Exhibit 10.3
 EXECUTION COPY
   
 


	
  CREDIT AGREEMENT

   

  Dated
  as of November 14, 2006

   

  among

   

  WHITE MOUNTAINS INSURANCE GROUP, LTD.,

   

  and

   

  WHITE MOUNTAINS RE GROUP, LTD.,

  as
  the Borrowers,

   

  BANK OF AMERICA, N.A.,

  as Administrative Agent, Swing Line Lender and

  Issuing Lender,

   

  and

   

  THE OTHER LENDERS PARTY HERETO

   

  LEHMAN BROTHERS INC.,

  as Syndication
  Agent

   

  and

   

  JPMORGAN
  CHASE BANK, N.A.,

  THE
  BANK OF NEW YORK,

  THE
  BANK OF TOKYO-MITSUBISHI UFJ. LTD., NEW YORK BRANCH,

  and

  DEUTSCHE BANK AG NEW YORK BRANCH

  as Co-Documentation Agents

   

  and

   

  BANC OF AMERICA SECURITIES LLC,

   

  and

   

  LEHMAN BROTHERS INC.

  as Joint Lead Arrangers and Joint Book Runners

  



 


 



   
 















TABLE OF CONTENTS


	
  

  	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  DEFINITIONS

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Defined Terms

  	
  1

  
	
   

  	
  1.2.

  	
  Other Definitional Provisions

  	
  27

  
	
   

  	
  1.3.

  	
  Letter of Credit Amounts

  	
  27

  
	
   

  	
  1.4.

  	
  Rounding

  	
  27

  
	
   

  	
  1.5.

  	
  Times of Day

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  AMOUNT AND TERMS OF COMMITMENTS

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1.

  	
  Revolving Credit Commitments

  	
  28

  
	
   

  	
  2.2.

  	
  Procedure for Revolving Credit Borrowing

  	
  28

  
	
   

  	
  2.3.

  	
  Swing Line Commitment

  	
  29

  
	
   

  	
  2.4.

  	
  Procedure for Swing Line Borrowing; Refunding of
  Swing Line Loans

  	
  29

  
	
   

  	
  2.5.

  	
  Repayment of Loans; Evidence of Debt

  	
  31

  
	
   

  	
  2.6.

  	
  Facility Fee, etc

  	
  32

  
	
   

  	
  2.7.

  	
  Termination or Reduction of Revolving Credit
  Commitments

  	
  33

  
	
   

  	
  2.8.

  	
  Prepayments

  	
  34

  
	
   

  	
  2.9.

  	
  Conversion and Continuation Options

  	
  34

  
	
   

  	
  2.10.

  	
  Maximum Number of Eurodollar Loans

  	
  35

  
	
   

  	
  2.11.

  	
  Interest Rates and Payment Dates

  	
  35

  
	
   

  	
  2.12.

  	
  Computation of Interest and Fees

  	
  36

  
	
   

  	
  2.13.

  	
  Inability to Determine Interest Rate

  	
  36

  
	
   

  	
  2.14.

  	
  Pro Rata Treatment and Payments

  	
  37

  
	
   

  	
  2.15.

  	
  Requirements of Law

  	
  39

  
	
   

  	
  2.16.

  	
  Taxes

  	
  40

  
	
   

  	
  2.17.

  	
  Compensation for Losses

  	
  42

  
	
   

  	
  2.18.

  	
  Illegality

  	
  42

  
	
   

  	
  2.19.

  	
  Change of Office

  	
  43

  
	
   

  	
  2.20.

  	
  Replacement of Lenders under Certain Circumstances

  	
  43

  
	
   

  	
  2.21.

  	
  Guaranty of Payment and Performance

  	
  44

  
	
   

  	
  2.22.

  	
  Increase in Commitments

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  LETTERS OF CREDIT

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1.

  	
  L/C Commitment

  	
  48

  
	
   

  	
  3.2.

  	
  Procedure for Issuance and Amendment of Letter of
  Credit

  	
  48

  
	
   

  	
  3.3.

  	
  Drawings and Reimbursements; Funding of
  Participations

  	
  49

  
	
   

  	
  3.4.

  	
  Repayment of Participations

  	
  51

  
	
   

  	
  3.5.

  	
  Obligations Absolute

  	
  52

  
	
   

  	
  3.6.

  	
  Role of Issuing Lender

  	
  52

  
								



 



 i
 









 


	
  

  	
  3.7.

  	
  Cash Collateral

  	
   

  	
  53

  
	
   

  	
  3.8.

  	
  Applicability of ISP98 and UCP

  	
   

  	
  53

  
	
   

  	
  3.9.

  	
  Fees and Other Charges

  	
   

  	
  53

  
	
   

  	
  3.10.

  	
  Conflict with Issuer Documents

  	
   

  	
  54

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  CONDITIONS PRECEDENT

  	
   

  	
   

  	
  54

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1.

  	
  Conditions to Closing

  	
   

  	
  54

  
	
   

  	
  4.2.

  	
  Conditions to Closing and Each Extension of Credit

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1.

  	
  Financial Statements

  	
   

  	
  56

  
	
   

  	
  5.2.

  	
  Corporate Existence; Compliance with Law

  	
   

  	
  57

  
	
   

  	
  5.3.

  	
  Corporate Power; Authorization; Enforceable
  Obligations

  	
   

  	
  57

  
	
   

  	
  5.4.

  	
  No Legal Bar

  	
   

  	
  58

  
	
   

  	
  5.5.

  	
  No Material Litigation

  	
   

  	
  58

  
	
   

  	
  5.6.

  	
  Ownership of Property; Liens

  	
   

  	
  58

  
	
   

  	
  5.7.

  	
  Intellectual Property

  	
   

  	
  58

  
	
   

  	
  5.8.

  	
  Taxes

  	
   

  	
  58

  
	
   

  	
  5.9.

  	
  Federal Regulations

  	
   

  	
  59

  
	
   

  	
  5.10.

  	
  ERISA

  	
   

  	
  59

  
	
   

  	
  5.11.

  	
  Investment Company Act; Other Regulations

  	
   

  	
  59

  
	
   

  	
  5.12.

  	
  Use of Proceeds

  	
   

  	
  59

  
	
   

  	
  5.13.

  	
  Accuracy of Information, etc.

  	
   

  	
  59

  
	
   

  	
  5.14.

  	
  Insurance Regulatory Matters

  	
   

  	
  60

  
	
   

  	
  5.15.

  	
  Indebtedness and Liens

  	
   

  	
  60

  
	
   

  	
  5.16.

  	
  Taxpayer Identification Number

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  AFFIRMATIVE COVENANTS

  	
   

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1.

  	
  Financial Statements

  	
   

  	
  60

  
	
   

  	
  6.2.

  	
  Certificates; Other Information

  	
   

  	
  63

  
	
   

  	
  6.3.

  	
  Payment of Obligations

  	
   

  	
  64

  
	
   

  	
  6.4.

  	
  Conduct of Business and Maintenance of Existence,
  etc.

  	
   

  	
  64

  
	
   

  	
  6.5.

  	
  Maintenance of Property; Insurance

  	
   

  	
  64

  
	
   

  	
  6.6.

  	
  Inspection of Property; Books and Records;
  Discussions

  	
   

  	
  65

  
	
   

  	
  6.7.

  	
  Notices

  	
   

  	
  65

  
	
   

  	
  6.8.

  	
  Taxes

  	
   

  	
  66

  
	
   

  	
  6.9.

  	
  Use of Proceeds

  	
   

  	
  66

  
	
   

  	
  6.10.

  	
  Further Assurances

  	
   

  	
  66

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  NEGATIVE COVENANTS

  	
   

  	
   

  	
  66

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1.

  	
  Financial Condition Covenants

  	
   

  	
  66

  
									




 ii
 









 


	
  

  	
  7.2.

  	
  Limitation on Indebtedness and Issuance of Preferred
  Stock

  	
   

  	
  67

  
	
   

  	
  7.3.

  	
  Limitation on Liens

  	
   

  	
  68

  
	
   

  	
  7.4.

  	
  Limitation on Changes in Fiscal Periods

  	
   

  	
  69

  
	
   

  	
  7.5.

  	
  Limitation on Lines of Business

  	
   

  	
  69

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  EVENTS OF DEFAULT

  	
   

  	
   

  	
  69

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1.

  	
  Events of Default

  	
   

  	
  69

  
	
   

  	
  8.2.

  	
  Remedies Upon Event of Default

  	
   

  	
  72

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  THE ADMINISTRATIVE AGENT

  	
   

  	
   

  	
  72

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1.

  	
  Appointment

  	
   

  	
  72

  
	
   

  	
  9.2.

  	
  Delegation of Duties

  	
   

  	
  73

  
	
   

  	
  9.3.

  	
  Liability of Administrative Agent

  	
   

  	
  73

  
	
   

  	
  9.4.

  	
  Reliance by Administrative Agent

  	
   

  	
  73

  
	
   

  	
  9.5.

  	
  Notice of Default

  	
   

  	
  74

  
	
   

  	
  9.6.

  	
  Credit Decision; Disclosure of Information by
  Administrative Agent

  	
   

  	
  74

  
	
   

  	
  9.7.

  	
  Indemnification of Administrative Agent

  	
   

  	
  75

  
	
   

  	
  9.8.

  	
  Administrative Agent in its Individual Capacity

  	
   

  	
  75

  
	
   

  	
  9.9.

  	
  Successor Administrative Agent

  	
   

  	
  76

  
	
   

  	
  9.10.

  	
  Administrative Agent May File Proofs of Claim

  	
   

  	
  76

  
	
   

  	
  9.11.

  	
  Guarantee and Collateral Matters

  	
   

  	
  77

  
	
   

  	
  9.12.

  	
  Other Agents; Arrangers and Managers

  	
   

  	
  78

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  MISCELLANEOUS

  	
   

  	
   

  	
  78

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1.

  	
  Amendments, Etc.

  	
   

  	
  78

  
	
   

  	
  10.2.

  	
  Notices; Effectiveness; Electronic Communication

  	
   

  	
  80

  
	
   

  	
  10.3.

  	
  No Waiver; Cumulative Remedies

  	
   

  	
  82

  
	
   

  	
  10.4.

  	
  Survival of Representations and Warranties

  	
   

  	
  82

  
	
   

  	
  10.5.

  	
  Attorney Costs and Expenses

  	
   

  	
  82

  
	
   

  	
  10.6.

  	
  Indemnification

  	
   

  	
  83

  
	
   

  	
  10.7.

  	
  Successors and Assigns

  	
   

  	
  84

  
	
   

  	
  10.8.

  	
  Adjustments; Set-off

  	
   

  	
  89

  
	
   

  	
  10.9.

  	
  Counterparts

  	
   

  	
  90

  
	
   

  	
  10.10.

  	
  Severability

  	
   

  	
  90

  
	
   

  	
  10.11.

  	
  Integration

  	
   

  	
  90

  
	
   

  	
  10.12.

  	
  GOVERNING LAW

  	
   

  	
  90

  
	
   

  	
  10.13.

  	
  SUBMISSION TO JURISDICTION; WAIVERS

  	
   

  	
  91

  
	
   

  	
  10.14.

  	
  WAIVERS OF JURY TRIAL

  	
   

  	
  91

  
	
   

  	
  10.15.

  	
  No Advisory or Fiduciary Responsibility

  	
   

  	
  92

  
	
   

  	
  10.16.

  	
  Confidentiality

  	
   

  	
  92

  
	
   

  	
  10.17.

  	
  Release of Guarantee Obligations

  	
   

  	
  93

  
								



 



 iii
 









 


	
  

  	
  10.18.

  	
  Accounting Changes

  	
   

  	
  93

  
	
   

  	
  10.19.

  	
  USA PATRIOT Act Notice

  	
   

  	
  94

  
	
   

  	
  10.20.

  	
  Interest Rate Limitation

  	
   

  	
  94

  




 iv
 









SCHEDULES:


	
  1

  	
  Commitment Schedule

  
	
  1A

  	
  Existing Letters of Credit

  
	
  5.3

  	
  Consents, Authorizations, Filings and Notices

  
	
  10.2

  	
  Notice Addresses

  
	
   

  	
   

  
	
  EXHIBITS:

  	
   

  
	
   

  	
   

  
	
  A

  	
  Form of Compliance Certificate

  
	
  B-1

  	
  Form of Borrowing Request

  
	
   

  	
   

  
	
  B-2

  	
  Form of Swing Line Loan Notice

  
	
  C-1

  	
  Form of Revolving Credit Note

  
	
  C-2

  	
  Form of Swing Line Note

  
	
  D

  	
  Form of Exemption Certificate

  
	
   

  	
   

  
	
  E

  	
  Form of Closing Certificate

  
	
  F

  	
  Form of Legal Opinion of Robert Seelig, Esq.

  
	
  G

  	
  Form of Legal Opinion of Conyers Dill & Pearman

  
	
  H

  	
  Form of Assignment and Assumption

  
	
  I

  	
  Form of Instrument of Accession

  



 



 v















CREDIT
AGREEMENT


This CREDIT AGREEMENT, dated as of November 14,
2006, among (i) WHITE MOUNTAINS INSURANCE
GROUP, LTD., a company existing under the laws of Bermuda (“Parent”),
(ii) WHITE MOUNTAINS RE GROUP, LTD.,
a company existing under the laws of Bermuda (“White Mountains Re” and,
together with Parent, collectively, the “Borrowers” and, individually, a
“Borrower”), (iii) each lender from time to time party hereto
(collectively, the “Lenders”), (iv) BANK
OF AMERICA, N.A., as Administrative Agent, Swing Line Lender and the
Issuing Lender and (v) LEHMAN BROTHERS INC.,
as Syndication Agent.


PRELIMINARY STATEMENTS


The Borrowers have
requested that the Lenders provide a revolving credit facility, and the Lenders
are willing to do so on the terms and conditions set forth herein.


In consideration of the
mutual covenants and agreements herein contained, the parties hereto covenant
and agree as follows:


1.             DEFINITIONS


1.1.  Defined Terms.  As used in this Agreement, the terms listed
in this Section  1.1 shall have the respective meanings set forth
in this Section 1.1.


“Act of 1934”
means the Securities Exchange Act of 1934 and the regulations issued
thereunder.


“Administrative
Agent” means Bank of America, N.A., in its capacity as administrative agent
under any of the Loan Documents, or any successor administrative agent
appointed in accordance with Section 9.9.


“Administrative
Agent’s Office” means the Administrative Agent’s address and, as
appropriate, account as set forth on Schedule 10.2, or such other
address or account as the Administrative Agent may from time to time notify the
Borrowers and the Lenders.


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


“Affiliate”
means, as to any Person, any other Person that, directly or indirectly, is in
control of, is controlled by, or is under common control with, such
Person.  For purposes of this definition,
“control” of a Person means the power, directly or indirectly, either to (a)
vote 10% or more of the securities having ordinary voting power for the
election of directors (or persons performing similar functions) of such Person
or (b) direct or cause the direction of the management and policies of such
Person, whether by contract or otherwise.



   
 









“Agent Fee
Letter” means that certain letter agreement dated as of November 14, 2006
by and between the Borrowers, Fund American, the Administrative Agent and Banc
of America Securities LLC.


