EXHIBIT 10.21

EXECUTION VERSION

 

 

 

 

$100,000,000

CREDIT AGREEMENT

dated as of

February 27, 2009

among

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.,

ARGO GROUP US, INC.,

ARGO ACQUISITION, LIMITED, and

HERITAGE UNDERWRITING AGENCY LIMITED,

as Borrowers,

The Lenders Party Hereto

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,

as Administrative Agent

and

WACHOVIA BANK, N.A.,

as Syndication Agent

 

 

J.P. MORGAN SECURITIES INC.,

as Sole Bookrunner and Joint Lead Arranger

and

WACHOVIA CAPITAL MARKETS LLC

as Joint Lead Arranger

 

 

 

 

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TABLE OF CONTENTS

 

              Page

ARTICLE I          Definitions

   1  

SECTION 1.01.

  

  Defined Terms

   1  

SECTION 1.02.

  

  Classification of Loans and Borrowings

   22  

SECTION 1.03.

  

  Terms Generally

   22  

SECTION 1.04.

  

  Accounting Terms; GAAP

   23  

SECTION 1.05.

  

  Foreign Currency Calculations

   23

ARTICLE II        The Credits

   23  

SECTION 2.01.

  

  Commitments

   23  

SECTION 2.02.

  

  Loans and Borrowings

   24  

SECTION 2.03.

  

  Requests for Revolving Borrowings

   25  

SECTION 2.04.

  

  Equalization of Borrowings

   26  

SECTION 2.05.

  

  [Intentionally Omitted]

   27  

SECTION 2.06.

  

  Letters of Credit

   27  

SECTION 2.07.

  

  Funding of Borrowings

   31  

SECTION 2.08.

  

  Interest Elections

   32  

SECTION 2.09.

  

  Termination and Reduction of Commitments

   33  

SECTION 2.10.

  

  Repayment of Loans; Evidence of Debt

   34  

SECTION 2.11.

  

  Prepayment of Loans

   36  

SECTION 2.12.

  

  Fees

   36  

SECTION 2.13.

  

  Interest

   37  

SECTION 2.14.

  

  Alternate Rate of Interest

   38  

SECTION 2.15.

  

  Increased Costs

   39  

SECTION 2.16.

  

  Break Funding Payments

   40  

SECTION 2.17.

  

  Taxes

   40  

SECTION 2.18.

  

  Payments Generally; Pro Rata Treatment; Sharing of Set-offs

   41  

SECTION 2.19.

  

  Mitigation Obligations; Replacement of Lenders

   43  

SECTION 2.20.

  

  Joint and Several Liability of Borrowers

   44  

SECTION 2.21.

  

  Additional Reserve Costs

   46  

SECTION 2.22.

  

  Defaulting Lenders

   46

ARTICLE III       Representations and Warranties

   48  

SECTION 3.01.

  

  Organization; Powers

   48  

SECTION 3.02.

  

  Authorization; Enforceability

   48  

SECTION 3.03.

  

  Governmental Approvals; No Conflicts

   48  

SECTION 3.04.

  

  Financial Condition; No Material Adverse Change

   48  

SECTION 3.05.

  

  Properties

   49  

SECTION 3.06.

  

  Litigation and Environmental Matters

   49  

SECTION 3.07.

  

  Compliance with Laws and Agreements

   49  

SECTION 3.08.

  

  Investment Company Status

   50  

SECTION 3.09.

  

  Taxes

   50

 

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SECTION 3.10.

 

  ERISA

   50  

SECTION 3.11.

 

  Insurance Licenses

   50  

SECTION 3.12.

 

  Subsidiaries

   50  

SECTION 3.13.

 

  Material Agreements

   51  

SECTION 3.14.

 

  Environmental Matters

   51  

SECTION 3.15.

 

  Disclosure

   51  

SECTION 3.16.

 

  Solvency

   51  

SECTION 3.17.

 

  Foreign Pension Plan

   51  

SECTION 3.18.

 

  Purpose of Borrowings

   52

ARTICLE IV        Conditions

   52  

SECTION 4.01.

 

  Effective Date

   52  

SECTION 4.02.

 

  Each Credit Event

   53

ARTICLE V         Affirmative Covenants

   54  

SECTION 5.01.

 

  Financial Statements; Ratings Change and Other Information

   54  

SECTION 5.02.

 

  Notices of Material Events

   56  

SECTION 5.03.

 

  Existence; Conduct of Business

   57  

SECTION 5.04.

 

  Payment of Obligations

   57  

SECTION 5.05.

 

  Maintenance of Properties; Insurance

   58  

SECTION 5.06.

 

  Books and Records; Inspection Rights

   58  

SECTION 5.07.

 

  Compliance with Laws

   58  

SECTION 5.08.

 

  Use of Proceeds and Letters of Credit

   58  

SECTION 5.09.

 

  Covenant to Pledge

   58  

SECTION 5.10.

 

  Insurance Licenses and Permits

   58  

SECTION 5.11.

 

  Clean Up Period

   59

ARTICLE VI        Negative Covenants

   59  

SECTION 6.01.

 

  Indebtedness

   59  

SECTION 6.02.

 

  Liens

   60  

SECTION 6.03.

 

  Fundamental Changes

   61  

SECTION 6.04.

 

  Investments, Loans, Advances, Guarantees and Acquisitions

   61  

SECTION 6.05.

 

  Swap Agreements

   62  

SECTION 6.06.

 

  Restricted Payments

   62  

SECTION 6.07.

 

  Transactions with Affiliates

   63  

SECTION 6.08.

 

  Restrictive Agreements

   63  

SECTION 6.09.

 

  Minimum Interest Coverage Ratio

   63  

SECTION 6.10.

 

  Maximum Leverage Ratio

   64  

SECTION 6.11.

 

  Tangible Net Worth

   64  

SECTION 6.12.

 

  Risk Based Capital Ratio

   64  

SECTION 6.13.

 

  Fiscal Year

   64  

SECTION 6.14.

 

  Sale and Leaseback Transactions

   64  

SECTION 6.15.

 

  Rentals

   64  

SECTION 6.16.

 

  Subordinated Indebtedness; Other Indebtedness and Payments

   64

ARTICLE VII       Events of Default

   65

 

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ARTICLE VIII        The Administrative Agent

   67

ARTICLE IX          Miscellaneous

   69  

SECTION 9.01.

 

  Notices

   69  

SECTION 9.02.

 

  Waivers; Amendments

   70  

SECTION 9.03.

 

  Expenses; Indemnity; Damage Waiver

   71  

SECTION 9.04.

 

  Successors and Assigns

   73  

SECTION 9.05.

 

  Survival

   76  

SECTION 9.06.

 

  Counterparts; Integration; Effectiveness

   76  

SECTION 9.07.

 

  Severability

   76  

SECTION 9.08.

 

  Right of Setoff

   76  

SECTION 9.09.

 

  Governing Law; Jurisdiction; Consent to Service of Process

   77  

SECTION 9.10.

 

  WAIVER OF JURY TRIAL

   77  

SECTION 9.11.

 

  Headings

   78  

SECTION 9.12.

 

  Confidentiality

   78  

SECTION 9.13.

 

  Interest Rate Limitation

   79  

SECTION 9.14.

 

  USA PATRIOT Act

   79  

SECTION 9.15.

 

  Conversion of Currencies

   79  

SECTION 9.16.

 

  Appointment and Authorization of Borrower Representative

   80

 

 

SCHEDULES:

 

Schedule 1.01

 

--

  

Pricing Schedule

Schedule 2.01

 

--

  

Commitments

Schedule 3.11

 

--

  

Licenses

Schedule 3.12

 

--

  

Subsidiaries

Schedule 6.01

 

--

  

Existing Indebtedness

Schedule 6.02

 

--

  

Existing Liens

Schedule 6.08

 

--

  

Existing Restrictions

EXHIBITS:

 

Exhibit A

  --   

Form of Assignment and Assumption

Exhibit B

  --   

Mandatory Costs Rate

 

iii

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CREDIT AGREEMENT dated as of February 27, 2009, among ARGO GROUP INTERNATIONAL
HOLDINGS, LTD, ARGO GROUP US, INC., ARGO ACQUISITION, LIMITED, and HERITAGE
UNDERWRITING AGENCY LIMITED, as Borrowers, the LENDERS party hereto, and
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, as Administrative Agent.

The parties hereto agree as follows:

ARTICLE I

Definitions

SECTION 1.01.  Defined Terms.    As used in this Agreement, the following terms
have the meanings specified below:

“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 or Business” means either (a) the assets constituting a
business, division, facility, product line or line of business of any Person not
already a Subsidiary or (b) all of the capital stock of any such Person, which
Person shall, as a result of such acquisition or merger, become a Wholly-Owned
Subsidiary of the Parent (or shall be merged with and into the Parent or a
Wholly-Owned Subsidiary, with the Parent or such Wholly-Owned Subsidiary being
the surviving Person).

“Adjusted Eurocurrency Rate” means, with respect to any Eurocurrency Borrowing
in Dollars for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/100 of 1%) equal to (a) the Eurocurrency Rate for
such Interest Period multiplied by (b) the Statutory Reserve Rate. For all other
Eurocurrency Borrowings, “Adjusted Eurocurrency Rate” means the Eurocurrency
Rate.

“Administrative Agent” means JPMCB, together with its permitted successors and
assigns, in its capacity as administrative agent for the Lenders hereunder.

“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.

“Advance” means any Loan or any Letter of Credit.

“Affiliate” means, 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.

“Agreement” means this Credit Agreement, as amended, restated, modified or
supplemented from time to time.

 

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“Agreement Currency” shall have the meaning assigned to such term in
Section 9.15(b).

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective
Rate in effect on such day plus  1/2 of 1% and (c) the Adjusted Eurocurrency
Rate for a one month Interest Period on such day (or if such day is not a
Business Day, the immediately preceding Business Day) plus 1%, provided that,
for the avoidance of doubt, the Adjusted Eurocurrency Rate for any day shall be
based on the rate appearing on the Reuters BBA Libor Rates Page 3750 (or on any
successor or substitute page of such page) at approximately 11:00 a.m. London
time on such day. Any change in the Alternate Base Rate due to a change in the
Prime Rate, the Federal Funds Effective Rate or the Adjusted Eurocurrency Rate
shall be effective from and including the effective date of such change in the
Prime Rate, the Federal Funds Effective Rate or the Adjusted Eurocurrency Rate,
respectively.

“Annual Statement” means the annual statutory financial statement of any
Insurance Subsidiary required to be filed with the insurance commissioner (or
similar authority) of its jurisdiction of incorporation, which statement shall
be in the form required by such Insurance Subsidiary’s jurisdiction of
incorporation or, if no specific form is so required, in the form of financial
statements recommended by the NAIC to be used for filing annual statutory
financial statements and shall contain the type of information recommended by
the NAIC to be disclosed therein, together with all exhibits or schedules filed
therewith, or, in the case of an Insurance Subsidiary not domiciled in the
United States, any comparable statement.

“Applicable Creditor” shall have the meaning assigned to such term in
Section 9.15(b).

“Applicable Lending Installation” is defined in Section 2.02(f).

“Applicable Rate” means, for any day, with respect to any ABR Loan or
Eurocurrency Loan or with respect to the facility fees payable hereunder, the
applicable rate per annum set forth on Schedule 1.01 under the caption
“Eurocurrency Spread”, “Alternative Base Rate Spread” or “Facility Fee Rate”.

“Approved Fund” has the meaning assigned to such term in Section 9.04.

“Argo US” means Argo Group US, Inc., a Delaware corporation.

“Argo Investment Policy” means the investment policy of the Parent and its
Subsidiaries delivered to the Administrative Agent and the Lenders prior to the
Effective Date, together with any amendments or supplements thereto which do not
materially alter or change the guidelines or objectives of such policy as exist
on the Effective Date.

“Asset Disposition” means any sale, transfer or other disposition of any asset
of a Borrower or any Subsidiary in a single transaction or in a series of
related transactions (other than the sale of inventory or products in the
ordinary course of business, the sale of obsolete or worn out property in the
ordinary course of business or the sale of cash and cash equivalents in the
ordinary course of business).

 

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“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 9.04), and accepted by the Administrative Agent, in the form of
Exhibit A or any other form approved by the Administrative Agent.

“Availability Period” means the period from and including the Effective Date to
but excluding the earlier of the Maturity Date and the date of termination of
the Commitments.

“Board” means the Board of Governors of the Federal Reserve System of the United
States of America.

“Borrower Representative” shall mean Argo US in its capacity as borrowing agent
and Loan administrator for the Borrowers hereunder and under each of the other
Credit Documents.

“Borrowers” means, individually and collectively, the Parent, Argo US, Argo
Acquisition Ltd., a private limited liability company organized under the laws
of England and Wales and registered under company number: 06543704 and Heritage
Underwriting Agency Ltd., a private limited liability company organized under
the laws of England and Wales and registered under company number: 03741768.

“Borrowing” means Revolving Loans of the same Type, made pursuant to the same
kind of commitment (i.e., either Dollar Tranche Commitment or Multicurrency
Tranche Commitment), made, converted or continued on the same date and, in the
case of Eurocurrency Loans, as to which a single Interest Period is in effect.

“Borrowing Request” means a request by the Borrower Representative for a
Revolving Borrowing in accordance with Section 2.03.

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City and Bermuda are authorized or required
by law to remain closed; provided that, when used in connection with a
Eurocurrency Loan denominated in a Foreign Currency, the term “Business Day”
shall mean any day on which banks are generally open in London for the conduct
of substantially all of their commercial lending activities or for the sale and
purchase of Euros which is also a day on which the TARGET (Trans-European
Automated Real-Time Gross Settlement Express Transfer) payment system is open
for settlement of payment in Euros.

“Capital Lease Obligations” of any Person means 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
shall be the capitalized amount thereof determined in accordance with GAAP.

“Change in Control” means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in

 

3

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effect on the date hereof), of Equity Interests representing more than 30% of
the aggregate ordinary voting power represented by the issued and outstanding
Equity Interests of the Parent; (b) occupation of a majority of the seats (other
than vacant seats) on the board of directors of the Parent by Persons who were
neither (i) nominated by the board of directors of the Parent nor (ii) appointed
by directors so nominated; (c) the acquisition of direct or indirect Control of
the Parent by any Person or group; (d) except as otherwise expressly permitted
under the terms of this Agreement (including a disposition permitted under
Section 6.03(b)), the Parent shall cease to own and control, directly or
indirectly, free and clear of all Liens and other encumbrances all of the
economic and voting rights associated with all of the outstanding capital stock
of each of its Insurance Subsidiaries or shall cease to have the power, directly
or indirectly, to elect all of the members of the board of directors of each of
its Insurance Subsidiaries; (e) except as otherwise expressly permitted under
the terms of this Agreement (including a disposition permitted under
Section 6.03(b)), Argo US shall cease to own and control, directly or
indirectly, free and clear of all Liens and other encumbrances all of the
economic and voting rights associated with all of the outstanding capital stock
of each of its Insurance Subsidiaries or shall cease to have the power, directly
or indirectly, to elect all of the members of the board of directors of each of
its Insurance Subsidiaries or (f) the Parent shall cease to own and control,
directly or indirectly, free and clear of all Liens and other encumbrances all
of the economic and voting rights associated with all of the outstanding capital
stock of any of the other Borrowers or shall cease to have the power, directly
or indirectly, to elect all of the members of the board of directors of any of
the other Borrowers.

“Change in Law” means (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 2.15(b), by any lending office of such Lender or by such
Lender’s or the 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” has the meaning set forth in Section 9.13.

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

“Collateral” means all property with respect to which any security interest has
been granted (or purported to be granted) pursuant to any Pledge Document. The
parties acknowledge that, as of the date hereof, no Pledge Document is being, or
is required to be, executed and there exists no Collateral.

“Commitment” means, with respect to each Lender, the sum of the Dollar Tranche
Commitment and the Multicurrency Tranche Commitment of such Lender.

“Control” means 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 ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.

 

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“Credit Documents” means this Agreement, any note issued pursuant to
Section 2.10(f) hereof and any Pledge Document.

“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.

“Defaulting Lender” means any Lender, as determined by the Administrative Agent,
that has (a) failed to fund any portion of its Loans or participations in
Letters of Credit within three Business Days of the date required to be funded
by it hereunder, (b) notified any Borrower, the Administrative Agent, the
Issuing Bank or any Lender in writing that it does not intend to comply or is
refusing to comply with any of its funding obligations under this Agreement or
has made a public statement to the effect that it does not intend to comply with
its funding obligations under this Agreement or under other agreements in which
it commits to extend credit, (c) otherwise failed to pay over to the
Administrative Agent or any other Lender any other amount required to be paid by
it hereunder within three Business Days of the date when due, unless the subject
of a good faith dispute, or (d) become the subject of a bankruptcy or insolvency
proceeding, or has had a receiver, conservator, trustee or custodian appointed
for it, or has taken any action in furtherance of, or indicating its consent to,
approval of or acquiescence in any such proceeding or appointment or has a
parent company that has become the subject of a bankruptcy or insolvency
proceeding, or has had a receiver, conservator, trustee or custodian appointed
for it, or has taken any action in furtherance of, or indicating its consent to,
approval of or acquiescence in any such proceeding or appointment.

“Dollar Equivalent” means, on any date of determination (a) with respect to any
amount in Dollars, such amount, and (b) with respect to any amount in any
Foreign Currency, the equivalent in Dollars of such amount, determined by the
Administrative Agent pursuant to Section 1.05 using the Exchange Rate with
respect to such Foreign Currency at the time in effect under the provisions of
such Section.

“Dollar Tranche Borrowing” means a Borrowing comprised exclusively of Dollar
Tranche Loans.

“Dollar Tranche Commitment” means, with respect to each Lender, the commitment
of such Lender to make Dollar Tranche Loans, expressed as an amount representing
the maximum aggregate amount of such Lender’s Dollar Tranche Revolving Credit
Exposure hereunder, as such commitment 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 amount
of each Lender’s Dollar Tranche Commitment is set forth on Schedule 2.01, or in
the Assignment and Assumption pursuant to which such Lender shall have assumed
its Dollar Tranche Commitment, as applicable. The initial aggregate amount of
the Lenders’ Dollar Tranche Commitments is $35,000,000.

“Dollar Tranche Lender” means a Lender with a Dollar Tranche Commitment or any
Dollar Tranche Revolving Credit Exposure.

“Dollar Tranche Loan” means a Loan made pursuant to Section 2.01(a).

 

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“Dollar Tranche Revolving Credit Exposure” means, with respect to any Lender at
any time, the sum of the outstanding principal amount of such Lender’s Dollar
Tranche Loans at such time.

“Dollar Tranche Revolving Credit Exposure Percentage” means, with respect to any
Lender, the percentage of the total Dollar Tranche Commitments represented by
such Lender’s Dollar Tranche Commitment; provided that for purposes of
Section 2.22 when a Defaulting Lender shall exist, “Dollar Tranche Revolving
Credit Exposure Percentage” shall mean the percentage of the total Dollar
Tranche Commitments (disregarding any Defaulting Lender’s Dollar Tranche
Commitment) represented by such Lender’s Dollar Tranche Commitment. If the
Dollar Tranche Commitments have terminated or expired, the Dollar Tranche
Revolving Credit Exposure Percentages shall be determined based upon the Dollar
Tranche Commitments most recently in effect, giving effect to any assignments
and to any Lender’s status as a Defaulting Lender at the time of determination.

“Dollar Tranche Utilization Percentage” means, at any time, the percentage
equivalent of the aggregate Dollar Tranche Revolving Credit Exposure at such
time divided by the total Dollar Tranche Commitments at such time.

“Dollars” or “$” refers to lawful money of the United States of America.

“EBITDA” means, for any applicable computation period, the Parent’s and
Subsidiaries’ Net Income on a consolidated basis from continuing operations,
plus, to the extent included in the determination of Net Income, (a) income and
franchise taxes paid or accrued during such period, (b) Total Interest Expense
for such period and (c) amortization and depreciation for such period.

“Effective Date” means the date on which the conditions specified in
Section 4.01 are satisfied (or waived in accordance with Section 9.02).

“Environmental Laws” means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, release or threatened release of any Hazardous Material or to health
and safety matters.

“Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Parent or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of 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 into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing; provided that the definition of “Environmental Liability” shall not
include any liability arising out of any insurance policy issued by the
Borrowers or any Subsidiary thereof.

 

6

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“Equity Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
equity interest.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with any Borrower, is treated as a single employer under
Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of
ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30 day notice period is waived); (b) the existence with
respect to any Plan of an “accumulated funding deficiency” (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by any Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by any Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by any
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by any Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from any Borrower or any ERISA Affiliate 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.

“Euro” or “€” means the single currency unit of the Participating Member States.

“Eurocurrency”, 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 Eurocurrency Rate.

“Eurocurrency Rate” means, (a) with respect to any Eurocurrency Borrowing
denominated in Dollars or Sterling for any Interest Period, the rate per annum
determined by the Administrative Agent at approximately 11:00 a.m., London time,
on the Quotation Day for such Interest Period by reference to the British
Bankers’ Association Interest Settlement Rates for deposits in the currency of
such Borrowing (as reflected on the applicable Reuters screen page (or on any
successor or substitute page of such page)), for a period equal to such Interest
Period and (b) with respect to any Eurocurrency Borrowing denominated in Euros
for any Interest Period, the rate appearing on the Reuters Screen EURIBOR01 Page
(it being understood that this rate is the Euro interbank offered rate (known as
the “EURIBOR Rate”) sponsored by the Banking Federation of the European Union
and the Financial Markets Association) at approximately 11:00 a.m., London time,
on the Quotation Day prior to the commencement of

 

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such Interest Period, as the rate for deposits in Euros with a maturity
comparable to such Interest Period. To the extent that an interest rate is not
ascertainable pursuant to the foregoing provisions of this definition, the
“Eurocurrency Rate” shall be the average (rounded upward, if necessary, to the
next 1/100 of 1%) determined by the Administrative Agent of the respective
interest rates per annum reported to the Administrative Agent by JPMCB and each
other Lender selected by the Administrative Agent (JPMCB and each such other
Lender, the “Reference Lenders”) as the rate at which each Reference Lender
offers to place deposits in the currency of such Borrowing for such Interest
Period to first-class banks in the London interbank market at approximately
11:00 a.m., London time, on the Quotation Day for such Interest Period.

“Event of Default” has the meaning assigned to such term in Article VII.

“Exchange Rate” means on any day, for purposes of determining the Dollar
Equivalent of any currency other than Dollars, the rate at which such currency
may be exchanged into Dollars at 11:00 a.m. Local Time on such day on the
Reuters Currency pages, if available, for such currency. In the event that such
rate does not appear on any Reuters Currency pages, the Exchange Rate shall be
determined by reference to such other publicly available service for displaying
exchange rates as may be agreed upon by the Administrative Agent and the
Borrowers, or, in the absence of such an agreement, such Exchange Rate shall
instead be the arithmetic average of the spot rates of exchange of the
Administrative Agent in the market where its foreign currency exchange
operations in respect of such currency are then being conducted, at or about
such time as the Administrative Agent shall elect after determining that such
rates shall be the basis for determining the Exchange Rate, on such date for the
purchase of Dollars for delivery two Business Days later; provided that if at
the time of any such determination, for any reason, no such spot rate is being
quoted, the Administrative Agent may use any reasonable method it deems
appropriate to determine such rate, and such determination shall be conclusive
absent manifest error.

“Exchange Rate Date” means, if on such date any outstanding Loan or Letter of
Credit is (or any Loan or Letter of Credit that has been requested at such time
would be) denominated in a currency other than Dollars, each of:

(a) the last Business Day of each calendar month,

(b) if an Event of Default has occurred and is continuing, any Business Day
designated as an Exchange Rate Date by the Administrative Agent in its sole
discretion, and

(c) each date (with such date to be reasonably determined by the Administrative
Agent) that is on or about the date of (i) a Borrowing Request or an Interest
Election Request with respect to any Revolving Borrowing or (ii) each request
for the issuance, amendment, renewal or extension of any Letter of Credit.

“Excluded Taxes” means, 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 Borrowers hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any

 

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Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which any of the Borrowers is organized or in which
its principal office is located and (c) in the case of a Foreign Lender (other
than an assignee pursuant to a request by the Borrower Representative under
Section 2.19(b)), any withholding tax that is imposed by any jurisdiction other
than the United Kingdom or Bermuda 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 2.17(e), 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 additional amounts from the Borrowers with
respect to such withholding tax pursuant to Section 2.17(a); provided that the
payment obligations of the Borrowers under Section 2.17(a) are not thereby
increased.

