Exhibit 10.1

EXECUTION COPY

 

 

 

LOAN AGREEMENT

between

MBIA INSURANCE CORPORATION,

as Borrower

and

BLUE RIDGE INVESTMENTS, L.L.C.,

as Lender

Dated as of May 6, 2013

 

 

 

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Table of Contents

 

         Page   ARTICLE I    DEFINITIONS    1.1  

Certain Defined Terms

     1    1.2  

Other Interpretive Provisions

     21    ARTICLE II    THE LOANS    2.1  

Amounts and Terms of Commitments

     23    2.2  

Evidence of Debt

     23    2.3  

Procedure for Borrowing

     23    2.4  

Prepayments and Commitment Reductions

     24    2.5  

Scheduled Repayment

     26    2.6  

Interest

     26    2.7  

Computation of Interest

     27    2.8  

Payments Generally

     28    2.9  

Conversion/Continuation

     28    2.10  

[reserved]

     29    2.11  

Fees

     29    2.12  

Increased Costs

     29    ARTICLE III    TAXES, YIELD PROTECTION AND ILLEGALITY    3.1  

Taxes

     31    3.2  

Funding Losses

     35    3.3  

Illegality, Etc.

     35    3.4  

Survival

     37    ARTICLE IV    CONDITIONS PRECEDENT    4.1  

Conditions Precedent to Effectiveness of this Agreement

     37    4.2  

Conditions Precedent to the Making of each Loan

     40    ARTICLE V    REPRESENTATIONS AND WARRANTIES    5.1  

Corporate Existence and Power

     42    5.2  

Corporate Authorization; Non-Contravention

     42    5.3  

Execution; Binding Effect

     42    5.4  

No Injunction

     42    5.5  

No Potential Event Default or Event Default

     43   

 

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Table of Contents

(continued)

 

         Page   5.6  

Ownership of Property

     43    5.7  

Environmental Compliance

     43    5.8  

Insurance

     43    5.9  

Taxes

     43    5.10  

Compliance with Law

     44    5.11  

USA PATRIOT Act; OFAC

     44    5.12  

Margin Stock; Investment Company Act

     44    5.13  

Governmental Authorization; Other Consents

     44    5.14  

Financial Statements; No Material Adverse Effect

     45    5.15  

Litigation

     46    5.16  

ERISA Compliance

     46    5.17  

Subsidiaries; Equity Interests

     47    5.18  

Disclosure

     48    5.19  

Intellectual Property; Licenses, Etc.

     48    5.20  

Solvency

     48    5.21  

Casualty, Etc.

     48    5.22  

Labor Matters

     49    5.23  

Security Documents

     49    5.24  

Insurance Licenses

     49    5.25  

Commutation

     49    ARTICLE VI    AFFIRMATIVE COVENANTS    6.1  

Financial Statements and Reports

     49    6.2  

Payments of Obligations

     53    6.3  

Further Assurances

     53    6.4  

Maintenance of Existence

     54    6.5  

Maintenance of Properties

     54    6.6  

Maintenance of Insurance

     54    6.7  

Compliance with Laws

     54    6.8  

Books and Records

     55    6.9  

Inspection Rights

     55    6.10  

Compliance with Environmental Laws

     55    6.11  

Material Contracts

     55    ARTICLE VII    NEGATIVE COVENANTS    7.1  

Liens

     56    7.2  

Indebtedness

     57    7.3  

Investments

     59    7.4  

Dissolution

     59   

 

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Table of Contents

(continued)

 

         Page   7.5  

Consolidations, Mergers and Sales of Assets

     59    7.6  

Dispositions

     59    7.7  

Restricted Payments

     61    7.8  

Use of Proceeds

     61    7.9  

Change in Fiscal Year; Accounting Policies

     61    7.10  

Transactions with Affiliates

     61    7.11  

Burdensome Agreements

     61    7.12  

Financial Covenants

     62    7.13  

Prepayments of Indebtedness

     62    7.14  

Amendments of Organization Documents

     62    7.15  

Change of Business

     62    7.16  

Commutations

     62    ARTICLE VIII    EVENTS OF DEFAULT/REMEDIES    8.1  

Events of Default

     63    8.2  

Rights Not Exclusive

     65    ARTICLE IX    MISCELLANEOUS    9.1  

Amendments and Waivers

     65    9.2  

Notices

     67    9.3  

No Waiver; Cumulative Remedies

     68    9.4  

Costs and Expenses

     69    9.5  

Indemnity

     69    9.6  

Payments Set Aside

     70    9.7  

Successors and Assigns

     70    9.8  

Counterparts

     73    9.9  

Severability

     73    9.10  

No Third Parties Benefited

     73    9.11  

Governing Law; Waiver of Jury Trial

     74    9.12  

Submission to Jurisdiction, Etc.

     74    9.13  

Entire Agreement

     75    9.14  

Independence of Covenants

     75    9.15  

No Partnership, Etc.

     75    9.16  

Treatment of Certain Information; Confidentiality

     76    9.17  

USA PATRIOT Act

     77    9.18  

Collateral Agent

     77    9.19  

Survival of Representations and Warranties

     77   

 

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Table of Contents

(continued)

 

EXHIBITS

 

EXHIBIT A    Form of Note EXHIBIT B    Form of Notice of Borrowing EXHIBIT C   
[Intentionally Omitted] EXHIBIT D    Form of Collateral Calculation Certificate
EXHIBIT E    Form of Conversion/Continuation Notice EXHIBIT F    Form of
Compliance Certificate

 

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LOAN AGREEMENT (this “Agreement”) dated as of May 6, 2013, between MBIA
INSURANCE CORPORATION, a stock insurance corporation organized under the laws of
the State of New York (the “Borrower”), and BLUE RIDGE INVESTMENTS, L.L.C., a
Delaware limited liability company, as a lender (the “Lender”). Unless otherwise
defined herein, all capitalized terms used herein and defined in Section 1.1 are
used herein as so defined.

PRELIMINARY STATEMENTS

A. In connection with the Settlement Agreement and as part of the consideration
for releases contemplated thereunder, the Lender has agreed to provide revolving
credit loans to the Borrower in an aggregate amount of up to $500,000,000, to be
made available by the Lender in one or more disbursements during the Commitment
Period, upon the terms and conditions set forth in this Agreement.

B. Beginning on the first Business Day to occur after the Closing Date, the
Borrower intends to use the proceeds of such loans for general corporate
purposes.

C. On or prior to the Closing Date, the New York State Department of Financial
Services shall have been given the requisite notice of the Borrower entering
into this Agreement and shall have approved the Borrower pledging the Collateral
pursuant to the Security Agreement, repaying the amounts outstanding under the
NPFGC Loan Agreement and entering into the Settlement Agreement and consummating
the transactions contemplated thereby.

NOW, THEREFORE, in consideration of the foregoing premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:

ARTICLE I

DEFINITIONS

1.1 Certain Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:

“Additional Amounts” shall have the meaning set forth in Section 3.1(b)(i).

“Adjusted LIBOR Rate” shall mean, a rate per annum determined by the Lender
pursuant to the following formula: (i) for any Interest Period on any Interest
Rate Determination Date with respect to a LIBOR Rate Loan, the rate per annum
equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published
by Reuters (or other commercially available source providing quotations of BBA
LIBOR as designated

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by the Lender from time to time) at approximately 11:00 a.m., London time, on
such Interest Rate Determination Date, for Dollar deposits (for delivery on the
first day of such Interest Period) with a term equivalent to such Interest
Period. If such rate is not available at such time for any reason, then the
“Adjusted LIBOR Rate” for such Interest Period shall be the rate per annum
determined by the Lender to be the rate at which deposits in Dollars for
delivery on the first day of such Interest Period in same day funds in the
approximate amount of the Eurodollar Rate Loan being made, continued or
converted by Bank of America and with a term equivalent to such Interest Period
would be offered by Bank of America’s London Branch to major banks in the London
interbank eurodollar market at their request at approximately 11:00 a.m. (London
time) two Business Days prior to the commencement of such Interest Period
divided by (ii) an amount equal to (a) 1.00, minus (b) the Applicable Reserve
Requirement.

“Affiliate” shall mean, 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.

“Applicable Law” shall mean any applicable statute, law, regulation, ordinance,
rule, judgment, rule of common law, order, decree, Governmental Approval,
approval, concession, grant, franchise, license, agreement, directive,
guideline, policy, requirement or other governmental restriction or any similar
form of decision of, or determination by (or any interpretation or
administration of any of the foregoing by), any Governmental Authority, whether
in effect as of the date of this Agreement or thereafter.

“Applicable Margin” shall mean (i) with respect to Loans that are LIBOR Rate
Loans, a percentage per annum equal to 7.50%, and (ii) with respect to Loans
that are Base Rate Loans, a percentage per annum equal to 6.50%.

“Applicable Reserve Requirement” shall mean, at any time, for any LIBOR Rate
Loan, the maximum rate, expressed as a decimal, at which reserves (including any
basic marginal, special, supplemental, emergency or other reserves) are required
to be maintained with respect thereto against “Eurocurrency Liabilities” (as
such term is defined in Regulation D) under regulations issued from time to time
by the Board of Governors of the Federal Reserve System or other applicable
banking regulator. A LIBOR Rate Loan shall be deemed to constitute Eurocurrency
liabilities and as such shall be deemed subject to reserve requirements without
benefits of credit for proration, exceptions or offsets that may be available
from time to time to the applicable Lender. The rate of interest on LIBOR Rate
Loans shall be adjusted automatically on and as of the effective date of any
change in the Applicable Reserve Requirement.

“Attributable Indebtedness” means, on any date, (a) in respect of any
Capitalized Lease of any Person, the capitalized amount thereof that would
appear on a balance sheet of such Person prepared as of such date in accordance
with US GAAP, (b) in respect of any Synthetic Lease Obligation, the capitalized
amount of the remaining lease or similar

 

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payments under the relevant lease or other applicable agreement or instrument
that would appear on a balance sheet of such Person prepared as of such date in
accordance with US GAAP if such lease or other agreement or instrument were
accounted for as a Capitalized Lease and (c) all Synthetic Debt of such Person.

“Audited Financial Statements” means (i) the audited balance sheet of the
Borrower and its Subsidiaries on a consolidated basis, prepared in accordance
with US GAAP, (ii) the audited balance sheet of the Borrower, prepared in
accordance with the Regulated Accounting Principles, (iii) the audited balance
sheet of MBIA UK prepared in accordance with UK GAAP and (iv) the audited
balance sheet of UK Insurance, prepared in accordance with UK GAAP, in each
case, for the fiscal year ended December 31, 2012, and, in the case of each of
clauses (i) through (iv), the related statements of income or operations and
shareholders’ equity for such fiscal year, and in the case of clauses (i) and
(ii) only, cash flows for such fiscal year, of each of the Borrower and its
Subsidiaries, the Borrower, MBIA UK or UK Insurance, as applicable, including
the notes thereto, prepared in accordance with US GAAP, Regulated Accounting
Principles or UK GAAP, as applicable.

“Available Commitment” shall mean, at any time, an amount equal to the excess,
if any, of (a) the amount of the Commitment Amount over (b) the principal amount
of all Loans made by the Lender.

“Bank of America” shall mean Bank of America, N.A., a national banking
association.

“Base Rate” shall mean, for any day, a rate per annum equal to the greatest of
(i) the Prime Rate in effect on such day, (ii) the Federal Funds Effective Rate
in effect on such day plus 0.5% and (iii) the rate set forth in clause (i) of
the definition of Adjusted LIBOR Rate for a one month Interest Period determined
as of such date or, if such date is not a Business Day, on the immediately
preceding Business Day plus 1.00%. Any change in the Base Rate due to a change
in the Prime Rate or the Federal Funds Effective Rate shall be effective on the
effective day of such change in the Prime Rate or the Federal Funds Effective
Rate, respectively. As used in this definition “Prime Rate” shall mean the rate
of interest per annum publicly announced from time to time by Bank of America as
its “prime rate” in effect at its principal office in New York, New York; each
change in the Prime Rate shall be effective on the date such change is publicly
announced. The Prime Rate is a reference rate and does not necessarily represent
the lowest or best rate actually charged to any customer. The Lender may make
commercial loans or other loans at rates of interest at, above or below the
Prime Rate.

“Base Rate Loan” shall mean a Loan bearing interest at a rate determined by
reference to the Base Rate.

“Borrower” shall have the meaning assigned thereto in the preamble hereof.

 

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“Borrowing Date” shall mean any date on which a Loan is made (or, as applicable,
is requested to be made) hereunder.

“Business Day” shall mean (i) any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of New York or is a day on
which banking institutions located in such state are authorized or required by
law or other governmental action to close, or are in fact closed, and (ii) with
respect to all notices, determinations, fundings and payments in connection with
the Adjusted LIBOR Rate or any LIBOR Rate Loans, the term “Business Day” shall
mean any day which is a Business Day described in clause (i) and which is also a
day for trading by and between banks in Dollar deposits in the London interbank
market.

“Capitalized Leases” shall mean all leases that have been or should be, in
accordance with US GAAP, recorded as capitalized leases.

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation and
Liability Act of 1980.

“CERCLIS” shall mean the Comprehensive Environmental Response, Compensation and
Liability Information System maintained by the U.S. Environmental Protection
Agency.

“Change in Law” shall mean (a) the adoption or taking effect of any law, treaty,
rule or regulation after the date of this Agreement, (b) any change in any law,
treaty, rule or regulation or in the administration, interpretation,
implementation or application thereof by any Governmental Authority after the
date of this Agreement or (c) the making or issuance of any request, rule,
guideline or directive (whether or not having the force of law) by any
Governmental Authority after the date of this Agreement; provided that
notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street
Reform and Consumer Protection Act and all requests, rules, guidelines or
directives thereunder or issued in connection therewith and (y) all requests,
rules, guidelines or directives promulgated by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any successor or
similar authority) or the United States or foreign regulatory authorities, in
each case pursuant to Basel III, shall in each case be deemed to be a “Change in
Law”, regardless of the date enacted, adopted or issued.

“Change of Control” means an event or series of events by which:

(a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, but excluding any employee benefit plan
of such person or its subsidiaries, and any person or entity acting in its
capacity as trustee, agent or other fiduciary or administrator of any such plan)
other than (i) MBIA Inc. or a direct or indirect Subsidiary thereof,
(ii) Warburg Pincus Private Equity X, L.P., Warburg Pincus Equity Partners,
L.P., any of their Affiliates or (iii) Fairholme Funds, Inc., Fairholme

 

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Capital Management, L.L.C., any of their Affiliates becomes the “beneficial
owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of
1934, except that a person or group shall be deemed to have “beneficial
ownership” of all securities that such person or group has the right to acquire,
whether such right is exercisable immediately or only after the passage of time
(such right, an “option right”)), directly or indirectly, of 25% or more of the
equity securities of the Borrower entitled to vote for members of the board of
directors or equivalent governing body of the Borrower on a fully-diluted basis
(and taking into account all such securities that such “person” or “group” has
the right to acquire pursuant to any option right); or

(b) during any period of 12 consecutive months, a majority of the members of the
board of directors or other equivalent governing body of the Borrower or MBIA
Inc. ceases to be composed of individuals (i) who were members of that board or
equivalent governing body on the first day of such period, (ii) whose election
or nomination to that board or equivalent governing body was approved by
individuals referred to in clause (i) above constituting at the time of such
election or nomination at least a majority of that board or equivalent governing
body or (iii) whose election or nomination to that board or other equivalent
governing body was approved by individuals referred to in clauses (i) and
(ii) above constituting at the time of such election or nomination at least a
majority of that board or equivalent governing body (excluding, in the case of
both clause (ii) and clause (iii), any individual whose initial nomination for,
or assumption of office as, a member of that board or equivalent governing body
occurs as a result of an actual or threatened solicitation of proxies or
consents for the election or removal of one or more directors by any person or
group other than a solicitation for the election of one or more directors by or
on behalf of the board of directors); or

(c) MBIA Inc. shall cease, directly or indirectly, to own and control legally
and beneficially all of the Equity Interests in the Borrower; or

(d) a “change of control” or any comparable term under, and as defined in any
Indebtedness of the Borrower or any of its Subsidiaries in an aggregate
principal amount in excess of the Threshold Amount shall have occurred.

“Closing Date” shall mean the first Business Day when all the conditions
precedent in Section 4.1 are satisfied or waived (provided, that, the Closing
Date shall not occur on a date after May 10, 2013).

“Code” means the Internal Revenue Code of 1986.

“Collateral” shall have the meaning assigned thereto in Section 2.1 of the
Security Agreement.

“Collateral Calculation Certificate” shall mean a certificate substantially in
the form of Exhibit D signed by the Chief Financial Officer, Treasurer or
Controller of the

 

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Borrower (together with detailed supporting calculations and underlying data in
a form satisfactory to the Lender) (i) including the Borrower’s good faith
calculation of the notional amount of the Subject Collateral as of the last date
of the most recently ended fiscal quarter of the Borrower in the case of a
Collateral Calculation Certificate delivered pursuant to Section 6.1(b), and as
of the date of the proposed Loan, in the case of a Collateral Calculation
Certificate delivered pursuant to Section 4.2(g), calculated by adding (w) the
notional amount of the Excess Spread Salvage Collateral reflected in the
Borrower’s Statutory Financial Statements, (x) the notional amount of the
Installment Premium Collateral calculated in a manner consistent with the manner
in which the Borrower calculates the present value of future installment
premiums on a stand-alone basis for inclusion in MBIA Inc.’s periodic reports
filed under the Securities Exchange Act of 1934, as amended and (y) the notional
amount of the Put-Back Recoveries, net of any expected set-offs against the
Subject Collateral determined by the Borrower in good faith consistent with the
estimates used in determining its loss reserves reflected in its Statutory
Financial Statements (provided that such Collateral Calculation Certificate
shall also include (a) the notional amount of Put-Back Recoveries gross of any
set-offs described in this clause (y) and (b) the amount of Put-Back Recoveries
recorded as a contra-liability on the Borrower’s Statutory Financial
Statements), and (ii) certifying that since the last date of such fiscal
quarter, no event or circumstance has occurred that would reasonably be expected
to have a material adverse effect on the notional amount of any component of the
Subject Collateral as reflected on such Collateral Calculation Certificate,
except as otherwise disclosed on such Certificate.

“Commitment Amount” shall mean (i) prior to the last day of the Commitment
Period $500,000,000, as such amount may be reduced pursuant to the terms hereof,
and (ii) on and after the last day of the Commitment Period, zero.

“Commitment Period” shall mean the period from and including the first Business
Day after the Closing Date to but excluding the Maturity Date (provided that the
Commitment Amount at such time is greater than zero pursuant to the terms
hereof).

“Compliance Certificate” shall mean a certificate substantially in the form of
Exhibit F.

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

“Contractual Obligation” shall mean, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.

“Control” shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.

 

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“Conversion/Continuation Date” shall mean the effective date of a continuation
or conversion, as the case may be, as set forth in the applicable
Conversion/Continuation Notice.

“Conversion/Continuation Notice” shall mean a Conversion/Continuation Notice
substantially in the form of Exhibit E.

“Debtor Relief Laws” means all rehabilitation, dissolution, impairment,
liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or other debtor relief laws of the United States or other applicable
jurisdictions, including the State of New York, from time to time in effect and
affecting the rights of policyholders or creditors generally, including Article
74 and Section 1310 of the New York Insurance Law and Title 11 of the United
States Code.

“Default Rate” shall mean an interest rate (before as well as after judgment)
equal to (a) with respect to overdue principal, the applicable interest rate
plus 2.00% per annum and (b) with respect to any other overdue amount (including
overdue interest), the interest rate applicable to Base Rate Loans plus 2% per
annum.

“Disposition” or “Dispose” means the sale, transfer, license, lease or other
disposition (including any sale and leaseback transaction) of any property by
any Person (or the granting of any option or other right to do any of the
foregoing), including any sale, assignment, transfer or other disposal, with or
without recourse, of any notes or accounts receivable or any rights and claims
associated therewith.

“Dollar” and “$” shall mean the lawful currency of the United States.

“Eligible Assignee” shall mean (i) any Affiliate of the Lender, and (ii) any
other Person (other than a natural Person or the Borrower or any of the
Borrower’s Affiliates or Subsidiaries).

“Environmental Laws” shall mean any and all Applicable Laws now or hereafter in
effect and in each case as amended, and any judicial or administrative
interpretation thereof, relating to pollution and the protection of the
environment or of human health (as it relates to the exposure to Hazardous
Materials) or to the presence, release or threatened release, or the
manufacture, use, transportation, treatment, storage, disposal or recycling of
Hazardous Materials, or the arrangement for any such activities.

“Equity Interests” shall mean, with respect to any Person, all of the shares of
capital stock of (or other ownership or profit interests in) such Person, all of
the warrants, options

 

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or other rights for the purchase or acquisition from such Person of shares of
capital stock of (or other ownership or profit interests in) such Person, all of
the securities convertible into or exchangeable for shares of capital stock of
(or other ownership or profit interests in) such Person or warrants, rights or
options for the purchase or acquisition from such Person of such shares (or such
other interests), and all of the other ownership or profit interests in such
Person (including partnership, member or trust interests therein), whether
voting or nonvoting, and whether or not such shares, warrants, options, rights
or other interests are outstanding on any date of determination.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974.

“ERISA Affiliate” shall mean any trade or business (whether or not incorporated)
under common control with the Borrower within the meaning of Section 414(b) or
(c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).

“ERISA Event” shall mean (a) a Reportable Event with respect to a Pension Plan;
(b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than for PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower
or any ERISA Affiliate.

“Event of Default” shall have the meaning set forth in Section 8.1.

“Excess Spread Salvage Collateral” shall have the meaning assigned thereto in
Section 2.1(c) of the Security Agreement.

