those Installment Premiums actually received) at such time with
respect to an Insurance Contract covering any defaulted Insured Obligations in
the Covered Portfolio minus (ii) the aggregate amount of such Installment
Premiums referred to in clause (i) paid or payable to any Person other than the
Borrower at such time under reinsurance agreements (whether facultative or
treaty) and similar arrangements.
"Pledged Recoveries" shall mean at any time on and after the Loss
Threshold Incurrence Date any and all moneys and other payments, property and
other consideration and compensation received or receivable by or for the
account of the Borrower (it being understood that the Borrower is required to
remit only that consideration and compensation actually received) at such time
(excluding the aggregate amount of any and all monies, payments, property,
consideration and compensation paid or payable to any Person other than the
Borrower under reinsurance agreements (whether facultative or treaty) and
similar arrangements) as repayment or reimbursement of, or otherwise in respect
of or arising out of, the payment of a claim by the Borrower under an Insurance
Contract covering any Insured Obligation in the Covered Portfolio (without
regard to whether such claim was paid from the proceeds of a Loan), whether from
the issuer thereof or any other Person including without limitation under or
pursuant to (i) such Insurance Contract, any reimbursement agreement, guaranty,
letter of credit, mortgage, security agreement, pledge agreement or other
contract, agreement or arrangement with respect to such Insurance Contract,
other than such items described in (ii) through (ix) below, (ii) any account or
account receivable, (iii) any compromise, settlement or similar arrangement with
respect to such payment, (iv) any voluntary payment or gift, (v) any reinsurance
of such Insured Obligation to the extent that payment or expected payment under
such reinsurance was not deducted in determining the Loss attributed to the
Borrower's payment or required payment of such claim, (vi) any contractual,
statutory, common law or other right of subrogation, (vii) any realization upon
any mortgage, security interest or other Lien, (viii) any cause of action,
whether sounding in tort, contract or otherwise, and any judicial, arbitration
or other proceeding by or before any court, agency, tribunal, association or
other governmental or private body, or (ix) any other legal or equitable right
or claim, whether or not similar to the foregoing), less the out-of-pocket costs
and expenses, including without limitation attorneys fees and court costs,
actually incurred by the Borrower in connection with the collection or other
realization of such moneys and other payments, property and other consideration
and compensation.
"Pledged Reserves Account" shall have the meaning provided in the
Security Agreement.
"Pledged Reserves Account Funds" shall mean at any time the
aggregate amount of proceeds of Loans borrowed hereunder for the purpose of
establishing or maintaining Permitted Reserves, such proceeds to be deposited in
the Pledged Reserves Account in accordance with Section 2.1(b) of the Security
Agreement.
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"Pledged Reserve Release Notice" shall have the meaning provided in
Section 8.11.
"Pledged Reserve Repayment Date" shall mean the date on which the
Borrower delivers the Pledged Reserve Release Notice required by Section 8.11.
"Prime Lending Rate" shall mean the rate as announced by Deutsche
Bank AG, New York Branch, from time to time as its prime lending rate, the Prime
Lending Rate to change when and as such prime lending rate changes. The Prime
Lending Rate is a reference rate and does not necessarily represent the lowest
or best rate actually charged to any customer. Deutsche Bank AG, New York
Branch, may make commercial loans or other loans at rates of interest at, above
or below the Prime Lending Rate.
"Replacement Bank" shall have the meaning provided in Section
3.04(b).
"Reportable Event" shall mean an event described in Section 4043(c)
of ERISA with respect to a Plan as to which the 30-day notice requirement has
not been waived by the PBGC.
"Retained Percentage" of an Insured Obligation shall mean the
percentage of risk assumed by the Borrower under Insurance Contracts with
respect thereto.
"Security Agreement" shall have the meaning provided in Section
5.05.
"S&P" shall mean Standard & Poor's Corporation.
"Subsidiary" shall mean, as to any Person, (i) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, limited liability
company, association, joint venture or other entity in which such Person and/or
one or more Subsidiaries of such Person has more than a 50% equity interest at
the time.
"Taxes" shall have the meaning provided in Section 4.04(a).
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan means the amount, if any,
by which the present value of the accrued benefits under the Plan as of the
close of its most recent plan year, determined in accordance with Statement of
Financial Accounting Standards No. 35, based upon the actuarial assumptions used
by the Plan's actuary in the most recent annual valuation of the Plan, exceeds
the fair market value of the assets allocable thereto, determined in accordance
with Section 412 of the Code.
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"United States" and "U.S." shall each mean the United States of
America.
"Unutilized Commitment" shall mean, for any Bank, at any time, the
Commitment of such Bank at such time less the aggregate principal amount of all
Loans made by such Bank pursuant to Section 2.01(a) prior to such time.
"Unutilized Contingent Commitment" shall mean, for any Part C Bank,
at any time, the Contingent Commitment of such Bank at such time less the
aggregate principal amount of all Loans made by such Bank pursuant to Section
2.02(b) prior to such time.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock is at the time owned by such Person
and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any
partnership, limited liability company, association, joint venture or other
entity in which such Person and/or one or more Wholly-Owned Subsidiaries of such
Person has a 100% equity interest at such time.
Section 1.02 Principles of Construction. (a) All references to
sections, schedules and exhibits are to sections, schedules and exhibits in or
to this Agreement unless otherwise specified. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement.
(b) The term generally accepted accounting principles means
generally accepted accounting principles in the United States, and all
accounting terms not specifically defined herein shall be construed in
accordance therewith.
SECTION 2. AMOUNT AND TERMS OF CREDIT.
Section 2.01 The Loans. (a) Subject to and upon the terms and
conditions set forth herein, each Bank severally agrees, at any time and from
time to time prior to the Expiry Date, to make loans (such loans, together with
any loans made pursuant to Section 2.01(b), being each a "Loan" and,
collectively, the "Loans") to the Borrower, provided, however, that the
principal amount of any Loan made by a Bank at any time pursuant to this Section
2.01(a) shall not exceed the Unutilized Commitment of such Bank at such time.
(b) In the event that (i) the Borrower requests a Borrowing under
Section 2.01(a) and (ii) any Part B Bank shall fail to make on the date
specified in the Notice of Borrowing for such requested Borrowing any Loan or
any portion of a Loan required to be made by such Bank hereunder representing
such Bank's pro rata portion (in accordance with the Commitment of such Bank and
the aggregate Commitments of all of the Banks as in effect on such date) of the
amount of such requested Borrowing, then each Part C Bank severally agrees to
make a Loan to the Borrower on such date in an amount equal to such Part C
Bank's pro rata portion (in accordance with the Contingent Commitment of such
Part C Bank and the aggregate Contingent Commitments of all of the Part C Banks
as in effect on such date) of such Part B Bank's Defaulted Loan, provided,
however, that the principal amount of any Loan made by a Part
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C Bank at any time pursuant to this Section 2.01(b) shall not exceed the
Unutilized Contingent Commitment of such Part C Bank at such time.
(c) Once repaid, Loans incurred hereunder may not be reborrowed.
Section 2.02 Amount of Each Borrowing. The aggregate principal
amount of each Borrowing hereunder shall not (i) be less than $1,000,000, and if
greater, shall be in an integral multiple of $100,000 and (ii) exceed the lesser
of (a) Cumulative Losses incurred after the occurrence of the Loss Threshold
Incurrence Date less the aggregate principal amount of all Loans previously made
and (b) the aggregate Unutilized Commitments of all Banks as in effect on the
date such Borrowing is made.
Section 2.03 Notice of Borrowing. Whenever the Borrower desires to
make a Borrowing hereunder, it shall give the Agent at its Notice Office at
least two Business Days' prior notice made hereunder, provided that any such
notice shall be deemed to have been given on a certain day only if given before
12:00 Noon (New York time) on such day. Each such notice (each a "Notice of
Borrowing") shall be in the form of Exhibit A, appropriately completed to
specify the aggregate principal amount of the Loans to be made pursuant to such
Borrowing, and the date of such Borrowing (which shall be a Business Day).
Section 2.04 Disbursement of Funds. (a) No later than 11:00 A.M.
(New York time) on the date specified in each Notice of Borrowing, (i) each Bank
will make available at the Payment Office of the Agent its pro rata portion (in
accordance with the Commitment of such Bank and the aggregate Commitments of all
of the Banks as in effect on such date) of the amount of the Borrowing requested
to be made on such date, in Dollars and in immediately available funds and (ii)
the Agent will make available to the Borrower the aggregate of the amounts so
made available by the Banks on such day at its Payment Office.
(b) In the event that any Part B Bank shall fail to make available
at the Payment Office of the Agent its pro rata portion (in accordance with the
Commitment of such Bank and the aggregate Commitments of all of the Banks as in
effect on such date) of the amount of the Borrowing requested to be made in any
Notice of Borrowing, at or prior to 11:00 A.M. (New York time) on the date
specified in such Notice of Borrowing, the Agent shall immediately notify each
Part C Bank that such Part B Bank has so defaulted and no later than 1:00 P.M.
(New York time) on such date, (i) each Part C Bank will (subject to the proviso
at the end of Section 2.01(b)) make available at the Payment Office its pro rata
portion (in accordance with the Contingent Commitment of such Part C Bank and
the aggregate Contingent Commitments of all of the Part C Banks as in effect on
such date) of such Part B Bank's Defaulted Loan, in Dollars and in immediately
available funds, and (ii) the Agent will make available to the Borrower the
aggregate of the amounts so made available by the Part C Banks on such day at
the Payment Office.
Section 2.05 Notes. The Borrower's obligation to pay the principal
of, and interest on, the Loans made by each Bank shall be evidenced by a
promissory note duly executed and delivered by the Borrower substantially in the
form of Exhibit B with blanks appropriately completed in conformity herewith
(each a "Note" and, collectively, the "Notes"). Each Note
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shall (i) be payable to the order of such Bank and be dated the Effective Date
if such Bank shall be a party hereto on the Effective Date or the effective date
of the Assignment and Assumption Agreement pursuant to which it becomes a party
hereto if such Bank shall become a party hereto after the Effective Date, (ii)
be in a stated principal amount equal to such Bank's Commitment (plus, if such
Bank shall be a Part C Bank, such Bank's Contingent Commitment) and be payable
in the principal amount of the Loans evidenced thereby, (iii) mature, with
respect to each Loan evidenced thereby, on the Expiry Date, (iv) bear interest
as provided in the appropriate clause of Section 2.06 in respect of the Loans
evidenced thereby and (v) be entitled to the benefits of this Agreement and be
secured by the Security Agreement. Each Bank will note on its internal records
the amount of each Loan made by it and each payment in respect thereof and will
prior to any transfer of its Note endorse on the reverse side thereof the
outstanding principal amount of Loans evidenced thereby. Failure to make any
such notation shall not affect the Borrower's obligations in respect of such
Loans.
Section 2.06 Interest. (a) The Borrower agrees to pay interest in
respect of the unpaid principal amount of each Loan from the date the proceeds
thereof are made available to the Borrower until the maturity thereof (whether
by acceleration or otherwise) at a rate per annum which shall be equal to the
Base Rate in effect from time to time plus the Applicable Margin.
(b) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and any other overdue amount payable by the
Borrower hereunder shall bear interest from the date payment thereof was due
until (but not including) the date of actual payment at a rate per annum equal
to 4.0% per annum in excess of the Base Rate in effect from time to time.
(c) Accrued (and theretofore unpaid) interest shall be payable (i)
in respect of each Loan, quarterly in arrears on the last Business Day of each
March, June, September and December, and (ii) in respect of each Loan, on any
prepayment (on the amount prepaid), at maturity (whether by acceleration or
otherwise) and, after such maturity, on demand.
