Exhibit 10.32
Execution Copy
 
$220,000,000
CREDIT AGREEMENT
dated as of January 31, 2007
among
AFFIRMATIVE INSURANCE HOLDINGS, INC.,
as Borrower
THE LENDERS PARTY HERETO
and
CREDIT SUISSE, CAYMAN ISLANDS BRANCH
as Administrative Agent and Collateral Agent
 
CREDIT SUISSE SECURITIES (USA) LLC,
as Sole Bookrunner and Sole Lead Arranger
 

 

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

 

TABLE OF CONTENTS

              PAGE
ARTICLE I.
       
 
       
Definitions
       
 
       
SECTION 1.01. Defined Terms
    1  
SECTION 1.02. Terms Generally
    32  
SECTION 1.03. Classification of Loans and Borrowings
    33  
SECTION 1.04. Pro Forma Calculations
    33  
 
       
ARTICLE II.
       
 
       
The Credits
       
 
       
SECTION 2.01. Commitments
    33  
SECTION 2.02. Loans
    34  
SECTION 2.03. Borrowing Procedure
    36  
SECTION 2.04. Repayment of Loans; Evidence of Debt
    36  
SECTION 2.05. Fees
    37  
SECTION 2.06. Interest on Loans
    38  
SECTION 2.07. Default Interest
    38  
SECTION 2.08. Alternate Rate of Interest
    39  
SECTION 2.09. Termination and Reduction of Commitments
    39  
SECTION 2.10. Conversion and Continuation of Borrowings
    40  
SECTION 2.11. Repayment of Term Borrowings
    41  
SECTION 2.12. Prepayment
    42  
SECTION 2.13. Mandatory Prepayments
    43  
SECTION 2.14. Reserve Requirements; Change in Circumstances
    45  
SECTION 2.15. Change in Legality
    46  
SECTION 2.16. Indemnity
    47  
SECTION 2.17. Pro Rata Treatment
    47  
SECTION 2.18. Sharing of Setoffs
    48  
SECTION 2.19. Payments
    48  
SECTION 2.20. Taxes
    49  
SECTION 2.21. Assignment of Commitments Under Certain Circumstances; Duty to
Mitigate
    50  
SECTION 2.22. Swingline Loans
    52  
SECTION 2.23. Letters of Credit
    53  
SECTION 2.24. Incremental Facilities
    57  
SECTION 2.25. Extension of Revolving Credit Maturity Date
    60  

i

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

 

              PAGE
ARTICLE III.
       
 
       
Representations and Warranties
       
 
       
SECTION 3.01. Organization; Powers
    61  
SECTION 3.02. Authorization; No Conflicts
    62  
SECTION 3.03. Enforceability
    62  
SECTION 3.04. Governmental Approvals
    62  
SECTION 3.05. Financial Statements
    62  
SECTION 3.06. No Material Adverse Change
    63  
SECTION 3.07. Title to Properties; Possession Under Leases
    63  
SECTION 3.08. Subsidiaries
    65  
SECTION 3.09. Litigation; Compliance with Laws
    65  
SECTION 3.10. Agreements
    66  
SECTION 3.11. Federal Reserve Regulations
    66  
SECTION 3.12. Investment Company Act
    66  
SECTION 3.13. Use of Proceeds
    66  
SECTION 3.14. Tax Returns
    67  
SECTION 3.15. No Material Misstatements; Acquisition Documentation
    67  
SECTION 3.16. Employee Benefit Plans
    67  
SECTION 3.17. Environmental Matters
    68  
SECTION 3.18. Insurance
    69  
SECTION 3.19. Security Documents
    69  
SECTION 3.20. Location of Real Property
    70  
SECTION 3.21. Labor Matters
    70  
SECTION 3.22. Liens
    70  
SECTION 3.23. Intellectual Property
    70  
SECTION 3.24. Solvency
    70  
SECTION 3.25. Acquisition Documentation
    71  
SECTION 3.26. Permits
    71  
SECTION 3.27. Reinsurance Agreements
    71  
SECTION 3.28. Premium Finance Agreements
    72  
SECTION 3.29. Senior Indebtedness
    72  
SECTION 3.30. Closing Date Inactive Subsidiaries
    72  
 
       
ARTICLE IV.
       
 
       
Conditions of Lending
       
 
       
SECTION 4.01. All Credit Events
    72  
SECTION 4.02. First Credit Event
    73  

ii

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

 

              PAGE
ARTICLE V.
       
 
       
Affirmative Covenants
       
SECTION 5.01. Existence; Businesses and Properties
    78  
SECTION 5.02. Insurance
    79  
SECTION 5.03. Obligations and Taxes
    79  
SECTION 5.04. Financial Statements, Reports, etc.
    79  
SECTION 5.05. Litigation and Other Notices
    82  
SECTION 5.06. Information Regarding Collateral
    83  
SECTION 5.07. Maintaining Records; Access to Properties and Inspections;
Environmental Assessments
    83  
SECTION 5.08. Use of Proceeds
    84  
SECTION 5.09. Additional Collateral, etc
    84  
SECTION 5.10. Further Assurances
    87  
SECTION 5.11. Interest Rate Protection
    88  
SECTION 5.12. Maintain Reinsurance
    88  
SECTION 5.13. Tax Sharing Arrangements
    88  
 
       
ARTICLE VI.
       
 
       
Negative Covenants
       
 
       
SECTION 6.01. Indebtedness
    89  
SECTION 6.02. Liens
    90  
SECTION 6.03. Sale and Lease-Back Transactions
    92  
SECTION 6.04. Investments, Loans and Advances
    92  
SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions
    93  
SECTION 6.06. Restricted Payments; Restrictive Agreements
    94  
SECTION 6.07. Transactions with Affiliates
    95  
SECTION 6.08. Business of the Borrower and Subsidiaries; Limitation on Hedging
Agreements
    95  
SECTION 6.09. Other Indebtedness and Agreements; Amendments to Acquisition
Documentation
    96  
SECTION 6.10. Capital Expenditures
    97  
SECTION 6.11. Interest Coverage Ratio
    97  
SECTION 6.12. Leverage Ratio
    98  
SECTION 6.13. Minimum Risk-Based Capital Ratio
    99  
SECTION 6.14. Combined Ratio
    99  
SECTION 6.15. Fixed Charge Coverage Ratio
    99  
SECTION 6.16. Consolidated Net Worth
    99  
SECTION 6.17. Fiscal Year
    99  
 
       
ARTICLE VII. Events of Default
       
 
       
ARTICLE VIII.
       
 
       
The Agents and the Arranger
       

iii

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

 

              PAGE
ARTICLE IX.
       
 
       
Miscellaneous
       
 
       
SECTION 9.01. Notices
    105  
SECTION 9.02. Survival of Agreement
    106  
SECTION 9.03. Binding Effect
    106  
SECTION 9.04. Successors and Assigns
    106  
SECTION 9.05. Expenses; Indemnity
    110  
SECTION 9.06. Right of Setoff
    111  
SECTION 9.07. Applicable Law
    111  
SECTION 9.08. Waivers; Amendment
    112  
SECTION 9.09. Interest Rate Limitation
    113  
SECTION 9.10. Entire Agreement
    113  
SECTION 9.11. WAIVER OF JURY TRIAL
    113  
SECTION 9.12. Severability
    113  
SECTION 9.13. Counterparts
    114  
SECTION 9.14. Headings
    114  
SECTION 9.15. Jurisdiction; Consent to Service of Process
    114  
SECTION 9.16. Confidentiality
    114  
SECTION 9.17. Delivery of Lender Addenda
    115  

Exhibits and Schedules

     
Exhibit A
  Form of Administrative Questionnaire
Exhibit B
  Form of Affiliate Subordination Agreement
Exhibit C
  Form of Assignment and Acceptance
Exhibit D
  Form of Borrowing Request
Exhibit E
  Form of Guarantee and Collateral Agreement
Exhibit F
  Form of Lender Addendum
Exhibit G
  Form of Mortgage (Owned and Leased Real Property)
Exhibit H
  Form of Perfection Certificate
Exhibit I
  Form of Non-Bank Certificate
Exhibit J
  Form of Opinion of McDermott Will & Emery
Exhibits K-1, K-2, K-3
  Forms of Premium Finance Agreements

     
Schedule 1.01(a)
  Mortgaged Properties
Schedule 1.01(b)
  Subsidiary Guarantors
Schedule 3.08
  (a)Subsidiaries
Schedule 3.08(b)
  Additional Prohibitions and Restrictions
Schedule 3.09
  Litigation
Schedule 3.17
  Environmental Matters

iv

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

 

     
Schedule 3.18
  Insurance
Schedule 3.19(a)
  UCC Filing Offices
Schedule 3.19(c)
  Mortgage Filing Offices
Schedule 3.20
  Owned and Leased Real Property
Schedule 3.25
  Acquisition Documentation
Schedule 3.26
  Regulated Insurance Subsidiary Permits
Schedule 6.01
  Existing Indebtedness
Schedule 6.02
  Existing Liens
Schedule 6.04
  Existing Investments

v

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

 

     CREDIT AGREEMENT dated as of January 31, 2007 (this “Agreement”), among
AFFIRMATIVE INSURANCE HOLDINGS, INC., a Delaware corporation, (the “Borrower”),
the LENDERS from time to time party hereto, and CREDIT SUISSE, CAYMAN ISLANDS
BRANCH as administrative agent (in such capacity and together with its
successors, the “Administrative Agent”).
     The parties hereto agree as follows:
ARTICLE I.
Definitions
     SECTION 1.01. Defined Terms. As used in this Agreement, the following terms
shall have the meanings specified below:
     “2004 Debentures” shall mean the $30,928,000 aggregate principal amount of
Junior Subordinated Debt Securities due 2035 issued by Borrower to Affirmative
Trust I, as the same may be amended, supplemented or otherwise modified from
time to time in accordance with this Agreement.
     “2005 Debentures” shall mean the $25,774,000 aggregate principal amount of
Junior Subordinated Debt Securities due 2035 issued by Borrower to Affirmative
Trust II, as the same may be amended, supplemented or otherwise modified from
time to time in accordance with this Agreement.
     “ABR”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Alternate Base Rate.
     “Acquired Entity” shall have the meaning assigned to such term in the
definition of Permitted Acquisition.
     “Acquisition” shall mean the acquisition by the Borrower pursuant to the
Purchase Agreement of all the Equity Interests in USAgencies from the Sellers,
with the Sellers receiving an aggregate amount of $200,000,000 in cash (the
“Acquisition Consideration”).
     “Acquisition Consideration” shall have the meaning assigned to such term in
the definition of “Acquisition”.
     “Acquisition Documentation” shall mean, collectively, the Purchase
Agreement and all schedules, exhibits, annexes and amendments thereto and all
side letters and agreements affecting the terms thereof or entered into in
connection therewith, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with this Agreement.
     “Acquisition Transactions” shall mean, collectively, (a) the Acquisition,
including the payment of the Acquisition Consideration, (b) the obtaining by the
Borrower of the Facility provided for by this Agreement, (c) the repayment by
the Borrower of all amounts outstanding under the Existing Credit Facilities,
the termination of the Existing Credit Facilities and, in each

 

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

 

case, the release of all Liens and guarantees granted in respect thereof, in
each case in a manner satisfactory to the Administrative Agent and (d) the
payment of fees and expenses incurred in connection with the foregoing.
     “Adjusted Book Value” shall mean, at the applicable date, the Book Value on
such date adjusted to disregard the positive or negative effects, net of taxes,
of (a) unrealized gains or losses accruing on the investment portfolio after
June 30, 2006, (b) any losses or expenses that are the result of a natural
catastrophe occurring after the effective date of the Purchase Agreement,
(c) any claim settlement of the business interruption insurance claim currently
being negotiated with Hartford Insurance Company recognized after the effective
date of the Purchase Agreement, (d) any prior treaty year ceding commission
adjustments paid or payable by GMAC RE Corporation (“GMAC”) and recorded after
the effective date of the Purchase Agreement, (e) any current treaty year ceding
commission adjustments resulting from a change in the commission rate that are
paid or payable by GMAC and recorded after the effective date of the Purchase
Agreement, and (f) after the tax effect of any Transaction Expenses (as defined
in the Purchase Agreement) to the extent such expenses have reduced Book Value
prior to the applicable date.
     “Adjusted LIBO Rate” shall mean, with respect to any Eurodollar Borrowing
for any Interest Period, an interest rate per annum equal to the product of
(a) the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves.
     “Administrative Agent” shall have the meaning assigned to such term in the
preamble.
     “Administrative Agent Fees” shall have the meaning assigned to such term in
Section 2.05(b).
     “Administrative Questionnaire” shall mean an Administrative Questionnaire
in the form of Exhibit A, or such other form as may be supplied from time to
time by the Administrative Agent.
     “Affiliate” shall mean, when used with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the person
specified; provided, however, that, for purposes of Section 6.07. , the term
“Affiliate” shall also include any person that directly or indirectly owns 10%
or more of any class of Equity Interests of the person specified or that is an
officer or director of the person specified.
     “Affiliate Subordination Agreement” shall mean an Affiliate Subordination
Agreement in the form of Exhibit B pursuant to which intercompany obligations
and advances owed by any Loan Party are subordinated to the Obligations.
     “Affirmative Intercompany Tax Agreement” shall have the meaning assigned to
such term in Section 5.13.
     “Affirmative Trust I” shall mean Affirmative Insurance Holdings Statutory
Trust I, a special purpose statutory Delaware business trust established by
Borrower, of which Borrower holds all the common securities, which purchased
from Borrower the 2004 Debentures.

2

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

 

     “Affirmative Trust II” shall mean Affirmative Insurance Holdings Statutory
Trust II, a special purpose statutory Delaware business trust established by
Borrower, of which Borrower holds all the common securities, which purchased
from Borrower the 2005 Debentures.
     “Agents” shall have the meaning assigned to such term in Article VIII.
     “Aggregate Revolving Credit Exposure” shall mean the aggregate amount of
the Lenders’ Revolving Credit Exposures.
     “Agreement” shall have the meaning assigned to such term in the preamble.
     “Alternate Base Rate” shall mean, for any day, a rate per annum equal to
the greater of (a) the Prime Rate in effect on such day and (b) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective as of the opening of business on the effective
date of such change in the Prime Rate or the Federal Funds Effective Rate,
respectively.
     “A.M. Best” shall mean A.M. Best & Company, Inc.
     “Applicable Margin” shall mean, (y) with respect to the Loans that are
Eurodollar Loans, 3.50% per annum and (z) with respect to Loans that are ABR
Loans, 2.50 % per annum.
     “Approved Premium Finance Facility” shall means any line or lines of credit
with an aggregate principal amount of not greater than $50,000,000, entered into
by Premium Finance Co., the proceeds of which are used solely to fund loans to
retail customers who are purchasing nonstandard automobile insurance from any
Regulated Insurance Subsidiary of the Borrower and which such loans are secured
by the unearned portion of the insurance premiums being so financed; provided
that (a) such Approved Premium Finance Facility may be secured solely by the
assets of the Premium Finance Co. (which may include, without limitation, a
pledge of eligible accounts receivable of the Premium Finance Co., as well as
the rights under such accounts receivable to insurance policies, proceeds
thereof and refunds of unearned premiums thereunder pledged by insurance
policyholders financed by the borrowers under any such Approved Premium Finance
Facility); (b) such Approved Premium Finance Facility shall not be secured by
any Equity Interests of Borrower or any Subsidiary thereof (including, without
limitation, Premium Finance Co.); (c) such Approved Premium Finance Facility
shall not be secured by the assets of Borrower or any Subsidiary thereof (other
than as provided for in clause (a) above); (d) such Approved Premium Finance
Facility shall not be guaranteed by any Subsidiary of Borrower (other than
Premium Finance Co. and its Subsidiaries); (e) such Approved Premium Finance
Facility shall not be guaranteed by any Regulated Insurance Subsidiary; (f) such
Approved Premium Finance Facility shall not be exchangeable or convertible into
Indebtedness or Equity Interests of Borrower or any Subsidiary thereof; (g) such
Approved Premium Finance Facility shall not prohibit, restrict or impose any
condition upon the ability of any Subsidiary (including any Premium Finance Co.
or any of its Subsidiaries) to pay dividends or other distributions with respect
to any of its Equity Interests or to make or repay loans or advances to the
Borrower or any other Subsidiary (including any Premium Finance Co. or any of
its Subsidiaries) or to Guarantee Indebtedness of the Borrower or any other
Subsidiary under this Agreement or the other Loan Documents; and (h) the
documents and other agreements

3

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

 

executed by Premium Finance Co. in connection with such Approved Premium Finance
Facility shall otherwise be reasonably satisfactory in form and substance to the
Administrative Agent.
     “Arranger” shall mean CS Securities acting in its capacity as sole
bookrunner and sole lead arranger for the Facilities.
     “Asset Sale” shall mean the sale, lease, sub-lease, sale and leaseback,
assignment, conveyance, transfer, issuance or other disposition (by way of
merger, casualty, condemnation or otherwise) by the Borrower or any Subsidiary
(other than Premium Finance Co.) to any person other than the Borrower or any
Subsidiary Guarantor of (a) any Equity Interests of any of the Subsidiaries or
(b) any other assets of the Borrower or any of the Subsidiaries, including
Equity Interests of any person that is not a Subsidiary (other than inventory,
obsolete or worn out assets, scrap and Permitted Investments, in each case
disposed of in the ordinary course of business); provided that any asset sale or
series of related asset sales described in clause (b) above having a value not
in excess of, in the aggregate, $1,000,000 annually, shall be deemed not to be
an “Asset Sale” for purposes of this Agreement.
     “Assignment and Acceptance” shall mean an assignment and acceptance entered
into by a Lender and an assignee (with the consent of any person whose consent
is required by Section 9.04. ), and accepted by the Administrative Agent, in the
form of Exhibit C or such other form as shall be approved by the Administrative
Agent.
     “Authorized Control Level” shall mean “Authorized Control Level Risk-Based
Capital” as defined by the NAIC as of December 31, 1994, as such definition has
been amended from time to time, and as applied in the context of the Risk-Based
Capital Guidelines promulgated by the NAIC.
     “Benefit Plan” shall mean any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or
Section 412 of the Tax Code or Section 307 of ERISA, and in respect of which the
Borrower or any ERISA Affiliate is (or, if such plan were terminated, would
under Section 4069 of ERISA be deemed to be) an “employer” as defined in
Section 3(5) of ERISA.
     “Board” shall mean the Board of Governors of the Federal Reserve System of
the United States of America.
     “Book Value” shall mean at the applicable date an amount equal to all of
the assets of USAgencies minus all of the liabilities of USAgencies as set forth
on the consolidated balance sheet of USAgencies at such date, prepared in
accordance with GAAP consistent with past practices.
     “Borrower” shall have the meaning assigned to such term in the preamble.
     “Borrower Subordinated Notes” shall mean (i) the 2004 Debentures and
(ii) the 2005 Debentures.
     “Borrower Trust Preferred Note Documents” shall mean each of the indentures
under which each of the Borrower Subordinated Notes is issued and all other
instruments, agreements

4

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

 

and other documents evidencing or governing each of the Borrower Subordinated
Notes or providing any Guarantee or other right in respect thereof, as the same
may be amended, supplemented or otherwise modified from time to time in
accordance with this Agreement.
     “Borrowing” shall mean (a) Loans of the same Class and Type made, converted
or continued on the same date and, in the case of Eurodollar Loans, as to which
a single Interest Period is in effect, or (b) a Swingline Loan.
     “Borrowing Request” shall mean a request by the Borrower in accordance with
the terms of Section 2.03. and substantially in the form of Exhibit D, or such
other form as shall be approved by the Administrative Agent.
     “Breakage Event” shall have the meaning assigned to such term in
Section 2.16.
     “Business” shall mean the businesses of the Borrowers and its subsidiaries
limited to the provision of nonstandard automobile insurance and the premium
finance thereof, including businesses incidental thereto.
     “Business Day” shall mean any day other than a Saturday, Sunday or day on
which commercial banks in New York City are authorized or required by law to
close; provided, however, that when used in connection with a Eurodollar Loan
(including with respect to all notices and determinations in connection
therewith and any payments of principal, interest or other amounts thereon), the
term “Business Day” shall also exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market.
     “Capital Expenditures” shall mean, for any period, with respect to any
person, (a) the additions to property, plant and equipment and other capital
expenditures of such person and its consolidated subsidiaries that are (or
should be) set forth in a consolidated statement of cash flows of such person
for such period prepared in accordance with GAAP and (b) Capital Lease
Obligations incurred by such person and its consolidated subsidiaries during
such period.
     “Capital Lease Obligations” of any person shall mean the obligations of
such person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such person under GAAP,
and the amount of such obligations at any time shall be the capitalized amount
thereof at such time determined in accordance with GAAP.
     “Cash Capital Expenditures” shall mean any Capital Expenditures the source
of funds for which was not or is not proceeds of any Indebtedness (whether or
not subordinate to any other obligation of any person).
     “Cash Flow” shall mean, for any relevant 12 month fiscal period, the sum,
without duplication, of (i) for the Borrower, USAgencies and their respective
subsidiaries (other than the Regulated Insurance Subsidiaries and other than
Premium Finance Co. and its Subsidiaries) Consolidated EBITDA for the relevant
period, (ii) all state and federal income tax expenses incurred by the Regulated
Insurance Subsidiaries for the relevant period, and (iii) the lesser of
(a) combined statutory earnings for all Regulated Insurance Subsidiaries for the
December 31st

5

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

 

calendar period most recently ended prior to the relevant period, and (b) the
sum of 10% of surplus of all Regulated Insurance Subsidiaries as of the last day
of the December 31st calendar period most recently ended prior to the relevant
period, provided that for purposes of calculating Cash Flow for any period
(A) the Cash Flow of USAgencies and of any other Acquired Entity acquired by the
Borrower or any Subsidiary (other than Premium Finance Co.) pursuant to a
Permitted Acquisition during such period shall be included on a pro forma basis
for such period (assuming the consummation of such acquisition and the
incurrence or assumption of any Indebtedness in connection therewith occurred as
of the first day of such period) and (B) the Cash Flow of any person or line of
business sold or otherwise disposed of by the Borrower or any Subsidiary during
such period for shall be excluded for such period (assuming the consummation of
such sale or other disposition and the repayment of any Indebtedness in
connection therewith occurred as of the first day of such period). The preceding
formula shall be adjusted on a proportionate basis for any relevant period that
is not a fiscal twelve month period.
     A “Change in Control” shall be deemed to have occurred if (a) the Permitted
Holders shall fail to own directly or indirectly, beneficially and of record,
Equity Interests representing at least the Required Minimum Percentage of the
aggregate ordinary voting power and aggregate equity value represented by the
issued and outstanding Equity Interests in the Borrower, (b) any “person” or
“group” (within the meaning of Rule 13d5 of the Securities Exchange Act of 1934
as in effect on the date hereof) other than the Permitted Holders shall own
directly or indirectly, beneficially or of record, Equity Interests representing
a greater percentage of either the aggregate ordinary voting power or the
aggregate equity value represented by the issued and outstanding Equity
Interests in the Borrower then held, directly or indirectly, beneficially and of
record, by the Permitted Holders; (c) a majority of the seats (other than vacant
seats) on the board of directors of the Borrower shall at any time be occupied
by persons who are not Continuing Directors; (d) Borrower shall at any time fail
to own directly or indirectly, beneficially and of record, 100% of each class of
issued and outstanding Equity Interests in each of its direct whollyowned
Subsidiaries free and clear of all Liens (other than Liens created by the
Guarantee and Collateral Agreement); or (e) any change of control (or similar
event, however denominated) with respect to the Borrower or any Subsidiary shall
occur under and as defined in the Subordinated Debt Documents, any Qualified
Additional Subordinated Debt Documents, or any Approved Premium Financing to
which the Borrower or any Subsidiary is a party, provided, that a Change in
Control shall not be deemed to have occurred as a result of the Acquisition and
other Acquisition Transactions.
     “Change in Law” shall mean (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender or the Issuing
Bank (or, for purposes of Section 2.14. , by any lending office of such Lender
or by such Lender’s or Issuing Bank’s holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
     “Charges” shall have the meaning assigned to such term in Section 9.09.
     “Class”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Term
Loans or Swingline Loans

6

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

 

and, when used in reference to any Commitment, refers to whether such Commitment
is a Revolving Credit Commitment, Term Loan Commitment or Swingline Commitment.
     “Closing Date” shall mean January 31, 2007.
     “Closing Date Material Adverse Effect” shall mean (i) a material adverse
condition or material adverse change in or materially affecting (a) the
business, assets, liabilities, operations, condition (financial or otherwise),
operating results, Projections or prospects of the Borrower and its
Subsidiaries, taken as a whole (excluding USAgencies and its Subsidiaries), or
(b) the validity or enforceability of any of the Loan Documents or the rights
and remedies of the Administrative Agent, the Collateral Agent or the Secured
Parties thereunder; provided, however, that the following shall be excluded from
a determination of whether such a material adverse change has occurred: any
change or effect relating to (A) the effects or conditions or events that are
generally applicable to (1) the industries in which the Borrower or its
subsidiaries operate, which do not have a materially disproportionate effect
(relative to other industry participants) on the Borrower and its subsidiaries,
taken as a whole (excluding USAgencies and its subsidiaries), or (2) the
capital, financial, banking or currency markets; (B) changes in applicable
accounting regulations and principles resulting from changes in GAAP or SAP,
which do not have a materially disproportionate effect (relative to other
industry participants) on the Borrower and its subsidiaries, taken as a whole
(excluding USAgencies and its subsidiaries); (C) any change resulting from the
announcement of the transactions described in the Commitment Letter or the
Transactions; (D) national or international political or social conditions,
including the engagement by the United States in hostilities, whether or not
pursuant to the declaration of a nation emergency or war, or the occurrence of
any military or terrorist attack upon the United States, or any of its
territories, possessions, or diplomatic or consular offices or upon any military
installation, equipment or personnel of the United States, which do not have a
materially disproportionate effect (relative to other industry participants) on
the Borrower and its subsidiaries, taken as a whole (excluding USAgencies and
its subsidiaries); or (E) any event that has or is reasonably expected to have a
negative impact of less than 15% on the earnings of the Borrower and its
subsidiaries, taken as a whole (excluding USAgencies and its subsidiaries) or
(ii) any effect, change, development, state of facts, or circumstance that
individually or taken as a whole with all other such effects, changes,
developments, states of fact, or circumstances has or is reasonably expected to
have a material adverse effect on (a) the business, assets, liabilities,
financial condition or results of operations of USAgencies and its Subsidiaries
taken as a whole or (b) the ability of the Borrower to operate USAgencies and
its Subsidiaries or conduct the Business immediately after the closing of the
Acquisition in substantially the same manner as such operations were being
conducted by USAgencies and its Subsidiaries prior to the closing of the
Acquisition (disregarding for purposes of this clause (a) any specific effect,
change, development, state of facts, or circumstance existing or occurring prior
to the Closing Date that is solely attributable to or solely impacts the
Borrower or its affiliates and is not connected in any way to the operation of
USAgencies and its Subsidiaries or the conduct of the Business prior to the
Closing Date), which shall include, without limitation, any effect, change,
development, state of facts, or circumstance that has resulted in the Adjusted
Book Value falling below the MAE Book Value as of the applicable date for such
MAE Book Value or is reasonably expected to result in a 10% reduction in the
projected consolidated revenues of USAgencies and its subsidiaries for fiscal
year ended December 31, 2007 of $104,700,000; provided that any such effect,
change, development, state of facts or circumstances described above
attributable to or

7

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

 

resulting from any action or omission of USAgencies or any of its subsidiaries
taken with the express prior written consent of the Borrower shall not be
considered for purposes of determining whether a Closing Date Material Adverse
Effect exists.
     “Collateral” shall mean all property and assets of the Loan Parties, now
owned or hereafter acquired, upon which a Lien is purported to be created by any
Security Document, and shall include the Mortgaged Properties.
     “Collateral Agent” shall have the meaning assigned to such term in the
preamble.
     “Combined Ratio” means the (a) Loss Ratio plus the (b) Expense Ratio.
     “Combined Risk-Based Capital Ratio” shall mean the ratio (expressed as a
percentage), at any time, of (i) the sum, without duplication, of the Total
Adjusted Capital of each Regulated Insurance Subsidiary to (ii) the sum, without
duplication, of the Authorized Control Level of each Regulated Insurance
Subsidiary.
     “Commitment” shall mean, with respect to any Lender, such Lender’s
Revolving Credit Commitment, Term Loan Commitment and Swingline Commitment.
     “Commitment Fee” shall have the meaning assigned to such term in
Section 2.05. (a) .
     “Commitment Fee Rate” shall mean a rate per annum equal to 1/2 of 1%.
     “Commitment Letter” shall mean the Commitment Letter dated as of October 5,
2006, among the Borrower, CS and CS Securities.
     “Confidential Information Memorandum” shall mean the Confidential
Information Memorandum of the Borrower dated November, 2006.
     “Consolidated EBITDA” shall mean, for any period, Consolidated Net Income
for such period plus (a) without duplication and to the extent deducted in
determining such Consolidated Net Income, the sum of (i) Consolidated Interest
Expense for such period, (ii) consolidated income tax expense for such period,
(iii) all amounts attributable to depreciation and amortization for such period,
(iv) any non-cash charges, (other than the write-down of current assets,
provided that, the Borrower may include as a non-cash charge a write-down of
uncollected accounts receivable in an amount up to $7,200,000 that occurs during
the fourth quarter of fiscal year 2006 or any quarter of fiscal year 2007)
(v) fees, costs and expenses related to the consummation of the Acquisition of
up to $2,000,000 in the aggregate incurred on or prior to June 30, 2007 and (vi)
unusual or non-recurring charges in an amount not to exceed $9,000,000 for
periods ending in fiscal years 2006 and 2007 and $5,000,000 for periods ending
in any fiscal year thereafter (provided that to the extent that all or any
portion of the income of any person is excluded from Consolidated Net Income
pursuant to the definition thereof for all or any portion of such period any
amounts set forth in the preceding clauses (i) through (iv) that are
attributable to such person shall not be included for purposes of this
definition for such period or portion thereof), and minus (b) without
duplication (i) all cash payments made during such period on account of
reserves, restructuring charges and other non-cash charges added to Consolidated
Net Income pursuant to clause (a)(iv) above in a previous period and (ii) to the

8

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

 

extent included in determining such Consolidated Net Income, any extraordinary
gains and all non-cash items of income for such period, all determined on a
consolidated basis in accordance with GAAP; provided that for purposes of
calculating Consolidated EBITDA for any period (A) the Consolidated EBITDA of
USAgencies and of any other Acquired Entity acquired by the Borrower or any
Subsidiary (other than Premium Finance Co.) pursuant to a Permitted Acquisition
during such period shall be included on a pro forma basis for such period
(assuming the consummation of such acquisition and the incurrence or assumption
of any Indebtedness in connection therewith occurred as of the first day of such
period) and (B) the Consolidated EBITDA of any person or line of business sold
or otherwise disposed of by the Borrower or any Subsidiary during such period
for shall be excluded for such period (assuming the consummation of such sale or
other disposition and the repayment of any Indebtedness in connection therewith
occurred as of the first day of such period).
     “Consolidated Interest Expense” shall mean, for any period, the sum of
(a) the interest expense (including imputed interest expense in respect of
Capital Lease Obligations and Synthetic Lease Obligations) of the Borrower and
its Subsidiaries (other than Premium Finance Co. and its Subsidiaries) for such
period (including all commissions, discounts and other fees and charges owed by
the Borrower and the Subsidiaries (other than Premium Finance Co. and its
Subsidiaries) with respect to letters of credit and bankers’ acceptance
financing), net of interest income, in each case determined on a consolidated
basis in accordance with GAAP, plus (b) any interest accrued during such period
in respect of Indebtedness of the Borrower or any Subsidiary (other than Premium
Finance Co. and its Subsidiaries) that is required to be capitalized rather than
included in consolidated interest expense for such period in accordance with
GAAP, provided that for purposes of calculating Consolidated Interest Expense
for any period (A) the Consolidated Interest Expense of USAgencies and of any
other Acquired Entity acquired by the Borrower or any Subsidiary (other than
Premium Finance Co.) during such period shall be included on a pro forma basis
for such period (assuming the consummation of such acquisition and the
incurrence or assumption of any Indebtedness in connection therewith occurred as
of the first day of such period) and (B) the Consolidated Interest Expense of
any person or line of business sold or otherwise disposed of by the Borrower or
any Subsidiary in accordance with the terms of this Agreement during such period
shall be excluded for such period (assuming the consummation of such sale or
other disposition and the repayment of any Indebtedness in connection therewith
occurred as of the first day of such period). For purposes of the foregoing,
interest expense shall be determined after giving effect to any net payments
made or received by the Borrower or any Subsidiary (other than Premium Finance
Co. and its Subsidiaries) with respect to interest rate Hedging Agreements.
     “Consolidated Net Income” shall mean, for any period, the net income or
loss of the Borrower and the Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) the income of any Subsidiary to the extent that the declaration or
payment of dividends or similar distributions by the Subsidiary of that income
is not at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, statute, rule or governmental
regulation applicable to such Subsidiary, (b) the income or loss of any person
accrued prior to the date it becomes a Subsidiary or is merged into or
consolidated with the Borrower or any Subsidiary or the date that such person’s
assets are acquired by the Borrower or any Subsidiary, (c) the income of any
person (other than a Subsidiary) in which any other person (other than the
Borrower or a wholly owned

9

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

 

Subsidiary or any director holding qualifying shares in accordance with
applicable law) has an interest, except to the extent of the amount of dividends
or other distributions actually paid to the Borrower or a wholly owned
Subsidiary by such person during such period, and (d) any gains attributable to
sales of assets out of the ordinary course of business; provided, that there
shall be excluded from Consolidated Net Income for any period the net income or
loss of Premium Finance Co. and its Subsidiaries for such period to the extent
otherwise included in Consolidated Net Income, except to the extent actually
received in cash by Borrower or any of its Subsidiaries (other than Premium
Finance Co. or any Subsidiary thereof) during such period through dividends or
other distributions other than intercompany loans.
     “Consolidated Net Worth” shall mean the net worth of Borrower and its
Subsidiaries determined on a consolidated basis in accordance with GAAP after
appropriate deduction for any minority interests in Subsidiaries.
     “Continuing Directors” shall mean, at any time, any member of the board of
directors of Borrower who (a) was a member of such board of directors on the
Closing Date, after giving effect to the Acquisition, or (b) was nominated for
election or elected to such board of directors with the approval of a majority
of the Continuing Directors who were members of such board of directors at the
time of such nomination or election.
     “Control” shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms “Controlling” and “Controlled” shall have meanings correlative
thereto.
     “Credit Event” shall have the meaning assigned to such term in
Section 4.01.
     “CS” shall mean Credit Suisse, Cayman Islands Branch.
     “CS Securities” shall mean Credit Suisse Securities (USA) LLC.
     “Default” shall mean any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would constitute an Event of
Default.
     “dollars” or “$” shall mean lawful money of the United States of America.
     “Domestic Subsidiaries” shall mean all Subsidiaries incorporated, formed or
organized under the laws of the United States of America, any State thereof or
the District of Columbia.
     “Environmental Laws” shall mean all former, current and future Federal,
state, local and foreign laws (including common law), treaties, regulations,
rules, ordinances, codes, decrees, judgments, directives, orders (including
consent orders), and agreements in each case, relating to protection of the
environment, natural resources, human health and safety or the presence, Release
of, threatened Release, or exposure to, Hazardous Materials, or the generation,
manufacture, processing, distribution, use, treatment, storage, transport,
recycling or handling of, or the arrangement for such activities with respect
to, Hazardous Materials.

10

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

 

     “Environmental Liability” shall mean all liabilities, obligations, damages,
losses, claims, actions, suits, judgments, orders, fines, penalties, fees,
expenses and costs (including administrative oversight costs, natural resource
damages and remediation costs), whether contingent or otherwise, arising out of
or relating to (a) compliance or noncompliance with any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the Release or threatened Release of any Hazardous Materials or (e) any
contract, agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.
     “Environmental Permit” shall mean any Permit issued pursuant to any
Environmental Law.
     “Equity Interests” shall mean shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity interests in any person, or any obligations
convertible into or exchangeable for, or giving any person a right, option or
warrant to acquire, such equity interests or such convertible or exchangeable
obligations.
     “Equity Issuance” shall mean any issuance or sale by the Borrower of any
Equity Interests of the Borrower, or the receipt by the Borrower of any capital
contribution, as applicable, except in each case for (a) any issuance of
directors’ qualifying shares and (b) sales or issuances of common stock of
Borrower to management or employees of the Borrower or any Subsidiary under any
employee stock option or stock purchase plan or employee benefit plan in
existence from time to time in the ordinary course of business.
     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
     “ERISA Affiliate” shall mean any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Tax Code, or solely for purposes of
Section 302 of ERISA and Section 412 of the Tax Code, is treated as a single
employer under Section 414 of the Tax Code.
     “ERISA Event” shall mean (a) any “reportable event”, as defined in
Section 4043 of ERISA or the regulations issued thereunder, with respect to a
Benefit Plan (other than an event for which the 30-day notice period is waived);
(b) the existence with respect to any Benefit Plan of an “accumulated funding
deficiency” (as defined in Section 412 of the Tax Code or Section 302 of ERISA),
whether or not waived; (c) the filing pursuant to Section 412(d) of the Tax Code
or Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Benefit Plan; (d) the incurrence by the Borrower or
any of its ERISA Affiliates of any liability under Title IV of ERISA with
respect to the termination of any Benefit Plan or the withdrawal or partial
withdrawal of the Borrower or any of its ERISA Affiliates from any Benefit Plan
or Multiemployer Plan; (e) the receipt by the Borrower or any of its ERISA
Affiliates from the PBGC or a plan administrator of any notice relating to the
intention to terminate any Benefit Plan or Plans or to appoint a trustee to
administer any Benefit Plan; (f) the adoption of any amendment to a Benefit Plan
that would require the provision of

11

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

 

security pursuant to Section 401(a)(29) of the Tax Code or Section 307 of ERISA;
(g) the receipt by the Borrower or any of its ERISA Affiliates of any notice, or
the receipt by any Multiemployer Plan from the Borrower or any of its ERISA
Affiliates of any notice, concerning the imposition of Withdrawal Liability or a
determination that a Multiemployer Plan is, or is expected to be, insolvent or
in reorganization, within the meaning of Title IV of ERISA; (h) the occurrence
of a “prohibited transaction” with respect to which the Borrower or any of the
Subsidiaries is a “disqualified person” (within the meaning of Section 4975 of
the Tax Code) or with respect to which the Borrower or any such Subsidiary could
otherwise be liable; or (i) any other event or condition with respect to a
Benefit Plan or Multiemployer Plan that could result in liability of the
Borrower or any Subsidiary.
     “Eurodollar”, when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Adjusted LIBO Rate.
     “Event of Default” shall have the meaning assigned to such term in
Article VII.
     “Excess Cash Flow” shall mean, for any relevant twelve (12) month fiscal
period, without duplication, Cash Flow, less (i) the consolidated aggregate
amount of all Capital Expenditures for such period, including capital payments
for business expenditures and investments, such as capital lease payments,
(ii) consolidated state and federal income taxes for such period,
(iii) Consolidated Interest Expense, (iv) consolidated minimum required
principal amortization repayments actually paid in accordance with
Section 2.11(a) hereof, (v) ordinary corporate dividends made in accordance with
the terms hereof during such period, and (vi) cash consideration utilized for
Permitted Acquisitions during the relevant twelve (12) month fiscal period. The
preceding formula shall be adjusted on a pro rata basis for any relevant period
that is not a fiscal twelve (12) month period.
     “Excluded Foreign Subsidiaries” shall mean, at any time, any Foreign
Subsidiary that is (or is treated as) for United States federal income tax
purposes either (a) a corporation or (b) a pass-through entity owned directly or
indirectly by another Foreign Subsidiary that is (or is treated as) a
corporation, or any subsidiary that is prohibited by applicable law from
guaranteeing the Obligations.
     “Excluded Taxes” shall mean, with respect to the Administrative Agent, any
Lender, the Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of the Borrower hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income as a result of a present or
former connection between such recipient and the jurisdiction imposing such tax
(or any political subdivision thereof), other than any such connection arising
solely from such recipient having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or any
other Loan Document and (b) in the case of a Foreign Lender (other than an
assignee pursuant to a request by the Borrower under Section 2.21. (a) , any
United States withholding tax that is imposed on amounts payable to such Foreign
Lender at the time such Foreign Lender becomes a party to this Agreement (or
designates a new lending office) or is attributable to such Foreign Lender’s
failure to comply with Section 2.20. (d) , except to the extent that such
Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new lending office (or assignment), to receive

12

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

 

additional amounts from the Borrower with respect to such withholding tax
pursuant to Section 2.20. (a) (it being understood and agreed, for the avoidance
of doubt, that any withholding tax imposed on a Foreign Lender as a result of a
Change in Law or regulation or interpretation thereof occurring after the time
such Foreign Lender became a party to this Agreement shall not be an Excluded
Tax).
     “Existing Credit Facilities” shall mean, collectively, the Frost Credit
Facility and the Hibernia Credit Facility.
     “Existing TruPS Business Trusts” shall mean Affirmative Trust I and
Affirmative Trust II.
     “Expense Ratio” means the sum of operating expenses and depreciation and
amortization expenses less commission income and fees, divided by earned
premiums.
     “Extraordinary Receipts” means any Net Cash Proceeds received by any Loan
Party or any of their respective Subsidiaries (other than Premium Finance Co.)
not in the ordinary course of business (and not consisting of proceeds described
in Section 2.3(b), (c), (d), (e) or (f) hereof), including, without limitation,
(i) foreign, federal, state or local tax refunds, (ii) pension plan reversions,
(iii) proceeds of insurance to the extent not constituting a Recovery Event,
(iv) judgments, proceeds of settlements or other consideration of any kind in
connection with any cause of action or litigation, (v) condemnation awards (and
payments in lieu thereof) to the extent not constituting a Recovery Event, (vi)
indemnity payments in respect of the Acquisition Documentation or any other
purchase and sale agreement and related documentation in respect of any
Permitted Acquisition and (vii) any purchase price adjustment (or similar
payments) received in connection with the Acquisition Documentation any other
purchase and sale agreement and related documentation in respect of any
Permitted Acquisition.
     “Facility” shall mean each of (a) the Term Loan Commitments and the Term
Loans made thereunder (the “Term Loan Facility”) and (b) the Revolving Credit
Commitments and the extensions of credit made thereunder (the “Revolving Credit
Facility”).
     “Federal Funds Effective Rate” shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the average of
the quotations for the day for such transactions received by the Administrative
Agent from three federal funds brokers of recognized standing selected by it.
     “Fee Letter” shall mean the Fee Letter dated as of October 5, 2006, among
the Borrower, CS and CS Securities.
     “Fees” shall mean the Commitment Fees, the Administrative Agent Fees, the
L/C Participation Fees and the Issuing Bank Fees.
     “Financial Officer” of any person shall mean the chief financial officer,
principal accounting officer, treasurer or controller of such person.

13

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

 

     “Financial Reinsurance Agreement” shall mean a reinsurance agreement
covering any transaction in which any Regulated Insurance Subsidiary cedes
business that does not meet the conditions for reinsurance accounting as
provided by the Financial Accounting Standards Board in Statement of Financial
Accounting Standards No. 113, as the same may be revised, replaced, or
supplemented from time to time.
     “Fixed Charge Coverage Ratio” shall mean the ratio (rounded to two decimal
places) determined as at the last day of the most recent fiscal year of Borrower
of (a) Consolidated EBITDA for the four fiscal quarter period ended on the last
day of such fiscal year, to (b) Fixed Charges determined as at the last day of
such fiscal year.
     “Fixed Charges” means the sum of (a) Consolidated Interest Expense for the
four fiscal quarter period ended on the date of determination, plus
(b) scheduled principal payments of Indebtedness which would be classified as a
current liability on a consolidated balance sheet of Borrower and its
consolidated Subsidiaries payable during the four fiscal quarter period
beginning on the day following the date of determination, plus (c) Cash Capital
Expenditures (other than Permitted IT Capital Expenditures) actually paid by
Borrower and its consolidated Subsidiaries during the four fiscal quarter period
ended on the date of determination, plus (d) the aggregate amount of Taxes
actually paid by Borrower and its consolidated Subsidiaries during the four
fiscal quarter period ended on the date of determination, plus (e) cash
Restricted Payments actually paid by Borrower during the four fiscal quarter
period ended on the date of determination.
     “Foreign Lender” shall mean any Lender that is organized under the laws of
a jurisdiction other than that in which the Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
     “Foreign Subsidiary” shall mean any Subsidiary that is not a Domestic
Subsidiary.
     “Frost Credit Facility” shall mean the credit facility of the Borrower
under the credit agreement dated as of July 30, 2004, as amended, among the
Borrower, Frost National Bank, as a lender and as agent for all lenders, and the
other lenders party thereto.
     “GAAP” shall mean generally accepted accounting principles in the United
States.
     “Governmental Authority” shall mean the government of the United States of
America or any other nation, any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
     “Granting Lender” shall have the meaning assigned to such term in
Section 9.04. (i).
     “Guarantee” of or by any person (the “guarantor”) shall mean any
obligation, contingent or otherwise, of (a) the guarantor or (b) another person
(including any bank under a letter of credit) to induce the creation of which
the guarantor has issued a reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or having the economic effect

14

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

 

of guaranteeing any Indebtedness or other obligation of any other person (the
“primary obligor”) in any manner, whether directly or indirectly, and including
any obligation, contingent or otherwise, of the guarantor, direct or indirect,
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of such
Indebtedness or other obligation, (ii) to purchase or lease property, securities
or services for the purpose of assuring the owner of such Indebtedness or other
obligation of the payment of such Indebtedness or other obligation, (iii) to
maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation, (iv) to act as an account
party in respect of any letter of credit or letter of guaranty issued to support
such Indebtedness or obligation or (v) to otherwise assure or hold harmless the
owner of such Indebtedness or other obligation against loss in respect thereof;
provided, however, that the term “Guarantee” shall not include (x) endorsements
for collection or deposit in the ordinary course of business or (y) obligations
of Regulated Insurance Subsidiaries under Insurance Contracts, Reinsurance
Agreements or Retrocession Agreements.
     “Guarantee and Collateral Agreement” shall mean the Guarantee and
Collateral Agreement in the form of Exhibit E, to be executed and delivered by
the Borrower and each Subsidiary Guarantor.
     “Hazardous Materials” shall mean any petroleum (including crude oil or
fraction thereof) or petroleum products or byproducts, or any pollutant,
contaminant, chemical, compound, constituent, or hazardous, toxic or other
substances, materials or wastes defined, or regulated as such by, or pursuant
to, any Environmental Law, or requires removal, remediation or reporting under
any Environmental Law, including asbestos, or asbestos containing material,
radon or other radioactive material, polychlorinated biphenyls and urea
formaldehyde insulation.
     “Hedging Agreement” shall mean any agreement with respect to any swap,
forward, future or derivative transaction or option or similar agreement
involving, or settled by reference to, one or more rates, currencies, fuel or
other commodities, equity or debt instruments or securities, or economic,
financial or pricing indices or measures of economic, financial or pricing risk
or value or any similar transaction or any combination of these transactions;
provided, however, that no phantom stock or similar plan providing for payments
and on account of services provided by current or former directors, officers,
employees or consultants of the Borrower or any Subsidiary shall be a Hedging
Agreement.
     “Hibernia Credit Facility” shall mean the credit facility of under the
Second Amended and Restated Credit Agreement dated as of July 28, 2005, as
amended as of the Closing Date, among LIFCO, L.L.C., a Louisiana limited
liability company, USAgencies, Hibernia National Bank, as a lender and as agent
for all lenders, and the other parties thereto.
     “Increased Amount Date” shall have the meaning assigned to such term in
Section 2.24.
     “Increase Loan Notice” shall have the meaning assigned to such term in
Section 2.24.
     “Indebtedness” of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all

15

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

 

obligations of such person evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such person under conditional sale or other
title retention agreements relating to property or assets acquired by such
person, (d) all obligations of such person in respect of the deferred purchase
price of property or services (other than current trade accounts payable
incurred in the ordinary course of business, which for the avoidance of doubt,
shall mean trade payables that are no more than ninety (90) days outstanding
after the earlier of (i) the typical payment date or (ii) the required payment
date), (e) all obligations of such person, contingent or otherwise, to purchase,
redeem, retire or otherwise acquire for value any Equity Interests in such
person, (f) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such person, whether or not the
Indebtedness secured thereby has been assumed; provided that if such
Indebtedness has expressly not been assumed, the amount of such Indebtedness for
purposes of this Agreement shall be the lesser of (1) the amount of such
Indebtedness and (2) the fair market value of the collateral subject to such
Lien, (g) all obligations of such person under Financial Reinsurance Agreements,
(h) all Guarantees by such person of Indebtedness of others, (i) all Capital
Lease Obligations or Synthetic Lease Obligations of such person, (j) all
obligations, contingent or otherwise, of such person as an account party in
respect of letters of credit and letters of guaranty and (k) all obligations,
contingent or otherwise, of such person in respect of bankers’ acceptances. The
Indebtedness of any person shall include the Indebtedness of any other person
(including any partnership in which such person is a general partner) to the
extent such person is liable therefor as a result of such person’s ownership
interest in, or other relationship with, such other person, except to the extent
the terms of such Indebtedness provide that such person is not liable therefor.
For the avoidance of doubt, Indebtedness shall not include obligations to
employees undertaken in the ordinary course and consistent with past practice
under health or disability employee benefit programs not constituting
obligations for borrowed money.
     “Indemnified Taxes” shall mean Taxes other than Excluded Taxes and Other
Taxes.
     “Indemnitee” shall have the meaning assigned to such term in Section 9.05.
(b) .
     “Information” shall have the meaning assigned to such term in Section 9.16.
     “Installment Agreement” shall mean an agreement or arrangement (however
evidenced) pursuant to which a policyholder agrees to pay a Regulated Insurance
Subsidiary the premium cost on an insurance policy at a future date in one or
more installments, together with a service charge.
     “Insurance Business” shall mean one or more aspects of the business of
(a) selling, issuing or underwriting nonstandard personal auto insurance and
(b) selling or issuing reinsurance substantially related to the foregoing.
     “Insurance Contract” shall mean any insurance contract or policy issued by
a Regulated Insurance Subsidiary (but shall not include any Reinsurance
Agreement or Retrocession Agreement).

16

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

 

     “Insurance Regulators” shall mean, with respect to any Regulated Insurance
Subsidiary, the Governmental Authority, insurance department or similar
administrative authority or agency located in (a) each state in which such
Regulated Insurance Subsidiary is domiciled or (b) to the extent asserting
regulatory jurisdiction over such Regulated Insurance Subsidiary, the
Governmental Authority, insurance department, authority or agency in each state
in which such Regulated Insurance Subsidiary is licensed, shall include any
federal insurance regulatory department, authority or agency that may be created
and that asserts regulatory jurisdiction over such Regulated Insurance
Subsidiary.
     “Intellectual Property Collateral” shall have the meaning assigned to such
term in the Guarantee and Collateral Agreement.
     “Intellectual Property Security Agreement” shall mean all Intellectual
Property Security Agreements to be executed and delivered by the Loan Parties,
each substantially in the applicable form required by the Guarantee and
Collateral Agreement.
     “Interest Coverage Ratio” shall mean, on any date, the ratio of (a) Cash
Flow for the Borrower and its Subsidiaries (other than Premium Finance Co. and
its Subsidiaries) for the period of four consecutive fiscal quarters most
recently ended on or prior to such date, taken as one accounting period, to
(b) Consolidated Interest Expense for the Borrower its Subsidiaries (other than
Premium Finance Co. and its Subsidiaries) for the period of four consecutive
fiscal quarters ended on or prior to such date, taken as one accounting period.
     “Interest Payment Date” shall mean (a) with respect to any ABR Loan, the
last Business Day of each March, June, September and December commencing
March 30, 2007, (b) with respect to any Eurodollar Loan, the last day of the
Interest Period applicable to the Borrowing of which such Loan is a part and, in
the case of a Eurodollar Borrowing with an Interest Period of more than three
months’ duration, each day that would have been an Interest Payment Date had
successive Interest Periods of three months’ duration been applicable to such
Borrowing.
     “Interest Period” shall mean, with respect to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is 1, 2, 3 or 6 months thereafter,
as the Borrower may elect; provided, however, that (a) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (b) any Interest Period
that commences on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. Interest shall accrue from and including the
first day of an Interest Period to but excluding the last day of such Interest
Period. For purposes hereof, the date of a Borrowing initially shall be the date
on which such Borrowing is made and thereafter shall be the effective date of
the most recent conversion or continuation of such Borrowing.
     “Investments” shall have the meaning assigned to such term in Section 6.04.

17

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

 

     “Issuing Bank” shall mean, as the context may require, (a) CS, in its
capacity as the issuer of Letters of Credit hereunder, and (b) any other Lender
that may become an Issuing Bank pursuant to Section 2.23. (i) or Section 2.23.
(k) , with respect to Letters of Credit issued by such Lender. The Issuing Bank
may, in its discretion, arrange for one or more Letters of Credit to be issued
by Affiliates of the Issuing Bank, in which case the term “Issuing Bank” shall
include any such Affiliate with respect to Letters of Credit issued by such
Affiliate.
     “Issuing Bank Fees” shall have the meaning assigned to such term in
Section 2.05. (c).
     “Joinder Agreement” means the joinder agreement, if any, by and among
Borrower, each New Revolving Loan Lender and Administrative Agent, executed in
accordance with Section 2.24, which shall set forth the terms and conditions for
the making of the New Revolving Loans by the New Revolving Loan Lenders.
     “L/C Commitment” shall mean the commitment of the Issuing Bank to issue
Letters of Credit pursuant to Section 2.23..
     “L/C Disbursement” shall mean a payment or disbursement made by the Issuing
Bank pursuant to a Letter of Credit.
     “L/C Exposure” shall mean, at any time, the sum of (a) the aggregate
undrawn amount of all Letters of Credit at such time and (b) the aggregate
amount of all L/C Disbursements that have not been reimbursed at such time. The
L/C Exposure of any Revolving Credit Lender at any time shall equal its Pro Rata
Percentage of the aggregate L/C Exposure at such time.
     “L/C Fee Payment Date” shall have the meaning assigned to such term in
Section 2.05. (c).
     “L/C Participation Fee” shall have the meaning assigned to such term in
Section 2.05. (c).
     “Lender Addendum” shall mean, with respect to any initial Lender, a Lender
Addendum in the form of Exhibit F, or such other form as may be supplied by the
Administrative Agent, to be executed and delivered by such Lender on the Closing
Date.
     “Lenders” shall mean (a) the persons that deliver a Lender Addendum (other
than any such person that has ceased to be a party hereto pursuant to an
Assignment and Acceptance) and (b) any person that has become a party hereto
pursuant to an Assignment and Acceptance. Unless the context otherwise requires,
the term “Lenders” shall include the Swingline Lender.
     “Letter of Credit” shall mean any letter of credit issued pursuant to
Section 2.23.
     “Leverage Ratio” shall mean, on any date, the ratio of (a) Total Debt on
such date to (b) Cash Flow for the period of four consecutive fiscal quarters
most recently ended on or prior to such date, taken as one accounting period.
     “LIBO Rate” shall mean, with respect to any Eurodollar Borrowing for any
Interest Period, the rate per annum determined by the Administrative Agent at
approximately 11:00 a.m.,

18

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

 

London time, on the date that is two Business Days prior to the commencement of
such Interest Period by reference to the British Bankers’ Association Interest
Settlement Rates for deposits in dollars (as set forth by the Bloomberg
Information Service or any successor thereto or any other service selected by
the Administrative Agent which has been nominated by the British Bankers’
Association as an authorized information vendor for the purpose of displaying
such rates) for a period equal to such Interest Period; provided that, to the
extent that an interest rate is not ascertainable pursuant to the foregoing
provisions of this definition, the “LIBO Rate” shall be the interest rate per
annum determined by the Administrative Agent to be the average of the rates per
annum at which deposits in dollars are offered for such relevant Interest Period
to major banks in the London interbank market in London, England by the
Administrative Agent at approximately 11:00 a.m. (London time) on the date that
is two Business Days prior to the beginning of such Interest Period.
     “Lien” shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien (statutory or otherwise), pledge, hypothecation, encumbrance,
collateral assignment, charge or security interest in, on or of such asset,
(b) the interest of a vendor or a lessor under any conditional sale agreement,
capital lease or title retention agreement (or any financing lease having
substantially the same economic effect as any of the foregoing) relating to such
asset and (c) in the case of securities, any purchase option, call or similar
right of a third party with respect to such securities.
     “LIFCO” shall mean LIFCO, L.L.C., a Louisiana limited liability company.
     “Loan Documents” shall mean this Agreement and the Security Documents.
     “Loan Parties” shall mean the Borrower and each Subsidiary that is or
becomes a party to a Loan Document.
     “Loans” shall mean the Revolving Loans, the Term Loans and the Swingline
Loans.
     “Loss Ratio” means the ratio of loss and loss adjustment expense to earned
premiums.
     “MAE Book Value” shall mean (a) $88,800,000 as of October 31, 2006, (b)
$90,100,000 as of November 30, 2006, (c) $91,500,000 as of December 31, 2006,
(d) $92,900,000 as of January 31, 2007, and (e) $94,300,000 as of February 28,
2007.
     “Majority Facility Lenders” shall mean, with respect to any Facility, the
holders of a majority of the aggregate unpaid principal amount of the Term Loans
or the Aggregate Revolving Credit Exposure, as the case may be, outstanding
under such Facility (or, in the case of the Revolving Credit Facility, prior to
the termination of the Revolving Credit Commitments, the holders of a majority
of the Total Revolving Credit Commitment).
     “Margin Stock” shall have the meaning assigned to such term in
Regulation U.
     “Material Adverse Effect” shall mean shall mean a material adverse
condition or material adverse change in or materially affecting (a) the
business, assets, liabilities, operations or condition (financial or otherwise)
of the Borrower and the Subsidiaries, taken as a whole, or (b) the validity or
enforceability of any of the Loan Documents or the rights and remedies of the

19

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

 

Arranger, the Administrative Agent, the Collateral Agent or the Secured Parties
thereunder; provided that solely for purposes of the representations and
warranties given on and as of the Closing Date, “Material Adverse Effect” shall
mean a Closing Date Material Adverse Effect.
     “Material Real Property” shall mean (i) all Real Property owned in fee by
any Loan Party that, together with any improvements thereon, individually has a
fair market value of at least $5,000,000, and (ii) all leased Real Property of
any Loan Party which lease individually has a fair market value of at least
$5,000,000.
     “Material Indebtedness” shall mean Indebtedness (other than the Loans and
Letters of Credit), or obligations in respect of one or more Hedging Agreements,
of any one or more of the Borrower or the Subsidiaries in an aggregate principal
amount exceeding $2,500,000. For purposes of determining Material Indebtedness,
the “principal amount” of the obligations of the Borrower or any Subsidiary in
respect of any Hedging Agreement at any time shall be the maximum aggregate
amount (giving effect to any netting agreements) that the Borrower or such
Subsidiary would be required to pay if such Hedging Agreement were terminated at
such time.
     “Maximum Rate” shall have the meaning assigned to such term in
Section 9.09.
     “Moody’s” shall mean Moody’s Investors Service, Inc.
     “Mortgaged Properties” shall mean, initially, each parcel of real property
and the improvements thereto owned or leased by a Loan Party and specified on
Schedule 1.01(a), and shall include each other parcel of real property and
improvements thereto with respect to which a Mortgage is granted pursuant to
Section 5.09 or 5.10.
     “Mortgages” shall mean the fee or leasehold mortgages or deeds of trust,
assignments of leases and rents and other security documents granting a Lien on
any Mortgaged Property to secure the Obligations, in the form of Exhibit G, with
such changes as shall be advisable under the law of the jurisdiction in which
such Mortgage is to be recorded and as are reasonably satisfactory to the
Collateral Agent, as the same may be amended, supplemented, replaced or
otherwise modified from time to time in accordance with this Agreement.
     “Multiemployer Plan” shall mean a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
     “NAIC” shall mean the National Association of Insurance Commissioners or
any successor organization thereto.
     “Net Cash Proceeds” shall mean (a) with respect to any Asset Sale, Recovery
Event or Extraordinary Receipts, the proceeds thereof in the form of cash and
Permitted Investments (including any such proceeds subsequently received (as and
when received) in respect of noncash consideration initially received), net of
(i) in respect of Asset Sales or Recovery Events, selling expenses (including
reasonable and customary broker’s fees or commissions, legal fees, transfer and
similar taxes incurred by the Borrower and the Subsidiaries in connection
therewith and the Borrower’s good faith estimate of income taxes paid or payable
in connection with such sale, after taking into account any available tax
credits or deductions and any tax sharing arrangements), (ii) in respect of
Asset Sales, amounts provided as a reserve, in accordance with

20

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

 

GAAP, against any liabilities under any indemnification obligations or purchase
price adjustment associated with such Asset Sale (provided that, to the extent
and at the time any such amounts are released from such reserve, such amounts
shall constitute Net Cash Proceeds) and (iii) in respect of Asset Sales or
Recovery Events, the principal amount, premium or penalty, if any, interest and
other amounts on any Indebtedness for borrowed money which is secured by the
asset sold in such Asset Sale and which is required to be repaid with such
proceeds (other than any such Indebtedness assumed by the purchaser of such
asset); provided, however, that, in respect of Asset Sales and Recovery Events,
if (x) the Borrower shall deliver a certificate of a Financial Officer of the
Borrower to the Administrative Agent at the time of receipt thereof setting
forth the Borrower’s intent to reinvest such proceeds in productive assets of a
kind then used or usable in the business of the Borrower and the Subsidiaries
within 180 days of receipt of such proceeds and (y) no Default or Event of
Default shall have occurred and shall be continuing at the time of such
certificate or at the proposed time of the application of such proceeds, such
proceeds shall not constitute Net Cash Proceeds except to the extent not so used
at the end of such 180day period, at which time such proceeds shall be deemed to
be Net Cash Proceeds; and (b) with respect to any issuance or disposition of
Indebtedness or any Equity Issuance, the cash proceeds thereof, net of all taxes
and reasonable and customary fees, commissions, costs and other expenses
incurred by the Borrower and the Subsidiaries in connection therewith.
     “New Revolving Loan Commitment” shall have the meaning assigned to such
term in Section 2.24.
     “New Revolving Loan Lender” shall have the meaning assigned to such term in
Section 2.24.
     “New Revolving Loan” shall have the meaning assigned to such term in
Section 2.24.
     “Obligations” shall mean all obligations defined as “Obligations” in the
Guarantee and Collateral Agreement and the other Security Documents.
     “Other Taxes” shall mean any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
(including interest, fines, penalties and additions to tax) arising from any
payment made under any Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, any Loan Document.
     “Paying Agent” shall have the meaning assigned to such term in
Article VIII.
     “PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.
     “Perfection Certificate” shall mean the Pre-Closing UCC Diligence
Certificate substantially in the form of Exhibit H or any other form approved by
the Collateral Agent.
     “Permits” shall mean any and all franchises, licenses, leases, permits,
approvals, notifications, certifications, registrations, authorizations,
exemptions, qualifications, easements, rights of way, Liens and other rights,
privileges and approvals required under any Requirement of Law.

21

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

 

     “Permitted Acquisition” shall mean (i) the acquisition by Borrower of
USAgencies and its Subsidiaries pursuant to the Purchase Agreement and the
transactions contemplated thereby, and (ii) the acquisition by the Borrower or
any Subsidiary of all or substantially all the assets of a person or line of
business of such person, or all of the Equity Interests of a person (referred to
herein as the “Acquired Entity”); provided that (w) the Acquired Entity shall be
a going concern and shall be in a similar line of business as that of the
Borrower and the Subsidiaries as conducted during the current and most recently
concluded calendar year; (x) at the time of such transaction (A) both before and
after giving effect thereto, no Event of Default or Default shall have occurred
and be continuing; and (B) the Borrower would be in compliance with the
covenants set forth in Sections 6.11 through 6.16, in each case as of the most
recently completed period ending prior to such transaction for which the
financial statements and certificates required by Section 5.04(a) or 5.04(b)
were required to be delivered or for which comparable financial statements have
been filed with the Securities and Exchange Commission, after giving pro forma
effect to such transaction and to any other event occurring after such period as
to which pro forma recalculation is appropriate (including any other transaction
described in this definition occurring after such period) as if such transaction
(and the occurrence or assumption of any Indebtedness in connection therewith)
had occurred as of the first day of such period; and (C) after giving effect to
such acquisition, there must be at least $3,000,000 of unused and available
Revolving Credit Commitments; (y) the Borrower and the Subsidiaries shall not
incur or assume any Indebtedness in connection with such acquisition, except as
permitted by Section 6.01; and (iv) the Borrower shall comply, and shall cause
the Acquired Entity to comply, with the applicable provisions of Sections 5.09
and 5.10 and the Security Documents.
     “Permitted Holders” shall mean JC Flowers I L.P., JC Flowers II L.P., JC
Flowers II-A L.P., JC Flowers II-B L.P., JC Flowers & Co., LLC and any other
affiliated investment funds which are managed or controlled thereby or an
Affiliate thereof in the ordinary course of business and pursuant to written
agreements (including, without limitation, pursuant to the organizational
documents of such persons).
     “Permitted Investments” shall mean:
     (a) direct obligations of, or obligations the principal of and interest on
which are unconditionally guaranteed by, the United States of America (or by any
agency thereof to the extent such obligations are backed by the full faith and
credit of the United States of America), in each case maturing within one year
from the date of acquisition thereof;
     (b) investments in commercial paper maturing within 270 days from the date
of acquisition thereof and having, at such date of acquisition, the highest
credit rating obtainable from S&P or from Moody’s;
     (c) investments in certificates of deposit, banker’s acceptances and time
deposits maturing within 180 days from the date of acquisition thereof issued or
guaranteed by or placed with, and money market deposit accounts issued or
offered by, the Administrative Agent or any domestic office of any commercial
bank organized under the laws of the United States of America or any State
thereof that has a combined capital and surplus and undivided profits of not
less than $500,000,000;

22

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

 

     (d) fully collateralized repurchase agreements with a term of not more than
30 days for securities described in clause (a) above and entered into with a
financial institution satisfying the criteria of clause (c) above;
     (e) investments in “money market funds” within the meaning of Rule 2a-7 of
the Investment Company Act of 1940, as amended, substantially all of whose
assets are invested in investments of the type described in clauses (a) through
(d) above; and
     (f) other shortterm investments utilized by Foreign Subsidiaries in
accordance with normal investment practices for cash management in investments
of a type analogous to the foregoing.
     “Permitted IT Capital Expenditures” shall have the meaning assigned to such
term in Section 6.10.
     “Permitted Refinancing Indebtedness” shall mean Indebtedness issued or
incurred (including by means of the extension or renewal of existing
Indebtedness) to refinance, refund, extend, renew or replace existing
Indebtedness (“Refinanced Indebtedness”); provided that (a) the principal amount
of such refinancing, refunding, extending, renewing or replacing Indebtedness is
not greater than the principal amount of such Refinanced Indebtedness plus the
amount of any premiums or penalties and accrued and unpaid interest paid thereon
and reasonable fees and expenses, in each case associated with such refinancing,
refunding, extension, renewal or replacement, (b) such refinancing, refunding,
extending, renewing or replacing Indebtedness has a final maturity that is no
sooner than, and a weighted average life to maturity that is no shorter than,
such Refinanced Indebtedness, (c) if such Refinanced Indebtedness or any
Guarantees thereof are subordinated to the Obligations, such refinancing,
refunding, extending, renewing or replacing Indebtedness and any Guarantees
thereof remain so subordinated on terms no less favorable to the Lenders,
(d) the obligors in respect of such Refinanced Indebtedness immediately prior to
such refinancing, refunding, extending, renewing or replacing are the only
obligors on such refinancing, refunding extending, renewing or replacing
Indebtedness and (e) such refinancing, refunding, extending, renewing or
replacing Indebtedness contains covenants and events of default and is benefited
by Guarantees, if any, which, taken as a whole, are determined in good faith by
a Financial Officer of the Borrower to be no less favorable to the Borrower or
the applicable Subsidiary and the Lenders in any material respect than the
covenants and events of default or Guarantees, if any, in respect of such
Refinanced Indebtedness.
     “person” shall mean any natural person, corporation, trust, business trust,
joint venture, joint stock company, association, company, limited liability
company, partnership, Governmental Authority or other entity.
     “Pledged Collateral” shall have the meaning assigned to such term in the
Guarantee and Collateral Agreement.
     “Premium Finance Agreement” shall mean an agreement (however evidenced) by
which a policyholder agrees to pay LIFCO or a Premium Finance Co. the premium
cost on an insurance policy at a future date in one or more installments,
together with a finance charge and any related

23

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

 

fees, as the same may be amended, supplemented or otherwise modified from time
to time in accordance with this Agreement.
     “Premium Finance Co.” shall mean a wholly owned bankruptcy remote single
purpose subsidiary of the Borrower organized to provide premium financing to
customers of the Borrower, its Subsidiaries and other third parties engaged in
the Insurance Business (excluding USAgencies and its Subsidiaries, or any person
that USAgencies or any of its Subsidiaries are or may be merged with or into) to
which such persons have provided non-standard automobile insurance policies,
which was formed pursuant to organizational documents acceptable in form and
content to the Administrative Agent, which has entered into an Approved Premium
Finance Facility, and which does not compete in the state of Louisiana with
USAgencies or any of its Subsidiaries with respect to the provision of premium
financing to customers of USAgencies, its Subsidiaries or any other Subsidiary
of the Borrower operating under the brand or trade name “USAgencies” or any
other brand or trade name used by the Borrower or its Subsidiaries.
     “Primary New Revolving Loan Commitment” shall have the meaning assigned to
such term in Section 2.24.
     “Prime Rate” shall mean the rate of interest per annum announced from time
to time by CS as its prime rate in effect at its principal office in New York
City; each change in the Prime Rate shall be effective as of the opening of
business on the date such change is announced as being effective. The Prime Rate
is a reference rate and does not necessarily represent the lowest or best rate
actually available.
     “Pro Forma Cash Flow” shall have the meaning assigned to such term in
Section 4.02. (j) .
     “Pro Rata Percentage” of any Revolving Credit Lender, at any time, shall
mean the percentage of the Total Revolving Credit Commitment represented by such
Lender’s Revolving Credit Commitment. In the event the Revolving Credit
Commitments shall have expired or been terminated, the Pro Rata Percentages of
any Revolving Credit Lender shall be determined on the basis of the Revolving
Credit Commitments most recently in effect prior thereto.
     “Projections” shall have the meaning assigned such term in Section 4.02(k).
     “Purchase Agreement” shall mean the purchase and sale agreement dated as of
October 3, 2006, among the Sellers and the Borrower, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with this
Agreement.
     “Qualified Additional Subordinated Debt” shall mean any Indebtedness of the
Borrower incurred pursuant to the issuance of any TruPS and any related TruPS
instrument, which (i) shall not be secured by any Equity Interests or assets of
the Borrower, any Subsidiary thereof or any other person; (ii) shall not be
guaranteed by any person other than the Borrower; (iii) shall not mature, and
shall not be subject to any mandatory repurchase, redemption or amortization, in
each case, prior to the date that is six months after the latest of the
Revolving Credit Maturity Date and the Term Loan Maturity Date, as either of the
foregoing may be extended in accordance with the terms of this Agreement;
(iv) may be optionally or voluntarily redeemable, at the Borrower’s option,
subject to the restrictions set forth in Section 6.09(b) hereof; (v) shall

24

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

 

not contain any financial maintenance covenants; (vi) shall not contain any
other covenants, events of default (including cross defaults) or remedies, more
restrictive or less advantageous to the Borrower, its Subsidiaries and the
Lenders than those set forth in the Subordinated Debt; (vii) shall not be
exchangeable or convertible into Indebtedness of Borrower or any of its
Subsidiaries (other than additional Qualified Additional Subordinated Debt) or
any preferred stock or other Equity Interests; (viii) after giving effect to the
incurrence of such Indebtedness, (A) Borrower and its Subsidiaries must be in
pro forma compliance with the financial covenants set forth in Sections 6.12 and
6.16 and (B) no Default or Event of Default shall exist or would result from
such incurrence; (ix) shall be contractually subordinated in right of payment
and otherwise to the Obligations pursuant to provisions substantially similar to
those set forth in the Subordinated Debt, such terms of subordination to be
subject to the consent of the Administrative Agent, which consent shall not be
unreasonably conditioned withheld or delayed (it being understood that
provisions substantially similar to those set forth in the Subordinated Debt
shall be deemed to be so satisfactory); and (x) shall otherwise contain
provisions substantially similar to those set forth in the Subordinated Debt.
     “Qualified Additional Subordinated Debt Documents” shall mean the TruPS,
TruPS Instruments, indentures and all other instruments, agreements and other
documents evidencing or governing the Qualified Additional Subordinated Debt or
providing any Guarantee or other right in respect thereof, executed by the
Borrower and/or any TruPS Business Trust established in connection with the
issuance of such Qualified Additional Subordinated Debt for the benefit of the
lenders, noteholders or other securities holders thereunder, as the same may be
amended, supplemented, replaced or otherwise modified from time to time in
accordance with this Agreement.
     “Qualified Insurance Holding Company” means each Subsidiary of the Borrower
that (x) is an entity which has as its only assets (a) the direct ownership of
the Equity Interests of one or more Regulated Insurance Subsidiaries, (b) any de
minimis assets related to such Regulated Insurance Subsidiaries and (c) any cash
or other distributions from any such Regulated Insurance Subsidiary prior to
prompt further distribution of such cash or distribution, subject to the
Requirements of Law, if any, to the Qualified Insurance Holding Company’s
parent, and (y) is subject to a Requirement of Law which, in the reasonable
judgment of the Borrower and upon advice of counsel, prohibits, restricts or
otherwise places limitations upon the ability of the Collateral Agent, for the
benefit of the Secured Parties, being granted a perfected first priority
security interest in the Equity Interests in such Subsidiary as if such
Subsidiary were a Regulated Insurance Subsidiary, in each case, if, only to the
extent and only for so long as such Requirement of Law remains in effect;
provided that the Collateral Agent, for the benefit of the Secured Parties,
shall have been granted a perfected first priority security interest in the
Equity Interests in a wholly-owned Subsidiary of the Borrower (i) that at all
times owns and controls 100% of the Equity Interests in each such Qualified
Insurance Holding Company, (ii) is not itself a Qualified Insurance Holding
Company, (iii) is and remains a Guarantor hereunder and (iv) has otherwise
complied with its obligations under Section 5.09.
     “Real Property” shall mean all Mortgaged Property and all other real
property owned or leased from time to time by the Borrower and the Subsidiaries.

25

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

 

     “Recovery Event” shall mean any settlement of or payment in respect of any
property or casualty insurance claim or any taking under power of eminent domain
or by condemnation or similar proceeding of or relating to any property or asset
of the Borrower or any Subsidiary.
     “Register” shall have the meaning assigned to such term in
Section Section 9.04. (d)         .
     “Regulated Insurance Subsidiaries” shall mean collectively, Affirmative
Insurance Company, an Illinois corporation, Affirmative Insurance Company of
Michigan, a Michigan corporation, Insura Property and Casualty Insurance
Company, an Illinois corporation, USDirect and USCasualty and any Subsidiary of
the Borrower, formed or acquired after the Closing Date, which is authorized or
admitted to carry on or transact Insurance Business in any jurisdiction, is
regulated by an Insurance Regulator, and is required by any Insurance Regulator
to file an annual statement in the form prescribed by NAIC for an insurance
company.
     “Regulation T” shall mean Regulation T of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
     “Regulation U” shall mean Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
     “Regulation X” shall mean Regulation X of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
     “Reinsurance Agreement” shall mean any agreement, contract, treaty or other
arrangement whereby one or more insurers, as reinsurers, assume liabilities
under insurance policies or agreements issued by another insurance or
reinsurance company or companies.
     “Related Fund” shall mean, with respect to any Lender that is a fund that
invests in bank loans, any other fund that invests in bank loans and is advised
or managed by the same investment advisor as such Lender or by an Affiliate of
such investment advisor.
     “Related Parties” shall mean, with respect to any specified person, such
person’s Affiliates and the respective directors, officers, trustees, employees,
agents and advisors of such person and such person’s Affiliates.
     “Release” shall mean any release, spill, seepage, emission, leaking,
pumping, injection, pouring, emptying, deposit, disposal, discharge, dispersal,
dumping, escaping, leaching, or migration into, onto or through the environment
or within or upon any building, structure or facility.
     “Repayment Date” shall have the meaning given such term in Section 2.11.
(d) .
     “Required Lenders” shall mean, at any time, Lenders having Loans (excluding
Swingline Loans), L/C Exposure, Swingline Exposure and unused Revolving Credit
Commitments and Term Loan Commitments representing at least a majority of the
sum of all Loans outstanding (excluding Swingline Loans), L/C Exposure,
Swingline Exposure and unused Revolving Credit Commitments and Term Loan
Commitments at such time.

26

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

 

     “Required Minimum Percentage” shall mean 30%; provided that the Required
Minimum Percentage shall decrease to a revised Required Minimum Percentage of no
lower than 15% if, and for so long (and only for so long as) the Permitted
Holders continue to appoint and control the greater of three (3) or a majority
of the seats (other than vacant seats) on the board of directors of the
Borrower; provided further that such decrease shall be limited to the percentage
of the Permitted Holders’ ownership dilution caused solely by the issuance of
Equity Interests of the Borrower and not, for the avoidance of doubt, by the
sale, transfer or other assignment of any Equity Interests of the Borrower by
Permitted Holders to persons that are not Permitted Holders.
     “Required Prepayment Percentage” shall mean (a) in the case of any Asset
Sale or Recovery Event, 100%; (b) in the case of any Equity Issuance, 50%;
(c) in the case of any issuance or other incurrence of Indebtedness, 100%;
(d) in the case of any Excess Cash Flow, 75%, or, if on the date of the
applicable prepayment, the Leverage Ratio is less than 3.00 to 1.00 but greater
than 2.50 to 1.00, 50% or if on the date of the applicable prepayment, the
Leverage Ratio is less than or equal to 2.50 to 1.00, 25%; and (e) in the case
of Extraordinary Receipts, 100%.
     “Required Revolving Credit Lenders” shall mean, at any time, Revolving
Credit Lenders having Revolving Loans (excluding Swingline Loans), L/C Exposure,
Swingline Exposure and unused Revolving Credit Commitments representing at least
a majority of the sum of all Revolving Loans outstanding (excluding Swingline
Loans), L/C Exposure, Swingline Exposure and unused Revolving Credit Commitments
at such time.
     “Requirement of Law” shall mean as to any person, the governing documents
of such person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such person or any of its Real Property or personal property
or to which such person or any of its property of any nature is subject.
     “Responsible Officer” of any person shall mean any executive officer or
Financial Officer of such person and any other officer or similar official
thereof responsible for the administration of the obligations of such person in
respect of this Agreement.
     “Restricted Indebtedness” shall mean Indebtedness of any Loan Party, the
payment, prepayment, repurchase or defeasance of which is restricted under
Section 6.09. (b) .
     “Restricted Payment” shall mean any dividend or other distribution (whether
in cash, securities or other property) with respect to any Equity Interests in
the Borrower or any Subsidiary, or any payment (whether in cash, securities or
other property), including any sinking fund or similar deposit, on account of
the purchase, redemption, defeasance, retirement, acquisition, cancellation or
termination of any Equity Interests in Borrower or any Subsidiary or any option,
warrant or other right to acquire any such Equity Interests in Borrower or any
Subsidiary.
     “Retrocession Agreement” shall mean any agreement, contract, treaty or
other arrangement whereby one or more insurers or reinsurers, as
retrocessionaires, assume liabilities

27

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

 

of reinsurers under a Reinsurance Agreement or other retrocessionaires under
another Retrocession Agreement.
     “Revolving Credit Borrowing” shall mean a Borrowing comprised of Revolving
Loans.
     “Revolving Credit Commitment” shall mean, with respect to each Lender, the
commitment, if any, of such Lender to make Revolving Loans (and to acquire
participations in Letters of Credit and Swingline Loans) hereunder as set forth
on the Lender Addendum delivered by such Lender, or in the Assignment and
Acceptance pursuant to which such Lender assumed its Revolving Credit
Commitment, as applicable, as the same may be (a) increased from time to time
pursuant to Section 2.24, (b) reduced from time to time pursuant to
Section 2.09. or Section 2.25 and (c) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to Section 9.04.         .
     “Revolving Credit Exposure” shall mean, with respect to any Lenders, at any
time, the aggregate principal amount at such time of all outstanding Revolving
Loans of such Lender, plus the aggregate amount at such time of such Lender’s
L/C Exposure, plus the aggregate amount at such time of such Lender’s Swingline
Exposure.
     “Revolving Credit Lender” shall mean a Lender with a Revolving Credit
Commitment or an outstanding Revolving Loan.
     “Revolving Credit Maturity Date” shall mean the third anniversary of the
Closing Date.
     “Revolving Loan Facility” shall have the meaning assigned to such term in
the definition of “Facility”.
     “Revolving Loans” shall mean the revolving loans made by the Lenders to the
Borrower pursuant to clause (b) of Section 2.01.
     “Risk-Based Capital Ratio” shall mean, for any Regulated Insurance
Subsidiary, the ratio (expressed as a percentage), at any time, of the Total
Adjusted Capital of such Regulated Insurance Subsidiary to the Authorized
Control Level of such Regulated Insurance Subsidiary.
     “S&P” shall mean Standard & Poor’s Ratings Group, Inc.
     “SAP” shall mean the statutory accounting and reporting practices
prescribed or permitted by the insurance laws or Insurance Regulator (or other
similar Governmental Authority) with respect to each Regulated Insurance
Subsidiary.
     “Secondary New Revolving Loan Commitment” shall have the meaning assigned
to such term in Section 2.24.
     “Secured Parties” shall have the meaning assigned to such term in the
Guarantee and Collateral Agreement.
     “Security Documents” shall mean the Guarantee and Collateral Agreement, the
Mortgages, the Intellectual Property Security Agreements and each of the other
security

28

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

 

agreements, pledges, mortgages, consents and other instruments and documents
executed and delivered pursuant to any of the foregoing or pursuant to
Section 5.09 or 5.10.
     “Sellers” shall mean persons identified on Exhibit A of the Purchase
Agreement that are signatories thereto.
     “SPC” shall have the meaning assigned to such term in Section 9.04(i).
     “Statutory Reserves” shall mean a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board and any other banking authority, domestic or foreign,
to which the Administrative Agent or any Lender (including any branch, Affiliate
or other fronting office making or holding a Loan) is subject for eurocurrency
funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of
the Board). Eurodollar Loans shall be deemed to constitute eurocurrency funding
and to be subject to such reserve requirements without benefit of or credit for
proration, exemptions or offsets that may be available from time to time to any
Lender under such Regulation D or any comparable regulation. Statutory Reserves
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.
     “Subordinated Debt” shall mean all Indebtedness outstanding under the
Subordinated Debt Documents.
     “Subordinated Debt Documents” shall mean the USAgencies Trust Preferred
Note Documents and the Borrower Trust Preferred Note Documents.
     “subsidiary” shall mean, with respect to any person (herein referred to as
the “parent”), any corporation, partnership, limited liability company,
association or other entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power or more than 50% of the general partnership interests are, at the time any
determination is being made, owned, controlled or held, or (b) that is, at the
time any determination is made, otherwise Controlled, by the parent or one or
more subsidiaries of the parent or by the parent and one or more subsidiaries of
the parent.
     “Subsidiary” shall mean any subsidiary of any Loan Party.
     “Subsidiary Guarantor” shall mean, initially, each Subsidiary specified on
Schedule 1.01(b) and, at any time thereafter, shall include each other
Subsidiary that is not an Excluded Foreign Subsidiary, a Regulated Insurance
Subsidiary or a Premium Finance Co.
     “Survey” shall have the meaning assigned to such term in Section 4.02(q).
     “Swingline Commitment” shall mean the commitment of the Swingline Lender to
make loans pursuant to Section 2.22, as the same may be reduced from time to
time pursuant to Section 2.09.

29

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

 

     “Swingline Exposure” shall mean, at any time, the aggregate principal
amount at such time of all outstanding Swingline Loans. The Swingline Exposure
of any Revolving Credit Lender at any time shall equal its Pro Rata Percentage
of the aggregate Swingline Exposure at such time.
     “Swingline Lender” shall mean Credit Suisse acting in its capacity as
lender of Swingline Loans hereunder.
     “Swingline Loan” shall mean any loan made by the Swingline Lender pursuant
to Section 2.22.
     “Synthetic Lease Obligations” shall mean all monetary obligations of a
person under (a) a so-called synthetic, off-balance sheet or tax retention lease
or (b) an agreement for the use or possession of any property (whether real,
personal or mixed) creating obligations which do not appear on the balance sheet
of such person, but which, upon the insolvency or bankruptcy of such person,
would be characterized as Indebtedness of such person (without regard to
accounting treatment).
     “Synthetic Purchase Agreement” shall mean any swap, derivative or other
agreement or combination of agreements pursuant to which the Borrower or any
Subsidiary is or may become obligated to make (a) any payment in connection with
a purchase by any third party from a person other than the Borrower or any
Subsidiary of any Equity Interest or Restricted Indebtedness or (b) any payment
(other than on account of a permitted purchase by it of any Equity Interest or
Restricted Indebtedness) the amount of which is determined by reference to the
price or value at any time of any Equity Interest or Restricted Indebtedness;
provided that no phantom stock or similar plan providing for payments only to
current or former directors, officers or employees of the Borrower or the
Subsidiaries (or to their heirs or estates) shall be deemed to be a Synthetic
Purchase Agreement.
     “Tax Code” shall mean the Internal Revenue Code of 1986, as amended from
time to time.
     “Taxes” shall mean any and all present or future taxes, levies, imposts,
duties, deductions, charges, liabilities or withholdings imposed by any
Governmental Authority.
     “Term Borrowing” shall mean a Borrowing comprised of Term Loans.
     “Term Lender” shall mean a Lender with a Term Loan Commitment or an
outstanding Term Loan.
     “Term Loan Commitment” shall mean, with respect to each Lender, the
commitment, if any, of such Lender to make Term Loans hereunder as set forth on
the Lender Addendum delivered by such Lender, or in the Assignment and
Acceptance pursuant to which such Lender assumed its Term Loan Commitment, as
applicable, as the same may be (a) reduced from time to time pursuant to
Section 2.09 and (b) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 9.04. The initial aggregate
amount of the Term Loan Commitments is $200,000,000.

30

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

 

     “Term Loan Facility” shall have the meaning assigned to such term in the
definition of “Facility.”
     “Term Loan Maturity Date” shall mean the seventh anniversary of the Closing
Date.
     “Term Loans” shall mean the term loans made by the Lenders to the Borrower
pursuant to Section 2.01.
     “Title Insurance Company” shall have the meaning assigned to such term in
Section 4.02(o).
     “Total Adjusted Capital” shall mean “Total Adjusted Capital” as defined by
the NAIC as of December 31, 1994, as such definition has been amended from time
to time, and as applied in the context of the Risk-Based Capital Guidelines
promulgated by the NAIC.
     “Total Debt” shall mean, at any time, the aggregate amount of Indebtedness
of the Borrower and the Subsidiaries (other than Premium Finance Co. and its
Subsidiaries) outstanding at such time, in the amount that would be reflected on
a balance sheet prepared at such time on a consolidated basis in accordance with
GAAP.
     “Total Revolving Credit Commitment” shall mean, at any time, the aggregate
amount of the Revolving Credit Commitments, as in effect at such time. The
initial Total Revolving Credit Commitment is $0.00.
     “Transactions” shall mean, collectively, (a) the execution, delivery and
performance by the Loan Parties of the Loan Documents to which they are a party,
(b) the borrowings hereunder, the issuance of Letters of Credit and the use of
proceeds of each of the foregoing, (c) the granting of Liens pursuant to the
Security Documents, (d) the Acquisition and the other Acquisition Transactions
and (e) any other transactions related to or entered into in connection with any
of the foregoing.
     “TruPS” shall mean trust preferred securities issued to investors by a
wholly-owned subsidiary of the Borrower formed as a business trust (each a
“TruPS Business Trust”) pursuant to organizational and charter documents
substantially similar to those of the Existing TruPS Business Trusts, in
exchange for an investment of funds by such investors, which funds in turn are
loaned by such TruPS Business Trust to the Borrower in exchange for the issuance
by the Borrower of Indebtedness in the form of a debenture or similar instrument
to such TruPS Business Trust (each a “TruPS Instrument”) and which otherwise
contains provisions substantially similar to those set forth in the Subordinated
Debt outstanding.
     “TruPS Business Trust” has the meaning given such term in the definition of
TruPS.
     “TruPS Instrument” has the meaning given such term in the definition of
TruPS.
     “Type”, when used in respect of any Loan or Borrowing, shall refer to the
Rate by reference to which interest on such Loan or on the Loans comprising such
Borrowing is determined. For purposes hereof, the term “Rate” shall include the
Adjusted LIBO Rate and the Alternate Base Rate.

