Exhibit 10.1

 

Execution Version

 

 

CREDIT AGREEMENT

 

DATED AS OF MAY 28, 2014

 

AMONG

 

RLI CORP.,

 

THE LENDERS

AND

 

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,
AS AGENT

 

 

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

 

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Table of Contents

 

 

 

Page

 

 

 

ARTICLE I

DEFINITIONS

1

 

 

 

ARTICLE II

THE CREDITS

17

 

 

 

2.1

Commitment

17

 

 

 

2.2

Termination

17

 

 

 

2.3

Ratable Loans

17

 

 

 

2.4

Types of Advances

17

 

 

 

2.5

Commitment Fee; Reductions and Increases in Aggregate Commitment

17

 

 

 

2.6

Minimum Amount of Each Advance

18

 

 

 

2.7

Optional Principal Payments

18

 

 

 

2.8

Method of Selecting Types and Interest Periods for New Advances

18

 

 

 

2.9

Conversion and Continuation of Outstanding Advances

19

 

 

 

2.10

Changes in Interest Rate, etc

19

 

 

 

2.11

Rates Applicable After Default

20

 

 

 

2.12

Method of Payment

20

 

 

 

2.13

Noteless Agreement; Evidence of Indebtedness

20

 

 

 

2.14

Telephonic Notices

21

 

 

 

2.15

Interest Payment Dates; Interest and Fee Basis

21

 

 

 

2.16

Notification of Advances, Interest Rates, Prepayments and Commitment Reductions

21

 

 

 

2.17

Lending Installations

22

 

 

 

2.18

Non-Receipt of Funds by the Agent

22

 

 

 

ARTICLE III

INCREASED COSTS; TAXES

22

 

 

 

3.1

Increased Costs

22

 

 

 

3.2

Alternate Rate of Interest

23

 

 

 

3.3

Funding Indemnification

24

 

 

 

3.4

Taxes

24

 

 

 

 

3.4.1

Payments Free of Taxes

24

 

 

 

 

 

3.4.2

Payment of Other Taxes by the Borrower

24

 

 

 

 

 

3.4.3

Evidence of Payments

24

 

 

 

 

 

3.4.4

Indemnification by the Borrower

24

 

i

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Table of Contents

(continued)

 

 

 

 

Page

 

 

 

 

 

3.4.5

Indemnification by the Lenders

25

 

 

 

 

 

3.4.6

Status of Lenders

25

 

 

 

 

 

3.4.7

Treatment of Certain Refunds

27

 

 

 

 

 

3.4.8

Survival

27

 

 

 

 

 

3.4.9

Defined Terms

27

 

 

 

 

3.5

Lender Statements; Survival of Indemnity

28

 

 

 

3.6

Substitution of Lender

28

 

 

 

3.7

Defaulting Lenders

28

 

 

 

ARTICLE IV

CONDITIONS PRECEDENT

29

 

 

 

4.1

Effectiveness

29

 

 

 

4.2

Each Advance

30

 

 

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES

30

 

 

 

5.1

Existence and Standing

30

 

 

 

5.2

Authorization and Validity

30

 

 

 

5.3

No Conflict; Consent

30

 

 

 

5.4

Financial Statements

31

 

 

 

5.5

Taxes

31

 

 

 

5.6

Material Adverse Change

31

 

 

 

5.7

Litigation and Contingent Obligations

31

 

 

 

5.8

Subsidiaries

32

 

 

 

5.9

ERISA

32

 

 

 

5.10

Accuracy of Information

32

 

 

 

5.11

Regulation U

32

 

 

 

5.12

Material Agreements

32

 

 

 

5.13

Compliance With Laws

32

 

 

 

5.14

Plan Assets; Prohibited Transactions

32

 

 

 

5.15

Investment Company Act

33

 

 

 

5.16

Insurance Licenses

33

 

 

 

5.17

Solvency

33

 

 

 

5.18

Labor Controversies; Union Contracts, Etc

33

 

ii

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Table of Contents

(continued)

 

 

 

Page

 

 

 

5.19

Surety Obligations; Financial Assurances

33

 

 

 

5.20

Business Relations

34

 

 

 

5.21

Hazardous Materials

34

 

 

 

5.22

Ranking

34

 

 

 

5.23

Intellectual Property

34

 

 

 

5.24

Sanctions Laws and Regulations

34

 

 

 

ARTICLE VI

COVENANTS

34

 

 

 

6.1

Financial Reporting

35

 

 

 

6.2

Other Reports

35

 