Section 2.07 Capital Adequacy. If any Bank determines at any time
that the introduction of or change to any applicable law or governmental rule,
regulation, order or request (whether or not having the force of law) concerning
capital adequacy, or any change in interpretation or administration thereof by
any governmental authority, central bank or comparable agency, in any case
occurring after the date hereof, will have the effect of increasing the amount
of capital required or expected to be maintained by such Bank based on the
existence of its Commitment and/or Contingent Commitment hereunder or its
obligations hereunder, then the Borrower shall pay to such Bank, upon its
written demand therefor, such additional amounts as shall be required to
compensate such Bank for the increased cost to such Bank as a result of such
increase of capital. In determining such additional amounts, such Bank will act
reasonably and in good faith and will use averaging and attribution methods
which are reasonable, provided that such Bank's determination of compensation
owing under this Section 2.07 shall, absent manifest error, be final and
conclusive and binding on all the parties hereto. Each Bank, upon determining
that any additional amounts will be payable pursuant to this Section 2.07, will
give prompt written notice thereof to the Borrower, which notice shall show the
basis for the
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calculation of such additional amounts. The failure to give any such notice
shall not be deemed to be a waiver of any of the Borrower's obligations to pay
additional amounts pursuant to this Section 2.07, provided that the Borrower
shall not be required to pay any such additional amounts (i) until it receives
written notice from a Bank in accordance with this Section 2.07 or (ii) with
respect to any period prior to 60 days prior to the date any such notice is
received, unless the relevant introduction or change has a retroactive effect,
in which case the Borrower's obligation to pay additional amounts pursuant to
this Section 2.07 may encompass the entire period of retroactivity.
Section 2.08 Obligations of Defaulting Banks. Anything contained in
this Agreement to the contrary notwithstanding, in the event any Part C Bank
makes a Loan pursuant to Section 2.01(b) (a "Part C Loan") because of a Part B
Bank failing to make a Loan required to be made pursuant to this Agreement, such
Part C Bank, in addition to any other right or remedy it may have pursuant to
this Agreement or any other Credit Document, shall be entitled to receive, from
such Part B Bank, upon demand, the principal amount of such Part C Loan, plus
interest thereon, from the date made until paid, at the Federal Funds Rate for
the first three days and at the Base Rate plus 2% per annum thereafter. Upon any
such payment by a Part B Bank, such Part B Bank shall be subrogated to the
rights of the relevant Part C Bank with respect to the relevant Part C Loan. In
addition, for so long as any amounts are owed to any Part C Bank with respect to
any Part C Loan, any amounts otherwise owing by a Part B Bank pursuant to this
Agreement or any other Credit Document shall be paid on a pro rata basis to the
Part C Banks until all amounts with respect to outstanding Part C Loans have
been repaid.
SECTION 3. COMMITMENT FEES, FEES; AND TERMINATIONS, EXTENSIONS AND INCREASES OF
COMMITMENTS AND CONTINGENT COMMITMENTS.
Section 3.01 Fees. (a) The Borrower agrees to pay to the Agent for
distribution to the Banks pro rata in accordance with their respective
Unutilized Commitments a commitment fee (such commitment fee, together with the
commitment fee payable pursuant to Section 3.01(b), being the "Commitment Fees")
for the period from the Effective Date until the Expiry Date (or such earlier
date as the Commitments shall have been terminated) computed at a rate equal to
0.6% per annum on the daily average Unutilized Commitments of the Banks;
provided, however, that any Commitment Fee accrued with respect to the
Unutilized Commitment of a Defaulting Bank during the period prior to the time
such Bank became a Defaulting Bank and unpaid at such time shall not be payable
by the Borrower so long as such Bank shall be a Defaulting Bank except to the
extent that such Commitment Fee shall otherwise have been due and payable by the
Borrower prior to such time; and provided further that no Commitment Fee shall
accrue on the Unutilized Commitment of a Defaulting Bank so long as such Bank
shall be a Defaulting Bank.
(b) The Borrower agrees to pay each Part C Bank a Commitment Fee for
the period from the Effective Date until the Expiry Date (or such earlier date
as the Contingent Commitment of such Part C Bank shall have been terminated)
computed as agreed in writing from time to time by the Borrower and such Part C
Bank.
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(c) Accrued Commitment Fees shall be due and payable quarterly in
arrears on the last Business Day of each March, June, September and December of
each year and on the Expiry Date or upon such earlier date as the Commitments or
the Contingent Commitments, as the case may be, shall be terminated, and shall
be based on a 365/366-day year and actual days elapsed.
(d) The Borrower shall pay to the Agent such fees in connection with
the Credit Documents as may be agreed to from time to time between the Borrower
and the Agent.
Section 3.02 Voluntary Termination of Unutilized Commitments and
Unutilized Contingent Commitments. Upon at least five Business Days' prior
notice to the Agent at its Notice Office, the Borrower shall have the right to
terminate the Unutilized Commitments or the Unutilized Contingent Commitments,
or both, in whole or in part, in minimum aggregate amounts of $5,000,000 (or, if
greater, in integral multiples of $1,000,000), provided that the Borrower shall
concurrently satisfy its obligations, if any, at such time under Section 3.01.
Section 3.03 Mandatory Termination of Commitments and Contingent
Commitments. (a) The Commitment of each Bank shall be permanently reduced on
each date a Loan is made by such Bank pursuant to Section 2.01(a) by the amount
of such Loan. In addition, the Contingent Commitment of each Part C Bank shall
be permanently reduced on each date a Loan is made pursuant to Section 2.01(a)
by any Bank that is not a Part C Bank by an amount equal to 30% of such Loan.
The Contingent Commitment of each Part C Bank shall be permanently reduced on
each date a Loan is made by such Part C Bank pursuant to Section 2.01(b) by the
amount of such Loan.
(b) Notwithstanding anything herein to the contrary, the Borrower
shall have the right to unilaterally terminate the Commitment and/or Contingent
Commitment of any Bank if, at any time after the Effective Date (with respect to
any Bank that is a party hereto on the Effective Date) or at any time after the
effective date of the relevant Assignment and Assumption Agreement (with respect
to any Bank that becomes a party hereto after the Effective Date pursuant to
Section 3.04 or 12.04), the unsecured senior debt rating (or shadow rating as
reflected in a letter) of such Bank or its parent shall be downgraded by Moody's
or S&P, such termination to be effective 60 days after the Borrower delivers to
such Bank a notice of termination. The Borrower shall, concurrent with such
termination, pay to such Bank the aggregate amount, if any, owing at such time
by the Borrower to such Bank under this Agreement.
(c) In addition to any other mandatory Commitment reductions
pursuant to this Section 3.03, the Commitment of each Bank, and the Contingent
Commitment of each Part C Bank, shall each terminate in its entirety on the
Expiry Date.
Section 3.04 Expiry Date. (a) The expiration of the Commitments and
the Contingent Commitments shall occur on November 7, 2008 (the "Expiry Date");
provided, however, that before (but not earlier than 120 days nor later than 60
days before) each anniversary of the Effective Date, the Borrower may make a
written request (an "Extension Request") to the Agent at the Notice Office that
the Expiry Date be extended by one calendar year. Such Extension Request (a copy
of which shall be forwarded by the Agent to each of the Banks) shall
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include a certification by a senior officer of the Borrower that no Default or
Event of Default has occurred and is continuing and all representations and
warranties contained herein and the other Credit Documents are true and correct
in all material aspects on and as of the date of the Extension Request (it being
understood and agreed that any representation or warranty which expressly refers
by its terms to a specified date shall be required to be true only as of such
date). If by the date occurring 30 days next succeeding the Agent's receipt of
such Extension Request, any Bank agrees thereto in writing by so indicating on
counterparts of the Extension Request and delivering such counterpart to the
Borrower, "Expiry Date" as to such Bank shall mean the November 7, occurring in
the calendar year next succeeding the Expiry Date then in effect, provided that
any failure to so notify the Borrower shall be deemed to be a disapproval by
such Bank of the Borrower's Extension Request. The Commitment of any Bank which
does not so agree, the Contingent Commitment, if any, of each Part C Bank with
respect thereto and the Contingent Commitment of such Bank if such Bank is a
Part C Bank, shall terminate upon the Expiry Date then in effect. No Bank shall
be obligated to grant any extension pursuant to this Section 3.04(a), and any
such extension shall be in the sole discretion of each Bank. The Borrower shall
pay to each Bank which does not so agree all amounts owing under its Note and
this Agreement on the effective date of the termination of such Bank's
Commitment and Contingent Commitment, if any.
(b) If fewer than all of the Banks consent to an Extension Request
(each Bank that has not so consented being a "Declining Bank", and each other
Bank being an "Extending Bank"), the Borrower shall have the right to require
any Declining Bank to assign in full its rights and obligations under this
Agreement (i) to any one or more Extending Banks designated by the Borrower that
have offered in their returned counterpart of the Extension Request to increase
their respective Commitments (and, if any such Extending Bank is a Part C Bank,
its Contingent Commitment) in an aggregate amount at least equal to the amount
of such Declining Bank's Commitment (and, if such Declining Bank is a Part C
Bank, its Contingent Commitment) (each such Extending Bank being an "Increasing
Extending Bank") and (ii) to the extent of any shortfall in the aggregate amount
of extended Commitments or extended Contingent Commitments, to any one or more
Eligible Transferees designated by the Borrower that agree to assume all of such
rights and obligations (each such Eligible Transferee being a "Replacement
Bank"), provided that (1) such Declining Bank shall have received payment of all
amounts owing under its Note and this Agreement on the effective date of such
assignment, (2) such assignment shall otherwise have occurred in compliance with
Section 12.04 including, without limitation, clauses (iii) and (iv) of
subsection (b) thereof and (3) the effective date of such assignment shall be
the date specified by the Borrower and agreed to by the Replacement Bank or
Increasing Extending Bank, as the case may be, which date shall be on or prior
to the applicable Expiry Date (without giving effect to the relevant requested
extension).
SECTION 4. PREPAYMENTS; PAYMENTS.
Section 4.01 Voluntary Prepayments. The Borrower shall have the
right to prepay the Loans, without premium or penalty, in whole or in part from
time to time.
Section 4.02 Mandatory Prepayments. On each Pledged Reserve
Repayment Date, an amount equal to 100% of the Pledged Reserves Account Funds
with respect to which
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the Borrower has delivered a Pledged Reserve Release Notice as required by
Section 8.11 shall be applied as a mandatory prepayment of principal of
outstanding Loans.
Section 4.03 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement or any Note
shall be made to the Agent not later than 12:00 Noon (New York time) on the date
when due and shall be made in Dollars in immediately available funds at the
Agent's Payment Office. Whenever any payment to be made hereunder or under the
Note shall be stated to be due on a day which is not a Business Day, the due
date thereof shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest shall be payable at the applicable
rate during such extension.