31

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

 

     “UCC” shall mean the Uniform Commercial Code.
     “Uniform Customs” shall have the meaning assigned to such term in
Section 9.07.
     “USAgencies” shall mean USAgencies L.L.C., a Louisiana limited liability
company and its Subsidiaries.
     “USAgencies Indenture” shall mean the Indenture, dated as of March 29,
2005, by and among USAgencies and JPMorgan Chase Bank, National Association, as
trustee, as the same may be amended, supplemented or otherwise modified from
time to time in accordance with this Agreement.
     “USAgencies Intercompany Tax Agreement” shall have the meaning assigned to
such term in Section 5.13.
     “USAgencies Subordinated Notes” shall mean USAgencies’s Floating Rate
Subordinate Notes due 2035 in the aggregate amount of $20,000,000 issued
pursuant to the USAgencies Indenture.
     “USAgencies Trust Preferred Note Documents” shall mean the USAgencies
Indenture and all other instruments, agreements and other documents evidencing
or governing the USAgencies Subordinated Notes or providing any Guarantee or
other right in respect thereof, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with this Agreement.
     “USCasualty” shall mean USAgencies Casualty Insurance Company, Inc., a
Louisiana corporation.
     “USDirect” shall mean USAgencies Direct Insurance Company, Inc., a New York
corporation.
     “wholly owned subsidiary” of any person shall mean a subsidiary of such
person of which securities (except for directors’ qualifying shares) or other
ownership interests representing 100% of the Equity Interests are, at the time
any determination is being made, owned, controlled or held by such person or one
or more wholly owned subsidiaries of such person or by such person and one or
more wholly owned subsidiaries of such person; a “wholly owned Subsidiary” shall
mean any wholly owned subsidiary of the Borrower.
     “Withdrawal Liability” shall mean liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
     SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and “including”, and
words of similar import, shall not be limiting and shall be deemed to be
followed by the phrase “without limitation”. The word “will” shall be construed
to have the same meaning and effect as the word “shall”. The words “asset” and

32

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

 

“property” shall be construed as having the same meaning and effect and to refer
to any and all rights and interests in tangible and intangible assets and
properties of any kind whatsoever, whether real, personal or mixed, including
cash, securities, Equity Interests, accounts and contract rights. The words
“herein”, “hereof” and “hereunder”, and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision of this Agreement unless the context shall otherwise require. All
references herein to Articles, Sections, Exhibits and Schedules shall be deemed
references to Articles and Sections of, and Exhibits and Schedules to, this
Agreement unless the context shall otherwise require. Except as otherwise
expressly provided herein, (a) any definition of, or reference to, any Loan
Document or any other agreement, instrument or document in this Agreement shall
mean such Loan Document or other agreement, instrument or document as amended,
restated, supplemented or otherwise modified from time to time (subject to any
restrictions on such amendments, restatements, supplements or modifications set
forth herein) and (b) all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided,
however, that if the Borrower notifies the Administrative Agent that the
Borrower wishes to amend any covenant in Article VI or any related definition to
eliminate the effect of any change in GAAP occurring after the date of this
Agreement on the operation of such covenant (or if the Administrative Agent
notifies the Borrower that the Required Lenders wish to amend Article VI or any
related definition for such purpose), then the Borrower’s compliance with such
covenant shall be determined on the basis of GAAP in effect immediately before
the relevant change in GAAP became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to the Borrower
and the Required Lenders.
     SECTION 1.03. Classification of Loans and Borrowings. For purposes of this
Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving
Loan”) or by Type (e.g., a “Eurodollar Loan”) or by Class and Type (e.g., a
“Eurodollar Revolving Loan”). Borrowings also may be classified and referred to
by Class (e.g., a “Revolving Borrowing”) or by Type (e.g., a “Eurodollar
Borrowing”) or by Class and Type (e.g., a “Eurodollar Revolving Borrowing”).
     SECTION 1.04. Pro Forma Calculations. All pro forma calculations permitted
or required to be made by the Borrower or any Subsidiary pursuant to this
Agreement shall include only those adjustments that would be permitted or
required by Regulation S-X under the Securities Act of 1933, as amended,
together with those adjustments that (a) have been certified by a Financial
Officer of the Borrower as having been prepared in good faith based upon
reasonable assumptions and (b) are based on reasonably detailed written
assumptions reasonably acceptable to the Administrative Agent.
ARTICLE II.
The Credits
     SECTION 2.01. Commitments. Subject to the terms and conditions hereof and
relying upon the representations and warranties set forth herein, (a) each Term
Lender agrees, severally and not jointly, to make a Term Loan to the Borrower on
the Closing Date in a principal amount not to exceed its Term Loan Commitment
and (b) each Revolving Credit Lender agrees, severally and not jointly, to make
Revolving Loans to the Borrower, at any time

33

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

 

and from time to time on or after the date that is sixty (60) days following
Closing Date (or such earlier date as the Borrower and the Revolving Credit
Lenders as of such date may agree) and until the earlier of the Revolving Credit
Maturity Date and the termination of the Revolving Credit Commitment of such
Revolving Credit Lender in accordance with the terms hereof, in an aggregate
principal amount at any time outstanding that will not result in such Revolving
Credit Lender’s Revolving Credit Exposure exceeding such Revolving Credit
Lender’s Revolving Credit Commitment. Within the limits set forth in clause (b)
of the preceding sentence and subject to the terms, conditions and limitations
set forth herein, the Borrower may borrow, pay or prepay and reborrow Revolving
Loans. Amounts paid or prepaid in respect of Term Loans may not be reborrowed.
     SECTION 2.02. Loans. (a) Each Loan (other than Swingline Loans) shall be
made as part of a Borrowing consisting of Loans of the same Class and Type made
by the Lenders ratably in accordance with their respective Commitments of the
applicable Class; provided, however, that the failure of any Lender to make any
Loan required to be made by it shall not in itself relieve any other Lender of
its obligation to lend hereunder (it being understood, however, that no Lender
shall be responsible for the failure of any other Lender to make any Loan
required to be made by such other Lender). Except for Loans deemed made pursuant
to Section 2.02(f) and subject to Section 2.22 relating to Swingline Loans, the
Loans comprising any Borrowing shall be in an aggregate principal amount that is
(i) an integral multiple of $500,000 and not less than $1,000,000 or (ii) equal
to the remaining available balance of the applicable Commitments.
     (b) Subject to Sections 2.08 and 2.15, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Borrower may request pursuant
to Section 2.03; provided that no Borrowings may be converted into or continued
as a Eurodollar Borrowing having an Interest Period in excess of one month prior
to the date which is 60 days after the Closing Date. Each Lender may at its
option make any Eurodollar Loan by causing any domestic or foreign branch or
Affiliate of such Lender to make such Loan; provided that any exercise of such
option shall not affect the obligation of the Borrower to repay such Loan in
accordance with the terms of this Agreement. Borrowings of more than one Type
may be outstanding at the same time; provided, however, that the Borrower shall
not be entitled to request any Borrowing that, if made, would result in more
than ten Eurodollar Borrowings outstanding hereunder at any time. For purposes
of the foregoing, Borrowings having different Interest Periods, regardless of
whether they commence on the same date, shall be considered separate Borrowings.
     (c) Except with respect to Loans made pursuant to Section 2.02(f) and
subject to Section 2.22 relating to Swingline Loans, each Lender shall make each
Loan to be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds to such account in New York City as the
Administrative Agent may designate not later than 1:30 p.m., New York City time,
and the Administrative Agent shall promptly credit the amounts so received to an
account in the name of the Borrower, and designated by the Borrower in the
applicable Borrowing Request or, if a Borrowing shall not occur on such date
because any condition precedent herein specified shall not have been met, return
the amounts so received to the respective Lenders.

34

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

 

     (d) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender’s portion of such Borrowing,
the Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Borrowing in
accordance with paragraph (c) of this Section and the Administrative Agent may,
in reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If the Administrative Agent shall have so made funds
available then, to the extent that such Lender shall not have made such portion
available to the Administrative Agent, such Lender and the Borrower severally
agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower to but excluding the date such
amount is repaid to the Administrative Agent at (i) in the case of the Borrower,
the interest rate applicable at the time to the Loans comprising such Borrowing
or (ii) in the case of such Lender, a rate determined by the Administrative
Agent to represent its cost of overnight or shortterm funds (which determination
shall be conclusive absent manifest error). If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount shall constitute
such Lender’s Loan as part of such Borrowing for purposes of this Agreement.
     (e) Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request any Revolving Credit Borrowing if the Interest
Period requested with respect thereto would end after the Revolving Credit
Maturity Date.
     (f) If the Issuing Bank shall not have received from the Borrower the
payment required to be made by Section 2.23(e) with respect to a Letter of
Credit within the time specified in such Section, the Issuing Bank will promptly
notify the Administrative Agent of the L/C Disbursement and the Administrative
Agent will promptly notify each Revolving Credit Lender of such L/C Disbursement
and its Pro Rata Percentage thereof. Each Revolving Credit Lender shall pay by
wire transfer of immediately available funds to the Administrative Agent not
later than 2:00 p.m. Noon, New York City time, on such date (or, if such
Revolving Credit Lender shall have received such notice later than 12:00 (noon),
New York City time, on any day, not later than 10:00 a.m., New York City time,
on the immediately following Business Day), an amount equal to such Lender’s Pro
Rata Percentage of such L/C Disbursement (it being understood that such amount
shall be deemed to constitute an ABR Revolving Loan of such Lender and such
payment shall be deemed to have reduced the L/C Exposure), and the
Administrative Agent will promptly pay to the Issuing Bank amounts so received
by it from the Revolving Credit Lenders. The Administrative Agent will promptly
pay to the Issuing Bank any amounts received by it from the Borrower pursuant to
Section 2.23(e) prior to the time that any Revolving Credit Lender makes any
payment pursuant to this paragraph; any such amounts received by the
Administrative Agent thereafter will be promptly remitted by the Administrative
Agent to the Revolving Credit Lenders that shall have made such payments and to
the Issuing Bank, as their interests may appear. If any Revolving Credit Lender
shall not have made its Pro Rata Percentage of such L/C Disbursement available
to the Administrative Agent as provided above, such Lender and the Borrower
severally agree to pay interest on such amount, for each day from and including
the date such amount is required to be paid in accordance with this paragraph to
but excluding the date such amount is paid, to the Administrative Agent for the
account of the Issuing Bank at (i) in the case of the Borrower, a rate per annum
equal to the interest rate applicable to Revolving Loans pursuant to
Section 2.06(a), and (ii) in the case of

35

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

 

such Lender, for the first such day, the Federal Funds Effective Rate, and for
each day thereafter, the Alternate Base Rate.
     SECTION 2.03. Borrowing Procedure. In order to request a Borrowing (other
than a Swingline Loan or a deemed Borrowing pursuant to Section 2.02(f), as to
which this Section 2.03 shall not apply), the Borrower shall hand deliver or fax
(or request telephonically with prompt hand delivery or fax made thereafter) to
the Administrative Agent a duly completed Borrowing Request (a) in the case of a
Eurodollar Borrowing, not later than 12:00 Noon, New York City time, three
Business Days before a proposed Borrowing and (b) in the case of an ABR
Borrowing, not later than 12:00 Noon, New York City time, one Business Day
before a proposed Borrowing. Each Borrowing Request shall be irrevocable, shall
be signed by or on behalf of the Borrower and shall specify the following
information: (i) whether the Borrowing then being requested is to be a Term
Borrowing or a Revolving Credit Borrowing, and whether such Borrowing is to be a
Eurodollar Borrowing or an ABR Borrowing; (ii) the date of such Borrowing (which
shall be a Business Day); (iii) the number and location of the account to which
funds are to be disbursed (which shall be an account that complies with the
requirements of Section 2.02(c)); (iv) the amount of such Borrowing; and (v) if
such Borrowing is to be a Eurodollar Borrowing, the initial Interest Period with
respect thereto; provided, however, that, notwithstanding any contrary
specification in any Borrowing Request, each requested Borrowing shall comply
with the requirements set forth in Section 2.02. If no election as to the Type
of Borrowing is specified in any such notice, then the requested Borrowing shall
be an ABR Borrowing. If no Interest Period with respect to any Eurodollar
Borrowing is specified in any such notice, then the Borrower shall be deemed to
have selected an Interest Period of one month’s duration. The Administrative
Agent shall promptly advise the applicable Lenders of any notice given in
accordance with this Section 2.03 (and the contents thereof), and of each
Lender’s portion of the requested Borrowing.
     SECTION 2.04. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Lender (i) the principal amount of each Term Loan of such Lender made to
the Borrower as provided in Section 2.11 and (ii) the then unpaid principal
amount of each Revolving Loan (including any Swingline Loan) of such Lender made
to the Borrower on the Revolving Credit Maturity Date. The Borrower hereby
unconditionally promises to pay to the Swingline Lender the then unpaid
principal amount of each Swingline Loan made to the Borrower on the earlier of
the Revolving Credit Maturity Date and the first date after such Swingline Loan
is made that is the 15th day or the last day of a calendar month and is at least
three Business Days after such Swingline Loan is made.
     (b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender to the Borrower from time to time,
including the amounts of principal and interest payable and paid to such Lender
from time to time under this Agreement.
     (c) The Administrative Agent shall maintain accounts in which it will
record (i) the amount of each Loan made hereunder, the Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of the sum received by

36

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

 

the Administrative Agent hereunder from the Borrower or any Guarantor and each
Lender’s share thereof.
     (d) The entries made in the accounts maintained pursuant to paragraphs
(b) and (c) of this Section shall be conclusive evidence (absent manifest error)
of the existence and amounts of the obligations therein recorded; provided,
however, that the failure of any Lender or the Administrative Agent to maintain
such accounts or any error therein shall not in any manner affect the
obligations of the Borrower to repay the Loans made to the Borrower in
accordance with the terms of this Agreement.
     (e) Any Lender may request that Loans made by it hereunder be evidenced by
a promissory note. In such event, the Borrower shall execute and deliver to such
Lender a promissory note payable to such Lender and its registered assigns and
in a form and substance reasonably acceptable to the Administrative Agent.
Notwithstanding any other provision of this Agreement, in the event any Lender
shall request and receive such a promissory note, the interests represented by
such note shall at all times (including after any assignment of all or part of
such interests pursuant to Section 9.04) be represented by one or more
promissory notes payable to the payee named therein or its registered assigns.
     SECTION 2.05. Fees. (a) The Borrower agrees to pay to each Lender, through
the Administrative Agent, on the last Business Day of March, June, September and
December (commencing March 30, 2007) in each year and on each date on which any
Commitment of such Lender shall expire or be terminated as provided herein, a
commitment fee (a “Commitment Fee”) equal to the Commitment Fee Rate on the
average daily unused amount of the Commitments of such Lender (other than the
Swingline Commitment) during the preceding quarter (or other period commencing
with the date hereof or ending with the Revolving Credit Maturity Date or the
date on which the Commitments of such Lender shall expire or be terminated). All
Commitment Fees shall be computed on the basis of the actual number of days
elapsed in a year of 360 days. The Commitment Fee due to each Lender shall
commence to accrue on the date hereof and shall cease to accrue on the date on
which the Commitment of such Lender shall expire or be terminated as provided
herein. For purposes of calculating Commitment Fees with respect to Revolving
Credit Commitments only, no portion of the Revolving Credit Commitments shall be
deemed utilized under Section 2.22 as a result of outstanding Swingline Loans.
     (b) The Borrower agrees to pay to the Administrative Agent, for its own
account, the fees in the amounts and at the times from time to time agreed to in
writing by the Borrower (or any Affiliate) and the Administrative Agent,
including pursuant to the Fee Letter (the “Administrative Agent Fees”).
     (c) The Borrower agrees to pay (i) to each Revolving Credit Lender, through
the Administrative Agent, on the last Business Day of March, June, September and
December (commencing March 30, 2007) of each year and on the date on which the
Revolving Credit Commitment of such Lender shall be terminated as provided
herein (each, an “L/C Fee Payment Date”) a fee (an “L/C Participation Fee”)
calculated on such Lender’s Pro Rata Percentage of the daily aggregate L/C
Exposure (excluding the portion thereof attributable to unreimbursed L/C
Disbursements which are earning interim interest pursuant to Section 2.23(h))
during the

37

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

 

preceding quarter (or shorter period commencing with the date hereof or ending
with the Revolving Credit Maturity Date or the date on which all Letters of
Credit have been canceled or have expired and the Revolving Credit Commitments
of all Lenders shall have been terminated) at a rate per annum equal to the
Applicable Margin used to determine the interest rate on Revolving Credit
Borrowings comprised of Eurodollar Loans pursuant to Section 2.06, and (ii) to
the Issuing Bank with respect to each outstanding Letter of Credit issued for
the account of (or at the request of) the Borrower a fronting fee, which shall
accrue at the rate of 1/4 of 1% per annum or such other rate as shall be
separately agreed upon between the Borrower and the Issuing Bank, on the
drawable amount of such Letter of Credit, payable quarterly in arrears on each
L/C Fee Payment Date after the issuance date of such Letter of Credit, as well
as the Issuing Bank’s standard fees with respect to the issuance, amendment,
renewal or extension of any Letter of Credit issued for the account of (or at
the request of) the Borrower or processing of drawings thereunder (the fees in
this clause (ii), collectively, the “Issuing Bank Fees”). All L/C Participation
Fees and Issuing Bank Fees shall be computed on the basis of the actual number
of days elapsed in a year of 360 days.
     (d) All Fees shall be paid on the dates due, in immediately available
funds, to the Administrative Agent for distribution, if and as appropriate,
among the Lenders, except that the Issuing Bank Fees shall be paid directly to
the Issuing Bank. Once paid, none of the Fees shall be refundable under any
circumstances, other than in connection with the over-payment of any such Fees
as a result of any erroneous calculation by the Agent or the Issuing Bank, as
the case may be.
     SECTION 2.06. Interest on Loans. (a) Subject to the provisions of
Section 2.07, the Loans comprising each ABR Borrowing, including each Swingline
Loan, shall bear interest (computed on the basis of the actual number of days
elapsed over a year of 365 or 366 days, as the case may be, when the Alternate
Base Rate is determined by reference to the Prime Rate and over a year of
360 days at all other times) at a rate per annum equal to the Alternate Base
Rate plus the Applicable Margin in effect from time to time.
     (b) Subject to the provisions of Section 2.07, the Loans comprising each
Eurodollar Borrowing shall bear interest (computed on the basis of the actual
number of days elapsed over a year of 360 days) at a rate per annum equal to the
Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the
Applicable Margin in effect from time to time.
     (c) Interest on each Loan shall be payable on the Interest Payment Dates
applicable to such Loan except as otherwise provided in this Agreement. The
applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest Period or
day within an Interest Period, as the case may be, shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest
error.
     SECTION 2.07. Default Interest. If the Borrower shall default in the
payment of the principal of or interest on any Loan or any other amount becoming
due hereunder or under any other Loan Document, by acceleration or otherwise,
the Borrower shall on demand from time to time pay interest, to the extent
permitted by law, on such defaulted amount to but excluding the date of actual
payment (after as well as before judgment) (a) in the case of overdue principal,
at the rate otherwise applicable to such Loan pursuant to Section 2.06 plus
2.00% per

38

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

 

annum and (b) in all other cases, at a rate per annum (computed on the basis of
the actual number of days elapsed over a year of 365 or 366 days, as the case
may be, when determined by reference to the Prime Rate and over a year of
360 days at all other times) equal to the rate that would be applicable to an
ABR Revolving Loan plus 2.00%.
     SECTION 2.08. Alternate Rate of Interest. In the event, and on each
occasion, that prior to the commencement of any Interest Period for a Eurodollar
Borrowing (a) the Administrative Agent shall have determined that adequate and
reasonable means do not exist for determining the Adjusted LIBO Rate for such
Interest Period or (b) the Administrative Agent is advised by the Majority
Facility Lenders in respect of the relevant Facility that the Adjusted LIBO Rate
for such Interest Period will not adequately and fairly reflect the cost to such
Lenders of making or maintaining their Loans included in such Borrowing for such
Interest Period, the Administrative Agent shall, as soon as practicable
thereafter, give written or fax notice of such determination to the Borrower and
the Lenders. In the event of any such determination, until the Administrative
Agent shall have advised the Borrower and the Lenders that the circumstances
giving rise to such notice no longer exist, (i) any request by the Borrower for
a Eurodollar Borrowing pursuant to Section 2.03 or 2.10 shall be deemed to be a
request for an ABR Borrowing and (ii) any Interest Period election that requests
the conversion of any Borrowing to, or continuation of any Borrowing as, a
Eurodollar Borrowing shall be ineffective. Each determination by the
Administrative Agent under this Section 2.08 shall be conclusive absent manifest
error.
     SECTION 2.09. Termination and Reduction of Commitments. (a) Unless
previously terminated in accordance with the terms hereof, (i) the Term Loan
Commitments shall automatically terminate at 5:00 p.m., New York City time, on
the Closing Date and (ii) the Revolving Credit Commitments, the Swingline
Commitment and the L/C Commitment shall automatically terminate on the Revolving
Credit Maturity Date. Notwithstanding the foregoing, all the Commitments shall
automatically terminate at 5:00 p.m., New York City time, on January 31, 2007,
if the initial Credit Event shall not have occurred by such time.
     (b) Upon at least three Business Days’ prior irrevocable written or fax
notice to the Administrative Agent, the Borrower may at any time in whole
permanently terminate, or from time to time in part permanently reduce, the Term
Loan Commitments, the Revolving Credit Commitments or the Swingline Commitment;
provided, however, that (i) each partial reduction of the Term Loan Commitments,
the Revolving Credit Commitments or the Swingline Commitment shall be in an
integral multiple of $1,000,000 and in a minimum amount of $1,000,000 and
(ii) the Total Revolving Credit Commitment shall not be reduced to an amount
that is less than the Aggregate Revolving Credit Exposure then in effect.
     (c) Each reduction in the Term Loan Commitments, Revolving Credit
Commitments or Swingline Commitment hereunder shall be made ratably among the
applicable Lenders in accordance with their Pro Rata Percentages. The Borrower
shall pay to the Administrative Agent for the account of the applicable Lenders,
on the date of each termination or reduction, the Commitment Fees on the amount
of the Commitments so terminated or reduced accrued to but excluding the date of
such termination or reduction.

39

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

 

     SECTION 2.10. Conversion and Continuation of Borrowings. (a) The Borrower
shall have the right at any time upon prior irrevocable notice to the
Administrative Agent (x) not later than 12:00 (noon), New York City time, one
Business Day prior to conversion, to convert any Eurodollar Borrowing of the
Borrower into an ABR Borrowing, (y) not later than 10:00 a.m., New York City
time, three Business Days prior to conversion or continuation, to convert any
ABR Borrowing of the Borrower into a Eurodollar Borrowing or to continue any
Eurodollar Borrowing of the Borrower as a Eurodollar Borrowing for an additional
Interest Period and (z) not later than 12:00 (noon) New York City time, three
Business Days prior to conversion, to convert the Interest Period with respect
to any Eurodollar Borrowing of the Borrower to another permissible Interest
Period, subject in each case to the following:
     (i) each conversion or continuation shall be made pro rata among the
Lenders in accordance with the respective principal amounts of the Loans
comprising the converted or continued Borrowing;
     (ii) if less than all the outstanding principal amount of any Borrowing
shall be converted or continued, then each resulting Borrowing shall satisfy the
limitations specified in Sections 2.02(a) and 2.02(b) regarding the principal
amount and maximum number of Borrowings of the relevant Type;
     (iii) each conversion shall be effected by each Lender and the
Administrative Agent by recording for the account of such Lender the new Loan of
such Lender resulting from such conversion and reducing the Loan (or portion
thereof) of such Lender being converted by an equivalent principal amount;
accrued interest on any Eurodollar Loan (or portion thereof) being converted
shall be paid by the Borrower at the time of conversion;
     (iv) if any Eurodollar Borrowing is converted at a time other than the end
of the Interest Period applicable thereto, the Borrower shall pay, upon demand,
any amounts due to the Lenders pursuant to Section 2.16;
     (v) any portion of a Borrowing maturing or required to be repaid in less
than one month may not be converted into or continued as a Eurodollar Borrowing;
     (vi) any portion of a Eurodollar Borrowing that cannot be converted into or
continued as a Eurodollar Borrowing by reason of the immediately preceding
clause shall be automatically converted at the end of the Interest Period in
effect for such Borrowing into an ABR Borrowing;
     (vii) no Interest Period may be selected for any Eurodollar Term Borrowing
that would end later than a Repayment Date occurring on or after the first day
of such Interest Period if, after giving effect to such selection, the aggregate
outstanding amount of (A) the Eurodollar Term Borrowings with Interest Periods
ending on or prior to such Repayment Date and (B) the ABR Term Borrowings would
not be at least equal to the principal amount of Term Borrowings to be paid on
such Repayment Date; and
     (viii) after the occurrence and during the continuance of a Default or
Event of Default, no outstanding Loan may be converted into, or continued as, a
Eurodollar Loan.

40

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

 

     (b) Each notice pursuant to this Section 2.10 shall be irrevocable and
shall refer to this Agreement and specify (i) the identity and amount of the
Borrowing that the Borrower requests be converted or continued, (ii) whether
such Borrowing is to be converted to or continued as a Eurodollar Borrowing or
an ABR Borrowing, (iii) if such notice requests a conversion, the date of such
conversion (which shall be a Business Day) and (iv) if such Borrowing is to be
converted to or continued as a Eurodollar Borrowing, the Interest Period with
respect thereto. If no Interest Period is specified in any such notice with
respect to any conversion to or continuation as a Eurodollar Borrowing, the
Borrower shall be deemed to have selected an Interest Period of one month’s
duration. The Administrative Agent shall advise the Lenders of any notice given
pursuant to this Section 2.10 and of each Lender’s portion of any converted or
continued Borrowing. If the Borrower shall not have given notice in accordance
with this Section 2.10 to continue any Borrowing into a subsequent Interest
Period (and shall not otherwise have given notice in accordance with this
Section 2.10 to convert such Borrowing), such Borrowing shall, at the end of the
Interest Period applicable thereto (unless repaid pursuant to the terms hereof),
automatically be converted or continued into an ABR Borrowing.
     SECTION 2.11. Repayment of Term Borrowings. (a) On the dates set forth
below, or if any such date is not a Business Day, on the next preceding Business
Day (each such date being called a “Repayment Date”), the Borrower shall pay to
the Administrative Agent, for the account of the Term Lenders, a principal
amount of the Term Loans (as adjusted from time to time pursuant to
Sections 2.11(b), 2.12 and 2.13(f)) equal to the amount set forth below for such
date, together in each case with accrued and unpaid interest and Fees on the
amount to be paid to but excluding the date of such payment:

          Repayment Date   Amount
March 31, 2007
  $ 500,000  
June 30, 2007
  $ 500,000  
September 30, 2007
  $ 500,000  
December 31, 2007
  $ 500,000  
March 31, 2008
  $ 500,000  
June 30, 2008
  $ 500,000  
September 30, 2008
  $ 500,000  
December 31, 2008
  $ 500,000  
March 31, 2009
  $ 500,000  
June 30, 2009
  $ 500,000  
September 30, 2009
  $ 500,000  
December 31, 2009
  $ 500,000  
March 31, 2010
  $ 500,000  
June 30, 2010
  $ 500,000  
September 30, 2010
  $ 500,000  
December 31, 2010
  $ 500,000  
March 31, 2011
  $ 500,000  
June 30, 2011
  $ 500,000  
September 30, 2011
  $ 500,000  
December 31, 2011
  $ 500,000  
March 31, 2012
  $ 500,000  
June 30, 2012
  $ 500,000  

41

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

 

          Repayment Date   Amount
September 30, 2012
  $ 500,000  
December 31, 2012
  $ 500,000  
March 31, 2013
  $ 500,000  
June 30, 2013
  $ 500,000  
September 30, 2013
  $ 500,000  
December 31, 2013
  $ 500,000  
March 31, 2014
  $ 500,000  
June 30, 2014
  $ 500,000  
September 30, 2014
  $ 500,000  
Term Loan Maturity Date
  $ 184,500,000  

     (b) In the event and on each occasion that any Term Loan Commitments shall
be reduced or shall expire or terminate other than as a result of the making of
a Term Loan, the installments payable on each Repayment Date shall be reduced
pro rata by an aggregate amount equal to the amount of such reduction,
expiration or termination.
     (c) To the extent not previously paid, all Term Loans shall be due and
payable on the Term Loan Maturity Date, together with accrued and unpaid
interest on the principal amount to be paid to but excluding the date of
payment.
     (d) All repayments pursuant to this Section 2.11 shall be subject to
Section 2.16, but shall otherwise be without premium or penalty.
     SECTION 2.12. Prepayment. (a) The Borrower shall have the right at any time
and from time to time to prepay any Borrowing, in whole or in part, upon at
least three Business Days’ prior written (including electronic mail) or fax
notice (or telephone notice promptly confirmed by written or fax notice) in the
case of Eurodollar Loans, or written or fax notice (or telephone notice promptly
confirmed by written or fax notice) at least one Business Day prior to the date
of prepayment in the case of ABR Loans, to the Administrative Agent before 12:00
(noon), New York City time; provided, however, that each partial prepayment
shall be in an amount that is an integral multiple of $500,000 and not less than
$1,000,000.
     (b) Optional prepayments of Term Loans shall be applied pro rata against
the remaining scheduled installments of principal due in respect of the Term
Loans.
     (c) Each notice of prepayment shall specify the prepayment date and the
principal amount of each Borrowing (or portion thereof) to be prepaid, shall be
irrevocable and shall commit the Borrower to prepay such Borrowing by the amount
stated therein on the date stated therein. All prepayments under this
Section 2.12 shall be subject to Section 2.16, but otherwise without premium or
penalty, except as provided in Section 2.12(d) below. All prepayments under this
Section 2.12 shall be accompanied by accrued and unpaid interest on the
principal amount to be prepaid to but excluding the date of payment (other than
any accrued and unpaid interest on any ABR Loan, which shall be payable on the
earlier of next Interest Payment Date or the Term Loan Maturity Date or the
Revolving Credit Maturity Date).

42

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

 

     (d) In the event that the Term Loans are prepaid or repaid in whole or in
part pursuant to Section 2.12 prior to the first anniversary of the Closing
Date, the Borrower shall pay to Lenders having Term Loans a prepayment premium
on the amount so prepaid or repaid in an amount equal to 1.0% of the amount so
prepaid or repaid.
     SECTION 2.13. Mandatory Prepayments. (a) In the event of any termination of
all the Revolving Credit Commitments, the Borrower shall, on the date of such
termination, repay or prepay all its outstanding Revolving Credit Borrowings and
all its outstanding Swingline Loans and replace all its outstanding Letters of
Credit and/or deposit an amount equal to the L/C Exposure in cash in a cash
collateral account established with the Collateral Agent for the benefit of the
Secured Parties. If as a result of any partial reduction of the Revolving Credit
Commitments the Aggregate Revolving Credit Exposure would exceed the Total
Revolving Credit Commitment after giving effect thereto, then the Borrower
shall, on the date of such reduction, repay or prepay Revolving Credit
Borrowings or Swingline Loans (or a combination thereof) and/or cash
collateralize Letters of Credit in an amount sufficient to eliminate such
excess.
     (b) Not later than the fifth Business Day following the completion of any
Asset Sale or the occurrence of any Recovery Event, in each case by the Borrower
or any Subsidiary thereof (other than any Premium Finance Co. and its
Subsidiaries), the Borrower shall apply the Required Prepayment Percentage of
the Net Cash Proceeds received with respect thereto to prepay outstanding Term
Loans in accordance with Section 2.13(g).
     (c) In the event and on each occasion that an Equity Issuance occurs, the
Borrower shall, substantially simultaneously with (and in any event not later
than the fifth Business Day next following) the occurrence of such Equity
Issuance, apply the Required Prepayment Percentage of the Net Cash Proceeds
therefrom to prepay outstanding Term Loans in accordance with Section 2.13(g).
     (d) In the event that any Loan Party or any subsidiary of a Loan Party
shall receive Net Cash Proceeds from the issuance or other incurrence of
Indebtedness of any Loan Party or any subsidiary of a Loan Party (other than
Indebtedness permitted pursuant to Section 6.01) (other than pursuant to
Section 6.01(g)), the Borrower shall, substantially simultaneously with (and in
any event not later than the third Business Day next following) the receipt of
such Net Cash Proceeds by such Loan Party or such subsidiary, apply an amount
equal to the Required Prepayment Percentage of such Net Cash Proceeds to prepay
outstanding Term Loans in accordance with Section 2.13(g). For the avoidance of
doubt, this paragraph (d) in no event or circumstances shall be interpreted to
permit the Borrower to incur any Indebtedness that is not permitted under
Section 6.01.
     (e) No later than the earlier of (i) 90 days after the end of each fiscal
year of the Borrower, commencing with the fiscal year ending on December 31,
2007, and (ii) the date on which the financial statements with respect to such
period are delivered pursuant to Section 5.04(a), the Borrower shall prepay
outstanding Term Loans in accordance with Section 2.13(g), in an aggregate
principal amount equal to the Required Prepayment Percentage of Excess Cash Flow
for the fiscal year then ended.

43

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

 

     (f) Immediately upon receipt by the Borrower or any Subsidiary (other than
Premium Finance Co. or its Subsidiaries) of any Extraordinary Receipts (other
than Extraordinary Receipts received by any Regulated Insurance Subsidiary, in
each case, of less than $500,000), the Borrower shall apply the Required
Prepayment Percentage of the Net Cash Proceeds received with respect thereto to
prepay outstanding Term Loans in accordance with Section 2.13(g), provided that,
with respect to the receipt of any Extraordinary Receipt in excess of $500,000
by any Regulated Insurance Subsidiary, any prepayment pursuant to this
Section 2.13(f) shall be subject to Requirements of Law and the receipt of any
required Governmental Authority approval, if any, which the Borrower shall use
commercially reasonable efforts to obtain so long as there is a reasonable
expectation of obtaining such approval.
     (g) Mandatory prepayments of outstanding Loans pursuant to clauses
(b) through (f) above shall be applied, first pro rata against the remaining
scheduled installments due in respect of the Term Loans under Section 2.11,
second, to prepay outstanding Swingline Loans to the full extent thereof, third,
to prepay Revolving Loans to the full extent thereof and fourth, to prepay
outstanding reimbursement obligations with respect to Letters of Credit. Any
Lender may elect, by notice to the Administrative Agent by facsimile at least
two Business Days of receiving notice of such prepayment, as set forth in
Section 2.13(h), to decline its portion of any prepayment of its Loans pursuant
to clauses (b) through (f) above, in which case the aggregate amount of the
prepayment that would have been applied to prepay such Loans but was so declined
shall be re-offered to those Lenders under this Agreement who have initially
accepted such prepayment (such re-offer to be made to each such Lender based on
the percentage which such Lender’s Loans represents of the aggregate Loans of
all such Lenders who have initially accepted such prepayment). In the event of
such a re-offer, each of the relevant Lenders may elect, by notice to the
Administrative Agent by telephone by facsimile within two Business Days of
receiving notification of such re-offer, to decline its portion of the amount of
such prepayment that is re-offered to them and, to the extent so declined by
such Lenders, with any remaining amounts being retained by the Borrower to be
used for any other purpose not prohibited by this Agreement.
     (h) The Borrower shall deliver to the Administrative Agent, at the time of
each prepayment required under this Section 2.13, (i) a certificate signed by a
Financial Officer of the Borrower setting forth in reasonable detail the
calculation of the amount of such prepayment and (ii) to the extent practicable,
at least three days prior written notice of such prepayment. Each notice of
prepayment shall specify the prepayment date and the principal amount to be
prepaid. If all Lenders accept the prepayment offer, the prepayment amount will
be applied first to ABR Loans outstanding then Eurodollar Loans (in inverse
order of maturity). If any Lender refuses the prepayment offer, the prepayment
amount will be applied to the then outstanding Loans on a pro rata basis,
regardless of Type. All prepayments of Borrowings pursuant to this Section 2.13
shall be subject to Section 2.16, but shall otherwise be without premium or
penalty.
     (i) Notwithstanding anything to the contrary contained above in this
Section 2.13, to the extent that (i) funds for any prepayment otherwise required
to be made pursuant to the terms of Section 2.13(b) are only available to the
Borrower through dividend payments to the Borrower from one or more Regulated
Insurance Subsidiaries, (ii) such dividend payments cannot be made at such time
within the ordinary dividend-paying capacity of such Regulated Insurance
Subsidiary or Subsidiaries and, accordingly, require specific affirmative
regulatory approval for

44

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

 

the payment of extraordinary dividends and (iii) after due written application
or request, such approval for the payment of extraordinary dividends is not
obtained by such Regulated Insurance Subsidiary, upon certification by the
Borrower to the Administrative Agent to such effect (together with, in the case
of an application or request for regulatory approval, copies of all documents
submitted, and all written responses received, in connection therewith), the
Borrower shall not, to such extent, be required to make such prepayment for so
long as (but only for so long as) such dividend payments may not, for such
reasons, be made, provided that, promptly upon any such restrictions no longer
being applicable, any such accrued prepayments that would be delinquent but for
the foregoing provisions shall be made with the proceeds of any dividends or
other distributions no longer subject to such restrictions.
SECTION 2.14. Reserve Requirements; Change in Circumstances. (a) Notwithstanding
any other provision of this Agreement, if any Change in Law shall:
     (i) impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by, any Lender, the Administrative Agent or the Issuing Bank
(except any such reserve requirement which is reflected in the Adjusted LIBO
Rate) or
     (ii) impose on any Lender, the Administrative Agent or the Issuing Bank or
the London interbank market any other condition affecting this Agreement or
Eurodollar Loans made by such Lender or any Letter of Credit or participation
therein,
and the result of any of the foregoing shall be to increase the cost to such
Lender or the Issuing Bank of making or maintaining any Eurodollar Loan (or of
maintaining its obligation to make any such Loan) or to increase the cost to any
Lender, the Administrative Agent or the Issuing Bank of issuing or maintaining
any Letter of Credit or purchasing or maintaining a participation therein or to
reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise but
excluding Excluded Taxes) by an amount deemed in good faith by such Lender, the
Administrative Agent or the Issuing Bank to be material, then the Borrower will
pay to such Lender, the Administrative Agent or the Issuing Bank, as the case
may be, upon demand such additional amount or amounts as will compensate such
Lender or the Issuing Bank, as the case may be, for such additional costs
incurred or reduction suffered.
     (b) If any Lender, the Administrative Agent or the Issuing Bank shall have
determined that any Change in Law regarding capital adequacy has or would have
the effect of reducing the rate of return on such Lender’s, the Administrative
Agent’s or the Issuing Bank’s capital or on the capital of such Lender’s, the
Administrative Agent’s or the Issuing Bank’s holding company, if any, as a
consequence of this Agreement or the Loans made by, or participations in Letters
of Credit purchased by, such Lender or the Letters of Credit issued by the
Issuing Bank to a level below that which such Lender, the Administrative Agent
or the Issuing Bank or such Lender’s, the Administrative Agent’s or the Issuing
Bank’s holding company could have achieved but for such Change in Law (taking
into consideration such Lender’s, the Administrative Agent’s or the Issuing
Bank’s policies and the policies of such Lender’s, the Administrative Agent’s or
the Issuing Bank’s holding company with respect to capital adequacy) by an
amount deemed in good faith by such Lender, the Administrative Agent

45

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

 

or the Issuing Bank to be material, then from time to time the Borrower shall
pay to such Lender, the Administrative Agent or the Issuing Bank, as the case
may be, such additional amount or amounts as will compensate such Lender, the
Administrative Agent or the Issuing Bank or such Lender’s, the Administrative
Agent’s or the Issuing Bank’s holding company for any such reduction suffered.
     (c) A certificate in reasonable detail of a Lender, the Administrative
Agent or the Issuing Bank setting forth the amount or amounts necessary to
compensate such Lender, the Administrative Agent or the Issuing Bank or its
holding company, as applicable, as specified in paragraph (a) or (b) of this
Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender, the Administrative Agent or
the Issuing Bank, as the case may be, the amount or amounts shown as due on any
such certificate delivered by it within 10 days after its receipt of the same.
     (d) Failure or delay on the part of any Lender, the Administrative Agent or
the Issuing Bank to demand compensation pursuant to this Section shall not
constitute a waiver of such Lender’s, the Administrative Agent’s or the Issuing
Bank’s right to demand such compensation; provided that the Borrower shall not
be under any obligation to compensate any Lender, the Administrative Agent or
the Issuing Bank under paragraph (a) or (b) above for increased costs or
reductions with respect to any period prior to the date that is 180 days prior
to such request if such Lender, the Administrative Agent or the Issuing Bank
knew or could reasonably have been expected to know of the circumstances giving
rise to such increased costs or reductions and of the fact that such
circumstances would result in a claim for increased compensation by reason of
such increased costs or reductions; provided further that the foregoing
limitation shall not apply to any increased costs or reductions arising out of
the retroactive application of any Change in Law within such 180-day period. The
protection of this Section shall be available to each Lender, the Administrative
Agent and the Issuing Bank regardless of any possible contention of the
invalidity or inapplicability of the Change in Law that shall have occurred or
been imposed.
     SECTION 2.15. Change in Legality. (a) Notwithstanding any other provision
of this Agreement, if any Change in Law shall make it unlawful for any Lender to
make or maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to any Eurodollar Loan, then, by written notice
to the Borrower and to the Administrative Agent:
     (i) such Lender may declare that Eurodollar Loans will not thereafter (for
the duration of such unlawfulness) be made by such Lender hereunder (or be
continued for additional Interest Periods and ABR Loans will not thereafter (for
such duration) be converted into Eurodollar Loans), whereupon any request for a
Eurodollar Borrowing (or to convert an ABR Borrowing to a Eurodollar Borrowing
or to continue a Eurodollar Borrowing for an additional Interest Period) shall,
as to such Lender only, be deemed a request for an ABR Loan (or a request to
continue an ABR Loan as such for an additional Interest Period or to convert a
Eurodollar Loan into an ABR Loan, as the case may be), unless such declaration
shall be subsequently withdrawn; and
     (ii) such Lender may require that all outstanding Eurodollar Loans made by
it be converted to ABR Loans, in which event all such Eurodollar Loans shall be

46

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

 

automatically converted to ABR Loans as of the effective date of such notice as
provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal that would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans made by such Lender in lieu of, or resulting from the conversion of,
such Eurodollar Loans. Any such conversion of a Eurodollar Loan under (i) above
shall be subject to Section 2.16.
     (b) For purposes of this Section 2.15, a notice to the Borrower by any
Lender shall be effective as to each Eurodollar Loan made by such Lender, if
lawful, on the last day of the Interest Period then applicable to such
Eurodollar Loan; in all other cases such notice shall be effective on the date
of receipt by the Borrower.
     SECTION 2.16. Indemnity. The Borrower shall indemnify each Lender against
any loss or expense that such Lender may sustain or incur as a consequence of
(a) any event, other than a default by such Lender in the performance of its
obligations hereunder, which results in (i) such Lender receiving or being
deemed to receive any amount on account of the principal of any Eurodollar Loan
prior to the end of the Interest Period in effect therefor, (ii) except as set
forth in Section 2.15 the conversion of any Eurodollar Loan to an ABR Loan, or
the conversion of the Interest Period with respect to any Eurodollar Loan, in
each case other than on the last day of the Interest Period in effect therefor
or (iii) any Eurodollar Loan to be made by such Lender (including any Eurodollar
Loan to be made pursuant to a conversion or continuation under Section 2.10) not
being made after notice of such Loan shall have been given by the Borrower
hereunder (any of the events referred to in this clause (a) being called a
“Breakage Event”) or (b) any default in the making of any payment or prepayment
required to be made hereunder. In the case of any Breakage Event, such loss
shall include an amount equal to the excess, as reasonably determined by such
Lender, of (i) its cost of obtaining funds for the Eurodollar Loan that is the
subject of such Breakage Event for the period from the date of such Breakage
Event to the last day of the Interest Period in effect (or that would have been
in effect) for such Loan over (ii) the amount of interest likely to be realized
by such Lender in redeploying the funds released or not utilized by reason of
such Breakage Event for such period. A certificate of any Lender setting forth
any amount or amounts which such Lender is entitled to receive pursuant to this
Section 2.16 shall be delivered to the Borrower and shall be conclusive absent
manifest error.
     SECTION 2.17. Pro Rata Treatment. Except as provided below in this
Section 2.17 with respect to Swingline Loans and as required under Sections 2.13
and 2.15, each Borrowing, each payment or prepayment of principal of any
Borrowing, each payment of interest on the Loans, each payment of the Commitment
Fees, each reduction of the Term Loan Commitments or the Revolving Credit
Commitments and each conversion of any Borrowing to or continuation of any
Borrowing as a Borrowing of any Type shall be allocated pro rata among the
Lenders in accordance with their respective applicable Commitments (or, if such
Commitments shall have expired or been terminated, in accordance with the
respective principal amounts of their outstanding Loans). For purposes of
determining the available Revolving Credit Commitments of the Lenders at any
time, each outstanding Swingline Loan shall be deemed to have utilized the
Revolving Credit Commitments of the Lenders (including those Lenders which shall
not have

47

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

 

made Swingline Loans) pro rata in accordance with such respective Revolving
Credit Commitments. Each Lender agrees that in computing such Lender’s portion
of any Borrowing to be made hereunder, the Administrative Agent may, in its
discretion, round each Lender’s percentage of such Borrowing to the next higher
or lower whole dollar amount.
     SECTION 2.18. Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of banker’s lien, setoff or counterclaim against
the Borrower or any other Loan Party, or pursuant to a secured claim under
Section 506 of Title 11 of the United States Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law or otherwise, or by
any other means, obtain payment (voluntary or involuntary) in respect of any
Loan or Loans or L/C Disbursement as a result of which the unpaid principal
portion of its Loans and participations in L/C Disbursements shall be
proportionately less than the unpaid principal portion of the Loans and
participations in L/C Disbursements of any other Lender, it shall be deemed
simultaneously to have purchased from such other Lender at face value, and shall
promptly pay to such other Lender the purchase price for, a participation in the
Loans and L/C Exposure of such other Lender, so that the aggregate unpaid
principal amount of the Loans and L/C Exposure and participations in Loans and
L/C Exposure held by each Lender shall be in the same proportion to the
aggregate unpaid principal amount of all Loans and L/C Exposure then outstanding
as the principal amount of its Loans and L/C Exposure prior to such exercise of
banker’s lien, setoff or counterclaim or other event was to the principal amount
of all Loans and L/C Exposure outstanding prior to such exercise of banker’s
lien, setoff or counterclaim or other event; provided, however, that if any such
purchase or purchases or adjustments shall be made pursuant to this Section 2.18
and the payment giving rise thereto shall thereafter be recovered, such purchase
or purchases or adjustments shall be rescinded to the extent of such recovery
and the purchase price or prices or adjustment restored without interest. The
Borrower expressly consents to the foregoing arrangements and agrees that any
Lender holding a participation in a Loan or L/C Disbursement deemed to have been
so purchased may exercise any and all rights of banker’s lien, setoff or
counterclaim with respect to any and all moneys owing by the Borrower to such
Lender by reason thereof as fully as if such Lender had made a Loan directly to
the Borrower in the amount of such participation.
SECTION 2.19. Payments. (a) The Borrower shall make each payment (including
principal of or interest on any Borrowing or any L/C Disbursement or any Fees or
other amounts) hereunder and under any other Loan Document not later than 12:00
(noon), New York City time, on the date when due in immediately available
dollars, without setoff, defense or counterclaim. Each such payment (other than
(i) Issuing Bank Fees, which shall be paid directly to the Issuing Bank, and
(ii) principal of and interest on Swingline Loans, which shall be paid directly
to the Swingline Lender except as otherwise provided in Section 2.21(e)) shall
be made to an account designated by the Administrative Agent. All payments
hereunder and under each other Loan Document shall be made in dollars.
     (b) Except as otherwise expressly provided herein, whenever any payment
(including principal of or interest on any Borrowing or any Fees or other
amounts) hereunder or under any other Loan Document shall become due, or
otherwise would occur, on a day that is not a Business Day, such payment may be
made on the next succeeding Business Day, and such

48

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

 

extension of time shall in such case be included in the computation of interest
or Fees, if applicable.
     SECTION 2.20. Taxes. (a) Any and all payments by or on account of any
obligation of the Borrower or any other Loan Party hereunder or under any other
Loan Document shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; provided that if any Indemnified Taxes or
Other Taxes are required to be withheld or deducted from such payments, then
(i) the sum payable by the Borrower shall be increased as necessary so that
after all required deductions or withholding (including deductions or
withholdings applicable to additional sums payable under this Section) the
Administrative Agent or such Lender (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been made,
(ii) the Borrower or such other Loan Party shall make (or cause to be made) such
deductions and (iii) the Borrower or such other Loan Party shall pay (or cause
to be paid) the full amount deducted to the relevant Governmental Authority in
accordance with applicable law. In addition, the Borrower or any other Loan
Party hereunder shall pay (or cause to be paid) any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
     (b) The Borrower shall jointly and severally indemnify the Administrative
Agent and each Lender, within 10 days after written demand therefor, for the
full amount of any Indemnified Taxes or Other Taxes paid by the Administrative
Agent or such Lender, as the case may be, or any of their respective Affiliates,
on or with respect to any payment by or on account of any obligation of the
Borrower or any Loan Party hereunder or under any other Loan Document (including
Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable under this Section) and any penalties, interest and expenses
arising therefrom or with respect thereto, whether or not such Indemnified Taxes
or Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate in reasonable detail as to the amount of
such payment or liability delivered to the Borrower by a Lender, or by the
Administrative Agent on its behalf or on behalf of a Lender, shall be conclusive
absent manifest error.
     (c) As soon as practicable after any payment of Indemnified Taxes or Other
Taxes pursuant to Section 2.20(a), and in any event within 30 days of any such
payment being due, the Borrower shall deliver (or cause to be delivered) to the
Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.
     (d) Any Foreign Lender that is entitled to an exemption from or reduction
of withholding tax under the law of the jurisdiction in which the Borrower is
located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to the Borrower (with a copy to the
Administrative Agent), at the reasonable written request of the Borrower, such
properly completed and executed documentation prescribed by applicable law as
will permit such payments to be made without withholding or at a reduced rate;
provided that such Lender is legally entitled to complete, execute and deliver
such documentation and in such Lender’s judgment such completion, execution or
delivery would not materially prejudice the legal position of such Lender. In
addition, each Foreign Lender shall (i) furnish on or before

49

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

 

it becomes a party to the Agreement either (a) two accurate and complete
originally executed U.S. Internal Revenue Service Form W-8BEN (or successor
form) or (b) an accurate and complete U.S. Internal Revenue Service Form W-8ECI
(or successor form), certifying, in either case, to such Foreign Lender’s legal
entitlement to an exemption or reduction from U.S. federal withholding tax with
respect to all interest payments hereunder, and (ii) provide a new Form W-8BEN
(or successor form) or Form W-8ECI (or successor form) upon the expiration or
obsolescence of any previously delivered form to reconfirm any complete
exemption from, or any entitlement to a reduction in, U.S. federal withholding
tax with respect to any interest payment hereunder; provided that any Foreign
Lender that is not a “bank” within the meaning of Section 881(c)(3)(A) of the
Code and is relying on the so-called “portfolio interest exemption” shall also
furnish a “Non-Bank Certificate” in the form of Exhibit I together with a
Form W-8BEN. Notwithstanding any other provision of this paragraph, a Foreign
Lender shall not be required to deliver any form pursuant to this paragraph that
such Foreign Lender is not legally able to deliver.
     (e) Any Lender that is a United States person, as defined in
Section 7701(a)(30) of the Internal Revenue Code, and is not an exempt recipient
within the meaning of Treasury Regulations Section 1.6049-4(c) shall deliver to
the Borrower (with a copy to the Administrative Agent) two accurate and complete
original signed copies of Internal Revenue Service Form W-9, or any successor
form that such person is entitled to provide at such time in order to comply
with United States back-up withholding requirements.
     (f) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.20 shall survive the payment in full of all amounts due
hereunder.
SECTION 2.21. Assignment of Commitments Under Certain Circumstances; Duty to
Mitigate. (a) In the event (i) any Lender or the Issuing Bank delivers a
certificate requesting compensation pursuant to Section 2.14, (ii) any Lender or
the Issuing Bank delivers a notice described in Section 2.15, (iii) the Borrower
is required to pay any additional amount to any Lender or the Issuing Bank or
any Governmental Authority on account of any Lender or the Issuing Bank pursuant
to Section 2.20, (iv) any Lender is in default of its obligations under this
Agreement, (v) any Lender does not consent to a proposed amendment, modification
or waiver of this Agreement requested by the Borrower which requires the consent
of all of the Lenders or all of the Lenders under any Facility to become
effective (and which is approved by at least the Required Lenders), (vi) any
Revolving Credit Lender does not consent to a proposed extension of the
Revolving Credit Facility requested by the Borrower in accordance with
Section 2.25 (and which is approved by Revolving Credit Lenders holding at least
the minimum aggregate principal amount set forth in Section 2.25(a) (iv)) or
(vii) any Revolving Credit Lender does not consent to a proposed amendment,
modification or waiver of Section 6.15 or 6.16 of this Agreement requested by
the Borrower which requires the consent of the Required Revolving Credit Lenders
to become effective (and which is approved by all other Required Revolving
Credit Lenders other than such non-consenting Revolving Credit Lender), the
Borrower may, at its sole expense and effort (including with respect to the
processing and recordation fee referred to in Section 9.04(b)), upon notice to
such Lender or the Issuing Bank and the Administrative Agent, require such
Lender or the Issuing Bank to transfer and assign, without recourse (in
accordance with and subject to the restrictions contained in Section 9.04), all
of its interests,

50

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

 

rights and obligations under this Agreement to an assignee that shall assume
such assigned obligations (which assignee may be another Lender, if a Lender
accepts such assignment); provided that (x) such assignment shall not conflict
with any law, rule or regulation or order of any court or other Governmental
Authority having jurisdiction, (y) solely with respect to replacements of
Lenders pursuant to clauses (i), (ii) or (iii) of this Section, the Borrower
shall have received the prior written consent of the Administrative Agent (and,
if a Revolving Credit Commitment is being assigned, of the Issuing Bank and the
Swingline Lender), which consent shall not unreasonably be withheld, and (z) the
Borrower or such assignee shall have paid to the affected Lender or the Issuing
Bank in immediately available funds an amount equal to the sum of the principal
of and interest accrued to the date of such payment on the outstanding Loans or
L/C Disbursements of such Lender or the Issuing Bank, respectively, plus all
Fees and other amounts accrued for the account of such Lender or the Issuing
Bank hereunder (including any amounts under Section 2.14 and with respect to a
replacement pursuant to clauses (i), (ii), (iii) and (v) of Section 2.16);
provided further that, if prior to any such transfer and assignment the
circumstances or event that resulted in such Lender’s or the Issuing Bank’s
claim for compensation under Section 2.14 or notice under Section 2.15 or the
amounts paid pursuant to Section 2.20, as the case may be, cease to cause such
Lender or the Issuing Bank to suffer increased costs or reductions in amounts
received or receivable or reduction in return on capital, or cease to have the
consequences specified in Section 2.15, or cease to result in amounts being
payable under Section 2.20, as the case may be (including as a result of any
action taken by such Lender or the Issuing Bank pursuant to paragraph
(b) below), or if such Lender or the Issuing Bank shall waive its right to claim
further compensation under Section 2.14 in respect of such circumstances or
event or shall withdraw its notice under Section 2.15 or shall waive its right
to further payments under Section 2.20 in respect of such circumstances or
event, as the case may be, then such Lender or the Issuing Bank shall not
thereafter be required to make any such transfer and assignment hereunder. In
connection with any such replacement, if the replaced Lender does not execute
and deliver to the Administrative Agent a duly completed Assignment and
Acceptance reflecting such replacement within five Business Days of the date on
which the replacement Lender executes and delivers such Assignment and
Acceptance to the replaced Lender, then such replaced Lender shall be deemed to
have executed and delivered such Assignment and Acceptance; provided, that in
connection with any such replacement of a Revolving Credit Lender following its
determination not to consent to a proposed extension of the Revolving Credit
Facility requested by the Borrower in accordance with Section 2.25, such duly
completed Assignment and Acceptance Agreement shall have been delivered to the
non-consenting Revolving Credit Lender at least five Business Days prior to the
then scheduled Revolving Credit Maturity Date (as in effect prior to the
applicable proposed extension) (and if such Assignment and Acceptance is not so
delivered, the provisions of Section 2.25 shall apply as if no such assignment
had been made).
     (b) If (i) any Lender or the Issuing Bank shall request compensation under
Section 2.14, (ii) any Lender or the Issuing Bank delivers a notice described in
Section 2.15 or (iii) the Borrower is required to pay any additional amount to
any Lender or the Issuing Bank or any Governmental Authority on account of any
Lender or the Issuing Bank, pursuant to Section 2.20, then such Lender or the
Issuing Bank shall use reasonable efforts (which shall not require such Lender
or the Issuing Bank to incur an unreimbursed loss or unreimbursed cost or
expense or otherwise take any action inconsistent with its internal policies or
legal or regulatory restrictions or suffer any disadvantage or burden deemed by
it to be significant) (x) to file any

51

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

 

certificate or document reasonably requested in writing by the Borrower or
(y) to assign its rights and delegate and transfer its obligations hereunder to
another of its offices, branches or affiliates, if such filing or assignment
would reduce its claims for compensation under Section 2.14 or enable it to
withdraw its notice pursuant to Section 2.15 or would reduce amounts payable
pursuant to Section 2.20, as the case may be, in the future. The Borrower hereby
agrees to pay all reasonable costs and expenses incurred by any Lender or the
Issuing Bank in connection with any such filing or assignment, delegation and
transfer.
     SECTION 2.22. Swingline Loans. (a) Swingline Commitment. Subject to the
terms and conditions hereof and relying upon the representations and warranties,
set forth herein, the Swingline Lender agrees to make loans to the Borrower, at
any time and from time to time after the Closing Date, and until the earlier of
the Revolving Credit Maturity Date and the termination of the Revolving Credit
Commitments in accordance with the terms hereof, in an aggregate principal
amount at any time outstanding that will not result in (i) the aggregate
principal amount of all Swingline Loans exceeding $2,000,000 in the aggregate or
(ii) the Aggregate Revolving Credit Exposure, after giving effect to any
Swingline Loan, exceeding the Total Revolving Credit Commitment. Each Swingline
Loan shall be in a principal amount that is an integral multiple of $100,000.
The Swingline Commitment may be terminated or reduced from time to time as
provided herein. Within the foregoing limits, the Borrower may borrow, pay or
prepay and reborrow Swingline Loans hereunder, subject to the terms, conditions
and limitations set forth herein.
     (b) Swingline Loans. The Borrower shall notify the Administrative Agent by
fax, or by telephone (confirmed by fax), not later than 12:00 (noon), New York
City time, on the day of a proposed Swingline Loan to be made to it. Such notice
shall be delivered on a Business Day, shall be irrevocable and shall refer to
this Agreement and shall specify the requested date (which shall be a Business
Day) and amount of such Swingline Loan. The Administrative Agent will promptly
advise the Swingline Lender of any notice received from the Borrower pursuant to
this paragraph (b). The Swingline Lender shall make each Swingline Loan
available to the Borrower by means of a credit to the general deposit account of
the Borrower as specified in the Borrowing Request by 3:00 p.m. on the date such
Swingline Loan is so requested.
     (c) Prepayment. The Borrower shall have the right at any time and from time
to time to prepay any Swingline Loan, in whole or in part, upon giving written
or fax notice (or telephone notice promptly confirmed by written or fax notice)
to the Swingline Lender and to the Administrative Agent before 12:00 (noon), New
York City time, on the date of prepayment at the Swingline Lender’s address for
notices specified in the Lender Addendum delivered by the Swingline Lender. All
principal payments of Swingline Loans shall be accompanied by accrued interest
on the principal amount being repaid to the date of payment.
     (d) Interest. Each Swingline Loan shall be an ABR Loan and, subject to the
provisions of Section 2.07, shall bear interest as provided in Section 2.06(a).
     (e) Participations. The Swingline Lender may by written notice given to the
Administrative Agent not later than 10:00 a.m., New York City time, on any
Business Day require the Revolving Credit Lenders to acquire participations on
such Business Day in all or a portion of the Swingline Loans outstanding. Such
notice shall specify the aggregate amount of

52

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

 

Swingline Loans in which Revolving Credit Lenders will participate. The
Administrative Agent will, promptly upon receipt of such notice, give notice to
each Revolving Credit Lender, specifying in such notice such Lender’s Pro Rata
Percentage of such Swingline Loan or Loans. In furtherance of the foregoing,
each Revolving Credit Lender hereby absolutely and unconditionally agrees, upon
receipt of notice as provided above, to pay to the Administrative Agent, for the
account of the Swingline Lender, such Revolving Credit Lender’s Pro Rata
Percentage of such Swingline Loan or Loans. Each Revolving Credit Lender
acknowledges and agrees that its obligation to acquire participations in
Swingline Loans pursuant to this paragraph is absolute and unconditional and
shall not be affected by any circumstance whatsoever, including the occurrence
and continuance of a Default or an Event of Default, and that each such payment
shall be made without any offset, abatement, withholding or reduction
whatsoever. Each Revolving Credit Lender shall comply with its obligation under
this paragraph by wire transfer of immediately available funds, in the same
manner as provided in Section 2.02(c) with respect to Loans made by such Lender
(and Section 2.02(c) shall apply, mutatis mutandis, to the payment obligations
of the Lenders under this Section) and the Administrative Agent shall promptly
pay to the Swingline Lender the amounts so received by it from the Lenders. The
Administrative Agent shall notify the Borrower of any participations in any
Swingline Loan acquired pursuant to this paragraph and thereafter payments in
respect of such Swingline Loan shall be made to the Administrative Agent and not
to the Swingline Lender. Any amounts received by the Swingline Lender from the
Borrower (or other party on behalf of the Borrower) in respect of a Swingline
Loan after receipt by the Swingline Lender of the proceeds of a sale of
participations therein shall be promptly remitted to the Administrative Agent;
any such amounts received by the Administrative Agent shall be promptly remitted
by the Administrative Agent to the Lenders that shall have made their payments
pursuant to this paragraph and to the Swingline Lender, as their interests may
appear. The purchase of participations in a Swingline Loan pursuant to this
paragraph shall not relieve the Borrower (or other party liable for obligations
of the Borrower) of any default in the payment thereof.
     SECTION 2.23. Letters of Credit. (a) General. Subject to the terms and
conditions hereof, the Borrower may request the issuance of a Letter of Credit
at any time and from time to time while the Revolving Credit Commitments remain
in effect for its own account or for the account of any of the Subsidiary
Guarantors (in which case the Borrower and such Subsidiary Guarantor shall be
co-applicants with respect to such Letter of Credit), but not later than thirty
(30) days prior to the Revolving Loan Maturity Date in a form reasonably
acceptable to the Administrative Agent and the Issuing Bank. This Section shall
not be construed to impose an obligation upon the Issuing Bank to issue any
Letter of Credit that is inconsistent with the terms and conditions of this
Agreement.
     (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.
In order to request the issuance of a Letter of Credit (or to amend, renew or
extend an existing Letter of Credit), the Borrower shall hand deliver or fax to
the Issuing Bank and the Administrative Agent (no less than three Business Days
(or such shorter period of time acceptable to the Issuing Bank) in advance of
the requested date of issuance, amendment, renewal or extension) a notice
requesting the issuance of a Letter of Credit, or identifying the Letter of
Credit to be amended, renewed or extended, the date of issuance, amendment,
renewal or extension, the date on which such Letter of Credit is to expire
(which shall comply with paragraph (c) below), the amount of such Letter of
Credit, the name and address of the

53

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

 

beneficiary thereof and such other information as shall be necessary to prepare
such Letter of Credit. A Letter of Credit shall be issued, amended, renewed or
extended only if, and upon issuance, amendment, renewal or extension of each
Letter of Credit the Borrower shall be deemed to represent and warrant that,
after giving effect to such issuance, amendment, renewal or extension (i) the
L/C Exposure shall not exceed $2,000,000 and (ii) the Aggregate Revolving Credit
Exposure shall not exceed the Total Revolving Credit Commitment.
     (c) Expiration Date. Each Letter of Credit shall expire at the close of
business on the earlier of (i) the date one year after the date of the issuance
of such Letter of Credit and (ii) the date that is five Business Days prior to
the Revolving Credit Maturity Date, unless such Letter of Credit expires by its
terms on an earlier date; provided, however, that a Letter of Credit may, upon
the request of the Borrower, include a provision whereby such Letter of Credit
shall be renewed automatically for additional consecutive periods of 12 months
or less (but not beyond the date that is five Business Days prior to the
Revolving Credit Maturity Date) unless the Issuing Bank notifies the beneficiary
thereof at least 45 days prior to the then-applicable expiration date that such
Letter of Credit will not be renewed.
     (d) Participations. By the issuance of a Letter of Credit and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Revolving Credit Lender, and each such Lender hereby
acquires from the Issuing Bank, a participation in such Letter of Credit equal
to such Lender’s Pro Rata Percentage of the aggregate amount available to be
drawn under such Letter of Credit, effective upon the issuance of such Letter of
Credit. In consideration and in furtherance of the foregoing, each Revolving
Credit Lender hereby absolutely and unconditionally agrees to pay to the
Administrative Agent, for the account of the Issuing Bank, such Lender’s Pro
Rata Percentage of each L/C Disbursement made by the Issuing Bank and not
reimbursed by the Borrower (or, if applicable, another party pursuant to its
obligations under any other Loan Document) forthwith on the date due as provided
in Section 2.02(f). Each Revolving Credit Lender acknowledges and agrees that
its obligation to acquire participations pursuant to this paragraph in respect
of Letters of Credit is absolute and unconditional and shall not be affected by
any circumstance whatsoever, including the occurrence and continuance of a
Default or an Event of Default, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
     (e) Reimbursement. If the Issuing Bank shall make any L/C Disbursement in
respect of a Letter of Credit, the Borrower shall pay to the Administrative
Agent an amount equal to such L/C Disbursement not later than two hours after
the Borrower shall have received notice from the Issuing Bank that payment of
such draft will be made if such notice is received on or before 10:00 am New
York time, or, if the Borrower shall have received such notice later than
10:00 a.m., New York City time, on any Business Day, not later than 10:00 a.m.,
New York City time, on the immediately following Business Day. To the extent
that the Borrower does not reimburse the Issuing Bank on the same business day,
the Lenders under the Revolving Facility shall be irrevocably obligated to
reimburse the Issuing Bank pro rata based upon their respective Revolving Credit
Commitment.
     (f) Obligations Absolute. The Borrower’s obligations to reimburse L/C
Disbursements as provided in paragraph (e) above shall be absolute,
unconditional and

54

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

 

irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement, under any and all circumstances whatsoever, and irrespective of:
     (i) any lack of validity or enforceability of any Letter of Credit or any
Loan Document, or any term or provision therein;
     (ii) any amendment or waiver of, or any consent to departure from, all or
any of the provisions of any Letter of Credit or any Loan Document;
     (iii) the existence of any claim, setoff, defense or other right that the
Borrower, any other party guaranteeing, or otherwise obligated with, the
Borrower, any subsidiary or other Affiliate thereof or any other person may at
any time have against the beneficiary under any Letter of Credit, the Issuing
Bank, the Administrative Agent or any Lender or any other person, whether in
connection with this Agreement, any other Loan Document or any other related or
unrelated agreement or transaction;
     (iv) any draft or other document presented under a Letter of Credit proving
to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
     (v) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or other document that does not comply with the terms of
such Letter of Credit; and
     (vi) any other act or omission to act or delay of any kind of the Issuing
Bank, any Lender, the Administrative Agent or any other person or any other
event or circumstance whatsoever, whether or not similar to any of the
foregoing, that might, but for the provisions of this Section, constitute a
legal or equitable discharge of the Borrower’s obligations hereunder.
     Without limiting the generality of the foregoing, it is expressly
understood and agreed that the absolute and unconditional obligation of the
Borrower hereunder to reimburse L/C Disbursements will not be excused by the
gross negligence, bad faith or willful misconduct of the Issuing Bank. However,
the foregoing shall not be construed to excuse the Issuing Bank from liability
to the Borrower to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Borrower to the
extent permitted by applicable law) suffered by the Borrower that are caused by
the Issuing Bank’s gross negligence, bad faith or willful misconduct in
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof; it is understood that the Issuing Bank may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary and, in making any payment under any Letter of
Credit (i) the Issuing Bank’s exclusive reliance on the documents presented to
it under such Letter of Credit as to any and all matters set forth therein,
including reliance on the amount of any draft presented under such Letter of
Credit, whether or not the amount due to the beneficiary thereunder equals the
amount of such draft and whether or not any document presented pursuant to such
Letter of Credit proves to be insufficient in any respect, if such document on
its face appears to be in order, and whether or not any other statement or any

55

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

 

other document presented pursuant to such Letter of Credit proves to be forged
or invalid or any statement therein proves to be inaccurate or untrue in any
respect whatsoever and (ii) any noncompliance in any immaterial respect of the
documents presented under such Letter of Credit with the terms thereof shall, in
each case, be deemed not to constitute willful misconduct or gross negligence of
the Issuing Bank.
     (g) Disbursement Procedures. The Issuing Bank shall, promptly following its
receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Issuing Bank shall as promptly as possible
give telephonic notification, confirmed by fax, to the Administrative Agent and
the Borrower of such demand for payment and whether the Issuing Bank has made or
will make an L/C Disbursement thereunder; provided that any failure to give or
delay in giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the applicable Lenders with respect to any such
L/C Disbursement. The Administrative Agent shall promptly give each Revolving
Credit Lender notice thereof.
     (h) Interim Interest. If the Issuing Bank shall make any L/C Disbursement
in respect of a Letter of Credit, then, unless the Borrower shall reimburse such
L/C Disbursement in full on such date, the unpaid amount thereof shall bear
interest for the account of the Issuing Bank, for each day from and including
the date of such L/C Disbursement to but excluding the earlier of the date of
payment by the Borrower or the date on which interest shall commence to accrue
thereon as provided in Section 2.02(f), at the rate per annum that would apply
to such amount if such amount were an ABR Revolving Loan.
     (i) Resignation or Removal of the Issuing Bank. The Issuing Bank may resign
at any time by giving 30 days’ prior written notice to the Administrative Agent,
the Lenders and the Borrower. Subject to the next succeeding paragraph, upon the
acceptance of any appointment as the Issuing Bank hereunder by a Lender that
shall agree to serve as successor Issuing Bank, such successor shall succeed to
and become vested with all the interests, rights and obligations of the retiring
Issuing Bank and the retiring Issuing Bank shall be discharged from its
obligations to issue additional Letters of Credit hereunder. At the time such
removal or resignation shall become effective, the Borrower shall pay all
accrued and unpaid fees pursuant to Section 2.05(c)(ii). The acceptance of any
appointment as the Issuing Bank hereunder by a successor Lender shall be
evidenced by an agreement entered into by such successor, in a form satisfactory
to the Borrower and the Administrative Agent, and, from and after the effective
date of such agreement, (i) such successor Lender shall have all the rights and
obligations of the previous Issuing Bank under this Agreement and the other Loan
Documents and (ii) references herein and in the other Loan Documents to the term
“Issuing Bank” shall be deemed to refer to such successor or to any previous
Issuing Bank, or to such successor and all previous Issuing Banks, as the
context shall require. After the resignation or removal of the Issuing Bank
hereunder, the retiring Issuing Bank shall remain a party hereto and shall
continue to have all the rights and obligations of an Issuing Bank under this
Agreement and the other Loan Documents with respect to Letters of Credit issued
by it prior to such resignation or removal, but shall not be required to issue
additional Letters of Credit.
     (j) Cash Collateralization. If any Event of Default shall occur and be
continuing, the Borrower shall, on the Business Day it receives notice from the
Administrative Agent or the

56

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

 

Required Lenders (or, if the maturity of the Loans has been accelerated,
Revolving Credit Lenders representing greater than 50% of the total L/C
Exposure) thereof and of the amount to be deposited, deposit in an account with
the Collateral Agent, for the ratable benefit of the Revolving Credit Lenders,
an amount in cash equal to the L/C Exposure as of such date. Such deposit shall
be held by the Collateral Agent as collateral for the payment and performance of
the obligations of the Borrower under this Agreement. The Collateral Agent shall
have exclusive dominion and control, including the exclusive right of
withdrawal, over such account. Other than any interest earned on the investment
of such deposits in Permitted Investments, which investments shall be made at
the option and sole discretion of the Collateral Agent, such deposits shall not
bear interest. Interest or profits, if any, on such investments shall accumulate
in such account. Moneys in such account shall (i) automatically be applied by
the Administrative Agent to reimburse the Issuing Bank for L/C Disbursements for
which it has not been reimbursed, (ii) be held for the satisfaction of the
reimbursement obligations of the Borrower for the L/C Exposure at such time and
(iii) if the maturity of the Loans has been accelerated (but subject to the
consent of Revolving Credit Lenders representing greater than 50% of the total
L/C Exposure), be applied to satisfy the Obligations. If the Borrower is
required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower within three Business Days after
all Events of Default have been cured or waived.
     (k) Additional Issuing Banks. The Borrower may, at any time and from time
to time with the consent of the Administrative Agent (which consent shall not be
unreasonably withheld) and such Lender, designate one or more additional Lenders
to act as an issuing bank under the terms of the Agreement. Any Lender
designated as an issuing bank pursuant to this paragraph shall be deemed to be
an “Issuing Bank” (in addition to being a Lender) in respect of Letters of
Credit issued or to be issued by such Lender, and, with respect to such Letters
of Credit, such term shall thereafter apply to the other Issuing Bank and such
Lender.
     SECTION 2.24. Incremental Facilities.
     (a) (i) Borrower may by written notice to the Administrative Agent (the
“Increase Loan Notice”) elect to request prior to the first anniversary of the
Closing Date, an increase to the existing Revolving Credit Commitment (any such
increase, the “Primary New Revolving Loan Commitments”) on any one or more
occasions by an amount not in excess of $20,000,000 in the aggregate. Any
Primary New Revolving Loan Commitment shall be in the minimum amount of
$5,000,000 and integral multiples of $500,000 in excess thereof (or, in the
aggregate, if less, the entire remaining amount of an amount equal to
$20,000,000 less the amount of Revolving Loan Commitments outstanding as of the
applicable Increased Amount Date (as defined below)), and shall be subject to
the voluntary participation of Lenders in such Primary New Revolving Loan
Commitment as otherwise provided herein. Such notice shall specify (A) the date
(the “Increased Amount Date”) on which Borrower proposes that the Primary New
Revolving Loan Commitments shall be effective, which need not be the same date
for all Primary New Revolving Loan Commitments and shall be a date not less than
5 Business Days after the date on which such notice is delivered to the
Administrative Agent (or such shorter period as may be approved by the
Administrative Agent) and (B) the identity of each Lender or other Person that
is an Eligible Assignee (each, a “New

57

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

 

Revolving Loan Lender”) to whom Borrower proposes any portion of such Primary
New Revolving Loan Commitments be allocated and the amounts of such proposed
allocations.
          (ii) Borrower may by written Increase Loan Notice elect to request,
prior to the Revolving Credit Maturity Date, an increase to the existing
Revolving Credit Commitment (any such increase, the “Secondary New Revolving
Loan Commitments” and, together with the Primary New Revolving Loan Commitments,
the “New Revolving Loan Commitments”) on any one occasion by an amount not in
excess of $20,000,000 in the aggregate; provided that, notwithstanding the
foregoing, no Secondary New Revolving Loan Commitments may be requested until
the date the Borrower shall have fully activated all permitted Primary New
Revolving Loan Commitments in accordance with Section 2.24(a)(i) and (y) the
Business Day immediately following the first anniversary of the Closing Date.
Any Secondary New Revolving Loan Commitment shall be in the minimum amount of
$5,000,000 and integral multiples of $500,000 in excess thereof, and shall be
subject to the voluntary participation of Lenders or Eligible Assignees in such
Secondary New Revolving Loan Commitment as otherwise provided herein. Such
notice shall specify (A) the Increased Amount Date, which shall be the same date
for all Secondary New Revolving Loan Commitments and shall be a date not less
than 10 Business Days after the date on which such notice is delivered to the
Administrative Agent (or such shorter period as may be approved by the
Administrative Agent) and (B) the identity of each New Revolving Loan Lender to
whom Borrower proposes any portion of such New Revolving Loan Commitments be
allocated and the amounts of such proposed allocations.
     (b) The entering into of New Revolving Loan Commitments shall be subject to
the satisfaction of each of the following conditions precedent, as determined by
Administrative Agent in its good faith judgment:
          (i) any existing Lender may elect or decline, in its sole discretion,
to provide a New Revolving Loan Commitment; provided, however, that the election
by any such Lender to provide or not provide New Revolving Loan Commitments
shall, in no way affect its then existing obligations under the Loan Documents;
          (ii) no Default or Event of Default shall exist on the date the
Increased Loan Notice is delivered and no Default or Event of Default shall
exist on the Increased Amount Date, both before and after giving effect to such
New Revolving Loan Commitments;
          (iii) in connection with the making of any Secondary New Revolving
Loan Commitments only, both before and after giving effect to the making of any
New Revolving Loan Commitments, Borrower and its Subsidiaries shall be in
compliance, on a pro forma basis (after giving effect to such New Revolving Loan
Commitments and such other customary adjustments reasonably acceptable to the
Administrative Agent), with each of the covenants set forth in Sections 6.11,
6.12, 6.13, 6.14, 6.15 and 6.16 as of the last day of the most recently ended
fiscal quarter after giving effect to such New Revolving Loan Commitments;

58

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

 

          (iv) the New Revolving Loan Commitments shall be effected pursuant to
one or more Joinder Agreements executed and delivered by Borrower and
Administrative Agent, and each of which shall be recorded in the Register and
shall be subject to the requirements set forth in Section 2.20(d);
          (v) Borrower shall make any payments required pursuant to
Section 2.16(c) in connection with the New Revolving Loan Commitments;
          (vi) in connection with the making of any Secondary New Revolving Loan
Commitments only, Borrower shall deliver or cause to be delivered any legal
opinions or other documents reasonably requested by Administrative Agent in
connection with the New Revolving Loan Commitments;
          (vii) in connection with the making of any Secondary New Revolving
Loan Commitments only, and as requested by Administrative Agent, the Loan
Parties shall have acknowledged and ratified that their obligations under the
applicable Loan Documents remain in full force and effect, and continue to
guaranty the Obligations under the Loan Documents, as modified by the
implementation of the New Revolving Loan Commitments; and
          (viii) in connection with the making of any New Revolving Loan
Commitments, Borrower shall have paid all reasonable out-of-pocket costs and
expenses incurred by the Administrative Agent in connection with the
implementation of the New Revolving Loan Commitments.
     (c) Each New Revolving Loan Commitment shall be deemed, for all purposes
(and shall have identical terms, including without limitation, pricing, as), the
existing Revolving Loan Commitments (including, without limitation, for purposes
of calculating Revolving Facility Exposure) and each Loan made thereunder (a
“New Revolving Loan”) shall be deemed, for all purposes (and shall have
identical terms as), the existing Revolving Loans. In the event an Eligible
Assignee participates in the New Revolving Loan Commitments (in such capacity, a
“New Revolving Loan Lender”), such New Revolving Loan Lender shall be deemed,
for all purposes, a Lender and a Revolving Credit Lender hereunder.
     (d) On any Increased Amount Date on which New Revolving Loan Commitments
are effected, subject to the satisfaction of the foregoing terms and conditions,
each of the Revolving Credit Lenders shall assign to each of the New Revolving
Loan Lenders, and each of the New Revolving Loan Lenders shall purchase from
each of the Revolving Credit Lenders, at the principal amount thereof (together
with accrued interest), such interests in the Revolving Loans outstanding on
such Increased Amount Date as shall be necessary in order that, after giving
effect to all such assignments and purchases, such Revolving Loans will be held
by existing Revolving Loan Lenders and New Revolving Loan Lenders ratably in
accordance with their Revolving Loan Commitments after giving effect to the
addition of such New Revolving Loan Commitments to the Revolving Loan
Commitments.
     (e) Administrative Agent shall notify Lenders promptly upon receipt of
Borrower’s notice of each Increased Amount Date and in respect thereof (y) the
New Revolving Loan

59

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

 

Commitments and the New Revolving Loan Lenders and (z) in the case of each
notice to any Revolving Loan Lender, the respective interests in such Revolving
Loan Lender’s Revolving Loans, in each case subject to the assignments
contemplated by this Section.
     (f) Each Joinder Agreement may, without the consent of any other Lenders,
effect such amendments to this Agreement and the other Loan Documents as may be
necessary or appropriate, in the opinion of the Administrative Agent to give
effect to the provisions of this Section 2.24.
     SECTION 2.25. Extension of Revolving Credit Maturity Date. (a) Borrower
shall have the right to extend the Revolving Credit Maturity Date for three
(3) additional distinct consecutive periods, each of one year in duration (each
an “Extension Period”). To request an extension of the Revolving Credit Maturity
Date, Borrower shall deliver to Administrative Agent at least thirty (30) days’
prior written notice (an “Extension Notice”; such 30th day after delivery of the
Extension Notice being hereinafter referred to as the “Extension Effectiveness
Date”) containing Borrower’s election to extend the term of the Revolving Credit
Maturity Date, which Extension Notice shall be delivered not less than one
(1) month nor more than three (3) months prior to the then scheduled Revolving
Credit Maturity Date. As further provided below, on the applicable Extension
Effectiveness Date, the Revolving Credit Maturity Date shall be extended one
year from the then scheduled Revolving Credit Maturity Date, respectively,
subject to the satisfaction of the following conditions precedent:
          (ix) no Event of Default exists on the date such Extension Notice is
delivered and no Default or Event of Default exists on the Extension
Effectiveness Date;
          (x) Borrower shall have paid any reasonable out of pocket costs and
expenses incurred by Administrative Agent, in connection with the requested
extension (including, without limitation, reasonable attorneys’ fees and costs);
          (xi) both before and after giving effect to such extension, Borrower
and its Subsidiaries shall be in compliance, on a pro forma basis (after giving
effect to such extension and such other customary adjustments reasonably
acceptable to the Administrative Agent), with each of the covenants set forth in
Sections 6.11, 6.12, 6.13, 6.14, 6.15 and 6.16 as of the last day of the most
recently ended fiscal quarter after giving effect to such extension; and
          (xii) Revolving Credit Lenders holding Revolving Credit Commitments,
in aggregate, of at least $2,000,000, shall have consented in writing to such
extension at least five (5) Business Days before the scheduled Extension
Effectiveness Date.
For the avoidance of doubt, and notwithstanding anything herein to the contrary,
(x) any Revolving Credit Lender may elect or decline, in its sole discretion, to
consent to a request for any extension of the Revolving Credit Maturity Date and
(y) the consent to any such extension of the Revolving Credit Maturity Date by
any Term Lender shall not be required.
     (b) Upon the satisfaction of the conditions set forth in clauses
(i) through (iv) of Section 2.25(a), the Revolving Credit Maturity Date shall be
deemed extended on the Extension Effectiveness Date. If the Revolving Credit
Maturity Date is extended, all the terms and

60

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

 

conditions of the Credit Documents shall continue to apply, except that
(i) Borrower shall have no further option to extend the Revolving Credit
Maturity Date beyond the expiration of the third occurring Extension Period,
(ii) as of each Extension Effectiveness Date, the Revolving Credit Commitments
shall be deemed permanently reduced by an amount equal to the Revolving Credit
Commitments of those Revolving Credit Lenders that did not consent in writing to
such extension at least five (5) Business Days before the scheduled Extension
Effectiveness Date and whose Revolving Credit Commitments were not otherwise
assigned to one or more replacement Revolving Credit Lenders in accordance with
Section 2.21(a), (iii) such reduction in the Revolving Credit Commitments shall
be made ratably among solely the applicable Revolving Credit Lenders that did
not so consent in accordance with their Pro Rata Percentages and whose Revolving
Credit Commitments were not otherwise assigned to one or more replacement
Revolving Credit Lenders in accordance with Section 2.21(a) (and not, for the
avoidance of doubt, all Revolving Credit Lenders) and (iv) notwithstanding
anything in Section 2.13 or otherwise contained herein to the contrary, Borrower
shall pay to the Administrative Agent for the account of the applicable
Revolving Credit Lenders that did not so consent and whose Revolving Credit
Commitments were not otherwise assigned to one or more replacement Revolving
Credit Lenders in accordance with Section 2.21(a), on the Extension
Effectiveness Date, (A) the amount of Revolving Loans outstanding as of such
date attributable to such Revolving Credit Lenders in accordance with their Pro
Rata Percentages and (B) the Commitment Fees on the amount of the Commitments so
terminated or reduced accrued to but excluding the date of such termination or
reduction (it being understood and agreed that Borrower shall be permitted to
make additional borrowings of Revolving Loans from continuing Revolving Credit
Lenders to fund such payments, in accordance with and subject to the limitations
of this Section 2 and Section 4).
ARTICLE III.
Representations and Warranties
     The Borrower represents and warrants to the Administrative Agent, the
Collateral Agent, the Issuing Bank and each of the Lenders that:
     SECTION 3.01. Organization; Powers. The Borrower and each Subsidiary (a) is
duly organized or formed, validly existing and in good standing under the laws
of the jurisdiction of its organization or formation, (b) has all requisite
corporate or limited liability company power and authority, and the legal right,
to own and operate its property and assets, to lease the property it operates as
lessee and to carry on its business as now conducted and as proposed to be
conducted, (c) is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required (except where failure to do so
could not reasonably be expected to have a Material Adverse Effect) and (d) has
the corporate or limited liability company power and authority, and the legal
right, to execute, deliver and perform its obligations under this Agreement,
each of the other Loan Documents, the Acquisition Documentation and each other
agreement or instrument contemplated hereby or thereby to which it is or will be
a party, including, in the case of the Borrower, to borrow hereunder, in the
case of each Loan Party, to grant the Liens contemplated to be granted by it
under the Security Documents and, in the case

61

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

 

of each Subsidiary Guarantor, to Guarantee the Obligations as contemplated by
the Guarantee and Collateral Agreement.
     SECTION 3.02. Authorization; No Conflicts. The Transactions (a) have been
duly authorized by all requisite corporate, partnership or limited liability
company and, if required, stockholder, partner or member action and (b) will not
(i) violate (A) any provision of law, statute, rule or regulation, or of the
certificate or articles of incorporation or other constitutive documents or
by-laws of the Borrower or any Subsidiary, (B) any order of any Governmental
Authority or arbitrator or (C) any provision of any indenture, agreement or
other instrument to which the Borrower or any Subsidiary is a party or by which
any of them or any of their property is or may be bound (except where such
violation could not reasonably be expected to have a Material Adverse Effect),
(ii) be in conflict with, result in a breach of or constitute (alone or with
notice or lapse of time or both) a default under, or give rise to any right to
accelerate or to require the prepayment, repurchase or redemption of any
obligation under any such indenture, agreement or other instrument or
(iii) result in the creation or imposition of any Lien upon or with respect to
any property or assets now owned or hereafter acquired by the Borrower or any
Subsidiary (other than Liens created under the Security Documents or as
permitted by this Agreement).
     SECTION 3.03. Enforceability. This Agreement has been duly executed and
delivered by the Borrower and constitutes, and each other Loan Document when
executed and delivered by each Loan Party party thereto will constitute, a
legal, valid and binding obligation of such Loan Party enforceable against such
Loan Party in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’ rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.
     SECTION 3.04. Governmental Approvals. No action, consent or approval of,
registration or filing with, Permit from, notice to, or any other action by, any
Governmental Authority is or will be required in connection with the
Transactions, except for (a) the filing of UCC financing statements and filings
with the United States Patent and Trademark Office and the United States
Copyright Office, (b) recordation of the Mortgages, (c) such as have been made
or obtained and are in full force and effect, other than, in the case of each of
the foregoing, the failure of which to obtain or make could not reasonably be
expected to have a Material Adverse Effect or which are not material to the
consummation of the Transactions.
     SECTION 3.05. Financial Statements. (a) The Borrower has heretofore
furnished to the Lenders the consolidated balance sheets and related statements
of income, stockholder’s equity and cash flows of each of the Borrower and
USAgencies as of and for the fiscal years ended December 31, 2005, December 31,
2004 and December 31, 2003 in each case audited by and accompanied by the
opinion of (i) in the case of the Borrower, PricewaterhouseCoopers LLP, and
(ii) in the case of USAgencies, Postlethwaite & Netterville, in both cases
independent public accountants. Such financial statements present fairly in all
material respects the financial condition and results of operations and cash
flows of USAgencies, the Borrower and each of their consolidated Subsidiaries as
of such dates and for such periods. Such balance sheets and the notes thereto
disclose all material liabilities, direct or contingent, of USAgencies, the
Borrower and each of their consolidated Subsidiaries as of the dates thereof.
Such financial statements were prepared in accordance with GAAP applied on a
consistent basis.

