Exhibit 10.20

 

AMENDED AND RESTATED

CREDIT AGREEMENT

 

Dated as of September 22, 2004

 

Among

 

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY,

 

THE BANKS,

as defined herein,

 

and

 

U.S. BANK NATIONAL ASSOCIATION,

as a Bank and as Agent

 

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

 

execution copy

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT, dated as of September 22, 2004 is by and between AMERICAN
EQUITY INVESTMENT LIFE HOLDING COMPANY, an Iowa corporation (the “Borrower”),
the banks or financial institutions listed on the signature pages hereof or
which hereafter become parties hereto as hereinafter provided (individually
referred to as a “Bank” or collectively as the “Banks”) and U.S. BANK NATIONAL
ASSOCIATION, a national banking association, as agent for the Banks (together
with its successors in such capacity, the “Agent”).

 

ARTICLE I  DEFINITIONS AND ACCOUNTING TERMS

 

Section 1.1  Defined Terms. In addition to the terms defined elsewhere in this
Agreement, the following terms shall have the following respective meanings (and
such meanings shall be equally applicable to both the singular and plural form
of the terms defined, as the context may require):

 

“Adjusted Capital”: As to AEILIC, as of any date, the total amount shown on line
30, page 27, column 1 of the Annual Statement of AEILIC, or an amount determined
in a consistent manner for any date other than one as of which an Annual
Statement is prepared.  Such amount is intended to equal the “total adjusted
capital” as defined in Iowa Code Section 521E.1, or such other amount as is used
to calculate risk-based capital level of AEILIC from time to time.

 

“Advance”: The portion of the outstanding Loans bearing interest at an identical
rate for an identical Interest Period, provided that all Prime Rate Advances
shall be deemed a single Advance. An Advance may be a “LIBOR Advance” or “Prime
Rate Advance” (each, a “type” of Advance).

 

“AEILIC”: American Equity Investment Life Insurance Company, an Iowa insurance
company.

 

“Affiliate”: Any Person (other than a Subsidiary): (a) which directly or
indirectly through one or more intermediaries controls, or is controlled by, the
Borrower; (b) which beneficially owns or holds 5% or more of the equity interest
of the Borrower; or (c) 5% or more of the equity interest of which is
beneficially owned or held by the Borrower or a Subsidiary. The term “control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.

 

“Agent”: U.S. Bank National Association as agent for the Banks hereunder and
each successor, as provided in Section 12.7, who shall act as Agent.

 

“Agent’s Fee Letter” means the letter agreement, dated as of September 22, 2004
(as thereafter amended, modified, renewed or replaced from time to time) between
the Agent and the Borrower pertaining to certain fees.

 

“Agreement”: This Credit Agreement, as it may be amended, modified,
supplemented, restated or replaced from time to time.

 

2

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

 

“A.M. Best”: A.M. Best & Company.

 

“Amounts Available for Dividends”: For any fiscal year of AEILIC, the maximum
amount of dividends AEILIC is permitted to pay for such fiscal year under the
Applicable Insurance Code of its state of domicile without necessitating
approval of the Insurance Regulatory Authority.

 

“Annual Statement”: As to any Insurance Subsidiary, the annual financial
statements of such Insurance Subsidiary as required to be filed with the
applicable Insurance Regulatory Authority, together with all exhibits and
schedules filed therewith, prepared in conformity with SAP. References to
amounts on particular exhibits, schedules, lines, pages and columns of the
Annual Statement are based on the format promulgated by the NAIC for 2003 Life,
Accident and Health Insurance Company Annual Statements. If such format is
changed in future years so that different information is contained in such items
or they no longer exist, it is understood that the reference is to information
consistent with that reported in the referenced item in the 2003 Annual
Statement of the Insurance Subsidiary.

 

“Applicable Insurance Code”: As to any Insurance Subsidiary, the insurance code
of any state where such Insurance Subsidiary is domiciled or doing insurance
business and any successor statute of similar import, together with the
regulations thereunder, as amended or otherwise modified and in effect from time
to time. References to sections of the Applicable Insurance Code shall be
construed to also refer to successor sections.

 

“Borrower Pledge Agreement”: The Pledge Agreement dated as of September 22,
2004, in the form of Exhibit B hereto, between the Borrower and the Agent for
the benefit of the Agent and the Banks, as the same may be amended, supplemented
restated or otherwise modified in writing from time to time by the Borrower and
the Agent.

 

“Business Day”:  Any day (other than a Saturday, Sunday or legal holiday in the
State of Minnesota) on which national banks are permitted to be open in
Minneapolis, Minnesota and New York, New York and, with respect to LIBOR
Advances, a day on which dealings in Dollars may be carried on by the Agent in
the interbank eurodollar market.

 

“Capitalized Lease Liabilities”: With respect to any Person, all monetary
obligations of such Person under any leasing or similar arrangement which, in
accordance with GAAP, would be classified as a capitalized lease, and, for
purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP, and the stated
maturity thereof shall be the date of the last payment of rent or any other
amount due under such lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a penalty.

 

“Cash Coverage Ratio”: The ratio, determined on a consolidated basis for the
Borrower and its Subsidiaries at the end of each fiscal quarter for the period
of four consecutive fiscal quarters then ending of:

 

(a)  the total of the following: (i) Amounts Available for Dividends as of (A)
the last day of the most recently completed fiscal year, if the determination of
Cash Coverage Ratio is

 

3

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

 

being made at the end of any of the first three fiscal quarters of a fiscal
year, or (B) the first day of the following fiscal year, if the determination of
Cash Coverage Ratio is being made at the end of the fourth quarter of a fiscal
year; plus (ii) interest paid on the Surplus Notes; plus (iii) revenues of the
Borrower under the Investment Advisory Agreement (between the Borrower and
AEILIC); plus (iv) investments income of the Borrower (non-consolidated),
excluding investments in Subsidiaries; minus (v) cash operating expenses of the
Borrower; and minus (vi) all Restricted Payments made by the Borrower during the
current fiscal year;

 

to

 

(b)  Fixed Charges for such period.

 

“Change of Control”: A Change of Control shall be deemed to have occurred at
such times as: (a) the Borrower ceases to own, free and clear of all Liens other
than the Lien of the Agent pursuant to the Loan Documents, 100% of the
outstanding shares of voting stock of AEILIC; (b) any Person or two or more
Persons acting in concert who shall, as of the date of this Agreement, have
owned 10% or less of the outstanding shares of voting stock of the Borrower
shall directly or indirectly have acquired beneficial ownership (within the
meaning of said Rule 13d-3) of 30% or more of the outstanding shares of voting
stock of the Borrower, or (c) individuals who as of the date of this Agreement
constitute the Borrower’s Board of Directors (together with any new director
whose election or appointment was approved by at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved), for any reason, cease to constitute a majority of the directors at
any time then in office.

 

“Code”: The Internal Revenue Code of 1986, as amended, or any successor statute,
together with regulations thereunder.

 

“Collections”:  Any payment received by the Agent in respect of the Obligations
or any reduction in the amount of Obligations, whether by voluntary payment, by
realization upon collateral (including payment of any note or security included
thereunder), through the exercise of any right of set-off, banker’s lien or
similar right, by counterclaim or cross action or by the enforcement of any
other right under the Loan Documents, or under any other guaranties or security
agreements or otherwise, or as a distribution, adequate protection payment or
similar amount received in respect of any collateral for the Obligations or
otherwise in any insolvency case or proceeding involving the Borrower, any
guarantor, third-party pledgor or obligee under any collateral.

 

“Commitment Fees”:  As such term is defined in Section 3.2.

 

“Company Action Level”:  AEILIC’s “company-action-level risk-based capital” as
calculated under Iowa Code Section 521E, and the equivalent amount for any other
Insurance Subsidiary, as calculated under the laws or regulations of Insurance
Regulatory Authorities applicable to such other Insurance Subsidiaries.

 

4

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

 

“Compliance Certificate”:  A certificate in the form of Exhibit C, duly
completed and signed by an authorized officer of the Borrower.

 

“Consolidated Total Indebtedness”:  As of any time of determination, the amount
reported by the Borrower as total indebtedness of the Borrower and its
Subsidiaries on its most recently-filed Consolidated Statements of Operations as
filed with the SEC in its Form 10Q or 10K, minus the principal amount of Trust
Preferred Indebtedness, to the extent that such Trust Preferred Indebtedness is
included in such total indebtedness.

 

“Consolidated Net Worth”:  As of any time of determination, the amount reported
by the Borrower as the consolidated stockholders’ equity of the Borrower and its
Subsidiaries on its most recently-filed Consolidated Statements of Operations as
filed with the SEC in its Form 10Q or 10K, excluding unrealized net losses and
gains on assets held for sale pursuant to Statement of Financial Accounting
Standards No. 115, plus, if not otherwise included therein, the principal amount
of Trust Preferred Indebtedness.

 

“Consolidated Total Capitalization”:  As of any time of determination, the sum
of Consolidated Total Indebtedness plus Consolidated Net Worth.

 

“Contingent Obligation”: Any agreement, undertaking or arrangement by which any
Person guarantees, endorses or otherwise becomes or is contingently liable upon
(by direct or indirect agreement, contingent or otherwise, to provide funds for
payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise
to assure a creditor against loss) the debt, obligation or other liability of
any other Person (other than by endorsements of instruments in the course of
collection), or guarantees the payment of dividends or other distributions upon
the shares of any other Person; provided, that the Borrower’s assumption of the
trade debt of its Subsidiaries and obligations of the Borrower or the Insurance
Subsidiaries under Reinsurance Agreements and Surplus Relief Reinsurance
Agreements shall not be deemed Contingent Obligations of the Borrower or the
Insurance Subsidiaries. The amount of any Person’s liability with respect to any
Contingent Obligation shall (subject to any limitation set forth therein) be
deemed to be the outstanding principal amount (or maximum outstanding principal
amount, if larger) of the debt, obligation or other liability outstanding
thereunder.

 

“Default”: Any event which, with the giving of notice to the Borrower or lapse
of time, or both, would constitute an Event of Default.

 

“ERISA”: The Employee Retirement Income Security Act of 1974, as amended, and
any successor statute, together with regulations thereunder.

 

“ERISA Affiliate”: Any trade or business (whether or not incorporated) that is a
member of a group of which the Borrower is a member and which is treated as a
single employer under Section 414 of the Code.

 

“Event of Default”: Any event described in Section 10.1.

 

“Federal Reserve Board”: The Board of Governors of the Federal Reserve System or
an successor thereto.

 

5

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

 

“Fixed Charges”: With respect to any period of calculation, the total of the
following for the Borrower and its Subsidiaries: (i) interest paid or, without
duplication, accrued but unpaid on the Loans and all other Indebtedness,
including without limitation the Trust Preferred Indebtedness and any
Subordinated Notes Payable (other than Indebtedness in respect of Repurchase
Transactions), plus (ii) one fifth (1/5) of the amount of the Revolving Loans
outstanding on the last day of such period, or after the Termination Date (if
the Revolving Loans are converted into Tranche A Loans) the mandatory principal
payments of the Tranche A Loans) plus (iii) the mandatory principal payments of
the Tranche B Loans.

 

“GAAP”: Generally accepted accounting principles as applied in the preparation
of the audited financial statements of the Borrower referred to in Section 7.5,
provided that changes in generally accepted accounting principles shall be given
effect for purposes of this Agreement as provided in Section 1.2.

 

“Hedging Obligations”: With respect to any Person, all liabilities of such
Person under interest rate swap agreements, total return swap agreements,
interest rate cap agreements, interest rate collar agreements and other
agreements designed to protect the such Person against fluctuations in interest
rates or currency exchange rates.

 

“Indebtedness”: With respect to any Person at any date, all obligations,
contingent or otherwise, which in accordance with GAAP should be classified upon
such Person’s balance sheet as liabilities, but in any event including the
following (whether or not they should be classified as liabilities upon such
balance sheet), without duplication: (a) all obligations of such Person for
borrowed money or in respect of loans or advances; (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments; (c)
all obligations in respect of letters of credit, whether or not drawn, and
bankers’ acceptances issued for the account of such Person; (d) all Capitalized
Lease Liabilities of such Person; (e) all Hedging Obligations of such Person;
(f) all obligations of such Person secured by a contractual Lien; (g) whether or
not so included as liabilities in accordance with GAAP, all obligations of such
Person to pay the deferred purchase price of property or services, and
Indebtedness secured by a Lien on property owned or being purchased by such
Person (including Indebtedness arising under conditional sales or other title
retention agreements) whether or not such Indebtedness shall have been assumed
by such Person or is limited in recourse; (h) any Indebtedness of another Person
secured by a lien on any assets of such first Person, whether or not such
Indebtedness is assumed by such first Person; (i) any Indebtedness of a
partnership in which such Person is a general partner; and (j) all Contingent
Obligations of such Person whether or not in connection with the foregoing.

 

“Insurance Regulatory Authority”: With respect to any Insurance Subsidiary, each
governmental or regulatory agency with which such Insurance Subsidiary is
required to file its Annual Statement or which exercises regulatory authority
over the primary businesses being conducted by such Insurance Subsidiary.

 

“Insurance Subsidiaries”: AEILIC and all other Subsidiaries which at the time of
reference are regulated as insurance companies under the laws of any state of
the United States of America or of the District of Columbia.

 

6

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

 

“Interest Period” For any LIBOR Advance, the period commencing on the borrowing
date of such LIBOR Advance or the date a Prime Rate Advance is converted into
such LIBOR Advance, or the last day of the preceding Interest Period for such
LIBOR Advance, as the case may be, and ending on the numerically corresponding
day one, two, three or six months thereafter, as selected by the Borrower
pursuant to Section 2.3; provided, that:

 

(a)  any Interest Period which would otherwise end on a day which is not a
Business Day shall end on the next succeeding Business Day unless such next
succeeding Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Business Day;

 

(b)  any Interest Period which begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest Period; and

 

(c)  Interest Periods shall not be chosen for Advances that would require
payment of any amount of any Advance prior to the last day of the Interest
Period in order to pay an installment of the Loans when due.

 

“Investment Advisory Agreement”:  Each agreement between the Borrower and an
Insurance Subsidiary under which the Borrower will act as investment advisor for
such Insurance Subsidiary in consideration of fees paid by the Insurance
Subsidiary thereunder.

 

“Investment”:  The acquisition, purchase, making or holding of any stock or
other security, any loan, advance, contribution to capital, extension of credit
(except for trade and customer accounts receivable for inventory sold or
services rendered in the ordinary course of business and payable in accordance
with customary trade terms), any acquisitions of real or personal property
(other than real and personal property acquired in the ordinary course of
business) and any purchase or commitment or option to purchase stock or other
debt or equity Securities of or any interest in another Person or any integral
part of any business or the assets comprising such business or part thereof.

 

“Leverage Ratio”: As of the last day of any fiscal quarter of the Borrower, that
ratio (expressed as a percentage) of:

 

(a)  Consolidated Total Indebtedness of the Borrower and its Subsidiaries;

 

to

 

(b)  Consolidated Total Capitalization of the Borrower and its Subsidiaries.

 

“LIBOR Advance”: An Advance designated as such in a notice of continuation or
conversion under Section 2.3.

 

“LIBOR Interbank Rate”:  The offered rate for deposits in United States Dollars
for delivery of such deposits on the first day of an Interest Period of a LIBOR
Advance, for the number of days comprised therein, quoted by the Agent from Page
3750 of the Telerate Service

 

7

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

 

as of approximately 11:00 a.m., London time, on the day that is two Banking Days
preceding the first day of the Interest Period of such LIBOR Advance, or the
rate for such deposits determined by the Agent at such time based on such other
published service of general application as shall be selected by the Agent for
such purpose; provided, that in lieu of determining the rate in the foregoing
manner, the Agent may determine the rate based on rates offered to the Agent for
deposits in United States Dollars in the interbank Eurodollar market at such
time for delivery on the first day of the Interest Period for the number of days
comprised therein.

 

“LIBOR Rate (Reserve Adjusted)”:  A rate per annum calculated for the Interest
Period of a LIBOR Advance in accordance with the following formula:

 

LRRA

=

LIBOR Interbank Rate

 

 

1.00 - LRR

 

In such formula, “LRR” means “LIBOR Reserve Rate” and “LRRA” means “LIBOR Rate
(Reserve Adjusted)”, in each instance determined by the Agent for the applicable
Interest Period.  The Agent’s determination of all such rates for any Interest
Period shall be conclusive in the absence of manifest error.

 

“LIBOR Reserve Rate”:  A percentage equal to the daily average during such
Interest Period of the aggregate maximum reserve requirements (including all
basic, supplemental, marginal and other reserves), as specified under Regulation
D of the Federal Reserve Board, or any other applicable regulation that
prescribes reserve requirements applicable to Eurocurrency liabilities (as
presently defined in Regulation D) or applicable to extensions of credit by the
Agent the rate of interest on which is determined with regard to rates
applicable to Eurocurrency liabilities.  Without limiting the generality of the
foregoing, the Eurocurrency Reserve Rate shall reflect any reserves required to
be maintained by the Agent against (i) any category of liabilities that includes
deposits by reference to which the LIBOR Interbank Rate is to be determined, or
(ii) any category of extensions of credit or other assets that includes LIBOR
Advances.

 

“Licenses”: As such term is defined in Section 7.18.

 

“Lien”: Any security interest, mortgage, pledge, lien, hypothecation, judgment
lien or similar legal process, charge, encumbrance, title retention agreement or
analogous instrument or device (including, without limitation, the interest of
the lessors under capitalized leases and the interest of a vendor under any
conditional sale or other title retention agreement).

 

“Loan Documents”: Collectively, this Agreement, the Notes, the Borrower Pledge
Agreement, the Agent’s Fee Letter and any and all other documents or instruments
furnished or required to be furnished in connection with any of the foregoing,
as the same may be amended or modified in accordance with this Agreement.

 

“Loan” and “Loans”:  The Revolving Loans, the Tranche A Loans and the Tranche B
Loans.

 

“Material Adverse Change” or “Material Adverse Effect”: Any change, event,
action, condition or effect which individually or in the aggregate (a) impairs
the validity or

 

8

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

 

enforceability of this Agreement, any other Loan Document, or (b) materially and
adversely affects the business, operations, financial prospects or condition of
the Borrower or AEILIC on an unconsolidated basis, or (c) materially impairs the
ability of the Borrower and its Subsidiaries to perform their respective
Obligations under this Agreement or any of the other Loan Documents, or (d)
materially and adversely affects the perfection or priority of any Lien granted
under any of the Loan Documents.

 

“NAIC”: National Association of Insurance Commissioners, or any successor
organization.

 

“Notes”:  The Revolving Notes, Tranche A Notes and the Tranche B Notes.

 

“Obligations”: All obligations of the Borrower and/or any of its Subsidiaries to
the Banks or the Agent, howsoever created, arising or evidenced, whether direct
or indirect, joint or several, absolute or contingent, or now or hereafter
existing, or due or to become due, which arise under, out of or in connection
with this Agreement, the Notes or the other Loan Documents.

 

“Payment Date”:  The final maturity date of each of the Loans, plus (a) the last
day of each Interest Period for each LIBOR Advance and, if such Interest Period
is in excess of three months after the first day of such Interest Period,
thereafter each day three months after each succeeding Payment Date; and (b) the
last day of each month for each Prime Rate Advance.

 

“PBGC”: The Pension Benefit Guaranty Corporation, established pursuant to
Subtitle A of Title IV of ERISA, and any successor thereto or to the functions
thereof.

 

“Person”: Any natural person, corporation, partnership, joint venture, firm,
association, trust, unincorporated organization, government or governmental
agency or political subdivision or any other entity, whether acting in an
individual, fiduciary or other capacity.

 

“Plan”: An employee benefit plan or other plan, maintained for employees of the
Borrower or of any ERISA Affiliate, and subject to Title IV of ERISA or Section
412 of the Code.

 

“Prime Rate”:  The rate of interest from time to time announced by the Agent as
its “prime rate.”  For purposes of determining any interest rate which is based
on the Prime Rate, such interest rate shall be adjusted each time that the prime
rate changes.

 

“Prime Rate Advance”: An Advance designated as such in a notice of continuation
or conversion under Section 2.3.

 

“Reinsurance Agreements”: Any agreement, contract, treaty, certificate or other
arrangement (other than a Surplus Relief Reinsurance Agreement) by which any of
the Insurance Subsidiaries agrees to transfer or cede to another insurer all or
part of the liability assumed or assets held by any one of the Insurance
Subsidiaries under a policy or policies of insurance or under a reinsurance
agreement assumed by any one of the Insurance Subsidiaries. Reinsurance
Agreements shall include, but not be limited to, any agreement, contract,
treaty, certificate or other arrangement (other than a Surplus Relief
Reinsurance Agreement) which is treated as such by the applicable Insurance
Regulatory Authority.

 

9

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

 

“Reportable Event”: 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 by regulation has waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided that a failure to meet the minimum
funding standard of Section 412 of the Code and Section 302 of ERISA shall be a
reportable event regardless of the issuance of any such waivers in accordance
with Section 4 12(d) of the Code.

 

“Repurchase Transactions”: Repurchase agreements entered into by the Borrower,
as “Seller,” providing for the sale of certain securities to an investment
banking firm, as “Buyer,” subject to repurchase obligations of the Borrower, the
total amount of which Repurchase Transactions outstanding at any time shall be
related to the total amount of new annuities that the Borrower anticipates will
be sold by AEILIC during the time such Repurchase Transactions are outstanding.

 

“Required Banks”:  Those Banks whose Total Percentages equal or exceed 75%,
provided, that if there are two or three Banks, the Required Banks shall include
not less than two of such Banks.

 

“Restricted Payments”:  Payment by the Borrower or setting aside of funds to
make payments (a) in respect of its stock as dividends, purchases, redemptions
or retirements thereof or other payments described in Section 9.5(a) or (b), and
(b) of interest and principal of the Trust Preferred Indebtedness and any
Subordinated Notes Payable (payment of which is governed by Section 9.5 hereof)
or any defeasance, retirement, redemption, call or other payment or acquisition
thereof.

 

“Risk-Based Capital”:  The ratio of Adjusted Capital of AEILIC to the Company
Action Level of AEILIC, expressed as a percentage, as such formula is determined
by the Iowa Insurance Division.

 

“Revolving Commitments”:  The maximum unpaid principal amount of the Revolving
Loans of all Banks which may from time to time be outstanding hereunder, being
initially as set forth on Schedule 1.1 hereto, as the same may be reduced from
time to time pursuant to Section 4.3, or, if so indicated, the maximum unpaid
principal amount of Loans of any Bank (which amounts are set forth on the
signature pages hereof or in the relevant Assignment and Assumption Agreement
for such Bank) and, as the context may require, the agreement of each Bank to
make Revolving Loans to the Borrower subject to the terms and conditions of this
Agreement up to its Revolving Commitment.

 

“Revolving Loans”:  The Loans described in Section 2.1(a).

 

“Revolving Notes”:  The promissory notes of the Borrower described in Section
2.4(a), substantially in the form of Exhibit A-1, as such promissory notes may
be amended, modified or supplemented from time to time, and such term shall
include any substitutions for, or renewals of, such promissory notes.

 

10

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

 

“Revolving Percentage”:  As to any Bank the proportion, expressed as a
percentage, that such Bank’s Revolving Commitment bears to the aggregate
Revolving Commitments of all Banks, as set forth on Schedule 1.1 hereto.

 

“Revolving Termination Date” means the earliest of (a) September 22, 2007, (b)
the date designated by the Borrower as the Revolving Termination Date by written
notice to the Agent given not later than five (5) Business Days prior to such
designated Revolving Termination Date, (c) the date on which the Revolving
Commitments are terminated pursuant to Section 10.2 hereof, or (d) the date on
which the Revolving Commitments are reduced to zero pursuant to Section 4.3
hereof.