“Excluded Taxes” means any of the following Taxes imposed on or with respect the
Lender or required to be withheld or deducted from a payment to the Lender:
(i) Taxes imposed on or measured by its pre-tax income (however denominated),
franchise Taxes and branch profits Taxes, in each case, (A) imposed as a result
of the Lender being organized under the laws of, or having its principal office
or its applicable lending office located in, the jurisdiction imposing such Tax
(or any political subdivision thereof) or (B) that are Other Connection Taxes,
(ii) U.S. federal withholding Taxes imposed on amounts payable to or for the
account of the Lender with respect to an applicable interest in a Loan

 

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pursuant to a law in effect on the date on which (A) the Lender acquires such
interest in the Loan or (B) the Lender changes its applicable lending office,
except in each case to the extent that, pursuant to Section 3.1(a)(ii) or (c),
amounts with respect to such Taxes were payable either to the Lender’s assignor
immediately before the Lender became a party hereto or to the Lender immediately
before it changed its applicable lending office, (iii) Taxes attributable to the
Lender’s failure to comply with Section 3.1(e) and (iv) any U.S. federal
withholding Taxes imposed pursuant to FATCA.

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

“Federal Funds Effective Rate” shall mean for any day, the rate per annum
(expressed, as a decimal, rounded upwards, if necessary, to the next higher
one-hundredth of one percent (1/100 of 1%)) equal to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day; provided, that (i) if such day is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (ii) if no
such rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average of the quotations on such day
received by the Lender from three federal funds brokers of recognized standing
selected by it.

“Fiscal Quarter” shall mean, for any Fiscal Year, each three-month fiscal period
commencing on (i) January 1, (ii) April 1, (iii) July 1 and (iv) October 1 of
such Fiscal Year. As used herein, references to the First Fiscal Quarter, the
Second Fiscal Quarter, the Third Fiscal Quarter and the Fourth Fiscal Quarter
shall mean the Fiscal Quarter referred to in clauses (i), (ii), (iii) and (iv),
respectively.

“Fiscal Year” shall mean the fiscal year of the Borrower ending on December 31
of each calendar year. As used herein, references to a Fiscal Year followed by a
given calendar year (e.g., Fiscal Year 2012) shall mean the Fiscal Year ended on
December 31 of such calendar year.

“Governmental Approval” shall mean any action, order, authorization, consent,
approval, license, lease, ruling, permit, certification, exemption, filing or
registration by or with any Governmental Authority.

“Governmental Authority” shall mean any nation, government, state or any
political subdivision of any thereof, any central bank (or similar monetary or
regulatory authority) of any thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government (including any supranational or multi-national entity), and any
corporation or other entity owned or controlled, through stock or capital
ownership or otherwise, by any of the foregoing.

 

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“Guarantee” shall mean, as to any Person, any (a) any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation payable or performable by
another Person (the “primary obligor”) in any manner, whether directly or
indirectly, and including any obligation of such Person, direct or indirect,
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation, (ii) to purchase or lease property,
securities or services for the purpose of assuring the obligee in respect of
such Indebtedness or other obligation of the payment or performance of such
Indebtedness or other obligation, (iii) to maintain working capital, equity
capital or any other financial statement condition or liquidity or level of
income or cash flow of the primary obligor so as to enable the primary obligor
to pay such Indebtedness or other obligation, or (iv) entered into for the
purpose of assuring in any other manner the obligee in respect of such
Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part), or
(b) any Lien on any assets of such Person securing any Indebtedness or other
obligation of any other Person, whether or not such Indebtedness or other
obligation is assumed by such Person (or any right, contingent or otherwise, of
any holder of such Indebtedness to obtain any such Lien). The amount of any
Guarantee shall be deemed to be an amount equal to the stated or determinable
amount of the related primary obligation, or portion thereof, in respect of
which such Guarantee is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by the
guaranteeing Person in good faith. The term “Guarantee” as a verb has a
corresponding meaning.

“Hazardous Materials” shall mean (i) any petroleum or petroleum product,
radioactive material, asbestos in any form that is or could become friable, urea
formaldehyde foam insulation and polychlorinated biphenyls; and (ii) any
chemical, materials waste, pollutant, contaminant or substance in any form that
is defined by Environmental Law as “toxic,” “hazardous,” a “pollutant” a
“contaminant” or words of similar meaning and regulatory effect.

“Indebtedness” means, as to any Person at a particular time, without
duplication, all of the following, whether or not included as indebtedness or
liabilities in accordance with US GAAP:

(a) all obligations of such Person for borrowed money and all obligations of
such Person evidenced by bonds, debentures, notes, loan agreements or other
similar instruments;

(b) the maximum amount of all direct or contingent obligations of such Person
arising under letters of credit (including standby and commercial), bankers’
acceptances, bank guaranties, surety bonds and similar instruments;

 

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(c) net obligations of such Person under any Swap Contract;

(d) all obligations of such Person to pay the deferred purchase price of
property or services (other than trade accounts payable in the ordinary course
of business and not past due for more than 30 days after the due date therefor);

(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on
property owned or being purchased by such Person (including indebtedness arising
under conditional sales or other title retention agreements), whether or not
such indebtedness shall have been assumed by such Person or is limited in
recourse;

(f) all Attributable Indebtedness in respect of Capitalized Leases and Synthetic
Lease Obligations of such Person and all Synthetic Debt of such Person;

(g) all obligations of such Person to purchase, redeem, retire, defease or
otherwise make any payment in respect of any Equity Interest in such Person or
any other Person or any warrant, right or option to acquire such Equity
Interest, valued, in the case of a redeemable preferred interest, at the greater
of its voluntary or involuntary liquidation preference plus accrued and unpaid
dividends; and

(h) all Guarantees of such Person in respect of any of the foregoing.

For all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited liability company) in which such Person
is a general partner or a joint venturer, unless such Indebtedness is expressly
made non-recourse to such Person. The amount of any net obligation under any
Swap Contract on any date shall be deemed to be the Swap Termination Value
thereof as of such date.

“Indemnified Taxes” means (i) Taxes, other than Excluded Taxes, imposed on or
with respect to any payment made by or on account of any obligation of the
Borrower under any Loan Document and (ii) to the extent not otherwise described
in clause (i) above, Other Taxes.

“Insolvency Proceeding” shall mean, with respect to any Person (a) any case,
action or proceeding with respect to such Person before or by any court or other
Governmental Authority relating to bankruptcy, rehabilitation, liquidation,
dissolution, winding-up, relief of debtors, debt arrangement or reorganization
in a bankruptcy, rehabilitation, liquidation or receivership proceeding, or
(b) any general assignment for the benefit of creditors, composition, debt
arrangement, marshaling of assets for creditors or other similar arrangement in
respect of its creditors generally or any substantial portion of its creditors,
in any case undertaken under Applicable Law.

 

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“Installment Premium Collateral” shall have the meaning assigned thereto in
Section 2.1(b) of the Security Agreement.

“Insurance Licenses” has the meaning assigned to such term in Section 5.24.

“Insurance Subsidiary” shall mean any Subsidiary of the Borrower that is
authorized or admitted by a Supervisory Authority to carry on or transact one or
more aspects of the business of selling, issuing or underwriting insurance or
reinsurance.

“Interest Payment Date” shall mean, with respect to (i) any Base Rate Loan, the
last day of each Fiscal Quarter, commencing on the first such date to occur
after the Closing Date, (ii) any LIBOR Rate Loan having an Interest Period of
less than three (3) months, the last day of each Interest Period applicable to
such Loan and (iii) any LIBOR Rate Loan having an Interest Period of three
(3) months or longer, the last day of each Fiscal Quarter and, without
duplication, the last day of such Interest Period.

“Interest Period” shall mean, in connection with a LIBOR Rate Loan, an interest
period of one (1), two (2), three (3) or six (6) months (or such other period as
may be agreed by the Lender), as specified by the Borrower in the applicable
Notice of Borrowing or Conversion/Continuation Notice, (i) initially, commencing
on the Borrowing Date or Conversion/Continuation Date thereof, as the case may
be; and (ii) thereafter, commencing on the day on which the immediately
preceding Interest Period expires; provided, that (a) if an Interest Period
would otherwise expire on a day that is not a Business Day, such Interest Period
shall expire on the next succeeding Business Day unless no further Business Day
occurs in such month, in which case such Interest Period shall expire on the
immediately preceding Business Day; (b) any Interest Period that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (c) of this definition, end on the last
Business Day of a calendar month; (c) no Interest Period with respect to any
portion of any Loan shall extend beyond the Maturity Date.

“Interest Rate Determination Date” shall mean, with respect to any Interest
Period, the date that is two Business Days prior to the first day of such
Interest Period.

“Investment” shall mean, as to any Person, any direct or indirect acquisition or
investment by such Person, whether by means of (a) the purchase or other
acquisition of Equity Interests of another Person, (b) a loan, advance or
capital contribution to, Guarantee or assumption of debt or any obligations of,
or purchase or other acquisition of any other debt or interest in, another
Person, or (c) the purchase or other acquisition (in one transaction or a series
of transactions) of assets of another Person that constitute a business unit or
all or a substantial part of the business of, such Person. For purposes of
covenant compliance, the amount of any Investment shall be the amount actually
invested, without adjustment for subsequent increases or decreases in the value
of such Investment.

 

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“IRS” shall mean the United States Internal Revenue Service.

“Lender” shall have the meaning assigned thereto in the preamble hereof.

“LIBOR Rate Loan” shall mean a Loan bearing interest at a rate determined by
reference to the Adjusted LIBOR Rate.

“Lien” shall mean any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, claim, charge or deposit arrangement, encumbrance,
lien (statutory or other) or preferential arrangement of any kind or nature
whatsoever in respect of any property (including those created by, arising under
or evidenced by any conditional sale or other title retention agreement), the
interest of a lessor under a capital lease, or any financing lease (such as a
synthetic lease) having substantially similar economic effect as any of the
foregoing, but not including the interest of a lessor under an operating lease
(other than a synthetic lease) as defined under US GAAP.

“Loan Documents” shall mean this Agreement, the Note, the Security Documents,
each Notice of Borrowing and each Conversion/Continuation Notice, and any other
document, instrument or agreement designated as a “Loan Document” by the
Borrower and the Lender.

“Loans” shall have the meaning set forth in Section 2.1.

“Margin Stock” shall mean “margin stock” as such term is defined in Regulation U
of the Board of Governors of the Federal Reserve System as amended, or any
successor regulation.

“Material Adverse Effect” shall mean any of (a) a material adverse change in, or
a material adverse effect upon the condition (financial or otherwise), business,
properties or results of operations of the Borrower, (b) a material impairment
on the ability of the Borrower to fulfill any of its obligations under this
Agreement or any of the other Loan Documents or (c) a material adverse effect
upon the legality, validity, binding effect or enforceability against the
Borrower of any Loan Document or the rights and remedies of the Lender under any
of the Loan Documents.

“Maturity Date” shall mean the earliest of (i) the third anniversary of the
Closing Date, and (ii) the date that all Loans shall become due and payable in
full hereunder, whether by acceleration or otherwise.

“MBIA UK” shall mean MBIA UK (Holdings) Limited, a limited company organized
under the laws of England and Wales.

 

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“MBIA UK Pledge Agreement” shall mean the pledge agreement under the laws of the
laws of England and Wales, relating to the pledge of the Equity Interests of
MBIA UK as Collateral to secure the Obligations.

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

“Multiemployer Plan” shall mean any employee benefit plan of the type described
in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate
makes or is obligated to make contributions, or during the preceding five plan
years, has made or been obligated to make contributions.

“Note” shall mean the promissory note, substantially in the form of Exhibit A,
issued by the Borrower pursuant to Section 2.2.

“Notice of Borrowing” shall mean a notice substantially in the form of Exhibit
B.

“NPFGC Loan Agreement” shall mean that certain Loan Agreement dated as of
December 12, 2011 between the Borrower and National Public Finance Guarantee
Corporation, as lender, as the same may be amended, restated, supplemented or
otherwise modified from time to time.

“NPFGC Loan Documents” shall mean (i) the NPFGC Loan Agreement, (ii) that
certain Security Agreement dated as of December 12, 2011 between the Borrower
and National Public Finance Guarantee Corporation, as secured party, and
(iii) any other document, agreement or instrument entered into in connection
with the foregoing, in each case as the same may be amended, restated,
supplemented or otherwise modified from time to time.

“NPL” shall mean the National Priorities List under CERCLA.

“Obligations” shall mean all indebtedness (including interest accruing during
the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) and
other monetary obligations of the Borrower to the Lender or any other Person,
individually or collectively, existing on the Closing Date or arising thereafter
(direct or indirect, joint or several, absolute or contingent, matured or
unmatured, liquidated or unliquidated, secured or unsecured) arising or incurred
under this Agreement or any of the other Loan Documents (including under any of
the Loans made or reimbursement or other monetary obligations incurred or other
instruments at any time evidencing any thereof), in each case whether now
existing or hereafter arising, whether all such obligations arise or accrue
before or after the commencement of any bankruptcy, insolvency or receivership
proceedings (and whether or not such claims, interest, costs, expenses or fees
are allowed or allowable in any such proceeding).

 

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“Organization Documents” shall mean, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non-U.S. jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation or organization and operating agreement; and (c) with respect to
any partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity.

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

“Other Prepayment Collateral” shall mean (a) Installment Premium Collateral,
(b) Excess Spread Salvage Collateral and (c) all Collateral described in clause
(f) of Section 2.1 of the Security Agreement to the extent derived from
Installment Premium Collateral or Excess Spread Salvage Collateral.

“Other Taxes” shall mean any present or future stamp, court or documentary,
intangible, recording, filing or similar Taxes or any other excise or property
taxes, charges or similar levies that arise from any payment made under, from
the execution, delivery, performance, enforcement or registration of, from the
receipt or perfection of a security interest under, or otherwise with respect
to, any Loan Document.

“Permitted Investments” means any of the following types of Investments, to the
extent owned by the Borrower or any of its Subsidiaries free and clear of all
Liens (other than Liens created under the Security Documents):

(a) readily marketable obligations issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
having maturities of not more than 360 days from the date of acquisition
thereof; provided that the full faith and credit of the United States of America
is pledged in support thereof;

(b) time deposits with, or insured certificates of deposit or bankers’
acceptances of, any commercial bank that (i) (A) is a Lender or (B) is organized
under the laws of the United States, any state thereof or the District of
Columbia or is the principal banking subsidiary of a bank holding company
organized under the laws of the United States, any state thereof or the District
of Columbia, and is a member of the Federal Reserve System, (ii) issues (or the
parent of which issues) commercial paper rated as

 

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described in clause (c) of this definition and (iii) has combined capital and
surplus of at least $500,000,000, in each case with maturities of not more than
180 days from the date of acquisition thereof;

(c) commercial paper issued by any Person organized under the laws of any state
of the United States of America and rated at least “P-1” (or the then equivalent
grade) by Moody’s or at least “A-1” (or the then equivalent grade) by S&P, in
each case with maturities of not more than 180 days from the date of acquisition
thereof;

(d) Investments in fixed income securities rated at least “A” by S&P or “A2” by
Moody’s on the date of acquisition, other than those issued by Affiliates of the
Borrower; and

(e) Investments, classified in accordance with US GAAP as current assets of the
Borrower or any of its Subsidiaries, in money market investment programs
registered under the Investment Company Act of 1940, which are administered by
financial institutions that are rated AAA (or the equivalent thereof) or better
by S&P or Aaa3 (or the equivalent thereof) or better by Moody’s, and the
portfolios of which are limited solely to Investments of the character, quality
and maturity described in clauses (a), (b) and (c) of this definition.

“Permitted Lien” shall have the meaning set forth in Section 7.1.

“Person” shall mean an individual, sole proprietorship, partnership,
corporation, association, institution, entity, limited liability company,
business trust, joint stock company, trust, unincorporated association, joint
venture or Governmental Authority.

“Pension Plan” shall mean any “employee pension benefit plan” (as such term is
defined in Section 3(2) of ERISA), including a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by the Borrower or
any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes
or has an obligation to contribute, or in the case of a multiple employer or
other plan described in Section 4064(a) of ERISA, has made contributions at any
time during the immediately preceding five plan years.

“Plan” shall mean any “employee benefit plan” (as such term is defined in
Section 3(3) of ERISA) established by the Borrower or, with respect to any such
plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA
Affiliate.

“Potential Event of Default” shall mean any event or circumstance that, with the
giving of notice, the passage of time or both, would (if not cured, waived or
otherwise remedied during such time) constitute an Event of Default.

 

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“Put Back Prepayment Collateral” shall mean Put-Back Recoveries, as well as all
Collateral described in clause (f) of Section 2.1 of the Security Agreement to
the extent derived from Put Back Prepayment Collateral.

“Put-Back Recoveries” shall have the meaning assigned thereto in Section 2.1(a)
of the Security Agreement.

“Register” shall have the meaning set forth in Section 9.7(c).

“Regulated Accounting Principles” shall mean the statutory accounting principles
permitted or prescribed by the New York State Department of Financial Services.

“Regulation D” shall mean Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.

“Regulation X” shall mean Regulation X of the Board of Governors of the Federal
Reserve System, as in effect from time to time.

“Related Parties” means, with respect to any Person, such Person’s Affiliates
and the partners, directors, officers, employees, agents, trustees,
administrators, managers, advisors and representatives of such Person and of
such Person’s Affiliates.

“Reportable Event” means any of the events set forth in Section 4043(c) of
ERISA, other than events for which the 30 day notice period has been waived.

“Required Coverage” shall mean $1,000,000,000.

“Responsible Officer” means the chief executive officer, president, chief
financial officer, treasurer, assistant treasurer or controller of the Borrower
or any of its Subsidiaries, as the context may require. Any document delivered
hereunder that is signed by a Responsible Officer of the Borrower or any of its
Subsidiaries shall be conclusively presumed to have been authorized by all
necessary corporate, partnership and/or other action on the part of such Person
and such Responsible Officer shall be conclusively presumed to have acted on
behalf of such Person.

“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any capital stock or other Equity
Interest of any Person or any of its Subsidiaries, or any payment (whether in
cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, defeasance,
acquisition, cancellation or termination of any such capital stock or other
Equity Interest, or on account of any return of capital to any Person’s
stockholders, partners or members (or the equivalent of any thereof), or any
option, warrant or other right to acquire any such dividend or other
distribution or payment.

 

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“S&P” means Standard & Poor’s Financial Services LLC, a subsidiary of The
McGraw-Hill Companies, Inc., and any successor thereto.

“SEC” means the Securities and Exchange Commission, any successor thereto and
any analogous Governmental Authority succeeding to any of its principal
functions.

“Securities Act” shall mean the Securities Act of 1933, as amended from time to
time, and any successor statute.

“Security Agreement” shall mean the Security Agreement, dated as of the date
hereof, between the Borrower and the Lender, as the same may from time to time
be amended, modified or supplemented.

“Security Documents” shall mean the Security Agreement, the MBIA UK Pledge
Agreement, and all other instruments, agreements, certificates and documents
(including Uniform Commercial Code financing statements and fixture filings)
delivered to the Lender in connection with any Collateral or to secure the
Obligations under the Loan Documents.

“Settlement Agreement” shall mean the Settlement Agreement and Release, dated as
of the date hereof, among, inter alios, the Borrower and the Lender, as the same
may be amended, modified or supplemented from time to time.

“Settlement Documents” shall mean (i) the Settlement Agreement, (ii) the
Termination Agreement (as defined in the Settlement Agreement), (iii) the
Investment Agreement (as defined in the Settlement Agreement) and (iv) the
Warrant Issuance (as defined in the Settlement Agreement).

“Solvent” and “Solvency” shall mean, with respect to any Person on any date of
determination, that on such date (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including contingent
liabilities, of such Person, (b) the present fair salable value of the assets of
such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person’s ability to pay such debts and
liabilities as they mature, (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person’s property would constitute an unreasonably small capital, and
(e) such Person is able to pay its debts and liabilities, contingent obligations
and other commitments as they mature in the ordinary course of business. The
amount of contingent liabilities at any time shall be computed as the amount
that, in the light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.

 

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“Statutory Capital” shall mean the policyholders’ surplus, plus contingency
reserves of the Borrower, determined in a manner consistent with that used in
preparing the Audited Financial Statements described in clause (ii) of the
definition thereof.

“Statutory Financial Statements” shall have the meaning set forth in
Section 6.1(a)(iii).

“Subject Collateral” shall mean the Collateral described in clauses (a), (b) and
(c) of Section 2.1 of the Security Agreement.

“Subsidiary” of a Person shall mean a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
shares of securities or other interests having ordinary voting power for the
election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise specified, all references herein to a
“Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of
the Borrower.

“Supervisory Authority” shall mean , with respect to the Borrower or any
Insurance Subsidiary, (a) the department of insurance or similar Governmental
Authority of the state or other jurisdiction of domicile of the Borrower or such
Insurance Subsidiary, as the case may be, or (b) to the extent asserting
regulatory jurisdiction over the Borrower or such Insurance Subsidiary, as the
case may be, the insurance department, authority or agency in each state or
jurisdiction (domestic or foreign) in which the Borrower or such Insurance
Subsidiary, as the case may be, is licensed, and shall include any federal or
national insurance regulatory department, authority or agency that may be
created and that asserts insurance regulatory jurisdiction over the Borrower or
such Insurance Subsidiary, as the case may be.

“Surplus Notes” shall mean the Borrower’s 14% Fixed to Floating Rate Surplus
Notes due 2033.

“Swap Contract” shall mean (a) any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all transactions
of any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any

 

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form of master agreement published by the International Swaps and Derivatives
Association, Inc., any International Foreign Exchange Master Agreement, or any
other master agreement (any such master agreement, together with any related
schedules, a “Master Agreement”), including any such obligations or liabilities
under any Master Agreement.

“Swap Termination Value” shall mean, in respect of any one or more Swap
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include the Lender or any Affiliate of
the Lender).

“Synthetic Debt” shall mean, with respect to any Person as of any date of
determination thereof, all obligations of such Person in respect of transactions
entered into by such Person that are intended to function primarily as a
borrowing of funds (including any minority interest transactions that function
primarily as a borrowing) but are not otherwise included in the definition of
“Indebtedness” or as a liability on the consolidated balance sheet of such
Person and its Subsidiaries in accordance with US GAAP.