62

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

 

     (b) The Borrower has heretofore delivered to the Lenders its unaudited pro
forma consolidated balance sheet and related statements of income, stockholder’s
equity and cash flows as of September 30, 2006, prepared giving effect to the
Transactions as if they had occurred, with respect to such balance sheet, on
such date and, with respect to such other financial statements, on the first day
of the 12-month period ending on such date. Such pro forma financial statements
(i) have been prepared in good faith by the Borrower, based on the assumptions
used to prepare the pro forma financial information contained in the
Confidential Information Memorandum (which assumptions are believed by the
Borrower on the date hereof and on the Closing Date to be reasonable), (ii) are
based on the best information available to the Borrower after due inquiry as of
the date of delivery thereof, (iii) accurately reflect all material adjustments
required to be made to give effect to the Transactions and (iv) present fairly
in all material respects on a pro forma basis the estimated consolidated
financial position of the Borrower and its consolidated Subsidiaries as of such
date and for such period, assuming that the Transactions had actually occurred
at such date or at the beginning of such period, as the case may be.
     SECTION 3.06. No Material Adverse Change. No event, change or condition has
occurred since December 31, 2005 that has caused, or could reasonably be
expected to cause, a Material Adverse Effect.
     SECTION 3.07. Title to Properties; Possession Under Leases. (a) Each of the
Borrower and each Subsidiary has good and valid title to, or valid leasehold
interests in, all its material properties and assets (including, good and
marketable title to, or valid leasehold interests in all its material Real
Property), except for minor defects in title that, in the aggregate, are not
substantial in amount and do not materially detract from the value of the
property subject thereto and do not interfere in any material respect with its
ability to conduct its business as currently conducted or to utilize such
properties and assets for their intended purposes. Each parcel of Real Property
is free from material structural defects and all building systems contained
therein are in good working order and condition, ordinary wear and tear
excepted, suitable for the purposes for which they are currently being used. No
portion of the Real Property has suffered any material damage by fire or other
casualty loss that has not heretofore been completely repaired and restored to
its original condition. Each parcel of Real Property and the current use thereof
complies with all applicable laws (including building and zoning ordinances and
codes) and with all insurance requirements; the Borrower is not a non-conforming
user of any Real Property.
     (b) Each of the Borrower and the Subsidiaries, and, to the knowledge of the
Borrower, each other party thereto, has complied with all obligations under all
material leases to which it is a party and all such leases are legal, valid,
binding and in full force and effect and are enforceable in accordance with
their terms. Each of the Borrower and the Subsidiaries enjoys peaceful and
undisturbed possession under all such material leases. No landlord Lien has been
filed, and, to the knowledge of the Borrower, no claim is being asserted, with
respect to any lease payment under any material lease. None of the Real Property
is subject to any lease, sublease, license or other agreement granting to any
person (other than the Borrower and their Affiliates) any right to the use,
occupancy, possession or enjoyment of the Real Property or any portion thereof.
The Borrower has delivered to the Administrative Agent true, complete and
correct copies of all leases (whether as landlord or tenant) of Real Property.

63

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

 

     (c) None of the Borrower or any of the Subsidiaries has received any notice
of, nor has any knowledge of, any pending or contemplated condemnation
proceeding affecting the Real Properties or any sale or disposition thereof in
lieu of condemnation.
     (d) None of the Borrower or any of the Subsidiaries is obligated under any
right of first refusal, option or other contractual right to sell, assign or
otherwise dispose of any Real Property or any interest therein.
     (e) There are no pending or, to the knowledge of the Borrower, proposed
special or other assessments for public improvements or otherwise affecting any
material portion of the owned Real Property, nor are there any contemplated
improvements to such owned Real Property that may result in such special or
other assessments. The Borrower has not suffered, permitted or initiated the
joint assessment of any owned Real Property with any other real property
constituting a separate tax lot. Each owned parcel of Real Property is comprised
of one or more parcels, each of which constitutes a separate tax lot and none of
which constitutes a portion of any other tax lot.
     (f) The Borrower has obtained all permits, licenses, variances and
certificates required by applicable law to be obtained and necessary to the use
and operation of each parcel of Real Property, except where the failure to have
such permit, license, certificate or variance would not prohibit the use of such
parcel of Real Property as it is currently being used. The use being made of
each parcel of Real Property conforms with the certificate of occupancy and/or
such other permits, licenses, variances and certificates for such Real Property
and any other restrictions, covenants or conditions affecting such Real
Property, except for any such nonconformity that could not reasonably be
expected to be enjoined or to result in material fines.
     (g) (i) each parcel of Real Property has adequate rights of access to
public ways to permit the Real Property to be used for its intended purpose, and
is served by installed, operating and adequate water, electric, gas, telephone,
sewer, sanitary sewer and storm drain facilities; (ii) all public utilities
necessary to the continued use and enjoyment of each parcel of Real Property as
used and enjoyed on the Closing Date are located in the public right-of-way
abutting the premises, and all such utilities are connected so as to serve such
Real Property without passing over other Property except for land of the utility
company providing such utility service or, in the case of leased Real Property,
contiguous land owned by the lessor of such leased Real Property; (iii) each
parcel of Real Property, including each leased parcel, has adequate available
parking to meet legal and operating requirements; (iv) all roads necessary for
the full utilization of each parcel of Real Property for its current purpose
have been completed and dedicated to public use and accepted by all governmental
authorities or are the subject of access easements for the benefit of such Real
Property; (v) no building or structure constituting Real Property or any
appurtenance thereto or equipment thereon, or the use, operation or maintenance
thereof, violates any restrictive covenant or encroaches on any easement or on
any property owned by others, which violation or encroachment interferes with
the use or could materially adversely affect the value of such building,
structure or appurtenance or which encroachment is necessary for the operation
of the business at any Real Property; and (vi) all buildings, structures,
appurtenances and equipment necessary for the use of each parcel of Real
Property for the purpose for which it is currently being used are located on the
real property encumbered by such Mortgage.

64

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

 

     SECTION 3.08. Subsidiaries. (a) Schedule 3.08(a) sets forth as of the
Closing Date a list of all Subsidiaries, after giving effect to the Acquisition,
including each Subsidiary’s exact legal name (as reflected in such Subsidiary’s
certificate or articles of incorporation or other constitutive documents) and
jurisdiction of incorporation or formation and the percentage ownership interest
of the Borrower (direct or indirect) therein, and identifies each Subsidiary
that is Loan Party. The shares of capital stock or other Equity Interests so
indicated on Schedule 3.08(a) are fully paid and non-assessable and are owned by
the Borrower, directly or indirectly, free and clear of all Liens (other than
Liens created under the Security Documents).
     (b) As of the Closing Date, there are no restrictions on any Regulated
Insurance Subsidiary which prohibit or otherwise restrict the ability of any
Regulated Insurance Subsidiary to (i) pay dividends or make other distributions
or pay any Indebtedness owed to the Borrower or any Subsidiary, (ii) make loans
or advances to the Borrower or any Subsidiary, (iii) transfer any of its
properties or assets to the Borrower or any Subsidiary, (iv) guarantee the
Obligations, other than prohibitions or restrictions existing under or by reason
of (A) customary nonassignment provisions entered into in the ordinary course of
business and consistent with past practices and (B) purchase money obligations
for property acquired in the ordinary course of business, so long as such
obligations are permitted under this Agreement, (v) dividend or distribute to
the Borrower or any Subsidiary amounts equal to all state and federal income tax
expenses incurred by the Regulated Insurance Subsidiaries, or (vi) conduct
business in the ordinary course in the jurisdictions in which such Regulated
Insurance Subsidiary conducts its Insurance Business, including, without
limitation, as set forth on Schedule 3.26, other than, in the case of each of
clause (i) through clause (vi), prohibitions or restrictions existing under or
by reason of (A) this Agreement or the other Loan Documents, (B) Requirements of
Law or (C) as set forth on Schedule 3.08(b).
     SECTION 3.09. Litigation; Compliance with Laws. (a) There are no actions,
investigations, suits or proceedings at law or in equity or by or before any
arbitrator or Governmental Authority now pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any Subsidiary or any
business, property or rights of any such person (i) that involve any Loan
Document or the Transactions or (ii) except as set forth on Schedule 3.09, as to
which there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect.
     (b) None of the Borrower or any of the Subsidiaries or any of their
respective material properties or assets is in violation of, nor will the
continued operation of their material properties and assets as currently
conducted violate, any law, rule or regulation (including any zoning, building,
Environmental Law, ordinance, code or approval or any building permits) or any
restrictions of record or agreements affecting the Mortgaged Property, or is in
default with respect to any judgment, writ, injunction, decree or order of any
Governmental Authority, where such violation or default, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
     (c) Certificates of occupancy, if any, and permits are in effect for each
Mortgaged Property as currently constructed, and true and complete copies of
such certificates of

65

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

 

occupancy, if any, have been delivered to the Collateral Agent as mortgagee with
respect to each Mortgaged Property.
     SECTION 3.10. Agreements. (a) None of the Borrower or any of the
Subsidiaries is a party to any agreement or instrument, or subject to any
corporate restriction, that, individually or in the aggregate, has resulted or
could reasonably be expected to result in a Material Adverse Effect.
     (b) None of the Borrower or any of the Subsidiaries is in default in any
manner under any provision of any indenture or other agreement or instrument
evidencing Indebtedness, or any other material agreement or instrument to which
it is a party or by which it or any of its properties or assets are or may be
bound where such default, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. No Default has occurred and is
continuing.
     SECTION 3.11. Federal Reserve Regulations. (a) None of the Borrower or any
of the Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of buying or
carrying Margin Stock.
     (b) No part of the proceeds of any Loan or any Letter of Credit will be
used, whether directly or indirectly, and whether immediately, incidentally or
ultimately, for purchasing or carrying Margin Stock or for the purpose of
purchasing, carrying or trading in any securities under such circumstances as to
involve the Borrower in a violation of Regulation X or to involve any broker or
dealer in a violation of Regulation T. No Indebtedness being reduced or retired
out of the proceeds of any Loans or Letters of Credit was or will be incurred
for the purpose of purchasing or carrying any Margin Stock. Following the
application of the proceeds of the Loans and the Letters of Credit, Margin Stock
will not constitute more than 25% of the value of the assets of the Borrower and
the Subsidiaries. None of the transactions contemplated by this Agreement will
violate or result in the violation of any of the provisions of the Regulations
of the Board, including Regulation T, U or X. If requested by any Lender or the
Administrative Agent, the Borrower will furnish to the Administrative Agent and
each Lender a statement to the foregoing effect in conformity with the
requirements of FR Form G-3 or FR Form U-1 referred to in Regulation U.
     SECTION 3.12. Investment Company Act. None of the Borrower or any of the
Subsidiaries is an “investment company” as defined in, or subject to regulation
under, the Investment Company Act of 1940, as amended.
     SECTION 3.13. Use of Proceeds. The Borrower will use the proceeds of the
Term Loans solely to pay the Acquisition Consideration. The Borrower will use
the proceeds of the Revolving Loans and the Swingline Loans to pay fees and
expenses related to the Transactions and, from time to time, for general
corporate purposes, including, without limitation payments in accordance with
Section 6.06(a)(iii). The Borrower will request the issuance of Letters of
Credit solely to support payment obligations incurred in the ordinary course of
business by the Borrower and its Subsidiaries.

66

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

 

     SECTION 3.14. Tax Returns. Each of the Borrower and each of the
Subsidiaries has timely filed or timely caused to be filed all federal, material
state, material local and material foreign tax returns or materials required to
have been filed by it and all such tax returns are correct and complete in all
material respects. (a) Each of the Borrower and each of the Subsidiaries has
timely paid or timely caused to be paid all Taxes due and payable by it and all
assessments received by it, except Taxes that are being contested in good faith
by appropriate proceedings and for which the Borrower or such Subsidiary as
applicable, shall have set aside on its books adequate reserves in accordance
with GAAP, (b) each of the Borrower and each of the Subsidiaries has made
adequate provision in accordance with GAAP for all Taxes not yet due and payable
and (c) no Tax Lien has been filed, and to the knowledge of the Borrower and
each of the Subsidiaries, no claim is being asserted, with respect to any Tax
except, in the case clauses (a), (b) and (c) with respect to such taxes and
Liens that do not exceed $2,500,000 in the aggregate at any time outstanding.
None of the Borrower or any of the Subsidiaries (a) intends to treat the Loans
or any of the transactions contemplated by any Loan Document or the Acquisition
as being a “reportable transaction” (within the meaning of Treasury
Regulation Section 1.6011-4) or (b) is aware of any facts or events that would
result in such treatment.
     SECTION 3.15. No Material Misstatements; Acquisition Documentation. (a) The
Borrower has disclosed to the Arranger, the Administrative Agent and the Lenders
all agreements, instruments and corporate or other restrictions to which the
Borrower or any of the Subsidiaries is subject, and all other matters known to
any of them, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. None of (i) the Confidential
Information Memorandum or (ii) any other information, report, financial
statement, exhibit or schedule furnished by or on behalf of the Borrower or any
Subsidiary to the Arranger, the Administrative Agent or any Lender for use in
connection with the transactions contemplated by the Loan Documents or in
connection with the negotiation of any Loan Document or included therein or
delivered pursuant thereto, when taken as a whole, contained, contains or will
contain any material misstatement of fact or omitted, omits or will omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were, are or will be made, not misleading;
provided that to the extent any such information, report, financial statement,
exhibit or schedule was based upon or constitutes a forecast or projection, the
Borrower represents only that it acted in good faith and utilized assumptions
believed by it to be reasonable at the time (it being understood that
projections are subject to significant uncertainty and contingencies many of
which are beyond the control of the Borrower and that no assurances can be given
that such projections will be realized).
     (b) As of the Closing Date, the representations and warranties of the
applicable Loan Parties and their Affiliates set forth in the Acquisition
Documentation are true and correct in all material respects.
     SECTION 3.16. Employee Benefit Plans. Each of the Borrower and each of its
ERISA Affiliates is in compliance in all material respects with the applicable
provisions of ERISA and the Tax Code and the regulations and published
interpretations thereunder. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events,
could reasonably be expected to result in material liability of the Borrower or
any of its ERISA Affiliates. The present value of all benefit liabilities under
each Benefit Plan (based on the assumptions used for purposes of Statement of
Financial Accounting

67

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

 

Standards No. 87) did not, as of the last annual valuation date applicable
thereto, exceed by more than $1,000,000 the fair market value of the assets of
such Benefit Plan, and the present value of all benefit liabilities of all
underfunded Benefit Plans (based on the assumptions used for purposes of
Statement of Financial Accounting Standards No. 87) did not, as of the last
annual valuation dates applicable thereto, exceed by more than $1,000,000 the
fair market value of the assets of all such underfunded Benefit Plans.
     SECTION 3.17. Environmental Matters. (a) Except as set forth in
Schedule 3.17 and except with respect to any other matters that, individually or
in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect, none of the Borrower or any of the Subsidiaries:
     (i) has failed to comply with any Environmental Law or to take, in a timely
manner, all actions necessary to obtain, maintain, renew and comply with any
Environmental Permit, and all such Environmental Permits are in full force and
effect and not subject to any administrative or judicial appeal;
     (ii) has become a party to any governmental, administrative or judicial
proceeding commenced pursuant to any Environmental Law or possesses knowledge of
any such proceeding that has been threatened under Environmental Law;
     (iii) has received notice of, become subject to, or is aware of any facts
or circumstances that could form the basis for, any Environmental Liability
other than those which have been fully and finally resolved and for which no
obligations remain outstanding;
     (iv) possesses knowledge that any Mortgaged Property (A) is subject to any
Lien, restriction on ownership, occupancy, use or transferability imposed
pursuant to Environmental Law or (B) contains or previously contained Hazardous
Materials of a form or type or in a quantity or location that could reasonably
be expected to result in any Environmental Liability;
     (v) possesses knowledge that there has been a Release or threat of Release
of Hazardous Materials at or from the Mortgaged Properties (or from any
facilities or other properties formerly owned, leased or operated by the
Borrower or any of the Subsidiaries) in violation of, or in amounts or in a
manner that could give rise to liability under, any Environmental Law;
     (vi) has generated, treated, stored, transported, or Released Hazardous
Materials from the Mortgaged Properties (or from any facilities or other
properties formerly owned, leased or operated by the Borrower or any of the
Subsidiaries) in violation of, or in a manner or to a location that could give
rise to liability under, any Environmental Law;
     (vii) is aware of any facts, circumstances, conditions or occurrences in
respect of any of the facilities and properties owned, leased or operated that
could (A) form the basis of any action, suit, claim or other judicial or
administrative proceeding relating to liability under or noncompliance with
Environmental Law on the part of the Borrower or

68

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

 

any of the Subsidiaries or (B) or interfere with or prevent continued compliance
with Environmental Laws by the Borrower or the Subsidiaries; or
     (viii) has pursuant to any order, decree, judgment or agreement by which it
is bound or has assumed the Environmental Liability for any Person.
     SECTION 3.18. Insurance. Schedule 3.18 sets forth a true, complete and
correct description of all insurance maintained by or on behalf of the Borrower
and the Subsidiaries as of the Closing Date. As of the Closing Date, such
insurance is in full force and effect and all premiums have been duly paid. The
Borrower and the Subsidiaries are insured by financially sound and reputable
insurers and such insurance is in such amounts and covering such risks and
liabilities (and with such deductibles, retentions and exclusions) as are in
accordance with normal and prudent industry practice.
     SECTION 3.19. Security Documents. (a) The Guarantee and Collateral
Agreement is effective to create in favor of the Collateral Agent, for the
ratable benefit of the Secured Parties, a legal, valid, binding and enforceable
security interest in the Collateral described therein and proceeds thereof and
(i) in the case of the Pledged Collateral, upon the earlier of (A) when such
Pledged Collateral is delivered to the Collateral Agent and (B) when financing
statements in appropriate form are filed in the offices specified on
Schedule 3.19(a) and (ii) in the case of all other Collateral described therein
(other than Intellectual Property Collateral), when financing statements in
appropriate form are filed in the offices specified on Schedule 3.19(a), the
Guarantee and Collateral Agreement shall constitute a fully perfected Lien on,
and security interest in, all right, title and interest of the Secured Parties
in such Collateral and proceeds thereof, as security for the Obligations, in
each case prior and superior to the rights of any other person (except, in the
case of all Collateral other than Pledged Collateral, with respect to Liens
expressly permitted by Section 6.02).
     (b) Each Intellectual Property Security Agreement is effective to create in
favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a
legal, valid, binding and enforceable security interest in the Intellectual
Property Collateral described therein and proceeds thereof. When each
Intellectual Property Security Agreement is filed in the United States Patent
and Trademark Office and the United States Copyright Office, respectively,
together with financing statements in appropriate form filed in the offices
specified in Schedule 3.19(a), such Intellectual Property Security Agreement
shall constitute a fully perfected Lien on, and security interest in, all right,
title and interest of the grantors thereunder in the Intellectual Property
Collateral and proceeds thereof, as security for the Obligations, in each case
prior and superior in right to any other person (except with respect to Liens
expressly permitted by Section 6.02) (it being understood that subsequent
recordings in the United States Patent and Trademark Office and the United
States Copyright Office may be necessary to perfect a lien on registered
trademarks, trademark applications and copyrights acquired by the grantors after
the date hereof).
     (c) Each of the Mortgages is effective to create in favor of the Collateral
Agent, for the ratable benefit of the Secured Parties, a legal, valid, binding
and enforceable Lien on, and security interest in, all of the Loan Parties’
right, title and interest in and to the Mortgaged Property thereunder and
proceeds thereof, and when the Mortgages are filed in the offices

69

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

 

specified on Schedule 3.19(c), each such Mortgage shall constitute a fully
perfected Lien on, and security interest in, all right, title and interest of
the grantors thereof in such Mortgaged Property and proceeds thereof, as
security for the Obligations, in each case prior and superior in right to any
other person (except with respect to Liens expressly permitted by Section 6.02).
     SECTION 3.20. Location of Real Property. Schedule 3.20 lists completely and
correctly as of the Closing Date all Real Property and the addresses thereof,
indicating for each parcel whether it is owned or leased, including in the case
of leased Real Property, the landlord name, lease date and lease expiration
date. The Borrower and the Subsidiaries own in fee or have valid leasehold
interests in, as the case may be, all the real property set forth on
Schedule 3.20.
     SECTION 3.21. Labor Matters. As of the Closing Date, there are no strikes,
lockouts or slowdowns against the Borrower or any Subsidiary pending or, to the
knowledge of the Borrower, threatened. Except to the extent any of the following
could not reasonably be expected to have a Material Adverse Effect, (a) the
hours worked by and payments made to employees of the Borrower and the
Subsidiaries have not been in violation of the Fair Labor Standards Act or any
other applicable Federal, state, local or foreign law dealing with such matters
and (b) payments due from the Borrower or any Subsidiary, or for which any claim
may be made against the Borrower or any Subsidiary, on account of wages and
employee health and welfare insurance and other benefits, have been paid or
accrued as a liability on the books of the Borrower or such Subsidiary. The
consummation of the Transactions will not give rise to any right of termination
or right of renegotiation on the part of any union under any collective
bargaining agreement to which the Borrower or any Subsidiary is bound.
     SECTION 3.22. Liens. There are no Liens of any nature whatsoever on any of
the properties or assets of the Borrower or any of the Subsidiaries (other than
Liens expressly permitted by Section 6.02).
     SECTION 3.23. Intellectual Property. Each of the Borrower and each of the
Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, patents and other intellectual property material to its business,
and the use thereof by the Borrower and the Subsidiaries does not infringe upon
the rights of any other person, except for any such infringements that,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
     SECTION 3.24. Solvency. Immediately after the consummation of the
Transactions to occur on the Closing Date and immediately following the making
of each Loan (or other extension of credit hereunder) and after giving effect to
the application of the proceeds of each Loan (or other extension of credit
hereunder), (a) the fair value of the assets of the Loan Parties, taken as a
whole, will exceed its debts and liabilities, subordinated, contingent or
otherwise; (b) the present fair saleable value of the property of the Loan
Parties, taken as a whole, will be greater than the amount that will be required
to pay the probable liability of its debts and other liabilities, subordinated,
contingent or otherwise, as such debts and other liabilities become absolute and
matured; (c) the Loan Parties, taken as a whole, will be able to pay its debts
and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (d) the Loan Parties, taken as a
whole, will not have

70

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

 

unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted
following the Closing Date.
     SECTION 3.25. Acquisition Documentation. The Acquisition Documentation
listed on Schedule 3.25 constitutes all of the material agreements, instruments
and undertakings to which the Borrower or any of the Subsidiaries is bound or by
which any of their respective property or assets is bound or affected relating
to, or arising out of, the Acquisition. None of such material agreements,
instruments or undertakings has been amended, supplemented or otherwise modified
in any manner materially adverse to the Agent or the Lenders, and all such
material agreements, instruments and undertakings are in full force and effect.
Neither of the Borrower or, to the best of the Borrower’s knowledge, USAgencies
is in default under any of the Acquisition Documentation as of the Closing Date
and neither of the Borrower or, to the best of the Borrower’s knowledge,
USAgencies has the right to terminate any of the Acquisition Documentation.
     SECTION 3.26. Permits. (a) Each Loan Party has obtained and holds all
Permits required in respect of all Real Property and for any other property
otherwise operated by or on behalf of, or for the benefit of, such person and
for the operation of each of its businesses as presently conducted and as
proposed to be conducted, (b) all such Permits are in full force and effect, and
each Loan Party has performed and observed all requirements of such Permits,
(c) no event has occurred that allows or results in, or after notice or lapse of
time would allow or result in, revocation or termination by the issuer thereof
or in any other impairment of the rights of the holder of any such Permit,
(d) no such Permits contain any restrictions, either individually or in the
aggregate, that are materially burdensome to any Loan Party, or to the operation
of any of its businesses or any property owned, leased or otherwise operated by
such person and (e) the Borrower has no knowledge or reason to believe that any
Governmental Authority is considering limiting, suspending, revoking or renewing
on materially burdensome terms any such Permit. Schedule 3.26 lists, with
respect to each Regulated Insurance Subsidiary, as of the Closing Date, all of
the jurisdictions in which such Regulated Insurance Subsidiary holds Permits
(including, without limitation Permits from Insurance Regulators and any other
Permits necessary to transact Insurance Business), and indicates (i) the line or
lines of insurance in which each such Regulated Insurance Subsidiary is
permitted to be engaged with respect to each license therein listed. (ii) the
expiration of such license, and (iii) the status of any renewal thereof.
     SECTION 3.27. Reinsurance Agreements. There are no material liabilities
outstanding as of the Closing Date under any Reinsurance Agreement. Each
Reinsurance Agreement is in full force and effect. No Regulated Insurance
Subsidiary or any other party is in breach of or default under any such
Reinsurance Agreement, except any such breach or default which could not
reasonably be expected to have a Material Adverse Effect. Borrower has no reason
to believe that the financial condition of any other party to any such
Reinsurance Agreement is impaired such that a default thereunder by such party
could reasonable be anticipated and expected to have a Material Adverse Effect.
Each Reinsurance Agreement is qualified under all applicable Requirements of Law
to receive the statutory credit assigned to such Reinsurance Agreement in the
relevant annual statement or quarterly statement at the time prepared. Each
person to whom any Regulated Insurance Subsidiary has ceded any material
liability pursuant to any Reinsurance Agreement on the Closing Date (other than
any such person

71

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

 

that is the Borrower or a Subsidiary thereof in respect of which no such
representation shall be required) has a rating of “B++” or better by A.M. Best.
     SECTION 3.28. Premium Finance Agreements. The forms of Premium Finance
Agreement furnished to Lender by LIFCO, copies of which are attached hereto as
Exhibits K-1, K-2 and K-3, are forms which are currently outstanding and/or
which are currently being used to evidence the financing of all current, new and
renewal insurance premiums produced by USCasualty in Louisiana and USDirect in
Illinois and Alabama. Exhibit K1 is the form currently being used by LIFCO on
behalf of USCasualty in Louisiana, Exhibit K2 is the form currently being used
by LIFCO on behalf of USDirect in Illinois, and Exhibit K3 is the form currently
being used by LIFCO on behalf of USDirect in Alabama. No subsidiary of Borrower
(including any Premium Finance Co.) provides premium financing to policyholders
of any Regulated Insurance Subsidiary other than pursuant to a Premium Finance
Agreement in the form of Exhibit K1, K2 or K3. No Regulated Insurance Subsidiary
has any Installment Agreements outstanding as of the Closing Date. Borrower
shall notify Lender in writing of any changes to the forms of Premium Finance
Agreements being used by Borrower or any of its Subsidiaries on behalf of its
Regulated Insurance Subsidiaries to the extent of any material changes to the
forms.
     SECTION 3.29. Senior Indebtedness. All Obligations of the Borrower and each
of its Subsidiaries constitute “Senior Indebtedness” under the Subordinated Debt
and “Senior Indebtedness” (or such similar term utilized to define or describe
any prior-ranking senior Indebtedness for purposes of the subordination
provisions set forth therein) under the Qualified Additional Subordinated Debt.
     SECTION 3.30. Closing Date Inactive Subsidiaries. As of the Closing Date,
each of Instant Auto Insurance Agency of Arizona, Inc., Instant Auto Insurance
Agency of Colorado, Inc., Instant Auto Insurance Agency of Indiana, Inc.,
Instant Auto Insurance Agency of New Mexico, Inc. and Affirmative Insurance
Services of Pennsylvania, Inc. conducts no operations and has no assets and no
liabilities, in each case, individually or in the aggregate, with a fair market
value in excess of $500,000.
ARTICLE IV.
Conditions of Lending
     The obligations of the Lenders to make Loans hereunder and the obligations
of the Issuing Bank to issue Letters of Credit are subject to the satisfaction
(or waiver in accordance with Section 9.08) of the following conditions:
     SECTION 4.01. All Credit Events. On the date of each Borrowing, including
each Borrowing of a Swingline Loan, and on the date of each issuance, amendment,
extension or renewal of a Letter of Credit (each such event being called a
“Credit Event”):
     (a) The Administrative Agent shall have received a notice of such Borrowing
as required by Section 2.03 (or such notice shall have been deemed given in
accordance with Section 2.03) or, in the case of the issuance, amendment,
extension or renewal of a Letter of Credit, the Issuing Bank and the
Administrative Agent shall have received a notice requesting the issuance,
amendment, extension or renewal of such Letter of Credit

72

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

 

as required by Section 2.23(b) or, in the case of the Borrowing of a Swingline
Loan, the Swingline Lender and the Administrative Agent shall have received a
notice requesting such Swingline Loan as required by Section 2.22(b).
     (b) In the case of each Credit Event (other than Credit Events occurring on
the Closing Date), the representations and warranties set forth in the Loan
Documents shall be true and correct in all material respects on and as of the
date of such Credit Event, with the same effect as though made on and as of such
date, except to the extent such representations and warranties expressly relate
to an earlier date (in which case such representations and warranties shall be
true and correct in all material respects as of such earlier date).
     (c) At the time of and immediately after such Credit Event, no Event of
Default or Default shall have occurred and be continuing
     Each Credit Event shall be deemed to constitute a joint and several
representation and warranty by the Borrower on the date of such Credit Event as
to the matters specified in paragraphs (b) and (c) of this Section 4.01.
     SECTION 4.02. First Credit Event. On the Closing Date:
     (a) The Administrative Agent shall have received, on behalf of itself, the
Lenders and the Issuing Bank, a favorable written opinion of (i) McDermott Will
& Emery LLP, counsel for the Borrower and the Subsidiaries, substantially to the
effect set forth in Exhibit J, and (ii) each special and local counsel to the
Borrower and the Subsidiaries as the Administrative Agent may reasonably
request, in each case (A) dated the Closing Date, (B) addressed to the
Administrative Agent, the Issuing Bank, the Arranger and the Lenders and
(C) covering such matters relating to the Loan Documents and the Transactions as
the Administrative Agent shall reasonably request and which are customary for
transactions of the type contemplated herein, and the Borrower and the
Subsidiaries hereby request such counsel to deliver such opinions.
     (b) The Administrative Agent shall have received (i) a copy of the
certificate or articles of incorporation or other formation documents, including
all amendments thereto, of each Loan Party, certified as of a recent date by the
Secretary of State of the state of its organization, and a certificate as to the
good standing of each Loan Party as of a recent date, from such Secretary of
State; (ii) a certificate of the Secretary or Assistant Secretary of each Loan
Party dated the Closing Date and certifying (A) that attached thereto is a true
and complete copy of the by-laws, operating agreement or similar document of
such Loan Party as in effect on the Closing Date and at all times since a date
prior to the date of the resolutions described in clause (B) below, (B) that
attached thereto is a true and complete copy of resolutions duly adopted by the
Board of Directors, managers or members, as applicable, of such Loan Party
authorizing the execution, delivery and performance of the Loan Documents to
which such person is a party, in the case of the Borrower, the borrowings
hereunder, in the case of each Loan Party, the granting of the Liens
contemplated to be granted by it under the Security Documents and, in the case
of each Subsidiary Guarantor, the Guaranteeing of the Obligations as

73

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

 

contemplated by the Guarantee and Collateral Agreement, and that such
resolutions have not been modified, rescinded or amended and are in full force
and effect, (C) that the certificate or articles of incorporation or other
formation documents of such Loan Party have not been amended since the date of
the last amendment provided to the Administrative Agent and (D) as to the
incumbency and specimen signature of each officer executing any Loan Document or
any other document delivered in connection herewith on behalf of such Loan
Party; (iii) a certificate of another officer as to the incumbency and specimen
signature of the Secretary or Assistant Secretary executing the certificate
pursuant to (ii) above; and (iv) such other documents as the Administrative
Agent, the Issuing Bank or the Lenders may reasonably request.
     (c) The Administrative Agent shall have received a certificate, dated the
Closing Date and signed by a Financial Officer of the Borrower, confirming
compliance with the conditions precedent set forth in paragraphs (b) and (c) of
Section 4.01.
     (d) The Administrative Agent shall have received (i) this Agreement,
executed and delivered by a duly authorized officer of each of the Borrower,
(ii) the Guarantee and Collateral Agreement, executed and delivered by a duly
authorized officer of each of the Borrower and each Subsidiary Guarantor,
(iii) a Mortgage covering each of the Mortgaged Properties, executed and
delivered by a duly authorized officer of each Loan Party thereto, (iv) the
Intellectual Property Security Agreements, executed and delivered by a duly
authorized officer of each Loan Party thereto, (v) if requested by any Lender
pursuant to Section 2.04, a promissory note or notes conforming to the
requirements of such Section and executed and delivered by a duly authorized
officer of the Borrower and (vi) a Lender Addendum executed and delivered by
each Lender and accepted by the Borrower.
     (e) The Collateral Agent, for the ratable benefit of the Secured Parties,
shall have been granted on the Closing Date first priority perfected Liens on
the Collateral (subject, in the case of all Collateral other than Pledged
Collateral, only to Liens expressly permitted by Section 6.02) and customary
Guarantees from the Subsidiary Guarantors and shall have received such other
reports, documents and agreements as the Collateral Agent shall reasonably
request and which are customarily delivered in connection with security
interests in real property assets. The Pledged Collateral shall have been duly
and validly pledged under the Guarantee and Collateral Agreement to the
Collateral Agent, for the ratable benefit of the Secured Parties, and
certificates representing such Pledged Collateral, accompanied by instruments of
transfer and stock powers endorsed in blank, shall be in the actual possession
of the Collateral Agent.
     (f) The Collateral Agent shall have received a duly executed Perfection
Certificate dated on or prior to the Closing Date. The Collateral Agent shall
have received the results of a recent Lien and judgment search in each relevant
jurisdiction with respect to the Borrower and those of the Subsidiaries that
shall be Subsidiary Guarantors or shall otherwise have assets that are included
in the Collateral, and such search shall reveal no Liens on any of the assets of
the Borrower or any of such Subsidiaries except, in the case of Collateral other
than Pledged Collateral, for Liens expressly permitted by Section 6.02 and
except for Liens to be discharged on or prior to

74

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

 

the Closing Date pursuant to documentation reasonably satisfactory to the
Collateral Agent.
     (g) The Acquisition and the Acquisition Transactions shall be consummated
simultaneously with the closing of the Facility hereunder in accordance with
applicable law and on the terms described in the term sheets to the Commitment
Letter; the Purchase Agreement and all other related documentation shall be
reasonably satisfactory to the Administrative Agent; the Administrative Agent
shall be reasonably satisfied with the capitalization and structure of the
Borrower after giving effect to the Transactions.
     (h) After giving effect to the Transactions and the other transactions
contemplated hereby, Borrower and its Subsidiaries shall have outstanding no
Indebtedness or preferred stock other than (i) the Loans and other extensions of
credit hereunder, (ii) the Subordinated Debt and (iii) other limited
Indebtedness to be agreed upon by the Borrower and the Administrative Agent. The
Borrower shall have repaid all amounts outstanding under the Existing Credit
Facilities, if any. The Administrative Agent shall have received satisfactory
evidence that (i) the Existing Credit Facilities shall have been terminated, all
amounts then due and payable or to become due and payable (other than
indemnification obligations not yet having been requested) thereunder shall have
been paid in full and all commitments and reimbursement obligations thereunder
shall have been terminated and (ii) reasonably satisfactory arrangements shall
have been made for the termination of all Liens granted in connection therewith,
in each case on terms and conditions satisfactory to the Administrative Agent.
     (i) The Administrative Agent shall have received (i) the financial
statements described in Section 3.05 and (ii) U.S. GAAP unaudited consolidated
balance sheets and related statements of income, stockholders’ equity and cash
flows of the Borrower for (A) each subsequent fiscal quarter ended 30 days
before the Closing Date and (B) each fiscal month after the most recent 2006
fiscal quarter for which financial statements were received by the
Administrative Agent as described above and ended 30 days before the Closing
Date.
     (j) The Agent shall be reasonably satisfied that (a) the Borrower’s
consolidated pro forma Cash Flow for the four-fiscal quarter period most
recently ended prior to the Closing Date (i) prepared in accordance with
Regulation S-X under the Securities Act of 1933, as amended, to give pro forma
effect to the Transactions as if they had occurred at the beginning of such
four-fiscal quarter period and (ii) in the event that such four-fiscal quarter
period includes the quarter ended December 31, 2005, excluding for purposes of
this calculation (x) $5,400,000 of severance expense and IT system write-off
expense incurred during the fourth fiscal quarter of 2005 and (y) $4,300,000 of
losses incurred at USAgencies’s Regulated Insurance Subsidiaries related to
Hurricane Katrina (such consolidated pro forma Cash Flow, “Pro Forma Cash
Flow”), shall not be less than $60,200,000 and (b) the ratio of Total Debt of
the Borrower and its consolidated subsidiaries on the Closing Date to Pro Forma
Cash Flow shall be no more than 4.60 to 1.0.

75

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

 

     (k) The Administrative Agent shall have received projections of the
Borrower and its subsidiaries for the years 2006 through 2013 and for the
quarters beginning with the fourth fiscal quarter of 2006 and through the fourth
fiscal quarter of 2008, in form and substance reasonably satisfactory to the
Administrative Agent (the “Projections”).
     (l) The Administrative Agent shall have received a certificate from the
chief financial officer of the Borrower certifying that the Borrower and each of
the Subsidiary Guarantors, after giving effect to the Transactions and the other
transactions contemplated hereby, are solvent.
     (m) All material governmental and third party consents and approvals with
respect to the Transactions and the other transactions contemplated hereby to
the extent required shall have been obtained, all applicable appeal periods
shall have expired and there shall be no litigation, governmental,
administrative or judicial action, actual or threatened in writing, that could
reasonably be expected to restrain, prevent or impose materially burdensome
conditions on the Transactions or the other transactions contemplated hereby.
     (n) The Administrative Agent shall have received at least five days prior
to the Closing Date all documentation and other information required by bank
regulatory authorities under applicable “know your customer” and anti-money
laundering rules and regulations, including the U.S.A. Patriot Act.
     (o) The Administrative Agent shall have received in respect of each
Mortgaged Property a mortgagee’s title insurance policy (or policies) or marked
up unconditional binder for such insurance. Each such policy shall (i) be in an
amount equal to the fair market value of such property or, with respect to
Mortgaged Property acquired after the Closing Date, equal to 115% of the fair
market value of the Mortgaged Property, (ii) be issued at ordinary rates;
(iii) insure that the Mortgage insured thereby creates a valid first Lien on,
and security interest in, such Mortgaged Property free and clear of all defects
and encumbrances, except as disclosed therein; (iv) name the Collateral Agent,
for the benefit of the Secured Parties, as the insured thereunder; (v) be in the
form of ALTA Loan Policy - 1970 Form B (Amended 10/17/70 and 10/17/84) (or
equivalent policies), if available; (vi) contain such endorsements and
affirmative coverage as the Administrative Agent may reasonably request in form
and substance acceptable to the Administrative Agent, including (to the extent
applicable with respect to such Mortgaged Property and available in the
jurisdiction in which such Mortgaged Property is located), the following
endorsements: variable rate; survey; comprehensive; zoning (ALTA 3.1 with
parking added); first loss, last dollar and tie-in; access; separate tax parcel;
usury; doing business; subdivision; environmental protection lien; CLTA 119.2
and CLTA 119.3 (for leased Mortgaged Property, only); contiguity; and such other
endorsements as the Administrative Agent shall reasonably require in order to
provide insurance against specific risks identified by the Administrative Agent
in connection with such Mortgaged Property; and (vii) be issued by title
companies satisfactory to the Administrative Agent (including any such title
companies acting as co-insurers or reinsurers, at the option of the
Administrative Agent) (in each such case, a “Title Insurance Company”). The
Administrative Agent shall have received evidence satisfactory to it that all
premiums in

76

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

 

respect of each such policy, all charges for mortgage recording tax, and all
related expenses, if any, have been paid. The Administrative Agent shall have
received a copy of all recorded documents referred to, or listed as exceptions
to title in, the title policy or policies referred to above and a copy of all
other material documents affecting the Mortgaged Property.
     (p) If requested by the Administrative Agent, the Administrative Agent
shall have received (i) a policy of flood insurance that (A) covers any parcel
of improved Mortgaged Property that is located in a flood zone, (B) is written
in an amount not less than the outstanding principal amount of the indebtedness
secured by such Mortgage that is reasonably allocable to such Mortgaged Property
or the maximum limit of coverage made available with respect to the particular
type of property under the National Flood Insurance Act of 1968, whichever is
less, and (C) has a term ending not later than the Term Loan Maturity Date and
(ii) confirmation that the Borrower has received the notice required pursuant to
Section 208(e)(3) of Regulation H of the Board.
     (q) The Administrative Agent and the Title Insurance Company shall have
received maps or plans of an as-built survey (in each case, a “Survey”) of the
sites of the owned Mortgaged Property intended to be subject to a Mortgage
hereunder certified to the Administrative Agent and the Title Insurance Company
in a manner satisfactory to them, dated not more than 60 days prior to the
Closing Date by an independent professional licensed land surveyor satisfactory
to the Administrative Agent and the Title Insurance Company, which maps or plans
and the surveys on which they are based shall be made in accordance with the
Minimum Standard Detail Requirements for Land Title Surveys jointly established
and adopted by the American Land Title Association and the American Congress on
Surveying and Mapping in 1997 or 1999 and meeting the accuracy requirements as
defined therein. Without limiting the generality of the foregoing, each Survey
shall (i) be a current “as-built” survey showing the location of any adjoining
streets (including their widths and any pavement or other improvements),
easements (including the recorded information with respect to all recorded
instruments), the mean high water base line or other legal boundary lines of any
adjoining bodies of water, fences, zoning or restriction setback lines,
rights-of-way, utility lines to the points of connection and any encroachments;
(ii) locate all means of ingress and egress, certifying the amount of acreage
and square footage, indicate the address of the Mortgaged Property, contain the
legal description of the Mortgaged Property, and also contain a location sketch
of the Mortgaged Property; (iii) show the location of all improvements as
constructed on the Mortgaged Property, all of which shall be within the boundary
lines of the Mortgaged Property and conform to all applicable zoning ordinances,
set-back lines and restrictions; (iv) indicate the location of any improvements
on the Mortgaged Property with the dimensions in relations to the lot and
building lines; (v) show measured distances from the improvements to be set back
and specified distances from street or Mortgaged Property lines in the event
that deed restrictions, recorded plats or zoning ordinances require same;
(vi) designate all courses and distances referred to in the legal description,
and indicate the names of all adjoining owners on all sides of the Mortgaged
Property, to the extent available; and (vii) indicate the flood zone
designation, if any, in which the Mortgaged Property is located. The legal
description of the applicable Mortgaged Property shall be shown on the face of
each survey or affixed

77

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

 

thereto, and the same shall conform to the legal description contained in the
title policy described above.
     (r) The Administrative Agent shall have received estoppel certificates from
the landlord with respect to each leased Material Real Property, confirming the
nonexistence of any default thereunder and certain other information with
respect to such lease, each of the foregoing in form and substance reasonably
satisfactory to the Administrative Agent and the Collateral Agent. In the event
that Administrative Agent has determined that a recorded memorandum of lease or
an amendment of lease is necessary or appropriate in order to make any leased
Material Real Property mortgageable, or to grant the leasehold lender customary
lender protections, then the Administrative Agent shall have received evidence
of such recordation or a copy of such fully executed and binding lease
amendment.
     (s) The Administrative Agent shall have received a copy of each Reinsurance
Agreement and Retrocession Agreement to which Borrower or any of its
Subsidiaries is a party or it or its property is subject.
     (t) The representations and warranties contained in Article 3 of the
Purchase Agreement shall be true and correct and the conditions in
Article 7.1(a) of the Purchase Agreement shall be satisfied (but, in each case,
only with respect to representations and warranties that are material to the
interests of the Lenders), and the representations and warranties made in
Sections 3.01(b) and 3.01(d), 3.02(a), 3.03, 3.11 and 3.12 shall be true and
correct.
     (u) No event, change or condition shall have occurred since December 31,
2005, that has caused, or could reasonably be expected to cause, a Closing Date
Material Adverse Effect.
ARTICLE V.
Affirmative Covenants
     The Borrower covenants and agrees with each Lender that so long as this
Agreement shall remain in effect and until the Commitments have been terminated
and the principal of and interest on each Loan, all Fees and all other expenses
or amounts payable under any Loan Document (other than obligations for taxes,
costs, indemnifications, reimbursements, damages and other contingent
liabilities in respect of which no claim or demand for payment has been made or,
in the case of indemnification, no notice has been given) shall have been paid
in full and all Letters of Credit have been canceled or have expired and all
amounts drawn thereunder have been reimbursed in full, the Borrower will, and
will cause each of the Subsidiaries to:
     SECTION 5.01. Existence; Businesses and Properties. (a) Do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence, except as otherwise expressly permitted under Section 6.05.
     (b) Do or cause to be done all things necessary to obtain, preserve, renew,
extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents,

78

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

 

copyrights, trademarks and trade names material to the conduct of its business;
maintain and operate such business in substantially the manner in which it is
presently conducted and operated; comply in all material respects with all
applicable laws, rules, regulations and decrees and orders of any Governmental
Authority, whether now in effect or hereafter enacted; comply with the terms of,
or enforce its rights under, each material lease of real property and each other
material agreement so as to not permit any material uncured default on its part
to exist thereunder, and except where the failure to do so could not have a
material impact on the Borrower and its Subsidiaries taken as a whole; and at
all times maintain and preserve all property material to the conduct of such
business and keep such property in good repair, working order and condition
(except in respect of ordinary wear and tear and casualty) and from time to time
make, or cause to be made, all needful and proper repairs, renewals, additions,
improvements and replacements thereto necessary in order that the business
carried on in connection therewith may be properly conducted at all times.
     SECTION 5.02. Insurance. Keep its insurable properties adequately insured
at all times by financially sound and reputable insurers; maintain such other
reasonably satisfactory insurance, to such extent and against such risks (and
with such deductibles, retentions and exclusions), including fire and other
risks insured against by extended coverage, as is prudent in the reasonable
business judgment of the Borrower, including public liability insurance against
claims for personal injury or death or property damage occurring upon, in, about
or in connection with the use of any properties owned, occupied or controlled by
it and maintain such other insurance as may be required by law.
     SECTION 5.03. Obligations and Taxes. Pay its Indebtedness and other
obligations promptly and in accordance with their terms and pay and discharge
promptly when due all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or in respect of its property,
before the same shall become delinquent or in default, as well as all lawful
claims for labor, materials and supplies or otherwise that, if unpaid, might
give rise to a Lien (other than a Lien permitted by Section 6.02 of this
Agreement) upon such properties or any part thereof; provided, however, that
such payment and discharge shall not be required with respect to any such tax,
assessment, charge, levy or claim so long as the validity or amount thereof
shall be contested in good faith by appropriate proceedings and the Borrower or
the applicable Subsidiary shall have set aside on its books adequate reserves
with respect thereto in accordance with GAAP and such contest operates to
suspend collection of the contested obligation, tax, assessment or charge and
enforcement of a Lien and, in the case of a Mortgaged Property, there is no risk
of forfeiture of such property.
     SECTION 5.04. Financial Statements, Reports, etc. In the case of the
Borrower, furnish to the Administrative Agent who will deliver to each Lender:
     (a) (i) within 90 days after the end of each fiscal year, its consolidated
balance sheet and related statements of income, stockholders’ equity and cash
flows showing the financial condition of the Borrower and its consolidated
Subsidiaries as of the close of such fiscal year and the results of its
operations and the operations of such Subsidiaries during such year, together
with comparative figures for the immediately preceding fiscal year, all audited
by KPMG or other independent public accountants of recognized national standing
and accompanied by an opinion of such accountants (which shall not be

79

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

 

qualified in any material respect) to the effect that such consolidated
financial statements fairly present in all material respects the financial
condition and results of operations of the Borrower and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied; and (ii) as soon as available and in any event within 60 days (or, in
the case of any audited statements and risk-based capital reports required to be
delivered pursuant to this clause (ii), 180 days) after the close of each fiscal
year of each Regulated Insurance Subsidiary, the annual statement of such
Regulated Insurance Subsidiary (prepared in accordance with SAP) for such fiscal
year and as filed with the Insurance Regulators of the state in which such
Regulated Insurance Subsidiary is domiciled (together with any certifications or
statements of such Regulated Insurance Subsidiary relating to such annual
statement and any audited statements and risk-based capital reports, in each
case which are required by such Insurance Regulators);
     (b) (i) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year, its consolidated balance sheet and related
statements of income, stockholders’ equity and cash flows showing the financial
condition of the Borrower and its consolidated Subsidiaries as of the close of
such fiscal quarter and the results of its operations and the operations of such
Subsidiaries during such fiscal quarter and the then elapsed portion of the
fiscal year, and comparative figures for the same periods in the immediately
preceding fiscal year, all certified by one of its Financial Officers as fairly
presenting in all material respects the financial condition and results of
operations of the Borrower and its consolidated Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied, subject to normal year-end
audit adjustments and the absence of footnotes; and (ii) as soon as available
and in any event within 60 days after the close of each of the first three
quarterly accounting periods in each fiscal year of each Regulated Insurance
Subsidiary, quarterly financial statements of such Regulated Insurance Company
(prepared in accordance with SAP) for such quarterly accounting period as filed
with the Insurance Regulators of the state in which such Regulated Insurance
Subsidiary is domiciled (together with any certifications or statements of such
Regulated Insurance Subsidiary relating to such quarterly financial statements
which are required by such Insurance Regulators);
     (c) within 30 days after the end of the first two fiscal months of each
fiscal quarter, its consolidated balance sheet and related statements of income
and cash flows showing the financial condition of the Borrower and its
consolidated Subsidiaries during such fiscal month and the then elapsed portion
of the fiscal year, all certified by one of its Financial Officers as fairly
presenting in all material respects the financial condition and results of
operations of the Borrower and its consolidated Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied, subject to normal year-end
audit adjustments and the absence of footnotes;
     (d) concurrently with any delivery of financial statements under paragraph
(a) or (b) above, (i) a certificate of the Financial Officer certifying such
statements (i) certifying that no Event of Default or Default has occurred or,
if such an Event of Default or Default has occurred, specifying the nature and
extent thereof and any corrective action taken or proposed to be taken with
respect thereto and (ii) setting forth computations in reasonable detail
satisfactory to the Administrative Agent demonstrating

80

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

 

compliance with the covenants contained in Sections 6.11, 6.12, 6.13, 6.14, 6.15
and 6.16, and, in the case of a certificate delivered with the financial
statements required by paragraph (a) above, setting forth the Borrower’s
calculation of Excess Cash Flow and (ii) the related unaudited consolidating
financial statements reflecting the adjustments necessary to eliminate the
accounts of Premium Finance Co. (if any) from such consolidated financial
statements;
     (e) concurrently with any delivery of financial statements under paragraph
(a) above, a certificate of the accounting firm that reported on such financial
statements stating whether they obtained knowledge during the course of their
examination of such financial statements of any Event of Default or Default with
respect to Sections 6.11, 6.12, 6.13, 6.14, 6.15 or 6.16 (which certificate may
be limited to the extent required by generally accepted accounting rules or
guidelines);
     (f) at least 90 days after the end of each fiscal year of the Borrower, a
detailed consolidated budget for the fiscal year following such fiscal year then
ended (including a projected consolidated balance sheet and related statements
of projected operations and cash flows as of the end of and for such following
fiscal year and setting forth the assumptions used for purposes of preparing
such budget) and, promptly when available, any significant revisions of such
budget;
     (g) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by the
Borrower or any Subsidiary with the Securities and Exchange Commission, or any
Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange, or distributed to its
shareholders, as the case may be;
     (h) promptly after the receipt thereof by the Borrower or any of the
Subsidiaries, a copy of any “management letter” (whether in final or draft form)
received by any such person from its certified public accountants and the
management’s response thereto;
     (i) promptly following receipt or as promptly as reasonably practicable
following the request of the Administrative Agent or the Required Lenders, a
report prepared by an independent actuarial consulting firm of recognized
professional standing reasonably satisfactory to the Administrative Agent and
the Required Lenders reviewing the adequacy of reserves of each Regulated
Insurance Subsidiary determined in accordance with SAP, which firm shall be
provided access to or copies of all reserve analyses and valuations relating to
the insurance business of each Regulated Insurance Subsidiary in the possession
of or available to the Borrower or its Subsidiaries; provided that no request
may be made pursuant to this clause (i) unless there shall have occurred and be
continuing an Event of Default;
     (j) promptly (i) after receipt thereof, copies of all regular and periodic
reports of examinations (including, without limitation, triennial examinations
and annual risk adjusted capital reports) of any Regulated Insurance Subsidiary,
delivered to such person by any Insurance Regulators, insurance commission or
similar regulatory authority,

81

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

 

(ii) after receipt thereof, written notice of any assertion by any Insurance
Regulators or any governmental agency or agencies substituted therefor, as to a
violation of any Requirement of Law by any Regulated Insurance Subsidiary which
could reasonably be expected to have a Material Adverse Effect, (iii) after
receipt thereof, a copy of any notice of termination, cancellation or recapture
of any Reinsurance Agreement or Retrocession Agreement to which a Regulated
Insurance Subsidiary is a party to the extent such termination or cancellation
is likely to have a Material Adverse Effect, (iv) after receipt thereof, copies
of any notice of actual suspension, termination or revocation of any material
license of any Regulated Insurance Subsidiary by any Insurance Regulators,
including any request by an Insurance Regulators which commits a Regulated
Insurance Subsidiary to take or refrain from taking any action or which
otherwise affects the authority of such Regulated Insurance Subsidiary to
conduct its business and (v) an in any event within 30 Business Days after
Borrower or any of its Subsidiaries obtains knowledge thereof, notice of any
actual changes in the insurance Requirements of Laws enacted in any state in
which any Regulated Insurance Subsidiary is domiciled which would reasonably be
expected to have a Material Adverse Effect;
     (k) concurrently with any delivery of financial statements under paragraph
(a) or (b) above, (i) in connection with the termination of each Reinsurance
Agreement and Retrocession Agreement (other than with respect to any such
agreement with the Borrower or any Subsidiary thereof), a copy of the slip or
other document, agreement or correspondence with each reinsurer,
retrocessionaire, reinsurance broker or agent which will amend, restate or
supersede such terminating Reinsurance Agreement or Retrocession Agreement, and
(ii) in connection with the execution of any Reinsurance Agreement and
Retrocession Agreement, a copy of each such Reinsurance Agreement and
Retrocession Agreement (other than with respect to any such agreement with the
Borrower or any Subsidiary thereof), certified to be complete and correct by an
authorized Signatory of the Regulated Insurance Subsidiary a party to such
agreement acceptable to Administrative Agent;
     (l) concurrently with any delivery of financial statements under paragraph
(a) or (b) above, a copy of (i) each A.M. Best report, if any, with respect to
Borrower of any of its Subsidiaries, and (ii) all correspondence from A.M. Best
to Borrower or any of its Subsidiaries the contents of which (A) relate to a
probable downgrade of the A.M. Best rating of any Regulated Insurance Subsidiary
or (B) describe or relate to a circumstance that would reasonably be expected to
have a Material Adverse Effect; and
     (m) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of the Borrower or any
Subsidiary, or compliance with the terms of any Loan Document, as the
Administrative Agent or any Lender may reasonably request.
     SECTION 5.05. Litigation and Other Notices. Furnish to the Administrative
Agent (who will deliver to the Issuing Bank and each Lender) prompt written
notice of the following:
     (a) any Event of Default or Default, specifying the nature and extent
thereof and the corrective action (if any) taken or proposed to be taken with
respect thereto;

82

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

 

     (b) the filing or commencement of, or any threat or notice of intention of
any person to file or commence, any action, suit or proceeding, whether at law
or in equity or by or before any arbitrator or Governmental Authority, against
the Borrower or any Subsidiary that could reasonably be expected to result in a
Material Adverse Effect;
     (c) the occurrence of any ERISA Event described in clause (b) of the
definition thereof or any other ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to result in
liability of the Borrower and the Subsidiaries in an aggregate amount exceeding
$2,500,000; and
     (d) any development that has resulted in, or could reasonably be expected
to result in, a Material Adverse Effect.
     SECTION 5.06. Information Regarding Collateral. (a) Furnish to each of the
Administrative Agent and the Collateral Agent prompt written notice of any
change (i) in any Loan Party’s corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of any Loan Party’s chief executive office, its
principal place of business, any office in which it maintains books or records
relating to Collateral owned by it or any office or facility at which Collateral
owned by it is located (including the establishment of any such new office or
facility), (iii) in any Loan Party’s identity or corporate structure or (iv) in
any Loan Party’s Federal Taxpayer Identification Number. The Borrower agrees not
to effect or permit any change referred to in the preceding sentence unless all
filings have been made under the UCC or otherwise and all other actions have
been taken that are required in order for the Collateral Agent to continue at
all times following such change to have a valid, legal and perfected security
interest in all the Collateral. The Borrower also agrees promptly to notify each
of the Administrative Agent and the Collateral Agent if any material portion of
the Collateral is damaged or destroyed.
     (b) In the case of the Borrower, each year, at the time of delivery of the
annual financial statements with respect to the preceding fiscal year pursuant
to Section 5.04(a), deliver to the Administrative Agent a certificate of a
Financial Officer setting forth the information required pursuant to Section I
of the Perfection Certificate or confirming that there has been no change in
such information since the date of the Perfection Certificate delivered on the
Closing Date or the date of the most recent certificate delivered pursuant to
this Section.
     SECTION 5.07. Maintaining Records; Access to Properties and Inspections;
Environmental Assessments. (a) Keep proper books of record and account in which
full, true and correct entries in conformity with GAAP and all requirements of
law are made of all dealings and transactions in relation to its business and
activities. The Borrower will, and will cause each of its subsidiaries to,
permit any representatives designated by the Administrative Agent or any Lender
to visit and inspect the financial records and the properties of the Borrower,
as the case may be, or any of its subsidiaries at reasonable times and as
reasonably requested, and to make extracts from and copies of such financial
records, and permit any representatives designated by the Administrative Agent
or any Lender to discuss the affairs, finances and condition of the Borrower, as
the case may be, or any of its subsidiaries with the officers thereof and
independent accountants therefore, provided that a member of management of the
applicable Loan Party shall be afforded a reasonable opportunity to be present
at any meeting with such

83

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

 

accountants, provided further, that so long as no Event of Default or Default
has occurred and is continuing, there shall be no more than three visits in the
aggregate by the Administrative Agent, Lenders, or their representatives per
calendar year (or such additional number of visits as any of the Administrative
Agent or Lenders may reasonably request provided such additional visits are
coordinated with the Administrative Agent so as to reasonably minimize the
burden imposed on each Loan Party and its Subsidiaries) and such visits shall be
limited to normal business hours.
     (b) At its election, the Administrative Agent or any Lender may, at its own
cost and expense, retain an independent engineer or environmental consultant to
conduct an environmental assessment of any Mortgaged Property or facility of any
Loan Party. The Borrower shall, and shall cause each of the Subsidiaries to,
cooperate in the performance of any such environmental assessment and permit any
such engineer or consultant designated by the Administrative Agent or such
Lender to have full access to each property or facility at reasonable times and
after reasonable advance notice to the Borrower of the plans to conduct such an
environmental assessment. Environmental assessments conducted under this
paragraph shall be limited to visual inspections of the Mortgaged Property or
facility, interviews with representatives of the Loan Parties or facility
personnel, and review of applicable records and documents pertaining to the
property or facility.
     (c) In the event that the Administrative Agent or any Lender shall have
reason to believe that Hazardous Materials have been Released on or from any
Mortgaged Property or other facility of the Borrower or the Subsidiaries or that
any such property or facility is not being operated in material compliance with
applicable Environmental Law, the Administrative Agent may, at its election and
after reasonable advance notice to the Borrower, retain an independent engineer
or other qualified environmental consultant to evaluate whether Hazardous
Materials are present in the soil, groundwater, or surface water at such
Mortgaged Property or facility or whether the facilities or properties are being
operated and maintained in material compliance with applicable Environmental
Laws. Such environmental assessments may include detailed visual inspections of
the Mortgaged Property or facility, including any and all storage areas, storage
tanks, drains, dry wells and leaching areas, and the taking of soil samples,
surface water samples and groundwater samples as well as such other reasonable
investigations or analyses as are necessary. The scope of any such environmental
assessments under this paragraph shall be within the reasonable discretion of
the Administrative Agent. The Borrower shall, and shall cause each of the
Subsidiaries to, cooperate in the performance of any such environmental
assessment and permit any such engineer or consultant designated by the
Administrative Agent to have full access to each property or facility at
reasonable times and after reasonable advance notice to the Borrower of the
plans to conduct such an environmental assessment. All environmental assessments
conducted pursuant to this paragraph shall be at the Borrower’s sole cost and
expense.
     SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans and request
the issuance of Letters of Credit only for the purposes set forth in
Section 3.13.
     SECTION 5.09. Additional Collateral, etc. (a) With respect to any
Collateral acquired after the Closing Date or, in the case of inventory or
equipment, any material Collateral moved after the Closing Date by the Borrower
or any other Loan Party (other than any Collateral described in paragraphs (b),
(c), (d) (e) or (f) of this Section) as to which the Collateral Agent,

84

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

 

for the benefit of the Secured Parties, does not have a first priority perfected
security interest, promptly (and, in any event, within 10 days following the
date of such acquisition) (i) execute and deliver to the Administrative Agent
and the Collateral Agent such amendments to the Guarantee and Collateral
Agreement or such other Security Documents as the Collateral Agent deems
necessary or advisable to grant to the Collateral Agent, for the benefit of the
Secured Parties, a security interest in such Collateral and (ii) take all
actions necessary or advisable to grant to, or continue on behalf of, the
Collateral Agent, for the benefit of the Secured Parties, a perfected first
priority security interest in such Collateral, including the filing of UCC
financing statements in such jurisdictions as may be required by the Guarantee
and Collateral Agreement or by law or as may be requested by the Administrative
Agent or the Collateral Agent.
     (b)   With respect to any fee interest in any Collateral consisting of
Material Real Property or any lease of Collateral consisting of Material Real
Property acquired or leased after the Closing Date by the Borrower or any other
Loan Party, promptly (and, in any event, within 10 days following the date of
such acquisition) (i) execute and deliver a first priority Mortgage in favor of
the Collateral Agent, for the benefit of the Secured Parties, covering such real
property and complying with the provisions herein and in the Security Documents,
(ii) provide the Secured Parties with title and extended coverage insurance in
an amount at least equal to the purchase price of such Material Real Property
(or such other amount as the Administrative Agent shall reasonably specify),
Surveys, and if applicable, flood insurance, lease estoppel certificates,
memoranda or amendments, all in accordance with the standards for deliveries
contemplated on the Closing Date, as described in Sections 4.02(o) through
(r) hereof, (iii) if requested by the Administrative Agent, deliver to the
Administrative Agent and the Collateral Agent legal opinions relating to the
matters described above, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent and the Collateral
Agent and (iv) deliver to the Administrative Agent a notice identifying, and
upon the Administrative Agent’s request, provide a copy of, the consultant’s
reports, environmental site assessments or other documents, if any, relied upon
by the Borrower or any other Loan Party to determine that any such real property
included in such Collateral does not contain Hazardous Materials of a form or
type or in a quantity or location that could reasonably be expected to result in
a material Environmental Liability.
     (c)   With respect to any Subsidiary (other than an Excluded Foreign
Subsidiary, any Regulated Insurance Subsidiary, any Qualified Insurance Holding
Company any TruPS Business Trust or a Premium Finance Co.) created or acquired
after the Closing Date (which, for the purposes of this paragraph, shall include
any existing Subsidiary that ceases to be an Excluded Foreign Subsidiary or a
Regulated Insurance Subsidiary or ceases to meet the requirement of being a
Qualified Insurance Holding Company, TruPS Business Trust or a Premium Finance
Co. at any time after the Closing Date) by the Borrower or any of the
Subsidiaries, promptly (and, in any event, within 10 days following such
creation or the date of such acquisition) (i) execute and deliver to the
Administrative Agent and the Collateral Agent such amendments to the Guarantee
and Collateral Agreement as the Administrative Agent or the Collateral Agent
deems necessary or advisable to grant to the Collateral Agent, for the benefit
of the Secured Parties, a valid, perfected first priority security interest in
the Equity Interests in such new Subsidiary that are owned by the Borrower or
any of the Subsidiaries, (ii) deliver to the Collateral Agent the certificates,
if any, representing such Equity Interests, together with undated stock powers,
in blank, executed and delivered by a duly authorized officer of the Borrower or
such Subsidiary, as

85

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

 

the case may be, (iii) cause such new Subsidiary (A) to become a party to the
Guarantee and Collateral Agreement (and provide Guarantees of the Obligations)
and the Intellectual Property Security Agreements and (B) to take such actions
necessary or advisable to grant to the Collateral Agent, for the benefit of the
Secured Parties, a perfected first priority security interest in the Collateral
described in the Guarantee and Collateral Agreement and the Intellectual
Property Security Agreement with respect to such new Subsidiary, including the
recording of instruments in the United States Patent and Trademark Office and
the United States Copyright Office and the filing of UCC financing statements in
such jurisdictions as may be required by the Guarantee and Collateral Agreement,
the Intellectual Property Security Agreement or by law or as may be requested by
the Administrative Agent or the Collateral Agent and (iv) if requested by the
Administrative Agent, deliver to the Administrative Agent and the Collateral
Agent legal opinions relating to the matters described above, which opinions
shall be in form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent and the Collateral Agent.
     (d)   With respect to any Excluded Foreign Subsidiary created or acquired
after the Closing Date by the Borrower or any of its Domestic Subsidiaries,
promptly (and, in any event, within 10 days following such creation or the date
of such acquisition) (i) execute and deliver to the Administrative Agent and the
Collateral Agent such amendments to the Guarantee and Collateral Agreement as
the Administrative Agent or the Collateral Agent deems necessary or advisable in
order to grant to the Collateral Agent, for the benefit of the Secured Parties,
a perfected first priority security interest in the Equity Interests in such new
Excluded Foreign Subsidiary that is owned by the Borrower or any of its Domestic
Subsidiaries (provided that in no event shall more than 65% of the total
outstanding voting Equity Interests in any such new Excluded Foreign Subsidiary
be required to be so pledged), (ii) if certificated, deliver to the Collateral
Agent the certificates representing such Equity Interests, together with undated
stock powers, in blank, executed and delivered by a duly authorized officer of
the Borrower or such Domestic Subsidiary, as the case may be, and take such
other action as may be necessary or, in the opinion of the Administrative Agent
or the Collateral Agent, desirable to perfect the security interest of the
Collateral Agent thereon and (iii) if requested by the Administrative Agent,
deliver to the Administrative Agent and the Collateral Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative Agent
and the Collateral Agent.
     (e)   With respect to any Regulated Insurance Subsidiary, Premium Finance
Co. or TruPS Business Trust created or acquired after the Closing Date by the
Borrower or any of its Domestic Subsidiaries, promptly (and, in any event,
within 10 days following such creation or the date of such acquisition)
(i) execute and deliver to the Administrative Agent and the Collateral Agent
such amendments to the Guarantee and Collateral Agreement as the Administrative
Agent or the Collateral Agent deems necessary or advisable in order to grant to
the Collateral Agent, for the benefit of the Secured Parties, a perfected first
priority security interest in the Equity Interests in such new Regulated
Insurance Subsidiary, Premium Finance Co. or TruPS Business Trust that is owned
by the Borrower or any of its Domestic Subsidiaries provided that such security
interest shall remain limited by and subject to any and all Requirements of Law
as further set forth in the Guarantee and Collateral Agreement, (ii) if
certificated, deliver to the Collateral Agent the certificates representing such
Equity Interests, together with undated stock powers, in blank, executed and
delivered by a duly authorized officer of the Borrower or such Domestic
Subsidiary, as the case may be, and take such other

86

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

 

action as may be necessary or, in the opinion of the Administrative Agent or the
Collateral Agent, desirable to perfect the security interest of the Collateral
Agent thereon and (iii) if requested by the Administrative Agent, deliver to the
Administrative Agent and the Collateral Agent legal opinions relating to the
matters described above, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent and the Collateral
Agent.
     (f)   With respect to any Qualified Insurance Holding Company created or
acquired after the Closing Date by the Borrower or any of the Subsidiaries,
promptly (and, in any event, within 10 days following such creation or the date
of such acquisition) (i) execute and deliver to the Administrative Agent and the
Collateral Agent such amendments to the Guarantee and Collateral Agreement as
the Administrative Agent or the Collateral Agent deems necessary or advisable in
order to grant to the Collateral Agent, for the benefit of the Secured Parties,
a perfected first priority security interest in the Equity Interests in such new
Qualified Insurance Holding Company that is owned by the Borrower or any of its
Domestic Subsidiaries provided that such security interest shall remain limited
by and subject to any and all Requirements of Law as further set forth in the
Guarantee and Collateral Agreement, (ii) if certificated, deliver to the
Collateral Agent the certificates, if any, representing such Equity Interests,
together with undated stock powers, in blank, executed and delivered by a duly
authorized officer of the Borrower or such Subsidiary, as the case may be,
(iii) cause such new Subsidiary (A) to become a party to the Guarantee and
Collateral Agreement (and provide Guarantees of the Obligations) and the
Intellectual Property Security Agreements and (B) to take such actions necessary
or advisable to grant to the Collateral Agent, for the benefit of the Secured
Parties, a perfected first priority security interest in the Collateral
described in the Guarantee and Collateral Agreement and the Intellectual
Property Security Agreement with respect to such new Subsidiary, including the
recording of instruments in the United States Patent and Trademark Office and
the United States Copyright Office and the filing of UCC financing statements in
such jurisdictions as may be required by the Guarantee and Collateral Agreement,
the Intellectual Property Security Agreement or by law or as may be requested by
the Administrative Agent or the Collateral Agent and (iv) if requested by the
Administrative Agent, deliver to the Administrative Agent and the Collateral
Agent legal opinions relating to the matters described above, which opinions
shall be in form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent and the Collateral Agent.
     SECTION 5.10.   Further Assurances. From time to time duly authorize,
execute and deliver, or cause to be duly authorized, executed and delivered,
such additional instruments, certificates, financing statements, agreements or
documents, and take all such actions (including filing UCC and other financing
statements), as the Administrative Agent or the Collateral Agent may reasonably
request, for the purposes of implementing or effectuating the provisions of this
Agreement and the other Loan Documents, or of more fully perfecting or renewing
the rights of the Administrative Agent, the Collateral Agent and the Secured
Parties with respect to the Collateral (or with respect to any additions thereto
or replacements or proceeds or products thereof or with respect to any other
property or assets hereafter acquired by the Borrower or any Subsidiary which
may be deemed to be part of the Collateral) pursuant hereto or thereto. Upon the
exercise by the Administrative Agent, the Collateral Agent or any Lender of any
power, right, privilege or remedy pursuant to this Agreement or the other Loan
Documents which requires any consent, approval, recording, qualification or
authorization of any Governmental

87

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

 

Authority, the Borrower will execute and deliver, or will cause the execution
and delivery of, all applications, certifications, instruments and other
documents and papers that the Administrative Agent, the Collateral Agent or such
Lender may be required to obtain from the Borrower or any of the Subsidiaries
for such governmental consent, approval, recording, qualification or
authorization.
     SECTION 5.11.   Interest Rate Protection. The Borrower shall ensure that
for at least 2 years following the Closing Date no less than 25% of the
Borrower’s long-term Indebtedness (excluding the Subordinated Debt) effectively
bears interest at a fixed rate, either by its terms or through the Borrower
entering into, as promptly as practicable (and in any event no later than the
120th day after the Closing Date), Hedging Agreements reasonably acceptable to
the Administrative Agent.
     SECTION 5.12.   Maintain Reinsurance. Maintain such quota-share reinsurance
as is prudent in the reasonable business judgment of the Borrower.
     SECTION 5.13.   Tax Sharing Arrangements. (a) With respect to USAgencies
and USCasualty, maintain and act in accordance with that certain Inter-Company
Tax Allocation Agreement (the “USAgencies Intercompany Tax Agreement”), dated as
of August 21, 1997 by and between USAgencies and USCasualty, and shall not
amend, modify or terminate the USAgencies Intercompany Tax Agreement in any way
adverse to the Lenders without the prior written consent of the Lenders (other
than any such amendments or modifications necessary to conform to the
Affirmative Intercompany Tax Agreement in effect as of the Closing Date, as
modified in accordance with Section 5.13(b)).
     (b) With respect to Borrower and its Subsidiaries, maintain and act in
accordance with that certain Intercompany Tax Allocation Agreement (the
“Affirmative Intercompany Tax Agreement”), effective as of January 1, 2004, by
and among Borrower and each of the Subsidiaries listed on the signature pages
thereto, and shall not amend, modify or terminate the Affirmative Intercompany
Tax Agreement in any way adverse to the Lenders without the prior written
consent of the Lenders.
     (c) Other than the USAgencies Intercompany Tax Agreement and the
Affirmative Intercompany Tax Agreement, the Borrower and its Subsidiaries are
not a party to any tax sharing, tax allocation or similar agreement and shall
not enter into any such agreement without the prior written consent of the
Lenders.
ARTICLE VI.
Negative Covenants
     The Borrower covenants and agrees with each Lender that, so long as this
Agreement shall remain in effect and until the Commitments have expired, been
terminated and the principal of and interest on each Loan, all Fees and all
other expenses or amounts payable under any Loan Document have been paid in full
and all Letters of Credit have been cancelled or have expired and all amounts
drawn thereunder have been reimbursed in full, the Borrower will not, nor will
it cause or permit any of the Subsidiaries to:

88

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

 

     SECTION 6.01.   Indebtedness. Incur, create, assume or permit to exist any
Indebtedness, except:
     (a)   Indebtedness existing on the date hereof and set forth in
Schedule 6.01 and any Permitted Refinancing Indebtedness in respect of any such
Indebtedness;
     (b)   Indebtedness created hereunder and under the other Loan Documents;
     (c)   unsecured intercompany Indebtedness of the Borrower and the
Subsidiary Guarantors to the extent permitted by Section 6.04(a) so long as such
Indebtedness is subordinated to the Obligations pursuant to an Affiliate
Subordination Agreement;
     (d)   Capital Lease Obligations and Synthetic Lease Obligations of Borrower
of any Subsidiary Guarantor in an aggregate principal amount, not exceeding
$5,000,000 at any time outstanding;
     (e)   (i) Indebtedness of the Borrower and the Subsidiary Guarantors under
the Subordinated Debt and (ii) Indebtedness of the Borrower and the Subsidiary
Guarantors under the Qualified Additional Subordinated Debt, in the case of
clause (ii), not to exceed a principal amount equal to $50,000,000;
     (f)   Indebtedness of any person that becomes a Subsidiary Guarantor after
the date hereof; provided that (i) such Indebtedness exists at the time such
persons becomes a Subsidiary and is not created in contemplation of or in
connection with such person becoming a Subsidiary, (ii) immediately before and
after such person becomes a Subsidiary, no Default or Event of Default shall
have occurred and be continuing and (iii) the aggregate principal amount of
Indebtedness permitted by this Section 6.01(f) shall not exceed $2,000,000 at
any time outstanding;
     (g)   Indebtedness under performance bonds or with respect to workers’
compensation claims, in each case incurred in the ordinary course of business;
     (h)   Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently drawn against
insufficient funds in the ordinary course of business; provided that such
Indebtedness is promptly covered by the Borrower or any Subsidiary;
     (i)   Indebtedness of Premium Finance Co. incurred in connection with any
Approved Premium Finance Facility in an aggregate principal amount not to exceed
$50,000,000, provided, that for the avoidance of doubt, such Indebtedness
(i) shall be secured solely by the assets of the Premium Finance Co. (which may
include, without limitation, a pledge of eligible accounts receivable of the
Premium Finance Co.), (ii) shall not be secured by any Equity Interests of the
Borrower or any of its Subsidiaries, (iii) shall not be guaranteed by any
Subsidiary of the Borrower other than in accordance with Section 6.01(j) below,
and (iv) shall not be exchangeable or convertible into Indebtedness or Equity
Interests of the Borrower or any of its Subsidiaries;

89

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

 

     (j)   unsecured Guaranties by any Loan Party of Indebtedness incurred in
accordance with Section 6.01(i) above;
     (k)   Customary indemnity obligations for the benefit of a seller or
purchaser in connection with the acquisition or disposition of assets otherwise
permitted by this Agreement (excluding for the avoidance of doubt, Indebtedness
for borrowed money or Guarantees of the payment of borrowed money, whether in
the form of a seller or purchaser note or otherwise); and
     (l)   other unsecured Indebtedness of the Borrower or the Subsidiary
Guarantors in an aggregate principal amount not exceeding $5,000,000 at any time
outstanding.
     SECTION 6.02.   Liens. Create, incur, assume or permit to exist any Lien on
any property or assets (including Equity Interests or other securities of any
person, including any Subsidiary) now owned or hereafter acquired by it or on
any income or revenues or rights in respect of any thereof, except:
     (a)   Liens on property or assets of the Borrower and the Subsidiary
Guarantors existing on the date hereof and set forth in Schedule 6.02; provided
that such Liens shall secure only those obligations which they secure on the
date hereof and refinancings, extensions, renewals and replacements thereof
permitted hereunder;
     (b)   any Lien created under the Loan Documents;
     (c)   any Lien existing on any property or asset prior to the acquisition
thereof by the Borrower or any Subsidiary Guarantor; provided that (i) such Lien
is not created in contemplation of or in connection with such acquisition,
(ii) such Lien does not apply to any other property or assets of the Borrower or
any Subsidiary Guarantor and (iii) such Lien does not (A) materially interfere
with the use, occupancy and operation of any Mortgaged Property, (B) materially
reduce the fair market value of such Mortgaged Property but for such Lien or
(C) result in any material increase in the cost of operating, occupying or
owning or leasing such Mortgaged Property;
     (d)   Liens for taxes not yet due or which are being contested in
compliance with Section 5.03;
     (e)   carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or
other like Liens arising in the ordinary course of business and securing
obligations that are not due and payable or which are being contested in
compliance with Section 5.03;
     (f)   pledges and deposits made in the ordinary course of business in
compliance with workmen’s compensation, unemployment insurance and other social
security laws or regulations;
     (g)   deposits to (i) secure the performance of bids, trade contracts
(other than for Indebtedness), leases (other than Capital Lease Obligations),
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature

90

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

 

incurred in the ordinary course of business; (ii) secure liabilities for payment
of liability insurance or for reimbursement or indemnification obligations of
insurance carriers; (iii) satisfy escrow obligations under reinsurance
agreements; and (iv) satisfy statutory obligations to grant Liens in favor of
any Insurance Regulator imposed by such Insurance Regulator, in the case of
clauses (ii), (iii) and (iv) if and only (A) to the extent granted by any
Regulated Insurance Subsidiary in the course of its customary and ordinary
Business and (B) in any event limited to an amount not to exceed, in the
aggregate at any time outstanding, $5,000,000;
     (h)   zoning restrictions, easements, rights-of-way, restrictions on use of
real property and other similar encumbrances incurred in the ordinary course of
business which, in the aggregate, are not substantial in amount and do not
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the business of the Borrower or any of the
Subsidiary Guarantors or the ability of the Borrower or any of the Subsidiary
Guarantors to utilize such property for its intended purpose;
     (i)   purchase money security interests in real property, improvements
thereto or other fixed or capital assets hereafter acquired (or, in the case of
improvements, constructed) by the Borrower or any Subsidiary Guarantors;
provided that (i) such security interests secure Indebtedness permitted by
Section 6.01, (ii) such security interests are incurred, and the Indebtedness
secured thereby is created, within 90 days after such acquisition (or
construction) and (iii) such security interests do not apply to any other
property or assets of the Borrower or any Subsidiary Guarantors;
     (j)   judgment Liens securing judgments not constituting an Event of
Default under Article VII;
     (k)   any interest or title of a lessor or sublessor under any lease
entered into by the Borrower or any of the Subsidiary Guarantor in the ordinary
course of business and covering only the assets so leased;
     (l)   Liens on cash deposits and other funds maintained with a depositary
institution, in each case arising in the ordinary course of business by virtue
of any statutory or common law provision relating to banker’s liens; provided
that (i) the applicable deposit account is not a dedicated cash collateral
account and is not subject to restrictions against access by the Borrower or the
Subsidiary Guarantors in excess of those set forth in regulations promulgated by
the Board and (ii) the applicable deposit account is not intended by the
Borrower or any of the Subsidiary Guarantor to provide collateral or security to
the applicable depositary institution or any other person;
     (m)   any Lien in respect of eligible receivables or other assets of
Premium Finance Co. granted by Premium Finance Co. to secure any Approved
Premium Finance Facility in favor or the lenders or their agent thereunder;
     (n)   Liens deemed to exist in connection with Investments in repurchase
agreements permitted under Section 6.04;

91

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

 

     (o)   Liens arising from precautionary uniform commercial code financing
statements regarding operating leases not constituting Indebtedness or
consignments;
     (p)   Liens solely on any cash earnest money deposits made in connection
with any letter of intent or purchase agreement permitted hereunder; and
     (q)   other liens securing obligations of the Borrower or the subsidiaries
the aggregate principal amount of the obligations secured by which does not
exceed $2,000,000 at any time outstanding.
     SECTION 6.03.   Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal or mixed, used or useful in its
business, whether now owned or hereafter acquired, and thereafter rent or lease
such property or other property which it intends to use for substantially the
same purpose or purposes as the property being sold or transferred unless
(a) the sale of such property is permitted by Section 6.05 and (b) any Capital
Lease Obligations or Liens arising in connection therewith are permitted by
Sections 6.01 and 6.02, respectively.
     SECTION 6.04.   Investments, Loans and Advances. Purchase, hold or acquire
any Equity Interests, evidences of indebtedness or other securities of, make or
permit to exist any loans or advances or capital contributions to, or make or
permit to exist any investment or any other interest in, any other person (all
of the foregoing, “Investments”), except:
     (a)   (i) Investments by the Borrower and the Subsidiaries existing on the
date hereof in the Equity Interests of the Borrower and the Subsidiaries and
(ii) additional Investments by the Borrower and the Subsidiaries in the Equity
Interests of the Borrower and the whollyowned Subsidiaries of the Borrower;
provided that (A) any such Equity Interests held by a Loan Party shall be
pledged pursuant to the Guarantee and Collateral Agreement (subject to the
limitation referred to in Sections 5.09(c), (d) and (e) in the case of any
Excluded Foreign Subsidiary, Regulated Insurance Subsidiary or Premium Finance
Co.), (B) the aggregate amount of Investments by Loan Parties in Subsidiaries
that are either Excluded Foreign Subsidiaries or a Premium Finance Co. shall not
exceed $2,000,000 at any time outstanding and (C) if such Investment shall be in
the form of a loan or advance, such loan or advance shall be unsecured and
subordinated to the Obligations pursuant to an Affiliate Subordination Agreement
and, if such loan or advance shall be made by a Loan Party, it shall be
evidenced by a promissory note pledged to the Collateral Agent for the ratable
benefit of the Secured Parties pursuant to the Guarantee and Collateral
Agreement;
     (b)   (i) Permitted Investments by the Borrower and its Subsidiaries (other
than Regulated Insurance Subsidiaries) and (ii) investments by Regulated
Insurance Subsidiaries to the extent permitted under applicable Requirements of
Law;
     (c)   Investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes with,
customers and suppliers, in each case in the ordinary course of business;

92

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

 

     (d)   the Borrower and the Subsidiaries may make loans and advances in the
ordinary course of business to their respective employees so long as the
aggregate principal amount thereof at any time outstanding (determined without
regard to any write-downs or write-offs of such loans and advances) shall not
exceed $1,000,000;
     (e)   the Acquisition and Permitted Acquisitions;
     (f)   Investments existing on the date hereof and set forth on
Schedule 6.04;
     (g)   extensions of trade credit in the ordinary course of business;
     (h)   Investments made as a result of the receipt of non-cash consideration
from a sale, transfer or other disposition of any asset in compliance with
Section 6.05;
     (i)   intercompany loans and advances to Borrower to the extent that the
Subsidiaries may pay dividends to the Borrower pursuant to Section 6.06 (and in
lieu of paying such dividends); provided that such intercompany loans and
advances (i) shall be made for the purposes, and shall be subject to all the
applicable limitations set forth in, Section 6.06 and (ii) shall be unsecured
and subordinated to the Obligations pursuant to an Affiliate Subordination
Agreement; and
     (j)   in addition to Investments permitted by paragraphs (a) through
(i) above, additional Investments by the Borrower and the Subsidiaries so long
as the aggregate amount invested, loaned or advanced pursuant to this paragraph
(j) (determined without regard to any write-downs or write-offs of such
investments, loans and advances) does not exceed $5,000,000 in the aggregate.
     SECTION 6.05.   Mergers, Consolidations, Sales of Assets and Acquisitions.
(a) Merge into or consolidate with any other person, or permit any other person
to merge into or consolidate with it, or liquidate or dissolve, or sell,
transfer, lease, issue or otherwise dispose of (in one transaction or in a
series of transactions) all or substantially all the assets (whether now owned
or hereafter acquired) of the Borrower or less than all the Equity Interests of
any Subsidiary, or purchase, lease or otherwise acquire (in one transaction or a
series of transactions) all or any substantial part of the assets of any other
person, except for (i) the purchase and sale by the Borrower or any Subsidiary
of inventory in the ordinary course of business, (ii) the sale or discount by
the Borrower or any Subsidiary in each case without recourse and in the ordinary
course of business of overdue accounts receivable arising in the ordinary course
of business, but only in connection with the compromise or collection thereof
consistent with customary industry practice (and not as part of any bulk sale or
financing transaction), (iii) any Regulated Insurance Subsidiary may (x) enter
into any Insurance Contract, Reinsurance Agreement or Retrocession Agreement in
the ordinary course of business in accordance with its normal underwriting,
indemnity and retention policies, provided that any counterparty to any such
Reinsurance Agreement or Retrocession Agreement shall have an A.M. Best
financial strength rating of B++ (or equivalent rating level if A.M. Best
changes its ratings methodology or designations) or better, unless such
counterparty’s obligations under such Reinsurance Agreement or Retrocession
Agreement are collateralized by irrevocable letters of credit and/or a trust or
similar arrangement containing cash and/or marketable securities with an average
quality rating of B++

93

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

 

(or its equivalent) or better of which the applicable Regulated Insurance
Subsidiary is the beneficiary, and (y) dispose of any assets in its investment
portfolio, and (iv) if at the time thereof and immediately after giving effect
thereto no Event of Default or Default shall have occurred and be continuing,
(1) the merger or consolidation of any wholly owned Subsidiary into or with the
Borrower in a transaction in which the Borrower is the surviving corporation,
(2) the merger or consolidation of any wholly owned Subsidiary (other than any
Regulated Insurance Subsidiary or any Premium Finance Co.) into or with any
other wholly owned Subsidiary (other than any Regulated Insurance Subsidiary or
any Premium Finance Co.) in a transaction in which the surviving entity is a
wholly owned Subsidiary and no person other than the Borrower or a wholly owned
Subsidiary receives any consideration (provided that if any party to any such
transaction is (A) a Loan Party, the surviving entity of such transaction shall
be a Loan Party, (B) a Domestic Subsidiary, the surviving entity of such
transaction shall be a Domestic Subsidiary and (C) USAgencies or a Subsidiary
thereof, the surviving entity shall be USAgencies or a surviving Subsidiary
thereof) and (3) Permitted Acquisitions by the Borrower or any Subsidiary.
     (b)   Engage in any Asset Sale otherwise permitted under paragraph
(a) above unless (i) such Asset Sale is for consideration at least 80% of which
is cash (and no portion of the remaining consideration shall be in the form of
Indebtedness of the Borrower or any Subsidiary), (ii) such consideration is at
least equal to the fair market value of the assets being sold, transferred,
leased or disposed of, (iii) the fair market value of all assets sold,
transferred, leased or disposed of pursuant to this paragraph (b) shall not
exceed $30,000,000 in the aggregate and (iv) such sale, transfer, lease or
disposition of assets is from USAgencies or a Subsidiary thereof to the Borrower
or its Subsidiaries, and the acquirer of such assets is not USAgencies or a
Subsidiary thereof.
     SECTION 6.06.   Restricted Payments; Restrictive Agreements. (a) Declare or
make, or agree to declare or make, directly or indirectly, any Restricted
Payment (including pursuant to any Synthetic Purchase Agreement), or incur any
obligation (contingent or otherwise) to do so; provided, however, that (i) any
Subsidiary may declare and pay dividends or make other distributions ratably to
its equity holders, (ii) so long as no Event of Default or Default shall have
occurred and be continuing or would result therefrom, the Borrower may
repurchase its Equity Interests owned by employees of the Borrower or the
Subsidiaries or make payments to employees of the Borrower or the Subsidiaries
upon termination of employment in connection with the exercise of stock options,
stock appreciation rights or similar equity incentives or equity based
incentives pursuant to management incentive plans or in connection with the
death or disability of such employees in an aggregate amount not to exceed
$1,500,000 in any fiscal year, (iii) so long as no Default or Event of Default
shall have occurred or be continuing or would result therefrom, the Borrower may
declare and pay dividends or make other customary distributions ratably to its
equity holders consistent with past practice and in an amount not to exceed
$3,000,000 in any fiscal year, and (iv) Borrower may declare and pay dividends
to holders of a class of Equity Interests payable solely in Equity Interests of
such class of Equity Interests held by such holders.
     (b)   Enter into, incur or permit to exist any agreement or other
arrangement that prohibits, restricts or imposes any condition upon (i) the
ability of the Borrower or any Subsidiary to create, incur or permit to exist
any Lien upon any of its property or assets, or (ii) the ability of any
Subsidiary to pay dividends or other distributions with respect to any of its