“Existing Letter of Credit” means letter of credit number CTCS-713912 issued by
JPMCB in the face amount of $60,000 upon the application of Argo US.

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

“Financial Officer” means the chief financial officer, principal accounting
officer, treasurer or controller of any Borrower.

“Foreign Currency” means Euros or Sterling.

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than the jurisdiction of organization of the relevant
Borrower to or to the account of which any funds are disbursed in the manner
contemplated in this Agreement, or by or on account of which any payment
obligation is made under the Agreement. 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 Pension Plan” means any plan, fund (including, without limitation, any
superannuation fund) or other similar program established or maintained outside
the United States by a Borrower or any one or more of the Subsidiaries primarily
for the benefit of employees of such Borrower or any Subsidiary residing outside
the United States, which plan, fund or other similar program provides, or
results in, retirement income, a deferral of income in contemplation of
retirement or payments to be made upon termination or severance of employment,
and which plan is not subject to ERISA or the Code.

“GAAP” means generally accepted accounting principles in the United States of
America.

 

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“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity, including any insurance commissioner or other insurance
regulatory authority, exercising executive, legislative, judicial, taxing,
regulatory or administrative powers or functions of or pertaining to government.

“Guarantee” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect 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 of the guarantor, direct or indirect, (a) 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 thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) 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 or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; provided, that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Guarantee made by any guarantor shall be deemed to be the lower of (a) an amount
equal to the stated or determinable amount of the primary obligation in respect
of which such Guarantee is made and (b) the maximum amount for which such
guarantor may be liable pursuant to the terms of the instrument embodying such
Guarantee, unless (in the case of a primary obligation that is not Indebtedness)
such primary obligation and the maximum amount for which such guarantor may be
liable are not stated or determinable, in which case the amount of such
Guarantee shall be such guarantor’s maximum reasonably anticipated liability in
respect thereof as determined by the Borrowers in good faith.

“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any Environmental Law.

“Indebtedness” of any Person means, without duplication, (a) all obligations of
such Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, (c) all obligations of such
Person upon which interest charges are customarily paid, (d) all obligations of
such Person under conditional sale or other title retention agreements relating
to property acquired by such Person, (e) all obligations of such Person in
respect of the deferred purchase price of property or services (excluding
current accounts payable incurred in the ordinary course of business), (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, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person,
(i) all obligations, contingent or otherwise, of such Person as an account party
in respect of letters of credit and

 

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letters of guaranty, (j) all obligations, contingent or otherwise, of such
Person in respect of bankers’ acceptances, (k) all Off-Balance Sheet Liabilities
and (l) all Trust Preferred Securities and similarly structured indebtedness.
The Indebtedness of any Person shall include the Indebtedness of any other
entity (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 entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Information Memorandum” means the Confidential Information Memorandum dated
January, 2009 relating to the Borrowers and the Transactions.

“Insurance Subsidiary” means each of Argonaut Insurance Co., Argonaut Great
Central Insurance Co., Argonaut-Midwest Insurance Co., Select Markets Insurance
Company, Argonaut-Southwest Insurance Co., Argonaut Limited Risk Insurance
Company, Colony Insurance Co., Colony Specialty Insurance Co., Colony National
Insurance Co., Rockwood Casualty Insurance Co., Somerset Casualty Insurance Co.,
ARGO RE Limited, and each other Subsidiary which is engaged in the business of
insurance or reinsurance, together with their respective successors and
permitted assigns.

“Intercompany Loan Agreement” means that certain letter agreement dated as of
April, 2008 between Argo Acquisition, Limited and Argonaut Group, Inc., together
with all amendments and modifications thereto entered into and provided to the
Administrative Agent prior to the Effective Date, pursuant to which Argo US may
extend credit to Argo Acquisition, Limited up to a maximum amount of
$199,500,000.

“Interest Coverage Ratio” means, as of the end of any fiscal quarter of the
Parent, the ratio of (a) EBITDA to (b) Total Interest Expense, in each case for
the period of four fiscal quarters then ended, computed on a consolidated basis
for the Parent and its Subsidiaries.

“Interest Election Request” means a request by the Borrower Representative to
convert or continue a Revolving Borrowing in accordance with Section 2.08.

“Interest Payment Date” means (a) with respect to any ABR Loan, the last day of
each March, June, September and December and (b) with respect to any
Eurocurrency 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 Eurocurrency
Borrowing with an Interest Period of more than three months’ duration, each day
prior to the last day of such Interest Period that occurs at intervals of three
months’ duration after the first day of such Interest Period.

“Interest Period” means, with respect to any Eurocurrency Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower Representative may elect; provided, that (i) 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 (ii) any
Interest Period

 

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pertaining to a Eurocurrency Borrowing 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. 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.

“Issuing Bank” means JPMCB., in its capacity as the issuer of Letters of Credit
hereunder, and its successors in such capacity as provided in Section 2.06(i).
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.

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

“LC Disbursement” means a payment made by the Issuing Bank pursuant to a Letter
of Credit.

“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of
all outstanding Letters of Credit at such time plus (b) the aggregate amount of
all LC Disbursements that have not yet been reimbursed by or on behalf of the
Borrowers at such time. The LC Exposure of any Lender at any time shall be its
Multicurrency Tranche Revolving Credit Exposure Percentage of the total LC
Exposure at such time.

“Lenders” means the Persons listed on Schedule 2.01 and any other Person that
shall have become a party hereto pursuant to an Assignment and Assumption, other
than any such Person that ceases to be a party hereto pursuant to an Assignment
and Assumption.

“Letter of Credit” means any letter of credit issued pursuant to this Agreement.

“Leverage Ratio” means at any time, the ratio of Total Debt at such time to
Total Capitalization at such time.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, 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.

“Loans” means the loans made by the Lenders to the Borrowers pursuant to this
Agreement.

“Local Time” means (a) with respect to a Loan or Borrowing denominated in
Dollars, Chicago time and (b) with respect to a Loan or Borrowing denominated in
any Foreign Currency, London time.

 

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“Mandatory Costs Rate” means the rate calculated in accordance with the formula
and in the manner set forth in Exhibit B hereto.

“Material Adverse Effect” means a material adverse effect on (a) the business,
assets, operations or condition, financial or otherwise, of (i) the Parent and
the Subsidiaries taken as a whole or (ii) Argo US and its subsidiaries taken as
a whole, (b) the ability of any of the Borrowers to perform any of its payment
or other material obligations under this Agreement or any other Credit Document
or (c) the rights of or benefits available to the Lenders under this Agreement
or any other Credit Document.

“Material Indebtedness” means Indebtedness (other than the Loans and Letters of
Credit), or obligations in respect of one or more Swap Agreements, of any one or
more of the Borrowers and the Subsidiaries in an aggregate principal amount
exceeding $5,000,000. For purposes of determining Material Indebtedness, the
“principal amount” of the obligations of a Borrower or any Subsidiary in respect
of any Swap Agreement at any time shall be the maximum aggregate amount (giving
effect to any netting agreements) that such Borrower or such Subsidiary would be
required to pay if such Swap Agreement were terminated at such time.

“Maturity Date” means February 26, 2010.

“Maximum Rate” has the meaning set forth in Section 9.13.

“Multicurrency Tranche Borrowing” means a Borrowing comprised exclusively of
Multicurrency Tranche Loans.

“Multicurrency Tranche Commitment” means, with respect to each Lender, the
commitment of such Lender to make Multicurrency Tranche Loans and to acquire
participations in Letters of Credit hereunder, expressed as an amount
representing the maximum aggregate amount of such Lender’s Multicurrency Tranche
Revolving Credit Exposure hereunder, as such commitment 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 amount of each Lender’s Multicurrency Tranche Commitment is set forth on
Schedule 2.01, or in the Assignment and Assumption pursuant to which such Lender
shall have assumed its Multicurrency Tranche Commitment, as applicable. The
initial aggregate amount of the Lenders’ Multicurrency Tranche Commitments is
$65,000,000.

“Multicurrency Tranche Lender” means a Lender with a Multicurrency Tranche
Commitment or any Multicurrency Tranche Revolving Credit Exposure.

“Multicurrency Tranche Loan” means a Loan made pursuant to Section 2.01(b).

“Multicurrency Tranche Revolving Credit Exposure” means, with respect to any
Lender at any time, the Dollar Equivalent of the sum of the outstanding
principal amount of such Lender’s Multicurrency Tranche Loans and its LC
Exposure at such time.

“Multicurrency Tranche Revolving Credit Exposure Percentage” means, with respect
to any Lender, the percentage of the total Multicurrency Tranche Commitments
represented by such Lender’s Multicurrency Tranche Commitment; provided that for
purposes of

 

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Section 2.22 when a Defaulting Lender shall exist, “Multicurrency Tranche
Revolving Credit Exposure Percentage” shall mean the percentage of the total
Multicurrency Tranche Commitments (disregarding any Defaulting Lender’s
Multicurrency Tranche Commitment) represented by such Lender’s Multicurrency
Tranche Commitment. If the Multicurrency Tranche Commitments have terminated or
expired, the Multicurrency Tranche Revolving Credit Exposure Percentages shall
be determined based upon the Multicurrency Tranche Commitments most recently in
effect, giving effect to any assignments and to any Lender’s status as a
Defaulting Lender at the time of determination.

“Multicurrency Tranche Utilization Percentage” means, at any time, the
percentage equivalent of the aggregate Multicurrency Tranche Revolving Credit
Exposure at such time divided by the total Multicurrency Tranche Commitments at
such time.

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3)
of ERISA.

“NAIC” means the National Association of Insurance Commissioners and any
successors thereto.

“Net Income” means, for any computation period, with respect to the Parent on a
consolidated basis with its Subsidiaries (other than any Subsidiary which is
restricted from declaring or paying dividends or otherwise advancing funds to
its parent whether by contract or otherwise (except pursuant to laws and/or
regulations restricting the payment of dividends by Insurance Subsidiaries)),
cumulative net income earned during such period (determined before the deduction
of minority interests) as determined in accordance with GAAP.

“Obligations” shall mean (a) the unpaid principal of and interest on the Loans,
(b) the obligation of the Borrowers to pay the amounts of all drawings, together
with interest accrued thereon, made under Letters of Credit, (c) the fees,
expenses and all other liabilities of the Borrowers to the Administrative Agent
and any Lender, which may arise under, out of, or in connection with, this
Agreement or any other Credit Document.

“Off-Balance Sheet Liability” of a Person means (a) any repurchase obligation or
liability of such Person with respect to accounts or notes receivable sold by
such Person, (b) any liability under any Sale and Leaseback Transaction other
than Capital Lease Obligations, (c) any liability under any so-called “synthetic
lease” arrangement or transaction entered into by such Person, or (d) any
obligation arising with respect to any other transaction which is the functional
equivalent of or takes the place of borrowing but which does not constitute a
liability on the balance sheets of such Person.

“Other Taxes” means any and all present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies arising from any
payment made hereunder or from the execution, delivery or enforcement of, or
otherwise with respect to, this Agreement.

“Parent” means Argo Group International Holdings, Ltd., a company formed under
the laws of Bermuda.

 

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“Participant” has the meaning set forth in Section 9.04.

“Participating Member State” means any member state of the European Communities
that adopts or has adopted the Euro as its lawful currency in accordance with
the legislation of the European Community relating to the Economic and Monetary
Union.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA and any successor entity performing similar functions.

“Permitted Acquisition” means the acquisition by the Parent or a Wholly-Owned
Subsidiary thereof of an Acquired Entity or Business (including by way of merger
of such Acquired Entity or Business with and into the Parent (so long as the
Parent is the surviving corporation) or a Wholly-Owned Subsidiary thereof (so
long as the Wholly-Owned Subsidiary is the surviving corporation); provided that
(a) in the case of the acquisition of the capital stock of any Person (including
by way of merger), such Person shall own no capital stock of any other Person
(excluding de minimis amounts) unless either (i) such Person owns 100% of the
capital stock of such other Person or (ii) (x) such Person and its Wholly-Owned
Subsidiaries own at least 80% of the consolidated assets of such other Person
and its Subsidiaries and (y) any non-Wholly-Owned Subsidiary of such Person was
a non-Wholly-Owned Subsidiary prior to the date of such Permitted Acquisition of
such Person; (b) the Acquired Entity or Business acquired pursuant to the
respective Permitted Acquisition is in a business permitted by Section 6.03(c);
(c) in the case of a stock acquisition, such acquisition shall have been
approved by the board of directors of the Acquired Entity or Business; and
(d) all applicable requirements of Section 6.04(e) applicable to Permitted
Acquisitions are satisfied.

“Permitted Encumbrances” means:

(a)      Liens imposed by law for Taxes that are not yet due or are being
contested in compliance with Section 5.04;

(b)      carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and
other like Liens imposed by law, arising in the ordinary course of business and
securing obligations that are not overdue by more than 30 days or are being
contested in compliance with Section 5.04;

(c)      pledges and deposits made in the ordinary course of business for
insurance regulatory or licensing purposes or in compliance with workers’
compensation, unemployment insurance and other social security laws or
regulations;

(d)      deposits required for insurance regulatory or licensing purposes or to
secure the performance of bids, trade contracts, leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature, in each case in the ordinary course of business;

(e)      judgment liens in respect of judgments that do not constitute an Event
of Default under clause (k) of Article VII; and

 

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(f)      easements, zoning restrictions, rights-of-way and similar encumbrances
on real property imposed by law or arising in the ordinary course of business
that do not secure any monetary obligations and do not materially detract from
the value of the affected property or interfere with the ordinary conduct of
business of a Borrower or any Subsidiary;

provided that the term “Permitted Encumbrances” shall not include any Lien
securing Indebtedness.

“Permitted Purchase Money Indebtedness” means, with respect to any Person, any
Indebtedness, whether secured or unsecured, including Capital Lease Obligations,
incurred by such Person to finance the acquisition of fixed assets, so long as
(a) at the time of such incurrence, no Default has occurred and is continuing or
would result from such incurrence, (b) such Indebtedness has a scheduled
maturity and is not due on demand and (c) such Indebtedness does not exceed the
lower of the fair market value or the cost of the applicable fixed assets on the
date acquired.

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which a 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.

“Pledge Document” means any pledge or security agreement delivered by any
Borrower or any Subsidiary pursuant to Section 5.09.

“Pledge Subsidiary” has the meaning set forth in Section 5.09.

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

“Quotation Day” means, with respect to any Eurocurrency Borrowing and any
Interest Period, the day on which it is market practice in the London interbank
market for prime banks to give quotations for deposits in the currency of such
Borrowing for delivery on the first day of such Interest Period. If such
quotations would normally be given by prime banks on more than one day, the
Quotation Day will be the last of such days.

“Rating” has the meaning set forth in Schedule 1.01.

“Register” has the meaning set forth in Section 9.04.

“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and such Person’s Affiliates.

 

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“Required Lenders” means, at any time, subject to Section 2.22, Lenders having
Revolving Credit Exposures and unused Commitments representing at least 51% of
the sum of the total Revolving Credit Exposures and unused Commitments at such
time.

“Required Multicurrency Tranche Lenders” means, at any time, subject to
Section 2.22, Lenders having Multicurrency Tranche Revolving Credit Exposures
and unused Multicurrency Tranche Commitments representing at least 51% of the
sum of the total Multicurrency Tranche Revolving Credit Exposures and unused
Multicurrency Tranche Commitments at such time.

“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any Equity Interests in the Parent
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, retirement, acquisition, cancellation or termination of
any such Equity Interests in the Parent or any Subsidiary or any option, warrant
or other right to acquire any such Equity Interests in the Parent or any
Subsidiary.

“Revolving Credit Exposure” means, with respect to any Lender at any time, the
sum of such Lender’s Dollar Tranche Revolving Credit Exposure at such time and
its Multicurrency Tranche Revolving Credit Exposure at such time.

“Revolving Loan” means a Dollar Tranche Loan or a Multicurrency Tranche Loan.

“Risk Based Capital Ratio” means, with respect to any Specified Insurance
Subsidiary, the ratio (expressed as a percentage) of the “Total Adjusted
Capital” of such Specified Insurance Subsidiary at such time to the “Authorized
Control Level Risk-Based Capital” of such Specified Insurance Subsidiary at such
time, in each case as set forth on lines 28 and 29, respectively of the
applicable December 31 Annual Statements for such Specified Insurance
Subsidiary.

“S&P” means Standard & Poor’s.

“Sale and Leaseback Transaction” means any sale or other transfer of property by
any Person with the intent to lease such property as lessee.

“SAP” means, with respect to any Insurance Subsidiary, the statutory accounting
practices prescribed or permitted by the insurance commissioner (or other
similar authority) as of the date hereof in the jurisdiction of incorporation of
such Insurance Subsidiary for the preparation of annual statements and other
financial reports by insurance companies of the same type as such Insurance
Subsidiary.

“Significant Insurance Subsidiary” means any Significant Subsidiary which is an
Insurance Subsidiary.

“Significant Subsidiary” of a Person means a “significant subsidiary” as defined
in Rule 1 02(w) of Regulation S-X of the Securities and Exchange Commission (17
CFR Part 210). Unless otherwise expressly provided, all references herein to a
“Significant Subsidiary” shall mean a Significant Subsidiary of any of the
Borrowers.

 

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“Solvent” means, when used with respect to a Person, that (a) the fair saleable
value of the assets of such Person is in excess of the total amount of the
present value of its liabilities (including for purposes of this definition all
liabilities (including loss reserves as determined by such Person), whether or
not reflected on a balance sheet prepared in accordance with GAAP and whether
direct or indirect, fixed or contingent, secured or unsecured, disputed or
undisputed), (b) such Person is able to pay its debts or obligations in the
ordinary course as they mature and (c) such Person does not have unreasonably
small capital to carry out its business as conducted and as proposed to be
conducted. “Solvency” shall have a correlative meaning.

“Specified Insurance Subsidiaries” means, individually and collectively, each of
Argonaut Insurance Company, an Illinois insurance company, Rockwood Casualty
Insurance Company, a Pennsylvania insurance company and Colony Insurance
Company, a Virginia insurance company.

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

“Sterling” or “£” means the lawful currency of the United Kingdom of Great
Britain and Northern Ireland.

“Subordinated Indebtedness” means (a) for purposes of Section 6.01(d),
Indebtedness the payment of which is subordinated to all obligations of the
applicable Borrower or Borrowers hereunder or in connection herewith on terms of
subordination no less favorable to the Lenders than the terms of subordination
in the Trust Preferred Securities referred to in part (ix) of the definition of
Trust Preferred Securities and (b) for purposes of Section 6.16, Indebtedness
the payment of which is subordinated to any of the obligations of the applicable
Borrower or Borrowers hereunder or in connection herewith, including without
limitation the obligations of the Borrowers in respect of the Trust Preferred
Securities or Indebtedness incurred pursuant to Section 6.01(d) or (f).

“subsidiary” means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other entity
the accounts of which would be consolidated with those of the parent in the
parent’s consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date,

 

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as well as any other corporation, limited liability company, partnership,
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, in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, controlled or held, or (b) that is, as of
such date, 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” means any subsidiary of the Parent.

“Substantial Portion” means, with respect to the property of the Parent and its
Subsidiaries, property which (a) represents more than 10% of the consolidated
assets of the Parent and its Subsidiaries or of Argo US and its subsidiaries, in
either case as would be shown in the consolidated financial statements of the
Parent and its Subsidiaries (or, as applicable, Argo US and its subsidiaries) as
at the beginning of the twelve-month period ending with the last day of the
month preceding the month in which such determination is made, or (b) is
responsible for more than 10% of the consolidated net sales or of the
consolidated net income of the Parent and its Subsidiaries or of Argo US and its
subsidiaries, in either case as reflected in the financial statements referred
to in clause (a) above.

“Swap Agreement” means 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, 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 that no phantom stock or similar
plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of a Borrower or the
Subsidiaries shall be a Swap Agreement.

“Tangible Net Worth” means, with respect to a Borrower, an amount equal to
(a) such Borrower’s total shareholder’s equity determined in accordance with
GAAP, minus (b) the aggregate book value of the intangible assets, including
goodwill, of such Borrower and its subsidiaries, all determined in accordance
with GAAP.

“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.

“Total Capitalization” means an amount equal to the sum of Tangible Net Worth of
the Parent plus Total Debt.

“Total Debt” means all Indebtedness of the Parent and its Subsidiaries, on a
consolidated basis, which appears on a balance sheet calculated in accordance
with GAAP plus, without duplication (a) the principal amount of all Trust
Preferred Securities, (b) all Off-Balance Sheet Liabilities of the Parent or any
Subsidiary, (c) the face amount of all outstanding letters of credit in respect
of which the Parent or any Subsidiary has any actual or contingent reimbursement
obligation (excluding letters of credit which are issued to support the
reinsurance obligations of Subsidiaries of the Parent which have been fully
collateralized) and (d) the principal amount of all Guarantees of the Parent and
its Subsidiaries.

 

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“Total Interest Expense” means, for any period, total cash interest expense
deducted in the computation of Net Income for such period (including that
attributable to Capital Lease Obligations and interest paid under synthetic
leases) of the Parent and its Subsidiaries for such period with respect to all
outstanding Indebtedness of the Parent and its Subsidiaries.

“Transactions” means the execution, delivery and performance by the Borrowers of
this Agreement, the borrowing of Loans, the use of the proceeds thereof and the
issuance of Letters of Credit hereunder.

“Trust Preferred Securities” means, collectively, the following, which, without
duplication, do not exceed $311,334,000 in the aggregate:

(i)      those certain Floating Rate Capital Securities in the amount of
$15,000,000 that were issued by Argonaut Group Statutory Trust on May 15, 2003
and that mature in 2033, those certain Floating Rate Common Securities in the
amount of $464,000 that were issued by Argonaut Group Statutory Trust to Argo US
on May 15, 2003 and that mature in 2033, and the related Floating Rate Junior
Subordinated Deferrable Interest Debentures in the amount of $15,464,000 that
were issued by Argo US on May 15, 2003 and that mature in 2033;

(ii)     those certain Capital Securities in the amount of $12,000,000 that were
issued by Argonaut Group Statutory Trust III on December 16, 2003 and that
mature in 2034, those certain Common Securities in the amount of $372,000 that
were issued by Argonaut Group Statutory Trust III to Argo US on December 16,
2003 and that mature in 2034, and the related Floating Rate Junior Subordinated
Debt Securities due 2034 in the amount of $12,372,000 that were issued by Argo
US on December 16, 2003 and that mature in 2034;

(iii)    those certain Preferred Securities in the amount of $13,000,000 that
were issued by Argonaut Group Statutory Trust IV on April 29, 2004 and that
mature in 2034, those certain Common Securities in the amount of $403,000 that
were issued by Argonaut Group Statutory Trust IV to Argo US on April 29, 2004
and that mature in 2034, and the related Floating Rate Junior Subordinated Debt
Securities due 2034 in the amount of $13,403,000 that were issued by Argo US on
April 29, 2004 and that mature in 2034;

(iv)     those certain Floating Rate Capital Securities in the amount of
$13,000,000 that were issued by Argonaut Group Statutory Trust VI on May 12,
2004 and that mature in 2034, those certain Floating Rate Common Securities in
the amount of $403,000 that were issued by Argonaut Group Statutory Trust VI to
Argo US on May 12, 2004 and that mature in 2034, and the related Floating Rate
Junior Subordinated Deferrable Interest Debentures in the amount of $13,403,000
that were issued by Argo US on May 12, 2004 and that mature in 2034;

(v)     those certain Preferred Securities in the amount of $12,000,000 that
were issued by Argonaut Group Statutory Trust V on May 26, 2004 and that mature
in 2034, those certain Common Securities in the amount of $372,000 that were
issued by Argonaut Group Statutory Trust V to Argo US on May 26, 2004 and that
mature in 2034, and the related Floating Rate Junior Subordinated Debentures due
2034 in the amount of $12,372,000 that were issued by Argo US on May 26, 2004
and that mature in 2034;

 

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(vi)      those certain Preferred Securities in the amount of $15,000,000 that
were issued by Argonaut Group Statutory Trust VII on September 17, 2004 and that
mature in 2034, those certain Common Securities in the amount of $464,000 that
were issued by Argonaut Group Statutory Trust VII to Argo US on September 17,
2004 and that mature in 2034, and the related Floating Rate Junior Subordinated
Debentures due 2034 in the amount of $15,464,000 that were issued by Argo US on
September 17, 2004 and that mature in 2034;

(vii)      those certain Preferred Securities in the amount of $15,000,000 that
were issued by Argonaut Group Statutory Trust VIII on September 22, 2004 and
that mature in 2034, those certain Common Securities in the amount of $464,000
that were issued by Argonaut Group Statutory Trust VIII to Argo US on
September 22, 2004 and that mature in 2034, and the related Floating Rate Junior
Subordinated Debentures due 2034 in the amount of $15,464,000 that were issued
by Argo US on September 22, 2004 and that mature in 2034;

(viii)     those certain Preferred Securities in the amount of $15,000,000 that
were issued by Argonaut Group Statutory Trust IX on October 22, 2004 and that
mature in 2034, those certain Common Securities in the amount of $464,000 that
were issued by Argonaut Group Statutory Trust IX to Argo US on October 22, 2004
and that mature in 2034, and the related Floating Rate Junior Subordinated
Debentures due 2034 in the amount of $15,464,000 that were issued by Argo US on
October 22, 2004 and that mature in 2034;

(ix)      those certain Preferred Securities in the amount of $30,000,000 that
were issued by Argonaut Group Statutory Trust X on September 15, 2005 and that
mature in 2035, those certain Common Securities in the amount of $928,000 that
were issued by Argonaut Group Statutory Trust X to Argo US on September 15, 2005
and that mature in 2035, and the related Fixed/Floating Rate Junior Subordinated
Deferrable Interest Debentures due 2035 in the amount of $30,928,000 that were
issued by Argo US on September 15, 2005 and that mature in 2035;

(x)       those certain Trust Preferred Securities in the amount of $103,100,000
that were issued by PXRE Capital Trust I on January 29, 1997 and that mature in
2027, and the related Junior Subordinated Deferrable Interest Debentures that
mature in 2027 that were issued by PXRE Corporation (n/k/a Argo Group US) on
January 29, 1997;

(xi)      those certain capital trust pass-through securities in the amount of
$18,000,000 that were issued by PXRE Capital Statutory Trust II on May 15, 2003
and that mature in 2033;

(xii)     those certain capital trust pass-through securities in the amount of
$15,500,000 that were issued by PXRE Capital Trust III on May 23, 2003 and that
mature in 2033;

(xiii)    those certain capital trust pass-through securities in the amount of
$20,600,000 that were issued by PXRE Capital Statutory Trust V on October 29,
2003 and that mature in 2033; and

(xiv)    those certain capital trust pass-through securities in the amount of
$10,300,000 that were issued by PXRE Capital Trust VI on November 6, 2003 and
that mature in 2033.