 

“SAP”:  As to any insurance company, the statutory accounting practices
prescribed or permitted by the Insurance Regulatory Authority.

 

“Standard & Poor’s”: Standard & Poor’s Rating Group and any successor thereto.

 

“Subordinated Notes Payable”:  All notes or debentures payable by the Borrower
that are subordinated to the Obligations in accordance with the terms of the
documents governing such notes or debentures, excluding, however, notes or
debentures issued in respect of the Trust Preferred Indebtedness.

 

“Subsidiary”: Any Person of which or in which the Borrower and its other
Subsidiaries own directly or indirectly 50% or more of: (a) the combined voting
power of all classes of stock having general voting power under ordinary
circumstances to elect a majority of the board of directors of such Person, if
it is a corporation, (b) the capital interest or profit interest of such Person,
if it is a partnership, limited liability company, joint venture or similar
entity, or (c) the beneficial interest of such Person, if it is a trust,
association or other unincorporated organization.

 

“Surplus Note”: Any surplus note or debenture issued at any time by AEILIC to
the Borrower, as such surplus note or debenture may be amended or modified in
accordance with this Agreement and approved by the Insurance Regulatory
Authority.

 

“Surplus Relief Reinsurance Agreements”: Any agreement whereby any of the
Insurance Subsidiaries assumes or cedes business under a reinsurance agreement
that would be considered a “financing-type” reinsurance agreement as determined
in accordance with the Statement of Financial Accounting Standards 113 or any
successor thereto.

 

“Total Percentage”: As to any Bank the proportion, expressed as a percentage,
that (a) the sum of such Bank’s Revolving Commitments until the Revolving
Termination Date (whether used or unused) plus such Bank’s outstanding Tranche A
Loans and Tranche B Loans, bears to (b) the sum of the aggregate Revolving
Commitments of all Banks plus the outstanding Tranche A Loans and Tranche B
Loans of all Banks.

 

“Tranche A Loans”:  The loans described in Section 2.1(b).

 

“Tranche A Notes”:  The promissory notes defined and described in Section 2.4(b)
Substantially in the form of Exhibit A-2, as such promissory notes may be
amended, modified or

 

11

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

 

supplemented from time to time, and such term shall include any substitutions
for, or renewals of, such promissory notes.

 

“Tranche A Percentage”: As to any Tranche A Bank the proportion, expressed as a
percentage, that such Tranche A Bank’s outstanding Tranche A Loans bears to the
outstanding Tranche A Loans of all Tranche A Banks, as initially shown on
Schedule 1.1 hereto.

 

“Tranche B Banks”:  The Banks funding the Tranche B Loans, as designated on
Schedule 1.1 attached hereto.

 

“Tranche B Loans”:  The loans described in Section 2.1(c).

 

“Tranche B LIBOR Margins”:  Is defined in Section 3.1(a).

 

“Tranche B Notes”:  The promissory notes defined and described in Section 2.4(c)
substantially in the form of Exhibits A-3, A-4 and A-5, as such promissory notes
may be amended, modified or supplemented from time to time, and such term shall
include any substitutions for, or renewals of, such promissory notes.

 

“Tranche B Percentage”: As to any Tranche B Bank the proportion, expressed as a
percentage, that such Tranche B Bank’s outstanding Tranche B Loans bears to the
outstanding Tranche B Loans of all Tranche B Banks, as initially shown on
Schedule 1.1 hereto.

 

“Trust Preferred Indebtedness”:  Indebtedness of the Borrower under the
following subordinated notes or debentures:

 

(a)  The 8% Convertible Junior Subordinated Debentures issued by the Borrower in
the aggregate amount of $26,773,237 in exchange for the proceeds received by
American Equity Capital Trust I, a statutory trust created under the laws of the
State of Delaware (“Trust I”) upon issuance of preferred securities and common
securities by Trust I;

 

(b)  The 5% Convertible Junior Subordinated Debentures issued by the Borrower in
the nominal amount of $100,000,000 in exchange for the proceeds received by
American Equity Capital Trust II, a statutory trust created under the laws of
the State of Delaware (“Trust II”) upon issuance of preferred securities and
common securities by Trust II;

 

(c)  Subordinated Debentures issued by the Borrower in the nominal amount of
$12,400,000 in exchange for the proceeds received by American Equity Capital
Trust IV, a statutory trust created under the laws of the State of Delaware
(“Trust IV”) upon issuance of preferred securities and common securities by
Trust IV;

 

(d)  Such other subordinated notes or debentures that may hereafter be issued by
the Borrower payable to a trust in connection with issuance by such trust of
preferred or common securities, provided that the terms of such notes or
debentures (including tenors and subordination provisions) are accepted by
written approval of the Required Banks.

 

12

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

 

Section 1.2  Accounting Terms and Calculations.  Except as may be expressly
provided to the contrary herein, all accounting terms used herein shall be
interpreted and all accounting determinations hereunder (including, without
limitation, determination of compliance with financial ratios and restrictions
in Articles VIII and IX hereof) shall be made in accordance with GAAP, of if so
provided, SAP, consistently applied.  Any reference to “consolidated” financial
terms shall be deemed to refer to those financial terms as applied to the
Borrower and its Subsidiaries in accordance with GAAP.  Notwithstanding the
foregoing, further changes in accounting principles and policies (whether GAAP
or SAP or both) may be given effect for purposes of this Agreement provided
that:

 

(a)  if any such changes shall affect computations determining compliance with
the financial ratios and restrictions Articles VIII and IX hereof, the Borrower
shall give reasonable notice thereof to the Agent and each of the Banks, and
shall not give effect to such change unless and until this Agreement shall be
amended to give effect to such change, and

 

(b)  if at any time the computations determining compliance with financial
ratios and restrictions in Articles VIII and IX hereof utilize accounting
principles different from those utilized in the financial statements then being
furnished to the Banks pursuant to Section 8.1, such financial statements shall
be accompanied by reconciliation work-sheets.

 

Section 1.3  Computation of Time Periods. In this Agreement, in the computation
of a period of time from a specified date to a later specified date, unless
otherwise stated the word “from” means “from and including” and the word “to” or
“until” each means “to but excluding.”

 

Section 1.4  Other Definitional Terms. The words “hereof’, “herein” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. References to Sections, Exhibits, schedules and like references are
to this Agreement unless otherwise expressly provided.

 

ARTICLE II  TERMS OF LENDING

 

Section 2.1  The Loans.

 

(a)  Revolving Loans.  Subject to the terms and conditions hereof and in
reliance upon the warranties of the Borrower herein, each Bank agrees, severally
and not jointly to make loans (the “Revolving Loans”) to the Borrower from time
to time from the date hereof until the Revolving Termination Date, during which
period the Borrower may repay and reborrow in accordance with the provisions
hereof, provided, that the aggregate unpaid principal amount of the Revolving
Loans of any Bank at any one time outstanding shall not exceed its Revolving
Commitment.  The Revolving Loans shall be made by the Banks on a pro rata basis,
calculated for each Bank based on its Revolving Percentage.

 

(b)  Tranche A Loans.  Subject to the terms and conditions hereof and in
reliance upon the warranties of the Borrower herein (including satisfaction of
the conditions set forth in Section 6.2 hereof, as if the making of the Tranche
A Loans is a new Loan hereunder), each

 

13

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

 

Bank agrees, severally and not jointly to make loans (the “Tranche A Loans”) to
the Borrower on the Revolving Termination Date in such amount as the Borrower
shall request, but not exceeding the Revolving Commitment of such Bank
immediately prior to the Revolving Termination Date; the proceeds of the Tranche
A Loans being applied to the extent necessary to the concurrent payment in full
of the aggregate principal amount of the Revolving Loans outstanding on the
Revolving Termination Date.

 

(c)  Tranche B Loans.  Subject to the terms and conditions hereof and in
reliance upon the warranties of the Borrower herein, each Tranche B Bank agrees,
severally and not jointly to make loans (the “Tranche B Loans”) to the Borrower
(which shall constitute a refinancing of certain loans outstanding under prior
credit agreements between the Tranche B Bank and the Borrower or Affiliates) in
the amounts set forth on Schedule 1.1 hereto.  The Tranche B Loan evidenced by
the Tranche B Note in the form of Exhibit A-3 hereof shall refinance an existing
loan made under a prior Credit Agreement and shall be deemed funded on the date
of this Agreement.  The Tranche B Loans evidenced by the Tranche B Notes in the
form of Exhibits A-4 and A-5 will be funded upon assumption by the Borrower of
certain assets and indebtedness formerly held by and owed by American Equity
Investment Service Company, and will be funded on or before December 31, 2004
(after which date the Tranche B Banks shall have no obligation to fund such
Tranche B Loans).

 

Section 2.2  Advance Options. The Loans shall be constituted of LIBOR Advances
and Prime Rate Advances, as shall be selected by the Borrower, except as
otherwise provided herein. Any combination of types of Advances may be
outstanding at the same time. Each LIBOR Advance shall be in a minimum amount of
$500,000. Each Prime Rate Advance shall be in a minimum amount of $100,000.

 

Section 2.3  Borrowing Procedures and Continuation or Conversion of Loans.

 

(a)  The Borrower may elect to (i) borrow a Revolving Loan, (ii) continue any
outstanding LIBOR Advance from one Interest Period into a subsequent Interest
Period to begin on the last day of the earlier Interest Period, or (iii) convert
any outstanding Advance into another type of Advance (on the last day of an
Interest Period only, in the instance of a LIBOR Advance), by giving the Agent
notice in writing, or by telephone promptly confirmed in writing, given so as to
be received by the Agent not later than:

 

(i)  12:00 noon, Minneapolis time, on the Business Day of the requested
borrowing, continuation or conversion, if the continuing or converted Advance
shall be a Prime Rate Advance; or

 

(ii)  12:00 noon, Minneapolis time, three Business days prior to the date of the
requested borrowing, continuation or conversion, if the continuing or converted
Advance shall be a LIBOR Advance.

 

Each notice of continuation or conversion of an Advance shall specify (i) the
effective date of the borrowing, continuation or conversion date (which shall be
a Business Day), (ii) the amount and the type or types of Advances following
such continuation or conversion (subject to the limitation on amount set forth
in Section 2.2), and (iii) for

 

14

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

 

borrowing or continuation as, or conversion into, LIBOR Advances, the Interest
Periods for such Advances.  Absent timely notice of continuation or conversion,
following expiration of an Interest Period unless the LIBOR Advance is paid in
full the Agent may at any time thereafter convert the LIBOR Advance into a Prime
Rate Advance.  Until such time as such Advance is converted into a Prime Rate
Advance by the Agent or the Borrower or is continued as a LIBOR Advance with a
new Interest Period by notice by the Borrower as provided above, such Advance
shall continue to accrue interest at a rate equal to the interest rate
applicable during the expired Interest Period.  No Advance shall be continued
as, or converted into, a LIBOR Advance if a Default or Event of Default shall
exist.

 

(b)  Funding of Agent.  For new borrowings, the Agent shall promptly notify each
other Bank of the receipt of such request, the matters specified therein, and of
such Bank’s Revolving Percentage, Tranche A Percentage or Tranche B Percentage
(as applicable) of the requested Loans.  On the date of the requested Loans,
each Bank shall provide its share of the requested Loans to the Agent in
immediately available funds not later than 2:00 p.m., Minneapolis time.  Unless
the Agent determines that any applicable condition specified in Article VI has
not been satisfied, the Agent will make the requested Loans available to the
Borrower at the Agent’s principal office in Minneapolis, Minnesota in
immediately available funds not later than 5:00 p.m. (Minneapolis time) on the
lending date so requested.  If the Agent has made a Loan to the Borrower on
behalf of a Bank but has not received the amount of such Loan from such Bank by
the time herein required, such Bank shall pay interest to the Agent on the
amount so advanced at the overnight Federal Funds rate from the date of such
Loan to the date funds are received by the Agent from such Bank, such interest
to be payable with such remittance from such Bank of the principal amount of
such Loan (provided, however, that the Agent shall not make any Loan on behalf
of a Bank if the Agent has received prior notice from such Bank that it will not
make such Loan).  If the Agent does not receive payment from such Bank by the
next Business Day after the date of any Loan, the Agent shall be entitled to
recover such Loan, with interest thereon at the rate then applicable to the such
Loan, on demand, from the Borrower, without prejudice to the Agent’s and the
Borrower’s rights against such Bank.  If such Bank pays the Agent the amount
herein required with interest at the overnight rate before the Agent has
recovered from the Borrower, such Bank shall be entitled to the interest payable
by the Borrower with respect to the Loan in question accruing from the date the
Agent made such Loan.

 

(c)  Notification of Advances, Interest Rates, Prepayments and Revolving
Commitment Reductions.  In addition to new borrowings, the Agent will promptly
notify each Bank of the contents of each Revolving Commitment reduction notice,
conversion or continuation notice and repayment or prepayment notice received by
it hereunder.  The Agent will notify each Bank of the interest rate applicable
to each LIBOR Advance promptly upon determination of such interest rate and will
(if there are Prime Rate Advances outstanding) give each Bank prompt notice of
each change in the Prime Rate.

 

15

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

 

Section 2.4  The Notes.  The Loans shall be evidenced by the following Notes:

 

(a)  Revolving Note.  The Revolving Loans of each Bank shall be evidenced by a
promissory note of the Borrower (the “Revolving Notes”), substantially in the
form of Exhibit A-1 hereto duly completed, in the amount of such Bank’s
Revolving Commitment originally in effect and dated as of the date of this
Agreement.  The Banks shall enter in their respective records the amount of each
Revolving Loan and each Advance, the rate of interest borne by each Advance and
the payments made on the Revolving Loans, and such records shall be deemed
conclusive evidence of the subject matter thereof, absent manifest error.

 

(b)  Tranche A Loans.  The Tranche A Loans of each Bank shall be evidenced by a
promissory note of the Borrower (the “Tranche A Notes”), substantially in the
form of Exhibit A-2 hereto duly completed, in the amount of such Bank’s Tranche
A Loan, when made.  The Banks shall enter in their respective records each
Advance, the rate of interest borne by each Advance and the payments made on the
Tranche A Loans, and such records shall be deemed conclusive evidence of the
subject matter thereof, absent manifest error.

 

(c)  Tranche B Loans.  The Tranche B Loans of each Tranche B Bank shall be
evidenced by promissory notes of the Borrower (the “Tranche B Notes”),
substantially in the form of Exhibits A-3, A-4 and A-5 hereto duly completed, in
the amount of such Tranche B Bank’s Tranche B Loans, when made.  The Tranche B
Banks shall enter in their respective records each Advance, the rate of interest
borne by each Advance and the payments made on the Tranche B Loans, and such
records shall be deemed conclusive evidence of the subject matter thereof,
absent manifest error.

 

Section 2.5  Funding Losses.  In the event of (a) any failure of the Borrower to
borrow, continue or convert a LIBOR Advance on a date specified in a notice
thereof, or (b) any payment (including, without limitation, any payment pursuant
to Section 4.2, 4.3 or 10.2), prepayment or conversion of any LIBOR Advance on a
date other than the last day of the Interest Period for such Advance, the
Borrower agrees to pay each Bank’s costs, expenses and Interest Differential (as
determined by such Bank) incurred as a result of such event.  The term “Interest
Differential” shall mean that amount (not less than $0) of the financial loss
incurred by each Bank resulting from such event, calculated as the difference
between the amount of interest such Bank would have earned (from like
investments in the Money Markets as of the first day of the Interest Period of
the relevant Advance) had such event not occurred and the interest the Bank will
actually earn (from like investments in the Money Markets as of the date of such
event) as a result of the redeployment of funds from such event.  Because of the
short-term nature of this facility, the Borrower agrees that the Interest
Differential shall not be discounted to its present value.  The term “Money
Markets” refers to one or more wholesale funding markets available to the Banks,
including negotiable certificates of deposit, commercial paper, LIBOR deposits,
bank notes, federal funds and others.  Such determinations by each Bank of shall
be conclusive in the absence of manifest error.

 

16

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

 

ARTICLE III  INTEREST AND FEES

 

Section 3.1  Interest.

 

(a)  LIBOR Advances. The unpaid principal amount of each LIBOR Advance shall
bear interest prior to maturity at a rate per annum equal to the LIBOR Rate
(Reserve Adjusted) in effect for each Interest Period for such LIBOR Advance
plus (i) 1.75% per annum, in the instance of the Revolving Loans and the Tranche
A Loans, or (ii) the interest rate margins (the “Tranche B LIBOR Margins”) as
set forth on each of the Tranche B Notes for the principal outstanding under
such Tranche B Notes.

 

(b)  Prime Rate Advances. The unpaid principal amount of each Prime Rate Advance
shall bear interest prior to maturity at a rate per annum equal to the Prime
Rate per annum.

 

(c)  Interest After Maturity. Any amount of the Loans not paid when due, whether
at the date scheduled therefor or earlier upon acceleration, shall bear interest
until paid in full at a rate per annum equal to the greater of (i) 2.00% in
excess of the rate applicable to the unpaid principal amount immediately before
it became due, or (ii) 2.00% in excess of the Prime Rate in effect from time to
time.

 

Section 3.2  Commitment Fee.  The Borrower shall pay fees (the “Commitment
Fees”) to the Agent for the account of the Banks in an amount determined by
applying a rate of 0.25% per annum to the average daily unused amount of the
Revolving Commitments of the respective Banks for the period from the date
hereof to the Revolving Termination Date.

 

Section 3.3  Computation.  Interest and Commitment Fees shall be computed on the
basis of actual days elapsed and a year of 360 days.

 

Section 3.4  Agent’s Fee Letter.  The Borrower agrees to pay the Agent the
amounts described in the Agent’s Fee Letter.

 

Section 3.5  Payment Dates. Accrued interest under Sections 3.1(a) and (b) shall
be payable on the Payment Dates for the applicable types of Advances.  Accrued
interest under Section 3.1(c) shall be payable on demand.  Accrued unpaid
Commitment Fees shall be payable on the last day of March, June, September and
December of each year.  Fees under Section 3.2 shall be payable as provided in
the Agent’s Fee Letter.

 

ARTICLE IV  PAYMENTS, PREPAYMENTS, REDUCTION
OR TERMINATION OF THE CREDIT AND SETOFF

 

Section 4.1  Repayment.  The principal amount of the Loans shall be paid as
follows:

 

(a)  Revolving Loans.  Principal of the Revolving Loans of each Bank shall be
payable in full on the Revolving Termination Date (whether or not the Tranche A
Loans shall be made on the Revolving Termination Date, but applying the proceeds
of any Tranche A Loans to payment of the Revolving Loans.

 

17

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

 

(b)  Tranche A Loans.  Principal of the Tranche A Loans of each Bank shall be
payable in eight (8) quarterly installments, each in the amount of one eighth
(1/8th) of the amount of the Tranche A Loan of such Bank when made, commencing
on the date three (3) months after the Revolving Termination Date, and
continuing at intervals of three (3) months thereafter, with the final such
payment to equal all outstanding principal of the Tranche A Loans of each Bank.

 

(c)  Tranche B Loans.  Principal of the Tranche B Loans of each Tranche B Bank
shall be payable in installments, as described on Schedule I attached to each of
the Tranche B Notes.

 

Section 4.2  Prepayments.

 

Section 4.2  Optional Prepayments.  The Borrower may prepay the Loans, in whole
or in part, at any time subject to the provisions of Section 2.5 without any
other premium or penalty.  Each partial prepayment shall be in an amount of
$100,000 or an integral multiple thereof.  Any prepayment of a Eurodollar
Advance shall be in an amount equal to the remaining entire principal balance of
such Advance.  Each prepayment of the Tranche A Loans or the Tranche B Loans
shall be applied to the unpaid installments of the Tranche A Loans or the
Tranche B Loans in the inverse order of their maturities.

 

Section 4.3  Optional Reduction or Termination of Revolving Commitment.  The
Borrower may, at any time, upon no less than three (3) Business Days prior
written or telephonic notice received by the Agent, reduce the Revolving
Commitments of all Banks, such reduction to be in a minimum amount of $1,000,000
or an integral multiple thereof and to be applied ratably to the Revolving
Commitments of the respective Banks.  Upon any reduction in the Revolving
Commitments pursuant to this Section, the Borrower shall pay to the Agent for
the account of the Banks the amount, if any, by which the aggregate unpaid
principal amount of outstanding Revolving Loans exceeds the total Revolving
Commitments of all Banks as so reduced.  Amounts so paid cannot be reborrowed. 
The Borrower may, at any time, upon not less than three (3) Business Days prior
written notice to the Agent, terminate the Revolving Commitments in their
entirety.  Upon termination of the Revolving Commitments pursuant to this
Section, the Borrower shall pay to the Agent for the account of the Banks the
full amount of all outstanding Revolving Loans, all accrued and unpaid interest
thereon, all unpaid Commitment Fees accrued to the date of such termination and
all other unpaid obligations of the Borrower to the Banks hereunder.  All
payment described in this Section is subject to the provisions of Section 2.5. 
The initial amount of the Tranche A Loan shall not exceed the amount of the
Revolving Commitment as reduced (or terminated) hereunder.

 

Section 4.4  Payments. Payments and prepayments of principal of, and interest
on, the Notes and all fees, expenses and other Obligations under the Loan
Documents shall be made without set-off or counterclaim in immediately available
funds not later than 2:00 p.m., Minneapolis time, on the dates due at the main
office of the Agent in Minneapolis, Minnesota. Funds received on any day after
such time shall be deemed to have been received on the next Business Day.  The
Agent shall promptly distribute in like funds to each Bank its respective
Revolving Percentage, Tranche A Percentage or Tranche B Percentage share of each
such payment of principal and interest and its Revolving Percentage of
Commitment Fees.  Following

 

18

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

 

an Event of Default and acceleration of the Obligations, allocation of any
payments to the Revolving Loans, Tranche A Loans and Tranche B Loans shall be
made as provided in Section 10.4, and the Agent shall distribute to each Bank
its respective Revolving Percentage, Tranche A Percentage or Tranche B
Percentage (as applicable) share of each payment applied to the Revolving Loans,
Tranche A Loan or Tranche B Loans as provided therein Subject to the definition
of the term “Interest Period”, whenever any payment to be made hereunder or on
the Notes shall be stated to be due on a day which is not a Business Day, such
payment shall be made on the next succeeding Business Day and such extension of
time shall be included in the computation of any interest or fees.

 

Section 4.5  Proration of Payments.  If any Bank or other holder of a Loan shall
obtain any payment or other recovery (whether voluntary, involuntary, by
application of offset, pursuant to the guaranty hereunder, or otherwise) on
account of principal of, interest on, or fees with respect to any Loan, in any
case in excess of the share of payments and other recoveries of other Banks or
holders, such Bank or other holder shall purchase from the other Banks or
holders, in a manner to be specified by the Agent. such participations in the
Loans held by such other Banks or holders as shall be necessary to cause such
purchasing Bank or other holder to share the excess payment or other recovery
ratably with each of such other Banks or holders; provided, however, that if all
or any portion of the excess payment or other recovery is thereafter recovered
from such purchasing Bank or holder, the purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without interest. 
Notwithstanding the foregoing, prior to occurrence of an Event of Default,
payments of the Revolving Loans, Tranche A Loans and Tranche B Loans, as
designated by the Borrower or otherwise determined by the Agent, shall be
applied to the respective Loans and remitted by the Agent to the Banks holding
the respective Loans.  Following an Event of Default and acceleration of the
Obligations, the recoveries applied to the Revolving Loans, Tranche A Loans and
Tranche B Loans shall be determined under Section 10.4.

 

Section 4.6  Debit of Account for Interest and Fees.  The Agent is authorized to
charge a demand deposit account maintained by the Borrower at the Agent (the
account number to be agreed from time to time between the Agent and the
Borrower) with the amount of any interest payment, Commitment Fees and other
fees hereunder when due.  The Borrower shall remain liable to the Banks for such
payment in the event such account does not contain a sufficient amount to cover
such required payment.  The Borrower agrees to execute any additional
authorizations which may be required at any time by the Agent in order to
effectuate the making of such payment.