94

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

 

Equity Interests or to make or repay loans or advances to the Borrower or any
other Subsidiary or to Guarantee Indebtedness of the Borrower or any other
Subsidiary; provided that (A) the foregoing shall not apply to restrictions and
conditions imposed by law or by any Loan Document, (B) the foregoing shall not
apply to customary restrictions and conditions contained in agreements relating
to the sale of a Subsidiary pending such sale, provided such restrictions and
conditions apply only to the Subsidiary that is to be sold and such sale is
permitted hereunder, (C) the foregoing shall not apply to restrictions and
conditions imposed on any Subsidiary that is not a Loan Party (other than any
Premium Finance Co. and its Subsidiaries, as to which the foregoing shall apply)
by the terms of any Indebtedness of such Subsidiary permitted to be incurred
hereunder (other than any Approved Premium Finance Facility, as to which the
foregoing shall apply), (D) clause (i) of the foregoing shall not apply to
restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness, (E) clause
(i) of the foregoing shall not apply to restrictions or conditions imposed by
the Subordinated Debt Documents or any restrictions or conditions no less
favorable to the Borrower, its Subsidiaries and the Lenders contained in the
Qualified Additional Subordinated Debt Documents and (F) clause (i) of the
foregoing shall not apply to customary provisions in leases and other contracts
restricting the assignment thereof.
     SECTION 6.07.   Transactions with Affiliates. Except for transactions by or
among Loan Parties, sell or transfer any property or assets to, or purchase or
acquire any property or assets from, or otherwise engage in any other
transactions with, any of its Affiliates, except that (a) the Borrower or any
Subsidiary may engage in any of the foregoing transactions in the ordinary
course of business at prices and on terms and conditions not less favorable to
the Borrower or such Subsidiary than could be obtained on an arm’s-length basis
from unrelated third parties, (b) Restricted Payments may be made to the extent
provided in Section 6.06, (c) Borrower and its Subsidiaries may engage in
transactions with Premium Finance Co. in the ordinary course of business and on
terms no less favorable to the Loan Parties than would be obtained in a
comparable arm’s-length transaction with a third party who is not an Affiliate.
     SECTION 6.08.   Business of the Borrower and Subsidiaries; Limitation on
Hedging Agreements. (a) With respect to Borrower, engage in any business
activities or have any assets or liabilities other than its ownership of the
Equity Interests in its direct whollyowned Domestic Subsidiaries (none of which
shall be a Premium Finance Co.) and liabilities incidental thereto, including
its liabilities pursuant to the Loan Documents.
     (b)   With respect to the Borrower and the Subsidiaries, engage at any time
in any business or business activity other than the business conducted by it as
of the date hereof and business activities reasonably incidental thereto.
     (c)   With respect to LIFCO, (i) directly or indirectly be merged with or
into or otherwise transfer any of its assets to any Premium Finance Co. or any
person that becomes a Premium Finance Co. or (ii) provide any premium financing
to any persons other than customers of USAgencies or any of its Subsidiaries.
     (d)   With respect to any Premium Finance Co., (i) directly or indirectly
be merged with or into or otherwise transfer any of its assets to LIFCO or any
of its Subsidiaries or (ii)

95

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

 

provide any premium financing to customers of USAgencies or any of its
Subsidiaries or otherwise compete in the state of Louisiana with USAgencies or
any of its Subsidiaries with respect to the provision of premium financing to
customers of USAgencies, its Subsidiaries or any other Subsidiary of the
Borrower operating under the brand or trade name of “USAgencies” or any other
brand or trade name used by the Borrower or its Subsidiaries.
     (e)   Enter into any Hedging Agreement other than (a) any such agreement or
arrangement entered into in the ordinary course of business and consistent with
prudent business practice to hedge or mitigate risks to which the Borrower or
any Subsidiary is exposed in the conduct of its business or the management of
its liabilities or (b) any such agreement entered into to hedge against
fluctuations in interest rates or currency incurred in the ordinary course of
business and consistent with prudent business practice; provided that in each
case such agreements or arrangements shall not have been entered into for
speculation purposes.
     SECTION 6.09.   Other Indebtedness and Agreements; Amendments to
Acquisition Documentation. (a) Permit any waiver, supplement, modification,
amendment, termination or release of any indenture, instrument or agreement
pursuant to which the Subordinated Debt, any Qualified Additional Subordinated
Debt, any Approved Premium Financing, any other Material Indebtedness of the
Borrower or any of the Subsidiaries is outstanding if the effect of such waiver,
supplement, modification, amendment, termination or release would materially
increase the obligations of the obligor or confer additional material rights on
the holder of such Indebtedness in a manner adverse to the Borrower or any of
the Subsidiaries or the Lenders.
     (b)   (i) Make any distribution, whether in cash, property, securities or a
combination thereof, other than regular scheduled payments of principal and
interest as and when due (to the extent not prohibited by applicable
subordination provisions), in respect of, or pay, or offer or commit to pay, or
directly or indirectly (including pursuant to any Synthetic Purchase Agreement)
redeem, repurchase, retire or otherwise acquire for consideration, or set apart
any sum for the aforesaid purposes, any Indebtedness, except (A) the payment of
the Indebtedness created hereunder, (B) refinancings of Indebtedness permitted
by Section 6.01, (C) payments by Premium Finance Co. of any Approved Premium
Financing made in accordance with the terms of such Approved Premium Financing
and (D) the payment of secured Indebtedness that becomes due as a result of the
voluntary sale or transfer of the property or assets securing such Indebtedness,
(ii) pay in cash any amount in respect of any Indebtedness or preferred Equity
Interests that may at the obligor’s option be paid in kind or in other
securities or (iii) to optionally or voluntarily redeem any Indebtedness of the
Borrower or any of its Subsidiaries incurred pursuant to the issuance of any
TruPS and any related TruPS instrument, at any time prior to the date that is
six months after the latest of the Revolving Credit Maturity Date and the Term
Loan Maturity Date, other than upon issuance of additional Qualified Additional
Subordinated Debt;
     (c)   (i) Permit any waiver, supplement, modification, amendment,
termination or release of, or fail to enforce strictly the terms and conditions
of, any of the indemnities and licenses furnished to the Borrower and the
Subsidiaries pursuant to the Acquisition Documentation such that after giving
effect thereto such indemnities or licenses shall be materially less favorable
to the interests of the Loan Parties or the Secured Parties with respect thereto
or (ii) otherwise permit any waiver, supplement, modification, amendment,
termination

96

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

 

or release of, or fail to enforce strictly the terms and conditions of, any of
the Acquisition Documentation except to the extent that such waiver, supplement,
modification, amendment, termination or release or failure to enforce could not
reasonably be expected to have a Material Adverse Effect.
     SECTION 6.10.   Capital Expenditures. Permit the aggregate amount of
Capital Expenditures made by the Borrower and the Subsidiaries (other than
Premium Finance Co.) in any period set forth below to exceed the amount set
forth below for such period:

          Fiscal Year Ending   Amount
December 31, 2007
  $ 7,000,000  
December 31, 2008
  $ 7,300,000  
December 31, 2009
  $ 7,500,000  
December 31, 2010
  $ 7,800,000  
December 31, 2011
  $ 8,000,000  
December 31, 2012
  $ 8,000,000  
December 31, 2013
  $ 8,000,000  

; provided, however, (x) if the aggregate amount of permitted Capital
Expenditures set forth above in respect of any fiscal year commencing with the
fiscal year ending on December 31, 2008, shall be less than the maximum amount
of Capital Expenditures permitted under this Section 6.10 for such fiscal year
(before giving effect to any carryover), then an amount of such shortfall not
exceeding 50% of such maximum amount may be added to the amount of Capital
Expenditures permitted under this Section 6.10 for the immediately succeeding
(but not any other) fiscal year and (y) in determining whether any amount is
available for carryover, the amount expended in any fiscal year shall first be
deemed to be from the amount allocated to such fiscal year (before giving effect
to any carryover), provided further, that Borrower shall be allowed to expend an
amount up to $35,000,000 in the aggregate during the period beginning on
January 1, 2007 and ending on December 31, 2008 (the “Permitted IT Capital
Expenditures”), in addition to the aggregate amounts of permitted Capital
Expenditures set forth above in the fiscal years commencing on January 1, 2007
and January 1, 2008, respectively, in connection with the upgrade of its
information technology infrastructure by Accenture or another technology
services provider reasonably acceptable to the Administrative Agent.
     SECTION 6.11.   Interest Coverage Ratio. Permit the Interest Coverage Ratio
during any period set forth below to be less than the ratio set forth opposite
such period below:

          Four Fiscal Quarters Ended   Ratio
March 31, 2007
    3.00:1.00  
June 30, 2007
    3.00:1.00  
September 30, 2007
    3.00:1.00  
December 31, 2007
    3.00:1.00  
March 31, 2008
    3.25:1.00  
June 30, 2008
    3.25:1.00  
September 30, 2008
    3.50:1.00  

97

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

 

          Four Fiscal Quarters Ended   Ratio
December 31, 2008
    3.50:1.00  
March 31, 2009
    4.00:1.00  
June 30, 2009
    4.00:1.00  
September 30, 2009
    4.00:1.00  
December 31, 2009
    4.00:1.00  
March 31, 2010
    4.50:1.00  
June 30, 2010
    4.50:1.00  
September 30, 2010
    4.50:1.00  
December 31, 2010
    4.50:1.00  
March 31, 2011
    4.50:1.00  
June 30, 2011
    4.50:1.00  
September 30, 2011
    4.50:1.00  
December 31, 2011
    4.50:1.00  
March 31, 2012
    4.50:1.00  
June 30, 2012
    4.50:1.00  
September 30, 2012
    4.50:1.00  
December 31, 2012
    4.50:1.00  
March 31, 2013
    4.50:1.00  
June 30, 2013
    4.50:1.00  
September 30, 2013
    4.50:1.00  
December 31, 2013
    4.50:1.00  

     SECTION 6.12.   Leverage Ratio. Permit the Leverage Ratio during any period
set forth below to be greater than the ratio set forth opposite such period
below:

          Four Fiscal Quarters Ended   Ratio
March 31, 2007
    4.25:1.00  
June 30, 2007
    4.25:1.00  
September 30, 2007
    4.00:1.00  
December 31, 2007
    4.00:1.00  
March 31, 2008
    3.75:1.00  
June 30, 2008
    3.75:1.00  
September 30, 2008
    3.25:1.00  
December 31, 2008
    3.25:1.00  
March 31, 2009
    3.00:1.00  
June 30, 2009
    3.00:1.00  
September 30, 2009
    2.75:1.00  
December 31, 2009
    2.75:1.00  
March 31, 2010
    2.50:1.00  
June 30, 2010
    2.50:1.00  
September 30, 2010
    2.00:1.00  
December 31, 2010
    2.00:1.00  
March 31, 2011
    2.00:1.00  
June 30, 2011
    2.00:1.00  
September 30, 2011
    2.00:1.00  

98

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

 

          Four Fiscal Quarters Ended   Ratio
December 31, 2011
    2.00:1.00  
March 31, 2012
    2.00:1.00  
June 30, 2012
    2.00:1.00  
September 30, 2012
    2.00:1.00  
December 31, 2012
    2.00:1.00  
March 31, 2013
    2.00:1.00  
June 30, 2013
    2.00:1.00  
September 30, 2013
    2.00:1.00  
December 31, 2013
    2.00:1.00  

     SECTION 6.13.   Minimum Risk-Based Capital Ratio. The Borrower will not
permit the Risk-Based Capital Ratio for any Regulated Insurance Subsidiary
determined on an individual basis calculated as of the last day of any fiscal
year to be less than 250%, provided that if any such person fails to maintain
such Risk-Based Capital Ratio as of the last day of any fiscal year the Borrower
shall nevertheless be deemed to be in compliance with this Section 6.13, and no
Default or Event of Default shall exist, so long as (i) the Combined Risk-Based
Capital Ratio for all Regulated Insurance Subsidiaries as of the last day of
such fiscal year is at least 275% and (ii) the Risk-Based Capital Ratio of each
Regulated Insurance Subsidiary determined on an individual basis as of the last
day of such fiscal year is at least 200%.
     SECTION 6.14.   Combined Ratio. Borrower shall not permit the Combined
Ratio of any Regulated Insurance Subsidiary to be greater than 105% at any time.
     SECTION 6.15.   Fixed Charge Coverage Ratio. From and after any Increased
Amount Date in respect of which any Primary New Revolving Loan Commitments have
become effective in accordance with Section 2.24 hereof, Borrower shall not
permit the Fixed Charge Coverage Ratio to be less than 1.50 to 1.00 as at the
last day of any fiscal year of Borrower (for the avoidance of doubt, as such
covenant may be waived, amended or modified by the Required Revolving Credit
Lenders in accordance with the final “provided further” clause contained in
Section 9.08(b) hereof).
     SECTION 6.16.   Consolidated Net Worth. From and after any Increased Amount
Date in respect of which any Primary New Revolving Loan Commitments have become
effective in accordance with Section 2.24 hereof, Borrower shall not permit
Consolidated Net Worth to be less than $195,000,000 at any time (for the
avoidance of doubt, as such covenant may be waived, amended or modified by the
Required Revolving Credit Lenders in accordance with the final “provided
further” clause contained in Section 9.08(b) hereof).
     SECTION 6.17.   Fiscal Year. With respect to the Borrower or USAgencies,
change its fiscal year-end to a date other than December 31.

99

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

 

ARTICLE VII.
Events of Default
     In case of the happening of any of the following events (“Events of
Default”):
     (a)   any representation or warranty made or deemed made in or in
connection with any Loan Document or the Borrowings or issuances of Letters of
Credit hereunder, or any representation, warranty, statement or information
contained in any report, certificate, financial statement or other instrument
furnished in connection with or pursuant to any Loan Document, shall prove to
have been false or misleading in any material respect when so made, deemed made
or furnished;
     (b)   default shall be made in the payment of any principal of any Loan or
the reimbursement with respect to any L/C Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof or by acceleration thereof or otherwise;
     (c)   default shall be made in the payment of any interest on any Loan or
L/C Disbursement or any Fee or any other amount (other than an amount referred
to in (b) above) due under any Loan Document, when and as the same shall become
due and payable, and such default shall continue unremedied for a period of five
Business Days;
     (d)   default shall be made in the due observance or performance by the
Borrower or any Subsidiary of any covenant, condition or agreement contained in
Section 5.01(a), 5.02, 5.05 or 5.08 or in Article VI;
     (e)   default shall be made in the due observance or performance by the
Borrower or any Subsidiary of any covenant, condition or agreement contained in
any Loan Document (other than those specified in clauses (b), (c) or (d) above)
and such default shall continue unremedied for a period of 30 days;
     (f)   (i) the Borrower or any Subsidiary shall (i) fail to pay any
principal or interest, regardless of amount, due in respect of any Subordinated
Debt, any Qualified Additional Subordinated Debt, any Approved Premium Financing
or any other Material Indebtedness, when and as the same shall become due and
payable, or (ii) any other event or condition occurs that results in any
Subordinated Debt, any Qualified Additional Subordinated Debt, any Approved
Premium Finance Facility or any other Material Indebtedness becoming due prior
to its scheduled maturity or that enables or permits (with or without the giving
of notice, the lapse of time or both) the holder or holders of any Subordinated
Debt, any Qualified Additional Subordinated Debt, any Approved Premium Financing
or any other Material Indebtedness or any trustee or agent on its or their
behalf to cause any Material Indebtedness to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled
maturity; provided that this clause (ii) shall not apply to secured Indebtedness
that becomes due as a result of the voluntary sale or transfer of the property
or assets securing such Indebtedness;
     (g)   an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of the Borrower or any

100

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

 

Subsidiary, or of a substantial part of the property or assets of the Borrower
or a Subsidiary, under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other Federal, state or foreign bankruptcy,
insolvency, receivership or similar law, (ii) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for the
Borrower or any Subsidiary or for a substantial part of the property or assets
of the Borrower or a Subsidiary or (iii) the winding-up or liquidation of the
Borrower or any Subsidiary; and such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any of the
foregoing shall be entered;
     (h)   the Borrower or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other Federal,
state or foreign bankruptcy, insolvency, receivership or similar law,
(ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or the filing of any petition described in
(g) above, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Borrower or any
Subsidiary or for a substantial part of the property or assets of the Borrower
or any Subsidiary, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general assignment
for the benefit of creditors, (vi) become unable, admit in writing its inability
or fail generally to pay its debts as they become due or (vii) take any action
for the purpose of effecting any of the foregoing;
     (i)   one or more judgments for the payment of money in an aggregate amount
in excess of $2,500,000 or other judgments that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect
shall be rendered against the Borrower, any Subsidiary or any combination
thereof and the same shall remain undischarged for a period of 30 consecutive
days during which execution shall not be effectively stayed, or any action shall
be legally taken by a judgment creditor to levy upon assets or properties of the
Borrower or any Subsidiary to enforce any such judgment;
     (j)   an ERISA Event described in clause (b) of the definition thereof
shall have occurred or any other ERISA Event shall have occurred that, when
taken together with all other such ERISA Events, could reasonably be expected to
result in liability of the Borrower and its ERISA Affiliates in an aggregate
amount exceeding $2,500,000;
     (k)   any Guarantee under the Guarantee and Collateral Agreement for any
reason shall cease to be in full force and effect (other than in accordance with
its terms), or any Guarantor shall deny that it has any further liability under
its Guarantee (other than as a result of the discharge of such Guarantor in
accordance with the terms of the Loan Documents);
     (l)   any Lien purported to be created under any Security Document shall
cease to be, or shall be asserted by the Borrower or any other Loan Party not to
be, a valid, perfected and, with respect to the Secured Parties, first priority
(except as otherwise expressly provided in this Agreement or such Security
Document) Lien on any material Collateral covered thereby, except to the extent
that any such loss of perfection or priority results from the failure of the
Collateral Agent to maintain possession of certificates representing Equity
Interests pledged under the Guarantee and Collateral Agreement; or

101

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

 

     (m)   there shall have occurred a Change in Control;
then, and in every such event (other than an event with respect to the Borrower
described in paragraph (g) or (h) above), and at any time thereafter during the
continuance of such event either or both of the following actions may be taken:
(i) the Administrative Agent may, and at the request of the Majority Facility
Lenders with respect to the Revolving Credit Facility shall, by notice to the
Borrower, terminate forthwith the Revolving Credit Commitments and the Swingline
Commitment and (ii) the Administrative Agent may, and at the request of the
Required Lenders shall, declare the Loans then outstanding to be forthwith due
and payable in whole or in part, whereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and any
unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder
and under any other Loan Document, shall become forthwith due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived by the Borrower, anything contained herein or
in any other Loan Document to the contrary notwithstanding, and the
Administrative Agent and the Collateral Agent shall have the right to take all
or any actions and exercise any remedies available to a secured party under the
Security Documents or applicable law or in equity; and in any event with respect
to the Borrower described in paragraph (g) or (h) above, the Revolving Credit
Commitments and the Swingline Commitment shall automatically terminate and the
principal of the Loans then outstanding, together with accrued interest thereon
and any unpaid accrued Fees and all other liabilities of the Borrower accrued
hereunder and under any other Loan Document, shall automatically become due and
payable, without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived by the Borrower, anything contained
herein or in any other Loan Document to the contrary notwithstanding, and the
Administrative Agent and the Collateral Agent shall have the right to take all
or any actions and exercise any remedies available to a secured party under the
Security Documents or applicable law or in equity.
ARTICLE VIII.
The Agents and the Arranger
     Each of the Lenders and the Issuing Bank hereby irrevocably appoints each
of the Administrative Agent and the Collateral Agent (for purposes of this
Article VIII, the Administrative Agent and the Collateral Agent are referred to
collectively as the “Agents”) its agent and authorizes the Agents to take such
actions on its behalf, including the execution of the other Loan Documents, and
to exercise such powers as are delegated to such Agent by the terms of the Loan
Documents, together with such actions and powers as are reasonably incidental
thereto. Without limiting the generality of the foregoing, the Agents are hereby
expressly authorized by the Lenders to execute any and all documents (including
releases and the Security Documents) with respect to the Collateral and the
rights of the Secured Parties with respect thereto, as contemplated by and in
accordance with the provisions of this Agreement and the Security Documents.
     Each bank serving as an Agent hereunder shall have the same rights and
powers in its capacity as a Lender as any other Lender and may exercise the same
as though it were not an Agent, and such bank and its Affiliates may accept
deposits from, lend money to and generally

102

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

 

engage in any kind of business with the Borrower or any Subsidiary or any of
their respective Affiliates as if it were not an Agent hereunder.
     No Agent shall have any duties or obligations except those expressly set
forth in the Loan Documents. Without limiting the generality of the foregoing,
(a) no Agent shall be subject to any fiduciary or other implied duties,
regardless of whether a Default has occurred and is continuing, (b) no Agent
shall have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated by the Loan Documents that such Agent is required to exercise in
writing as directed by the Required Lenders (or such other number or percentage
of the Lenders as shall be necessary under the circumstances as provided in
Section 9.08), and (c) except as expressly set forth in the Loan Documents, no
Agent shall have any duty to disclose, nor shall it be liable for the failure to
disclose, any information relating to the Borrower or any of the Subsidiaries or
any of their respective Affiliates that is communicated to or obtained by the
bank serving as an Agent or any of its Affiliates in any capacity. No Agent
shall be liable for any action taken or not taken by it with the consent or at
the request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in
Section 9.08) or in the absence of its own gross negligence or willful
misconduct. No Agent shall be deemed to have knowledge of any Default unless and
until written notice thereof is given to such Agent by the Borrower or a Lender,
and no Agent shall be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection with
any Loan Document, (ii) the contents of any certificate, report or other
document delivered thereunder or in connection therewith, (iii) the performance
or observance of any of the covenants, agreements or other terms or conditions
set forth in any Loan Document, (iv) the validity, enforceability, effectiveness
or genuineness of any Loan Document or any other agreement, instrument or
document, (v) the creation, perfection or priority of Liens on the Collateral or
the existence of the Collateral or (vi) the satisfaction of any condition set
forth in Article IV or elsewhere in any Loan Document, other than to confirm
receipt of items expressly required to be delivered to such Agent.
     Each Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper person. Each Agent may also rely
upon any statement made to it orally or by telephone and believed by it to have
been made by the proper person, and shall not incur any liability for relying
thereon. Each Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.
     Each Agent may perform any and all its duties and exercise its rights and
powers by or through any one or more sub-agents appointed by it. Each Agent and
any such sub-agent may perform any and all its duties and exercise its rights
and powers by or through their respective Related Parties. The exculpatory
provisions of the preceding paragraphs shall apply to any such sub-agent and to
the Related Parties of each Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Agent.

103

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

 

     Subject to the appointment and acceptance of a successor Agent as provided
in this paragraph, each Agent may resign at any time by notifying the Lenders,
the Issuing Bank and the Borrower. Upon any such resignation, the Required
Lenders shall have the right, with the consent (not to be unreasonably withheld
or delayed) of the Borrower, to appoint a successor; provided that during the
existence and continuance of an Event of Default no such consent of the Borrower
shall be required. If no successor shall have been so appointed by the Required
Lenders and shall have accepted such appointment within 30 days after the
retiring Agent gives notice of its resignation, then the retiring Agent may, on
behalf of the Lenders and the Issuing Bank, appoint a successor Agent which
shall be a bank with an office in New York, New York, or an Affiliate of any
such bank. Upon the acceptance of its appointment as Agent hereunder by a
successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. The fees
payable by the Borrower to a successor Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrower and such
successor. After an Agent’s resignation hereunder, the provisions of this
Article and Section 9.05 shall continue in effect for the benefit of such
retiring Agent, its sub-agents and their respective Related Parties in respect
of any actions taken or omitted to be taken by any of them while acting as
Agent. In addition, notwithstanding the effectiveness of a resignation by the
Administrative Agent hereunder, (a) the retiring Administrative Agent may, in
its sole discretion, continue to provide the services of the Administrative
Agent solely with respect to administering, collecting and delivering any
payments of principal, interest, fees, premium or other amounts in respect of
the Loans and maintaining the books and records relating thereto (such
Administrative Agent acting in such capacity, the “Paying Agent”), (b) the term
“Administrative Agent” when used in connection with any such functions shall be
deemed to mean such retiring Administrative Agent in its capacity as the Paying
Agent and (c) such retiring Administrative Agent shall, in its capacity as the
Paying Agent, continue to be vested with and enjoy all of the rights and
benefits of an Administrative Agent hereunder.
     The Arranger, in its capacity as such, shall have no duties or
responsibilities, and shall incur no liability, under this Agreement or any
other Loan Document.
     Each Lender acknowledges that it has, independently and without reliance
upon the Agents, the Arranger or any Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agents, the Arranger or any
Lender and based on such documents and information as it shall from time to time
deem appropriate, continue to make its own decisions in taking or not taking
action under or based upon this Agreement or any other Loan Document, any
related agreement or any document furnished hereunder or thereunder.
     To the extent required by any applicable law, the Administrative Agent may
withhold from any interest payment to any Lender an amount equivalent to any
applicable withholding tax. If the Internal Revenue Service or any other
Governmental Authority asserts a claim that the Administrative Agent did not
properly withhold tax from amounts paid to or for the account of any Lender
because the appropriate form was not delivered or was not properly executed or
because such Lender failed to notify the Administrative Agent of a change in
circumstance which rendered the exemption from, or reduction of, withholding tax
ineffective or for any other

104

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

 

reason, such Lender shall indemnify the Administrative Agent fully for all
amounts paid, directly or indirectly, by the Administrative Agent as tax or
otherwise, including any penalties or interest and together with all expenses
(including legal expenses, allocated internal costs and out-of-pocket expenses)
incurred.
ARTICLE IX.
Miscellaneous
     SECTION 9.01.   Notices. (a) Except in the case of notices and other
communications expressly permitted to be given by telephone (and subject to
paragraph (b) of this Section 9.01), notices and other communications provided
for herein shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail or sent by fax, as
follows:
     (i) if to the Borrower or any other Loan Party, to the Borrower at
Affirmative Insurance Holdings, Inc., Attention of Joseph Fisher, 150 Harvester
Drive, Burr Ridge, IL 60527 (Tel. No. (708) 233-7080) (Fax No. (708) 233-7013)
(e-mail: joseph.fisher@affirmativeinsurance.com) and to Affirmative Insurance
Holdings, Inc., Attention of Mark E. Pape, 4450 Sojourn Drive, Suite 500,
Addison, TX 75001 (e-mail: mark.pape@affirmativeinsurance.com);
     (ii) if to the Administrative Agent or the Collateral Agent, to Credit
Suisse, Eleven Madison Avenue, New York, NY 10010, Attention of Agency Group
(Fax No. (212) 325-8304); and
     (iii) if to a Lender, to it at its address (or fax number) set forth in the
Lender Addendum or the Assignment and Acceptance pursuant to which such Lender
shall have become a party hereto or set forth in its Administrative
Questionnaire.
All such notices and other communications (i) sent by hand or overnight courier
service, or mailed by certified or registered mail, shall be deemed to have been
given when received or (ii) sent by fax shall be deemed to have been given when
sent and when receipt has been confirmed by telephone; provided that if not
given during normal business hours for the recipient, shall be deemed to have
been given at the opening of business on the next Business Day for the
recipient.
     (b) Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communications (including e-mail and
internet or intranet websites) pursuant to procedures approved by the
Administrative Agent; provided that the foregoing shall not apply to notices to
any Lender pursuant to Article II if such Lender has notified the Administrative
Agent that it is incapable of receiving notices under such Article by electronic
communication. The Administrative Agent or the Borrower (on behalf of the Loan
Parties) may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications. All such notices and other
communications (i) sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by
the “return receipt requested”

105

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

 

function, return e-mail or other written acknowledgment); provided that if not
given during the normal business hours of the recipient, such notice or
communication shall be deemed to have been given at the opening of business on
the next Business Day for the recipient, and (ii) posted to an internet or
intranet website shall be deemed received upon the deemed receipt by the
intended recipient at its e-mail address as described in the foregoing clause
(b)(i) of notification that such notice or communication is available and
identifying the website address therefor.
     (c) Any party hereto may change its address or fax number for notices and
other communications hereunder by notice to the other parties hereto in
accordance with the provisions hereof.
     SECTION 9.02.   Survival of Agreement. All covenants, agreements,
representations and warranties made by the Loan Parties in the Loan Documents
and in the certificates or other documents delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the other parties hereto and shall survive the
execution and delivery of the Loan Documents and the making of any Loans and the
issuance of any Letters of Credit, regardless of any investigation made by any
such other party or on its behalf and notwithstanding that any such other party
may have had notice or knowledge of any Default or incorrect representation or
warranty at the time any credit is extended hereunder, and shall continue in
full force and effect as long as the principal of or any accrued interest on any
Loan or any Fee or any other amount payable under this Agreement or any other
Loan Document is outstanding and unpaid or any Letter of Credit is outstanding
and so long as the Commitments have not expired or terminated. The provisions of
Sections 2.14, 2.16, 2.20 and 9.05 and Article VIII shall survive and remain
operative and in full force and effect regardless of the expiration or
termination of this Agreement (or any provisions hereof), the consummation of
the transactions contemplated hereby, the repayment of any Loan, the expiration
or termination of the Commitments, the expiration of any Letter of Credit, the
invalidity or unenforceability of any provision of this Agreement or any other
Loan Document or any investigation made by or on behalf of the Administrative
Agent, the Collateral Agent, the Arranger, any Lender or the Issuing Bank.
     SECTION 9.03.   Binding Effect. This Agreement shall become effective when
it shall have been executed by each of the parties hereto and when the
Administrative Agent shall have received counterparts hereof which, when taken
together, bear the signatures of each of the other parties hereto.
     SECTION 9.04.   Successors and Assigns. (a) Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the permitted successors and assigns of such party; and all covenants, promises
and agreements by or on behalf of the Borrower, the Administrative Agent, the
Collateral Agent, the Issuing Bank or the Lenders that are contained in this
Agreement shall bind and inure to the benefit of their respective successors and
assigns.
     (b)   Each Lender may assign to one or more assignees all or a portion of
its interests, rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); provided,
however, that (i) the Administrative Agent must give its prior written consent
to such assignment (which consent shall not be unreasonably

106

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

 

withheld or delayed), (ii) in the case of any assignment of a Revolving Credit
Commitment, each of the Issuing Bank, the Swingline Lender and the Borrower must
give its prior written consent to such assignment (which consent shall not be
unreasonably withheld or delayed); provided that the consent of the Borrower
shall not be required to any such assignment during the continuance of any
Default or in connection with the initial syndication of the Facility, (iii) the
amount of the Commitment of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Acceptance with respect to such
assignment is delivered to the Administrative Agent) shall not be less than
$1,000,000 in the case of Term Loans and $5,000,000 in the case of Revolving
Loans (or, if less, the entire remaining amount of such Lender’s Commitment) and
shall be in an amount that is an integral multiple of $1,000,000 (or the entire
remaining amount of such Lender’s Commitment) (it being understood and agreed
that, with respect to any Lender that is an investment fund, such Lender and any
other one or more investment funds that invest in commercial loans and that is
or are managed or advised by the same investment advisor as such Lender or by an
Affiliate of such Lender shall be deemed to be a single Lender for purpose of
calculating such minimum thresholds), (iv) the parties to each assignment shall
execute and deliver to the Administrative Agent an Assignment Agreement via an
electronic settlement system acceptable to the Administrative Agent (or, if
previously agreed with the Agent, manually), and shall pay to the Administrative
Agent a processing and recordation fee of $3,500 (which fee may be waived or
reduced in the sole discretion of the Administrative Agent) and (v) the
assignee, if it shall not be a Lender immediately prior to the assignment, shall
deliver to the Administrative Agent an Administrative Questionnaire and
applicable tax forms. Upon acceptance and recording pursuant to paragraph (e) of
this Section 9.04, from and after the effective date specified in each
Assignment and Acceptance, (A) the assignee thereunder shall be a party hereto
and, to the extent of the interest assigned by such Assignment and Acceptance,
have the rights and obligations of a Lender under this Agreement and (B) the
assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender’s rights and obligations under this
Agreement, such Lender shall cease to be a party hereto but shall continue to be
entitled to the benefits of Sections 2.14, 2.16, 2.20 and 9.05, as well as to
any Fees accrued for its account and not yet paid).
     (c)   By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and that
its Term Loan Commitment and Revolving Credit Commitment, and the outstanding
balances of its Term Loans and Revolving Loans, in each case without giving
effect to assignments thereof which have not become effective, are as set forth
in such Assignment and Acceptance, (ii) except as set forth in (i) above, such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement,
any other Loan Document or any other instrument or document furnished pursuant
hereto, or the financial condition of the Borrower or any Subsidiary or the
performance or observance by the Borrower or any Subsidiary of any of its
obligations under this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto; (iii) such assignee represents
and warrants that it is

107

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

 

legally authorized to enter into such Assignment and Acceptance; (iv) such
assignee confirms that it has received a copy of this Agreement, together with
copies of the most recent financial statements referred to in Section 3.05(a) or
delivered pursuant to Section 5.04 and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance; (v) such assignee will independently and
without reliance upon the Administrative Agent, the Collateral Agent, the
Arranger, such assigning Lender or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement;
(vi) such assignee appoints and authorizes the Administrative Agent and the
Collateral Agent to take such action as agent on its behalf and to exercise such
powers under this Agreement as are delegated to the Administrative Agent and the
Collateral Agent, respectively, by the terms hereof, together with such powers
as are reasonably incidental thereto; and (vii) such assignee agrees that it
will perform in accordance with their terms all the obligations which by the
terms of this Agreement are required to be performed by it as a Lender.
     (d)   The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices in The City of New York a copy of
each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans owing to, each Lender pursuant to the terms
hereof from time to time (the “Register”). The entries in the Register shall be
conclusive and the Borrower, the Administrative Agent, the Issuing Bank, the
Collateral Agent and the Lenders may treat each person whose name is recorded in
the Register pursuant to the terms hereof as a Lender hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower, the Issuing Bank, the Collateral Agent
and any Lender, at any reasonable time and from time to time upon reasonable
prior notice.
     (e)   Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, an Administrative Questionnaire
and all applicable tax forms completed in respect of the assignee (unless the
assignee shall already be a Lender hereunder) and the written consent of the
Swingline Lender, the Issuing Bank and the Administrative Agent to such
assignment, the Administrative Agent shall promptly (i) accept such Assignment
and Acceptance and (ii) record the information contained therein in the
Register. No assignment shall be effective unless it has been recorded in the
Register as provided in this paragraph (e).
     (f)   Each Lender may without the consent of the Borrower, the Swingline
Lender, the Issuing Bank or the Administrative Agent sell participations to one
or more banks or other entities in all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans); provided, however, that (i) such Lender’s obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) the participating banks or other entities shall be entitled to the benefit
of the cost protection provisions contained in Sections 2.14, 2.16 and 2.20 to
the same extent as if they were Lenders (but, with respect to any particular
participant, to no greater extent than the Lender that sold the participation to
such participant) and (iv) the Borrower, the Administrative Agent, the Issuing
Bank and the Lenders shall continue to deal solely and directly with such Lender
in connection with such Lender’s rights and obligations under this Agreement,
and such Lender shall retain the sole right to

108

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

 

enforce the obligations of the Borrower relating to the Loans or L/C
Disbursements and to approve any amendment, modification or waiver of any
provision of this Agreement (other than amendments, modifications or waivers
decreasing any fees payable hereunder or the amount of principal of or the rate
at which interest is payable on the Loans, extending any scheduled principal
payment date or date fixed for the payment of interest on the Loans, increasing
or extending the Commitments or releasing any Guarantor or all or any
substantial part of the Collateral).
     (g)   Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section 9.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower furnished to such Lender by
or on behalf of the Borrower; provided that, prior to any such disclosure of
information designated by the Borrower as confidential, each such assignee or
participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential information on
terms no less restrictive than those applicable to the Lenders pursuant to
Section 9.16.
     (h)   Any Lender may at any time assign all or any portion of its rights
under this Agreement to secure extensions of credit to such Lender or in support
of obligations owed by such Lender; provided that no such assignment shall
release a Lender from any of its obligations hereunder or substitute any such
assignee for such Lender as a party hereto.
     (i)   Notwithstanding anything to the contrary contained herein, any Lender
(a “Granting Lender”) may grant to a special purpose funding vehicle (an “SPC”),
identified as such in writing from time to time by the Granting Lender to the
Administrative Agent and the Borrower, the option to provide to the Borrower all
or any part of any Loan that such Granting Lender would otherwise be obligated
to make to the Borrower pursuant to this Agreement; provided that (i) nothing
herein shall constitute a commitment by any SPC to make any Loan and (ii) if an
SPC elects not to exercise such option or otherwise fails to provide all or any
part of such Loan, the Granting Lender shall be obligated to make such Loan
pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall
utilize the Commitment of the Granting Lender to the same extent, and as if,
such Loan were made by such Granting Lender. Each party hereto hereby agrees
that no SPC shall be liable for any indemnity or similar payment obligation
under this Agreement (all liability for which shall remain with the Granting
Lender). In furtherance of the foregoing, each party hereto hereby agrees (which
agreement shall survive the termination of this Agreement) that, prior to the
date that is one year and one day after the payment in full of all outstanding
commercial paper or other senior indebtedness of any SPC, it will not institute
against, or join any other person in instituting against, such SPC any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
under the laws of the United States or any State thereof. In addition,
notwithstanding anything to the contrary contained in this Section 9.04, any SPC
may (i) with notice to, but without the prior written consent of, the Borrower
and the Administrative Agent and without paying any processing fee therefor,
assign all or a portion of its interests in any Loans to the Granting Lender or
to any financial institutions (consented to by the Borrower and Administrative
Agent) providing liquidity and/or credit support to or for the account of such
SPC to support the funding or maintenance of Loans and (ii) disclose on a
confidential basis any non-public information

109

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

 

relating to its Loans to any rating agency, commercial paper dealer or provider
of any surety, guarantee or credit or liquidity enhancement to such SPC.
     (j)   The Borrower shall not assign or delegate any of its rights or duties
hereunder without the prior written consent of the Administrative Agent, the
Issuing Bank and each Lender, and any attempted assignment without such consent
shall be null and void.
     SECTION 9.05.   Expenses; Indemnity. (a) The Borrower agrees to pay all
out-of-pocket costs and expenses incurred by the Administrative Agent, the
Collateral Agent, the Arranger, the Issuing Bank and the Swingline Lender in
connection with the syndication of the credit facilities provided for herein and
the preparation and administration of this Agreement and the other Loan
Documents or in connection with any amendments, modifications or waivers of the
provisions hereof or thereof (whether or not the transactions hereby or thereby
contemplated shall be consummated) or incurred by the Administrative Agent, the
Collateral Agent, the Arranger, the Issuing Bank or any Lender in connection
with the enforcement or protection of its rights in connection with this
Agreement and the other Loan Documents or in connection with the Loans made or
Letters of Credit issued hereunder, including in each case the fees,
disbursements and other charges of Latham & Watkins LLP, counsel for the
Administrative Agent and the Collateral Agent, and, in connection with any such
enforcement or protection, the reasonable fees, disbursements and other charges
of any counsel for the Administrative Agent, the Collateral Agent, the Arranger,
the Issuing Bank or any Lender.
     (b)   The Borrower agrees to indemnify the Administrative Agent, the
Collateral Agent, the Arranger, each Lender, the Issuing Bank and each Related
Party of any of the foregoing persons (each such person being called an
“Indemnitee”) against, and to hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related costs and expenses, including
reasonable counsel fees, disbursements and other charges, incurred by or
asserted against any Indemnitee arising out of, in any way connected with, or as
a result of (i) the execution or delivery of this Agreement or any other Loan
Document or any agreement or instrument contemplated thereby, the performance by
the parties thereto of their respective obligations thereunder or the
consummation of the Transactions and the other transactions contemplated
thereby, (ii) the use of the proceeds of the Loans or issuance of Letters of
Credit, (iii) any claim, litigation, investigation or proceeding relating to any
of the foregoing, whether or not any Indemnitee is a party thereto, or (iv) any
actual or alleged presence or Release of Hazardous Materials on any property
owned or operated by the Borrower or any of the Subsidiaries, or any
Environmental Liability related in any way to the Borrower or any of the
Subsidiaries; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related costs and expenses are determined by a court of competent jurisdiction
by final and nonappealable judgment to have resulted from primarily the gross
negligence or willful misconduct of such Indemnitee (and, upon any such
determination, any indemnification payments with respect to such losses, claims,
damages, liabilities or related costs and expenses previously received by such
Indemnitee shall be subject to reimbursement by such Indemnitee).
     (c)   To the extent that the Borrower fails to pay any amount required to
be paid by it to the Administrative Agent, the Collateral Agent, the Arranger,
the Issuing Bank or the Swingline Lender under paragraph (a) or (b) of this
Section, each Lender severally agrees to pay

110

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

 

to the Administrative Agent, the Collateral Agent, the Arranger, the Issuing
Bank or the Swingline Lender, as the case may be, such Lender’s pro rata share
(determined as of the time that the applicable unreimbursed expense or indemnity
payment is sought) of such unpaid amount; provided that the unreimbursed expense
or indemnified loss, claim, damage, liability or related expense, as the case
may be, was incurred by or asserted against the Administrative Agent, the
Collateral Agent, the Arranger, the Issuing Bank or the Swingline Lender in its
capacity as such. For purposes hereof, a Lender’s “pro rata share” shall be
determined based upon its share of the sum of the Aggregate Revolving Credit
Exposure, outstanding Term Loans and unused Commitments at the time.
     (d)   To the extent permitted by applicable law, the Borrower shall not
assert, and it hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement or any agreement or instrument contemplated hereby, the
Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.
     (e)   The provisions of this Section 9.05 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the Transactions or the other transactions
contemplated hereby, the repayment of any of the Loans, the expiration of the
Commitments, the expiration of any Letter of Credit, the invalidity or
unenforceability of any term or provision of this Agreement or any other Loan
Document, or any investigation made by or on behalf of the Administrative Agent,
the Collateral Agent, the Arranger, any Lender or the Issuing Bank. All amounts
due under this Section 9.05 shall be payable on written demand therefor.
     SECTION 9.06.   Right of Setoff. If an Event of Default shall have occurred
and be continuing, each Lender is hereby authorized at any time and from time to
time, except to the extent prohibited by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender to or for the
credit or the account of the Borrower against any of and all the obligations of
the Borrower now or hereafter existing under this Agreement and other Loan
Documents held by such Lender, irrespective of whether or not such Lender shall
have made any demand under this Agreement or such other Loan Document and
although such obligations may be unmatured. The rights of each Lender under this
Section 9.06 are in addition to other rights and remedies (including other
rights of setoff) which such Lender may have.
     SECTION 9.07.   Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN
DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF
CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS MOST RECENTLY PUBLISHED AND IN EFFECT, ON THE
DATE SUCH LETTER OF CREDIT WAS ISSUED, BY THE INTERNATIONAL CHAMBER OF COMMERCE
(THE “UNIFORM CUSTOMS”)

111

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

 

AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF
NEW YORK.
     SECTION 9.08.   Waivers; Amendment. (a) No failure or delay of the
Administrative Agent, the Collateral Agent, any Lender or the Issuing Bank 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
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the
Administrative Agent, the Collateral Agent, the Issuing Bank and the Lenders
hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of this Agreement or any other Loan Document or consent to any
departure by the Borrower or any other Loan Party therefrom shall in any event
be effective unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice or demand on the Borrower in any case
shall entitle the Borrower to any other or further notice or demand in similar
or other circumstances.
     (b)   Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Lenders; provided, however, that
no such agreement shall (i) decrease the principal amount of, or extend the
maturity of or any scheduled principal payment date or date for the payment of
any interest on any Loan or any date for reimbursement of an L/C Disbursement,
or waive or excuse any such payment or any part thereof, or decrease the rate of
interest on any Loan or L/C Disbursement, without the prior written consent of
each Lender affected thereby, (ii) increase or extend the Commitment or decrease
or extend the date for payment of any Fees of any Lender without the prior
written consent of such Lender, (iii) amend or modify the pro rata requirements
of Section 2.17, the provisions of Section 9.04(j), the provisions of this
Section or the definition of the term “Required Lenders,” or release any
Guarantor, without the prior written consent of each Lender, (iv) amend or
modify the definition of the term “Majority Facility Lenders” without the prior
written consent of each Lender affected thereby, (v) release all or any
substantial part of the Collateral without the prior written consent of each
Lender, (vi) change the provisions of any Loan Document in a manner that by its
terms adversely affects the rights in respect of payments due to Lenders holding
Loans of one Class differently from the rights of Lenders holding Loans of any
other Class without the prior written consent of Lenders holding a majority in
interest of the outstanding Loans and unused Commitments of each adversely
affected Class or (vii) modify the protections afforded to an SPC pursuant to
the provisions of Section 9.04(i) without the written consent of such SPC;
provided further that no such agreement shall amend, modify or otherwise affect
the rights or duties of the Administrative Agent, the Collateral Agent, the
Issuing Bank or the Swingline Lender hereunder or under any other Loan Document
without the prior written consent of the Administrative Agent, the Collateral
Agent, the Issuing Bank or the Swingline Lender, as applicable; provided further
that on or prior to the date upon which, in accordance with Article VII hereof,
any Loans then outstanding shall have been declared to be forthwith due and
payable in whole or in part, Sections 6.15 and 6.16 may be waived, amended or
modified (in each case in a manner such that the foregoing Sections shall be no
more onerous to the Borrower and its

112

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

 

Subsidiaries than the existing provisions contained therein) pursuant to an
agreement or agreements in writing entered into by the Borrower and the Required
Revolving Credit Lenders.
     SECTION 9.09.   Interest Rate Limitation. Notwithstanding anything herein
to the contrary, if at any time the interest rate applicable to any Loan or
participation in any L/C Disbursement, together with all fees, charges and other
amounts which are treated as interest on such Loan or participation in such L/C
Disbursement under applicable law (collectively the “Charges”), shall exceed the
maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged,
taken, received or reserved by the Lender holding such Loan or participation in
accordance with applicable law, the rate of interest payable in respect of such
Loan or participation hereunder, together with all Charges payable in respect
thereof, shall be limited to the Maximum Rate and, to the extent lawful, the
interest and Charges that would have been payable in respect of such Loan or
participation but were not payable as a result of the operation of this
Section 9.09 shall be cumulated and the interest and Charges payable to such
Lender in respect of other Loans or participations or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.
     SECTION 9.10.   Entire Agreement. This Agreement, the Fee Letter and the
other Loan Documents constitute the entire contract between the parties relative
to the subject matter hereof. Any other previous agreement among the parties
with respect to the subject matter hereof is superseded by this Agreement and
the other Loan Documents. Nothing in this Agreement or in the other Loan
Documents, expressed or implied, is intended to confer upon any person (other
than the parties hereto and thereto, their respective successors and assigns
permitted hereunder (including any Affiliate of the Issuing Bank that issues any
Letter of Credit) and, to the extent expressly contemplated hereby, the Related
Parties of each of the Administrative Agent, the Collateral Agent, the Arranger,
the Issuing Bank and the Lenders ) any rights, remedies, obligations or
liabilities under or by reason of this Agreement or the other Loan Documents.
     SECTION 9.11.   WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.
     SECTION 9.12.   Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby (it being

113

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

 

understood that the invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of such provision in
any other jurisdiction). The parties shall endeavor in good-faith negotiations
to replace the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.
     SECTION 9.13.   Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original but all of which when taken together shall
constitute a single contract, and shall become effective as provided in
Section 9.03. Delivery of an executed signature page to this Agreement or of a
Lender Addendum by facsimile transmission shall be as effective as delivery of a
manually signed counterpart of this Agreement.
     SECTION 9.14.   Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
     SECTION 9.15.   Jurisdiction; Consent to Service of Process. (a) The
Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the exclusive jurisdiction of any New York State court or Federal
court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto 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. Nothing in this Agreement shall affect any right that the
Administrative Agent, the Collateral Agent, the Arranger, the Issuing Bank or
any Lender may otherwise have to bring any action or proceeding relating to this
Agreement or the other Loan Documents against the Borrower or its properties in
the courts of any jurisdiction.
     (b)   The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
     (c)   Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
     SECTION 9.16.   Confidentiality. Each of the Administrative Agent, the
Collateral Agent, the Issuing Bank and the Lenders agrees to maintain the
confidentiality of the Information, except that Information may be disclosed
(a) to its and its Affiliates’ officers, directors, employees and agents,
including accountants, legal counsel and other advisors (it being

114

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

 

understood that the persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
authority or quasi-regulatory authority (such as the National Association of
Insurance Commissioners), (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) in connection with
the exercise of any remedies hereunder or under the other Loan Documents or any
suit, action or proceeding relating to the enforcement of its rights hereunder
or thereunder, (e) subject to an agreement containing provisions substantially
the same as those of this Section 9.16, to (i) any actual or prospective
assignee of or participant in any of its rights or obligations under this
Agreement and the other Loan Documents or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
the Borrower or any Subsidiary or any of their respective obligations, (f) with
the consent of the Borrower or (g) to the extent such Information becomes
publicly available other than as a result of a breach of this Section 9.16. For
the purposes of this Section, “Information” shall mean all information received
from the Borrower and related to the Borrower or its business, other than any
such information that was available to the Administrative Agent, the Collateral
Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to its
disclosure by the Borrower; provided that, in the case of Information received
from the Borrower after the date hereof, such information is clearly identified
at the time of delivery as confidential. Any person required to maintain the
confidentiality of Information as provided in this Section 9.16 shall be
considered to have complied with its obligation to do so if such person has
exercised the same degree of care to maintain the confidentiality of such
Information as such person would accord its own confidential information.
Notwithstanding any other express or implied agreement, arrangement or
understanding to the contrary, each of the parties hereto agrees that each other
party hereto (and each of its employees, representatives or agents) are
permitted to disclose to any persons, without limitation, the tax treatment and
tax structure of the Loans and the other transactions contemplated by the Loan
Documents and all materials of any kind (including opinions and tax analyses)
that are provided to the Loan Parties, the Lenders, the Arranger or any Agent
related to such tax treatment and tax aspects. To the extent not inconsistent
with the immediately preceding sentence, this authorization does not extend to
disclosure of any other information or any other term or detail not related to
the tax treatment or tax aspects of the Loans or the transactions contemplated
by the Loan Documents.
     SECTION 9.17.   Delivery of Lender Addenda. Each initial Lender shall
become a party to this Agreement by delivering to the Administrative Agent a
Lender Addendum duly executed by such Lender, the Borrower and the
Administrative Agent.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

115

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

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.

            AFFIRMATIVE INSURANCE HOLDINGS, INC., as Borrower
      By:   /s/ Mark E. Pape         Name:   Mark E. Pape        Title:   Chief
Financial Officer and Executive Vice President        CREDIT SUISSE, CAYMAN
ISLANDS BRANCH, as
Administrative Agent, Collateral Agent, Issuing Bank
and Swingline Lender
      By:   /s/ John D. Toronto         Name:   John D. Toronto        Title:  
Director              By:   /s/ Denise L. Alvarez         Name:   Denise L.
Alvarez        Title:   Associate   

 

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

 

         

Exhibit A
Administrative Questionnaire

     
I. Borrower Name: Affirmative Insurance Holdings, Inc.
   
 
   
 
   
II. Legal Name of Lender for Signature Page:
   
 
   
 
   
III. Name of Lender for any eventual tombstone:
   
 
   
 
   
IV. Legal Address:
   
 
   
 
   
 
   
 

V. Contact Information:
   

                  Credit Contact   Operations Contact   Legal Counsel
 
                       
Name:
           
 
           
Title:
           
 
           
Address:
           
 
           
 
           
 
           
 
           
 
           
Telephone:
           
 
           
Facsimile:
           
 
           
Email: Address:
           
 
           

VI. Lender’s Wire Payment Instructions:

         
Pay to:
             
 
  (Name of Lender)          
 
  (ABA#)   (City/State)      
 
  (Account #)   (Account Name)

Please return this form, by fax, to the attention of “Credit Suisse, Agency
Group” fax (212) 325-8304, no later than 5:00 p.m. New York City time, on
[          ], 2007.

 

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

 

Exhibit A
Administrative Questionnaire
Borrower Name: Affirmative Insurance Holdings, Inc.

     
VII. Organizational Structure:
   
Foreign Branch, organized under which laws etc.
   
 
   
 
       
Lender’s Tax ID:
   
 
   

Tax withholding Form Attached (For Foreign Buyers)
[   ]    Form W-9
[   ]    Form W-8
[   ]    Form 4224 effective:
[   ]    Form 1001
[   ]    W/Hold                     % Effective
[___]  Form 4224 on file with Administrative Agent from previous current year’s
transaction
VIII. Payment Instructions:
Servicing Site:

Pay To:

     
IX. Name of Authorized Officer:
   
 
   
Name:
   
 
   
Signature:
   
 
   
Date:
   
 
   

A-2

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

 

Exhibit A
Administrative Questionnaire
X. Institutional Investor Sub-Allocations

     
Institution Legal
   
 
   
Fund Manager:
   
 
   
Sub-Allocations:
   

                  Exact Legal                 Name   Sub-   Direct Signer to    
    (for   Allocation   Credit   Purchase by   Date of Post documentation  
(Indicate   Agreement   Assignment   Closing purposes)   US$)   (Yes / No)  
(Yes / No)   Assignment 1.                                   2.                
                  3.                                   4.                      
            5.                                   6.                            
      7.                                   Total                  

Special Instructions
 
 
 
 

A-3

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

 

Exhibit B
AFFIRMATIVE INSURANCE HOLDINGS, INC.
FORM OF AFFILIATE SUBORDINATION AGREEMENT
AFFILIATE SUBORDINATION AGREEMENT dated as of [     ], 200___ (this
“Agreement”), among the subordinated lenders listed on Schedule 1 hereto (each a
“Subordinated Lender” and collectively, the “Subordinated Lenders”), AFFIRMATIVE
INSURANCE HOLDINGS, INC.(“Borrower”) and each Subsidiary listed on Schedule 2
hereto (together with the Borrower, each a “Subordinated Borrower” and
collectively, the “Subordinated Borrowers”) and CREDIT SUISSE, CAYMAN ISLANDS
BRANCH, in its capacity as administrative agent (the “Administrative Agent”)
under the Credit Agreement (as defined below), for the benefit of the Lenders
(as defined in the Credit Agreement referred to below).
Reference is made to the Credit Agreement dated as of January 31, 2007 (as
amended, supplemented, replaced or otherwise modified from time to time, the
“Credit Agreement”), among the Borrower, the Lenders from time to time party
thereto, the Administrative Agent, and other parties thereto.
Terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Credit Agreement. All references to articles,
sections, exhibits and schedules shall be deemed references to articles and
sections of, and exhibits and schedules to, this Agreement, unless the context
shall otherwise require.
The ability under the Credit Agreement of any Subordinated Borrower to incur
Indebtedness to any Subordinated Lender is conditioned upon the execution and
delivery by such Subordinated Lender and each Subordinated Borrower of an
agreement in the form hereof pursuant to which such Subordinated Lender agrees
to subordinate its rights with respect to the Subordinated Obligations (as
defined below) to the rights of the Senior Lenders (as defined below) under the
Credit Agreement, all on the terms set forth herein.
Accordingly, each Subordinated Lender, each Subordinated Borrower and the
Administrative Agent, on behalf of itself and each Senior Lender (and each of
their respective successors or assigns), hereby agrees as follows:
SECTION 1. Subordination. (a) Each Subordinated Lender hereby agrees that all
its right, title and interest in and to the Subordinated Obligations shall be
subordinate and junior in right of payment to the rights of the Lenders and the
Agents (each, as defined in the Credit Agreement and collectively, the “Senior
Lenders”) in respect of the Obligations of the Borrower arising under the Credit
Agreement and the other Loan Documents, including the payment of principal,
premium (if any), interest (including interest accruing on or after the filing
of any petition in bankruptcy or for reorganization relating to the Borrower or
any Subsidiary whether or not a claim for post-filing interest is allowed or
allowable in any such proceeding), fees, charges, expenses, indemnities,
reimbursement obligations, Guarantees and all other amounts payable thereunder
or in respect thereof (collectively, the “Senior Obligations.”). For purposes
hereof, “Subordinated Obligations” means all obligations of each Subordinated
Borrower to each Subordinated Lender in respect of loans, advances, extensions
of credit or other Indebtedness, including in respect of principal, premium (if
any), interest, fees, charges, expenses, indemnities, reimbursement obligations
and other amounts payable in respect thereof.

B-1

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

 

(b) Each Subordinated Borrower and each Subordinated Lender agrees (in each case
solely with respect to the Subordinated Obligations in respect of which it is
the obligor or obligee, as the case may be, and solely with respect to each
Subordinated Borrower or Subordinated Lender that is its counterparty on such
Subordinated Obligations) that no payment (whether directly, by purchase,
redemption or exercise of any right of setoff or otherwise) in respect of the
Subordinated Obligations, whether as principal, interest or otherwise, and
whether in cash, securities or other property, shall be made by or on behalf of
any Subordinated Borrower or received, accepted or demanded, directly or
indirectly, by or on behalf of any Subordinated Lender at any time when an Event
of Default exists as defined under the Credit Agreement and the Borrower has
received a written notice from the Administrative Agent prohibiting any further
payment in respect of the Subordinated Obligations so long as any such Event of
Default is continuing (provided that such notice shall not be required to be
given (and no such payment may be made) if the Event of Default is of the type
set forth in clauses (b), (c), (g) or (h) of Article VII of the Credit
Agreement).
(c) Upon any distribution of the assets of any Subordinated Borrower or upon any
dissolution, winding up, liquidation or reorganization of any Subordinated
Borrower, whether in bankruptcy, insolvency, reorganization, arrangement or
receivership proceedings or otherwise, or upon any assignment for the benefit of
creditors or any other marshalling of the assets and liabilities of any
Subordinated Borrower, or otherwise:
     (i) the Senior Lenders shall first be entitled to receive indefeasible
payment in full in cash of the Senior Obligations (whenever arising) (other than
indemnification obligations and other contingent obligations not then due and
payable) before any Subordinated Lender shall be entitled to receive any payment
on account of the Subordinated Obligations of such Subordinated Borrower,
whether of principal, interest or otherwise; and
     (ii) any payment by, or on behalf of, or distribution of the assets of,
such Subordinated Borrower of any kind or character, whether in cash, securities
or other property, to which any Subordinated Lender would be entitled except for
the provisions of this Section 1 shall be paid or delivered by the person making
such payment or distribution (whether a trustee in bankruptcy, a receiver,
custodian or liquidating trustee or otherwise) directly to the Administrative
Agent, for the benefit of the Senior Lenders (pro rata, in accordance with the
respective amounts of the Senior Obligations owed to each of the Senior
Lenders), until the indefeasible payment in full of all Senior Obligations
(other than indemnification obligations and other contingent obligations not
then due and payable).
At any time when an Event of Default exists under the Credit Agreement, each
Subordinated Lender agrees not to ask, demand, sue for or take or receive from
any Subordinated Borrower in cash, securities or other property or by setoff,
purchase or redemption (including, without limitation, from or by way of
collateral), payment of all or any part of the Subordinated Obligations and
agrees that in connection with any proceeding involving any Subordinated
Borrower under any bankruptcy, insolvency, reorganization, arrangement,
receivership or similar law (i) the Administrative Agent is irrevocably
authorized and empowered (in its own name or in the name of such Subordinated
Lender or otherwise), but shall have no obligation, to demand, sue for, collect
and receive every payment or distribution referred to in the preceding sentence

B-2

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

 

and give acquittance therefor and to file claims and proofs of claim and take
such other action (including, without limitation, voting the applicable
Subordinated Obligations and enforcing any security interest or other Lien
securing payment of such Subordinated Obligations) as the Administrative Agent
may deem necessary or advisable for the exercise or enforcement of any of the
rights or interest of the Senior Lenders and (ii) such Subordinated Lender shall
duly and promptly take such action as the Administrative Agent may request to
(A) collect amounts in respect of the applicable Subordinated Obligations for
the account of the Senior Lenders and to file appropriate claims or proofs of
claim in respect of such Subordinated Obligations, (B) execute and deliver to
the Administrative Agent such irrevocable powers of attorney, assignments or
other instruments as the Administrative Agent may request in order to enable the
Administrative Agent to enforce any and all claims with respect to, and any
security interests and other Liens securing payment of, the applicable
Subordinated Obligations and (C) collect and receive any and all payments or
distributions which may be payable or deliverable upon or with respect to the
applicable Subordinated Obligations. A copy of this Agreement may be filed with
any court as evidence of the Senior Lenders’ right, power and authority
hereunder.
(d) In the event that any payment by, or on behalf of, or distribution of the
assets of, any Subordinated Borrower of any kind or character, whether in cash,
securities or other property, and whether directly, by purchase, redemption,
exercise of any right of setoff or otherwise, shall be received by or on behalf
of any Subordinated Lender or any Affiliate thereof at a time when such payment
is prohibited by this Agreement, such payment or distribution shall be held by
such Subordinated Lender or Affiliate in trust (segregated from other property
of such Subordinated Lender or Affiliate) for the benefit of, and shall
forthwith be paid over to, the Administrative Agent, for the benefit of the
Senior Lenders (pro rata, in accordance with the respective amounts of the
Senior Obligations owed to each of the Senior Lenders), until the indefeasible
payment in full in cash of all Senior Obligations (other than indemnification
obligations and other contingent obligations not then due and payable).
(e) Subject to the prior indefeasible payment in full in cash of the Senior
Obligations (other than indemnification obligations and other contingent
obligations not then due and payable), each applicable Subordinated Lender shall
be subrogated to the rights of the Senior Lenders to receive payments or
distributions in cash, securities or other property of each applicable
Subordinated Borrower applicable to the Senior Obligations until all amounts
owing on the Senior Obligations shall be indefeasibly paid in full in cash, and,
as between and among a Subordinated Borrower, its creditors (other than the
Senior Lenders) and the applicable Subordinated Lenders, no such payment or
distribution made to the Senior Lenders by virtue of this Agreement that
otherwise would have been made to any applicable Subordinated Lender shall be
deemed to be a payment by the applicable Subordinated Borrower on account of the
Subordinated Obligations, it being understood that the provisions of this
paragraph (e) are intended solely for the purpose of defining the relative
rights of the Subordinated Lenders and the Senior Lenders.
(f) Without the prior written consent of the Administrative Agent, no
Subordinated Borrower shall give, or permit to be given, and no Subordinated
Lender shall receive, accept or demand, (i) any security of any nature
whatsoever for any Subordinated Obligations on any property or assets, whether
now existing or hereafter acquired, of any Subordinated Borrower or any
subsidiary of any Subordinated Borrower, unless such security shall by its terms
be subject to enforcement and collection by the Administrative Agent in
connection with any action in respect of enforcement or collection taken under
paragraph (c) above or (ii) any Guarantee, of any nature

B-3

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

 

whatsoever, by any Subordinated Borrower or any subsidiary of any Subordinated
Borrower, of any Subordinated Obligations other than any Guarantee subordinated
to the Senior Obligations on terms substantially identical to (and no less
favorable in any significant respect to the Senior Lenders than) those hereof.
Each Subordinated Lender agrees that all the proceeds of any such security or
Guarantee shall be subject to the provisions hereof with respect to payments and
other distributions in respect of the Subordinated Obligations.
(g) Each Subordinated Lender and each Subordinated Borrower agrees that all
Subordinated Obligations will be evidenced solely by a single promissory note in
the form attached hereto as Annex 1, and that such promissory note and any and
all instruments or records now or hereafter creating or evidencing the
Subordinated Obligations, whether upon refunding, extension, renewal,
refinancing, replacement or otherwise, shall contain the following legend:
“Notwithstanding anything contained herein to the contrary, neither the
principal of nor the interest on, nor any other amounts payable in respect of,
the indebtedness created or evidenced by this instrument or record shall become
due or be paid or payable, except to the extent permitted under the Affiliate
Subordination Agreement dated [     ], 200___, among the Subordinated Lenders,
the Subordinated Borrowers and Credit Suisse, Cayman Islands Branch, in its
capacity as Administrative Agent, which Affiliate Subordination Agreement is
incorporated herein with the same effect as if fully set forth herein.”
(h) Each Subordinated Lender agrees that, except for claims submitted in any
proceeding contemplated by Section 1(c) hereof, it will not take any action to
cause any Subordinated Obligations to become payable prior to their scheduled
maturity (which, in the case of any demand notes, shall be the date demand is
made thereunder) or exercise any remedies or take any action or proceeding to
enforce any Subordinated Obligation if the payment of such Subordinated
Obligation is then prohibited by this Agreement, and each Subordinated Lender
further agrees not to file, or to join with any other creditors of any
Subordinated Borrower in filing, any petition commencing any bankruptcy,
insolvency, reorganization, arrangement or receivership proceeding or any
assignment for the benefit of creditors against or in respect of such
Subordinated Borrower or any other marshalling of the assets and liabilities of
such Subordinated Borrower (provided that this prohibition shall in no event be
construed so as to limit any Subordinated Lender’s right to cause any
Subordinated Obligations to become payable prior to their scheduled maturity if
all the outstanding Loans under the Credit Agreement have been declared due and
payable prior to their scheduled maturity dates). Each Subordinated Lender
further agrees, to the fullest extent permitted under applicable law, that it
will not cause any Subordinated Borrower to file any such petition, commence any
such proceeding or make any such assignment referred to above until all Senior
Obligations have been indefeasibly paid in full in cash (other than
indemnification obligations and other contingent obligations not then due and
payable).
SECTION 2. Waivers and Consents. (a) Each Subordinated Lender waives the right
to compel that the Collateral or any other assets of property of any
Subordinated Borrower or the assets of property of any guarantor of the Senior
Obligations or any other person be applied in any particular order to discharge
the Senior Obligations. Each Subordinated Lender expressly waives the right to
require the Senior Lenders to proceed against any Subordinated Borrower, the
Collateral or any guarantor of the Senior Obligations or any other person, or to
pursue any other

B-4

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

 

remedy in any Senior Lender’s power which such Subordinated Lender cannot pursue
and which would lighten such Subordinated Lender’s burden, notwithstanding that
the failure of any Senior Lender to do so may thereby prejudice such
Subordinated Lender. Each Subordinated Lender agrees that it shall not be
discharged, exonerated or have its obligations hereunder to the Senior Lenders
reduced by any Senior Lender’s delay in proceeding against or enforcing any
remedy against any Subordinated Borrower, the Collateral or any guarantor of the
Senior Obligations or any other person; by any Senior Lender releasing any
Subordinated Borrower, the Collateral or any other guarantor of the Senior
Obligations or any other person from all or any part of the Senior Obligations;
or by the discharge of any Subordinated Borrower, the Collateral or any
guarantor of the Senior Obligations or any other person by an operation of law
or otherwise, with or without the intervention or omission of a Senior Lender.
Any Senior Lender’s vote to accept or reject any plan of reorganization relating
to any Subordinated Borrower, the Collateral, or any guarantor of the Senior
Obligations or any other person, or any Senior Lender’s receipt on account of
the Senior Obligations other than the indefeasible payment in full in cash
thereof of any cash, securities or other property distributed in any bankruptcy,
reorganization, or insolvency case, shall not discharge, exonerate, or reduce
the obligations of any Subordinated Lender hereunder to the Senior Lenders.
(b) Each Subordinated Lender waives all rights and defenses arising out of an
election of remedies by the Senior Lenders, even though that election of
remedies, including, without limitation, any nonjudicial foreclosure with
respect to security for the Senior Obligations, has impaired the value of such
Subordinated Lender’s rights of subrogation, reimbursement or contribution
against any Subordinated Borrower or any other guarantor of the Senior
Obligations or any other person. Each Subordinated Lender expressly waives any
rights or defenses it may have by reason of protection afforded to any
Subordinated Borrower or any other guarantor of the Senior Obligations or any
other person with respect to the Senior Obligations pursuant to any
anti-deficiency laws or other laws of similar import which limit or discharge
the principal debtor’s indebtedness upon judicial or nonjudicial foreclosure of
real property or personal property Collateral for the Senior Obligations.
(c) Each Subordinated Lender agrees that, without the necessity of any
reservation of rights against it, and without notice to or further assent by it,
any demand for payment of any Senior Obligations made by a Senior Lender may be
rescinded in whole or in part by the Senior Lender, and any Senior Obligation
may be continued, and the Senior Obligations, or the liability of the applicable
Subordinated Borrower or any other guarantor or any other party upon or for any
part thereof, or any Collateral or Guarantee therefor or right of offset with
respect thereto, may, from time to time, in whole or in part, be renewed,
extended, modified, accelerated, compromised, waived, surrendered, or released
by the Senior Lenders, in each case without notice to or further assent by any
Subordinated Lender, which will remain bound under this Agreement and without
impairing, abridging, releasing or affecting the subordination and other
agreements provided for herein.
(d) Each Subordinated Lender waives any and all notice of the creation, renewal,
extension or accrual of any of the Senior Obligations and notice of or proof of
reliance by the Senior Lenders upon this Agreement. The Senior Obligations, and
any of them, shall be deemed conclusively to have been created, contracted or
incurred and the consent given to create the obligations of each Subordinated
Borrower in respect of the Subordinated Obligations in reliance upon this
Agreement, and all dealings between each Subordinated Borrower and the Senior
Lenders shall

B-5

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

 

be deemed to have been consummated in reliance upon this Agreement. Each
Subordinated Lender acknowledges and agrees that the Senior Lenders have relied
upon the subordination and other agreements provided for herein in consenting to
the Subordinated Obligations. Each Subordinated Lender waives notice of or proof
of reliance on this Agreement and protest, demand for payment and notice of
default.
SECTION 3. Transfers. Each Subordinated Lender shall not sell, assign or
otherwise transfer or dispose of, in whole or in part, all or any part of the
Subordinated Obligations or any interest therein to any other person (a
“Transferee”) or create, incur or suffer to exist any security interest, Lien,
charge or other encumbrance whatsoever upon all or any part of the Subordinated
Obligations or any interest therein in favor of any Transferee unless (i) such
action is made expressly subject to this Agreement and (ii) the Transferee,
expressly acknowledges to the Administrative Agent, by a writing in form and
substance reasonably satisfactory to the Administrative Agent, the subordination
and other agreements provided for herein and in such writing agrees to be bound
by all of the terms of this Agreement, including, without limitation, this
Section 3, as if such person were a Subordinated Lender.
SECTION 4. Senior Obligations Unconditional. All rights and interests of the
Senior Lenders hereunder, and all agreements and obligations of the Subordinated
Lenders and the Subordinated Borrowers hereunder, shall remain in full force and
effect irrespective of:
     (a) any lack of validity or enforceability of the Credit Agreement or any
other Loan Document;
     (b) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Senior Obligations, or any amendment or waiver or
other modification, whether by course of conduct or otherwise, of, or consent to
departure from, the Credit Agreement or any other Loan Document;
     (c) any exchange, release or nonperfection of any Lien in any collateral,
or any release, amendment, waiver or other modification, whether in writing or
by course of conduct or otherwise, of, or consent to departure from, any
Guarantee of any of the Senior Obligations; or
     (d) any other circumstances that might otherwise constitute a defense
available to, or a discharge of, any Subordinated Borrower in respect of the
Senior Obligations, or of the Subordinated Lender or any Subordinated Borrower
in respect of this Agreement.
SECTION 5. Representations and Warranties. Each Subordinated Lender represents
and warrants to the Administrative Agent, for the benefit of the Senior Lenders,
that:
     (a) It has the power and authority to execute and deliver and to perform
its obligations under this Agreement and has taken all necessary action to
authorize its execution, delivery and performance of this Agreement.
     (b) This Agreement has been duly executed and delivered by such
Subordinated Lender and constitutes a legal, valid and binding obligation of
such Subordinated Lender, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency,

B-6

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

 

reorganization, moratorium or other laws affecting creditors’ rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.
     (c) The execution, delivery and performance of this Agreement will not
violate any provision of any requirement of law applicable to such Subordinated
Lender or of any contractual obligation of such Subordinated Lender.
     (d) No consent or authorization of filing with, or other act by or in
respect of, any Governmental Authority, is required in connection with the
execution, delivery or performance of this Agreement, except as may be required
by the Insurance Laws.
SECTION 6. Waiver of Claims. (a) To the maximum extent permitted by law, each
Subordinated Lender waives any claim it might have against any Senior Lender
with respect to, or arising out of, any action or failure to act or any error of
judgment, negligence, or mistake or oversight whatsoever on the part of any
Senior Lender or its directors, officers, employees, agents or Affiliates with
respect to any exercise of rights or remedies under the Loan Documents or any
transaction relating to the Collateral. Neither the Senior Lenders nor any of
their respective directors, officers, employees, agents or Affiliates shall be
liable for failure to demand, collect or realize upon any of the Collateral or
any Guarantee or for any delay in doing so or shall be under any obligation to
sell or otherwise dispose of any Collateral upon the request of any Subordinated
Borrower or any Subordinated Lender or any other person or to take any other
action whatsoever with regard to the Security Documents, including, without
limitation, the Guarantee and Collateral Agreement, or any part thereof.
(b) Each Subordinated Lender, for itself and on behalf of its successors and
assigns, hereby waives any and all now existing or hereafter arising rights it
may have to require the Senior Lenders to marshal assets for the benefit of such
Subordinated Lender, or to otherwise direct the timing, order or manner of any
sale, collection or other enforcement of the Collateral or enforcement of the
Loan Documents. The Senior Lenders are under no duty or obligation, and each
Subordinated Lender hereby waives any right it may have to compel the Senior
Lenders, to pursue any guarantor or other person who may be liable for the
Senior Obligations, or to enforce any Lien or security interest in any
Collateral.
(c) Each Subordinated Lender hereby waives and releases all rights which a
guarantor or surety with respect to the Senior Obligations could exercise.
(d) Each Subordinated Lender hereby waives any duty on the part of the Senior
Lenders to disclose to it any fact known or hereafter known by the Senior
Lenders relating to the operation or financial condition of any Subordinated
Borrower or any guarantor of the Senior Obligations, or their respective
businesses. Each Subordinated Lender enters into this Agreement based solely
upon its independent knowledge of the applicable Subordinated Borrower’s results
of operations, condition (financial or otherwise) and business and the
Subordinated Lender assumes full responsibility for obtaining any further or
future information with respect to the applicable Subordinated Borrower or its
results of operations, condition (financial or otherwise) or business.
SECTION 7. Further Assurances. Each Subordinated Lender and each Subordinated
Borrower, at their own expense and at any time from time to time, upon the
written request of the Administrative Agent shall promptly and duly execute and
deliver such further instruments and documents and take such further actions as
the Administrative Agent reasonably may request for

B-7

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

 

the purposes of obtaining or preserving the full benefits of this Agreement and
of the rights and powers herein granted.
SECTION 8. Expenses; Indemnification. (a) Each Subordinated Borrower shall pay
or reimburse the Administrative Agent and the Senior Lenders, upon demand, for
all their reasonable costs and expenses in connection with the enforcement or
preservation of any rights under this Agreement, including, without limitation,
reasonable fees and disbursements of counsel to the Administrative Agent and the
Senior Lenders.
(b) The Subordinated Borrowers shall, and jointly and severally agree to, pay,
indemnify, and hold the Administrative Agent and the Senior Lenders harmless
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions (whether sounding in contract, tort or on any other ground),
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the failure of such Subordinated Borrower or any
applicable Subordinated Lender to perform any of its obligations arising out of
or relating to this Agreement; provided that such indemnity shall not, as to any
such Indemnitee, be available to the extent that such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements are determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from primarily the gross negligence,
willful misconduct or bad faith of such Indemnitee.
SECTION 9. Provisions Define Relative Rights. This Agreement is intended solely
for the purpose of defining the relative rights of the Senior Lenders on the one
hand and the Subordinated Lenders and the Subordinated Borrowers on the other,
and no other person shall have any right, benefit or other interest under this
Agreement.
SECTION 10. Powers Coupled with an Interest. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until the Senior Obligations are indefeasibly paid in full in cash.
SECTION 11. Notices. All notices, requests and demands to or upon any party
hereto shall be in writing and shall be given in the manner provided in
Section 9.01 of the Credit Agreement.
SECTION 12. Counterparts. This Agreement may be executed by one or more of the
parties on any number of separate counterparts, each of which shall constitute
an original, but all of which taken together shall be deemed to constitute but
one instrument. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually signed
counterpart of this Agreement.
SECTION 13. Severability. In case any one or more of the provisions contained in
this Agreement should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision hereof in a particular
jurisdiction shall not in and of itself affect the validity of such provision in
any other jurisdiction). The parties hereto shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 14. Integration. This Agreement represents the agreement of the
Subordinated Borrowers, the Subordinated Lenders and the Senior Lenders with
respect to the subject matter hereof and there are no promises or
representations by any Subordinated Borrower, any

B-8

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

 

Subordinated Lender or the Senior Lenders relative to the subject matter hereof
not reflected herein.
SECTION 15. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of
the terms or provisions of this Agreement may be waived, amended, supplemented
or otherwise modified except by a written instrument executed by the
Administrative Agent, each affected Subordinated Borrower and each affected
Subordinated Lender; provided that any provision of this Agreement may be waived
by the Senior Lenders in a letter or agreement executed by the Required Lenders
and each affected Subordinated Lender.
(b) No failure to exercise, nor any delay in exercising, on the part of the
Senior Lenders, any right, power or privilege hereunder shall operate as a
waiver thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
(c) The rights and remedies herein provided are cumulative, may be exercised
singly or concurrently and are not exclusive of any other rights or remedies
provided by law.
SECTION 16. Section Headings. The section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
SECTION 17. Successors and Assigns. (a) This Agreement shall be binding upon the
successors and assigns of each of the Subordinated Borrowers and each of the
Subordinated Lenders and shall inure to the benefit of the Senior Lenders and
their respective successors and assigns.
(b) Notwithstanding the provisions of Section 17(a) above, nothing herein shall
be construed to limit or relieve the obligations of any Subordinated Lender
pursuant to Section 3 of this Agreement, and no Subordinated Lender shall assign
its obligations hereunder to any person (except as otherwise specifically
permitted under Section 3 of this Agreement); any such assignment other than as
specifically permitted under Section 3 shall be void.
SECTION 18. Governing Law; Jurisdiction; Consent to Service of Process. (a) THIS
AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
(b) Each Subordinated Lender hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or Federal court of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto 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. Nothing in this Agreement shall affect any
right that the Administrative Agent, the Collateral Agent, the Syndication
Agent, the Documentation Agent, the Arranger, the Issuing Bank or any Lender may
otherwise have to bring any action or proceeding relating to this Agreement or
the other Loan Documents against any Subordinated Lender or its properties in
the courts of any jurisdiction.

B-9

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

 

(c) Each Subordinated Lender hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(d) Each Subordinated Lender hereby irrevocably consents to service of process
in the manner provided for notices in Section 11 hereof. Nothing in this
Agreement, the Credit Agreement or any other Loan Document will affect the right
of any party to this Agreement to serve process in any other manner permitted by
law.
SECTION 19. Waiver Of Jury Trial. Each party hereto hereby waives, to the
fullest extent permitted by applicable law, any right it may have to a trial by
jury in respect of any litigation directly or indirectly arising out of, under
or in connection with this agreement or any of the other loan documents. each
party hereto (a) certifies that no representative, agent or attorney of any
other party has represented, expressly or otherwise, that such other party would
not, in the event of litigation, seek to enforce the foregoing waiver and
(b) acknowledges that it and the other parties hereto have been induced to enter
into this agreement and the other loan documents, as applicable, by, among other
things, the mutual waivers and certifications in this Section 19.
SECTION 20. Additional Subordinated Lenders. Upon execution and delivery by the
Administrative Agent and a Subsidiary of an instrument substantially in the form
of Annex 2 attached hereto, such Subsidiary shall become a Subordinated Lender
and a Subordinated Borrower hereunder with the same force and effect as if
originally named as a Subordinated Lender and a Subordinated Borrower herein.
The execution and delivery of any such instrument shall not require the consent
of any other Subordinated Lender or Subordinated Borrower hereunder. The rights
and obligations of each Subordinated Borrower and each Subordinated Lender
herein shall remain in full force and effect notwithstanding the addition of any
Subordinated Lender and Subordinated Borrower as a party to this Agreement.
[Remainder of page intentionally left blank]

B-10

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

 

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

            AFFIRMATIVE INSURANCE HOLDINGS, INC.,
as Subordinated Lender and Subordinated Borrower,
      By:           Name:           Title:           [NAME OF SUBSIDIARY],
as Subordinated Lender and Subordinated Borrower,
      By:           Name:           Title:           CREDIT SUISSE, CAYMAN
ISLANDS BRANCH,
as Administrative Agent,
      By:           Name:           Title:      

B-11

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

 

         

Schedule 1 to
Affiliate Subordination Agreement
SUBORDINATED LENDERS

B-12

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

 

Schedule 2 to
Affiliate Subordination Agreement
SUBORDINATED BORROWERS

B-13

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

 

Annex 1 to
Affiliate Subordination Agreement
INTERCOMPANY SUBORDINATED DEMAND PROMISSORY NOTE

      Note Number: 1   Dated: [     ], 200___

     FOR VALUE RECEIVED, Affirmative Insurance Holdings, Inc., and each of its
respective subsidiaries (collectively, the “Group Members” and each, a “Group
Member”) which is a party to this intercompany subordinated demand promissory
note (the “Promissory Note”) promises to pay to the order of such other Group
Member as makes loans to such Group Member (each Group Member which borrows
money pursuant to this Promissory Note is referred to herein as a “Payor” and
each Group Member which makes loans and advances pursuant to this Promissory
Note is referred to herein as a “Payee”), on demand, in lawful money of the
United States of America, in immediately available funds and at the appropriate
office of the Payee, the aggregate unpaid principal amount of all loans and
advances heretofore and hereafter made by such Payee to such Payor and any other
indebtedness now or hereafter owing by such Payor to such Payee as shown either
on Schedule A attached hereto (and any continuation thereof) or in the books and
records of such Payee. The failure to show any such Indebtedness or any error in
showing such Indebtedness shall not affect the obligations of any Payor
hereunder. Capitalized terms used herein but not otherwise defined herein shall
have the meanings given such terms in the Credit Agreement dated as of
January 31, 2007 (as amended, supplemented, replaced or otherwise modified from
time to time, the “Credit Agreement”), among Affirmative Insurance Holdings,
Inc., the Lenders from time to time party thereto, Credit Suisse, Cayman Islands
Branch, as administrative agent (in such capacity, the “Administrative Agent”)
and as collateral agent (in such capacity, the “Collateral Agent”), and the
other parties thereto.
     The unpaid principal amount hereof from time to time outstanding shall bear
interest at a rate equal to the rate as may be agreed upon from time to time by
the relevant Payor and Payee or, at the Administrative Agent’s option following
the occurrence and during the continuation of a Default, at the rate per annum
then applicable to ABR Loans, plus 2% per annum. Interest shall be due and
payable on the last day of each month commencing after the date hereof or at
such other times as may be agreed upon from time to time by the relevant Payor
and Payee. Upon demand for payment of any principal amount hereof, accrued but
unpaid interest on such principal amount shall also be due and payable. Interest
shall be paid in lawful money of the United States of America and in immediately
available funds. Interest shall be computed for the actual number of days
elapsed on the basis of a year consisting of 365 days.
     Each Payor and any endorser of this Promissory Note hereby waives
presentment, demand, protest and notice of any kind. No failure to exercise, and
no delay in exercising, any rights hereunder on the part of the holder hereof
shall operate as a waiver of such rights.
     This Promissory Note has been pledged by each Payee to the Administrative
Agent, for the benefit of the Secured Parties, as security for such Payee’s
obligations, if any, under the applicable loan agreements, indentures or other
agreements to which such Payee is a party. Each Payor acknowledges and agrees
that the Administrative Agent and the other Secured Parties may

B-14

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

 

exercise all the rights of the Payees under this Promissory Note and will not be
subject to any abatement, reduction, recoupment, defense, setoff or counterclaim
available to such Payor.
     Notwithstanding anything contained herein to the contrary, neither the
principal of nor the interest on, nor any other amounts payable in respect of,
the indebtedness created or evidenced by this instrument or record shall become
due or be paid or payable, except to the extent permitted under the Affiliate
Subordination Agreement dated [ ], 200___, among the Subordinated Lenders, the
Subordinated Borrowers and Credit Suisse, Cayman Islands Branch, in its capacity
as Administrative Agent, which Affiliate Subordination Agreement is incorporated
herein with the same effect as if fully set forth herein.
     Notwithstanding anything to the contrary contained herein, in any other
agreement or in any such promissory note or other instrument, this Promissory
Note (i) replaces and supersedes any and all promissory notes or other
instruments which create or evidence any loans or advances made on or before the
date hereof by any Group Member to any other Group Member, and (ii) without the
written consent of the Administrative Agent, shall not be deemed replaced,
superseded or in any way modified by any promissory note or other instrument
entered into on or after the date hereof which purports to create or evidence
any loan or advance by any Group Member to any other Group Member.
     THIS PROMISSORY NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
     From time to time after the date hereof, additional subsidiaries of the
Group Members may become parties hereto by executing a counterpart signature
page to this Promissory Note (each additional subsidiary, an “Additional
Payor”). Upon delivery of such counterpart signature page to the Payees, notice
of which is hereby waived by the other Payors, each Additional Payor shall be a
Payor and shall be as fully a party hereto as if such Additional Payor were an
original signatory hereof. Each Payor expressly agrees that its obligations
arising hereunder shall not be affected or diminished by the addition or release
of any other Payor hereunder. This Promissory Note shall be fully effective as
to any Payor that is or becomes a party hereto regardless of whether any other
Person becomes or fails to become or ceases to be a Payor hereunder.
     This Promissory Note may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
[Remainder of page intentionally left blank]

B-15

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

 

     IN WITNESS WHEREOF, each Payor has caused this Promissory Note to be
executed and delivered by its proper and duly authorized officer as of the date
set forth above.