 

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“Trust Preferred Security Indebtedness” means any Indebtedness of a Borrower or
a Subsidiary arising under Trust Preferred Securities.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Adjusted Eurocurrency Rate or the Alternate Base
Rate.

“Wholly-Owned Subsidiary” of a Person means (a) any subsidiary all of the
outstanding voting securities of which shall at the time be owned or controlled,
directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries
of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of
such Person, or (b) any partnership, limited liability company, association,
joint venture or similar business organization 100% of the ownership interests
having ordinary voting power of which shall at the time be so owned or
controlled (other than in the case of Foreign Subsidiaries, director’s
qualifying shares and/or other nominal amounts of shares required to be held by
Persons other than the Parent and its Subsidiaries under applicable law).

“Withdrawal Liability” means 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.  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 “Eurocurrency Loan”) or by class and Type (e.g., a
“Eurocurrency Revolving Loan”). Borrowings also may be classified and referred
to by class (e.g., a “Revolving Borrowing”) or by Type (e.g., a “Eurocurrency
Borrowing”) or by class and Type (e.g., a “Eurocurrency Revolving Borrowing”).

SECTION 1.03.  Terms Generally.    The definitions of terms herein shall apply
equally to 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” 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”.
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and
assigns, (c) 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 hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
“asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.

 

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SECTION 1.04.  Accounting Terms; GAAP.    Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided that, if the
Borrower Representative notifies the Administrative Agent that the Borrowers
request an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Borrower Representative that the Required Lenders request an amendment to any
provision hereof for such purpose), regardless of whether any such notice is
given before or after such change in GAAP or in the application thereof, then
such provision shall be interpreted on the basis of GAAP as in effect and
applied immediately before such change shall have become effective until such
notice shall have been withdrawn or such provision amended in accordance
herewith.

SECTION 1.05.  Foreign Currency Calculations.   (a) For purposes of determining
the Dollar Equivalent of any Advance denominated in a Foreign Currency or any
related amount, the Administrative Agent shall determine the Exchange Rate as of
the applicable Exchange Rate Date with respect to each Foreign Currency in which
any requested or outstanding Advance or Letter of Credit is denominated and
shall apply such Exchange Rates to determine such amount (in each case after
giving effect to any Advance to be made or repaid on or prior to the applicable
date for such calculation).

(b)   For purposes of any determination hereunder (including determinations
under Section 6.01, 6.02, 6.04 6.09, 6.10, 6.11 or 6.12 or under Article VII),
all amounts incurred, outstanding or proposed to be incurred or outstanding in
currencies other than Dollars shall be translated into Dollars at the
appropriate currency Exchange Rate; provided that no Default shall arise as a
result of any limitation set forth in Dollars in Section 6.01 or 6.02 being
exceeded solely as a result of changes in Exchange Rates from those rates
applicable at the time or times Indebtedness or Liens were initially consummated
in reliance on the exceptions under such Sections. For purposes of any
determination under Section 6.04, 6.09, 6.10, 6.11 or 6.12, the amount of each
investment, asset disposition or other applicable transaction denominated in a
currency other than Dollars shall be translated into Dollars at the applicable
Exchange Rate. Such Exchange Rates shall be determined in good faith by the
Borrowers.

ARTICLE II

The Credits

SECTION 2.01.  Commitments.    Subject to the terms and conditions set forth
herein:

(a)      each Dollar Tranche Lender agrees to make revolving loans denominated
in Dollars to the Borrowers from time to time during the Availability Period in
an aggregate principal amount that will not result in (a) such Lender’s Dollar
Tranche Revolving Credit Exposure exceeding such Lender’s Dollar Tranche
Commitment, (b) the sum of the total Dollar Tranche Revolving Credit Exposures
exceeding the total Dollar Tranche Commitments or (c) the sum of the total
Revolving Credit Exposures exceeding the total Commitments. Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrowers
may borrow, prepay and reborrow Dollar Tranche Loans.

 

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(b)      each Multicurrency Tranche Lender agrees to make revolving loans
denominated in Dollars and Foreign Currencies to the Borrowers from time to time
during the Availability Period in an aggregate principal amount that will not
result in (a) such Lender’s Multicurrency Tranche Revolving Credit Exposure
exceeding such Lender’s Multicurrency Tranche Commitment, (b) the sum of the
total Multicurrency Tranche Revolving Credit Exposures exceeding the total
Multicurrency Tranche Commitments, (c) the Dollar Equivalent of the aggregate
amount of all Loans and Letters of Credit denominated in a Foreign Currency
exceeding $50,000,000 or (d) the sum of the total Revolving Credit Exposures
exceeding the total Commitments. Within the foregoing limits and subject to the
terms and conditions set forth herein, the Borrowers may borrow, prepay and
reborrow Multicurrency Tranche Loans.

SECTION 2.02.  Loans and Borrowings.   (a) Each Revolving Loan shall be made as
part of a Borrowing consisting, as applicable, of either all Dollar Tranche
Loans made by the Dollar Tranche Lenders ratably in accordance with their
respective Dollar Tranche Commitments or all Multicurrency Tranche Loans made by
the Multicurrency Tranche Lenders ratably in accordance with their respective
Multicurrency Tranche Commitments. The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations
hereunder; provided that the Commitments of the Lenders are several and no
Lender shall be responsible for any other Lender’s failure to make Loans as
required hereby.

(b)      Subject to Section 2.14, (i) each Revolving Borrowing denominated in
Dollars shall be comprised entirely of ABR Loans or Eurocurrency Loans as the
Borrower Representative may request in accordance herewith and (ii) each
Revolving Borrowing denominated in a Foreign Currency shall be comprised
entirely of Eurocurrency Loans. Each Lender at its option may make any
Eurocurrency 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 Borrowers to repay such Loan in accordance with the
terms of this Agreement.

(c)      At the commencement of each Interest Period for any Eurocurrency
Revolving Borrowing, such Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000 (or, for any Foreign Currency Borrowing, an
approximate equivalent thereof as determined by the Administrative Agent) and
not less than $1,000,000 (or, for any Foreign Currency Borrowing, an approximate
equivalent thereof as determined by the Administrative Agent). At the time that
each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate
amount that is an integral multiple of $1,000,000 and not less than $1,000,000;
provided that an ABR Revolving Borrowing may be in an aggregate amount (i) that
is equal to the entire unused balance of the total Commitments or (ii) for a
Multicurrency Tranche Loan, that is required to finance the reimbursement of an
LC Disbursement as contemplated by Section 2.06(e). Borrowings of more than one
Type may be outstanding at the same time; provided that there shall not at any
time be more than a total of twelve Eurocurrency Revolving Borrowings which are
Dollar Tranche Drawings or twelve Eurocurrency Revolving Borrowings which are
Multicurrency Tranche Borrowings.

(d)      Notwithstanding any other provision of this Agreement, the Borrowers
shall not be entitled to request, or to elect to convert or continue, any
Borrowing if the Interest Period requested with respect thereto would end after
the Maturity Date.

 

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(e)      Notwithstanding any other provision of this Agreement, each Lender at
its option may make any ABR Loan or Eurocurrency Loan by causing any domestic or
foreign office, branch or Affiliate of such Lender (an “Applicable Lending
Installation”) to make such Loan that has been designated by such Lender to the
Administrative Agent. All terms of this Agreement shall apply to any such
Applicable Lending Installation of such Lender and the Loans and any Notes
issued hereunder shall be deemed held by each Lender for the benefit of any such
Applicable Lending Installation. Each Lender may, by written notice to the
Administrative Agent and the Borrower Representative, designate replacement or
additional Applicable Lending Installations through which Loans will be made by
it and for whose account Loan payments are to be made.

SECTION 2.03.  Requests for Revolving Borrowings.   To request a Revolving
Borrowing, the Borrower Representative shall notify the Administrative Agent of
such request by telephone (a) in the case of a Eurocurrency Borrowing, not later
than 11:00 a.m., Local time, three Business Days before the date of the proposed
Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m.,
Local time, one Business Day before the date of the proposed Borrowing. Each
such telephonic Borrowing Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy (or by electronic communication if, after
the date hereof, arrangements for doing so shall be approved by the
Administrative Agent) to the Administrative Agent of a written Borrowing Request
in a form approved by the Administrative Agent and signed by the Borrower
Representative. Each such telephonic and written Borrowing Request shall specify
the following information in compliance with Section 2.02:

(i)         the Borrower to which the proceeds of the requested Borrowing shall
be disbursed;

(ii)        the aggregate amount of the requested Borrowing;

(iii)       whether such Borrowing is to be comprised exclusively of Dollar
Tranche Loans or exclusively of Multicurrency Tranche Loans;

(iv)       the currency (which may be Dollars or a Foreign Currency) in which
such Borrowing is to be denominated;

(v)        the date of such Borrowing, which shall be a Business Day;

(vi)       in the case of a Borrowing denominated in Dollars, whether such
Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing;

(vii)      in the case of a Eurocurrency Borrowing, the initial Interest Period
to be applicable thereto, which shall be a period contemplated by the definition
of the term “Interest Period”;

(viii)     the location and number of the account of a Borrower to which funds
are to be disbursed, which shall comply with the requirements of Section 2.07;
and

(ix)       information confirming the Borrowers’ compliance with Section 2.04
(including reasonably detailed computations in support of such confirmation).

 

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If no election as to the Type of Revolving Borrowing is specified, then the
requested Revolving Borrowing shall be an ABR Borrowing, unless such Revolving
Borrowing is denominated in a Foreign Currency, in which case such Revolving
Borrowing shall be a Eurocurrency Borrowing. If no Interest Period is specified
with respect to any requested Eurocurrency Revolving Borrowing, then the
Borrower Representative shall be deemed to have selected an Interest Period of
one month’s duration. Promptly following receipt of a Borrowing Request in
accordance with this Section, the Administrative Agent shall advise each
applicable Lender of the details thereof and of the amount of such Lender’s Loan
to be made as part of the requested Borrowing.

SECTION 2.04.  Equalization of Borrowings.

(a)      It is the intent of the parties that the Dollar Tranche Utilization
Percentage and the Multicurrency Tranche Utilization Percentage be at all times
equal or as close to equal as reasonably possible giving effect to the
Borrowers’ right to utilize the Multicurrency Tranche Commitment for Loans
denominated in Foreign Currencies and for Letters of Credit. Accordingly, the
Borrowers shall, in consultation with the Administrative Agent, (i) allocate all
Borrowings and prepayments between the Dollar Tranche Commitments and Dollar
Tranche Loans on the one hand and the Multicurrency Tranche Commitments and
Multicurrency Tranche Loans on the other hand in such a manner as to accomplish
such intent and (ii) whether or not resulting in breakage expense to the
Borrowers, cause outstanding Borrowings under one facility (i.e., the facility
established hereby for Dollar Tranche Loans or for Multicurrency Tranche Loans)
to be refinanced by Borrowings under the other facility established hereby as of
the end of each Interest Period applicable to any Borrowing in such a manner as
to accomplish such intent.

(b)      Notwithstanding anything in this Agreement to the contrary, (i) for
purposes of determining the Borrowers’ compliance with the Borrowing minimums
and increments set forth in Section 2.02(c), amounts borrowed simultaneously
pursuant to clause (i) of the second sentence of Section 2.04(a) shall be
aggregated; (ii) prepayments made pursuant to clause (ii) of the second sentence
of Section 2.04(a) shall not be subject to the prepayment minimums and
increments set forth in Section 2.11(b); and (iii) the conditions precedent set
forth in Section 4.02(a) and (b) (other than the absence of a Default under
Article 7(h) or (i)) shall not be applicable to Borrowings made (and applied
exclusively to the refinancing of Borrowings) pursuant to clause (ii) of the
second sentence of Section 2.04(a).

(c)      Notwithstanding the foregoing, no equalization Borrowing or related
prepayment pursuant to this Section 2.04 shall be required if, absent such
Borrowing and repayment and after giving effect to any Borrowing or prepayment
being made which gave rise to the applicability of this Section 2.04, (i) the
Dollar Tranche Revolving Credit Exposure does not exceed by $1,000,000 or more
an amount equal to what the Dollar Tranche Revolving Credit Exposure would be if
the Dollar Tranche Revolving Credit Exposure Percentage and the Multicurrency
Tranche Revolving Credit Exposure Percentage were equal and (ii) the
Multicurrency Tranche Revolving Credit Exposure does not exceed by $1,000,000 or
more an amount equal to what the Multicurrency Tranche Revolving Credit Exposure
would be if the Dollar Tranche Revolving Credit Exposure Percentage and the
Multicurrency Tranche Revolving Credit Exposure Percentage were equal. Moreover,
the parties acknowledge that for administrative reasons it may not always be
practicable to have Borrowings and prepayments

 

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contemplated hereby occur simultaneously and agree that the Borrowers shall be
deemed in compliance with this Section to the extent that they make such
Borrowings and prepayments (and give related required notices) in a manner and
time-frame reasonably acceptable to the Administrative Agent and consistent with
the stated objective of this Section. Exchange rate computations made for
purposes of implementing this Section 2.04 shall be made on such days and at
such times as may be reasonably specified by the Administrative Agent to
facilitate the objectives of this Section.

SECTION 2.05.  [Intentionally Omitted]

SECTION 2.06.  Letters of Credit.    (a) General.    Subject to the terms and
conditions set forth herein, the Borrower Representative may request the
issuance of Letters of Credit for the joint and several account of the
Borrowers, in a form reasonably acceptable to the Administrative Agent and the
Issuing Bank, at any time and from time to time during the Availability Period.
In the event of any inconsistency between the terms and conditions of this
Agreement and the terms and conditions of any form of letter of credit
application or other agreement submitted by any Borrower to, or entered into by
any Borrower with, the Issuing Bank relating to any Letter of Credit, the terms
and conditions of this Agreement shall control. Upon the effectiveness of this
Agreement, the Existing Letter of Credit shall, without any further action by
any party, be deemed to have been issued as a Letter of Credit hereunder on the
date of such effectiveness and shall for all purposes hereof be treated as a
Letter of Credit under this Agreement. As more specifically set forth in
Section 2.06(d) below, only Lenders with a Multicurrency Tranche Commitment
shall be obligated to acquire participations in Letters of Credit.

(b)      Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.
To request the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit), the Borrower Representative shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the Issuing
Bank and the Administrative Agent (reasonably 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, and specifying the date of issuance, amendment, renewal or
extension (which shall be a Business Day), the date on which such Letter of
Credit is to expire (which shall comply with paragraph (c) of this Section), the
amount of such Letter of Credit, the name and address of the beneficiary thereof
and such other information as shall be necessary to prepare, amend, renew or
extend such Letter of Credit. If requested by the Issuing Bank, the Borrower
Representative also shall submit a letter of credit application on the Issuing
Bank’s standard form in connection with any request for a Letter of Credit. A
Letter of Credit shall be issued, amended, renewed or extended by the Issuing
Lender only if (and upon issuance, amendment, renewal or extension of each
Letter of Credit each Borrower shall be deemed to represent and warrant that),
after giving effect to such issuance, amendment, renewal or extension (i) the LC
Exposure shall not exceed the Dollar Equivalent of $10,000,000, (ii) the sum of
the total Multicurrency Tranche Revolving Credit Exposures shall not exceed the
total Multicurrency Tranche Commitments, (iii) the Dollar Equivalent of the
aggregate amount of all Loans and Letters of Credit denominated in a Foreign
Currency shall not exceed $50,000,000 and (iv) the sum of the total Revolving
Credit Exposures shall not exceed the total Commitments.

 

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(c)      Expiration Date.  Each Letter of Credit shall expire at or prior to the
close of business on the date one year or less after the date of the issuance of
such Letter of Credit (or, in the case of any renewal or extension thereof, one
year or less after such renewal or extension); provided that (i) any Letter of
Credit will include, if requested, customary “evergreen” provisions; and
(ii) the Issuer shall be under no obligation to permit the renewal or extension
of any Letter of Credit otherwise expiring after the Maturity Date.

(d)      Participations.  By the issuance of a Letter of Credit (or an amendment
to a Letter of Credit increasing the amount thereof) and without any further
action on the part of the Issuing Bank or the Multicurrency Tranche Lenders, the
Issuing Bank hereby grants to each Multicurrency Tranche Lender, and each
Multicurrency Tranche Lender hereby acquires from the Issuing Bank, a
participation in such Letter of Credit equal to such Multicurrency Tranche
Lender’s Multicurrency Tranche Revolving Credit Exposure Percentage of the
aggregate amount available to be drawn under such Letter of Credit. In
consideration and in furtherance of the foregoing, each Multicurrency Tranche
Lender hereby absolutely and unconditionally agrees to pay to the Administrative
Agent, for the account of the Issuing Bank, such Multicurrency Tranche Lender’s
Multicurrency Tranche Revolving Credit Exposure Percentage of each LC
Disbursement made by the Issuing Bank and not reimbursed by the Borrowers on the
date due as provided in paragraph (e) of this Section, or of any reimbursement
payment required to be refunded to the Borrowers for any reason. Each
Multicurrency Tranche 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 any amendment, renewal or extension of any
Letter of Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, 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 LC Disbursement in
respect of a Letter of Credit, the Borrowers shall reimburse such LC
Disbursement by paying to the Administrative Agent an amount equal to such LC
Disbursement not later than 3:00 p.m., Local time, on the date that such LC
Disbursement is made, if the Borrower Representative shall have received notice
of such LC Disbursement prior to 10:00 a.m., Local time, on such date, or, if
such notice has not been received by the Borrower Representative prior to such
time on such date, then not later than 3:00 p.m., Local time, on (i) the
Business Day that the Borrower Representative receives such notice, if such
notice is received prior to 10:00 a.m., Local time, on the day of receipt, or
(ii) the Business Day immediately following the day that the Borrower
Representative receives such notice, if such notice is not received prior to
such time on the day of receipt; provided that the Borrowers may, subject to the
conditions to borrowing set forth herein, request in accordance with
Section 2.03 that such payment be financed with an ABR Revolving Borrowing in an
equivalent amount and, to the extent so financed, the Borrowers’ obligation to
make such payment shall be discharged and replaced by the resulting ABR
Revolving Borrowing. If the Borrowers fail to make such payment when due, such
amount shall bear interest at the Alternate Base Rate and the Administrative
Agent shall notify each Multicurrency Tranche Lender of the applicable LC
Disbursement, the payment then due from the Borrowers in respect thereof and
such Multicurrency Tranche Lender’s Multicurrency Tranche Revolving Credit
Exposure Percentage thereof. Promptly following receipt of such notice, each
Multicurrency Tranche Lender shall pay to the Administrative Agent its

 

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Multicurrency Tranche Revolving Credit Exposure Percentage of the payment then
due from the Borrowers, in the same manner as provided in Section 2.07 with
respect to Multicurrency Tranche Loans made by such Lender (and Section 2.07
shall apply, mutatis mutandis, to the payment obligations of the Multicurrency
Tranche Lenders), and the Administrative Agent shall promptly pay to the Issuing
Bank the amounts so received by it from the Multicurrency Tranche Lenders.
Promptly following receipt by the Administrative Agent of any payment from the
Borrowers pursuant to this paragraph, the Administrative Agent shall distribute
such payment to the Issuing Bank or, to the extent that Multicurrency Tranche
Lenders have made payments pursuant to this paragraph to reimburse the Issuing
Bank, then to such Multicurrency Tranche Lenders and the Issuing Bank as their
interests may appear. Any payment made by a Multicurrency Tranche Lender
pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement
(other than the funding of ABR Revolving Loans as contemplated above) shall not
constitute a Loan and shall not relieve the Borrowers of their obligation to
reimburse such LC Disbursement.

(f)      Obligations Absolute.    The Borrowers’ obligation to reimburse LC
Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and 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 this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) 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, or (iv) 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, or
provide a right of setoff against, the Borrowers’ obligations hereunder. Neither
the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their
Related Parties, shall have any liability or responsibility by reason of or in
connection with the issuance or transfer of any Letter of Credit or any payment
or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank; provided that the foregoing shall not be construed to excuse the
Issuing Bank from liability to the Borrowers to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrowers to the extent permitted by applicable law) suffered by
the Borrowers that are caused by the Issuing Bank’s failure to exercise care
when determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. The parties hereto expressly agree that,
in the absence of gross negligence or willful misconduct on the part of the
Issuing Bank (as finally determined by a court of competent jurisdiction), the
Issuing Bank shall be deemed to have exercised care in each such determination.
In furtherance of the foregoing and without limiting the generality thereof, the
parties agree that, with respect to documents presented which appear on their
face to be in substantial compliance with the terms of a Letter of Credit, the
Issuing Bank may, in its sole discretion, either accept and make payment upon
such documents without responsibility for further investigation, regardless of
any notice or information to the contrary, or refuse to accept and make payment
upon such documents if such documents are not in strict compliance with the
terms of such Letter of Credit.

 

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(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 promptly notify the
Administrative Agent and the Borrower Representative by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Bank has made or
will make an LC Disbursement thereunder; provided that any failure to give or
delay in giving such notice shall not relieve the Borrowers of their obligation
to reimburse the Issuing Bank and the Multicurrency Tranche Lenders with respect
to any such LC Disbursement.

(h)      Interim Interest.    If the Issuing Bank shall make any LC
Disbursement, then, unless the Borrowers shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrowers reimburse such LC
Disbursement, at the rate per annum then applicable to ABR Revolving Loans;
provided that, if the Borrowers fail to reimburse such LC Disbursement when due
pursuant to paragraph (e) of this Section, then Section 2.13(c) shall apply.
Interest accrued pursuant to this paragraph shall be for the account of the
Issuing Bank, except that interest accrued on and after the date of payment by
any Multicurrency Tranche Lender pursuant to paragraph (e) of this Section to
reimburse the Issuing Bank shall be for the account of such Lender to the extent
of such payment.