Section 4.04 Net Payments. (a) All payments made by the Borrower
hereunder or under any Note will be made without setoff, counterclaim or other
defense. All such payments will be made free and clear of, and without deduction
or withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by any
jurisdiction or by any political subdivision or taxing authority thereof or
therein with respect to such payment (but excluding any tax imposed on or
measured by the net income of any Bank pursuant to the laws of the jurisdiction
(or any political subdivision or taxing authority thereof or therein) in which
the principal office or lending office of such Bank is located or in which such
Bank is organized) or any interest, penalties or similar liabilities with
respect thereto (collectively, "Taxes"). If any Taxes are so levied or imposed,
the Borrower agrees to pay the full amount of such Taxes and such additional
amounts as may be necessary so that every payment of all amounts due hereunder
or under any Note, after withholding or deduction for or on account of any
Taxes, will not be less than the amount provided for herein or in such Note. The
Borrower shall also reimburse each Bank, upon its written request (which request
shall set forth the basis for calculation of such reimbursement), for taxes
imposed on or measured by the net income of such Bank pursuant to the laws of
the jurisdiction (or any political subdivision or taxing authority thereof or
therein) in which its principal office or lending office is located or in which
such Bank is organized as it shall determine are payable by it in respect of
amounts paid to or on behalf of such Bank pursuant to the preceding sentence and
for any withholding of taxes as such Bank shall determine are payable by, or
withheld from, such Bank, in respect of such amounts so paid to or on behalf of
such Bank pursuant to the preceding sentence and in respect of any amounts paid
to or on behalf of such Bank pursuant to this sentence. The Borrower will
furnish to the applicable Bank within 45 days after the date the payment of any
Taxes is due pursuant to applicable law certified copies of any tax receipts
available to the Borrower evidencing such payment by the Borrower. The Borrower
will indemnify and hold harmless each Bank, and reimburse each Bank upon its
written request, for the amount of any Taxes so levied or imposed and paid by
such Bank.
(b) Each of the Banks organized under the laws of a jurisdiction
outside the United States shall, on or prior to the date of its execution and
delivery of this Agreement in the case of each of Bank party to this Agreement
as of the date of this Agreement, and on the date of the Assignment and
Assumption Agreement pursuant to which it becomes a Bank in the case of each of
the other Banks, and from time to time thereafter as reasonably requested in
writing by the Borrower or the Agent (but only so long thereafter as such Bank
remains lawfully able to do so), provide each of the Borrower and the Agent with
an original Internal Revenue Service Form
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W-8BEN or Form W-8ECI (in each case with all appropriate attachments) or, in the
case of any Bank that is claiming exemption from United States withholding tax
under Section 871(h) or 881(c) of the Internal Revenue Code with respect to
payments of "portfolio interest", Form W-8BEN (and, if such Bank delivers a Form
W-8BEN, a certificate representing that such Bank is not a "bank" for purposes
of Section 881(c) of the Internal Revenue Code, certifying that such Bank is
exempt from or entitled to a reduced rate of United States withholding tax on
payments pursuant to this Agreement or the other Credit Documents or certifying
that such Bank is a foreign corporation, partnership, estate or trust). If the
forms referred to in this Section 4.04(b) that are provided by a Bank at the
time such Bank first becomes a party to this Agreement indicate a United States
interest withholding tax rate in excess of zero, withholding tax at such rate
shall be considered excluded from Taxes unless and until such Bank provides the
appropriate form certifying that a lesser rate applies, whereupon withholding
tax at such lesser rate shall be considered excluded from Taxes solely for the
period governed by such form. However, if, on the date of the Assignment and
Assumption Agreement pursuant to which a Bank assignee becomes a party to this
Agreement, the Bank assignor was entitled to payments under Section 4.04(a) in
respect of United States withholding tax with respect to interest paid at such
date, then, to such extent (and only to such extent), the term "Taxes" shall
include (in addition to withholding taxes that may be imposed in the future or
other amounts otherwise includable in Taxes) United States withholding tax, if
any, applicable with respect to such Bank assignee on such date.
(c) For any period with respect to which any of the Banks has failed
to provide the Borrower with the appropriate form, certificate or other document
described in Section 4.04(b), such Bank shall not be entitled to payment or
indemnification under Section 4.04(a) with respect to Taxes imposed by reason of
such failure.
(d) Each of the Banks hereby agrees that, upon the occurrence of any
circumstances entitling such Bank to additional amounts pursuant to this Section
4.04, such Bank shall, if requested by the Borrower, use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions) to
designate a different applicable lending office if the making of such a change
would avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, determined by the Bank in its sole
discretion, be otherwise disadvantageous to such Bank in any respect.
Section 4.05 Limitations on Sources of Payment. Notwithstanding any
other provision of this Agreement or of any other Credit Document, the
obligations of the Borrower to make payments of principal and interest on the
Loans and the Notes are limited recourse obligations of the Borrower payable
solely from the Pledged Recoveries, the Pledged Premiums, the Pledged Reserves
Account Funds and the other Collateral, and none of the Agent, the Collateral
Agent, any Bank or any other Person shall be entitled to procure any money
judgment against or to levy or foreclose upon or attach any other assets or
properties of the Borrower for payment of such obligations; provided, however,
that nothing herein contained shall limit, restrict or impair the lien created
by the Security Agreement or the right of any Bank to exercise any of its rights
herein or in any of the other Credit Documents upon the occurrence of an Event
of Default or otherwise, or to bring suit and obtain a judgment against the
Borrower (recourse
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thereon being limited as to payment of principal and interest on the Loans and
the Notes as provided in this Section 4.05).
SECTION 5. CONDITIONS PRECEDENT TO EFFECTIVENESS.
This Agreement shall become effective subject to the satisfaction
(or waiver by the Banks) of the following conditions:
Section 5.01 Execution of Agreement; Notes. The Borrower and each
Bank shall have signed a copy hereof (whether the same or different copies) and
shall have delivered the same to the Agent at its Notice Office and there shall
have been delivered to each Bank a Note executed by the Borrower in the amount,
maturity and as otherwise provided herein.
Section 5.02 No Default; Representations and Warranties. There shall
exist no Default or Event of Default and all representations and warranties
contained herein and in the other Credit Documents shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on and as of the Effective Date.
Section 5.03 Opinions of Counsel. The Agent shall have received
separate opinions addressed to it and the Banks and dated the Effective Date
from Cadwalader, Wickersham & Taft and David Beidler, Senior Vice President and
Chief Legal Officer of the Borrower, covering the matters set forth in Exhibit
C.
Section 5.04 Corporate Documents; Proceedings. (a) The Agent shall
have received a certificate, dated the Effective Date, signed by the president
or any vice president of the Borrower, and attested to by the secretary or any
assistant secretary of the Borrower, in the form of Exhibit D with appropriate
insertions, together with copies of the charter documents and resolutions of the
Borrower referred to in such certificate.
(b) All corporate and legal proceedings and all instruments and
agreements in connection with the transactions contemplated in this Agreement
and the other Credit Documents shall be satisfactory in form and substance to
the Agent, and it shall have received all information and copies of all
documents and papers, including records of corporate proceedings and
governmental approvals, if any, which the Agent reasonably may have requested in
connection therewith, such documents and papers where appropriate to be
certified by proper corporate or governmental authorities.
Section 5.05 Security Agreement. The Borrower shall have duly
authorized, executed and delivered a Pledge and Security Agreement in the form
of Exhibit E (as modified, supplemented or amended from time to time, the
"Security Agreement") covering all the Borrower's present and future Collateral,
together with:
(a) evidence of all filings as may be necessary or, in the opinion
of the Collateral Agent, desirable to perfect the security interests
purported to be created by the Security Agreement; and
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(b) evidence that all other actions necessary or, in the opinion of
the Collateral Agent, desirable to perfect and protect the security
interests purported to be created by the Security Agreement have been
taken.
Section 5.06 Covered Portfolio, etc. The Agent shall have received a
certificate, dated the Effective Date, signed by the president, the chief
financial officer or other senior financial officer of the Borrower, setting
forth in reasonable detail as of September 30, 2001 (i) each Insured Obligation
in the Covered Portfolio and each reinsurance agreement or similar arrangement
which covers any material amount of such Insured Obligations, (ii) each default
by the issuer of any such Insured Obligation or other obligor with respect
thereto which has formed or the Borrower reasonably expects to form the basis of
a claim under an Insurance Contract, in each case to the extent the Borrower has
knowledge thereof, (iii) each default by any party to any such reinsurance
agreement or similar arrangement, (iv) each claim paid by the Borrower under any
Insurance Contract with respect to such Insured Obligations and (v) the
Borrower's reasonable estimate as of September 30, 2001 of Installment Premiums
payable with respect to the Covered Portfolio.
Section 5.07 Requisite Approvals. All necessary governmental
(domestic and foreign) and third party approvals in connection with the
transactions contemplated by the Credit Documents and otherwise referred to
herein or therein shall have been obtained and remain in effect, and all
applicable waiting periods shall have expired without any action being taken by
any competent authority which restrains, prevents or imposes materially adverse
conditions upon the consummation of the transactions contemplated by the Credit
Documents and otherwise referred to herein or therein. Additionally, there shall
not exist any judgment, order, injunction or other restraint issued or filed or
a hearing seeking injunctive relief or other restraint pending or notified
prohibiting or imposing materially adverse conditions upon the making of the
Loans.
Section 5.08 Litigation. No litigation by any entity (private or
governmental) shall be pending or threatened with respect to this Agreement or
any documentation executed in connection herewith or the transactions
contemplated hereby, or with respect to any material Indebtedness of the
Borrower or which any Bank shall determine would reasonably be expected to have
a materially adverse effect on the business, operations, property, assets,
liabilities, prospects or condition (financial or otherwise) of the Borrower.
Section 5.09 Fees, etc. The Borrower shall have paid to the Agent
and to the Banks all costs, fees and expenses (including, without limitation,
legal fees and expenses) payable to the Agent and/or the Banks to the extent
then due.
All of the certificates, legal opinions and other documents and papers referred
to in this Section 5, unless otherwise specified, shall have been delivered to
the Agent at its Notice Office.
SECTION 6. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS.
The obligation of the Banks to make Loans is subject, at the time of
each such Credit Event, to the satisfaction of the following conditions:
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Section 6.01 Loss Threshold Incurrence Date. At or prior to the time
of each such Credit Event, the Loss Threshold Incurrence Date shall have
occurred.
Section 6.02 Notice of Borrowing. Prior to the making of each Loan,
the Agent shall have received a Notice of Borrowing meeting the requirements of
Section 2.03.
The acceptance of the proceeds of each Credit Event shall constitute a
representation and warranty by the Borrower to each Bank that the Loss Threshold
Incurrence Date has occurred.
SECTION 7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
In order to induce the Banks to enter into this Agreement, the
Borrower makes the following representations, warranties and agreements as of
the Effective Date, which shall survive the execution and delivery of this
Agreement and the Notes (it being understood and agreed that any representation
or warranty which expressly refers by its terms to a specified date shall be
required to be true and correct in all material respects only as of such date):
Section 7.01 Corporate Status. The Borrower (i) is a duly organized
and validly existing stock insurance company in good standing under the laws of
New York, (ii) has the power and authority to own its property and assets and to
transact the business in which it is engaged and (iii) is duly qualified as a
foreign corporation and in good standing in each jurisdiction where the
ownership, leasing or operation of property or the conduct of its business
requires such qualification, except where the failure to qualify would not have
a material adverse effect on the business, operations, property, assets,
liabilities, prospects or condition (financial or otherwise) of the Borrower.
Section 7.02 Corporate Power and Authority. The Borrower has the
corporate power to execute, deliver and perform the terms and provisions of each
of the Credit Documents to which it is party and has taken all necessary
corporate action to authorize the execution, delivery and performance by it of
each of such Credit Documents. The Borrower has, or in the case of the Credit
Documents other than this Agreement, by the Effective Date will have, duly
executed and delivered each of the Credit Documents to which it is party, and
each of such Credit Documents constitutes or, in the case of each such other
Credit Document when executed and delivered, will constitute, its legal, valid
and binding obligation enforceable in accordance with its terms, subject to the
qualifications that enforcement of the rights and remedies created hereby or
thereby is subject to (i) bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting the rights and remedies of creditors
and (ii) general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
Section 7.03 No Violation. Neither the execution, delivery or
performance by the Borrower of the Credit Documents to which it is a party, nor
compliance by it with the terms and provisions thereof, nor the use of the
proceeds of the Loans (i) will contravene any provision of any law, statute,
rule or regulation or any order, writ, injunction or decree of any court or
governmental instrumentality, (ii) will conflict or be inconsistent with or
result in any breach of any of the terms, covenants, conditions or provisions
of, or constitute a default under, or result in
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the creation or imposition of (or the obligation to create or impose) any Lien
(other than Permitted Liens) upon any of the property or assets of the Borrower
pursuant to the terms of any indenture, mortgage, deed of trust, credit
agreement, loan agreement or any other agreement, contract or instrument to
which the Borrower is a party or by which it or any of its property or assets is
bound or to which it may be subject or (iii) will violate any provision of the
certificate of incorporation or by-laws of the Borrower.