 

ARTICLE V  ADDITIONAL PROVISIONS RELATING TO LOANS

 

Section 5.1  Increased Costs. If, as a result of any law, rule, regulation,
treaty or directive, or any change therein or in the interpretation or
administration thereof, or compliance by the Banks with any request or directive
(whether or not having the force of law) from any court, central bank.
governmental authority, agency or instrumentality, or comparable agency:

 

(a)  any tax, duty or other charge with respect to any Loan, the Notes or the
Commitments is imposed, modified or deemed applicable, or the basis of taxation
of

 

19

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

 

payments to any Bank of interest or principal of the Loans or of the Commitment
Fees (other than taxes imposed on the overall net income of such Bank by the
jurisdiction in which such Bank has its principal office) is changed;

 

(b)  any reserve, special deposit, special assessment or similar requirement
against assets of, deposits with or for the account of, or credit extended by,
any Bank is imposed, modified or deemed applicable;

 

(c)  any increase in the amount of capital required or expected to be maintained
by any Bank or any Person controlling such Bank is imposed, modified or deemed
applicable; or

 

(d)  any other condition affecting this Agreement or the Commitments is imposed
on any Bank or the relevant funding markets;

 

and such Bank determines that, by reason thereof, the cost to such Bank of
making or maintaining the Loans or extending the Commitments is increased, or
the amount of any sum receivable by such Bank hereunder or under the Notes in
respect of any Loan is reduced;

 

then, the Borrower shall pay to such Bank upon demand such additional amount or
amounts as will compensate such Bank (or the controlling Person in the instance
of (c) above) for such additional costs or reduction (provided that the Banks
have not been compensated for such additional cost or reduction in the
calculation of the LIBOR Reserve Rate). Determinations by each Bank for purposes
of this Section 5.1 of the additional amounts required to compensate such Bank
shall be conclusive in the absence of manifest error. In determining such
amounts, the Banks may use any reasonable averaging. attribution and allocation
methods.

 

Section 5.2  Deposits Unavailable or Interest Rate Unascertainable or
Inadequate: Impracticability. If the Agent determines (which determination shall
be conclusive and binding on the parties hereto) that:

 

(a)  deposits of the necessary amount for the relevant Interest Period for any
LIBOR Advance are not available in the relevant markets or that, by reason of
circumstances affecting such market, adequate and reasonable means do not exist
for ascertaining the LIBOR Interbank Rate for such Interest Period;

 

(b)  the LIBOR Rate (Reserve Adjusted) will not adequately and fairly reflect
the cost to the Banks of making or funding the LIBOR Advance for a relevant
Interest Period; or

 

(c)  the making or funding of LIBOR Advances has become impracticable as a
result of any event occurring after the date of this Agreement which, in the
opinion of the Agent, materially and adversely affects such Advances or the
Banks’ Commitments to make such Advances or the relevant market;

 

the Agent shall promptly give notice of such determination to the Borrower, and
(i) any notice of a new LIBOR Advance previously given by the Borrower and not
yet borrowed or converted shall be deemed to be a notice to make a Prime Rate
Advance, and (ii) the Borrower shall be obligated to either prepay in full any
outstanding LIBOR Advances, without premium or penalty

 

20

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

 

on the last day of the current Interest Period with respect thereto or convert
any such LIBOR Advance to a Prime Rate Advance on such last day.

 

Section 5.3  Changes in Law Rendering LIBOR Advances Unlawful. If at any time
due to the adoption of any law, rule, regulation, treaty or directive, or any
change therein or in the interpretation or administration thereof by any court,
central bank, governmental authority, agency or instrumentality, or comparable
agency charged with the interpretation or administration thereof, or for any
other reason arising subsequent to the date of this Agreement, it shall become
unlawful or impossible for any Bank to make or fund any LIBOR Advance, the
obligation of such Bank to provide such Advance shall, upon the happening of
such event, forthwith be suspended for the duration of such illegality or
impossibility. If any such event shall make it unlawful or impossible for any
Bank to continue any LIBOR Advance previously made by it hereunder, such Bank
shall, upon the happening of such event, notify the Agent and the Borrower
thereof in writing, and the Borrower shall, at the time notified by such Bank,
either convert each such unlawful Advance to a Prime Rate Advance or repay such
Advance in full, together with accrued interest thereon, subject to the
provisions of Section 2.5.

 

Section 5.4  Discretion of the Banks as to Manner of Funding. Notwithstanding
any provision of this Agreement to the contrary, each Bank shall be entitled to
fund and maintain its funding of all or any part of the Loans in any manner it
elects; it being understood, however, that for purposes of this Agreement, all
determinations hereunder shall be made as if the Banks had actually funded and
maintained each LIBOR Advance during the Interest Period for such Advance
through the purchase of deposits having a term corresponding to such Interest
Period and bearing an interest rate equal to the LIBOR Interbank Rate for such
Interest Period (whether or not any Bank shall have granted any participations
in such Advances).

 

ARTICLE VI  CONDITIONS PRECEDENT

 

Section 6.1  Conditions of Initial Loan.  The obligation of the Banks to make
the initial Loan hereunder shall be subject to the satisfaction of the
conditions precedent, in addition to the applicable conditions precedent set
forth in Section 6.2 below, that the Agent shall have received all of the
following, in form and substance satisfactory to the Agent, each duly executed
and certified or dated as of the date of this Agreement or such other date as is
satisfactory to the Agent:

 

(a)  This Agreement and the Notes .

 

(b)  The Borrower Pledge Agreement, together with delivery of certificates
evidencing all stock pledged thereunder, together with stock powers in blank,
and all Surplus Notes pledged thereunder, together with bond powers in blank.

 

(c)  Copies of the corporate resolutions of the Borrower authorizing the
execution, delivery and performance of the Loan Documents to which it is a
party, certified duly authorized officers thereof.

 

21

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

 

(d)  Incumbency certificates showing the names and titles, and bearing the
signatures of, the officers of the Borrower authorized to execute the Loan
Documents to which it is a party, certified by duly authorized officers thereof.

 

(e)  Copies of the Articles or Certificates of Incorporation and By-Laws of the
Borrower with all amendments thereto, certified by duly authorized officers
thereof.

 

(f)  Certificates of Good Standing for the Borrower in the jurisdictions of its
incorporation, certified by the appropriate governmental officials.

 

(g)  A Certificate of Good Standing for AEILIC from the appropriate Insurance
Regulatory Authority.

 

(h)  An opinion of the Borrower’s general counsel, addressed to the Agent and
the Banks, in substantially the form of Exhibit D.

 

(i)  The Agent’s Fee Letter, and payment of the fees provided therein and in
Section 12.4.

 

(j)  UCC, tax and judgment lien searches with respect to the Borrower and its
Subsidiaries.

 

Section 6.2  Conditions Precedent to all Loans.  The obligation of the Banks to
make any Loan hereunder (including the initial Loan, and treating any conversion
of the Revolving Loans into Tranche A Loans) shall be subject to the
satisfaction of the following conditions precedent (and any request for a Loan
shall be deemed a representation by the Borrower that the following are
satisfied):

 

(a)  Before and after giving effect to such Loan, the representation and
warranties contained in Article VII shall be true and correct, as though made on
the date of such Loan.

 

(b)  Before and after giving effect to such Loan, no Default or Event of Default
shall have occurred and be continuing.

 

ARTICLE VII  REPRESENTATIONS AND WARRANTIES

 

To induce the Agent and the Banks to enter into this Agreement and to make or
continue the Loans hereunder, the Borrower represents and warrants to the Agent
and the Banks:

 

Section 7.1  Organization, Standing. Etc. The Borrower and each of its corporate
Subsidiaries are corporations duly incorporated and validly existing and in good
standing under the laws of the jurisdiction of their respective incorporation
and have all requisite corporate power and authority to carry on their
respective businesses as now conducted, to (in the instance of the Borrower)
enter into the Loan Documents to which it is a party and to pay and perform its
Obligations under such Loan Documents. The Borrower and each of its Subsidiaries
are duly qualified and in good standing as a foreign corporation in each
jurisdiction in which the character

 

22

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

 

of the properties owned, leased or operated by it or the business conducted by
it makes such qualification necessary.

 

Section 7.2  Authorization and Validity. The execution, delivery and performance
by the Borrower of the Loan Documents to which it is a party have been duly
authorized by all necessary corporate action by the Borrower, and such Loan
Documents constitute the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms,
subject to limitations as to enforceability which might result from bankruptcy,
insolvency, moratorium and other similar laws affecting creditors’ rights
generally and subject to limitations on the availability of equitable remedies.

 

Section 7.3  No Conflict: No Default. The execution, delivery and performance by
the Borrower of the Loan Documents to which it is a party will not (a) violate
any provision of any law, statute, rule or regulation or any order, writ,
judgment, injunction, decree, determination or award of any court, governmental
agency or arbitrator presently in effect having applicability to the Borrower,
(b) violate or contravene any provisions of the Articles (or Certificate) of
Incorporation or by-laws of the Borrower, or (c) result in a breach of or
constitute a default under any indenture, loan or credit agreement or any other
agreement, lease or instrument to which the Borrower is a party or by which it
or any of its properties may be bound or result in the creation of any Lien on
any asset of the Borrower or any Subsidiary.  Neither the Borrower nor any
Subsidiary is in default under or in violation of any such law, statute, rule or
regulation, order, writ, judgment, injunction, decree, determination or award or
any such indenture, loan or credit agreement or other agreement, lease or
instrument in any case in which the consequences of such default or violation
could constitute a Material Adverse Change.  No Default or Event of Default has
occurred and is continuing.

 

Section 7.4  Government Consent. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority is required on the
part of the Borrower to authorize, or is required in connection with the
execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, the Loan Documents.

 

Section 7.5  Financial Statements and Condition.

 

(a)  The Borrower’s audited consolidated and consolidating financial statements
as at December 31, 2003 and its unaudited consolidated and consolidating
financial statements as at June 30, 2004, as heretofore furnished to the Banks,
have been prepared in accordance with GAAP on a consistent basis and fairly
present the financial condition of the Borrower and its Subsidiaries as at such
dates and the results of their operations and changes in financial position for
the respective periods then ended.  As of the dates of such financial
statements, neither the Borrower nor any Subsidiary had any material obligation,
contingent liability, liability for taxes or long-term lease obligation which is
not reflected in such financial statements or in the notes thereto.  Since June
30, 2004, no Material Adverse Change has occurred.

 

(a) AEILIC’s statutory annual statement as at December 31, 2003 and its
quarterly statement as at June 30, 2004, as heretofore furnished to the Banks,
have been prepared in accordance

 

23

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

 

with SAP on a consistent basis and fairly present the financial condition of
AEILIC as at such dates and the results of its operations and changes in
financial position for the respective periods then ended.  Since June 30, 2004,
no Material Adverse Change in respect of AEILIC has occurred.

 

Section 7.6  Litigation and Contingent Liabilities. There are no actions, suits
or proceedings pending or, to the knowledge of the Borrower, threatened against
or affecting the Borrower or any Subsidiary or any of their properties before
any court or arbitrator, or any governmental department, board, agency or other
instrumentality which singly or in the aggregate, if determined adversely to the
Borrower or such Subsidiary, could constitute a Material Adverse Change. Neither
the Borrower nor any Subsidiary has any contingent liabilities which are
material to the Borrower and the Subsidiaries as a consolidated enterprise.

 

Section 7.7  Compliance with Laws. Neither the Borrower nor any Subsidiary is in
violation of any law, ordinance, rule, regulation, order, policy, guideline or
other requirement of any governmental agency or authority, if the effect of such
violation could reasonably be expected to have a Material Adverse Effect and, to
the best of the Borrower’s knowledge, no such violation has been alleged and the
Borrower and each Subsidiary (a) has filed in a timely manner all reports,
documents and other materials required to be filed by it with any governmental
agency or authority, if such failure to so file could reasonably be expected to
have a Material Adverse Effect; and the information contained in each of such
filings is true, correct and complete in all material respects and (b) has
retained all records and documents required to be retained by it pursuant to any
law, ordinance, rule, regulation, order, policy, guideline or other requirement
of any governmental agency or authority, if the failure to so retain such
records and documents could reasonably be expected to have a Material Adverse
Effect.

 

Section 7.8  Environmental. Health and Safety Laws. There does not exist any
violation by the Borrower or any Subsidiary of any applicable federal, state or
local law, rule or regulation or order of any government, governmental
department, board, agency or other instrumentality relating to -environmental,
pollution, health or safety matters which will or threatens to impose a material
liability on the Borrower or a Subsidiary or which would require a material
expenditure by the Borrower or such Subsidiary to cure. Neither the Borrower nor
any Subsidiary has received any notice to the effect that any part of its
operations or properties is not in material compliance with any such law, rule,
regulation or order or notice that it or its property is the subject of any
governmental investigation evaluating whether any remedial action is needed to
respond to any release of any toxic or hazardous waste or substance into the
environment, the consequences of which noncompliance or remedial action could
constitute a Material Adverse Change.

 

Section 7.9  ERISA. Each Plan complies with all material applicable requirements
of ERISA and the Code and with all material applicable rulings and regulations
issued under the provisions of ERISA and the Code setting forth those
requirements. No Reportable Event, other than a Reportable Event for which the
reporting requirements have been waived by regulations of the PBGC, has occurred
and is continuing with respect to any Plan. All of the minimum funding standards
applicable to such Plans have been satisfied and there exists no event or
condition which would permit the institution of proceedings to terminate any
Plan under Section

 

24

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

 

4042 of ERISA. The current value of the Plans’ benefits guaranteed under Title
IV or ERISA does not exceed the current value of the Plans’ assets allocable to
such benefits.

 

Section 7.10  Regulation U. The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (as
defined in Regulation U of the Board of Governors of the Federal Reserve System)
and no part of the proceeds of any Loan will be used to purchase or carry margin
stock or for any other purpose which would violate any of the margin
requirements of the Board of Governors of the Federal Reserve System.

 

Section 7.11  Ownership of Property: Liens. Each of the Borrower and the
Subsidiaries has good and marketable title to its real properties and good and
sufficient title to its other properties. including all properties and assets
referred to as owned by the Borrower and its Subsidiaries in the audited
financial statements of the Borrower referred to in Section 7.5 (other than
property disposed of since the date of such financial statements in the ordinary
course of business). None of the properties. revenues or assets of the Borrower
or any of its Subsidiaries is subject to a Lien, except for (a) Liens disclosed
in the financial statements referred to in Section 7.5 or (b) Liens allowed
under Section 9.2.

 

Section 7.12  Taxes. Each of the Borrower and the Subsidiaries has filed all
federal, state and local tax returns required to be filed and has paid or made
provision for the payment of all taxes due and payable pursuant to such returns
and pursuant to any assessments made against it or any of its property and all
other taxes, fees and other charges imposed on it or any of its property by any
governmental authority (other than taxes, fees or charges the amount or validity
of which is currently being contested in good faith by appropriate proceedings
and with respect to which reserves in accordance with GAAP have been provided on
the books of the Borrower). No tax Liens have been filed and no material claims
are being asserted with respect to any such taxes, fees or charges. The charges,
accruals and reserves on the books of the Borrower in respect of taxes and other
governmental charges are adequate.

 

Section 7.13  Trademarks, Patents. Each of the Borrower and the Subsidiaries
possesses or has the right to use all of the patents, trademarks, trade names,
service marks and copyrights, and applications therefor, and all technology,
know-how, processes, methods and designs used in or necessary for the conduct of
its business, without known conflict with the rights of others.

 

Section 7.14  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.

 

Section 7.15  Public Utility Holding Company Act. Neither the Borrower nor any
Subsidiary is a “holding company” or a “subsidiary company” of a holding company
or an “affiliate” of a holding company or of a subsidiary company of a holding
company within the meaning of the Public Utility Holding Company Act of 1935, as
amended.

 

Section 7.16  Subsidiaries.  Schedule 7.16 sets forth as of the date of this
Agreement a list of all Subsidiaries and the number and percentage of the shares
of each class of capital stock owned beneficially or of record by the Borrower
or any Subsidiary therein, and the jurisdiction of incorporation of each
Subsidiary.

 

25

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

 

Section 7.17  Partnerships and Joint Ventures.  As of the date of this
Agreement, there are no partnerships or joint ventures in which the Borrower or
any Subsidiary is a partner (limited or general) or joint venturer.

 

Section 7.18  Insurance Licenses.  Schedule 7.18 lists all of the jurisdictions
in which each of the Insurance Subsidiaries hold licenses (including, without
limitation, licenses or certificates of authority from applicable insurance
departments), permits or authorizations to transact insurance and reinsurance
business (collectively, the “Licenses”). Except as set forth on Schedule 7.18,
no such License is the subject of a proceeding for suspension or revocation or
any similar proceedings, there is no sustainable basis for such a suspension or
revocation, and, to the best of the Borrower’s knowledge, no such suspension or
revocation is threatened by any Insurance Regulatory Authority which, in either
case, could reasonably be expected to have a Material Adverse Effect.  Schedule
7.18 indicates that line or lines of insurance which the Insurance Subsidiaries
are permitted to be engaged in with respect to each License therein listed. The
Insurance Subsidiaries do not transact any insurance business, directly or
indirectly, in any state or jurisdiction other than those enumerated on Schedule
7.18, where such business requires any license, permit, governmental approval,
consent or other authorization.

 

Section 7.19  Reinsurance. All persons with whom any Insurance Subsidiaries have
ceded any obligations with respect to any Reinsurance Agreement or Surplus
Relief Reinsurance Agreements have a financial strength rating of “A” or better
by A.M. Best.

 

Section 7.20  Pledged Shares. All of the shares of capital stock of AEILIC are
duly authorized and validly issued, fully paid and non-assessable, and pledged
to the Agent pursuant to the terms of the Borrower Pledge Agreement.

 

Section 7.21  Pledged Surplus Notes.  All of the Surplus Notes of AEILIC are
duly authorized and validly issued, and pledged to the Agent pursuant to the
terms of the Borrower Pledge Agreement.  There is no order of preference or
priority among the Surplus Notes (i.e., no Surplus Note is paid on a higher
priority than any other Surplus Note) under any instrument or agreement related
thereto or under applicable law respecting insolvency or liquidation of AEILIC.

 

Section 7.22.  Insurance Subsidiaries.  No Insurance Subsidiary is subject to
any regulatory prohibition regarding the declaration or payment of dividends
that is not generally applicable to all insurance companies which are domiciled
in the same jurisdiction and are engaged in the same line of business as such
Insurance Subsidiary.

 

ARTICLE VIII  AFFIRMATIVE COVENANTS

 

From the date of this Agreement and thereafter until the Loans and all other
Obligations of the Borrower to the Banks hereunder and under the Notes and the
other Loan Documents have been paid in full, the Borrower will do, and will
cause each Subsidiary to do, all of the following:

 

26

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

 

Section 8.1  Reports, Certificates and Other Information. Unless otherwise
provided herein, furnish or cause to be furnished to the Agent (who will forward
copies to each Bank):

 

8.1.1  Audit Report.

 

(a)  As soon as available and in any event within 120 days after the end of each
fiscal year of the Borrower, the annual audit report of the Borrower and its
Subsidiaries prepared on a consolidated basis and in conformity with GAAP,
consisting of at least statements of income, cash flows, changes in
stockholders’ equity, and a consolidated balance sheet as at the end of such
year, setting forth in each case in consolidated form corresponding figures from
the previous annual audit, certified without qualification by independent
certified public accountants of recognized standing selected by the Borrower and
acceptable to the Required Banks, together with any -management letters,
management reports or other supplementary comments or reports to the Borrower or
its board of directors furnished by such accountants and together with unaudited
consolidating statements prepared for Borrower’s management.

 

(b)  Together with the audited financial statements required under Section
8.1(a), a statement by the accounting firm performing each such audit stating
that it has reviewed this Agreement and that in performing its examination
nothing came to its attention that caused it to believe that any Default or
Event of Default exists, or, if such Default or Event of Default exists,
describing its nature.

 

8.1.2  Quarterly Reports. As soon as available and in any event within 60 days
after the end of each fiscal quarter of each fiscal year, a copy of the
unaudited financial statement of the Borrower and its Subsidiaries prepared in
the same manner as the audit report referred to in Section 8.1.l(a), signed by
the Borrower’s responsible officer, consisting of at least consolidated
statements of income, cash flow, changes in stockholders’ equity for the
Borrower and its Subsidiaries for such quarter and for the period from the
beginning of such fiscal year to the end of such quarter, and the consolidated
balance sheet of the Borrower as at the end of such quarter.

 

8.1.3  Tax Returns and Reports. If requested by the Agent or the Required Banks,
copies of all federal, state, local and foreign Tax Returns and Reports filed by
the Borrower or any of its Subsidiaries.

 

8.1.4  SAP Financial Statements.

 

(a)  As soon as possible, but in any event within sixty (60) days after the end
of each fiscal year of each of the Insurance Subsidiaries, a copy of the Annual
Statement of such Insurance Subsidiaries for such fiscal year prepared in
accordance with SAP and accompanied by the certification of the responsible
officer of such Insurance Subsidiaries that such financial statements present
fairly, in accordance with SAP, the financial position of such Insurance
Subsidiaries for the period then ended;

 

27

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

 

(b)  As soon as possible, but in any event within sixty (60) days after the end
of each of the first three fiscal quarters of each fiscal year of each of the
Insurance Subsidiaries, a copy of the quarterly statement of such Insurance
Subsidiaries for such fiscal quarter, all prepared in accordance with SAP and
accompanied by the certification of the responsible officer of such Insurance
Subsidiaries that all such financial statements present fairly in accordance
with SAP the financial position of such Insurance Subsidiaries for the periods
then ended (subject to normal year-end and audit adjustments);

 

(c)  Within fifteen (15) days after being delivered to any of the Insurance
Subsidiaries, any final examination report issued from time to time by the
applicable Insurance Regulatory Authority or the NAIC;

 

(d)  Within ninety (90) days after the close of each Fiscal Year of each of the
Insurance Subsidiaries, a copy of the “Statement of Actuarial Opinion” for each
of the Insurance Subsidiaries which is provided to the applicable Insurance
Regulatory Authority (or equivalent information should the Insurance Regulatory
Authority no longer require such a statement). Such statement shall be in the
format prescribed by the Applicable Insurance Code of the state of domicile of
such Insurance Subsidiary.

 

8.1.5  Compliance Certificate and Risk-Based Capital Calculations.

 

(a)  Together with the financial statements furnished by the Borrower under
Sections 8.1.1 and 8.1.2, a Compliance Certificate signed by the chief financial
officer of the Borrower, duly completed.

 

(b) Together with the financial statements furnished by the Borrower under
Sections 8.1.1 and 8.1.2, calculations of the Risk Based Capital for all or any
of Insurance Subsidiaries based on the quarterly or annual financial statements
being delivered.

 

8.1.6  Reports to SEC and to Stockholders. Promptly upon the mailing or filing
thereof, copies of all financial statements, reports and proxy statements mailed
to the Borrower’s shareholders, and copies of all registration statements,
periodic reports and other documents filed with the Securities and Exchange
Commission (or any successor thereto) or any national securities exchange.

 

8.1.7  Notice of Default and Litigation. Promptly upon learning of the
occurrence of any of the following, written notice thereof, describing the same
and the steps being taken by the Borrower with respect thereto:

 

(a)  the occurrence of a Default or Event of Default;

 

(b) the institution of any material litigation or the occurrence of any material
litigation development;

 

28

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

 

(c) the commencement of any dispute which might reasonably be expected to lead
to the material modification, transfer, revocation, suspension or termination or
any Loan Document; or

 

(d) any Material Adverse Change.