(i)      Replacement of the Issuing Bank.    The Issuing Bank may be replaced at
any time by written agreement among the Borrowers, the Administrative Agent, the
replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent
shall notify the Lenders of any such replacement of the Issuing Bank. At the
time any such replacement shall become effective, the Borrowers shall pay all
unpaid fees accrued for the account of the replaced Issuing Bank pursuant to
Section 2.12(b). From and after the effective date of any such replacement,
(i) the successor Issuing Bank shall have all the rights and obligations of the
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein 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
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain
a party hereto and shall continue to have all the rights and obligations of an
Issuing Bank under this Agreement with respect to Letters of Credit issued by it
prior to such replacement, but shall not be required to issue additional Letters
of Credit.

(j)      Cash Collateralization.    If (i) any Event of Default shall occur and
be continuing and if all outstanding Loans have been declared to be due and
payable pursuant to Article VII, then, on the Business Day that the Borrowers
receive notice from the Administrative Agent or the Required Multicurrency
Tranche Lenders demanding the deposit of cash collateral pursuant to this
paragraph, the Borrowers shall deposit in an account with the Administrative
Agent, in the name of the Administrative Agent and for the benefit of the
Multicurrency Tranche Lenders, an amount in cash equal to the LC Exposure as of
such date plus any accrued and unpaid interest thereon; provided that the
obligation to deposit such cash collateral shall become

 

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effective immediately, and such deposit shall become immediately due and
payable, without demand or other notice of any kind, upon the occurrence of any
Event of Default with respect to the Borrowers described in clause (h) or (i) of
Article VII or (ii) any Letter of Credit shall have an expiration date after the
Maturity Date, the Borrowers shall deposit in an account with the Administrative
Agent, in the name of the Administrative Agent and for the benefit of the
Multicurrency Tranche Lenders, an amount in cash in Dollars equal to 105% of the
face amount of such Letter of Credit in the case of Letters of Credit
denominated in Dollars and 120% of the face amount of such Letter of Credit in
the case of Letters of Credit denominated in a Foreign Currency on the date five
Business Days prior to the Maturity Date. Any such deposit shall be held by the
Administrative Agent as collateral for the payment and performance of the
obligations of the Borrowers under this Agreement. The Administrative 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, which investments shall be made at the option and sole
discretion of the Administrative Agent and at the Borrowers’ risk and expense,
such deposits shall not bear interest. Interest or profits, if any, on such
investments shall accumulate in such account. Moneys in such account shall be
applied by the Administrative Agent to reimburse the Issuing Bank for LC
Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
the Borrowers for the LC Exposure at such time or, if the maturity of the Loans
has been accelerated, be applied to satisfy other obligations of the Borrowers
under this Agreement. If the Borrowers are required to provide an amount of cash
collateral hereunder (i) 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
Borrowers within three Business Days after all Events of Default have been cured
or waived and (ii) as a result of the expiration of a Letter of Credit extending
past the Maturity Date, such amount (to the extent not applied as aforesaid)
shall be returned to the Borrowers within three Business Days after the
surrender or expiration of such Letter of Credit.

SECTION 2.07.  Funding of Borrowings.  (a) Each Dollar Tranche Lender shall make
each Loan to be made by it hereunder on the proposed date thereof by wire
transfer of immediately available funds by 12:00 noon, Local Time, to the
account of the Administrative Agent most recently designated by it for such
purpose by notice to the Dollar Tranche Lenders. The Administrative Agent will
make such Loans available to the Borrowers by promptly crediting the amounts so
received, in like funds, to the account specified pursuant to Section 2.03,
which shall be an account of a Borrower maintained with the Administrative Agent
in New York City and designated by the Borrower Representative in the applicable
Borrowing Request.

(b)      Each Multicurrency Tranche Lender shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer of immediately available
funds by 12:00 noon, Local Time, to the account or accounts of the
Administrative Agent most recently designated by it for such purpose by notice
to the Multicurrency Tranche Lenders. The Administrative Agent will make such
Loans available to the Borrowers by promptly crediting the amounts so received,
in like funds, to the account specified pursuant to Section 2.03, which shall be
an account of a Borrower maintained with the Administrative Agent in New York
City (or, in the case of Loans denominated in a Foreign Currency, in such other
location as may be designated by the Administrative Agent) and designated by the
Borrowers in the applicable Borrowing Request; provided that ABR Revolving Loans
made to finance the reimbursement of an LC Disbursement as provided in
Section 2.06(e) shall be remitted by the Administrative Agent to the Issuing
Bank.

 

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(c)      Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender’s share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) or (b) of this
Section and may, in reliance upon such assumption, make available to the
Borrowers a corresponding amount. In such event, if a Lender has not in fact
made its share of the applicable Borrowing available to the Administrative
Agent, then the applicable Lender and the Borrowers severally agree to pay to
the Administrative Agent forthwith on demand such corresponding amount with
interest thereon, for each day from and including the date such amount is made
available to the Borrowers to but excluding the date of payment to the
Administrative Agent, at (i) in the case of such Lender, (x) the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative Agent
in accordance with banking industry rules on interbank compensation (in the case
of a Borrowing denominated in Dollars) or (y) the rate reasonably determined by
the Administrative Agent to be the cost to it of funding such amount (in the
case of a Borrowing denominated in a Foreign Currency) or (ii) in the case of
the Borrowers, the interest rate applicable to ABR Loans. If such Lender pays
such amount to the Administrative Agent, then such amount shall constitute such
Lender’s Loan included in such Borrowing.

SECTION 2.08.  Interest Elections.  (a) Each Revolving Borrowing initially shall
be of the Type specified in the applicable Borrowing Request and, in the case of
a Eurocurrency Revolving Borrowing, shall have an initial Interest Period as
specified in such Borrowing Request. Thereafter, the Borrower Representative may
elect to convert such Borrowing to a different Type, in the case of Borrowings
denominated in Dollars, or to continue such Borrowing and, in the case of a
Eurocurrency Revolving Borrowing, may elect Interest Periods therefor, all as
provided in this Section. The Borrower Representative may elect different
options with respect to different portions of the affected Borrowing, in which
case each such portion shall be allocated ratably among the Lenders holding the
Loans comprising such Borrowing, and the Loans comprising each such portion
shall be considered a separate Borrowing.

(b)      To make an election pursuant to this Section, the Borrower
Representative shall notify the Administrative Agent of such election by
telephone by the time that a Borrowing Request would be required under
Section 2.03 if the Borrower Representative were requesting a Revolving
Borrowing of the Type and denominated in the currency resulting from such
election to be made on the effective date of such election. Each such telephonic
Interest Election Request shall be irrevocable and shall be confirmed promptly
by hand delivery or telecopy to the Administrative Agent of a written Interest
Election Request in a form approved by the Administrative Agent and signed by
the Borrower Representative.

(c)      Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.02:

(i)      the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions thereof,
the portions

 

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thereof to be allocated to each resulting Borrowing (in which case the
information to be specified pursuant to clauses (iii) and (iv) below shall be
specified for each resulting Borrowing);

(ii)      the effective date of the election made pursuant to such Interest
Election Request, which shall be a Business Day;

(iii)     whether the resulting Borrowing is to be an ABR Borrowing or a
Eurocurrency Borrowing;

(iv)     if the resulting Borrowing is a Eurocurrency Borrowing, the Interest
Period to be applicable thereto after giving effect to such election, which
shall be a period contemplated by the definition of the term “Interest Period”;
and

(v)      confirmation of the Borrowers’ compliance with Section 2.04 (including
reasonably detailed computations in support of such confirmation).

If any such Interest Election Request requests a Eurocurrency Borrowing but does
not specify an Interest Period, then the Borrower Representative shall be deemed
to have selected an Interest Period of one month’s duration.

(d)      Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each applicable Lender of the details thereof
and of such Lender’s portion of each resulting Borrowing.

(e)      If the Borrower Representative fails to deliver a timely Interest
Election Request with respect to a Eurocurrency Revolving Borrowing prior to the
end of the Interest Period applicable thereto, then, unless such Borrowing is
repaid as provided herein, at the end of such Interest Period such Borrowing
shall be converted to an ABR Borrowing (unless such Borrowing is denominated in
a Foreign Currency, in which case such Borrowing shall be continued as a
Eurocurrency Borrowing with an Interest Period of one month’s duration
commencing on the last day of such Interest Period). Notwithstanding any
contrary provision hereof, if an Event of Default has occurred and is continuing
and the Administrative Agent, at the request of the Required Lenders, so
notifies the Borrower Representative then, so long as an Event of Default is
continuing (i) no outstanding Revolving Borrowing may be converted to or
continued as a Eurocurrency Borrowing, (ii) unless repaid, each Eurocurrency
Revolving Borrowing denominated in Dollars shall be converted to an ABR
Borrowing at the end of the Interest Period applicable thereto, and (iii) unless
repaid, each Eurocurrency Revolving Borrowing denominated in a Foreign Currency
shall be continued as a Eurocurrency Revolving Borrowing with an Interest Period
of one month’s duration.

SECTION 2.09.  Termination and Reduction of Commitments.     (a)  Unless
previously terminated, the Commitments shall terminate on the Maturity Date.

(b)      The Borrowers may at any time terminate, or from time to time reduce,
the Dollar Tranche Commitments; provided that (i) each reduction of the Dollar
Tranche Commitments shall be in an amount that is an integral multiple of
$1,000,000 and not less than $5,000,000 and (ii) the Borrowers shall not
terminate or reduce the Dollar Tranche

 

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Commitments if, after giving effect to any concurrent prepayment of the Loans in
accordance with Section 2.11, the sum of (A) the Dollar Tranche Revolving Credit
Exposures would exceed the total Dollar Tranche Commitments or (B) the Revolving
Credit Exposures would exceed the total Commitments.

(c)      The Borrowers may at any time terminate, or from time to time reduce,
the Multicurrency Tranche Commitments; provided that (i) each reduction of the
Multicurrency Tranche Commitments shall be in an amount that is an integral
multiple of $1,000,000 and not less than $5,000,000 and (ii) the Borrowers shall
not terminate or reduce the Multicurrency Tranche Commitments if, after giving
effect to any concurrent prepayment of the Loans in accordance with
Section 2.11, the sum of (A) the Multicurrency Tranche Revolving Credit
Exposures would exceed the total Multicurrency Tranche Commitments or (B) the
Revolving Credit Exposures would exceed the total Commitments.

(d)      The Borrower Representative shall notify the Administrative Agent of
any election to terminate or reduce the Commitments under paragraph (b) or
(c) of this Section at least three Business Days prior to the effective date of
such termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the applicable Lenders of the contents thereof. Each notice
delivered by the Borrower Representative pursuant to this Section shall be
irrevocable; provided that a notice of termination of the Commitments delivered
by the Borrower Representative may state that such notice is conditioned upon
the effectiveness of other credit facilities, in which case such notice may be
revoked by the Borrower Representative (by notice to the Administrative Agent on
or prior to the specified effective date) if such condition is not satisfied.
Any termination or reduction of the Commitments shall be permanent. Each
reduction of (i) the Dollar Tranche Commitments shall be made ratably among the
Dollar Tranche Lenders and (ii) the Multicurrency Tranche Commitments shall be
made ratably among the Multicurrency Tranche Lenders, in each case accordance
with their respective Commitments. Notwithstanding anything to the contrary in
Section 2.09(b), (c) or (d), the Borrowers shall not be permitted to
(i) voluntarily reduce or terminate the Dollar Tranche Commitments unless they
contemporaneously reduce by a like percentage or terminate, as applicable, the
Multicurrency Tranche Commitments or (ii) voluntarily reduce or terminate the
Multicurrency Tranche Commitments unless they contemporaneously reduce by a like
percentage or terminate, as applicable, the Dollar Tranche Commitments.

SECTION 2.10.  Repayment of Loans; Evidence of Debt.    (a)  The Borrowers
hereby jointly and severally unconditionally promise to pay to the
Administrative Agent for the account of each Dollar Tranche Lender the then
unpaid principal amount of each Dollar Tranche Loan on the Maturity Date.

(b)      The Borrowers hereby jointly and severally unconditionally promise to
pay to the Administrative Agent for the account of each Multicurrency Tranche
Lender the then unpaid principal amount of each Multicurrency Tranche Loan on
the Maturity Date.

(c)      Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrowers to such Lender
resulting from each Loan made by such Lender, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.

 

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(d)      The Administrative Agent shall maintain accounts in which it shall
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 Borrowers to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder for the account of the Lenders and each Lender’s share thereof.

(e)      The entries made in the accounts maintained pursuant to paragraph
(b) or (c) of this Section shall be prima facie evidence of the existence and
amounts of the obligations recorded therein; provided 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 obligation of the Borrowers to repay
the Loans in accordance with the terms of this Agreement.

(f)      Any Lender may request that Loans made by it be evidenced by a
promissory note. In such event, the Borrowers shall prepare, execute and deliver
to such Lender a promissory note payable to the order of such Lender (or, if
requested by such Lender, to such Lender and its registered assigns) and in a
form approved by the Administrative Agent. Thereafter, the Loans evidenced by
such promissory note and interest thereon shall at all times (including after
assignment pursuant to Section 9.04) be represented by one or more promissory
notes in such form payable to the order of the payee named therein (or, if such
promissory note is a registered note, to such payee and its registered assigns).

(g)      If at any time (i) the aggregate Dollar Tranche Revolving Credit
Exposure of the Dollar Tranche Lenders exceeds the aggregate Dollar Tranche
Commitments of the Dollar Tranche Lenders, the Borrowers shall immediately
prepay the Dollar Tranche Loans in the amount of such excess and (ii) the
aggregate Multicurrency Tranche Revolving Credit Exposure of the Multicurrency
Tranche Lenders exceeds the aggregate Multicurrency Tranche Commitments of the
Lenders (other than as a result of currency fluctuations), the Borrowers shall
immediately prepay the Multicurrency Tranche Loans in the amount of such excess.
To the extent that, after the prepayment of all Multicurrency Tranche Loans an
excess of the Multicurrency Credit Exposure over the aggregate Multicurrency
Tranche Commitments still exists, the Borrowers shall promptly cash
collateralize the Letters of Credit in the manner described in Section 2.06(j)
in an amount sufficient to eliminate such excess.

(h)      The Administrative Agent will determine the Dollar Equivalent of the
aggregate LC Exposure and the Dollar Equivalent of each Multicurrency Tranche
Loan on each Exchange Rate Date. If at any time the sum of such amounts exceeds
105% of the aggregate Multicurrency Tranche Commitments of the Lenders, the
Borrowers shall immediately prepay the Multicurrency Tranche Loans in an amount
sufficient to reduce the sum of such amounts to no greater than the amount of
the aggregate Multicurrency Tranche Commitments of the Lenders. To the extent
that, after the prepayment of all Multicurrency Tranche Loans an excess of the
sum of such amounts over the aggregate Multicurrency Tranche Commitments still
exists, the Borrowers shall promptly cash collateralize the Letters of Credit in
the manner described in Section 2.06(j) in an amount sufficient to eliminate
such excess.

 

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SECTION 2.11.  Prepayment of Loans.  (a) The Borrowers shall have the right at
any time and from time to time to prepay any Borrowing in whole or in part,
subject to prior notice in accordance with paragraph (b) of this Section.

(b)      The Borrower Representative shall notify the Administrative Agent by
telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurocurrency Revolving Borrowing, not later than 11:00 a.m.,
Local time, three Business Days before the date of prepayment or (ii) in the
case of prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m.,
Local time, one Business Day before the date of prepayment. Each such notice
shall be irrevocable and shall specify the prepayment date and the principal
amount of each Borrowing or portion thereof to be prepaid; provided that, if a
notice of prepayment is given in connection with a conditional notice of
termination of the Commitments as contemplated by Section 2.09(d), then such
notice of prepayment may be revoked if such notice of termination is revoked in
accordance with Section 2.09(d). Promptly following receipt of any such notice
relating to a Revolving Borrowing, the Administrative Agent shall advise the
applicable Lenders of the contents thereof. Each partial prepayment of any
Revolving Borrowing shall be in an amount that would be permitted in the case of
an advance of a Revolving Borrowing of the same Type as provided in
Section 2.02. Each prepayment of a Revolving Borrowing shall be applied ratably
to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied
by accrued interest to the extent required by Section 2.13.

SECTION 2.12.  Fees.  (a) Subject to Section 2.22(a), the Borrowers agree to pay
to the Administrative Agent for the account of each Lender a facility fee, which
shall accrue at the Applicable Rate on the daily amount of the Commitment of
such Lender (whether used or unused) during the period from and including the
date hereof to but excluding the date on which such Commitment terminates;
provided that, if such Lender continues to have any Revolving Credit Exposure
after its Commitment terminates, then such facility fee shall continue to accrue
on the daily amount of such Lender’s Revolving Credit Exposure from and
including the date on which its Commitment terminates to but excluding the date
on which such Lender ceases to have any Revolving Credit Exposure. Accrued
facility fees shall be payable in arrears on the third Business Day following
the last day of March, June, September and December of each year and on the date
on which the Commitments terminate, commencing on the first such date to occur
after the date hereof; provided that any facility fees accruing after the date
on which the Commitments terminate shall be payable on demand. All facility fees
shall be computed on the basis of a year of 360 days and shall be payable for
the actual number of days elapsed (including the first day but excluding the
last day).

(b)      Subject to Section 2.22(c), the Borrowers agree to pay (i) to the
Administrative Agent for the account of each Multicurrency Tranche Lender a
participation fee with respect to its participations in Letters of Credit, which
shall accrue at the same Applicable Rate used to determine the interest rate
applicable to Eurocurrency Revolving Loans on the average daily amount of such
Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed
LC Disbursements) during the period from and including the Effective Date to but
excluding the later of the date on which such Lender’s Commitment terminates and
the date on which such Lender ceases to have any LC Exposure, and (ii) to the
Issuing Bank a fronting fee, which shall accrue at the rate or rates per annum
separately agreed upon between the Borrowers and the Issuing Bank on the average
daily amount of the LC Exposure (excluding any

 

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portion thereof attributable to unreimbursed LC Disbursements) during the period
from and including the Effective Date to but excluding the later of the date of
termination of the Commitments and the date on which there ceases to be any LC
Exposure, as well as the Issuing Bank’s customary and standard fees with respect
to the issuance, amendment, renewal or extension of any Letter of Credit or
processing of drawings thereunder. Participation fees and fronting fees accrued
through and including the last day of March, June, September and December of
each year shall be payable on the third Business Day following such last day,
commencing on the first such date to occur after the Effective Date; provided
that all such fees shall be payable on the date on which the Commitments
terminate and any such fees accruing after the date on which the Commitments
terminate shall be payable on demand. Any other fees payable to the Issuing Bank
pursuant to this paragraph shall be payable within 10 days after demand. All
participation fees and fronting fees shall be computed on the basis of a year of
360 days and shall be payable for the actual number of days elapsed (including
the first day but excluding the last day).

(c)      The Borrowers agree to pay to the Administrative Agent, for its own
account, fees payable in the amounts and at the times separately agreed upon
between the Borrowers and the Administrative Agent.

(d)      All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent (or to the Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
facility fees and participation fees, to the Lenders. Fees paid shall not be
refundable under any circumstances.

SECTION 2.13.  Interest.  (a) The Loans comprising each ABR Borrowing shall bear
interest at the Alternate Base Rate plus the Applicable Rate.

(b)      The Loans comprising each Eurocurrency Borrowing shall bear interest at
the Adjusted Eurocurrency Rate for the Interest Period in effect for such
Borrowing plus the Applicable Rate.

(c)      Notwithstanding the foregoing, if any principal of or interest on any
Loan or any fee or other amount payable by any of the Borrowers hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise applicable to such Loan as provided in the preceding paragraphs
of this Section or (ii) in the case of any other amount, 2% plus the rate
applicable to ABR Loans as provided in paragraph (a) of this Section.

(d)      Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan, upon the final maturity thereof and upon
termination of the Commitments; provided that (i) interest accrued pursuant to
paragraph (c) of this Section shall be payable on demand, (ii) in the event of
any repayment or prepayment of any Loan (other than a prepayment of an ABR Loan
prior to the end of the Availability Period), accrued interest on the principal
amount repaid or prepaid shall be payable on the date of such repayment or
prepayment and (iii) in the event of any conversion of any Eurocurrency Loan
prior to the end of the current Interest Period therefor, accrued interest on
such Loan shall be payable on the effective date of such conversion.

 

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(e)      All interest hereunder shall be computed on the basis of a year of 360
days, except that (i) interest on Borrowings denominated in Sterling shall be
computed on the basis of a year of 365 days, (ii) interest on Borrowings
denominated in any other Foreign Currency for which it is required by applicable
law or customary to compute interest on the basis of a year of 365 days or, if
required by applicable law or customary, 366 days in a leap year, shall be
computed on such basis, and (iii) interest computed by reference to the
Alternate Base Rate at times when the Alternate Base Rate is based on the Prime
Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap
year), and in each case shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). The applicable Alternate
Base Rate or Adjusted Eurocurrency Rate shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest
error.

SECTION 2.14.  Alternate Rate of Interest.  If prior to the commencement of any
Interest Period for a Eurocurrency Borrowing denominated in any currency:

(a)      the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted Eurocurrency Rate for such Interest Period;
or

(b)      the Administrative Agent is advised by the Required Lenders that the
Adjusted Eurocurrency Rate for such Interest Period will not adequately and
fairly reflect the cost to such Lenders (or Lender) of making or maintaining
their Loans (or its Loan) included in such Borrowing for such Interest Period,
which notice is accompanied by a written rationale for the determination of the
Required Lenders, which will be shared with the Borrowers;

then the Administrative Agent shall give notice thereof to the Borrowers and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrowers and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Revolving Borrowing to, or
continuation of any Revolving Borrowing as, a Eurocurrency Borrowing denominated
in such currency shall be ineffective, (ii) such Borrowing shall be converted to
or continued as on the last day of the Interest Period applicable thereto (A) if
such Borrowing is denominated in Dollars, an ABR Borrowing or (B) if such
Borrowing is denominated in a Foreign Currency, as a Borrowing in respect of
which the rate to apply to each Lender’s participation is an interest rate to
include (1) the Applicable Rate for Eurocurrency Loans, (2) the rate notified to
the Administrative Agent by such Lender as soon as practicable and in any event
before interest is due to be paid in respect of the applicable Interest Period,
to be that which expresses as a percentage rate per annum the cost to such
Lender of funding its participation in the applicable Borrowing from whatever
source it may reasonably select; and (3) the Mandatory Costs Rate, if any,
applicable to such Lender’s participation in the applicable Borrowing, and
(iii) if any Borrowing Request requests a Eurocurrency Borrowing in such
currency, such Borrowing shall be made as an ABR Borrowing (if such Borrowing is
requested to be made in Dollars) or shall be made as a Borrowing bearing
interest at the rate described under (ii)(B) above.

 

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SECTION 2.15.  Increased Costs.  (a) 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 (except any such reserve requirement reflected in
the Adjusted Eurocurrency Rate or compensated for by the Mandatory Cost Rate) or
the Issuing Bank; or

(ii)      impose on any Lender or the Issuing Bank or the London interbank
market any other condition affecting this Agreement or Eurocurrency 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 of making or maintaining any Eurocurrency Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit 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), then the
Borrowers will pay to such Lender or the Issuing Bank, as the case may be, 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 or the Issuing Bank determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate
of return on such Lender’s or the Issuing Bank’s capital or on the capital of
such Lender’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 held
by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level
below that which such Lender or the Issuing Bank or such Lender’s or the Issuing
Bank’s holding company could have achieved but for such Change in Law (taking
into consideration such Lender’s or the Issuing Bank’s policies and the policies
of such Lender’s or the Issuing Bank’s holding company with respect to capital
adequacy), then from time to time the Borrowers will pay to such Lender or the
Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Bank or such Lender’s or the Issuing
Bank’s holding company for any such reduction suffered.

(c)      A certificate of a Lender or the Issuing Bank setting forth the amount
or amounts necessary to compensate such Lender or the Issuing Bank or its
holding company, as the case may be, as specified in paragraph (a) or (b) of
this Section shall be delivered to the Borrower Representative and shall be
conclusive absent manifest error. The Borrowers shall pay such Lender or the
Issuing Bank, as the case may be, the amount shown as due on any such
certificate within 10 days after receipt thereof.