Section 7.04 Governmental Approvals. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with (except as have been obtained or made prior to the Effective Date), or
exemption by, any governmental or public body or authority, or any subdivision
thereof, is required to authorize, or is required in connection with, (i) the
execution, delivery and performance of any Credit Document to which the Borrower
is a party or (ii) the legality, validity, binding effect or enforceability of
any such Credit Document.
Section 7.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; etc. (a) The balance sheet of the Borrower at December 31, 2000,
and the related statements of income and retained earnings and changes in
financial position of the Borrower for the fiscal year ended on such date, all
heretofore furnished to the Banks, present fairly the financial condition of the
Borrower at December 31, 2000, and the results of the operations of the Borrower
for the fiscal year ended on such date. All such financial statements have been
audited by Deloitte & Touche LLP. Since December 31, 2000, there has been no
material adverse change in the business, operations, property, assets,
liabilities, prospects or condition (financial or otherwise) of the Borrower,
except as may be set forth in any unaudited quarterly financial statements
prepared by the Borrower since the date of the audited financial statements or
in a quarterly report on Form 10-Q/A filed by Radian Group Inc. with the
Securities and Exchange Commission (all of which have heretofore been furnished
to the Banks).
(b) Except as fully reflected in the financial statements delivered
pursuant to Section 7.05(a), there are no liabilities or obligations with
respect to the Borrower of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether or not due) which, either individually or in
aggregate, would be material to the Borrower. The Borrower does not know of any
basis for the assertion against the Borrower of any liability or obligation of
any nature whatsoever that is not fully reflected in the financial statements
delivered pursuant to Section 7.05(a) which, either individually or in the
aggregate, could reasonably be expected to be material to the Borrower. At
September 30, 2001, Average Annual Debt Service was $3,712,636,466.
(c) The Borrower has delivered to each Bank its annual statements
and its financial statements as filed with the New York Insurance Department for
the years ended December 31, 1999 and December 31, 2000, and its quarterly
statements and its financial statements as filed with the New York Insurance
Department for the periods ended March 31 and June 30, 2001. Such annual and
quarterly statements and financial statements were prepared in accordance with
the statutory accounting principles set forth in the New York Insurance Law, and
each such annual statement is a full and true statement of all the assets and
liabilities and of
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the condition and affairs of the Borrower as of such date and of its income and
deductions therefrom for the year ended on such date.
Section 7.06 Litigation. There are no actions, suits or proceedings
pending or, to the best knowledge of the Borrower, threatened (i) with respect
to any Credit Document or (ii) that are reasonably likely to materially and
adversely affect the business, operations, property, assets, liabilities,
prospects or condition (financial or otherwise) of the Borrower.
Section 7.07 True and Complete Disclosure. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on behalf of
the Borrower in writing to the Banks (including without limitation all
information contained in the Credit Documents) for purposes of or in connection
with this Agreement or any transaction contemplated herein is, and all other
such factual information (taken as a whole) hereafter furnished by or on behalf
of the Borrower in writing to the Banks will be, true and accurate in all
material respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any fact necessary to make such
information (taken as a whole) not misleading at such time in light of the
circumstances under which such information was provided.
Section 7.08 Use of Proceeds; Margin Regulations. All proceeds of
each Loan shall be used by the Borrower only to establish and/or maintain
Permitted Reserves in the Pledged Reserves Account and/or to pay or reimburse
itself for the payment of Losses in respect of the Covered Portfolio, and no
part of the proceeds of any Loan will be used by the Borrower to purchase or
carry any Margin Stock or to extend credit to others for the purpose of
purchasing or carrying any Margin Stock. Neither the making of any Loan nor the
use of the proceeds thereof will violate or be inconsistent with the provisions
of Regulations T, U or X of the Board of Governors of the Federal Reserve
System.
Section 7.09 Tax Returns and Payments. The Borrower has filed all
tax returns required to be filed by it and has paid all income taxes payable by
it which have become due pursuant to such tax returns and all other taxes and
assessments payable by it which have become due, other than those not yet
delinquent and except for those contested in good faith and for which adequate
reserves have been established. The Borrower has paid, or has provided adequate
reserves (in the good faith judgment of the management of the Borrower) for the
payment of, all federal and state income taxes applicable for all prior fiscal
years and for the current fiscal year to the date hereof.
Section 7.10 Compliance with ERISA. Each Plan is in substantial
compliance with all applicable provisions of ERISA and the Code; no Reportable
Event has occurred with respect to any Plan; no Plan has an accumulated or
waived funding deficiency or has applied for an extension of any amortization
period within the meaning of Section 412 of the Code or Section 302 of ERISA;
neither the Borrower nor any ERISA Affiliate has incurred any material liability
to or on account of a Plan or a Multiemployer Plan pursuant to Section 409,
502(i), 515, 4201, 4204, 4212, 4062, 4063, 4064 or 4069 of ERISA or Section
401(a)(29), 4971 or 4975 of the Code which has not been satisfied in full or
expects to incur any material liability under any of the foregoing sections with
respect to any such Plan or Multiemployer Plan; no condition exists which
presents a material risk to the Borrower or any ERISA Affiliate of incurring a
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material liability to or on account of a Plan pursuant to the foregoing
provisions of ERISA and the Code; neither the Borrower nor any of its ERISA
Affiliates is or has ever been a party to, or is or has ever been required to
make contributions to, or has terminated any Multiemployer Plan; no Lien imposed
under the Code or ERISA on the assets of the Borrower or any ERISA Affiliate
exists or is likely to arise on account of any Plan or Multiemployer Plan; and
the Borrower does not maintain or contribute to any employee welfare benefit
plan (as defined in Section 3(1) of ERISA) which provides benefits to retired
employees or other former employees (other than as required by Section 601 of
ERISA) or any employee pension benefit plan (as defined in Section 3(2) of
ERISA) the obligations with respect to which would reasonably be expected to
have a material adverse effect on the ability of the Borrower to perform its
obligations under this Agreement.
Section 7.11 Capitalization. As of the date hereof, the authorized
capital stock of the Borrower consists of 100,000 shares of common stock, $40.00
par value per share, all of which are issued and outstanding. All such
outstanding shares have been duly and validly issued, and are fully paid and
non-assessable. The Borrower does not have outstanding any securities
convertible into or exchangeable for its capital stock or outstanding any rights
to subscribe for or to purchase, or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, its capital stock
except as otherwise disclosed in its financial statements.
Section 7.12 No Subsidiaries. The Borrower has no Subsidiaries.
Section 7.13 Compliance with Statutes, etc.. The Borrower is in
compliance with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
property (including applicable statutes, regulations, orders and restrictions
relating to environmental standards and controls), except such noncompliances as
could not reasonably be expected to have, in the aggregate, a material adverse
effect on the business, operations, property, assets, liabilities, prospects or
condition (financial or otherwise) of the Borrower.
Section 7.14 Investment Company Act. The Borrower is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
Section 7.15 Public Utility Holding Company Act. The Borrower is not
a "holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
Section 7.16 Compliance with Insurance Law. The Borrower is duly
licensed to transact business as a financial guaranty insurance corporation by
the New York Insurance Department and (a) has all other requisite federal, state
and other governmental licenses, authorizations, permits, consents and approvals
to conduct its insurance and other business as currently conducted and proposed
to be conducted in New York and in each jurisdiction in which it writes or
issues policies of insurance (including without limitation any form of financial
-23-
guaranty insurance, certain lines of surety insurance or credit insurance),
surety bonds, guaranties, contracts of reinsurance or other undertakings similar
to the foregoing (collectively, "Insurance Contracts") or in which it conducts
business, except for failures, if any, to have such licenses, authorizations,
permits, consents and approvals which singly or in the aggregate could not
reasonably be expected to have a material adverse effect on the business,
operations, property, assets, liabilities, prospects or condition (financial or
otherwise) of the Borrower or the ability of the Borrower to perform its
obligations under this Agreement or any of the other Credit Documents, (b) has
made all filings of each of its forms of Insurance Contracts and of its rates
and charges with the New York Insurance Department and all other federal, state
and other administrative or governmental bodies required for the use thereof and
has obtained all requisite approvals thereof, except for failures, if any, to
file or to obtain such approvals which singly or in the aggregate could not
reasonably be expected to have a material adverse effect on the business,
assets, operations or financial condition of the Borrower or the ability of the
Borrower to perform its obligations under this Agreement or any of the other
Credit Documents, (c) has duly established and maintains all reserves required
under the New York Insurance Law and other applicable federal, state and other
laws, rules and regulations, except for failures, if any, to maintain reserves
which could not reasonably be expected to have a material adverse effect on the
business, assets, operations, property or condition (financial or otherwise) of
the Borrower or the ability of the Borrower to perform its obligations under
this Agreement or any of the Credit Documents and (d) is in compliance (and has
not received any notice from the New York Insurance Department or similar
administrative or governmental body or an authorized representative thereof
claiming that it is not in compliance) with the New York Insurance Law and with
all other applicable federal, state and other laws relating to its insurance and
other businesses, except with respect to failures, if any, to comply which
singly or in the aggregate could not reasonably be expected to have a material
adverse effect on the business, assets, operations, property or condition
(financial or otherwise) of the Borrower or the ability of the Borrower to
perform its obligations under this Agreement or any of the other Credit
Documents.
Section 7.17 Covered Portfolio. Substantially all of the Insured
Obligations in the Covered Portfolio are insured or reinsured by the Borrower
under Insurance Contracts in the form or forms heretofore supplied to the Agent
in accordance with the Borrower's underwriting criteria. The Borrower has no
reason to believe that its rights included among the Collateral are not valid
and binding against the obligors thereunder in accordance with their respective
terms, except insofar as enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and the availability of equitable remedies, except
for such Collateral which, in the aggregate, could not reasonably be expected to
have a material adverse effect on the right and ability of the Collateral Agent,
in accordance with the Security Agreement, to realize upon the Collateral as a
whole. The Borrower has delivered to each Bank, via an email message in the form
set forth on Schedule II attached hereto, a listing, as of September 30, 2001,
of the reinsurer and the related amounts (both ceded par inforce and ceded
principal and interest inforce) of reinsured Insured Obligations as of such
date.
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SECTION 8. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees that on and after the Effective
Date and until the Commitments have terminated and the Loans and the Notes,
together with interest, Fees and all other obligations incurred hereunder and
thereunder, are paid in full:
Section 8.01 Information Covenants. The Borrower will furnish to the
Agent and, upon the request of any Bank, to such Bank:
(a) Quarterly Financial Statements. Within 60 days after the close
of each of the first three quarterly accounting periods in each fiscal year of
the Borrower, (i) the balance sheet of the Borrower as at the end of such
quarterly period and the related statements of income and retained earnings for
such quarterly period and for the elapsed portion of the fiscal year ended with
the last day of such quarterly period, in each case setting forth comparative
figures for the related periods in the prior fiscal year, all of which shall be
certified by the president, chief financial officer or the treasurer or other
senior financial officer of the Borrower, subject to normal year-end audit
adjustments which unaudited financial statements are not required to contain
footnotes, and (ii) all statutory statements required to be filed for such
period with the New York Insurance Department.