“Agent-Related
Persons” means the Administrative Agent, together with its Affiliates
(including, Bank of America, N.A. in its capacity as the Administrative Agent
and Banc of America Securities LLC in its capacity as one of the Arrangers),
and the officers, directors, employees, agents and attorneys-in-fact of such
Persons and Affiliates.


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


“Annual Report”
means the Annual Statement required to be filed by Sirius with the Department
in Sweden.


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


“Applicable
Margin” means the applicable percentage per annum set forth below
corresponding to the Total Consolidated Debt to Total Consolidated
Capitalization Ratio as of the most recent fiscal quarter of the Parent for
which a Compliance Certificate has been or is required to have been delivered
pursuant to Section 6.2(b):




	
  Pricing

   Level

  	
   

  	
  Total Consolidated Debt to Total

  Consolidated Capitalization Ratio

  	
   

  	
  Applicable Margin

  	
   

  
	
  I

  	
   

  	
  £ 10.0%

  	
   

  	
  0.320

  	
  %

  
	
  II

  	
   

  	
  > 10.0% £
  15.0%

  	
   

  	
  0.400

  	
  %

  
	
  III

  	
   

  	
  > 15.0% £
  22.5%

  	
   

  	
  0.525

  	
  %

  
	
  IV

  	
   

  	
  > 22.5% <
  30.0%

  	
   

  	
  0.675

  	
  %

  
	
  V

  	
   

  	
  3 30.0%

  	
   

  	
  0.875

  	
  %

  






The Applicable Margin in effect from the Closing Date
through the first Business Day immediately following the date the first
Compliance Certificate is delivered to the Administrative Agent pursuant to Section
6.2(b), shall be the Applicable Margin set forth in pricing level III.  Any increase or decrease in the Applicable
Margin resulting from a change in the Total Consolidated Debt to Total
Consolidated Capitalization Ratio, as set forth on a Compliance Certificate
delivered pursuant to Section 6.2(b), shall become 



 2
 









effective as of the first Business Day immediately
following delivery of such Compliance Certificate; provided, however,
that if a Compliance Certificate is not delivered when due in accordance with Section
6.2(b), then the level V Applicable Margin shall apply as of the first
Business Day after the date on which such Compliance Certificate was required
to have been delivered until the first Business Day after the date on which
such Compliance Certificate is delivered.


“Application”
means an application and agreement for the issuance or amendment of a Letter of
Credit in the form from time to time used by the Issuing Lender, which shall
not be inconsistent with this Agreement or impose additional obligations on the
Borrowers.


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


“Arranger Fee
Letter” means that certain letter agreement dated as of November 14, 2006
by and among the Borrowers, Fund American, the Arrangers and LBB.


“Arrangers”
means Banc of America Securities LLC and Lehman Brothers Inc., in their
respective capacities as joint lead arrangers and joint book runners.


“Assignee Group”
means two or more Eligible Assignees that are Affiliates of one another or two
or more Approved Funds managed by the same investment advisor.


“Assignment and
Assumption” means an assignment and assumption entered into by a Lender and
an Eligible Assignee (with the consent of any party whose consent is required
by Section 10.7(b), and accepted by the Administrative Agent, in
substantially in the form of Exhibit H or any other form approved by the
Administrative Agent.


“Attorney Costs”
means and includes all reasonable fees, expenses and disbursements of any law
firm or other external counsel.


“Available Cash
Flow” means, with respect to any Reference Period of Parent, the sum
(without duplication) of: (a) actual cash received during such period (whether by way of dividends,
distributions, principal or interest payments or guarantee fees) from
Non-Regulated Operating Subsidiaries; provided  that, there shall be netted against
such amounts received from each individual Non-Regulated Operating Subsidiary
(but only to the extent of such amounts received from such Non-Regulated
Operating Subsidiary), without duplication, an amount equal to the aggregate
amount of investments made by a Holding Company in such Non-Regulated Operating
Subsidiary during such period, (b) net tax sharing payments, group
contributions or similar payments received from Operating Subsidiaries during
such period, (c) in respect of investments reflected as fixed maturity
investments, short-term investments or common equity securities on the
consolidated balance sheet of Parent, net investment income earned, or 



 3
 









capital gains realized, by any Holding Company during such period
determined in accordance with GAAP and, in respect of other investments
reflected on the consolidated balance sheet of Parent (including investments
reflected as investments in unconsolidated affiliates), actual cash received
during such period, (d) the greater of (i) the actual cash received during such
period (whether by way of dividends, distributions, principal or interest
payments or guarantee fees) from Insurance Subsidiaries and (ii) the annual
dividend capacity of Insurance Subsidiaries as determined as of the most recent
fiscal quarter then ended, it being understood that Sirius’s annual dividend
capacity shall be equal to its trailing twelve month statutory after tax income
and (e) actual cash received during such period (whether by way of dividends,
distributions, principal or interest payments or guarantee fees) from OneBeacon
Limited and its Subsidiaries.  For
purposes of calculating Available Cash Flow, (x) amounts will be deemed received to the extent such amounts are actually
received by a Holding Company (except to the extent such Holding Company would
be unable to transfer the amounts so received directly or indirectly to a
Borrower without third-party approval and such third-party approval shall not
have been obtained) and (y) for purposes of clauses (a), (b), (c) and (d) of
the definition hereof, Available Cash Flow shall not, in any event, include
Available Cash Flow of OneBeacon Limited and its Subsidiaries.


“Available
Revolving Credit Commitment” means, with respect to any Lender at any time,
an amount equal to the excess, if any, of (a) such Lender’s Revolving Credit
Commitment then in effect over (b) such Lender’s Revolving Extensions of
Credit then outstanding.


“Base Rate”
means, for any day, a fluctuating rate per annum equal to the higher of (a) the
Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for
such day as publicly announced from time to time by Bank of America, N.A. as
its “prime rate.”  The “prime rate” is a
rate set by Bank of America, N.A. based upon various factors including Bank of
America, N.A.’s costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which may be
priced at, above, or below such announced rate. 
Any change in such rate announced by Bank of America, N.A. shall take
effect at the opening of business on the day specified in the public
announcement of such change.


“Base Rate
Loans” means Loans for which the applicable rate of interest is based upon
the Base Rate.


“Benefitted
Lender” has the meaning specified in Section 10.8.


“Berkshire
Hathaway” means, Berkshire Hathaway Inc., or an Affiliate thereof.


“Berkshire
Preferred Stock” means the $300,000,000 aggregate liquidation preference
amount of non-voting preferred stock issued by Fund American to Berkshire
Hathaway pursuant to the Certificate of Designation of Series A Preferred Stock
of TACK Acquisition Corp. (n/k/a Fund American) as amended, supplemented or
otherwise modified from time to time.



 4
 









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


“Borrower
Materials” has the meaning specified in Section 6.2(e).


“Borrowers”
has the meaning specified in the preamble hereto.


“Borrowing Date”
means any Business Day specified by a Borrower as a date on which such Borrower
requests the relevant Lenders to make Loans hereunder.


“Borrowing
Request” means a notice of (a) a borrowing, (b) a conversion of Loans from
one Type to the other, or (c) a continuation of Eurodollar Loans pursuant to Sections
2.2 or 2.9 which, if in writing, shall be substantially in the form
of Exhibit B-1.


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


“Capital Lease
Obligations” means, with respect to any Person, the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination
thereof, which obligations are required to be classified and accounted for as
capital leases on a balance sheet of such Person under GAAP; and, for the
purposes of this Agreement, the amount of such obligations at any time shall be
the capitalized amount thereof at such time determined in accordance with GAAP.


“Capital and
Surplus” means, as of any date, (a) as to any Insurance Subsidiary
domiciled in the United States, the total surplus as regards policyholders (or
any successor line item description that contains the same information) as
shown in its Annual Statement or Quarterly Statement, or an amount determined
in a consistent manner for any date other than one as of which an Annual
Statement or Quarterly Statement is prepared, (b) as to Sirius, the total
solvency capital (or any successor line item description that contains the same
information) as shown in its Annual Report or Interim Report, or an amount
determined in a consistent manner for any date other than one as of which an
Annual Report or Interim Report is prepared and (c) as to any other Insurance
Subsidiary, the equivalent amount (determined in good faith by Parent).


“Capital Stock”
means any and all shares, interests, participations or other equivalents
(however designated) of capital stock or share capital of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.



 5
 









“Cash Collateralize”
means to pledge and deposit with or deliver to the Administrative Agent, for
the benefit of the Issuing Lender and the Lenders, as collateral for the L/C
Obligations, cash or deposit account balances pursuant to documentation in form
and substance reasonably satisfactory to the Administrative Agent and the
Issuing Lender (which documents are hereby consented to by the Lenders).  Derivatives of such term have corresponding
meanings.


“Change of
Control” means (a) the acquisition of ownership, directly or indirectly,
beneficially or of record, by any Person or group (within the meaning of the
Act of 1934 and the rules of the SEC thereunder as in effect on the date
hereof), other than (i) Berkshire Hathaway, (ii) Franklin Mutual or (iii) John
J. Byrne or any Related Person with respect to John J. Byrne (together with, in
the case of clauses (i), (ii) and (iii), their Affiliates)
of Capital Stock representing more than 30% of the aggregate ordinary voting
power represented by the issued and outstanding Capital Stock of Parent,
(b) the occupation, within a period of two years, of a majority of the
seats (other than vacant seats) on the board of directors of Parent by Persons
who were neither (i) nominated by the board of directors of Parent nor
(ii) appointed by directors so nominated or (c) neither White Mountains Re
nor, if applicable, its successors shall be a Subsidiary of Parent.  For the avoidance of doubt, none of the
Capital Stock held by the entities listed in clauses (a)(i), (a)(ii)
and (a)(iii), nor the Capital Stock held by any of their Affiliates,
shall be included as being owned by a Person or group when determining whether
such Person or group has met the 30% threshold set forth in clause (a).


“Closing
Certificate” means a certificate substantially in the form of Exhibit E.


“Closing Date”
means the first date on which all the conditions precedent in Section 4.1
are satisfied or waived in accordance with Section 10.1.


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


“Commitments”
means, collectively the Revolving Credit Commitments, the Swing Line
Commitment, the L/C Commitment or as the context may require, any such
Commitment.


“Commonly
Controlled Entity” means an entity, whether or not incorporated, that is
under common control with the Borrowers within the meaning of Section 4001 (a)
(14) of ERISA or that is treated as a single employer with the Borrowers under
Section 414 of the Code.


“Compensation
Period” has the meaning specified in Section 2.14(e)(ii).


“Compliance
Certificate” means a certificate duly executed by a Responsible Officer on
behalf of Parent substantially in the form of Exhibit A.



 6
 









“Conditional
Common Equity” means convertible preferred stock which will convert to
common equity upon shareholder approval (provided that such shareholder
approval is obtained within the period required by the terms thereof).


“Consolidated
Net Income” means, for any period, the consolidated net income (or loss) of
Parent and its consolidated Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP; provided, that in
calculating Consolidated Net Income for any period, there shall be excluded for
purposes of the calculation of Consolidated Net Income (a) the income (or
deficit) of any Person accrued prior to the date it becomes a Subsidiary of
Parent or is merged into or consolidated with Parent or any of its Subsidiaries
and (b) any effects
resulting from SFAS 158.


“Consolidated
Net Worth” means, as at any date, the sum of all amounts that would, in
conformity with GAAP be included on a consolidated balance sheet of Parent and
its consolidated Subsidiaries under stockholders’ equity at such date, plus
minority interests in Subsidiaries, as determined in accordance with GAAP; provided,
however, that any effects resulting from (a) SFAS 115 or (b) SFAS 158 shall be excluded for purposes of
the calculation of Consolidated Net Worth.


“Cure Period”
has the meaning specified in Section 7.1(b).


“Contractual
Obligation” means, 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.


“Debt”
means indebtedness for borrowed money.


“Debtor Relief
Laws” the Bankruptcy Code of the United States, and all other liquidation,
conservatorship, bankruptcy, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization, or similar
debtor relief laws of the United States or other applicable jurisdictions,
domestic or foreign, from time to time in effect and affecting the rights of
creditors generally.


“Default”
means any of the events specified in Section 8.1, whether or not
any requirement for the giving of notice, the lapse of time, or both, has been
satisfied.


“Defaulting
Lender” means any Lender that (a) has failed to fund any portion of the
Loans or participations in the L/C Obligations required to be funded by it
hereunder within one Business Day of the date required to be funded by it
hereunder unless such failure has been cured, (b) has otherwise failed to pay
over to the Administrative Agent or any other Lender any other amount required
to be paid by it hereunder within one Business Day of the date when due, unless
the subject of a good faith dispute or unless such failure has been cured or
(c) has been deemed insolvent or become the subject of a bankruptcy or
insolvency proceeding.


“Default Rate”
has the meaning specified in Section 2.11(c).



 7
 









“Department”
means, with respect to any Insurance Subsidiary, the insurance commissioner or
other Governmental Authority of such Insurance Subsidiary’s jurisdiction of
domicile with which such Insurance Subsidiary is required to file its Annual
Statement.


“Dollars”
and “$” means lawful currency of the United States of America.


“Eligible
Assignee” means any Person that meets the requirements to be an assignee
under Section 10.7(b)(iii), (v), (vi), (vii) and (viii)
(subject to such consents, if any, as may be required under Section 10.7(b)(iii)).


“Environmental
Liability” means any liability, contingent or otherwise (including any
liability for damages, costs of environmental remediation, injunctive or
equitable relief, fines, penalties or indemnities), of a Borrower or any of its
Subsidiaries resulting from or based upon (a) a violation of any environmental
law, (b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) human exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous Materials
into the environment or (e) any contract, agreement or other consensual
arrangement pursuant to which liability is assumed or imposed with respect to
any of the foregoing.


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


“Eurodollar
Loans” means Loans for which the applicable rate of interest is based upon
the Eurodollar Rate.


“Eurodollar
Rate” means, for any Interest Period with respect to a Eurodollar 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 by the Administrative Agent
from time to time) at approximately 11:00 A.M., London time, two Business Days
prior to the commencement of such Interest Period, 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 “Eurodollar Rate” for such
Interest Period shall be the rate per annum determined by the Administrative
Agent 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 Loan being made, continued or converted by Bank of America, N.A. and
with a term equivalent to such Interest Period would be offered by Bank of
America, N.A.’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.


“Excluded Taxes”
has the meaning specified in Section 2.16(a).


“Existing
Credit Agreement” means that certain Credit Agreement, dated as of August
26, 2004, among Parent, Fund American, the several banks and other 



 8
 









financial
institutions or entities from time to time parties thereto, JP Morgan Chase
Bank, as syndication agent, and Bank of America, N.A., as administrative agent.


“Existing
Letters of Credit” means those letters of credit set forth on Schedule
1A.


“Event of
Default” means any of the events specified in Section 8.1, provided
that any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.