            AFFIRMATIVE INSURANCE HOLDINGS, INC.
      By:           Name:           Title:           [NAME OF SUBSIDIARY]
      By:           Name:           Title:      

B-16

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

 

         

SCHEDULE A
TRANSACTIONS
ON
INTERCOMPANY SUBORDINATED DEMAND PROMISSORY NOTE

                                              Outstanding                      
  Principal                     Amount of   Balance                 Amount of  
Principal   from Payor         Name of   Name of   Advance   Paid This   to
Payee   Notation Made Date   Payor   Payee   This Date   Date   This Date   By  
                                                                           

B-17

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

 

ENDORSEMENT
     FOR VALUE RECEIVED, each of the undersigned does hereby sell, assign and
transfer to                      all of its right, title and interest in and to
the Intercompany Subordinated Demand Promissory Note, dated [          ], 200___
(as amended, supplemented, replaced or otherwise modified from time to time, the
“Promissory Note”), made by Affirmative Insurance Holdings, Inc., and each of
its respective subsidiaries or any other person that is or becomes a party
thereto, and payable to the undersigned. This endorsement is intended to be
attached to the Promissory Note and, when so attached, shall constitute an
endorsement thereof.
     The initial undersigned shall be the Group Members (as defined in the
Promissory Note) party to the Affiliate Subordination Agreement on the date of
the Promissory Note. From time to time after the date thereof, additional
subsidiaries of the Group Members shall become parties to the Promissory Note
(each, an “Additional Payee”) and a signatory to this endorsement by executing a
counterpart signature page to the Promissory Note and to this endorsement. Upon
delivery of such counterpart signature page to the Payors, notice of which is
hereby waived by the other Payees, each Additional Payee shall be a Payee and
shall be as fully a Payee under the Promissory Note and a signatory to this
endorsement as if such Additional Payee were an original Payee under the
Promissory Note and an original signatory hereof. Each Payee expressly agrees
that its obligations arising under the Promissory Note and hereunder shall not
be affected or diminished by the addition or release of any other Payee under
the Promissory Note or hereunder. This endorsement shall be fully effective as
to any Payee that is or becomes a signatory hereto regardless of whether any
other Person becomes or fails to become or ceases to be a Payee to the
Promissory Note or hereunder.
Dated:                     
[Remainder of page intentionally left blank]

B-18

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

 

            AFFIRMATIVE INSURANCE HOLDINGS, INC.
      By:           Name:           Title:           [NAME OF SUBSIDIARY]
      By:           Name:           Title:        

B-19

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

 

Annex 2 to the
Affiliate Subordination Agreement
SUPPLEMENT NO. [ ] dated as of [      ] (this “Supplement”), to the Affiliate
Subordination Agreement dated as of [          ], 200___ (the “Affiliate
Subordination Agreement”), among the subordinated lenders named therein (the
“Subordinated Lenders”), the subordinated borrowers named therein (the
“Subordinated Borrowers”) and Credit Suisse, Cayman Islands Branch, as
administrative agent (in such capacity, the “Administrative Agent”) for the
Senior Lenders.
A. Reference is made to the Affiliate Subordination Agreement.
B. Terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Affiliate Subordination Agreement.
C. Each of the Subordinated Lenders and each of the Subordinated Borrowers have
entered into the Affiliate Subordination Agreement in order to induce the Senior
Lenders to make loans and other extensions of credit under the Credit Agreement
and the other Loan Documents. Section 20 of the Affiliate Subordination
Agreement provides that subsidiaries of Affirmative Insurance Holdings, Inc.,
may become Subordinated Lenders and Subordinated Borrowers under the Affiliate
Subordination Agreement by execution and delivery of an instrument in the form
of this Supplement. The undersigned Subsidiary (the “New Subordinated Party”) is
executing this Supplement to become a Subordinated Lender and a Subordinated
Borrower under the Affiliate Subordination Agreement in accordance with the
terms of the Credit Agreement as consideration for loans and letters of credit
previously made or issued or to be made or issued under the Credit Agreement.
Accordingly, the Administrative Agent and the New Subordinated Party agree as
follows:
SECTION 1. In accordance with Section 20 of the Affiliate Subordination
Agreement, the New Subordinated Party by its signature below becomes a
Subordinated Lender and a Subordinated Borrower under the Affiliate
Subordination Agreement with the same force and effect as if originally named
therein as a Subordinated Lender and a Subordinated Borrower and the New
Subordinated Party hereby (a) agrees to all the terms and provisions of the
Affiliate Subordination Agreement applicable to it as a Subordinated Lender and
a Subordinated Borrower thereunder and (b) represents and warrants that the
representations and warranties made by it as a Subordinated Lender and a
Subordinated Borrower thereunder are true and correct on and as of the date
hereof except for representations and warranties which by their terms refer to a
specific date. Each reference to a “Subordinated Lender” or a “Subordinated
Borrower” in the Affiliate Subordination Agreement shall be deemed to include
the New Subordinated Party. The Affiliate Subordination Agreement is hereby
incorporated herein by reference.
SECTION 2. The New Subordinated Party represents and warrants to the
Administrative Agent and the other Senior Lenders that this Supplement has been
duly authorized, executed and delivered by it and constitutes its legal, valid
and binding obligation, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium or other laws affecting
creditors’ rights generally and subject to general principles of equity
regardless of whether considered in a proceeding in equity or at law.
SECTION 3. This Supplement may be executed in counterparts (and by different
parties hereto on different counterparts), each of which shall constitute an
original, but all of which when taken

B-20

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

 

together shall constitute a single contract. This Supplement shall become
effective when the Administrative Agent shall have received counterparts of this
Supplement that, when taken together, bear the signatures of the New
Subordinated Party and the Administrative Agent. Delivery of an executed
signature page to this Supplement by facsimile transmission shall be as
effective as delivery of a manually signed counterpart of this Supplement.
SECTION 4. Except as expressly supplemented hereby, the Affiliate Subordination
Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Affiliate Subordination Agreement shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision hereof in a particular jurisdiction shall not in and of
itself affect the validity of such provision in any other jurisdiction). The
parties hereto shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing and
given as provided in Section 11 of the Affiliate Subordination Agreement. All
communications and notices hereunder to the New Subordinated Party shall be
given to it at the address set forth under its signature below, with a copy to
the Borrower.
SECTION 8. The New Subordinated Party agrees to reimburse the Administrative
Agent for its reasonable out-of-pocket expenses in connection with this
Supplement, including the reasonable fees, disbursements and other charges of
counsel for the Administrative Agent.
[Remainder of page intentionally left blank]

B-21

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

 

IN WITNESS WHEREOF, the New Subordinated Party and the Administrative Agent have
duly executed this Supplement to the Affiliate Subordination Agreement as of the
day and year first above written.

            [NAME OF NEW SUBORDINATED PARTY],
as New Subordinated Party
      By:           Name:           Title:           CREDIT SUISSE, CAYMAN
ISLANDS BRANCH,
as Administrative Agent,
      By:           Name:           Title:      

B-22

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

 

         

EXHIBIT C
AFFIRMATIVE INSURANCE HOLDINGS, INC.
FORM OF ASSIGNMENT AND ACCEPTANCE
     Reference is made to the Credit Agreement dated as of January, 31 2007 (as
amended, supplemented, replaced or otherwise modified from time to time, the
“Credit Agreement”), among the Borrower, the Lenders from time to time party
thereto, Credit Suisse, Cayman Islands Branch, as administrative agent (in such
capacity, the “Administrative Agent”) and as collateral agent (in such capacity,
the “Collateral Agent”), and the other parties thereto. Terms used herein and
not otherwise defined herein shall have the meanings assigned to such terms in
the Credit Agreement.
     SECTION 1. The Assignor hereby sells and assigns, without recourse, to the
Assignee, and the Assignee hereby purchases and assumes, without recourse, from
the Assignor, effective as of the Effective Date set forth below (but not prior
to the registration of the information contained herein in the Register pursuant
to Section 9.04(e) of the Credit Agreement), the interests set forth below (the
“Assigned Interest") in the Assignor’s rights and obligations under the Credit
Agreement and the other Loan Documents, including, without limitation, the
amounts and percentages set forth below of (i) the Commitments of the Assignor
on the Effective Date, (ii) the Loans owing to the Assignor which are
outstanding on the Effective Date and (iii) participations of the Assignor in
Letters of Credit and Swingline Loans which are outstanding on the Effective
Date. Each of the Assignor and the Assignee hereby makes and agrees to be bound
by all the representations, warranties and agreements set forth in
Section 9.04(c) of the Credit Agreement, a copy of which has been received by
each such party. From and after the Effective Date (i) the Assignee shall be a
party to and be bound by the provisions of the Credit Agreement and, to the
extent of the interests assigned by this Assignment and Acceptance, have the
rights and obligations of a Lender thereunder and under the Loan Documents and
(ii) the Assignor shall, to the extent of the interests assigned by this
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Credit Agreement.
     SECTION 2. This Assignment and Acceptance is being delivered to the
Administrative Agent together with, if the Assignee is not already a Lender
under the Credit Agreement, a completed Administrative Questionnaire.

C-1

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

 

     SECTION 3. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

     
Date of Assignment:
   
 
   
 
   
Legal Name of Assignor:
   
 
   
 
   
Legal Name of Assignee:
   
 
   
 
   
Assignee’s Address for Notices:
   
 
   
 
   
 
   
 
   
Effective Date of Assignment:
   
 
   
 
   

                  Percentage Assigned of         Applicable        
Facility/Commitment         (set forth, to at least         8 decimals, as a    
    percentage of the         Facility and the         aggregate Commitments    
Principal Amount   of all Lenders     Assigned   thereunder)
Facility/Commitment
       
Revolving Credit
  $    % 
 
       
Term Loans
  $    % 

[Remainder of page intentionally left blank]

C-2

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

 

The terms set forth on the foregoing pages are hereby agreed to:

         
 
       
 
  ,           as Assignor    
 
       
By:
       
 
       
 
  Name:    
 
  Title:    
 
       
 
       
 
       
 
       
 
  ,           as Assignor    
 
       
By:
       
 
       
 
  Name:    
 
  Title:    

Accepted*

      CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as Administrative Agent and as
Swingline Lender,
 
   
By:
   
 
   
 
  Name:
 
  Title:
 
   
By:
   
 
   
 
  Name:
 
  Title:
 
    AFFIRMATIVE INSURANCE HOLDINGS, INC.
 
   
By:
   
 
   
 
  Name:
 
  Title:
 
    [Issuing Bank]
 
   
By:
   
 
   
 
  Name:
 
  Title:

 

*   To be completed to the extent consents are required under Section 9.04(b) of
the Credit Agreement.

C-3

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

 

EXHIBIT D
AFFIRMATIVE INSURANCE HOLDINGS, INC.
FORM OF BORROWING REQUEST
Credit Suisse, Cayman Islands Branch as Administrative Agent for the Lenders
referred to below,
Eleven Madison Avenue
New York, NY 10010
Attention of Agency Group
[Date]
Ladies and Gentlemen:
     The undersigned, Affirmative Insurance Holdings, Inc., (the “Borrower”),
refers to the Credit Agreement dated as of January 31, 2007 (the “Credit
Agreement”), among Affirmative Insurance Holdings, Inc., the Borrower, the
Lenders from time to time party thereto, Credit Suisse, Cayman Islands Branch,
as administrative agent (in such capacity, the “Administrative Agent”) and as
collateral agent (in such capacity, the “Collateral Agent”), Credit Suisse
Securities (USA) LLC, as sole lead arranger and sole bookrunner (the
“Arranger”). Terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement. The Borrower hereby
gives you notice pursuant to Section 2.03 of the Credit Agreement that it
requests a Borrowing under the Credit Agreement, and in that connection sets
forth below the terms on which such Borrowing is requested to be made:

(A)   Date of Borrowing
(which is a Business Day)                                                      
(B)   Principal Amount of Borrowing1                                         

 

1   Not less than $100,000 and in an integral multiple of $500,000, but in any
event not exceeding the available Total Revolving Credit Commitment at such
time.

D-1

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

 

(C)   Type of Borrowing2
                                                               (D)   Interest
Period and the last day thereof3
                                                               (E)   Funds are
requested to be disbursed to the Company’s account with                     
(Account No.                      ).

(signature page follows)
 

2   Specify Eurodollar Borrowing or ABR Borrowing.   3   Which shall be subject
to the definition of “Interest Period” and Section 2.02 of the Credit Agreement
and end not later than the Maturity Date (applicable for Eurodollar Borrowings
only).

D-2

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

 

     The Borrower hereby represents and warrants to the Administrative Agent and
the Lenders that, on the date of this Borrowing Request and on the date of the
related Borrowing, the conditions to lending specified in Section 4.01 of the
Credit Agreement have been satisfied.

            AFFIRMATIVE INSURANCE HOLDINGS, INC.
      By:           Name:           Title:        

D-3

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

 

EXHIBIT E
Form of Guarantee and Collateral Agreement
 
GUARANTEE AND COLLATERAL AGREEMENT
made by
AFFIRMATIVE INSURANCE HOLDINGS, INC.,
and certain Subsidiaries of Affirmative Insurance Holdings, Inc.
in favor of
CREDIT SUISSE, CAYMAN ISLANDS BRANCH as Collateral Agent
Dated as of January __, 2007
 

 

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

 

TABLE OF CONTENTS

                      Page SECTION 1 DEFINED TERMS     1  
 
           
1.1.
  Definitions     1  
1.2.
  Other Definitional Provisions     10  
 
            SECTION 2. GUARANTEE     10  
 
           
2.1.
  Guarantee     10  
2.2.
  Rights of Reimbursement, Contribution and Subrogation     11  
2.3.
  Amendments, etc. with respect to the Borrower Obligations     13  
2.4.
  Guarantee Absolute and Unconditional     13  
2.5.
  Reinstatement     14  
2.6.
  Payments     14  
 
            SECTION 3. GRANT OF SECURITY INTEREST; CONTINUING LIABILITY UNDER
PLEDGED COLLATERAL     14  
 
            SECTION 4. REPRESENTATIONS AND WARRANTIES     16  
 
           
4.1.
  Representations in Credit Agreement     17  
4.2.
  Title; No Other Liens     17  
4.3.
  Perfected First Priority Liens     17  
4.4.
  Name; Jurisdiction of Organization, etc.     17  
4.5.
  Inventory and Equipment     18  
4.6.
  Farm Products     18  
4.7.
  Investment Property     18  
4.8.
  Receivables     19  
4.9.
  Intellectual Property     20  
4.10.
  Letters of Credit and Letter of Credit Rights     22  
4.11.
  Commercial Tort Claims     22  
4.12.
  Contracts     22  
4.13.
  Insurance     23  
4.14.
  Governmental Approval; Filings     24  
 
            SECTION 5. COVENANTS     24  
 
           
5.1.
  Covenants in Credit Agreement     24  
5.2.
  Delivery and Control of Instruments, Chattel Paper, Negotiable Documents,
Investment Property and Deposit Accounts     24  
5.3.
  Maintenance of Insurance     26  
5.4.
  Payment of Obligations     27  
5.5.
  Maintenance of Perfected Security Interest; Further Documentation     27  
5.6.
  Changes in Locations, Name, Jurisdiction of Incorporation, etc.     27  

i

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

 

                      Page
5.7.
  Notices     28  
5.8.
  Investment Property     28  
5.9.
  Receivables     29  
5.10.
  Intellectual Property     30  
5.11.
  Contracts     32  
5.12.
  Commercial Tort Claims     33  
 
            SECTION 6. REMEDIAL PROVISIONS     33  
 
           
6.1.
  Certain Matters Relating to Receivables     33  
6.2.
  Communications with Obligors; Grantors Remain Liable     34  
6.3.
  Pledged Securities     34  
6.4.
  Proceeds to be Turned Over To Collateral Agent     35  
6.5.
  Application of Proceeds     36  
6.6.
  Code and Other Remedies     36  
6.7.
  Registration Rights     38  
6.8.
  Deficiency     39  
6.9.
  Executory Process     39  
 
            SECTION 7. THE COLLATERAL AGENT     40  
 
           
7.1.
  Collateral Agent’s Appointment as Attorney-in-Fact, etc.     40  
7.2.
  Duty of Collateral Agent     42  
7.3.
  Execution of Financing Statements     42  
7.4.
  Authority of Collateral Agent     43  
7.5.
  Appointment of Co-Collateral Agents     43  
 
            SECTION 8. MISCELLANEOUS     43  
 
           
8.1.
  Amendments in Writing     43  
8.2.
  Notices     43  
8.3.
  No Waiver by Course of Conduct; Cumulative Remedies     43  
8.4.
  Enforcement Expenses; Indemnification     44  
8.5.
  Successors and Assigns     44  
8.6.
  Set-Off     44  
8.7.
  Counterparts     45  
8.8.
  Severability     45  
8.9.
  Section Headings     45  
8.10.
  Integration     45  
8.11.
  APPLICABLE LAW     45  
8.12.
  Submission to Jurisdiction; Waivers     45  
8.13.
  Acknowledgments     46  
8.14.
  Additional Grantors     46  
8.15.
  Releases     46  
8.16.
  WAIVER OF JURY TRIAL     47  

ii

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

 

                      Page Annexes, Exhibits and Schedules        
 
           
Annex 1
  Assumption Agreement        
Exhibit A
  Form of Acknowledgment and Consent        
Exhibit B-1
  Form of Intellectual Property Security Agreement        
Exhibit B-2
  Form of After Acquired Intellectual Property Security Agreement        
Exhibit C
  Form of Uncertificated Securities Control Agreement        
Exhibit D
  Form of Deposit Account Agreement        
Exhibit E
  Form of Securities Account Control Agreement        
Exhibit F
  Form of Landlord Waiver        
 
           
Schedule 4.3
  Perfected First Priority Liens        
Schedule 4.4
  Names, Jurisdiction of Organization        
Schedule 4.5(a)
  Inventory and Equipment        
Schedule 4.7(a,b,c)
  Investment Property        
Schedule 4.9(a)
  Owned Intellectual Property        
Schedule 4.9(c)
  Material Intellectual Property        
Schedule 4.9(f)
  Intellectual Property Proceedings        
Schedule 4.9(h)
  Intellectual Property Fees        
Schedule 4.10
  Letters of Credit and Letter of Credit Rights        
Schedule 4.11
  Commercial Tort Claims        
Schedule 4.12(a,b)
  Contracts        
Schedule 8.2
  Guarantor Notice Addresses        

iii

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

 

Exhibit E
     GUARANTEE AND COLLATERAL AGREEMENT, dated as of January ___, 2007, made by
each of the signatories hereto (together with any other entity that may become a
party hereto as provided herein, the “Grantors”), in favor of CREDIT SUISSE,
CAYMAN ISLANDS BRANCH as administrative agent (in such capacity and together
with its successors, the “Administrative Agent”) and as collateral agent (in
such capacity and together with its successors, the “Collateral Agent”) for
(i) the banks and other financial institutions or entities (the “Lenders”) from
time to time parties to the Credit Agreement, dated as of January ___, 2007 (as
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among AFFIRMATIVE INSURANCE HOLDINGS, INC., a Delaware corporation
(“Borrower”), the Lenders party thereto, the Administrative Agent, and (ii) the
other Secured Parties (as hereinafter defined).
W I T N E S S E T H:
     WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make extensions of credit to the Borrower upon the terms and subject
to the conditions set forth therein;
     WHEREAS, the Borrower is a member of an affiliated group of companies that
includes each other Grantor;
     WHEREAS, subject to the terms and conditions of the Credit Agreement,
certain Grantors may enter into one or more Hedging Agreements.
     WHEREAS, the proceeds of the extensions of credit under the Credit
Agreement will be used in part to enable the Borrower to acquire all of the
Equity Interests in USAgencies pursuant to the Purchase Agreement;
     WHEREAS, the Borrower and the other Grantors are engaged in related
businesses, and each Grantor will derive substantial direct and indirect benefit
from the making of the extensions of credit under the Credit Agreement; and
     WHEREAS, it is a condition precedent to the obligation of the Lenders to
make their respective extensions of credit to the Borrower under the Credit
Agreement that the Grantors shall have executed and delivered this Agreement to
the Collateral Agent for the ratable benefit of the Secured Parties;
     NOW, THEREFORE, in consideration of the premises and to induce the
Arrangers, the Collateral Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower thereunder, each Grantor hereby agrees with the
Collateral Agent, for the ratable benefit of the Secured Parties, as follows:
SECTION 1. DEFINED TERMS
          1.1 Definitions. (a) Unless otherwise defined herein, terms defined in
the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement, and the following terms are used herein as defined in the
New York UCC (and if defined in more than one Article of the New York UCC, such
terms shall have the meanings

E-1

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

 

Exhibit E
given in Article 9 thereof): Accounts, Account Debtor, As-Extracted Collateral,
Certificated Security, Chattel Paper, Commercial Tort Claim, Commodity Account,
Commodity Contract, Commodity Intermediary, Documents, Deposit Account,
Electronic Chattel Paper, Equipment, Farm Products, Financial Asset, Fixtures,
Goods, Instruments, Inventory, Letter of Credit, Letter of Credit Rights, Money,
Payment Intangibles, Securities Account, Securities Intermediary, Security,
Security Entitlement, Supporting Obligations, Tangible Chattel Paper and
Uncertificated Security.
          (b) The following terms shall have the following meanings:
     “Administrative Agent” shall have the meaning assigned to such term in the
preamble.
     “Agreement” shall mean this Guarantee and Collateral Agreement, as the same
may be amended, supplemented, replaced or otherwise modified from time to time.
     “Applicable Subsidiary” shall have the meaning assigned to such term in
Section 3(a).
     “Arrangers” shall have the meaning assigned to such term in the preamble.
     “Borrower” shall have the meaning assigned to such term in the preamble.
     “Borrower Obligations” shall mean the collective reference to the unpaid
principal of and interest on (including interest accruing after the maturity of
the Loans and reimbursement obligations in respect of amounts drawn under
Letters of Credit and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to any Grantor, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) the Loans and all other
obligations and liabilities of the Grantors to the Arrangers, to any Agent or to
any Lender (or, in case of Specified Hedge Agreements, any Affiliate of any
Lender or any Agent or any Affiliate of any Agent), whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with the Credit
Agreement, any other Loan Document, the Letters of Credit, any Specified Hedge
Agreement or any other document made, delivered or given in connection herewith
or therewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including all fees, charges and
disbursements of counsel to the Arrangers, to any Agent or to any Lender that
are required to be paid by any Grantor pursuant to the Credit Agreement or any
other Loan Document) or otherwise; provided, that (i) obligations of the
Borrower or any other Loan Party under any Specified Hedge Agreement shall be
secured and guaranteed pursuant to the Security Documents only to the extent
that, and for so long as the other obligations are so secured and guaranteed,
(ii) any release of collateral or guarantors effected in the manner permitted by
the Credit Agreement or any other Loan Document shall not require the consent of
holders of obligations under Specified Hedge Agreements and (iii) the amount of
secured obligations under any Specified Hedge Agreements shall not exceed the
net amount, including any net termination payments, that would be

E-2

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

 

Exhibit E
required to be paid to the counterparty to such Specified Hedge Agreement on the
date of termination of such Specified Hedge Agreement.
     “Business Day” shall mean any day other than a Saturday, Sunday or day on
which commercial banks in New York City are authorized or required by law to
close.
     “Closing Date” shall mean the date hereof.
     “Collateral Account” shall mean (i) any collateral account established by
the Collateral Agent as provided in Section 6.1 or 6.4 or (ii) any cash
collateral account established as provided in Section 2.23(j) of the Credit
Agreement.
     “Collateral Account Funds” shall mean, collectively, the following: all
funds (including all trust monies), investments (including all cash equivalents)
credited to, or purchased with funds from, any Collateral Account and all
certificates and instruments from time to time representing or evidencing such
investments; all notes, certificates of deposit, checks and other instruments
from time to time hereafter delivered to or otherwise possessed by the
Collateral Agent for or on behalf of any Grantor in substitution for, or in
addition to, any or all of the Pledged Collateral; and all interest, dividends,
cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the items
constituting Pledged Collateral.
     “Collateral Agent” shall have the meaning assigned to such term in the
preamble.
     “Contracts” shall mean all contracts and agreements between any Grantor and
any other person (in each case, whether written or oral, or third party or
intercompany) as the same may be amended, assigned, extended, restated,
supplemented, replaced or otherwise modified from time to time including (i) all
rights of any Grantor to receive moneys due and to become due to it thereunder
or in connection therewith, (ii) all rights of any Grantor to receive proceeds
of any insurance, indemnity, warranty or guaranty with respect thereto,
(iii) all rights of any Grantor to damages arising thereunder and (iv) all
rights of any Grantor to terminate and to perform and compel performance of,
such Contracts and to exercise all remedies thereunder.
     “Copyright Licenses” shall mean any agreement, whether written or oral,
naming any Grantor as licensor or licensee (including those listed in
Schedule 4.9(a) (as such schedule may be amended or supplemented from time to
time)), granting any right in, to or under any Copyright, including the grant of
rights to manufacture, print, publish, copy, import, export, distribute, exploit
and sell materials derived from any Copyright.
     “Copyrights” shall mean (i) all copyrights arising under the laws of the
United States, any other country, or union of countries, or any political
subdivision of any of the foregoing, whether registered or unregistered and
whether published or unpublished (including those listed in Schedule 4.9(a) (as
such schedule may be amended or supplemented from time to time)), all
registrations and recordings thereof, and all applications in connection
therewith and rights corresponding thereto throughout the world, including all
registrations, recordings and applications in the United States

E-3

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

 

Exhibit E
Copyright Office, (ii) the right to, and to obtain, all extensions and renewals
thereof, and the right to sue for past, present and future infringements of any
of the foregoing, (iii) all proceeds of the foregoing, including license,
royalties, income, payments, claims, damages, and proceeds of suit and (iv) all
other rights of any kind whatsoever accruing thereunder or pertaining thereto.
     “Credit Agreement” shall have the meaning assigned to such term in the
preamble.
     “dollars” or “$” shall mean lawful money of the United States of America.
     “Excluded Assets” shall mean any lease, license, contract, property right
or agreement to which any Grantor is a party or any of its rights, title or
interests thereunder if and only for so long as the grant of a security interest
hereunder shall constitute or result in a breach, termination or default under
any such lease, license, contract, property right or agreement (other than to
the extent that any such term would be rendered ineffective pursuant to
Sections 9-406, 9-407, 9-408 or 9-409 of the UCC of any relevant jurisdiction or
any other applicable law or principles of equity); provided, however, that such
security interest shall attach immediately to any portion of such lease,
license, contract, property rights or agreement that does not result in any of
the consequences specified above.
     “Excluded Foreign Subsidiary Voting Stock” shall mean the voting Equity
Interests in any Excluded Foreign Subsidiary.
     “General Intangibles” shall mean all “general intangibles” as such term is
defined in Section 9-102(a)(42) of the New York UCC and, in any event, including
with respect to any Grantor, all rights of such Grantor to receive any tax
refunds, all Hedging Agreements and all contracts, agreements, instruments and
indentures and all licenses, permits, concessions, franchises and authorizations
issued by Governmental Authorities in any form, and portions thereof, to which
such Grantor is a party or under which such Grantor has any right, title or
interest or to which such Grantor or any property of such Grantor is subject, as
the same may from time to time be amended, supplemented, replaced or otherwise
modified, including (i) all rights of such Grantor to receive moneys due and to
become due to it thereunder or in connection therewith, (ii) all rights of such
Grantor to receive proceeds of any insurance, indemnity, warranty or guaranty
with respect thereto, (iii) all rights of such Grantor to damages arising
thereunder and (iv) all rights of such Grantor to terminate and to perform and
compel performance and to exercise all remedies thereunder.
     “Grantors” shall have the meaning assigned to such term in the preamble.
     “Guarantor Obligations” shall mean with respect to any Guarantor, all
obligations and liabilities of such Guarantor which may arise under or in
connection with this Agreement (including Section 2) or any other Loan Document
to which such Guarantor is a party, in each case whether on account of guarantee
obligations, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including all fees and

E-4

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

 

Exhibit E
disbursements of counsel to any Secured Party that are required to be paid by
such Guarantor pursuant to the terms of this Agreement or any other Loan
Document).
     “Guarantors” shall mean the collective reference to each Grantor other than
the Borrower.
     “Insurance” shall mean (i) all insurance policies covering any or all of
the Pledged Collateral (regardless of whether the Collateral Agent is the loss
payee thereof) and (ii) any key man life insurance policies.
     “Insurance Law” shall mean a Requirement of Law pertaining to the business
of insurance and applicable to a Regulated Insurance Subsidiary.
     “Intellectual Property” shall mean the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including the
Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the
Trademarks, the Trademark Licenses, the Trade Secrets and the Trade Secret
Licenses, and all rights to sue at law or in equity for any past, present and
future infringement or other impairment thereof, including the right to receive
all proceeds and damages therefrom.
     “Intercompany Note” shall mean any promissory note evidencing loans made by
any Grantor to any Loan Party, including any subordinated intercompany note
entered into in connection with the Affiliate Subordination Agreement.
     “Investment Property” shall mean the collective reference to (i) all
“investment property” as such term is defined in Section 9-102(a)(49) of the New
York UCC (other than any Excluded Foreign Subsidiary Voting Stock, excluded from
the definition of “Pledged Equity Interests”) including all Certificated
Securities and Uncertificated Securities, all Security Entitlements, all
Securities Accounts, all Commodity Contracts and all Commodity Accounts,
(ii) security entitlements, in the case of any United States Treasury book-entry
securities, as defined in 31 C.F.R. section 357.2, or, in the case of any United
States federal agency book-entry securities, as defined in the corresponding
United States federal regulations governing such book-entry securities, and
(iii) whether or not otherwise constituting “investment property”, all Pledged
Notes, all Pledged Equity Interests, all Pledged Security Entitlements and all
Pledged Commodity Contracts.
     “Issuers” shall mean the collective reference to each issuer of a Pledged
Security.
     “Lenders” shall have the meaning assigned to such term in the preamble.
     “Licensed Intellectual Property” shall have the meaning assigned to such
term in Section 4.9(a).
     “Material Contract” shall mean any agreement, contract or license or other
arrangement (other than an agreement, contract or arrangement representing
indebtedness for borrowed money) to which any Grantor is a party that is
material to the Grantors and

E-5

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

 

Exhibit E
their subsidiaries, taken as a whole, and for which breach, nonperformance,
cancellation or failure to renew could reasonably be expected to have a Material
Adverse Effect.
     “New York UCC” shall mean the Uniform Commercial Code as from time to time
in effect in the State of New York.
     “Non-Assignable Contract” shall mean any Contract that by its terms
purports to restrict or prevent the assignment thereof or granting of a security
interest therein (either by its terms or by any federal or state statutory or
regulatory prohibition or otherwise, irrespective of whether such prohibition or
restriction is enforceable under Sections 9-407 through 9-409 of the New York
UCC).
     “Obligations” shall mean (i) in the case of the Borrower, the Borrower
Obligations, and (ii) in the case of each Guarantor, its Guarantor Obligations.
     “Owned Intellectual Property” shall have the meaning assigned to such term
in Section 4.9(a).
     “Patent License” shall mean all agreements, whether written or oral,
providing for the grant by or to any Grantor of any right to manufacture, use,
import, export, distribute or sell any invention covered in whole or in part by
a Patent, including any of the foregoing listed in Schedule 4.9(a) (as such
schedule may be amended or supplemented from time to time).
     “Patents” shall mean (i) all letters of patent of the United States, any
other country, union of countries or any political subdivision of any of the
foregoing, all reissues and extensions thereof and all goodwill associated
therewith, including any of the foregoing listed in Schedule 4.9(a) (as such
schedule may be amended or supplemented from time to time), (ii) all
applications for letters of patent of the United States or any other country or
union of countries or any political subdivision of any of the foregoing and all
divisions, continuations and continuations-in-part thereof, all improvements
thereof, including any of the foregoing listed in Schedule 4.9(a) (as such
schedule may be amended or supplemented from time to time), (iii) all rights to,
and to obtain, any reissues or extensions of the foregoing and (iv) all proceeds
of the foregoing, including licenses, royalties, income, payments, claims,
damages and proceeds of suit.
     “person” shall mean any natural person, corporation, trust, business trust,
joint venture, joint stock company, association company, limited liability
company, partnership, Governmental Authority or other entity.
     “Pledged Alternative Equity Interests” shall mean all interests of any
Grantor in participation or other interests in any equity or profits of any
business entity and the certificates, if any, representing such interests and
all dividends, distributions, cash, warrants, rights, options, instruments,
securities and other property or proceeds from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of such
interests and any other warrant, right or option to acquire any of the
foregoing; provided, however, that Pledged Alternative Equity Interests shall
not include

E-6

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

 

Exhibit E
any Pledged Stock, Pledged Partnership Interests, Pledged LLC Interests or
Pledged Trust Interests.
     “Pledged Collateral” shall have the meaning assigned to such term in
Section 3.
     “Pledged Commodity Contracts” shall mean all commodity contracts listed on
Schedule 4.7(c) (as such schedule may be amended from time to time) and all
other commodity contracts to which any Grantor is party from time to time.
     “Pledged Debt Securities” shall mean all debt securities now owned or
hereafter acquired by any Grantor, including the debt securities listed on
Schedule 4.7(b), (as such schedule may be amended or supplemented from time to
time), together with any other certificates, options, rights or security
entitlements of any nature whatsoever in respect of the debt securities of any
person that may be issued or granted to, or held by, any Grantor while this
Agreement is in effect.
     “Pledged Equity Interests” shall mean all Pledged Stock, Pledged LLC
Interests, Pledged Partnership Interests, Pledged Trust Interests and Pledged
Alternative Equity Interests.
     “Pledged LLC Interests” shall mean all interests of any Grantor now owned
or hereafter acquired in any limited liability company, including all limited
liability company interests listed on Schedule 4.7(a) hereto under the heading
“Pledged LLC Interests” (as such schedule may be amended or supplemented from
time to time) and the certificates, if any, representing such limited liability
company interests and any interest of such Grantor on the books and records of
such limited liability company and all dividends, distributions, cash, warrants,
rights, options, instruments, securities and other property or proceeds from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such limited liability company interests and any
other warrant, right or option to acquire any of the foregoing.
     “Pledged Notes” shall mean all promissory notes now owned or hereafter
acquired by any Grantor, including those listed on Schedule 4.7(b) (as such
schedule may be amended or supplemented from time to time) and all Intercompany
Notes at any time issued to or held by any Grantor.
     “Pledged Partnership Interests” shall mean all interests of any Grantor now
owned or hereafter acquired in any general partnership, limited partnership,
limited liability partnership or other partnership, including all partnership
interests listed on Schedule 4.7(a) hereto under the heading “Pledged
Partnership Interests” (as such schedule may be amended or supplemented from
time to time) and the certificates, if any, representing such partnership
interests and any interest of such Grantor on the books and records of such
partnership and all dividends, distributions, cash, warrants, rights, options,
instruments, securities and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such partnership interests and any other warrant, right or option
to acquire any of the foregoing.

E-7

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

 

Exhibit E
     “Pledged Securities” shall mean the collective reference to the Pledged
Debt Securities, the Pledged Notes and the Pledged Equity Interests.
     “Pledged Security Entitlements” shall mean all security entitlements with
respect to the financial assets listed on Schedule 4.7(c) (as such schedule may
be amended from time to time) and all other security entitlements of any
Grantor.
     “Pledged Stock”: shall mean all shares of capital stock now owned or
hereafter acquired by any Grantor, including all shares of capital stock listed
on Schedule 4.7(a) hereto under the heading “Pledged Stock” (as such schedule
may be amended or supplemented from time to time), and the certificates, if any,
representing such shares and any interest of such Grantor in the entries on the
books of the issuer of such shares and all dividends, distributions, cash,
warrants, rights, options, instruments, securities and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such shares and any other warrant,
right or option to acquire any of the foregoing; provided, however, that in no
event shall more than 65% of the total outstanding Excluded Foreign Subsidiary
Voting Stock be required to be pledged hereunder.
     “Pledged Trust Interests” shall mean all interests of any Grantor now owned
or hereafter acquired in a Delaware business trust or other trust, including all
trust interests listed on Schedule 4.7(a) hereto under the heading “Pledged
Trust Interests” (as such schedule may be amended or supplemented from time to
time) and the certificates, if any, representing such trust interests and any
interest of such Grantor on the books and records of such trust or on the books
and records of any securities intermediary pertaining to such interest and all
dividends, distributions, cash, warrants, rights, options, instruments,
securities and other property or proceeds from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of such
trust interests and any other warrant, right or option to acquire any of the
foregoing.
     “Proceeds” shall mean all “proceeds” as such term is defined in Section
9-102(a)(64) of the New York UCC and, in any event, shall include all dividends
or other income from the Investment Property, collections thereon or
distributions or payments with respect thereto.
     “Qualified Counterparty” shall mean, with respect to any Specified Hedge
Agreement, any counterparty thereto that, at the time such Specified Hedge
Agreement was entered into, was a Lender, an Agent or an Affiliate of a Lender
or an Agent.
     “Receivable” shall mean all Accounts and any other right to payment for
goods or other property sold, leased, licensed or otherwise disposed of or for
services rendered, whether or not such right is evidenced by an Instrument or
Chattel Paper or classified as a Payment Intangible and whether or not it has
been earned by performance. References herein to Receivables shall include any
Supporting Obligation or collateral securing such Receivable.

E-8

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

 

Exhibit E
     “Secured Parties” shall mean, collectively, the Arrangers, the Collateral
Agent, the Collateral Agent, the Syndication Agent, the Documentation Agent, the
Lenders and, with respect to any Specified Hedge Agreement, any Qualified
Counterparty that has agreed to be bound by the provisions of Article VIII of
the Credit Agreement as if it were a Lender party thereto; provided that no
Qualified Counterparty shall have any rights in connection with the management
or release of any Pledged Collateral or the obligations of any Guarantor under
this Agreement.
     “Securities Act” shall mean the Securities Act of 1933, as amended.
     “Specified Hedge Agreement” shall mean any Hedging Agreement (a) entered
into by (i) the Borrower or any of the Subsidiaries and (ii) any Lender or any
Affiliate thereof or any Agent or any Affiliate thereof, or any person that was
a Lender or an Affiliate thereof or an Agent or Affiliate thereof when such
Hedging Agreement was entered into as counterparty and (b) which has been
designated by such Lender or Agent and the Borrower, by notice to the Collateral
Agent not later than 90 days after the execution and delivery thereof by the
Borrower or such Subsidiary, as a Specified Hedge Agreement; provided that the
designation of any Hedging Agreement as a Specified Hedge Agreement shall not
create in favor of any Lender or Affiliate thereof or any Agent or any Affiliate
thereof that is a party thereto any rights in connection with the management or
release of any Pledged Collateral or of the obligations of any Guarantor under
this Agreement.
     “Trademark License” shall mean any agreement, whether written or oral,
providing for the grant by or to any Grantor of any right in, to or under any
Trademark, including any of the foregoing referred to in Schedule 4.9(a) (as
such schedule may be amended or supplemented from time to time).
     “Trademarks” shall mean (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos and other source or business identifiers, and all goodwill
associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country, union of countries, or any political subdivision of any of the
foregoing, or otherwise, and all common-law rights related thereto, including
any of the foregoing listed in Schedule 4.9(a) (as such schedule may be amended
or supplemented from time to time), (ii) the right to, and to obtain, all
renewals thereof, (iii) the goodwill of the business symbolized by the
foregoing, (iv) other source or business identifiers, designs and general
intangibles of a like nature and (v) the right to sue for past, present and
future infringements or dilution of any of the foregoing or for any injury to
goodwill, and all proceeds of the foregoing, including royalties, income,
payments, claims, damages and proceeds of suit.
     “Trade Secret License” shall mean any agreement, whether written or oral,
providing for the grant by or to any Grantor of any right in, to or under any
Trade Secret,

E-9

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

 

Exhibit E
including any of the foregoing listed in Schedule 4.9(a) (as such schedule may
be amended or supplemented from time to time).
     “Trade Secrets” shall mean all trade secrets and all other confidential or
proprietary information and know-how (all of the foregoing being collectively
called a “Trade Secret”), whether or not reduced to a writing or other tangible
form, including all documents and things embodying, incorporating or describing
such Trade Secret, the right to sue for past, present and future infringements
of any Trade Secret and all proceeds of the foregoing, including royalties,
income, payments, claims, damages and proceeds of suit.
          1.2 Other Definitional Provisions. (a) The words “hereof”, “herein”,
“hereto” 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, and Section and Schedule references are to the specific
provisions of this Agreement unless otherwise specified.
          (a) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
          (b) Where the context requires, terms relating to the Pledged
Collateral or any part thereof, when used in relation to a Grantor, shall refer
to the property or assets such Grantor has granted as Pledged Collateral or the
relevant part thereof.
          (c) The expressions “payment in full,” “paid in full” and any other
similar terms or phrases when used herein with respect to the Borrower
Obligations or the Guarantor Obligations shall mean the unconditional, final and
irrevocable payment in full, in immediately available funds, of all of the
Borrower Obligations or the Guarantor Obligations, as the case may be, in each
case, unless otherwise specified, other than indemnification and other
contingent obligations not then due and payable.
          (d) The words “include”, “includes” and “including”, and words of
similar import, shall not be limiting and shall be deemed to be followed by the
phrase “without limitation”.
          (e) All references to the Lenders herein shall, where appropriate,
include any Lender, the Collateral Agent, the Collateral Agent or any Arranger
or, in the case of any Lender or Agent, any Affiliate thereof that is a party to
a Specified Hedge Agreement.
SECTION 2. GUARANTEE
          2.1 Guarantee.
          (a) Each of the Guarantors hereby, jointly and severally,
unconditionally and irrevocably, guarantees to the Collateral Agent, for the
ratable benefit of the Secured Parties and their respective successors,
indorsees, transferees and assigns, the prompt and complete payment and
performance by the Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower Obligations.

E-10

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

 

Exhibit E
          (b) If and to the extent required in order for the Obligations of any
Guarantor to be enforceable under applicable federal, state and other laws
relating to the insolvency of debtors, the maximum liability of such Guarantor
hereunder shall be limited to the greatest amount which can lawfully be
guaranteed by such Guarantor under such laws, after giving effect to any rights
of contribution, reimbursement and subrogation arising under Section 2.2. Each
Guarantor acknowledges and agrees that, to the extent not prohibited by
applicable law, (i) such Guarantor (as opposed to its creditors, representatives
of creditors or bankruptcy trustee, including such Guarantor in its capacity as
debtor in possession exercising any powers of a bankruptcy trustee) has no
personal right under such laws to reduce, or request any judicial relief that
has the effect of reducing, the amount of its liability under this Agreement,
(ii) such Guarantor (as opposed to its creditors, representatives of creditors
or bankruptcy trustee, including such Guarantor in its capacity as debtor in
possession exercising any powers of a bankruptcy trustee) has no personal right
to enforce the limitation set forth in this Section 2.1(b) or to reduce, or
request judicial relief reducing, the amount of its liability under this
Agreement, and (iii) the limitation set forth in this Section 2.1(b) may be
enforced only to the extent required under such laws in order for the
obligations of such Guarantor under this Agreement to be enforceable under such
laws and only by or for the benefit of a creditor, representative of creditors
or bankruptcy trustee of such Guarantor or other person entitled, under such
laws, to enforce the provisions thereof.
          (c) Each Guarantor agrees that the Borrower Obligations may at any
time and from time to time be incurred or permitted in an amount exceeding the
maximum liability of such Guarantor under Section 2.1(b) without impairing the
guarantee contained in this Section 2 or affecting the rights and remedies of
any Secured Party hereunder.
          (d) The guarantee contained in this Section 2 shall remain in full
force and effect until payment in full of the Obligations, notwithstanding that
from time to time during the term of the Credit Agreement the Borrower may be
free from any Borrower Obligations.
          (e) No payment made by the Borrower, any of the Guarantors, any other
guarantor or any other person or received or collected by any Secured Party from
the Borrower, any of the Guarantors, any other guarantor or any other person by
virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of
the Borrower Obligations shall be deemed to modify, reduce, release or otherwise
affect the liability of any Guarantor hereunder which shall, notwithstanding any
such payment (other than any payment made by such Guarantor in respect of the
Borrower Obligations or any payment received or collected from such Guarantor in
respect of the Borrower Obligations), remain liable for the Borrower Obligations
up to the maximum liability of such Guarantor hereunder until the Borrower
Obligations (other than Obligations in respect of any Specified Hedge Agreement)
are paid in full, no letter of credit shall be outstanding under the Credit
Agreement and all commitments to extend credit under the Credit Agreement shall
have been terminated or have expired.
          2.2 Rights of Reimbursement, Contribution and Subrogation. In case any
payment is made on account of the Obligations by any Grantor or is received or
collected on account of the Obligations from any Grantor or its property:

E-11

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

 

Exhibit E
          (a) If such payment is made by the Borrower or from its property,
then, if and to the extent such payment is made on account of Obligations
arising from or relating to a Loan or other extension of credit made to the
Borrower or a letter of credit issued for the account of the Borrower, the
Borrower shall not be entitled (i) to demand or enforce reimbursement or
contribution in respect of such payment from any other Grantor or (ii) to be
subrogated to any claim, interest, right or remedy of any Secured Party against
any other person, including any other Grantor or its property.
          (b) If such payment is made by a Guarantor or from its property, such
Guarantor shall be entitled, subject to and upon payment in full of the
Obligations, (i) to demand and enforce reimbursement for the full amount of such
payment from the Borrower and (ii) to demand and enforce contribution in respect
of such payment from each other Guarantor that has not paid its fair share of
such payment, as necessary to ensure that (after giving effect to any
enforcement of reimbursement rights provided hereby) each Guarantor pays its
fair share of the unreimbursed portion of such payment. For this purpose, the
fair share of each Guarantor as to any unreimbursed payment shall be determined
based on an equitable apportionment of such unreimbursed payment among all
Guarantors based on the relative value of their assets and any other equitable
considerations deemed appropriate by a court of competent jurisdiction.
          (c) If and whenever (after payment in full of the Obligations) any
right of reimbursement or contribution becomes enforceable by any Grantor
against any other Grantor under Sections 2.2(a) and 2.2(b), such Grantor shall
be entitled, subject to and upon payment in full of the Obligations, to be
subrogated (equally and ratably with all other Grantors entitled to
reimbursement or contribution from any other Grantor as set forth in this
Section 2.2) to any security interest that may then be held by the Collateral
Agent upon any Pledged Collateral granted to it in this Agreement. Such right of
subrogation shall be enforceable solely against the Grantors, and not against
the Secured Parties, and neither the Collateral Agent nor any other Secured
Party shall have any duty whatsoever to warrant, ensure or protect any such
right of subrogation or to obtain, perfect, maintain, hold, enforce or retain
any Pledged Collateral for any purpose related to any such right of subrogation.
If subrogation is demanded by any Grantor, then (after payment in full of the
Obligations) the Collateral Agent shall deliver to the Grantors making such
demand, or to a representative of such Grantors or of the Grantors generally, an
instrument satisfactory to the Collateral Agent transferring, on a quitclaim
basis without any recourse, representation, warranty or obligation whatsoever,
whatever security interest the Collateral Agent then may hold in whatever
Pledged Collateral may then exist that was not previously released or disposed
of by the Collateral Agent.
          (d) All rights and claims arising under this Section 2.2 or based upon
or relating to any other right of reimbursement, indemnification, contribution
or subrogation that may at any time arise or exist in favor of any Grantor as to
any payment on account of the Obligations made by it or received or collected
from its property shall be fully subordinated in all respects to the prior
payment in full of all of the Obligations. Until payment in full of the
Obligations, no Grantor shall demand or receive any collateral security, payment
or distribution whatsoever (whether in cash, property or securities or
otherwise) on account of any such right or claim. If any such payment or
distribution is made or becomes available to any Grantor in any bankruptcy case
or receivership, insolvency or liquidation proceeding, such payment or
distribution shall be delivered by the person making such payment or
distribution directly to the Collateral Agent, for

E-12

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

 

Exhibit E
application to the payment of the Obligations. If any such payment or
distribution is received by any Grantor, it shall be held by such Grantor in
trust, as trustee of an express trust for the benefit of the Secured Parties,
and shall forthwith be transferred and delivered by such Grantor to the
Collateral Agent, in the exact form received and, if necessary, duly endorsed.
          (e) The obligations of the Grantors under the Loan Documents,
including their liability for the Obligations and the enforceability of the
security interests granted thereby, are not contingent upon the validity,
legality, enforceability, collectibility or sufficiency of any right of
reimbursement, contribution or subrogation arising under this Section 2.2. The
invalidity, insufficiency, unenforceability or uncollectibility of any such
right shall not in any respect diminish, affect or impair any such obligation or
any other claim, interest, right or remedy at any time held by any Secured Party
against any Guarantor or its property. The Secured Parties make no
representations or warranties in respect of any such right and shall have no
duty to assure, protect, enforce or ensure any such right or otherwise relating
to any such right.
          (f) Each Grantor reserves any and all other rights of reimbursement,
contribution or subrogation at any time available to it as against any other
Grantor, but (i) the exercise and enforcement of such rights shall be subject to
Section 2.2(d) and (ii) neither the Collateral Agent nor any other Secured Party
shall ever have any duty or liability whatsoever in respect of any such right,
except as provided in Section 2.2(c).
          2.3 Amendments, etc. with respect to the Borrower Obligations. Each
Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Borrower
Obligations made by any Secured Party may be rescinded by such Secured Party and
any of the Borrower Obligations continued, and the Borrower Obligations, or the
liability of any other person upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, increased, extended,
amended, modified, accelerated, compromised, waived, surrendered or released by
any Secured Party, and the Credit Agreement and the other Loan Documents and any
other documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the parties
thereto may deem advisable from time to time, and any collateral security,
guarantee or right of offset at any time held by any Secured Party for the
payment of the Borrower Obligations may be sold, exchanged, waived, surrendered
or released in each case, pursuant to and in accordance with the terms set forth
in Section 9.08 of the Credit Agreement. No Secured Party shall have any
obligation to protect, secure, perfect or insure any Lien at any time held by it
as security for the Borrower Obligations or for the guarantee contained in this
Section 2 or any property subject thereto.
          2.4 Guarantee Absolute and Unconditional. Each Guarantor waives any
and all notice of the creation, renewal, extension or accrual of any of the
Borrower Obligations and notice of or proof of reliance by any Secured Party
upon the guarantee contained in this Section 2 or acceptance of the guarantee
contained in this Section 2; the Borrower Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred, or renewed,
extended, amended or waived, in reliance upon the guarantee contained in this
Section 2; and all dealings between the Borrower and any of the Guarantors, on
the one hand, and the Secured

E-13

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

 

Exhibit E
Parties, on the other hand, likewise shall be conclusively presumed to have been
had or consummated in reliance upon the guarantee contained in this Section 2.
Each Guarantor waives diligence, presentment, protest, demand for payment and
notice of default or nonpayment to or upon the Borrower or any of the Guarantors
with respect to the Borrower Obligations. Each Guarantor understands and agrees
that the guarantee contained in this Section 2 shall be construed as a
continuing, absolute and unconditional guarantee of payment and performance
without regard to (a) the validity or enforceability of the Credit Agreement or
any other Loan Document, any of the Borrower Obligations or any other collateral
security therefor or guarantee or right of offset with respect thereto at any
time or from time to time held by any Secured Party, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance hereunder) which
may at any time be available to or be asserted by the Borrower or any other
person against any Secured Party, or (c) any other circumstance whatsoever (with
or without notice to or knowledge of the Borrower or such Guarantor) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of the Borrower for the Borrower Obligations, or of such Guarantor
under the guarantee contained in this Section 2, in bankruptcy or in any other
instance. When making any demand hereunder or otherwise pursuing its rights and
remedies hereunder against any Guarantor, any Secured Party may, but shall be
under no obligation to, make a similar demand on or otherwise pursue such rights
and remedies as it may have against the Borrower, any other Guarantor or any
other person or against any collateral security or guarantee for the Borrower
Obligations or any right of offset with respect thereto, and any failure by any
Secured Party to make any such demand, to pursue such other rights or remedies
or to collect any payments from the Borrower, any other Guarantor or any other
person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of the Borrower, any other
Guarantor or any other person or any such collateral security, guarantee or
right of offset, shall not relieve any Guarantor of any obligation or liability
hereunder, and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of any Secured Party against
any Guarantor. For the purposes hereof “demand” shall include the commencement
and continuance of any legal proceedings.
          2.5 Reinstatement. The guarantee contained in this Section 2 shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Borrower Obligations is rescinded or
must otherwise be restored or returned by any Secured Party upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Borrower or any
Guarantor, or upon or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, the Borrower or any
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made.
          2.6 Payments. Each Guarantor hereby guarantees that payments hereunder
will be paid to the Collateral Agent without set-off or counterclaim in Dollars
in immediately available funds at the office of the Collateral Agent as
specified in the Credit Agreement.
SECTION 3. GRANT OF SECURITY INTEREST;
CONTINUING LIABILITY UNDER PLEDGED COLLATERAL
          (a) Each Grantor hereby assigns and transfers to the Collateral Agent,
and hereby grants to the Collateral Agent, for the ratable benefit of the
Secured Parties, a security interest in all of the personal property of such
Grantor, including the following property, in each case,

E-14

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

 

Exhibit E
wherever located and now owned or at any time hereafter acquired by such Grantor
or in which such Grantor now has or at any time in the future may acquire any
right, title or interest (collectively, the “Pledged Collateral”), as collateral
security for the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of such Grantor’s
Obligations:
                    (i) all Accounts;
                    (ii) all As-Extracted Collateral
                    (iii) all Chattel Paper;
                    (iv) all Collateral Accounts and all Collateral Account
Funds;
                    (v) all Commercial Tort Claims from time specifically
described on Schedule 4.11;
                    (vi) all Contracts;
                    (vii) all Deposit Accounts;
                    (viii) all Documents;
                    (ix) all Equipment;
                    (x) all Fixtures;
                    (xi) all General Intangibles;
                    (xii) all Goods;
                    (xiii) all Instruments;
                    (xiv) all Insurance;
                    (xv) all Intellectual Property;
                    (xvi) all Inventory;
                    (xvii) all Investment Property;
                    (xviii) all Letters of Credit and Letter of Credit Rights;
                    (xix) all Money;
                    (xx) all Securities Accounts;
                    (xxi) all books, records, ledger cards, files,
correspondence, customer lists, blueprints, technical specifications, manuals,
computer software, computer

E-15

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

 

Exhibit E
printouts, tapes, disks and other electronic storage media and related data
processing software and similar items that at any time pertain to or evidence or
contain information relating to any of the Pledged Collateral or are otherwise
necessary or helpful in the collection thereof or realization thereupon; and
          (xxii) to the extent not otherwise included, all other property,
whether tangible or intangible, of the Grantor and all Proceeds, products,
accessions, rents and profits of any and all of the foregoing and all collateral
security, Supporting Obligations and guarantees given by any person with respect
to any of the foregoing;
provided that, notwithstanding any other provision set forth in this Section 3,
(x) this Agreement shall not, at any time, constitute a grant of a security
interest in any property that is, at such time, an Excluded Asset, and (y) the
Equity Interests of a Regulated Insurance Subsidiary, a Qualified Insurance
Holding Company, LIFCO or any Premium Finance Co. (collectively, the “Applicable
Subsidiaries”) owned directly by a Grantor shall remain limited by and subject
to the requirements of any and all applicable Requirements of Law, including
notice of or prior approval of (A) a merger, an acquisition or any other change
in control of an Applicable Subsidiary’s Equity Interests, and (B) the transfer
to a Collateral Agent of a Grantor’s right to vote, to give consents,
ratifications or waivers or to take any other action with respect to the Equity
Interests of any Applicable Subsidiary.
          (b) Notwithstanding anything herein to the contrary, (i) each Grantor
shall remain liable for all obligations under and in respect of the Pledged
Collateral and nothing contained herein is intended or shall be a delegation of
duties to the Collateral Agent or any other Secured Party, (ii) each Grantor
shall remain liable under and each of the agreements included in the Pledged
Collateral, including any Receivables, any Contracts and any agreements relating
to Pledged Partnership Interests or Pledged LLC Interests, to perform all of the
obligations undertaken by it thereunder all in accordance with and pursuant to
the terms and provisions thereof and neither the Collateral Agent nor any other
Secured Party shall have any obligation or liability under any of such
agreements by reason of or arising out of this Agreement or any other document
related hereto nor shall the Collateral Agent nor any other Secured Party have
any obligation to make any inquiry as to the nature or sufficiency of any
payment received by it or have any obligation to take any action to collect or
enforce any rights under any agreement included in the Pledged Collateral,
including any agreements relating to any Receivables, any Contracts or any
agreements relating to Pledged Partnership Interests or Pledged LLC Interests
and (iii) the exercise by the Collateral Agent of any of its rights hereunder
shall not release any Grantor from any of its duties or obligations under the
contracts and agreements included in the Pledged Collateral, including any
agreements relating to any Receivables, any Contracts and any agreements
relating to Pledged Partnership Interests or Pledged LLC Interests.
SECTION 4. REPRESENTATIONS AND WARRANTIES
     To induce the Administrative Agent, the Collateral Agent and the Lenders to
enter into the Credit Agreement and to induce the Lenders to make their
respective extensions of credit to the Borrower thereunder, each Grantor hereby
represents and warrants to the Secured Parties that:

E-16

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

 

Exhibit E
          4.1 Representations in Credit Agreement. In the case of each
Guarantor, the representations and warranties set forth in Article III of the
Credit Agreement as they relate to such Guarantor or to the Loan Documents to
which such Guarantor is a party, each of which is hereby incorporated herein by
reference, are true and correct, in all material respects, except for
representations and warranties expressly stated to relate to a specific earlier
date, in which case such representations and warranties shall be true and
correct in all material respects as of such earlier date, and the Secured
Parties shall be entitled to rely on each of them as if they were fully set
forth herein, provided that each reference in each such representation and
warranty to the Borrower’s knowledge shall, for the purposes of this
Section 4.l, be deemed to be a reference to such Guarantor’s knowledge.
          4.2 Title; No Other Liens. Such Grantor owns each item of the Pledged
Collateral free and clear of any and all Liens or claims, including Liens
arising as a result of such Grantor becoming bound (as a result of merger or
otherwise) as grantor under a security agreement entered into by another person,
except for Liens expressly permitted by Section 6.02 of the Credit Agreement. No
financing statement, mortgage or other public notice with respect to all or any
part of the Pledged Collateral is on file or of record in any public office,
except such as have been filed in favor of the Collateral Agent, for the ratable
benefit of the Secured Parties, pursuant to this Agreement or as are expressly
permitted by the Credit Agreement.
          4.3 Perfected First Priority Liens. The security interests granted
pursuant to this Agreement (a) upon completion of the filings and other actions
specified on Schedule 4.3 (all of which, in the case of all filings and other
documents referred to on said Schedule, have been delivered to the Collateral
Agent in duly completed and duly executed form (which shall include real estate
descriptions sufficient to enable the Collateral Agent to record financing
statements in the county records, in such counties identified on Schedule 4.3),
as applicable, and may be filed by the Collateral Agent at any time) and payment
of all filing fees, will constitute valid fully perfected security interests in
all of the Pledged Collateral in favor of the Collateral Agent, for the ratable
benefit of the Secured Parties, as collateral security for such Grantor’s
Obligations, enforceable in accordance with the terms hereof and (b) are prior
to all other Liens on the Pledged Collateral, except for Liens expressly
permitted by Section 6.02 of the Credit Agreement. Without limiting the
foregoing, each Grantor has taken and will take all actions that the Collateral
Agent deems necessary or desirable, including those specified in Section 5.2 to
(i) establish the Collateral Agent’s “control” (within the meanings of
Sections 8-106 and 9-106 of the New York UCC) over any portion of the Investment
Property constituting Certificated Securities, Uncertificated Securities,
Securities Accounts, Securities Entitlements or Commodity Accounts (each as
defined in the New York UCC), (ii) establish the Collateral Agent’s “control”
(within the meaning of Section 9-104 of the New York UCC) over all Deposit
Accounts, (iii) establish the Collateral Agent’s “control” (within the meaning
of Section 9-107 of the New York UCC) over all Letter of Credit Rights,
(iv) establish the Collateral Agent’s control (within the meaning of
Section 9-105 of the New York UCC) over all Electronic Chattel Paper and
(v) establish the Collateral Agent’s “control” (within the meaning of Section 16
of the Uniform Electronic Transaction Act as in effect in the applicable
jurisdiction “UETA”) over all “transferable records” (as defined in UETA).
          4.4 Name; Jurisdiction of Organization, etc. On the date hereof, such
Grantor’s exact legal name (as indicated on the public record of such Grantor’s
jurisdiction of

E-17

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

 

Exhibit E
formation or organization), jurisdiction of organization, organizational
identification number, if any, and the location of such Grantor’s chief
executive office or sole place of business are specified on Schedule 4.4. Each
Grantor is organized solely under the law of the jurisdiction so specified and
has not filed any certificates of domestication, transfer or continuance in any
other jurisdiction. Except as otherwise indicated on Schedule 4.4, the
jurisdiction of each such Grantor’s organization of formation is required to
maintain a public record showing the Grantor to have been organized or formed.
Except as specified on Schedule 4.4, no such Grantor has changed its name,
jurisdiction of organization, chief executive office or sole place of business
or its corporate structure in any way (e.g. by merger, consolidation, change in
corporate form or otherwise) within the past year and has not within the last
five years become bound (whether as a result of merger or otherwise) as a
grantor under a security agreement entered into by another person, which has not
heretofore been terminated.
          4.5 Inventory and Equipment. (a) On the date hereof, the Inventory and
the Equipment (other than mobile goods) that is included in the Pledged
Collateral are kept at the locations listed on Schedule 4.5(a). Within the five
years preceding execution of this agreement, such Grantor has not changed the
location of a material portion of its Equipment and Inventory that is included
in the Pledged Collateral except as otherwise disclosed on Schedule 4.5(a).
          (b) Any Inventory now or hereafter produced by any Grantor included in
the Pledged Collateral have been and will be produced in material compliance
with the requirements of all applicable laws and regulations, including the Fair
Labor Standards Act, as amended.
          (c) none of the Inventory or Equipment that is included in the Pledged
Collateral is in the possession of an issuer of a negotiable document (as
defined in Section 7-104 of the New York UCC) therefor or is otherwise in the
possession of any bailee or warehouseman.
          4.6 Farm Products. None of the Pledged Collateral constitutes, or is
the Proceeds of, Farm Products.
          4.7 Investment Property. (a) Schedule 4.7(a) hereto (as such schedule
may be amended or supplemented from time to time) sets forth under the headings
“Pledged Stock,” “Pledged LLC Interests,” “Pledged Partnership Interests” and
“Pledged Trust Interests,” respectively, all of the Pledged Stock, Pledged LLC
Interests, Pledged Partnership Interests and Pledged Trust Interests owned by
any Grantor and such Pledged Equity Interests constitute the percentage of
issued and outstanding shares of stock, percentage of membership interests,
percentage of partnership interests or percentage of beneficial interest of the
respective issuers thereof indicated on such schedule. Schedule 4.7(b) (as such
schedule may be amended or supplemented from time to time) sets forth under the
heading “Pledged Debt Securities” or “Pledged Notes” all of the Pledged Debt
Securities and Pledged Notes owned by any Grantor and all of such Pledged Debt
Securities and Pledged Notes have been duly authorized, authenticated or issued,
and delivered and are the legal, valid and binding obligation of the issuers
thereof enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ rights generally and subject to general principals of equity,
regardless of whether considered in a proceeding in equity or at law, and are
not in default and constitute all of the issued and outstanding inter-company
indebtedness evidenced by an instrument or certificated security of the
respective issuers thereof

E-18

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

 

Exhibit E
owing to such Grantor. Schedule 4.7(c) hereto (as such schedule may be amended
from time to time) sets forth under the headings “Securities Accounts,”
“Commodities Accounts,” and “Deposit Accounts” respectively, all of the
Securities Accounts, Commodities Accounts and Deposit Accounts in which each
Grantor has an interest and in which the value of each such account is in excess
of $100,000. Each Grantor is the sole entitlement holder or customer of each
such account and no Grantor has consented to or is otherwise aware of any person
having “control” (within the meanings of Sections 8-106, 9-106 and 9-104 of the
New York UCC) over, or any other interest in, any Securities Account, Commodity
Account, Deposit Account, in each case in which such Grantor has an interest, or
any securities, commodities or other property credited thereto.
     (b) The shares of Pledged Equity Interests pledged by such Grantor
hereunder constitute all of the issued and outstanding shares of all classes of
Equity Interests in each Issuer owned by such Grantor or, in the case of
Excluded Foreign Subsidiary Voting Stock, if less, 65% of the outstanding
Excluded Foreign Subsidiary Voting Stock of each relevant Issuer.
     (c) The Pledged Equity Interests have been duly and validly issued and are
fully paid and nonassessable.
     (d) The terms of any uncertificated Pledged LLC Interests and Pledged
Partnership Interests expressly provide that they are securities governed by
Article 8 of the Uniform Commercial Code in effect from time to time in the
“issuer’s jurisdiction” of each Issuer thereof (as such term is defined in the
Uniform Commercial Code in effect in such jurisdiction).
     (e) The terms of any certificated Pledged LLC Interests and Pledged
Partnership Interests expressly provide that they are securities governed by
Article 8 of the New York UCC.
     (f) Such Grantor is the record and beneficial owner of, and has good and
marketable title to, the Investment Property and Deposit Accounts pledged by it
hereunder, free of any and all Liens or options in favor of, or claims of, any
other person, except Liens expressly permitted by Section 6.02 of the Credit
Agreement, and there are no outstanding warrants, options or other rights to
purchase, or shareholder, voting trust or similar agreements outstanding with
respect to, or property that is convertible into, or that requires the issuance
or sale of, any Pledged Equity Interests.
     (g) Each Issuer that is not a Grantor hereunder has executed and delivered
to the Collateral Agent an Acknowledgment and Consent, in substantially the form
of Exhibit A, to the pledge of the Pledged Securities pursuant to this
Agreement.
     4.8 Receivables. (a) No amount payable to such Grantor under or in
connection with any Receivable that is included in the Pledged Collateral is
evidenced by any Instrument or Tangible Chattel Paper which has not been
delivered to the Collateral Agent or constitutes Electronic Chattel Paper that
has not been subjected to the control (within the meaning of Section 9-105 of
the New York UCC) of the Collateral Agent to the extent required by, and in
accordance with, Section 5.2 hereof.

E-19

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

 

Exhibit E
     (b) None of the obligors on any Receivables in excess of $50,000
individually or $100,000 in the aggregate that are included in the Pledged
Collateral is a Governmental Authority.
     (c) Each Receivable that is included in the Pledged Collateral (i) is and
will be the legal, valid and binding obligation of the Account Debtor in respect
thereof, representing an unsatisfied obligation of such Account Debtor, (ii) is
and will be enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ rights generally and subject to general principals of equity,
regardless of whether considered in a proceeding in equity or at law, (iii) is
not and will not be subject to any setoffs, defenses, taxes, counterclaims
(except with respect to refunds, returns and allowances in the ordinary course
of business with respect to damaged merchandise) and (iv) is and will be in
compliance with all applicable laws and regulations.
     4.9 Intellectual Property. (a) Schedule 4.9(a) lists all Intellectual
Property which is registered with a Governmental Authority or is the subject of
an application for registration and all material unregistered Intellectual
Property, in each case which is owned by such Grantor in its own name on the
date hereof (collectively, the “Owned Intellectual Property”). Except as set
forth in Schedule 4.9(a), such Grantor is the exclusive owner of the entire and
unencumbered right, title and interest in and to all such Owned Intellectual
Property and is otherwise entitled to use, and grant to others the right to use,
all such Owned Intellectual Property subject only to the license terms of the
licensing or franchise agreements referred to in paragraph (c) below. Such
Grantor has a valid and enforceable right to use all Intellectual Property which
it uses in its business, but does not own (collectively, the “Licensed
Intellectual Property”).
     (b) On the date hereof, all Owned Intellectual Property and, to such
Grantor’s knowledge, all Licensed Intellectual Property, in each case, which is
material to such Grantor’s business (collectively, the “Material Intellectual
Property”), is valid, subsisting, unexpired and enforceable and has not been
abandoned. Neither the operation of such Grantor’s business as currently
conducted or as contemplated to be conducted nor the use of the Intellectual
Property in connection therewith conflicts with, infringes, misappropriates,
dilutes, misuses or otherwise violates the intellectual property rights of any
other person.
     (c) Except as set forth in Schedule 4.9(c), on the date hereof (i) none of
the Material Intellectual Property is the subject of any licensing or franchise
agreement pursuant to which such Grantor is the licensor or franchisor and
(ii) there are no other agreements, obligations, orders or judgments which
affect the use of any Material Intellectual Property.
     (d) The rights of such Grantor in or to the Material Intellectual Property
do not conflict with or infringe upon the rights of any third party, and no
claim has been asserted that the use of such Intellectual Property does or may
infringe upon the rights of any third party.
     (e) To such Grantor’s knowledge, no holding, decision or judgment has been
rendered by any Governmental Authority or arbitrator in the United States or
outside the United States which would limit, cancel or question the validity or
enforceability of, or such Grantor’s rights in, any Material Intellectual
Property. Such Grantor is not aware of any uses of any item

E-20

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

 

Exhibit E
of Material Intellectual Property that could reasonably be expected to lead to
such item becoming invalid or unenforceable including unauthorized uses by third
parties and uses which were not supported by the goodwill of the business
connected with Trademarks and Trademark Licenses.
     (f) No action or proceeding is pending, or, to such Grantor’s knowledge,
threatened, on the date hereof (i) seeking to limit, cancel or question the
validity of any Owned Intellectual Property, (ii) alleging that any services
provided by, processes used by, or products manufactured or sold by such Grantor
infringe any patent, trademark, copyright, or any other right of any other
person, (iii) alleging that any Material Intellectual Property is being
licensed, sublicensed or used in violation of any intellectual property or any
other right of any other person, or (iv) which, if adversely determined, would
have a Material Adverse Effect on the value of any Material Intellectual
Property. To such Grantor’s knowledge, no person is engaging in any activity
that infringes upon, or is otherwise an unauthorized use of, any Material
Intellectual Property or upon the rights of such Grantor therein. Except as set
forth in Schedule 4.9(f), such Grantor has not granted any license, release,
covenant not to sue, non-assertion assurance, or other right to any person with
respect to any part of the Material Intellectual Property. The consummation of
the transactions contemplated by this Agreement (including the enforcement of
remedies) will not result in the termination or impairment of any of the
Material Intellectual Property.
     (g) With respect to each Copyright License, Trademark License, Trade Secret
License and Patent License which relates to Material Intellectual Property or
the loss of which could otherwise have a Material Adverse Effect: (i) such
license is valid and binding and in full force and effect and represents the
entire agreement between the respective licensor and licensee with respect to
the subject matter of such license; (ii) such license will not cease to be valid
and binding and in full force and effect on terms identical to those currently
in effect as a result of the rights and interests granted herein, nor will the
grant of such rights and interests constitute a breach or default under such
license or otherwise give the licensor or licensee a right to terminate such
license; (iii) such Grantor has not received any notice of termination or
cancellation under such license; (iv) such Grantor has not received any notice
of a breach or default under such license, which breach or default has not been
cured; (v) such Grantor has not granted to any other person any rights, adverse
or otherwise, under such license; and (vi) such Grantor is not in breach or
default in any material respect, and no event has occurred that, with notice
and/or lapse of time, would constitute such a breach or default or permit
termination, modification or acceleration under such license.
     (h) Except as set forth in Schedule 4.9(h), such Grantor has performed all
acts and has paid all required fees and taxes to maintain each and every item of
Material Intellectual Property in full force and effect and to protect and
maintain its interest therein. Such Grantor has used proper statutory notice in
connection with its use of each Patent, Trademark and Copyright that is material
to its business included in the Intellectual Property.
     (i) None of the Trade Secrets of such Grantor that are material to its
business have been used, divulged, disclosed or appropriated to the detriment of
such Grantor for the benefit of any other person; (ii) no employee, independent
contractor or agent of such Grantor has misappropriated any trade secrets of any
other person in the course of the performance of his or her duties as an
employee, independent contractor or agent of such Grantor; and (iii) no

E-21

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

 

Exhibit E
employee, independent contractor or agent of such Grantor is in default or
breach of any term of any employment agreement, non-disclosure agreement,
assignment of inventions agreement or similar agreement or contract relating in
any way to the protection, ownership, development, use or transfer of such
Grantor’s Intellectual Property.
     (j) Such Grantor has made all filings and recordations necessary to
adequately protect its interest in its Material Intellectual Property, including
recordation of its interests in the Patents and Trademarks with the United
States Patent and Trademark Office and in corresponding national and
international patent offices, and recordation of any of its interests in the
Copyrights with the United States Copyright Office and in corresponding national
and international copyright offices.
     (k) Such Grantor has taken all commercially reasonable steps to use
consistent standards of quality in the manufacture, distribution and sale of all
products sold and provision of all services provided under or in connection with
any item of Intellectual Property and has taken all steps to ensure that all
licensed users of any kind of Intellectual Property use such consistent
standards of quality.
     (l) No Grantor is subject to any settlement or consents, judgment,
injunction, order, decree, covenants not to sue, non-assertion assurances or
releases that would impair the validity or enforceability of, or such Grantor’s
rights in, any Material Intellectual Property.
     4.10 Letters of Credit and Letter of Credit Rights. No Grantor is a
beneficiary or assignee under any Letter of Credit other than the Letters of
Credit described on Schedule 4.10 (as such schedule may be amended or
supplemented from time to time). With respect to any Letters of Credit that are
by their terms transferable, each Grantor has caused (or, in the case of the
Letters of Credit that are specified on Schedule 4.10 on the date hereof, will
use commercially reasonable efforts to cause) all issuers and nominated persons
under Letters of Credit in which the Grantor is the beneficiary or assignee to
consent to the assignment of such Letter of Credit to the Collateral Agent and
has agreed that upon the occurrence and during the continuance of an Event of
Default it shall cause all payments thereunder to be made to the Collateral
Account. With respect to any Letters of Credit that are not transferable, each
Grantor shall obtain (or, in the case of the Letters of Credit that are
specified on Schedule 4.10 on the date hereof, use commercially reasonable
efforts to obtain) the consent of the issuer thereof and any nominated person
thereon to the assignment of the proceeds of the released Letter of Credit to
the Collateral Agent in accordance with Section 5-114(c) of the New York UCC.
     4.11 Commercial Tort Claims. No Grantor has any Commercial Tort Claims as
of the date hereof individually or in the aggregate in excess of $100,000 and,
except as specifically described on Schedule 4.11 (as such schedule may be
amended or supplemented from time to time), no Grantor has any Commercial Tort
Claims after the date hereof individually or in the aggregate in excess of
$100,000.
     4.12 Contracts.

E-22

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

 

Exhibit E
     (a) Schedule 4.12(a) (as such schedule may be amended or supplemented form
time to time) sets forth all of the Material Contracts in which such Grantor has
any right or interest.
     (b) Except as set forth on Schedule 4.12(b) and provided in Sections 4.13
and 4.14 below, no Material Contract prohibits assignment or encumbrance by such
Grantor or requires or purports to require consent of, or notice to, any party
(other than such Grantor) to any Material Contract in connection with the
execution, delivery and performance of this Agreement, including the exercise of
remedies by the Collateral Agent with respect to such Material Contract, except
for such consents that have been obtained and such notices that have been given.
     (c) Each Material Contract is in full force and effect and constitutes a
valid and legally enforceable obligation of the Grantor party thereto and (to
the best of such Grantor’s knowledge) each other party thereto, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
     (d) The right, title and interest of such Grantor in, to and under the
Material Contracts are not subject to any defenses, rights of recoupment or
claims.
     (e) Neither such Grantor nor (to the best of such Grantor’s knowledge) any
of the other parties to the Material Contracts is in default in the performance
or observance of any of the terms thereof.
     (f) The right, title and interest of such Grantor in, to and under the
Material Contracts are not subject to any defenses or claims.
     (g) Such Grantor has delivered to the Collateral Agent a complete and
correct copy of each Material Contract, including all amendments, supplements
and other modifications thereto.
     (h) No amount payable to such Grantor under or in connection with any
Contract which has a value in excess of $100,000 individually or $100,000 in the
aggregate is evidenced by any Instrument or Tangible Chattel Paper which has not
been delivered to the Collateral Agent or constitutes Electronic Chattel Paper
that is not under the control (within the meaning of Section 9-105 of the New
York UCC) of the Collateral Agent.
     (i) None of the parties to any Material Contract is a Governmental
Authority.
     4.13 Insurance. Subject to the provisions of 215 Ill. Comp. Stat. 5/131.4
(West 2006), La. Rev. Stat. Ann. § 22:1004 (West 2006), Mich. Comp. Laws §
500.1311 (West 2006), and N.Y. Ins. Law § 1506 (McKinney 2006), and state
insurance pre-acquisition antitrust laws and regulations, and similar statutes
in each of the states in which any Regulated Insurance Subsidiary is domiciled
or writes business, pertaining to the notifications to and approvals by the
Illinois Department of Financial and Professional Regulation, Division of
Insurance, the Louisiana Department of Insurance, the Michigan Office of
Financial and

E-23

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

 

Exhibit E
Insurance Services or the New York State Insurance Department (which are the
insurance regulatory authorities of the domiciliary jurisdictions of the
Regulated Insurance Subsidiaries, collectively, the “Insurance Regulatory
Authorities”), and similar regulatory authorities in each state in which any of
the Regulated Insurance Subsidiaries writes business, required in the case of
mergers, acquisitions and changes of control of insurance companies, held either
directly or indirectly, and to prescribed waiting periods in connection
therewith, the exercise by the Collateral Agent of its rights and remedies
hereunder shall not, to the knowledge of any Grantor, contravene any Insurance
Law or any contractual restriction binding on or affecting any Grantor or any of
the Grantor’s properties and will not result in or require the creation of any
lien, security interest or other charge or encumbrance upon or with respect to
any of the Grantor’s properties.
     4.14 Governmental Approval; Filings. To the knowledge of each Grantor, no
authorization or approval or other action by, and no notice to or filing with,
any Governmental Authority is required either (i) for the pledge hereunder by
each Grantor of, or the grant by any Grantor of the security interest created
hereby in, the Pledged Collateral or (ii) except for the approval of the
Insurance Regulatory Authorities under 215 Ill. Comp. Stat. 5/131.4 (West 2006),
La. Rev. Stat. Ann. § 22:1004 (West 2006), Mich. Comp. Laws § 500.1311 (West
2006), and N.Y. Ins. Law § 1506 (McKinney 2006), and state insurance
pre-acquisition antitrust laws and regulations, and of similar regulatory
authorities under applicable statutes of each state in which any Regulated
Insurance Subsidiary is domiciled or writes business, and the approval of the
Louisiana Office of Financial Institutions under La. Rev. Stat. Ann. § 9:3561
(West 2006), and except as may be required by laws affecting the offering and
sale of securities generally, for the exercise by the Collateral Agent of its
rights and remedies hereunder.
SECTION 5. COVENANTS
     Each Grantor covenants and agrees with the Secured Parties that, from and
after the date of this Agreement until the Obligations (other than Obligations
in respect of any Specified Hedge Agreement) shall have been paid in full, no
letter of credit issued under the Credit Agreement shall be outstanding and all
commitments to extend credit under the Credit Agreement shall have expired or
been terminated:
     5.1 Covenants in Credit Agreement. Each Grantor shall take, or shall
refrain from taking, as the case may be, each action that is necessary to be
taken or not taken, as the case may be, so that no Default or Event of Default
is caused by the failure to take such action or to refrain from taking such
action by such Grantor or any of its Subsidiaries.
     5.2 Delivery and Control of Instruments, Chattel Paper, Negotiable
Documents, Investment Property and Deposit Accounts. (a) If any of the Pledged
Collateral is or shall become evidenced or represented by any Instrument,
Certificated Security, Negotiable Document or Tangible Chattel Paper, such
Instrument (other than checks received in the ordinary course of business),
Certificated Security, Negotiable Documents or Tangible Chattel Paper shall be,
subject to any and all Requirements of Law, immediately delivered to the
Collateral Agent, duly endorsed in a manner satisfactory to the Collateral
Agent, to be held as Pledged Collateral pursuant to this Agreement, and all of
such property owned by any Grantor as of the Closing Date shall be delivered on
the Closing Date; provided, however, that, notwithstanding any

E-24

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

 

Exhibit E
provision to the contrary contained above, for any Receivable comprising the
Pledged Collateral in excess of $50,000 individually or $100,000 in the
aggregate that is evidenced by, or constitutes, Chattel Paper or Instruments,
such Grantor shall cause each originally executed copy thereof to be delivered
to the Collateral Agent (or its agent or designee) appropriately indorsed to the
Collateral Agent or indorsed in blank: (i) with respect to any such Receivable
in existence on or prior to the date hereof, and (ii) with respect to any such
Receivables hereafter arising, within ten (10) Business Days of such Grantor
acquiring rights therein.
     (b) If any Receivable comprising the Pledged Collateral in excess of
$50,000 individually or $100,000 in the aggregate is or shall become “Electronic
Chattel Paper” such Grantor shall, subject to any and all Requirements of Law,
ensure that (i) a single authoritative copy exists which is unique,
identifiable, unalterable (except as provided in clauses (iii), (iv) and (v) of
this paragraph), (ii) such authoritative copy identifies the Collateral Agent as
the assignee and is communicated to and maintained by the Collateral Agent or
its designee, (iii) copies or revisions that add or change the assignee of the
authoritative copy can only be made with the participation of the Collateral
Agent, (iv) each copy of the authoritative copy and any copy of a copy is
readily identifiable as a copy and not the authoritative copy and (v) any
revision of the authoritative copy is readily identifiable as an authorized or
unauthorized revision.
     (c) If any Pledged Collateral is or shall become evidenced or represented
by an Uncertificated Security, such Grantor shall, subject to any and all
Requirements of Law, cause the Issuer thereof either (i) to register the
Collateral Agent as the registered owner of such Uncertificated Security, upon
original issue or registration of transfer or (ii) to agree in writing with such
Grantor and the Collateral Agent that such Issuer will comply with instructions
with respect to such Uncertificated Security originated by the Collateral Agent
without further consent of such Grantor, such agreement to be in substantially
the form of Exhibit A, and such actions shall be taken on or prior to the
Closing Date with respect to any Uncertificated Securities owned as of the
Closing Date by any Grantor.
     (d) Each Grantor shall maintain Securities Entitlements, Securities
Accounts and Deposit Accounts with values in excess of $550,000 in the
aggregate, only with financial institutions that have agreed to comply with
entitlement orders and instructions issued or originated by the Collateral Agent
without further consent of such Grantor, such agreement to be substantially in
the form of Exhibit D or E as applicable, or in such other form as is reasonably
satisfactory to the Collateral Agent; provided that notwithstanding any other
provision herein or in any such agreement to the contrary, only upon and during
the continuation of an Event of Default may the Collateral Agent issue
entitlement orders and instructions with respect to such accounts (or otherwise
apply the balance from any such accounts or instruct the bank or securities
intermediary at which any account is maintained to pay the balance of any such
account to or for the benefit of the Collateral Agent). Notwithstanding the
foregoing, no Grantor shall hold cash in an aggregate amount greater than
$50,000 in any Deposit Account unless such Deposit Account is subject to an
agreement described in the foregoing sentence or is otherwise subject to
customary standing instructions by such Grantor to sweep the cash balance of
such account into another Deposit Account subject to such an agreement on no
less frequently than a weekly basis.
     (e) Reserved.

E-25

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

 

Exhibit E
     (f) In addition to and not in lieu of the foregoing, if any Issuer of any
Investment Property is organized under the law of, or has its chief executive
office in, a jurisdiction outside of the United States, each Grantor shall take
such additional actions, including causing the issuer to register the pledge on
its books and records, as may be necessary or advisable or as may be reasonably
requested by the Collateral Agent, under the laws of such jurisdiction to insure
the validity, perfection and priority of the security interest of the Collateral
Agent.
     (g) In the case of any transferable Letters of Credit in excess of $100,000
individually or in the aggregate, each Grantor shall use commercially reasonable
efforts to obtain the consent of any issuer thereof to the transfer of such
Letter of Credit to the Collateral Agent. In the case of any other Letter of
Credit Rights in excess of $100,000 individually or in the aggregate each
Grantor shall use commercially reasonable efforts to obtain the consent of the
issuer thereof and any nominated person thereon to the assignment of the
proceeds of the related Letter of Credit in accordance with Section 5-114(c) of
the New York UCC.
     5.3 Maintenance of Insurance. (a) Such Grantor will maintain, with
financially sound and reputable insurance companies, insurance on all its
property (including all Inventory, Equipment and Vehicles) as further set forth
in the Credit Agreement; provided that in any event such Grantor will maintain,
to the extent obtainable on commercially reasonable terms, (i) property and
casualty insurance on all real and personal property on an all risks basis
(including the perils of flood and quake and loss by fire, explosion and theft),
covering the repair or replacement cost of all such property and consequential
loss coverage for business interruption and extra expense (which shall include
construction expenses and such other business interruption expenses as are
otherwise generally available to similar businesses), and (ii) public liability
insurance. All such insurance with respect to such Grantor shall be provided by
insurers or reinsurers which (x) in the case of United States insurers and
reinsurers, have an A.M. Best policyholders rating of not less than A- with
respect to primary insurance and B+ with respect to excess insurance and (y) in
the case of non-United States insurers or reinsurers, the providers of at least
80% of such insurance have either an ISI policyholders rating of not less than
A, an A.M. Best policyholders rating of not less than A- or a surplus of not
less than $500,000,000 with respect to primary insurance, and an ISI
policyholders rating of not less than BBB with respect to excess insurance, or,
if the relevant insurance is not available from such insurers, such other
insurers as the Collateral Agent may approve in writing. All insurance shall
(i) provide that no cancellation, material reduction in amount or material
change in coverage thereof shall be effective until at least 30 days after
receipt by the Collateral Agent of written notice thereof, (ii) if reasonably
requested by the Collateral Agent, include a breach of warranty clause and (iii)
be reasonably satisfactory in all other respects to the Collateral Agent.
     (b) Such Grantor will deliver to the Collateral Agent on behalf of the
Secured Parties, (i) on the Closing Date, a certificate dated such date showing
the amount and types of insurance coverage as of such date, (ii) upon request of
any Secured Party from time to time, full information as to the insurance
carried, (iii) promptly following receipt of notice from any insurer, a copy of
any notice of cancellation or material change in coverage from that existing on
the Closing Date, (iv) forthwith, notice of any cancellation or nonrenewal of
coverage by such Grantor and (v) promptly after such information is available to
such Grantor, full information as to any claim for an amount in excess of
$250,000 with respect to any property and casualty insurance policy maintained
by such Grantor. The Collateral Agent shall be named as additional

E-26

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

 

Exhibit E
insured on all such liability insurance policies of such Grantor and the
Collateral Agent shall be named as loss payee on all property and casualty
insurance policies of such Grantor.
     (c) Upon the request of the Collateral Agent, the Borrower shall deliver to
the Secured Parties a report of a reputable insurance broker with respect to
such insurance and such supplemental reports with respect thereto as the
Collateral Agent may from time to time reasonably request.
     5.4 Payment of Obligations. Such Grantor shall pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon the Pledged Collateral or in respect of income or profits therefrom, as
well as all claims of any kind (including claims for labor, materials and
supplies) against or with respect to the Pledged Collateral, except that no such
charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of such Grantor and
such proceedings could not reasonably be expected to result in the sale,
forfeiture or loss of any material portion of the Pledged Collateral or any
interest therein.
     5.5 Maintenance of Perfected Security Interest; Further Documentation.
(a) Such Grantor shall maintain each of the security interests created by this
Agreement as a perfected security interest having at least the priority
described in Section 4.3 and shall defend such security interest against the
claims and demands of all persons whomsoever, subject to the provisions of
Section 8.15.
     (b) Such Grantor shall furnish to the Secured Parties from time to time
statements and schedules further identifying and describing the Pledged
Collateral and such other reports in connection with the assets and property of
such Grantor as the Collateral Agent may reasonably request, all in reasonable
detail.
     (c) At any time and from time to time, upon the written request of the
Collateral Agent, and at the sole expense of such Grantor, such Grantor shall
promptly and duly authorize, execute and deliver, and have recorded, such
further instruments and documents and take such further actions as the
Collateral Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, the filing of any financing or continuation
statements under the Uniform Commercial Code (or other similar laws) in effect
in any jurisdiction with respect to the security interests created hereby and in
the case of Investment Property, Deposit Accounts and any other relevant Pledged
Collateral, taking any actions necessary to enable the Collateral Agent to
obtain “control” (within the meaning of the applicable Uniform Commercial Code)
with respect thereto, including without limitation, executing and delivering and
causing the relevant depositary bank or securities intermediary to execute and
deliver a Control Agreement in the form attached hereto as C or D, as
applicable.
     5.6 Changes in Locations, Name, Jurisdiction of Incorporation, etc. Such
Grantor shall not, except upon, in the case of clause (i) below, 60 days’ prior
written notice and, in the case of clause (ii), or (iii) below, 10 days’ prior
written notice, in each case, to the

E-27

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

 

Exhibit E
Collateral Agent and delivery to the Collateral Agent of duly authorized and,
where required, executed copies of (a) all additional financing statements and
other documents reasonably requested by the Collateral Agent to maintain the
validity, perfection and priority of the security interests provided for herein
and (b) if applicable, a written supplement to Schedule 4.5(a) showing any
additional location at which Inventory or Equipment (other than mobile goods)
with a value in excess of $100,000 that is included in the Pledged Collateral
shall be kept:
               (i) permit any of the Inventory or Equipment (other than mobile
goods) to be kept at a location other than those listed on Schedule 4.5(a);
               (ii) change its legal name, jurisdiction of organization or the
location of its chief executive office or sole place of business from that
referred to in Section 4.4; or
               (iii) change its legal name, identity or structure to such an
extent that any financing statement filed by the Collateral Agent in connection
with this Agreement would become misleading.
          5.7 Notices. Such Grantor shall advise the Collateral Agent promptly,
in reasonable detail, of:
          (a) any Lien (other than any Lien expressly permitted by Section 6.02
of the Credit Agreement) on any of the Pledged Collateral which would adversely
affect the ability of the Collateral Agent to exercise any of its remedies
hereunder; and
          (b) of the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the Pledged
Collateral or on the security interests created hereby.
          5.8 Investment Property. (a) If such Grantor shall become entitled to
receive or shall receive any stock or other ownership certificate (including any
certificate representing a stock dividend or a distribution in connection with
any reclassification, increase or reduction of capital or any certificate issued
in connection with any reorganization), option or rights in respect of the
Equity Interests in any Issuer, whether in addition to, in substitution of, as a
conversion of, or in exchange for, any shares of or other ownership interests in
the Pledged Securities, or otherwise in respect thereof, such Grantor shall
accept the same as the agent of the Secured Parties, hold the same in trust for
the Secured Parties and deliver the same forthwith to the Collateral Agent in
the exact form received, duly endorsed by such Grantor to the Collateral Agent,
if required, together with an undated stock power or similar instrument of
transfer covering such certificate duly executed in blank by such Grantor and
with, if the Collateral Agent so requests, signature guaranteed, to be held by
the Collateral Agent, subject to the terms hereof, as additional collateral
security for the Obligations. Any sums paid upon or in respect of the Pledged
Securities upon the liquidation or dissolution of any Issuer shall be paid over
to the Collateral Agent to be applied by the Collateral Agent in accordance with
the provisions of Section 6.5.
          (b) Without the prior written consent of the Collateral Agent, such
Grantor shall not (i) vote to enable, or take any other action to permit, any
Issuer to issue any stock,

E-28

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

 

Exhibit E
partnership interests, limited liability company interests or other equity
securities of any nature or to issue any other securities convertible into or
granting the right to purchase or exchange for any stock, partnership interests,
limited liability company interests or other equity securities of any nature of
any Issuer (except, in each case, pursuant to a transaction expressly permitted
by the Credit Agreement), (ii) sell, assign, transfer, exchange, or otherwise
dispose of, or grant any option with respect to, any of the Investment Property
or Proceeds thereof or any interest therein (except, in each case, pursuant to a
transaction expressly permitted by the Credit Agreement), (iii) create, incur or
permit to exist any Lien or option in favor of, or any claim of any person with
respect to, any of the Investment Property or Proceeds thereof, or any interest
therein, except for the security interests created by this Agreement or any Lien
expressly permitted thereon pursuant to Section 6.02 of the Credit Agreement,
(iv) enter into any agreement or undertaking restricting the right or ability of
such Grantor or the Collateral Agent to sell, assign or transfer any of the
Investment Property or Proceeds thereof or any interest therein or (v) without
the prior written consent of the Collateral Agent, cause or permit any Issuer of
any Pledged Partnership Interests or Pledged LLC Interests which are not
securities (for purposes of the New York UCC) on the date hereof to elect or
otherwise take any action to cause such Pledged Partnership Interests or Pledged
LLC Interests to be treated as securities for purposes of the New York UCC;
provided, however, notwithstanding the foregoing, if any issuer of any Pledged
Partnership Interests or Pledged LLC Interests takes any such action in
violation of the provisions in this clause (v), such Grantor shall promptly
notify the Collateral Agent in writing of any such election or action and, in
such event, shall take all steps necessary or advisable to establish the
Collateral Agent’s “control” thereof.
     (c) In the case of each Grantor which is an Issuer, such Issuer agrees that
(i) it shall be bound by the terms of this Agreement relating to the Pledged
Securities issued by it and shall comply with such terms insofar as such terms
are applicable to it, (ii) it shall notify the Collateral Agent promptly in
writing of the occurrence of any of the events described in Section 5.8(a) with
respect to the Pledged Securities issued by it and (iii) the terms of
Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to all
actions that may be required of it pursuant to Section 6.3(c) or 6.7 with
respect to the Pledged Securities issued by it. In addition, subject to any
Requirements of Law, each Grantor which is either an Issuer or an owner of any
Pledged Security hereby consents to the grant by each other Grantor of the
security interest hereunder in favor of the Collateral Agent and to the transfer
of any Pledged Security to the Collateral Agent or its nominee following an
Event of Default and to the substitution of the Collateral Agent or its nominee
as a partner, member or shareholder of the Issuer of the related Pledged
Security.
     5.9 Receivables. (a) Other than in the ordinary course of business
consistent with its past practice, such Grantor shall not (i) grant any
extension of the time of payment of any Receivable, (ii) compromise or settle
any Receivable for less than the full amount thereof, (iii) release, wholly or
partially, any person liable for the payment of any Receivable, (iv) allow any
credit or discount whatsoever on any Receivable or (v) amend, supplement or
modify any Receivable in any manner that could adversely affect the value
thereof.
     (b) Such Grantor shall deliver to the Collateral Agent a copy of each
material demand, notice or document received by it that questions or calls into
doubt the validity or

E-29

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

 

Exhibit E
enforceability of more than 5% of the aggregate amount of the then outstanding
Receivables that are included in the Pledged Collateral.
     (c) Each Grantor shall perform and comply in all material respects with all
of its obligations with respect to the Receivables.
     5.10 Intellectual Property. (a) Such Grantor (either itself or through
licensees) shall (i) continue to use each Trademark material to its business on
each and every trademark class of goods applicable to its current line as
reflected in its current catalogs, brochures and price lists in order to
maintain such Trademark in full force free from any claim of abandonment for
non-use, (ii) maintain as in the past the quality of products and services
offered under such Trademark and take all necessary steps to ensure that all
licensed users of such Trademark maintain as in the past such quality, (iii) use
such Trademark with the appropriate notice of registration and all other notices
and legends required by applicable Requirements of Law, (iv) not adopt or use
any mark which is confusingly similar or a colorable imitation of such Trademark
unless the Collateral Agent, for the ratable benefit of the Secured Parties,
shall obtain a perfected security interest in such mark pursuant to this
Agreement and the Intellectual Property Security Agreement, and (v) not (and not
permit any licensee or sublicensee thereof to) do any act or knowingly omit to
do any act whereby such Trademark may become invalidated or impaired in any way.
     (b) Such Grantor (either itself or through licensees) shall not do any act,
or omit to do any act, whereby any Patent owned by such Grantor material to its
business may become forfeited, abandoned or dedicated to the public.
     (c) Such Grantor (either itself or through licensees) (i) shall employ each
Copyright material to its business and (ii) shall not (and shall not permit any
licensee or sublicensee thereof to) do any act or knowingly omit to do any act
whereby any material portion of such Copyrights may become invalidated or
otherwise impaired. Such Grantor shall not (either itself or through licensees)
do any act whereby any material portion of such Copyrights may fall into the
public domain.
     (d) Such Grantor (either itself or through licensees) shall not do any act
that uses any Material Intellectual Property to infringe, misappropriate or
violate the intellectual property rights of any other person.
     (e) Such Grantor (either itself or through licensees) shall use proper
statutory notice in connection with the use of the Material Intellectual
Property.
     (f) Such Grantor shall notify the Collateral Agent immediately if it knows,
or has reason to know, that any application or registration relating to any
Material Intellectual Property may become forfeited, abandoned or dedicated to
the public, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office, the United States Copyright
Office or any court or tribunal in any country) regarding such Grantor’s
ownership of, or the validity of, any Material Intellectual Property or such
Grantor’s right to register the same or to own and maintain the same.