(b) Annual Financial Statements. Within 120 days after the close of
each fiscal year of the Borrower, but in any event as promptly as shall be
available, (i) the balance sheet of the Borrower as at the end of such fiscal
year and the related combined statements of income and retained earnings and of
cash flows for such fiscal year setting forth comparative figures for the
preceding fiscal year and audited by Deloitte & Touche LLP, or such other
independent certified public accountants of recognized national standing
reasonably acceptable to the Agent, together with a report of such accounting
firm stating that in the course of its regular audit of the financial statements
of the Borrower, the audit was conducted in accordance with generally accepted
auditing standards, (ii) if prepared, management's discussions and analysis of
the important operational and financial developments during such fiscal year and
(iii) all statutory statements required to be filed for such fiscal year with
the New York Insurance Department.
(c) Management Letters. Promptly after the receipt thereof by the
Borrower or any of its Subsidiaries, a copy of any "management letter" received
by the Borrower or such Subsidiary from its certified public accountants and the
management's responses thereto.
(d) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Section 8.01(a) or 8.01(b), a certificate
of the president, chief financial officer or treasurer or other senior financial
officer of the Borrower (i) to the extent provided to the Borrower by primary
insurers (it being understood that such information is to be provided by the
Borrower solely in reliance on the information so provided by such primary
insurers without investigation by the Borrower), listing the Insured Obligations
in the Covered Portfolio (and if the Loss Threshold Incurrence Date has occurred
identifying the Insurance Contracts with respect thereto) and calculating in
reasonable detail as of the date of such financial statements (A) if such date
is prior to the Loss Threshold Incurrence Date, (1) the Borrower's Cumulative
Losses
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(stating separately any Permitted Reserves included therein) for the current
Commitment Period and (2) the Average Annual Debt Service, and (B) if such date
is on or after the occurrence of the Loss Threshold Incurrence Date, (1) the
date of the occurrence thereof, (2) evidence of the occurrence thereof, (3) the
amount of Permitted Reserves as of the date of such financial statements, and
(4) the aggregate amount of Pledged Recoveries received by or for the account of
the Borrower during the current Commitment Period on or prior to the date of
such financial statements, (ii) to the extent provided to the Borrower by
primary insurers (it being understood that such information is to be provided by
the Borrower solely in reliance on the information so provided by such primary
insurers without investigation by the Borrower), certifying information with
respect to reinsured Insured Obligations as of the date of such financial
statements in a format comparable to the listing referred to in the last
sentence of Section 7.17 and (iii) to the effect that, to the best of his
knowledge, no Default or Event of Default has occurred and is continuing (and
including a specific reference to compliance with Section 8.09) or, if any
Default or Event of Default has occurred and is continuing, specifying the
nature and extent thereof.
(e) Notice of Default or Litigation. Promptly, and in any event
within two Business Days, after an Authorized Officer obtains knowledge thereof,
written notice of (i) the occurrence of any event which constitutes a Default or
Event of Default, (ii) any litigation or governmental proceeding pending (A)
against the Borrower or any of its Subsidiaries which could reasonably be
expected to have a materially adverse effect upon the business, operations,
property, assets, liabilities, or condition (financial or otherwise) of the
Borrower and its Subsidiaries taken as a whole or (B) with respect to any Credit
Document, (iii) any other event which could reasonably be expected to have a
materially adverse effect upon the business, operations, property, assets,
liabilities, prospects or condition (financial or otherwise) of the Borrower and
its Subsidiaries taken as a whole, (iv) any rating report received by the
Borrower published by Moody's, S&P or, if either Moody's or S&P no longer rates
the claims-paying ability of the Borrower, any other nationally recognized
rating agency which, with the consent of the Borrower, rates the
creditworthiness of obligations insured by the Borrower, (v) each Loss in excess
of $100,000, including without limitation, identification of the Insured
Obligation with respect to which such Loss occurred, (vi) each default by the
issuer of any Insured Obligation in the Covered Portfolio or other obligor with
respect thereto which could form the basis of a claim in excess of $100,000
under an Insurance Contract and (vii) each default by any party to a reinsurance
agreement or similar arrangement with the Borrower which covers at least
$100,000 of Insured Obligations in the Covered Portfolio.
(f) Other Reports and Filings. Within 10 Business Days following the
filing thereof with the Securities and Exchange Commission or any successor
thereto, copies of all financial information, proxy materials and other
information and reports, if any, which the Borrower or any Affiliate of the
Borrower shall file with the Securities and Exchange Commission or any successor
thereto.
(g) Specific Information. No less frequently than quarterly, (i)
information with respect to the Covered Portfolio received by the Borrower from
the relevant primary insurer, (ii) service mix (i.e., health care, education,
small issue industrial development bonds, utilities and pollution control, etc.)
detail, on a par insured and debt service basis, with respect to the
-26-
Covered Portfolio and (iii) a watch list/weakening credit update with respect to
the Covered Portfolio.
(h) Other Information. From time to time, such other information or
documents (financial or otherwise) as any Bank may reasonably request,
including, without limitation, information with respect to, and copies of, any
relevant reinsurance agreement.
Section 8.02 Books, Records and Inspections. The Borrower will, and
will cause each of its Subsidiaries to, keep proper books of record and account
in which full, true and correct entries in conformity with generally accepted
accounting principles in the United States and all requirements of law shall be
made of all dealings and transactions in relation to its business and
activities. The Borrower will, and will cause each of its Subsidiaries to,
permit officers and designated representatives of the Agent or any Bank to visit
and inspect, during regular business hours and under guidance of officers of the
Borrower or such Subsidiary, any of the properties of the Borrower or such
Subsidiary, and to examine the books of account of the Borrower or such
Subsidiary and discuss the affairs, finances and accounts of the Borrower or
such Subsidiary with, and be advised as to the same by, its and their officers
and independent accountants, all at such reasonable times and intervals and to
such reasonable extent as the Agent or such Bank may request.
Section 8.03 Corporate Franchises. The Borrower will do or cause to
be done all things necessary to preserve and keep in full force and effect its
existence and its material rights, franchises, licenses and patents; provided,
however, that nothing in this Section 8.03 shall prevent (i) transactions by the
Borrower or any of its Subsidiaries which are permitted as exceptions to the
restrictions of Section 9.02 or (ii) the withdrawal by the Borrower of its
qualification as a foreign corporation in any jurisdiction where such withdrawal
could not reasonably be expected to have a material adverse effect on the
business, operations, property, assets, liabilities, prospects or condition
(financial or otherwise) of the Borrower or of the Borrower and its Subsidiaries
taken as a whole.
Section 8.04 Compliance with Statutes, etc. The Borrower will, and
will cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (including applicable statutes,
regulations, orders and restrictions relating to environmental standards and
controls), except such noncompliances as could not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
business, operations, property, assets, liabilities, prospects or condition
(financial or otherwise) of the Borrower or of the Borrower and its Subsidiaries
taken as a whole.
Section 8.05 ERISA. Promptly after an Authorized Officer of the
Borrower has received notice or otherwise has knowledge thereof, the Borrower
shall deliver to the Agent a written notice describing in reasonable detail the
occurrence of any of the following: that a Reportable Event has occurred; that
an accumulated funding deficiency, within the meaning of Section 412 of the Code
or Section 302 of ERISA, has been incurred or an application may be or has been
made to the Secretary of the Treasury for a waiver or modification of the
minimum
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funding standard (including any required installment payments) or an extension
of any amortization period under Section 412 of the Code or Section 303 or 304
of ERISA with respect to a Plan; that a Plan has an Unfunded Current Liability
giving rise to a Lien under ERISA; or that the Borrower or any ERISA Affiliate
will or may incur any material liability (including any contingent or secondary
liability) to or on account of the termination of or withdrawal from a Plan or
Multiemployer Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of
ERISA. Upon written request of the Agent, the Borrower will deliver to each Bank
a complete copy of the annual report (Form 5500) of each Plan required to be
filed with the Internal Revenue Service.
Section 8.06 Performance of Obligations. The Borrower will, and will
cause each of its Subsidiaries to, perform all of its obligations under the
terms of each mortgage, indenture, security agreement and other debt instrument
by which it is bound, except such non-performances as could not, individually or
in the aggregate, reasonably be expected to have a material adverse effect on
the business, operations, property, assets, liabilities, prospects or condition
(financial or otherwise) of the Borrower or of the Borrower and its Subsidiaries
taken as a whole.
Section 8.07 Use of Proceeds. The Borrower will use the proceeds of
the Loans only to pay or reimburse itself for the payment of Losses (including
establishing and/or maintaining Permitted Reserves in the Pledged Reserves
Account) in respect of the Covered Portfolio.
Section 8.08 Conduct of Business. The Borrower will continue to
engage in business of the same general type as conducted by it on the Effective
Date.
Section 8.09 Underwriting Criteria. The Borrower shall maintain (i)
its criteria for underwriting (including reinsuring) Insurance Contracts and
(ii) with respect to the Covered Portfolio, its basic service/industry mix
substantially as heretofore in effect.
Section 8.10 Collection of Pledged Recoveries and Pledged Premiums.
The Borrower shall at all times use its commercially reasonable efforts to
collect and otherwise realize upon all Pledged Recoveries and Pledged Premiums
in compliance with applicable law and in a commercially reasonable manner.
Section 8.11 Pledged Reserve Release Notice. The Borrower hereby
acknowledges and agrees that if, at any time, it shall cease to maintain (other
than as a result of a transfer or application contemplated by Section 2.4(d) of
the Security Agreement) all or any portion of Permitted Reserves in respect of
which Pledged Reserves Account Funds have been deposited in the Pledged Reserves
Account, the Borrower as promptly as possible (and in any event within three
Business Days) after it shall cease to maintain such Permitted Reserves shall
give written notice thereof (each such notice, a "Pledged Reserve Release
Notice") to the Agent and the Collateral Agent which notice shall provide the
amount of such Pledged Reserves Account Funds that have been released.
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Section 8.12 Registry. The Borrower hereby covenants that it shall
maintain a register on which it will record the Commitment and Contingent
Commitment from time to time of each of the Banks, the Loans made by each of the
Banks and each repayment in respect of the principal amount of the Loans of each
Bank. Failure to make any such recordation, or any error in such recordation,
shall not affect the Borrower's obligations in respect of such Loans. Upon the
request of the Borrower, the Agent hereby agrees to use its reasonable efforts
to provide to the Borrower such information not otherwise available to the
Borrower, as the Borrower shall reasonably request from time to time in order to
enable it to fulfill its obligations pursuant to this Section 8.12.
SECTION 9. NEGATIVE COVENANTS.
The Borrower covenants and agrees that on and after the Effective
Date and until the Commitments have terminated and the Loans and the Notes,
together with interest, Fees and all other obligations incurred hereunder and
thereunder, are paid in full:
Section 9.01 Liens. The Borrower will not, and will not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon
any Pledged Recoveries, Pledged Premiums, Pledged Reserves Account Funds or
other Collateral, provided that the provisions of this Section 9.01 shall not
prevent the creation, incurrence, assumption or existence of the following
(Liens described below are herein referred to as "Permitted Liens"):
(i) the Lien in favor of the Banks under the Security Agreement or
otherwise permitted thereunder;
(ii) inchoate Liens for taxes, assessments or governmental charges
or levies not yet due or Liens for taxes, assessments or governmental charges or
levies being contested in good faith and by appropriate proceedings for which
adequate reserves have been established in accordance with generally accepted
accounting principles;
(iii) Liens in respect of property or assets of the Borrower or any
of its Subsidiaries imposed by law, which were incurred in the ordinary course
of business and do not secure Indebtedness for borrowed money, such as
carriers', warehousemen's, materialmen's and mechanics' liens and other similar
Liens arising in the ordinary course of business, which relate to Indebtedness
which has not been paid when due and payable in accordance with its terms and
which are being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the property
or assets subject to any such Lien; and
(iv) Liens incurred in connection with reinsurer trust agreements
entered into pursuant to Section 114 of the New York Insurance Law.
