MFB » Topics » SECTION 3. LETTERS OF CREDIT

This excerpt taken from the MFB 8-K filed Jun 18, 2007.

SECTION 3.         LETTERS OF CREDIT

3.1                               Issuance of Letters of Credit and Lenders’ Purchase of Participations Therein.

A.            Letters of Credit.  Company may request, in accordance with the provisions of this subsection 3.1, from time to time during the period from the Closing Date to but excluding the 30th day prior to the Revolving Loan Commitment Termination Date (or, if said 30th day is not a Business Day, the next preceding Business Day), that one or more Issuing Lenders issue Letters of Credit payable on a sight basis for the account of Company or a Subsidiary of Company for the general corporate purposes of Company or a Subsidiary of Company.  Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Company herein set forth, any one or more Issuing Lenders may, but (except as provided in subsection 3.1B(ii)) shall not be obligated to, issue such Letters of Credit in accordance with the provisions of this subsection 3.1; provided that Company shall not request that any Issuing Lender issue (and no Issuing Lender shall issue or be obligated to issue):

(i)            any Letter of Credit if, after giving effect to such issuance, (a) the Total Utilization of Revolving Loan Commitments would exceed the lesser of (1) the Revolving Loan Commitment Amount then in effect and (2) the Borrowing Base then in effect or (b) the sum of (1) the Pro Rata Share of any Revolving Lender of the aggregate principal amount of all then outstanding Revolving Loans plus (2) the aggregate amount of all participations purchased by such Revolving Lender in Letters of Credit then issued and outstanding plus (3) the aggregate amount of all risk participations purchased by such Revolving Lender in Swing Line Loans then outstanding would exceed such Lender’s Revolving Credit Commitment;

(ii)           any Letter of Credit if, after giving effect to such issuance, the Letter of Credit Usage would exceed $25,000,000.00;

(iii)          any Standby Letter of Credit having an expiration date later than the earlier to occur of (a) 30 days prior to the Revolving Loan Commitment Termination Date (or, if such day is not a Business Day, the next preceding Business Day) and (b) the date which is one year from the date of issuance of such Standby Letter of Credit; provided that, if Company so requests in any applicable L/C Application (Standby), the Issuing Lender may, in its sole and absolute discretion, agree to issue a Letter of Credit that has automatic extension provisions (each, an “Auto-Extension Letter of Credit”); provided that any such Auto-Extension Letter of Credit must permit Issuing Lender to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to Company and to

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the beneficiary thereof not later than a day (the “Non-Extension Notice Date”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued.  Unless otherwise directed by Issuing Lender, Company shall not be required to make a specific request to Issuing Lender for any such extension.  Once an Auto-Extension Letter of Credit has been issued, the Revolving Lenders shall be deemed to have authorized (but may not require) Issuing Lender to permit the extension of such Letter of Credit at any time to an expiry date not later than the L/C Expiration Date; provided, however, that Issuing Lender shall not permit any such extension if (I) Issuing Lender has determined in good faith that it would not be permitted, or would have no obligation, at such time to issue such Letter of Credit in its revised form (as extended) under the terms hereof (by reason of the provisions of this subsection 3.1A or otherwise), or (II) it has received notice (which may be by telephone or in writing) on or before the day that is five Business Days before the Non-Extension Notice Date from Administrative Agent, any Revolving Lender or Company that one or more of the applicable conditions specified in subsection 4.4 is not then satisfied (or has not been waived in accordance with the terms, conditions and provisions of subsection 10.6), and in each such case directing Issuing Lender not to permit such extension;

(iv)          any Standby Letter of Credit issued for the purpose of supporting (a) trade payables or (b) any Indebtedness constituting “antecedent debt” (as that term is used in Section 547 of the Bankruptcy Code);

(v)           any Commercial Letter of Credit having an expiration date (a) later than the earlier of (I) the date which is 30 days prior to the Revolving Loan Commitment Termination Date (or, if such day is not a Business Day, the next preceding Business Day) and (II) the date which is 180 days from the date of issuance of such Commercial Letter of Credit or (b) that is otherwise unacceptable to the applicable Issuing Lender in its reasonable discretion;

(vi)          any Letter of Credit denominated in a currency other than Dollars;

(vii)         any Letter of Credit if any order, judgment or decree of any Government Authority or arbitrator shall by its terms purport to enjoin or restrain such Issuing Lender from issuing such Letter of Credit, or any Federal, state or local law applicable to such Issuing Lender or any request or directive (whether or not having the force of law) from any Government Authority with jurisdiction over such Issuing Lender shall prohibit, or request that such Issuing Lender refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuing Lender with respect to such Letter of Credit any restriction, reserve or capital requirement (for which such Issuing Lender is not otherwise compensated hereunder) not in effect on the Closing Date or, if later, the date on which such Issuing Lender became an Issuing Lender, or shall impose upon such Issuing Lender any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which such Issuing Lender in good faith deems material to it;

(viii)        any Letter of Credit if the issuance of such Letter of Credit would violate one or more policies of such Issuing Lender applicable to letters of credit generally;

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(ix)           any Letter of Credit if, except as otherwise agreed by Administrative Agent and such Issuing Lender, such Letter of Credit is in an initial stated amount less than $20,000.00, in the case of a Commercial Letter of Credit, or $100,000.00, in the case of a Standby Letter of Credit;

(x)            any Letter of Credit if a default of any Lender’s obligations to fund under subsection 3.3C exists, unless such Issuing Lender has entered into reasonably satisfactory arrangements with Company or such Lender to eliminate such Issuing Lender’s risk with respect to such Lender; or

(xi)           any Letter of Credit if, unless specifically provided for in this Agreement, such Letter of Credit contains any provisions for automatic reinstatement of the stated amount after any drawing thereunder.

No Issuing Lender shall amend any Letter of Credit if such Issuing Lender would not be permitted at such time to issue such Letter of Credit in its amended form under the terms hereof.  No Issuing Lender shall be under any obligation to amend any Letter of Credit if (1) such Issuing Lender would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (2) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.

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