“Synthetic Lease Obligation” shall mean the monetary obligation of a Person
under (a) a so-called synthetic, off-balance sheet or tax retention lease, or
(b) an agreement for the use or possession of property (including sale and
leaseback transactions), in each case, creating obligations that do not appear
on the balance sheet of such Person but which, upon the application of any
Debtor Relief Laws to such Person, would be characterized as the indebtedness of
such Person (without regard to accounting treatment).

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

“Threshold Amount” shall mean $10,000,000.

“Type of Loan” shall mean either a Base Rate Loan or a LIBOR Rate Loan.

“UK GAAP” shall mean generally accepted accounting principles in the United
Kingdom that are applicable to the circumstances as of the date of
determination, consistently applied.

 

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“UK Insurance” shall mean MBIA UK Insurance Limited, a limited company organized
under the laws of England and Wales.

“Unfunded Pension Liability” shall mean the excess of a Pension Plan’s benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Pension Plan’s assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.

“Uniform Commercial Code” shall have the meaning assigned thereto in the
Security Agreement.

“United States” shall mean the United States of America.

“US GAAP” shall mean generally accepted accounting principles in the United
States set forth in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or such other
principles as may be approved by a significant segment of the accounting
profession in the United States, that are applicable to the circumstances as of
the date of determination, consistently applied.

“USA PATRIOT Act” shall mean the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(Title III of Pub. L. 107-56, Oct. 26, 2001).

1.2 Other Interpretive Provisions.

Except as otherwise expressly provided herein, the rules of interpretation set
forth below shall apply to this Agreement and the other Loan Documents:

(a) any term defined herein or in any other Loan Document by reference to
another document, instrument or agreement shall continue to have the meaning
assigned thereto whether or not such other document, instrument or agreement
remains in effect;

(b) words imparting the singular include the plural and vice versa;

(c) words imparting a gender include any gender;

(d) within a Loan Document, each reference to a part, clause, section,
paragraph, article, party, annex, appendix, exhibit, schedule or other
attachment shall be deemed to be a reference to a part, clause, section,
paragraph, or article of, or a party, annex, appendix, exhibit, schedule or
other attachment to, the Loan Document in question unless, in any such case,
otherwise expressly provided in any such Loan Document;

 

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(e) a reference to any statute, regulation, proclamation, ordinance or law
includes all statutes, regulations, proclamations, ordinances or laws varying,
consolidating or replacing the same from time to time, and a reference to a
statute includes all regulations, policies, protocols, codes, proclamations and
ordinances issued or otherwise applicable under that statute unless, in any such
case, otherwise expressly provided in any such statute or in the applicable Loan
Document;

(f) a definition of or reference to any document, schedule, exhibit, instrument
or agreement includes any amendment or supplement to, or restatement,
replacement, modification or novation of, any such document, schedule, exhibit,
instrument or agreement (other than any such amendment, supplement, restatement,
replacement, modification or novation in violation of the Loan Documents) unless
otherwise specified in such definition or in the context in which such reference
is used;

(g) a reference to a particular section, paragraph or other part of a particular
statute shall be deemed to be a reference to any other section, paragraph or
other part of a statute substituted therefor from time to time;

(h) if a capitalized term describes, or shall be defined by reference to, a
document, instrument or agreement that has not as of any particular date been
executed and delivered and such document, instrument or agreement is attached as
an exhibit to any Loan Document, such reference shall be deemed to be to such
form and, following such execution and delivery and subject to paragraph
(f) above, to the document, instrument or agreement as so executed and
delivered;

(i) a reference to any Person (as hereinafter defined) includes such Person’s
successors and permitted assigns, whether by way of merger or otherwise;

(j) any reference to “days” shall mean calendar days unless “Business Days” are
expressly specified;

(k) unless otherwise provided herein, if the date as of which any right, option
or election is exercisable is stated to be on a day that is not a Business Day,
such right, option or election may be exercised on the next succeeding Business
Day with the same effect as if the same was exercised or made on such date or
day;

(l) words such as “hereunder,” “hereto,” “hereof” and “herein” and other words
of similar import shall, unless the context requires otherwise, refer to the
whole of the applicable document and not to any particular article, section,
subsection, paragraph or clause thereof;

(m) a reference to “including” means including without limiting the generality
of any description preceding such term, and for purposes hereof and of each Loan
Document the rule of ejusdem generis shall not be applicable to limit a general
statement, followed by or referable to an enumeration of specific matters, to
matters similar to those specifically mentioned;

 

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(n) except where expressly provided otherwise, whenever any matter is required
to be satisfactory to, or determined or approved by, the Lender, or the Lender
is required or permitted to exercise any discretion (including any discretion to
waive, select, require, deem appropriate, deem necessary, permit, determine or
approve any matter), the satisfaction, determination or approval of the Lender,
or the exercise by the Lender of such discretion, shall be in its sole and
absolute discretion; and

(o) the word “or” shall be non-exclusive and shall be construed to include the
word “and.”

ARTICLE II

THE LOANS

2.1 Amounts and Terms of Commitments.

(a) Subject to and upon the terms and conditions set forth herein, the Lender
agrees to make loans (each a “Loan”) to the Borrower from time to time, on any
Business Day, during the Commitment Period in an aggregate principal amount not
to exceed at any time outstanding the Commitment Amount. Loans may be Base Rate
Loans or LIBOR Loans, as further provided herein.

(b) Except as otherwise provided herein, the Borrower may borrow, repay and
reborrow Loans until the Maturity Date.

2.2 Evidence of Debt.

(a) The entries made in the Lender’s accounts in respect of (i) the amount of
the Loans made hereunder, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to the Lender hereunder
and (iii) the amount of any sum received by the Lender hereunder from the
Borrower shall be prima facie evidence of the existence and amounts of the
obligations therein recorded; provided that the failure of the Lender to
maintain such accounts or any error therein shall not in any manner affect the
obligations of the Borrower to repay the Loans in accordance with the terms
specified herein.

(b) Upon request by the Lender, the Borrower will duly execute and deliver the
Note to the Lender to evidence the Loans made hereunder.

2.3 Procedure for Borrowing.

From time to time during the Commitment Period, the Borrower may request the
Lender to make a Loan by delivering an irrevocable written notice to the Lender
in the

 

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form of a Notice of Borrowing (to be confirmed promptly by telephone),
specifying (i) the aggregate principal amount of the Loan to be made on the
Borrowing Date, (ii) the requested Borrowing Date, which shall be a Business
Day, (iii) whether the requested Loan is to consist of Base Rate Loans or LIBOR
Loans, and (iv) if the requested Loan is to consist of LIBOR Loans, the initial
Interest Periods selected by the Borrower for such LIBOR Loans. The Borrower
shall give each Notice of Borrowing to the Lender not later than 12:00 p.m. (New
York City time) at least three Business Days before the date of the requested
Loan borrowing in the case of a Loan consisting of LIBOR Loans and not later
than 12:00 p.m. (New York City time) at least one Business Day before the date
of the requested Loan borrowing in the case of a Loan consisting of Base Rate
Loans. Each Notice of Borrowing shall be delivered by first-class mail, fax or
by e-mail containing such signed and completed Notice of Borrowing to the Lender
at the office or facsimile number (or e-mail address, as the case may be)
specified by the Lender (and such telephonic notice shall be given to the
telephone number specified by the Lender). Unless the Lender determines that any
applicable condition set forth in Article IV has not been satisfied by not later
than 2:00 p.m. New York City time on the requested Borrowing Date, the Lender
will make the requested Loan by wire transfer of immediately available funds to
such account of the Borrower or its designee as specified in the applicable
Notice of Borrowing. Each borrowing of Loans shall be in a principal amount of
(i) $5,000,000 or a whole multiple of $1,000,000 in excess thereof, in the case
of LIBOR Rate Loans and (ii) $2,000,000 or a whole multiple of $500,000 in
excess thereof, in the case of Base Rate Loans.

2.4 Prepayments and Commitment Reductions.

(a) Optional Prepayments and Commitment Reductions.

(i) Subject to Section 3.2, the Borrower may, from time to time, prepay the
Loans, in whole or in part, without premium or penalty, by giving the Lender
irrevocable written notice of its intent to prepay the Loans and the amount of
such prepayment, which notice shall be given at or before 12:00 noon (New York
City time) on (x) the date of such prepayment, if such Loans being prepaid are
Base Rate Loans, or (y) on the date that is three Business Days prior to the
date of repayment, in the case of any LIBOR Rate Loan. Any such prepayment
(other than any prepayment of all Loans then outstanding) shall be in a
principal amount of (A) $5,000,000 or a whole multiple of $1,000,000 in excess
thereof, in the case of LIBOR Rate Loans, or (B) $500,000 or a whole multiple of
$100,000 in excess thereof, in the case of Base Rate Loans. If such notice is
given by the Borrower, the Borrower shall make such prepayment (and the payment
amount specified in such notice shall be due and payable) on the date specified
therein, together with accrued interest to such date on the amount prepaid and
any amounts required pursuant to Section 3.2.

(ii) The Borrower may, upon notice to the Lender, from time to time permanently
reduce the Commitment Amount; provided that (x) any such notice

 

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shall be received by the Lender not later than 11:00 a.m. five Business Days
prior to the date of termination or reduction, (y) any such partial reduction
shall be in an aggregate amount of $5,000,000 or any whole multiple of
$1,000,000 in excess thereof and (z) the Borrower shall not terminate or reduce
the Commitment Amount if, after giving effect thereto and to any concurrent
prepayments hereunder, the Loans outstanding would exceed the Commitment Amount.

(b) Mandatory Prepayments and Mandatory Commitment Reductions.

(i) Promptly upon (and in no event later than 5 p.m. New York City time on the
date of, or in the case of cash proceeds received after noon New York City time,
no later than 5 p.m. New York City time on the following Business Day) receipt
of any cash proceeds by the Borrower or any Subsidiary from or in respect of any
Put Back Prepayment Collateral, the Borrower shall (A) notify the Lender in
writing thereof and (B) prepay the Loans (with a corresponding automatic and
permanent reduction of the Commitment Amount) in an amount of principal that,
together with accrued interest thereon as of the date of prepayment, is equal to
the amount of such cash proceeds, and automatically, without any further action
by the Borrower, the Commitment Amount shall be permanently reduced by an amount
that is equal to the amount of such cash proceeds in excess of any Loans then
outstanding.

(ii) On and after the date that is one year after the Closing Date, promptly
upon (and in no event later than 5 p.m. New York City time on the date of, or in
the case of cash proceeds received after noon New York City time, no later than
5 p.m. New York City time on the following Business Day) receipt of any cash
proceeds by the Borrower or any Subsidiary from or in respect of any Other
Prepayment Collateral, the Borrower shall (A) notify the Lender in writing
thereof and (B) prepay the Loans (with a corresponding automatic and permanent
reduction of the Commitment Amount) in an amount of principal that, together
with accrued interest thereon as of the date of prepayment, is equal to
(x) prior to the date that is two years after the Closing Date, 50% or (y) from
and after the date that is two years after the Closing Date, 100% of the amount
of such cash proceeds, and automatically, without any further action by the
Borrower, the Commitment Amount shall be permanently reduced by an amount that
is equal to the amount by which (x) prior to the date that is two years after
the Closing Date, 50% or (y) from and after the date that is two years after the
Closing Date, 100% of such cash proceeds exceeds the amount of any Loans then
outstanding.

(iii) Promptly upon (and in no event later than 5 p.m. New York City time on the
date of, or in the case of cash proceeds received after noon New York City time,
no later than 5 p.m. New York City time on the following Business Day) receipt
by the Borrower or any Subsidiary of any cash proceeds from any Disposition made
pursuant to Section 7.6(m), the Borrower shall (A) notify the

 

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Lender in writing thereof and (B) prepay the Loans (with a corresponding
automatic and permanent reduction of the Commitment Amount) in an amount of
principal that, together with accrued interest thereon as of the date of
prepayment, is equal to the amount of such cash proceeds, and automatically,
without any further action by the Borrower, the Commitment Amount shall be
permanently reduced by an amount that is equal to the amount of such cash
proceeds in excess of any Loans then outstanding, provided that, notwithstanding
anything herein to the contrary, the Borrower shall not be required to make any
prepayment pursuant to this Section 2.4(b)(iii) so long as the aggregate amount
of such Dispositions made from and after the Closing Date and as to which
prepayments have not been made under this Section 2.4(b)(iii) is not greater
than $1,000,000.

(iv) In the event that the Borrower is required, in connection with any
borrowing of Loans, to represent and warrant to the Lender pursuant to
Section 4.2(h) that the proceeds of such borrowing of Loans are to be used by
the Borrower to meet the Borrower’s ordinary course liquidity needs within 30
days of such Borrowing Date, then, to the extent that any portion of the
proceeds of such Loans are not so used within such 30 day period, the Borrower
shall, on the 30th day of such period, (A) notify the Lender in writing thereof
and (B) prepay the Loans (but not, for the avoidance of doubt, reduce the
Commitment Amount) in an amount of principal that is equal to the amount of
Loans borrowed as part of such borrowing which were not so used in such period
to meet the Borrower’s ordinary course liquidity needs or to make voluntary
prepayments of the Loans in accordance with Section 2.4(a).

(c) Application of Prepayments of Loans to Base Rate Loans and LIBOR Rate Loans.
Any prepayment of Loans shall be applied first to Base Rate Loans to the full
extent thereof before application to LIBOR Rate Loans, in each case in a manner
which minimizes the amount of any payments required to be made by the Borrower
pursuant to Section 3.2.

2.5 Scheduled Repayment.

The Borrower shall repay the full amount of principal outstanding of the Loans,
and all accrued and unpaid interest thereon, all accrued and unpaid fees due
under any Loan Documents and all other Obligations, on the Maturity Date. The
Borrower shall also make the mandatory prepayments required by Section 2.4(b).

2.6 Interest.

(a) The Loans shall accrue interest for each day from, and including, the first
day of each Interest Period to, but excluding, the last day of such Interest
Period on the outstanding principal amount thereof commencing on the Borrowing
Date thereof: (i) in the case of a Base Rate Loan, at the Base Rate plus the
Applicable Margin, and (ii) in the case of a LIBOR Rate Loan, at the Adjusted
LIBOR Rate plus the Applicable Margin.

 

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(b) Interest on each Loan shall be paid in arrears on each Interest Payment Date
and at such other times as may be specified herein. Accrued interest also shall
be paid on the date of any prepayment of Loans under Section 2.4 for the portion
of the Loans so prepaid.

(c) [Reserved]

(d) Notwithstanding paragraphs (a) and (b), while any Event of Default exists,
(i) the Borrower shall pay interest (after as well as before entry of judgment
thereon to the extent permitted by Applicable Law) on the principal amount of
all outstanding Loans and, to the extent permitted by Applicable Law, on any
other amount payable under any Loan Document, at a rate per annum equal to the
Default Rate, and (ii) all such interest shall be due and payable on demand of
the Lender.

(e) The basis for determining the rate of interest with respect to any Loan, and
the Interest Period with respect to any LIBOR Rate Loan, shall be selected by
the Borrower and notified to the Lender pursuant to the applicable Notice of
Borrowing or Conversion/Continuation Notice, as the case may be. If on any day a
Loan is outstanding with respect to which a Notice of Borrowing or
Conversion/Continuation Notice has not been delivered to the Lender in
accordance with the terms hereof specifying the applicable basis for determining
the rate of interest, then for that day such Loan shall be a Base Rate Loan.

2.7 Computation of Interest.

Interest payable hereunder shall be computed on the basis of a 360-day year with
respect to LIBOR Rate Loans and 365/366-day year with respect to Base Rate
Loans, in each case for the actual number of days elapsed in the period during
which it accrues. In computing interest on any Loan, the date of the making of
such Loan or the first day of an Interest Period applicable to such Loan or,
with respect to a Base Rate Loan being converted from a LIBOR Rate Loan, the
date of conversion of such LIBOR Rate Loan to such Base Rate Loan, as the case
may be, shall be included, and the date of payment of such Loan or the
expiration date of an Interest Period applicable to such Loan or, with respect
to a Base Rate Loan being converted to a LIBOR Rate Loan, the date of conversion
of such Base Rate Loan to such LIBOR Rate Loan, as the case may be, shall be
excluded; provided, that if a Loan is repaid on the same day on which it is
made, one (1) day’s interest shall be paid on that Loan.

 

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2.8 Payments Generally.

(a) All payments (including prepayments) to be made by the Borrower hereunder
shall be made without condition, defense, set-off, deduction, withholding,
recoupment or counterclaim, except as required by Applicable Law, and shall be
made prior to 12:00 noon, New York City time, on the due date thereof to the
Lender in Dollars by wire transfer of immediately available funds to such
account of the Lender as the Lender may notify the Borrower. Any payment
received by the Lender later than such time on the specified payment date shall
be deemed to have been received on the following Business Day, and any
applicable interest or fees shall continue to accrue.

(b) Whenever any payment is due on a day other than a Business Day, such payment
shall be made on the next Business Day, provided that, should such next Business
Day fall in the next calendar month, such payment shall be due on the preceding
Business Day, and such extension of time shall in such event be included in, and
such reduction of time shall in such event be excluded from, the computation of
interest or fees.

(c) Payments in respect of Loans received by the Lender from the Borrower shall
be applied: first, to accrued interest and fees due on such Loans (including on
any amount of deferred interest); second, to payments of principal due on such
Loans; and third, to all other amounts due under this Agreement and the other
Loan Documents and all Obligations.

2.9 Conversion/Continuation.

(a) Subject to Section 3.3 and so long as no Event of Default shall have
occurred and then be continuing, the Borrower shall have the option:

(i) to convert at any time all or any part of any Loan (equal to (x) in the case
of a conversion to LIBOR Rate Loans, $5,000,000 and integral multiples of
$1,000,000 in excess thereof and (y) in the case of a conversion to Base Rate
Loans, $500,000 and integral multiples of $100,000 in excess thereof) from one
Type of Loan to another Type of Loan; provided, that a LIBOR Rate Loan may only
be converted on the expiration of the Interest Period applicable to such LIBOR
Rate Loan unless the Borrower shall pay all amounts due under Section 3.2 in
connection with any such conversion; or

(ii) upon the expiration of any Interest Period applicable to any LIBOR Rate
Loan, to continue all or any portion of such Loan equal to $5,000,000 and
integral multiples of $1,000,000 in excess of that amount as a LIBOR Rate Loan.

(b) The Borrower shall deliver a Conversion/Continuation Notice to the Lender no
later than 12:00 p.m. (New York City time) at least one Business Day in advance

 

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of the proposed conversion date (in the case of a conversion to a Base Rate
Loan) and at least three (3) Business Days in advance of the proposed
Conversion/Continuation Date (in the case of a conversion to, or a continuation
of, a LIBOR Rate Loan). If for any reason a conversion or continuation of a
LIBOR Rate Loan does not occur on a date specified therefor in a
Conversion/Continuation Notice or telephonic request for conversion or
continuation, the Borrower shall make any payments required pursuant to
Section 3.2.

(c) Notwithstanding anything herein to the contrary, the Borrower may not borrow
LIBOR Loans, or convert to or continue LIBOR Loans, in each case unless such
resulting LIBOR Loans shall have an Interest Period ending on or prior to the
Maturity Date.

2.10 [reserved]

2.11 Fees.

(a) Commitment Fee. The Borrower shall pay to the Lender a commitment fee equal
to 2.00% times the actual daily amount by which the Commitment Amount exceeds
the sum of the outstanding amount of the Loans. The commitment fee shall accrue
at all times during the Commitment Period. The commitment fee shall be payable
in arrears on the last day of March, June, September and December of each year
and on the Maturity Date, commencing on the first such date to occur after the
date hereof. The commitment fee 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) Other Fees. The Borrower agrees to pay to the Lender fees payable in the
amounts and at the times separately agreed upon between the Borrower and the
Lender. Such fees shall be fully earned when paid and shall not be refundable
for any reason whatsoever.

2.12 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, the Lender (except any reserve requirement which is reflected in
the determination of Adjusted LIBOR Rate);

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

(iii) impose on the Lender or the London interbank market any other condition,
cost or expense affecting this Agreement or LIBOR Rate Loans made by such Lender
or any LIBOR Rate Loan or participation therein;

 

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and the result of any of the foregoing shall be to increase the cost to the
Lender of making, converting to, continuing or maintaining any LIBOR Rate Loan
or of maintaining its obligation to make any such LIBOR Rate Loan, or to reduce
the amount of any sum received or receivable by the Lender hereunder, whether of
principal, interest or otherwise, then, upon the request of the Lender, the
Borrower will pay to the Lender such additional amount or amounts as will
compensate the Lender for such additional costs incurred or reduction suffered.

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

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

(d) Failure or delay on the part of the Lender to demand compensation pursuant
to this Section shall not constitute a waiver of the Lender’s right to demand
such compensation; provided that the Borrower shall not be required to
compensate the Lender pursuant to this Section for any increased costs or
reductions incurred more than nine months prior to the date that the Lender
notifies the Borrower of the Change in Law giving rise to such increased costs
or reductions and of the Lender’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 nine-month period referred to above shall
be extended to include the period of retroactive effect thereof.

 

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ARTICLE III

TAXES, YIELD PROTECTION AND ILLEGALITY

3.1 Taxes.

(a) Payments Free of Taxes; Obligation to Withhold; Payments on Account of
Taxes. Any and all payments by or on account of any obligation of the Borrower
under any Loan Document shall be made without deduction or withholding for any
Taxes, except as required by Applicable Law. If any Applicable Law (as
determined in the good faith discretion of the Borrower) requires the deduction
or withholding of any Tax from any such payment by the Borrower, then the
Borrower shall be entitled to make such deduction or withholding and shall
timely pay the full amount deducted or withheld to the relevant Governmental
Authority in accordance with Applicable Law and, if such Tax is an Indemnified
Tax, then the sum payable by the Borrower shall be increased as necessary so
that after such deduction or withholding has been made (including such
deductions and withholdings applicable to additional sums payable under this
Section 3.1) the Lender receives an amount equal to the sum it would have
received had no such deduction or withholding been made.

(b) Payment of Other Taxes by the Borrower. Without limiting the provisions of
subsection (a) above, the Borrower shall timely pay to the relevant Governmental
Authority in accordance with Applicable Law any Other Taxes.

(c) Tax Indemnifications.