Section 9.02 Consolidation, Merger, Sale of Assets, etc. The
Borrower will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of (or agree to do
any of the foregoing at any future time) all or any substantial part of its
property or assets, or purchase or otherwise acquire (in one or a series of
related transactions) all or
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substantially all of the property or assets (other than purchases or other
acquisitions of inventory, materials and equipment in the ordinary course of
business) of any Person, or permit any of its Subsidiaries so to do any of the
foregoing, except that:
(i) each of the Borrower and its Subsidiaries may in the ordinary
course of business sell or lease assets;
(ii) any Subsidiary may wind up its affairs or liquidate or dissolve
into, and may consolidate or merge with or into, the Borrower or any other
Subsidiary of the Borrower;
(iii) the assets or stock of any Subsidiary of the Borrower may be
purchased or otherwise acquired by the Borrower or any other Subsidiary of the
Borrower; and
(iv) the Borrower or any of its Subsidiaries may purchase or
otherwise acquire all or substantially all of the properties or assets of any
Person (other than the Borrower) or acquire such Person by merger so long as (a)
no Default or Event of Default has occurred and is continuing or would occur
after giving effect thereto, (b) such purchase, acquisition or merger shall not
result in any downgrading of the Borrower's Rating assigned by Moody's or S&P
from that in effect immediately prior to such purchase, acquisition or merger
and (c) the Borrower shall deliver to the Agent a certificate of the president,
chief financial officer or the treasurer of the Borrower stating that such
purchase, merger or acquisition complied with the conditions contained in this
clause (iv).
SECTION 10. EVENTS OF DEFAULT.
Upon the occurrence of any of the following specified events (each
an "Event of Default"):
Section 10.01 Payments. The Borrower shall (i) default in the
payment when due of any principal of any Loan or any Note or (ii) default, and
such default shall continue unremedied for two or more Business Days, in the
payment when due of any interest on any Loan or any Note or any Fees or any
other amounts owing hereunder or under any Note; or
Section 10.02 Representations, etc. Any representation, warranty or
statement made by or on behalf of the Borrower herein or in any other Credit
Document or in any certificate delivered pursuant hereto or thereto shall prove
to be untrue in any material respect on the date as of which made or deemed
made; or
Section 10.03 Covenants. The Borrower shall (i) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 8.01(e)(i), 8.07, 8.08, 8.09, 8.10, 8.11 or 9 or (ii) default in the due
performance or observance by it of any term, covenant or agreement (other than
those referred to in Sections 10.01 and 10.02 and clause (i) of this Section
10.03) contained in this Agreement and such default shall continue unremedied
for a period of 30 days after written notice to the Borrower by the Agent or, in
the event there is no Agent, any Bank; or
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Section 10.04 Default Under Other Agreements. The Borrower or any of
its Subsidiaries shall (i) default in any payment of any Indebtedness (other
than the Notes) with an outstanding principal balance in excess of $10,000,000
beyond the period of grace, if any, provided in the instrument or agreement
under which such Indebtedness was created or (ii) default in the observance or
performance of any agreement or condition relating to any such Indebtedness
beyond the grace period as provided therein (other than the Notes) or contained
in any instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of any such default or
other event or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause any such Indebtedness to become due prior to its stated maturity; or any
Indebtedness of the Borrower or any of its Subsidiaries shall be declared to be
due and payable, or required to be prepaid other than by a regularly scheduled
required prepayment, prior to the stated maturity thereof; or
Section 10.05 Bankruptcy, etc. The Borrower or any of its
Subsidiaries shall commence a voluntary case concerning itself under Title 11 of
the United States Code entitled "Bankruptcy," as now or hereafter in effect, or
any successor thereto (the "Bankruptcy Code"); or an involuntary case is
commenced against the Borrower or any of its Subsidiaries, and the petition is
not controverted within 10 days, or is not stayed or dismissed and remains in
effect after 60 days, after commencement of the case; or a custodian (as defined
in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of the Borrower or any of its Subsidiaries, or
the Borrower or any of its Subsidiaries commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Borrower or any of its Subsidiaries, or
there is commenced against the Borrower or any of its Subsidiaries any such
proceeding which remains undismissed or unstayed for a period of 60 days, or the
Borrower or any of its Subsidiaries is adjudicated insolvent or bankrupt; or any
order of relief or other order approving any such case or proceeding is entered;
or the Borrower or any of its Subsidiaries suffers any appointment of any
custodian or the like for it or any substantial part of its property to continue
undischarged or unstayed for a period of 60 days; or the Borrower or any of its
Subsidiaries makes a general assignment for the benefit of creditors; or any
corporate action is taken by the Borrower or any of its Subsidiaries for the
purpose of effecting any of the foregoing; or
Section 10.06 Security Agreement. (i) The Security Agreement or any
provision thereof shall cease to be in full force and effect, or shall cease in
any material respect to give the Collateral Agent for the benefit of the Banks,
the Liens, rights, powers and privileges purported to be created thereby, or
(ii) the Borrower shall otherwise default in any material respect in the due
performance or observance of any term, covenant or agreement on its part to be
performed or observed pursuant to the Security Agreement and such default shall
continue unremedied for a period of 30 days after written notice to the Borrower
by the Agent or, in the event there is no Agent, any Bank; or
Section 10.07 Judgments. One or more judgments or decrees shall be
entered against the Borrower or any of its Subsidiaries involving in the
aggregate for the Borrower and its Subsidiaries a liability (not paid or fully
covered by insurance) of $5,000,000 or more at any
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one time, and all such judgments or decrees shall not have been vacated,
discharged or stayed or bonded pending appeal within 60 days after the entry
thereof; or
Section 10.08 Change of Control. A Change of Control shall occur;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Agent may or shall upon direction from the
Majority Banks, by written notice to the Borrower, take the following actions to
the extent permitted below (provided, that, if an Event of Default specified in
Section 10.05 shall occur with respect to the Borrower, the result which would
occur upon the giving of written notice to the Borrower as specified below shall
occur automatically without the giving of any such notice): if any Event of
Default has occurred and is continuing, the Agent may declare the principal of
and any accrued interest in respect of all Loans and the Notes and all
obligations owing hereunder and thereunder to be, whereupon the same shall
become, forthwith due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower.
SECTION 11. THE AGENT.
Section 11.01 Appointment. The Banks hereby designate Deutsche Bank
AG, New York Branch as Agent (for purposes of this Section 11, the term "Agent"
shall also include Deutsche Bank AG, New York Branch in its capacity as
Collateral Agent pursuant to the Security Documents) to act as specified herein
and in the other Credit Documents. Each Bank hereby irrevocably authorizes, and
each holder of any Note by the acceptance of such Note shall be deemed
irrevocably to authorize, the Agent to take such action on its behalf under the
provisions of this Agreement, the other Credit Documents and any other
instruments and agreements referred to herein or therein and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of the Agent by the terms hereof and thereof and such
other powers as are reasonably incidental thereto. The Agent may perform any of
its duties hereunder by or through its officers, directors, agents or employees.
Section 11.02 Nature of Duties. The Agent shall not have any duties
or responsibilities except those expressly set forth in this Agreement and the
Security Agreement. Neither the Agent nor any of its officers, directors, agents
or employees shall be liable for any action taken or omitted by it or them
hereunder or under any other Credit Document or in connection herewith or
therewith, unless caused by its or their gross negligence or willful misconduct.
The duties of the Agent shall be mechanical and administrative in nature; the
Agent shall not have by reason of this Agreement or any other Credit Document a
fiduciary relationship in respect of any Bank or the holder of any Note; and
nothing in this Agreement or any other Credit Document, expressed or implied, is
intended to or shall be so construed as to impose upon the Agent any obligations
in respect of this Agreement or any other Credit Document except as expressly
set forth herein or therein.
Section 11.03 Lack of Reliance on the Agent. Independently and
without reliance upon the Agent, each Bank and the holder of each Note, to the
extent it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of the Borrower
in connection with the making and the continuance of the Loans and
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the taking or not taking of any action in connection herewith and (ii) its own
appraisal of the creditworthiness of the Borrower and, except as expressly
provided in this Agreement, the Agent shall not have any duty or responsibility,
either initially or on a continuing basis, to provide any Bank with any credit
or other information with respect thereto, whether coming into its possession
before the making of the Loans or at any time or times thereafter. The Agent
shall not be responsible to any Bank or the holder of any Note for any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith or for
the execution, effectiveness, genuineness, validity, enforceability, perfection,
collectability, priority or sufficiency of this Agreement or any other Credit
Document or the financial condition of the Borrower or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement or any other Credit Document, or the
financial condition of the Borrower or the existence or possible existence of
any Default or Event of Default.
Section 11.04 Certain Rights of the Agent. If the Agent shall
request instructions from the Banks with respect to any act or action (including
failure to act) in connection with this Agreement or any other Credit Document,
the Agent shall be entitled to refrain from such act or taking such action
unless and until the Agent shall have received instructions from the Majority
Banks or all the Banks to the extent required by Section 12.11; and the Agent
shall not incur liability to any Person by reason of so refraining. Without
limiting the foregoing, no Bank or the holder of any Note shall have any right
of action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder or under any other Credit Document in
accordance with the instructions of the Majority Banks or the Banks, as the case
may be.
Section 11.05 Reliance. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
any Person that the Agent believed to be the proper Person, and, with respect to
all legal matters pertaining to this Agreement and any other Credit Document and
its duties hereunder and thereunder, upon advice of counsel selected by the
Agent.
Section 11.06 Indemnification. To the extent the Agent is not
reimbursed and indemnified by the Borrower, each Bank will reimburse and
indemnify the Agent for and against any and all liabilities, obligations,
losses, damages, penalties, claims, actions, judgments, suits and reasonable
costs, expenses and disbursements of whatsoever kind or nature which may be
imposed on, asserted against or incurred by the Agent in performing its duties
hereunder or under any other Credit Document, in any way relating to or arising
out of this Agreement or any other Credit Document; provided that no Bank shall
be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent's gross negligence or willful misconduct.
Section 11.07 The Agent in Its Individual Capacity. With respect to
its obligation to make Loans under this Agreement, the Agent shall have the
rights and powers specified herein for a "Bank" and may exercise the same rights
and powers as though it was not performing the duties specified herein; and the
term "Banks," "holders of Notes" or any similar terms shall, unless the context
clearly otherwise indicates, include the Agent in its individual capacity. The
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Agent may accept deposits from, lend money to, and generally engage in any kind
of banking, trust or other business with the Borrower or any Affiliate of the
Borrower as if they were not performing the duties specified herein, and may
accept fees and other consideration from the Borrower for services in connection
with this Agreement and otherwise without having to account for the same to the
Banks.
Section 11.08 Resignation by the Agent. (a) The Agent may resign
from the performance of all its functions and duties hereunder and/or under the
other Credit Documents at any time by giving 15 Business Days' prior written
notice to the Borrower and the Banks. In the case of the resignation by the
Agent, such resignation shall take effect upon the appointment of a successor
Agent pursuant to Section 11.08(b) or 11.08(c) or as otherwise provided in
Section 11.08(d).
(b) Upon any such notice of resignation by the Agent, the Banks
shall appoint a successor Agent hereunder or thereunder who shall be a
commercial bank or trust company reasonably acceptable to the Borrower (it being
understood and agreed that any Bank is deemed to be acceptable to the Borrower).