 

8.1.8  ERISA Liability. Immediately upon becoming aware of the occurrence, with
respect to any Plan, of any Reportable Event (other than a Reportable Event for
which the reporting requirements have been waived by PBGC regulations) or any
“prohibited transaction” (as defined in Section 4975 of the Code), a notice
specifying the nature thereof and what action the Borrower proposes to take with
respect thereto,. and, when received, copies of any notice from PBGC of
intention to terminate or have a trustee appointed for any Plan.

 

8.1.9  Environmental Liabilities. Immediately upon becoming aware of the
occurrence thereof, notice of any violation as to any environmental matter by
the Borrower or any Subsidiary and of the commencement of any judicial or
administrative proceeding relating to health, safety or environmental matters
(i) in which an adverse determination or result could result in the revocation
of or have a material adverse effect on any operating permits, air emission
permits, water discharge permits, hazardous waste permits or other permits held
by the Borrower or any Subsidiary which are material to the operations of the
Borrower or such Subsidiary, or (ii) which will or threatens to impose a
material liability on the Borrower or such Subsidiary to any Person or which
will require a material expenditure by the Borrower or such Subsidiary to cure
any alleged problem or violation.

 

8.1.10  Insurance Holding Company Filings. Copies of all material Insurance
Holding Company System Act filings with Governmental Authorities by the Borrower
or any Insurance Subsidiary not later than ten (10) Business Days after such
filings are made, including, without limitation. filings which seek approval of
Governmental Authorities with respect to transactions between the Borrower and
its Affiliates.

 

8.1.11  Insurance Licenses. Within five (5) Business Days of such notice, notice
of actual suspension, termination or revocation of any License or restriction
thereon (material to the Insurance Subsidiaries) of any of the Insurance
Subsidiaries by any Insurance Regulatory Authority or of receipt of notice from
any Insurance Regulatory Authority notifying any of the Insurance Subsidiaries
of a hearing (which is not withdrawn within ten (10) days) relating to such a
suspension, termination, revocation or restriction, including any request by an
Insurance Regulatory Authority which commits any of the Insurance Subsidiaries
to take, or refrain from taking, any action or which otherwise materially and
adversely affects the authority of any of the Insurance Subsidiaries to conduct
its business.

 

8.1.12  Insurance Proceedings. Within three (3) Business Days of such notice,
notice of any pending or threatened investigation or regulatory proceeding
(other than routine periodic investigations or reviews) by any Insurance
Regulatory Authority concerning the

 

29

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

 

business, practices or operations of any of the Insurance Subsidiaries,
including any agent or managing general agent thereof.

 

8.1.13  Changes in Applicable Insurance Code. Promptly, upon knowledge of the
Borrower or any Insurance Subsidiary, to the Agent (who shall promptly deliver
such reports to the Banks), notice of any actual or proposed changes in any
Applicable Insurance Code, if such changes could reasonably be expected to have
a Material Adverse Effect.

 

8.1.14  Reinsurance Agreements.

 

(a)  Promptly, notice of any material change or modification to any Reinsurance
Agreements or Surplus Relief Reinsurance Agreements whether entered into before
or after the date of this Agreement including Reinsurance Agreements, if any,
which are in a runoff mode on the date of this Agreement, which change or
modification could reasonably be expected to have a Material Adverse Effect;

 

(b)  promptly, notice of any written notice received by any of the Insurance
Subsidiaries of any material denial of coverage, litigation or arbitration
arising out of any Surplus Relief Reinsurance Agreement or any material
Reinsurance Agreement to which any of the Insurance Subsidiaries is a party; and

 

(c)  promptly, such other financial, actuarial and other information with
respect to Surplus Relief Reinsurance Agreements and Reinsurance Agreements as
the Agent may reasonably request.

 

8.1.15  Ratings.  Promptly and in any event within ten Business Days after
(i) learning thereof, notification of any changes after the date hereof in the
rating given by A.M. Best in respect of the Borrower or any Insurance Subsidiary
and (ii) receipt thereof, copies of any ratings analysis by A.M. Best, S&P or
Moody’s relating to the Borrower or any Insurance Subsidiary.

 

8.1.16  Other Information. From time to time, such other information regarding
the business, operation and financial condition of the Borrower and the
Subsidiaries as the Agent or the Required Banks may reasonably request.

 

Section 8.2  Corporate Existence. Subject to Section 9.3 in the instance of a
Subsidiary, maintain its corporate existence in good standing under the laws of
its jurisdiction of incorporation and its qualification to transact business in
each jurisdiction in which the character of the properties owned, leased or
operated by it or the business conducted by it makes such qualification
necessary.

 

Section 8.3  Insurance. Maintain with financially sound and reputable insurance
companies such insurance as may be required by law and such other insurance in
such amounts and against such hazards as is customary in the case of reputable
corporations engaged in the same or similar business and similarly situated.

 

30

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

 

Section 8.4  Payment of Taxes and Claims. File all tax returns and reports which
are required by law to be filed by it and pay before they become delinquent all
taxes, assessments and governmental charges and levies imposed upon it or its
property and all claims or demands of any kind (including, without limitation,
those of suppliers, mechanics, carriers, warehouses, landlords and other like
Persons) which, if unpaid, might result in the creation of a Lien upon its
property; provided that the foregoing items need not be paid if they are being
contested in good faith by appropriate proceedings, and as long as the
Borrower’s or such Subsidiary’s title to its property is not materially
adversely affected, its use of such property in the ordinary course of its
business is not materially interfered with and adequate reserves with respect
thereto have been set aside on the Borrower’s or such Subsidiary’s books in
accordance with GAAP.

 

Section 8.5  Inspection. Permit any Person designated by any Bank to visit and
inspect any of its properties, corporate books and financial records, to examine
and to make copies of its books of accounts and other financial records, and to
discuss the affairs, finances and accounts of the Borrower and the Subsidiaries
with, and to be advised as to the same by, its officers at such reasonable times
and intervals as such Bank may designate. So long as no Event of Default exists,
the expenses of the Banks for such visits, inspections and examinations shall be
at the expense of the Banks, but any such visits, inspections, and examinations
made while any Event of Default is continuing shall be at the expense of the
Borrower.

 

Section 8.6  Maintenance of Properties. Maintain its properties used or useful
in the conduct of its business in good condition, repair and working order, and
supplied with all necessary equipment, and make all necessary repairs, renewals,
replacements, betterments and improvements thereto, all as may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times.

 

Section 8.7  Books and Records. Keep adequate and proper records and books of
account in which full and correct entries will be made of its dealings, business
and affairs.

 

Section 8.8  Compliance. Comply in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject.

 

Section 8.9  ERISA. Maintain each Plan in compliance with all material
applicable requirements of ERISA and of the Code and with all material
applicable rulings and regulations issued under the provisions of ERISA and of
the Code.

 

Section 8.10  Environmental Matters. Observe and comply with all laws, rules,
regulations and orders of any government or government agency relating to
health, safety, pollution, hazardous materials or other environmental matters to
the extent non-compliance could result in a material liability or otherwise
constitute or result in a Material Adverse Change.

 

ARTICLE IX  NEGATIVE COVENANTS

 

From the date of this Agreement and thereafter until the Loans and all other
Obligations of the Borrower to the Banks hereunder and under the Notes and the
other Loan Documents have been paid in full, the Borrower will not, and will not
permit any Subsidiary to, do any of the following:

 

31

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

 

Section 9.1  Indebtedness.  Create, incur, assume or suffer to exist any
Indebtedness, except:

 

(a) Indebtedness under this Agreement;

 

(b) Current liabilities, other than for borrowed money, incurred in the ordinary
course of business;

 

(c) Indebtedness secured by Liens permitted under Section 9.2 hereof;

 

(d) Indebtedness consisting of endorsements for collection, deposit or
negotiation and warranties of products or services, in each case incurred in the
ordinary course of business;

 

(e) Indebtedness arising under Hedging Obligations related to the Loans;

 

(f) Indebtedness owing by the Borrower to any Subsidiary or by any Subsidiary to
the Borrower or any other Subsidiary;

 

(g) The Trust Preferred Indebtedness; and

 

(h)  Unsecured Indebtedness not otherwise permitted by this Section 9.1 so long
as (i) at the time of incurrence or assumption thereof, the Borrower would be in
compliance with Section 9.12 hereof applied on a pro forma basis as of such
time, (ii) such Indebtedness shall mature in accordance with its terms after the
Revolving Termination Date, and (iii) the documents pertaining to such
Indebtedness shall not include financial covenants, ratios or financial
performance tests (other than by inclusion of a cross-default or
cross-acceleration to this Agreement).

 

Section 9.2  Liens. Create, incur, assume or suffer to exist any Lien with
respect to any property, revenues or assets now owned or hereafter arising or
acquired, except the following Liens:

 

(a) Deposits or pledges to secure payment of workers’ compensation, unemployment
insurance, old age pensions or other social security obligations, in the
ordinary course of business of the Borrower or a Subsidiary;

 

(b) Liens for taxes, fees, assessments and governmental charges not delinquent
or to the extent that payments therefor shall not at the time be required to be
made in accordance with the provisions of Section 8.4;

 

(c) Liens of carriers, warehousemen, mechanics and materialmen, and other like
Liens arising in the ordinary course of business, for sums not due or to the
extent that payment therefor shall not at the time be required to be made in
accordance with the provisions of Section 8.4;

 

32

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

 

(d) Deposits to secure the performance of bids, trade contracts, leases,
statutory obligations and other obligations of a like nature incurred in the
ordinary course of business:

 

(f) Liens described on Schedule 9.2 hereof, and Liens securing refinancing of
the Indebtedness described therein which shall not exceed the amount of
Indebtedness currently secured by such Liens;

 

(g) Liens in favor of the Agent for the benefit of the Banks pursuant to this
Agreement and the other Loan Documents; and

 

(h) the interests of sellers in Repurchase Transactions.

 

Section 9.3  Merger. Merge or consolidate or enter into any analogous
reorganization or transaction with any Person; provided, however, any
wholly-owned Subsidiary may be merged with or liquidated into the Borrower (if
the Borrower is the surviving corporation) or any other wholly-owned Subsidiary.

 

Section 9.4  Sale of Assets. Sell, assign, lease, transfer, contribute,
reinsure, cede, convey or otherwise dispose of, or grant options, warrants or
other rights with respect to, any of its assets (including, without limitation,
any books of business) to any Person, unless:

 

(a) such sale, assignment, transfer, lease, contribution, reinsurance, cession,
conveyance or other disposition is in the ordinary course of its business
including, without limitation, sales of assets in connection with the management
of the investment portfolio of the Borrower and its Subsidiaries;

 

(b) the aggregate net book value of all assets sold, transferred, leased,
contributed, reinsured, ceded or conveyed (other than in the ordinary course of
business) by the Borrower or any of its Subsidiaries pursuant to this clause (b)
does not exceed $500,000; or

 

(c) such sale, assignment, transfer, lease, contribution, reinsurance, cession,
conveyance or other disposition is with respect to the sale of its capital
assets and the net proceeds of such sale are used to replace such capital assets
within ninety (90) days after receipt of such net proceeds.

 

Section 9.5  Restricted Payments. Except as hereinafter provided, do any of the
following:

 

(a) Declare or pay any dividends, either in cash or property, on any shares of
its capital stock of any class (except dividends or other distributions payable
solely in shares of common stock of the Borrower and except for dividends or
other distributions payable solely to the Borrower) or make any other payment or
distribution, either directly or indirectly or through any Subsidiary, in
respect of its capital stock (except for payments or distributions made solely
to the Borrower) if before or after giving effect to such payment any Default or
Event of Default shall have occurred and be continuing or if the sum of the
aggregate amount of such payments made during any fiscal year of the

 

33

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

 

Borrower shall exceed 33% of the consolidated net income of the Borrower
(determined in accordance with GAAP) for the prior fiscal year;

 

(b) Directly or indirectly, or through any Subsidiary, purchase, redeem or
retire any shares of its capital stock of any class or any warrants, rights or
options to purchase or acquire any shares of its capital stock (other than in
exchange for or out of the net cash proceeds to the Borrower from the
substantially concurrent issue or sale of other shares of common stock of the
Borrower or warrants, rights or options to purchase or acquire any shares of its
common stock); or

 

(c) Make payments of the principal or interest of any Trust Preferred
Indebtedness or Subordinated Note Payable at any time that the terms of the
documents pertaining thereto shall prevent or defer such payment or shall
provide that the recipient of such payments may not retain such payment (it
being expressly acknowledged that the Borrower may pay accrued interest at the
stated rates of the Trust Preferred Indebtedness and Subordinated Notes Payable
at any time that the foregoing clause shall not apply).

 

Notwithstanding the foregoing, so long as no Default or Event of Default shall
have occurred and be continuing (i) the Borrower or any Subsidiary may acquire
shares of the Borrower’s common stock to be held in trust to fund the
obligations of AEILIC under its NMO Deferred Stock Compensation Plans; and (ii)
the Borrower may redeem shares of its capital stock of any class, provided that
(A) the number of shares of voting capital stock redeemed in any one fiscal year
shall not exceed 1% of the total number of such shares outstanding at January 1
of such year, and (B) the aggregate redemption price paid for all such shares
redeemed in any fiscal year of the Borrower shall not exceed $750,000.

 

Section 9.6  Plans. Permit any condition to exist in connection with any Plan
which might constitute grounds for the PBGC to institute proceedings to have
such Plan terminated or a trustee appointed to administer such Plan, permit any
Plan to terminate under any circumstances which would cause the lien provided
for in Section 4068 of ERISA to attach to any property, revenue or asset of the
Borrower or any Subsidiary or permit the underfunded amount of Plan benefits
guaranteed under Title IV of ERISA to exceed $200,000.

 

Section 9.7  Change in Nature of Business. Make any material change in the
nature of the business of the Borrower or such Subsidiary, as carried on at the
date hereof.

 

Section 9.8  Other Agreements. Enter into any agreement, bond, note or other
instrument with or for the benefit of any Person other than the Banks which
would: (a) prohibit the Borrower or such Subsidiary from granting, or otherwise
limit the ability of the Borrower or such Subsidiary to grant, to the Banks any
Lien on any assets or properties of the Borrower or such Subsidiary; or (b) be
violated or breached by the Borrower’s payment and performance of its
Obligations under the Loan Documents.

 

Section 9.9  Transactions with Affiliates. Enter into or be a party to any
transaction or arrangement, including, without limitation, the purchase, sale,
lease or exchange of property or the rendering of any service, with any
Affiliate, except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower’s or the applicable Subsidiary’s business and upon

 

34

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

 

fair and reasonable terms no less favorable to the Borrower or such Subsidiary
than would obtain in a comparable arm’s-length transaction with a Person not a
Affiliate.

 

Section 9.10  Use of Proceeds. Permit any proceeds of the Loans to be used,
either directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of “purchasing or carrying any margin stock” within the meaning of
Regulation U of the Federal Reserve Board, as amended from time to time, and
furnish to any Bank, upon its request, a statement in conformity with the
requirements of Federal Reserve Form U-1 referred to in Regulation U.

 

Section 9.11  Reinsurance.

 

(a)  Enter into or amend any Surplus Relief Reinsurance Agreements except (i)
those treaties existing on the date of this Agreement and described on Schedule
9.11 hereto, and (ii) additional or replacement Surplus Relief Reinsurance
Agreements so long as such Agreements and those listed in clause (i) above,
individually or in the aggregate, do not provide statutory pre-tax gain of more
than an aggregate benefit of the amount then outstanding of more than $250,000.
Any additional Surplus Relief Reinsurance Agreements entered into under this
Section 9.11(a) shall be with reinsurers having a financial strength rating of
“A” or better by A.M. Best.

 

(b) Enter into any Reinsurance Agreement pursuant to which the Borrower or any
of the Insurance Subsidiaries cede any liabilities with any reinsurers having a
financial strength rating of “A” or less by A.M. Best.

 

Section 9.12  Leverage Ratio.  Permit the Leverage Ratio to be greater than 40%
at any time.

 

Section 9.13  Cash Coverage Ratio.  Permit the Cash Coverage Ratio for any
period of four consecutive fiscal quarters to be less than 1.30 to 1.00.

 

Section 9.14  Risk-Based Capital.  As of the end of any fiscal quarter or fiscal
year, permit the Risk-Based Capital of AEILIC to fall below 200%.

 

Section 9.15  Payment of Other Indebtedness.  Directly or indirectly voluntarily
prepay, defease or in substance defease, purchase, redeem, retire or otherwise
acquire, any Indebtedness prior to the date due (other than the Loans) while a
Default or Event of Default has occurred and is continuing or would occur after
giving effect thereto.

 

Section 9.16  Investments.  Acquire for value, make, have or hold any
Investments, except:

 

(a)  Investments by the Borrower in its wholly-owned Subsidiaries;

 

(b)  Investments consisting of loans or advances made by the Borrower to any
Subsidiary and made by any Subsidiary to the Borrower or any other Subsidiary;

 

(c)  Investments that would be permitted under the investment provisions of the
laws and regulations administered and enforced by each Insurance Regulatory
Authority of any Insurance Subsidiary (whether made by the Borrower or any
Subsidiary);

 

35

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

 

(d)  Acquisitions of insurance related businesses or entities so long as the
acquired business or entity is in a substantially related line of business as
the Borrower or any of its Subsidiaries; and

 

(e)  Investments by the Borrower or any Subsidiary that is not an Insurance
Subsidiary that are not otherwise permitted hereunder in an aggregate amount not
exceeding $10,000,000.

 

ARTICLE X  EVENTS OF DEFAULT AND REMEDIES

 

Section 10.1  Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default:

 

(a) The Borrower shall fail to make when due, whether by acceleration or
otherwise, any payment of principal of or interest on the Notes or any fee or
other amount required to be made to the Banks pursuant to the Loan Documents;

 

(b) Any representation or warranty made or deemed to have been made by or on
behalf of the Borrower or any Subsidiary by any of the Loan Documents or by or
on behalf of the Borrower or any Subsidiary in any certificate, statement,
report or other writing furnished by or on behalf of the Borrower to the Banks
pursuant to the Loan Documents shall prove to have been false or misleading in
any material respect on the date as of which the facts set forth are stated or
certified or deemed to have been stated or certified;

 

(c) The Borrower shall fail to comply with and of Sections 8.2, 9.1, 9.2, 9.4,
9.5, 9.12, 9.13, 9.14, 9.15 or 9.16 hereof;

 

(d) The Borrower shall fail to comply with any agreement, covenant, condition,
provision or term contained in the Loan Documents (and such failure shall not
constitute an Event of Default under any of the other provisions of this Section
10.1) and such failure to comply shall continue for 30 days after whichever of
the following dates is the earliest: (i) the date the Borrower gives notice of
such failure to the Agent; (ii) the date the Borrower should have given notice
of such failure to the Agent pursuant to Section 8.1.7; or (iii) the date the
Agent gives notice of such failure to the Borrower.

 

(e) The Borrower or any Subsidiary shall become insolvent or shall generally not
pay its debts as they mature or shall apply for, shall consent to, or shall
acquiesce in the appointment of a custodian, trustee or receiver of the Borrower
or such Subsidiary or for a substantial part of the property thereof or, in the
absence of such application, consent or acquiescence, a custodian, trustee or
receiver shall be appointed for the Borrower or a Subsidiary or for a
substantial part of the property thereof and shall not be discharged within 30
days;

 

(f) Any bankruptcy, reorganization, debt arrangement or other proceedings under
any bankruptcy or insolvency law shall be instituted by or against the Borrower
or a Subsidiary, and, if instituted against the Borrower or a Subsidiary, shall
have been consented to or acquiesced in by the Borrower or such Subsidiary, or
shall remain

 

36

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

 

undismissed for 30 days, or an order for relief shall have been entered against
the Borrower or such Subsidiary, or the Borrower or any Subsidiary shall take
any corporate action to approve institution of, or acquiescence in, such a
proceeding;

 

(g) Any dissolution or liquidation proceeding shall be instituted by or against
the Borrower or a Subsidiary and, if instituted against the Borrower or such
Subsidiary, shall be consented to or acquiesced in by the Borrower or such
Subsidiary or shall remain for 30 days undismissed, or the Borrower or any
Subsidiary shall take any corporate action to approve institution of, or
acquiescence in, such a proceeding;

 

(h) A judgment or judgments for the payment of money in excess of the sum of
$500,000 in the aggregate shall be rendered against the Borrower or a Subsidiary
and the Borrower or such Subsidiary shall not discharge the same or provide for
its discharge in accordance with its terms, or procure a stay of execution
thereof, prior to any execution on such judgments by such judgment creditor,
within 30 days from the date of entry thereof, and within said period of 30
days, or such longer period during which execution of such judgment shall be
stayed, appeal therefrom and cause the execution thereof to be stayed during
such appeal;

 

(i) The institution by the Borrower or any ERISA Affiliate of steps to terminate
any Plan if in order to effectuate such termination, the Borrower or any ERISA
Affiliate would be required to make a contribution to such Plan, or would incur
a liability or obligation to such Plan, in excess of $500,000, or the
institution by the PBGC of steps to terminate any Plan;

 

(j) The maturity of any Indebtedness of the Borrower (other than Indebtedness
under this Agreement) or a Subsidiary shall be accelerated, or the Borrower or a
Subsidiary shall fail to pay any such Indebtedness when due or, in the case of
such Indebtedness payable on demand, when demanded, or any event shall occur or
condition shall exist and shall continue for more than the period of grace, if
any, applicable thereto and shall have the effect of causing, or permitting (any
required notice having been given and grace period having expired) the holder of
any such Indebtedness or any trustee or other Person acting on behalf of such
holder to cause, such Indebtedness to become due prior to its stated maturity or
to realize upon any collateral given as security therefor;

 

(k) Any Change of Control shall occur;

 

(l)  Any License of any material Insurance Subsidiary issued in its state of
domicile or in a state in which its earned premiums in the prior fiscal year
constituted 15% or more of net earned premiums, on a consolidated basis, in such
period (a) shall be revoked by the Insurance Regulatory Authority which issued
such License, or any formal action (administrative or judicial) to revoke such
License shall have been commenced against such Insurance Subsidiary and shall
not have been dismissed within 30 days after the commencement thereof, (b) shall
be suspended by such Insurance Regulatory Authority for a period in excess of 30
days or (c) shall not be reissued or renewed by such Insurance Regulatory
Authority upon the expiration thereof following application for such reissuance
or renewal of such Insurance Subsidiary;

 

37

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

 

(m) Any Insurance Subsidiary shall become subject to (a) any conservation or
liquidation order, directive or mandate issued by any Insurance Regulatory
Authority or (b) any other directive or mandate issued by any Insurance
Regulatory Authority which could reasonably be expected to have a Material
Adverse Effect, which in either case is not stayed within twenty (20) days.

 

(n) Any Insurance Subsidiary shall be the subject of a final non-appealable
order imposing a fine in an amount in excess of $5,000,000 in any single
instance or other such orders imposing fines in excess of $10,000,000 in the
aggregate after the date of this Agreement in any fiscal year by or at the
request of any Insurance Regulatory Authority as a result of the violation by
such Insurance Subsidiary of such state’s applicable insurance laws or the
regulations promulgated in connection therewith; or

 

(o) The Borrower Pledge Agreement ceases to be in full force and effect, or
shall cease to give the Agent the Liens, rights, powers and privileges purported
to be created thereby (including, without limitation, a first priority perfected
security interest in, and Lien on, all of the collateral subject thereto, in
favor of the Agent for the benefit of the Banks, superior to and prior to the
rights of all third Persons and subject to no other Liens).