E-30

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

 

Exhibit E
     (g) Promptly upon such Grantor’s acquisition or creation of any
copyrightable work, invention, trademark or other similar property that is
material to the business of such Grantor, apply for registration thereof with
the United states Copyright Office, the United States Patent and Trademark
Office and any other appropriate office. Whenever such Grantor, either by itself
or through any agent, employee, licensee or designee, shall file an application
for the registration of any Intellectual Property that is material to the
business of such Grantor with the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, such Grantor shall report such
filing to the Collateral Agent within five Business Days after the last day of
the fiscal quarter in which such filing occurs. Upon request of the Collateral
Agent, such Grantor shall execute and deliver, and have recorded, any and all
agreements, instruments, documents, and papers as the Collateral Agent may
request to evidence the Secured Parties’ security interest in any Copyright,
Patent, Trademark or other Intellectual Property of such Grantor and the
goodwill and general intangibles of such Grantor relating thereto or represented
thereby.
     (h) Such Grantor shall take all reasonable and necessary steps, including
in any proceeding before the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, to maintain and pursue each
application (and to obtain the relevant registration) and to maintain each
registration of Intellectual Property material to its business, including the
payment of required fees and taxes, the filing of responses to office actions
issued by the United States Patent and Trademark Office and the United States
Copyright Office, the filing of applications for renewal or extension, the
filing of affidavits of use and affidavits of incontestability, the filing of
divisional, continuation, continuation-in-part, reissue, and renewal
applications or extensions, the payment of maintenance fees, and the
participation in interference, reexamination, opposition, cancellation,
infringement and misappropriation proceedings.
     (i) Such Grantor (either itself or through licensees) shall not, without
the prior written consent of the Collateral Agent, discontinue use of or
otherwise abandon any of its Intellectual Property, or abandon any application
or any right to file an application for letters patent, trademark, or copyright,
unless such Grantor shall have previously determined that such use or the
pursuit or maintenance of such Intellectual Property is no longer desirable in
the conduct of such Grantor’s business and that the loss thereof could not
reasonably be expected to have a Material Adverse Effect and, in which case,
such Grantor shall give prompt notice of any such abandonment to the Collateral
Agent in accordance herewith.
     (j) In the event that any Intellectual Property material to its business is
infringed, misappropriated or diluted by a third party, such Grantor shall
(i) take such actions as such Grantor shall reasonably deem appropriate under
the circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the
Collateral Agent after it learns thereof and sue for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and to
recover any and all damages for such infringement, misappropriation or dilution.
     (k) Such Grantor agrees that, should it obtain an ownership interest in any
item of intellectual property which is not, as of the Closing Date, a part of
the Intellectual Property Collateral (the “After-Acquired Intellectual
Property”), (i) the provisions of Section 3 shall

E-31

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

 

Exhibit E
automatically apply thereto, (ii) any such After-Acquired Intellectual Property,
and in the case of trademarks, the goodwill of the business connected therewith
or symbolized thereby, shall automatically become part of the Intellectual
Property Collateral, (iii) it shall give prompt (and, in any event within five
Business Days after the last day of the fiscal quarter in which such Grantor
acquires such ownership interest) written notice thereof to the Collateral Agent
in accordance herewith, and (iv) it shall provide the Collateral Agent promptly
(and, in any event within five Business Days after the last day of the fiscal
quarter in which such Grantor acquires such ownership interest) with an amended
Schedule 4.9(a) and take the actions specified in 5.9(m).
     (l) Such Grantor agrees to execute an Intellectual Property Security
Agreement with respect to its Intellectual Property in substantially the form of
Exhibit B-1 in order to record the security interest granted herein to the
Collateral Agent for the ratable benefit of the Secured Parties with the United
States Patent and Trademark Office, the United States Copyright Office, and any
other applicable Governmental Authority.
     (m) Such Grantor agrees to execute an After-Acquired Intellectual Property
Security Agreement with respect to its After-Acquired Intellectual Property in
substantially the form of Exhibit B-2 in order to record the security interest
granted herein to the Collateral Agent for the ratable benefit of the Secured
Parties with the United States Patent and Trademark Office, the United States
Copyright Office and any other applicable Governmental Authority.
     (n) Such Grantor shall take all steps reasonably necessary to protect the
secrecy of all Trade Secrets material to its business, including entering into
confidentiality agreements with employees and labeling and restricting access to
secret information and documents.
     5.11 Contracts. (a) Such Grantor shall perform and comply in all material
respects with all its obligations under the Contracts.
     (b) Such Grantor shall not amend, modify, terminate, waive or fail to
enforce any provision of any Contract in any manner which could reasonably be
expected to materially adversely affect the value of the Pledged Collateral or
otherwise have a Material Adverse Effect.
     (c) Such Grantor shall exercise promptly and diligently each and every
material right which it may have under each Material Contract (other than any
right of termination).
     (d) Such Grantor shall deliver to the Collateral Agent a copy of each
material demand, notice or document received by it relating in any way to any
Material Contract and shall also deliver to the Collateral Agent a copy of all
new Material Contracts entered into after the date hereof.
     (e) With respect to any Non-Assignable Contract that is a Material Contract
as of the date hereof, each Grantor shall, within ten days of the date hereof,
request in writing the consent of the counterparty or counterparties to such
Non-Assignable Contract pursuant to the terms of such Non-Assignable Contract or
applicable law to the assignment or granting of a security interest in such
Non-Assignable Contract to the Collateral Agent for the ratable benefit of the
Secured Parties and use its commercially reasonable efforts to obtain such
consent as soon as practicable thereafter. No Grantor shall after the Closing
Date enter into any Non-Assignable

E-32

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

 

Exhibit E
Contract that is a Material Contract unless, within 30 days, counterparties to
such Non-Assignable Contract consent in writing pursuant to the terms of such
Non-Assignable Contract to the assignment and granting of a security interest in
such Non-Assignable Contract to the Collateral Agent for the ratable benefit of
the Secured Parties.
     (f) Such Grantor shall not permit to become effective in any document
creating, governing or providing for any permit, lease, license or Material
Contract, a provision that would prohibit the creation or perfection of, or
exercise of remedies in connection with, a Lien on such permit, lease, license
or Material Contract in favor of the of the Collateral Agent for the ratable
benefit of the Secured Parties unless such Grantor believes, in its reasonable
judgment, that such prohibition is usual and customary in transactions of such
type.
     5.12 Commercial Tort Claims. Such Grantor shall advise the Collateral Agent
promptly of any Commercial Tort Claim held by such Grantor individually or in
the aggregate in excess of $100,000 and shall promptly execute a supplement to
this Agreement in form and substance reasonably satisfactory to the Collateral
Agent to grant a security interest in such Commercial Tort Claim to the
Collateral Agent for the ratable benefit of the Secured Parties.
SECTION 6. REMEDIAL PROVISIONS
     6.1 Certain Matters Relating to Receivables. (a) The Collateral Agent shall
have the right (but shall in no way be obligated) to make test verifications of
the Receivables that are included in the Pledged Collateral in any manner and
through any medium that it reasonably considers advisable, and each Grantor
shall furnish all such assistance and information as the Collateral Agent may
reasonably require in connection with such test verifications. At any time and
from time to time, upon the Collateral Agent’s request and at the expense of the
relevant Grantor, such Grantor shall cause independent public accountants or
others satisfactory to the Collateral Agent to furnish to the Collateral Agent
reports showing reconciliations, aging and test verifications of, and trial
balances for, the Receivables.
     (b) The Collateral Agent hereby authorizes each Grantor to collect such
Grantor’s Receivables, subject to the Collateral Agent’s direction and control,
and each Grantor hereby agrees to continue to collect all amounts due or to
become due to such Grantor under the Receivables and any Supporting Obligation
and diligently exercise each material right it may have under any Receivable and
any Supporting Obligation, in each case, at its own expense; provided, however,
that the Collateral Agent may curtail or terminate said authority at any time
after the occurrence and during the continuance of an Event of Default. If
required by the Collateral Agent at any time after the occurrence and during the
continuance of an Event of Default, any payments of Receivables, when collected
by any Grantor, (i) shall be forthwith (and, in any event, within two Business
Days) deposited by such Grantor in the exact form received, duly endorsed by
such Grantor to the Collateral Agent if required, in a Collateral Account
maintained under the sole dominion and control of the Collateral Agent, subject
to withdrawal by the Collateral Agent for the account of the Secured Parties
only as provided in Section 6.5, and (ii) until so turned over, shall be held by
such Grantor in trust for the Secured Parties, segregated from other funds of
such Grantor. Each such deposit of Proceeds of Receivables shall be accompanied
by a report identifying in reasonable detail the nature and source of the
payments included in the deposit.

E-33

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

 

Exhibit E
     (c) At the Collateral Agent’s request, each Grantor shall deliver to the
Collateral Agent all original and other documents evidencing, and relating to,
the agreements and transactions which gave rise to the Receivables that are
included in the Pledged Collateral, including all original orders, invoices and
shipping receipts.
     6.2 Communications with Obligors; Grantors Remain Liable.
     (a) The Collateral Agent in its own name or in the name of others may at
any time after the occurrence and during the continuance of an Event of Default
communicate with obligors under the Receivables and parties to the Contracts to
verify with them to the Collateral Agent’s satisfaction the existence, amount
and terms of any Receivables or Contracts.
     (b) After the occurrence and during the continuance of an Event of Default,
the Collateral Agent may at any time notify, or require any Grantor to so
notify, the Account Debtor or counterparty on any Receivable or Contract of the
security interest of the Collateral Agent therein. In addition, after the
occurrence and during the continuance of an Event of Default, the Collateral
Agent may upon written notice to the applicable Grantor, notify, or require any
Grantor to notify, the Account Debtor or counterparty to make all payments under
the Receivables and/or Contracts directly to the Collateral Agent;
     (c) Anything herein to the contrary notwithstanding, each Grantor shall
remain liable under each of the Receivables and Contracts to observe and perform
all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto. No Secured Party shall have any obligation or liability under any
Receivable (or any agreement giving rise thereto) or Contract by reason of or
arising out of this Agreement or the receipt by any Secured Party of any payment
relating thereto, nor shall any Secured Party be obligated in any manner to
perform any of the obligations of any Grantor under or pursuant to any
Receivable (or any agreement giving rise thereto) or Contract, to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party
thereunder, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
     6.3 Pledged Securities. (a) Unless an Event of Default shall have occurred
and be continuing and the Collateral Agent shall have given notice to the
relevant Grantor of the Collateral Agent’s intent to exercise its corresponding
rights pursuant to Section 6.3(b), each Grantor shall be permitted to receive
all cash dividends paid in respect of the Pledged Equity Interests and all
payments made in respect of the Pledged Notes, in each case paid in the normal
course of business of the relevant Issuer and consistent with past practice, to
the extent permitted in the Credit Agreement, and to exercise all voting and
corporate rights with respect to the Pledged Securities; provided, however, that
no vote shall be cast or corporate or other ownership right exercised or other
action taken which, in the Collateral Agent’s reasonable judgment, would impair
the Pledged Collateral or which would be inconsistent with or result in any
violation of any provision of the Credit Agreement, this Agreement or any other
Loan Document.

E-34

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

 

Exhibit E
     (b) If an Event of Default shall occur and be continuing: (i) all rights of
each Grantor to exercise or refrain from exercising the voting and other
consensual rights which it would otherwise be entitled to exercise pursuant
hereto shall cease and all such rights shall thereupon become vested in the
Collateral Agent who shall thereupon have the sole right, but shall be under no
obligation, to exercise or refrain from exercising such voting and other
consensual rights and (ii) the Collateral Agent shall have the right, without
notice to any Grantor, to transfer all or any portion of the Investment Property
to its name or the name of its nominee or agent; provided, however, that the
Collateral Agent will not have the right to vote, to give consents,
ratifications or waivers or to take any other action with respect to the Equity
Interests of any Applicable Subsidiary to the extent that such action would
require prior regulatory approval under the applicable Requirements of Law,
unless such approval shall have been granted, and, provided, further, that the
right of the Collateral Agent to sell or otherwise dispose of the Equity
Interests of any Applicable Subsidiary shall be subject to the Collateral Agent
or the relevant Grantor obtaining, to the extent necessary under applicable
Requirements of Law, the prior approval of such sale or other disposition by the
Governmental Authority having jurisdiction with respect to such Applicable
Subsidiary. In addition, the Collateral Agent shall have the right at any time,
without notice to any Grantor, to exchange any certificates or instruments
representing any Investment Property for certificates or instruments of smaller
or larger denominations. In order to permit the Collateral Agent to exercise the
voting and other consensual rights which it may be entitled to exercise pursuant
hereto and to receive all dividends and other distributions which it may be
entitled to receive hereunder each Grantor shall promptly execute and deliver
(or cause to be executed and delivered) to the Collateral Agent all proxies,
dividend payment orders and other instruments as the Collateral Agent may from
time to time reasonably request and each Grantor acknowledges that the
Collateral Agent may utilize the power of attorney set forth herein.
     (c) Each Grantor hereby authorizes and instructs each Issuer of any Pledged
Securities pledged by such Grantor hereunder to (i) comply with any instruction
received by it from the Collateral Agent in writing that (x) states that an
Event of Default has occurred and is continuing and (y) is otherwise in
accordance with the terms of this Agreement, without any other or further
instructions from such Grantor, and each Grantor agrees that each Issuer shall
be fully protected in so complying, and (ii) upon any such instruction following
the occurrence and during the continuance of an Event of Default, pay any
dividends or other payments with respect to the Investment Property, including
Pledged Securities, directly to the Collateral Agent.
     6.4 Proceeds to be Turned Over To Collateral Agent. In addition to the
rights of the Secured Parties specified in Section 6.1 with respect to payments
of Receivables, if an Event of Default shall occur and be continuing, all
Proceeds received by any Grantor consisting of cash, cash equivalents, checks
and other near-cash items shall be held by such Grantor in trust for the Secured
Parties, segregated from other funds of such Grantor, and shall, forthwith upon
receipt by such Grantor, be turned over to the Collateral Agent in the exact
form received by such Grantor (duly endorsed by such Grantor to the Collateral
Agent, if required). All Proceeds received by the Collateral Agent hereunder
shall be held by the Collateral Agent in a Collateral Account maintained under
its sole dominion and control. All Proceeds while held by the Collateral Agent
in a Collateral Account (or by such Grantor in trust for the Secured Parties)
shall continue to be held as collateral security for all the Obligations and
shall not constitute payment thereof until applied as provided in Section 6.5.

E-35

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

 

Exhibit E
          6.5 Application of Proceeds. At such intervals as may be agreed upon
by the Borrower and the Collateral Agent, or, if an Event of Default shall have
occurred and be continuing, at any time at the Collateral Agent’s election, the
Collateral Agent may apply all or any part of the net Proceeds (after deducting
fees and expenses as provided in Section 6.6) constituting Pledged Collateral
realized through the exercise by the Collateral Agent of its remedies hereunder,
whether or not held in any Collateral Account, and any proceeds of the guarantee
set forth in Section 2, in payment of the Obligations in the following order:
          First, to the Collateral Agent, to pay incurred and unpaid fees and
expenses of the Secured Parties under the Loan Documents;
          Second, to the Collateral Agent, for application by it towards payment
of amounts then due and owing and remaining unpaid in respect of the
Obligations, pro rata among the Secured Parties according to the amounts of the
Obligations then due and owing and remaining unpaid to the Secured Parties;
          Third, to the Collateral Agent, for application by it towards
prepayment of the Obligations, pro rata among the Lenders according to the
amounts of the Obligations then held by the Lenders; and
          Fourth, any balance of such Proceeds remaining after the Obligations
shall have been paid in full, no letters of credit issued under the Credit
Agreement shall be outstanding and the Commitments under the Credit Agreement
shall have terminated or expired shall be paid over to the Borrower or to
whomsoever may be lawfully entitled to receive the same.
          6.6 Code and Other Remedies. (a) If an Event of Default shall occur
and be continuing, the Collateral Agent, on behalf of the Secured Parties, may
exercise, in addition to all other rights and remedies granted to them in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the New York UCC (whether or not the New York UCC applies to the affected
Pledged Collateral) or its rights under any other applicable law or in equity.
Without limiting the generality of the foregoing, the Collateral Agent, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below) to or
upon any Grantor or any other person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Pledged Collateral,
or any part thereof, and/or may forthwith sell, lease, license, assign, give
option or options to purchase, or otherwise dispose of and deliver the Pledged
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker’s
board or office of any Secured Party or elsewhere upon such terms and conditions
as it may deem advisable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk. Each
Secured Party shall have the right upon any such public sale or sales, and, to
the extent permitted by law, upon any such private sale or sales, to purchase
the whole or any part of the Pledged Collateral so sold, free of any right or
equity of redemption in any Grantor, which right or equity is hereby waived and
released. Each purchaser at any such sale shall hold the property sold
absolutely free from any

E-36

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

 

Exhibit E
claim or right on the part of any Grantor, and each Grantor hereby waives (to
the extent permitted by applicable law) all rights of redemption, stay and/or
appraisal which it now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted. Each Grantor agrees that,
to the extent notice of sale shall be required by law, at least ten days notice
to such Grantor of the time and place of any public sale or the time after which
any private sale is to be made shall constitute reasonable notification. The
Collateral Agent shall not be obligated to make any sale of Pledged Collateral
regardless of notice of sale having been given. The Collateral Agent may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. The Collateral Agent may sell the
Pledged Collateral without giving any warranties as to the Pledged Collateral.
The Collateral Agent may specifically disclaim or modify any warranties of title
or the like. This procedure will not be considered to adversely affect the
commercial reasonableness of any sale of the Pledged Collateral. Each Grantor
agrees that it would not be commercially unreasonable for the Collateral Agent
to dispose of the Pledged Collateral or any portion thereof by using Internet
sites that provide for the auction of assets of the types included in the
Pledged Collateral or that have the reasonable capability of doing so, or that
match buyers and sellers of assets. Each Grantor hereby waives any claims
against the Collateral Agent arising by reason of the fact that the price at
which any Pledged Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale, even if the
Collateral Agent accepts the first offer received and does not offer such
Pledged Collateral to more than one offeree. Each Grantor further agrees, at the
Collateral Agent’s request, to assemble the Pledged Collateral and make it
available to the Collateral Agent at places which the Collateral Agent shall
reasonably select, whether at such Grantor’s premises or elsewhere. The
Collateral Agent shall have the right to enter onto the property where any
Pledged Collateral is located and take possession thereof with or without
judicial process.
     (b) The Collateral Agent shall apply the net proceeds of any action taken
by it pursuant to this Section 6.6, after deducting all reasonable costs and
expenses of every kind incurred in connection therewith or incidental to the
care or safekeeping of any of the Pledged Collateral or in any way relating to
the Pledged Collateral or the rights of the Secured Parties hereunder, including
reasonable attorneys’ fees and disbursements, to the payment in whole or in part
of the Obligations and only after such application and after the payment by the
Collateral Agent of any other amount required by any provision of law, including
Section 9-615(a) of the New York UCC, need the Collateral Agent account for the
surplus, if any, to any Grantor. If the Collateral Agent sells any of the
Pledged Collateral upon credit, the Grantor will be credited only with payments
actually made by the purchaser and received by the Collateral Agent and applied
to indebtedness of the purchaser. In the event the purchaser fails to pay for
the Pledged Collateral, the Collateral Agent may resell the Pledged Collateral
and the Grantor shall be credited with proceeds of the sale. To the extent
permitted by applicable law, each Grantor waives all claims, damages and demands
it may acquire against any Secured Party arising out of the exercise by them of
any rights hereunder.
     (c) In the event of any disposition of any of the Intellectual Property,
the goodwill of the business connected with and symbolized by any Trademarks
subject to such Disposition shall be included, and the applicable Grantor shall
supply the Collateral Agent or its designee with such Grantor’s know-how and
expertise, and with documents and things

E-37

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

 

Exhibit E
embodying the same, relating to the manufacture, distribution, advertising and
sale of products or the provision of services relating to any Intellectual
Property subject to such disposition, and such Grantor’s customer lists and
other records and documents relating to such Intellectual Property and to the
manufacture, distribution, advertising and sale of such products and services.
     6.7 Registration Rights. (a) If the Collateral Agent shall determine to
exercise its right to sell any or all of the Pledged Equity Interests or the
Pledged Debt Securities pursuant to Section 6.6, and if in the opinion of the
Collateral Agent it is necessary or advisable to have the Pledged Equity
Interests or the Pledged Debt Securities, or that portion thereof to be sold,
registered under the provisions of the Securities Act, the relevant Grantor
shall cause the Issuer thereof to (i) execute and deliver, and cause the
directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Collateral Agent, necessary or advisable to register
the Pledged Equity Interests or the Pledged Debt Securities, or that portion
thereof to be sold, under the provisions of the Securities Act, (ii) use
commercially reasonable efforts to cause the registration statement relating
thereto to become effective and to remain effective for a period of one year
from the date of the first public offering of the Pledged Equity Interests or
the Pledged Debt Securities, or that portion thereof to be sold, and (iii) make
all amendments thereto and/or to the related prospectus which, in the opinion of
the Collateral Agent, are reasonably necessary or advisable, all in conformity
with the requirements of the Securities Act and the rules and regulations of the
SEC applicable thereto. Each Grantor agrees to use commercially reasonable
efforts to cause such Issuer to comply with the provisions of the securities or
“Blue Sky” laws of any and all jurisdictions which the Collateral Agent shall
designate and to make available to its security holders, as soon as practicable,
an earnings statement (which need not be audited) which will satisfy the
provisions of Section 11(a) of the Securities Act.
     (b) Each Grantor recognizes that the Collateral Agent may be unable to
effect a public sale of any or all the Pledged Equity Interests or the Pledged
Debt Securities, by reason of certain prohibitions contained in the Securities
Act and applicable state securities laws or otherwise, and may be compelled to
resort to one or more private sales thereof to a restricted group of purchasers
which will be obliged to agree, among other things, to acquire such securities
for their own account for investment and not with a view to the distribution or
resale thereof. Each Grantor acknowledges and agrees that any such private sale
may result in prices and other terms less favorable than if such sale were a
public sale and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner. The Collateral Agent shall be under no obligation to delay a sale of any
of the Pledged Equity Interests or the Pledged Debt Securities for the period of
time necessary to permit the Issuer thereof to register such securities for
public sale under the Securities Act, or under applicable state securities laws,
even if such Issuer would agree to do so.
     (c) Each Grantor agrees to use its best efforts to do or cause to be done
all such other acts as may be necessary to make such sale or sales of all or any
portion of the Pledged Equity Interests or the Pledged Debt Securities pursuant
to this Section 6.7 valid and binding and in compliance with any and all other
applicable Requirements of Law. Each Grantor further agrees that a breach of any
of the covenants contained in this Section 6.7 will cause irreparable injury to
the Secured Parties, that the Secured Parties have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant
contained in this Section 6.7

E-38

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

 

Exhibit E
shall be specifically enforceable against such Grantor, and such Grantor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no Event of Default has
occurred and is continuing under the Credit Agreement or a defense of payment.
          6.8 Deficiency. Each Grantor shall remain liable for any deficiency if
the proceeds of any sale or other disposition of the Pledged Collateral are
insufficient to pay its Obligations and the fees and disbursements of any
attorneys employed by any Secured Party to collect such deficiency.
          6.9 Executory Process.
          (a) For purposes of executory process under applicable Louisiana law,
each Grantor hereby acknowledges the Grantor’s Obligations, confesses judgment
thereon and consents that judgment be rendered and signed, whether during the
court’s term or during vacation, in favor of the Collateral Agent, for the
ratable benefit of the Secured Parties, for the full amount of the Grantor’s
Obligations, in principal, interest and attorneys’ fees, together with all
charges and expenses whatsoever pursuant to this Agreement and any other related
documents. Upon the occurrence of an Event of Default, and in addition to all of
its rights, powers and remedies under this Agreement, the other related
documents and applicable law, the Collateral Agent may, at its option, cause all
or any part of the Collateral to be seized and sold under executory process, or
under writ of fieri facias issued in execution of an ordinary judgment obtained
upon the Grantor’s Obligations, without appraisement to the highest bidder, for
cash or under such terms as the Collateral Agent deems acceptable. Each Grantor
hereby waives all and every appraisement of the Collateral and waives and
renounces the benefit of appraisement and the benefit of all laws relative to
the appraisement of the Collateral seized and sold under executory or other
legal process. Each Grantor agrees to waive and does hereby specifically waive:
               (i) the benefit of appraisement provided for in Articles 2332,
2336, 2723, and 2724, Louisiana Code of Civil Procedure, and all other laws
conferring such benefits;
               (ii) the demand and three (3) days delay accorded by Articles
2639 and 2721, Louisiana Code of Civil Procedure;
               (iii) the notice of seizure required by Articles 2293 and 2721,
Louisiana Code of Civil Procedure;
               (iv) the three (3) days delay provided by Articles 2331 and 2722,
Louisiana Code of Civil Procedure;
               (v) the benefit of the other provisions of Articles 2331, 2722,
and 2723, Louisiana Code of Civil Procedure;
               (vi) the benefit of the provisions of any other articles of the
Louisiana Code of Civil Procedure not specifically mentioned above; and

E-39

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

 

Exhibit E
          (vii) all pleas of division and discussion with respect to the
Grantor’s Obligations.
          (b) In the event the Collateral Agent elects, at its option, to enter
suit via ordinaria on the Grantor’s Obligations, in addition to the foregoing
confession of judgment and waivers, each Grantor hereby waives citation, other
legal process and legal delays and hereby consents that judgment for the unpaid
principal due on the Grantor’s Obligations, together with interest, reasonable
attorneys’ fees, costs and other charges that may be due on the Grantor’s
Obligations, be rendered and signed immediately.
          (c) Pursuant to the authority contained in Louisiana Revised Statutes
9:5136 through 9:5140.2, each Grantor and the Collateral Agent do hereby
expressly designate the Collateral Agent or its designee to be keeper or
receiver (“Keeper”) for the benefit of the Secured Parties or any assignee of
the Secured Parties, such designation to take effect immediately upon any
seizure of any of the Collateral under writ of executory process or under writ
of sequestration or fieri facias as an incident to an action brought by the
Collateral Agent. The fees of the Keeper are hereby fixed at five percent (5%)
of the amount due or sued for or claimed or sought to be protected, preserved or
enforced in the proceeding for the recognition of the security interest created
hereby, and the payment of such fees shall be secured by the security interest
in the Collateral granted in this Agreement.
SECTION 7. THE COLLATERAL AGENT
          7.1 Collateral Agent’s Appointment as Attorney-in-Fact, etc. (a) Each
Grantor hereby irrevocably constitutes and appoints the Collateral Agent and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of such Grantor and in the name of such Grantor or in its own name,
for the purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, each Grantor hereby gives the
Collateral Agent the power and right, on behalf of such Grantor, without notice
to or assent by such Grantor, to do any or all of the following after the
occurrence and during the continuance of an Event of Default:
          (i) in the name of such Grantor or its own name, or otherwise, take
possession of and endorse and collect any checks, drafts, notes, acceptances or
other instruments for the payment of moneys due under any Receivable or Contract
or with respect to any other Pledged Collateral and file any claim or take any
other action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Collateral Agent for the purpose of collecting any and all
such moneys due under any Receivable or Contract or with respect to any other
Pledged Collateral whenever payable;
          (ii) in the case of any Intellectual Property, execute and deliver,
and have recorded, any and all agreements, instruments, documents and papers as
the Collateral Agent may request to evidence the Secured Parties’ security
interest in such

E-40

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

 

Exhibit E
Intellectual Property and the goodwill and general intangibles of such Grantor
relating thereto or represented thereby;
               (iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Pledged Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;
               (iv) execute, in connection with any sale provided for in
Section 6.7 or 6.8, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Pledged Collateral; and
               (v) (1) direct any party liable for any payment under any of the
Pledged Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Collateral Agent or as the Collateral Agent shall
direct; (2) ask or demand for, collect, and receive payment of and receipt for,
any and all moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Pledged Collateral; (3) sign and endorse any
invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications, notices and other
documents in connection with any of the Pledged Collateral; (4) commence and
prosecute any suits, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Pledged Collateral or any portion thereof
and to enforce any other right in respect of any Pledged Collateral; (5) defend
any suit, action or proceeding brought against such Grantor with respect to any
Pledged Collateral; (6) settle, compromise or adjust any such suit, action or
proceeding and, in connection therewith, give such discharges or releases as the
Collateral Agent may deem appropriate; (7) assign any Copyright, Patent or
Trademark (along with the goodwill of the business to which any such Copyright,
Patent or Trademark pertains), throughout the world for such term or terms, on
such conditions, and in such manner, as the Collateral Agent shall in its sole
discretion determine; and (8) generally, sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Pledged Collateral
as fully and completely as though the Collateral Agent were the absolute owner
thereof for all purposes, and do, at the Collateral Agent’s option and such
Grantor’s expense, at any time, or from time to time, all acts and things which
the Collateral Agent deems necessary to protect, preserve or realize upon the
Pledged Collateral and the Secured Parties’ security interests therein and to
effect the intent of this Agreement, all as fully and effectively as such
Grantor might do.
          Anything in this Section 7.1(a) to the contrary notwithstanding, the
Collateral Agent agrees that, except as provided in Section 7.1(b), it will not
exercise any rights under the power of attorney provided for in this
Section 7.1(a) unless an Event of Default shall have occurred and be continuing.
          (b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Collateral Agent, at its option, but without
any obligation so to do, may perform or comply, or otherwise cause performance
or compliance, with such agreement; provided, however, that unless and Event of
Default has occurred and is continuing or time is of

E-41

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

 

Exhibit E
the essence, the Collateral Agent shall not exercise this power without first
making demand on the Grantor and the Grantor failing to immediately comply
therewith.
          (c) The expenses of the Collateral Agent incurred in connection with
actions undertaken as provided in this Section 7.1, together with interest
thereon at a rate per annum equal to the rate per annum at which interest would
then be payable on past due Revolving Loans that are ABR Loans under the Credit
Agreement, from the date of payment by the Collateral Agent to the date
reimbursed by the relevant Grantor, shall be payable by such Grantor to the
Collateral Agent on demand.
          (d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
          7.2 Duty of Collateral Agent. The Collateral Agent’s sole duty with
respect to the custody, safekeeping and physical preservation of the Pledged
Collateral in its possession, under Section 9-207 of the New York UCC or
otherwise, shall be to deal with it in the same manner as the Collateral Agent
deals with similar property for its own account. Neither the Collateral Agent,
nor any other Secured Party nor any of their respective officers, directors,
partners, employees, agents, attorneys and other advisors, attorneys-in-fact or
affiliates shall be liable for failure to demand, collect or realize upon any of
the Pledged Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Pledged Collateral upon the
request of any Grantor or any other person or to take any other action
whatsoever with regard to the Pledged Collateral or any part thereof. The powers
conferred on the Secured Parties hereunder are solely to protect the Secured
Parties’ interests in the Pledged Collateral and shall not impose any duty upon
any Secured Party to exercise any such powers. The Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
partners, employees, agents, attorneys and other advisors, attorneys-in-fact or
affiliates shall be responsible to any Grantor for any act or failure to act
hereunder, except to the extent that any such act or failure to act is found by
a final and nonappealable decision of a court of competent jurisdiction to have
resulted primarily from their own gross negligence or willful misconduct in
breach of a duty owed to such Grantor.
          7.3 Execution of Financing Statements. Each Grantor acknowledges that
pursuant to Section 9-509(b) of the New York UCC and any other applicable law,
each Grantor authorizes the Collateral Agent to file or record financing or
continuation statements, and amendments thereto, and other filing or recording
documents or instruments with respect to the Pledged Collateral, without the
signature of such Grantor, in such form and in such offices as the Collateral
Agent reasonably determines appropriate to perfect or maintain the perfection of
the security interests of the Collateral Agent under this Agreement. Each
Grantor agrees that such financing statements may describe the collateral in the
same manner as described in the Security documents or as “all assets” or “all
personal property,” whether now owned or hereafter existing or acquired or such
other description as the Collateral Agent, in its sole judgment, determines is
necessary or advisable. A photographic or other reproduction of this Agreement
shall be

E-42

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

 

Exhibit E
sufficient as a financing statement or other filing or recording document or
instrument for filing or recording in any jurisdiction.
     7.4 Authority of Collateral Agent. Each Grantor acknowledges that the
rights and responsibilities of the Collateral Agent under this Agreement with
respect to any action taken by the Collateral Agent or the exercise or
non-exercise by the Collateral Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Collateral Agent and the other
Secured Parties, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Collateral Agent and the Grantors, the Collateral Agent shall be
conclusively presumed to be acting as agent for the Secured Parties with full
and valid authority so to act or refrain from acting, and no Grantor shall be
under any obligation, or entitlement, to make any inquiry respecting such
authority.
     7.5 Appointment of Co-Collateral Agents. At any time or from time to time,
in order to comply with any applicable requirement of law, the Collateral Agent
may appoint another bank or trust company or one of more other persons, either
to act as co-agent or agents on behalf of the Secured Parties with such power
and authority as may be necessary for the effectual operation of the provisions
hereof and which may be specified in the instrument of appointment (which may,
in the discretion of the Collateral Agent, include provisions for
indemnification and similar protections of such co-agent or separate agent).
SECTION 8. MISCELLANEOUS
     8.1 Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by each affected Grantor and the Collateral Agent,
subject to any consents required under Section 9.08 of the Credit Agreement;
provided that any provision of this Agreement imposing obligations on any
Grantor may be waived by the Collateral Agent in a written instrument executed
by the Collateral Agent.
     8.2 Notices. All notices, requests and demands to or upon the Collateral
Agent or any Grantor hereunder shall be effected in the manner provided for in
Section 9.01 of the Credit Agreement; provided that any such notice, request or
demand to or upon any Guarantor shall be addressed to such Guarantor at its
notice address set forth on Schedule 8.2.
     8.3 No Waiver by Course of Conduct; Cumulative Remedies. No Secured Party
shall by any act (except by a written instrument pursuant to Section 8.1),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default. No
failure to exercise, nor any delay in exercising, on the part of any Secured
Party, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by any Secured Party of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which such Secured Party would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative,

E-43

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

 

Exhibit E
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
     8.4 Enforcement Expenses; Indemnification. (a) Each Grantor agrees to pay
or reimburse each Secured Party for all its costs and expenses incurred in
collecting against such Grantor under the guarantee contained in Section 2 or
otherwise enforcing or preserving any rights under this Agreement and the other
Loan Documents to which such Grantor is a party, including the fees and
disbursements of counsel to each Secured Party and of counsel to the Collateral
Agent.
     (b) Each Grantor agrees to pay, and to hold the Secured Parties harmless
from, any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to, or resulting from any delay in paying, any and all
stamp, excise, sales or other taxes which may be payable or determined to be
payable with respect to any of the Pledged Collateral or in connection with any
of the transactions contemplated by this Agreement.
     (c) Each Grantor agrees to pay, and to hold the Secured Parties harmless
from, any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Agreement to the extent the Borrower would be required to
do so pursuant to Section 9.05 of the Credit Agreement.
     (d) The agreements in this Section shall survive repayment of the
Obligations and all other amounts payable under the Credit Agreement and the
other Loan Documents.
     8.5 Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of each Grantor and shall inure to the benefit of the
Secured Parties and their successors and assigns; provided that no Grantor may
assign, transfer or delegate any of its rights or obligations under this
Agreement without the prior written consent of the Collateral Agent, and any
attempted assignment without such consent shall be null and void.
     8.6 Set-Off. Each Grantor hereby irrevocably authorizes each Secured Party
at any time and from time to time, while an Event of Default shall have occurred
and be continuing, without notice to such Grantor or any other Grantor, any such
notice being expressly waived by each Grantor, to set-off and appropriate and
apply any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Secured Party to or for
the credit or the account of such Grantor, or any part thereof in such amounts
as such Secured Party may elect, against and on account of the obligations and
liabilities of such Grantor to such Secured Party hereunder and claims of every
nature and description of such Secured Party against such Grantor, in any
currency, whether arising hereunder, under the Credit Agreement, any other Loan
Document or otherwise, as such Secured Party may elect, whether or not any
Secured Party has made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured. Each Secured Party shall
notify such Grantor promptly of any such set-off and the application made by
such Secured Party of the proceeds thereof,

E-44

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

 

Exhibit E
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Secured Party under this
Section are in addition to other rights and remedies (including other rights of
set-off) which such Secured Party may have.
     8.7 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
facsimile), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
     8.8 Severability. Any provision of this 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, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
     8.9 Section Headings. The Section headings used in this Agreement are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
     8.10 Integration. This Agreement and the other Loan Documents represent the
agreement of the Grantors, the Collateral Agent and the other Secured Parties
with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by any Secured Party
relative to subject matter hereof and thereof not expressly set forth or
referred to herein or in the other Loan Documents.
     8.11 APPLICABLE LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
     8.12 Submission to Jurisdiction; Waivers. Each Grantor hereby irrevocably
and unconditionally:
     (a) submits for itself and its property in any legal action or proceeding
relating to this Agreement and the other Loan Documents to which it is a party,
or for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State of New York, the
courts of the United States of America for the Southern District of New York,
and appellate courts from any thereof;
     (b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
     (c) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such Grantor at its
address referred to in Section 8.2 or at such other address of which the
Collateral Agent shall have been notified pursuant thereto;

E-45

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

 

Exhibit E
     (d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and
     (e) waives, to the maximum extent not prohibited by law, any right it may
have to claim or recover in any legal action or proceeding referred to in this
Section any special, exemplary, punitive or consequential damages.
     8.13 Acknowledgments. Each Grantor hereby acknowledges that:
     (a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a party;
     (b) no Secured Party has any fiduciary relationship with or duty to any
Grantor arising out of or in connection with this Agreement or any of the other
Loan Documents, and the relationship between the Grantors, on the one hand, and
the Secured Parties, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor; and
     (c) no joint venture is created hereby or by the other Loan Documents or
otherwise exists by virtue of the transactions contemplated hereby among the
Secured Parties or among the Grantors and the Secured Parties.
     8.14 Additional Grantors. Each Subsidiary of the Borrower that is required
to become a party to this Agreement pursuant to Section 5.09 of the Credit
Agreement shall become a Grantor for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of Annex 1 hereto.
     8.15 Releases. (a) At such time as the Loans and the other Obligations
(other than Obligations in respect of any Specified Hedge Agreement) shall have
been paid in full, the commitments under the Credit Agreement have been
terminated or expired and no letter of credit issued under the Credit Agreement
shall be outstanding, the Pledged Collateral shall be released from the Liens
created hereby, and this Agreement and all obligations (other than those
expressly stated to survive such termination) of the Collateral Agent and each
Grantor hereunder shall terminate, all without delivery of any instrument or
performance of any act by any party, and all rights to the Pledged Collateral
shall revert to the Grantors. At the request and sole expense of any Grantor
following any such termination, the Collateral Agent shall deliver to such
Grantor any Pledged Collateral held by the Collateral Agent hereunder, and
execute and deliver to such Grantor such documents as such Grantor shall
reasonably request to evidence such termination.
     (b) If any of the Pledged Collateral shall be sold or otherwise disposed of
by any Grantor in a transaction permitted by the Credit Agreement, then the
Collateral Agent, at the request and sole expense of such Grantor, shall execute
and deliver to such Grantor all releases or other documents reasonably necessary
or desirable for the release of the Liens created hereby on such Pledged
Collateral. At the request and sole expense of the Borrower, a Guarantor shall
be released from its obligations hereunder in the event that all the Equity
Interests in such Guarantor shall be sold or otherwise disposed of in a
transaction permitted by the Credit Agreement; provided that the Borrower shall
have delivered to the Collateral Agent, at least ten Business Days prior to the
date of the proposed release, a written request for such release identifying the
relevant Guarantor and the terms of the relevant sale or other disposition in

E-46

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

 

Exhibit E
reasonable detail, including the price thereof and any expenses incurred in
connection therewith, together with a certification by the Borrower stating that
such transaction is in compliance with the Credit Agreement and the other Loan
Documents.
     (b) Each Grantor acknowledges that it is not authorized to file any
financing statement or amendment or termination statement with respect to any
financing statement originally filed in connection herewith without the prior
written consent of the Collateral Agent, subject to such Grantor’s rights under
Section 9-509(d)(2) of the New York UCC.
     8.16 WAIVER OF JURY TRIAL. EACH GRANTOR AND THE COLLATERAL AGENT HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.

E-47

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

 

Exhibit E
     IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee and
Collateral Agreement to be duly executed and delivered as of the date first
above written.
[INSERT GRANTORS]
By:                                        
Name:
Title:

E-48

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

 

Exhibit E
CREDIT SUISSE, CAYMAN ISLANDS BRANCH,
as Administrative Agent and Collateral Agent
By:                                                            
Name:
Title:
By:                                                            
Name:
Title:

E-49

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

 

Exhibit F
[INSERT LENDER NAME]
LENDER ADDENDUM
     Reference is made to the Credit Agreement dated as of January 31, 2007 the
“Credit Agreement”), among Affirmative Insurance Holdings, Inc., the Borrower,
the Lenders from time to time party thereto, Credit Suisse, Cayman Islands
Branch, as administrative agent (in such capacity, the “Administrative Agent”)
and as collateral agent (in such capacity, the “Collateral Agent”), and the
other parties thereto. Terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement.
     Upon execution and delivery of this Lender Addendum by the parties hereto
as provided in Section 9.17 of the Credit Agreement, the undersigned hereby
becomes a Lender thereunder having the Commitments set forth in Schedule 1
hereto, effective as of the Closing Date.
     THIS LENDER ADDENDUM SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.
     This Lender Addendum may be executed by one or more of the parties hereto
on any number of separate counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. Delivery of
an executed signature page hereof by facsimile transmission shall be effective
as delivery of a manually executed counterpart hereof.
[Remainder of page intentionally left blank]

F-1

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

 

     IN WITNESS WHEREOF, the parties hereto have caused this Lender Addendum to
be duly executed and delivered by their proper and duly authorized officers as
of this ǵ Ƿ day of ǵ Ƿ, 200ǹǹǹ.
                                                            
Name of Lender
By:
   Name:
   Title:

F-2

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

 

Accepted and agreed:
AFFIRMATIVE INSURANCE HOLDINGS, INC.,
By:                                        
      Name:
      Title:
CREDIT SUISSE, CAYMAN ISLANDS BRANCH
as Administrative Agent,
By:                                        
      Name:
      Title:

F-3

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

 

Schedule 1 to
Lender Addendum
COMMITMENTS AND NOTICE ADDRESS

1.   Name of Lender:
Notice Address:       Attention:
Telephone:
Facsimile:   2.   Revolving Credit Commitment:

F-4

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

 

EXHIBIT G — FORM OF MARTGAGE
PREPARED BY, AND WHEN
RECORDED RETURN TO:
Latham & Watkins LLP
633 W. Fifth Street, Suite 4000
Los Angeles, California 90071
Attn: Kim N. A. Boras, Esq.
 
(above for recorder’s use only)
Mortgage

 

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

 

EXHIBIT G — FORM OF MARTGAGE

         
FEE AND LEASEHOLD MORTGAGE,
  *   UNITED STATES OF AMERICA
SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND
  *    
LEASES AND FIXTURE FILING (this “Mortgage”)
  *   STATE OF TEXAS
 
  *    
 
  *    
BY
  *   PARISH/COUNTY OF DALLAS
 
  *    
 
  *    
USAGENGIES, L.L.C.
  *
*    
 
  *    
IN FAVOR OF
  *    
 
  *    
 
  *    
CREDIT SUISSE, CAYMAN ISLANDS BRANCH
  *   COUNTY
 
  *    
 
  *    
* * * * * * * * * * * * * * * * * * * * * *
       

     BE IT KNOWN, that on the date set forth below, before me the undersigned
Notary Public, duly commissioned and qualified, and in the presence of the
undersigned competent witnesses, personally came and appeared:
     USAGENCIES, L.L.C., a Louisiana limited liability company (last four digits
of Taxpayer Identification Number 2445 and Organizational No. 35192344K), whose
address is 8550 United Plaza Boulevard, Suite 805, Baton Rouge, Louisiana 70809,
represented herein by Mark E. Pape, its Executive Vice President, duly
authorized by written consent of the holders of a majority of the Units of said
limited liability company certified by a manager of the limited liability
company which certified unanimous written consent is attached hereto as
Exhibit A (hereinafter referred to as “Mortgagor”)
who declared as follows:
     This Mortgage is made and entered into as of January 31, 2007, by
Mortgagor, in favor of CREDIT SUISSE, CAYMAN ISLANDS BRANCH whose address is
Eleven Madison Avenue, New York, NY 10010, as the Collateral Agent
(“Mortgagee”).
RECITALS
     A. Mortgagor is a subsidiary of Affirmative Insurance Holdings, Inc., a
Delaware corporation (“Borrower”). Borrower is a party to that certain Credit
Agreement, dated as of the date hereof (as may be amended, supplemented,
extended, restated or otherwise modified from time to time, the “Credit
Agreement”), among Borrower, Mortgagee as the Administrative Agent and
Collateral Agent, each Lender from time to time a party thereto (collectively,
the “Lenders”), and the other parties thereto. Unless otherwise defined,
capitalized terms are used in this Mortgage as they are defined in the Credit
Agreement.
Mortgage

1

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

 

     B. Pursuant to the terms of the Credit Agreement, the Lenders have made
loans available to Borrower in the aggregate principal amount of $220,000,000.
     C. Mortgagor is the 100% fee simple owner of Parcels A through E and G of
certain real property more particularly described on Exhibit B attached hereto
(all of the real property described on Exhibit B being hereinafter referred to
as the “Property”). Pursuant to that certain Lease of Air Space dated May 28,
1986 from the City of Baton Rouge and the Parish of East Baton Rouge to
Goudchaux/Maison Blanche, Inc., which was recorded as Original 858, Bundle 9837
of the records of the East Baton Rouge Parish Clerk of Court (the “Clerk’s
Records”), as assigned to Renaissance Park, LLC pursuant to a certain Assignment
and Assumption of Air Space Leases dated September 20, 2004 and recorded as
Original 797, Bundle 11655 of the Clerk’s Records, and as further assigned to
Mortgagor pursuant to a certain Assignment and Assumption of City/Parish Air
Space Lease dated November 10, 2005 and recorded as Original 440, Bundle 11784
of the Clerk’s Records (as it has heretofore been assigned and may heretofore
have been or hereafter be amended, supplemented, extended, restated or otherwise
modified from time to time, the “Subject Lease”), Mortgagor holds leasehold
title in and to Parcel F of the Property (the “Leased Property”).
     D. The Credit Agreement requires that the obligations of Borrower under the
Credit Agreement and the other Loan Documents be secured by liens and security
interests covering, among other things, Mortgagor’s interest in the Property and
the Subject Lease. In connection therewith, Mortgagor is executing and
delivering this Mortgage in accordance with the Credit Agreement.
AGREEMENT
     NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Mortgagor hereby agrees as follows:
     All of the following property constitutes and is collectively called herein
the “Collateral”:
     All of MORTGAGOR’S RIGHT, TITLE AND INTEREST in the Property, including the
leasehold estate in the Leased Property created by the Subject Lease, whether
now owned or hereafter acquired;
     TOGETHER WITH any greater or additional estate in the Leased Property as
hereafter may be acquired by Mortgagor;
     TOGETHER WITH all right, title and interest of Mortgagor in and to the
following, whether now owned or hereafter acquired: (a) all improvements
(including, without limitation, all infrastructure improvements and public
improvements) now or hereafter attached to or placed, erected, constructed or
developed on the Property or otherwise affixed thereto in such manner that such
items are not deemed to be personal property under the laws of the State of
Louisiana (collectively, the “Improvements”); (b) any and all fixtures,
furnishings, equipment, machinery, furniture, and other items of tangible
personal property now or hereafter located on the Property or in the
Improvements or used in connection with the development, construction,
Mortgage

2

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

 

use, occupancy, operation and maintenance of all or any part of the Property or
the Improvements, including construction equipment, machinery, signs, artwork,
furnishings, specialized fixtures, furnishings and equipment relating to
Mortgagor’s ownership, operation and/or development of the Property, and all
renewals of or replacements or substitutions for any of the foregoing, whether
or not the same are or shall be attached to the Property or Improvements (the
“FF&E” and together with the Property, and Improvements, the “Project”); (c) all
water and water rights, timber, crops, and mineral interests pertaining to the
Property; (d) all building materials and equipment now or hereafter delivered to
and intended to be installed in or on the Property or the Improvements; and all
plans and specifications for the Improvements; (e) any contracts relating to the
Property, the Improvements or the FF&E (including all construction related
agreements, license agreements, service agreements, maintenance agreements,
management agreements and other agreements relating to the development of the
Property); (f) all deposits, bank accounts, financial assets, funds,
instruments, investment property, notes or chattel paper arising from or by
virtue of any transactions related to the Property, the Improvements or the
FF&E; (g) to the extent assignable, all community facilities districts or any
similar public financing vehicles which related to the Property or the
Improvements (or future Improvements) and any reimbursement rights of Mortgagor
relating thereto; (h) to the extent assignable, any documents, contract rights,
accounts, commitments, construction contracts, architectural agreements, and
general intangibles (including trademarks, trade names and symbols) arising from
or by virtue of any transactions related to the Property, the Improvements or
FF&E; (i) to the extent assignable, all permits, approvals (including, without
limitation, approved preliminary and final subdivision plats), licenses,
franchises, certificates and all other rights, privileges and entitlements
(“Permits”) obtained now or in the future in connection with the Property, the
Improvements and the FF&E; (j) all proceeds arising from or by virtue of the
sale, lease or other disposition of the Property, the Improvements or the FF&E;
(k) all proceeds (including premium refunds) of each policy of insurance
relating to the Property, the Improvements or the FF&E; (l) all proceeds from
the taking or condemnation of any of the Property, the Improvements, the FF&E or
any rights appurtenant thereto by right of eminent domain or by private or other
purchase in lieu thereof, including change of grade of streets, curb cuts or
other rights of access, for any public or quasi-public use under any law;
(m) all streets, roads, public places, servitudes, easements and rights-of-way,
existing or proposed, public or private, adjacent to or used in connection with,
belonging or pertaining to the Property; (n) all of the leases, rents,
royalties, bonuses, issues, profits, revenues or other benefits of the Property,
the Improvements or the FF&E, including cash or securities deposited pursuant to
leases to secure performance by the lessees of their obligations thereunder;
(o) all fees, charges, accounts and/or other payments for the use or occupancy
of any portion of the Improvements; (p) all rights, hereditaments and
appurtenances pertaining to the foregoing; (q) all patents, trademarks,
tradenames, copyrights and other intellectual property rights and privileges
obtained or hereafter acquired in connection with the Property, the Improvements
and the FF&E and, with respect to trademark and service mark applications that
are so called “intent-to-use” applications, together with the entire business or
portion thereof to which such applications pertain as required by 15 U.S.C.
Section 1060; (r) all assignments, modifications, extensions and renewals of the
Subject Lease and all credits, deposits, options, privileges and rights of
Mortgagor under the Subject Lease, including, but not limited to, rights of
first refusal, if any, and the right, if any, to renew or extend the Subject
Lease for a succeeding term or terms; and (s) other interests of every kind and
character that Mortgagor now has or at any time hereafter acquires in and to the
Mortgage

3

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

 

Property, Improvements, and FF&E described herein and in and to all other real
property, personal property and other property that is used or useful in
connection therewith, including rights of ingress and egress and all
reversionary rights or interests of Mortgagor with respect to such property.
     With respect to the proceeds referred to in Sections (j), (k) and (l) above
(collectively, the “Proceeds”), this Mortgage is a collateral assignment thereof
pursuant to Louisiana Revised Statutes § 9:5386 et seq., whether such Proceeds
or any of them now exist or arise in the future, and Mortgagor does hereby
irrevocably make, constitute, and appoint Mortgagee and the agents of Mortgagee
as the true and lawful mandataries and attorneys-in-fact of Mortgagor to carry
out and enforce all of Mortgagor’s rights, title, and interest in and to any or
all of the Proceeds hereby collaterally assigned. The collateral assignment
herein made of the Proceeds shall not be construed as imposing upon Mortgagee
any obligations with respect thereto unless and until Mortgagee shall become the
absolute owner thereof and Mortgagor shall have been wholly dispossessed
thereof.
     Notwithstanding anything herein to the contrary, in no event shall the
security interest granted hereunder attach to (i) any lease, license, contract
right, property right or agreement to which Mortgagor is a party or any of its
rights or interests thereunder if and for so long as the grant of such security
interest shall constitute or result in (A) the abandonment, invalidation or
unenforceability of any right, title or interest of Mortgagor therein or (B) in
a breach or termination pursuant to the terms of, or a default under, any such
lease, license, contract, property rights or agreement (other than to the extent
that any such term would be rendered ineffective pursuant to Sections 9-406,
9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions) of
any relevant jurisdiction or any other Applicable Law or principles of equity);
provided, however, that such security interest shall attach immediately at such
time as the condition causing such abandonment, invalidation, unenforceability,
breach, termination, other restriction or assignment shall be remedied and, to
the extent severable, shall attach immediately to any portion of such lease,
license, contract, property rights or agreement that does not result in any of
the consequences specified in (A) or (B) of this clause (i) including any
proceeds of such lease, license, contract, property rights or agreement; or
(ii) any Permit, if and for so long as the grant of such security interest shall
constitute or result in (A) the abandonment, invalidation or unenforceability of
any right, title or interest of Mortgagor therein, (B) a violation of, or
termination pursuant to, the terms of such Permit, or (C) a violation of any
applicable law; provided, however, that such security interest shall attach
immediately at such time as the condition causing such abandonment,
invalidation, unenforceability, violation, termination, other restriction or
assignment shall be remedied and, to the extent severable, shall attach
immediately to any portion of such Permit that does not result in any of the
consequences specified in (A) or (B) of this clause (ii).
     Mortgagor, in order to secure the Secured Obligations (as defined below) up
to the Maximum Amount (as defined below), does hereby:
     E. Mortgage and collaterally assign and grant a security interest in, and
confirm unto Mortgagee, WITH POWER OF SALE, all of Mortgagor’s right, title and
interest in and to the Collateral that constitutes immovable property under the
laws of the State of Louisiana (the “RP
Mortgage

4

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

 

Collateral”), TO HAVE AND TO HOLD the RP Collateral, together with the rights,
privileges and appurtenances thereto belonging, unto Mortgagee and its
substitutes or successors, forever to satisfy payment of the indebtedness as
hereinafter set forth.
     F. Grant a security interest to Mortgagee in those portions of the
Collateral that either are fixtures or are not RP Collateral under the laws of
the State of Louisiana, including the UCC Collateral (as defined in Article 3
below), but subject to the rights of Mortgagee under the assignment made in the
immediately following paragraph; and
     G. Absolutely and unconditionally assign and transfer to Mortgagee all of
the Leases and the Rents (each as defined in Article 2 below) and other benefits
derived from the Leases, whether now existing or hereafter created, all subject
to the terms and conditions of the revocable license in favor of Mortgagor
granted in Article 2 below:
     IN FURTHERANCE OF THE FOREGOING GRANTS (INCLUDING GRANTS OF SECURITY
INTERESTS), ASSIGNMENTS AND MORTGAGES, AND TO PROTECT THE COLLATERAL AND THE
SECURITY GRANTED BY THIS MORTGAGE, MORTGAGOR HEREBY WARRANTS, REPRESENTS,
COVENANTS AND AGREES AS FOLLOWS:
ARTICLE 1
SECURED OBLIGATIONS
          1.1 Credit Agreement. This Mortgage is given for the purpose of
securing the total principal indebtedness of Two Hundred Twenty Million Dollars
($220,000,000) and other obligations of every type and nature of Borrower and
Mortgagor, up to the Maximum Amount under (i) the Credit Agreement (including
the “Obligations” as such term is defined in the Credit Agreement), (ii) this
Mortgage, including, but not limited to, the payment by the Mortgagor to the
Mortgagee of all sums expended or advanced by the Mortgagee pursuant to the
provisions of this Mortgage, and (iii) the other Loan Documents (all such
indebtedness and obligations collectively, for purposes of this Mortgage, the
“Secured Obligations”). Mortgagor shall pay and perform the Secured Obligations
at the times and places and in the manner specified in the Credit Agreement, any
Hedge Agreements, this Mortgage and the other Loan Documents, in each case
subject to any applicable grace or cure periods.
          1.2 Term of Mortgage. This Mortgage shall be effective for the period
from the date of this Mortgage through the date upon which all Secured
Obligations have been paid or performed in full (as the case may be) (other than
indemnity obligations that survive the termination of the Loan Documents and the
Hedge Agreements). Upon the payment and performance in full of the Secured
Obligations, Mortgagee shall promptly execute a full satisfaction of this
Mortgage in the form appropriate for recording and deliver such satisfaction to
Mortgagor.
          1.3 Maximum Amount. The maximum amount of the Secured Obligations that
may be outstanding at any time and from time to time that this Mortgage secures,
including, without limitation, as a mortgage, as an assignment of leases and
rents and as a
Mortgage

5

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

 

security agreement shall be Four Hundred Forty Million Dollars ($440,000,000)
(the “Maximum Amount”).
ARTICLE 2
ASSIGNMENT OF RENTS AND LEASES
     2.1 Assignment of Rents, Profits, etc. As further security for the Secured
Obligations, all of Mortgagor’s right, title and interest in the rents,
royalties, bonuses, issues, profits, revenue and income derived from the
Collateral or arising from the use or enjoyment of any portion thereof or from
any lease or agreement pertaining thereto, and liquidated damages following
default under such leases, and all proceeds payable under any policy of
insurance covering loss of rents resulting from untenantability caused by damage
to any part of the Collateral, together with any and all rights that Mortgagor
may have against any tenant under such leases or any subtenants or occupants of
any part of the Collateral (hereinafter called the “Rents”), are hereby
absolutely and unconditionally assigned to Mortgagee, to be applied by Mortgagee
in payment of the Secured Obligations. Notwithstanding anything to the contrary
contained herein, the assignment of Rents, as described in this Section 2.1, is,
and is intended to be, an assignment made in accordance with and to the fullest
extent permitted by La. R.S. §9:4401.
     2.2 Assignment of Leases. As further security for the Secured Obligations,
Mortgagor hereby assigns to Mortgagee all of Mortgagor’s right, title and
interest as lessor in and to all existing and future leases respecting the
Property or Improvements, including subleases thereof, and any and all
extensions, renewals, modifications and replacements thereof, upon any part of
the Collateral (the “Leases”). Mortgagor hereby further assigns to Mortgagee all
guaranties of tenants’ performance under the Leases. Notwithstanding anything to
the contrary contained herein, the assignment of Leases, as described in this
Section 2.2, is, and is intended to be, an assignment made in accordance with
and to the fullest extent permitted by La. R.S. §9:4401.
     2.3 License. Notwithstanding the foregoing provisions and subject to the
terms of the Credit Agreement, so long as no Event of Default shall exist and be
continuing hereunder, Mortgagor shall have the right and license to collect, use
and enjoy the Rents and other sums payable under and by virtue of any Lease, and
Mortgagor shall have the right to enforce the covenants of such Leases and other
agreements and arrangements, and the right to enter into, modify and terminate
such Leases and other agreements and arrangements in good faith (subject to the
terms of the Credit Agreement). Upon the occurrence of an Event of Default and
during the continuance thereof, such license in favor of Mortgagor shall
automatically and immediately terminate upon notice to Mortgagor, and Mortgagee
shall be entitled thereupon to receive and collect the Rents personally or
through an agent or a receiver so long as any such Event of Default shall exist
and during pendency of any foreclosure proceedings.
     2.4 Representations and Warranties Concerning Leases and Rents. Mortgagor
represents and warrants that:
Mortgage

6

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

 

               (a) Mortgagor has good and marketable title to the Leases and
Rents hereby assigned (except for such defects in such rights that would not
reasonably be expected, alone or in the aggregate, to have a Material Adverse
Effect) and authority to assign them, and no other person or entity has any
right, title or interest therein (other than Permitted Encumbrances);
               (b) the Leases are subordinate to this Mortgage in all respects;
and
               (c) no Rents have been or will be assigned, mortgaged or pledged,
except to the extent permitted by the terms of the Credit Agreement.
2.5 Mortgagor’s Covenants of Performance. In addition to the obligations which
Mortgagor has with respect to Leases under the Credit Agreement, Mortgagor
covenants and agrees to:
               (a) defend, at Mortgagor’s expense, any proceeding, legal or
otherwise, pertaining to the Leases, including, if Mortgagee so requests, any
such proceeding to which Mortgagee is a party;
               (b) neither create nor permit any encumbrance upon its interest
as lessor of the Leases, except this Mortgage and any other encumbrances
permitted by this Mortgage or the Credit Agreement; and
               (c) cause all Leases hereafter entered into by Mortgagor to
expressly provide that if Mortgagee forecloses under this Mortgage, then the
tenant shall attorn to Mortgagee or its assignee and the Lease will remain in
full force and effect in accordance with its terms notwithstanding such
foreclosure.
2.6 Representations and Warranties and Covenants Concerning the Subject Lease.
Mortgagor represents, warrants and covenants that:
               (a) the Subject Lease is unmodified and in full force and effect;
               (b) all rent and other charges in the Subject Lease have been
paid to the extent they are payable to the date hereof;
               (c) Mortgagor enjoys the quiet and peaceful possession of the
Leased Property;
               (d) Mortgagor is not in default under any of the terms of the
Subject Lease and there are no circumstances which, with the passage of time or
the giving of notice or both, would constitute an event of default thereunder;
               (e) the lessor under the Subject Lease is not in default under
any of the terms or provisions thereof on the part of the lessor to be observed
or performed;
               (f) Mortgagor shall promptly pay, when due and payable, the rent
and other charges payable pursuant to the Subject Lease, and will timely perform
and observe all of
Mortgage

7

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

 

the other terms, covenants and conditions required to be performed and observed
by Mortgagor as lessee under the Subject Lease and shall do all things necessary
to preserve and to keep unimpaired its rights thereunder;
          (g) Mortgagor shall, immediately following the receipt thereof,
deliver a copy of any notice of default, notice claiming a default or notice of
lessor’s intention to exercise any remedy reserved to lessor under the Subject
Lease given to Mortgagor by the lessor pursuant to the Subject Lease and
promptly notify Mortgagee in writing of any default by the lessor in the
performance or observance of any of the terms, covenants or conditions on the
part of the lessor to be performed or observed thereunder;
          (h) Mortgagor shall not, without the prior written consent of
Mortgagee (which may be granted or withheld in Mortgagee’s reasonable
discretion) (i) terminate or surrender the Subject Lease other than at its
stated termination date or (ii) enter into any modification of the Subject Lease
which materially impairs the practical realization of the security interest
granted by this Mortgage, and any such attempted termination, modification or
surrender without Mortgagee’s written consent shall be void.
          (i) Mortgagor shall, within thirty (30) days after written request
from Mortgagee, use reasonable efforts to obtain from the lessor and deliver to
Mortgagee a certificate setting forth the name of the tenant under the Subject
Lease and stating that the Subject Lease is in full force and effect, is
unmodified or, if the Subject Lease has been modified, the date of each
modification (together with copies of each such modification), that no notice of
termination thereon has been served on Mortgagor, stating that to the best of
lessor’s knowledge, no default or event which with notice or lapse of time (or
both) would become a default is existing under the Subject Lease, stating the
date to which rent has been paid, and specifying the nature of any defaults, if
any, and containing such other statements and representations as may be
reasonably requested by Mortgagee.
          (j) So long as any of the Secured Obligations remain unpaid or
unperformed, the fee title to and the leasehold estate in the Leased Property
shall not merge but shall always be kept separate and distinct notwithstanding
the union of such estates in the lessor or Mortgagor, or in a third party, by
purchase or otherwise;
          (k) If Mortgagor acquires the fee title or any other estate, title or
interest in the property demised by the Subject Lease, or any part thereof, the
lien of this Mortgage shall attach to, cover and be a lien upon such acquired
estate, title or interest and the same shall thereupon be and become a part of
the Collateral with the same force and effect as if specifically encumbered
herein. Mortgagor agrees to execute all instruments and documents that Mortgagee
may reasonably require to ratify, confirm and further evidence the lien of this
Mortgage on the acquired estate, title or interest. Furthermore, Mortgagor
hereby appoints Mortgagee as its true and lawful attorneyinfact to execute and
deliver, following an Event of Default and during the continuance thereof, all
such instruments and documents in the name and on behalf of Mortgagor. This
power, being coupled with an interest, shall be irrevocable as long as any
portion of the Indebtedness remains unpaid; and
Mortgage

8

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

 

                         (l) If the Subject Lease shall be terminated prior to
the natural expiration of its term due to default by Mortgagor, and if, pursuant
to the provisions of the Subject Lease, Mortgagee or its designee shall acquire
from the lessor a new lease of the premises subject to the Subject Lease,
Mortgagor shall have no right, title or interest in or to such new lease or the
leasehold estate created thereby, or renewal privileges therein contained.
          2.7 Mortgagee in Possession. Mortgagee’s acceptance of this assignment
shall not, prior to entry upon and taking possession of the Collateral by
Mortgagee, be deemed to constitute Mortgagee a “mortgagee in possession,” nor
obligate Mortgagee to appear in or defend any proceeding relating to any of the
Leases or to the Collateral, take any action hereunder, expend any money, incur
any expenses, or perform any obligation or liability under the Leases, or assume
any obligation for any deposits delivered to Mortgagor by any lessee and not
delivered to Mortgagee. Mortgagee shall not be liable for any injury or damage
to person or property in or about the Collateral unless caused by the gross
negligence or intentional misconduct of Mortgagee. Notwithstanding anything to
the contrary contained herein, Mortgagee shall have no liability or obligation
under the Subject Lease by reason of its acceptance of this Mortgage. Mortgagee
shall be liable for the obligations of the tenant arising out of any Subject
Lease for only that period of time for which Mortgagee is in possession of the
premises demised thereunder or has acquired, by foreclosure or otherwise, and is
holding all of Mortgagor’s right, title and interest therein.
          2.8 Indemnification. Mortgagor hereby indemnifies, agrees to defend,
and hold Mortgagee, all agents for the Lenders, the Lenders, and any persons or
entities owned or controlled by, owning or controlling, or under common control
or affiliated with, Mortgagee, the directors, officers, partners, employees,
attorneys, agents and representatives of each of the foregoing persons and
entities, and the heirs, personal representatives, successors and assignees of
each of the foregoing persons and entities (collectively, the “Indemnified
Parties”) harmless from all liability, damage or expense imposed on or incurred
by the Indemnified Parties from any claims under the Leases, including any
claims by Mortgagor with respect to payments of Rents made directly to Mortgagee
during the continuation of an Event of Default and claims by tenants for
security deposits or for rental payments more than one (1) month in advance and
not delivered to Mortgagee, but excluding any liability, loss or damage which
may be incurred by the Indemnified Parties by reason of the Indemnified Parties’
gross negligence or willful misconduct.
          2.9 Records. If requested by Mortgagee, Mortgagor shall deliver to
Mortgagee a copy of the executed originals of all Leases and, after an Event of
Default, executed originals thereof in Mortgagor’s possession or control.
          2.10 Right to Rely. Mortgagor hereby authorizes and directs the
tenants under the Leases to pay Rents to Mortgagee upon written demand by
Mortgagee provided such demand shall be given only if an Event of Default exists
and is continuing, without further consent of Mortgagor, and the tenants may
rely upon any such written statement delivered by Mortgagee to the tenants
(including with respect to the existence and
Mortgage

9

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

 

continuation of an Event of Default). Any such payment to Mortgagee shall
constitute payment to Mortgagor under the applicable Leases.
ARTICLE 3
SECURITY AGREEMENT AND FINANCING STATEMENT
     3.1 Security Interest and Financing Statement. This Mortgage shall also be
a security agreement between Mortgagor and Mortgagee and a financing statement
covering the Collateral constituting personal property or fixtures (hereinafter
collectively called “UCC Collateral”) governed by the Uniform Commercial Code as
adopted by the State of New York (hereinafter called the “Code”) as the same may
be more specifically set forth in any financing statements delivered in
connection with this Mortgage, and as further security for the payment and
performance of the Secured Obligations, Mortgagor hereby grants to Mortgagee a
security interest in such portion of the Collateral. In addition to Mortgagee’s
other rights hereunder, Mortgagee shall have all rights of a secured party under
the Code. Mortgagor shall bear all costs of filing financing statements,
continuation and change statements, including all Code searches. If Mortgagee
should dispose of any of the Collateral comprising the UCC Collateral pursuant
to the Code after the occurrence and during the continuation of an Event of
Default, ten (10) days’ prior written notice by Mortgagee to Mortgagor shall be
deemed to be reasonable notice; provided, however, Mortgagee may dispose of such
property in accordance with the foreclosure procedures of this Mortgage in lieu
of proceeding under the Code. Mortgagee may from time to time file financing
statements (without the separate authorization or signature of Mortgagor) and
may execute and deliver all continuation statements, termination statements,
amendments, partial releases, or other instruments relating to all financing
statements by and between Mortgagor and Mortgagee.
     3.2 Notice of Changes. Mortgagor shall not, voluntarily or involuntarily,
change its name, identity or legal structure, unless Mortgagor shall have given
to Mortgagee prior written notice of any such proposed change and shall have
delivered to Mortgagee, prior to or concurrently with the occurrence of any such
change, all additional financing statements or other documents that may be
required to perfect, protect and preserve Mortgagee’s security interest with
respect to any Collateral described or referred to herein, all in form and
substance reasonably satisfactory to Mortgagee.
     3.3 Fixtures. The Property is specifically described on Exhibit B attached
hereto. Some of the items of the Collateral described herein constitute property
that is or will become fixtures related to the Property, and it is intended
that, as to those items, this Mortgage shall be effective as a financing
statement filed as a fixture filing from the date of its filing for record in
the real estate records where this Mortgage is recorded. For this purpose, the
following information is set forth:
Name and address of Mortgagor:
Mortgage

10

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

 

USAgencies, L.L.C.
8550 United Plaza Boulevard, Suite 805
Baton Rouge, Louisiana 70809
Attn: Mark E. Pape
Facsimile: (972) 728-6491
     Name and address of Mortgagee:
Credit Suisse, Cayman Islands Branch
Eleven Madison Avenue
New York, New York 10010
Attn: Julia Kingsbury
Facsimile: (212) 325-8304
     The record owner of the fee interest in the Property (other than the
Leasehold Property), and the record owner of the leasehold interest in the
Leasehold Property, is the Mortgagor.
ARTICLE 4
MORTGAGOR AND AGREEMENTS OF MORTGAGOR
     Mortgagor does hereby covenant and agree for the benefit of Mortgagee, and
as expressly specified, Mortgagor does hereby warrant and represent and covenant
to Mortgagee as of the date of recording this Mortgage as follows:
          4.1 Payment and Performance. Mortgagor shall make all payments on the
Secured Obligations when due and shall punctually and properly perform all of
Mortgagor’s covenants, obligations and liabilities under the Credit Agreement,
the Hedge Agreements, this Mortgage, and the other Loan Documents, subject to
any applicable cure or grace periods. Time shall be of the essence with respect
to this Mortgage.
          4.2 Title to Collateral and Lien of this Mortgage. Mortgagor
represents and warrants that Mortgagor holds and will maintain (subject to
dispositions permitted by the Credit Agreement) (i) a good and marketable fee
simple interest in the Property, other than the Leasehold Property, (ii) good
and marketable leasehold interest in the Leasehold Property, (iii) good title to
the Improvements thereon, (iv) good and marketable title to the FF&E. Mortgagor
further represents and warrants that this Mortgage shall constitute a first
priority Lien on the Property. Mortgagor will not create or suffer to exist any
Lien on its interest in the Property other than Liens permitted under the Credit
Agreement (the “Permitted Liens”). If the first priority Lien created by this
Mortgage or any other interest of Mortgagee in the Collateral shall be
endangered or shall be attacked, directly or indirectly, Mortgagor, at
Mortgagor’s expense, will take all necessary and proper steps for the defense of
such interest, including the employment of counsel satisfactory to Mortgagee,
the prosecution or defense of litigation, and the compromise or discharge of
claims made against such interest.
Mortgage

11

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

 

          4.3 Taxes on Mortgage. If at any time any law shall be enacted
imposing or authorizing the imposition of any tax, assessment or other fees upon
this Mortgage, or upon any rights, titles, liens or security interests created
hereby, Mortgagor shall pay all such taxes, assessments or other fees prior to
delinquency except to the extent any such tax, assessment or fee is being
Properly Contested as permitted by the Credit Agreement. If it is unlawful for
Mortgagor to pay such taxes, assessments or other fees, then Mortgagor agrees to
promptly reimburse Mortgagee for the amounts incurred by Mortgagee to pay such
taxes, assessments or other fees.
          4.4 Statements by Mortgagor. At the request of Mortgagee, Mortgagor
shall furnish promptly a written statement or affidavit, in such form as may be
reasonably required by Mortgagee, to confirm the unpaid principal balance of
each of the Loans and that there are no offsets or defenses against full payment
of the alleged Loans and performance of the terms of the Credit Agreement or, if
there are any such offsets or defenses, specifying them.
                         (a) Repair, Waste, Alterations, etc. Mortgagor shall
take all commercially reasonable actions required to keep the Property,
Improvements and FF&E in good operating order, repair and condition, ordinary
wear and tear excepted, and shall not commit or permit any waste thereof.
Mortgagor shall not suffer any lien of mechanics or materialmen to be perfected
by the filing of any lawsuit therefor respecting any part of the Collateral,
except for Permitted Encumbrances. If Mortgagor shall fail to discharge any such
lien that has become final by judgment, then, in addition to any other right or
remedy of Mortgagee, Mortgagee may, but shall not be obligated to, discharge the
same, either by paying the amount claimed to be due, or by procuring the
discharge of such lien by depositing in court a bond for the amount claimed, or
otherwise giving security for such claim, or by taking such action as may be
prescribed by law. Mortgagor shall have the right from time to time at its sole
cost and expense to make additions, alterations and changes, whether structural
or non-structural (hereinafter collectively referred to as “Alterations”) in or
to the Collateral; provided, however, that in all cases Mortgagor shall comply
with the other provisions of this Mortgage, the Credit Agreement, the Collateral
Documents and in all material respects with applicable law, and all Alterations
to any buildings included in the Collateral shall be located wholly within the
boundary lines of the Property. Notwithstanding anything herein to the contrary,
Mortgagor shall have the right to remove and replace FF&E as Mortgagor may deem
appropriate in the ordinary course of Mortgagor’s business and as otherwise
permitted under the Credit Agreement (including Section 6.05 thereof) or, in
connection with the Leased Property, under the Subject Lease.
          4.5 Hold Harmless. Mortgagor shall indemnify Mortgagee hereunder to
the extent set forth in Section 9.2B of the Credit Agreement. The provisions of
this Section 4.5 shall survive the payment in full of the Secured Obligations
and the release of this Mortgage as to events occurring and causes of action
arising before such payment and release.
          4.6 Further Assurances. At Mortgagee’s request, Mortgagor shall
execute, acknowledge, deliver, and record such further instruments and do such
further acts as
Mortgage

12

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

 

may be necessary, desirable or proper to carry out the purposes of this Mortgage
and to subject to the liens and security interests created thereby, any property
intended by the terms thereof to be covered thereby, including specifically but
without limitation any renewals, additions, substitutions, replacements,
improvements or appurtenances to the Collateral.
     4.7 Recording and Filing. Mortgagor shall cause this Mortgage and any
related financing statements and all amendments, supplements and extensions
thereto and substitutions therefor to be recorded, filed, re-recorded and
refiled, as necessary to carry out the purpose of this Mortgage and the Credit
Agreement, and shall pay all such recording, filing, re-recording and refiling
fees, title insurance premiums and other charges.
     4.8 Payment of Debts. Mortgagor shall promptly pay when due all its
obligations regarding the ownership and operation of the Collateral except any
such obligations which are being Properly Contested in good faith by appropriate
proceedings and as to which Mortgagor shall have set aside adequate reserves in
accordance with GAAP and to the extent required by the terms of the Credit
Agreement or the other Collateral Documents.
     4.9 Environmental Compliance. Mortgagor shall promptly take any and all
necessary remedial action in connection with the presence, handling, storage,
use, disposal, transportation or Release or threatened Release of any Hazardous
Materials on, under or affecting any Real Property Asset in order to comply in
all material respects with all applicable Environmental Laws and Governmental
Authorizations. In the event the Mortgagor undertakes any Cleanup action with
respect to the presence, Release or threatened Release of any Hazardous
Materials on or affecting any Real Property Asset, Mortgagor shall conduct and
complete such Cleanup action in material compliance with all applicable
Environmental Laws, and in accordance with the policies, orders and directives
of all federal, state and local governmental authorities except when, and only
to the extent that, the Mortgagor’s liability for such presence, handling,
storage, use, disposal, transportation or Release or threatened Release of any
Hazardous Materials is being Properly Contested.
     4.10 Enforceability. This Mortgage constitutes a legal, valid and binding
obligation of Mortgagor, enforceable against Mortgagor in accordance with its
terms, except as enforceability may be limited by the effect of applicable
bankruptcy, insolvency, reorganization, moratorium or, other similar laws
affecting creditors’ rights generally or the application of equitable
principles.
     4.11 No Violation; No Consents. The execution, delivery and performance of
this Mortgage by Mortgagor will not violate, conflict with or constitute a
breach of any of the terms or provisions of, or a default under (or an event
that, with notice or the lapse of time, or both, would constitute a default), or
require consent under, or result in the imposition of a lien on any properties
of Mortgagor or an acceleration of indebtedness pursuant to: (i) Mortgagor’s
operating agreement or other organizational documents, (ii) any bond, debenture,
note, credit agreement, mortgage, Mortgage or other agreement or
Mortgage

13

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

 

instrument to which Mortgagor is a party or by which Mortgagor or Mortgagor’s
property is or may be bound, (iii) any statute, rule or regulation applicable to
Mortgagor, or any of its assets or properties, or (iv) any judgment, order or
decree of any court or governmental agency or authority having jurisdiction over
Mortgagor, or any of its assets or properties except for those which, in the
case of clauses (ii), (iii) and (iv) only, could not reasonably be expected to
have a Material Adverse Effect. No consent, approval, authorization or other
action by, or order of, or filing, registration, qualification, license or
permit of or with, any court or governmental agency, body or administrative
agency is required for the execution, delivery and performance by Mortgagor of
this Mortgage other than those which already have been obtained and delivered to
Mortgagee. No consents or waivers from any other person or entity are required
for the execution, delivery and performance by Mortgagor of this Mortgage, other
than those which already have been obtained and delivered to Mortgagee.
          4.12 Security Interest. The Collateral is owned or, as to the Leased
Property, leased solely by Mortgagor. As of the date hereof, (i) Mortgagee has
either filed or caused to be filed or submitted for filing all financing
statements and other instruments necessary to perfect its security interest in
the Collateral (other than the RP Collateral) (ii) Mortgagee’s security
interests in the Collateral (other than the RP Collateral) are valid first
priority Liens and, upon the filings referenced in clause (i) above, will be
perfected, (iii) there are no other liens on the Collateral or any portion
thereof except for the Permitted Encumbrances, and (iv) no effective financing
statement or similar instrument exists or is on file in any public office with
respect to the Collateral, except for financing statements filed in connection
with the Credit Agreement.
          4.13 Disposition of Collateral. Mortgagor will not sell, transfer,
assign, pledge, collaterally assign, exchange or otherwise dispose of the
Collateral, except as expressly permitted by the Credit Agreement. If the
Collateral, or any part thereof, is sold, transferred, assigned, exchanged, or
otherwise disposed of in violation of these provisions, the security interests
of Mortgagee shall continue in such Collateral or part thereof notwithstanding
such sale, transfer, assignment, exchange or other disposition.
ARTICLE 5
EVENTS OF DEFAULT
     The occurrence of any one of the following shall be a default hereunder
(“Event of Default”):
          5.1 Nonperformance of Covenants under this Mortgage. Mortgagor fails
to perform or observe any covenant or agreement contained in this Mortgage and
such failure continues for thirty (30) days after written notice of
non-performance thereof from Mortgagee.
          5.2 False Representation. Any representation or warranty in this
Mortgage is false, misleading or erroneous in any material respect when made.
Mortgage

14

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

 

          5.3 Events of Default under the Credit Agreement. The occurrence of
any Event of Default under the Credit Agreement, as the term “Event of Default”
is defined thereunder. Mortgagor acknowledges that this provision has the effect
of cross-defaulting this Mortgage with various collateral, guaranty and other
documents respecting the Credit Agreement.
          5.4 Transfer of the Property. Any transfer of Mortgagor’s interest
with respect to all or any part of the Property, Improvements or FF&E other than
dispositions expressly permitted under the Loan Documents.
          5.5 Performance of Defaulted Acts. From and after the occurrence and
during the continuance of an Event of Default, Mortgagee may, but need not, make
any payment or perform any act herein required of Mortgagor in any form and
manner deemed expedient, including making full or partial payments of principal
or interest on prior encumbrances, if any, making rental payments and
purchasing, discharging, compromising or settling any tax lien or other prior
lien or title or claim thereof, or redeeming from any tax sale or forfeiture
affecting the Collateral or contesting any tax or assessment. All moneys paid
for any of the purposes herein authorized and all expenses paid or incurred in
connection therewith, including reasonable attorneys’ fees, shall be included
among the Secured Obligations and shall be due and payable upon demand and with
interest thereon from the date of such payment or expense at the rate of
interest payable after default under the terms of the Credit Agreement. Inaction
of Mortgagee shall never be considered as a waiver of any right accruing to it
hereunder on account of any default on the part of Mortgagor. Mortgagee, making
any payment hereby authorized relating to taxes or assessments, may do so
according to any bill, statement or estimate procured from the appropriate
public office without inquiry into the accuracy of such bill, statement or
estimate or into the validity of any tax, assessment, sale, forfeiture, tax lien
or title or claim thereof.
ARTICLE 6
REMEDIES
          6.1 Exercise of Specific Remedies. Upon the occurrence of any of Event
of Default, and during the continuation thereof, Mortgagee shall be entitled to
exercise all rights and remedies of a mortgagee or secured party under the laws
of the State of Louisiana (“Louisiana Law”), including, without limitation, the
following rights and remedies:
                         (a) Mortgagee may deem the Secured Obligations
immediately due and payable without notice or declaration to the Mortgagor and
without presentment, demand or other notice of any kind, all of which are hereby
waived by Mortgagor.
                         (b) Mortgagee shall have the right to foreclose this
Mortgage by judicial procedure as provided by Louisiana Law, whether ordinary or
executory, for the foreclosure of mortgages on real property. For the purposes
of foreclosure under Louisiana executory process procedures, Mortgagor hereby
acknowledges the Secured Obligations and
Mortgage