(i) Without limiting the provisions of subsection (a) or (b) above, the Borrower
shall, and does hereby, indemnify the Lender, and shall make payment in respect
thereof within thirty days after demand therefor, for the full amount of any
Indemnified Taxes (including Indemnified Taxes imposed or asserted on or
attributable to amounts payable under this Section 3.1) payable or paid by the
Lender or required to be withheld or deducted from a payment to the Lender, and
any penalties, interest and reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority. A certificate as to
the amount of such payment or liability delivered to the Borrower by the Lender
shall be conclusive absent manifest error.

(ii) Without limiting the provisions of subsection (a) or (b) above, the Lender
shall, and does hereby, indemnify the Borrower, and shall make payment in
respect thereof within thirty days after demand therefor, (x) against any Taxes
attributable to the Lender’s failure to comply with the provisions of
Section 9.7(d) relating to the maintenance of a Participant Register and
(y) against any Excluded Taxes attributable to the Lender, in each case, that
are payable or paid by the Borrower in connection with any Loan Document, and
any reasonable expenses arising therefrom or with respect thereto, whether or
not such Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Lender by the Borrower shall be conclusive absent
manifest error. The Lender hereby authorizes the Borrower to set off and apply
any and all amounts at any time owing to the Lender under this Agreement or any
other Loan Document against any amount due to the Borrower under this clause
(ii).

 

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(d) Evidence of Payments. Upon request by the Borrower or the Lender, as the
case may be, after any payment of Taxes by the Borrower or the Lender to a
Governmental Authority as provided in this Section 3.1, the Borrower shall
deliver to the Lender or the Lender shall deliver to the Borrower, as the case
may be, the original or a certified copy of a receipt issued by such
Governmental Authority evidencing such payment, a copy of any return required by
Applicable Law to report such payment or other evidence of such payment
reasonably satisfactory to the Borrower or the Lender, as the case may be.

(e) Status of Lender; Tax Documentation.

(i) If the Lender is entitled to an exemption from or reduction of withholding
Tax with respect to payments made under any Loan Document, the Lender shall
deliver to the Borrower, at the time or times reasonably requested by the
Borrower, such properly completed and executed documentation reasonably
requested by the Borrower as will permit such payments to be made without
withholding or at a reduced rate of withholding. In addition, the Lender, if
reasonably requested by the Borrower, shall deliver such other documentation
prescribed by Applicable Law or reasonably requested by the Borrower as will
enable the Borrower to determine whether or not the Lender is subject to backup
withholding or information reporting requirements. Notwithstanding anything to
the contrary in the preceding two sentences, the completion, execution and
submission of such documentation (other than such documentation set forth in
Sections 3.1(e)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in
the Lender’s reasonable judgment such completion, execution or submission would
subject the Lender to any material unreimbursed cost or expense or would
materially prejudice the legal or commercial position of the Lender.

(ii) Without limiting the generality of the foregoing:

(A) if the Lender is a “United States person” as defined in Section 7701(a)(30)
of the Code, the Lender shall deliver to the Borrower on or prior to the date on
which the Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of the Borrower), executed copies of IRS
Form W-9 certifying that the Lender is exempt from U.S. federal backup
withholding tax;

 

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(B) if the Lender is not a “United States person” as defined in
Section 7701(a)(30) of the Code, the Lender shall, to the extent it is legally
entitled to do so, deliver to the Borrower on or prior to the date on which the
Lender becomes a Lender under this Agreement (and from time to time thereafter
upon the reasonable request of the Borrower), whichever of the following is
applicable:

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

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

(3) if the Lender claims the benefits of the exemption for portfolio interest
under Section 871(h) or 881(c) of the Code, (x) a certificate to the effect that
the Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the
Code, a “10 percent shareholder” of the Borrower within the meaning of
Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation”
described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance
Certificate”) and (y) executed copies of IRS Form W-8BEN; or

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

(C) if the Lender is not a “United States person” as defined in
Section 7701(a)(30) of the Code, the Lender shall, to the extent it is legally
entitled to do so, deliver to the Borrower on or prior to the date on which the
Lender becomes a Lender under this Agreement (and from time to time thereafter
upon the reasonable request of the Borrower), executed originals of any other
form prescribed by Applicable Law as a basis for claiming exemption from or a
reduction in U.S. federal withholding Tax, duly completed, together with such
supplementary documentation as may be prescribed by Applicable Law to permit the
Borrower to determine the withholding or deduction required to be made; and

 

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(D) if a payment made to the Lender under any Loan Document would be subject to
U.S. federal withholding Tax imposed by FATCA if the Lender were to fail to
comply with the applicable reporting requirements of FATCA (including those
contained in Section 1471(b) or 1472(b) of the Code, as applicable), the Lender
shall deliver to the Borrower at the time or times prescribed by Applicable Law
and at such time or times reasonably requested by the Borrower such
documentation prescribed by Applicable Law (including as prescribed by
Section 1471(b)(3)(C)(i) of the Code) and such additional documentation
reasonably requested by the Borrower as may be necessary for the Borrower to
comply with its obligations under FATCA and to determine that the Lender has
complied with the Lender’s obligations under FATCA or to determine the amount to
deduct and withhold from such payment. Solely for purposes of this clause (D),
“FATCA” shall include any amendments made to FATCA after the date of this
Agreement.

(iii) The Lender agrees that if any form or certification it previously
delivered pursuant to this Section 3.1 expires or becomes obsolete or inaccurate
in any respect, it shall update such form or certification or promptly notify
the Borrower in writing of its legal inability to do so.

(f) Treatment of Certain Refunds. If the Lender determines, in its sole
discretion exercised in good faith, that it has received a refund of any Taxes
as to which it has been indemnified by the Borrower or with respect to which the
Borrower has paid additional amounts pursuant to this Section 3.1, it shall pay
to the Borrower an amount equal to such refund (but only to the extent of
indemnity payments made, or additional amounts paid, by the Borrower under this
Section 3.1 with respect to the Taxes giving rise to such refund), net of all
out-of-pocket expenses (including Taxes) incurred by the Lender, and without
interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund), provided that the Borrower, upon the request of
the Lender, agrees to repay the amount paid over to the Borrower (plus any
penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Lender in the event the Lender is required to repay such
refund to such Governmental Authority. Notwithstanding anything to the contrary
in this subsection, in no event will the Lender be required to pay any amount to
the Borrower pursuant to this subsection the payment of which would place the
Lender in a less favorable net after-Tax position than the Lender would have
been in if the Tax subject to indemnification and giving rise to such refund had
not been deducted, withheld or otherwise imposed and the indemnification
payments or additional amounts with respect to such Tax had never been paid.
This subsection shall not be construed to require the Lender to make available
its tax returns (or any other information relating to its taxes that it deems
confidential) to the Borrower or any other Person.

(g) Survival. Each party’s obligations under this Section 3.1 shall survive any
assignment of rights by, or the replacement of, the Lender, the termination of
the Commitments and the repayment, satisfaction or discharge of all obligations
under any Loan Document.

 

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3.2 Funding Losses. If the Borrower:

(a) fails to make on a timely basis any payment of principal of any Loan;

(b) fails to make any prepayment of any Loan in accordance with Section 2.4
(including, without limitation, an optional prepayment after having given notice
of such prepayment in accordance with Section 2.4(a));

(c) fails to borrow any Loan on the date indicated in a Notice of Borrowing
delivered in accordance with Section 2.3 (in each case except if such failure is
due solely to the fault of the Lender); or

(d) makes an optional prepayment, conversion or continuation of a Loan on a day
other than the last day of the applicable Interest Period for such Loan (whether
voluntary, mandatory, automatic, by reason of acceleration or otherwise);

the Borrower shall promptly compensate the Lender and hold such Lender harmless
from any loss, cost or expense incurred, including any loss of anticipated
profits and any loss or expense arising from the liquidation or reemployment of
funds obtained by it to maintain such Loan or from fees payable to terminate the
deposits from which such funds were obtained. The Borrower shall also pay any
customary administrative fees charged by such Lender in connection with the
foregoing.

3.3 Illegality, Etc.

(a) In the event that on any date the Lender shall have determined that the
making, maintaining or continuation of its LIBOR Rate Loans (i) has become
unlawful as a result of compliance by the Lender in good faith with any law,
treaty, governmental rule, regulation, guideline or order (or would conflict
with any such treaty, governmental rule, regulation, guideline or order not
having the force of law even though the failure to comply therewith would not be
unlawful), or (ii) has become impracticable, as a result of contingencies
occurring after the date hereof which materially and adversely affect the London
interbank market or the position of the Lender in that market, then, and in any
such event, the Lender shall give notice (by telecopy or by telephone confirmed
in writing) to the Borrower of such determination. Thereafter (1) the obligation
of the Lender to make Loans as, or to convert Loans to, LIBOR Rate Loans shall
be suspended until such notice

 

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shall be withdrawn by the Lender, (2) to the extent such determination by the
Lender relates to a LIBOR Rate Loan then being requested by the Borrower
pursuant to a Notice of Borrowing or a Conversion/Continuation Notice, the
Lender shall make such Loan as (or continue such Loan as or convert such Loan
to, as the case may be) a Base Rate Loan, (3) the Lender’s obligation to
maintain its outstanding LIBOR Rate Loans (the “Affected Loans”) shall be
terminated at the earlier to occur of the expiration of the Interest Period then
in effect with respect to the Affected Loans or when required by law, and
(4) the Affected Loans shall automatically convert into Base Rate Loans on the
date of such termination. Upon any such conversion, the Borrower shall also pay
accrued interest on the amount so converted. Notwithstanding the foregoing, to
the extent a determination by the Lender as described above relates to a LIBOR
Rate Loan then being requested by the Borrower pursuant to a Notice of Borrowing
or a Conversion/Continuation Notice the Borrower shall have the option to
rescind such Notice of Borrowing or Conversion/Continuation Notice by giving
notice (by telecopy or by telephone confirmed in writing) to the Lender of such
rescission on the date on which the Lender gives notice of its determination as
described above.

(b) In the event that the Lender shall have determined, on any Interest Rate
Determination Date with respect to any LIBOR Rate Loans, that by reason of
circumstances affecting the London interbank market, adequate and fair means do
not exist for ascertaining the interest rate applicable to such LIBOR Rate Loans
on the basis provided for in the definition of Adjusted LIBOR Rate, the Lender
shall give notice (by telecopy or by telephone confirmed in writing) to the
Borrower of such determination, whereupon (i) no Loans may be made as, or
converted to, LIBOR Rate Loans until such time as the Lender notifies the
Borrower that the circumstances giving rise to such notice no longer exist, and
(ii) any Notice of Borrowing or Conversion/ Continuation Notice given by the
Borrower with respect to the Loans in respect of which such determination was
made shall be deemed, as applicable, to be a Notice of Borrowing for Base Rate
Loans or a Conversion/Continuation Notice to convert or continue, as the case
may be, such Loans as Base Rate Loans.

(c) Calculation of all amounts payable to the Lender hereunder shall be made as
though the Lender had actually funded each of its relevant LIBOR Rate Loans
through the purchase of a LIBOR deposit bearing interest at the rate obtained
pursuant to clause (i) of the definition of Adjusted LIBOR Rate in an amount
equal to the amount of such LIBOR Rate Loan and having a maturity comparable to
the relevant Interest Period and through the transfer of such LIBOR deposit from
an offshore office of the Lender to a domestic office of the Lender in the
United States of America; provided, however, that the Lender may fund each of
its LIBOR Rate Loans in any manner it sees fit and the foregoing assumptions
shall be utilized only for the purposes of calculating amounts payable under
this Section 3.3.

 

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3.4 Survival. All of the Borrower’s obligations under this Article III shall
survive termination of this Agreement and the commitments hereunder and
repayment of all other obligations hereunder.

ARTICLE IV

CONDITIONS PRECEDENT

4.1 Conditions Precedent to Effectiveness of this Agreement. The effectiveness
of this Agreement is subject to the satisfaction (or waiver in accordance with
the terms hereof) of the following conditions precedent:

(a) Loan Documents. The Lender shall have received all of the following
documents, duly executed and delivered by the parties thereto and in form and
substance satisfactory to the Lender:

(i) this Agreement;

(ii) the Security Agreement;

(iii) the MBIA UK Pledge Agreement; and

(iv) the Note (if requested).

(b) Other Deliverables. The Lender shall have received the following, each of
which shall be originals or .pdf (or other electronic) copies unless otherwise
specified, each properly executed by an officer of the Borrower and each dated
the Closing Date (or, in the case of certificates of governmental officials, a
recent date before the Closing Date):

(i) appropriate financing statements (Form UCC-1 or such other financing
statements or similar notices as shall be required by Applicable Law) authorized
for filing under the Uniform Commercial Code or other Applicable Law of each
jurisdiction in which the filing of a financing statement or giving of notice
may be required to perfect the security interests intended to be created by the
Security Agreement;

(ii) a copy of the Organization Documents of the Borrower, including all
amendments thereto, certified as of a recent date by the Secretary of State or
other applicable Governmental Authority of its respective jurisdiction of
organization, together with:

(A) a certificate as to the good standing of the Borrower, as of a recent date,
from the Secretary of State or other applicable Governmental Authority of its
jurisdiction of organization;

 

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(B) a certificate of the Secretary or Assistant Secretary of the Borrower dated
the Closing Date and certifying (1) that attached thereto is a true and complete
copy of the Organization Documents of the Borrower as in effect on the Closing
Date and at all times since a date prior to the date of the resolutions
described in clause (2) below; (2) that attached thereto is a true and complete
copy of resolutions duly adopted by the board of directors of the Borrower
authorizing the execution, delivery and performance of the Loan Documents to
which it is to be a party and the borrowings hereunder, and that such
resolutions have not been modified, rescinded or amended and are in full force
and effect; and (3) as to the incumbency and specimen signature of each officer
executing any Loan Document or any other document delivered in connection
herewith on behalf of the Borrower; and

(C) a certificate of another officer as to the incumbency and specimen signature
of the Secretary or Assistant Secretary of the Borrower executing the
certificate pursuant to clause (B) above;

(iii) a customary written legal opinion of (A) Weil, Gotshal & Manges LLP,
special counsel to the Borrower, and (B) in-house counsel to the Borrower, in
each case as to matters of New York and United States federal law, addressed to
the Lender, dated as of the Closing Date, and in form and substance reasonably
satisfactory to the Lender.

(c) The Borrower shall have provided the financial statements described in
Sections 5.14(a), (c) and (d).

(d) Representations and Warranties. The representations and warranties of the
Borrower set forth in the Loan Documents shall be true and correct in all
material respects (except that, to the extent that any representation and
warranty is qualified by materiality, such representation and warranty shall be
true and correct in all respects), on and as of the date of the date hereof,
except as they relate to an earlier date, in which case they shall have been
true and correct in all material respects as of such earlier date.

(e) No Event of Default. No Potential Event of Default or Event of Default shall
exist or shall result from the consummation of the transactions contemplated
hereby or any of the other Loan Documents.

(f) Governmental Approvals.

(i) All Governmental Approvals required for the execution and delivery hereof by
each of the Lender and the Borrower and performance of their respective
obligations hereunder shall have been obtained and remain in full force and
effect;

 

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(ii) without limiting the generality of the foregoing, the Borrower shall have
given the New York State Department of Financial Services the requisite notice
of the Borrower entering into this Agreement and the Borrower and the Lender
shall have obtained the approval of the New York State Department of Financial
Services to this Agreement (including, without limitation, the assignment
provisions hereof), the other Loan Documents and the transactions contemplated
thereby, including without limitation the granting of Liens on the Collateral by
the Borrower to the Lender to secure the Obligations and the making of Loans,
and such approval shall be in form and substance reasonably satisfactory to the
Lender;

(iii) without limiting the generality of the foregoing, the Borrower and the
Lender shall have obtained all necessary approvals and consents of the
regulators of MBIA UK to the granting of Liens on the Equity Interests thereof
in favor of the Secured Party (as defined in the Security Agreement) and all
such approvals and consents shall be in form and substance reasonably
satisfactory to the Lender; and

(iv) all conditions required to be satisfied as of the effective date hereof
pursuant to such Governmental Approvals shall have been satisfied.

(g) Value of Collateral. The Lender shall have received a Collateral Calculation
Certificate, evidencing that as of the Closing Date, the value of the Subject
Collateral is in excess of Required Coverage.

(h) NPFGC Loan Documents. On or prior to the Closing Date and the initial
incurrence of Loans hereunder, (i) the NPFGC Loan Agreement shall have been
repaid in full and (ii) duly executed UCC-3 termination statements evidencing,
and any other documents necessary or desirable to evidence, the release of all
security interests and Liens granted pursuant to the NPFGC Loan Documents shall
have been delivered to the Lender.

(i) Effectiveness of the Settlement. On or prior to the Closing Date, there
shall have been delivered to the Borrower and the Lender true and correct copies
of the final Settlement Documents. All Settlement Documents shall have been duly
executed and delivered by the parties thereto and shall be in full force and
effect, and the terms and conditions of such documents, as well as the
transactions contemplated by them, shall have been duly approved by the board of
directors (or equivalent) of each of the Borrower, the Lender and each of the
other parties thereto.

(j) USA PATRIOT Act. The Borrower shall, prior to the Closing Date, have
provided the documentation and other information to the Lender that are required
by regulatory authorities under applicable “know your customer” rules and
regulations, including the USA PATRIOT Act, to the extent requested at least one
Business Day prior to the Closing Date.

 

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(k) Solvency Certificate. The Lender shall have received a certificate from the
chief financial officer of the Borrower attesting that the Borrower,
individually, and the Borrower and its Subsidiaries, taken as a whole, are
Solvent on the Closing Date, after giving effect to the transactions
contemplated hereby and pursuant to the Settlement Agreement.

(l) Pro Forma Compliance. The Borrower shall be in pro forma compliance with the
covenants set forth in Sections 7.12(a) and (b) after giving effect to the
transactions contemplated by the Settlement Agreement and hereby.

(m) Officer’s Certificate. The Borrower shall have provided the Lender with a
certificate signed by a Responsible Officer of the Borrower certifying that the
conditions specified in clauses (d), (e), (f), (g), (h), (i) and (l) of this
Section 4.1 have been satisfied.

(n) Lien Searches. The Borrower shall have delivered to the Lender customary
lien searches reasonably satisfactory thereto, evidencing the absence of Liens
(other than Permitted Liens) on the property of the Borrower.

4.2 Conditions Precedent to the Making of each Loan. The obligation of the
Lender to make each Loan hereunder is subject to the satisfaction (or waiver in
accordance with the terms hereof) of the following conditions on and as of the
requested Borrowing Date:

(a) Effective Date. The Agreement shall have become effective in accordance with
Section 4.1.

(b) Representations and Warranties. At the time of and immediately after giving
effect to such Loan, the representations and warranties of the Borrower set
forth in the Loan Documents shall be true and correct in all material respects
(except that, to the extent that any representation and warranty is qualified by
materiality, such representation and warranty shall be true and correct in all
respects), on and as of the applicable Borrowing Date as if made on and as of
such date, except as they relate to an earlier date, in which case they shall
have been true and correct in all material respects as of such earlier date.

(c) No Event of Default. At the time of and immediately after giving effect to
such Loan, no Potential Event of Default or Event of Default shall have occurred
and be continuing.

(d) Notice of Borrowing. The Lender shall have received a duly completed and
executed Notice of Borrowing from the Borrower, as required by Section 2.3. Such
Notice of Borrowing shall constitute a representation and warranty by the
Borrower that, as of the date of such notice and as of the requested Borrowing
Date, the conditions in this Section are satisfied and will be satisfied on the
requested Borrowing Date.

 

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(e) Commitment Availability. On the applicable Borrowing Date, the aggregate
principal amount of all Loans, after giving effect to any Loan borrowed on such
Borrowing Date, shall not exceed the Available Commitment.

(f) Governmental Approvals.

(i) All Governmental Approvals required for the execution and delivery hereof by
each of the Lender and the Borrower and performance of their respective
obligations hereunder, including the making of the requested Loan, shall have
been obtained and remain in full force and effect;

(ii) without limiting the generality of the foregoing, all of the approvals
described in Section 4.1(f)(ii) and (iii) shall be in full force and effect and
shall not have been revoked or amended in any manner; and

(iii) all conditions required to be satisfied as of the requested Borrowing Date
pursuant to such Governmental Approvals shall have been satisfied.

(g) Coverage. On the applicable Borrowing Date, the Borrower shall have
delivered to the Lender a Collateral Calculation Certificate (dated as of such
Borrowing Date), evidencing that as of the Borrowing Date, after giving effect
to the borrowing of the requested Loan, the value of the Subject Collateral is
in excess of Required Coverage.

(h) Proceeds. In the event that, after giving effect to such Borrowing, the
aggregate principal amount of the Loans outstanding will be greater than
$50,000,000, the Borrower shall, as of the applicable Borrowing Date, represent
and warrant to the Lender (in the executed Notice of Borrowing) that the
proceeds of such Borrowing are to be used by the Borrower to meet the Borrower’s
ordinary course liquidity needs within 30 days of such Borrowing Date.

(i) Pro Forma Compliance. On the applicable Borrowing Date and after giving
effect to the applicable borrowing and the use of the proceeds thereof, the
Borrower shall be in pro forma compliance with the covenants set forth in
Section 7.12(a) and (b).

ARTICLE V

REPRESENTATIONS AND WARRANTIES

The Borrower makes all of the following representations and warranties to and in
favor of the Lender as of the date of this Agreement and each Borrowing Date,
except to the extent that any of such representations or warranties specifically
relate to an earlier date (in which case they shall have been true and correct
on such date). All of the following representations and warranties shall survive
the execution and delivery of this Agreement.