 

Section 10.2  Remedies.  If (a) any Event of Default described in Sections
10.1(e), (f) or (g) shall occur with respect to the Borrower, the Commitments
shall automatically terminate and the outstanding unpaid principal balance of
the Notes, the accrued interest thereon and all other Obligations of the
Borrower to the Banks and the Agent under the Loan Documents shall automatically
become immediately due and payable; or (b) any other Event of Default shall
occur and be continuing, then the Agent may take any or all of the following
actions (and shall take any or all of the following actions on direction of the
Required Banks): (i) declare the Commitments terminated, whereupon the
Commitments shall terminate, (ii) declare that the outstanding unpaid principal
balance of the Notes, the accrued and unpaid interest thereon and all other
Obligations of the Borrower to the Banks and the Agent under the Loan Documents
to be forthwith due and payable, whereupon the Notes, all accrued and unpaid
interest thereon and all such Obligations shall immediately become due and
payable, in each case without demand or notice of any kind, all of which are
hereby expressly waived, anything in this Agreement or in the Notes to the
contrary notwithstanding, (iii) exercise all rights and remedies under any other
instrument, document or agreement between the Borrower and the Agent or the
Banks, and (iv) enforce all rights and remedies under any applicable law.

 

Section 10.3  Offset. In addition to the remedies set forth in Section 10.2,
upon the occurrence of any Event of Default or at any time thereafter while such
Event of Default continues, each Bank or any other holder of any Note may offset
any and all balances, credits, deposits (general or special, time or demand,
provisional or final), accounts or monies of the Borrower then or thereafter
with such Bank or such other holder, or any obligations of such Bank or such
other holder of the Note, against the Indebtedness then owed by the Borrower to
such Bank subject, however, to the provisions of Section 4.5.

 

38

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

 

Section 10.4  Application of Proceeds.  After the occurrence of an Event of
Default and acceleration of the Obligations, all Collections shall be applied by
the Agent as follows:

 

First, to the payment of all costs and expenses incurred by or on behalf of the
Agent, including the costs and expenses of any sale or enforcement, including
reasonable compensation to the Agent’s agents and counsels, and all expenses,
liabilities and advances made or incurred by or on behalf of the Agent in
connection therewith;

 

Second, to the payment of the costs and expenses of such sale or enforcement,
including reasonable compensation to the Banks’ agents and counsel, and all
expenses, liabilities and advances made or incurred by or on behalf of any Bank
in connection therewith;

 

Third, to the payment of all amounts due (other than principal and interest)
under the Notes or this Agreement, payable ratably to the Agent and each Bank in
accordance with the amount of such obligations owed to each of them, until such
obligations are paid in full;

 

Fourth, to the payment of interest accrued and unpaid on the Loans and the
Notes, payable ratably to each Bank in accordance with the amount of accrued
interest owed to each of them until such interest is paid in full;

 

Fifth, to the payment of the outstanding principal amounts of all Loans, payable
ratably to each Bank in accordance with the principal amount owed to each of
them until such principal is paid in full;

 

Sixth, to the payment of all other Obligations, payable ratably to the Agent and
the Banks in the proportion that the Agent’s and each Bank’s share of those
amounts bears to the total of those amounts for the Agent and all Banks; and

 

Finally, to the payment to the Borrower, or to its successors or assigns, or as
a court of competent jurisdiction may direct, of any surplus then remaining from
such proceeds.

 

If the proceeds of any Collections are insufficient to cover the costs and
expenses of such sale, as aforesaid, and the payment in full of all Obligations
of the Borrower, the Borrower shall remain liable for any deficiency.

 

ARTICLE XI  THE AGENT

 

Section 11.1  Appointment and Grant of Authority.  Each Bank hereby appoints the
Agent, and the Agent hereby agrees to act, as agent under this Agreement and the
other Loan Documents. The Agent shall have and may exercise such powers under
the Loan Documents as are specifically delegated to the Agent by the terms
hereof and thereof, together with such other powers as are reasonably incidental
thereto.  Each Bank hereby authorizes, consents to, and directs the Borrower to
deal with the Agent as the true and lawful agent of such Bank to the extent set
forth herein.

 

39

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

 

Section 11.2  Non-Reliance on Agent.  Each Bank agrees that it has,
independently and without reliance on the Agent or any other Bank, and based on
such documents and information as it has deemed appropriate, made its own credit
analysis of the Borrower and decision to enter into this Agreement and that it
will, independently and without reliance upon the Agent, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking action under the
Loan Documents. The Agent shall not be required to keep informed as to the
performance or observance by the Borrower of this Agreement and the Loan
Documents or to inspect the properties or books of the Borrower. Except for
notices, reports and other documents and information expressly required to be
furnished to the Banks by the Agent hereunder, the Agent shall not have any duty
or responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition or business of the Borrower (or any
of its related companies) which may come into the Agent’s possession.

 

Section 11.3  Responsibility of the Agent and Other Matters.

 

(a) The Agent shall have no duties or responsibilities except those expressly
set forth in this Agreement (including, without limitation, the duty to forward
copies of reports, certificates and other information to the Banks pursuant to
Section 8.1) and those duties and liabilities shall be subject to the
limitations and qualifications set forth in this Section.  The duties of the
Agent shall be mechanical and administrative in nature.

 

(b) Neither the Agent nor any of its directors, officers or employees shall be
liable for any action taken or omitted (whether or not such action taken or
omitted is within or without the Agent’s responsibilities and duties expressly
set forth in this Agreement) under or in connection with this Agreement, or any
other instrument or document in connection herewith, except for gross negligence
or willful misconduct. Without limiting the foregoing, neither the Agent nor any
of its directors, officers or employees shall be responsible for, or have any
duty to examine:

 

(i) the genuineness, execution, validity, effectiveness, enforceability, value
or sufficiency of (A) the Loan Documents, or the Notes, or (B) any document or
instrument furnished pursuant to or in connection with the Loan Documents or the
Notes,

 

(ii) the collectibility of any amounts owed by the Borrower,

 

(iii) any recitals or statements or representations or warranties in connection
with the Loan Documents or the Notes,

 

(iv) any failure of any party to this Agreement to receive any communication
sent, or

 

(v) the assets, liabilities, financial condition, results of operations,
business or creditworthiness of the Borrower.

 

(c ) The Agent shall be entitled to act, and shall be fully protected in acting
upon, any communication in whatever form believed by the Agent in good faith to
be genuine and

 

40

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

 

correct and to have been signed or sent or made by a proper person or persons or
entity. The Agent may consult counsel and shall be entitled to act, and shall be
fully protected in-any action taken in good faith, in accordance with advice
given by counsel. The Agent may employ agents and attorneys-in-fact and shall
not be liable for the default or misconduct of any such agents or
attorneys-in-fact selected by the Agent with reasonable care. The Agent shall
not be bound to ascertain or inquire as to the performance or observance of any
of the terms, provisions or conditions of the Loan Documents or the Notes on the
Borrower’s part.

 

Section 11.4  Action on Instructions.  The Agent shall be entitled to act or
refrain from acting, and in all cases shall be fully protected in acting or
refraining from acting under the Loan Documents or the Notes or any other
instrument or document in connection herewith or therewith in accordance with
instructions in writing from (i) the Required Banks except for instructions
which under the express provisions hereof must be received by the Agent from all
the Banks, and (ii) in the case of such instructions, from all the Banks.

 

Section 11.5  Indemnification.  To the extent the Borrower does not reimburse
and save the Agent harmless according to the terms hereof for and from all
costs, expenses and disbursements in connection herewith or with the other Loan
Documents, such costs, expenses and disbursements to the extent reasonable shall
be borne by the Banks ratably in accordance with their Percentages and the Banks
hereby agree on such basis (a) to reimburse the Agent for all such reasonable
costs, expenses and disbursements on request and (b) to indemnify and save
harmless the Agent against and from any and all losses, obligations, penalties,
actions, judgments and suits and other reasonable costs, expenses and
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against the Agent, other than as a consequence of actual gross
negligence or willful misconduct on the part of the Agent, arising out of or in
connection with the Loan Documents or the Notes or any instrument or document in
connection herewith or therewith, or any request of the Banks, including without
limitation the reasonable costs, expenses and disbursements in connection with
defending itself against any claim or liability, or answering any subpoena,
related to the exercise or performance of any of its powers or duties under this
Agreement or the other Loan Documents or the taking of any action under or in
connection with the Loan Documents or the Notes.

 

Section 11.6  U.S. Bank National Association and Affiliates.  With respect to
U.S. Bank National Association’s Commitment and any Loans by U.S. Bank National
Association under this Agreement and any Note and any interest of U.S. Bank
National Association in any Note, U.S. Bank National Association shall have the
same rights, powers and duties under this Agreement and such Note as any other
Bank and may exercise the same as though it were not the Agent. U.S. Bank
National Association and its affiliates may accept deposits from, lend money to,
and generally engage, and continue to engage, in any kind of business with the
Borrower as if U.S. Bank National Association were not the Agent.

 

Section 11.7  Notice to Holder of Notes.  The Agent may deem and treat the
payees of the Notes as the owners thereof for all purposes unless a written
notice of assignment, negotiation or transfer thereof has been filed with the
Agent. Any request, authority or consent of any holder of any Note shall be
conclusive and binding on any subsequent holder, transferee or assignee of such
Note.

 

41

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

 

Section 11.8  Successor Agent.  The Agent may resign at any time by giving at
least 30 days written notice thereof to the Banks and the Borrower. Upon any
such resignation, the Required Banks shall have the right to appoint a successor
Agent. If no successor Agent shall have been appointed by the Required Banks and
shall have accepted such appointment within 30 days after the retiring Agent’s
giving notice of resignation, then the retiring Agent may, but shall not be
required to, on behalf of the Banks, appoint a successor Agent.

 

ARTICLE XII  MISCELLANEOUS

 

Section 12.1  No Waiver and Amendment.  No failure on the part of the Banks or
the holders of the Notes to exercise and no delay in exercising any power or
right hereunder or under any other Loan Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any power or right preclude
any other or further exercise thereof or the exercise of any other power or
right. The remedies herein and in any other instrument, document or agreement
delivered or to be delivered to the Banks hereunder or in connection herewith
are cumulative and not exclusive of any remedies provided by law. No notice to
or demand on the Borrower not required hereunder or under the Notes shall in any
event entitle the Borrower to any other or further notice or demand in similar
or other circumstances or constitute a waiver of the right of the Banks or the
holders of the Notes to any other or further action in any circumstances without
notice or demand.

 

Section 12.2  Amendments, Etc.  No amendment or waiver of any provision of this
Agreement or any of the other Loan Documents, nor consent to any departure by
the Borrower therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Borrower and the Agent upon direction of the
Required Banks and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent shall, unless agreed to by the
Agent and all of the Banks:

 

(a) increase the amounts of or extend the terms of the Commitments or subject
the Banks to any additional obligations;

 

(b) reduce the principal of, or interest on, the Notes or any fees or other
amounts payable hereunder;

 

(c) postpone any date fixed for any payment of principal of, or interest on, the
Notes or any fees or other amounts payable hereunder;

 

(d) change the definition of Required Banks or amend this Section 12.2; or

 

(e) release any collateral or security interest securing the Loans.

 

provided, further that amendments, waivers or consents affecting the rights of
the Agent shall also require the consent of the Agent.

 

42

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

 

Section 12.3  Assignments and Participations.

 

(a) Assignments. Each Bank shall have the right, subject to the further
provisions of this Sections 12.3, to sell or assign all or any part of its
Commitment, Loans, Note, and other rights and obligations under this Agreement
and related documents (such transfer, an “Assignment”) to any of its affiliates
and to any commercial lender, other financial institution or other entity (an
“Assignee”). Upon such Assignment becoming effective as provided in Section
12.3(b), the assigning Bank shall be relieved from the portion of the
Commitments, obligations to indemnify the Agent and other obligations hereunder
to the extent assumed and undertaken by the Assignee, and to such extent the
Assignee shall have the rights and obligations of a “Bank” hereunder.
Notwithstanding the foregoing, unless otherwise consented to by the Borrower and
the Agent (which consent, in the case of the Borrower, shall not be required if
such assignment is to an affiliate of the assigning Bank or if an Event of
Default has occurred and is continuing and, in any other case, shall not be
unreasonably withheld or delayed by the Borrower or the Agent, as the case may
be), each Assignment shall be in the initial principal amount of not less than
$2,000,000 in the aggregate for all Loans and Commitments assigned, or an
integral multiple of $1,000,000 if above such amount (or the remaining portion
of such assigning Bank’s commitment, if less than $2,000,000). Each Assignment
shall be documented by an agreement between the assigning Bank and the Assignee
(an “Assignment and Assumption Agreement”) in form and substance satisfactory to
the Agent.

 

(b) Effectiveness of Assignments. An Assignment shall become effective hereunder
when all of the following shall have occurred: (i) the Assignee shall have
submitted an Assignment Agreement in the form attached hereto as Exhibit E, duly
completed and executed, in which the Assignee shall have agreed in writing to
have irrevocably assumed and undertaken the transferred portion of the assigning
Bank’s obligations hereunder (including without limitation the obligations to
indemnify the Agent hereunder), to the Agent with a copy for the Borrower, and
shall have provided to the Agent information the Agent shall have reasonably
requested to make payments to the Assignee, (ii) either the assigning Bank or
the Assignee shall have paid a processing fee of $3,500 to the Agent for its own
account, (iii) the assigning Bank and the Agent shall have agreed upon a date
upon which the Assignment shall become effective, and (iv) the Agent and the
Borrower shall have given their consent to such Assignment by executing such
Assignment Agreement. Upon the Assignment becoming effective, (x) if requested
by the assigning Bank, the Agent and the Borrower shall make appropriate
arrangements so that new Notes are issued to the assigning Bank and the
Assignee; and (y) the Agent shall forward all payments of interest, principal,
fees and other amounts that would have been made to the assigning Bank, in
proportion to the percentage of the assigning Bank’s rights transferred, to the
Assignee.

 

(c) Participations. Each Bank shall have the right, subject to the further
provisions of this Section 12.3, to grant or sell a participation in all or any
part of its Loans, Note and Commitment (a “Participation”) to any commercial
lender, other financial institution or other entity (a “Participant”) without
the consent of the Borrower, the Agent of any other party hereto. The Borrower
agrees that if amounts outstanding under this Agreement and the Notes are due
and unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall be deemed to
have the right of setoff in respect of its Participation in amounts owing under
this

 

43

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

 

Agreement and any Note to the same extent as if the amount of its Participation
were owing directly to it as a Bank under this agreement or any note; provided,
that such right of setoff shall be subject to the obligation of such Participant
to share with the Banks, and the Banks agree to share with such Participant, as
provided in Section 4.4 hereof. The Borrower also agrees that each Participant
shall be entitled to the benefits of Article V with respect to its
Participation, provided, that no Participant shall be entitled to receive any
greater amount pursuant to such Sections than the transferor Bank would have
been entitled to receive in respect of the amount of the Participation
transferred by such transferor Bank to such Participant had no such transfer
occurred.

 

(d) Limitation of Rights of any Assignee or Participant. Notwithstanding
anything in the foregoing to the contrary, except in the instance of an
Assignment that has become effective as provided in Section 12.3(b), (i) no
Assignee or Participant shall have any direct rights hereunder, (ii) the
Borrower, the Agent and the Banks other than the assigning or selling Bank shall
deal solely with the assigning or selling Bank and shall not be obligated to
extend any rights or make any payment to, or seek any consent of, the Assignee
or Participant, (iii) no Assignment or Participation shall relieve the assigning
or selling Bank from its Commitment to make Loans hereunder or any of its other
obligations hereunder and such Bank shall remain solely responsible for the
performance hereof, the (iv) no Assignee or Participant, other than an affiliate
of the assigning or selling Bank, shall be entitled to require such Bank to take
or omit to take any action hereunder, except that such Bank may agree with such
Assignee or Participant that such Bank will not, without such Assignee’s or
Participant’s consent, take any action which would, in the case of any
principal, interest or fee in which the Assignee or Participant has an ownership
or beneficial interest: (A) extend the final maturity of any Loans or extend the
Termination Date, (B) reduce the interest rate on the Loans or the rate of
Commitment Fees, (C) forgive any principal of, or interest on, the Loans or any
fees, or (D) release all or substantially all of the collateral for the Loans.

 

(d)  Tax Matters. No Bank shall be permitted to enter into any Assignment or
Participation with any Assignee or Participant who is not a United States
Person, and no New Bank who is not a United States Person shall be permitted to
become a Bank, unless such Assignee, Participant or New Bank represents and
warrants to such the assigning or participating Bank, as applicable, and to the
Agent that, as at the date of such Assignment or Participation, or as of the
date such New Bank is to become a Bank, as the case may be, it is entitled to
receive interest payments without withholding or deduction of any taxes and such
Assignee, Participant or New Bank, as the case may be, executes and delivers to
the Agent and to the assigning or participating Bank, as applicable, on or
before the date of execution and delivery of documentation of such Participation
or Assignment or on the date such New Bank is to become a Bank, as the case may
be, a United States Internal Revenue Service Form W-8ECI or W-8BEN, or any
successor to either of such forms, as appropriate, properly completed an
claiming complete exemption from withholding and deduction of all Federal Income
Taxes. A “United States Person” means any citizen, national or resident of the
United States, any corporation or other entity created or organized in or under
the laws of the United States or any political subdivision hereof or any estate
or trust, in each case that is not subject to withholding of

 

44

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

 

United States Federal income taxes or other taxes on payment of interest,
principal of fees hereunder.

 

(e) Information. Each Bank may furnish any information concerning the Borrower
in the possession of such Bank from time to time to Assignees and Participants
and potential Assignees and Participants.

 

(f) Federal Reserve Bank. Nothing herein stated shall limit the right of any
Bank to assign any interest herein and in any Note to a Federal Reserve Bank.

 

Section 12.4  Costs, Expenses and Taxes. The Borrower agrees, whether or not any
Loan is made hereunder, to pay on demand all costs and expenses of the following
persons (including the reasonable fees and expenses of counsel and paralegals
for such persons who may be employees of such persons), incurred in connection
with the following matters: (i) the Agent in connection with the preparation,
execution and delivery of the Loan Documents and the preparation, negotiation
and execution of any and all amendments to each thereof and (ii) the Agent and
the Banks in connection with the enforcement of the Loan Documents. The Borrower
agrees to pay, and save the Agent and the Banks harmless from all liability for,
any stamp or other taxes which may be payable with respect to the execution or
delivery of the Loan Documents. The Borrower agrees to indemnify and hold the
Agent and the Banks harmless from any loss or expense which may arise or be
created by the acceptance of telephonic or other instructions for making Loans
or disbursing the proceeds thereof. The obligations of the Borrower under this
Section 12.4 shall survive any termination of this Agreement.

 

Section 12.5  Notices. Except when telephonic notice is expressly authorized by
this Agreement, any notice or other communication to any party in connection
with this Agreement shall be in writing and shall be sent by manual delivery,
telegram, telex, facsimile transmission, overnight courier or United States mail
(postage prepaid) addressed to such party at the address specified on the
signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from
the first Business Day after the date of sending if sent by overnight courier,
or from four days after the date of mailing if mailed; provided, however, that
any notice to the Agent under Article II hereof shall be deemed to have been
given only when received by the Agent.

 

Section 12.6  Confidentiality. The Agent and the Banks may have received, and
may hereafter receive, confidential financial and business information
concerning the Borrower and its Subsidiaries and Affiliates. The Agent and each
Bank agrees to hold non-public information received from the Borrower in
confidence, and not disclose such information to persons other than the Agent’s
or Bank’s officers, employees, agents and other representatives (who, if they
are not employees of the Agent or the Bank, shall be informed of this
confidentiality provision) except: (a) as required to disclose such information
to a bank regulatory agency or in connection with an examination of its records
by bank examiners or at the express direction of any other authorized government
agency; (b) pursuant to a subpoena or other court order; (c) in connection with
legal process in the Agent’s or Bank’s lending capacity; or (d) to participants,
assignees, potential participants and potential assignees with respect to the
financing who agree to be bound

 

45

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

 

by confidentiality provisions substantially similar to this paragraph.
Confidential information shall not include (i) information already in the
Agent’s or Bank’s possession prior to receipt from the Borrower, or (ii)
information which becomes generally available to the public, other than as a
result of disclosure by the Agent or a Bank, or its directors, officers,
employees, advisors or agents or becomes available to the Agent or a Bank on a
non-confidential basis from a source other than the Borrower or its advisors,
provided that such source is not known by the Agent or Bank to be bound by a
confidentiality agreement with, or other obligation of confidentiality to, the
Borrower or another party.

 

Section 12.7  Indemnity.  The Borrower hereby further agrees to indemnify the
Agent and each Bank and the directors, officers and employees of each 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 or any Bank 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 (i) they are determined in a final non-appealable judgment by
a court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of the party seeking indemnification or (ii) that they arise
solely from any dispute of or any litigation or other proceeding instituted by
any Bank against the Agent (if the Agent was determined to have breached its
obligations to such Bank hereunder) or (for Persons other than the Agent and its
directors, officers and employees) any other Bank.  The obligations of the
Borrower under this Section 12.7 shall survive the termination of this
Agreement.

 

Section 12.8  Successors. This Agreement shall be binding upon the Borrower, the
Banks and the Agent and their respective successors and assigns, and shall inure
to the benefit of the Borrower, the Banks and the Agent and the successors and
assigns of the Banks. The Borrower shall not assign its rights or duties
hereunder without the written consent of the Banks.

 

Section 12.9  Severability. Any provision of the Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.

 

Section 12.10  Subsidiary References. The provisions of this Agreement relating
to Subsidiaries shall apply only during such times as the Borrower has one or
more Subsidiaries.

 

Section 12.11  Captions. The captions or headings herein and any table of
contents hereto are for convenience only and in no way define, limit or describe
the scope or intent of any provision of this Agreement.

 

Section 12.12  Entire Agreement. The Loan Documents embody the entire agreement
and understanding between the Borrower, the Banks and the Agent with respect to
the subject matter hereof and thereof. This Agreement supersedes all prior
agreements and understandings relating to the subject matter hereof.

 

46

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

 

Section 12.13  Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.

 

Section 12.14  Governing Law. THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE
OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT
GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS.

 

Section 12.15  Consent to Jurisdiction. AT THE OPTION OF THE BANKS, THIS
AGREEMENT AND THE NOTES MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE
COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA; AND THE BORROWER CONSENTS
TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT
VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWER COMMENCES ANY
ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY
ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT,
THE BANKS AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF
THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.

 

Section 12.16  Waiver of Jury Trial. EACH OF THE BORROWER, THE AGENT, THE
CO-AGENT, THE DOCUMENTATION AGENT AND THE BANKS (a) WAIVES ANY RIGHT TO A TRIAL
BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (i) UNDER
THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR (ii)
ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY AND (b) WAIVES ANY RIGHT TO SEEK OR RECEIVE
CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES IN ANY SUCH ACTION OR PROCEEDING.

 

 

(signature pages follow)

 

47

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

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the date first above written.

 

 

 

AMERICAN EQUITY INVESTMENT LIFE

 

 

HOLDING COMPANY

 

 

 

 

 

By:

/s/ Wendy L. Carlson

 

 

 

 

 

 

Title:

CFO & General Counsel

 

 

 

 

 

 

5000 Westown Parkway, Suite 200

 

 

West Des Moines, Iowa 50266

 

 

Attention: Mr. David J. Noble, President

 

 

Telephone: (515) 221-0002

 

 

Fax: (515) 221-9947

 

1

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

 

 

U.S. BANK NATIONAL ASSOCIATION, as

 

Agent and as a Bank

 

 

 

By:

/s/ Ziad W. Amra

 

 

 

 

Title:

Corporate Banking Officer

 

 

 

 

800 Nicollet Mall

 

Mail Code BC-MN-H03N

 

Minneapolis, MN 55402

 

Attention: Mr. Ziad W. Amra

 

Telephone: (612) 303-3757

 

Fax: (612) 303-2265

 

2

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

 

 

WEST BANK, as a Bank

 

 

 

By:

/s/ Brad L. Winterbottom

 

 

 

 

Title:

President

 

 

 

 

1601 22nd St.