“Facility Fee
Rate” means the applicable percentage per annum set forth below
corresponding to the Total Consolidated Debt to Total Consolidated
Capitalization Ratio as of the most recent fiscal quarter of the Parent for
which a Compliance Certificate has been or is required to have been delivered
pursuant to Section 6.2(b):




	
  Pricing

  Level

  	
   

  	
  Total Consolidated Debt to Total

  Consolidated Capitalization Ratio

  	
   

  	
  Facility Fee Rate

  	
   

  
	
  I

  	
   

  	
  £
  10.0%

  	
   

  	
  0.080

  	
  %

  
	
  II

  	
   

  	
  > 10.0% £
  15.0%

  	
   

  	
  0.100

  	
  %

  
	
  III

  	
   

  	
  > 15.0% £
  22.5%

  	
   

  	
  0.125

  	
  %

  
	
  IV

  	
   

  	
  > 22.5% <
  30.0%

  	
   

  	
  0.175

  	
  %

  
	
  V

  	
   

  	
  3
  30.0%

  	
   

  	
  0.225

  	
  %

  






The Facility Fee Rate in effect from the Closing Date
through the first Business Day immediately following the date the first
Compliance Certificate is delivered to the Administrative Agent pursuant to Section
6.2(b), shall be the Facility Fee Rate set forth in pricing level III.  Any increase or decrease in the Facility Fee
Rate resulting from a change in the Total Consolidated Debt to Total
Consolidated Capitalization Ratio, as set forth on a Compliance Certificate
delivered pursuant to Section 6.2(b), shall become effective as of the
first Business Day immediately following delivery of such Compliance
Certificate; provided, however, that if a Compliance Certificate
is not delivered when due in accordance with Section 6.2(b), then the
level V Facility Fee Rate shall apply as of the first Business Day after the
date on which such Compliance Certificate was required to have been delivered
until the first Business Day after the date on which such Compliance
Certificate is delivered.


“Federal Funds
Rate” means, for any day, the rate per annum 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 (a) 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 (b) if no such rate is so published on such next
succeeding Business Day, the Federal Funds Rate for such day shall be the 



 9
 









average rate
(rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to
Bank of America, N.A. on such day on such transactions as reasonably determined
by the Administrative Agent.


“Fee Letters”
means, collectively, the Agent Fee Letter and the Arranger Fee Letter.


“Fitch”
means Fitch, Inc. (or any successor thereto).


“Franklin
Mutual” means any investment fund managed by Franklin Mutual Advisers LLC
(or any successor thereto) or any of its Affiliates.


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


“Fund American”
means Fund American Companies, Inc., a Delaware corporation.


“Fund American
Administrative Agent” means Bank of America, N.A., in its capacity as
administrative agent under any of the Fund American Loan Documents, or any
successor administrative agent appointed in accordance with the terms contained
in the Fund American Credit Agreement.


“Fund American
Arrangers” means Banc of America Securities LLC and Lehman Brothers Inc.,
in their respective capacities as joint lead arrangers and joint book runners
under the Fund American Credit Agreement.


“Fund American
Credit Agreement” means that certain Credit Agreement, dated as of the date
hereof, among Fund American, OneBeacon Limited, as parent, the Fund American
Lenders, the Fund American Administrative Agent, the Fund American Arrangers
and the Fund American Syndication Agent, as such agreement may be amended,
restated, extended, supplemented or otherwise modified in writing from time to
time.


“Fund American
Enterprises” means Fund American Enterprises Holdings, Inc., a Delaware
corporation.


“Fund American
Lenders” means the financial institutions from time to time party to the
Fund American Credit Agreement.


“Fund American
Loan Documents” means the “Loan Documents” as defined in the Fund American
Credit Agreement.


“Fund American
Notes” means those certain 5.875% Senior Notes issued pursuant to the
Senior Indenture, dated as of May 19, 2003, between Parent, Fund American and
Bank One, National Association, as trustee, in the aggregate principal amount
of $700,000,000 due May 15, 2013.



 10
 









“Fund American
Preferred Stock” means collectively, the Berkshire Preferred Stock and the
Zenith Preferred Stock.


“Fund American
Syndication Agent” means Lehman Brothers Inc., and any other Fund American
Lender as may be designated from time to time by Fund American as a syndication
agent under the Fund American Credit Agreement, with the consent of such Fund
American Lender and the Fund American Arrangers.


“Fundamental
Change” means any of (a) Parent consolidating or amalgamating with or
merging into any other Person, (b) Parent failing to preserve, renew and keep,
in full force and effect, its corporate existence, (c) Parent, directly or
indirectly through one or more of its Subsidiaries, conveying or transferring
the properties and assets of Parent and its Subsidiaries (taken as a whole for
Parent and its Subsidiaries) substantially as an entirety (other than to Parent
or one or more of its Subsidiaries), or (d) Parent liquidating, winding up or
dissolving itself, other than, in the case of clauses (a) through (d),
any such transaction or transactions the sole purpose of which is to change the
domicile of Parent (in any such redomiciliation (x) the surviving, amalgamated or transferee entity shall expressly assume,
by an agreement reasonably satisfactory to the Administrative Agent, the
obligations of Parent to be performed or observed hereunder and deliver to the
Administrative Agent such corporate authority documents and legal opinions as
the Administrative Agent shall reasonably request, (y) the surviving, amalgamated or transferee entity shall succeed to, and be
substituted for, and may exercise every right and power of, Parent under this
Agreement with the same effect as if such surviving, amalgamated or transferee
entity had been named as Parent herein and (z) the surviving, amalgamated or transferee entity shall be organized under
the laws of the United States of America, any state thereof, the District of
Columbia or Bermuda); provided  that a conveyance or transfer of
all or any part of OneBeacon Limited or any of its Subsidiaries shall not
constitute a Fundamental Change.


“GAAP”
means generally accepted accounting principles in the United States of America
as in effect from time to time and 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, except
that for purposes of Section 7.1, GAAP shall be determined on the basis
of such principles in effect on the date hereof.


“Governmental
Authority” means any nation or government, any state or other political
subdivision thereof whether state or local and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing, including any
board of insurance, insurance department or insurance commissioner.


“Granting
Lender” has the meaning specified in Section 10.7(h).



 11
 









“Guarantee
Obligation” means as to any Person (the “guaranteeing person”), any
obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the guaranteeing person has issued a reimbursement, counterindemnity
or similar obligation, in either case guaranteeing or in effect guaranteeing
any Indebtedness, leases, dividends or other obligations (the “primary
obligations”) of any other third Person (the “primary obligor”) in
any manner, whether directly or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether or not contingent, (i) to
purchase any such primary obligation or any Property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for the
purchase or payment of any such primary obligation or (2) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase Property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment
of such primary obligation or (iv) otherwise to assure or hold harmless the
owner of any such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business.  The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (b) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary obligation
and the maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person’s maximum reasonably anticipated liability in
respect thereof as determined by Parent in good faith.


“Guarantor”
has the meaning specified in Section 2.21 hereto, as applicable.


“Guaranty”
has the meaning specified in Section 2.21(b)  hereto.


“Hazardous
Materials” means all explosive or radioactive substances or wastes,
hazardous or toxic substances or wastes, pollutants, solid, liquid or gaseous
wastes, including petroleum or petroleum distillates, asbestos or asbestos
containing materials, polychlorinated biphenyls (“PCBs”) or PCB-containing
materials or equipment, radon gas, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any environmental law.


“Hedge
Agreements” means all interest rate swaps, caps or collar agreements or
similar arrangements entered into by the Borrowers or their Subsidiaries
providing for protection against fluctuations in interest rates or currency
exchange rates or otherwise providing for the exchange of nominal interest
obligations, either generally or under specific contingencies.


 


 



 12















“Holding
Company” means, collectively, the Borrowers and each Subsidiary of a
Borrower that is not an Operating Subsidiary, excluding OneBeacon Limited and
its Subsidiaries.


“Increase
Effective Date” has the meaning specified in Section 2.22(b).


“Indebtedness”
means, as to any Person at any date, without duplication, all of the following,
whether or not included as Indebtedness or liabilities in accordance with GAAP
(a) all Debt of such Person, (b) all obligations of such Person for the
deferred purchase price of Property or services (other than trade payables
incurred in the ordinary course of such Person’s business), (c) all obligations
of such Person evidenced by notes, bonds, debentures or other similar
instruments, (d) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to Property acquired by such
Person (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
Property), (e) all Capital Lease Obligations of such Person, (f) all
obligations of such Person, contingent or otherwise, as an account party or
applicant under acceptance, letter of credit, bank guarantees, surety bonds or
similar facilities, (g) all obligations of such Person, contingent or
otherwise, to purchase, redeem, retire, defease or otherwise acquire for value
any Capital Stock of such Person, (h) all Guarantee Obligations of such Person
in respect of any of the foregoing, (i) all obligations of the kind referred to
in clauses (a) through (h) above secured by (or for which the
holder of such obligation has an existing right, contingent or otherwise, to be
secured by) any Lien on Property (including, without limitation, accounts and
contract rights) owned by such Person, whether or not such Person has assumed
or become liable for the payment of such obligation and (j) for the purposes of
Section 8.1(h) only, all obligations of such Person in respect of Hedge
Agreements entered into in the ordinary course
of business and not for speculative purposes.  For the avoidance of doubt, Indebtedness
shall include Surplus Debentures and shall in any event not include any
obligations (including Guarantee Obligations) in respect of the Fund American
Preferred Stock, provided,  that, arrangements reasonably
satisfactory to the Administrative Agent shall have been made for the
establishment of grantor trusts to provide for the payment or redemption of the
Fund American Preferred Stock, it being understood that such arrangements in
effect on the Closing Date are reasonably satisfactory to the Administrative
Agent.


“Indemnified
Liabilities” has the meaning specified in Section 10.6.


“Indemnitees”
has the meaning specified in Section 10.6.


“Insolvency”
means with respect to any Multiemployer Plan, the condition that such Plan is
insolvent within the meaning of Section 4245 of ERISA.


“Insolvent”
means pertaining to a condition of Insolvency.


“Insurance
Regulations” means any Law, directive or order applicable to an insurance
company.



 13
 









“Insurance
Regulator” means any Person charged with the administration, oversight or
enforcement of any Insurance Regulation.


“Insurance
Subsidiary” means any Subsidiary which is required to be licensed by any
Department as an insurer or reinsurer and each direct or indirect Subsidiary of
such Subsidiary.


“Intellectual
Property” means the collective reference to all rights, priorities and
privileges relating to intellectual property, arising under Laws, including,
without limitation, copyrights, copyright licenses, patents, patent licenses,
trademarks, trademark licenses, technology, know-how and processes, and all
rights to sue at law or in equity for any infringement or other impairment
thereof, including the right to receive all proceeds and damages therefrom.


“Interest
Payment Date” means (a) as to any Base Rate Loan, the first Business Day of
each of January, April, July and October and the last day of the Revolving
Credit Commitment Period, (b) as to any Eurodollar Loan, the last day of each
Interest Period applicable to such Loan and the last day of the Revolving
Credit Commitment Period; provided, however, that if any Interest
Period for a Eurodollar Loan exceeds three months, the respective dates that
fall every three months after the beginning of such Interest Period shall also
be Interest Payment Dates, and (c) as to any Loan (other than a Base Rate
Loan), the date of any repayment or prepayment made in respect thereof.


“Interest
Period” means, as to any Eurodollar Loan, (a) initially, the period
commencing on the borrowing or conversion date, as the case may be, with
respect to such Eurodollar Loan and ending one, two, three or six months (or,
unless unavailable to  any Lender, nine
or twelve months) thereafter, as selected by the relevant Borrower in its
notice of borrowing or notice of conversion, as the case may be, given with
respect thereto; and (b) thereafter, each period commencing on the last day of
the next preceding Interest Period applicable to such Eurodollar Loan and ending
one, two, three or six months (or, unless unavailable to any Lender, nine or
twelve months) thereafter, as selected by the relevant Borrower by irrevocable
notice to the Administrative Agent not less than three Business Days prior to
the last day of the then current Interest Period with respect thereto; provided
that, all of the foregoing provisions relating to Interest Periods are subject
to the following:


(i) if any Interest Period would otherwise end on a
day that is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;


(ii) any Interest Period in respect of the Loans that
would otherwise extend beyond the Revolving Credit Termination Date shall end
on the Revolving Credit Termination Date, and



 14
 









(iii) 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 end on the last Business Day of the calendar month at the end of such
Interest Period.


“Interim Report”
means the interim financial report required to be filed by Sirius with the
Department in Sweden in any fiscal year.


“IPO” means
an initial public offering by OneBeacon Limited of its common stock pursuant to
an effective S-1 Registration Statement under the Securities Act of 1933, as
amended.


“ISP”
means, with respect to any Letter of Credit, the “International Standby
Practices 1998” published by the Institute of International Banking Law &
Practice (or such later version thereof as may be in effect at the time of
issuance).


“Issuer
Documents” means with respect to any Letter of Credit, the Application, and
any other document, agreement and instrument entered into by the Issuing Lender
and the relevant Borrower (or any Subsidiary) or by the relevant Borrower (or
any Subsidiary) in favor of the Issuing Lender and relating to any such Letter
of Credit.


“Issuing Lender”
means Bank of America, N.A. and any other Lender from time to time designated
by the Borrowers as an Issuing Lender, with the consent of such Lender and the
Administrative Agent.


“Laws”
means any law, treaty, rule, regulation or order of an arbitrator or a court or
other Governmental Authority.


“LBB” means
Lehman Brothers Bank, FSB.


“L/C Advance”
means, with respect to each Lender, such Lender’s funding of its participation
in any L/C Borrowing in accordance with its Revolving Credit Percentage.


“L/C Borrowing”
means an extension of credit resulting from a drawing under any Letter of
Credit which has not been reimbursed on the date when made or refinanced as a
borrowing.


“L/C Commitment”
means $100,000,000, as the same may be reduced from time to time pursuant to Section
2.7.


“L/C Credit
Extension” means, with respect to any Letter of Credit, the issuance
thereof or extension of the expiry date thereof or the increase of the amount
thereof.


“L/C Fee
Payment Date” means the first Business Day of each of January, April, July
and October and the last day of the Revolving Credit Commitment Period.



 15
 









“L/C
Obligations” means, at any time, an amount equal to the sum of (a) the
aggregate amount available to be drawn under all outstanding Letters of Credit
and (b) the aggregate amount of drawings under Letters of Credit that have not
then been reimbursed pursuant to Section 3.3.  For purposes of computing the amount
available to be drawn under any Letter of Credit, the amount of such Letter of
Credit shall be determined in accordance with Section 1.3.  For all purposes of this Agreement, if on any
date of determination a Letter of Credit has expired by its terms but any
amount may still be drawn thereunder by reason of the operation of Rule 3.14 of
the ISP, such Letter of Credit shall be deemed to be “outstanding” in the
amount so remaining available to be drawn.


“L/C
Participants” means, with respect to any Letter of Credit, the collective
reference to all of the Lenders, other than the Issuing Lender that issued such
Letter of Credit.


“Lenders”
has the meaning specified in the preamble hereto.


“Letters of
Credit” means any letters of credit issued hereunder and shall include the
Existing Letters of Credit.


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


“Lien”
means any mortgage, pledge, security interest, encumbrance, charge or security
interest of any kind.


“Loan”
means any loan made by any Lender to any Borrower pursuant to this Agreement,
including any Revolving Credit Loan and any Swing Line Loan made by the Swing
Line Lender.