 

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5.1 Corporate Existence and Power. The Borrower and each of its Subsidiaries:

(a) is duly organized and validly existing and in good standing under the laws
of the jurisdiction of its organization,

(b) has, in the case of the Borrower, the full power and authority to enter into
and perform the obligations undertaken by it pursuant to the Loan Documents,

(c) has, in the case of the Borrower, taken all necessary action whatsoever
required and obtained all necessary consents and licenses required to authorize
its entry into, delivery and performance of the Loan Documents and the terms
hereof, and to ensure that the obligations of the Borrower thereunder are legal,
valid and binding on it,

(d) is duly authorized, qualified and licensed under the laws of each
jurisdiction in which its ownership, lease or operation of property or the
conduct of its business requires such qualification or license except as the
failure to be so authorized or qualified (individually or in the aggregate)
could not reasonably be expected to have a Material Adverse Effect, and

(e) has not taken any corporate action nor have any other steps been taken or
legal proceedings been started or threatened against it for its winding-up,
dissolution, administration or reorganization or the appointment of a receiver,
administrator, liquidator or similar officer of it or of any or all of its
assets or revenues.

5.2 Corporate Authorization; Non-Contravention. The execution, delivery and
performance by it of the Loan Documents does not (a) contravene (i) its
Organization Documents, (ii) any Applicable Law, (iii) any material Contractual
Obligation to which it is a party or binding on or affecting it or its property
other than any Contractual Obligations that have been waived, or (iv) any order,
judgment, award, injunction or decree binding on or affecting it or its property
or (b) result in, or require the creation or imposition of, any Lien upon or
with respect to any of the properties now owned or hereafter acquired by it,
except pursuant to the Security Documents.

5.3 Execution; Binding Effect. The Loan Documents have been duly executed and
delivered and constitute legal, valid and binding obligations of the Borrower
enforceable against it in accordance with their terms subject to any applicable
bankruptcy, insolvency or similar laws affecting creditors’ rights generally.

5.4 No Injunction. No injunction, writ, temporary restraining order or any order
of any nature has been issued by any court or other Governmental Authority
purporting to enjoin or restrain the execution, delivery or performance of the
Loan Documents, or directing that the transactions provided for therein not be
consummated as therein provided.

 

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5.5 No Potential Event Default or Event Default. The Borrower and each of its
Subsidiaries is not in default under or with respect to any Contractual
Obligation that could, either individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. No Potential Event Default or Event
of Default has occurred and is continuing or would result from the consummation
of the transactions contemplated by this Agreement or any other Loan Document.

5.6 Ownership of Property.

(a) The Borrower and each of its Subsidiaries has good record and title in fee
simple to, or valid leasehold interests in, all real property necessary or used
in the ordinary conduct of its business.

(b) Schedule 5.6(b) sets forth a complete and accurate list of all Liens on the
property or assets of the Borrower and each of its Subsidiaries, showing as of
the date hereof the lienholder thereof, the principal amount of the obligations
secured thereby and the property or assets of the Borrower or such Subsidiary
subject thereto. The property of the Borrower and each of its Subsidiaries is
subject to no Liens, other than Liens set forth on Schedule 5.6(b), and as
otherwise permitted by Section 7.1.

5.7 Environmental Compliance. Except as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, the
Borrower and each of its Subsidiaries is and has been in compliance with
applicable Environmental Laws.

5.8 Insurance. The properties of the Borrower and its Subsidiaries are insured
with financially sound and reputable insurance companies which are not
Affiliates of the Borrower, in such amounts, with such deductibles and covering
such risks as are customarily carried by companies engaged in similar businesses
and owning similar properties in localities where the applicable company
operates.

5.9 Taxes. The Borrower and its Subsidiaries have filed all Tax returns and
reports required to be filed, and have paid all Federal, state and other
material Taxes, assessments, fees and other governmental charges levied or
imposed upon them or their properties, income or assets otherwise due and
payable, except those which are being contested in good faith by appropriate
proceedings diligently conducted and for which adequate reserves have been
provided in accordance with the US GAAP. There is no proposed tax assessment
against the Borrower or any Subsidiary that would, if made, reasonably be
expected to have a Material Adverse Effect.

 

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5.10 Compliance with Law. The Borrower and its Subsidiaries are in compliance in
all material respects with the requirements of all Applicable Laws and all
orders, writs, injunctions and decrees applicable to it or to its properties,
except in such instances in which (i) such requirement of law or order, writ,
injunction or decree is being contested in good faith by appropriate proceedings
diligently conducted or (ii) the failure to comply therewith, either
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.

5.11 USA PATRIOT Act; OFAC.

(a) USA PATRIOT Act. To the extent applicable, the Borrower and its Subsidiaries
is in compliance in all material respects with (i) the Trading with the Enemy
Act, as amended, and each of the foreign assets control regulations of the
United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended),
and any other enabling legislation or executive order relating thereto, and
(ii) the USA PATRIOT Act.

(b) Sanctioned Persons. None of the Borrower, any Subsidiary nor, to the
knowledge of the Borrower, any director or officer of the Borrower or any
Subsidiary is subject to any U.S. sanctions administered by the Office of
Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the
Borrower will not directly or indirectly use the proceeds of the Loans or
otherwise make available such proceeds to any Person, for the purpose of
financing the activities of any Person subject to any United States sanctions
administered by OFAC.

5.12 Margin Stock; Investment Company Act.

(a) The Borrower is not engaged and will not engage, principally, or as one of
its important activities, in the business of purchasing or carrying any Margin
Stock or extending credit for such purpose, and no part of the proceeds of any
Loan will be used to purchase or carry any Margin Stock, or be used for any
purpose which violates, or which is inconsistent with, the provisions of
Regulation U or X.

(b) None of the Borrower, any Person Controlling the Borrower, or any Subsidiary
is or is required to be registered as an “investment company” under the
Investment Company Act of 1940.

5.13 Governmental Authorization; Other Consents. No approval, consent,
exemption, authorization, or other action by, or notice to, or filing with, any
Governmental Authority or any other Person is necessary or required in
connection with (a) the execution, delivery or performance by, or enforcement
against, the Borrower of this Agreement or any other Loan Document, (b) the
grant by the Borrower of the Liens granted by it pursuant to the Security
Documents, (c) the perfection or maintenance of the Liens created under the
Security Documents (including the first priority nature thereof) or (d) the
exercise by the Lender of its rights under the Loan Documents or the remedies in
respect of the Collateral

 

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pursuant to the Security Documents, except for (i) the authorizations,
approvals, actions, notices and filings listed on Schedule 5.13, all of which
have been duly obtained, taken, given or made and are in full force and effect
and (ii) consents required to enforce the pledge of shares in MBIA UK.

5.14 Financial Statements; No Material Adverse Effect.

(a) The Audited Financial Statements (i) were prepared in accordance with
US GAAP, Regulated Accounting Principles or UK GAAP, as applicable, consistently
applied throughout the period covered thereby, except as otherwise expressly
noted therein; (ii) fairly present the financial condition of the Borrower, the
Borrower and its Subsidiaries, MBIA UK or UK Insurance, as applicable, in each
case as of the date thereof and their results of operations for the period
covered thereby in accordance with US GAAP, Regulated Accounting Principles or
UK GAAP, as applicable consistently applied throughout the period covered
thereby, except as otherwise expressly noted therein; and (iii) show all
material indebtedness and other liabilities, direct or contingent, of the
Borrower, the Borrower and its Subsidiaries, MBIA UK or UK Insurance, as
applicable, in each case as of the date thereof, including liabilities for
taxes, material commitments and Indebtedness.

(b) Since the date of the Audited Financial Statements, there has been no event
or circumstance, either individually or in the aggregate, that has had or could
reasonably be expected to have a Material Adverse Effect.

(c) The forecasted cash flows, shown on a monthly basis for each of the six
months beginning with the month ending May 31, 2013, of (A) the Borrower,
prepared in accordance with Regulated Accounting Principles, (B) the Borrower
and its Subsidiaries on a consolidated basis, prepared in accordance with
US GAAP, (C) UK Insurance, prepared in accordance with UK GAAP and (D) UK
Insurance, in the form prepared by the Borrower and delivered to the Lender on
the Closing Date, were prepared in good faith on the basis of the assumptions
stated therein, which assumptions were fair in light of the conditions existing
at the time of delivery of such forecasts, and represented, at the time of
delivery, the Borrower’s reasonable estimate of its (or its and its
Subsidiaries, or UK Insurance’s, as applicable) future financial condition and
performance, it being recognized by the Lender that such forecasts are not to be
viewed as facts and are subject to significant uncertainties and contingencies,
many of which are beyond the control of the Borrower and its Subsidiaries, that
no assurances can be given that any particular forecast will be realized, that
actual results may vary from projected results and that such differences may be
material.

(d) The consolidated pro forma balance sheet (i) of the Borrower and its
Subsidiaries as at March 31, 2013, prepared in accordance with US GAAP, and
(ii) of the Borrower as at March 31, 2013, prepared in accordance with Regulated
Accounting Principles, each certified by the chief financial officer or
treasurer of the Borrower, copies

 

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of which have been furnished to the Lender, fairly present the consolidated pro
forma financial condition of the Borrower and its Subsidiaries or the Borrower,
as applicable, as at such date, in each case giving effect to the transactions
contemplated by the Settlement Agreement, all in accordance with US GAAP or
Regulated Accounting Principles, as applicable.

5.15 Litigation. (x) Except as set forth on Schedule 5.15, there are no actions,
suits, proceedings, claims or disputes pending or, to the knowledge of the
Borrower after due and diligent investigation, threatened or contemplated, at
law, in equity, in arbitration or before any Governmental Authority, by or
against the Borrower or any of its Subsidiaries or against any of their
properties or revenues that (a) purport to affect or pertain to this Agreement
or any other Loan Document, or (b) either individually or in the aggregate, if
determined adversely, could reasonably be expected to have a Material Adverse
Effect and (y) since the Closing Date, there have been no developments, events
or other changes in the actions, suits, proceedings, claims or disputes set
forth on Schedule 5.15 that, either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.

5.16 ERISA Compliance. (a) Each Plan is in compliance in all material respects
with the applicable provisions of ERISA, the Code and other Applicable Laws.
Each Plan that is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the IRS or an application for
such a letter is currently being processed by the IRS with respect thereto and,
to the best knowledge of the Borrower, nothing has occurred which would prevent,
or cause the loss of, such qualification. The Borrower and each ERISA Affiliate
have made all required contributions to each Plan subject to Section 412 of the
Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan.

(b) There are no pending or, to the best knowledge of the Borrower, threatened
claims, actions or lawsuits, or action by any Governmental Authority, with
respect to any Plan sponsored by the Borrower or any ERISA Affiliate that could
reasonably be expected to have a Material Adverse Effect. There has been no
prohibited transaction or violation of the fiduciary responsibility rules with
respect to any Plan sponsored by the Borrower or any ERISA Affiliate that has
resulted or could reasonably be expected to result in a Material Adverse Effect.

(c) Except as could not reasonably be expected to have a Material Adverse
Effect, (i) no ERISA Event has occurred or is reasonably expected to occur;
(ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither the
Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur,
any liability under Title IV of ERISA with respect to any Pension Plan (other
than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither
the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability (and no event has occurred which, with the

 

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giving of notice under Section 4219 of ERISA, would result in such liability)
under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and
(v) neither the Borrower nor any ERISA Affiliate has engaged in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA.

(d) With respect to each scheme or arrangement mandated by a government other
than the United States (a “Foreign Government Scheme or Arrangement”) and with
respect to each employee benefit plan maintained or contributed to by the
Borrower or any Subsidiary of the Borrower that is not subject to United States
law (a “Foreign Plan”):

(i) any employer and employee contributions required by law or by the terms of
any Foreign Government Scheme or Arrangement or any Foreign Plan have been made,
or, if applicable, accrued, in accordance with normal accounting practices;

(ii) the fair market value of the assets of each funded Foreign Plan, the
liability of each insurer for any Foreign Plan funded through insurance or the
book reserve established for any Foreign Plan, together with any accrued
contributions, is sufficient to procure or provide for the accrued benefit
obligations, as of the date hereof, with respect to all current and former
participants in such Foreign Plan according to the actuarial assumptions and
valuations most recently used to account for such obligations in accordance with
applicable generally accepted accounting principles; and

(iii) each Foreign Plan required to be registered has been registered and has
been maintained in good standing with applicable regulatory authorities.

5.17 Subsidiaries; Equity Interests. The Borrower has no Subsidiaries other than
those specifically disclosed in Part (a) of Schedule 5.17 (as may be updated
from time to time in accordance with the terms of this Agreement), and all of
the outstanding Equity Interests in such Subsidiaries have been validly issued,
are fully paid and non-assessable and are owned by the Borrower in the amounts
specified on Part (a) of Schedule 5.17 (as may be updated from time to time in
accordance with the terms of this Agreement) free and clear of all Liens except
those created under the Security Documents. The Borrower has no equity
investments in any other corporation or entity other than those specifically
disclosed in Part (b) of Schedule 5.17 (as may be updated from time to time in
accordance with the terms of this Agreement). All of the outstanding Equity
Interests in the Borrower have been validly issued, are fully paid and
non-assessable and are owned by MBIA Inc. in the amounts specified on Part
(c) of Schedule 5.17 free and clear of all Liens except those created under the
Security Documents. Part (d) of Schedule 5.17 shows, as of the Closing Date, the
jurisdiction of the Borrower’s incorporation, the address of the Borrower’s
principal place of business and the Borrower’s U.S. taxpayer identification
number. The copy of the charter of the Borrower and each amendment thereto
provided pursuant to Section 4.1(b)(ii)(B) is a true and correct copy of each
such document, each of which is valid and in full force and effect.

 

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5.18 Disclosure. The Borrower has disclosed to the Lender 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. No report, financial statement, certificate or other information
furnished (whether in writing or orally) by or on behalf of the Borrower to the
Lender in connection with the transactions contemplated hereby and the
negotiation of this Agreement or delivered hereunder or under any other Loan
Document (in each case as modified or supplemented by other information so
furnished) contains any untrue statement of a material 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 in any material
respect; provided that, with respect to projected financial information, the
Borrower represents only that such information was prepared in good faith based
upon assumptions believed to be reasonable at the time; it being recognized by
the Lender that such projections are not to be viewed as facts and are subject
to significant uncertainties and contingencies, many of which are beyond the
control of the Borrower and its Subsidiaries, that no assurances can be given
that any particular financial projections will be realized, that actual results
may vary from projected results and that such differences may be material.

5.19 Intellectual Property; Licenses, Etc. The Borrower and each of its
Subsidiaries own, or possess the right to use, all of the material trademarks,
service marks, trade names, copyrights, patents, patent rights, franchises,
licenses and other intellectual property rights (collectively, “IP Rights”) that
are reasonably necessary for the operation of their respective businesses as
currently being conducted, without conflict with the rights of any other Person,
and Schedule 5.19 sets forth a complete and accurate list of all registered IP
Rights owned or used by the Borrower and each of its Subsidiaries. To the
knowledge of the Borrower, no slogan or other advertising device, product,
process, method, substance, part or other material now employed, or now
contemplated to be employed, by the Borrower or any of its Subsidiaries
infringes upon any rights held by any other Person. No claim or litigation
regarding any of the foregoing is pending or, to the knowledge of the Borrower,
threatened, which, either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.

5.20 Solvency. The Borrower is, individually and together with its Subsidiaries
on a consolidated basis, Solvent.

5.21 Casualty, Etc. Neither the businesses nor the properties of the Borrower or
any of its Subsidiaries are affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or of the public enemy or other casualty (whether or not covered by
insurance) that, either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.

 

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5.22 Labor Matters. Other than national collective bargaining or similar
agreements in the case of non-U.S. employees, there are no collective bargaining
agreements or Multiemployer Plans covering the employees of the Borrower or any
of its Subsidiaries and neither the Borrower nor any Subsidiary has suffered any
strikes, walkouts, work stoppages or other material labor difficulty within the
last five years.

5.23 Security Documents. The provisions of the Security Documents are effective
to create in favor of the Lender a legal, valid and enforceable first priority
Lien (subject to Liens permitted by Section 7.1) on all right, title and
interest of the Borrower in the Collateral described therein. Except for filings
completed prior to the Closing Date and as contemplated hereby and by the
Security Documents, no filing or other action will be necessary to perfect or
protect such Liens, other than consents required to enforce the pledge of shares
in MBIA UK.

5.24 Insurance Licenses. The Borrower and each Insurance Subsidiary holds all
material licenses (including licenses or certificates of authority from
applicable Supervisory Authorities), permits or authorizations necessary or
otherwise required to transact insurance and reinsurance business (collectively,
the “Insurance Licenses”). There is (i) no Insurance License that is the subject
of a proceeding for suspension, revocation or limitation or any similar
proceedings, (ii) no sustainable basis for such a suspension, revocation or
limitation, and (iii) to the knowledge of the Borrower, no such suspension,
revocation or limitation threatened by any Supervisory Authority, that, in each
instance under clauses (i), (ii) and (iii) above and either individually or in
the aggregate, has had, or could reasonably be expected to have, a Material
Adverse Effect.

5.25 Commutation. Schedule 5.25 sets forth a list that is complete and accurate
in all material respects of matters with respect to which the Borrower or any of
its Subsidiaries is engaged in remediation efforts, including, without
limitation, amendments, compromises or commutations with respect to its
insurance obligations and settlements of litigation, whether or not they effect
the Subject Collateral.

ARTICLE VI

AFFIRMATIVE COVENANTS

The Borrower hereby agrees that it shall perform and comply with the covenants
set forth in this Article until the irrevocable payment in full in cash of all
of the Obligations (other than contingent Obligations related to indemnification
payments not then due and owing).

6.1 Financial Statements and Reports. The Borrower shall furnish to the Lender:

(a) such information regarding the condition or operations, financial or
otherwise, of the Borrower as the Lender may from time to time reasonably
request, including,

 

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(i) as soon as available, but in any event within 120 days after the end of each
Fiscal Year of the Borrower, a consolidated balance sheet of the Borrower and
its Subsidiaries as at the end of such fiscal year, and the related consolidated
statements of income or operations, changes in shareholders’ equity, and cash
flows for such Fiscal Year, setting forth in each case in comparative form the
figures for the previous Fiscal Year, all in reasonable detail and prepared in
accordance with US GAAP, audited and accompanied by a report and opinion of an
independent certified public accountant of nationally recognized standing
reasonably acceptable to the Lender (it being agreed that any of the so-called
“Big-4” accounting firms is acceptable to the Lender), which report and opinion
shall be prepared in accordance with US GAAP.

(ii) as soon as available, but in any event within 60 days after the end of each
of the first three Fiscal Quarters of each Fiscal Year of the Borrower, a
consolidated balance sheet of the Borrower and its Subsidiaries as at the end of
such fiscal quarter, and the related consolidated statements of income or
operations, changes in shareholders’ equity, and cash flows for such fiscal
quarter and for the portion of the Borrower’s Fiscal Year then ended, setting
forth in each case in comparative form the figures for the corresponding Fiscal
Quarter of the previous fiscal year and the corresponding portion of the
previous Fiscal Year, all in reasonable detail, certified by the chief executive
officer, chief financial officer, treasurer or controller of the Borrower as
fairly presenting the financial condition, results of operations, shareholders’
equity and cash flows of the Borrower and its Subsidiaries in accordance with
US GAAP, subject only to normal year-end audit adjustments and the absence of
footnotes;

(iii) as soon as available, but in any event not later than the earlier of
(x) the date that such statements are required to be filed with the New York
State Department of Financial Services, (y) the date that is five days after the
date such statements are actually filed with the New York State Department of
Financial Services and (z) the date that is 45 days after the end of each Fiscal
Quarter, the financial statements of the Borrower prepared in accordance with
Regulated Accounting Principles (the “Statutory Financial Statements”) in the
form required to be filed with the New York State Department of Financial
Services;

(iv) as soon as available, but in any event within 120 days after the end of
each Fiscal Year of each of MBIA UK and UK Insurance, a balance sheet of each of
MBIA UK and UK Insurance as at the end of such fiscal year, and the related
statements of income or operations and changes in shareholders’ equity for such
Fiscal Year, setting forth in each case in comparative form the figures for the
previous Fiscal Year, all in reasonable detail and prepared in accordance with
UK GAAP, audited and accompanied by a report and opinion of an independent
certified public accountant of nationally recognized standing reasonably
acceptable

 

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to the Lender (it being agreed that any of the so-called “Big 4” accounting
firms is acceptable to the Lender), which report and opinion shall be prepared
in accordance with generally accepted auditing standards and shall not be
subject to any “going concern” or like qualification or exception or any
qualification or exception as to the scope of such audit;

(b) concurrently with the delivery of the financial statements referred to in
Sections 6.1(a)(i) and (ii), (X) a duly completed Compliance Certificate and a
duly completed Collateral Calculation Certificate, in each case, signed by a
Responsible Officer of the Borrower and (Y) a copy of management’s discussion
and analysis with respect to such financial statements;

(c) as soon as available, but in any event not more than 60 days after the end
of each Fiscal Year of the Borrower, an annual business plan and budget of the
Borrower and its Subsidiaries on a consolidated basis, including forecasts
prepared by management of the Borrower, in form reasonably satisfactory to the
Lender, of (i) projected consolidated balance sheets for the end of each Fiscal
Quarter of such Fiscal Year, (ii) statements of income or operations on a
quarterly basis and (iii) cash flows on a monthly basis, in each case of the
Borrower and its Subsidiaries for the immediately following fiscal year
(including the fiscal year in which the Maturity Date occurs), it being
recognized by the Lender that such business plans, budgets and forecasts are not
to be viewed as facts and are subject to significant uncertainties and
contingencies, many of which are beyond the control of the Borrower and its
Subsidiaries, that no assurances can be given that any particular business plan,
budget or forecast will be realized, that actual results may vary from projected
results and that such differences may be material;

(d) promptly after any request by the Lender, (x) copies of any detailed audit
reports, management letters or recommendations submitted to the board of
directors (or the audit committee of the board of directors) of the Borrower or
any of its Subsidiaries by independent accountants in connection with the
accounts or books of the Borrower or any of its Subsidiaries, or any audit of
any of them and (y) any other information or materials reasonably requested by
the Lender;

(e) promptly after the same are available, copies of each annual report, proxy
or financial statement or other report or communication sent to the stockholders
of the Borrower, and copies of all annual, regular, periodic and special reports
and registration statements which the Borrower may file or be required to file
with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934,
or with any national securities exchange, and in any case not otherwise required
to be delivered to the Lender pursuant hereto;

(f) promptly after the furnishing thereof, copies of any statement or report
furnished to any holder of debt of the Borrower or any of its Subsidiaries
pursuant to the terms of any indenture, loan or credit or similar agreement and
not otherwise required to be furnished to the Lender pursuant to Section 6.1;

 

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(g) promptly, and in any event within five Business Days after receipt thereof
by the Borrower or any Subsidiary thereof, copies of each notice or other
correspondence received from the SEC (or comparable agency in any applicable
non-U.S. jurisdiction) concerning any investigation or possible investigation or
other inquiry by such agency regarding financial or other operational results of
the Borrower or any Subsidiary thereof or any parent entity of the Borrower;

(h) not later than five Business Days after receipt thereof by the Borrower or
any Subsidiary thereof, copies of all notices, requests and other documents
(including amendments, waivers and other modifications) so received under or
pursuant to any instrument, indenture, loan or credit or similar agreement and,
from time to time upon request by the Lender, such information and reports
regarding the such instruments, indentures and loan and credit and similar
agreements as the Lender may reasonably request;

(i) promptly, and in any event within five Business Days after any material
discussion relating to the Borrower or any Subsidiary thereof between the
Borrower and/or any Subsidiary thereof, on the one hand, and any Governmental
Authority exercising regulatory authority thereof, on the other hand, a
reasonably detailed summary of all substantive aspects of such discussion;

(j) not more than fifteen days prior to, and not less than five days prior to
the first day of each calendar month ending after the Closing Date, projections
of the cash flows and cash balances, shown on a monthly basis for each of the
six months beginning with such month, of (A) the Borrower, prepared in
accordance with Regulated Accounting Principles, (B) the Borrower and its
Subsidiaries on a consolidated basis, prepared in accordance with US GAAP,
(C) UK Insurance, prepared in accordance with UK GAAP and (D) UK Insurance,
prepared in substantially the form of forecasted cash flows prepared by the
Borrower and delivered to the Lender on the Closing Date, it being recognized by
the Lender that such projections are not to be viewed as facts and are subject
to significant uncertainties and contingencies, many of which are beyond the
control of the Borrower and its Subsidiaries, that no assurances can be given
that any particular projection will be realized, that actual results may vary
from projected results and that such differences may be material;

(k) Prompt notice of:

(i) the occurrence of any Potential Event of Default or Event of Default;

 

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(ii) any matter that has resulted or could reasonably be expected to result in a
Material Adverse Effect, including (i) breach or non-performance of, or any
default under, a Contractual Obligation of the Borrower or any Subsidiary
thereof; (ii) any dispute, litigation, investigation, proceeding or suspension
between the Borrower or any Subsidiary and any Governmental Authority; or
(iii) the commencement of, or any material development in, any litigation or
proceeding affecting the Borrower or any Subsidiary, including pursuant to any
applicable Environmental Laws;

(iii) the occurrence of any ERISA Event that could reasonably be expected to
have or result in a Material Adverse Effect; and

(iv) any material change in accounting policies or financial reporting practices
by the Borrower or any Subsidiary thereof.