(d)      Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender’s or the Issuing Bank’s right to demand such compensation; provided
that the Borrowers shall not be required to compensate a Lender or the Issuing
Bank pursuant to this Section for any increased

 

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costs or reductions incurred more than 270 days prior to the date that such
Lender or the Issuing Bank, as the case may be, notifies the Borrower
Representative of the Change in Law giving rise to such increased costs or
reductions and of such Lender’s or the Issuing Bank’s intention to claim
compensation therefor; provided further that, if the Change in Law giving rise
to such increased costs or reductions is retroactive, then the 270-day period
referred to above shall be extended to include the period of retroactive effect
thereof.

SECTION 2.16.  Break Funding Payments.  In the event of (a) the payment of any
principal of any Eurocurrency Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default or
pursuant to Section 2.04), (b) the conversion of any Eurocurrency Loan other
than on the last day of the Interest Period applicable thereto, (c) the failure
to borrow, convert, continue or prepay any Eurocurrency Loan on the date
specified in any notice delivered pursuant hereto (regardless of whether such
notice may be revoked under Section 2.11(b) and is revoked in accordance
therewith) or (d) the assignment of any Eurocurrency Loan other than on the last
day of the Interest Period applicable thereto as a result of a request by a
Borrower pursuant to Section 2.19, then, in any such event, the Borrowers shall
compensate each Lender for the loss, cost and expense attributable to such
event. In the case of a Eurocurrency Loan, such loss, cost or expense to any
Lender shall be deemed to be an amount determined by such Lender to be the
excess, if any, of (i) the amount of interest which would have accrued on the
principal amount of such Loan had such event not occurred, at the Adjusted
Eurocurrency Rate that would have been applicable to such Loan, for the period
from the date of such event to the last day of the then current Interest Period
therefor (or, in the case of a failure to borrow, convert or continue, for the
period that would have been the Interest Period for such Loan), over (ii) the
amount of interest which would accrue on such principal amount for such period
at the interest rate which such Lender would bid were it to bid, at the date of
such event, for Dollar deposits in the applicable currency of a comparable
amount and period from other banks in the eurocurrency market. A certificate of
any Lender setting forth any amount or amounts that such Lender is entitled to
receive pursuant to this Section shall be delivered to the Borrower
Representative and shall be conclusive absent manifest error. The Borrowers
shall pay such Lender the amount shown as due on any such certificate within 10
days after receipt thereof.

SECTION 2.17.  Taxes.   (a) Any and all payments by or on account of any
obligation of any of the Borrowers hereunder shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; provided that if any
of the Borrowers shall be required to deduct any Indemnified Taxes or Other
Taxes from such payments, then (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) the Administrative
Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the
Borrowers shall make such deductions and (iii) the Borrowers shall pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable law.

(b)      In addition, the Borrowers shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.

 

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(c)      The Borrowers shall indemnify the Administrative Agent, each Lender and
the Issuing Bank, within 10 days after written demand therefor, for the full
amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent,
such Lender or the Issuing Bank, as the case may be, on or with respect to any
payment by or on account of any obligation of any Borrower hereunder (including
Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable under this Section) and any penalties, interest and reasonable
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 as to the amount of such
payment or liability delivered to the Borrower Representative by a Lender or the
Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a
Lender or the Issuing Bank, shall be conclusive absent manifest error.

(d)      As soon as practicable after any payment of Indemnified Taxes or Other
Taxes by the Borrowers to a Governmental Authority, the Borrower Representative
shall deliver 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.

(e)      Any Foreign Lender that is entitled to an exemption from or reduction
of withholding tax under the law of the jurisdiction in which any Borrower is
located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall, upon the request of the Borrower
Representative, deliver to the Borrower Representative (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law, such
properly completed and executed documentation prescribed by applicable law or
reasonably requested by the Borrower Representative as will permit such payments
to be made without withholding or at a reduced rate.

(f)      If the Administrative Agent or a Lender determines, in its sole
discretion, that it has received a refund of any Taxes or Other Taxes as to
which it has been indemnified by the Borrowers or with respect to which one of
the Borrowers has paid additional amounts pursuant to this Section 2.17, it
shall pay over such refund to the Borrowers (but only to the extent of indemnity
payments made, or additional amounts paid, by the Borrowers under this
Section 2.17 with respect to the Taxes or Other Taxes giving rise to such
refund), net of all out-of-pocket expenses of the Administrative Agent or such
Lender and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund); provided, that the
Borrowers, upon the request of the Administrative Agent or such Lender, agrees
to repay the amount paid over to the Borrowers (plus any penalties, interest or
other charges imposed by the relevant Governmental Authority) to the
Administrative Agent or such Lender in the event the Administrative Agent or
such Lender is required to repay such refund to such Governmental Authority.
This Section shall not be construed to require the Administrative Agent or any
Lender to make available its tax returns (or any other information relating to
its taxes which it deems confidential) to any of the Borrowers or any other
Person.

SECTION 2.18.  Payments Generally; Pro Rata Treatment; Sharing of
Set-offs.  (a) Each of the Borrowers shall make each payment required to be made
by it hereunder (whether of principal, interest, fees or reimbursement of LC
Disbursements, or of amounts payable under Section 2.15, 2.16 or 2.17, or
otherwise) prior to 12:00 noon, Local time, on the

 

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date when due, in immediately available funds, without set off or counterclaim.
Any amounts received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices at 10 South Dearborn,
Floor 19, Chicago, Illinois 60603 (or, for payments denominated in a Foreign
Currency, to J.P. Morgan Europe Limited, 125 London Wall, London EC2Y 5AJ),
except payments to be made directly to the Issuing Bank as expressly provided
herein and except that payments pursuant to Sections 2.15, 2.16, 2.17 and 9.03
shall be made directly to the Persons entitled thereto. The Administrative Agent
shall distribute any such payments received by it for the account of any other
Person to the appropriate recipient promptly following receipt thereof. If any
payment hereunder shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day, and, in the case
of any payment accruing interest, interest thereon shall be payable for the
period of such extension. All payments hereunder of (i) principal or interest in
respect of any Loan shall be made in the currency in which such Loan is
denominated, (ii) reimbursement obligations shall be made in the currency in
which the Letter of Credit in respect of which such reimbursement obligation
exists is denominated or (iii) any other amount due hereunder or under another
Credit Document shall be made in Dollars. Any payment required to be made by the
Administrative Agent hereunder shall be deemed to have been made by the time
required if the Administrative Agent shall at or before such time have taken the
necessary steps to make such payment in accordance with the regulations or
operating procedures of the clearing or settlement system used by the
Administrative Agent to make such payment.

(b)      If at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal, unreimbursed LC
Disbursements, interest and fees then due hereunder, such funds shall be applied
(i) first, towards payment of interest and fees then due hereunder, ratably
among the parties entitled thereto in accordance with the amounts of interest
and fees then due to such parties, and (ii) second, towards payment of principal
and unreimbursed LC Disbursements then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of principal and unreimbursed LC
Disbursements then due to such parties.

(c)      If any Lender shall, by exercising any right of set off or counterclaim
or otherwise, obtain payment in respect of any principal of or interest on any
of its Loans or participations in LC Disbursements resulting in such Lender
receiving payment of a greater proportion of the aggregate amount of its Loans
and participations in LC Disbursements and accrued interest thereon than the
proportion received by any other Lender, then the Lender receiving such greater
proportion shall purchase (for cash at face value) participations in the Loans
and participations in LC Disbursements of other Lenders without recourse or
warranty from the other Lenders except as contemplated by Section 9.04 in
respect of assignments to the extent necessary so that the benefit of all such
payments shall be shared by the Lenders ratably in accordance with the aggregate
amount of principal of and accrued interest on their respective Loans and
participations in LC Disbursements; provided that (i) if any such participations
are purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment made
by any of the Borrowers pursuant to and in accordance with the express terms of

 

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this Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or participations
in LC Disbursements to any assignee or participant, other than to the Borrowers
or any Subsidiary or Affiliate thereof (as to which the provisions of this
paragraph shall apply). Each of the Borrowers consents to the foregoing and
agrees, to the extent it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against any of the Borrowers rights of set-off and counterclaim with
respect to such participation as fully as if such Lender were a direct creditor
of such Borrower in the amount of such participation.

(d)      Unless the Administrative Agent shall have received notice from the
Borrower Representative prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or the Issuing Bank
hereunder that the Borrowers will not make such payment, the Administrative
Agent may assume that the Borrowers have made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute to the
Lenders or the Issuing Bank, as the case may be, the amount due. In such event,
if the Borrowers have not in fact made such payment, then each of the Lenders or
the Issuing Bank, as the case may be, severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Lender or Issuing Bank with interest thereon, for each day from and including
the date such amount is distributed to it to but excluding the date of payment
to the Administrative Agent, (i) at the greater of the Federal Funds Effective
Rate and a rate determined by the Administrative Agent in accordance with
banking industry rules on interbank compensation (in the case of an amount
denominated in Dollars) and (ii) the rate reasonably determined by the
Administrative Agent to be the cost to it of funding such amount (in the case of
an amount denominated in a Foreign Currency).

(e)      If any Lender shall fail to make any payment required to be made by it
pursuant to Section 2.06(d) or (e), 2.07(c), 2.18(d) or 9.03(c), then the
Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), (i) apply any amounts thereafter received by the
Administrative Agent for the account of such Lender and for the benefit of the
Administrative Agent or the Issuing Bank to satisfy such Lender’s obligations
under such Sections until all such unsatisfied obligations are fully paid,
and/or (ii) hold any such amounts in a segregated account as cash collateral
for, and application to, any future funding obligations of such Lender under
such Sections; in the case of each of (i) and (ii) above, in any order as
determined by the Administrative Agent in its discretion.

SECTION 2.19.  Mitigation Obligations; Replacement of Lenders.  (a)      If any
Lender requests compensation under Section 2.15, or if any of the Borrowers is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.17, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.15 or 2.17, as the case may be, in the
future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrowers
hereby agree to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

 

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(b)      If any Lender requests compensation under Section 2.15, or if any of
the Borrowers is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.17,
or if any Lender becomes a Defaulting Lender, then the Borrowers may, at their
sole expense and effort, upon notice to such Lender and the Administrative
Agent, require such Lender to assign and delegate, without recourse (in
accordance with and subject to the restrictions contained in Section 9.04), all
its interests, rights and obligations under this Agreement to an assignee that
shall assume such obligations (which assignee may be another Lender, if a Lender
accepts such assignment); provided that (i) the Borrower Representative shall
have received the prior written consent of the Administrative Agent (and if a
Commitment is being assigned, the Issuing Bank), which consent shall not
unreasonably be withheld, (ii) such Lender shall have received payment of an
amount equal to the outstanding principal of its Loans and participations in LC
Disbursements, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Borrowers (in the case of all
other amounts) and (iii) in the case of any such assignment resulting from a
claim for compensation under Section 2.15 or payments required to be made
pursuant to Section 2.17, such assignment will result in a reduction in such
compensation or payments. A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling the Borrowers to require such
assignment and delegation cease to apply.

SECTION 2.20.  Joint and Several Liability of Borrowers.

(a)      Each of the Borrowers shall be jointly and severally liable hereunder
and under each of the other Credit Documents with respect to all Loans and all
other Obligations, regardless of which of the Borrowers actually receives the
proceeds of the Loans or the benefit of any other extensions of credit
hereunder, or the manner in which the Borrowers, the Administrative Agent, the
Lenders or the Issuing Bank accounts therefore in their respective books and
records. In furtherance and not in limitation of the foregoing, (i) each
Borrower’s obligations and liabilities with respect to proceeds of Loans which
it receives or Letters of Credit issued for its account, and related fees, costs
and expenses, and (ii) each Borrower’s obligations and liabilities arising as a
result of the joint and several liability of Borrowers hereunder with respect to
proceeds of Loans received by, or Letters of Credit issued for the account of,
any of the other Borrowers, together with the related fees, costs and expenses,
shall be separate and distinct obligations, both of which are primary
obligations of such Borrower. Neither the joint and several liability of, nor
any Liens which may be granted to the Administrative Agent under a Pledge
Document by, any of the Borrowers shall be impaired or released by (A) the
failure of the Administrative Agent, any Lender or the Issuing Bank, any
successors or assigns thereof, or any holder of any of the Obligations to assert
any claim or demand or to exercise or enforce any right, power or remedy against
any Borrower, any Subsidiary, any other Person, the Collateral or otherwise;
(B) any extension or renewal for any period (whether or not longer than the
original period) or exchange of any of the Obligations or the release or
compromise of any obligation of any nature of any Person with respect thereto;
(C) the surrender, release or exchange of all or any part of any property
(including without limitation the Collateral) securing payment, performance
and/or observance of any of the Obligations or the compromise or extension or
renewal for any period (whether or not longer than the original period) of any
obligations of any nature of any Person with respect to any such property;
(D) any action or inaction on the part of the

 

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Administrative Agent, any Lender or the Issuing Bank, or any other event or
condition with respect to any other Borrower, including any such action or
inaction or other event or condition, which might otherwise constitute a defense
available to, or a discharge of, such Borrower, or a guarantor or surety of or
for any or all of the Obligations; and (E) any other act, matter or thing (other
than indefeasible payment in full or performance of the Obligations) which would
or might, in the absence of this provision, operate to release, discharge or
otherwise prejudicially affect the obligations of such Borrower or any other
Borrower.

(b)      Notwithstanding any provision to the contrary contained herein or in
any other of the Credit Documents, to the extent the joint obligations of a
Borrower shall be adjudicated to be invalid or unenforceable for any reason
(including, without limitation, because of Section 548 of Chapter 11 of the
Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act,
Uniform Fraudulent Conveyance Act or similar statute or common law) then the
Obligations of each Borrower hereunder shall be limited to the maximum amount
that is permissible under applicable law (whether federal or state and
including, without limitation, the federal Bankruptcy Code).

(c)      To the extent that any Borrower shall make a payment under this
Section 2.20 of all or any of the Obligations (other than Loans the proceeds of
which were received by such Borrower) (a “Surety Payment”) that, taking into
account all other Surety Payments then previously or concurrently made by any
other Borrower, exceeds the amount that such Borrower would otherwise have paid
if each Borrower had paid the aggregate Obligations satisfied by such Surety
Payment in the same proportion that such Borrower’s “Allocable Amount” (as
defined below) (as determined immediately prior to such Surety Payment) bore to
the aggregate Allocable Amounts of each of the Borrowers as determined
immediately prior to the making of such Surety Payment, then, following
indefeasible payment in full in cash of the Obligations and termination of the
Commitments, such Borrower shall be entitled to receive contribution and
indemnification payments from, and be reimbursed by, each other Borrower for the
amount of such excess, pro rata based upon their respective Allocable Amounts in
effect immediately prior to such Surety Payment. As of any date of
determination, the “Allocable Amount” of any Borrower shall be equal to the
maximum amount of the claim that could then be recovered from such Borrower
under this Section 2.20 without rendering such claim voidable or avoidable under
Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state
Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar
statute or common law. This Section 2.20(c) is intended only to define the
relative rights of Borrowers and nothing set forth in this Section 2.20(c) is
intended to or shall impair the obligations of Borrowers, jointly and severally,
to pay any amounts as and when the same shall become due and payable in
accordance with the terms of this Agreement, including Section 2.20(a). Nothing
contained in this Section 2.20(c) shall limit the liability of any Borrower to
pay the Loans made directly or indirectly to that Borrower and accrued interest,
fees and expenses with respect thereto for which such Borrower shall be
primarily liable. The parties hereto acknowledge that the rights of contribution
and indemnification hereunder shall constitute assets of the Borrower to which
such contribution and indemnification is owing. The rights of the indemnifying
Borrowers against other Borrowers under this Section 2.20(c) shall be
exercisable only upon the full and indefeasible payment of the Obligations and
the termination of the Commitments.

 

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(d)      The liability of Borrowers under this Section 2.20 is in addition to
and shall be cumulative with all liabilities of each Borrower to the
Administrative Agent and Lenders under this Agreement and the other Credit
Documents to which such Borrower is a party, without any limitation as to
amount.

SECTION 2.21.  Additional Reserve Costs.   (a) For so long as any Lender is
required to comply with (a) the requirements of the Bank of England and/or the
Financial Services Authority (or, in either case, any other authority which
replaces all or any of its functions) or (b) the requirements of the European
Central Bank, in each case in respect of such Lender’s Eurocurrency Loans, such
Lender shall be entitled to require the Borrowers to pay, contemporaneously with
each payment of interest on each of such Loans, additional interest on such Loan
at a rate per annum equal to the Mandatory Costs Rate calculated in accordance
with the formula and in the manner set forth in Exhibit B hereto.

(b)      Any additional interest owed pursuant to paragraph (a) or (b) above
shall be determined by the applicable Lender, which determination shall be
conclusive absent manifest error, and notified to the Borrower Representative
(with a copy to the Administrative Agent) at least five Business Days before
each date on which interest is payable for the applicable Loan, and such
additional interest so notified to the Borrower Representative by such Lender
shall be payable to the Administrative Agent for the account of such Lender on
each date on which interest is payable for such Loan.

SECTION 2.22.  Defaulting Lenders.    Notwithstanding any provision of this
Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the
following provisions shall apply for so long as such Lender is a Defaulting
Lender:

(a)      fees shall cease to accrue on the unfunded portion of the Commitment of
such Defaulting Lender pursuant to Section 2.12;

(b)      the Commitment and Revolving Credit Exposure of such Defaulting Lender
shall not be included in determining whether all Lenders, the Required Lenders
or the Required Multicurrency Tranche Lenders have taken or may take any action
hereunder (including any consent to any amendment or waiver pursuant to
Section 9.02), provided that any waiver, amendment or modification requiring the
consent of all Lenders or each affected Lender which affects such Defaulting
Lender differently than other affected Lenders shall require the consent of such
Defaulting Lender;

(c)      if any LC Exposure exists at the time a Lender becomes a Defaulting
Lender then:

(i)       all or any part of such LC Exposure shall be reallocated among the
non-Defaulting Lenders in accordance with their respective Multicurrency Tranche
Revolving Credit Exposure Percentages but only to the extent (x) the sum of all
non-Defaulting Lenders’ Multicurrency Tranche Revolving Credit Exposures plus
such Defaulting Lender’s LC Exposure does not exceed the total of all
non-Defaulting Lenders’ Multicurrency Tranche Commitments and (y) the conditions
set forth in Section 4.02 are satisfied at such time; and

 

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(ii)       if the reallocation described in clause (i) above cannot, or can only
partially, be effected, the Borrowers shall within one Business Day following
notice by the Administrative Agent cash collateralize such Defaulting Lender’s
LC Exposure (after giving effect to any partial reallocation pursuant to clause
(i) above) in accordance with the procedures set forth in Section 2.06(j) for so
long as such LC Exposure is outstanding;

(iii)      if the Borrowers cash collateralize any portion of such Defaulting
Lender’s LC Exposure pursuant to Section 2.22(c), the Borrowers shall not be
required to pay any fees to such Defaulting Lender pursuant to Section 2.12(b)
with respect to such Defaulting Lender’s LC Exposure during the period such
Defaulting Lender’s LC Exposure is cash collateralized;

(iv)      if the LC Exposure of the non-Defaulting Lenders is reallocated
pursuant to Section 2.22(c), then the fees payable to the Lenders pursuant to
Section 2.12 shall be adjusted in accordance with such non-Defaulting Lenders’
Multicurrency Tranche Revolving Credit Exposure Percentages; or

(v)       if any Defaulting Lender’s LC Exposure is neither cash collateralized
nor reallocated pursuant to Section 2.22(c), then, without prejudice to any
rights or remedies of the Issuing Bank or any Lender hereunder, all facility
fees that otherwise would have been payable to such Defaulting Lender (solely
with respect to the portion of such Defaulting Lender’s Multicurrency Tranche
Commitment that was utilized by such LC Exposure) and letter of credit fees
payable under Section 2.12(b) with respect to such Defaulting Lender’s LC
Exposure shall be payable to the Issuing Bank until such LC Exposure is cash
collateralized and/or reallocated; and

(d)      so long as any Lender is a Defaulting Lender, the Issuing Bank shall
not be required to issue, amend or increase any Letter of Credit, unless it is
satisfied that the related exposure will be 100% covered by the Multicurrency
Tranche Commitments of the non-Defaulting Lenders and/or cash collateral will be
provided by the Borrowers in accordance with Section 2.22(c), and participating
interests in any such newly issued or increased Letter of Credit shall be
allocated among non-Defaulting Lenders in a manner consistent with
Section 2.22(c)(i) (and Defaulting Lenders shall not participate therein).

(e)      In the event that the Administrative Agent, the Borrowers and the
Issuing Bank each agrees that a Defaulting Lender has adequately remedied all
matters that caused such Lender to be a Defaulting Lender, then the LC Exposure
of the Lenders shall be readjusted to reflect the inclusion of such Lender’s
Multicurrency Tranche Commitment and on such date such Lender shall purchase at
par such of the Loans of the other Lenders as the Administrative Agent shall
determine may be necessary in order for such Lender to hold such Loans in
accordance with its Multicurrency Tranche Revolving Credit Exposure Percentage
and/or its Dollar Tranche Revolving Credit Exposure Percentage, as applicable.

 

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ARTICLE III

Representations and Warranties

Each of the Borrowers represents and warrants to the Administrative Agent and
the Lenders that:

SECTION 3.01.  Organization; Powers.  Each of the Parent and its Subsidiaries is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, has all requisite power and authority to carry
on its business as now conducted and, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, is qualified to do business in, and is in good
standing in, every jurisdiction where such qualification is required.

SECTION 3.02.  Authorization; Enforceability.  The Transactions are within the
Borrowers’ corporate powers and have been duly authorized by all necessary
corporate and, if required, stockholder action. This Agreement has been duly
executed and delivered by the Borrowers and constitutes a legal, valid and
binding obligation of the Borrowers, enforceable 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 3.03.  Governmental Approvals; No Conflicts.  The Transactions (a) do
not require any consent or approval of, registration or filing with, or any
other action by, any Governmental Authority, except such as have been obtained
or made and are in full force and effect, (b) will not violate any applicable
law or regulation or the charter, by-laws, memorandum or articles of association
or other organizational documents of the Parent or any of its Subsidiaries or
any order of any Governmental Authority, (c) will not violate or result in a
default under any indenture, agreement or other instrument binding upon the
Parent or any of its Subsidiaries or its assets, or give rise to a right
thereunder to require any payment to be made by the Parent or any of its
Subsidiaries, and (d) will not result in the creation or imposition of any Lien
on any asset of the Parent or any of its Subsidiaries except Liens created under
the Credit Documents.

SECTION 3.04.  Financial Condition; No Material Adverse Change.    (a)  The
Borrowers have heretofore furnished to the Lenders the consolidated balance
sheet and statements of income, stockholders equity and cash flows (including
consolidating statements and schedules) of the Parent (i) as of and for the
fiscal year ended December 31, 2007, reported on without qualification by
Ernst & Young LLP, independent public accountants, and (ii) as of and for the
fiscal quarter and the nine month period ended September 30, 2008, certified by
its chief financial officer. Such financial statements present fairly, in all
material respects, the financial position and results of operations and cash
flows of the Parent and its consolidated Subsidiaries as of such dates and for
such periods in accordance with GAAP, subject to year end audit adjustments and
the absence of footnotes in the case of the statements referred to in clause
(ii) above.

 

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(b)      Argo US has heretofore furnished to the Lenders its consolidated
balance sheet and statements of income, stockholders equity and cash flows as of
and for the fiscal year ended December 31, 2006, reported on without
qualification by Ernst & Young LLP, independent public accountants, certified by
its chief financial officer. Such financial statements present fairly, in all
material respects, the financial position and results of operations and cash
flows of Argo US and its subsidiaries as of such dates and for such periods in
accordance with GAAP.

(c)      Since December 31, 2007, there has been no material adverse change in
the business, assets, operations, prospects or condition, financial or
otherwise, of the Parent and its Subsidiaries, taken as a whole or of Argo US
and its subsidiaries, taken as a whole.

SECTION 3.05.  Properties.  (a) Each of the Parent and its Subsidiaries has good
title to, or valid leasehold interests in, all its real and personal property
material to its business, except for minor defects in title that do not
interfere with its ability to conduct its business as currently conducted or to
utilize such properties for their intended purposes.