 

 

6.3

Use of Proceeds

36

 

 

 

6.4

Notice of Default

36

 

 

 

6.5

Taxes

36

 

 

 

6.6

Insurance

36

 

 

 

6.7

Compliance with Laws

37

 

 

 

6.8

Maintenance of Properties

37

 

 

 

6.9

Inspection

37

 

 

 

6.10

Conduct of Business

37

 

 

 

6.11

Dividends

38

 

 

 

6.12

Merger

38

 

 

 

6.13

Sale of Assets

38

 

 

 

6.14

Investments and Acquisitions

39

 

 

 

6.15

Liens

39

 

 

 

6.16

Reinsurance

41

 

 

 

6.17

Affiliates

41

 

 

 

6.18

Financial Covenants

41

 

 

 

 

6.18.1

Leverage Ratio

41

 

 

 

 

 

6.18.2

Risk-Based Capital

41

 

 

 

 

6.19

Sanctions Laws and Regulations

42

 

 

 

ARTICLE VII

DEFAULTS

42

 

 

 

ARTICLE VIII

ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES

44

 

iii

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Table of Contents

(continued)

 

 

 

Page

 

 

 

8.1

Acceleration

44

 

 

 

8.2

Amendments

44

 

 

 

8.3

Preservation of Rights

45

 

 

 

ARTICLE IX

GENERAL PROVISIONS

45

 

 

 

9.1

Survival of Representations

45

 

 

 

9.2

Governmental Regulation

45

 

 

 

9.3

Headings

46

 

 

 

9.4

Entire Agreement

46

 

 

 

9.5

Several Obligations; Benefits of this Agreement

46

 

 

 

9.6

Expenses; Indemnification

46

 

 

 

9.7

Numbers of Documents

47

 

 

 

9.8

Accounting

47

 

 

 

9.9

Severability of Provisions

47

 

 

 

9.10

Nonliability of Lenders

47

 

 

 

9.11

Confidentiality

47

 

 

 

9.12

Nonreliance

48

 

 

 

9.13

Disclosure

48

 

 

 

9.14

USA Patriot Act

48

 

 

 

ARTICLE X

THE AGENT

48

 

 

 

10.1

Appointment; Nature of Relationship

48

 

 

 

10.2

Powers

48

 

 

 

10.3

General Immunity

49

 

 

 

10.4

No Responsibility for Loans, Recitals, etc

49

 

 

 

10.5

Action on Instructions of Lenders

49

 

 

 

10.6

Employment of Agents and Counsel

49

 

 

 

10.7

Reliance on Documents; Counsel

49

 

 

 

10.8

Agent’s Reimbursement and Indemnification

50

 

 

 

10.9

Notice of Default

50

 

 

 

10.10

Rights as a Lender

50

 

 

 

10.11

Lender Credit Decision

50

 

iv

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Table of Contents

(continued)

 

 

 

Page

 

 

 

10.12

Successor Agent

51

 

 

 

10.13

Delegation to Affiliates

51

 

 

 

ARTICLE XI

SETOFF; RATABLE PAYMENTS

51

 

 

 

11.1

Setoff

51

 

 

 

11.2

Ratable Payments

52

 

 

 

ARTICLE XII

BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

52

 

 

 

12.1

Successors and Assigns

52

 

 

 

12.2

Participations

53

 

 

 

 

12.2.1

Permitted Participants; Effect

53

 

 

 

 

 

12.2.2

Voting Rights

53

 

 

 

 

 

12.2.3

Benefit of Certain Provisions

53

 

 

 

 

 

12.2.4

Participant Register

54

 

 

 

 

12.3

Assignments

54

 

 

 

 

12.3.1

Permitted Assignments

54

 

 

 

 

 

12.3.2

Consents

54

 

 

 

 

 

12.3.3

Effect; Effective Date

54

 

 

 

 

 

12.3.4

Register

55

 

 

 

 

12.4

Dissemination of Information

55

 

 

 

12.5

Tax Treatment

55

 

 

 

ARTICLE XIII

NOTICES

56

 

 

 

13.1

Notices

56

 

 

 

13.2

Change of Address

56

 

 

 

ARTICLE XIV

COUNTERPARTS

56

 

 

 

ARTICLE XV

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

56

 

v

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EXHIBITS

 

 

 

 

 

Exhibit A

 

Form of Compliance Certificate

Exhibit B

 

Form of Assignment Agreement

Exhibit C

 

Form of Note

Exhibit D

 