“Loan Documents”
means this Agreement, the Applications, the Notes and any Instrument of
Accession executed hereunder pursuant to Section 2.22.


“Majority
Lenders” means the holders of more than 50% of the Total Revolving
Extensions of Credit (or, if no such Revolving Extensions of Credit are
outstanding, prior to any termination of the Revolving Credit Commitments, the
holders of more than 50% of the Total Revolving Credit Commitments).  The Revolving Credit Commitment in effect
(or, when applicable, Revolving Extensions of Credit outstanding) of any
Defaulting Lender shall be excluded for purposes of any vote of Majority
Lenders.


“Mandatory
Convertible Securities” means equity securities or subordinated debt securities
(which debt securities, if issued by a Borrower, will include subordination to
the obligations of such Borrower hereunder), issued by Parent or one of its
Subsidiaries which (i) are not (w) Mandatory Redeemable Securities or (x)
Conditional Common Equity and (ii) provide, pursuant to the terms thereof, that
the issuer of such securities (or an affiliate of such issuer) may cause
(without the payment of 



 16
 









additional cash
consideration by the issuer thereof) the conversion of such securities to equity
securities of Parent or one of its Subsidiaries upon the occurrence of a
certain date or of certain events.


“Mandatory Redeemable Securities” means
debt or equity securities (other than Conditional Common Equity, so long as
such Conditional Common Equity may not be required, by the holder thereof, to
be repurchased or redeemed during the period provided for shareholder approval
of conversion pursuant to the terms of such Conditional Common Equity) issued
by Parent or one of its Subsidiaries which provide, pursuant to the terms
thereof, that such securities must be repurchased or redeemed, or the holder of
such securities may require the issuer of such securities to repurchase or
redeem such securities, upon the occurrence of a certain date or of certain events.


“Material
Adverse Effect” means a material adverse effect on (a) the business,
assets, property or financial condition of the Borrowers and their Subsidiaries
taken as a whole, or (b) the validity or enforceability of this Agreement or
any of the other Loan Documents or the rights and remedies of the
Administrative Agent and the Lenders hereunder or thereunder.


“Material Debt
Offerings” means an issuance or incurrence by a Holding Company of Debt
that (a) has a stated maturity of one year or longer and (b) results in Net
Proceeds to such Person of $50,000,000 or more, other than (i) any such Debt
incurred to refinance or replace other existing Indebtedness of a Borrower or
any of its Subsidiaries, (ii) any such Debt incurred to finance the acquisition,
construction or improvement of any Property by a Borrower or any of its
Subsidiaries and (iii) any such Debt owed to a Borrower or any of its
Subsidiaries.


“Material Debt
Offering Notice” means a written notice signed by a Responsible Officer on
behalf of the Parent (a) describing and setting forth in reasonable detail the
terms of such Material Debt Offering, (b) detailing the calculations utilized
in computing the Net Proceeds of such Material Debt Offering, and (c) as
applicable (i) the amount of any prepayment of the Loans to be made in
connection therewith pursuant to Section 2.7(b), (ii) a statement
certifying that the Borrowers or their Subsidiaries intend to use such Net
Proceeds in accordance with the terms herein.


“Material
Insurance Subsidiary” means any Insurance
Subsidiary (whether existing on or acquired or formed after the Closing
Date) having Capital and Surplus equal to 10%
or more of the Consolidated Net Worth of Parent as of the most recent Annual
Statement or Quarterly Statement (or, in the case of Sirius, Annual Report or
Interim Report) of such Insurance Subsidiary.


“Maximum Rate” has the meaning specified in Section 10.20(a).


“Moody’s”
means Moody’s Investors Service, Inc. (or any successor thereto).


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



 17
 









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


“Net Proceeds”
means the aggregate amount of all cash proceeds received by a Holding Company
from any Material Debt Offering less all fees and expenses (including legal,
underwriting and similar fees and expenses) incurred in connection therewith,
but only to the extent that the amounts so deducted are properly attributable
to such transaction.


“Non-Excluded
Taxes” has the meaning specified in Section 2.16(a).


“Non-Regulated
Operating Subsidiary” means each Subsidiary of the Borrowers engaged
directly (as opposed to indirectly through the ownership of Capital Stock of a
Person engaged in a Principal Business) in a Principal Business, whether now
owned or hereafter acquired, which is not an Insurance Subsidiary.


“Non-U.S.
Lender” has the meaning specified in Section 2.16(d).


“Note”
means any promissory note, including any revolving credit note or swing line
note, made by the Borrowers in favor of a Lender evidencing any Loan,
substantially in the forms of Exhibit C-1 and C-2, as the case
may be and as any such Note may be amended, restated, supplemented, modified or
replaced from time to time.


“OneBeacon
Insurance Group” means OneBeacon Insurance Group, LLC, a Delaware limited
liability company, and, for purposes of Section 6.1(b), the grouping of
Subsidiaries of OneBeacon Insurance Group identified by NAIC Group Code 1129
(or any successor grouping equivalent thereto).


“OneBeacon
Limited” means OneBeacon Insurance Group, Ltd., a company existing under
the laws of Bermuda.


“OneBeacon
Limited Consolidated Net Worth” means, as at any date, the sum of all
amounts that would, in conformity with GAAP be included on a consolidated
balance sheet of OneBeacon Limited and its consolidated Subsidiaries under
stockholders’ equity at such date, plus minority interests in Subsidiaries, as
determined in accordance with GAAP; provided, however, that any
effects resulting from (a) SFAS 115 or (b) SFAS 158 shall be excluded for purposes of
the calculation of OneBeacon Limited Consolidated Net Worth.


“OneBeacon
Limited Debt to Capitalization Ratio” means, as at the end of any fiscal
quarter of OneBeacon Limited, the ratio of (a) OneBeacon Limited Total
Consolidated Debt to (b) OneBeacon Limited Total Consolidated Capitalization.



 18
 









“OneBeacon
Limited Total Consolidated Capitalization” means, as at any date, the sum,
without duplication, of (a) OneBeacon Limited Consolidated Net Worth plus (b)
OneBeacon Limited Total Consolidated Debt plus, (c) the amounts in respect of
Trust Preferred Securities, Mandatory Convertible Securities, Mandatory
Redeemable Securities, Conditional Common Equity and any other preferred stock
that would, in conformity with GAAP, be reflected on a consolidated balance
sheet of OneBeacon Limited and its consolidated Subsidiaries prepared as of
such date and which are not already included in clause  (a) or (b)
above.  OneBeacon Limited Total
Consolidated Capitalization shall in any event not include (x) any obligations
(including Guarantee Obligations) in respect of the Fund American Preferred
Stock, provided  that, arrangements reasonably satisfactory to the
Administrative Agent shall have been made for the establishment of grantor
trusts to provide for the payment or redemption of the Fund American Preferred
Stock, it being understood that such arrangements in effect on the Closing Date
are reasonably satisfactory to the Administrative Agent or (y) any effects resulting from SFAS 158.


“OneBeacon Limited Total Consolidated Debt” means,
at any date, the sum, without duplication, of (a) all amounts that would, in
conformity with GAAP, be reflected and classified as debt on a consolidated
balance sheet of OneBeacon Limited and its consolidated Subsidiaries prepared
as of such date, (b) Indebtedness represented by (i) Trust Preferred Securities
or Qualified Mandatory Redeemable Securities (in each case, owned by Persons
other than OneBeacon Limited or any of its consolidated Subsidiaries) but only
to the extent that such securities (other than Mandatory Convertible
Securities) exceed 15% of OneBeacon Limited Total Consolidated Capitalization
or (ii) Mandatory Redeemable Securities (owned by Persons other than OneBeacon
Limited or any of its consolidated Subsidiaries) other than Qualified Mandatory
Redeemable Securities, and (c) Indebtedness represented by Mandatory
Convertible Securities (owned by Persons other than OneBeacon Limited or any of
its consolidated Subsidiaries) but only to the extent that such Mandatory
Convertible Securities plus Trust Preferred Securities and Qualified Mandatory
Redeemable Securities (in each case, owned by Persons other than OneBeacon
Limited or any of its consolidated Subsidiaries) exceed 25% of OneBeacon
Limited Total Consolidated Capitalization; provided, that in the event
that the notes related to the Mandatory Convertible Securities remain
outstanding following the exercise of forward purchase contracts related to
such Mandatory Convertible Securities, then such outstanding notes will be
included in OneBeacon Limited Total Consolidated Debt thereafter.  OneBeacon Limited Total Consolidated Debt
shall, in any event, not include (a) Hedge Agreements entered into in the
ordinary course of business for non-speculative
purposes, (b) Indebtedness of OneBeacon Limited of the type described in Sections
7.2(a)(ii), (a)(iii), (a)(iv), (a)(vi) and (a)(vii),
(c) Conditional Common Equity, (d) any obligations (including Guarantee
Obligations) in respect of the Fund American Preferred Stock, provided  that,
arrangements reasonably satisfactory to the Administrative Agent shall have
been made for the establishment of grantor trusts to provide for the payment or
redemption of the Fund American Preferred Stock, it being understood that such
arrangements in effect on the Closing Date are reasonably satisfactory to the
Administrative Agent (e) any other amounts in
respect of Trust Preferred Securities, 



 19
 









Mandatory Redeemable Securities or Mandatory
Convertible Securities, or (f) any effects resulting from SFAS 158.


“Operating
Subsidiary” means, collectively, Insurance Subsidiaries and Non-Regulated
Operating Subsidiaries.


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


“Parent”
has the meaning specified in the preamble hereto.


“Parent
Guaranty” has the meaning specified in Section 2.21(a).


“Parent
Interest Expense” means, with respect to any Reference Period of Parent,
the sum of all interest expense of Holding Companies during such period
determined in accordance with GAAP that is required to be paid in cash
(excluding amounts owed or paid to any other Holding Company).


“Parent Only
Interest Coverage Ratio” means, as at the end of any Reference Period of
Parent, the ratio of (a) Available Cash Flow for such Reference Period to (b)
Parent Interest Expense for such Reference Period.


“Participant”
has the meaning specified in Section 10.7(d).


“PBGC”
means the Pension Benefit Guaranty Corporation established pursuant to Subtitle
A of Title IV of ERISA (or any successor).


“Permitted Acquisitions” means, as to any
Borrower, any direct or indirect acquisition of, or investments
by such Borrower or any of its Subsidiaries in, businesses or entities, so long
as, (a) in the case of (i) an investment in and/or acquisition of a majority
interest in a Person whose securities are publicly traded or (ii) an investment
in and/or acquisition of a Person that would trigger any anti-takeover
provisions under any applicable state Law or organizational documents of such
Person (including any shareholder rights plan), such investment or acquisition
has been approved by the board of directors or other governing body of such
Person, and (b) at the time of delivery of the relevant Material Debt Offering
Notice, no Default or Event of Default shall have occurred and be continuing.


“Permitted Liens” means
(a) any Lien upon Property to secure any part of the cost of development,
construction, alteration, repair or improvement of such Property, or Debt
incurred to finance such cost; (b) any extension, renewal or replacement,
in whole or in part, of any Lien referred to in the foregoing clause (a);
(c) any Lien relating to a sale and leaseback transaction; (d) any
Lien in favor of a Borrower or any Subsidiary granted by a Borrower or any
Subsidiary in order to secure any intercompany obligations; (e) mechanic’s,
materialmen’s, carriers’ or other like Liens arising in the ordinary course of
business (including construction of facilities) in respect of obligations which
are not 



 20
 









due or which are
being contested in good faith: (f) any Lien arising in connection with any
legal proceeding which is being contested in good faith; (g) Liens for
taxes not yet subject to penalties for non-payment or which are being contested
in good faith by appropriate proceedings; (h) minor survey exceptions,
minor encumbrances, easements or reservations of, or rights of others for,
licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines
and other similar purposes, or zoning or other restrictions as to the use of
real property or Liens incidental to the conduct of the business of such Person
or to the ownership of its properties which were not incurred in connection
with Debt and which do not in the aggregate materially adversely affect the
value of said properties or materially impair their use in the operation of the
business of such Person; (i) pledges or deposits under workers’
compensation Laws, unemployment insurance Laws or similar social security
legislation; (j) any deposit to secure performance of letters of credit,
bank guarantees, bids, leases, statutory obligations, surety and appeal bonds,
performance bonds or other obligations of a like nature in the ordinary course
of business; (k) any interest or title of a lessor under any lease entered into
in the ordinary course of business; (l) Liens on assets of any Insurance
Subsidiary securing (i) short-term Debt (i.e. with a maturity of less than one
year when issued, provided that such Debt may include an option to extend for
up to an additional one year period) incurred to provide short-term liquidity
to facilitate claims payments in the event of catastrophe, (ii) Debt incurred
in the ordinary course of its business or in securing insurance-related
obligations (that do not constitute Debt) and letters of credit issued for the
account of any such Subsidiary in the ordinary course of its business or in
securing insurance-related obligations (that do not constitute Debt) or (iii)
insurance-related obligations (that do not constitute Debt); and (m) Liens
securing the obligations hereunder.


“Person”
means an individual, partnership, corporation, limited liability company,
business trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.


“Plan”
means at a particular time, any employee pension benefit plan that is subject
to the provisions of Title IV of ERISA or Section 412 of the Code or Section
302 of ERISA, and in respect of which either of the Borrowers or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an “employer” as defined in
Section 3(5) of ERISA.


“Platform”
has the meaning specified in Section 6.2(e).


“Principal
Business” means (a) a business of the type engaged in by the Borrowers and
their Subsidiaries on the date of this Agreement, (b) any other insurance,
insurance services, insurance related or risk management related business and
(c) any business reasonably incident to any of the foregoing.


“Property”
means any property of any kind whatsoever, whether real, personal or mixed and
whether tangible or intangible.


“Qualified
Mandatory Redeemable Securities” means Mandatory Redeemable Securities
that, pursuant to the terms thereof, must be redeemed or repurchased, or may be
required to be redeemed or 



 21
 









repurchased at the
option of the holder of such securities (other than upon the occurrence of one
or more events or conditions other than the occurrence of a certain date), not
sooner than the Revolving Credit Termination Date.


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


“Reference
Period” means, as of any date of determination, the period of four
consecutive fiscal quarters of the Parent ending on such date (treated as a
single accounting period).


“Refunded Swing
Line Loans” has the meaning specified in Section 2.4(b).


“Refunding Date”
has the meaning specified in Section 2.4(c).


“Register”
has the meaning specified in Section 10.7(c).


“Regulation U”
means Regulation U of the Board as in effect from time to time.


“Reimbursement
Obligation” means the obligation of the Borrowers to reimburse an Issuing
Lender pursuant to Section 3.3(a) for amounts drawn under Letters of
Credit issued by such Issuing Lender for the account of the Borrowers.


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


“Reorganization”
means, with respect to any Multiemployer Plan, the condition that such plan is
in reorganization within the meaning of Section 4241 of ERISA.


“Reportable
Event” means any of the events set forth in Section 4043(c) of ERISA, other
than those events as to which the thirty day notice period is waived.


“Requested
Reimbursement Date” has the meaning specified in Section 3.3(a).