Each notice pursuant to Section 6.1(k) shall be accompanied by a statement of a
Responsible Officer of the Borrower setting forth details of the occurrence
referred to therein and stating what action the Borrower has taken and proposes
to take with respect thereto. Each notice pursuant to Section 6.1(k)(i) shall
describe with particularity any and all provisions of this Agreement and any
other Loan Document that have been breached.

6.2 Payments of Obligations. The Borrower shall, and shall cause its
Subsidiaries to pay and discharge as the same shall become due and payable, all
its material obligations and liabilities, including (a) all material tax
liabilities, assessments and governmental charges or levies upon it or its
properties or assets, unless the same are being contested in good faith by
appropriate proceedings diligently conducted and adequate reserves in accordance
with US GAAP are being maintained by the Borrower or such Subsidiary; (b) all
lawful claims which, if unpaid, would by law become a Lien upon its property
(other than a Permitted Lien); and (c) all Indebtedness, as and when due and
payable, in excess of the Threshold Amount, but subject to any subordination
provisions contained in any instrument or agreement evidencing such
Indebtedness; provided, however, that the Borrower and its Subsidiaries shall
not be required to pay any such tax, assessment, charge, levy, claim or
Indebtedness which is being contested in good faith by appropriate proceedings
and as to which adequate reserves have been established in accordance with GAAP,
unless the failure to make any such payment could give rise to an immediate
right to foreclose on a Lien securing such amounts.

6.3 Further Assurances. (x) The Borrower shall, and shall cause its Subsidiaries
to do and perform, from time to time, any and all acts (and execute any and all
documents) as may be necessary or as may be reasonably requested by the Lender
in order to effect the purposes of the Loan Documents, including, without
limitation, to: (a) correct any material defect or error that may be discovered
in any Loan Document or in the execution, acknowledgment, filing or recordation
thereof, and (b) do, execute, acknowledge, deliver, record, re-record, file,
re-file, register and re-register any and all such further acts, deeds,

 

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certificates, assurances and other instruments as the Lender may reasonably
require from time to time in order to (i) carry out more effectively the
purposes of the Loan Documents, (ii) to the fullest extent permitted by
applicable law, subject any the Borrower’s or any of its Subsidiaries’
properties, assets, rights or interests to the Liens now or hereafter intended
to be covered by any of the Security Documents, (iii) perfect and maintain the
validity, effectiveness and priority of any of the Security Documents and any of
the Liens intended to be created thereunder and (iv) assure, convey, grant,
assign, transfer, preserve, protect and confirm more effectively unto the Lender
the rights granted or now or hereafter intended to be granted to the Lender
under any Loan Document or under any other instrument executed in connection
with any Loan Document to which the Borrower or any of its Subsidiaries is or is
to be a party. The Borrower shall, within ten Business Days after the Closing
Date, deliver to the Lender documentation evidencing the perfection under the
laws of England and Wales of the Lender’s security interest in the capital stock
of MBIA UK and (B) customary legal opinions of English counsel to the Lender
related to the foregoing, in each case in form and substance reasonably
satisfactory to the Lender.

6.4 Maintenance of Existence. The Borrower shall, and cause each of its
Subsidiaries to: (a) maintain in full force and effect its legal existence and
good standing under the Applicable Laws of its jurisdiction of organization and
carry on its business in substantially the same manner and in substantially the
same fields as such business is now carried on and maintained; (b) take all
reasonable action to maintain all rights, privileges, permits, licenses and
franchises necessary or desirable in the normal conduct of its business, except
to the extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect; and (c) preserve or renew all of its registered
patents, trademarks, trade names and service marks, the non-preservation of
which could reasonably be expected to have a Material Adverse Effect.

6.5 Maintenance of Properties. The Borrower shall, and shall cause each of its
Subsidiaries to: (i) maintain, preserve and protect all of its material
properties and equipment necessary in the operation of its business in good
working order and condition, ordinary wear and tear excepted; (ii) make all
necessary repairs thereto and renewals and replacements thereof except where the
failure to do so could not reasonably be expected to have a Material Adverse
Effect; and (iii) use the standard of care typical in the industry in the
operation and maintenance of its facilities.

6.6 Maintenance of Insurance. The Borrower shall, and shall cause each of its
Subsidiaries to: maintain with financially sound and reputable insurance
companies not Affiliates of the Borrower insurance with respect to its
properties and business against loss or damage of the kinds customarily insured
against by similarly sized Persons engaged in the same or similar business, of
such types and in such amounts as are customarily carried under similar
circumstances by such other Persons.

6.7 Compliance with Laws. The Borrower shall, and shall cause each of its
Subsidiaries to comply in all material respects with the requirements of all
Applicable

 

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Law, except, as to matters which have been disclosed publicly or to the Lender
in the financial statements of the Borrower prior to the Closing Date, where the
failure to comply therewith could not reasonably be expected to have a Material
Adverse Effect.

6.8 Books and Records. The Borrower shall, and shall cause each of its
Subsidiaries to: (a) maintain proper books of record and account, in which full,
true and correct entries in conformity with US GAAP consistently applied shall
be made of all financial transactions and matters involving the assets and
business of the Borrower or such Subsidiary, as the case may be, and
(b) maintain such books of record and account in material conformity with all
applicable requirements of any Governmental Authority having regulatory
jurisdiction over the Borrower or such Subsidiary, as the case may be.

6.9 Inspection Rights. Permit representatives and independent contractors of the
Lender to visit and inspect any of its properties, to examine its corporate,
financial and operating records, and make copies thereof or abstracts therefrom,
and to discuss its affairs, finances and accounts with its directors, officers,
and independent public accountants, all at the expense of the Borrower and at
such reasonable times during normal business hours and upon reasonable advance
notice to the Borrower (provided that the Lender shall give the Borrower an
opportunity to participate in any and all such discussions), but no more
frequently than four times per year unless an Event of Default has occurred and
is continuing; provided, however, that when an Event of Default exists the
Lender (or any of its representatives or independent contractors) may do any of
the foregoing at the expense of the Borrower at any time during normal business
hours and without advance notice.

6.10 Compliance with Environmental Laws. Except as could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect, the
Borrower shall, and shall cause each of its Subsidiaries to use commercially
reasonable efforts to comply and cause all lessees and other Persons operating
or occupying its properties to comply, in all material respects, with all
applicable Environmental Laws; obtain and renew all Environmental Permits
necessary for its operations and properties; and conduct any investigation,
study, sampling and testing, and undertake any cleanup, removal, remedial or
other action necessary to remove and clean up all Hazardous Materials from any
of its properties, in accordance with the requirements of all Environmental
Laws, if required; provided, however, that neither the Borrower nor any of its
Subsidiaries shall be required to undertake any such cleanup, removal, remedial
or other action to the extent that its obligation to do so is being contested in
good faith and by proper proceedings and appropriate reserves are being
maintained with respect to such circumstances in accordance with US GAAP.

6.11 Material Contracts. The Borrower shall, and shall cause each of its
Subsidiaries to perform and observe all the terms and provisions of each
material Contractual Obligation to be performed or observed by it, maintain each
such material Contractual Obligation in full force and effect, enforce each such
material Contractual Obligation in accordance with its terms.

 

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ARTICLE VII

NEGATIVE COVENANTS

Until the irrevocable payment in full in cash of all of the Obligations (other
than contingent Obligations related to indemnification payments not then due and
owing), the Borrower hereby agrees that it shall not, nor shall it permit any of
its Subsidiaries to, directly or indirectly:

7.1 Liens. Create, incur, assume or suffer to exist any Lien upon any of its
property, assets or revenues, whether now owned or hereafter acquired, or sign
or file or suffer to exist under the Uniform Commercial Code of any jurisdiction
a financing statement that names the Borrower or any of its Subsidiaries as
debtor, or assign any accounts or other right to receive income, other than the
following (each a “Permitted Lien”):

(a) Liens created pursuant to any Security Document;

(b) Liens existing on the date hereof and listed on Schedule 5.6(b) and any
modifications, replacements, renewals or extensions thereof, provided that
(i) the property covered thereby is not changed, (ii) the amount secured or
benefited thereby is not increased except as contemplated by Section 7.2(c),
(iii) the direct or any contingent obligor with respect thereto is not changed,
and (iv) any renewal, modification or extension of the obligations secured or
benefited thereby is permitted by Section 7.2(c);

(c) Liens for taxes not yet due or which are being contested in good faith and
by appropriate proceedings diligently conducted, if adequate reserves with
respect thereto are maintained on the books of the applicable Person in
accordance with US GAAP;

(d) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s,
landlord’s or other like Liens arising in the ordinary course of business which
are not overdue for a period of more than 30 days or which are being contested
in good faith and by appropriate proceedings diligently conducted, if adequate
reserves with respect thereto are maintained on the books of the applicable
Person;

(e) pledges or deposits in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other social security
legislation, other than any Lien imposed by ERISA;

(f) Liens (A) of a collecting bank arising under Section 4-208 of the Uniform
Commercial Code on items in the course of collection, and (B) in favor of a
banking institution arising as a matter of law encumbering deposits (including
the right of set-off) and which are within the general parameters customary in
the banking industry;

 

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(g) pledges or deposits of cash and Permitted Investments securing deductibles,
self-insurance, co-payment, co-insurance, retentions and similar obligations to
providers of insurance in the ordinary cause of business consistent with past
practice;

(h) deposits to secure the performance of leases, licenses, subleases or
sublicenses (other than Indebtedness) incurred in the ordinary course of
business consistent with past practice which do not interfere in any material
respect with the business of the Borrower or any of its Subsidiaries;

(i) Liens arising from precautionary Uniform Commercial Code financing
statements regarding, and any interest or title of a licensor, lessor or
sublessor under, operating leases;

(j) [reserved];

(k) pledges or deposits of cash and Permitted Investments of any Subsidiary
securing obligations to landlords under operating leases where such Subsidiary
is the tenant, securing performance by the tenant, in each case in the ordinary
course of business consistent with past practice;

(l) deposits to secure the performance of bids, trade contracts and leases
(other than Indebtedness), statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;

(m) easements, rights-of-way, restrictions and other similar encumbrances
affecting real property which, in the aggregate, are not substantial in amount,
and which do not in any case materially detract from the value of the property
subject thereto or materially interfere with the ordinary conduct of the
business of the applicable Person;

(n) Liens securing judgments for the payment of money not constituting an Event
of Default under Section 8.1(h); and

(o) other Liens affecting property with an aggregate fair value not to exceed
$1,000,000, provided that no such Lien shall extend to or cover any Collateral.

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

(a) Indebtedness of any Subsidiary of the Borrower owed to the Borrower or
another Subsidiary of the Borrower, which Indebtedness is otherwise permitted
under the provisions of Section 7.3, provided that all such Indebtedness which
is owed by the Borrower shall be subordinated to the Obligations on terms
satisfactory to the Lender in its sole discretion;

(b) Indebtedness under the Loan Documents;

 

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(c) [reserved];

(d) Guarantees by the Borrower or any of its Subsidiaries of Indebtedness of any
of their respective officers and employees in respect of moving and relocation
and travel expenses of such Persons, in each case in the ordinary course of
business consistent with past practice;

(e) [reserved];

(f) [reserved];

(g) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn against insufficient
funds in the ordinary course of business; provided that such Indebtedness is
extinguished within five Business Days of its incurrence;

(h) Indebtedness representing deferred compensation to employees of the Borrower
and its Subsidiaries in the ordinary course of business consistent with past
practice;

(i) [reserved];

(j) [reserved];

(k) Indebtedness outstanding on the date hereof and listed on Schedule 7.2 and
any refinancings, refundings, renewals or extensions thereof; provided that the
amount of such Indebtedness is not increased at the time of such refinancing,
refunding, renewal or extension except by an amount equal to a reasonable
premium or other reasonable amount paid, and fees and expenses reasonably
incurred, in connection with such refinancing and the direct or any contingent
obligor with respect thereto is not changed, as a result of or in connection
with such refinancing, refunding, renewal or extension; and provided, further,
that the terms relating to principal amount, amortization, maturity, collateral
(if any) and subordination (if any), and other material terms taken as a whole,
of any such refinancing, refunding, renewing or extending Indebtedness, and of
any agreement entered into and of any instrument issued in connection therewith,
are no less favorable in any material respect to the Borrower and its
Subsidiaries or the Lender than the terms of any agreement or instrument
governing the Indebtedness being refinanced, refunded, renewed or extended and
the interest rate applicable to any such refinancing, refunding, renewing or
extending Indebtedness does not exceed the then applicable market interest rate,
provided that all such Indebtedness under this clause (k) which is owed by the
Borrower to any Affiliate of the Borrower shall be subordinated to the
Obligations on terms satisfactory to the Lender in its sole discretion; and

(l) Indebtedness of the Borrower and its Subsidiaries not otherwise permitted by
this Section 7.2 incurred after the Closing Date in an aggregate principal
amount not to exceed $1,000,000 at any time outstanding; provided that no
Potential Event of Default or Event of Default shall have occurred and be
continuing immediately before and immediately after giving effect to such
incurrence.

 

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7.3 Investments. Make or hold any Investments, except:

(a) Investments held by the Borrower and its Subsidiaries in the form of
Permitted Investments;

(b) advances to officers, directors and employees of the Borrower and
Subsidiaries in the ordinary course of business consistent with past practice,
for travel, entertainment, relocation and analogous ordinary business purposes;

(c) Investments by any of the Subsidiaries of the Borrower in the Borrower or
any of its wholly owned Subsidiaries;

(d) Guarantees permitted by Section 7.2;

(e) [reserved];

(f) Investments consisting of extensions of credit in the nature of accounts
receivable or notes receivable arising from the grant of trade credit in the
ordinary course of business, and Investments received in satisfaction or partial
satisfaction thereof from financially troubled account debtors to the extent
reasonably necessary in order to prevent or limit loss; and

(g) Investments existing on the date hereof and set forth on Schedule 7.3.

7.4 Dissolution. Suffer or permit dissolution or liquidation of itself either in
whole or in part.

7.5 Consolidations, Mergers and Sales of Assets. Consolidate or merge with or
into, or sell, lease or otherwise transfer all or any substantial part of their
assets to, any other Person, provided that any Subsidiary of the Borrower may
consolidate or merge with or into, or sell, lease or otherwise transfer all or
any substantial part of their assets to the Borrower or any Subsidiary of the
Borrower.

7.6 Dispositions. Make any Disposition or enter into any agreement to make any
Disposition, except:

(a) Dispositions of obsolete or worn out property, whether now owned or
hereafter acquired, in the ordinary course of business;

(b) Dispositions of inventory in the ordinary course of business;

 

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(c) licenses of IP Rights in the ordinary course of business and consistent with
past practice;

(d) the Borrower and its Subsidiaries may liquidate or sell Permitted
Investments;

(e) leases, subleases, licenses or sublicenses of property in the ordinary
course of business consistent with past practice and which do not materially
interfere with the business of the Borrower and its Subsidiaries;

(f) [reserved];

(g) Dispositions in the ordinary course of business consistent with past
practice consisting of the abandonment of IP Rights which, in the reasonable
good faith determination of the Borrower, are not material to the conduct of the
business of the Borrower or any of its Subsidiaries;

(h) [reserved];

(i) Dispositions of equipment or real property to the extent that (i) such
property is exchanged for credit against the purchase price of similar
replacement property or (ii) the proceeds of such Disposition are reasonably
promptly applied to the purchase price of such replacement property;

(j) Dispositions of property by any Subsidiary to the Borrower or to a
wholly-owned Subsidiary;

(k) Dispositions of (i) immaterial Subsidiaries of the Borrower organized in
Mexico or (ii) Investments owned by MBIA UK and its Subsidiaries for fair market
value;

(l) Dispositions permitted by Section 7.5; and

(m) Dispositions by the Borrower and its Subsidiaries not otherwise permitted
under this Section 7.6; provided that (A) the consideration therefor is at least
75% cash and is paid at the time of the closing of such Disposition; (B) each
such Disposition is in an arms’-length transaction; (C) no portion of the assets
or property subject to such Disposition shall consist of Collateral; (D) no
Potential Event of Default or Event of Default shall have occurred and be
continuing immediately before or immediately after giving effect to such
transaction; and (E) the Borrower shall use the proceeds of such Dispositions in
compliance with Section 2.4(b)(iii) hereof;

provided, however, that any Disposition pursuant to Section 7.6(a) through
Section 7.6(m) shall be for no less than fair market value.

 

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7.7 Restricted Payments. Declare or make, directly or indirectly, any Restricted
Payment, or incur any obligation (contingent or otherwise) to do so, or issue or
sell any Equity Interests, except that, so long as no Potential Event of Default
shall have occurred and be continuing at the time of any action described below
or would result therefrom:

(a) each Subsidiary of the Borrower may make Restricted Payments to the Borrower
and any Subsidiaries of the Borrower, ratably according to their respective
holdings of the type of Equity Interest in respect of which such Restricted
Payment is being made;

(b) the Borrower and each Subsidiary may declare and make dividend payments or
other distributions payable solely in the common stock or other common Equity
Interests of such Person.

7.8 Use of Proceeds. Use proceeds of the Loans (i) directly or indirectly, for
the purpose, whether immediate, incidental or ultimate, of purchasing or
carrying any Margin Stock, or (ii) for any purpose in violation of any
Applicable Law or regulation.

7.9 Change in Fiscal Year; Accounting Policies. (a) Permit the last day of its
Fiscal Year to end on a day other than December 31 or change its method of
determining its Fiscal Quarters; or (b) make any change in accounting policies
or reporting practices, except as required by US GAAP, Regulated Accounting
Principles or UK GAAP, as applicable.

7.10 Transactions with Affiliates. Enter into any transaction of any kind with
any Affiliate thereof (other than, in the case of any Subsidiary of the Borrower
(including MBIA UK and its Subsidiaries), with any other Subsidiary of the
Borrower), whether or not in the ordinary course of business.

7.11 Burdensome Agreements. Enter into or permit to exist any Contractual
Obligation (other than this Agreement or any other Loan Document) that
(a) limits the ability (i) of any Subsidiary of the Borrower to make Restricted
Payments to the Borrower or any Subsidiary thereof or to otherwise transfer
property to or invest in the Borrower or any Subsidiary thereof, except for any
agreement in effect on the date hereof and set forth on Schedule 7.11 or (ii) of
the Borrower or any Subsidiary thereof to create, incur, assume or suffer to
exist Liens on property of such Person; or (b) requires the grant of a Lien to
secure an obligation of such Person if a Lien is granted to secure another
obligation of such Person, except in each case for prohibitions or restrictions
existing under or by reason of:

(a) this Agreement, and the other Loan Documents;

(b) Applicable Law; and

(c) customary non-assignment provisions pursuant to leases (other than
Indebtedness) or licensing agreements entered into by the Borrower or any of its
Subsidiaries, in each case entered into in the ordinary course of business and
consistent with past practices.

 

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7.12 Financial Covenants.

(a) Required Coverage. At all times, the value of the Subject Collateral (as
calculated in a manner described with the definition of Collateral Calculation
Certificate) shall be in excess of the Required Coverage.

(b) Minimum Statutory Capital. Permit the Statutory Capital of the Borrower to
be less than an amount equal to $750,000,000.