 

West Des Moines, Iowa 50266

 

Attention: Mr. Brad L. Winterbottom

 

Telephone: (515) 222-2320

 

Fax: (515) 222-2346

 

3

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

 

 

LaSALLE NATIONAL BANK, as a Bank

 

 

 

By:

/s/ Brandon S. Allison

 

 

 

 

Title:

Assistant Vice President

 

 

 

 

135 South LaSalle Street

 

Chicago, IL 60603

 

Attention: Mr. Brandon S. Allison

 

Telephone: (312) 904-6324

 

Fax: (312) 904-6189

 

4

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

 

EXHIBIT

 

Exhibit

 

Contents

 

 

 

 

 

 

A-1, A-2, A-3,
A-4 and A-5

 

Form of Notes

 

 

 

B

 

Borrower Pledge Agreement

 

 

 

C

 

Compliance Certificate

 

 

 

D

 

Form of Legal Opinion

 

 

 

E

 

Assignment and Assumption

 

 

 

Schedules

 

 

 

 

 

1.1

 

Amounts and Percentages

 

 

 

7.16

 

Subsidiaries

 

 

 

7.18

 

Insurance Licenses

 

 

 

9.2

 

Existing Liens

 

 

 

9.11

 

Surplus Relief Reinsurance Agreements

 

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

 

EXHIBIT A-1

 

REVOLVING NOTE

 

[$Revolving Amount]

Minneapolis, Minnesota: September 22, 2004

 

FOR VALUE RECEIVED, the undersigned AMERICAN EQUITY INVESTMENT LIFE HOLDING
COMPANY, an Iowa corporation (the “Borrower”), promises to pay to the order of
[BANK] (the “Bank”), on the Revolving Termination Date, or other due date or
dates determined under the Credit Agreement hereinafter referred to, the
principal sum of                                     DOLLARS ($[Commitment]), or
if less, the then aggregate unpaid principal amount of the Revolving Loans (as
such terms are defined in the Credit Agreement) as may be made by the Bank under
the Credit Agreement.  All Revolving Loans and all payments of principal shall
be recorded by the holder in its records which records shall be conclusive
evidence of the subject matter thereof, absent manifest error.

 

The Borrower further promises to pay to the order of the Bank interest on the
aggregate unpaid principal amount hereof from time to time outstanding from the
date hereof until paid in full at the rates per annum which shall be determined
in accordance with the provisions of the Credit Agreement.  Accrued interest
shall be payable on the dates specified in the Credit Agreement.

 

All payments of principal and interest under this Note shall be made in lawful
money of the United States of America in immediately available funds at the
office of U.S. Bank National Association, at 800 Nicollet Mall, Minneapolis,
Minnesota 55402, or at such other place as may be designated by the Agent to the
Borrower in writing.

 

This Note is one of the Revolving Notes and Notes referred to in, and evidences
indebtedness incurred under, a Credit Agreement dated as of September 22, 2004
(herein, as it may be amended, modified or supplemented from time to time,
called the “Credit Agreement”) among the Borrower, the Banks, as defined therein
(including the Bank) and U.S. Bank National Association, as Agent, to which
Credit Agreement reference is made for a statement of the terms and provisions
thereof, including those under which the Borrower is permitted and required to
make prepayments and repayments of principal of such indebtedness and under
which such indebtedness may be declared to be immediately due and payable.

 

All parties hereto, whether as makers, endorsers or otherwise, severally waive
presentment, demand, protest and notice of dishonor in connection with this
Note.

 

This Note is made under and governed by the internal laws of the State of
Minnesota.

 

 

AMERICAN EQUITY INVESTMENT LIFE

 

HOLDING COMPANY

 

 

 

By:

 

 

 

 

 

Title:

 

 

 

6

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

 

EXHIBIT A-2

TRANCHE A NOTE

 

$[Tranche A Amount]

Minneapolis, Minnesota:  September 22, 2004

 

FOR VALUE RECEIVED, the undersigned AMERICAN EQUITY INVESTMENT LIFE HOLDING
COMPANY, an Iowa corporation (the “Borrower”), promises to pay to the order of
[BANK] (the “Bank”), payable in installments in amounts set forth in, and on the
due dates determined under, the Credit Agreement hereinafter referred to, the
principal sum of                                     DOLLARS ($Tranche A
Amount).

 

The Borrower further promises to pay to the order of the Bank interest on the
aggregate unpaid principal amount hereof from time to time outstanding from the
date hereof until paid in full at the rates per annum which shall be determined
in accordance with the provisions of the Credit Agreement.  Accrued interest
shall be payable on the dates specified in the Credit Agreement.

 

All payments of principal and interest under this Note shall be made in lawful
money of the United States of America in immediately available funds at the
office of U.S. Bank National Association, at 800 Nicollet Mall., Minneapolis,
Minnesota 55402, or at such other place as may be designated by the Agent to the
Borrower in writing.

 

This Note is one of the Tranche A Notes and the Notes referred to in, and
evidences indebtedness incurred under, a Credit Agreement dated as of September
22, 2004 (herein, as it may be amended, modified or supplemented from time to
time, called the “Credit Agreement”) among the Borrower, the Banks, as defined
therein (including the Bank) and U.S. Bank National Association, as Agent, to
which Credit Agreement reference is made for a statement of the terms and
provisions thereof, including those under which the Borrower is permitted and
required to make prepayments and repayments of principal of such indebtedness
and under which such indebtedness may be declared to be immediately due and
payable.

 

All parties hereto, whether as makers, endorsers or otherwise, severally waive
presentment, demand, protest and notice of dishonor in connection with this
Note.

 

This Note is made under and governed by the internal laws of the State of
Minnesota.

 

 

AMERICAN EQUITY INVESTMENT LIFE

 

HOLDING COMPANY

 

 

 

By:

 

 

 

 

 

Title:

 

 

 

7

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

 

EXHIBIT A-3

TRANCHE B NOTE

 

$8,500,000

Minneapolis, Minnesota:  September 22, 2004

 

FOR VALUE RECEIVED, the undersigned AMERICAN EQUITY INVESTMENT LIFE HOLDING
COMPANY, an Iowa corporation (the “Borrower”), promises to pay to the order of
U.S. BANK NATIONAL ASSOCIATION (the “Bank”), payable in installments in the
amounts and on due dates set forth on Schedule I attached hereto, the principal
sum of EIGHT MILLION FIVE HUNDRED THOUSAND DOLLARS ($8,500,000).

 

The Borrower further promises to pay to the order of the Bank interest on the
aggregate unpaid principal amount hereof from time to time outstanding from the
date hereof until paid in full at the rates per annum which shall be determined
in accordance with the provisions of the Credit Agreement.  Accrued interest
shall be payable on the dates specified in the Credit Agreement.

 

The Tranche B LIBOR Margin for this Note and the indebtedness evidenced hereby
is 3.00% per annum.

 

All payments of principal and interest under this Note shall be made in lawful
money of the United States of America in immediately available funds at the
office of U.S. Bank National Association, at 800 Nicollet Mall., Minneapolis,
Minnesota 55402, or at such other place as may be designated by the Agent to the
Borrower in writing.

 

This Note is one of the Tranche B Notes and the Notes referred to in, and
evidences indebtedness incurred under, a Credit Agreement dated as of September
22, 2004 (herein, as it may be amended, modified or supplemented from time to
time, called the “Credit Agreement”) among the Borrower, the Banks, as defined
therein (including the Bank) and U.S. Bank National Association, as Agent, to
which Credit Agreement reference is made for a statement of the terms and
provisions thereof, including those under which the Borrower is permitted and
required to make prepayments and repayments of principal of such indebtedness
and under which such indebtedness may be declared to be immediately due and
payable.

 

All parties hereto, whether as makers, endorsers or otherwise, severally waive
presentment, demand, protest and notice of dishonor in connection with this
Note.

 

This Note is made under and governed by the internal laws of the State of
Minnesota.

 

 

AMERICAN EQUITY INVESTMENT LIFE

 

HOLDING COMPANY

 

 

 

By:

 

 

 

 

 

Title:

 

 

 

8

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

 

Schedule I to

Tranche B Note in the original

principal amount of $8,500,000

 

Principal of this Note shall be payable in installments of $425,000 each, due on
the last day of March, June, September and December of each year, commencing on
December 31, 2004, with a final principal payment due on September 30, 2009
equal in principal amount to the outstanding principal balance hereunder on such
date, if different from such other installments.

 

9

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

 

EXHIBIT A-4

TRANCHE B NOTE

 

$2,379,053

Minneapolis, Minnesota: September 22, 2004

 

FOR VALUE RECEIVED, the undersigned AMERICAN EQUITY INVESTMENT LIFE HOLDING
COMPANY, an Iowa corporation (the “Borrower”), promises to pay to the order of
U.S. BANK NATIONAL ASSOCIATION (the “Bank”), payable in installments in the
amounts and on due dates set forth on Schedule I attached hereto, the principal
sum of TWO MILLION THREE HUNDRED SEVENTY NINE THOUSAND FIFTY THREE DOLLARS
($2,379,053), payable at times provided in the Credit Agreement, as defined
below.

 

The Borrower further promises to pay to the order of the Bank interest on the
aggregate unpaid principal amount hereof from time to time outstanding from the
date hereof until paid in full at the rates per annum which shall be determined
in accordance with the provisions of the Credit Agreement.  Accrued interest
shall be payable on the dates specified in the Credit Agreement.

 

The Tranche B LIBOR Margin for this Note and the indebtedness evidenced hereby
is 2.25% per annum.

 

All payments of principal and interest under this Note shall be made in lawful
money of the United States of America in immediately available funds at the
office of U.S. Bank National Association, at 800 Nicollet Mall., Minneapolis,
Minnesota 55402, or at such other place as may be designated by the Agent to the
Borrower in writing.

 

This Note is one of the Tranche B Notes and the Notes referred to in, and
evidences indebtedness incurred under, a Credit Agreement dated as of September
22, 2004 (herein, as it may be amended, modified or supplemented from time to
time, called the “Credit Agreement”) among the Borrower, the Banks, as defined
therein (including the Bank) and U.S. Bank National Association, as Agent, to
which Credit Agreement reference is made for a statement of the terms and
provisions thereof, including those under which the Borrower is permitted and
required to make prepayments and repayments of principal of such indebtedness
and under which such indebtedness may be declared to be immediately due and
payable.

 

All parties hereto, whether as makers, endorsers or otherwise, severally waive
presentment, demand, protest and notice of dishonor in connection with this
Note.

 

This Note is made under and governed by the internal laws of the State of
Minnesota.

 

 

AMERICAN EQUITY INVESTMENT LIFE

 

HOLDING COMPANY

 

 

 

By:

 

 

 

 

 

Title:

 

 

 

10

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

 

Schedule I to

Tranche B Note in the original

principal amount of $2,379,053

 

Principal of this Note shall be payable in (a) one installment of $1,075,000,
due on               , 2004 and (b) $1,304,053, due on October 8, 2004.

 

11

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

 

EXHIBIT A-5

TRANCHE B NOTE

 

$7,500,000

Minneapolis, Minnesota: September 22, 2004

 

FOR VALUE RECEIVED, the undersigned AMERICAN EQUITY INVESTMENT LIFE HOLDING
COMPANY, an Iowa corporation (the “Borrower”), promises to pay to the order of
U.S. BANK NATIONAL ASSOCIATION (the “Bank”), payable in installments in the
amounts and on due dates set forth on Schedule I attached hereto, the principal
sum of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($7,500,000), payable at
times provided in the Credit Agreement, as defined below.

 

The Borrower further promises to pay to the order of the Bank interest on the
aggregate unpaid principal amount hereof from time to time outstanding from the
date hereof until paid in full at the rates per annum which shall be determined
in accordance with the provisions of the Credit Agreement.  Accrued interest
shall be payable on the dates specified in the Credit Agreement.

 

The Tranche B LIBOR Margin for this Note and the indebtedness evidenced hereby
is 3.00% per annum.

 

All payments of principal and interest under this Note shall be made in lawful
money of the United States of America in immediately available funds at the
office of U.S. Bank National Association, at 800 Nicollet Mall., Minneapolis,
Minnesota 55402, or at such other place as may be designated by the Agent to the
Borrower in writing.

 

This Note is one of the Tranche B Notes and the Notes referred to in, and
evidences indebtedness incurred under, a Credit Agreement dated as of September
22, 2004 (herein, as it may be amended, modified or supplemented from time to
time, called the “Credit Agreement”) among the Borrower, the Banks, as defined
therein (including the Bank) and U.S. Bank National Association, as Agent, to
which Credit Agreement reference is made for a statement of the terms and
provisions thereof, including those under which the Borrower is permitted and
required to make prepayments and repayments of principal of such indebtedness
and under which such indebtedness may be declared to be immediately due and
payable.

 

All parties hereto, whether as makers, endorsers or otherwise, severally waive
presentment, demand, protest and notice of dishonor in connection with this
Note.

 

This Note is made under and governed by the internal laws of the State of
Minnesota.

 

 

AMERICAN EQUITY INVESTMENT LIFE

 

HOLDING COMPANY

 

 

 

By:

 

 

 

 

 

Title:

 

 

 

12

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

 

Schedule I to

Tranche B Note in the original

principal amount of $5,500,000

 

Principal of this Note shall be payable in (a) one installment of $1,000,000,
due on September 30, 2004, and (b) additional installments of $500,000 each, due
on the last day of March, June, September and December of each year, commencing
on December 31, 2004, with a final principal payment due on December 31, 2007
equal in principal amount to the outstanding principal balance hereunder on such
date, if different from such other installments.

 

13

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

 

Exhibit D

Opinion of Counsel

 

To:  The Agent and Banks party
to the Credit Agreement described herein

 

[address to each bank]

 

U.S. Bank National Association

800 Nicollet Mall

Mail Code BC-MN-H03N

Minneapolis, MN 55402

Attention: Mr. Ziad W. Amra

 

Ladies/Gentlemen:

 

We have acted as counsel for AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY,
(the “Borrower”), and we are delivering to you this opinion of counsel upon
which you may rely, in connection with a Credit Agreement, dated as of September
22, 2004, entered into among the Borrower, the Banks, as defined therein, and
U.S. Bank National Association, as Agent (the “Credit Agreement”), and the
transactions and other Loan Documents described therein.  Unless otherwise
defined herein, capitalized terms used herein shall have the respective meanings
assigned to such terms in the Credit Agreement.

 

In so acting, we, as counsel for the Borrower, have made such factual inquiries,
and have examined or caused to be examined such questions of law, as we have
considered necessary or appropriate for the purposes of this opinion and, upon
the basis of such inquiries and examinations, advise you that, in our opinion:

 

(1)  The Borrower and each of its Subsidiaries are corporations duly organized,
validly existing and in good standing under the laws of the state of their
respective incorporation, and each is duly qualified and in good standing as a
foreign corporation in all other jurisdictions in which its respective present
operations or properties require such qualification.

 

(2)  The Borrower has full corporate power and authority to own and operate its
properties and assets, carry on its business as presently conducted, and enter
into and perform its obligations under the Loan Documents to which it is a
party.

 

(3)  The execution and delivery of the Loan Documents to which the Borrower is a
party, the performance by the Borrower of its obligations thereunder, and the
borrowing by the Borrower under the Credit Agreement, have been duly authorized
by all necessary corporate action, and all of said Loan Documents have been duly
executed and delivered on behalf of the Borrower and constitute valid and
binding obligations of the Borrower, enforceable in accordance with their
respective terms.

 

14

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

 

(4)  There is no provision in the Borrower’s Articles of Incorporation or
By-Laws, nor any provision in any indenture, mortgage, contract or agreement to
which the Borrower is a party or by which it or its properties may be bound, nor
any law, statute, rule or regulation, nor any writ, order or decision of any
court or governmental instrumentality binding on the Borrower which would be
contravened by the execution and delivery of the Loan Documents to which the
Borrower is a party, nor do any of the foregoing prohibit the Borrower’s
performance of any term, provision, condition, covenant or any other obligation
of the Borrower contained therein.

 

(5)  There are no actions, suits or proceedings pending or, to the best of our
knowledge after due inquiry, threatened against or affecting the Borrower before
any court or arbitrator or by or before any administrative agency or government
authority, which, if adversely determined, could constitute an Adverse Event.

 

(6)  Neither the making nor performance of the Loan Documents, nor the
borrowing(s) under the Credit Agreement, requires the consent or approval of any
governmental instrumentality.

 

(7)  The Borrower is not a “holding company”, a “subsidiary company” of a
“holding company” or an “affiliate” of a “holding company”, within the meaning
of the Public Utility Holding Company Act of 1935, as amended.

 

(8)  The Borrower is not an “investment company” or a company “controlled” by an
“investment company”, within the meaning of the Investment Company Act of 1940,
as amended.

 

(9)  The Borrower is not engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of Regulation
U of the Board of Governors of the Federal Reserve System), and, to the best of
our knowledge after due inquiry, no part of the proceeds of any loan under the
Credit Agreement will be used to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin stock.

 

(10)  Assuming that the Agent has taken and is retaining possession of the stock
certificates evidencing the shares of stock described in the Borrower Pledge
Agreement (the “Pledged Stock”) or entered into a satisfactory bailee
arrangement with a third party who has taken and is retaining possession of the
Pledged Stock on the Agent’s behalf, and the Agent has taken such Pledged Stock
in good faith without notice (actual or constructive) of any adverse claim
within the meaning of the Code, there has been created under the Borrower Pledge
Agreement, and there has been granted to the Agent a valid and perfected
security interest and lien upon the Pledged Stock to the extent a security
interest may be obtained by possession under the Code.

 

Very truly yours,

 

15

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

 

Schedule 1.1

Revolving Commitments,

Tranche B Amounts and Percentages

 

Revolving Loans

 

Banks:

 

Revolving Commitment:

 

Revolving Percentage:

 

 

 

 

 

 

 

U.S. Bank

 

$

20,000,000

 

40.000000

%

 

 

 

 

 

 

LaSalle Bank

 

$

20,000,000

 

40.000000

%

 

 

 

 

 

 

West Bank

 

$

10,000,000

 

20.000000

%

 

 

 

 

 

 

Total:

 

$

50,000,000

 

100.000000

%

 

Tranche A Loans

 

Banks:

 

Tranche A Amount:

 

Tranche A Percentage:

 

 

 

 

 

 

 

U.S. Bank

 

$

20,000,000

 

40.000000

%

 

 

 

 

 

 

LaSalle Bank

 

$

20,000,000

 

40.000000

%

 

 

 

 

 

 

West Bank

 

$

10,000,000

 

20.000000

%

 

 

 

 

 

 

Total:

 

$

50,000,000

 

100.000000

%

 

Tranche B Loans:

 

Tranche B Banks:

 

Tranche B Amounts:

 

Tranche B Percentage:

 

 

 

 

 

 

 

U.S. Bank

 

$

18,379,053

 

100.000000

%

 

 

 

 

 

 

Total Amount:

 

$

68,379,053

 

 

 

 

Total Percentages:  Note that this assumes all Tranche B Loans are funded (Total
Percentage will be calculated as provided in the definition thereof

 

Banks:

 

Percentage:

 

 

 

 

 

U.S. Bank:

 

56.1269152

%

 

 

 

 

LaSalle:

 

29.2487232

%

 

 

 

 

West Bank

 

14.6243616

%

 

 

100.000000

%

 

16

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

 

Schedule 7.16

Subsidiaries

 

 

American Equity Investment Life Insurance Company

American Equity Investment Life Insurance Company of New York

American Equity Properties, LC

American Equity Capital, Inc.

American Equity Capital Trust I

American Equity Capital Trust II

American Equity Capital Trust III

American Equity Capital Trust IV

American Equity Capital Trust VII

 

17

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

 

Schedule 7.18

Licenses, etc. (Section 7.18)

 

AMERICAN EQUITY Investment Life Insurance Company

 

Geographic Coverage*

1. Alabama

2. Alaska

3. Arkansas

4. Arizona

5. California

6. Colorado

7. Delaware

8. Florida

9. Georgia

10. Hawaii

11. Idaho

12. Illinois

13. Indiana

14. Iowa

15. Kansas

16. Kentucky

17. Louisiana

18. Maine

19. Maryland

20. Massachusetts

21. Michigan

22. Minnesota

23. Mississippi

24. Missouri

25. Montana

26. Nebraska

27. Nevada

28. New Hampshire

29. New Jersey

30. New Mexico

31. New York**

32. North Dakota

33. Ohio

34. Oklahoma

35. Oregon

36. Pennsylvania

37. Rhode Island

38. South Carolina

39. South Dakota

40. Tennessee

41. Texas

42. Utah

43. Vermont

44. Virginia

 

18

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

 

45. Washington

46. West Virginia

47. Wisconsin

48. Wyoming

and District of Columbia

 

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

* The above listed states represent those which the Company is licensed to
conduct business.

Additional state filings are in process.

** American Equity Investment Life Insurance Company of New York Map-3 09/08/04

 

19

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

 

Schedule 9.2

 

Liens (Section 9.2)

 

 

None

 

20

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

 

Schedule 9.11

 

Surplus Relief Reinsurance Agreements (Section 9.11)

 

 

2002 Coinsurance and Yearly Renewable Term Reinsurance Agreement dated November
1, 2002 between American Equity Investment Life Holding Company and Hannover
Life Reassurance Company of America.

 

2003 Coinsurance and Yearly Renewable Term Reinsurance Agreement dated September
30, 2003 between American Equity Investment Life Holding Company and Hannover
Life Reassurance Company of America.

 

21

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

 

[Suggested Form of Board of Directors’ Resolutions—

Revolving Credit Agreement]

 

CERTIFICATE

 

I,                   , do hereby certify that I am the duly elected and
qualified Secretary and the keeper of the records and corporate seal of AMERICAN
EQUITY INVESTMENT LIFE HOLDING COMPANY, a corporation organized and existing
under the laws of the State of [State] and that the following is a true and
correct copy of certain resolutions duly adopted at a meeting of the Board of
Directors thereof, convened and held in accordance with law and the by-laws of
said corporation, and that such resolutions are now in full force and effect,
unamended, unaltered and unrepealed:

 

WHEREAS, there has been presented to this meeting a form of Credit Agreement
(the “Credit Agreement”) among this Corporation, the Banks named therein (the
“Banks”) and U.S. Bank National Association, as Agent (the “Agent”) providing
for, among other things, loans from time to time to this Corporation up to the
amount of $68,400,000 (as such amount may hereafter be amended);

 

NOW, THEREFORE, BE IT RESOLVED, that the [insert officers and the number
necessary to act] of this Corporation is/are authorized to execute and deliver a
Credit Agreement, substantially in the form of the Credit Agreement presented to
this meeting, except such changes of the terms and provisions thereof as the
officer(s) executing such Credit Agreement on behalf of this Corporation shall
deem proper, such execution to be conclusive evidence that such officer(s)
deem(s) all of the terms and provisions thereof to be proper;

 

FURTHER RESOLVED, that the [insert officers and the number necessary to act]of
this Corporation is/are authorized to borrow from time to time on behalf of this
Corporation amounts permitted to be borrowed by this Corporation under the
Credit Agreement and to designate officers, agents or employees to borrow such
amounts and to set rates of interest if applicable, to execute and deliver on
behalf of this Corporation a promissory note or notes, substantially in the form
provided for in the Credit Agreement, and to execute all amendments, waivers,
modifications, supplements to, and restatements of, the Credit Agreement from
time to time as such officers shall deem proper, such execution by such
officer(s) to be conclusive evidence that such officer(s) deem(s) all of the
terms and provisions thereof to be proper;

 

FURTHER RESOLVED, that each and every officer of this Corporation is authorized
to take such action from time to time on behalf of this Corporation as he may
deem necessary, advisable or proper in order to carry out and perform the
obligations of this Corporation under the Credit Agreement and other agreements
and documents executed and delivered by this Corporation pursuant to or in
connection with the Credit Agreement.