“Requirement of
Law” means, as to any Person, the Certificate of Incorporation and By-Laws
or other organizational or governing documents of such 



 22
 









Person (excluding,
in the case of Section 2.15(a)(i), any of the foregoing relating to the
Administrative Agent or any Lender), and any Law, in each case applicable to or
binding upon such Person or any of its Property or to which such Person or any
of its Property is subject.


“Responsible
Officer” means, as to any Borrower or Subsidiary, the chief executive
officer, president, chief financial officer, treasurer, chief accounting
officer, any vice president or any managing director of such Borrower or any
Subsidiary, as the context requires.  Any
document delivered hereunder that is signed by a Responsible Officer on behalf
of a Borrower or Subsidiary shall be conclusively presumed to have been
authorized by all necessary corporate, partnership and/or other action on the
part of such Borrower or Subsidiary and such Responsible Officer shall be
conclusively presumed to have acted on behalf of such Borrower or Subsidiary.


“Revolving
Credit Commitment” means, as to any Lender, the obligation of such Lender,
if any, to make Revolving Credit Loans and participate in Swing Line Loans and
Letters of Credit, in an aggregate principal or face amount not to exceed the
amount set forth under the heading “Revolving Credit Commitment” opposite such
Lender’s name on Schedule 1 to this Agreement, or, as the case may be,
in the Assignment and Assumption pursuant to which such Lender became a party
hereto, as the same may be adjusted from time to time pursuant to the terms
hereof.


“Revolving
Credit Commitment Period” means the period from and including the Closing
Date to the earliest of (a) the Revolving Credit Termination Date, (b) the date
of termination of the Revolving Credit Commitments pursuant to Section 2.7,
and (c) the date of termination of the commitment of each Lender to make Loans
and of the obligation of the Issuing Lender to make L/C Credit Extensions
pursuant to Section 8.2.


“Revolving
Credit Loans” has the meaning specified in Section 2.1.


“Revolving
Credit Percentage” means, as to any Lender at any time, the percentage
(carried out to the ninth decimal place) which such Lender’s Revolving Credit
Commitment then constitutes of the Total Revolving Credit Commitments (or, at
any time after the commitment of each Lender to make Loans and the obligation
of the Issuing Lender to make L/C Credit Extensions shall have terminated
pursuant to Section 8.2 or if the Revolving Credit Commitments shall
have expired, then the percentage which the aggregate amount of such Lender’s
Revolving Extensions of Credit then outstanding constitutes of the amount of
the Total Revolving Extensions of Credit then outstanding).


“Revolving
Credit Termination Date” means November 14, 2011; provided, however,
that, if such date is not a Business Day, the Revolving Credit Termination Date
shall be the next succeeding Business Day.


“Revolving
Extensions of Credit” means, as to any Lender at any time, an amount equal
to the sum of (a) the aggregate principal amount of all Revolving Credit 



 23
 









Loans made by such
Lender then outstanding, (b) the principal amount equal to such Lender’s
Revolving Credit Percentage of the L/C Obligations then outstanding and (c) the
principal amount equal to such Lender’s Revolving Credit Percentage of the
aggregate principal amount of Swing Line Loans then outstanding.


“S&P”
means Standard & Poor’s Rating Services (or any successor thereto).


“SAP” means
with respect to any Insurance Subsidiary, the statutory accounting practices
prescribed or permitted by the Department in the jurisdiction of such Insurance
Subsidiary for the preparation of annual statements and other financial reports
by insurance companies of the same type as such Insurance Subsidiary, which are
applicable to the circumstances as of the date of determination.


“SEC” means
the Securities and Exchange Commission (or successors thereto or an analogous
Governmental Authority).


“SFAS”
means the Statements of Financial Accounting Standards adopted by the Financial
Accounting Standards Board.


“Single
Employer Plan” means any Plan that is covered by Title IV of ERISA, but
which is not a Multiemployer Plan.


“Sirius” means Sirius International Insurance
Corporation, a Swedish corporation.


“SPC” has
the meaning specified in Section 10.7(h).


“Specified
Event of Default” means an Event of Default pursuant to Sections 8.1(a),
8.1(b) (with respect to Section 7.1 only) or 8.1(c).


“Stated Rate” has the meaning specified in Section 10.20(a).


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


“Surplus
Debentures” means as to any Insurance Subsidiary, debt securities of such
Insurance Subsidiary the proceeds of which are permitted to be included, in
whole or in part, as Capital and Surplus of such Insurance Subsidiary as
approved and permitted by the applicable Department.


 



 24















“Swing Line
Commitment” means the obligation of the Swing Line Lender to make Swing
Line Loans pursuant to Section 2.3 in an aggregate principal amount at
any one time outstanding not to exceed $50,000,000.


“Swing Line
Lender” means Bank of America, N.A., in its capacity as provider of Swing
Line Loans, or any successor swing line lender hereunder.


“Swing Line
Loans” has the meaning specified in Section 2.3(a).


“Swing Line
Participation Amount” has the meaning specified in Section 2.4(c).


“Syndication
Agent” means Lehman Brothers Inc., and any other Lender as may be
designated from time to time by the Borrowers as a syndication agent, with the
consent of such Lender and the Arrangers.


“Total
Consolidated Capitalization” means, as at any date, the sum, without
duplication, of (a) Consolidated Net Worth plus (b) Total Consolidated Debt
plus, (c) the amounts in respect of Trust Preferred Securities, Mandatory
Convertible Securities, Mandatory Redeemable Securities, Conditional Common
Equity and any other preferred stock that would, in conformity with GAAP, be
reflected on a consolidated balance sheet of Parent and its consolidated
Subsidiaries prepared as of such date and which are not already included in clause
(a) or (b) above.  Total
Consolidated Capitalization shall in any event not include (x) any obligations
(including Guarantee Obligations) in respect of the Fund American Preferred
Stock, provided  that, arrangements reasonably satisfactory to the
Administrative Agent shall have been made for the establishment of grantor
trusts to provide for the payment or redemption of the Fund American Preferred
Stock, it being understood that such arrangements in effect on the Closing Date
are reasonably satisfactory to the Administrative Agent or (y) any effects resulting from SFAS 158.


“Total Consolidated Debt” means,
at any date, the sum, without duplication, of (a) all amounts that would, in
conformity with GAAP, be reflected and classified as debt on a consolidated
balance sheet of Parent and its consolidated Subsidiaries prepared as of such
date, (b) Indebtedness represented by (i) Trust Preferred Securities or
Qualified Mandatory Redeemable Securities (in each case, owned by Persons other
than Parent or any of its consolidated Subsidiaries) but only to the extent that
such securities (other than Mandatory Convertible Securities) exceed 15% of
Total Consolidated Capitalization or (ii) Mandatory Redeemable Securities
(owned by Persons other than Parent or any of its consolidated Subsidiaries)
other than Qualified Mandatory Redeemable Securities, and (c) Indebtedness
represented by Mandatory Convertible Securities (owned by Persons other than
Parent or any of its consolidated Subsidiaries) but only to the extent that
such Mandatory Convertible Securities plus Trust Preferred Securities and
Qualified Mandatory Redeemable Securities (in each case, owned by Persons other
than Parent or any of its consolidated Subsidiaries) exceed 25% of Total
Consolidated Capitalization; provided, that in the event that the notes
related to the Mandatory Convertible Securities remain outstanding following
the exercise of forward 



 25
 









purchase contracts
related to such Mandatory Convertible Securities, then such outstanding notes
will be included in Total Consolidated Debt thereafter.  Total Consolidated Debt shall, in any event,
not include (1) Hedge Agreements entered into in the ordinary course of
business for non-speculative purposes, (2)
Indebtedness of the type described in Sections 7.2(a)(ii), (a)(iii),
(a)(iv), (a)(vi) and (a)(vii), (3) Conditional Common
Equity, (4) any obligations (including Guarantee Obligations) in respect
of the Fund American Preferred Stock, provided  that, arrangements
reasonably satisfactory to the Administrative Agent shall have been made for
the establishment of grantor trusts to provide for the payment or redemption of
the Fund American Preferred Stock, it being understood that such arrangements
in effect on the Closing Date are reasonably satisfactory to the Administrative
Agent, (5) any other amounts in respect of Trust
Preferred Securities, Mandatory Redeemable Securities or Mandatory Convertible
Securities, or (6) any effects resulting from SFAS 158.


“Total
Consolidated Debt to Total Consolidated Capitalization Ratio” means, as at
the end of any fiscal quarter of Parent, the ratio of (a) Total Consolidated
Debt to (b) Total Consolidated Capitalization.


“Total
Revolving Credit Commitments” means, at any time, the aggregate amount of
the Revolving Credit Commitments then in effect.  The aggregate amount of the Total Revolving
Credit Commitments on the Closing Date is $500,000,000.


“Total
Revolving Extensions of Credit” means, at any time, the aggregate amount of
the Revolving Extensions of Credit of the Lenders outstanding at such time.


“Transferee”
means a Participant or an assignee of any Lender’s rights and obligations under
this Agreement pursuant to an Assignment and Assumption.


“Trust
Preferred Securities” means preferred securities issued by a special
purpose entity, the proceeds of which are used to purchase subordinated debt
securities of Parent or one of its Subsidiaries having terms that substantially
mirror those of such preferred securities issued by the special purpose entity
such that the debt securities constitute credit support for obligations in respect
of such preferred securities and such preferred securities are reflected on a
consolidated balance sheet of Parent and its consolidated Subsidiaries in
accordance with GAAP.


“Type”
means, as to any Loan, its nature as a Base Rate Loan or a Eurodollar Loan.


“Unreimbursed
Amount” has the meaning specified in Section 3.3(a).


“White
Mountains Re” has the meaning specified in the preamble hereto.


“White
Mountains Re Guaranty”  has the
meaning specified in Section 2.21(b).


“Zenith
Preferred Stock” means the $20,000,000 aggregate liquidation preference
amount of non-voting preferred stock issued by Fund American Enterprises to 



 26
 









Zenith Insurance
Company pursuant to the Certificate of Designation of Series A Preferred Stock
of TACK Holding Corp. (n/k/a Fund American Enterprises), as amended,
supplemented or otherwise modified from time to time.


1.2.  Other Definitional Provisions.  Unless otherwise specified therein, all terms
defined in this Agreement shall have the defined meanings when used in the
other Loan Documents or any certificate or other document made or delivered
pursuant hereto or thereto.


(a)           As used herein and in the other Loan
Documents, and any certificate or other document made or delivered pursuant
hereto or thereto, accounting terms relating to the Borrowers or their
Subsidiaries not defined in Section 1.1 and accounting terms partly
defined in Section 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP or SAP, as the case may be.


(b)           References herein to particular
pages, columns, lines or sections of any Person’s Annual Statement shall be
deemed, where appropriate, to be references to the corresponding page, column,
line or section of such Person’s Quarterly Statement, or if no such
corresponding page, column, line or section exists or if any report form
changes, then to the corresponding item referenced thereby.


(c)           The words “hereof”, “herein” and “hereunder”
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Section, Schedule and Exhibit references are to this Agreement unless otherwise
specified.


(d)           The meanings given to terms defined
herein shall be equally applicable to both the singular and plural forms of
such terms.


(e)           The word “or” is not exclusive and
the words “include”, “includes” or “including” shall be deemed to be followed
by the phrase “without limitation”.


(f)            References to “preferred stock”
includes Capital Stock designated as preferred stock, preference shares,
preferred shares or any similar term.


1.3.  Letter of Credit Amounts.  Unless otherwise specified herein, the amount
of a Letter of Credit at any time shall be deemed to be the stated amount of
such Letter of Credit in effect at such time; provided, however,
that with respect to any Letter of Credit that, by its terms or the terms of
any Issuer Document related thereto, provides for one or more automatic
increases in the stated amount thereof, other than with respect to the calculation
of L/C Fees, the amount of such Letter of Credit shall be deemed to be the
maximum stated amount of such Letter of Credit after giving effect to all such
increases, whether or not such maximum stated amount is in effect at such time.


1.4.  Rounding.  Any financial ratios required to be
maintained by the Borrower pursuant to this Agreement shall be calculated by
dividing the appropriate component by the other component, carrying the result
to one place more than the number of places by which such ratio is expressed
herein and rounding the result up or down to the nearest number (with a
rounding-up if there is no nearest number).



 27
 









1.5.  Times
of Day.  Unless otherwise
specified, all references herein to times of day shall be references to Eastern
time (daylight or standard, as applicable).


2.             AMOUNT AND TERMS OF COMMITMENTS


2.1.  Revolving Credit Commitments.  (a) 
Subject to the terms and conditions hereof, the Lenders severally agree
to make revolving credit loans (“Revolving Credit Loans”) to each Borrower
from time to time on any Business Day during the Revolving Credit Commitment
Period in an aggregate principal amount at any one time outstanding for each
Lender which, when added to such Lender’s Revolving Credit Percentage of the
sum of (i) the L/C Obligations then outstanding and (ii) the aggregate
principal amount of the Swing Line Loans then outstanding, does not exceed the
amount of such Lender’s Revolving Credit Commitment.  During the Revolving Credit Commitment Period
each Borrower may use the Revolving Credit Commitments by borrowing, prepaying
the Revolving Credit Loans in whole or in part, and reborrowing, all in
accordance with the terms and conditions hereof.  The Revolving Credit Loans may from time to
time be Eurodollar Loans or Base Rate Loans, as determined by the applicable
Borrower and notified to the Administrative Agent in accordance with Sections
2.2 and 2.9, provided that no Revolving Credit Loan shall be made as
a Eurodollar Loan after the day that is one month prior to the Revolving Credit
Termination Date.


(b)           Each Borrower shall repay to the
Lenders all outstanding Revolving Credit Loans made to such Borrower on the
Revolving Credit Termination Date.


2.2.  Procedure for Revolving Credit Borrowing.  A Borrower may borrow under the Revolving
Credit Commitments on any Business Day during the Revolving Credit Commitment
Period, provided that such Borrower shall give the Administrative Agent a
borrowing request in the form of Exhibit B-1 hereto (hereinafter, a “Borrowing
Request”) (which  Borrowing Request
must be received by the Administrative Agent prior to 11:00 A.M., New York City
time, (a) three Business Days prior to the requested Borrowing Date, in the
case of Eurodollar Loans, or (b) on the requested Borrowing Date, in the case
of Base Rate Loans, provided that requests for Base Rate Loans not received
prior to 11:00 A.M., New York City time on the requested Borrowing Date shall
be deemed received on the following Business Day), and must specify (i) the
amount and Type of Revolving Credit Loans to be borrowed, (ii) the requested
Borrowing Date and (iii) in the case of Eurodollar Loans, the length of the
initial Interest Period therefor; provided, however, that if a Borrower wishes
to request Eurodollar Loans having an Interest Period of nine or twelve months
in duration as provided in the definition of “Interest Period,” the applicable
notice must be received by the Administrative Agent not later than 11:00 A.M.
New York City time, four Business Days prior to the requested date of such
borrowing, whereupon the Administrative Agent shall give prompt notice to the
Lenders of such request and determine whether the requested Interest Period is
unavailable to any of them.  Not later
than 10:00 A.M. New York City time, three Business Days before the requested
date of such borrowing, the Administrative Agent shall notify such Borrower
(which notice may be by telephone) whether or not the requested Interest Period
is unavailable to any Lender.  If a Borrower
requests a borrowing of Eurodollar Loans in any Borrowing Request, but fails to
specify an Interest Period, it will be deemed to have specified an Interest
Period of one month.  Each
borrowing of Revolving Credit Loans under the Revolving Credit Commitments
shall be in an amount equal to (x) in the case of Base Rate Loans, $1,000,000
or a whole multiple 



 28
 









thereof (or, if
the then aggregate Available Revolving Credit Commitments are less than
$1,000,000, such lesser amount) and (y) in the case of Eurodollar Loans,
$5,000,000 or a whole multiple of $1,000,000 in excess thereof; provided, that
the Swing Line Lender may request, on behalf of any Borrower, borrowings of
Base Rate Loans under the Revolving Credit Commitments in other amounts
pursuant to Section 2.4.  Upon
receipt of any such notice from a Borrower, the Administrative Agent shall
promptly notify each Lender thereof. 
Each Lender will make its Revolving Credit Percentage of the amount of
each borrowing of Revolving Credit Loans available to the Administrative Agent
for the account of such Borrower at the Administrative Agent’s Office prior to
12:00 Noon, New York City time, on the Borrowing Date requested by such
Borrower in funds immediately available to the Administrative Agent.  Such borrowing will then be made available to
such Borrower by the Administrative Agent in like funds as received by the
Administrative Agent.