Form of Tax Certificate

 

 

 

SCHEDULES

 

 

 

 

 

Schedule 5.8

 

Subsidiaries

Schedule 5.9

 

Employee Plans

Schedule 5.19

 

Financial Assurance

 

vi

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CREDIT AGREEMENT

 

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

 

ARTICLE I

 

DEFINITIONS

 

As used in this Agreement:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective
Rate in effect on such day plus ½ of 1% and (c) the Adjusted LIBO Rate for a one
month Interest Period on such day (or if such day is not a Business Day, the
immediately preceding Business Day) plus 1% less the Applicable Rate, provided
that, for the avoidance of doubt, the Adjusted LIBO Rate for any day shall be
based on the rate appearing on the Reuters Screen LIBOR01 Page (or on any
successor or substitute page of such page) at approximately 11:00 a.m. London
time on such day.  Any change in the Alternate Base Rate due to a change in the
Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be
effective from and including the effective date of such change in the Prime
Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate, respectively.

 

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

 

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

 

Index Debt Ratings:

 

Floating Rate Spread

 

Eurodollar Spread

 

Commitment Fee Rate

 

Level I Status

 

0.125

%

1.125

%

0.150

%

Level II Status

 

0.250

%

1.250

%

0.175

%

Level III Status

 

0.375

%

1.375

%

0.225

%

 

2

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For the purposes of this definition:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Borrowing Notice” is defined in Section 2.8.

 

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

 

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

 

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

 

4

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

 

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

 

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

 

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

 

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

 

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

 

5

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Default” means an event described in Article VII.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Facility Termination Date” means May 28, 2018.

 

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

 

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

 

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

 

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

 

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

 

“Financial Statements” is defined in Section 5.4.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Note” is defined in Section 2.13.

 

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

 

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

 

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

 

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

 

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

 

“Participants” is defined in Section 12.2.1.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Purchasers” is defined in Section 12.3.1.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Reports” is defined in Section 9.6.

 

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

 

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

 

“Response Date” is defined in Section 2.19.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Transferee” is defined in Section 12.4.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE II

 

THE CREDITS

 

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

 

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

 

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

 

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

 

2.5                               Commitment Fee; Reductions and Increases in
Aggregate Commitment.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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(ii)                                the aggregate amount of such Advance,

 

(iii)                             the Type of Advance selected, and

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE III

 

INCREASED COSTS; TAXES

 

3.1                               Increased Costs.

 

(a)                               If any Change in Law shall:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3.4                               Taxes.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE IV

 

CONDITIONS PRECEDENT

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(a)                                 There exists no Default or Unmatured
Default.

 

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

 

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

 

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

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES

 

The Borrower represents and warrants to the Lenders that:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE VI

 

COVENANTS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6.18                        Financial Covenants.

 

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

 

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

 

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

 

6.19                        Sanctions Laws and Regulations.

 

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

 

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

 

ARTICLE VII

 

DEFAULTS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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7.11                        Any Change in Control shall occur.

 

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

 

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

 

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

 

ARTICLE VIII

 

ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE IX

 

GENERAL PROVISIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE X

 

THE AGENT

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE XI

 

SETOFF; RATABLE PAYMENTS

 

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

 

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

 

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

 

ARTICLE XII

 

BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

 

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

 

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

 

12.2                        Participations.

 

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

 

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

 

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

 

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

 

12.3                        Assignments.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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ARTICLE XIII

 

NOTICES

 

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

 

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

 

ARTICLE XIV

 

COUNTERPARTS

 

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

 

ARTICLE XV

 

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

 

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

 

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

 

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

 

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

 

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

 

 

RLI CORP.

 

 

 

By:

/s/ Thomas L. Brown

 

 

 

Title:

V.P., Chief Financial Officer & Treasurer

 

 

 

9025 North Lindbergh Drive

 

Peoria, Illinois 61615-1431

 

Attention: Thomas L. Brown

 

thomas.brown@rlicorp.com

 

 

 

 

Commitments

 

 

 

$40,000,000

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,

 

Individually and as Agent

 

 

 

By:

/s/ Thomas A. Kiepura

 

 

 

Title:

Senior Credit Executive

 

 

 

10 South Dearborn

 

9th Floor

 

Chicago, Illinois 60603

 

Suite IL1-0364

 

Attention: Danielle D. Babine

 

danielle.d.babine@jpmorgan.com

 

 

Aggregate Commitment

 

$40,000,000

 

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Exhibits, Schedules, and Annexes available upon request.

 

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