 

FURTHER RESOLVED, that the Secretary or any other officer of this Corporation is
authorized to certify to the Banks and the Agent a copy of these resolutions and
the names and signatures of this Corporation’s officers or employees hereby
authorized to act hereunder, and the Banks and Agent are hereby authorized to
rely upon such certificate until formally advised by a like certificate of any
change therein, and is hereby authorized to rely on any such additional
certificates.

 

22

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

 

I FURTHER CERTIFY THAT the following persons have been appointed or elected and
are now acting as officers or employees of said corporation in the capacity set
before their respective names:

 

NAME

 

TITLE

 

SIGNATURE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

I FURTHER CERTIFY THAT the Articles of Incorporation attached hereto as
Exhibit A and the Bylaws attached hereto as Exhibit B are, respectively, true,
complete and correct copies of this Corporation’s Articles of Incorporation,
duly filed with the Secretary of State of the state of [state], and the Bylaws
of this Corporation, which Articles and Bylaws have been duly adopted by this
Corporation and are presently in full force and effect.

 

IN WITNESS WHEREOF, I have subscribed my name as Secretary as of September 22,
2004.

 

 

 

Secretary

 

AMERICAN EQUITY INVESTMENT LIFE

 

HOLDING COMPANY

 

23

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

 

Exhibit B

PLEDGE AGREEMENT

 

THIS PLEDGE AGREEMENT (this “Agreement”), dated as of September 22, 2004, is
made between AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY, an Iowa
corporation (herein, called the “Pledgor”), and U.S. BANK NATIONAL ASSOCIATION,
as agent (in such capacity, the “Agent”) for the Banks party to the Credit
Agreement, as hereinafter defined.

 

RECITALS

 

A.                                   The Pledgor, the Banks named therein and
the Agent have entered into a Credit Agreement dated as of December 30, 2002
(the “Existing Credit Agreement”), pursuant to which the Banks have made certain
credit facilities available to the Pledgor, said credit facilities being
evidenced by the Notes of the Pledgor in favor such Banks (the “Existing Note”).

 

B.                                     The Pledgor’s obligations under the
Existing Credit Agreement, the Existing Notes have the benefit of, inter alia, a
Second Amended and Restated Borrower Pledge Agreement dated as of April 6, 2000
(the “Existing Pledge Agreement”).

 

C.                                     The parties are, concurrently herewith,
amending and restating the Existing Credit Agreement in the form of a Credit
Agreement, dated as of September 22, 2004 (as the same may be further amended,
supplemented, restated or otherwise modified from time to time, the “Credit
Agreement”).

 

D.                                    It is a condition precedent to the
execution and delivery of the Credit Agreement by the Agent that the Existing
Pledge Agreement be amended and restated in the form of this Agreement.

 

NOW, THEREFORE, in consideration of the premises, the extension of financial
accommodations by the Banks to the Pledgor under the Credit Agreement and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Pledgor agrees with the Agent, for the benefit of the
Agent and the Banks, that the Existing Pledge Agreement is hereby amended and
restated in its entirety to read as follows:

 

SECTION 1   Definitions.

 

Capitalized terms used herein, unless otherwise specified, shall have the
meanings assigned thereto in the Credit Agreement; provided that such
definitions shall survive any termination of the Credit Agreement. In addition,
when used herein the following terms shall have the following meanings:

 

“AEILIC “ shall mean American Equity Investment Life Insurance Company, an Iowa
corporation.

 

“Collateral” see Section 2.

 

“Credit Agreement” see Recital C.

 

24

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

 

“Indemnified Obligations” see Section 7(b)(vi).

 

“Permitted Actions” see Section 5(b).

 

“Pledged Shares” see Section 2.

 

“Pledged Surplus Notes” see Section 2.

 

“Securities” shall mean securities (whether debt or equity) issued by AELLIC
(other than insurance policies or other insurance products which may constitute
securities) including, without limitation, the common and preferred stock,
partnership units and participations, notes, bonds, debentures, trust receipts
and other obligations or instruments, including debt instruments and tax-exempt
securities of AEILIC (including, without limitation, warrants, rights tied to
AEILIC’s earnings, put and call options and other options relating thereto or
any combination thereof, or any instruments convertible into any of the
foregoing.

 

“Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect
from time to time in the State of Minnesota.

 

SECTION 2   Pledge.

 

To secure the prompt and complete payment and performance of the Obligations,
the Pledgor hereby grants, pledges, hypothecates, assigns, transfers, sets over
and delivers unto the Agent for the benefit of the Agent and the Banks a Lien on
the following (herein collectively called the “Collateral”):

 

(a) the shares of capital stock of AEILIC and all other Securities, if any,
described in Attachment 1 hereto whether in certificated form or otherwise,
including the certificates representing or evidencing the certificated
Securities, and with respect to any uncertificated Securities, such
uncertificated Securities shall contain a notation of the Lien and pledge
granted to the Agent hereunder on the books and records of AEILIC (herein called
the “Pledged Shares”), together with all cash, securities, interests, dividends,
rights, notes, instruments and other property at any time and from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such Pledged Shares;

 

(b)                                 all additional shares of capital stock of
AEILIC and other Securities from time to time acquired by the Pledgor in any
manner including, without limitation, any uncertificated Securities (which
additional shares of capital stock and Securities shall constitute a part of,
and be, “Pledged Shares”), and, in the case of certificated Securities, the
certificates representing or evidencing such additional shares, together with
all cash, securities, interest, dividends, rights, notes, instruments and other
property at any time and from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such additional
shares;

 

(c)                                  all surplus notes or debentures issued at
any time by AEILIC to the Pledgor (as the same shall thereafter be amended,
extended, renewed, modified or replaced from time to time, called the “Pledged
Surplus Notes”) and all cash, securities, interests, rights, notes, instruments
and other property at any time and from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the Pledged
Surplus Notes;

 

25

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

 

(d)                                 all other property hereafter delivered to
the Agent in substitution for or in addition to any of the foregoing, all
certificates and instruments representing or evidencing such other property,
together with all cash, securities, interest, dividends, rights and other
property at any time and from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all thereof; and

 

(e)                                  all proceeds of all of the foregoing.

 

TO HAVE AND TO HOLD the Collateral, together with all rights, titles, interests,
privileges and preferences appertaining or incidental thereto, unto the Agent,
its successors and assigns, forever; subject, however, to the terms, covenants
and conditions and termination provisions hereafter set forth.

 

The Pledgor agrees to deliver to the Agent, promptly upon receipt and in the
case of the Pledged Shares and the Pledged Surplus Notes, in due form for
transfer (i.e., endorsed in blank accompanied by undated stock or bond powers
executed in blank or registered on the books of AEILIC) and, subject to the
provisions of Section 6 hereof, any Collateral which may at any time or from
time to time be in or come into possession or control of the Pledgor; and prior
to the delivery thereof to the Agent, such Collateral shall be held by the
Pledgor separate and apart from its other property and in express trust for the
Agent.

 

SECTION 3   Representations, Warranties and Covenants.

 

(a)                                  The Pledgor represents and warrants to the
Agent that: (i) the Pledged Shares are duly authorized and validly issued and
are fully paid and non-assessable; (ii) except for Liens in favor of the Agent
hereunder and claims and rights of third parties arising solely through acts of
the Agent, the Agent has and will continue to have at all times as security for
the Obligations a valid, first priority perfected Lien on the Collateral and the
proceeds thereof free of all other Liens, claims and rights of third parties
whatsoever; (iii) to the extent any Securities are evidenced by certificates,
the Pledgor has delivered to the Agent, for the benefit of the Banks, for pledge
under this Agreement on the date hereof the certificates representing all the
Securities which it owns; (iv) the Pledged Shares and the Pledged Surplus Notes
represent and will continue to represent all shares of the issued and
outstanding shares of capital stock and other Securities of AEILIC and (v) the
Pledgor will, at all times, keep pledged to the Agent, for the benefit of the
Banks, pursuant hereto all of the capital stock, surplus notes and other
Securities of AEILIC. The Pledgor agrees to endorse and deliver to the Agent for
pledge hereunder, promptly upon its obtaining any thereof, any additional
Collateral and to hold such additional Collateral, pending such delivery, in
trust for the Agent, separate and distinct from any other property of the
Pledgor. As of the date of any such delivery of additional Securities, surplus
notes, certificates or instruments to the Agent, the Pledgor represents and
warrants that (1) it will own such Securities, surplus notes, certificates and
instruments free and clear of any rights of any other Person (other than the
rights created in the Agent hereunder), (2) it will have good and marketable
title to said Securities, surplus notes, certificates and instruments and have
the right to pledge such Securities, surplus notes, certificates and instruments
to the Agent pursuant to this Agreement and (3) it will have pledged to the
Agent, as at such date, all of the capital stock, surplus notes and other
Securities of AEILIC owned, directly or indirectly by the Pledgor. The Pledgor
shall have represented and warranted by delivery of any additional Securities,
surplus notes, certificates or instruments, that at the time of such

 

26

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

 

delivery the Agent has a valid, first priority perfected Lien on said
Securities, surplus notes, certificates or instruments and the proceeds thereof
free of all Liens, claims and rights of third parties whatsoever (except for the
Lien of the Agent created under this Agreement). All documentary, stamp and
other taxes and fees owing in connection with the issuance, transfer and/or
pledge of the Pledged Shares, the Pledged Surplus Notes and other Securities,
certificates or instruments have been paid and will hereafter be paid by the
Pledgor as such become due and payable.

 

(b)                                 The Pledgor further represents and warrants
to the Agent that it is the lawful owner of the Collateral, free of all Liens,
(except for the Lien of the Agent created under this Agreement), with full right
to deliver, pledge, assign and transfer such Collateral to the Agent as
Collateral hereunder. The pledge of the Collateral effected by this Agreement is
effective to vest in the Agent the rights of Agent in the Collateral set forth
herein.

 

(c)                                  The Pledgor additionally represents and
warrants to the Agent that (i) each of the Pledgor and its Subsidiaries is duly
organized, validly existing and in good standing under the laws of its state of
formation, (ii) the execution and delivery of this Agreement and the performance
by the Pledgor of its obligations hereunder are within its corporate powers,
have been duly authorized by all necessary corporate action (including, without
limitation, shareholder approval if required), (iii) each of the Pledgor and its
Subsidiaries has received all material governmental consents and approvals (if
any shall be required) necessary for such execution, delivery and performance
(except governmental consents required by any Applicable Insurance Code to
foreclose on the Pledged Shares or Pledged Surplus Notes) and such execution,
delivery and performance do not and will not contravene or conflict with, result
in any breach of, or constitute a default under, any material agreement or
instrument binding on it or result in the creation or imposition of or the
obligation to create or impose any Lien (except for the Lien of the Agent
created under this Agreement) and (iv) this Agreement is the legal, valid and
binding obligation of the Pledgor, enforceable against the Pledgor in accordance
with its terms, except to the extent such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws affecting the enforcement of creditors’ rights
generally and by the effect of general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity (including,
without limitation, good faith, materiality and reasonableness) or at law).

 

(d)                                 The Pledgor additionally covenants and
agrees with the Agent that, until the expiration or termination of the
Commitments and thereafter so long as any of the Obligations remain outstanding,
the Pledgor will, unless the Agent shall otherwise consent in writing:

 

(i)                                     at the Pledgor’s sole expense, promptly
deliver to the Agent, from time to time upon request of the Agent, such stock
powers and other documents (including UCC financing statements), satisfactory in
form and substance to the Agent, with respect to the Collateral as the Agent may
reasonably request, to perfect, preserve and protect, and to enable the Agent to
enforce, its rights and remedies hereunder;

 

(ii)                                  not sell, assign, exchange, pledge or
otherwise dispose of or transfer any of its rights to any of the Collateral;

 

27

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

 

(iii) not create or suffer to exist any Lien in or with respect to any of the
Collateral (except for the Lien of the Agent created under this Agreement);

 

(iv) not make or consent to any amendment or other modification or waiver with
respect to any of the Collateral, or enter into any agreement or permit to exist
any restriction with respect to any of the Collateral other than pursuant
hereto; and

 

(v)                                 not take or fail to take any action which
would in any manner impair the enforceability of the Agent’s Lien on any of the
Collateral.

 

(e)                                  The information contained in Attachment 1
is true and accurate in all respects.

 

SECTION 4   Care of Collateral.

 

The Agent shall exercise reasonable care in the custody and preservation of the
Collateral. In addition, the Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral if it takes such action
for that purpose as the Pledgor requests in writing, but failure of the Agent to
comply with any such request shall not of itself be deemed a failure to exercise
reasonable care, and no failure of the Agent to preserve or protect any rights
with respect to the Collateral against prior or other parties, or to do any act
with respect to preservation of the Collateral not so requested by the Pledgor,
shall be deemed a failure to exercise reasonable care in the custody or
preservation of the Collateral.

 

SECTION 5   Certain Rights Regarding Collateral and Obligations.

 

(a)                                  Subject to Sections 5(c) and 6 hereof, the
Agent may, and upon the request of the Required Banks shall, from time to time,
after the occurrence and during the continuance of an Event of Default under the
Credit Agreement, without notice to the Pledgor, (i) transfer all or any part of
the Collateral into the name of the Agent or its nominee or sub-agent, with or
without disclosing that such Collateral is subject to the Lien created
hereunder, (ii) notify any Person obligated on any of the Collateral to make
payment to the Agent of any amounts due or to become due thereunder, and (iii)
enforce collection of any of the Collateral by suit or otherwise.

 

(b)                                 If at any time the Agent takes any or all of
the Permitted Actions (as hereinafter defined) whether such actions are taken
before or after any of the Obligations shall be due and payable and without
notice to the Pledgor, such actions shall not affect the enforceability of this
Agreement. The Agent shall have taken a “Permitted Action” if it shall (to the
extent permitted by the Credit Agreement and the other Loan Documents): (i)
retain or obtain a Lien upon any property to secure payment and performance of
any of the Obligations or any obligation hereunder, (ii) retain, obtain or
release the primary or secondary obligation of any Person, in addition to the
Pledgor, with respect to one or more of the Obligations, (iii) create, extend or
renew for any periods (whether or not longer than the original period) or alter
or exchange any of the Obligations, or release or compromise any obligation of
any nature of any Person with respect to any of the Obligations, (iv) release or
fail to perfect its Lien upon, or impair, surrender, release or permit any
substitution or exchange for, all or any part of any property securing any of
the Obligations or any obligation hereunder, or create, extend or renew for one
or more periods (whether or not longer than the original period) or release,
compromise, alter or exchange any obligations of any nature of any Person with
respect to any such property (provided, that the Agent may release all or any

 

28

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

 

portion of the Collateral to the Pledgor, and that upon such release, the rights
of the Agent under this Agreement shall, to the extent of such Collateral, be
deemed terminated), or (v) resort to the Collateral for payment of any of the
Obligations whether or not the Agent (1) shall have resorted to any other
property securing any of the Obligations or any obligation hereunder or (2)
shall have proceeded against any Person primarily or secondarily obligated with
respect to any of the Obligations (all of the actions referred to in preceding
clauses (1) and (2) being hereby expressly waived by the Pledgor).

 

(c)           The Agent shall have no right to vote the Pledged Shares or other
Collateral or give consents, waivers or ratifications in respect thereof prior
to the occurrence and during the continuance of an Event of Default. After the
occurrence and during the continuance of an Event of Default, the Pledgor shall
have the right to vote any and all of the Pledged Shares and other Collateral
and give consents, waivers and ratifications in respect thereof unless and until
it receives notice from the Agent that such right has been terminated. The
Pledgor agrees to deliver (properly endorsed when required) to the Agent, after
the occurrence of and during the continuance of an Event of Default shall have
occurred and shall be continuing, promptly upon request of the Agent, such
proxies and other documents as may be necessary for the Agent to exercise the
voting power with respect to the Pledged Shares and other Collateral then or
previously owned by the Pledgor.

 

SECTION 6   Dividends, etc.

 

(a)           So long as no Event of Default shall have occurred and shall be
continuing:

 

(i)            Subject to the provisions of the Credit Agreement and
notwithstanding the provisions of Section 2(a) of this Agreement, the Pledgor
shall be entitled to receive any and all cash dividends and payments on the
Collateral which it is otherwise entitled to receive, but any and all Securities
and/or liquidating dividends, payments, distributions in property, returns of
capital made on or in respect of the Collateral, whether resulting from a
subdivision, combination, reclassification or conversion of the outstanding
capital stock or other Securities of AEILIC, or received in exchange for the
Collateral or any part thereof, or as a result of any merger, consolidation,
acquisition or other exchange of assets to which AEILIC may be a party or
otherwise, and any and all cash and other property received in exchange for any
Collateral shall be and become part of the Collateral pledged hereunder and, if
received by the Pledgor, shall forthwith be delivered to the Agent or its
designated nominee (accompanied, if appropriate, by proper instruments of
assignment and/or stock powers executed by the Pledgor in accordance with the
Agent’s instructions) to be held by the Agent subject to the terms of this
Agreement and, until delivery to the Agent, shall be held by the Pledgor
separate and apart from its other property in trust for the Agent, for the
benefit of the Banks.

 

(ii)           If the Collateral or any part thereof shall have been registered
in the name of the Agent or its sub-agent, the Agent shall execute and deliver
(or cause to be executed and delivered) to the Pledgor all such dividend orders
and other instruments as the Pledgor may request for the purpose of enabling the
Pledgor to receive the dividends or other payments which it is authorized to
receive and retain pursuant to Section 6(a)(i) above.

 

29

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

 

(b)           Upon the occurrence and during the continuance of an Event of
Default, all rights of the Pledgor pursuant to Section 6(a)(i) hereof shall
cease and the Agent shall have the sole and exclusive right and authority to
receive and retain the dividends and other payments with respect of the
Collateral which the Pledgor would otherwise be authorized to retain. All such
dividends, payments, and all other distributions and payments made on or in
respect of the Collateral which may at any time and from time to time be held by
the Pledgor, shall, until delivery to the Agent, be held by the Pledgor separate
and apart from its other property in trust for the Agent. Any and all money and
other property paid over to or received by the Agent pursuant to the provisions
of this paragraph (b) shall be retained by the Agent as additional Collateral
hereunder and be applied in accordance with the provisions hereof.

 

SECTION 7   Default.

 

(a)           Upon the occurrence and during the continuance of an Event of
Default, the Agent may exercise from time to time any rights and remedies
available to it under the Credit Agreement, the Uniform Commercial Code or the
other Loan Documents or otherwise available to it, including, without
limitation, sale, assignment, or other disposal of the Collateral in exchange
for cash or credit. If any notification of intended disposition of any of the
Collateral is required by law, such notification, if mailed, shall be deemed
reasonably and properly given if mailed to the Pledgor at least ten (10) days
before such disposition as provided in Section 12.5 of the Credit Agreement. Any
proceeds of any disposition of Collateral shall be applied as provided in
Section 8 hereof. No rights and remedies of the Agent expressed hereunder are
intended to be exclusive of any other right or remedy, but every such right or
remedy shall be cumulative and shall be in addition to all other rights and
remedies herein conferred, or conferred upon the Agent under any other agreement
or instrument relating to any of the Obligations or security therefor or now or
hereafter existing at law or in equity or by statute. No delay on the part of
the Agent in the exercise of any right or remedy shall operate as a waiver
thereof, and no single or partial exercise by the Agent of any right or remedy
shall preclude any other or further exercise thereof or the exercise of any
other right or remedy.

 

(b)(i)       The Pledgor agrees that in any sale of any of the Collateral, the
Agent is authorized to comply with any limitation or restriction in connection
with such sale as counsel may advise the Agent is necessary in order to avoid
any violation of applicable law (including, without limitation, compliance with
such procedures as may restrict the number of prospective bidders and
purchasers, require that such prospective bidders and purchasers have certain
qualifications, and restrict such prospective bidders and purchasers to persons
who will represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or resale of such
Collateral), or in order to obtain any required approval of the sale or of the
purchaser by any governmental regulatory authority or official, and the Pledgor
further agrees that such compliance shall not result in such sale being
considered or deemed not to have been made in a commercially reasonable manner,
nor shall the Agent or any Bank be liable or accountable to the Pledgor for any
discount allowed by reason of the fact that such Collateral is sold in
compliance with any such limitation or restriction.

 

(ii)           Without limiting the rights of the Agent under any other
provision of this Agreement, and in addition thereto, the Pledgor agrees that,
to the maximum extent permitted by law, after an Event of Default shall have
occurred and shall be continuing,

 

30

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

 

upon written request from the Agent, the Pledgor shall or shall cause AEILIC to
prepare, file and cause to become effective promptly, registration statements
complying with the Securities Act of 1933, as amended, for the public sale of
such of the Collateral as the Agent may elect, and to take comparable action to
permit such sales under the securities laws of such jurisdictions as the Agent
may designate. The Pledgor further agrees to cause AEILIC to enter into and
perform its obligations under one or more underwriting agreements in connection
therewith, containing customary representations, warranties, covenants and
indemnities and contribution provisions if requested by the Agent. if such
registration statements are filed, the Pledgor agrees to cause AEILIC (A) to
keep any such registration statement and related prospectus current and in
compliance with applicable federal and state securities laws so long as required
to satisfy applicable prospectus delivery requirements and (B) at the request of
the Agent at any time after the effective date of any such registration
statement, to use reasonable efforts to file post-effective amendments to such
registration statement so that the Agent’s sales of Pledged Shares or other
Collateral will be covered by a current prospectus and can be made in compliance
with all applicable federal and state securities laws.

 

(iii)          The Pledgor further agrees, after an Event of Default shall have
occurred and shall be continuing, and upon written request from the Agent, to
(x) deliver, and cause AEILIC to deliver, to the Agent such information as the
Agent shall reasonably request for inclusion in any registration statement,
prospectus or offering memorandum or in any preliminary prospectus or
preliminary offering memorandum or any amendment or supplement to any thereof or
in any other writing prepared in connection with the offer, sale or resale of
all or any portion of the Pledged Shares or other Collateral, which information
shall not contain any untrue statement of a material fact or omit to state a
material fact required to be stated or necessary to make such information not
misleading, and (y) do or cause to be done all such other acts and things as may
be necessary to make such offer, sale or resale of all or any portion of the
Pledged Shares or other Collateral valid and binding and in compliance with any
and all applicable laws, regulations, orders, writs, injunctions, decrees or
awards of any and all courts, arbitrators or governmental agencies or
instrumentalities, domestic or foreign, having jurisdiction over any such offer,
sale or resale.

 

Without limiting the foregoing paragraph, if the Agent decides to exercise its
right to sell all or any of the Pledged Shares or other Collateral, upon written
request, the Pledgor shall furnish or cause to be furnished to the Agent all
such information as the Agent may request in order to qualify such Pledged
Shares or other Collateral as exempt securities, or the sale or resale of such
Pledged Shares or other Collateral as exempt transactions, under federal and
state securities laws. The Pledgor agrees to allow, and to cause AEILIC to
allow, upon request by the Agent, the Agent and any underwriter access at
reasonable times and places to the books, records and premises of AEILIC; the
Pledgor further agree~ to assist, and cause AEILIC to assist, the Agent, any
underwriter, any agent of any thereof, and any counsel, accountant or other
expert for any thereof, an inspection, evaluation, and any other “due diligence”
action of or with respect to any such books, records and premises; and the
Pledgor further agrees to cause any independent public accountant for AEILIC to
furnish a letter to the Agent and the underwriters in customary form and
covering matters of the type customarily covered by letters of accountants for
issuers to underwriters.

 

31

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

 

(iv)          The Pledgor, upon the occurrence and during the continuance of an
Event of Default, further agrees that the Agent shall have the right, for and in
the name, place and stead of the Pledgor to execute endorsements, assignments,
stock powers and other instruments of conveyance or transfer with respect to all
or any of the Collateral, and may, without demand, presentment or notice of any
kind appropriate and apply toward the payment of the Obligations in order of
application set forth in Section 8 any balances, credits, deposits, accounts or
monies of the Pledgor held by the Agent.