(b)      Each of the Parent and its 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 Parent and its 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 3.06.  Litigation and Environmental Matters.  (a) There are no actions,
suits or proceedings by or before any arbitrator or Governmental Authority
pending against or, to the knowledge of the Borrowers, threatened against or
affecting the Parent or any of its Subsidiaries (i) 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 or (ii) that involve this Agreement or the
Transactions.

(b)      Except with respect to any matters that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, neither the Parent nor any of its Subsidiaries (i) has failed to comply
with any Environmental Law or to obtain, maintain or comply with any permit,
license or other approval required under any Environmental Law, (ii) has become
subject to any Environmental Liability, (iii) has received notice of any claim
with respect to any Environmental Liability or (iv) knows of any basis for any
Environmental Liability.

SECTION 3.07.  Compliance with Laws and Agreements.  Each of the Parent and its
Subsidiaries is in compliance with: (i) the charter, by-laws, memorandum or
articles of association or other organizational documents applicable to it,
(ii) all laws, regulations and orders of any Governmental Authority applicable
to it or its property and (iii) all indentures, mortgages, leases, contracts,
agreements and other instruments binding upon its or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. No Default has occurred or is
continuing. Neither the Parent nor any Subsidiary is a party to any agreement or
instrument or subject to any charter or other corporate restriction which could
reasonably be expected to have a Material Adverse Effect.

 

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SECTION 3.08.  Investment Company Status.  Neither the Parent nor any of its
Subsidiaries is an “investment company” as defined in, or subject to regulation
under, the Investment Company Act of 1940.

SECTION 3.09.  Taxes.  Each of the Parent and its Subsidiaries has timely filed
or caused to be filed all Tax returns and reports required to have been filed
and has paid or caused to be paid all Taxes required to have been paid by it,
except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which the Parent or such Subsidiary, as applicable, has set
aside on its books adequate reserves or (b) to the extent that the failure to do
so could not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.10.  ERISA.    No ERISA Event has occurred or is reasonably expected
to occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed by more
than $5,000,000 the fair market value of the assets of such Plan, and the
present value of all accumulated benefit obligations of all underfunded Plans
(based on the assumptions used for purposes of Statement of Financial Accounting
Standards No. 87) did not, as of the date of the most recent financial
statements reflecting such amounts, exceed by more than $5,000,000 the fair
market value of the assets of all such underfunded Plans.

SECTION 3.11.  Insurance Licenses.    Schedule 3.11 attached hereto (as said
Schedule 3.11 shall be revised or supplemented from time to time to reflect
withdrawals or changes in jurisdictions permitted by Section 6.03 or additional
jurisdictions set forth in the Annual Statements furnished pursuant to
Section 5.01(b)) lists all of the jurisdictions in which any Significant
Insurance Subsidiary holds active Licenses and is authorized to transact
insurance business. No such License is the subject of a proceeding for
suspension or revocation, there is no sustainable basis for such suspension or
revocation, and to any Borrower’s knowledge, no such suspension or revocation
has been threatened by any Governmental Authority. Schedule 3.11 also indicates
the type or types of insurance in which each such Insurance Subsidiary is
permitted to engage with respect to each License therein listed. None of the
Significant Insurance Subsidiaries transacts any insurance business, directly or
indirectly, in any state other than those enumerated in Schedule 3.11.

SECTION 3.12.  Subsidiaries.    As of the Effective Date, the Parent has no
Subsidiaries other than those Subsidiaries listed on Schedule 3.12. Schedule
3.12 correctly sets forth, as of the Effective Date, (i) the percentage
ownership (direct or indirect) of the Parent in each class of capital stock or
other equity of its Subsidiaries and also identifies the direct owner thereof,
(ii) the jurisdiction of organization of each such Subsidiary and (iii) with
respect to each such Subsidiary, whether such Subsidiary is a Significant
Insurance Subsidiary.

 

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SECTION 3.13.  Material Agreements.    Neither the Parent nor any Subsidiary is
in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement to which it is a
party, which default could reasonably be expected to have a Material Adverse
Effect.

SECTION 3.14.  Environmental Matters.    In the ordinary course of its business,
the officers of the Borrowers consider the effect of Environmental Laws on the
business of the Parent and its Subsidiaries, in the course of which they
identify and evaluate potential risks and liabilities accruing to the Borrowers
due to Environmental Laws. On the basis of this consideration, the Borrowers
have concluded that, other than laws affecting the insurance industry generally,
Environmental Laws cannot reasonably be expected to have a Material Adverse
Effect. Neither the Parent nor any Subsidiary has received any notice to the
effect that its operations are not in material compliance with any of the
requirements of applicable Environmental Laws or are the subject of any federal
or state investigation evaluating whether any remedial action is needed to
respond to a release of any toxic or hazardous waste or substance into the
environment, which non compliance or remedial action could reasonably be
expected to have a Material Adverse Effect.

SECTION 3.15.  Disclosure.    Each of the Borrowers has disclosed to the Lenders
all agreements, instruments and corporate or other restrictions to which it or
any of its Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. Neither the Information Memorandum nor any of the other
reports, financial statements, certificates or other information furnished by or
on behalf of the Borrowers to the Administrative Agent or any Lender in
connection with the negotiation of this Agreement or delivered hereunder (as
modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that, with respect to projected financial
information, the Borrowers represent only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time.

SECTION 3.16.  Solvency.    Each of the Borrowers is Solvent.

SECTION 3.17.  Foreign Pension Plan.    Each Foreign Pension Plan has been
maintained in substantial compliance with its terms and in substantial
compliance with the requirements of any and all applicable laws, statutes,
rules, regulations and orders (including all funding requirements and the
respective requirements of the governing documents for each such Foreign Pension
Plan) and has been maintained, where required, in good standing with applicable
regulatory authorities. All contributions required to be made with respect to a
Foreign Pension Plan have been timely made. Neither any Borrower nor any
Subsidiary has incurred any material obligation in connection with the
termination of or withdrawal from any Foreign Pension Plan. The present value of
the accrued benefit liabilities (whether or not vested) under each Foreign
Pension Plan, determined as of the end of the Parent’s most recently ended
fiscal year on the basis of actuarial assumptions, each of which is reasonable,
did not exceed the current value of the assets of such Foreign Pension Plan
allocable to such benefit liabilities. No actions or proceedings have been taken
or instituted to terminate or wind-up a Foreign Pension Plan.

 

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SECTION 3.18.  Purpose of Borrowings.    Each Borrowing made on the date hereof
is and each Borrowing hereafter shall be, in the good faith judgment of the
Borrowers at the time of such Borrowing, reasonably required to meet the
proximate general corporate purposes of the Borrowers (including repayment of
Argo US’s existing revolving credit facility for which JPMCB acts as
administrative agent) and will not result in the maintenance of liquidity at a
level in excess of the level the Borrowers, in their reasonable discretion,
shall determine is appropriate for the Borrowers in light of the Borrowers’
current circumstances and strategic plans as of the date of such Borrowing (but
in no event taking into account concerns the Borrowers may have regarding
funding risks associated with any Lender or Lenders).

ARTICLE IV

Conditions

SECTION 4.01.  Effective Date.    The obligations of the Lenders to make Loans
and of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective until the date on which each of the following conditions is satisfied
(or waived in accordance with Section 9.02):

(a)      The Administrative Agent (or its counsel) shall have received from each
party hereto either (i) a counterpart of this Agreement signed on behalf of such
party or (ii) written evidence satisfactory to the Administrative Agent (which
may include telecopy transmission of a signed signature page of this Agreement)
that such party has signed a counterpart of this Agreement.

(b)      The Administrative Agent shall have received a favorable written
opinion (addressed to the Administrative Agent and the Lenders and dated the
Effective Date) of (i) Dewey & LeBoeuf LLP, US counsel for the Borrowers,
(ii) Conyers Dill & Pearman, Bermuda counsel for the Borrowers, (iii) Dewey &
LeBoeuf, UK counsel for the Borrowers and (iv) in house counsel to Argo US, in
form and substance reasonably satisfactory to the Administrative Agent and
covering such other matters relating to the Borrowers, this Agreement or the
Transactions as the Administrative Agent shall reasonably request. The Borrowers
hereby request such counsel to deliver such opinion.

(c)      The Administrative Agent shall have received such documents and
certificates as the Administrative Agent or its counsel may reasonably request
relating to the organization, existence and good standing of the Borrowers, the
authorization of the Transactions and any other legal matters relating to the
Borrowers, this Agreement or the Transactions, all in form and substance
satisfactory to the Administrative Agent and its counsel.

(d)      The Administrative Agent shall have received a certificate relating to
the solvency of each of the Borrowers in form and substance reasonably
satisfactory to the Administrative Agent.

(e)      The Administrative Agent shall have received a certificate, dated the
Effective Date and signed by the President, a Vice President or a Financial
Officer of the Parent, confirming compliance with the conditions set forth in
paragraphs (a) and (b) of Section 4.02, stating the Rating of Argo US and of
each Insurance Subsidiary of Argo US and confirming that neither of the
circumstances described in Section 5.09 (a) or (b) exists.

 

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(f)       All obligations of Argo US under Argo US’s Credit Agreement dated
March 6, 2006 with JPMCB as administrative agent and the lenders party thereto,
shall have been or shall substantially contemporaneously be repaid in full and
such agreement shall be terminated.

(g)      The Administrative Agent shall have received projections for the Parent
and its Subsidiaries for the fiscal year ending December 31, 2009 satisfactory
to it in its sole discretion.

(h)      The Administrative Agent shall have received all fees and other amounts
due and payable on or prior to the Effective Date, including, to the extent
invoiced, reimbursement or payment of all out of pocket expenses required to be
reimbursed or paid by the Borrowers hereunder.

The Administrative Agent shall notify the Borrower Representative and the
Lenders of the Effective Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans and
of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.02) at or prior to 3:00 p.m., Chicago time, on March 1,
2009 (and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate at such time).

SECTION 4.02.  Each Credit Event.    The obligation of each Lender to make a
Loan on the occasion of any Borrowing, and of the Issuing Bank to issue, amend,
renew or extend any Letter of Credit, is subject to the satisfaction of the
following conditions:

(a)      The representations and warranties of the Borrowers set forth in this
Agreement shall be true and correct in all material respects (except that any
representation or warranty which is already qualified as to materiality or by
reference to Material Adverse Effect shall be true and correct in all respects)
on and as of the date of such Borrowing or the date of issuance, amendment,
renewal or extension of such Letter of Credit, as applicable, 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 (except that any representation or warranty which is
already qualified as to materiality or by reference to Material Adverse Effect
shall be true and correct in all respects) as of such earlier date).

(b)      At the time of and immediately after giving effect to such Borrowing or
the issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no Default shall have occurred and be continuing.

(c)      if the circumstances described in either Section 5.09(a) or 5.09(b)
shall exist, then the related pledges contemplated by Section 5.09 shall have
been consummated in accordance with the requirements of such Section.

 

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Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrowers on the date thereof as to the matters specified in paragraphs (a),
(b) and (c) of this Section.

ARTICLE V

Affirmative Covenants

Until the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder shall have been paid in
full and all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, each of the Borrowers covenants and
agrees with the Lenders that:

SECTION 5.01.  Financial Statements; Ratings Change and Other
Information.    The Borrowers will furnish to the Administrative Agent and each
Lender:

(a)      Except as provided in clause (k) of this Section 5.01, within 90 days
after the end of each fiscal year of the Parent, audited consolidated balance
sheet and related statements of operations, stockholders’ equity and cash flows
as of the end of and for such year (including unaudited consolidating balance
sheet and income statement schedules, as customarily prepared by the Parent, for
each of the Parent its consolidated Subsidiaries and Argo US and its
consolidated subsidiaries) for the Parent. The consolidated financial statements
will set forth in each case in comparative form the figures for the previous
fiscal year as available, all reported on by Ernst & Young LLP or other
independent public accountants of recognized national standing (without a “going
concern” or like qualification or exception and without any qualification or
exception as to the scope of such audit) to the effect that such consolidated
financial statements present fairly in all material respects the financial
condition and results of operations of the Parent and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied;

(b)      With respect to each Insurance Subsidiary domiciled in the United
States, as soon as available, and in any event (i) within 15 days after the date
required to be filed, a copy of each such Insurance Subsidiary’s statutory
Annual Statement for such year ended December 31, as filed with the insurance
department (or other equivalent insurance regulatory authority) of the state or
other jurisdiction of domicile of such Insurance Subsidiary, and (ii) by
June 15th of each year, a copy of each such Insurance Subsidiary’s audited or
unaudited, as the case may be, financial statements for such year ended
December 31, as filed with the insurance department (or other equivalent
insurance regulatory authority) of the state or other jurisdiction of domicile
of such Insurance Subsidiary. The financial statements referred to in this
Section 5.01(b)(ii) shall fairly present in all material respects the statutory
financial position of each such Insurance Subsidiary as of the dates therein
specified and the statutory results of operations and cash flow of each such
Insurance Subsidiary for the periods therein specified, and shall be prepared in
conformity with SAP. The financial statements referred to in sub-clause (ii) of
this Section 5.01(b) shall, if required, be accompanied by an audit report
thereon of Ernst & Young LLP or such other firm of independent auditors of
recognized national

 

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standing selected by the Parent that is reasonably satisfactory to the
Administrative Agent to the effect that such financial statements present
fairly, in all material respects, the financial position of each such Insurance
Subsidiary as of the end of the fiscal year being reported on in conformity with
SAP and that the examination of such auditors in connection with such financial
statements has been conducted in accordance with generally accepted auditing
standards and included such tests of the accounting records and such other
auditing procedures as said auditors deemed necessary in the circumstances.

(c)      within 60 days after the end of each of the first three fiscal quarters
of each fiscal year of the Parent, unaudited consolidated balance sheet and
related statements of operations, stockholders’ equity and cash flows as of the
end of and for such fiscal quarter and the then elapsed portion of the fiscal
year (including unaudited consolidating balance sheet and income statement
schedules, as customarily prepared by the Parent, for each of the Parent its
consolidated Subsidiaries and Argo US and its consolidated subsidiaries) for the
Parent. The consolidated financial statements will set forth in each case in
comparative form the figures for the corresponding period or periods of (or, in
the case of the balance sheet, as of the end of) the previous fiscal year as
available, all certified by a Financial Officer of the Parent or Argo US, as
applicable, as presenting fairly in all material respects the financial
condition and results of operations of the Parent and its consolidated
Subsidiaries on a consolidated basis and Argo US and its consolidated
subsidiaries in accordance with GAAP consistently applied, subject to normal
year-end audit adjustments and the absence of footnotes;

(d)      within five (5) days of any delivery of financial statements under
clause (a) or (c) above, a certificate of a Financial Officer of the Parent or
Lynn Geurin or Mark W. Haushill as a Financial Officer of Argo US (i) certifying
as to whether a Default has occurred and, if a Default has occurred, specifying
the details thereof and any action taken or proposed to be taken with respect
thereto, (ii) setting forth reasonably detailed calculations demonstrating
compliance with Sections 6.09, 6.10 and 6.11 (and, in the case of deliveries
under clause (a) above, Section 6.12) and (iii) stating whether any change in
GAAP or in the application thereof has occurred since the date of the audited
financial statements referred to in Section 3.04 and, if any such change has
occurred, specifying the effect of such change on the financial statements
accompanying such certificate;

(e)      [RESERVED];

(f)      promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by the
Parent 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, as the case may be;

(g)      promptly after S&P or any other nationally recognized rating agency
shall have announced a change in the Rating, written notice of such rating
change;

 

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(h)      promptly after A.M. Best, S&P or any other nationally recognized rating
agency shall have announced a change in its financial strength rating of an
Insurance Subsidiary or any Affiliate thereof, or shall have first assigned a
rating thereto, written notice of such changed or initial rating;

(i)       prompt notice of the creation of any Subsidiary or of any Person
becoming a Subsidiary;

(j)       as soon as practicable and in any event not later than sixty (60) days
after the beginning of each fiscal year of the Parent, commencing with the year
beginning January 1, 2009, a copy of the plan and forecast of the Parent and its
Subsidiaries for such fiscal year;

(k)      audited consolidated financial statements (including unaudited
consolidating balance sheet and income statement schedules, as customarily
prepared by the Parent, for each of the Parent its consolidated Subsidiaries and
Argo US and its consolidated subsidiaries) of the Parent for the fiscal year
ended December 31, 2008 by March 31, 2009 which financial statements shall be
satisfactory to the Required Lenders and not (as determined by the Required
Lenders in their sole discretion) reflect any material adverse change relative
to the condition of the Parent and its Subsidiaries or Argo US and its
subsidiaries as reflected in the most recent financial statements and other
written materials delivered by the Borrowers to the Administrative Agent prior
to the Effective Date;

(l)       concurrently with any delivery of financial statements under clause
(a) or (c) above, reports in form reasonably satisfactory to the Administrative
Agent detailing the portfolio of investments held by the Parent and each of its
Subsidiaries as of the end of their most recently completed fiscal quarter
certified by an officer of the Parent; and

(m)     promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of the Parent
or any Subsidiary, or compliance with the terms of this Agreement, as the
Administrative Agent or any Lender may reasonably request, including any
actuarial reports prepared regarding any Insurance Subsidiary.

SECTION 5.02.  Notices of Material Events.    The Borrowers will furnish to the
Administrative Agent and each Lender prompt written notice of the following:

(a)      the occurrence of any Default;

(b)      the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting any
Borrower or any Affiliate thereof that, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect;

(c)      the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to result in
liability of the Parent and its Subsidiaries in an aggregate amount exceeding
$5,000,000;

 

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(d)      the receipt by the Parent or any Subsidiary of any notice from any
Governmental Authority, trustee or actuary in relation to any non-compliance
with any laws, regulations and rules applicable to any Foreign Pension Plan,
including funding requirements and the respective requirements of the governing
documents for such Foreign Pension Plan, which could reasonably be expected to
result in liability of the Parent and its Subsidiaries in an aggregate amount
which, either alone or with any other such events which have occurred, exceeds
$5,000,000;

(e)      (i) the receipt by any Borrower or any Insurance Subsidiary of any
notice from any Governmental Authority of the expiration without renewal,
revocation or suspension of, or the institution of any proceedings to revoke or
suspend, any License now or hereafter held by any Insurance Subsidiary which is
required to conduct insurance business in compliance with all applicable laws
and regulations, other than such expiration, revocation or suspension which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect, (ii) the receipt of any notice from any Governmental
Authority of the institution of any disciplinary proceedings against or in
respect of any Insurance Subsidiary, or the issuance of any order, the taking of
any action or any request for an extraordinary audit for cause by any
Governmental Authority which, if adversely determined, could reasonably be
expected to have a Material Adverse Effect or (iii) any judicial or
administrative order limiting or controlling the insurance business of any
Insurance Subsidiary (and not the insurance industry generally) which has been
issued or adopted and which could reasonably be expected to have a Material
Adverse Effect; and

(f)      any other development that results in, or could reasonably be expected
to result in, a Material Adverse Effect.

Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Parent setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.

SECTION 5.03.  Existence; Conduct of Business.    The Borrowers will, and will
cause each Subsidiary to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 6.03.

SECTION 5.04.  Payment of Obligations.    The Borrowers will, and will cause
each Subsidiary to, pay its obligations, including Tax liabilities, that, if not
paid, could result in a Material Adverse Effect before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (b) such Borrower or
such Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and (c) the failure to make payment pending such
contest could not reasonably be expected to result in a Material Adverse Effect.

 

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SECTION 5.05.  Maintenance of Properties; Insurance.    The Borrowers will, and
will cause each Subsidiary to, (a) keep and maintain all property material to
the conduct of its business in good working order and condition, ordinary wear
and tear excepted, and (b) maintain, with financially sound and reputable
insurance companies, insurance in such amounts and against such risks as are
customarily maintained by companies engaged in the same or similar businesses
operating in the same or similar locations.

SECTION 5.06.  Books and Records; Inspection Rights.    The Borrowers will, and
will cause each Subsidiary to, keep proper books of record and account in which
full, true and correct entries are made of all dealings and transactions in
relation to its business and activities. The Borrowers will, and will cause each
Subsidiary to, permit any representatives designated by the Administrative Agent
or any Lender, upon reasonable prior notice, to visit and inspect its
properties, to examine and make extracts from its books and records, and to
discuss its affairs, finances and condition with its officers and independent
accountants, all at such reasonable times and as often as reasonably requested.

SECTION 5.07.  Compliance with Laws.    The Borrowers will, and will cause each
Subsidiary to, comply with all laws, rules, regulations and orders of any
Governmental Authority applicable to it or its property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.

SECTION 5.08.  Use of Proceeds and Letters of Credit.    The proceeds of the
Loans will be used only for general corporate purposes, including working
capital and acquisitions permitted hereby. No part of the proceeds of any Loan
will be used, whether directly or indirectly, for any purpose that entails a
violation of any of the Regulations of the Board, including Regulations T, U and
X. Letters of Credit shall be used solely to support the ordinary course
obligations of the Parent and its Subsidiaries.

SECTION 5.09.  Covenant to Pledge.    In the event that at any time (a) Argo US
shall fail to maintain a Rating of at least BBB- or (b) any Insurance Subsidiary
of Argo US shall fail to maintain a Rating of at least A-, the Borrowers shall
within ten (10) Business Days of such failure (or such longer period of time to
which the Administrative Agent may agree) promptly (but subject to any required
regulatory filings or approvals) pledge or cause to be pledged to the
Administrative Agent as collateral for each of their obligations under the
Credit Documents (x) all of the equity interests in Argo US’s first tier
subsidiaries and all lower tier subsidiaries of Argo US which are not directly
or indirectly owned by an Insurance Subsidiary (collectively, the “Pledge
Subsidiaries”) and (y) all of the Indebtedness owing by any Pledge Subsidiary to
the Borrowers or any Pledge Subsidiary which is not an Insurance Subsidiary;
provided that no such pledge of Indebtedness will be required if such pledge may
reasonably be expected to result in adverse tax consequences to any Borrower.
Such pledge shall be effected pursuant to documentation reasonably satisfactory
to the Administrative Agent. In connection with such pledge, the Borrowers shall
deliver or cause to be delivered to the Administrative Agent such legal
opinions, resolutions, certificates and other documents as the Administrative
Agent may reasonably request.

SECTION 5.10.  Insurance Licenses and Permits.    The Borrowers shall cause each
of the Insurance Subsidiaries to hold and maintain certificates of authority and
any other required insurance licenses in each state or other jurisdiction in
which such Insurance Subsidiary conducts an insurance business.

 

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SECTION 5.11.  Clean Up Period.    After the Effective Date and prior to the
Maturity Date, the Borrowers shall cause there to be a period of thirty
(30) consecutive days during which the amount of aggregate outstanding Revolving
Loans on each day is zero. The Borrowers shall be deemed to have failed to
comply with this covenant on the first day upon which, taking into account the
number of days left until the Maturity Date, it is impossible for the Borrowers
to cause such a thirty (30) consecutive day period to exist prior to the
Maturity Date.

ARTICLE VI

Negative Covenants

Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder have been paid in full and
all Letters of Credit have expired or terminated and all LC Disbursements shall
have been reimbursed, each of the Borrowers covenants and agrees with the
Lenders that:

SECTION 6.01.  Indebtedness.    The Borrowers will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Indebtedness,
except:

(a)      Indebtedness created hereunder;

(b)      Indebtedness existing on the date hereof and set forth in Schedule 6.01
and extensions, renewals and replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof, including any Subordinated
Indebtedness that may be incurred pursuant to the proviso to the last sentence
of Section 6.16;

(c)      Indebtedness outstanding under the Trust Preferred Securities in an
aggregate principal amount not to exceed $311,334,000 at any time, together with
all guaranty obligations owing in respect thereof;

(d)      Other Indebtedness not otherwise permitted under this Section 6.01, of
the same or similar character as the Trust Preferred Securities together with
all guaranty obligations owing in respect thereof and constituting Subordinated
Indebtedness, so long as no Default shall arise hereunder upon the incurrence of
such Indebtedness, including without limitation a Default arising under
Section 6.10, and a compliance certificate, meeting the requirements of
Section 5.01(d) and showing the effect of the incurrence of such Indebtedness,
shall have been delivered to the Administrative Agent at least 5 days prior to
the incurrence of such Indebtedness;

(e)      Indebtedness of any Borrower to any other Borrower, of any Borrower to
any Subsidiary and of any Subsidiary to any Borrower or any other Subsidiary;
provided that any such Indebtedness of a Borrower is unsecured and, at all times
more than five Business Days after the date hereof, is subordinated to the
obligations of the Borrowers hereunder upon terms satisfactory to the
Administrative Agent; provided further, that this

 

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clause (e) shall not permit the Parent or any Subsidiary (other than Argo US or
any subsidiary thereof) to incur Indebtedness owing to Argo US or any subsidiary
thereof upon or during the continuance of a Default;

(f)      Subordinated Indebtedness of any of the Borrowers subordinated on terms
satisfactory to the Administrative Agent to the Borrowers’ obligations arising
hereunder or under any note issued pursuant hereto; provided that all such
Indebtedness shall mature at least ninety one days after the Maturity Date and
shall otherwise be on terms and conditions reasonably satisfactory to the
Administrative Agent;

(g)     Indebtedness (including Permitted Purchase Money Indebtedness) secured
by Liens, in a principal amount outstanding not to exceed $5,000,000 in the
aggregate at any time;

(h)     deferred purchase obligations in respect of Permitted Acquisitions which
are in the nature of “earn out” payments or similar payments relating to the
performance of the acquired entity or business;

(i)      Issuance of collateralized letters of credit or collateralized trusts
in the ordinary course of business of reinsurance operations;

(j)      Indebtedness permitted pursuant to Section 6.05; and

(k)     Indebtedness not otherwise permitted under this Section 6.01 in a
principal amount outstanding not to exceed $5,000,000 in the aggregate at any
time.