7.13 Prepayments of Indebtedness. Prepay, redeem, purchase, defease or otherwise
satisfy prior to the scheduled maturity thereof in any manner, or make any
payment of principal, interest or fees or any other payment on, any Indebtedness
(including the Surplus Notes), except (a) the payment of the Loans in accordance
with the terms of this Agreement and (b) refinancings and refundings of
Indebtedness set forth in Schedule 7.2 in compliance with Section 7.2(c).

7.14 Amendments of Organization Documents. Amend any of its Organization
Documents in any manner or to any extent that would reasonably be expected to be
adverse to the Lender, or any of the Lender’s rights hereunder.

7.15 Change of Business. Engage in any material extent in any business other
than those businesses conducted by it on the date hereof or any business
reasonably related or incidental thereto.

7.16 Commutations. Other than with respect to (a) insurance obligations and
settlements of insurance with such counterparties as the Borrower and Lender may
agree, as to which no such limitation shall apply, and (b) with respect to MBIA
UK and its Subsidiaries, consummate any remediation efforts, including, without
limitation, amendments, compromises or commutations with respect to its
insurance obligations and settlements of litigation, whether or not they effect
the Subject Collateral, to the extent that any amounts paid or transferred by
the Borrower and its Subsidiaries as consideration therefor or in connection
therewith since the Closing Date would exceed $500,000,000 in the aggregate,
provided that, notwithstanding the foregoing, the Borrower may not, without the
written consent of the Lender, consummate any remediation efforts, including,
without limitation, amendments, compromises or commutations with respect to its
insurance obligations and settlements of litigation, whether or not they effect
the Subject Collateral, if, (x) after giving effect thereto and to any
borrowings of Loans in connection therewith, the aggregate principal amount of
Loans outstanding would exceed $200,000,000 or (y) after giving effect thereto,
all remediation efforts, including, without limitation, amendments, compromises
or commutations with respect to its insurance obligations and settlements of
litigation, taken as a whole since the Closing Date, would, cumulatively, have
reduced the Statutory Capital of the Borrower by $100,000,000 or more.

 

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ARTICLE VIII

EVENTS OF DEFAULT/REMEDIES

8.1 Events of Default. If any of the following events (each an “Event of
Default”) shall occur and be continuing:

(a) the Borrower fails to (i) pay when and as required to be paid herein any
amount of principal of any Loan, (ii) pay within three Business Days after the
same becomes due, any interest on any Loan or any fee due hereunder when and as
required to be paid pursuant to the terms hereof, or (iii) pay within five
Business Days after the same becomes due any other amount due from it hereunder
or any other Loan Document;

(b) any representation or statement made or deemed to be made by the Borrower in
any Loan Document or in any notice, certificate or other document to be
delivered thereunder shall have been incorrect or misleading when made;

(c) the Borrower fails to perform or observe any term, covenant or agreement
contained in any of Section 6.1, 6.4, 6.7, 6.9 or Article VII;

(d) the Borrower fails duly to perform or comply with any other covenant or
agreement (not specified in Section 8.1(a) or (c) above) contained in any Loan
Document and such failure continues for fifteen days;

(e) (i) the Borrower or any Subsidiary thereof (A) fails to make any payment
when due (whether by scheduled maturity, required prepayment, acceleration,
demand, or otherwise) in respect of any Indebtedness (other than Indebtedness
hereunder and Indebtedness under Swap Contracts) having an aggregate principal
amount (including un-drawn committed or available amounts and including amounts
owing to all creditors under any combined or syndicated credit arrangement) of
more than the Threshold Amount, or (B) fails to observe or perform any other
agreement or condition relating to any such Indebtedness or Guarantee or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event occurs, the effect of which default or other event
is to cause, or to permit the holder or holders of such Indebtedness or the
beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf
of such holder or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, such Indebtedness to be demanded or to become due
or to be re-purchased, prepaid, defeased or redeemed (automatically or
otherwise), or an offer to repurchase, prepay, defease or redeem such
Indebtedness to be made, prior to its stated maturity, or such Guarantee to
become payable or cash collateral in respect thereof to be demanded; or
(ii) there occurs under any Swap Contract an Early Termination Date (as defined
in such Swap Contract) resulting from (A) any event of default under such Swap
Contract as to which the Borrower

 

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or any Subsidiary thereof is the Defaulting Party (as defined in such Swap
Contract) or (B) any Termination Event (as defined in such Swap Contract) under
such Swap Contract as to which the Borrower or any Subsidiary thereof is an
Affected Party (as defined in such Swap Contract) and, in either event, the Swap
Termination Value owed by the Borrower or such Subsidiary as a result thereof is
greater than the Threshold Amount;

(f) the Borrower or any Subsidiary thereof becomes unable or admits in writing
its inability or fails generally to pay its debts as they become due, or any
writ or warrant of attachment or execution or similar process is issued or
levied against all or any material part of the property of the Borrower or any
of its Subsidiaries and is not released, vacated or fully bonded within 30 days
after its issue or levy;

(g) the Borrower or any Subsidiary thereof institutes or consents to the
institution of any proceeding under any Debtor Relief Law, or makes an
assignment for the benefit of creditors; or applies for or consents to the
appointment of any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer for it or for all or any material part of its
property; or any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer is appointed without the application or consent
of such Person and the appointment continues undischarged or unstayed for 30
calendar days; or any proceeding under any Debtor Relief Law relating to any
such Person or to all or any material part of its property is instituted without
the consent of such Person and continues undismissed or unstayed for 30 calendar
days; or an order for relief is entered in any such proceeding; or

(h) there is entered against the Borrower or any Subsidiary thereof (i) one or
more final judgments or orders for the payment of money in an aggregate amount
(as to all such judgments and orders) exceeding the Threshold Amount (to the
extent not covered by independent third-party insurance as to which the insurer
is rated at least “A” by A.M. Best Company, has been notified of the potential
claim and does not dispute coverage), or (ii) any one or more non-monetary final
judgments that have, or could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect and, in either case, (A) enforcement
proceedings are commenced by any creditor upon such judgment or order, or
(B) there is a period of 10 consecutive days during which a stay of enforcement
of such judgment, by reason of a pending appeal or otherwise, is not in effect;
or

(i) an ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan
which has resulted or could reasonably be expected to result in a Material
Adverse Effect; or

(j) any provision of any Loan Document, at any time after its execution and
delivery and for any reason other than as expressly permitted hereunder or
thereunder or satisfaction in full of all the Obligations, ceases to be in full
force and effect; or the Borrower or any other Person contests in any manner the
validity or enforceability of any provision of any Loan Document; or the
Borrower denies that it has any further liability or obligation under any
provision of any Loan Document, or purports to revoke, terminate or rescind any
provision of any Loan Document; or

 

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(k) any of the Security Documents (or any Lien on any Collateral purported to be
created or perfected thereunder) shall, for any reason, cease to be in full
force and effect (or, in the case of any Lien on any Collateral, cease to be a
perfected first priority Lien) or be declared to be null and void, or the
validity or enforceability thereof shall be contested by the Borrower or the
Borrower shall deny that it has any or further liability or obligation
thereunder (or with respect thereto);

(l) there occurs any Change of Control; or

(m) any one or more Insurance Licenses of the Borrower or any Insurance
Subsidiary shall be suspended, limited or terminated or shall not be renewed, or
any other action shall be taken by any Governmental Authority, and such
suspension, limitation, termination, non-renewal or action, either individually
or in the aggregate, has had, or could reasonably be expected to have, a
Material Adverse Effect;

the Lender may, in its sole discretion, by notice to the Borrower terminate its
obligation to make Loans hereunder or declare the unpaid principal amount of all
outstanding Loans, all interest accrued and unpaid thereon, and all other
Obligations owing or payable under the Loan Documents to be immediately due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived by the Borrower; provided that, upon the
occurrence of any event specified in paragraph (f) or (g), the obligation of the
Lender to make Loans automatically shall terminate and the unpaid principal
amount of all outstanding Loans and all interest and other Obligations owing or
payable under the Loan Documents automatically shall become due and payable
without further act of the Lender.

8.2 Rights Not Exclusive. The rights provided for in the Loan Documents are
cumulative and are not exclusive of any other rights, powers, privileges or
remedies provided by Applicable Law or in equity, or under any other document
now existing or hereafter arising.

ARTICLE IX

MISCELLANEOUS

9.1 Amendments and Waivers. None of the terms or provisions of this Agreement or
any other Loan Document may be waived, amended, supplemented or otherwise
modified except by a written instrument executed by the Borrower and the Lender,
or, in the event that, at any time, there is more than one Lender, a written
instrument executed by the Borrower and the Required Lenders (as defined below)
with such prior approval, and each such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given;
provided that no such amendment, waiver or consent shall:

(a) waive any condition set forth in Article IV without the written consent of
each Lender;

 

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(b) extend or increase the Commitment Amount or Loans of any Lender (or
reinstate any Commitment Amount or Loans terminated pursuant to this Agreement)
without the written consent of such Lender;

(c) postpone any date fixed by this Agreement or any other Loan Document for
(i) any scheduled payment (which, for the avoidance of doubt, excludes mandatory
prepayments) of principal, interest, fees or other amounts due to the Lenders
(or any of them) hereunder or under such other Loan Document without the written
consent of each Lender entitled to such payment or (ii) any scheduled reduction
of the aggregate Commitment Amount hereunder or under any other Loan Document
without the written consent of each Lender;

(d) reduce the principal of, or the rate of interest specified herein on, any
Loan, or any fees or other amounts payable hereunder or under any other Loan
Document without the written consent of each Lender entitled to such amount;
provided, however, that only the consent of the Required Lenders shall be
necessary to amend the definition of “Default Rate”;

(e) change Section 9.7(f) in a manner that would alter the pro rata sharing of
payments required thereby without the written consent of each Lender;

(f) change any provision of this Section 9.1, including the definition of
“Required Lenders”, or any other provision hereof specifying the number or
percentage of Lenders required to amend, waive or otherwise modify any rights
hereunder or make any determination or grant any consent hereunder; or

(g) release all or substantially all of the Collateral in any transaction or
series of related transactions, without the written consent of each Lender.

For purposes of this Section 9.1, “Required Lenders” means, as of any date of
determination, Lenders holding more than 50% of the sum of the total used and
unused Commitment Amount then outstanding (after giving effect to any reductions
thereto from time to time pursuant to the terms of this Agreement).

Notwithstanding anything to the contrary set forth in this Agreement, including
this Section 9.1, or any other Loan Document, in connection with, or in order to
facilitate, any assignments of the rights or benefits of the Lender hereunder,
Blue Ridge Investments, L.L.C. may in its sole discretion, amend this Agreement
and any other Loan Document

 

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without the consent of any other Person, including the Borrower, in order to
(i) provide for customary agency and defaulting lender provisions, including
without limitation to address the transfer of any rights, obligations and duties
of the Lender to one or more agents, and (ii) reflect the appointment of such
agent(s) and the assignment of the Loans to more than one Lender, such
provisions to be generally consistent with the provisions of Blue Ridge
Investments, L.L.C.’s or, at Blue Ridge Investments L.L.C.’s option, Bank of
America, N.A.’s standard documentation for syndicated loan facilities. In the
event of such amendment, the Borrower agrees to pay Blue Ridge Investments,
L.L.C. an annual administrative agent fee in an amount consistent with that
charged by Blue Ridge Investments, L.L.C. or Bank of America, N.A. to borrowers
of similar creditworthiness pursuant to similar credit facilities. Within three
Business Days of any such amendment, Blue Ridge Investments, L.L.C. shall
provide the Borrower with a copy thereof, and such amendment shall automatically
be effective, conclusive and binding on the Borrower and each other party to the
amended Loan Documents in all respects.

9.2 Notices.

(a) All notices and other communications in connection with this Agreement and
the other Loan Documents shall, unless otherwise stated herein, be in writing
(including facsimile or other electronic transmission) and mailed, faxed or
delivered to the address or facsimile number of each of the parties hereto as
set out below or at such other address as shall be designated by such party in a
written notice to the Borrower or the Lender, as the case may be:

(i) If to the Lender (in the case of notices described in Section 2.3, 2.4, 2.8
and 2.9):

Global Credit Operations

Bank of America Merrill Lynch

101 N Tryon Street

Charlotte, NC 28255

Telephone No.: 980-386-7891

Attention: Nora Moss

E-mail: nora.a.moss@baml.com

(ii) If to the Lender (in all other cases):

Blue Ridge Investments, L.L.C.

214 N Tryon Street

Charlotte, NC 28255

NC1-027-14-01

Attention: John Hiebendahl

Facsimile: 704-208-1210

 

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With a copy to (which shall not constitute notice) to:

Bank of America Corporation

50 Rockefeller Plaza, 7th Floor

New York, NY 10020-1605

Attention: Christopher J. Garvey

Associate General Counsel and Senior Vice President

(iii) If to the Borrower:

MBIA Insurance Corporation

113 King Street

Armonk, New York 10504

Attention: Chief Financial Officer

Telephone No: 914-765-3925

Facsimile No: 914-765-3393

E-mail: chuck.chaplin@mbia.com

With a Copy to:

MBIA Insurance Corporation

113 King Street

Armonk, New York 10504

Attention: General Counsel

Telephone No: 914-765-3945

Facsimile No: 914-765-3919

E-mail: ram.wertheim@mbia.com

(b) All such notices, requests and communications shall be effective (i) if
transmitted by fax or other electronic communication, when transmitted in
legible form upon confirmation of receipt, and (ii) if sent by an
internationally-recognized overnight courier service or otherwise delivered,
with courier or delivery costs prepaid, upon receipt thereof by the recipient
thereof; provided that if notices or other communication sent to an e-mail
address is not sent during the normal business hours of the recipient, such
notice or communication shall be deemed to have been sent at the opening of
business on the next Business Day for the recipient.

9.3 No Waiver; Cumulative Remedies. No delay, indulgence, omission or other act
of the Lender shall be deemed to be a waiver of any right, remedy, power or
privilege of the Lender under this Agreement nor shall the Lender by any such
act be deemed to have acquiesced in any Potential Event of Default or Event of
Default or in any breach of any of the terms and conditions of this Agreement.
No single or partial exercise of any right,

 

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remedy, power or privilege hereunder or under any other Loan Document shall
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. A waiver by the Lender of any right, remedy,
power or privilege under this Agreement or any other Loan Document on any one
occasion shall not be construed as a bar to any right or remedy which the Lender
would otherwise have on any future occasion. The rights, titles, interests,
liens, securities and remedies provided in this Agreement and the other Loan
Documents are cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law.

9.4 Costs and Expenses.

(a) All costs and expenses of the parties hereto, including fees, charges and
disbursements of counsel, incurred in connection with preparing for,
negotiating, entering into and carrying out this Agreement and performing and
consummating the transactions contemplated by this Agreement shall be paid by
the Person incurring such costs and expenses.

(b) All costs and expenses, including fees and disbursements of counsel,
incurred in connection with the enforcement or protection of the Lender’s rights
(A) in connection with this Agreement and the other Loan Documents, including
its rights under this Section, or (B) in connection with the Loans made
hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans, shall be paid
by the Borrower.

9.5 Indemnity.

(a) The Borrower shall indemnify the Lender and each Related Party thereof (each
such Person being called an “Indemnitee”) against, and hold each Indemnitee
harmless from, any and all losses, claims, damages, liabilities and related
out-of-pocket expenses (including the reasonable fees, charges and disbursements
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 contemplated hereby, (ii) any Loan or
the use of the proceeds therefrom or (iii) 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 and whether brought by the Borrower, its
equityholders, its directors, its creditors or any third party; provided that
such indemnity shall not, as to any Indemnitee, be available to the extent that
such losses, claims, damages, liabilities or related expenses are determined by
a court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such Indemnitee.
Without limiting the provisions of Section 3.1(c), this Section 9.5(a) shall not
apply with respect to Taxes.

 

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(b) To the fullest extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement, any other Loan Document or any agreement or instrument
contemplated hereby, the transactions contemplated hereby or thereby, any Loan
or the use of the proceeds thereof. No Indemnitee referred to in subsection
(a) above shall be liable for any damages arising from the use by unintended
recipients of any information or other materials distributed to such unintended
recipients by such Indemnitee through telecommunications, electronic or other
information transmission systems in connection with this Agreement or the other
Loan Documents or the transactions contemplated hereby or thereby other than for
direct or actual damages resulting from the gross negligence or willful
misconduct of such Indemnitee as determined by a final and nonappealable
judgment of a court of competent jurisdiction.

(c) All amounts due under this Section 9.5 shall be payable not later than ten
Business Days after demand therefor.

(d) The agreements in this Section shall survive the termination of the
commitments and the repayment, satisfaction or discharge of all the other
Obligations.

9.6 Payments Set Aside. If the Borrower (or another Person on the Borrower’s
behalf) makes a payment on its Obligations under the Loan Documents, or the
Lender exercises its right of set-off, and such payment or the proceeds of such
set-off or any part thereof subsequently is invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by the Lender in its discretion) to be repaid to the
Borrower, a trustee, receiver or any other Person in connection with any
Insolvency Proceeding or otherwise, then, to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such set-off had not occurred.

9.7 Successors and Assigns.

(a) Assignments Generally. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective authorized successors and
assigns; provided that the Borrower may not assign or transfer any of its rights
or obligations under this Agreement without the prior written consent of the
Lender; provided that Optinuity Alliance Resources Corporation may act as the
Borrower’s agent hereunder, to do and perform, on behalf of the Borrower, any
and every act and thing required or necessary to be done hereunder; provided
further that the Borrower shall remain solely responsible for compliance with
its obligations hereunder

(b) Assignments by Lender. The Lender may at any time assign or transfer any of
its rights or benefits under this Agreement to an Eligible Assignee. On the
effective

 

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date of such assignment: (i) the assignee thereunder shall have the rights and
obligations of a “Lender” hereunder to the extent such rights and obligations
hereunder have been assigned to it pursuant to an assignment agreement and shall
thereafter be a party hereto and a “Lender” for all purposes hereof; (ii) the
assigning Lender thereunder shall, to the extent that rights and obligations
hereunder have been assigned thereby pursuant to such assignment agreement,
relinquish its rights (other than any rights which survive the termination
hereof) and be released from its obligations hereunder; (iii) if any such
assignment occurs after the issuance of the Note hereunder, the assigning Lender
shall, upon the effectiveness of such assignment or as promptly thereafter as
practicable, surrender its Note for cancellation, and thereupon the Borrower
shall issue and deliver new Note, if so requested by the assignee and/or
assigning Lender, to such assignee and/or to such assigning Lender, with
appropriate insertions, to reflect the new outstanding Loans of the assignee
and/or the assigning Lender. Notwithstanding anything to the contrary in this
Agreement, the Lender shall not assign or transfer (including by way of
participation) any of its rights or benefits under this Agreement to a Person
who is not a “United States person” within the meaning of Section 7701(a)(3) of
the Code. The Borrower shall maintain a register for the recordation of the name
and address of the Lender, and principal amounts (and stated interest) of the
Loans owing to, the Lender pursuant to the terms hereof from time to time (the
“Register”). The entries in the Register shall be conclusive absent manifest
error, and the Borrower and the Lender shall 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. The Register shall be available for inspection
by the Lender at any reasonable time and from time to time upon reasonable prior
notice. In addition, at any time that a request for a consent for a material or
other substantive change to the Loan Documents is pending, the Lender may
request and receive from the Borrower a copy of the Register.

(c) Security Interests. Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement (including
under the Note, if any) to secure obligations of such Lender, including any
pledge or assignment to secure obligations to a Federal Reserve Bank; provided
that no such pledge or assignment shall release such Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.

(d) Participations. Any Lender may at any time, without the consent of, or
notice to, the Borrower, sell participations to any Person (other than a natural
person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries )
(each, a “Participant”) in all or a portion of such Lender’s rights and/or
obligations under this Agreement (including all or a portion of its Commitment
Amount and/or the Loans owing to it); provided that (i) such Lender’s
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Borrower and any other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender’s
rights and obligations under

 

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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, waiver or other modification described in the first
proviso to Section 9.1 that affects such Participant. Subject to the following
paragraph (e) of this Section, the Borrower agrees that each Participant shall
be entitled to the benefits of Sections 2.11 and 3.1 to the same extent as if it
were a Lender. Each Participant also agrees to be subject to paragraph (f) of
this Section as though it were a Lender. Each Lender that sells a participation
shall, acting solely for this purpose as a non-fiduciary agent of the Borrower,
maintain a register on which it enters the name and address of each Participant
and the principal amounts (and stated interest) of each Participant’s interest
in the Loans or other obligations under the Loan Documents (the “Participant
Register”); provided that no Lender shall have any obligation to disclose all or
any portion of the Participant Register (including the identity of any
Participant or any information relating to a Participant’s interest in any
commitments, loans or its other obligations under any Loan Document) to any
Person except to the extent that such disclosure is necessary to establish that
such commitment, loan or other obligation is in registered form under
Section 5f.103-1(c) of the United States Treasury Regulations. The entries in
the Participant Register shall be conclusive absent manifest error, and the
Lender shall treat each Person whose name is recorded in the Participant
Register as the owner of such participation for all purposes of this Agreement
notwithstanding any notice to the contrary. For the avoidance of doubt, the
Borrower shall have no responsibility for maintaining a Participant Register.

(e) Limitations upon Participant Rights. A Participant shall not be entitled to
receive any greater payment under Section 3.1 or 3.3 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 Borrower’s prior written consent.