(c) If a successor Agent shall not have been so appointed within
such 15 Business Day period, the Agent, with the consent of the Borrower, shall
then appoint a successor Agent who shall serve as Agent hereunder or thereunder
until such time, if any, as the Banks appoint a successor Agent as provided
above.
(d) If no successor Agent has been appointed pursuant to Section
11.08(b) or 11.08(c) by the 20th Business Day after the date such notice of
resignation was given by the Agent, the Agent may appoint any other Bank which
agrees to such appointment to act as successor Agent.
SECTION 12. MISCELLANEOUS.
Section 12.01 Payment of Expenses, etc. The Borrower shall: (i)
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses (a) of the Agent (including, without
limitation, the reasonable fees and disbursements of White & Case, LLP, counsel
for the Agent) in connection with the preparation, execution and delivery of
this Agreement and the other Credit Documents and the documents and instruments
referred to herein and therein and any amendment, waiver or consent relating
hereto or thereto and (b) of the Agent and the Banks in connection with the
enforcement of this Agreement and the other Credit Documents and the documents
and instruments referred to herein and therein (including, without limitation,
the reasonable fees and disbursements of counsel for the Agent and the Banks);
(ii) pay and hold each Bank harmless from and against any and all present and
future stamp and other similar taxes with respect to the foregoing matters and
save such Bank harmless from and against any and all liabilities with respect to
or resulting from any delay or omission (other than to the extent attributable
to such Bank) to pay such taxes; and (iii) except as otherwise provided in
Section 4.05, indemnify each Bank, its officers, directors, employees,
representatives and agents from and hold each of them harmless against any and
all liabilities, obligations, losses, damages, penalties, claims, actions,
judgments, suits and
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reasonable costs, expenses and disbursements incurred by any of them as a result
of, or arising out of, or in any way related to, or by reason of, any
investigation, litigation or other proceeding (whether or not such Bank is a
party thereto) related to the entering into and/or performance of this Agreement
or any other Credit Document or the use of the proceeds of any Loans hereunder
or the consummation of any transactions contemplated herein or in any other
Credit Document, including, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such investigation,
litigation or other proceeding (but excluding any such liabilities, obligations,
losses, etc., to the extent incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified).
Section 12.02 Right of Setoff. Except as otherwise provided in
Section 4.05, in addition to any rights now or hereafter granted under
applicable law or otherwise, and not by way of limitation of any such rights and
to the extent permitted by applicable law, during the continuance of an Event of
Default, each Bank is hereby authorized at any time or from time to time,
without presentment, demand, protest or other notice of any kind to the Borrower
or to any other Person, any such notice being hereby expressly waived, to set
off and to appropriate and apply any and all deposits (general or special), and
any other Indebtedness at any time held or owing by such Bank (including without
limitation by branches and agencies of such Bank wherever located) to or for the
credit or the account of the Borrower against and on account of the Obligations
and liabilities of the Borrower to such Bank under this Agreement or under any
of the other Credit Documents, and all other claims of any nature or description
arising out of or connected with this Agreement or any other Credit Document,
irrespective of whether or not the Bank shall have made any demand hereunder and
although such Obligations, liabilities or claims, or any of them, shall be
contingent or unmatured, provided however that (i) except to the extent provided
in the next succeeding clause (ii), no Bank is authorized hereunder to take any
of the foregoing actions, nor shall any Bank exercise any other right of setoff
or bankers' lien or any other right now or hereafter granted under applicable
law with respect to the Pledged Reserves Account or any portion of the Pledged
Reserves Account Funds or any Collateral contained in the Pledged Reserves
Account (each of the Agent, the Collateral Agent and each Bank hereby waiving,
to the extent permitted by applicable law, any such right) and (ii) from and
after receipt by the Agent or the Collateral Agent of any Pledged Reserve
Release Notice, the Agent, the Collateral Agent or any Bank is authorized to and
may exercise, to the extent permitted by applicable law, any of such foregoing
actions or such rights only with respect to the amount of Pledged Reserves
Account Funds described in such Pledged Reserve Release Notice and the other
Collateral contained in the Pledged Reserves Account in an amount equal to the
interest and other earnings on such Pledged Reserves Account Funds.
Section 12.03 Notices. Except as otherwise expressly provided
herein, all notices and other communications provided for hereunder shall be in
writing (including telegraphic, telex, facsimile or cable communication) and
mailed, telegraphed, telexed, telecopied, cabled or delivered: if to the
Borrower or any Bank, at its address listed opposite its name on the signature
page hereto; and if to the Agent at its Notice Office; or, as to any Bank or the
Agent, at such other address as shall be designated by such party in a written
notice to the other parties hereto and, as to each other party, at such other
address as shall be designated by such party in a written notice to the Borrower
and the Agent. All such notices and communications shall not be effective until
received by the Agent or the Borrower.
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Section 12.04 Benefit of Agreement. (a) This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; provided, however, that the
Borrower may not assign or transfer any of its rights or obligations hereunder
without the prior written consent of the Banks and, provided further, that, no
Bank may transfer or assign its rights or obligations hereunder or under any of
the other Credit Documents, except as provided in this Section 12.04, provided
further, that no Bank shall transfer, grant or assign any participation under
which the participant shall have rights to approve any amendment to or waiver of
this Agreement or any of the other Credit Documents (i) except to the extent
such amendment or waiver (A) extends the final maturity of any Loan or Note
other than in accordance with Section 3.04, or reduces the rate or extends the
time of payment of interest or Fees thereon, or reduces the principal amount
thereof, or increases the Commitment of any Bank over the amount thereof then in
effect (it being understood that a waiver of any Default or Event of Default
shall not constitute a change in the terms of any Commitment of any Bank), (B)
releases any material portion of the Collateral under the Security Agreement
except as shall be otherwise provided in any Credit Document, (C) consents to
the assignment or transfer by the Borrower of any of its rights and obligations
under any Credit Document, (D) amends the definition of Loss Threshold
Incurrence Date other than to increase the dollar amount or the percentage
specified therein, (E) reduces the percentage specified in the definition of
Majority Participants or (F) amends, modifies or waives any provision of this
Section 12.04 or (ii) except to the extent that a Bank may permit its Majority
Participants to approve any material written amendment, modification, waiver or
release of any other provision of this Agreement or any other Credit Document
which would, if effected, materially adversely affect the interests of its
participants. "Majority Participants" for purposes of this Section 12.04 shall
mean, with respect to each Bank, at any time participants of such Bank
participating in at least 51% of the aggregate principal amount of Loans made by
such Bank and outstanding at such time, or if no such Loans are outstanding at
such time, participants of such Bank participating in at least 51% of the
Commitment of such Bank at such time. In the case of any such participation, the
participant shall not constitute a "Bank" hereunder and shall not have any
rights under this Agreement or any of the other Credit Documents (the
participant's rights against any Bank in respect of such participation to be
those set forth in the agreement executed by such Bank in favor of the
participant relating thereto) and all amounts payable by the Borrower hereunder
shall be determined as if such Bank had not sold such participation, except that
the participant shall be entitled to the benefits of Section 2.07 or 4.04 of
this Agreement to the extent that such Bank would be entitled to such benefits
if the participation had not been transferred, granted or assigned.
(b) Notwithstanding the foregoing, any Bank (or any Bank together
with one or more other Banks) may (and, at the direction of the Borrower
following a rating downgrade of such Bank, shall) assign all or a portion of its
Commitment (plus, if such Bank shall be a Part C Bank, such Bank's Contingent
Commitment) and related outstanding rights and obligations hereunder to one or
more Eligible Transferees, each of which assignees shall become a party to this
Agreement as a Bank and, if applicable, a Part C Bank by execution of an
Assignment and Assumption Agreement and delivery of such Assignment and
Assumption Agreement to the Borrower and the Agent, provided that (i) new Notes
will be issued to such new Bank in the stated amount of its assumed Commitment
(plus, if such Bank shall be a Part C Bank, such
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Bank's Contingent Commitment), and to the assigning Bank in the stated amount of
the Commitment (plus, if such Bank shall be a Part C Bank, the Contingent
Commitment) if any, retained by it, upon the request of such new Bank or
assigning Bank and the surrender of the Note previously issued to the assigning
Bank (or the execution and delivery to the Borrower of an indemnity satisfactory
to the Borrower), such new Notes to be in conformity with the requirements of
Section 2.05 to the extent needed to reflect the revised Commitments and, if
applicable, Contingent Commitments, (ii) unless such assignment is to an
Affiliate of such assigning Bank with the same or higher unsecured senior debt
rating, and so long as no Default or Event of Default exists at the time of such
assignment, the Borrower shall have consented to such assignment, (iii) at the
time of such assignment, the new Bank or (except to the extent the new Bank is
an affiliate of the assigning Bank) its parent shall have an unsecured senior
debt rating (or shadow rating as reflected in a letter) by each of Moody's and
S&P (A) acceptable to the Borrower (if such assignment is at the direction of
the Borrower) or (B) no lower than the unsecured senior debt rating (or shadow
rating as reflected in a letter) by each of Moody's and S&P of the assigning
Bank or its parent (if such assignment is not at the direction of the Borrower),
(iv) in the case of any assignment of all or a portion of a Part C Bank's
Contingent Commitment, the new Part C Bank or its parent shall have, at the time
of such assignment, an unsecured senior debt rating (or shadow rating as
reflected in a letter) by each of Moody's and S&P of Aaa and AAA, respectively,
(v) such assignment shall not result in a downgrading of the Borrower's Rating
by Moody's or S&P from that in effect immediately prior to such assignment, (vi)
the assigning Bank shall provide notice of any such assignment to the Agent and
the Borrower and the Borrower shall provide notice of same to Moody's and S&P
and (vii) the new Bank shall deliver a legal opinion addressed to each of the
Borrower, Moody's and S&P dated the effective date of the applicable assignment
to the effect that this Agreement constitutes its legal, valid and binding
obligation enforceable in accordance with its terms, except to the extent that
the enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws generally affecting creditor's
rights and by equitable principles (regardless of whether enforcement is sought
in equity or at law) as the same may be applied in the event of bankruptcy or
similar proceedings with respect to such new Bank. To the extent of any
assignment pursuant to this Section 12.04(b), the assigning Bank shall be
relieved of its obligations hereunder with respect to its assigned Commitment.
To the extent that an assignment of all or any portion of a Bank's Commitment
and related outstanding Obligations pursuant to this Section 12.04(b) would at
the time of such assignment, result in increased costs under Section 2.07 or
4.04 from those being charged by the respective assigning Bank prior to such
assignment, then the Borrower shall not be obligated to pay such increased costs
(although the Borrower shall be obligated to pay any other increased costs of
the type described above resulting from changes in applicable law, or government
rules, regulations, orders or requests after the date of the respective
assignment).
(c) Upon the execution and delivery of an Assignment and Assumption
Agreement in accordance with, and subject to the restrictions of, Section
12.04(b), the assignee thereunder shall be a party hereto and, to the extent
that rights and obligations hereunder and under the other Credit Documents have
been assigned to it pursuant to such Assignment and Assumption Agreement, have
the rights and obligations of a "Bank" hereunder and thereunder.
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(d) Any Bank claiming any amounts payable pursuant to Section 4.04
shall use reasonable efforts (consistent with legal and regulatory restrictions
and subject to overall policy considerations of such Bank) to designate another
lending office for its Commitment or Loans or take such other action to minimize
such amounts, as may be reasonably requested by the Borrower, provided that such
designation is made or such other action is taken on such terms that such Bank
and its lending office suffer no economic, legal or regulatory disadvantage.