2.3.  Swing Line Commitment.  (a) Subject to the terms and conditions
hereof, the Swing Line Lender agrees, in reliance on the agreements of the
other Lenders set forth in Section 2.4, that during the Revolving Credit
Commitment Period, it will make available to the Borrowers in the form of swing
line loans (“Swing Line Loans”) a portion of the credit otherwise
available to the Borrowers under the Revolving Credit Commitments; provided
that (i) the aggregate principal amount of Swing Line Loans outstanding at any
time shall not exceed the Swing Line Commitment then in effect (notwithstanding
that the Swing Line Loans outstanding at any time, when aggregated with the Swing
Line Lender’s other outstanding Revolving Credit Loans hereunder, may exceed
the Swing Line Commitment then in effect or such Swing Line Lender’s Revolving
Credit Commitment then in effect) and (ii) the Borrowers shall not request, and
the Swing Line Lender shall not make, any Swing Line Loan if, after giving
effect to the making of such Swing Line Loan, the aggregate amount of the
Available Revolving Credit Commitments would be less than zero.  During the Revolving Credit Commitment
Period, the Borrowers may use the Swing Line Commitment by borrowing, repaying
and reborrowing, all in accordance with the terms and conditions hereof.  Swing Line Loans shall be Base Rate Loans
only.


(b)           The Borrowers shall repay all
outstanding Swing Line Loans on the Revolving Credit Termination Date.  Each payment in respect of Swing Line Loans
shall be made to the Swing Line Lender.


2.4.  Procedure for Swing Line Borrowing;
Refunding of Swing Line Loans. 
(a)  A Borrower may borrow under
the Swing Line Commitment on any Business Day during the Revolving Credit
Commitment Period, provided, such Borrower shall give the Swing Line
Lender irrevocable telephonic notice confirmed promptly in writing in the form
of Exhibit B-2 (which telephonic notice must be received by the Swing
Line Lender not later than 1:00 P.M., New York City time, on the proposed
Borrowing Date), specifying (i) the amount to be borrowed and (ii) the
requested Borrowing Date.  Each borrowing
under the Swing Line Commitment shall be in an amount equal to $500,000 or a
whole multiple of $100,000 in excess thereof. 
Not later than 3:00 P.M., New York City time, on the Borrowing Date
specified in the borrowing notice in respect of any Swing Line Loan, the Swing
Line Lender shall make available to the Administrative Agent at the
Administrative Agent’s Office an amount in immediately available funds equal to
the amount of such Swing Line Loan.  The
Administrative 



 29
 









Agent shall make
the proceeds of such Swing Line Loan available to such Borrower on such
Borrowing Date in like funds as received by the Administrative Agent.


(b)           The Swing Line Lender, not less
frequently than once each week shall, and at any other time, from time to time,
as the Swing Line Lender elects in its sole and absolute discretion, may, on
behalf of a Borrower (which hereby irrevocably directs the Swing Line Lender to
act on its behalf), on one Business Day’s notice given by the Swing Line Lender
no later than 12:00 Noon, New York City time, request each Lender to make, and
each Lender hereby agrees to make, a Revolving Credit Loan, in an amount equal
to such Lender’s Revolving Credit Percentage of the aggregate amount of the
Swing Line Loans (the “Refunded Swing Line Loans”) outstanding on the
date of such notice, to repay the Swing Line Lender.  Each Lender shall make the amount of such
Revolving Credit Loan available to the Administrative Agent at the
Administrative Agent’s Office in immediately available funds, not later than
10:00 A.M., New York City time, one Business Day after the date of such
notice.  The proceeds of such Revolving
Credit Loans shall be made immediately available by the Administrative Agent to
the Swing Line Lender for application by the Swing Line Lender to the repayment
of the Refunded Swing Line Loans.  Upon
the written request of any Lender, the Administrative Agent will, within three
Business Days of such request, inform such Lender of the aggregate amount of
Swing Line Loans outstanding on the date of such request.


(c)           If prior to the time a Revolving
Credit Loan would have otherwise been made pursuant to Section 2.4(b),
one of the events described in Section 8.1(c) shall have occurred and be
continuing with respect to either Borrower, or if for any other reason, as
determined by the Swing Line Lender in its sole discretion, Revolving Credit
Loans may not be made as contemplated by Section 2.4(b), each Lender
shall, on the date such Revolving Credit Loan was to have been made pursuant to
the notice referred to in Section 2.4(b) (the “Refunding Date”),
purchase for cash an undivided participating interest in the then outstanding
Swing Line Loans by paying to the Swing Line Lender an amount (the “Swing
Line Participation Amount”) equal to (i) such Lender’s Revolving Credit
Percentage times (ii) the sum of the aggregate principal amount of Swing
Line Loans then outstanding which were to have been repaid with such Revolving
Credit Loans.


(d)           If any Lender fails to make available
to the Administrative Agent for the account of the Swing Line Lender any amount
required to be paid by such Lender pursuant to the foregoing provisions of this
Section 2.4(b) by the time specified in Section 2.4(b), the Swing
Line Lender shall be entitled to recover from such Lender (acting through the
Administrative Agent), on demand, such amount with interest thereon for the
period from the date such payment is required to the date on which such payment
is immediately available to the Swing Line Lender at a rate per annum equal to
the greater of the Federal Funds Rate and a rate determined by the Swing Line
Lender in accordance with banking industry rules on interbank compensation,
plus any administrative, processing or similar fees customarily charged by the
Swing Line Lender in connection with the foregoing.  If such Lender pays such amount (with interest
and fees as aforesaid), the amount so paid shall constitute such Lender’s Loan
included in the relevant borrowing or funded participation in the relevant
Swing Line Loan, as the case may be.  A
certificate of the Swing Line Lender submitted to any Lender (through the
Administrative Agent) with respect to any amounts owing under this paragraph
(d) shall be conclusive absent manifest error.



 30
 









(e)           Each Lender’s obligation to make the
Loans referred to in Section 2.4(b) and to purchase participating interests
pursuant to Section 2.4(c) shall be absolute and unconditional and shall
not be affected by any circumstance, including, without limitation, (i) any
setoff, counterclaim, recoupment, defense or other right which such Lender may
have against the Swing Line Lender, the Borrowers or any other Person for any
reason whatsoever; (ii) the occurrence or continuance of a Default or an Event
of Default or the failure to satisfy any of the other conditions specified in Section
4; (iii) any adverse change in the condition (financial or otherwise) of
the Borrowers; (iv) any breach of this Agreement or any other Loan Document by
the Borrowers or any Lender; or (v) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing.  No such funding of risk participations shall
relieve or otherwise impair the obligation of the Borrowers to repay Swing Line
Loans, together with interest as provided herein.


(f)            Whenever, at any time after the
Swing Line Lender has received from any Lender such Lender’s Swing Line
Participation Amount, the Swing Line Lender receives any payment on account of
the Swing Line Loans, the Swing Line Lender will distribute to such Lender its
Swing Line Participation Amount (appropriately adjusted, in the case of interest
payments, to reflect the period of time during which such Lender’s
participating interest was outstanding and funded and, in the case of principal
and interest payments, to reflect such Lender’s pro  rata portion
of such payment if such payment is not sufficient to pay the principal of and
interest on all Swing Line Loans then due); provided, however,
that in the event that such payment received by the Swing Line Lender is
required to be returned, such Lender will return to the Swing Line Lender any
portion thereof previously distributed to it by the Swing Line Lender.  The obligation of the Lenders under this paragraph
(f) shall survive the payment in full of the Obligations and the
termination of this Agreement.


(g)           The Swing Line Lender shall be responsible
for invoicing the Borrowers for interest on the Swing Line Loans.  Until each Lender funds its Refunded Swing
Line Loan or risk participation pursuant to this Section 2.4 to
refinance such Lender’s Revolving Credit Percentage of any Swing Line Loan,
interest in respect of such Revolving Credit Percentage shall be solely for the
account of the Swing Line Lender.


(h)           The Borrowers shall make all payments
of principal and interest in respect of the Swing Line Loans directly to the
Administrative Agent for the account of the Swing Line Lender.


2.5.  Repayment of Loans; Evidence of Debt.  (a) 
Each of the Borrowers hereby unconditionally promise to pay to the
Administrative Agent for the account of the appropriate Lender (i) the then
unpaid principal amount on the Revolving Credit Termination Date (or on such
earlier date on which the Loans become due and payable pursuant to Section
8.2) of each Revolving Credit Loan of such Lender made to such Borrower and
(ii) the then unpaid principal amount on the Revolving Credit Termination Date
(or on such earlier date on which the Loans become due and payable pursuant to Section
8.2) of each Swing Line Loan of such Swing Line Lender made to such
Borrower.  Each of the Borrowers hereby
further agrees to pay interest to the Administrative Agent for the account of
the appropriate Lender on the unpaid principal amount of the Loans made to it
from time to time outstanding from the date hereof until payment in full
thereof at the rates per annum, and on the dates, set forth in Section 2.11.



 31
 









(b)           Each Lender shall maintain in
accordance with its usual practice an account or accounts evidencing
indebtedness of each Borrower to such Lender resulting from each Loan of such
Lender from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time under this Agreement.


(c)           The Administrative Agent, on behalf
of each Borrower, shall maintain the Register pursuant to Section 10.7(c),
and a subaccount therein for each Lender, in which shall be recorded (i) the
amount of each Loan to such Borrower made hereunder and any Note evidencing
such Loan, the Type of such Loan and each Interest Period applicable thereto,
(ii) the amount of any principal or interest due and payable or to become due
and payable from such Borrower to each Lender hereunder and (iii) both the
amount of any sum received by the Administrative Agent hereunder from or for
the account of such Borrower and each Lender’s share thereof.  In the event of any conflict between the
accounts and records maintained by any Lender and the accounts and records of
the Administrative Agent in respect of such matters, the accounts and records
of the Administrative Agent shall control in the absence of manifest error.


(d)           The entries made in the Register and
the accounts of each Lender maintained pursuant to Section 2.5(b) shall,
to the extent permitted by applicable Law, be prima  facie
evidence of the existence and amounts of the obligations of each Borrower
therein recorded; provided, however, that the failure of any
Lender or the Administrative Agent to maintain the Register or any such
account, or any error therein, shall not in any manner affect the obligation of
any Borrower to repay (with applicable interest) the Loans made to it by such
Lender in accordance with the terms of this Agreement.


(e)           Each of the Borrowers agrees that,
upon the request to the Administrative Agent by any Lender, it will execute and
deliver to such Lender a promissory note of such Borrower evidencing any Revolving
Credit Loans or Swing Line Loans, as the case may be, made by such Lender to
such Borrower, substantially in the forms of Exhibit C-1 or C-2,
respectively, with appropriate insertions as to date and principal amount.  Each Lender may attach schedules to its Note
and endorse thereon the date, Type (if applicable), amount and maturity of its
Loans and payments with respect thereto.


(f)            In addition to the accounts and
records referred to herein above, each Lender and the Administrative Agent
shall maintain in accordance with its usual practice accounts or records
evidencing the purchases and sales by such Lender of participations in Letters
of Credit and Swing Line Loans.  In the
event of any conflict between the accounts and records maintained by the Administrative
Agent and the accounts and records of any Lender in respect of such matters,
the accounts and records of the Administrative Agent shall control in the
absence of manifest error.


2.6.  Facility Fee, etc.  (a) 
Parent agrees to pay to the Administrative Agent for the account of each
Lender in accordance with its Revolving Credit Percentage a facility fee for
the period from and including the Closing Date to the last day of the Revolving
Credit Commitment Period, computed at the Facility Fee Rate on the average
daily amount of the Revolving Credit Commitment of such Lender during the
period for which payment is made.  The
facility fee shall accrue at all times during the Revolving Credit Commitment
Period, including at any time during which one or more of the conditions in Section
4.2 is not met, and 



 32
 









shall be payable
quarterly in arrears on the first Business Day of each of January, April, July
and October and on the last day of the Revolving Credit Commitment Period,
commencing on the first of such dates to occur after the Closing Date.  The facility fee shall be calculated
quarterly in arrears, and if there is any change in the Facility Fee Rate
during any quarter, the actual daily amount shall be computed and multiplied by
the Facility Fee Rate separately for each period during such quarter that the
Facility Fee Rate was in effect.


(b)           The Borrowers agree to pay to the
Arrangers for their own respective accounts the fees in the amounts and on the
dates from time to time agreed to in the Arranger Fee Letter.


(c)           The Borrowers agree to pay to the
Administrative Agent the fees in the amounts and on the dates from time to time
agreed to in the Agent Fee Letter.


2.7.  Termination or Reduction of Revolving
Credit Commitments.  (a)  Parent shall have the right, upon notice to
the Administrative Agent, to terminate the Revolving Credit Commitments or,
from time to time, to reduce the aggregate amount of the Revolving Credit
Commitments; provided that (a) no such termination or reduction of
Revolving Credit Commitments shall be permitted if, after giving effect thereto
and to any prepayments of the Revolving Credit Loans and Swing Line Loans made
on the effective date thereof, the Total Revolving Extensions of Credit would
exceed the Total Revolving Credit Commitments, (b) any such reduction shall be
in an amount equal to $1,000,000, or a whole multiple thereof (or the remaining
amount of the Revolving Credit Commitments), (c) any such notice shall be
received by the Administrative Agent not later than 11:00 A.M. New York City
time, three Business Days prior to the date of termination or reduction and (d)
if, after giving effect to any reduction of the Revolving Credit Commitments,
the L/C Commitment or the Swing Line Commitment exceeds the amount of the Revolving
Credit Commitment, such Commitment shall be automatically reduced by the amount
of such excess; provided, further, that a notice of termination
of the Revolving Credit Commitments delivered by Parent may state that such
notice is conditioned upon the effectiveness of other credit facilities,
transactions or borrowings in general, in which case such notice may be revoked
by Parent (by notice to the Administrative Agent on or prior to the specified
effective date) if such condition is not satisfied.  The Administrative Agent will promptly notify
the Lenders of any notice of termination or reduction of the Revolving Credit
Commitments.  Any reduction of the
Revolving Credit Commitments shall be applied to the Revolving Credit
Commitment of each Lender according to its Revolving Credit Percentage.  All fees accrued until the effective date of
any termination of the Revolving Credit Commitment shall be paid on the
effective date of such termination.  Any
reduction shall reduce permanently the Revolving Credit Commitments then in
effect.