(f) Sharing of Payments. If any Lender shall, by exercising any right of setoff
or counterclaim or otherwise, obtain payment in respect of (a) Obligations due
and payable to such Lender hereunder and under the other Loan Documents at such
time in excess of its ratable share of payments on account of the Obligations
due and payable to all Lenders hereunder and under the other Loan Documents at
such time obtained by all the Lenders at such time or (b) Obligations owing (but
not due and payable) to such Lender hereunder and under the other Loan Documents
at such time in excess of its ratable share (according to the proportion of
(i) the amount of such Obligations owing (but not due and payable) to such
Lender at such time to (ii) the aggregate amount of the Obligations owing (but
not due and payable) to all Lenders hereunder at such time) of payment on
account of the Obligations owing (but not due and payable) to all Lenders
hereunder and under the other Loan Documents at such time obtained by all of the
Lenders at such time, then the

 

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Lender receiving such greater proportion shall (a) notify the other Lenders of
such fact, and (b) purchase (for cash at face value) participations in the Loans
of the other Lenders, or make such other adjustments as shall be equitable, so
that the benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of Obligations then due and payable to the
Lenders or owing (but not due and payable) to the Lenders, as the case may be,
provided that:

(i) if any such participations or subparticipations are purchased and all or any
portion of the payment giving rise thereto is recovered, such participations or
subparticipations shall be rescinded and the purchase price restored to the
extent of such recovery, without interest; and

(ii) the provisions of this Section shall not be construed to apply to (A) any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or (B) any payment obtained by a Lender as consideration
for the assignment of or sale of a participation in any of its Loans to any
assignee or participant, other than to the Borrower or any Affiliate thereof (as
to which the provisions of this Section shall apply). The Borrower 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 the Borrower setoff and counterclaim
with respect to such participation as fully as if such Lender were a direct
creditor of the Borrower in the amount of such participation.

9.8 Counterparts. This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. Delivery of an executed
counterpart of this Agreement by facsimile or other electronic transmission
shall be as effective as delivery of a manually executed counterpart.

9.9 Severability. The holding by any court of competent jurisdiction that any
remedy pursued by the Lender hereunder is unavailable or unenforceable shall not
affect in any way the ability of the Lender to pursue any other remedy available
to it. In the event any provision of this Agreement shall be held illegal,
invalid or unenforceable by any court of competent jurisdiction, the parties
hereto agree that such provision shall be ineffective only to the extent of such
illegality, invalidity or unenforceability without invalidating the remainder of
such provision or any other provisions of this Agreement and shall not
invalidate or render unenforceable such provision in any other jurisdiction.

9.10 No Third Parties Benefited. This Agreement is made and entered into for the
sole protection and legal benefit of the parties hereto, and their permitted
successors and assigns, and no other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement.

 

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9.11 Governing Law; Waiver of Jury Trial.

(a) THIS AGREEMENT AND, EXCEPT AS OTHERWISE SET FORTH THEREIN, THE OTHER LOAN
DOCUMENTS, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND
THEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE RULES OF CONFLICTS
OF LAWS (OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK GENERAL
OBLIGATIONS LAW).

(b) EACH OF THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY
IRREVOCABLY WAIVES (TO THE EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHTS IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN), OR ACTIONS OF THE BORROWER. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.

9.12 Submission to Jurisdiction, Etc. By execution and delivery of this
Agreement, the Borrower irrevocably and unconditionally:

(a) submits for itself and its property in any legal action or proceeding
against it arising out of or in connection with this Agreement or any other Loan
Document, or for recognition and enforcement of any judgment in respect thereof,
to the exclusive jurisdiction of the Supreme Court of the State of New York and
the United States District Court for the Southern District of New York, in each
case sitting in the Borough of Manhattan, and appellate courts from any thereof;

(b) consents that any such action or proceeding may be brought in or removed to
such courts, and waives any objection, or right to stay or dismiss any action or
proceeding, that it may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;

(c) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to the Borrower at its
address specified in Section 9.2 or at such other address of which the Lender
shall have been notified pursuant thereto;

 

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(d) agrees that nothing herein shall (i) affect the right of the Lender to
effect service of process in any other manner permitted by law or (ii) limit the
right of the Lender to commence proceedings against or otherwise sue the
Borrower or any other Person in any other court of competent jurisdiction nor
shall the commencement of proceedings in any one or more jurisdictions preclude
the commencement of proceedings in any other jurisdiction (whether concurrently
or not) if, and to the extent, permitted by the Applicable Law; and

(e) agrees that judgment against it in any such action or proceeding shall be
conclusive and may be enforced in any other jurisdiction within or without the
United States by suit on the judgment or otherwise as provided by law, a
certified or exemplified copy of which judgment shall be conclusive evidence of
the fact and amount of the Borrower’s obligation.

9.13 Entire Agreement. The Loan Documents embody the entire agreement and
understanding among the parties hereto, and supersede all prior or
contemporaneous agreements and understandings of such Persons, verbal or
written, relating to the subject matter hereof and thereof.

9.14 Independence of Covenants. All covenants under this Agreement and the other
Loan Documents shall be given independent effect so that if a particular action
or condition is not permitted by any of such covenants, the fact that it would
be permitted by an exception to, or would otherwise be within the limitations
of, another covenant shall not avoid the occurrence of a Potential Event of
Default or an Event of Default if such action is taken or condition exists.

9.15 No Partnership, Etc. The Lender and the Borrower intend that the
relationship between them shall be solely that of creditor and debtor and the
Lender does not have any fiduciary relationship with or duty to the Borrower
arising out of or in connection with this Agreement or the other Loan Documents.
In connection with all aspects of each transaction contemplated hereby
(including in connection with any amendment, waiver or other modification hereof
or of any other Loan Document), the Borrower acknowledges and agrees, and
acknowledges its Affiliates’ understanding, that: (i) (A) the Borrower has
consulted its own legal, accounting, regulatory and tax advisors to the extent
it has deemed appropriate, and (B) the Borrower is capable of evaluating, and
understands and accepts, the terms, risks and conditions of the transactions
contemplated hereby and by the other Loan Documents; (ii) (A) the Lender is and
has been acting solely as a principal and, except as expressly agreed in writing
by the relevant parties, has not been, is not, and will not be acting as an
advisor, agent or fiduciary for the Borrower or any of its Affiliates, or any
other Person and (B) the Lender has no obligation to the Borrower or any of its
Affiliates with respect to the transactions contemplated hereby except those
obligations

 

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expressly set forth herein and in the other Loan Documents; and (iii) the Lender
and its respective Affiliates may be engaged in a broad range of transactions
that involve interests that differ from those of the Borrower and its
Affiliates, and the Lender has no obligation to disclose any of such interests
to the Borrower or any of its Affiliates. To the fullest extent permitted by
law, the Borrower hereby waives and releases any claims that it may have against
the Lender with respect to any breach or alleged breach of agency or fiduciary
duty in connection with any aspect of any transaction contemplated hereby.
Nothing contained in this Agreement or any other Loan Document shall be deemed
or construed to create a partnership, tenancy-in-common, joint tenancy, joint
venture or co-ownership by or between the Lender and the Borrower or any other
Person. The Lender shall not in any way be responsible or liable, under the Loan
Documents, for the debts, losses, obligations or duties of the Borrower or any
other Person. Nothing in the Loan Documents shall be deemed to modify in any way
any other agreements between the Borrower and the Lender.

9.16 Treatment of Certain Information; Confidentiality. The Lender agrees to
maintain the confidentiality of the Information (as defined below), except that
Information may be disclosed: (i) to its Affiliates and to it and its Related
Parties (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); (ii) to the extent required or requested
by any regulatory authority purporting to have jurisdiction over such Person or
its Related Parties (including any self-regulatory authority, such as the
National Association of Insurance Commissioners); (iii) to the extent required
by Applicable Law or regulations or by any subpoena or similar legal process;
(iv) to any other party hereto; (v) in connection with the exercise of any
remedies hereunder or under any other Loan Document or any action or proceeding
relating to this Agreement or any other Loan Document or the enforcement of
rights hereunder or thereunder; (vi) subject to an agreement containing
provisions substantially the same as those of this Section, to any assignee of
any of the Lender’s rights and obligations under this Agreement or any Eligible
Assignee invited to be a Lender; (vii) with the consent of the Borrower or
(viii) to the extent such Information (A) becomes publicly available other than
as a result of a breach of this Section or (B) becomes available to the Lender
or any of its Affiliates on a non-confidential basis from a source other than
the Borrower or its Affiliates that is not to the knowledge of the Lender
subject to confidentiality obligations owed to the Borrower or any of its
Affiliates. For purposes of this Section, “Information” means all information
received from the Borrower or any of its Affiliates relating to the Borrower or
any of its Affiliates or any of their respective businesses, other than any such
information that is available to the Lender on a non-confidential basis prior to
disclosure by the Borrower or such Affiliate. 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.

 

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9.17 USA PATRIOT Act. The Lender hereby notifies the Borrower that pursuant to
the requirements of the USA PATRIOT Act it is required to obtain, verify and
record information that identifies the Borrower, which information includes the
name and address of the Borrower and other information that will allow the
Lender to identify the Borrower in accordance with the USA PATRIOT Act. The
Borrower shall, promptly following a request by the Lender, provide all
documentation and other information that the Lender requests in order to comply
with its ongoing obligations under applicable “know your customer” an anti-money
laundering rules and regulations, including the USA PATRIOT Act.

9.18 Collateral Agent. Each Lender hereby irrevocably appoints Blue Ridge
Investments, L.L.C. to act on its behalf as the collateral agent (and Blue Ridge
Investments, L.L.C. hereby accepts such appointment) under the Security
Documents for purposes of acquiring, holding and enforcing any and all Liens on
Collateral granted by the Borrower to secure any of the Obligations, together
with such powers and discretion as are reasonably incidental thereto, and
authorizes such collateral agent to take such actions on its behalf and to
exercise such powers as are delegated to such collateral agent by the terms
hereof or thereof, together with such actions and powers as are reasonably
incidental thereto. The provisions of this Section 9.18 are solely for the
benefit of each Lender and such collateral agent, and the Borrower shall not
have rights as a third party beneficiary of any of such provisions. In this
connection, such collateral agent and any co-agents, sub-agents and
attorneys-in-fact appointed by such collateral agent for purposes of holding or
enforcing any Lien on the Collateral (or any portion thereof) granted under the
Security Documents, or for exercising any rights and remedies thereunder at the
direction of the Lender, shall be entitled to the benefits of all provisions of
Section 9.5, as though such collateral agent, co-agents, sub-agents and
attorneys-in-fact were a Lender under the Loan Documents) as if set forth in
full herein with respect thereto.

9.19 Survival of Representations and Warranties. All representations and
warranties made hereunder and in any other Loan Document or other document
delivered pursuant hereto or thereto or in connection herewith or therewith
shall survive the execution and delivery hereof and thereof. Such
representations and warranties have been or will be relied upon by the Lender,
regardless of any investigation made by the Lender or on its behalf and
notwithstanding that the Lender may have had notice or knowledge of any Default
at the time it extended any credit hereunder, and shall continue in full force
and effect as long as any Loan or any other obligation hereunder shall remain
unpaid or unsatisfied.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]

 

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

 

MBIA INSURANCE CORPORATION, as Borrower By:  

/s/ C. Edward Chaplin

Name:   C. Edward Chaplin Title:   Chief Financial Officer

BLUE RIDGE INVESTMENTS, L.L.C.

as Lender

By:  

/s/ Neil Cotty

Name:   Neil Cotty Title:   Executive Vice President

 

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EXHIBIT A

TO LOAN AGREEMENT

FORM OF NOTE

 

$500,000,000   Dated: —, 2013

FOR VALUE RECEIVED, the undersigned, MBIA Insurance Corporation, a stock
insurance company organized under the laws of the State of New York (the
“Borrower”), HEREBY PROMISES TO PAY to Blue Ridge Investments, L.L.C. or its
registered assigns (the “Lender”) the principal sum of $500,000,000 or, if less,
the aggregate principal amount of the Loans (as defined below) made by the
Lender to the Borrower pursuant to the Loan Agreement outstanding on the
Maturity Date (as defined in the Loan Agreement).

The Borrower promises to pay interest on the unpaid principal amount of each
Loan from the date of such Loan until such principal amount is paid in full, at
such interest rates, and payable at such times, as are specified in the Loan
Agreement.

Each Loan owing to the Lender by the Borrower pursuant to the Loan Agreement,
and all payments made on account of principal thereof, shall be recorded by the
Lender and, prior to any transfer hereof, endorsed on the grid attached hereto
which is part of this Note.

This promissory note is the Note referred to in, and is entitled to the benefits
of, the Loan Agreement dated as of May 6, 2013 (the “Loan Agreement”) between
the Borrower and the Lender. The Loan Agreement, among other things,
(i) provides for the making of Loans by the Lender to the Borrower from time to
time in an aggregate amount not to exceed the Dollar amount first above
mentioned, the indebtedness of the Borrower resulting from each such Loan being
evidenced by this note, and (ii) contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon the
terms and conditions therein specified.

 

MBIA INSURANCE CORPORATION By:  

 

Name:   Title:  

 

A - 1

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LOANS AND PAYMENTS OF PRINCIPAL

 

                                           

Date

   Amount of
Loan    Amount of
Principal Paid    Unpaid
Principal
Balance    Notation Made
by                                    

 

A - 2

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EXHIBIT B

TO LOAN AGREEMENT

FORM OF

NOTICE OF BORROWING

Date: —

To: Blue Ridge Investments, L.L.C. (“Blue Ridge”)

Ladies and Gentlemen:

The undersigned refers to the Loan Agreement, dated as of May 6, 2013 (as
amended from time to time, the “Loan Agreement”), between MBIA Insurance
Corporation (“MBIA”), as Borrower, and Blue Ridge, as Lender (terms defined
therein being used herein as therein defined) and hereby gives you notice
irrevocably, pursuant to Section 2.3 of the Loan Agreement, of the request of
the Loan specified below:

(a) The aggregate amount of the requested Loan is $—.

(b) The requested Loan is to consist of [Base Rate][LIBOR] Loans.

(c) If the requested Loan is to consist of LIBOR Loans, the initial Interest
Rate Period for such Loans will be[one (1)] [three (3)] [six (6)] months.

(d) The Business Day for the making of the requested Loan is — (the “Borrowing
Date”).

(e) The Loan shall be made by deposit to [INCLUDE DISBURSEMENT INSTRUCTIONS].

The Borrower certifies that the following statements are true on the date
hereof, and will be true on the Borrowing Date, both before and after giving
effect to the Loan and to the application of the proceeds therefrom:

(i) the representations and warranties of the Borrower contained in Article V of
the Loan Agreement and each other Loan Document are true and correct in all
material respects as if made on and as of the date hereof and will be true and
correct in all material respects on the Borrowing Date as if made on and as of
that date (except to the extent such representations and warranties expressly
relate to an earlier date, in which case they are true and correct as of such
date), and

(ii) no Potential Event of Default or Event of Default exists or will result
from such Borrowing.

[(iii) the proceeds of such Borrowing are to be used by the Borrower to meet the
Borrower’s ordinary course liquidity needs within 30 days of such Borrowing
Date.]

As of the date hereof and as of the Borrowing Date the conditions set forth in
Section 4.2 will be satisfied.

 

B - 1

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

[This Space Intentionally Left Blank]

 

MBIA INSURANCE CORPORATION By:  

 

  Name:     Title:  

 

B - 2

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

EXHIBIT C

TO LOAN AGREEMENT

[INTENTIONALLY OMITTED]

 

C - 1

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EXHIBIT D

TO LOAN AGREEMENT

FORM OF

COLLATERAL CALCULATION CERTIFICATE

Date: —

To: Blue Ridge Investments, L.L.C. (“Blue Ridge”)

Ladies and Gentlemen:

The undersigned refers to the Loan Agreement, dated as of May 6, 2013 (as
amended from time to time, the “Loan Agreement”), between MBIA Insurance
Corporation (“MBIA”), as Borrower, and Blue Ridge, as Lender (terms defined
therein being used herein as therein defined).

I, —, hereby certify that I am the duly elected, qualified and acting [Chief
Financial Officer/Treasurer/Controller] of MBIA. I further certify to Blue Ridge
that (i) set forth below is MBIA’s good faith calculation of the notional amount
of the Subject Collateral as of —, 20—, calculated as required by the Loan
Agreement, and (ii) since such date, no event or circumstance has occurred that
would reasonably be expected to have a material adverse effect on any of the
amounts reflected below.

 

           ($ in thousands)       

Excess Spread Salvage Collateral

   $                   

 

 

 

Installment Premium Collateral

   $                   

 

 

 

Put-Back Recoveries (Net of Other Reserves)

   $                   

 

 

 

(Gross: $            )

  

(Reflected on Statutory Balance Sheet as a

  

Contra-liability: $            )

     

 

 

 

Total

   $                   

 

 

 

 

MBIA INSURANCE CORPORATION By:  

 

  Name:     Title:  

 

D - 1

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

EXHIBIT E

TO LOAN AGREEMENT

FORM OF

CONVERSION/CONTINUATION NOTICE

Date: —

To: Blue Ridge Investments, L.L.C. (“Blue Ridge”)

Ladies and Gentlemen:

The undersigned refers to the Loan Agreement, dated as of May 6, 2013 (as
amended from time to time, the “Loan Agreement”), between MBIA Insurance
Corporation (“MBIA”), as Borrower, and Blue Ridge, as Lender (terms defined
therein being used herein as therein defined) and hereby gives you notice
irrevocably, pursuant to Section 2.9 of the Loan Agreement, of the request to
convert a Loan as follows:

(a) The Loan to be converted consist of [Base Rate][LIBOR] Loans in the
aggregate principal amount of $                     which were initially
advanced to the Borrower on                     .

(b) Such borrowing is to be converted into a Loan consisting of the following
Interest Period:                     .

(c) The date of the requested conversion is to be                     .

For each conversion of a Loan consisting of Base Rate Loans to LIBOR Loans, the
Borrower hereby certifies to the Lender that, on the date of this Conversion/
Continuation Notice, and after giving effect to the requested conversion no
Potential Event of Default or Event of Default exists or will result from such
requested conversion.

 

MBIA INSURANCE CORPORATION By:  

 

  Name:     Title:  

 

E - 1

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

EXHIBIT F

TO LOAN AGREEMENT

FORM OF

COMPLIANCE CERTIFICATE

Date: —

To: Blue Ridge Investments, L.L.C. (“Blue Ridge”)

Ladies and Gentlemen:

The undersigned refers to the Loan Agreement, dated as of May 6, 2013 (as
amended from time to time, the “Loan Agreement”), between MBIA Insurance
Corporation (“MBIA”), as Borrower, and Blue Ridge, as Lender (terms defined
therein being used herein as therein defined).

The undersigned Responsible Officer of the Borrower hereby certifies as of the
date hereof that he/she is the                      of the Borrower, and that,
as such, he/she is authorized to execute and deliver this Certificate to the
Lender on behalf of the Borrower, and that:

[Use following paragraphs for fiscal year-end financial statements]

1. Attached hereto as Schedule 1 are the year-end audited financial statements
required by Section 6.1(a)(i) of the Loan Agreement for the fiscal year of the
Borrower and its Subsidiaries ended as of the above date, together with the
report and opinion of its independent certified public accountant required by
Section 6.1(a) of the Loan Agreement.

2. Attached hereto as Schedule 2 are the year-end audited financial statements
required by Section 6.1(a)(iv) of the Loan Agreement for the fiscal year of each
of MBIA UK and UK Insurance ended as of the above date, together with the report
and opinion of its independent certified public accountant required by
Section 6.1(a)(iv) of the Loan Agreement.

[Use following paragraphs for interim financial statements]

1. Attached hereto as Schedule 1 are the unaudited financial statements required
by Section 6.1(a)(ii) of the Loan Agreement for the fiscal quarter of the
Borrower ended as of the above date. Such financial statements fairly present
the consolidated financial condition, results of operations and cash flows of
the Holdings and its Subsidiaries in accordance with US GAAP as at such date and
for such period, subject only to normal year-end audit adjustments and the
absence of footnotes.

2. [reserved]

[Use following paragraphs for all financial statements]

 

F - 1

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

EXHIBIT F

TO LOAN AGREEMENT

 

3. The undersigned has reviewed and is familiar with the terms of the Loan
Agreement and has made, or has caused to be made under his/her supervision, a
detailed review of the transactions and condition (financial or otherwise) of
the Borrower and its Subsidiaries during the accounting period covered by the
attached financial statements.

4. A review of the activities of the Borrower and its Subsidiaries during such
fiscal period has been made under the supervision of the undersigned with a view
to determining whether during such fiscal period the Borrower performed and
observed all their respective obligations under the Loan Documents, and

[select one:]

[to the best knowledge of the undersigned during such fiscal period, the
Borrower and its Subsidiaries performed and observed each covenant and condition
of the Loan Documents applicable to them, and no Default or Event of Default has
occurred and is continuing.]

—or—

[the following covenants or conditions have not been performed or observed and
the following is a list of each such Default or Event of Default and its nature
and status:]

5. The financial covenant analyses and information set forth on Schedule 3 as
of, and for, the period referred to therein attached hereto are true and
accurate on and as of the date of this Certificate.

IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
            ,         .

 

MBIA INSURANCE CORPORATION By:  

 

Name:   Title:  

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

For the Fiscal Quarter / Year

ended                     

Schedule 3

to the Compliance Certificate

($ in thousands)

 

I. Section 7.12(a)—Required Coverage Covenant

 

          

A. Subject Collateral

  

1. Excess Spread Salvage Collateral

   $                   

 

 

 

2. Installment Premium Collateral

   $                   

 

 

 

3. Put-Back Recoveries (Net of Other Reserves)

   $                   

 

 

 

(Gross: $            )

  

(Reflected on Statutory Balance Sheet as a

  

Contra-liability: $            )

  

Subject Collateral

   $                   

 

 

 

(Lines I.A.1 + 2 + 3)

  

B. Required Coverage

  

$1,000,000,000

   $                   

 

 

 

Section 7.12(a) Covenant: Subject Collateral must be greater than Required
Coverage.

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

II. Section 7.12(b)—Minimum Statutory Capital Covenant

 

          

A. Statutory Capital

  

1. Policyholders’ surplus

   $                   

 

 

 

2. Contingency reserves1

   $                   

 

 

 

Statutory Capital

   $                   

 

 

 

(Lines II.A.1 + 2)

  

B. Minimum Statutory Capital

   $                   

 

 

 

Section 7.12(b) Covenant: Statutory Capital must be greater than or equal to
Minimum Statutory Capital.

 

1  Both policyholders’ surplus and contingency reserves must be determined in a
manner consistent with that used in preparing the Audited Statutory Financial
Statements