15

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

 

confesses judgment in favor of Mortgagee for the full and true sum of the
Secured Obligations. Furthermore, any and all declarations of fact made by
authentic act before a notary public in the presence of two witnesses by a
person declaring that such facts lie within his or its knowledge, shall
constitute authentic evidence of such facts for the purpose of executory
process. The Mortgagor specifically agrees that such an affidavit by a
representative of Mortgagee as to the existence, amount, terms and maturity of
the secured indebtedness and of a default hereunder shall constitute authentic
evidence of such facts for the purpose of executory process.
          (c) Mortgagee shall, to the extent permitted by Louisiana Law, have
the right and power, but not the obligation, with or without the appointment of
a keeper, to enter upon and take immediate possession of the RP Collateral or
any part thereof, to exclude Mortgagor therefrom, to hold, use, operate, manage
and control such real property, to make all such repairs, replacements,
alterations, additions and improvements to the same as Mortgagee may deem
proper, and to demand, collect and retain the Rents as provided in Article 2
hereof.
          (d) Mortgagors agree that, in the event the Collateral, or any part
thereof, is seized as an incident to an action for the recognition or
enforcement of this Mortgage by executory process, ordinary process,
sequestration, writ of fieri facias or otherwise, the court issuing any such
order shall, if petitioned for by Mortgagee, direct the applicable sheriff to
appoint as a keeper of the Property, Mortgagee or any agent designated by
Mortgagee or any person named by Mortgagee at the time such seizure is effected.
This designation is pursuant to Louisiana Revised Statutes 9:5131 through 9:5135
and 9:5136 through 9:5140.2, as the same may be amended, and Mortgagee shall be
entitled to all the rights and benefits afforded thereunder. It is hereby agreed
that the keeper shall be entitled to receive reasonable compensation in addition
to its costs and expenses incurred in the administration or preservation of said
Property, Collateral or RP Collateral. The designation of keeper made herein
shall not be deemed to require Mortgagee to provoke the appointment of such a
keeper.
          (e) Mortgagee shall have all of the rights and remedies of a secured
creditor and Mortgagee granted by New York Law, including the Code, as more
particularly provided in Article 3 above and shall, to the extent permitted by
New York Law and, solely with respect to the Leased Property, the Subject Lease
as affected by that certain Landlord Estoppel and Agreement executed by the
landlord under the Subject Lease, have the right and power, but not the
obligation, to take possession of the UCC Collateral, and for that purpose
Mortgagee may enter upon the Property on which any or all of the UCC Collateral
is located and take possession of and operate such UCC Collateral or remove the
same therefrom. After the occurrence and during the continuation of an Event of
Default, Mortgagee may require Mortgagor to assemble the UCC Collateral and make
it available to Mortgagee at a place to be designated by Mortgagee which is
reasonably convenient to both parties.
          (f) Mortgagee, in its sole discretion, may elect to treat the fixtures
constituting a part of the Improvements as either RP Collateral or UCC
Collateral and proceed to exercise such rights and remedies as apply to such
type of collateral, subject, solely with respect to the Leased Property, to the
provisions of the Subject Lease as affected by that certain Landlord Estoppel
and Agreement executed by the landlord under the Subject Lease.
Mortgage

16

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

 

          (g) Mortgagee may exercise the power of sale granted by this Mortgage
and, subject to the mandatory requirements of Louisiana Law, may sell or have
sold the RP Collateral or interests therein or any part thereof at one or more
public sales, as an entirety or in parcels, at such place or places and
otherwise in such manner and upon such notice as may be required by Louisiana
Law, by this Mortgage or, in the absence of any such requirement, as Mortgagee
may deem appropriate. Mortgagor shall make a conveyance to the purchaser or
purchasers thereof without, to the extent permitted by Louisiana Law, any
warranties express or implied. Mortgagee may postpone the sale of such RP
Collateral or interests therein or any part thereof by public announcement at
the time and place of such sale, and from time to time thereafter may further
postpone such sale by public announcement made at the time of sale fixed by the
preceding postponement. Sale of a part of the RP Collateral or interests therein
or any defective or irregular sale hereunder will not exhaust the power of sale,
and sales may be made from time to time until all such property is sold without
defect or irregularity or the Secured Obligations are paid in full. Mortgagee
shall have the right to appoint one or more attorney(s)-in-fact to act in
conducting the foreclosure sale and executing a deed to the purchaser. It shall
not be necessary for any of the Collateral at any such sale to be physically
present or constructively in the possession of Mortgagee and Mortgagor shall
deliver all of the Collateral to the purchaser at such sale. If it should be
impossible or impracticable to take actual delivery of the Collateral, then the
title and right of possession to the Collateral shall pass to the purchaser at
such sale as completely as if the same had been actually present and delivered.
          (h) Mortgagee (or any successor to Mortgagee) shall have the right to
become the purchaser at any sale made pursuant to the provisions of this
Article 6 and shall have the right to credit upon the amount of the bid made
therefor the amount payable to it out of the net proceeds of such sale. All
other sales shall be, to the extent permitted by Louisiana Law, on a cash basis.
Mortgagor does hereby ratify and confirm all legal acts that Mortgagee may do in
carrying out the provisions of this Mortgage.
          (i) Any sale of the Collateral or any part thereof pursuant to the
provisions of this Article 6 will operate to divest all right, title, interest,
claim and demand of Mortgagor in and to the property sold and will be a
perpetual bar against Mortgagor and all persons claiming by or through or under
Mortgagor, subject to Louisiana Law. Mortgagee is hereby irrevocably appointed
the true and lawful attorney-in-fact of the Mortgagor, in the Mortgagor’s name
and stead, for the purpose of effectuating any such sale, to execute and deliver
all necessary deeds, conveyances, assignments, bills of sale and other
instruments with power to substitute one or more persons with like power.
Nevertheless, if requested by Mortgagee so to do, Mortgagor shall join in the
execution, acknowledgment and delivery of all proper conveyances, assignments
and transfers of the property so sold. Any purchaser at a foreclosure sale will
receive possession of the property purchased at the earliest time permitted
under the Louisiana Law, and Mortgagor agrees that if Mortgagor retains
possession of the property or any part thereof subsequent to such sale,
Mortgagor will be considered a tenant at sufferance of the purchaser, and will,
if Mortgagor remains in possession after demand to remove, be guilty of forcible
detainer and will be subject to eviction and removal, forcible or otherwise,
with or without process of law, and all damages to Mortgagor by reason thereof
are hereby expressly waived by Mortgagor, to the extent permitted by Louisiana
Law.
Mortgage

17

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

 

                         (j) Mortgagee, at its option, is authorized to cause
foreclosure of this Mortgage subject to the rights of any tenants under Leases,
and the failure to make any such tenants parties to any such foreclosure
proceedings and to foreclose their rights will not be, nor be asserted to be by
Mortgagor, a defense at any proceedings instituted by Mortgagee to collect the
Secured Obligations.
          6.2 Cost and Expenses. All costs and expenses (including reasonable
attorneys’ fees and legal expenses, title premiums, title report and work
charges, filing fees, and mortgages, mortgage registration, transfer, stamp and
other excise taxes, if any) incurred by Mortgagee in perfecting, protecting or
enforcing its rights hereunder, whether or not an Event of Default shall have
occurred, shall be a demand obligation of Mortgagor to Mortgagee, as applicable,
and shall bear interest if unpaid commencing thirty (30) days following demand
(except if an Event of Default exists and is continuing in which case interest
shall begin to accrue immediately upon the incurrence of such cost or expense)
at the highest rate then applicable under the Credit Agreement with respect to
the Secured Obligations, all of which shall be part of the Secured Obligations.
          6.3 Application of Proceeds. The proceeds of any sale of the
Collateral or any part thereof made pursuant to this Article 6 shall be applied
in accordance with the terms of the Credit Agreement and the Security Documents,
including but not limited to Section 6.5 of the Guarantee and Collateral
Agreement.
          6.4 Combination of Remedies. From and after the occurrence and during
the continuance of an Event of Default, Mortgagee may, at its option, in such
order, and utilizing such combinations of remedies with respect to the
Collateral and the other property of Mortgagor encumbered by a Collateral
Document as Mortgagee shall so elect, pursue its remedies against (a) the
Collateral, individually, or any other property of a Loan Party encumbered by a
Collateral Document, individually, (b) the Collateral and any combination of the
other property of a Loan Party encumbered by a Collateral Document, (c) the
Collateral and all of the other property of Mortgagor and any other Loan Party
encumbered by a Collateral Document, or (d) all or any combination of the other
property of Mortgagor and the other Loan Parties encumbered by a Collateral
Document, in separate proceedings or in one proceeding in any order which
Mortgagee deems appropriate, all to the fullest extent permitted under Louisiana
Law.
          6.5 Advice of Counsel; Waivers. Mortgagor acknowledges that it is
aware of and has had the advice of counsel of its choice with respect to its
rights, under Louisiana Law, with respect to this Mortgage, the Secured
Obligations and the Collateral. Except to the extent expressly set forth in the
Credit Agreement or any other Loan Document, Mortgagor hereby agrees that
Mortgagor shall not at any time hereafter have or assert, and hereby waive to
the extent permitted under Louisiana Law, any right under any law pertaining to:
marshalling, whether of assets or liens, the sale of property in the inverse
order of alienation, the administration of estates of decedents, valuation,
stay, extension, reinstatement, redemption, subrogation, or abatement,
suspension, deferment, diminution or reduction of any of the Secured Obligations
(including setoff), now or hereafter in force. Mortgagor hereby further waives
(i) in favor of Mortgagee any and all homestead
Mortgage

18

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

 

exemptions and other exemptions of seizure or otherwise to which the Mortgagor
is or may be entitled under the constitution and statutes of the State of
Louisiana insofar as the Collateral is concerned and (ii) (a) the benefit of
appraisement as provided in Louisiana Code of Civil Procedure Articles 2332,
2336, 2723, 2724, and all other laws conferring the same; (b) the demand and
three (3) days’ delay according by Louisiana Code of Civil Procedure
Article 2721; (c) the notice of seizure required by Louisiana Code of Civil
Procedure Articles 2293 and 2721; (d) the three (3) days’ delay provided by
Louisiana Code of Civil Procedure Articles 2331 and 2722; and (e) the benefit of
the other provisions of Louisiana Code of Civil Procedure Articles 2331, 2722
and 2723, not specifically mentioned above.
ARTICLE 7
GENERAL PROVISIONS
     7.1 Mortgagor. This Mortgage and all provisions hereof shall extend to and
be binding upon Mortgagor and all persons claiming under or through Mortgagor.
Whenever in this Mortgage there is reference made to any of the parties hereto,
such reference shall be deemed to include, wherever applicable, a reference to
the heirs, executors and administrators or successors and assigns (as the case
may be) of such party. Mortgagor’s successors and assigns shall include a
receiver, trustee or debtor-in-possession of or for Mortgagor. Mortgagee’s
assigns and successors shall include any successor Collateral Agent under the
Credit Agreement.
     7.2 Cumulative Rights Waiver; Modifications. Each and every right, power
and remedy hereby granted to Mortgagee shall be cumulative and not exclusive,
and each and every right, power and remedy, whether specifically hereby granted
or otherwise existing, may be exercised from time to time and as often and in
such order as may be deemed expedient by Mortgagee and the exercise of any such
right, power or remedy will not be deemed a waiver of the right to exercise, at
the same time or thereafter, any other right, power or remedy. No delay or
omission by Mortgagee in the exercise of any right, power or remedy will impair
any such right, power or remedy or operate as a waiver thereof or of any other
right, power or remedy then or thereafter existing. Any and all covenants of
Mortgagor in this Mortgage may from time to time, by instrument in writing
signed by Mortgagee, be waived to such extent and in such manner as Mortgagee
may desire, but no such waiver will ever affect or impair the rights of
Mortgagee hereunder, except to the extent specifically stated in such written
instrument. All changes to and modifications of this Mortgage must be in writing
and signed by Mortgagor and Mortgagee.
     7.3 Additional Documents. Mortgagor agrees that upon request of Mortgagee
it will from time to time execute, acknowledge and deliver all such additional
instruments and will do or cause to be done all such further acts and things as
may be reasonably necessary fully to effectuate the intent of this Mortgage.
     7.4 Notices. All notices and other communications under this Mortgage shall
be in writing, except as otherwise provided in this Mortgage. A notice, if in
writing, shall
Mortgage

19

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

 

be considered as properly given if given in accordance with the provisions of
the Credit Agreement.
     7.5 Choice of Law. Without regard to principles of conflicts of law, this
Mortgage shall be construed under and governed by the laws of the State of New
York applicable to contracts made and to be performed entirely within such state
and the laws of the United States of America. Notwithstanding the foregoing:
(i) Louisiana Law shall govern with respect to procedural and substantive
matters relating to the creation, perfection, priority and enforcement of the
liens created by this Mortgage on the RP Collateral and (ii), if upon judicial
foreclosure and sale in accordance with Louisiana Law a deficiency exists,
Mortgagor agrees that Mortgagee shall have the right to seek a deficiency
judgment against Mortgagor. The terms and provisions set forth in Exhibit C
attached hereto are hereby incorporated by reference as though fully set forth
herein. In the event of any conflict between the terms and provisions contained
in the body of this Mortgage and terms and provisions set forth in Exhibit C,
the terms and provisions set forth in Exhibit C shall govern and control.
     7.6 Time of Essence. Time is of the essence of this Mortgage and of every
part hereof of which time is an element.
     7.7 Severability. If any provision hereof or of any of the other documents
constituting, evidencing or creating all or any part of the Secured Obligations
is invalid or unenforceable in any jurisdiction, the other provisions hereof or
of said documents shall remain in full force and effect in such jurisdiction.
The invalidity of any provision of this Mortgage in any jurisdiction will not
affect the validity or enforceability of any such provision in any other
jurisdiction. If any lien, encumbrance or security interest evidenced or created
by this Mortgage is invalid or unenforceable, in whole or in part, as to any
part of the Secured Obligations, or is invalid or unenforceable, in whole or in
part, as to any part of the Collateral, such portion, if any, of the Secured
Obligations as is not secured by all of the Collateral hereunder shall be paid
prior to the payment of the portion of the Secured Obligations secured by all of
the Collateral, and all payments made on the Secured Obligations (including cash
and/or property received in connection with sales of Collateral pursuant to
Article 3 hereof) shall, unless prohibited by applicable law or unless
Mortgagee, in its sole and absolute discretion, otherwise elects, be deemed and
considered to have been first paid on and applied to payment in full of the
unsecured or partially secured portion of the Secured Obligations, and the
remainder to the secured portion of the Secured Obligations.
     7.8 Mortgagee’s Powers. Without affecting the liability of any other person
liable for the payment of any Obligation herein mentioned, and without affecting
the lien or charge of this Mortgage upon any portion of the Collateral not then
or theretofore released as security for the full amount of all unpaid Secured
Obligations, Mortgagee may, from time to time and without notice, (a) release
any persons liable, (b) extend the maturity or alter any of the terms of any
such Obligation, (c) permit the issuance of additional Loans and/or indebtedness
under the Credit Agreement, (d) grant other indulgences, (e) release or
reconvey, or cause to be released or reconveyed at any time at
Mortgage

20

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

 

Mortgagee’s option any parcel, portion or all of the Collateral, (f) take or
release any other or additional security for any obligation herein mentioned, or
(g) make compositions or other arrangements with Mortgagor in relation thereto.
     7.9 Enforceability of Mortgage. This Mortgage is deemed to be and may be
enforced from time to time as an assignment, chattel mortgage, contract,
mortgage, deed to secure debt, fixture filing, real estate mortgage, or security
agreement, and from time to time as any one or more thereof, as is appropriate
and permitted under applicable law. A carbon, photographic or other reproduction
of this Mortgage or any financing statement in connection herewith shall be
sufficient as a financing statement for any and all purposes to the fullest
extent permitted under applicable law.
     7.10 Captions. The captions or headings at the beginning of Articles and
Sections hereof are for the convenience of the parties and are not part of this
Mortgage.
     7.11 Attorneys’ Fees. In connection with any enforcement of its rights
under this Mortgage (and in addition to all rights for fees and costs provided
for under the Credit Agreement), Mortgagor promises to pay all costs of
enforcement and collection, including reasonable attorneys’ fees, whether or not
such enforcement and collection includes the filing of a lawsuit.
     7.12 Relationship of Parties. The relationship between Mortgagor and
Mortgagee is that of borrower and lender only and neither Mortgagor nor
Mortgagee is, nor shall it hold itself out to be, the agent, employee, joint
venturer or partner of the other.
     7.13 Collateral Agent. The Collateral Agent will hold all items of
Collateral at any time received under this Mortgage or the other Loan Documents
in accordance with the terms of the Credit Agreement. It is expressly understood
and agreed that the obligations of Mortgagee in its capacity as the Collateral
Agent (and holder of the Collateral and interests therein and with respect to
the disposition thereof) are only those expressly set forth in the Credit
Agreement.
     7.14 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE LOAN DOCUMENTS BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Mortgage

21

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

 

     7.15 Credit Agreement Controlling. In the event that any of the terms or
provisions contained herein are inconsistent with the terms and provisions in
the Credit Agreement, the terms and provisions of the Credit Agreement shall
govern and control.
[SIGNATURE PAGE FOLLOWS.]

22

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

 

Exhibit G
     THUS DONE AND PASSED in                     ,                    , on the
___ day of                       2007, in the presence of the undersigned
competent witnesses, who hereunto sign their names with Mortgagor and me,
Notary, after due reading of the whole.

              WITNESSES:   MORTGAGOR:
 
                      Name:       USAGENGIES, L.L.C., a Louisiana limited      
  liability company
 
           
 
           
 
      By:              
Name:
      Name:    
 
           

_____________________________________________
                           NOTARY PUBLIC
Name: __________________________________________
Notary ID/Bar Roll No. ____________________________
My Commission Expires ___________________________
H-1

 

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

 

EXHIBIT A
Resolutions
Mortgage

2

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

 

EXHIBIT B
Legal Description of the Real Property
Parcel A
(1) That certain portion of former North 15th Street which lies between Lots 7,
8, 9 and a portion of Lot 10, Square 17 or 75 of the Suburb Waller Subdivision
on the West and Lots 1, 12 and a portion of Lot 11, Square 20 or 76 of the
Buhler Town subdivision on the East, commencing at the intersection of the South
right-of-way line of Main Street with the inside face of the curb of the portion
of the former North 15th Street which is 13.15 feet east from the Northeast
corner of Lot 7, Square 17 or 75, Suburb Waller; thence southerly a distance of
240 feet; thence easterly, perpendicular to the South right-of-way line of Main
Street, 37.46 feet to a point and corner on the East right-of-way line of former
North 15th Street; thence northerly along the East right-of-way line of former
North 15th Street a distance of 240 feet to the intersection of the South
right-of-way line of Main Street with the East right-of-way line of former North
15th Street; thence westerly along the South right-of-way line of Main Street,
36.84 feet to the point of beginning, as more particularly shown by a survey
dated October 20, 2005 by Evans-Graves Engineers, Inc. entitled “Map Showing
Survey of All of SQ. 20 or 76, All of SQ. 21 or 77 and Lots 1 Thru 4, A Portion
of Lot 5 and Lots 6, 7, 11 & 12, and Lots A & B, SQ. 24 or 78, Buhler Town and
Portion of Former North 15th Street and Former North 16th Street Right-Of-Ways,
Located in the Original City of Baton Rouge, T7S-R1W, Greensburg Land District,
East Baton Rouge Parish, Louisiana for USAgencies, L.L.C.”
(2) Lots 1 through 12, Square 20 or 76, Buhler Town, Lots 1 through 12, Square
21 or 77, Buhler Town and an undesignated parcel of ground (which is a portion
of former North 16th Street lying between the South boundary line of Main Street
and the North boundary line of Laurel Street) situated between the East side of
Lots 5, 6, and 7 of Square 20 or 76, Buhler Town and the West side of Lots 1, 11
and 12 of Square 21 or 77, Buhler Town, said lots and undesignated parcel being
bounded on the North by Main Street, on the East by 17th Street, on the South by
Laurel Street and on the West by 15th Street (and the portion of the former
North 15th Street) as shown on a survey dated October 20, 2005 by Evans-Graves
Engineers, Inc. entitled “Map Showing Survey of All of SQ. 20 or 76, All of SQ.
21 or 77 and Lots 1 Thru 4, A Portion of Lot 5 and Lots 6, 7, 11 & 12, and Lots
A & B, SQ. 24 or 78, Buhler Town and Portion of Former North 15th Street and
Former North 16th Street Right-Of-Ways, Located in the Original City of Baton
Rouge, T7S-R1W, Greensburg Land District, East Baton Rouge Parish, Louisiana for
USAgencies, L.L.C.”
Parcel B
Mortgage

3

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

 

Lots 1, 2, 3, 4, 5, 6, 8, 9, 10, 11 and 12, Square 22 or 90, Buhler Town, City
of Baton Rouge, East Baton Rouge Parish, Louisiana, as shown on a survey dated
October 20, 2005 by Evans-Graves Engineers, Inc. entitled “Map Showing Survey of
Lots 1 Thru 6, and Lots 8 Thru 12, SQ. 22 or 90, Buhler Town, Located in the
Original City of Baton Rouge, T7S-R1W, Greensburg Land District, East Baton
Rouge Parish, Louisiana for USAgencies, L.L.C.”
Parcel C
Lots 1, 2, 3, 4, 6 and 7, Lots A and B of a resubdivision of Lots 8, 9 and 10,
Lots 11 and 12, and the West 2 feet, 10 inches of Lot 5, Square 24 or 78, Buhler
Town, City of Baton Rouge, East Baton Rouge Parish, Louisiana, as shown on a
Plot Plan and Survey of the Subdivision of Lots 8, 9, 10 of Square 24 or 78
Buhler Town in the City of Baton Rouge, Louisiana, into Lots ‘A’ & ‘B’” dated
March 11, 1958 and recorded as Original 55, Bundle 4148, official records of
East Baton Rouge Parish, Louisiana; and as shown by Survey dated October 20,
2005 by Evans-Graves Engineers, Inc. entitled, “Map Showing Survey of All of SQ.
20 or 76, All of SQ. 21 or 77 and Lots 1 Thru 4, A Portion of Lot 5 and Lots 6,
7, 11 & 12, and Lots A & B, SQ. 24 or 78, Buhler Town and Portion of Former
North 15th Street and Former North 16th Street Right-Of-Ways, Located in the
Original City of Baton Rouge, T7S-R1W, Greensburg Land District, East Baton
Rouge Parish, Louisiana for USAgencies, L.L.C.”
Parcel D
The South 112 feet of Lot 1, the South 112 feet of Lot 2 and the South 112 feet
of the West 6 feet of Lot 3, the East 51 feet of Lot 3, and Lots 4, 5 and 6 of
Square 3 or 301 of Gusman Town & Lefever Town, City of Baton Rouge, East Baton
Rouge Parish, Louisiana, as shown on a survey dated October 20, 2005 by
Evans-Graves Engineers, Inc. entitled “Map Showing Survey of A Portion of Lots 1
Thru 3 and Lots 4, 5, & 6, SQ. 3 or 301, Lefever Town, Located in the Original
City of Baton Rouge, T7S-R1W, Greensburg Land District, East Baton Rouge Parish,
Louisiana for USAgencies, L.L.C.”
Parcel E
Private Air Space Servitude for Bridge (“Overhead Walk”) connecting the
Buildings situated on Square 20 or 76, Buhler Town and Square 17 or 75 Suburb
Waller, over and across a portion (which portion is designated by the
cross-hatched area on the Survey referenced below) of strip of land which lies
between the asphalt paving on former North 15th Street and the building on
Square 17 or 75, Suburb Waller, located on Lots 5, 6, 7, 11 and 12 and the East
150 feet of Lots 8 and 9 and the North 40 feet of Lot 10, square 17 or 75,
Suburb Waller, City of Baton Rouge, which strip of land has a width of
approximately 13.30 feet on the south and 13.15 feet on the North and a length
of 240 feet, as more particularly shown by a
Mortgage

4

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

 

survey dated October 20, 2005, by Evans-Graves Engineers, Inc. entitled “Map
Showing Survey of All of SQ. 20 or 76, All of SQ. 21 or 77 and Lots 1 Thru 4, A
Portion of Lot 5 and Lots 6, 7, 11 & 12, and Lots A & B, SQ. 24 or 78, Buhler
Town and Portion of Former North 15th Street and Former North 16th Street
Right-Of-Ways, Located in the Original City of Baton Rouge, T7S-R1W, Greensburg
Land District, East Baton Rouge Parish, Louisiana for USAgencies, L.L.C.”
created by Agreement of Private Air Servitude filed in the records of East Baton
Rouge Parish, Louisiana as Original 447, Bundle 11784.
Parcel F
Leasehold Interest under a Lease of Air Space dated May 28, 1986 from the City
of Baton Rouge and the Parish of East Baton Rouge to Goudchaux/Maison Blanche,
Inc. covering the following described property for a term of 99 years commencing
on March 1, 1986 and ending on February 28, 2085, which was recorded as Original
858, Bundle 9837 of the records of East Baton Rouge Parish Clerk of Court:
A certain portion or envelope of air space (“Space”) hereinafter described,
being immediately contiguous and adjacent to the East line of Lot 5, Square 21
(77) Devall Town, more particularly described as follows:
Commencing in a horizontal plane above North 17th Street at an elevation of 70.4
feet above mean sea level (determined by a reference to East Baton Rouge Parish
Benchmark PBM Post Office-38, copper disk in front of City Club Building (Old
Post Office), East Baton Rouge elevation — 58.081 feet above mean sea level and
extending upward to 74.5 feet above mean sea level with reference to the same
point, and located horizontally as follows: from the Northeast corner of Lot 5,
Square 21 (77) Devall Town, southerly along the lot line (right of way line), 50
feet, 6 inches to POINT OF BEGINNING, thence continue southerly along the lot
line (right of way line), 42 feet, 6 inches, then almost across the street to a
point 51 feet, 6 inches east of the east line of Lot 5 and 78 feet, 0 inches,
south of the South right-of-way line of Main Street; thence Northerly parallel
to the West right-of-way line of North 17th Street, 42 feet, 6 inches, then
return across the street to POINT OF BEGINNING, and extending down from the air
space envelope into the ground below, two supporting columns on the East side of
the street, each not more than 12.56 square feet in area, and not less than 14
feet 6 inches outside of the presently paved roadway, and one additional column,
of similar dimension and similarly located, but free standing, all as shown on
the plan recorded as Original 858, Bundle 9837 of the official records of the
East Baton Rouge Clerk of Court.
Said Lease of Air Space was assigned to Renaissance Park, LLC by Exchange
Support Services, Inc. pursuant to one certain Assignment and
Mortgage

5

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

 

Assumption of Air Space Leases dated September 20, 2004 filed and recorded with
the Clerk and Recorder of East Baton Rouge Parish as Original 797, Bundle 11655
on September 30, 2004; and further assigned to USAgencies, L.L.C. by Assignment
and Assumption of City/Parish Air Space Lease dated November 10, 2005 filed and
recorded with the Clerk and Recorder of East Baton Rouge Parish as Original 440,
Bundle 11784 on November 14, 2005.
Parcel G
Together with all buildings and improvements situated on the lots, parcels of
ground and air space described above, including the enclosed Overhead Walk that
connects the Buildings situated on Square 20 or 76, Buhler Town and Square 17 or
75, Suburb Waller, excluding, however any rights appurtenant to the four-story
building located on Square 17, Suburb Waller (“Renaissance Park West”) or
appurtenant to the parking areas located on Square 18, Suburb Waller, and on
Lots 2, 3, 4 and 5 of Square 19, Buhler Town.
Mortgage

6

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

 

EXHIBIT C
Local Law Provisions
     Section 1.1 Certificates. The production of mortgage, conveyance, tax
research or other certificates is waived by consent, and Mortgagee and Mortgagor
agree to hold each of the above-referenced Notaries Public harmless for any
failure to procure and attach same.
     Section 1.2 No Paraph. For purposes of La. R.S. § 9:5556 and other
applicable law, the parties declare that none of the indebtedness secured by
this Mortgage and no note or other written obligation evidencing the same has
been “paraphed” for identification with this Mortgage.
     Section 1.3 Multiple Originals. Mortgagor authorizes Mortgagee to file
multiple originals, photocopies, carbon copies, or facsimile copies of this
Mortgage or financing statements with the appropriate filing officer in the
State of Louisiana pursuant to the provisions of the Code.
     Section 1.4 Taxpayer Identification Number. The last four digits of
Mortgagor’s taxpayer identification number is accurately set out in the
appearance captions of this Mortgage. Mortgagor will not change its taxpayer
identification number or its name, identity or corporate structure so that any
financing statement filed in connection herewith may become seriously misleading
unless and until it notifies Mortgagee in writing and executes all new
appropriate financing statements or other such documents as Mortgagee may
require, with Mortgagor being required to pay the cost of such documentation and
the filing thereof as provided above.
     Section 1.5 Certain Louisiana References. Each reference to a “lien” will
include a reference to a “privilege,” “mortgage,” “collateral assignment” and/or
“security interest,” as appropriate. Each reference to an “easement” or
“easements” will include a reference to a “servitude” or “servitudes.” Each
reference to a county will include a reference to a Louisiana parish. The terms
“land,” “real property,” and “real estate” will mean “immovable property” as
that term is used in the Louisiana Civil Code. The term “personal property” will
mean “movable property” as that term is used in the Louisiana Civil Code. The
term “intangible” will mean “incorporeal” as that term is used in the Louisiana
Civil Code. Reference to “receiver” shall be deemed to be a keeper appointed by
Mortgagee as provided herein. The term “fee estate” or “fee simple title” will
mean “full ownership interest” as that term is used in the Louisiana Civil Code.
The term “condemnation” will include “expropriation” as that term is used in
Louisiana law. The term “conveyance in lieu of foreclosure” or “action in lieu
thereof” will mean “giving in payment” as that term is used in the Louisiana
Civil Code and “dation en paiment.” The term “joint and several” will mean
“solidary” as that term is used in the Louisiana Civil Code.
Mortgage

7

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

 

Exhibit H
Form of Perfection Certificate
PRE-CLOSING UCC DILIGENCE CERTIFICATE
          In connection with that certain Guarantee and Collateral Agreement,
dated as of January ___, 2007 (the “Guarantee and Collateral Agreement”), by and
among Affirmative Insurance Holdings, Inc. (“Borrower”), certain subsidiaries of
the Borrower (together with the Borrower, the “Grantors”) and Credit Suisse,
Cayman Islands Branch (“CS”), as Administrative Agent and Collateral Agent (the
“Collateral Agent”), each Grantor hereby certifies as follows:
I. Current Information
     A. Legal Names, Organizations, Jurisdictions of Organization and
Organizational Identification Numbers. The full and exact legal name4 (as it
appears in each respective certificate or articles of incorporation, limited
liability membership agreement or similar organizational documents, in each case
as amended to date), the type of organization, the jurisdiction of organization
(or formation, as applicable), and the organizational identification number (not
tax i.d. number) of each Grantor are as follows:5

                                      Type of                        
Organization (e.g. corporation,     Jurisdiction of     Organizational    
Federal Tax       limited liability company, limited     Organization/    
Identification     Identification   Name of Grantor   partnership)     Formation
    Number     Number  

                               

 

1.   It is crucial that the full and exact name of each Grantor is given. Even
seemingly minor errors such as substituting “n.a.” for “national association” or
“inc.” for “incorporated” may be seriously misleading in many states.   2   If a
Grantor does not have an organizational identification number or a federal tax
identification number, please indicate “none.”

H-1

 

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

 

Exhibit H
     B. Chief Executive Offices and Mailing Addresses. The chief executive
office address and the preferred mailing address (if different than chief
executive office or residence) of each Grantor are as follows:

                      Address of Chief Executive Office     Mailing Address (if
different than   Name of Grantor   (or for natural persons, residence)     CEO
or residence)  

               

     C. Changes in Names, Jurisdiction of Organization or Corporate Structure.
          Except as set forth below, no Grantor has changed its name,
jurisdiction of organization or its corporate structure in any way (e.g. by
merger, consolidation, change in corporate form, change in jurisdiction of
organization or otherwise) within the past one (1) year:

                  Grantor   Date of Change     Description of Change  

               

     D. Prior Addresses.
          Except as set forth below, no Grantor has changed its chief executive
office, or principal residence if a particular Grantor is a natural person,
within the past one (1) year:

          Grantor   Prior Address/City/State/Zip Code  

       

     E. Acquisitions of Equity Interests or Assets.
          Except as set forth below, no Grantor has acquired the equity
interests of another entity or substantially all the assets of another entity
within the past one (1) year:

                  Grantor   Date of Acquisition     Description of Acquisition  

               

II. ADDITIONAL INFORMATION.
H-2

 

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

 

Exhibit H
Form of Perfection Certificate
Tangible Personal Property. Set forth below are all the locations where any
Grantor currently maintains or has maintained any material amount (fair market
value of $10,000 or more) of its tangible personal property (including goods,
inventory and equipment) of such Grantor (whether or not in the possession of
such Grantor) within the past one (1) year:

                  Grantor   Address/City/State/Zip Code     County  

               

H-3

 

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

 

Exhibit H
Form of Perfection Certificate
III. MISCELLANEOUS
     A. Authority to File Financing Statements. Each of the undersigned, hereby
authorizes each of the Collateral Agents to file financing or continuation
statements, and amendments thereto, in all jurisdictions and with all filing
offices as each Collateral Agent may determine, in its sole discretion, are
necessary or advisable to perfect the security interest granted or to be granted
to such Collateral Agent under the Guarantee and Collateral Agreements. Such
financing statements may describe the collateral in the same manner as described
in the Guarantee and Collateral Agreements or may contain an indication or
description of collateral that describes such property in any other manner as
such Collateral Agent may determine, in its sole discretion, is necessary,
advisable or prudent to ensure the perfection of the security interest in the
collateral granted to such Collateral Agent, including, without limitation,
describing such property as “all assets” or “all personal property.”
H-4

 

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

 

Exhibit H
Form of Perfection Certificate
     IN WITNESS WHEREOF, the undersigned hereto has caused this Pre-Closing UCC
Diligence Certificate to be executed as of the date first written above by its
officer thereunto duly authorized.
[GRANTOR(S)]
By:                                        
Name:
Title:
H-5

 

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

 

Exhibit H
Form of Perfection Certificate
Appendix A
to Pre-Closing UCC Diligence Certificate
INVESTMENT RELATED PROPERTY
1. Securities. Set forth below is a list of all equity interests owned by a
Grantor together with the type of organization which issued such equity
interests (e.g. corporation, limited liability company, partnership or trust):

                                                                               
      Total             Certificate No.                     Type of     # of    
Shares     % of Interest     (if uncertificated,         Grantor   Issuer    
Organization     Shares Owned     Outstanding     Pledged     please indicate
so)     Par Value  

                                                       

2. Securities Accounts. Set forth below is a list of all securities accounts in
which any Grantor customarily maintains securities or other assets having an
aggregate value in excess of $10,000:

                              Name & Address of   Grantor   Type of Account    
Financial Institutions  

               

H-6

 

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

 

Exhibit H
Form of Perfection Certificate
3. Deposit Accounts. Set forth below is a list of all bank accounts (checking,
savings, money market or the like) in which any Grantor customarily maintains in
excess of $10,000:

                              Name & Address of   Grantor   Type of Account    
Financial Institutions  

               

4. Instruments. Set forth below is a list of all instruments owed to any Grantor
in the principal amount of greater than $10,000:

                                      Principal Amount         Grantor   Issuer
of Instrument     of Instrument     Maturity Date  

                       

H-7

 

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

 

Exhibit H
Form of Perfection Certificate
Appendix B
to Pre-Closing UCC Diligence Certificate
INTELLECTUAL PROPERTY
1. Set forth below is a list of all copyrights, patents and trademarks and other
intellectual property owned or used, or hereafter adopted, held or used, by a
Grantor:

                                  Grantor   Copyrights     Filing Date    
Status     Registration No.  

                               

                                  Grantor   Patents     Filing Date     Status  
  Registration No.  

                               

                                  Grantor   Trademarks     Filing Date    
Status     Registration No.  

                               

H-8

 

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

 

Exhibit H
Form of Perfection Certificate
Appendix C
to Pre-Closing UCC Diligence Certificate
INVENTORY AND EQUIPMENT
1. Inventory and Equipment. Set forth below are all the locations where any
Grantor currently maintains any material amount (aggregate fair market value of
$10,000 or more) of inventory and equipment of such Grantor (whether or not in
the possession of such Grantor):

                                              Description of   Grantor  
Address/City/State/Zip Code     County     Assets and Value  
 
                       

2. Warehousemen and bailees. Except as set forth below, no persons (including
warehousemen and bailees) other than a Grantor have possession of any material
amount (fair market value of $10,000 or more) of assets of any Grantor:

                                              Description of   Grantor  
Address/City/State/Zip Code     County     Assets and Value  
 
                       

H-9

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

 

Exhibit H
Form of Perfection Certificate
Appendix D
to Pre-Closing UCC Diligence Certificate
REAL ESTATE RELATED UCC COLLATERAL
1. Fixtures. Set forth below are all the locations where any Grantor owns or
leases any real property:

                                              Owned   Grantor  
Address/City/State/Zip Code     County     or Leased  
 
                       

2. “As Extracted” Collateral. Set forth below are all the locations where any
Grantor owns, leases or has an interest in any wellhead or minehead:

                  Grantor   Address/City/State/Zip Code     County  
 
               

3. Timber to be Cut. Set forth below are all locations where any Grantor owns
goods that are timber to be cut:

                  Grantor   Address/City/State/Zip Code     County  
 
               

H-10

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

 

Exhibit H
Form of Perfection Certificate
Appendix E
to Pre-Closing UCC Diligence Certificate
NAMES
1. Trade Names.
          Current Names. Set forth below is each trade name or assumed name
currently used by any Grantor or by which any Grantor is known or is transacting
any business:

                  Grantor           Trade/Assumed Name  
 
               

          Past Names. Set forth below is each trade name or assumed name used by
any Grantor during the past one (1) year or by which any Grantor has been known
or has transacted any business during the past one (1) year other than the names
identified in Section I.A. of this Pre-Closing UCC Diligence Certificate:

                  Grantor           Trade/Assumed Name  
 
               

H-11

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

 

Exhibit H
Form of Perfection Certificate
Appendix F
to Pre-Closing UCC Diligence Certificate
COMMERCIAL TORT CLAIMS
Set forth below is a true and correct list of all Commercial Tort Claims (as
defined in the Guarantee and Collateral Agreements) held by each Grantor,
including a brief description thereof.

H-12

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

 

Exhibit H
Form of Perfection Certificate
Appendix G
to Pre-Closing UCC Diligence Certificate
LETTER OF CREDIT RIGHTS
Set forth below is a true and correct list of all Letters of Credit issued in
favor of each Grantor, as beneficiary thereunder.

H-13

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

 

Exhibit H
Form of Perfection Certificate
Appendix H
to Pre-Closing UCC Diligence Certificate
MOTOR VEHICLES
     Set forth below is a true and correct list of all motor vehicles (covered
by certificates of title or ownership) valued at over $50,000 and owned by each
Grantor, and the owner and approximate value of such motor vehicles.

                          Motor Vehicle           Owner     Approximate Value  
 
                       

H-14

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

 

Exhibit I
FORM OF NON BANK CERTIFICATE
     Reference is made to the Credit Agreement dated as of January 31, 2007 (the
“Credit Agreement”), among Affirmative Insurance Holdings, Inc., the Borrower,
the Lenders from time to time party thereto, Credit Suisse, Cayman Islands
Branch, as administrative agent and as collateral agent, and the other parties
thereto. Pursuant to Section 2.20(d) of the Credit Agreement, the undersigned
hereby certifies that it is not a “bank” or other Person described in
Section 881(c)(3) of the Internal Revenue Code of 1986, as amended.

          [NAME OF LENDER]    
 
       
By:
       
 
 
 
Name:    
 
  Title:    

I-1

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

 

Exhibit J
FORM OF LEGAL OPINION
     Formation/Requisite Power
     a. Affirmative Insurance Holdings, Inc., and each Subsidiary Guarantor that
is a [corporation][limited liability company][limited partnership] formed or
organized under the laws of the State of Delaware (each, a “Delaware Guarantor”)
is a corporation duly formed or organized and is validly existing under the laws
of the State of Delaware with all necessary [corporate][limited liability
company][limited partnership] power and authority to own its properties and
conduct its business as presently conducted and as proposed to be conducted and
to enter into each Loan Document to which it is a party, perform its obligations
thereunder, borrow any amounts specified therein and give any guarantee
contemplated thereby. Affirmative Insurance Holdings, Inc., and each Subsidiary
Guarantor is in good standing under the laws of the State of Delaware and is
qualified to do business in each jurisdiction where the nature of its business
requires such qualification.
     b. Each Subsidiary Guarantor that is a [corporation][limited liability
company] formed or organized under the laws of the State of
[                    ] (each, a “[                      ] Guarantor”) is a
[corporation][limited liability company] duly formed or organized and is validly
existing under the laws of the State of [                    ] with all
necessary [corporate][limited liability company] power and authority to own its
properties and conduct its business as presently conducted and as proposed to be
conducted and enter into each Loan Document to which it is a party, perform its
obligations thereunder, borrow any amounts specified therein and give any
guarantee contemplated thereby. Each [                    ] Guarantor is in good
standing under the laws of the State of [                     ] and is qualified
to do business in each jurisdiction where the nature of its business requires
such qualification.
     Due Authorization
     The execution, delivery and performance by Affirmative Insurance Holdings,
Inc., and each Subsidiary Guarantor of each Loan Document to which it is a
party, including, without limitation, the borrowings, issuances of letters of
credit, guarantees and uses of proceeds thereunder and the creation of the
security interests contemplated thereby have all been duly authorized by all
necessary corporate, limited liability company or limited partnership action, as
applicable, and, if necessary, all stockholder, member or partner action of
Affirmative Insurance Holdings, Inc., and each Subsidiary Guarantor, as
applicable.
     Due Execution and Delivery
     Each Loan Document to which Affirmative Insurance Holdings, Inc., or any
Subsidiary Guarantor is a party has been duly executed and delivered by
Affirmative Insurance Holdings, Inc., or such Subsidiary Guarantor, as
applicable.
     Enforceability
     Each Loan Document to which Affirmative Insurance Holdings, Inc., or any
Subsidiary Guarantor is a party constitutes a legally valid and binding
obligation of ANR Affirmative Insurance Holdings, Inc., or such Subsidiary
Guarantor, as applicable, enforceable against Affirmative Insurance Holdings,
Inc., or such Subsidiary Guarantor, as applicable, in accordance with its terms.
     No Conflicts; Consents
     a. The execution and delivery by Affirmative Insurance Holdings, Inc., and
each Subsidiary Guarantor of each Loan Document to which it is a party and the
consummation of the transactions contemplated thereby, the granting of the Liens
under the Security Documents and the performance by each Affirmative Insurance
Holdings, Inc., and each Subsidiary Guarantor of its respective obligations
under the Loan Documents to which such it is a party, the borrowings, issuances
of letters of credit, guarantees and uses of proceeds thereunder and the
creation of the security interests contemplated thereby, do not (a) conflict
with, result in a breach of or

J-1

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

 

violate any of the terms, conditions or provisions of any of Affirmative
Insurance Holdings, Inc., or any Subsidiary Guarantor’s by-laws, limited
liability company agreement, partnership agreement, certificate of
incorporation, articles of incorporation or any other governing or constituent
documents (collectively, the “Governing Documents”), (b) result in the breach of
or a default under or result in the ability to terminate or accelerate any
outstanding obligations under any agreement identified to us by Affirmative
Insurance Holdings, Inc., as being material to the conduct of its or its
subsidiaries business (each, a “Material Agreement”), (c) violate any federal or
state law, statute, rule or regulation applicable to any of Affirmative
Insurance Holdings, Inc., or any Subsidiary Guarantor or their properties,
including, without limitation, Regulations T, U or X of the Board of Governors
of the Federal Reserve System, assuming Affirmative Insurance Holdings, Inc.,
complies with the provisions of the Loan Documents relating to the use of
proceeds, (d) contravene any orders, writs, injunctions, decrees or arbitral
awards that are binding upon Affirmative Insurance Holdings, Inc., or any
Subsidiary Guarantor or its properties or assets (each, an “Applicable Order”),
(e) result in, or require, the creation of or imposition of any Lien (other than
the lien of the Security Documents), upon or with respect to any of the
properties or assets now owned or hereafter acquired by Affirmative Insurance
Holdings, Inc., or any Subsidiary Guarantor, or (f) require any consents,
approvals, authorizations, registrations, declarations or filings to be obtained
by Affirmative Insurance Holdings, Inc., or any Subsidiary Guarantor under any
federal or state law, statute, rule, or regulation applicable to Affirmative
Insurance Holdings, Inc., or any Subsidiary Guarantor or their properties or
under the Governing Documents or under any Material Agreement, in each case,
that have not already been obtained or made.
     Investment Company Act Compliance
     None of Affirmative Insurance Holdings, Inc., or any Subsidiary Guarantor
is an “investment company”, or a company “controlled” by and “investment
company” as such terms are defined in the Investment Company Act of 1940, as
amended.
     Validity of Security Interest in Article 9 Collateral
     The provisions of each Security Document are effective to create valid
security interests in favor of the Collateral Agent, for the benefit of the
Secured Parties, in that portion of the Collateral and the Mortgaged Properties
described in the Guarantee and Collateral Agreement, each Mortgage and each
Intellectual Property Security Agreement, respectively, in each case to the
extent such Collateral is subject to Article 9 of the UCC (the “Collateral”) as
security for the payment, to the extent set forth in each such Security Document
of the Obligations of the relevant Loan Party to the Secured Parties under the
Loan Documents.
     Perfection of Security Interest in Pledged Collateral
     a. Upon delivery of the certificates representing the Pledged Securities to
the Collateral Agent in the State of New York pursuant to the Guarantee and
Collateral Agreement with undated transfer powers duly endorsed in blank by an
effective endorsement, the security interests in such Pledged Securities in
favor of the Collateral Agent, for the benefit of the Secured Parties, will be
perfected. No other security interest in the Pledged Securities is equal or
prior to the security interest of the Collateral Agent, for the benefit of the
Secured Parties.
     b. Upon delivery of that portion of the Pledged Collateral consisting of
the collateral that constitutes “instruments” within the meaning of
Section 9-102(a)(47) of the [___] UCC (the “Pledged Notes”) to the Collateral
Agent in the State of New York pursuant to the Guarantee and Collateral
Agreement, the security interests in favor of the Collateral Agent, for the
benefit of the Secured Parties, will be perfected. No other security interest in
the Pledged Notes is equal or prior to the security interest of the Collateral
Agent, for the benefit of the Secured Parties, assuming the Collateral Agent
takes possession of the Pledged Notes in good faith and without knowledge that
its security interest in the Pledged Notes violates the rights of another
secured party.
     [Perfection of Security Interest in Accounts
     a. The provisions of the Control Agreements are effective under the
[                    ] UCC to perfect the security interest in favor of the
Collateral Agent, for the benefit of the Secured Parties, in that portion of the

J-2

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

 

Pledged Collateral consisting of Deposit Account[s] maintained with
                     (the “Depositary Bank”) described in each such Control
Agreement (the “Deposit Account[s]”).
     b. The provisions of the Securities Account Control Agreements are
effective under the [                    ] to perfect the security interest in
favor of the Collateral Agent, for the benefit of the Secured Parties, in that
portion of the Pledged Collateral consisting of Securities Account[s] maintained
with                      (the “Securities Intermediary”) described in such
Securities Account Control Agreement (the “Securities Account[s]”). The
Collateral Agent’s security interest in the Securities Account[s] has priority
over any other security interest in the Securities Account[s] granted by
Affirmative Insurance Holdings, Inc., or any Subsidiary Guarantor assuming no
other secured party has control of, and the absence of any other control
agreement with respect to, the Securities Account[s]. We express no opinion as
to the priority of any security interest in the Securities Account as against
any other security interest in favor of the Securities Intermediary.]
     Appropriateness of Financing Statements
     Each Financing Statement is in appropriate form for filing in the office of
the [Secretary of State][relevant central filing authority] of the State of
[                    ]. Upon the proper filing of each such Financing Statement
in the office of the [Secretary of State][relevant central filing authority] of
the State of [                    ], the security interest in favor of the
Collateral Agent, for the benefit of the Secured Parties, in the collateral
described in each such Financing Statement will be perfected to the extent a
security interest in such collateral can be perfected under the provisions of
the [                    ] UCC by the filing of a financing statement in the
State of [                    ].
     Litigation
     There is no action, suit or proceeding before or by any court, arbitrator
or governmental agency, body or official, now pending or, to the best of our
knowledge, threatened, to Affirmative Insurance Holdings, Inc., or any
Subsidiary Guarantor is a party or to which the business, assets or property of
any of them is subject which is not disclosed in the Loan Documents, which (a)
involves the Loan Documents or the transactions contemplated thereby or
(b) could reasonably be expected to cause a Material Adverse Effect.
     Ownership Matters
     There are to the best of our knowledge, no outstanding subscriptions,
options, warrants, calls, rights, repurchase rights, or other agreements or
commitments of any nature relating to any of the Pledged Securities or
restricting the transfer thereof or voting thereunder and each of the shares
constituting Pledged Securities have been duly authorized and issued, are fully
paid and non-assessable and are free and clear of all liens.
     Real Estate and Local Permitting Opinions
     [Form opinions for real estate and local permitting matters will be
provided under separate cover.]
     Insurance / Regulatory Matters
     [Form opinions for federal regulatory matters will be provided under
separate cover.]

J-3

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

 

EXHIBIT K-1
CONTRACT INCLUDING INSURANCE PREMIUM FINANCE AGREEMENT
PROMISSORY NOTE, TRUTH IN LENDING DISCLOSURES AND SECURITY AGREEMENT
BORROWER:
ADDRESS:
E-MAIL:
Address for Notices:
Use this address for all notices required by law. Use this address to
communicate with me until I tell you in writing that I want you to use another
address, which I will specify. I promise to tell you in writing if I change my
address, my e-mail address, or my telephone number. In the event no address is
specified, the mailing address shown above will be used as the default. I
understand that you may also use other addresses to communicate with me when
formal notice is not necessary, or if you are unable to contact me at the
address, I have provided. However, I understand that you are not obliged to do
so. If I wish to communicate with you about this Contract, I agree to use the
address written after CREDITOR” below.
NO AGENT: USAgencies Casualty Insurance Company, Inc. issued the insurance
Policy. The Insurance Company sells directly to customers and does not use
agents.
INSURANCE POLICY DESCRIPTION:            Insurance Company:
               USAgencies Direct Insurance Company, Inc.
Policy No.:
Policy Period:      through
TOTAL COST OF OBTAINING THE INSURANCE COVERAGE: The cost of obtaining the
insurance coverage is itemized on the Declarations Page of Policy No. ___,
Issued by the Insurance Company. This Declarations Page is incorporated into and
made part of this Contract by reference.
DISCLOSURES REQUIRED UNDER THE FEDERAL TRUTH IN LENDING ACT
CREDITOR: LIFCO, L.L.C., Post Office Drawer 98515, Baton Rouge, Louisiana
70884-8515
ITEMIZATION OF AMOUNT FINANCED:

                     
(1) New Premium and Fees
              $ 0.00  
 
               
(2) (Less) Premium and Fees Down
              $ 0.00  
 
               
(3) Amount Paid to Insurance Co.
              $ 0.00  
 
               
(4) Previous Account Balance
              $ 0.00  
 
               
(5) Interest Accrued
              $ 0.00  
 
                 
(6)  Deferred Fees Collected
              $ 0.00  
 
               
(7) Origination Fee
              $ 0.00  
 
               
(8) (Less) Prepaid Origination Fee
              $ 0.00  
 
               
(9) Amount Financed (3 plus 4-7, minus 8)
              $ 0.00  
 
               

K-1-1

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

 

                                                             
ANNUAL
PERCENTAGE RATE
    FINANCE CHARGE     AMOUNT FINANCED     TOTAL OF PAYMENTS    
 
                                 
The cost of my loan as
a yearly rate

    The dollar amount my
loan will cost me     The amount of credit
provided to me or on my
behalf     The amount I will have paid
after I have made all
payments as scheduled    
 
                                 
0.00%
    $ 0.00       $ 0.00       $ 0.00                            

Payment Schedule: My loan is repayable as follows: equal monthly installments in
the amount of $0.00 beginning on ___, through ___, with 1 final payment of 0.00,
due on ___.
Late Charges: If a payment is more than 10 days late. I will be charged 5% of
the delinquent amount or $5.00, whichever is greater. Prepayment: If I pay my
loan off early, I may be entitled to a refund of part of the finance charge.
Security Interest: My loan is secured by the insurance policy purchased with the
loan proceeds, as wall as proceeds of the policy.
Contract Reference: I should look to the Contract for further information about
non-payment, default, your right to accelerate the maturity of the obligation,
and prepayment rebates and penalties.
PROMISSORY NOTE
Promise to Pay: I promise to pay to your order, at your address, the sum of
dollars ($0.00) consisting of principal and precomputed interest at the rate of
0.00% per annum, payable in equal installments of $0.00, due on the day of each
month, commencing on ___, with one final installment due on.
     Late Charges: If I fail to pay any installment within ten days of its due
date, I agree to pay you a late charge of 5% of the delinquent amount or $5.00
whichever is greater. A late charge will also be assessed if the policy is
canceled due to insufficient funds.
     Default and Acceleration: If I fail to pay one installment and it remains
unpaid for ten days or more after the due date, this Promissory Note will be in
default and you may cancel my Insurance Policy. If two or more installments are
in default for ten days or more, you may accelerate the maturity of this
Promissory note, which means that I must pay all outstanding amounts
immediately. After making any rebate required by law, you may then convert this
Promissory Note into a simple interest transaction.
     Additional Interest: If you accelerate the maturity of this Promissory Note
or if it remains unpaid after the final installment is due, then, for a period
of one (1) year after maturity, I agree to pay additional Interest on the unpaid
balance (after any applicable rebate) at the interest rate shown above. After
that, I agree to pay interest at the rate of 18% per annum, until this
Promissory Note is paid in full.
     Rebate: I may prepay this Promissory Note in full at any time. If I prepay
in full, or if you accelerate the maturity of this Promissory Note, l may be
entitled to a refund of part of the finance charge as determined by the simple
Interest method. The $25.00 Origination Fee I paid when I first made my loan is
earned when my loan is closed and will not be rebated.
     Attorney’s Fees: If you refer this Promissory Note to any attorney for
collection, I agree to pay attorney’s fees in an amount equal to 25% of the
unpaid debt owed to you.
     Unpaid Check Charges: If I pay by check and my check is returned because I
stopped payment, or because there were insufficient funds in my account, I will
pay you an additional amount, equal to 5% of the amount of my dishonored check,
or $15.00, whichever is less.
     Non-negotiable: This Promissory Note is not negotiable.
     Waivers: I waive demand for payment, notice of protest and of non-payment,
and all defenses of division and discussion. My liability under this Promissory
Note is “in solido” with the liability of any other person who may be liable.
Discharge or release of any specific right, or of any security given to secure
payment, will not affect the remainder of my obligation.

K-1-2

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

 

Signature Lines on Second Page
 
SECURITY AGREEMENT
     In order to secure payment of any amounts that I may owe you under this
Contract, I give you a security interest in my Insurance Policy, including (but
not limited to) any right to a refund of premiums or any amount the Insurance
Company might otherwise owe me for losses covered by my insurance Policy. You
may apply any money you receive from my Insurance policy to pay any debt owed to
you under this Contract, including any amount due under the Promissory Note, the
$25.00 Cancellation Fee described below, attorney fees, or any deferred charges.
Even though you have the right to be paid from proceeds of the Insurance Policy,
I remain personally liable to pay you these amounts until everything is paid.
Signature Lines Below
 
LIENHOLDERS AND OTHERS ENTITLED TO NOTICE OF CANCELLATION:
Signature Lines Below
 
POWER OF ATTORNEY
     I give you a power of attorney. If I fail to pay even one installment on
the Promissory Note, I authorize you to cancel my Insurance Policy and any
endorsements listed on this Contract or in any amendments to this Contract,
including amendments you make pursuant to this Power of Attorney. I give a power
of attorney to notify my Insurance Company and any persons entitled to notice
and to tell them that my Insurance Policy is cancelled. After payment of all
amounts due to you under this Contract, I also give you power of attorney to pay
to the Insurance Company (or allow the Insurance Company to retain) any unearned
premiums or other amounts which the Insurance Company may otherwise owe me, in
order to purchase as much continued coverage under the Insurance Policy as such
funds permit, until such time as I prove to the Insurance Company that I have
purchased replacement insurance, as required by law or as required by any other
person entitled to the benefit of coverage. I may not revoke this power of
attorney while my Promissory Note remains unpaid and until I have provided such
replacement Insurance.
Signature Lines Below
 
ADDITIONAL CONTRACT TERMS
     Pronouns and Headings: This Contract uses the words “I”, “me”, and “my”,
which refer to the Insured who is signing this Contract. The words “you”,
“your”, and “yours” refer to the Creditor. The headings in this Contract are
only for convenience and do not completely summarize the provisions which follow
them.
     Changes to Insurance Policy: If in the future I request any change to my
Insurance Policy and if the change is accepted by the Insurance Company and it
makes an endorsement to the Insurance Policy, the new Declaration Page
containing the requested endorsement will automatically become a part of and
incorporated into this Contract by reference. I further authorize you to adjust
the balance due you and the related remaining payments under my original
Insurance Premium Finance Contract together with any modifications thereto
without obtaining an amended, signed contract from me.
     No Reliance on Anything Not Written in this Contract: No employee of LIFCO
or USAgencies told me that this Contract includes anything not written in this
Contract.

K-1-3

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

 

     Use of Proceeds: I have borrowed from you the Amount Financed. This money
will be used to pay the premium on the Insurance Policy and for the other
purposes stated in the section entitled “Itemization of Amount Financed.”
     Cancellation Fee: If you cancel the Insurance Policy after my default, I
agree to pay you a cancellation fee of $25.00. This fee is different than the
Origination Fee which is described elsewhere in this Contract.
     Deferred Charges: You, in your absolute discretion, may choose to defer my
obligation to pay late charges, the Cancellation Fee or any other amount which I
may owe you under this Contract. I understand that you are not waiving your
right to collect such fees, but only deferring the time for payment. I
understand that you do not waive any such charges or release me from my
obligation to pay them, unless you specifically tell me in writing that you are
doing so.
     Louisiana Consumer Credit Law: You and I agree that this Contract is
governed by the Louisiana Consumer Credit Law.
     Receipt of Copy of Contract: I have received a copy of this contract.
     Electronic Collection of Checks: I authorize you to electronically collect
any check I give you. You may at your option electronically collect a check,
either the first time you present it for payment, or if a check is returned
because of insufficient funds and you re-present it. in the case of a returned
check, my account may be debited for any applicable fees as stated in the Unpaid
Check Charges section of the Promissory Note. If a check is collected
electronically, you will send the check amount, routing and account numbers to
my bank. Because this information is sent electronically, my bank account can be
debited as early as the same day you receive the check. If a check is collected
electronically, I authorize you to destroy the original and maintain an image in
your records. I understand that my bank will not return the canceled check to
me, but will show the transaction on my bank account statement.
     Reading and Understanding: I have read everything in this Contract (which
consists of 2 pages). Before signing this Contract, I understood it or I
obtained someone’s help so I could understand.

         
 
 
 
Borrower    
 
       
 
 
 
Date    

     Accepted by:                                                             ,
LIFCO Representative, on:

K-1-4

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

 

EXHIBIT K-2
INSURANCE PREMIUM FINANCE CONTRACT
COMBINATION PROMISSORY NOTE, TRUTH IN LENDING
DISCLOSURE STATEMENT AND SECURITY AGREEMENT
Illinois Premium Finance Regulation — Precomputed Interest

     
Date:
  THIS NOTE IS NON-NEGOTIABLE  

                         
BUYER:
                             
 
  (Print full Name)   (Street No.)   (City)   (County)   (State)   (Zip)
Co-BUYER:
                             
 
  (Print full Name)   (Street No.)   (City)   (County)   (State)   (Zip) AGENT:
  USAgencies Management Services   8550 United Plaza Blvd., Suite 805   Baton
Rouge   Baton Rouge LA           70809      
 
  (Print full Name)   (Street No.)   (City)   (County)   (State)   (Zip)

LENDER: LIFCO, L.L.C., 8550 United Plaza Blvd. Suite 804, Baton Rouge, LA 70809
I have obtained a loan from you to finance the purchase of the following
insurance policies:

                                                             
 
    Insurance Co.     Coverage     Policy Period     Premium                    
             
0
    USAgencies Direct           From:          
 
    Insurance Company           To:                                      

                     
(1) Previous Amount Financed:
  $ 0.00     (5) Principal Paid:   $ 0.00  
 
               
(2) New Premium:
  $ 0.00     (6) Premium Down:   $ 0.00  
 
               
(3) Interest Accrued:
  $ 0.00              
 
                 
(4) Deferred Fees Collected:
  $ 0.00     (7) Total (1 through 4 minus 5 through 6 equals 7):   $ 0.00  
 
               

DISCLOSURE REQUIRED UNDER THE FEDERAL TRUTH IN LENDING ACT

                               
ANNUAL PERCENTAGE RATE:
    FINANCE CHARGE:     Amount Financed:     Total of Payments:
The cost of my loan as a
yearly rate.
    The dollar amount my loan
will cost me.     The amount of credit provided
to me or on my behalf.     The amount I will have paid after
I have made all payments as
scheduled.
 
                             
0.00%
    $ 0.00       $ 0.00       $ 0.00                      

     Payment Schedule: My loan is repayable as follows:

                                             
Number of Payments
    Amount     When Payments Are Due                      
   0    equal installment payments
    $ 0.00       Monthly beginning on _____    
 
                                         
One final payment
    $ 0.00       Due on ____    
 
                                       

Late Charges: If a payment is more than 5 days late, I will be charged 5% of the
delinquent amount, not less than $1.00.
Prepayment: If I pay my loan off early, I will not be entitled to a refund of
any part of the finance charges.
Security: My loan is secured by the insurance policies being purchased with the
loan proceeds.
Contract Reference: I should look to my Note for additional information about
non-payment, default, your right to accelerate payment and prepayment rebates.
Itemization of the Amount Financed

                     
(1) Amount Paid to Insurance Company:
  $ 0.00     (3) (less) Prepaid Finance Fee:   $ 0.00  
 
               
(2) Additional Fee Financed:
  $ 0.00     (4) Amount Financed (Sum of 1 and 2, minus 3):   $ 0.00  
 
               

 
PROMISSORY NOTE (“Note”)
Promise to Pay: I promise to pay to the order of the above named Lender at
Lender’s address or at any of the USAgencies sales offices the sum of (0.00),
consisting of principal and precomputed interest, payable in accordance with the
Payment Schedule indicated above.
Late Charges: If I fail to pay any payment under this Note within five days of
when due, I agree to pay you a late charge in an amount equal to no less than $1
nor more than 5% of the installment in default.
Default and Acceleration: You have the right, at your option, to Insist on
immediate payment in full (to accelerate the maturity) of the Note If I fail to
make any payment under this Note when due.
Additional Promissory Note Terms and Conditions and Security Agreement Continued
on Page 2
 

     
Note Rate:
  0.00%
 
 

I (We) acknowledge receipt of a completed copy of this Disclosure Statement,
Promissory Note (as continued on page 2) and Security Agreement (on page 2) and
agree to their terms. I authorized you to make disbursements as itemized above.

 

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

 

             
 
Buyer
     
 
Co-Buyer    

Promissory Note — Additional Terms and Conditions Continued from Page 1
Rebate Upon Prepayment: I may prepay this Note in full at any time. I understand
that I am not entitled to a refund of any part of the finance charge.
Additional Interest: If you accelerate payment under this Note for any reason
and file suit against me, or If the Note remains unpaid after its final payment
date, I agree to pay additional interest on the unpaid balance 0 the Note after
applying the amount of unearned premium returned from the insurance company at
the Note Rate shown above.
Attorney’s Fees: If you hove to sue me, or if you refer this Note to an attorney
for collection, I agree to pay reasonable attorney’s fees In an amount equal IC
25% of the unpaid debt owed to you under this Note.
NSF Check Charges: In the event that I make any payment on this Note by check
and my check is returned to you unpaid due to non-sufficient funds in m deposit
account, I agree to pay you an additional NSF Check Charge of $15 plus any
actual expenses Incurred In connection with the dishonored check.
Reinstatement Charge: I may request you to ask the insurance company to
reinstate my policy, subject to all terms and conditions set forth by the
Insurance company. If the insurance company agrees to reinstate my policy, I
agree to pay my original monthly payment, the subsequent late charge, end the
$25.OC reinstatement charge. By my fulfilling all of the conditions set forth in
this paragraph, you can conclude that it Is my intention to have my policy
reinstated.
Endorsements: I may request changes to my insurance policy during its term. If
the changes ace accepted by the insurer, I authorize you to adjust this balance
due you and the related remaining payments under my original insurance Premium
Finance Contract together with any modifications thereto without obtaining en
amended, signed contract from me.
     If the premium increases, you will loan me the additional premium amount
plus the additional finance charges allowed by Illinois law and Increase my
payments equally over the remaining number of payments. If the premium
decreases, you wilt decrease my payments by the amount of the decreased premium
equally over the remaining number of payments. I understand that you will
provide me with a document in the form of the Insurance Premium Finance Contract
showing the change in my balance and the change in the remaining payments.
Further, I understand that my debt to you equals the sum of the remaining
payments on the original Contract and all endorsements thereto.
     Your records show that I owe payments of 0 each.
Governing Law: This Note is subject to the Illinois Premium Finance Regulation.

General Provisions: I. as well as all other persons signing this Contract as a
Guarantor, waive demand for payment and notice of protest and non-payment and
all pleas of division and discussion, and agree that our liability under this
Note shall be “joint, several and solitary” with each other. We further agree
that discharge or release of any party or collateral securing this Note,
extension of time for payment, or delay in enforcing any rights granted to you,
will not cause you to lone any of your rights.
     This Instrument is non-negotiable In form but may be pledged as collateral
security, If so pledged, any payment made to the Lender either of principal or
of interest, upon the debt evidenced by this obligation, shall be considered and
construed as a payment on this instrument, the same as though it were still in
the possession and under the control of the Lender named herein; and the pledges
holding this instrument as collateral security hereby makes said Lender its
agent to accept arid receive payments hereon, whether of principal or of
interest.
     Paragraph headings are for convenient reference and are not to be construed
as a complete summary of each paragraph. In this Contract (Note and Security
Agreement), the words “I”, “me”, “my”, “we”, “us”, and “our” mean each person
signing this Contract as a buyer, co-buyer or guarantor. The words “you”,
“your”, and “yours” mean the Lender named in the Contract.
Signature Lines on Page 1
 
 

 

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

 

 
SECURITY AGREEMENT
     To secure repayment of my Note (and other amounts that I may owe you under
this Contract), I am giving you a security interest in my insurance policies
described In this Contract, including but not limited to any rights which I may
have to return premiums and payments for losses under my policies.
     If should default under my Note, I authorize you, or my Agent on your
behalf, to cancel my insurance policies and to notify my insurance company o
companies of the cancellation. I am giving you a power of attorney to do this,
which I may not revoke while my Note remains unpaid.
     You may apply any funds which you receive from my insurance company or
companies to the payment of my Note in principal, Interest, and late charge
provided above, returning any excess funds to me. If the amount of funds you
receive are not sufficient to satisfy payment under my Note In full, I will
remain personally liable to you for the difference.
Signature Lines on Page 1
 
Guaranty
I (We) jointly, severally, and solidarity unconditionally guarantee payment of
the above Note and all substitutions, refinancings, and renewals thereof and
agree to at of the Contract’s terms and conditions.

       
 
Guarantor
 
 
 Guarantor      

             
 
Date
     
 
Authorized Representative    

 

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

 

EXHIBIT K-3
CONTRACT INCLUDING INSURANCE PREMIUM FINANCE AGREEMENT
PROMISSORY NOTE, TRUTH IN LENDING DISCLOSURES AND SECURITY AGREEMENT
BORROWER:
ADDRESS:
E-MAIL:
Address for
Notices:
Use this address for all notices required by law. Use this address to
communicate with me until I tell you in writing that I want you to use another
address, which I will specify. I promise to tell you in writing if I change my
address, my e-mail address, or my telephone number. In the event no address is
specified, the mailing address shown above will be used as the default. I
understand that you may also use other addresses to communicate with me when
formal notice is not necessary, or if you are unable to contact me at the
address, I have provided. However, I understand that you are not obliged to do
so. If I wish to communicate with you about this Contract, I agree to use the
address written after CREDITOR” below.
NO AGENT: USAgencies Casualty Insurance Company, Inc. issued the insurance
Policy. The Insurance Company sells directly to customers and does not use
agents.
INSURANCE POLICY DESCRIPTION:            Insurance Company:           USAgencies
Casualty Insurance Company, Inc.
Policy No.:
Policy Period:      through
TOTAL COST OF OBTAINING THE INSURANCE COVERAGE: The cost of obtaining the
insurance coverage is itemized on the Declarations Page of Policy No. ___,
Issued by the Insurance Company. This Declarations Page is incorporated into and
made part of this Contract by reference.
DISCLOSURES REQUIRED UNDER THE FEDERAL TRUTH IN LENDING ACT
CREDITOR: LIFCO, L.L.C., Post Office Drawer 98515, Baton Rouge, Louisiana
70884-8515
ITEMIZATION OF AMOUNT FINANCED:

                     
(1) New Premium and Fees
              $ 0.00  
 
               
(2) (Less) Premium and Fees Down
              $ 0.00  
 
               
(3) Amount Paid to Insurance Co.
              $ 0.00  
 
               
(4) Previous Account Balance
              $ 0.00  
 
               
(5) Interest Accrued
              $ 0.00  
 
                 
(6)  Deferred Fees Collected
              $ 0.00  
 
               
(7) Origination Fee
              $ 0.00  
 
               
(8) (Less) Prepaid Origination Fee
              $ 0.00  
 
               
(9) Amount Financed (3 plus 4-7, minus 8)
              $ 0.00  
 
               

 

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

 

                                                             
ANNUAL
PERCENTAGE RATE
    FINANCE CHARGE     AMOUNT FINANCED     TOTAL OF PAYMENTS    
 
                                 
The cost of my loan as
a yearly rate

    The dollar amount my
loan will cost me     The amount of credit
provided to me or on my
behalf     The amount I will have paid
after I have made all
payments as scheduled    
 
                                 
0.00%
    $ 0.00       $ 0.00       $ 0.00                            

Payment Schedule: My loan is repayable as follows: equal monthly installments in
the amount of $0.00 beginning on ___, through ___, with 1 final payment of 0.00,
due on                     .
Late Charges: If a payment is more than 10 days late. I will be charged 5% of
the delinquent amount or $5.00, whichever is greater. Prepayment: If I pay my
loan off early, I may be entitled to a refund of part of the finance charge.
Security Interest: My loan is secured by the insurance policy purchased with the
loan proceeds, as wall as proceeds of the policy.
Contract Reference: I should look to the Contract for further information about
non-payment, default, your right to accelerate the maturity of the obligation,
and prepayment rebates and penalties.
PROMISSORY NOTE
Promise to Pay: I promise to pay to your order, at your address, the sum of
dollars ($0.00) consisting of principal and precomputed interest at the rate of
0.00% per annum, payable in equal installments of $0.00, due on the day of each
month, commencing on ___, with one final installment due on.
     Late Charges: If I fail to pay any installment within ten days of its due
date, I agree to pay you a late charge of 5% of the delinquent amount or $5.00
whichever is greater. A late charge will also be assessed if the policy is
canceled due to insufficient funds.
     Default and Acceleration: If I fail to pay one installment and it remains
unpaid for ten days or more after the due date, this Promissory Note will be in
default and you may cancel my Insurance Policy. If two or more installments are
in default for ten days or more, you may accelerate the maturity of this
Promissory note, which means that I must pay all outstanding amounts
immediately. After making any rebate required by law, you may then convert this
Promissory Note into a simple interest transaction.
     Additional Interest: If you accelerate the maturity of this Promissory Note
or if it remains unpaid after the final installment is due, then, for a period
of one (1) year after maturity, I agree to pay additional Interest on the unpaid
balance (after any applicable rebate) at the interest rate shown above. After
that, I agree to pay interest at the rate of 18% per annum, until this
Promissory Note is paid in full.
     Rebate: I may prepay this Promissory Note in full at any time. If I prepay
in full, or if you accelerate the maturity of this Promissory Note, l may be
entitled to a refund of part of the finance charge as determined by the simple
Interest method. The $25.00 Origination Fee I paid when I first made my loan is
earned when my loan is closed and will not be rebated.
     Attorney’s Fees: If you refer this Promissory Note to any attorney for
collection, I agree to pay attorney’s fees in an amount equal to 25% of the
unpaid debt owed to you.
     Unpaid Check Charges: If I pay by check and my check is returned because I
stopped payment, or because there were insufficient funds in my account, I will
pay you an additional amount, equal to 5% of the amount of my dishonored check,
or $15.00, whichever is less.
     Non-negotiable: This Promissory Note is not negotiable.
     Waivers: I waive demand for payment, notice of protest and of non-payment,
and all defenses of division and discussion. My liability under this Promissory
Note is “in solido” with the liability of any other person who may be liable.
Discharge or release of any specific right, or of any security given to secure
payment, will not affect the remainder of my obligation.

 

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

 

Signature Lines on Second Page
SECURITY AGREEMENT
     In order to secure payment of any amounts that I may owe you under this
Contract, I give you a security interest in my Insurance Policy, including (but
not limited to) any right to a refund of premiums or any amount the Insurance
Company might otherwise owe me for losses covered by my insurance Policy. You
may apply any money you receive from my Insurance policy to pay any debt owed to
you under this Contract, including any amount due under the Promissory Note, the
$25.00 Cancellation Fee described below, attorney fees, or any deferred charges.
Even though you have the right to be paid from proceeds of the Insurance Policy,
I remain personally liable to pay you these amounts until everything is paid.
Signature Lines Below
LIENHOLDERS AND OTHERS ENTITLED TO NOTICE OF CANCELLATION:
Signature Lines Below
POWER OF ATTORNEY
     I give you a power of attorney. If I fail to pay even one installment on
the Promissory Note, I authorize you to cancel my Insurance Policy and any
endorsements listed on this Contract or in any amendments to this Contract,
including amendments you make pursuant to this Power of Attorney. I give a power
of attorney to notify my Insurance Company and any persons entitled to notice
and to tell them that my Insurance Policy is cancelled. After payment of all
amounts due to you under this Contract, I also give you power of attorney to pay
to the Insurance Company (or allow the Insurance Company to retain) any unearned
premiums or other amounts which the Insurance Company may otherwise owe me, in
order to purchase as much continued coverage under the Insurance Policy as such
funds permit, until such time as I prove to the Insurance Company that I have
purchased replacement insurance, as required by law or as required by any other
person entitled to the benefit of coverage. I may not revoke this power of
attorney while my Promissory Note remains unpaid and until I have provided such
replacement Insurance.
Signature Lines Below
ADDITIONAL CONTRACT TERMS
     Pronouns and Headings: This Contract uses the words “I”, “me”, and “my”,
which refer to the Insured who is signing this Contract. The words “you”,
“your”, and “yours” refer to the Creditor. The headings in this Contract are
only for convenience and do not completely summarize the provisions which follow
them.
     Changes to Insurance Policy: If in the future I request any change to my
Insurance Policy and if the change is accepted by the Insurance Company and it
makes an endorsement to the Insurance Policy, the new Declaration Page
containing the requested endorsement will automatically become a part of and
incorporated into this Contract by reference. I further authorize you to adjust
the balance due you and the related remaining payments under my original
Insurance Premium Finance Contract together with any modifications thereto
without obtaining an amended, signed contract from me.
     No Reliance on Anything Not Written in this Contract: No employee of LIFCO
or USAgencies told me that this Contract includes anything not written in this
Contract.

 

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

 

     Use of Proceeds: I have borrowed from you the Amount Financed. This money
will be used to pay the premium on the Insurance Policy and for the other
purposes stated in the section entitled “Itemization of Amount Financed.”
     Cancellation Fee: If you cancel the Insurance Policy after my default, I
agree to pay you a cancellation fee of $25.00. This fee is different than the
Origination Fee which is described elsewhere in this Contract.
     Deferred Charges: You, in your absolute discretion, may choose to defer my
obligation to pay late charges, the Cancellation Fee or any other amount which I
may owe you under this Contract. I understand that you are not waiving your
right to collect such fees, but only deferring the time for payment. I
understand that you do not waive any such charges or release me from my
obligation to pay them, unless you specifically tell me in writing that you are
doing so.
     Louisiana Consumer Credit Law: You and I agree that this Contract is
governed by the Louisiana Consumer Credit Law.
     Receipt of Copy of Contract: I have received a copy of this contract.
     Electronic Collection of Checks: I authorize you to electronically collect
any check I give you. You may at your option electronically collect a check,
either the first time you present it for payment, or if a check is returned
because of insufficient funds and you re-present it. in the case of a returned
check, my account may be debited for any applicable fees as stated in the Unpaid
Check Charges section of the Promissory Note. If a check is collected
electronically, you will send the check amount, routing and account numbers to
my bank. Because this information is sent electronically, my bank account can be
debited as early as the same day you receive the check. If a check is collected
electronically, I authorize you to destroy the original and maintain an image in
your records. I understand that my bank will not return the canceled check to
me, but will show the transaction on my bank account statement.
     Reading and Understanding: I have read everything in this Contract (which
consists of 2 pages). Before signing this Contract, I understood it or I
obtained someone’s help so I could understand.

         
 
 
 
   
 
  Borrower    
 
       
 
 
 
   
 
  Date    

Accepted by: ___, LIFCO Representative, on:

 

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

 

SCHEDULE 1.01(a)
MORTGAGED PROPERTIES
Affirmative Mortgaged Property
None.
USAgencies Mortgaged Property
Renaissance Park East, 1500 Main Street, Baton Rouge, Louisiana, East Baton
Rouge Parish.

 

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

 

SCHEDULE 1.01(b)
SUBSIDIARY GUARANTORS
Affirmative Subsidiary Guarantors

1.   Affirmative Management Services, Inc.   2.   Affirmative Property Holdings,
Inc.   3.   Affirmative Services Retail, Inc.   4.   Affirmative Services, Inc.
  5.   Affirmative Insurance Group, Inc.   6.   Affirmative Underwriting
Services, Inc.   7.   A-Affordable Managing General Agency, Inc.   8.  
Affirmative Insurance Services of South Carolina, Inc.   9.   Affirmative
Insurance Services of Illinois, Inc.   10.   Affirmative Insurance Services of
Texas, Inc.   11.   American Agencies Insurance Services of Louisiana, Inc.  
12.   American Agencies Investments, Inc.   13.   Space Coast Holdings, Inc.  
14.   Affirmative Insurance Services of Pennsylvania, Inc.   15.   Affirmative
Insurance Services of Florida, Inc.   16.   Affirmative Retail, Inc.   17.  
A-Affordable Insurance Agency, Inc.   18.   Driver’s Choice Insurance Agencies,
Inc.   19.   Driver’s Choice Insurance Services, LLC   20.   Fed USA Retail,
Inc.   21.   Instant Auto Insurance Agency of Arizona, Inc.   22.   Instant Auto
Insurance Agency of Colorado, Inc.   23.   Instant Auto Insurance Agency of
Indiana, Inc.   24.   Instant Auto Insurance Agency of New Mexico, Inc.   25.  
InsureOne Independent Insurance Agency, LLC   26.   Yellow Key Insurance Agency,
Inc.   27.   Affirmative Franchising Group, Inc.   28.   Fed USA Franchising
Group, Inc.   29.   Fed USA Franchising, Inc.   30.   Affirmative Alternative
Distribution, Inc.   31.   Affirmative Premium Finance Holdings, Inc.

USAgencies Subsidiary Guarantors

1.   USAgencies, L.L.C.   2.   LIFCO, L.L.C.   3.   USAgencies Management
Services, Inc.

 

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

 

SCHEDULE 3.08(a)
SUBSIDIARIES

                          Borrower’s Percentage of Ownership        
Jurisdiction of   Interest in Subsidiary   Loan Party Legal Name  
Incorporation/Formation   (direct and indirect)   Y/N
Affirmative Management Services, Inc.
  Texas     100 %   Y
 
               
Affirmative Property Holdings, Inc.
  Texas     100 %   Y
 
               
Affirmative Services Retail, Inc.
  Texas     100 %   Y
 
               
Affirmative Services, Inc.
  Texas     100 %   Y
 
               
Affirmative Insurance Group, Inc.
  Texas     100 %   Y
 
               
Affirmative Insurance Company
  Illinois     100 %   N
 
               
Insura Property and Casualty Insurance Company
  Illinois     100 %   N
 
               
Affirmative Insurance Company of Michigan
  Michigan     100 %   N
 
               
Affirmative Underwriting Services, Inc.
  Texas     100 %   Y
 
               
A-Affordable Managing General Agency, Inc.
  Texas     100 %   Y
 
               
Affirmative Insurance Services of South Carolina, Inc.
  South Carolina     100 %   Y
 
               
Affirmative Insurance Services of Illinois, Inc.
  Illinois     100 %   Y
 
               
Affirmative Insurance Services of Texas, Inc.
  Texas     100 %   Y
 
               
American Agencies Insurance Services of Louisiana,Inc.
  Louisiana     100 %   Y
 
               
American Agencies Investments, Inc.
  Delaware     100 %   Y
 
               
Space Coast Holdings, Inc.
  Delaware     100 %   Y
 
               
Affirmative Insurance Services of Pennsylvania, Inc.
  Pennsylvania     100 %   Y
 
               
Affirmative Insurance Services of Florida, Inc.
  Florida     100 %   Y

 

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

 

                          Borrower’s Percentage of Ownership        
Jurisdiction of   Interest in Subsidiary   Loan Party Legal Name  
Incorporation/Formation   (direct and indirect)   Y/N
Affirmative Retail, Inc.
  Texas     100 %   Y
 
               
A-Affordable Insurance Agency, Inc.
  Texas     100 %   Y
 
               
Driver’s Choice Insurance Agencies, Inc.
  South Carolina     100 %   Y
 
               
Driver’s Choice Insurance Services, LLC
  South Carolina     100 %   Y
 
               
Fed USA Retail, Inc.
  Florida     100 %   Y
 
               
Instant Auto Insurance Agency of Arizona, Inc.
  Arizona     100 %   Y
 
               
Instant Auto Insurance Agency of Colorado, Inc.
  Colorado     100 %   Y
 
               
Instant Auto Insurance Agency of Indiana, Inc.
  Indiana     100 %   Y
 
               
Instant Auto Insurance Agency of New Mexico, Inc.
  New Mexico     100 %   Y
 
               
InsureOne Independent Insurance Agency, LLC
  Illinois     100 %   Y
 
               
Yellow Key Insurance Agency, Inc.
  Illinois     100 %   Y
 
               
Affirmative Franchising Group, Inc.
  Texas     100 %   Y
 
               
Fed USA Franchising Group, Inc.
  Delaware     100 %   Y
 
               
Fed USA Franchising, Inc.
  Florida     100 %   Y
 
               
Affirmative Alternative Distribution, Inc.
  Texas     100 %   Y
 
               
Affirmative Insurance Holdings Statutory Trust I
  Delaware     100 %   Y
 
               
Affirmative Insurance Holdings Statutory Trust II
  Delaware     100 %   Y
 
               
Affirmative Premium Finance Holdings, Inc.
  Delaware     100 %   Y
 
               
USAgencies, L.L.C.
  Louisiana     100 %   Y
 
               
USAgencies Casualty Insurance Company, Inc.
  Louisiana     100 %   N

 

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

 

                          Borrower’s Percentage of Ownership        
Jurisdiction of   Interest in Subsidiary   Loan Party Legal Name  
Incorporation/Formation   (direct and indirect)   Y/N
USAgencies Direct Insurance Company
  New York     100 %   N
 
               
LIFCO, L.L.C.
  Louisiana     100 %   Y
 
               
USAgencies Management Services, Inc.
  Louisiana     100 %   Y

 

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

 

SCHEDULE 3.08(b)
DIVIDEND RESTRICTIONS
None.

 

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

 

SCHEDULE 3.09
LITIGATION
Affirmative Litigation
None.
USAgencies Litigation
None.

 

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

 

SCHEDULE 3.17
ENVIRONMENTAL MATTERS
Affirmative Environmental Matters
1. None.
USAgencies Environmental Matters
1. None.

 

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

 

SCHEDULE 3.18
INSURANCE
Affirmative Insurance

                          Policy Type   Insurance Company   Coverage Included  
Expiration Date   Policy Limits   Deductible   Annual Premium Commercial
Umbrella   Hartford Casualty Ins. Co.   Excess umbrella over
first layer — underlying   July 9, 2007   $15,000,000   Underlying
insurance $10,000
SIR   $24,846
(includes terrorism)                           Excess Liability -
Excess Umbrella   Fireman’s Fund Insurance
Company   Excess over second layer
- umbrella   July 9, 2007   $10,000,000 per
occurrence and in the aggregate   Underlying Insurance   $13,600
(includes terrorism)                           Mail Loss   Federal Insurance
Company   Crime coverage related to
use of mail   July 9, 2007   Registered mail or U.S. Postal Express
Mail: $2,500,000       $ 1,500                 Custom designed
services: $5,000,000                                                  
Registered mail only: $250,000                                                  
                          Insuring Clause I - Foreign                        
Registered mail or overnight
air couriers - $10,000,000        

 

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

 

                          Policy Type   Insurance Company   Coverage Included  
Expiration Date   Policy Limits   Deductible   Annual Premium                
Registered mail
only: $250,000                                                                  
          Insuring Clause II - Domestic
Only                                                   Not exceeding any one
shipping package: $250,000                                                      
                      Not exceeding to any
one addressee on any
one day: $2,500,000                                                   Overnight
air couriers
of U.S. postal express
mail: a)
non-negotiable:                         $10,000,000; b)
negotiable: $250,000                                   Commercial Package  
Hartford Casualty Ins. Co.       July 9, 2007   Property   Property: $5,000  
Property:                     Earthquake: $25,000
Wind: $10,000*   $23,616.20
General Liability:                     Flood: $25,000**
GL: none
Employee benefits:   $28,694.56                     $1,000    

 

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

 

                          Policy Type   Insurance Company   Coverage Included  
Expiration Date   Policy Limits   Deductible   Annual Premium Commercial      
Commercial Auto Coverage   July 9, 2007   BI/PD liability:         Automobile
(TX, IN,
and IL)   Hartford Accident &
Indemnity   for TX, IN, & IL garaged
vehicles       $1,000,000
Physical damage: ACV   Collision — $1,000   $ 57,110                          
Commercial
Automobile (All   Hartford Accident &
Indemnity   Commercial Auto Coverage   July 9, 2007   BI/PD liability:        
states other than
TX, IN, and IL)       for vehicles garaged
outside of TX, IN, & IL       $1,000,000
Physical damage: ACV   Collision — $1,000   $ 12,500                          
Workers Compensation   Hartford Underwriters
Ins. Co.       July 9, 2007   Part A — statutory
Part B (EL): $1,000,000   $1,000
comprehensive,

$1,000 collision   $148,897.00                           Commercial Crime  
Indian Harbor Insurance
Company   Employee dishonesty,
forgery, theft,
disappearance, robbery of
a custodian, computer
fraud, money orders,
counterfeit, securities
forgery, trading loss
Miscellaneous
professional liability
coverage for insurance   July 9, 2007   $ 5,000,000   $ 100,000
$250,000 for each
claim, unless   $40,000, $1,940 -
surplus,
$40 stamping fee                           Errors & Omissions
(Miscellaneous
Professional)   Indian Harbor Insurance
Company (XL)   company, insurance
agents, employed lawyers,
and franchise services   July 9, 2007   $5,000,000 pending
and prior date 7/9/04   insurance agent or
employed lawyers,
then $10,000   $250,000, $12,125 -
surplus, $250
stamping fee                           Employment Practices
Liability   Greenwich Insurance
Company (XL)   Employment practices
liability   July 9, 2007   $ 5,000,000   $150,000 per claim   $100,000

 

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

 

                          Policy Type   Insurance Company   Coverage Included  
Expiration Date   Policy Limits   Deductible   Annual Premium Fiduciary
Liability   Greenwich Insurance
Company (XL)   Fiduciary liability   July 9, 2007   $5,000,000 pending and
prior date 7/9/04   $50,000 per claim   $ 15,000                          
Directors & Officers   XL Specialty Insurance
Company   Management liability and
company reimbursement   July 9, 2007   $20,000,000 pending
and prior date 7/9/04
$10,000,000 of   $1,000,000   $400,000                           Directors &
Officers
(Side A — DIC)   Illinois National
Insurance Co.   Side A — DIC   July 9, 2007   liability in excess of
$20,000,000   $ 0   $104,125

 

*   Applies to Houston, Galveston, Baytown, Pasedena, Beaumont, McAllen,
Edinburg, Mission, Brownsville, Pharr Corpus Christi and Florida, except for 100
Rialto in Melbourne, which has a 2% wind deductible and a $500,000 flood limit,
and a $500,000 flood deductible.   **   100 Rialto in Melbourne has a $500,000
flood limit, and a $500,000 flood deductible Flood deductible of $25,000 applies
to those locations with a $1,000,000 limit as outlined in policy.