(b)           Reasonably contemporaneously with any
Material Debt Offering by a Holding Company, the Parent shall provide the
Administrative Agent with a Material Debt Offering Notice.  The aggregate Revolving Credit Commitments shall
be reduced in an amount equal to 50% of the Net Proceeds of such Material Debt
Offering, with such reduction applying pro rata to the Revolving Credit
Commitments of each Lender according to its Revolving Credit Percentage; provided,
however, that if, pursuant to the Material Debt Offering Notice, the
Parent notifies the Administrative Agent that it intends to (i) finance any
Permitted Acquisitions that are anticipated to be consummated within six months
after receipt of such Net Proceeds or (ii) 



 33
 









refinance any
Permitted Acquisitions that have been consummated within six months prior to
the Holding Company’s receipt of such Net Proceeds (which notice shall specify
the portion of such Net Proceeds to be so used, which may be up to 100%
thereof), then such reduction of the Revolving Credit Commitments shall not be
required to the extent of any amounts so used (x) in the case of clause (i)
above, within six months of the date of the receipt of such proceeds and (y) in
the case of a Permitted Acquisition under clause (ii) above and which
was financed with Debt that is still outstanding at the time that such Holding
Company receives such Net Proceeds, not later than three Business Days after
the receipt of such proceeds; and provided further that, notwithstanding
anything to the contrary contained herein, nothing in this subsection (b)
shall require the Revolving Credit Commitments to be reduced to less than
$300,000,000.


2.8.  Prepayments.  (a)  A
Borrower may at any time and from time to time prepay the Loans made to such
Borrower, in whole or in part, without premium or penalty, upon notice
delivered to the Administrative Agent at least three Business Days prior
thereto in the case of Eurodollar Loans and on the date of prepayment in the
case of Base Rate Loans, which notice shall specify the date and amount of
prepayment and whether the prepayment is of Eurodollar Loans or Base Rate
Loans; provided, that  (i) if a
Eurodollar Loan is prepaid on any day other than the last day of the Interest
Period applicable thereto, such Borrower shall also pay any amounts owing
pursuant to Section 2.17 and (ii) no prior notice is required for the
prepayment of Swing Line Loans; provided, further, that, if a
notice of prepayment is given in connection with a conditional notice of termination
of the Revolving Credit Commitments as contemplated by Section 2.7,
then such notice of prepayment may be revoked if such notice of termination is
revoked in accordance with Section 2.7.  Upon receipt of any such notice the
Administrative Agent shall promptly notify the Lenders thereof.  If any such notice is given, the amount
specified in such notice shall be due and payable on the date specified
therein, together with (except in the case of Base Rate Loans) accrued interest
to such date on the amount prepaid. 
Partial prepayments of Revolving Credit Loans shall be in an aggregate
principal amount of $1,000,000  or
a whole multiple thereof.  Partial
prepayments of Swing Line Loans shall be in an aggregate principal amount of
$100,000 or a whole multiple thereof.


(b)           If for any reason the Total Revolving
Extensions of Credit at any time exceed the Total Revolving Credit Commitments
then in effect, the Borrowers shall immediately prepay the Loans and/or Cash
Collateralize the L/C Obligations in an aggregate amount equal to such excess; provided,
however, that the Borrowers shall not be required to Cash Collateralize
the L/C Obligations pursuant to this Section 2.8(b) unless after the
prepayment in full of the Loans the Total Revolving Extensions of Credit exceed
the Total Revolving Credit Commitments then in effect.


2.9.  Conversion and Continuation Options.  (a)  A
Borrower may elect from time to time to convert Eurodollar Loans made to such
Borrower to Base Rate Loans by giving the Administrative Agent at least two
Business Days’ prior irrevocable notice (which may be telephonic) of such
election.  A Borrower may elect from time
to time to convert Base Rate Loans made to such Borrower to Eurodollar Loans by
giving the Administrative Agent at least three Business Days’ prior irrevocable
notice (which may be telephonic) of such election (which notice shall specify
the length of the initial Interest Period therefor); provided, however,
that if a Borrower wishes to request Eurodollar Loans having an Interest Period
of nine or twelve months in duration as provided in the definition of “Interest
Period”, the applicable notice must be 



 34
 









received by the Administrative Agent not later than 11:00 A.M. New York
City time, four Business Days prior to the requested date of such conversion or
continuation, whereupon the Administrative Agent shall give prompt notice to
the Lenders of such request and determine whether the requested Interest Period
is unavailable to any of them.  Not later
than 10:00 A.M. New York City time, three Business Days before the requested
date of such conversion or continuation, the Administrative Agent shall notify
such Borrower (which notice may be by telephone) whether or not the requested
Interest Period is unavailable to any of the Lenders, provided, further
that no Base Rate Loan may be converted to a Eurodollar Loan (i) when any Event
of Default has occurred and is continuing and the Administrative Agent or the
Majority Lenders have determined in its or their sole discretion not to permit
such conversions or (ii) after the date that is one month prior to the
Revolving Credit Termination Date.  Each
telephonic notice by a Borrower pursuant to this Section 2.9 must be
confirmed promptly by delivery to the Administrative Agent of a written Borrowing
Request appropriately completed and signed by a Responsible Officer of such
Borrower.  If any Borrower requests a
conversion to a Eurodollar Loan in any Borrowing Request, but fails to specify
an Interest Period, it will be deemed to have specified an Interest Period of
one month.  Upon receipt of any such
notice the Administrative Agent shall promptly notify the Lenders thereof.


(b)           A Borrower may elect to continue any
Eurodollar Loan made to such Borrower as such upon the expiration of the then current
Interest Period with respect thereto by giving irrevocable notice (which may be
telephonic) to the Administrative Agent, in accordance with the applicable
provisions of the term “Interest Period” set forth in Section 1.1, of
the length of the next Interest Period to be applicable to such Loans, provided
that no Eurodollar Loan may be continued as such (i) when any Event of Default
has occurred and is continuing and the Administrative Agent or the Majority
Lenders have, determined in its or their sole discretion not to permit such
continuations or (ii) after the date that is one month prior to the Revolving
Credit Termination Date, and provided, further, that if such
Borrower shall fail to give any required notice as described above in this
paragraph or if such continuation is not permitted pursuant to the preceding
proviso, such Loans shall be converted automatically to Base Rate Loans on the
last day of such then expiring Interest Period. 
Each telephonic notice by a Borrower pursuant to this Section 2.9
must be confirmed promptly by delivery to the Administrative Agent of a written
Borrowing Request appropriately completed and signed by a Responsible Officer
of such Borrower.  Upon receipt of any
such notice the Administrative Agent shall promptly notify the Lenders thereof.


2.10.  Maximum Number of Eurodollar Loans.  Notwithstanding anything to the contrary in
this Agreement, all borrowings, conversions, continuations and optional
prepayments of Eurodollar Loans and all selections of Interest Periods shall be
in such amounts and be made pursuant to such elections so that no more than ten
Eurodollar Loans shall be outstanding at any one time.


2.11.  Interest Rates and Payment Dates.  (a) 
Subject to the provisions of paragraph (c) below, each Eurodollar
Loan shall bear interest on the outstanding principal amount thereof for each
day during each Interest Period with respect thereto at a rate per annum equal
to the Eurodollar Rate determined for such day plus the Applicable Margin.



 35
 









(b)           Each Base Rate Loan, including Swing
Line Loans, shall bear interest on the outstanding principal amount thereof
from the applicable borrowing date at a rate per annum equal to the Base Rate.


(c)           (i) If all or a portion of the
principal amount of any Loan or Reimbursement Obligation shall not be paid when
due (whether at the stated maturity, by acceleration or otherwise), such
overdue amount shall bear interest at a rate per annum that is equal to (x) in
the case of the Loans, the rate that would otherwise be applicable thereto
pursuant to the foregoing provisions of this Section 2.11  plus 2%
or (y) in the case of Reimbursement Obligations, the rate applicable to Base
Rate Loans plus 2%, and (ii) if all or a portion of any interest payable
on any Loan or Reimbursement Obligation or any facility fee or other amount
payable hereunder shall not be paid when due (whether at the stated maturity,
by acceleration or otherwise), such overdue amount shall bear interest at a
rate per annum equal to the rate then applicable to Base Rate Loans plus
2%, in each case, with respect to clauses (i) and (ii) above,
from the date of such non-payment until such amount is paid in full (each
of the foregoing collectively, the “Default Rate”).


(d)           Interest shall be payable in arrears
on each Interest Payment Date, provided that interest accruing pursuant
to paragraph (c) of this Section 2.11 shall be payable from time
to time on demand (after as well as before judgment and before and after the
commencement of any proceeding under any Debtor Relief Law).


2.12.  Computation of Interest and Fees.  (a) 
Interest, fees and commissions payable pursuant hereto shall be
calculated on the basis of a 365-day (or 366-day, as the case may be) year for
the actual days elapsed, except that, with respect to Eurodollar Loans, the
interest thereon shall be calculated on the basis of a 360-day year for the
actual days elapsed.  The Administrative
Agent shall as soon as practicable notify the Borrowers and the Lenders of each
determination of a Eurodollar Rate.  Any
change in the interest rate on a Loan resulting from a change in the Base Rate
shall become effective as of the opening of business on the day on which such
change becomes effective.  The
Administrative Agent shall as soon as practicable notify the Borrowers and the
Lenders of the effective date and the amount of each such change in any
interest rate.  Interest shall accrue on
each Loan for the day on which the Loan is made, and shall not accrue on a
Loan, or any portion thereof, for the day on which the Loan or such portion is
paid, provided that any Loan that is repaid on the same day on which it
is made shall, subject to Section 2.14(d), bear interest for one day.


(b)           Each determination of an interest
rate by the Administrative Agent pursuant to any provision of this Agreement
shall be conclusive and binding on the Borrowers and the Lenders in the absence
of manifest error.


2.13.  Inability to Determine Interest Rate.  If prior to the first day of any Interest
Period:


(a)           the
Administrative Agent shall have determined (which determination shall be
conclusive and binding upon the Borrowers) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Interest Period, or


 



 36















(b)           the
Administrative Agent shall have received notice from the Majority Lenders that
the Eurodollar Rate determined or to be determined for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (as
conclusively certified by such Lenders) of making or maintaining their affected
Loans during such Interest Period,


the Administrative Agent
shall give telecopy or telephonic notice thereof to the Borrowers and the
relevant Lenders as soon as practicable thereafter.  If such notice is given (x) any Eurodollar
Loans requested to be made on the first day of such Interest Period shall be
made as Base Rate Loans, (y) any Loans that were to have been converted on
the first day of such Interest Period to Eurodollar Loans shall be continued as
Base Rate Loans and (z) any outstanding Eurodollar Loans shall be converted, on
the last day of the then current Interest Period with respect thereto, to Base
Rate Loans.  Until such notice has been
withdrawn by the Administrative Agent, no further Eurodollar Loans shall be
made or continued as such, nor shall the Borrowers have the right to convert
Loans to Eurodollar Loans.


2.14.  Pro Rata Treatment and Payments.  (a) 
Each borrowing, other than borrowings of Swing Line Loans, by the
Borrowers from the Lenders hereunder, each payment by the Borrowers on account
of any facility fee or Letter of Credit fee, and any reduction of the Revolving
Credit Commitments of the Lenders, shall be made pro rata according to the
respective Revolving Credit Percentages of the relevant Lenders.


(b)           Each payment (including each
prepayment) by the Borrowers on account of principal of and interest on the
Revolving Credit Loans of the Borrowers shall be made pro  rata
according to the respective outstanding principal amounts of the Revolving
Credit Loans of the Borrowers then held by the Lenders.  Each payment in respect of Reimbursement
Obligations in respect of any Letter of Credit shall be made to the relevant
Issuing Lender.


(c)           The application of any payment of
Loans shall be made, first, to Base Rate Loans and, second, to
Eurodollar Loans.  Each payment of the
Eurodollar Loans shall be accompanied by accrued interest to the date of such
payment on the amount paid.


(d)           All payments (including prepayments)
to be made by the Borrowers hereunder, whether on account of principal,
interest, fees or otherwise, shall be made without condition or deduction for
any counterclaim, defense, recoupment or setoff and shall be made prior to
12:00 Noon, New York City time, on the due date thereof to the Administrative
Agent, for the account of the relevant Lenders, at the Administrative Agent’s
Office, in Dollars and in immediately available funds.  Any payment made by the Borrowers after 12:00
Noon, New York City time, on any Business Day shall be deemed to have been made
on the next following Business Day.  The
Administrative Agent shall distribute such payments to the Lenders promptly
upon receipt in like funds as received. 
If any payment hereunder (other than payments on the Eurodollar Loans)
becomes due and payable on a day other than a Business Day, such payment shall
be extended to the next succeeding Business Day.  If any payment on a Eurodollar Loan becomes
due and payable on a day other than a Business Day, the maturity thereof shall
be extended to the next succeeding Business Day unless the result of such
extension would be to extend such payment into another calendar month, in which
event such payment shall be made on the immediately preceding Business Day.  In the case of any extension of any payment
of 



 37
 









principal pursuant
to the preceding two sentences, interest thereon shall be payable at the then
applicable rate during such extension.


(e)           Unless a Borrower or any Lender has
notified the Administrative Agent, prior to the date any payment is required to
be made by it to the Administrative Agent hereunder, that such Borrower or such
Lender, as the case may be, will not make such payment, the Administrative
Agent may assume that such Borrower or such Lender, as the case may be, has
timely made such payment and may (but shall not be so required to), in reliance
thereon, make available a corresponding amount to the Person entitled
thereto.  If and to the extent that such
payment was not in fact made to the Administrative Agent in immediately
available funds, then:


(i)            if such Borrower failed to make such
payment, each Lender shall forthwith on demand repay to the Administrative
Agent the portion of such assumed payment that was made available to such
Lender in immediately available funds, together with interest thereon in
respect of each day from and including the date such amount was made available
by the Administrative Agent to such Lender to the date such amount is repaid to
the Administrative Agent in immediately available funds at the Federal Funds
Rate from time to time in effect; and


(ii)           if any Lender failed to make such
payment, such Lender shall forthwith on demand pay to the Administrative Agent
the amount thereof in immediately available funds, together with interest
thereon for the period from the date such amount was made available by the
Administrative Agent to such Borrower to the date such amount is recovered by
the Administrative Agent (the “Compensation Period”) at a rate per annum
equal to the greater of the Federal Funds Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation, plus any administrative, processing or similar fees customarily
charged by the Administrative Agent in connection with the foregoing. If such
Lender pays such amount to the Administrative Agent, then such amount shall
constitute such Lender’s Revolving Credit Percentage of the Loan included in
the applicable borrowing.  If such Lender
does not pay such amount forthwith upon the Administrative Agent’s demand
therefor, the Administrative Agent may make a demand therefor upon such
Borrower, and such Borrower shall pay such amount to the Administrative Agent,
together with interest thereon for the Compensation Period at a rate per annum
equal to the rate of interest applicable to the applicable borrowing.  Nothing herein shall be deemed to relieve any
Lender from its obligation to fulfill its Revolving Credit Commitment or to
prejudice any rights which the Administrative Agent or the Borrowers may have
against any Lender as a result of any default by such Lender hereunder.