 

(v)           Without limiting the foregoing paragraph, upon the occurrence and
during the continuance of an Event of Default, the Agent may, to the fullest
extent permitted by applicable law, without notice, advertisement, hearing or
process of law of any kind, (x) sell any or all of the Collateral, free of all
rights and claims of the Pledgor therein and thereto at any public or private
sale or brokers’ board, and (y) bid for and purchase any or all of the
Collateral at any such public sale free from rights of redemption, stay or
appraisal of the Pledgor.

 

(vi)          The Pledgor further agrees to indemnify and hold harmless the
Agent and the Banks and each of their respective officers, directors, employees,
agents, successors and assigns, and any Person in control of any thereof, from
and against any loss, liability, claim, damage and expense, including, without
limitation, reasonable attorneys’ fees actually incurred (in this paragraph
collectively called the “Indemnified Obligations”), under federal and state
securities laws or otherwise insofar as such loss, liability, claim, damage or
expense was caused by any untrue statement or alleged untrue statement of a
material fact contained in any registration statement, any preliminary
prospectus or the prospectus, or was caused by any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages or Obligations were caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information relating
to the Agent furnished to the Pledgor in writing by the Agent expressly for use
therein, such indemnification to remain operative regardless of any
investigation made by or on behalf of the Agent or any successors thereof, or
any Person in control of any thereof. In connection with a public sale or other
distribution, the Pledgor will provide customary indemnification to any
underwriters, their respective successors and assigns, their respective officers
and directors and each Person who controls any such underwriter (within the
meaning of the Securities Act of 1933, as amended). If and to the extent that
the foregoing undertakings in this paragraph may be unenforceable for any
reason, the Pledgor agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Obligations which is permissible under
applicable law. The obligations of the Pledgor under this Section 7(b)(vi) shall
survive any termination of this Agreement.

 

(vii)         The Pledgor and the Agent acknowledge that the commissioners or
departments of insurance of various states under all Applicable Insurance Codes,
rules and regulations may have to consent to or approve any such sale, transfer
or other disposition of the Collateral and the terms and conditions thereof. The
Pledgor hereby waives and agrees not to assert against the Agent any claim that
any such sale, transfer or other disposition hereunder, or the terms or
conditions thereof, were not commercially reasonable because of any provision of
any such insurance law, rule or regulation or any matter related thereto.

 

32

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

 

SECTION 8   Application of Proceeds.

 

All of the proceeds from the sale or disposition of any item of the Collateral
sold pursuant to the terms of Section 7 hereof and/or, after an Event of Default
shall have occurred and shall be continuing, the cash held as Collateral
hereunder shall be applied by the Agent as follows:

 

First: to the payment of all of the reasonable costs and expenses of the Agent
actually incurred by retaking, holding, preparing for sale or lease, selling,
leasing and the like, including (i) the reasonable costs and expenses actually
incurred by the Agent and the reasonable fees, costs and expenses of counsel
actually incurred by the Agent (whether or not such costs and expenses are
incurred by the Agent on its own behalf or on behalf of the Banks), and (ii) the
payment of all reasonable costs and expenses actually incurred by the Agent in
connection with the administration and enforcement of this Agreement, to the
extent that such advances, costs and expenses shall not have been reimbursed to
the Agent;

 

Second: to the payment in full of the Obligations in such order as is consistent
with the Credit Agreement and to the extent not addressed in the Credit
Agreement as the Agent may determine from time to time in its sole discretion
(such application to be made ratably among the Banks); and

 

Third: the balance, if any, of such proceeds shall be paid to the Pledgor, its
successors and assigns, or as a court of competent jurisdiction may direct.

 

SECTION 9   Authority of the Agent.

 

The Agent shall have, and be entitled to exercise, all such powers hereunder (to
the extent permitted by the Credit Agreement) as are specifically delegated to
the Agent by the terms hereof, together with such powers as are incidental
thereto, for the benefit of the Banks. As to matters not expressly provided for
by this Pledge Agreement (including, without limitation, enforcement or
collection of this Pledge Agreement) the Agent shall not be required to exercise
any discretion, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Required Banks and such instructions shall be binding upon
all Banks. The Agent may execute any of its duties hereunder by or through
agents or employees and shall be entitled to retain counsel and to act in
reliance upon the reasonable advice of such counsel concerning all matters
pertaining to its duties hereunder. Neither the Agent, the Banks nor any
director, officer or employee thereof shall be liable for any action taken or
omitted to be taken by it hereunder or in connection herewith, except for its
own gross negligence or willful misconduct. Without limiting the generality of
the foregoing, the Agent shall not be responsible to any Bank for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Pledge Agreement or any other Loan Document or other support or security
(including the validity, priority or perfection of any Lien), or any other
document furnished in connection with any of the foregoing; provided that,
notwithstanding the foregoing, the Agent shall comply with Section 4 hereof. The
Pledgor agrees to reimburse the Agent, on demand, for all reasonable costs and
expenses actually incurred by the Agent in connection with the administration
and enforcement of this Agreement (including, without limitation, reasonable
costs and expenses actually incurred by any agent employed by the Agent) and
agrees to indemnify (which indemnification shall survive any termination of this
Agreement) and hold harmless the Agent and the Banks (and any such

 

33

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

 

agent) from and against any and all liability incurred by the Agent or any Bank
or any such agent thereof, hereunder or in connection herewith, unless such
liability shall be due to gross negligence or willful misconduct on the part of
the Agent or any Bank or such agent, as the case may be.

 

SECTION 10   Termination.

 

The Pledgor agrees that its pledge hereunder shall (notwithstanding, without
limitation, that at any time or from time to time all Obligations may have been
paid in full) terminate only when all Obligations (except Obligations which by
the terms of the Credit Agreement survive the payment in full of the Loans and
the termination of this Agreement) (including, without limitation, any
extensions or renewals of any thereof) and all expenses (including, without
limitation, reasonable attorneys’ fees and legal expenses) paid or actually
incurred by the Agent or the holder or the holders of the Notes in endeavoring
to enforce this Agreement, the Credit Agreement and the other Loan Documents to
which the Agent is a party or of which it is a beneficiary shall have been
finally paid in full and all other obligations of the Pledgor hereunder and
thereunder have been fully performed, and all Commitments under the Credit
Agreement have been terminated, at which time the Agent shall reassign and
redeliver (or cause to be reassigned and redelivered) to the Pledgor, or to such
Person or Persons as the Pledgor shall designate, such of the Collateral (if
any) as shall not have been sold or otherwise applied by the Agent pursuant to
the terms hereof and shall still be held by it hereunder, together with
appropriate instruments of reassignment and release. Any such reassignment shall
be without recourse upon, or representation or warranty by, the Agent or any
Bank and at the sole cost and expense of the Pledgor.

 

SECTION 11   Miscellaneous.

 

(a)           All notices or other communications hereunder shall be given in
the manner specified under Section 12.5 of the Credit Agreement, whether or not
then in effect.

 

(b)           This Agreement, and the terms, covenants and conditions hereof,
shall be binding upon and inure to the benefit of the parties hereto, and their
respective successors and assigns, except the Pledgor shall not be permitted to
assign this Agreement nor any interest herein nor in the Collateral, nor any
part thereof, nor otherwise pledge, encumber or grant any option with respect to
the Collateral, nor any part thereof.

 

(c)           SUBMISSION TO JURISDICTION: WAIVER OF VENUE. EACH OF THE PLEDGOR
AND THE AGENT (A) HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
MINNESOTA STATE OR FEDERAL COURT SITTING IN HENNEPIN COUNTY OR RAMSEY COUNTY,
MINNESOTA OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS, AND EACH OF THE PLEDGOR AND THE AGENT
“HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH MINNESOTA STATE OR FEDERAL COURT,
AND (B) AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST THE OTHER
PARTY HERETO OR THE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY OF ANY
THEREOF, ARISING OUT OF OR RELATING TO THIS AGREEMENT, IN ANY COURT OTHER THAN
AS HEREINABOVE SPECIFIED IN THIS SECTION 11(C). EACH OF THE PLEDGOR AND THE
AGENT

 

34

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

 

HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY ACTION OR PROCEEDING
(WHETHER BROUGHT BY THE PLEDGOR, ANY OF ITS SUBSIDIARIES, THE AGENT, ANY BANK OR
OTHERWISE) IN ANY COURT HEREINABOVE SPECIFIED IN THIS SECTION 11(c) AS WELL AS
ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO REMOVE ANY SUCH ACTION OR PROCEEDING,
ONCE COMMENCED, TO ANOTHER COURT ON THE GROUNDS OF FORUM NON CON VENIENS OR
OTHERWISE. EACH OF THE PLEDGOR AND THE AGENT AGREES THAT A FINAL JUDGMENT IN ANY
SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.

 

(d)           At the option of the Agent, this Agreement, or a carbon,
photographic or other reproduction of this Agreement or of any Uniform
Commercial Code financing statement covering the Collateral or any portion
thereof, shall be sufficient as a Uniform Commercial Code financing statement
and may be filed as such.

 

(e)           Subject to Section 12.1 of the Credit Agreement, no amendment to,
modification or waiver of, or consent with respect to, any provision of this
Agreement shall in any event be effective unless the same shall be in writing
and signed and delivered by the Agent at the request of the Required Banks, and
then any such amendment, modification, waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.

 

(f)            The section headings in this Agreement are inserted for
convenience of reference and shall not be considered a part of this Agreement or
used in its interpretation.

 

(g)           The Pledgor hereby expressly waives: (i) notice of the acceptance
by the Agent of this Agreement, (ii) notice of the existence or creation or
non-payment of all or any of the Obligations, (iii) presentment, demand, notice
of dishonor, protest, and all other notices whatsoever (except as otherwise
required herein), and (iv) all diligence in collection or protection of or
realization upon the Obligations, or any security for or guaranty of any of the
foregoing.

 

(h)           The Agent may, from time to time, without notice to the Pledgor,
assign or transfer any or all of the Obligations or any interest therein; and,
notwithstanding any such assignment or transfer or any subsequent assignment or
transfer thereof, such Obligations shall be and remain Obligations for the
purposes of this Agreement, and each and every immediate and successive assignee
or transferee of any of the Obligations or of any interest therein shall, to the
extent of the interest of such assignee or transferee in the Obligations, be
entitled to the benefits of this Agreement to the same extent as if such
assignee or transferee were the Agent; provided, however, that, unless the Agent
shall otherwise consent in writing, the Agent shall have an unimpaired right,
prior and superior to that of any such assignee or transferee, to enforce this
Agreement, for the benefit of the Agent, as to those of the Obligations which
the Agent has not assigned or transferred.

 

(i)            The Pledgor agrees that, if at any time all or any part of any
payment theretofore applied by the Agent to any of the Obligations is or must be
rescinded or returned by the Agent for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of any of the Pledgor,
AEILIC), such Obligations shall, for the purposes of this Agreement, to the

 

35

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

 

extent that such payment is or must be rescinded or returned, be deemed to have
continued in existence, notwithstanding such application by the Agent, and the
pledge by the Pledgor hereunder shall continue to be effective or be reinstated,
as the case may be, as to such Obligations, all as though such application by
the Agent had not been made.

 

(j)            No action of the Agent permitted hereunder shall in any way
affect or impair the rights of the Agent and the obligations of the Pledgor
under this Agreement. The Pledgor hereby acknowledges that there are no
conditions to the effectiveness of this Agreement.

 

(k)           All obligations of the Pledgor and rights of the Agent or
obligation expressed in this Agreement shall be in addition to and not in
limitation of those provided in applicable law or in any other written
instrument or agreement relating to any of the Obligations.

 

(l)            GOVERNING LAW. THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND
GOVERNED BY THE LAWS OF THE STATE OF MINNESOTA, WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES. ALL OBLIGATIONS OF THE PLEDGOR AND RIGHTS OF THE AGENT SHALL BE
IN ADDITION TO AND NOT IN LIMITATION OF THOSE PROVIDED BY APPLICABLE LAW.

 

(m)          This Agreement may be executed in any number of counterparts, each
of which shall for all purposes be deemed an original, but all such counterparts
shall constitute but one and the same Agreement. The Pledgor hereby acknowledges
receipt of a true, correct and complete counterpart of this Agreement.

 

(n)           The Agent acts herein as agent for itself, the Banks and any and
all future holders of the Obligations.

 

(o)           The Agent hereby acknowledges that its exercise of any rights or
remedies hereunder shall be subject to any Applicable Insurance Code and agrees
to first comply with any Applicable Insurance Code in exercising its rights
hereunder.

 

(p)           WAIVER OF JURY TRIAL. EACH OF THE PLEDGOR AND THE AGENT HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT OR UNDER ANY OTHER DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH
THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY; THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

36

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

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.

 

 

AMERICAN EQUITY INVESTMENT LIFE
HOLDING COMPANY

 

 

 

 

 

By:

/s/ Wendy L. Carlson

 

 

 

 

Title:

CFO & General Counsel

 

 

 

 

 

 

U.S. BANK NATIONAL ASSOCIATION, as
Agent

 

 

 

 

 

By:

/s/ Ziad W. Amra

 

 

 

 

Title:

Corporate Banking Officer

 

 

37

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

 

ATTACHMENT 1

 

LISTING OF AMERICAN EQUITY’S STOCK PLEDGED

 

Certificate
Number

 

Number of
Shares of
Stock

 

% Ownership

 

 

 

 

 

 

 

01

 

 

2,500,000

 

100

%

 

LISTING OF AMERICAN EQUITY’S SURPLUS NOTES PLEDGED

 

Note Number

 

Face Amount

 

% Ownership

 

 

 

 

 

 

 

1

 

 

$

2,500,000

 

100

%

 

 

 

 

 

 

 

2

 

 

$

5,500,000

 

100

%

 

 

 

 

 

 

 

3

 

 

$

17,000,000

 

100

%

 

 

 

 

 

 

 

4

 

 

$

16,000,000

 

100

%

 

 

 

 

 

 

 

5

 

 

$

10,000,000

 

100

%

 

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

 

REVOLVING NOTE

 

$20,000,000

Minneapolis, Minnesota: September 22, 2004

 

FOR VALUE RECEIVED, the undersigned AMERICAN EQUITY INVESTMENT LIFE HOLDING
COMPANY, an Iowa corporation (the “Borrower”), promises to pay to the order of
U.S. BANK NATIONAL ASSOCIATION (the “Bank”), on the Revolving Termination Date,
or other due date or dates determined under the Credit Agreement hereinafter
referred to, the principal sum of TWENTY MILLION DOLLARS ($20,000,000), or if
less, the then aggregate unpaid principal amount of the Revolving Loans (as such
terms are defined in the Credit Agreement) as may be made by the Bank under the
Credit Agreement.  All Revolving Loans and all payments of principal shall be
recorded by the holder in its records which records shall be conclusive evidence
of the subject matter thereof, absent manifest error.

 

The Borrower further promises to pay to the order of the Bank interest on the
aggregate unpaid principal amount hereof from time to time outstanding from the
date hereof until paid in full at the rates per annum which shall be determined
in accordance with the provisions of the Credit Agreement.  Accrued interest
shall be payable on the dates specified in the Credit Agreement.

 

All payments of principal and interest under this Note shall be made in lawful
money of the United States of America in immediately available funds at the
office of U.S. Bank National Association, at 800 Nicollet Mall, Minneapolis,
Minnesota 55402, or at such other place as may be designated by the Agent to the
Borrower in writing.

 

This Note is one of the Revolving Notes and Notes referred to in, and evidences
indebtedness incurred under, a Credit Agreement dated as of September 22, 2004
(herein, as it may be amended, modified or supplemented from time to time,
called the “Credit Agreement”) among the Borrower, the Banks, as defined therein
(including the Bank) and U.S. Bank National Association, as Agent, to which
Credit Agreement reference is made for a statement of the terms and provisions
thereof, including those under which the Borrower is permitted and required to
make prepayments and repayments of principal of such indebtedness and under
which such indebtedness may be declared to be immediately due and payable.

 

All parties hereto, whether as makers, endorsers or otherwise, severally waive
presentment, demand, protest and notice of dishonor in connection with this
Note.

 

This Note is made under and governed by the internal laws of the State of
Minnesota.

 

 

AMERICAN EQUITY INVESTMENT LIFE
HOLDING COMPANY

 

 

 

By:

/s/ Wendy L. Carlson

 

 

 

 

Title:

CFO & General Counsel

 

 

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

 

REVOLVING NOTE

 

$20,000,000

Minneapolis, Minnesota: September 22, 2004

 

FOR VALUE RECEIVED, the undersigned AMERICAN EQUITY INVESTMENT LIFE HOLDING
COMPANY, an Iowa corporation (the “Borrower”), promises to pay to the order of
LaSALLE NATIONAL BANK (the “Bank”), on the Revolving Termination Date, or other
due date or dates determined under the Credit Agreement hereinafter referred to,
the principal sum of TWENTY MILLION DOLLARS ($20,000,000), or if less, the then
aggregate unpaid principal amount of the Revolving Loans (as such terms are
defined in the Credit Agreement) as may be made by the Bank under the Credit
Agreement.  All Revolving Loans and all payments of principal shall be recorded
by the holder in its records which records shall be conclusive evidence of the
subject matter thereof, absent manifest error.

 

The Borrower further promises to pay to the order of the Bank interest on the
aggregate unpaid principal amount hereof from time to time outstanding from the
date hereof until paid in full at the rates per annum which shall be determined
in accordance with the provisions of the Credit Agreement.  Accrued interest
shall be payable on the dates specified in the Credit Agreement.

 

All payments of principal and interest under this Note shall be made in lawful
money of the United States of America in immediately available funds at the
office of U.S. Bank National Association, at 800 Nicollet Mall, Minneapolis,
Minnesota 55402, or at such other place as may be designated by the Agent to the
Borrower in writing.

 

This Note is one of the Revolving Notes and Notes referred to in, and evidences
indebtedness incurred under, a Credit Agreement dated as of September 22, 2004
(herein, as it may be amended, modified or supplemented from time to time,
called the “Credit Agreement”) among the Borrower, the Banks, as defined therein
(including the Bank) and U.S. Bank National Association, as Agent, to which
Credit Agreement reference is made for a statement of the terms and provisions
thereof, including those under which the Borrower is permitted and required to
make prepayments and repayments of principal of such indebtedness and under
which such indebtedness may be declared to be immediately due and payable.

 

All parties hereto, whether as makers, endorsers or otherwise, severally waive
presentment, demand, protest and notice of dishonor in connection with this
Note.

 

This Note is made under and governed by the internal laws of the State of
Minnesota.

 

 

AMERICAN EQUITY INVESTMENT LIFE
HOLDING COMPANY

 

 

 

By:

/s/ Wendy L. Carlson

 

 

 

 

Title:

CFO & General Counsel

 

 

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

 

REVOLVING NOTE

 

$10,000,000

Minneapolis, Minnesota: September 22, 2004

 

FOR VALUE RECEIVED, the undersigned AMERICAN EQUITY INVESTMENT LIFE HOLDING
COMPANY, an Iowa corporation (the “Borrower”), promises to pay to the order of
WEST BANK (the “Bank”), on the Revolving Termination Date, or other due date or
dates determined under the Credit Agreement hereinafter referred to, the
principal sum of TEN MILLION DOLLARS ($10,000,000), or if less, the then
aggregate unpaid principal amount of the Revolving Loans (as such terms are
defined in the Credit Agreement) as may be made by the Bank under the Credit
Agreement.  All Revolving Loans and all payments of principal shall be recorded
by the holder in its records which records shall be conclusive evidence of the
subject matter thereof, absent manifest error.

 

The Borrower further promises to pay to the order of the Bank interest on the
aggregate unpaid principal amount hereof from time to time outstanding from the
date hereof until paid in full at the rates per annum which shall be determined
in accordance with the provisions of the Credit Agreement.  Accrued interest
shall be payable on the dates specified in the Credit Agreement.

 

All payments of principal and interest under this Note shall be made in lawful
money of the United States of America in immediately available funds at the
office of U.S. Bank National Association, at 800 Nicollet Mall, Minneapolis,
Minnesota 55402, or at such other place as may be designated by the Agent to the
Borrower in writing.

 

This Note is one of the Revolving Notes and Notes referred to in, and evidences
indebtedness incurred under, a Credit Agreement dated as of September 22, 2004
(herein, as it may be amended, modified or supplemented from time to time,
called the “Credit Agreement”) among the Borrower, the Banks, as defined therein
(including the Bank) and U.S. Bank National Association, as Agent, to which
Credit Agreement reference is made for a statement of the terms and provisions
thereof, including those under which the Borrower is permitted and required to
make prepayments and repayments of principal of such indebtedness and under
which such indebtedness may be declared to be immediately due and payable.

 

All parties hereto, whether as makers, endorsers or otherwise, severally waive
presentment, demand, protest and notice of dishonor in connection with this
Note.

 

This Note is made under and governed by the internal laws of the State of
Minnesota.

 

 

AMERICAN EQUITY INVESTMENT LIFE
HOLDING COMPANY

 

 

 

By:

/s/ Wendy L. Carlson

 

 

 

 

Title:

CFO & General Counsel

 

 

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

 

TRANCHE B NOTE

 

$8,500,000

Minneapolis, Minnesota: September 22, 2004

 

FOR VALUE RECEIVED, the undersigned AMERICAN EQUITY INVESTMENT LIFE HOLDING
COMPANY, an Iowa corporation (the “Borrower”), promises to pay to the order of
U.S. BANK NATIONAL ASSOCIATION (the “Bank”), payable in installments in the
amounts and on due dates set forth on Schedule I attached hereto, the principal
sum of EIGHT MILLION FIVE HUNDRED THOUSAND DOLLARS ($8,500,000).

 

The Borrower further promises to pay to the order of the Bank interest on the
aggregate unpaid principal amount hereof from time to time outstanding from the
date hereof until paid in full at the rates per annum which shall be determined
in accordance with the provisions of the Credit Agreement.  Accrued interest
shall be payable on the dates specified in the Credit Agreement.

 

The Tranche B LIBOR Margin for this Note and the indebtedness evidenced hereby
is 3.00% per annum.

 

All payments of principal and interest under this Note shall be made in lawful
money of the United States of America in immediately available funds at the
office of U.S. Bank National Association, at 800 Nicollet Mall., Minneapolis,
Minnesota 55402, or at such other place as may be designated by the Agent to the
Borrower in writing.

 

This Note is one of the Tranche B Notes and the Notes referred to in, and
evidences indebtedness incurred under, a Credit Agreement dated as of September
22, 2004 (herein, as it may be amended, modified or supplemented from time to
time, called the “Credit Agreement”) among the Borrower, the Banks, as defined
therein (including the Bank) and U.S. Bank National Association, as Agent, to
which Credit Agreement reference is made for a statement of the terms and
provisions thereof, including those under which the Borrower is permitted and
required to make prepayments and repayments of principal of such indebtedness
and under which such indebtedness may be declared to be immediately due and
payable.

 

All parties hereto, whether as makers, endorsers or otherwise, severally waive
presentment, demand, protest and notice of dishonor in connection with this
Note.

 

This Note is made under and governed by the internal laws of the State of
Minnesota.

 

 

AMERICAN EQUITY INVESTMENT LIFE
HOLDING COMPANY

 

 

 

By:

/s/ Wendy L. Carlson

 

 

 

 

Title:

CFO & General Counsel

 

 

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

 

Schedule I to
Tranche B Note in the original
principal amount of $8,500,000

 

Principal of this Note shall be payable in installments of $425,000 each, due on
the last day of March, June, September and December of each year, commencing on
December 31, 2004, with a final principal payment due on September 30, 2009
equal in principal amount to the outstanding principal balance hereunder on such
date, if different from such other installments.

 

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