USAgencies Insurance
See attached.

 

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

 

SCHEDULE 3.19(a)
UCC FILING OFFICES
Affirmative Filing Offices

      Grantor   Filing Office
Affirmative Insurance Holdings, Inc.
  Secretary of State of Delaware
 
   
Affirmative Management Services, Inc.
  Secretary of State of Texas
 
   
Affirmative Property Holdings, Inc.
  Secretary of State of Texas
 
   
Affirmative Services Retail, Inc.
  Secretary of State of Texas
 
   
Affirmative Services, Inc.
  Secretary of State of Texas
 
   
Affirmative Insurance Group, Inc.
  Secretary of State of Texas
 
   
Affirmative Underwriting Services, Inc.
  Secretary of State of Texas
 
   
A-Affordable Managing General Agency, Inc.
  Secretary of State of Texas
 
   
Affirmative Insurance Services of South Carolina, Inc.
  Secretary of State of South Carolina
 
   
Affirmative Insurance Services of Illinois, Inc.
  Secretary of State of Illinois
 
   
Affirmative Insurance Services of Texas, Inc.
  Secretary of State of Texas
 
   
American Agencies Insurance Services of Louisiana, Inc.
  East Baton Rouge Parish Clerk of Court, Louisiana
 
   
American Agencies Investments, Inc.
  Secretary of State of Delaware
 
   
Space Coast Holdings, Inc.
  Secretary of State of Delaware
 
   
Affirmative Insurance Services of Pennsylvania, Inc.
  Secretary of State of Pennsylvania
 
   
Affirmative Insurance Services of Florida, Inc.
  Secretary of State of Florida
 
   
Affirmative Retail, Inc.
  Secretary of State of Texas
 
   
A-Affordable Insurance Agency, Inc.
  Secretary of State of Texas
 
   
Driver’s Choice Insurance Agencies, Inc.
  Secretary of State of South Carolina
 
   
Driver’s Choice Insurance Services, LLC
  Secretary of State of South Carolina
 
   
Fed USA Retail, Inc.
  Secretary of State of Florida
 
   
Instant Auto Insurance Agency of Arizona, Inc.
  Secretary of State of Arizona
 
   
Instant Auto Insurance Agency of Colorado, Inc.
  Secretary of State of Colorado
 
   
Instant Auto Insurance Agency of Indiana, Inc.
  Secretary of State of Indiana
 
   
Instant Auto Insurance Agency of New Mexico, Inc.
  Secretary of State of New Mexico
 
   
InsureOne Independent Insurance Agency, LLC
  Secretary of State of Illinois
 
   
Yellow Key Insurance Agency, Inc.
  Secretary of State of Illinois
 
   
Affirmative Franchising Group, Inc.
  Secretary of State of Texas
 
   
Fed USA Franchising Group, Inc.
  Secretary of State of Delaware

 

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

 

      Grantor   Filing Office
Fed USA Franchising, Inc.
  Secretary of State of Florida
 
   
Affirmative Alternative Distribution, Inc.
  Secretary of State of Texas
 
   
Affirmative Insurance Holdings Statutory Trust I
  Secretary of State of Delaware
 
   
Affirmative Insurance Holdings Statutory Trust II
  Secretary of State of Delaware
 
   
Affirmative Premium Finance Holdings, Inc.
  Secretary of State of Delaware

USAgencies Filing Offices

      Grantor   Filing Office
USAgencies, L.L.C.
  East Baton Rouge Parish Clerk of Court, Louisiana
 
   
LIFCO, L.L.C.
  East Baton Rouge Parish Clerk of Court, Louisiana
 
   
USAgencies Management Services, Inc.
  East Baton Rouge Parish Clerk of Court, Louisiana

 

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

 

SCHEDULE 3.19(c)
MORTGAGE FILING OFFICES
Affirmative Mortgage Filing Offices

1.   Not applicable.

USAgencies Mortgage Filing Offices

1.   East Baton Rouge Parish Clerk of Court, Louisiana.

 

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

 

SCHEDULE 3.20
OWNED AND LEASED REAL PROPERTY
Affirmative Owned and Leased Real Property

                                                          LEASE   LEASE
EXPIRATION             ADDRESS   CITY   STATE   ZIP   COMMENCEMENT   DATE  
LANDLORD NAME   LANDLORD PHONE   LANDLORD ADDRESS
236 W. Lincoln Hwy.
  Schererville   IN     46375     7/1/06   12/31/2006   Lincoln Ridge Plaza LLC
  630-924-8401 (Kena Lacy — Asst.)   c/o Pinecrest Property Management (Mathew
Vachaparambil) 672 E. Irving Park Rd. Suite 106 Roselle, IL 60172
 
                                   
7755 E. Washington St.
  Indianapolis   IN     46219     1/1/04   12/31/2006   East Washington Plaza  
317-816-4646; FAX 317-816-4656   P.O. Box 2303-130 Indianapolis, IN 46206
 
                                   
1298 N. Kinzie Ave.
  Bradley   IL     60915     2/1/04   1/31/2007   William J. Tucker Real Estate
Co.   847-917-2301; fax: 847-839-1925   William J. Tucker Jr.; William J. Tucker
Real Estate Co.; A&A Bradley, LP; c/o WJT Real Estate Company; 2140 Cat Tail Run
#208, Gurnee, IL 60031(new per letter dated 11/1/06) (2300 N. Barrington Road ~
Suite 457 ~ Hoffman Estates, IL, 60195)
 
                                   
3535 Broadway, Ste. A
  Kansas City   MO     64111     2/1/04   1/31/2007   4301 Main, LLC  
816-822-7788; fax 816-822-7778   c/o Del Hedgepath 5930 Ward Parkway Kansas
City, MO 64113 (dhedgepath@kc.rr.com)
 
                                   
3184 N. Water St.
  Decatur   IL     62526     2/1/06   1/31/2007   Brettwood Village LLC  
312/795-2210/(217) 877-4600   Brettwood Village c/o Draper & Kramer, Retail
Property Services(Joe Kunst) 33 W. Monroe St. Suite 1900 Chicago, IL 60603
 
                                   
1010 W. Rand Rd.
  Arlington Heights   IL     60004     8/14/06   1/31/2007   Rand Management
Group
(John Kalyviaris)   847/438-0025   20922 N. Rand Road Kildeer, IL 60047

 

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

 

                                                          LEASE   LEASE
EXPIRATION             ADDRESS   CITY   STATE   ZIP   COMMENCEMENT   DATE  
LANDLORD NAME   LANDLORD PHONE   LANDLORD ADDRESS
3160 W. 175th St.
  Hazel Crest   IL     60429     3/1/02   2/28/2007   Ted Pyrilis   847-470-2366
  5515 W. Madison Street Morton Grove, IL 60053
 
                                   
701 N. Lewis Ave.
  Waukegan   IL     60085     3/22/04   3/21/2007   James Wolden   708-623-2695
  37562 Holdridge
Avenue, Waukegan, IL
60085
 
                                   
2834 N. Harlem
  Elmwood Park   IL     60707     4/1/02   3/31/2007   Tops L.L.C.  
847-674-4321; fax: 847-674-0230   TOPS, LLC c/o The Taxman Corporation 5215 Old
Orchard Rd, Suite 130 Skokie, IL 60077
 
                                   
153 W. Roosevelt Road
  Chicago   IL     60185     6/1/04   5/31/2007   Alfredo Linares       P.O. Box
1193 Chicago, IL 60690
 
                                   
100 W. 87th St.
  Chicago   IL     60620     9/1/04   8/31/2007   Inland Commercial Property
Management, Inc. (Anna Maria Bartucci)   630-218-5262 (Angela Aeschliman
- Prop Mgr)   2901 Butterfield Rd. Oakbrook, IL 60523
 
                                   
2601 S. Halsted St.
  Chicago   IL     60608     9/1/06   8/31/2007   Kam L. Liu Realty *new payee
(no longer SQY) as of 8-25-06   312-225-0200 or 630-202-9688   3119 S. Halsted
Chicago, IL 60608
 
                                   
2423 Independence Ave.
  Kansas City   MO     64124     11/1/06   10/31/2007   Melba Ah Mu  
913-206-1505   2425 Independence Ave. Kansas City, MO 64124
 
                                   
12255 S. Western Ave.
  Chicago   IL     60406     11/1/04   10/31/2007   Mer-Car Corp   773-227-2160
  1410 S. Clinton Street Chicago, IL 60607
 
                                   
3413 B Noland Road.
  Independence   MO     64133     10/15/02   11/30/2007   Gaslight Square
Shopping Center   816-531-1400 (John Trevor)   c/oBlock & Company, Inc 605 W.
47th Street Kansas City, MO 64112
 
                                   
2599 W. Golf Rd.
  Hoffman Estates   IL     60194     12/1/04   11/30/2007   Tampa Rinaldi Ranch
Center LLC        
 
                                   
1612 Mishawaka Ave.
  South Bend   IN     46615     12/1/06   11/30/2007   Dan and Doris Weninger  
219-633-4603   11073 Dragoon Trail
Mishawaka, IN 46544
 
                                   
531 Roosevelt Rd.
  Glen Ellyn   IL     60137     12/1/05   11/30/2007   Glen Ellyn Plaza
Corporation/ Market
Plaza Shopping Center   847-559-8882; FAX 847-559-9160   c/o The Shiner Group
LLC 3100 Dundee #304
Northbrook, IL 60062
 
                                   

 

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

 

                                                          LEASE   LEASE
EXPIRATION             ADDRESS   CITY   STATE   ZIP   COMMENCEMENT   DATE  
LANDLORD NAME   LANDLORD PHONE   LANDLORD ADDRESS
11331 S. Michigan Avenue
  Chicago   IL     60628     1/1/05   12/31/2007   Candace Professional, Inc.
(Reverend Gardner)   773-934-4499   11331 S. Michigan Ave, Chicago IL 60605
 
                                   
6462A N. Lindbergh
  Florissant   MO     63031     1/1/05   12/31/2007   Keevan Development  
314-921-2624   8460 N. Lindbergh, Suite 15 Florissant, MO 63031
 
                                   
71 A West 159th Street
  Harvey   IL     60426     1/1/05   12/31/2007   Great Lakes Trust Co
AT/UT Number 01-014   708-906-3300 (Cell); 708-598-0098 (home) Eddie   c/o Musa
Financial Services 9147 S Oak Park Ave., Oak Lawn, IL 60453 (New as of 1/26/06)
 
                                   
1661 E. 80th Ave.
  Merrillville   IN     46410     1/1/05   12/31/2007   Acadia Merrillville
Realty, L.P.   914-288-8100 (Legal) Property
Mgmt: Pete 937-312-1930   1311 Mamaroneck Ave.,Suite 260 White Plains, NY 10605
 
                                   
20 E. Jefferson Ave.
  Naperville   IL     60540     1/1/06   12/31/2007   Naper LTD Partnership
(Jon Pusateri)   Cell: 262-249-9622   P.O. Box 2195 Naperville, IL 60567-2195
 
                                   
327 Armour Rd.
  Kansas City   MO     64116     2/1/05   1/31/2008   Revanne Partners,
L.P.(Ralph E. Lewis II)   816-792-5655   c/o Prudential Cres-Commerical 7 N.
Water Street Liberty, MO 64068
 
                                   
9238 S. Stony Island Ave.
  Chicago   IL     60617     3/1/03   2/28/2008   Stephen & Sheila Hill  
773-457-0126; 219-934-0520 (Sheila cell)   P.O.Box 3483 Munster, IN 46321
 
                                   
5 Clock Tower Plaza
  Elgin   IL     60120     9/1/04   3/31/2008   Butera Finer Foods (Paul J.
Butera)   847-741-1010    
 
                                   
5811 E. Riverside Blvd.
  Rockford   IL     61114     4/1/03   3/31/2008   Investquest, LLC (Dan
Cataldi)   815-282-0202 or cell:
815-978-2258   5813 E. Riverside Blvd. Rockford, IL 61114
 
                                   
4721 S. Kingshighway
  St. Louis   MO     63109     5/1/03   4/30/2008   Kenneth R. Baldridge d/b/a
Baldridge Properties/KRB Properties   314-966-2300; fax — 314-966-2370   11825
Manchester St. Louis, MO 63131
 
                                   
3535 N. Western Ave.
  Chicago   IL     60618     6/1/06   5/31/2008   Joe Hayes-Hayes Properties
Inc.   773-929-7050; fax (773) 929-5049   2811 N. Mildred Chicago, IL 60657
 
                                   
1801 E. 71st St.
  Chicago   IL     60649     6/1/05   5/31/2008   Henry English/The Black United
Fund of Illinois, an ILL. Non-profit corporation   773-324-0494   1809 E. 71st
Street Chicago, IL 60649

 

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

 

                                                          LEASE   LEASE
EXPIRATION             ADDRESS   CITY   STATE   ZIP   COMMENCEMENT   DATE  
LANDLORD NAME   LANDLORD PHONE   LANDLORD ADDRESS
5174 Franklin St.
  Michigan City   IN     46360     6/1/05   5/31/2008   Michigan City 421 LLC  
847-674-8020; fax 847-674-8157   c/o American Asset Management Services 4711 W.
Golf Rd., #1000, Skokie, IL 60076
 
                                   
3249 W. 26th Street
  Chicago   IL     60623     8/1/04   7/31/2008   Dr. Fernando Ampuero  
773-438-3010   3517 W. 26th Street Chicago, IL 60623
 
                                   
646 W. Lake St.
  Addison   IL     60101     8/1/02   7/31/2008   John Bertakis   708-686-0600
or 708-580-6330   242 Bunting Lane
Bloomingdale, IL
60108
 
                                   
10407 Blue Ridge Blvd.
  Kansas City, MO   MO     64134     9/1/05   8/31/2008   Elaine Rosenburg d/b/a
Elis Enterprises   913-814-7099/Cell:816-718-6277; fax 913-814-7290   P.O. Box
6734 Leawood, KS 66206
 
                                   
9257 W. Cermak Rd.
  North Riverside   IL     60546     10/1/05   9/30/2008   Andrew Nguyen  
913-568-2329    
 
                                   
1119 E. Sibley Blvd.
  Dolton   IL     60419     1/1/02   10/31/2008   Donald Kim/ KJZM LLC (new as
of 3/08/06)   847-971-3641   PO Box 115; Lincolnshire IL 60069
 
                                   
8531 Page Ave.
  Vinita Park   MO     63114     10/1/03   10/31/2008   I-70 Distribution Center
II, L.L.C. c/o Gateway Commercial   314-863-4447 (Monica Howard/AR); fax:
(314) 863-4407   c/o Gateway Commercial 100 S. Brentwood Blvd. Suite 222 St.
Louis, MO 63105
 
                              Chu Kim (Husband) Yang Kim (Wife) Work —
913-342-7873 Home - 913-341-0626   9900 Lamar Avenue Overland Park, KS 66207
 
                                   
1032 Minnesota Ave.
  Kansas City, KS   KS     66101     12/1/05   11/30/2008   Chu Kim and Yang Kim
       
 
                                   
4851 N. Broadway St.
  Chicago   IL     60640     12/1/03   11/30/2008   Sun Development Group,
L.L.C.   312-279-5323   c/o Property Solutions Group LLC 205 N. Michigan Ave.,
Suite 1615 Chicago, IL 60601: Kathy Staahl, Proprety Manager
 
                                   
4200 S. East St.
  Indianapolis   IN     46227     1/1/06   12/31/2008   Tri-Land Properties,
Inc.   708-531-8210   c/o Triland Properties, Inc One Westbrook Corp. Center
Suite 520 Westchester, IL 60154
 
                                   
6804 Green Bay Rd.
  Kenosha   WI     53142     2/1/06   1/31/2009   Southport Plaza L.P.  
262-942-9800; fax 262-942-7023   Barbara Jaeger, Prop. Mgr. 6804 Green Bay Road
Suite 111 Kenosha, WI 53142
 
                                   

 

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

 

                                                          LEASE   LEASE
EXPIRATION             ADDRESS   CITY   STATE   ZIP   COMMENCEMENT   DATE  
LANDLORD NAME   LANDLORD PHONE   LANDLORD ADDRESS
539 E. Sante Fe, Ste. 2
  Olathe, KS   KS     66061     2/1/06   1/31/2009   Bison Properties LLC c/o
John C. Byram Jr. (new company name & address as of 4/26/06)   913-541-8888; fax
913-541-8886; e-mail: jcbyram@swbell.net   15625 W. 87 Parkway, Lenexa, KS 66219
 
                                   
7345 Lemont Rd.
  Downer’s Grove   IL     60516     2/1/06   1/31/2009   Kimco North Trust II  
516-869-9000: fax (516) 869-2584   333 New Hyde Park Rd., Ste 100, PO Box 5020,
New Hyde Park, NY 11042-0020
 
                                   
2001 N. Knoxville Ave.
  Peoria   IL     61603     3/1/04   2/28/2009   Plotkin Enterprises   P.
309-692-4510   7718 N. Harker Drive Peoria, IL 61615
 
                                   
5706 West Cermak
  Cicero   IL     60804     3/1/06   2/28/2009   ATR Investments Cicero
IO LLC   (312) 226-8022 (Alan); (312) 226-8022 (Main)   1738 W. Erie St.,
Chicago, IL 60622 Attn: Alan T. Rasof
 
                                   
2205 W. Cermak
  Chicago   IL     60608     4/1/06   3/31/2009   ATR Investments LLC   (312)
226-8022 (Alan); (312) 226-8022 (Main)   1738 W. Erie St., Chicago, IL 60622
Attn: Alan T. Rasof
 
                                   
4614B W. Diversey Ave.
  Chicago   IL     60639     5/1/06   4/30/2009   Imperial Realty Co
(‘aschwartz@imperial-re alty.com’)   P. 773-736-4100; F. 773-736-4541   4747 W.
Peterson Ave. Chicago, IL 60646
 
                                   
6419 W. North Ave.
  Oak Park   IL     60302     6/1/06   5/31/2009   Property Management Services
(Dick and Margaret Blaurock)   P. 708-358-1112; F. 708-358-8029   Rossell N.
Shopping Center, 630 S. Wenonah, Oak Park, IL 60304 (New as of 2/20/06)
 
                                   
6601 N. Clark Street
  Chicago   IL     60626     6/1/06   5/31/2009   ATR Investments LLC   (312)
226-8022 (Alan); (312) 226-8022 (Main)   1738 W. Erie St., Chicago, IL 60622
Attn: Alan T. Rasof
 
                                   
1958 Dempster St.
  Evanston   IL     60202     6/1/06   5/31/2009   Evanston Plaza L.L.C.  
847-215-5510 (Steve Korey direct 847-215-5394); F. 847-215-5282   c/o Joseph
Freed & Assoc. 220 N. Smith St., Ste 300 Palatine, IL 60067
 
                                   
1155 East Ridge Road
  Griffith   IN     46319     6/1/06   5/31/2009   Hanover Acquisitions,
LLC c/o CB Richard
Ellis South Bend   Cathy Catlin 574-237-6000; F. 574-237-6001   PO Box 540;
South Bend, IN 46624 (RENT): Mailing: 202 S. Michigan Street; Suite 900; South
Bend, IN 46601

 

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

 

                                                          LEASE   LEASE
EXPIRATION             ADDRESS   CITY   STATE   ZIP   COMMENCEMENT   DATE  
LANDLORD NAME   LANDLORD PHONE   LANDLORD ADDRESS
20911 S. Cicero Ave., Unit B
  Matteson   IL     60443     7/1/06   6/30/2009   Century Plaza Management of
Matteson, Inc. (Paul Spiewak)   847-680-8222; Phil Spiewak at
phils@century-tile.com.   747 E. Roosevelt Road Lombard, IL 60148
 
                                   
2109 N. Veterans Pkwy.
  Bloomington   IL     61704     7/1/06   6/30/2009   M&J Wilkow LTD., an agent
for M&J/JPC Retail L.P., an Illinois Limited Partnership   312/726-9622 (Janice
Javors -
Property Manager 312-279-5980)   c/o M&J/JPC Retail LP 180 N. Michigan Avenue
Chicago, IL 60601
 
                                   
6438 S. Pulaski Rd.
  Chicago   IL     60629     8/1/06   7/31/2009   Mr. John Zeno; Astoria Plaza,
Inc.; (Zenos Investments)   P.708-372-1776; F. 708-499-0806
(zenoinvestments@aol.com)   7156 West 127th Street, #312; Palos Heights, IL
60463
 
                                   
4702 W. Irving Park Rd.
  Chicago   IL     60641     8/1/06   7/31/2009   Keylor Management & Realty
Inc. (Judy Hart)   P. 773-282-6262; F. 773-282-7351   4708 W. Irving Park Road
Chicago, IL 60641
 
                                   
4371 S. Archer Ave.
  Chicago   IL     60609     9/1/06   8/31/2009   Casas Mex USA Inc./Lourdes
Casas   773-581-4100   4425 W. 63rd Street Chicago, IL 60629
 
                                   
3918 W. North Ave.
  Chicago   IL     60647     10/1/06   9/30/2009   ATR Investments North
IO LLC   (312) 226-8022 (Alan); (312) 226-8022 (Main)   1738 W. Erie St.,
Chicago, IL 60622 Attn: Alan T. Rasof
 
                                   
5620-T Crawfordsville
                          Bradley Operating Limited Partnership/CENTRO WATT (as
of       c/o Centro Watt (formerly Heritage Realty Investment, Inc.). 131
Dartmouth Street Boston, MA 02116-5134 (Bob Pionke 847-272-9800/fax:
Rd.
  Indianapolis   IN     46224     11/1/06   10/31/2009   11/7/06)   317-243-8219
  847-480-1893)
 
                                   
1112 W. University Blvd.
  Urbana   IL     61801     11/15/06   11/14/2009   Mildred Durst Trust  
217-367-3600   c/o Mildred Durst 1112 W. University Avenue Urbana, IL 61801
 
                                   
3566A Village Ct.
  Gary   IN     46408     12/1/03   11/30/2009   Bradley Operating Limited
Partnership/CENTRO WATT (as of 11/7/06)   617-247-2200   c/o Centro Watt
(formerly Heritage Realty Management, Inc.) 131 Dartmouth Street Boston, MA
02116-5134
 
                                   

 

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

 

                                                          LEASE   LEASE
EXPIRATION             ADDRESS   CITY   STATE   ZIP   COMMENCEMENT   DATE  
LANDLORD NAME   LANDLORD PHONE   LANDLORD ADDRESS
4307 S. Ashland Ave.
  Chicago   IL     60609     1/1/07   12/31/2009   Comar Properties (Lynne
Chenelle, Prop. Mgr.)   630-889-9600   Corp. Office: 450 East Roosevelt Rd.
Lombard, IL 60148/Rent: P.O. Box 420 Elmhurst, IL 60126
 
                                   
3764 N. Meridian St.
  Indianapolis   IN     46208     1/1/07   12/31/2009   JR Realty c/o Ron
Anderson (Meridian, Ind., office). Premant@aol.com   727-204-3027   8044 Clymer
Lane, Indianapolis, IN 46250; 8014 12th Ave South, St. Petersburg, FL 33707
 
                                   
 
                                  c/o A&R Katz Management, Inc. 3175 Commercial
Avenue, Ste 100 Northbrook, IL 60062-1923 (Abe Katz’s Assistant :
 
                                  Fran Merar 847-205-1200; fax:
1701 N. Larkin Ave
  Crest Hill   IL     60435     1/1/07   12/31/2009   A&R Katz Management, Inc.
  847-205-1200   847-205-1212; franm@arkatz.com)
 
                                   
4642 N. Illinois
  Fairview Heights, IL   IL     62208     2/1/05   3/31/2010   Winchester Real
Estate
LLC   314-480-4120; F. 314-480-4140   c/o Lee & Assoc. of St. Louis 101 S.
Hanley Rd. Suite 1150 Clayton, MO 63105
 
                                   
1416 E. 53rd St.
  Chicago   IL     60615     4/1/05   3/31/2010   Podolsky Northstar
Realty Partners, LL   P. 847-444-5700; 847-444-5702 (Fax)   2610 Lake Cook Rd.,
Suite 100, Riverwoods, IL 60015-3852 (NEW AS OF 6/5/06)
 
                                   
10253 S. Western Ave.
  Chicago   IL     60643     4/15/05   4/14/2010   St. Paul Trust Co.08-9356/
Tom Morrissey   773-233-7900   10249 S. Western Chicago, IL 60643
 
                                   
1305 165th St.
  Hammond   IN     46320     5/1/07   4/30/2010   Columbia Limited
Partnership   P. 847-677-9100; F. 847-677-9106   c/o HSS Management Co. 4801 W.
Golf Road, 2nd Floor Skokie, IL 60077
 
                                   
6218 S. Western Avenue
  Chicago,   IL     60636     5/1/06   4/30/2010   ATR Investments
Western LLC   (312) 226-8022 (Alan); (312) 226-8022 (Main)   1738 W. Erie St.,
Chicago, IL 60622 Attn: Alan T. Rasof
 
                                   
3431 Nameoki Rd.
  Granite City   IL     62040     6/30/05   6/30/2010   Michael Margiotta
(Property management)
Priority Properties   Priority Properties 314-612-8081 (office); Sharon Kosyan
(Accounting); 314-612-8475   1045 South Woods Mill Road, Suite One, Town &
Country, MO 63017
 
                                   

 

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

 

                                                          LEASE   LEASE
EXPIRATION             ADDRESS   CITY   STATE   ZIP   COMMENCEMENT   DATE  
LANDLORD NAME   LANDLORD PHONE   LANDLORD ADDRESS
15910 S. Harlem Ave.
  Tinley Park   IL     60477     9/1/07   8/31/2010   Inland Commercial Property
Management, Inc.   630-218-5262 (Angela Aeschliman
- Prop Mgr)   c/o Park Center Plaza
4575 Paysphere Circle
Chicago, IL 60674
 
                                   
8809 S. Harlem Ave.
  Bridgeview   IL     60455     11/1/05   10/31/2010   New Plan of IL, LLC c/o
New Plan Excel Realty Trust, Inc.   212-869-3000   420 Lexington Ave., 7th Fl.
NY, NY 10170
 
                                   
2022 1st Street
  Moline   IL     61265     12/1/05   11/30/2010   City Line Meyers, LLC c/o
Mid-America Asset Mgmt.   630-954-7300; fax 630-954-7306   Two Mid-America
Plaza, 3rd Floor,
Oakbrook Terrace, IL
60181
 
                                   
1728 S. 6th St.
  Springfield   IL     62703     12/1/05   11/30/2010   Dowd Sullivan  
217-525-2288   410 S. Grand Ave. West Springfield, IL 62704
 
                                   
4712 W. Cermak Rd.
  Cicero   IL     60608     3/1/06   2/28/2011   Cermak Partnership
(Frank Levato)   708-656-0911 or Cell:
630-935-6622   4700 W. Cermak Cicero, IL 60650
 
                                   
 
                              Robert J. Lovero (atty) 708-795-9777; Yolanda
Avelar/Philip Avelar 708- 681-3641   RENT: 3025 S. 24th Avenue Broadview, IL
60153 (Avelar Address) Mr. Lovero:
1515 Lake St. Space #3
  Melrose Park   IL     60160     4/1/06   3/30/2011   Yolanda Avelar/ Philip
Avelar   (landline) 708-267-3225 (Philip
cell)   6536 W. Cermak Road, Berwyn, IL 60402
 
                                   
144 S. Bolingbrook Dr.
  Bolingbrook   IL     60440     5/1/06   4/30/2011   Market Square  
630-954-7300   c/o Mid-America Asset Management, Inc/ Two Mid America Plaza,
Third Floor, Oakbrook Terrace, IL 60181; Julie Ray (630) 954-7369; Fax
630-954-7306
 
                                   
4747 West 79th Street
  Chicago   IL           5/1/06   5/31/2011   Mitchco Development LLC; Ed Lowery
  Tami Trok 312-986-6825 (senior
accountant)   1455 South Michigan Avenue, Suite 100 Chicago, Illinois 60605
 
                                   
302 W. New Indian Trail Dr.
  Aurora   IL     60506     8/1/06   7/31/2011   Old Second National Bank as
Trustee (Janet S. Dee, Trust Officer)   630-906-5470   37 S. River Street
Aurora, IL 60506-4172
 
                                   
16837 Torrence Ave.
  Lansing   IL     60438     8/1/06   7/31/2011   KFS Landings LLC  
847-215-5442   c/o Joseph Freed & Assoc. 220 N. Smith St., Ste 300 Palatine, IL
60067
 
                                   

 

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

 

                                                          LEASE   LEASE
EXPIRATION             ADDRESS   CITY   STATE   ZIP   COMMENCEMENT   DATE  
LANDLORD NAME   LANDLORD PHONE   LANDLORD ADDRESS
3623 E. State Street
  Rockford   IL     61108     9/15/06   9/30/2011   Al and Anna Marie Caruana  
(847) 706-9035   1439 Shiloh Road,
Rockford, IL 61107
 
                                   
540 N. Western Ave.
  Chicago   IL     60612     1/1/07   12/31/2011   ATR Investments
Western IO LLC   (312) 226-8022 (Alan); (312) 226-8022 (Main)   1738 W. Erie
St., Chicago, IL 60622 Attn: Alan T. Rasof
 
                                   
7909 Gulf Freeway
  Houston   TX     77017     3/1/03   2/28/2006   FLN Investments, Inc.  
Charles Miller/Broker ph
877-597-8400 cell 832-752-4500   c/o Sheila Falk 13
Waterford Oaks Lane
Kemah, TX 77565
 
                                   
1332 S. Plano Rd Ste 700A
  Plano   TX     75081     1/4/04   1/31/2007   Heritage Buckingham
Place   617-247-2200; fax 617-266-0885 (Heather Blacketer — Prop Mananger
913-438-4538)   c/o Centro Watt (formerly Heritage Realty Management, Inc.) 131
Dartmouth Street Boston, MA 02116-5134
 
                                   
13968 Josey Lane
  Farmers Branch   TX     75234     1/1/04   2/28/2007   Ford Coin Realty, L.P.
  Michelle Dzmura 214-706-6955 fax 214-706-0531 dzmura@aol.com   c/o EF
Properties LC; 5950 Berkshire Lane; Suite 800; Dallas, TX 75225
 
                                   
609 N. 10th Street
  McAllen   TX     78501     8/1/03   2/28/2007   Texan Real Estate Sales      
1128 W. Pecan McAllen, TX 78501
 
                                   
6923 Antoine Drive, Suite B
  Houston   TX     77088     4/1/04   3/31/2007   Kevin Kim   713-530-3369 or
713-957-9800
Home 281-599-7949 fax
713-957-9825   6923-A Antoine Rd
Houston, TX
 
                                   
14360 Bellaire Blvd
#140
  Houston   TX     77083     5/1/04   6/30/2007   Levy & Associates C/O Kagan
Realty Investors, Inc.   713-748-2000   8801 Knight Road
Houston, Tx 77054
Lease
account #
4000-0129-04
 
                                   
813 W. Bedford-Euless Road
  Hurst   TX     76053     7/1/04   6/30/2007   Guion Gregg, III
Investments Tax
Id# 46-2809426   P. 214-526-7001; F. 214-522-1628   3838 Oak Lawn Ave., Ste
1416; Dallas, TX 75219
 
                                   
6912 N. Freeway
  Houston   TX     77076     8/1/04   7/31/2007   Aron Frank   713-622-0554
Shane Frank
713-877-9600 fax 713-877-9657
cell 713-504-7711   c/o Amco Jewelry Company 1300 Post Oak Blvd., Suite 420
Houston, TX 77056
 
                                   
1081 W. Main, Suite 106
  Lewisville   TX     75067     11/1/04   10/31/2007   TSCA-224 LIMITED
PARTNERSHIP tax ID
20-2744883   P. 972-669-8440; F. 972-783-8901 www.quine.com Nick Carrington/
Property Manager (Nick cell 972-523-8655) Brad Quine (bquine@quine.com )   c/o
Quine & Associates, Inc. P.O. Box 833009 Richardson, Tx 75083-3009
 
                                   

 

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

 

                                                          LEASE   LEASE
EXPIRATION             ADDRESS   CITY   STATE   ZIP   COMMENCEMENT   DATE  
LANDLORD NAME   LANDLORD PHONE   LANDLORD ADDRESS
5630 Lemmon Avenue
  Dallas   TX     75209     11/1/04   10/31/2007   Carlisle
Interests/Prescott
Interests   214-350-5555   7979 Inwood Road Suite 225 Dallas, Tx 75209
 
                                   
1008 NE Loop
  San Antonio   TX     78209     12/15/04   12/14/2007   Chester’s Hamburger
Co./ Margaret Ulrich   210-490-5400   15321 San Pedro, Ste
200 San Antonio, TX
78232
 
                                   
3402 Broadway
  Galveston   TX     77551     2/1/05   1/31/2008   Catherine Jo Taylor  
409-740-7162   #18 Campeche Estate
Drive Galveston, TX
77554
 
                                   
119 W. Southmore
  Pasadena   TX     77502     3/1/03   2/29/2008   Campbell Investment Co.  
Roland Richards P. 713-472-4381; F. 713-472-4382   1313 S. Houston Road
Pasadena, TX 77502
 
                                   
2815 N. MacArthur
  Irving   TX     75060     4/1/05   3/30/2008   PNYX, Ltd (Michael
Mantas)   214-727-5153   7203 J Carpenter
Dallas, TX 75242
 
                                   
13000 Josey Lane
  Farmers Branch   TX     75234     4/1/06   3/31/2008   Alamas Ventures
LTD/Andres Alarcon: Rosa Diez (rosadiez@dslproperties         .com)   P.
469-233-3017; F. 972-484-4119   9628 Overlake Drive, Dallas, TX 75220 -OR- 13000
Josey Lane, Suite 107, Farmers Branch, TX 75234
 
                                   
2717 61st Street
  Galveston   TX     77551     4/1/05   3/31/2008   Weingarten Realty
Investors   Robert Bailey P. 713-866-6074; F. 713-866-6049 Cell. 713-206-0255;
rbailey@weingarten.com   PO Box 924133,
Houston, TX
77024-4133
 
                                   
10927 Jones Road
  Houston   TX     77065     4/1/05   3/31/2008   Weingarten Realty
Investors   Lease # LAFFIPH01 Project #
0543   P.O. Box 924133 Houston, TX 77292-4133 Rent remit P.O. Box 200518
Houston, Tx 77216
 
                                   
10201 Lake June, Ste
102
  Dallas   TX     75217     5/1/05   4/30/2008   King Kash Investors
1991 Limited   Larry Fellman 214-361-0793 wlfrealty@prodigy.net   c/o Fellman
Realty
Management 11225 Park
Central Pl Dallas, TX
75230
 
                                   

 

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

 

                                                          LEASE   LEASE
EXPIRATION             ADDRESS   CITY   STATE   ZIP   COMMENCEMENT   DATE  
LANDLORD NAME   LANDLORD PHONE   LANDLORD ADDRESS
 
                                  Yu Tu c/o Reliance Property Management P.O.
Box 802736 Dallas, Tx 75380
1905 W. 15th Street
  Plano   TX     75075     5/1/05   4/30/2008   Yu Tu c/o Reliance
Property Management   P. (972) 288-7833; F. (972) 288-7890   United States of
America (NEW as of 10/30/06)
 
                                   
650 N. MacArthur
  Irving   TX     75061     5/15/03   5/15/2008   A & P Corporation (Mr. Young
Ha)   214-883-2758   PO Box 701762,
Dallas, TX 75370
 
                                   
210 Unviersity
  Edinburg   TX     78539     8/1/03   7/31/2008   Dorothy Chapapas  
956-581-2448   8700 N. Taylor Road McAllen, TX 78504
 
                                   
3522 Gus Thomasson Suite 100
  Mesquite   TX     75150     9/1/05   8/31/2008   Town East Partnership
Easley Waggoner   P.972-960-7742; F. 972-960-7743 e-mail: leywagg@sbcglobal.net
  5939 Lindenshire Lane
Dallas, Tx 75230
 
                                   
3538 Denton Hwy
  Haltom City   TX     76117     9/1/05   8/31/2008   CA New Plan Fixed Rate
Partnership, L.P. c/o New Plan Excel Realty Trust, Inc   Toni White (site
property mgr) 972-668-2986 x 6525 fax 972-668-2989 twhite@newplan.com or Eddie
Myers emyers@newplan.com   P.O. Box 848409 Dallas, Texas 75284-8409
 
                                   
 
                                  c/o Jim Boller &
Associates, Inc 4455
4455 S. Padre Island Drive, Suite 9
  Corpus Christi   TX     78411-5167     3/27/02   9/30/2008   Commerice Office
Park I   Jim Boller 361-808-7100   SPID ste 22 Corpus
Christi, Tx
78411-5148
 
                                   
5900 Chimney Rock, Suite Q
  Houston   TX     77081     11/30/05   11/30/2008   Plaza de las Americas c/o
Premier Property Services, Inc.   Jeanie Stark, Property Manager, Phone P.
713-463-9994; F. 713-463-7233   9225 Katy Freeway, Ste. 202; Houston TX 77024
 
                                   
1001 N. Beckley, #106-A
  DeSoto   TX     75115     1/1/06   12/31/2008   MICI DeSoto I, Ltd   Sue
Roamer 214-599-0631 sue@maclayproperties.com   c/o Maclay Properties Co. 3838
Oak Lawn, Ste 810 Dallas, TX 75219
 
                                   
112 E. Seminary Drive, Suite C
  Forth Worth   TX     76115     3/1/04   2/28/2009   EES Real Estate Trust c/o
Mrs. Betty Crawford   214-522-7171   Sanford Family Trusts 4516 Lovers Lane,
Suite 230 Dallas, TX 75225
 
                                   
1418 S. Tyler St., Ste B
  Harlingen   TX     78550     3/1/04   2/28/2009   STN, Inc. A Texas Corp. c/o
Lee Realty   956-493-7711   2901 N. 10th Street, Suite N McAllen, TX 78501
 
                                   

 

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

 

                                                          LEASE   LEASE
EXPIRATION             ADDRESS   CITY   STATE   ZIP   COMMENCEMENT   DATE  
LANDLORD NAME   LANDLORD PHONE   LANDLORD ADDRESS
2960 W. NW Hwy
  Dallas   TX     75220     4/1/06   3/31/2009   Rader Properties (Homer J.
Rader Jr., d/b/a Rader Properties)   P. 972-392-7500; F. 972-392-7502   12342
Inwood Rd., Dallas, TX 75244
 
                                   
2100 E. Beltline Road, Bldg 1
  Carrollton   TX     75006     4/1/06   3/31/2009   Oahn Tran   (972) 417-1026
(Pho Express); Alternate (972) 417-1017   2012 E. Beltline Rd., Carrollton, TX
75006
 
                                   
7952 Camp Bowie West
  Forth Worth   TX     76116     5/1/06   4/30/2009   Westside Café
Development, Ltd
Tracey
Sanford   817-247-0854   7950 Camp Bowie West
Fort Worth, TX 76116
 
                                   
1239 NW HWY
  Garland   TX     75041     5/1/06   6/30/2009   Meadowcreek Square
Shopping Center   972-931-7400   c/o Sabre Realty Management, Inc., Commercial
Division, 16475 Dallas Parkway, Suite 880, Addison, TX 75001
 
                                   
6301 Lyons Avenue
  Spring   TX     77379     6/1/06   7/31/2009   David J. Edwards   P.
281-370-1760; F. 281-370-2360 Cell. 713-907-1371; E-mail edw1760@aol.com   17602
Mellow Ridge
Spring, TX 77379
 
                                   
3714-B West Ledbetter
  Dallas   TX     75233     8/1/06   7/31/2009   Lee Widmer
LL notice address:
3677 Asbury Street
Dallas, TX 75205   Home 214-520-6365 Cell 214-354-5677 e-mail
leewidmer@charter.net   Rent remit: c/o
Gateway National Bank
6801 Gaylord Pkwy
#101 Frisco, Tx 75034
 
                                   
815 I45 South
  Conroe   TX     77301     9/1/06   8/31/2009   Conroe Central Shop Ctr. Turk
Investments (Allison Coontz)   713-772-3727 fax 713-772-6301   6230 A Evergreen
Houston, TX 77081
 
                                   
8211 C Long Point
  Houston   TX     77055     7/1/04   8/31/2009   Mia Reed & Co., Capital Fund
V, Ltd.   Michelle Fredericks
713-789-0890 fax 713-789-4672   NEW ADDRESS AS OF 6-28-06; 1535 West Loop South;
Suite 250; Houston, TX 77027
 
                                   
118 E. Jefferson, Ste. 102
  Dallas   TX     75203     12/1/06   11/30/2009   Guion Gregg, III
Investments Tax
Id# 46-2809426   Guion Gregg 214-526-7001 fax
214-522-1628 after hours
214-762-7001   3838 Oak Lawn Ave,
Ste 1416 Dallas, TX
75219
 
                                   

 

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

 

                                                          LEASE   LEASE
EXPIRATION             ADDRESS   CITY   STATE   ZIP   COMMENCEMENT   DATE  
LANDLORD NAME   LANDLORD PHONE   LANDLORD ADDRESS
4012 Ross Avenue
  Dallas   TX     75204     12/10/04   12/9/2009   Ross Ave. Retail, LLC   David
Claassen phone
214-361-8300 fax 214-361-1155   c/o David E. Claassen 8400 Westchester Suite 300
Dallas, Tx 75225
 
                                   
410 E. Pioneer Pkwy, #500
  Grand Prairie   TX     75051     1/1/07   12/31/2009   Centerville Partners,
Ltd   Jerry Head 972-840-3119 fax
903-874-4009   P.O. Box 472098 Garland, TX 75047
 
                                   
1006 Bay Area Blvd
  Houston   TX     77058     1/1/05   12/31/2009   SW Clear Lake, LP c/o
Southwestern
Investment Group, LLC   Michelle Roberts 303-534-1040
fax 303-534-6700   333 W Hampden Avenue Suite 810 Englewood CO 80110
 
                                   
2943 S Buckner Blvd #
275
  Dallas   TX     75227     2/1/07   1/31/2010   The Buckner
Partnership, LP       c/o United Equities
6909 Ashcroft, Suite
200 Houston, TX 77081
 
                                   
 
                              Robert Bailey 713-866-6074    
1004 Federal Road
  Houston   TX     77015     3/1/05   2/28/2010   Weingarten Realty
Investors   fax 713-866-6049 cell 713-206-0255 rbailey@weingarten.com   P.O. Box
924133 Houston, TX 77292-4133
 
                                   
2208 S. Fielder, Suite 116
  Arlington   TX     76013     3/1/07   2/28/2010   Grand Prairie
Associates   Sue Romer 214-599-0631 sue@maclayproperties.com   3838 Oak Lawn
Ave,
Ste 810 Dallas, TX
75219
 
                                   
1201 Main Street, Ste. 2424
  Dallas   TX     75202     6/16/06   7/31/2010   RAK Main Place Associates LP
(owner); RAK Group LLC Management on site (Tom Ligon)   214-744-9800; fax
214-744-9810    
 
                                   
342 FM 1960 West
  Houston   TX     77090     12/1/06   11/30/2010   Weingarten Realty
Investors/ Raleigh LP        
 
                                   
 
                              Robert Bailey 713-866-6074    
5892 Eastex Freeway
  Beaumont   TX     77708     11/29/05   11/30/2010   Weingarten Realty
Investors   fax 713-866-6049 cell 713-206-0255 rbailey@weingarten.com   P.O. Box
924133 Houston, TX 77292-4133
 
                                   
6520 Skillman
  Dallas   TX     75231     11/1/06   10/31/2011   Merriman Park Shopping
Center   817-732-4000 Jean McCorvy/Prop Mgr fax 817-377-7729 e-mail
jmccorvy@woodmont.com   c/o The Woodmont Company 2100 W. Seventh Street Fort
Worth, Texas 76107
 
                                   
810 Broad Street, Unit
8
  Sumter   SC           2/1/2005   1/31/2007   Island Investment LLC       1254
Wilson Hall Rd., Sumter SC 29150

 

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

 

                                                          LEASE   LEASE
EXPIRATION             ADDRESS   CITY   STATE   ZIP   COMMENCEMENT   DATE  
LANDLORD NAME   LANDLORD PHONE   LANDLORD ADDRESS
1836 Ashley River Road, Ste. D2 (Crossroads Center)
  Charleston   SC     29223     3/1/2004   2/28/2007   Crossroads Investors Ltd.
      c/o Ziff Properties
701 East Bay Street,
Charleston, SC 29403
 
                                   
3315 Broad River Road Ste. 170 (Widewater Square)
  Columbia   SC           4/30/2004   5/31/2007   MK Newmarket LLC c/o
RCG Ventures       PO Box 53483 Atlanta,
GA 30355: Managed by
NAI Avant
803-254-0100
 
                                   
Northwoods Mall; 2150 Northwoods Blvd., #60
  N. Charleston   SC     29406     5/1/2006   4/30/2007   North Charleston Joint
Venture II, LLC       North Charleston JV II LLC; 2150 Northwoods Blvd; #60;
North Charleston SC 29406-4021
 
                                   
246-C E. Blackstock Rd.
  Spartanburg   SC           5/1/2005   4/30/2008   Rockledge Development Corp.
      PO Box 170252,
Spartanburg, SC 29301
 
                                   
215 Pelham Rd. #B108
  Greenville   SC     29615     6/1/2005   5/31/2008   Regency Realty Group    
  121 W. Forsythe Street, Ste. 200, Jacksonville, FL 32202
 
                                   
7352 Notch Road
(Creekside Plaza)
  Columbia   SC     29223     7/15/2006   7/31/2011   First Palmer Trust c/o
Hugh A. Palmer       PO Box 23489,
Columbia, SC
29224-3489
 
                                   
4450 Sojourn Drive, Suite 500
  Addison   TX     75001     3/1/00   3/31/2010   DBSI Discovery Real
Estate Services   866-489-3377   DBSI Discovery Real Estate Services, 12426 W.
Explorer Dr., Suite 100, Boise, Idaho 83713
 
                                   
1201 Main Place, Suite
2424
  Dallas   TX     75202     8/1/04   7/31/2007   RAK One Main Place
Associates, LP   214-744-9800   1223 Paysphere
Circle, Chicago, IL
60674
 
                                   
100 Rialto Place #700
  Melbourne   FL     32901     7/1/04   6/30/2007   Rialto LLC   321-984-2942  
100 Rialto Place, Suite 450 Melbourne, FL 32901
 
                                   
150 Harvester Drive
  Burr Ridge   IL     60527     6/1/2006   11/30/2016   BJF Estancia I, LLC  
708-532-4321   150 Harvester Dr. #100 Burr Ridge, IL 60527
 
                                   
2360 University Drive
  Coral Springs   FL     33065     1/1/1996   12/20/2000   Tye Holdings LLC dba
Royal University Plaza   Howard Schachter; (954) 868-5701   2556 University
Drive, Coral Springs,
FL 33065
 
                                   
7520 E. Colonial Drive
  Orlando   FL     32807     3/14/2003   3/14/2006   Orville “Butch” Crouso  
321-231-0189   7465 Camford Court,
Winter Park, FL 32792
 
                                   
3690 Davie Blvd.
  Fort Lauderdale   FL     33312     1/1/2005   12/31/2006   21st Century
Holdings
(George Berwig)   954-308-1252   3661 Oakland Park Blvd., #300, Lauderdale
Lakes, FL 33311
 
                                   

 

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

 

                                                          LEASE   LEASE
EXPIRATION             ADDRESS   CITY   STATE   ZIP   COMMENCEMENT   DATE  
LANDLORD NAME   LANDLORD PHONE   LANDLORD ADDRESS
406 South State Road 7
  Hollywood   FL     33021     3/1/2004   2/28/2007   Bostonian Inc. c/o Dacar
Management LLC   954-927-4885   336 East Dania Beach Blvd. Dania, FL 33004
 
                                   
8960/62/64 Taft Street
  Pembroke Pines   FL     33024     9/1/2002   8/31/2007   Pine Plaza Corp.,
Marant & Associates, Inc. Managing Agent.   954-434-3934 (Grant Marant
954-557-4203 Cell) Assistant:
Michelle Bourst   5240 S. University Drive, Suite E-106, Davie, FL 33328
 
                                   
12145 Pembroke Rd. Suite 307
  Pembroke Pines   FL     33025     9/1/2002   8/31/2007   PMAT Flamingo
Marketplace, LLC   Mike Whelan [mailto:mhw@pmat.net] 985-847-2377 cell:
985-788-8496 (AR: Angela Pigford: 504-681-3401 or Yvonne Lockwood: 504-681-3405)
  PO Box 62600, Department 1361, New Orleans, LA 70162-2600 ALSO PMAT Flamingo
LLC c/o Property One, Inc. 1615 Poydras Street, Ste. 1350, New Orleans, LA 70112
(AS OF 2/9/06)
 
                                   
7245 NW 88th Avenue
  Tamarac   FL     33321     9/1/2002   8/31/2007   Misala Inc. c/o Dacar
Management LLC   P. (954) 927-4885   336 East Dania Beach Blvd. Dania, FL 33004
 
                                   
1501 North Main Street
  Kissimmee   FL     34744     10/1/2004   9/30/2007   Tillie Baker       1503
North Main
Street, Kissimmee, FL
 
                                   
4558 S. Semoran Blvd. #8
  Orlando   FL     32822     4/1/2005   3/31/2008   Semoran Retail, Inc. c/o
Stoltz Mgmt. of Delaware, Inc.   P. (610) 667-5800   725 Conshohocken State Rd.,
Bala Cynwyd, PN 19004
 
                                   
4325 S Orange Blossom
Trail
  Orlando   FL     32703     5/1/2005   4/30/2008   The Boswell Company   P.
(404) 252-4237   80 West Wieuca Road, NW, Ste. 202A, Atlanta, GA 30342
 
                                   
5206 B West Colonial Dr.
  Orlando   FL     32808     8/1/2005   7/31/2008   Onomea, Inc.   P.
407-299-5000 x 1189   12609 Nicolette Ct. Clermont, FL 34711
 
                                   
4992 W. Atlantic Blvd.
  Margate   FL     33063     9/1/2003   8/31/2008   Coconut Square Realty Co.,
LTD,   P. 954-972-0322; F.954-972-0323   PO Box 8552 Coral
Springs, FL 33075
 
                                   
1839 North Pine Island Rd.
  Plantation   FL     33322     4/1/1994   9/30/2008   Gator Investments   P.
(305) 949-9049 (Lisa in AR)   1595 NE 63rd Street, N. Miami Beach, FL 33162
 
                                   
8310 State Rd. 84
  Davie   FL     33324     1/1/2005   12/31/2008   Arrel Enterprises, Inc./
Route 84 Associates   P. 954-474-3508 (Michael Leaventhal)   8540 State Rd. 84,
Fort Lauderdale, FL 33324
 
                                   

 

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

 

                                                          LEASE   LEASE
EXPIRATION             ADDRESS   CITY   STATE   ZIP   COMMENCEMENT   DATE  
LANDLORD NAME   LANDLORD PHONE   LANDLORD ADDRESS
735 E. Oakland Park Blvd.
  Ft. Lauderdale   FL     33334     1/1/2006   12/31/2008   21st Century
Holdings
(George Berwig)   P. 954-308-1252   3661 Oakland Park Blvd., #300, Lauderdale
Lakes, FL 33311
 
                                   
2601 Broadway, Ste 182
  Rivera Beach   FL     33404     3/1/2004   2/28/2009   Cooksey & Cooksey, PA  
P. 561-842-4908; F. 561-863-4677   2601 Broadway #3,
Riviera Beach, FL
33404
 
                                   
5100 W. Commercial Blvd.
  Tamarac   FL     33319     4/1/2006   3/31/2009   MicronUSA Corp. attn: Romina
Traficante   (561) 305-7664 (Romina Cell)   PO Box 1875, Boca
Raton, FL 33429
 
                                   
743 S. Orange Blossom Trail
  Apopka   FL     32703     7/1/2006   6/30/2009   Janet L. Galvin; Liberty
Universal Management, Inc., 314 E. Anderson Street, Orlando, FL 32801 (business
contact)   P. 954-385-0001; F.516-294-3576   Ed or Scott Ross; Apopka Regional
Shopping Center; 600 Old Country Road, Suite 435, Garden City, NY 11530 (RENT)
 
                                   
3562 South US 1
  Stuart   FL     34997     11/1/2004   10/31/2009   Morris Stuart
Associates LLC       350 Veterans Blvd. Rutherford, NJ 07070
 
                                   
15904 State Rd. #84
  Sunrise   FL     33326     3/1/2007   2/28/2010   Westgate Square LLC,   P.
954-615-0615; F. 954-615-0616   15970 West State Rd. 84, #119, Sunrise, FL 33326
 
                                   
11707 Miracle Hills
Drive
  Omaha   NE     68154                      

USAgencies Owned and Leased Real Property
See attached.

 

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

 

SCHEDULE 3.25
ACQUISITION DOCUMENTATION

1.   Purchase and Sale Agreement by and among the Equityholders of USAgencies,
L.L.C. signatory thereto as Sellers and Affirmative Insurance Holdings, Inc. as
Buyer, dated as of October 3, 2006.

2.   Escrow Agreement dated as of January ___, 2007, by and among Affirmative
Insurance Holdings, Inc., a Delaware corporation, the Sellers’ Committee on
behalf of the Persons identified on Exhibit A thereto and The Frost National
Bank, as escrow agent.

 

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

 

SCHEDULE 3.26
REGULATED INSURANCE SUBSIDIARY PERMITS
Affirmative Regulated Insurance Subsidiary Permits

          Regulated Insurance   Jurisdiction(s) of Permits   Lines of Permitted
Business Subsidiary        
 
       
Affirmative Insurance Company
  Alabama   Property; Miscellaneous Casualty, Surety Including Official Surety
Bonds, Marine
 
       
Affirmative Insurance Company
  Arizona   Casualty without Workers’ Compensation; Property
 
       
Affirmative Insurance Company
  Arkansas   Property; Casualty (Excluding Workers Compensation); Surety; Marine
 
       
Affirmative Insurance Company
  California   Fire; Marine; Liability; Burglary; Automobile; Miscellaneous
 
       
Affirmative Insurance Company
  Connecticut   Worker’s Compensation
 
       
Affirmative Insurance Company
  Florida   Fire; Allied Lines; Farmowners Multi Peril; Homeowners Multi Peril;
Commercial Multi Peril; Inland Marine; Earthquake; Other Liability; Private
Passenger Auto Liability; Commercial Automobile Liability; PPA Physical Damage;
Commercial Auto Physical Damage; Fidelity; Surety; Glass; Burglary and Theft;
Boiler and Machinery; Livestock; Industrial Fire; Industrial Extended Coverage
 
       
Affirmative Insurance Company
  Georgia   Property; Marine and Transportation; Casualty (Including Workers’
Compensation); Surety
 
       
Affirmative Insurance Company
  Idaho   Casualty, Excluding Work Comp; Surety; Marine and Transportation;
Property
 
       
Affirmative Insurance Company
  Illinois   Class 2 (Casualty, Fidelity and Surety): Accident and Health;
Vehicle; Liability; Workers’ Compensation; Burglary and Forgery; Glass; Fidelity
and Surety; Miscellaneous; Other Casualty Risks; Contingent Losses; Livestock
and Domestic Animals; Legal Expense Insurance Class 3 (Fire and Marine, etc.):
Fire; Elements; War, Riot and Explosion; Marine and Transportation; Vehicle;
Property Damage, Sprinkler Leakage

 

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

 

          Regulated Insurance   Jurisdiction(s) of Permits   Lines of Permitted
Business Subsidiary        
 
       
 
      and Crop; Other Fire and Marine Risks; Contingent Losses; Legal Expense
Insurance
 
       
Affirmative Insurance Company
  Indiana   Class II (Casualty): Accident and Health — Disability; Burglary,
Theft; Glass; Boiler and Machinery; Automobile; Sprinkler; Liability; Fidelity &
Surety without Bail Bonds; MiscellaneousClass III (Property): Fire, Windstorm,
Hail, Loot, Riot; Sprinkler; Marine
 
       
Affirmative Insurance Company
  Iowa   Fire; Extended coverage; Other allied lines; Homeowners multiple peril;
Commercial multiple peril; Earthquake; Growing crops; Ocean marine; Inland
marine; Accident only; Accident and health; Hospital and medical expense; Group
accident and health; Non-cancellable accident and health; Liability other than
auto (BI); Liability other than auto (PD); Auto liability (BI); auto liability
(PD); Auto physical damage; Aircraft physical damage; Fidelity; Surety; Glass;
Burglary and theft; Boiler and machinery
 
       
Affirmative Insurance Company
  Kansas   Fire; Windstorm & Hail; Extended Coverage; Optional Perils; Sprinkler
Leakage; Business Interruption; Earthquake; Water Damage; Inland Marine; Rain;
Automobile Physical Damage; Flood; Homeowners Policies; Automobile Liability;
General Liability; Fidelity, Surety & Forgery Bonds; Glass; Burglary, Theft &
Robbery; Boiler & Machinery; Malpractice Liability; Cargo Liability
 
       
Affirmative Insurance Company
  Kentucky   Property, Casualty (limited to vehicle, liability, burglary &
theft, personal property floater, glass, boiler & machinery, leakage & fire
extinguishing equipment, failure of certain institutions to record documents,
automobile guaranty and miscellaneous), Surety; Marine & Transportation
 
       
Affirmative Insurance Company
  Michigan   Recognition as an Accredited Reinsurer in Michigan
 
       
Affirmative Insurance Company
  Mississippi   Fire and Allied Lines; Casualty/Liability; Fidelity; Surety;
Boiler and Machinery; Plate Glass; Inland Marine; Auto Phy Damage/Liab; Guaranty
 
       
Affirmative Insurance Company
  Missouri   Liability; Miscellaneous; Property
 
       
Affirmative Insurance Company
  Nebraska   Property Insurance; Glass Insurance; Burglary and Theft Insurance;
Boiler and Machinery Insurance; Liability Insurance; Vehicle Insurance; Fidelity
Insurance; Surety Insurance; Marine Insurance

 

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

 

          Regulated Insurance   Jurisdiction(s) of Permits   Lines of Permitted
Business Subsidiary        
 
       
Affirmative Insurance Company
  Nevada   Casualty (Excluding Workers’ Compensation) — Property
 
       
Affirmative Insurance Company
  New Mexico   Property (Excluding Marine and Transportation; Casualty and
Vehicle
 
       
Affirmative Insurance Company
  New York   Recognition as an Accredited Reinsurer in New York
 
       
Affirmative Insurance Company
  North Carolina   Fire; Extended Coverage; Commercial Water Damage; Residential
Water Damage; Burglary and Theft; Glass; Boiler and Machinery; Elevator; Animal;
Automobile Collision; Other Collision; Automobile Personal Injury Liability;
Other Personal Injury Liability; Automobile Property Damage Liability; Other
Property Damage Liability; Workmen’s Compensation & Employer’s Liability;
Fidelity and Surety; Motor Vehicle and Aircraft Property Damage, Fire, Theft,
Comprehensive, Collision; Inland Marine
 
       
Affirmative Insurance Company
  North Dakota   Casualty; Property
 
       
Affirmative Insurance Company
  Ohio   Accident & Health; Aircraft; Allied Lines; Boiler & Machinery; Burglary
& Theft; Collectively Renewable A & H; Commercial Auto — Liability; Commercial
Auto — No Fault; Commercial Auto — Phys. Damage; Credit Accident & Health;
Earthquake; Fidelity; Financial Guaranty; Fire; Glass, Group Accident & Health;
Guaranteed Renewable A & H; Inland Marine; Multiple Peril — Commercial; Multiple
Peril — Farmowners; Multiple Peril - Homeowners; Noncancellable A & H; Nonrenew
— State Reasons (A&H); Ocean Marine; Other Accident only; Other Liability;
Private Passenger Auto - Liab.; Private Passenger Auto-Other; Private
Passenger-Phys Damage; Surety; Workers Compensation
 
       
Affirmative Insurance Company
  Oklahoma   Property; Casualty
 
       
Affirmative Insurance Company
  Oregon   Casualty (Excluding Workers’ Compensation)
 
       
Affirmative Insurance Company
  Pennsylvania   Auto Liability; Inland Marine and Physical Damage
 
       
Affirmative Insurance Company
  Rhode Island   All Lines of insurance except life, annuities, title, mortgage
guaranty and worker’s compensation.
 
       
Affirmative Insurance Company
  South Carolina   Property; Casualty
 
       
Affirmative Insurance Company
  South Dakota   Fire & Allied Lines; Inland & Ocean Marine; Bodily Injury (No
Auto);

 

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

 

          Regulated Insurance   Jurisdiction(s) of Permits   Lines of Permitted
Business Subsidiary        
 
       
 
      Property Damage (No Auto); Bodily Injury (Auto); Property Damage (Auto);
Physical Damage (Auto); Fidelity & Surety Bonds; Glass; Burglary & Theft; Boiler
& Machinery; Bail Bonds
 
       
Affirmative Insurance Company
  Tennessee   Property; Casualty; Surety
 
       
Affirmative Insurance Company
  Texas   Automobile Liability; Automobile Physical Damage and Reinsurance on
all lines authorized to be written on a direct basis
 
       
Affirmative Insurance Company
  Utah   Liability; Property; Vehicle Liability
 
       
Affirmative Insurance Company
  Virginia   Fire; Miscellaneous Property; Farm Multiple Peril; Homeowners
Multiple Peril; Commercial Multiple Peril; Inland Marine; Workers
Compensation-Employer; Liability Other Than Auto; Automobile Liability;
Automobile Physical Damage; Fidelity; Surety; Glass; Burglary and Theft; Boiler
and Machinery; Water Damage
 
       
Affirmative Insurance Company
  Washington   Vehicle
 
       
Affirmative Insurance Company
  West Virginia   Fire; Marine; Casualty; Surety
 
       
Affirmative Insurance Company
  Wisconsin   Fire, inland marine, and other property insurance; Liability and
incidental medical expense insurance; Automobile and aircraft insurance;
Fidelity insurance; Surety insurance; Miscellaneous
 
       
 
      Property; Automobile Insurance — Limited; Casualty: Automobile; Casualty:
Affirmative Insurance Company of Michigan
  Michigan   Liablity; Casualty: Misc — Other; Disability coverage supplemental
to Auto Insurance
 
       
Insura Property & Casualty
Insurance Company
  Arizona   Casualty Without Workers’ Compensation; Marine and Transportation;
Property; Surety; Vehicle

 

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

 

          Regulated Insurance   Jurisdiction(s) of Permits   Lines of Permitted
Business Subsidiary        
 
       
Insura Property & Casualty
Insurance Company
  Arkansas   Property; Casualty (Excluding Workers Compensation); Surety; Marine
 
       
Insura Property & Casualty
Insurance Company
  Colorado   Fidelity and Surety; General Casualty; General Property; Motor
Vehicle (Casualty); Motor Vehicle (Property); Professional Malpractice;
 
       
Insura Property & Casualty
Insurance Company
  Connecticut   Fire, Extended Coverage, and Other Allied Lines; Homeowners
Multiple Peril; Commercial Multiple Peril; Inland Marine; Workman’s
Compensation; Liability other than Auto (BI and PD); Auto Liability (BI and PD);
Auto Physical Damage; Glass; Burglary and Theft; Credit; Reinsurance
 
       
Insura Property & Casualty
Insurance Company
  Florida   Fire; Allied Lines; Farmowners Multi Peril; Homeowners Multi Peril;
Commercial Multi Peril; Inland Marine; Medical Malpractice; Earthquake; Other
Liability; Private Passenger Auto Liability; Commercial Automobile Liability;
PPA Physical Damage; Commercial Auto Physical Damage; Fidelity; Surety; Glass;
Burglary and Theft; Boiler and Machinery; Industrial Fire; Industrial Extended
Coverage; Mobile Home Multi Peril; Mobile Home Physical Damage
 
       
Insura Property & Casualty
Insurance Company
  Georgia   Property; Marine and Transportation; Casualty (Including Workers’
Compensation); Surety
 
       
Insura Property & Casualty
Insurance Company
  Illinois   Class 2 (Casualty, Fidelity and Surety): Accident and Health;
Vehicle; Liability; Workers’ Compensation; Burglary and Forgery; Glass; Fidelity
and Surety; Miscellaneous; Other Casualty Risks; Contingent Losses; Livestock
and Domestic Animals; Legal Expense InsuranceClass 3 (Fire and Marine, etc.):
Fire; Elements; War, Riot and Explosion; Marine and Transportation; Vehicle;
Property Damage, Sprinkler Leakage and Crop; Other Fire and Marine Risks;
Contingent Losses; Legal Expense Insurance
 
       
Insura Property & Casualty
Insurance Company
  Indiana   Class II (Casualty): Accident and Health — Disability; Workers’
Compensation; Burglary, Theft; Glass; Boiler and Machinery; Automobile;
Sprinkler; Liability; Fidelity & Surety without Bail Bonds; Miscellaneous
Class III (Property): Fire, Windstorm, Hail, Loot, Riot; Sprinkler; Marine
 
       
Insura Property & Casualty
Insurance Company
  Iowa   Fire; Extended coverage; Other allied lines; Homeowners multiple peril;
Commercial multiple peril; Earthquake; Growing crops; Ocean marine;

 

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

 

          Regulated Insurance   Jurisdiction(s) Of Permits   Lines of Permitted
Business Subsidiary        
 
       
 
      Inland marine; Accident only; Accident and health; Hospital and medical
expense; Group accident and health; Non-cancellable accident and health;
Liability other than auto (BI); Liability other than auto (PD); Auto liability
(BI); auto liability (PD); Auto physical damage; Aircraft physical damage;
Fidelity; Surety; Glass; Burglary and theft; Boiler and machinery
 
       
Insura Property & Casualty
Insurance Company
  Kansas   Fire; Windstorm & Hail; Extended Coverage; Optional Perils; Sprinkler
Leakage; Business Interruption; Earthquake; Water Damage; Inland Marine; Rain;
Automobile Physical Damage; Flood; Homeowners Policies; Automobile Liability;
General Liability; Fidelity, Surety & Forgery Bonds; Glass; Burglary, Theft &
Robbery; Boiler & Machinery; Malpractice Liability; Cargo Liability
 
       
Insura Property & Casualty
Insurance Company
  Kentucky   Property, Casualty (limited to vehicle, liability, workers’
compensation & employer’s liability, burglary & theft, personal property
floater, glass, boiler & machinery, leakage & fire extinguishing equipment,
failure of certain institutions to record documents, automobile guaranty and
miscellaneous), Surety; Marine & Transportation
 
       
Insura Property & Casualty
Insurance Company
  Mississippi   Fire and Allied Lines; Casualty/Liability; Fidelity; Surety;
Boiler and Machinery; Plate Glass; Inland Marine; Auto Phy Damage/Liab; Guaranty
 
       
Insura Property & Casualty
Insurance Company
  Missouri   Miscellaneous; Accident & Health; Liability; Property
 
       
Insura Property & Casualty
Insurance Company
  Nebraska   Property Insurance; Glass Insurance; Burglary and Theft Insurance;
Boiler and Machinery Insurance; Liability Insurance; Vehicle Insurance; Fidelity
Insurance; Surety Insurance; Marine Insurance
 
       
Insura Property & Casualty
Insurance Company
  Nevada   Casualty (Excluding Workers’ Compensation) — Property
 
       
Insura Property & Casualty
Insurance Company
  New Mexico   Vehicle
 
       
Insura Property & Casualty
Insurance Company
  North Carolina   Fire; Extended Coverage; Commercial Water Damage; Residential
Water Damage; Burglary and Theft; Glass; Boiler and Machinery; Elevator; Animal;
Automobile Collision; Other Collision; Automobile Personal Injury Liability;
Other Personal Injury Liability; Automobile Property Damage

 

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

 

          Regulated Insurance   Jurisdiction(s) of Permits   Lines of Permitted
Business Subsidiary        
 
       
 
      Liability; Other Property Damage Liability; Workmen’s Compensation &
Employer’s Liability; Fidelity and Surety; Motor Vehicle and Aircraft Property
Damage, Fire, Theft, Comprehensive, Collision; Inland Marine; Ocean Marine;
Marine Protection and Indemnity; Aircraft Voluntary Settlement
 
       
Insura Property & Casualty
Insurance Company
  North Dakota   Casualty; Property
 
       
Insura Property & Casualty
Insurance Company
  Ohio   Accident & Health; Aircraft; Allied Lines; Boiler & Machinery; Burglary
& Theft; Collectively Renewable A & H; Commercial Auto — Liability; Commercial
Auto — No Fault; Commercial Auto — Phys. Damage; Credit Accident & Health;
Earthquake; Fidelity; Financial Guaranty; Fire; Glass, Group Accident & Health;
Guaranteed Renewable A & H; Inland Marine; Multiple Peril — Commercial; Multiple
Peril — Farmowners; Multiple Peril - Homeowners; Noncancellable A & H; Nonrenew
— State Reasons (A&H); Ocean Marine; Other Accident only; Other Liability;
Private Passenger Auto - Liab.; Private Passenger Auto-Other; Private
Passenger-Phys Damage; Surety;
 
       
Insura Property & Casualty
Insurance Company
  Oklahoma   Property; Casualty
 
       
Insura Property & Casualty
Insurance Company
  Oregon   Casualty (Excluding Workers’ Compensation)
 
       
Insura Property & Casualty
Insurance Company
  Rhode Island   All lines of insurance except life, annuities, title and
mortgage guaranty.
 
       
Insura Property & Casualty
Insurance Company
  South Carolina   Property; Casualty
 
       
Insura Property & Casualty
Insurance Company
  South Dakota   Fire & Allied Lines; Inland & Ocean Marine; Bodily Injury (No
Auto); Property Damage (No Auto); Bodily Injury (Auto); Property Damage (Auto);
Physical Damage (Auto); Fidelity & Surety Bonds; Glass; Burglary & Theft; Boiler
& Machinery; Bail Bonds
 
       
Insura Property & Casualty
Insurance Company
  Tennessee   Property; Casualty; Surety
 
       
Insura Property & Casualty
  Texas   Automobile — Liability and Physical Damage and Reinsurance on all
lines

 

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

 

          Regulated Insurance Subsidiary   Jurisdiction(s) of Permits   Lines of
Permitted Business
Insurance Company
      authorized to be written on a direct basis
Insura Property & Casualty
  Utah   Liability; Property; Vehicle Liability
Insurance Company
       
 
       
Insura Property &
Casualty Insurance
      Fire; Miscellaneous Property and Casualty; Farm Multiple Peril; Homeowners
Multiple Peril; Commercial Multiple Peril; Inland Marine; Workers
Compensation-Employer; Liability Other Than Auto; Automobile Liability;
Automobile Physical Damage; Aircraft Liability; Air Physical Damage;
Company
  Virginia   Fidelity; Glass; Burglary and Theft; Boiler and Machinery; Water
Damage
 
       
Insura Property & Casualty
Insurance Company
  Washington   Vehicle
 
       
Insura Property & Casualty
Insurance Company
  West Virginia   Fire; Marine; Casualty; Surety
 
       
Insura Property & Casualty
Insurance Company
  Wisconsin   None.

USAgencies Regulated Insurance Subsidiary Permits

          Regulated Insurance Subsidiary   Jurisdiction(s) of Permits   Lines of
Permitted Business
USAgencies Direct Insurance Company, Inc.
  Alabama   Miscellaneous Casualty; Surety Excluding Official Surety Bonds;
Marine
 
       
USAgencies Direct Insurance Company, Inc.
  Arizona   Vehicle
 
       
USAgencies Direct Insurance Company, Inc.
  Illinois   Class 2 (Casualty, Fidelity and Surety): Vehicle; Liability;
Workers’ Compensation; Burglary and Forgery; Glass; Miscellaneous; Other
Casualty Risks; Contingent Losses; Livestock and Domestic Animals; Legal Expense
Insurance

    Class 3 (Fire and Marine, etc.): Marine and Transportation; Vehicle;
Property Damage, Sprinkler Leakage and Crop; Other Fire and Marine Risks;
Contingent Losses

 

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

 

          Regulated Insurance Subsidiary   Jurisdiction(s) of Permits   Lines of
Permitted Business
USAgencies Direct Insurance
Company, Inc.
  Indiana   Class II (Casualty) — Accident and Health — Disability; Workers’
Compensation; Burglary, Theft; Glass; Boiler and Machinery; Automobile;
Sprinkler; Liability; Credit; Title; Fidelity & Surety-excluding bail bonds;
Miscellaneous; Legal Expenses; Class III (Property) — Fire, Windstorm, Hail,
Loot, Riot; Crops; Sprinkler; Marine
 
       
USAgencies Direct Insurance
Company, Inc.
  Iowa   Fire; Extended coverage; Other allied lines; Homeowners multiple peril
(Inc. B.I.); Commercial multiple peril; Earthquake; Growing crops; Ocean marine;
Inland marine; Workers’ compensation; Liability other than auto (B.I.);
Liability other than auto (P.D.); Auto liability (B.I.); Auto liability (P.D.);
Auto physical damage; Aircraft physical damage; Glass; Burglary and theft;
Boiler and machinery
 
       
USAgencies Direct Insurance
Company, Inc.
  Kentucky   Multiple Line — Health; Property; Surety; Casualty; and Marine and
transportation Insurance
 
       
USAgencies Direct Insurance
Company, Inc.
  Louisiana   Vehicle
 
       
USAgencies Direct Insurance
Company, Inc.
  Massachusetts   Ocean & Inland Marine
 
       
USAgencies Direct Insurance
Company, Inc.
  Montana   Property; Marine; Casualty (excluding Workers’ Compensation)
 
       
USAgencies Direct Insurance
Company, Inc.
  Nevada   Property; Casualty (excluding Workers’ Compensation)
 
       
USAgencies Direct Insurance
Company, Inc.
  New York   Fire; miscellaneous property; water damage; burglary and theft;
glass; boiler and machinery; collision; personal injury liability; property
damage liability; motor vehicle and aircraft physical damage; marine and inland
marine; marine protection and indemnity
 
       
 
      Allied Lines; Boiler & Machinery; Burglary & Theft; Commercial Auto -
Liability; Commercial Auto — No Fault; Commercial Auto — Physical

 

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

 

          Regulated Insurance Subsidiary   Jurisdiction(s) of Permits   Lines of
Permitted Business

  Oregon   Damage; Earthquake; Fidelity; Fire; Glass; Inland Marine; Multiple
Peril — Commercial; Multiple Peril — Farmowners; Multiple Peril - Homeowners;
Ocean Marine; Other Liability; Private Passenger Auto - Liability; Private
Passenger Auto — Other; Private Passenger - Physical Damage; Surety; Workers
Compensation
 
       
USAgencies Direct Insurance Company, Inc.
  Oregon   Casualty (Excluding Workers’ Coompensation); Marine and
Transportation
 
       
USAgencies Direct Insurance Company, Inc.
  Texas   Fire; Allied Coverages; Ocean Marine; Employers’ Liability; Automobile
— Liability & Physical Damage; Liability other than Automobile; Glass; Burglary
& Theft; Boiler & Machinery and Reinsurance on all lines authorized to be
writtenon a direct basis.
 
       
USAgencies Direct Insurance Company, Inc.
  Washington   Property; Marine & Transportation; Vehicle; General Casualty
 
       
USAgencies Direct Insurance Company, Inc.
  Wisconsin   Fire, inland marine, and other property insurance; Ocean marine
insurance; Liability and incidental medical expense insurance; Automobile and
aircraft insurance; Miscellaneous
 
       
USAgencies Casualty Insurance Company, Inc.
  Louisiana   Vehicle

 

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

 

SCHEDULE 6.01
EXISTING INDEBTEDNESS
Affirmative Existing Indebtedness

1.   None.

USAgencies Existing Indebtedness

1.   USAgencies Management Services, Inc. has outstanding debt as follows:

  a.   $11,517 owed to GMAC Financial Services for vehicle fleet financing.    
b.   $147,412 owed to Capital One Commercial Equipment Finance (formerly
Hibernia Bank) for an equipment capital lease.

 

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

 

SCHEDULE 6.02
EXISTING LIENS
Affirmative Existing Liens

     
1.
  Affirmative Insurance Holdings, Inc.
 
  Delaware Secretary of State
 
  Federal Tax Liens – clear.
 
  UCC

                                      FILE         SECURED PARTY   LIEN TYPE  
FILE NUMBER   DATE   COLLATERAL 1  
Dell Financial Services, L.P.
  UCC-1   51175455   4/15/05   Computer equipment lease 2  
Cisco Systems Capital Corporation
  UCC-1   63705696   10/24/06   Equipment lease    
 
               

     
2.
  Affirmative Property Holdings, Inc.
 
  Texas Secretary of State
 
  UCC

                                      FILE         SECURED PARTY   LIEN TYPE  
FILE NUMBER   DATE   COLLATERAL 1  
Pitney Bowes Credit Corporation
  UCC-1   04-0080962978   9/8/04   Pitney Bowes equipment 2  
Dell Financial Services, L.P.
  UCC-1   05-0014607962   5/10/05   Computer equipment lease 3  
Key Equipment Finance Inc.
  UCC-1   06-0017164904   5/19/06   Equipment, inventory, etc. 4  
Greater Bay Bank N.A.
  UCC-1   06-0018005282   5/26/06   Copiers 5  
Citicorp Vendor Finance, Inc.
  UCC-1   06-0018693922   6/2/06   Equipment (various fax machines) 6  
Citicorp Vendor Finance, Inc.
  UCC-1   06-0030630745   9/13/06   Copiers

     
3.
  A-Affordable Insurance Agency, Inc.
 
  Texas Secretary of State
 
  UCC

                                      FILE         SECURED PARTY   LIEN TYPE  
FILE NUMBER   DATE   COLLATERAL 1  
Citicorp Vendor Finance, Inc.
  UCC-1   01-00081647   4/27/01   Copiers lease    
 
  Continuation   06-00130631   4/18/06     2  
Citicorp Vendor Finance, Inc.
  UCC-1   04-0054146953   1/14/04   Specific equipment 3  
Meadow Creek Square S/C,
  UCC-1   06-0016720779   5/16/06   All goods, wares,    
Ltd., Meadow Creek Square
              equipment, fixtures, etc.    
S/C, G.P., LLC
                   
 
  Amendment   06-00168128   5/17/06   Restated collateral

USAgencies Existing Liens

 

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

 

     
1.
  USAgencies, L.L.C.

     
 
  State of Louisiana, East Baton Rouge Parish

 
  UCC

                          SECURED PARTY   LIEN TYPE   FILE NUMBER   FILE DATE  
COLLATERAL 1  
Cisco Systems Capital Corporation
  UCC-1   17-1216962   6/29/01   Equipment lease    
 
                   
 
  Amendment   17-1257819   11/5/03        
 
  Continuation   17-1295217   3/28/06     2  
Citicorp Vendor Finance, Inc.
  UCC-1   09-1040045   1/13/05   Copier

 

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

 

SCHEDULE 6.04
EXISTING INVESTMENTS
Affirmative Existing Investments

                              Bank Name   Beneficiary   Bank Account #   Account
Name   Location   Contact Name   Contact Number
Non-Restricted Securities
                           
 
                           
UBS Financial Services, Inc.
  N/A   Y1 13774   Affirmative Insurance Company   New York, NY   Hank Ludwicki
    212-821-2189  
 
                           
UBS Financial Services, Inc.
  N/A   Y1 13773   Insura Property & Casualty Insurance Company   New York, NY  
Hank Ludwicki     212-821-2189  
 
                           
UBS Financial Services, Inc.
  N/A   Y1 00880   Affirmative Insurance Company of Michigan   New York, NY  
Hank Ludwicki     212-821-2189  
 
                           
Comerica Bank
  N/A   4085000178   Affirmative Insurance Company   Detroit, MI   Ralph
Johnston     313-222-9053  
 
                           
Comerica Bank
  N/A   4085000187   Insura Property & Casualty Insurance Company   Detroit, MI
  Ralph Johnston     313-222-9053  
 
                           
Comerica Bank
  N/A   2085001302   Affirmative Insurance Company of Michigan   Detroit, MI  
Ralph Johnston     313-222-9053  
 
                           
Frost National Bank
  N/A   WA181   Affirmative Insurance Company   Fort Worth, TX   Chris Massey  
  817-420-5052  
 
                           
Frost National Bank
  N/A   WA182   Insura Property & Casualty Insurance Company   Fort Worth, TX  
Chris Massey     817-420-5052  
 
                           
Restricted Securities
                           
 
                           
Trusts:
                           

 

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

 

                              Bank Name   Beneficiary   Bank Account #   Account
Name   Location   Contact Name   Contact Number
Frost National Bank(NV)
  Old American-AAF   W00015500   Affirmative Insurance Company - OACM
A-Affordable Trust   Fort Worth, TX   Chris Massey     817-420-5052  
 
                           
 
                           
Frost National Bank
  Old American-AIS-SW   W00015600   Affirmative Insurance Company - OACM AIS-SW
Trust   Fort Worth, TX   Chris Massey     817-420-5052  
 
                           
 
                           
Frost National Bank
  Vesta   WA570   Affirmative Insurance Company - Vesta AIC Trust   Fort Worth,
TX   Chris Massey     817-420-5052  
 
                           
Special Deposits:
                           
 
                           
US Bank (GA)
  Policyholder   61-584708200   Affirmative Insurance Company   Winston-Salem,
NC   Debbie Blackburn     877-877-2143 x3  
 
                           
Illinois National Bank (IL)
  Policyholder   155   Affirmative Insurance Company (NAIC#42609)   Springfield,
IL   Cathy Suhling     217-557-4639  
 
                           
 
                           
Century Bank (NM)
  Policyholder   4955   Affirmative Insurance Company   Santa Fe, NM   Alan Snow
    505-995-1210  
 
                           
US Bank (NC)
  Policyholder   58-078477600   Affirmative Insurance Company   Winston-Salem,
NC   Diane Grubbs     877-877-2143 x1  
 
                           
Frost National Bank
  Policyholder   W00015600   Affirmative Insurance Company   Fort Worth, TX  
Chris Massey     817-420-5052  
 
                           
 
                           
US Bank (SC)
  Policyholder   222-121060003300   Affirmative Insurance Company  
Winston-Salem, NC   Debbie Blackburn     877-877-2143 x3  
 
                           
Sun Trust Bank (VA)
  Policyholder   7023549   Affirmative Insurance Company   Richmond, VA   Brenda
Whitener     804-782-7792  
 
                           
US Bank (GA)
  Policyholder   61-584918600   Insura Property & Casualty Insurance Company  
Winston-Salem, NC   Debbie Blackburn     877-877-2143 x3  
 
                           
Illinois National Bank (IL)
  Policyholder   14238   Insura Property & Casualty Insurance Company  
Springfield, IL   Cathy Suhling     217-557-4639  
 
          (NAIC#38806)                
 
                           
US Bank (NC)
  Policyholder   58-078544100   Insura Property & Casualty Insurance Company  
Winston-Salem, NC   Diane Grubbs     877-877-2143  
 
                           
Century Bank (NM)
  Policyholder   5020   Insura Property & Casualty Insurance Company   Santa Fe,
NM   Alan Snow     505-995-1210  
 
                           
Frost National Bank
  Policyholder   WA182   Insura Property & Casualty Insurance Company   Fort
Worth, TX   Chris Massey     817-420-5052  
(NV)
                           
 
                           
US Bank (SC)
  Policyholder   222-12106000300   Insura Property & Casualty Insurance Company
  Winston-Salem, NC   Debbie Blackburn     877-877-2143 x3  

 

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

 

                              Bank Name   Beneficiary   Bank Account #   Account
Name   Location   Contact Name   Contact Number
Sun Trust Bank (VA)
  Policyholder   7022958   Insura Property & Casualty Insurance Company  
Richmond, VA   Brenda Whitener     804-782-7792  
 
                           
JP Morgan Chase (MI)
  Policyholder   341000163   Affirmative Insurance Company of Michigan  
Lansing, MI   Betty Lotoszinski     517-241-9072  

USAgencies Existing Investments
Deposit Accounts

                                          Contact Bank Name   Bank Account #  
Account Name   Location   Contact Name   Number
Capital One, N. A.
  2080045355 — Operating   USAgencies Direct
Insurance Company   Baton Rouge, LA   Janet Olson   (225) 381-2140
 
                           
Capital One, N. A.
  792086675 – Operating
2080108020 –   792086675 – Operating       Janet Olson   (225) 381-2140
 
                   
 
  Consolidated Return
Account   2080108020 –
Consolidated Return
Account            
 
                   
 
  792156894 – Payroll Account   792156894 – Payroll Account   Baton Rouge, LA  
     
 
                   
 
  8660199999 – Kiosk Account   8660199999 — Kiosk Account
USAgencies Management Services, Inc            
JPMorgan Chase Bank, N.A.
  000000641907191 – Deposit (Sales Office)   USAgencies Management   Illinois
Market P. O. Box 260180   Tine Neames   (225) 332-7782
 
                   
 
      Services   Baton Rouge, LA
70826        

 

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

 

                      Bank Name   Bank Account #   Account Name   Location  
Contact Name   Number
Regions Bank
  4305089786 – Deposit (Sales Office)   USAgencies Management Services   Baton
Rouge, LA   Bonnie Couvillon   (225) 767-9394
 
                   
Capital One, N. A.
  792088139 – Operating 8649099999 – Tower key   USAgencies Casualty Insurance
Company   Baton Rouge, LA   Janet Olson   (225) 381-2140
 
                   
First National Bank
  139539 – Deposit (Sales Office)   USAgencies Casualty
Insurance Company   Crowley, LA   Diane Sarver   (337) 783-4014
 
                   
JPMorgan Chase Bank, N. A
  2101345508 — Deposit (Sales Office)   USAgencies Casualty
Insurance Company   Baton Rouge, LA   Tine Neames   (225) 332-7782
 
                   
Plaquemine Bank & Trust
  119210 — Deposit (Sales Office)   USAgencies Casualty
Insurance Company   Plaquemine, LA   Rhett Vaughn   (225) 687-6388
 
                   
Regions Bank
  4305051908 — Deposit (Sales Office)   USAgencies Casualty
Insurance Company   Baton Rouge, LA   Bonnie Couvillon   (225) 767-9394
 
                   
Sabine State Bank
  9009760 — Deposit (Sales Office)   USAgencies Casualty
Insurance Company   Many, LA   Bridget Hicks   (318) 256-7000
 
                   
Winnsboro state Bank
  1027158 — Deposit (Sales Office)`   USAgencies Casualty
Insurance Company   Winnsboro, LA   Michael Woods   (318) 435-7535
 
                   
Capital One, N.A.
  792157378 – Operating
8661099999 – TowerKEY   LIFCO, L.L.C.   Baton Rouge, LA   Janet Olson   (225)
381-2140

 

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

 

                      Bank Name   Bank Account #   Account Name   Location  
Contact Name   Number
First National Bank
  139594 – Deposit (Sales Office)   LIFCO, L.L.C.   Crowley, LA   Diane Sarver  
(337) 783-4014
 
                   
JP Morgan Chanse Bank, N.A.
  2102203162 — Deposit (Sales Office)   LIFCO, L.L.C.   Baton Rouge, LA   Tine
Neames   (225) 332-7782
 
                   
Plaquemine Bank & Trust
  119474 — Deposit (Sales Office)   LIFCO, L.L.C.   Plaquemine, LA   Rhett
Vaughn   (225) 687-6380
 
                   
Regions Bank
  4305051916 — Deposit (Sales Office)   LIFCO, L.L.C.   Baton Rouge, LA   Bonnie
Couvillon   (225) 767-9394
 
                   
Sabine State Bank & Trust Co.
  9009779 — Deposit (Sales Office)   LIFCO, L.L.C.   Many, LA   Bridget Hicks  
(318) 256-7000
 
                   
Winnsboro State Bank & Trust
  1027166 — Deposit (Sales Office)   LIFCO, L.L.C.   Winnsboro, LA   Michael
Woods   (318) 435-7535

Special Investment Accounts
Restricted Securities Accounts

              Bank Name   Bank Account #   Account Name   Location
Capital One, N.A.
  710415027   USAgencies Casualty Insurance Company, Inc.   Louisiana
 
           
Capital One, N.A.
  760110015   USAgencies Direct Insurance Company   Louisiana
 
           
US Bank
  141049754   USAgencies Direct Insurance Company   Arizona
 
           
US Bank
  141049754   USAgencies Direct Insurance Company   Arizona
 
           
Bank of New York
  050261   USAgencies Direct Insurance Company   Nevada
 
           
Bank of New York
  350518   USAgencies Direct Insurance Company   New York
 
           
Capital One, N.A.
  710415043   USAgencies Direct Insurance Company   Ohio