SECTION 6.02.  Liens.    The Borrowers will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof,
except:

(a)      Permitted Encumbrances;

(b)      any Lien on any property or asset of the Borrowers or any Subsidiary
existing on the date hereof and set forth in Schedule 6.02; provided that
(i) such Lien shall not apply to any other property or asset of the Borrowers or
any Subsidiary and (ii) such Lien shall secure only those obligations which it
secures on the date hereof and extensions, renewals and replacements thereof
that do not increase the outstanding principal amount thereof;

(c)      any Lien existing on any property or asset prior to the acquisition
thereof by a Borrower or any Subsidiary or existing on any property or asset of
any Person that becomes a Subsidiary after the date hereof prior to the time
such Person becomes a Subsidiary; provided that (i) such Lien is not created in
contemplation of or in connection with such acquisition or such Person becoming
a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other
property or assets of the Borrowers or any Subsidiary and (iii) such Lien shall
secure only those obligations which it secures on the date of such acquisition
or the date such Person becomes a Subsidiary, as the case may be

 

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(d)      Liens securing Indebtedness permitted pursuant to Section 6.01(g);

(e)      Liens on fixed or capital assets acquired, constructed or improved by a
Borrower or any Subsidiary; provided that (i) such security interests secure
Indebtedness permitted by clause (e) of Section 6.01, (ii) such security
interests and the Indebtedness secured thereby are incurred prior to or within
90 days after such acquisition or the completion of such construction or
improvement, (iii) the Indebtedness secured thereby does not exceed the cost of
acquiring, constructing or improving such fixed or capital assets and (iv) such
security interests shall not apply to any other property or assets of the
Borrowers or any Subsidiary; and

(f)       Liens arising out of the deposit by an Insurance Subsidiary of its
cash or securities into a reinsurance trust in the ordinary course of business
(including in connection with a Permitted Acquisition) on terms consistent with
market practices.

SECTION 6.03.  Fundamental Changes.    (a) The Borrowers will not, and will not
permit any Subsidiary to, merge into or consolidate with any other Person, or
permit any other Person to merge into or consolidate with it, or liquidate or
dissolve, except that, if at the time thereof and immediately after giving
effect thereto no Default shall have occurred and be continuing (i) any
Subsidiary may merge into a Borrower in a transaction in which such Borrower is
the surviving corporation, (ii) any Subsidiary (other than a Borrower) may merge
into any Subsidiary in a transaction in which the surviving entity is a
Subsidiary, and (iii) any Subsidiary (other than a Borrower) may liquidate or
dissolve if the Borrowers determine in good faith that such liquidation or
dissolution is in the best interests of the Borrowers and is not materially
disadvantageous to the Lenders; provided that any such merger involving a Person
that is not a wholly owned Subsidiary immediately prior to such merger shall not
be permitted unless also permitted by Section 6.04.

(b)      The Borrowers will not, nor will they permit any Subsidiary to, make
any Asset Disposition except for (i) Asset Dispositions expressly permitted by
Sections 6.04, 6.06 or 6.07 and (ii) other Asset Dispositions of property that,
together with all other property of the Borrowers and the Subsidiaries
previously leased, sold or disposed of in Asset Dispositions made pursuant to
Section 6.03(b) during the twelve-month period ending with the month in which
any such lease, sale or other disposition occurs, do not constitute a
Substantial Portion of the property of the Parent and its Subsidiaries; provided
that under no circumstances shall the Equity Interests in a Borrower be included
in a permitted Asset Disposition.

(c)      The Borrowers will not, and will not permit any Subsidiary to, engage
to any material extent in any business other than businesses of the type
conducted by the Parent and its Subsidiaries on the date of execution of this
Agreement and businesses reasonably related thereto.

SECTION 6.04.  Investments, Loans, Advances, Guarantees and Acquisitions.    The
Borrowers will not, and will not permit any Subsidiary to, purchase, hold or
acquire (including pursuant to any merger with any Person that was not a
Wholly-Owned Subsidiary prior to such merger) any capital stock, evidences of
indebtedness or other securities (including any option, warrant or other right
to acquire any of the foregoing) of, make or permit to exist any

 

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loans or advances to, Guarantee any obligations of, or make or permit to exist
any investment or any other interest in, any other Person, or purchase or
otherwise acquire (in one transaction or a series of transactions) any assets of
any other Person constituting a business unit, except:

(a)      investments complying with the terms of the Argo Investment Policy;

(b)      investments by any Subsidiary in the capital stock of a Subsidiary;

(c)      loans or advances made by any Borrower to any other Borrower, by any
Borrower to any Subsidiary or made by any Subsidiary to any Borrower or any
other Subsidiary to the extent the corresponding Indebtedness is permitted by
Section 6.01(e);

(d)      Guarantees constituting Indebtedness permitted by Section 6.01;

(e)      subject to the provisions of this Section 6.04 and the requirements
contained in the definition of Permitted Acquisition, the Parent and its
Wholly-Owned Subsidiaries may from time to time effect Permitted Acquisitions in
an aggregate amount not to exceed $125,000,000, so long as: (i) no Default shall
have occurred and be continuing at the time of the consummation of the proposed
Permitted Acquisition or immediately after giving effect thereto; and (ii) if
the proposed Permitted Acquisition would cause the aggregate amount of Permitted
Acquisitions consummated after the date hereof to exceed $20,000,000, the Argo
US Rating shall be at least BBB- both immediately before the consummation of the
proposed Permitted Acquisition and immediately after giving effect thereto (and
after giving effect to any adjustment of the Argo US Rating associated with the
consummation of such proposed Permitted Acquisition); and

(f)       other investments (valued at initial cost) at no time aggregating more
than $10,000,000.

SECTION 6.05.  Swap Agreements.    The Borrowers will not, and will not permit
any Subsidiary to, enter into any Swap Agreement, except, after five
(5) Business Days prior notice to the Administrative Agent, (a) Swap Agreements
entered into to hedge or mitigate risks to which a Borrower or any Subsidiary
has actual exposure (other than those in respect of Equity Interests of a
Borrower or any of its Subsidiaries), and (b) Swap Agreements entered into in
order to effectively cap, collar or exchange interest rates (from fixed to
floating rates, from one floating rate to another floating rate or otherwise)
with respect to any interest-bearing liability or investment of a Borrower or
any Subsidiary.

SECTION 6.06.  Restricted Payments.    The Borrowers will not, and will not
permit any Subsidiary to, declare, pay or make, or agree to declare, pay or
make, directly or indirectly, any Restricted Payment, except:

(a)      the Parent may pay publicly announced and regularly scheduled dividends
on its issued and outstanding common stock that is traded publicly on a national
securities exchange; provided, however, that no dividend shall be permitted
under this clause (a) upon the occurrence and during the continuance of a
Default;

(b)      the Parent may pay dividends payable solely in its common stock;

 

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(c)      the Borrowers and any Subsidiary may make any scheduled payment
required in connection with the Trust Preferred Securities permitted under
Sections 6.01(c) and (d); provided, however, that no dividend shall be permitted
under this clause (b) upon the occurrence and during the continuance of a
Default; and

(d)      any Subsidiary may declare and pay dividends or make distributions to
any of the Borrowers or to a Wholly-Owned Subsidiary provided, however, that
Argo US shall not make any Restricted Payment pursuant to this clause (d) upon
the occurrence and during the continuance of a Default or if a Default would
result therefrom.

SECTION 6.07.  Transactions with Affiliates.    The Borrowers will not, and will
not permit any Subsidiary to, sell, lease or otherwise transfer any property or
assets to, or purchase, lease or otherwise acquire any property or assets from,
or otherwise engage in any other transactions with, any of its Affiliates,
except (a) in the ordinary course of business at prices and on terms and
conditions not less favorable to such Borrower or such Subsidiary than could be
obtained on an arm’s-length basis from unrelated third parties, (b) transactions
between or among the Parent and its Wholly Owned Subsidiaries not involving any
other Affiliate, (c) any Restricted Payment permitted by Section 6.06,
(d) pursuant to the terms of the Intercompany Loan Agreement and (e) as
permitted by Section 6.04.

SECTION 6.08.  Restrictive Agreements.    The Borrowers will not, and will not
permit any Subsidiary to, directly or indirectly, enter into, incur or permit to
exist any agreement or other arrangement that prohibits, restricts or imposes
any condition upon (a) the ability of the Borrowers or any Subsidiary to create,
incur or permit to exist any Lien upon any of its property or assets to secure
the obligations of the Borrowers hereunder or under any guaranty thereof, or
(b) the ability of any Subsidiary to pay dividends or other distributions with
respect to any shares of its capital stock or to make or repay loans or advances
to the Borrowers or any other Subsidiary or to Guarantee Indebtedness of the
Borrowers or any other Subsidiary; provided that (i) the foregoing shall not
apply to restrictions and conditions imposed by law or by this Agreement,
(ii) the foregoing shall not apply to restrictions and conditions existing on
the date hereof identified on Schedule 6.08 (but shall apply to any extension or
renewal of, or any amendment or modification expanding the scope of, any such
restriction or condition) or to restrictions and conditions similar to those set
forth in the Trust Preferred Securities upon the ability of special purpose
trust Subsidiaries and other entities to pay dividends or make distributions
related to Indebtedness of the same or similar character as the Trust Preferred
Securities, (iii) the foregoing shall not apply to customary restrictions and
conditions contained in agreements relating to the sale of a Subsidiary or
assets pending such sale, provided that such restrictions and conditions apply
only to the Subsidiary or assets to be sold and such sale is permitted
hereunder, (iv) clause (a) 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 and (v) clause (a) of the foregoing shall
not apply to customary provisions in leases and other contracts restricting the
assignment thereof.

SECTION 6.09.  Minimum Interest Coverage Ratio.    The Borrowers will not permit
the Interest Coverage Ratio as of the end of any fiscal quarter of the Parent to
be less than 2.5:1.00.

 

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SECTION 6.10.  Maximum Leverage Ratio.    The Borrowers will not permit the
Leverage Ratio to exceed .35 to 1.00 at any time.

SECTION 6.11.  Tangible Net Worth.    Argo US will not permit at any time its
Tangible Net Worth to be less than the sum of (a) $626,300,000 plus (b) 75% of
the positive net income of Argo US and its subsidiaries on a consolidated basis
for each fiscal quarter ending after December 31, 2008.

SECTION 6.12.  Risk Based Capital Ratio.    The Borrowers will not permit any of
the Specified Insurance Subsidiaries to have a Risk Based Capital Ratio of less
than 300% as of December 31 of any calendar year from and including December 31,
2008.

SECTION 6.13.  Fiscal Year.    The Borrowers shall not, nor shall it permit any
Subsidiary to, change its fiscal year to end on any date other than December 31
of each year.

SECTION 6.14.  Sale and Leaseback Transactions.    The Borrowers will not, and
will not permit any Subsidiary to, enter into or suffer to exist any Sale and
Leaseback Transaction.

SECTION 6.15.  Rentals.    The Parent will not, nor will it permit any
Subsidiary to, create, incur or suffer to exist obligations for operating lease
rental expense in respect of any fiscal year of the Parent in excess of
$20,000,000 in the aggregate for the Parent and its Subsidiaries.

SECTION 6.16.  Subordinated Indebtedness; Other Indebtedness and
Payments.    The Borrowers will not, and will not permit any Subsidiary to, make
any amendment or modification to the indenture, note or other agreement
evidencing or governing any Subordinated Indebtedness or directly or indirectly
voluntarily prepay, defease or in substance defease, purchase, redeem, retire or
otherwise acquire, any Subordinated Indebtedness. The Borrowers will not, and
will not permit any Subsidiary to, directly or indirectly voluntarily prepay,
defease or in substance defease, purchase, redeem, retire or otherwise acquire,
any single Indebtedness that constitutes a Material Indebtedness or collective
Indebtedness that constitutes Material Indebtedness or any Subordinated
Indebtedness prior to the date when due (other than its obligations hereunder
and Indebtedness which would be classified as short term debt at the time of
determination in accordance with GAAP); provided, however, that the Borrowers
shall be allowed at any time to voluntarily refinance any Subordinated
Indebtedness with new Subordinated Indebtedness so long as (a) the principal
amount of such new Indebtedness does not exceed the outstanding principal amount
of the Subordinated Indebtedness being refinanced; (b) such Indebtedness is on
terms (other than pricing), taken as a whole, no less favorable to the Borrowers
than the terms of the Subordinated Indebtedness being refinanced; (c) such
Indebtedness is subordinated to the applicable Obligations at least to the same
extent as the Subordinated Indebtedness being refinanced and (d) such
Indebtedness has a final scheduled maturity at least six months after the
Maturity Date and has scheduled payments prior to the Maturity Date not in
excess of the scheduled payments under the Subordinated Indebtedness being
refinanced.

 

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ARTICLE VII

Events of Default

If any of the following events (“Events of Default”) shall occur:

(a)      any of the Borrowers shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement or any cash
collateral amount due pursuant to Section 2.06(j) when and as the same shall
become due and payable (including under Section 2.20 hereof but excluding under
Section 2.04 hereof), whether at the due date thereof or at a date fixed for
prepayment thereof or otherwise;

(b)      any of the Borrowers shall fail to pay any interest on any Loan or any
fee or any other amount (other than an amount referred to in clause (a) of this
Article) payable under this Agreement, when and as the same shall become due and
payable, and such failure shall continue unremedied for a period of three
Business Days;

(c)      any representation or warranty made or deemed made by or on behalf of
the Borrowers or any Subsidiary in or in connection with this Agreement or any
amendment or modification hereof or waiver hereunder, or in any report,
certificate, financial statement or other document furnished pursuant to or in
connection with this Agreement or any amendment or modification hereof or waiver
hereunder, shall prove to have been incorrect when made or deemed made;

(d)      the Borrowers shall fail to observe or perform any covenant, condition
or agreement contained in Sections 5.01(k), 5.02, 5.03 (with respect to any
Borrower’s existence), 5.08, 5.09, 5.11 or in Article VI;

(e)      the Borrowers shall fail to observe or perform any covenant, condition
or agreement contained in this Agreement (other than those specified in clause
(a), (b) or (d) of this Article), and such failure shall continue unremedied for
a period of 30 days after notice thereof from the Administrative Agent to the
Borrower Representative (which notice will be given at the request of any
Lender);

(f)       any of the Borrowers or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of any
Material Indebtedness, when and as the same shall become due and payable;

(g)      any event or condition occurs that results in any Material Indebtedness
or any Trust Preferred Security 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 Material Indebtedness or
Trust Preferred Security Indebtedness or any trustee or agent on its or their
behalf to cause any Material Indebtedness or Trust Preferred Security
Indebtedness to become due, or to require the prepayment, repurchase, redemption
or defeasance thereof, prior to its scheduled maturity; provided that this
clause (g) 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;

 

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(h)      an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, winding-up, administration,
reorganization or other relief in respect of any of the Borrowers or any
Subsidiary or its debts, or of a substantial part of its assets, under any
Federal, state or foreign bankruptcy, insolvency, administration, receivership
or similar law now or hereafter in effect or (ii) the appointment of a
liquidator, receiver, trustee, custodian, sequestrator, conservator,
administrator, administrative receiver or similar official for any of the
Borrowers or any Subsidiary or for a substantial part of its assets, and, in any
such case, 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;

(i)       any of the Borrowers or any Subsidiary shall (i) voluntarily commence
any proceeding or file any petition seeking liquidation, winding-up,
administration, reorganization or other relief under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or petition described in clause (h) of this
Article, (iii) apply for or consent to the appointment of a liquidator,
receiver, trustee, custodian, sequestrator, conservator, administrator or
similar official for any of the Borrowers or any Subsidiary or for a substantial
part of its assets, (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 or (vi) take any action for the purpose of
effecting any of the foregoing;

(j)       any Borrower or any Subsidiary shall become unable, admit in writing
its inability or fail generally to pay its debts as they become due;

(k)      one or more judgments for the payment of money in an aggregate amount
in excess of $5,000,000 shall be rendered against any 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 attach or levy
upon any assets of any Borrower or any Subsidiary to enforce any such judgment;

(l)       an ERISA Event or circumstance in respect of any Foreign Pension Plan
shall have occurred that, in the opinion of the Required Lenders, when taken
together with all other ERISA Events and such circumstances that have occurred,
could reasonably be expected to result in a Material Adverse Effect;

(m)     a Change in Control shall occur;

(n)      the AM Best Financial Strength Rating of any Significant Insurance
Subsidiary shall be less than B++ (or any such Significant Insurance Subsidiary
shall have no AM Best Financial Strength Rating) and such event shall continue
unremedied for a period of five (5) Business Days;

(o)      any Pledge Document shall, after its delivery, cease to be in full
force and effect, or shall cease to give the Administrative Agent for the
benefit of the Lenders the

 

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Liens, rights, powers and privileges purported to be created thereby, or any
Borrower or any Subsidiary shall default in the due performance or observance of
any term, covenant or agreement on its part to be performed or observed pursuant
to any such Pledge Document and such default shall continue beyond the period of
grace, if any, specifically applicable thereto pursuant to the terms of such
Pledge Document;

(p)      obligations owing in connection with the Trust Preferred Securities or
Indebtedness incurred pursuant to Section 6.01(h) shall at any time and for any
reason cease to be fully subordinated to the Obligations outstanding in
connection with the Credit Documents;

(q)      any governmental authority revokes or fails to renew any material
license, permit or franchise of any Borrower or any Significant Insurance
Subsidiary, or any Borrower or any Significant Insurance Subsidiary for any
reason loses any material license, permit or franchise, or any Borrower or any
Significant Insurance Subsidiary suffers the imposition of any restraining
order, escrow, suspension or impound of funds in connection with any proceeding
(judicial or administrative) with respect to any material license, permit or
franchise, which could reasonably be expected to result in losses or liability
of the Borrowers or any of the Significant Insurance Subsidiaries, individually
or in the aggregate, in excess of $5,000,000 and such event shall continue
unremedied for a period of five (5) Business Days;

then, and in every such event (other than an event with respect to any of the
Borrowers described in clause (h) or (i) of this Article), and at any time
thereafter during the continuance of such event, the Administrative Agent may,
and at the request of the Required Lenders shall, by notice to the Borrower
Representative, take either or both of the following actions, at the same or
different times: (i) terminate the Commitments, and thereupon the Commitments
shall terminate immediately, and (ii) declare the Loans then outstanding to be
due and payable in whole (or in part, in which case any principal not so
declared to be due and payable may thereafter be declared to be due and
payable), and thereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and all fees and other
obligations of the Borrowers accrued hereunder, shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrowers; and in case of any event with
respect to any of the Borrowers described in clause (h) or (i) of this Article,
the Commitments shall automatically terminate and the principal of the Loans
then outstanding, together with accrued interest thereon and all fees and other
obligations of the Borrowers accrued hereunder, shall automatically become due
and payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrowers.

ARTICLE VIII

The Administrative Agent

Each of the Lenders and the Issuing Bank hereby irrevocably appoints the
Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise such powers as are delegated to
the Administrative Agent by the terms hereof, together with such actions and
powers as are reasonably incidental thereto.

 

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The bank serving as the Administrative 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 the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with the Borrowers or any Subsidiary or other Affiliate
thereof as if it were not the Administrative Agent hereunder.

The Administrative Agent shall not have any duties or obligations except those
expressly set forth herein. Without limiting the generality of the foregoing,
(a) the Administrative Agent shall not be subject to any fiduciary or other
implied duties, regardless of whether a Default has occurred and is continuing,
(b) the Administrative Agent shall not have any duty to take any discretionary
action or exercise any discretionary powers, except discretionary rights and
powers expressly contemplated hereby that the Administrative 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 9.02), and (c) except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Borrowers or
any of its Subsidiaries that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not 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 9.02) or in the absence of its own gross negligence or
willful misconduct. The Administrative Agent shall be deemed not to have
knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower Representative or a Lender, and the
Administrative Agent shall not be responsible for or have any duty to ascertain
or inquire into (i) any statement, warranty or representation made in or in
connection with this Agreement, (ii) the contents of any certificate, report or
other document delivered hereunder or in connection herewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein, (iv) the validity, enforceability, effectiveness or
genuineness of this Agreement or any other agreement, instrument or document, or
(v) the satisfaction of any condition set forth in Article IV or elsewhere
herein, other than to confirm receipt of items expressly required to be
delivered to the Administrative Agent.

The Administrative 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. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to be made by the proper Person, and shall not incur any liability for
relying thereon. The Administrative Agent may consult with legal counsel (who
may be counsel for the Borrowers), 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.

The Administrative 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 the
Administrative Agent. The Administrative Agent and any such sub-agent may
perform any and all its duties and exercise its rights and powers through their
respective Related Parties. The exculpatory

 

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provisions of the preceding paragraphs shall apply to any such sub-agent and to
the Related Parties of the Administrative 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
Administrative Agent.

Subject to the appointment and acceptance of a successor Administrative Agent as
provided in this paragraph, the Administrative Agent may resign at any time by
notifying the Lenders, the Issuing Bank and the Borrowers. Upon any such
resignation, the Required Lenders shall have the right, in consultation with the
Borrowers, to appoint a successor. If no successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation, then
the retiring Administrative Agent may, on behalf of the Lenders and the Issuing
Bank, appoint a successor Administrative 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 Administrative Agent hereunder by a successor,
such successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. The fees payable by the Borrowers to a successor Administrative Agent
shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrowers and such successor. After the Administrative Agent’s
resignation hereunder, the provisions of this Article and Section 9.03 shall
continue in effect for the benefit of such retiring Administrative 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 it was acting as Administrative
Agent.

Each Lender acknowledges that it has, independently and without reliance upon
the Administrative Agent or any other 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 Administrative Agent or any
other 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, any related agreement or any
document furnished hereunder or thereunder.

The Administrative Agent shall be permitted from time to time to designate one
of its Affiliates to perform the duties to be performed by the Administrative
Agent hereunder with respect to Loans and Borrowings denominated in Foreign
Currencies. The provisions of this Article VIII shall apply to any such
Affiliate mutatis mutandis.

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) below), all 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 telecopy, as follows:

(i)      if to any Borrower, to it c/o Argo Group US, Inc., 10101 Reunion Place,
Suite 500, San Antonio, Texas 78216, Attention of Jay Bullock, (Telecopy No.
(210) 377-2637); with a copy to Lynn Geurin, (Telecopy No. (210) 344-5852 and
Craig Comeaux, (Telecopy No. (210) 321-8409);

 

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(ii)     if to the Administrative Agent, to JPMorgan Chase Bank, N.A., Loan and
Agency Services Group, 10 South Dearborn, Floor 7, Chicago, Illinois 60603,
Attention of LaDesiree Williams (Telecopy No. (312) 732-4864), with a copy to
JPMorgan Chase Bank, N.A., 1020 NE Loop 410, 1st Floor, San Antonio, Texas
78209, Attention of Jennifer Stewart (Telecopy No. (210) 829-6109);

(iii)    if to the Administrative Agent for Eurocurrency Loans in Foreign
Currencies, to J.P. Morgan Europe Limited, 125 London Wall, London EC1W 2JD,
Attention of Ching Loh/The Manager, Telecopy No. +44(0) 207 777 2360);

(iv)    if to the Issuing Bank, to it at JPMorgan Chase Bank, N.A., 420 West Van
Buren Street, Floor 02, Chicago, IL 60606-3534, Attention of LaDesiree Williams,
(Telecopy No. (312) 732-4864); and

(v)     if to any other Lender, to it at its address (or telecopy number) set
forth in its Administrative Questionnaire.