(e) Nothing in this Agreement shall prevent or prohibit any Bank
from pledging its Loans and Notes hereunder to a Federal Reserve Bank in support
of borrowings made by such Bank from such Federal Reserve Bank.
(f) Each Bank shall promptly notify the Borrower of any change in
the location of its applicable lending office.
Section 12.05 No Waiver; Remedies Cumulative. No failure or delay on
the part of any Bank or the holder of any Note in exercising any right, power or
privilege hereunder or under any other Credit Document and no course of dealing
between the Borrower and any Bank or the holder of any Note shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. Except as otherwise expressly provided herein or in any
other Credit Document, the rights, powers and remedies herein or in any other
Credit Document expressly provided are cumulative and not exclusive of any
rights, powers or remedies which any Bank would otherwise have. No notice to or
demand on the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of any Bank or the holder of any Note to any other or
further action in any circumstances without notice or demand.
Section 12.06 Calculations; Computations. (a) The financial
statements to be furnished to the Banks pursuant to Section 8.01(a) and (b)
shall be made and prepared in accordance with generally accepted accounting
principles in the United States consistently applied throughout the periods
involved (except as set forth in the notes thereto or as otherwise disclosed in
writing by the Borrower to the Banks).
(b) All computations of interest hereunder shall be made on the
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such interest
is payable.
Section 12.07 Governing Law; Submission to Jurisdiction; Venue;
Waiver of Jury Trial. (a) This Agreement and the other Credit Documents and the
rights and obligations of the parties hereunder and thereunder shall be
construed in accordance with and be governed by the law of the State of New
York, without regard to the conflict of law provisions thereof. Any legal action
or proceeding against the Borrower with respect to this Agreement or any other
Credit Document may be brought in the courts of the State of New York or of the
United States for the Southern District of New York, and, by execution and
delivery of this Agreement, the Borrower hereby irrevocably accepts for itself
and in respect of its property, generally and uncon-
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ditionally, the jurisdiction of the aforesaid courts. The Borrower irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to the Borrower at its address set forth
opposite its signature below (or to such other address as the Borrower may from
time to time notify the Agent in writing), such service to become effective 30
days after such mailing. Except as otherwise provided in Section 4.05, nothing
herein shall affect the right of the Agent or any Bank under this Agreement to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Borrower in any other jurisdiction.
(b) The Borrower hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid actions
or proceedings arising out of or in connection with this Agreement or any other
Credit Document brought in the courts referred to in Section 12.07(a) and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought in
an inconvenient forum.
(c) Each of the Borrower, the Agent and each of the Banks hereby
irrevocably waives its right to a jury trial in connection with any action,
proceeding or counterclaim arising out of or relating to this Agreement or any
other Credit Document or any transaction contemplated hereby or thereby.
Section 12.08 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Agent.
Section 12.09 Effectiveness. This Agreement shall become effective
on the date (the "Effective Date") on which the Borrower and the Banks shall
have signed a copy hereof (whether the same or different copies) and shall have
delivered the same to the Agent at its Notice Office and the conditions set
forth in Section 5 shall have been satisfied or waived by the Banks, as
evidenced by a written notice by the Agent to the Borrower confirming that the
Agreement has become effective and setting forth the Effective Date.
Section 12.10 Headings Descriptive. The headings of the several
sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
Section 12.11 Amendment or Waiver. Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the Borrower and the Majority Banks and the Agent;
provided, however, that no such change, waiver, discharge or termination shall,
without the consent of each Bank (other than any Bank that is, at the time of
the proposed extension, release, amendment, reduction or consent, a Defaulting
Bank; provided, however, that, with respect to any matter described in clause
(i) or
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(ii) of this Section 12.11, the consent of each Defaulting Bank which at such
time has a Loan outstanding shall also be required) (i) extend the final
maturity of any Loan or Note other than in accordance with Section 3.04 or
reduce the rate or extend the time of payment of interest or Fees thereon, or
reduce the principal amount thereof, or increase the Commitment or percentage of
the Commitment of any Bank over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default shall not constitute
a change in the terms of any Commitment of any Bank), (ii) release any material
portion of the Collateral under any Security Document except as shall be
otherwise provided in any Credit Document, (iii) amend, modify or waive any
provision of this Section 12.11, (iv) reduce the percentage specified in the
definition of Majority Banks, (v) consent to the assignment or transfer by the
Borrower of any of its rights and obligations under any Credit Document or (vi)
amend the definition of Loss Threshold Incurrence Date other than to increase
the dollar amount or the percentage specified therein.
Section 12.12 Survival. All indemnities set forth herein including,
without limitation, in Sections 2.07, 4.04 and 12.01 shall survive the execution
and delivery of this Agreement and the Notes and the making and repayment of the
Loans.
Section 12.13 Exclusions from Covered Portfolio. In the event that
any Bank (or any participant to whom such Bank has transferred, granted or
assigned any participation in its rights and obligations hereunder and under the
other Credit Documents) is, or upon the occurrence of any contingency would be,
obligated under the terms of a line of credit, standby bond purchase agreement,
letter of credit, liquidity agreement or similar agreement or arrangement to
purchase any Insured Obligation listed in a certificate delivered by the
Borrower to the Agent pursuant to Section 5.06 or 8.01(d), such Bank (or such
participant) shall promptly notify the Agent, and the Agent shall promptly
notify the Borrower, that such Bank (or such participant) is or would be so
obligated to purchase such Insured Obligation. Upon delivery by the Agent to the
Borrower of any such notice with respect to an Insured Obligation, such Insured
Obligation shall, effective upon delivery of such notice by the Agent to the
Borrower, be excluded from the Covered Portfolio.
Section 12.14 Confidentiality. Each of the Agent and each Bank
agrees to take and cause its respective Affiliates to take normal and reasonable
precautions and exercise due care to maintain the confidentially of all
financial information and all other information reasonably identified as
"confidential" or "secret" by the Borrower and provided to it by the Borrower or
by the Agent on the Borrower's behalf, and neither it nor any of its Affiliates
shall use such information other than in connection with or in enforcement of
this Agreement and the other Credit Documents, except to the extent such
information (i) was or becomes generally available to the public other than as a
result of a disclosure by the Agent or any Bank or (ii) was or becomes available
on a non-confidential basis from a source other than the Borrower, provided that
such source is not bound by a confidentiality agreement with the Borrower known
to the Agent or such Bank; provided, however, that the Agent or any Bank may
disclose such information (a) at the request or pursuant to any requirement of
any authority to which the Agent or such Bank is subject or in connection with
an examination of the Agent or such Bank by any such authority; (b) pursuant to
subpoena or other court process, provided that if not prohibited by law, the
Agent or such Bank will make reasonable efforts to provide notice to the
Borrower of the receipt of such subpoena prior to delivering confidential
material in response thereto, and the
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Agent and the Banks will cooperate with the Borrower in any attempt to obtain a
protective order, at the Borrower's expense, as may be reasonably requested by
the Borrower; (c) when required to do so in accordance with the provisions of
any applicable law or regulation; (d) to the extent reasonably required in
connection with any litigation or proceeding with respect to the transactions
contemplated hereby to which the Agent or any Bank or their respective
Affiliates may be party; (e) to the extent reasonably required in connection
with the exercise of any remedy hereunder or under any other Credit Document;
(f) to the Agent's or such Bank's independent auditors and other professional
advisors with a need to know and who agrees to keep such information
confidential to the extent required of the Agent or such Bank hereunder; and (g)
to any assignee or participant, actual or potential, provided that such Person
agrees to keep such information confidential to the same extent required of the
Agent or the Bank hereunder. In addition to the foregoing, each of the Agent and
each Bank agrees that, with respect to any information provided to them by or on
behalf of the Borrower pursuant to Section 8.01(d) or 8.01(g) or which is
obtained from, or derived from information provided by, any primary insurer
pursuant to any other provision of this Agreement, and in any event which the
Borrower notifies the Agent is subject to any confidentiality undertaking made
by the Borrower to any primary insurer, (1) such information shall be deemed
"confidential" for purposes of this Section 12.14, (2) such information shall
only be provided to any employee, agent, attorney or advisor on a need to know
basis and (3) each of the Agent and each Bank shall be deemed to have made the
same confidentiality undertakings as the Borrower with respect to such
information.
Section 12.15 Payments Pro Rata. (a) The Agent agrees that promptly
after its receipt of each payment from or on behalf of the Borrower in respect
of any Obligation (including, without limitation, any payment received pursuant
to Section 2.4 or 6.4 of the Security Agreement) it shall distribute such
payment to the Banks pro rata based upon their respective shares, if any, of the
Obligations with respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under any Credit Document or otherwise),
which is applicable to the payment of the principal of, or interest on, any Loan
or Commitment Fee, the sum of which when compared to the related sum or sums
received by other Banks is in a greater proportion than the total amount of such
Obligation then owed and due to such Bank vis a vis that owed and due to all
Banks immediately prior to such receipt, then such Bank receiving such excess
payment shall purchase for cash without recourse or warranty from the other
Banks an interest in the Obligations of the Borrower to such Banks in such
amount as shall result in a proportional participation by all the Banks in such
amount; provided, however, that if all or any portion of such excess amount is
thereafter recovered from such Bank, such purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without interest.
(c) Anything contained herein to the contrary notwithstanding, the
provisions of Sections 12.15(a) and 12.15(b) shall be subject to the express
provisions of this Agreement which require or permit differing payments to be
made to Defaulting Banks as opposed to non-Defaulting Banks.
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IN WITNESS WHEREOF, the parties hereto have caused their respective
duly authorized officers to execute and deliver this Agreement as of the date
first above written.
Address:
335 Madison Avenue ENHANCE REINSURANCE COMPANY
25th Floor
New York, New York 10017-4607 By_________________________________
Attention: President Title:
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1211 Avenue of the Americas WESTDEUTSCHE LANDESBANK
23rd Floor GIROZENTRALE, NEW YORK BRANCH
New York, New York 10036
Attention: Ms. Lillian Tung Lum By_________________________________
Title:
By_________________________________
Title:
245 Park Avenue COOPERATIEVE CENTRALE
New York, New York 10167-0062 RAIFFEISEN-BOERENLEENBANK,
Attention: Ms. Angela Reilly B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
By_________________________________
Title:
By_________________________________
Title:
1114 Avenue of the Americas NORDDEUTSCHE LANDESBANK
37th Floor GIROZENTRALE, NEW YORK
New York, New York 10036 BRANCH
Attention: Mr. Hinrich Holm
By_________________________________
Title:
By_________________________________
Title:
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DEUTSCHE BANK AG,
31 West 52nd Street NEW YORK BRANCH,
New York, New York 10019 Individually and as Agent
Attention: Mr. John S. McGill
By_________________________________
Title:
By_________________________________
Title:
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SCHEDULE I
PART A
Commitments
Name Commitment
---- ----------
Deutsche Bank AG, $25,000,000
New York Branch
Westdeutsche Landesbank 25,000,000
Girozentrale, New York Branch
Cooperatieve Centrale 20,000,000
Raiffeisen-Boerenleenbank, B.A.,
"Rabobank Nederland",
New York Branch
Norddeutsche Landesbank 20,000,000
-----------
Girozentrale, New York Branch
Total $90,000,000
===========
PART B
Part B Banks
Deutsche Bank AG, New York Branch
Westdeutsche Landesbank Girozentrale, New York Branch
Norddeutsche Landesbank Girozentrale, New York Branch
PART C
Part C Banks/Contingent Commitments
Name Contingent Commitment
---- ---------------------
Cooperatieve Centrale $21,000,000
-----------
Raiffeisen-Boerenleenbank, B.A.,
"Rabobank Nederland",
New York Branch
Total $21,000,000
===========