(b)    Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by the Administrative Agent; provided that the foregoing shall not
apply to notices pursuant to Article II unless otherwise agreed by the
Administrative Agent and the applicable Lender. The Administrative Agent or the
Borrower Representative 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.

(c)    Any party hereto may change its address or telecopy number for notices
and other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.

SECTION 9.02.  Waivers; Amendments.    (a) No failure or delay by the
Administrative Agent, the Issuing Bank or any Lender in exercising any right or
power hereunder 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 Issuing Bank and the Lenders
hereunder 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
consent to any departure by the Borrowers therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) of this Section,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. Without limiting the generality of the
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a Loan or issuance of a Letter of Credit shall not be construed as a waiver of
any Default, regardless of whether the Administrative Agent, any Lender or the
Issuing Bank may have had notice or knowledge of such Default at the time.

(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 Borrowers and the Required Lenders or by the Borrowers and the
Administrative Agent with the consent of the Required Lenders; provided that no
such agreement shall (i) increase the Commitment of any Lender or alter the
nature of such Commitment (i.e. its nature as either a Dollar Tranche Commitment
or a Multicurrency Tranche Commitment) without the written consent of such
Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or
reduce the rate of interest thereon, or reduce any fees payable hereunder,
without the written consent of each Lender affected thereby, (iii) postpone the
scheduled date of payment of the principal amount of any Loan or LC
Disbursement, or any interest thereon, or any fees payable hereunder, or reduce
the amount of, waive or excuse any such payment, or postpone the scheduled date
of expiration of any Commitment, without the written consent of each Lender
affected thereby, (iv) change any portion of this Agreement in a manner that
would alter the pro rata nature of payments, loans and Commitment reductions
under this Agreement, without the written consent of each Lender, (v) change any
of the provisions of this Section or the definitions of “Required Lenders” or
“Required Multicurrency Tranche Lenders” or any other provision hereof
specifying the number or percentage of Lenders required to waive, amend or
modify any rights hereunder or make any determination or grant any consent
hereunder, without the written consent of each Lender, (vi) release any Borrower
from any of its joint and several liabilities in respect of the Obligations
without the written consent of each Lender, (vii) change any provision of
Section 2.04 without the consent of each Lender adversely affected thereby or
(viii) after its granting, release all or substantially all of the Collateral,
without the written consent of each Lender; provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent or the Issuing Bank hereunder without the prior written
consent of the Administrative Agent or the Issuing Bank, as the case may be.

(c)      Notwithstanding the foregoing, Schedule 3.11 hereto shall be deemed
amended without the consent of any other party solely to reflect revisions or
supplements of the type described in the parenthetical in the first sentence of
Section 3.11 upon the delivery by the Borrower Representative to the
Administrative Agent of a revised Schedule 3.11 reflecting such revisions and
supplements.

SECTION 9.03.  Expenses; Indemnity; Damage Waiver.    (a) The Borrowers shall
pay (i) all reasonable out of pocket expenses incurred by the Administrative
Agent and its Affiliates, including the reasonable fees, charges and
disbursements of counsel for the Administrative Agent, in connection with the
syndication of the credit facilities provided for herein, the preparation and
administration of this Agreement or any amendments, modifications or waivers of
the provisions hereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (ii) without duplication of amounts otherwise
payable hereunder, all reasonable out-of-pocket expenses incurred by the Issuing
Bank in connection with the issuance, amendment, renewal or extension of any
Letter of Credit or any demand for payment thereunder and (iii) all
out-of-pocket expenses incurred by the Administrative Agent, the Issuing Bank or
any Lender, including the fees, charges and disbursements of (A) any counsel for
the

 

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Administrative Agent, the Issuing Bank or any Lender, and (B) a financial
advisor for the Administrative Agent, the Issuing Bank and the Lenders, in
connection with the enforcement or protection of its rights in connection with
this Agreement, including its rights under this Section, or in connection with
the Loans made or Letters of Credit issued hereunder, including all such out-of
pocket expenses incurred during any workout, restructuring or negotiations in
respect of such Loans or Letters of Credit.

(b)      The Borrowers shall indemnify the Administrative Agent, the Issuing
Bank and each Lender, and each Related Party of any of the foregoing Persons
(each such Person being called an “Indemnitee”) against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the fees, charges and disbursements of any counsel
for any Indemnitee, incurred by or asserted against any Indemnitee arising out
of, in connection with, or as a result of (i) the execution or delivery of this
Agreement or any agreement or instrument contemplated hereby, the performance by
the parties hereto of their respective obligations hereunder or the consummation
of the Transactions or any other transactions contemplated hereby, (ii) any Loan
or Letter of Credit or the use of the proceeds therefrom (including any refusal
by the Issuing Bank to honor a demand for payment under a Letter of Credit if
the documents presented in connection with such demand do not strictly comply
with the terms of such Letter of Credit), (iii) any actual or alleged presence
or release of Hazardous Materials on or from any property owned or operated by
the Borrowers or any of its Subsidiaries, or any Environmental Liability related
in any way to the Borrowers or any of its Subsidiaries, or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses resulting from the
gross negligence or willful misconduct of such Indemnitee.

(c)      To the extent that the Borrowers fail to pay any amount required to be
paid by them to the Administrative Agent or the Issuing Bank under paragraph
(a) or (b) of this Section, each Lender severally agrees to pay to the
Administrative Agent or the Issuing Bank, as the case may be, such Lender’s
Dollar Revolving Commitment Exposure Percentage or Multicurrency Revolving
Commitment Exposure Percentage, as the case may be, (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 or the Issuing Bank in its capacity
as such.

(d)      To the extent permitted by applicable law, the Borrowers shall not
assert, and hereby waive, 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)      All amounts due under this Section shall be payable not later than ten
days after written demand therefor.

 

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SECTION 9.04.  Successors and Assigns.    (a) The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit), except that (i) the
Borrowers may not assign or otherwise transfer any of their respective rights or
obligations hereunder without the prior written consent of each Lender (and any
attempted assignment or transfer by the Borrowers without such consent shall be
null and void) and (ii) no Lender may assign or otherwise transfer its rights or
obligations hereunder except in accordance with this Section. Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit), Participants (to the extent provided in paragraph (c) of this
Section) and, to the extent expressly contemplated hereby, the Related Parties
of each of the Administrative Agent, the Issuing Bank and the Lenders) any legal
or equitable right, remedy or claim under or by reason of this Agreement.

(b)      (i)  Subject to the conditions set forth in paragraph (b)(ii) below,
any Lender may assign to one or more assignees all or a portion of its rights
and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it) with the prior written consent
(such consent not to be unreasonably withheld) of:

(A)      the Borrowers, provided that no consent of the Borrowers shall be
required for an assignment to a Lender, an Affiliate of a Lender, an Approved
Fund or, if an Event of Default has occurred and is continuing, any other
assignee;

(B)      the Administrative Agent, provided that no consent of the
Administrative Agent shall be required for an assignment of any Commitment to an
assignee that is a Lender with a Commitment immediately prior to giving effect
to such assignment; and

(C)      the Issuing Bank, provided that no consent of the Issuing Bank shall be
required for an assignment of any Dollar Tranche Commitment.

(ii)      Assignments shall be subject to the following additional conditions:

(A)      except in the case of an assignment to a Lender or an Affiliate of a
Lender or an assignment of the entire remaining amount of the assigning Lender’s
Commitment or Loans, the amount of the Commitment or Loans of the assigning
Lender subject to each such assignment (determined as of the date the Assignment
and Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 unless each of the
Borrowers and the Administrative Agent otherwise consent, provided that no such
consent of the Borrowers shall be required if an Event of Default has occurred
and is continuing;

(B)      each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender’s rights and obligations under
this Agreement;

 

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(C)      the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500; and

(D)      the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire in which the assignee
designates one or more credit contacts to whom all syndicate-level information
(which may contain material non-public information about the Borrowers and their
affiliates and their related parties or their respective securities) will be
made available and who may receive such information in accordance with the
assignee’s compliance procedures and applicable laws, including Federal and
state securities laws.

For the purposes of this Section 9.04(b), the term “Approved Fund” has the
following meaning:

“Approved Fund” means any Person (other than a natural person) that is engaged
in making, purchasing, holding or investing in bank loans and similar extensions
of credit in the ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an
Affiliate of an entity that administers or manages a Lender.

(iii)    Subject to acceptance and recording thereof pursuant to paragraph
(b)(iv) of this Section, from and after the effective date specified in each
Assignment and Assumption the assignee thereunder shall be a party hereto and,
to the extent of the interest assigned by such Assignment and Assumption, have
the rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Assumption, be released from its obligations under this Agreement
(and, in the case of an Assignment and Assumption covering all of the 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
2.15, 2.16, 2.17 and 9.03). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this Section 9.04
shall be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (c) of
this Section.

(iv)    The Administrative Agent, acting for this purpose as an agent of the
Borrowers, shall maintain at one of its offices a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitment of, and principal amount of the
Loans and LC Disbursements 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 Borrowers, the Administrative Agent, the Issuing Bank 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 Borrowers, the Issuing Bank and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.

 

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(v)     Upon its receipt of a duly completed Assignment and Assumption executed
by an assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section and
any written consent to such assignment required by paragraph (b) of this
Section, the Administrative Agent shall accept such Assignment and Assumption
and record the information contained therein in the Register; provided that if
either the assigning Lender or the assignee shall have failed to make any
payment required to be made by it pursuant to Section 2.06(d) or (e), 2.07(c),
2.18(d) or 9.03(c), the Administrative Agent shall have no obligation to accept
such Assignment and Assumption and record the information therein in the
Register unless and until such payment shall have been made in full, together
with all accrued interest thereon. No assignment shall be effective for purposes
of this Agreement unless it has been recorded in the Register as provided in
this paragraph.

(c)      (i)  Any Lender may, without the consent of the Borrowers, the
Administrative Agent or the Issuing Bank, sell participations to one or more
banks or other entities (a “Participant”) in all or a portion of such Lender’s
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided that (A) such Lender’s
obligations under this Agreement shall remain unchanged, (B) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (C) the Borrowers, the Administrative Agent, the Issuing
Bank and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver described in the first proviso to
Section 9.02(b) that affects such Participant. Subject to paragraph (c)(ii) of
this Section, the Borrowers agree that each Participant shall be entitled to the
benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 9.08 as though it were a Lender, provided
such Participant agrees to be subject to Section 2.18(c) as though it were a
Lender.

(ii)      A Participant shall not be entitled to receive any greater payment
under Section 2.15, 2.16 or 2.17 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Borrowers’ prior written consent. A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 2.17 unless
the Borrower Representative is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Borrowers, to
comply with Section 2.17(e) as though it were a Lender.

(d)      Any Lender may at any time pledge or assign a security interest in all
or any portion of its rights under this Agreement to secure obligations of such
Lender, including

 

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without limitation any pledge or assignment to secure obligations to a Federal
Reserve Bank, and this Section shall not apply to any such pledge or assignment
of a security interest; provided that no such pledge or assignment of a security
interest shall release a Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.

SECTION 9.05.  Survival.    All covenants, agreements, representations and
warranties made by the Borrowers herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, the Issuing Bank or any Lender 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 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 2.15, 2.16, 2.17 and 9.03 and Article
VIII shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.

SECTION 9.06.  Counterparts; Integration; Effectiveness.    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. This Agreement and any
separate letter agreements with respect to fees payable to the Administrative
Agent constitute the entire contract among the parties relating to the subject
matter hereof and supersede any and all previous agreements and understandings,
oral or written, relating to the subject matter hereof. Except as provided in
Section 4.01, this Agreement shall become effective when it shall have been
executed by the Administrative Agent and when the Administrative Agent shall
have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.

SECTION 9.07.  Severability.    Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.

SECTION 9.08.  Right of Setoff.    If an Event of Default shall have occurred
and be continuing, each Lender and each of its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted 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 obligations at any time owing
by such Lender or Affiliate to or for the credit or the account of any of the

 

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Borrowers against any of and all the obligations of such Person now or hereafter
existing under this Agreement held by such Lender, irrespective of whether or
not such Lender shall have made any demand under this Agreement and although
such obligations may be unmatured. The rights of each Lender under this Section
are in addition to other rights and remedies (including other rights of setoff)
which such Lender may have.

SECTION 9.09.  Governing Law; Jurisdiction; Consent to Service of
Process.    (a) This Agreement shall be construed in accordance with and
governed by the law of the State of New York.

(b)      Each of the Borrowers hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of the Supreme
Court of the State of New York sitting in New York County and of the United
States District Court of the Southern District of New York, and any appellate
court from any thereof, in any action or proceeding arising out of or relating
to this Agreement, 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 Issuing Bank or any Lender may otherwise have to bring any action or
proceeding relating to this Agreement against the Borrowers or their respective
properties in the courts of any jurisdiction.

(c)      Each of the Borrowers 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 in any court referred to
in paragraph (b) of this Section. 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 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 9.10.  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 ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). 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 BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

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SECTION 9.11.  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 shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

SECTION 9.12.  Confidentiality.    Each of the Administrative Agent, the Issuing
Bank and the Lenders agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (a) to its and its
Affiliates’ directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being 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, (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process,
(d) to any other party to this Agreement, (e) in connection with the exercise of
any remedies hereunder or any suit, action or proceeding relating to this
Agreement or the enforcement of rights hereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section, to
(i) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement or
(ii) any actual or prospective counterparty (or its advisors) to any swap or
derivative transaction relating to any Borrower and its obligations, (g) with
the consent of the Borrowers or (h) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section or
(ii) becomes available to the Administrative Agent, the Issuing Bank or any
Lender on a non-confidential basis from a source other than the Borrowers. For
the purposes of this Section, “Information” means all information received from
the Borrowers relating to any Borrower or its business, other than any such
information that is available to the Administrative Agent, the Issuing Bank or
any Lender on a non-confidential basis prior to disclosure by the Borrowers. Any
Person required to maintain the confidentiality of Information as provided in
this Section 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 to its own
confidential information.

EACH LENDER ACKNOWLEDGES THAT INFORMATION AS DEFINED IN THE PRECEDING PARAGRAPH
FURNISHED TO IT PURSUANT TO THIS AGREEMENT MAY INCLUDE MATERIAL NON-PUBLIC
INFORMATION CONCERNING THE PARENT AND ITS RELATED PARTIES OR THEIR RESPECTIVE
SECURITIES, AND CONFIRMS THAT IT HAS DEVELOPED COMPLIANCE PROCEDURES REGARDING
THE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT WILL HANDLE SUCH MATERIAL
NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE PROCEDURES AND APPLICABLE LAW,
INCLUDING FEDERAL AND STATE SECURITIES LAWS.

ALL INFORMATION, INCLUDING REQUESTS FOR WAIVERS AND AMENDMENTS, FURNISHED BY THE
BORROWERS OR THE ADMINISTRATIVE AGENT PURSUANT TO, OR IN THE COURSE OF
ADMINISTERING, THIS AGREEMENT WILL BE SYNDICATE-LEVEL INFORMATION, WHICH MAY
CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUT THE BORROWERS AND THEIR AFFILIATES
AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES) AND ITS SECURITIES.
ACCORDINGLY, EACH

 

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LENDER REPRESENTS TO THE BORROWERS AND THE ADMINISTRATIVE AGENT THAT IT HAS
IDENTIFIED IN ITS ADMINISTRATIVE QUESTIONNAIRE A CREDIT CONTACT WHO MAY RECEIVE
INFORMATION THAT MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH
ITS COMPLIANCE PROCEDURES AND APPLICABLE LAW.

SECTION 9.13.  Interest Rate Limitation.    Notwithstanding anything herein to
the contrary, if at any time the interest rate applicable to any Loan, together
with all fees, charges and other amounts which are treated as interest on such
Loan 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 in accordance with
applicable law, the rate of interest payable in respect of such Loan 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 but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans 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 9.14.  USA PATRIOT Act.    Each Lender that is subject to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001)) (the “Act”) hereby notifies the Borrowers that pursuant
to the requirements of the Act, it is required to obtain, verify and record
information that identifies such Person, which information includes the names
and addresses of the Borrowers and other information that will allow such Lender
to identify the Borrowers in accordance with the Act.

SECTION 9.15.  Conversion of Currencies.    (a) If, for the purpose of obtaining
judgment in any court, it is necessary to convert a sum owing hereunder in one
currency into another currency, each party hereto agrees, to the fullest extent
that it may effectively do so, that the rate of exchange used shall be that at
which in accordance with normal banking procedures in the relevant jurisdiction
the first currency could be purchased with such other currency on the Business
Day immediately preceding the day on which final judgment is given.

(b)      The obligations of each Borrower in respect of any sum due to any party
hereto or any holder of the obligations owing hereunder (the “Applicable
Creditor”) shall, notwithstanding any judgment in a currency (the “Judgment
Currency”) other than the currency in which such sum is stated to be due
hereunder (the “Agreement Currency”), be discharged only to the extent that, on
the Business Day following receipt by the Applicable Creditor of any sum
adjudged to be so due in the Judgment Currency, the Applicable Creditor may in
accordance with normal banking procedures in the relevant jurisdiction purchase
the Agreement Currency with the Judgment Currency; if the amount of the
Agreement Currency so purchased is less than the sum originally due to the
Applicable Creditor in the Agreement Currency, the Borrowers agree, as a
separate obligation and notwithstanding any such judgment, to indemnify the
Applicable Creditor against such loss. The obligations of the Borrowers
contained in this Section 9.15 shall survive the termination of this Agreement
and the payment of all other amounts owing hereunder.

 

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SECTION 9.16.  Appointment and Authorization of Borrower Representative.

(a)      Each Borrower hereby designates, appoints, authorizes and empowers Argo
US as its agent to act as specified in the capacity of Borrower Representative
under this Agreement and each of the other Credit Documents and Argo US hereby
acknowledges such designation, authorization and empowerment, and accepts such
appointment. Each Borrower hereby irrevocably authorizes and directs the
Borrower Representative to take such action on its behalf under the respective
provisions of this Agreement and the other Credit Documents, and any other
instruments, documents and agreements referred to herein or therein, and to
exercise such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of the Borrower Representative by the
respective terms and provisions hereof and thereof, and such other powers as are
reasonably incidental thereto, including, without limitation, to take the
following actions for and on such Borrower’s behalf:

(i)       to submit on behalf of each Borrower Borrowing Requests, and notices
of conversion or continuation of Loans to the Administrative Agent in accordance
with the provisions of this Agreement, each such notice to be submitted by the
Borrower Representative to the Administrative Agent as soon as practicable after
its receipt of a request to do so from a Borrower; and

(ii)      to submit on behalf of each Borrower requests for the issuance of
Letters of Credit in accordance with the provisions of this Agreement, each such
request for the issuance of a Letter of Credit to be submitted by the Borrower
Representative as soon as practicable after its receipt of a request to do so
from any Borrower.

(b)      The Borrower Representative is further authorized and directed by each
of the Borrowers to take all such actions on behalf of such Borrower necessary
to exercise the specific powers granted in clauses (i) and (ii) above and to
perform such other duties hereunder and under the other Credit Documents, and
deliver such documents as delegated to or required of the Borrower
Representative by the terms hereof or thereof. The Administrative Agent and each
Lender may regard any notice or other communication pursuant to any Credit
Documents from the Borrower Representative as a notice or communication from all
Borrowers, and may give any notice or communication required or permitted to be
given to any Borrower or Borrowers hereunder to the Borrower Representative on
behalf of such Borrower or Borrowers. Each Borrower agrees that each notice,
election, representation and warranty, covenant, agreement and undertaking made
on its behalf by the Borrower Representative shall be deemed for all purposes to
have been made by such Borrower and shall be binding upon and enforceable
against such Borrower to the same extent as if the same had been made directly
by such Borrower.

(c)      The Borrower Representative may perform any of its duties hereunder or
under any of the other Credit Documents by or through its agents or employees.

[Signature page follows]

 

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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.

 

ARGO GROUP INTERNATIONAL HOLDINGS,

LTD.

By

 

/s/ Jay S.Bullock

Name:

 

Jay S. Bullock

Title:

 

 Executive Vice President and Chief Financial Officer

ARGO GROUP US, INC.

By

 

/s/ Craig S. Comeaux

Name:

 

Craig S. Comeaux

Title:

 

 Vice President, Secretary and Deputy General Counsel

ARGO ACQUISITION, LIMITED

By

 

/s/ Jay S.Bullock

Name:

 

Jay S. Bullock

Title:

 

 Director

HERITAGE UNDERWRITING AGENCY

LIMITED

By

 

/s/ Jay S.Bullock

Name:

 

Jay S. Bullock

Title:

 

 Director

 

1

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JPMORGAN CHASE BANK, NATIONAL

ASSOCIATION, individually and as

Administrative Agent

By

 

 

Name:

Title:

 

1

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[OTHER BANKS]

By

 

 

Name:

Title:

 

1

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Schedule 1.01

PRICING SCHEDULE

 

APPLICABLE MARGIN

(ALTERNATIVE BASE RATE SPREAD)

   LEVEL I    LEVEL II    LEVEL III

                Leverage Ratio < 20%

   1.25%    1.50%    2.25%

                Leverage Ratio < 30%

   1.50%    1.75%    2.50%

                Leverage Ratio > 30%

   1.75%    2.00%    3.00%

 

APPLICABLE MARGIN

(EUROCURRENCY SPREAD)

   LEVEL I    LEVEL II    LEVEL III

                Leverage Ratio < 20%

   2.25%    2.50%    3.25%

                Leverage Ratio < 30%

   2.50%    2.75%    3.50%

                Leverage Ratio > 30%

   2.75%    3.00%    4.00%

 

 

FACILITY FEE

   LEVEL I    LEVEL II    LEVEL III

                Facility Fee Rate

   0.50%    0.50%    0.75%

“Argo US Rating” means, at any time, the rating issued by issued by S&P, and
then in effect with respect to Argo US’s Issuer Credit Rating, as determined
without third-party enhancement.

“Subsidiary Rating” means, at any time, the AM Best Financial Strength Rating
then in effect for Argo US’s rated operating Significant Insurance Subsidiaries.

“Level I Status” exists at any date if, on such date, the Argo US Rating is BBB
or better and the Subsidiary Rating is A or better.

“Level II Status” exists at any date if, on such date, the Borrowers have not
qualified for Level I Status and the Argo US Rating is BBB- or better and the
Subsidiary Rating is A- or better.

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

“Rating” means either the Argo US Rating or the Subsidiary Rating.

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

The Applicable Rate shall be determined in accordance with the foregoing table
based on the Status as determined from the then current Argo US Rating and
Subsidiary Rating and the Leverage Ratio as reflected in the then most recent
Financials. The Argo US Rating and

 

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Subsidiary Rating in effect on any date for the purposes of this Schedule shall
be that in effect at the close of business on such date. Adjustments, if any, to
the Applicable Rate arising out of a change in the Leverage Ratio shall be
effective five Business Days after the Administrative Agent has received the
financial statements delivered pursuant to Section 5.01. If the Borrowers fail
to deliver such financials to the Administrative Agent at the time required
pursuant to this Agreement, then the Applicable Rate shall be the highest
Applicable Rate set forth in the foregoing table for the then effective Argo US
Rating and Subsidiary Rating until five Business Days after such Financials are
so delivered. Until adjusted after the receipt of the first set of financial
statements delivered after the Effective Date pursuant to Section 5.01, Level II
Status with a Leverage Ratio of 29% shall be deemed to exist.

 

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Schedule 2.01

Multicurrency Tranche Commitments

 

JPMorgan Chase Bank, National Association

   $ 25,000,000     

Wachovia Bank, N.A.

     25,000,000     

U.S. Bank N.A.

     15,000,000                       

TOTAL

   $ 65,000,000     

Dollar Tranche Commitments

 

The Frost National Bank

   $ 20,000,000     

Bank of Bermuda

     15,000,000                       

TOTAL

   $ 35,000,000     

 

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