A notice of the
Administrative Agent to any Lender or such Borrower with respect to any amount
owing under this subsection (e) shall be conclusive, absent manifest error.


(f)            The obligations of the Lenders
hereunder to make Loans, to fund participations in Letters of Credit and Swing
Line Loans and to make payments under Section



 38
 









10.6
are several and not joint.  The failure
of any Lender to make any Loan, to fund any such participation or to make any
payment under Section 10.6 on any date required hereunder shall not
relieve any other Lender of its corresponding obligation to do so on such date,
and no Lender shall be responsible for the failure of any other Lender to so
make its Loan, to purchase its participation or make its payment under Section
10.6.


2.15.  Requirements of Law.  (a)  If
the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof or compliance by any Lender with any
request or directive (whether or not having the force of law) from any central
bank or other Governmental Authority made subsequent to the date hereof:


(i)            shall subject any Lender to any tax
of any kind whatsoever with respect to this Agreement, any Letter of Credit,
any Application or any Eurodollar Loan made by it, or change the basis of
taxation of payments to such Lender in respect thereof (except for Non-Excluded
Taxes or Other Taxes covered by Section 2.16 and the imposition of, or
any change in, the rate of any Excluded Tax payable by such Lender);


(ii)           shall impose, modify or hold
applicable any reserve, special deposit, compulsory loan or similar requirement
against assets held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other acquisition of
funds by, any office of such Lender that is not otherwise included in the
determination of the Eurodollar Rate hereunder; or


(iii)          shall impose on such Lender any other
condition;


and the result of any of
the foregoing is to increase the cost to such Lender, by an amount which such
Lender deems to be material, of making, converting into, continuing or
maintaining Eurodollar Loans to a Borrower or issuing or participating in
Letters of Credit issued at the request of a Borrower, or to reduce any amount
receivable hereunder in respect thereof, then, in any such case, such Borrower
shall promptly pay such Lender, upon its demand, any additional amounts
necessary to compensate such Lender for such increased cost or reduced amount
receivable.  If any Lender becomes
entitled to claim any additional amounts pursuant to this Section 2.15,
it shall promptly notify the relevant Borrower (with a copy to the
Administrative Agent) of the event by reason of which it has become so
entitled.


(b)           If any Lender shall have determined
that the adoption of or any change in any Requirement of Law regarding capital
adequacy or in the interpretation or application thereof or compliance by such
Lender or any corporation controlling such Lender with any request or directive
regarding capital adequacy (whether or not having the force of law) from any
Governmental Authority made subsequent to the date hereof shall have the effect
of reducing the rate of return on such Lender’s or such corporation’s capital
as a consequence of its obligations hereunder or under or in respect of any
Letter of Credit to a level below that which such Lender or such corporation
could have achieved but for such adoption, change or compliance (taking into
consideration such Lender’s or such corporation’s policies with respect to
capital adequacy) by an amount deemed by such Lender to be material, then from
time to time, after submission by such Lender to the relevant Borrower (with a
copy to the Administrative Agent) of a written



 39
 









request therefor,
such Borrower shall pay to such Lender such additional amount or amounts as
will compensate such Lender or such corporation for such reduction.


(c)           In addition to, and without
duplication of, amounts which may become payable from time to time pursuant to paragraphs
(a) and (b) of this Section 2.15, each  Borrower agrees to pay to each Lender which
requests compensation under this paragraph (c) by notice to such
Borrower, on the last day of each Interest Period with respect to any
Eurodollar Loan made by such Lender to such Borrower, at any time when such
Lender shall be required to maintain reserves against “Eurocurrency liabilities”
under Regulation D of the Board of Governors of the Federal Reserve System (or,
at any time when such Lender may be required by the Board of Governors of the
Federal Reserve System or by any other Governmental Authority, whether within
the United States or in another relevant jurisdiction, to maintain reserves
against any other category of liabilities which includes deposits by reference
to which the Eurodollar Rate is determined as provided in this Agreement or
against any category of extensions of credit or other assets of such Lender
which includes any such Eurodollar Loans), an additional amount (determined by
such Lender’s calculation or, if an accurate calculation is impracticable,
reasonable estimate using such reasonable means of allocation as such Lender
shall determine) equal to the actual costs, if any, incurred by such Lender
during such Interest Period as a result of the applicability of the foregoing
reserves to such Eurodollar Loans.


(d)           A certificate as to any additional
amounts payable pursuant to this Section 2.15 submitted by any Lender to
a Borrower (with a copy to the Administrative Agent) shall be conclusive in the
absence of manifest error.  No
Lender  shall be entitled to
compensation  under  this  Section  2.15 from a Borrower for any costs
incurred  or  reductions suffered more than 180 days prior to
the date that such Lender notifies such Borrower of the circumstances giving
rise to such increased costs or reductions and of such Lender’s intention to
claim compensation therefor; provided  that if a change of law
giving rise to such increased costs or reductions is retroactive, then the
180-day period referred to above shall be extended to include the period of
retroactive effect thereof. The obligations of the Borrowers pursuant to this Section
2.15 shall survive the termination of this Agreement and the payment of the
Loans and all other amounts payable hereunder.


2.16.  Taxes. 
(a)  Except as required by Law,
all payments made by the Borrowers under this Agreement shall be made free and
clear of, and without deduction or withholding for or on account of, any
present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority, excluding net
income taxes and franchise and doing business taxes (imposed in lieu of net
income taxes) imposed on the Administrative Agent or any Lender as a result of
a present or former connection between the Administrative Agent or such Lender
and the jurisdiction of the Governmental Authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Administrative Agent’s or such Lender’s
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any other Loan Document) (such net income
taxes and franchise or doing business taxes imposed in lieu of net income taxes
being referred to hereinafter as “Excluded Taxes”).  If any such taxes, levies, imposts, duties,
charges, fees, deductions or withholdings other than Excluded Taxes (“Non-Excluded
Taxes”) or any Other Taxes are required to be withheld from



 40
 









any amounts
payable to the Administrative Agent or any Lender hereunder, the amounts so
payable to the Administrative Agent or such Lender shall be increased to the
extent necessary to yield to the Administrative Agent or such Lender (after
payment of all Non-Excluded Taxes and Other Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement; provided, however, that no Borrower shall be required
to increase any such amounts payable to any Lender with respect to any
Non-Excluded Taxes (i) that are attributable to such Lender’s failure to comply
with the requirements of paragraph (d) or (e) of this Section
2.16 or (ii) that are withholding taxes imposed on amounts payable to such
Lender at the time such Lender becomes a party to this Agreement or designates
a new lending office, except to the extent that such Lender (or its assignor,
if any) was entitled, at the time of designation of a new lending office or
assignment, to receive additional amounts from the relevant Borrower with
respect to such Non-Excluded Taxes pursuant to this Section 2.16(a).


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


(c)           Whenever any Non-Excluded Taxes or
Other Taxes are payable by either of the Borrowers, as soon as practicable
thereafter the relevant Borrower shall send to the Administrative Agent for its
own account or for the account of the relevant Lender, as the case may be, a
certified copy of an official receipt received by such Borrower showing payment
thereof (or other evidence of such payment reasonably satisfactory to the
Administrative Agent).  If the relevant
Borrower fails to pay any Non-Excluded Taxes or Other Taxes when due to the
appropriate taxing authority, such Borrower shall indemnify the Administrative
Agent and the Lenders for any incremental taxes, interest or penalties that may
become payable by the Administrative Agent or any Lender as a result of any
such failure.  The agreements in this Section
2.16 shall survive the termination of this Agreement and the payment of the
Loans and all other amounts payable hereunder.


(d)           Each Lender (or Transferee) that is
not (i) a citizen or resident of the United States of America, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States of America (or any jurisdiction thereof), or (iii) an
estate or trust that is subject to U.S. federal income taxation regardless of
the source of its income (a “Non-U.S. Lender”) that may lawfully
do so shall deliver to the Borrowers and the Administrative Agent (or, in the
case of a Participant, to the Lender from which the related participation shall
have been purchased) two copies of either U.S. Internal Revenue Service Form
W-8BEN or Form W-8ECI (or other applicable form), or, in the case of a Non-U.S.
Lender claiming exemption from U.S. federal withholding tax under Section
871(h) or 881(c) of the Code with respect to payments of “portfolio interest”,
a statement substantially in the form of Exhibit D and a Form W-8BEN (or
other applicable form), or to the extent such Lender may lawfully do so, it
shall deliver any subsequent versions thereof or successors thereto properly
completed and duly executed by such Non-U.S. Lender claiming complete
exemption from, or a reduced rate of, U.S. federal withholding tax on all
payments by the Borrowers under this Agreement and the other Loan
Documents.  Such forms shall be delivered
by each Non-U.S. Lender on or before the date it becomes a party to this
Agreement (or, in the case of any Participant, on or before the date such
Participant purchases the related participation).  In addition, to the extent it may lawfully do
so, each Non-U.S.Lender shall deliver such forms promptly upon the
obsolescence or invalidity of any form previously delivered by such Non-U.S.



 41
 









Lender.  Each Non-U.S. Lender shall, as soon as
reasonably practicable, notify the Borrowers at any time it determines that it
is no longer in a position to provide any previously delivered certificate to
the Borrowers (or any other form of certification adopted by the U.S. taxing
authorities for such purpose). 
Notwithstanding any other provision of this paragraph, a Non-U.S.
Lender shall not be required to deliver any form pursuant to this paragraph
that such Non-U.S. Lender is not legally able to deliver.


(e)           A Lender that is entitled to an
exemption from or reduction of non-U.S. withholding tax under the Law of the
jurisdiction in which a Borrower is located, or any treaty to which such
jurisdiction is a party, with respect to payments under this Agreement shall
deliver to such Borrower (with a copy to the Administrative Agent), at the time
or times prescribed by applicable Law or reasonably requested by such Borrower,
such properly completed and executed documentation prescribed by applicable Law
or reasonably requested by the Borrowers as will permit such payments to be
made without withholding or at a reduced rate, provided that such Lender
is legally entitled to complete, execute and deliver such documentation.


2.17.  Compensation for Losses.  Each Borrower agrees to, upon demand of any
Lender (with a copy to the Administrative Agent) from time to time, to
indemnify each Lender for, and to hold each Lender harmless from, any loss or
expense that such Lender sustains or incurs as a consequence of
(a) default by such Borrower in making a borrowing of, conversion to or
continuation of Eurodollar Loans after such Borrower has given a notice
requesting the same in accordance with the provisions of this Agreement, (b)
default by such Borrower in making any prepayment after such Borrower has given
a notice thereof in accordance with the provisions of this Agreement or (c) the
making by such Borrower of a prepayment or conversion of Eurodollar Loans on a
day that is not the last day of an Interest Period with respect thereto; provided
that any request for indemnification made by a Lender pursuant to this Section
2.17 shall be made within six months of the incurrence of the loss or
expense requested to be indemnified. 
Such indemnification may include an amount equal to the excess, if any,
of (i) the amount of interest that would have accrued on the amount so prepaid,
or not so borrowed, converted or continued, for the period from the date of
such prepayment or of such failure to borrow, convert or continue to the last
day of such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans
provided for herein (excluding, however, the Applicable Margin included
therein, if any) over (ii) the amount of interest (as reasonably determined by
such Lender) that would have accrued to such Lender on such amount by placing
such amount on deposit for a comparable period with leading banks in the
interbank Eurodollar market.  A
certificate as to any amounts payable pursuant to this Section 2.17
submitted to a Borrower by any Lender shall be conclusive in the absence of
manifest error.  This covenant shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.


2.18.  Illegality.  Notwithstanding any other provision herein,
if the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender to
make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the
commitment of such Lender hereunder to make Eurodollar Loans, continue
Eurodollar Loans as such and convert Base Rate Loans to Eurodollar Loans shall
forthwith be canceled and (b) such Lender’s Loans then outstanding as Eurodollar
Loans, if any, shall be



 42
 









converted
automatically to Base Rate Loans on the respective last days of the then
current Interest Periods with respect to such Loans or within such earlier
period as required by Law.  If any such
conversion of a Eurodollar Loan to a Base Rate Loan occurs on a day which is
not the last day of the then current Interest Period with respect thereto, such
Borrower shall pay to such Lender such amounts, if any, as may be required
pursuant to Section 2.17.


2.19.  Change of Office.  Each Lender agrees that, upon the occurrence
of any event that it knows to give rise to the operation of Sections 2.15,
2.16(a) or 2.18 with respect to such Lender, it will use all
commercially reasonable efforts (subject to overall policy considerations of
such Lender) to designate another lending office for any Loans affected by such
event, or to assign its rights and obligations hereunder with respect to such
Loans to another of its offices, branches or affiliates with the object of
avoiding the consequences of such event; provided, that such designation
is made on terms that, in the reasonable sole judgment of such Lender, cause
such Lender and its lending office(s) to suffer no economic, legal or
regulatory disadvantage, and provided, further, that nothing in this Section
2.19 shall affect or postpone any of the obligations of the Borrowers or
the rights of any Lender pursuant to Sections 2.15, 2.16(a) or 2.18.  The Borrowers hereby agree to pay all
reasonable out-of-pocket costs and expenses incurred by any Lender in
connection with any such designation or assignment.


2.20.  Replacement of Lenders under Certain
Circumstances.  The Borrowers shall
be permitted to replace any Lender (a) that requests reimbursement for amounts
owing pursuant to Section 2.15, (b) with respect to which any Borrower
is required to pay any amounts under Sections 2.16 or 2.18, (c)
that defaults in its obligation to make Loans hereunder or (d) that fails to
approve any amendment which, pursuant to Section 10.1, requires the
approval of each Lender, provided, that such amendment is approved by at
least the Majority Lenders, with a replacement financial institution or other
entity; provided that (i) such replacement does not conflict with any
Requirement of Law, (ii) with respect to a condition described in clause (a)
or (b) above, prior to any such replacement, such replaced Lender shall
have taken no action under Section 2.19 so as to eliminate the continued
need for payment of amounts owing pursuant to Sections 2.15, 2.16,
or 2.18 (iii) the replacement financial institution or other entity
shall purchase, at par, all Loans and other amounts owing to such replaced
Lender on or prior to the date of replacement, (iv) each Borrower shall be
liable to such replaced Lender under Section 2.17 (as though Section
2.17 were applicable) if any Eurodollar Loan to such Borrower owing to such
replaced Lender shall be purchased other than on the last day of the Interest
Period relating thereto, (v) the replacement financial institution or other
entity, if not already a Lender, shall be reasonably satisfactory to the
Administrative Agent and otherwise an Eligible Assignee, (vi)  the replaced Lender and replacement Lender
shall be obligated to make such replacement in accordance with the provisions
of Section 10.7 (including, without limitation, obtaining the consents
provided for therein) (provided that the Borrowers shall be obligated to pay
the registration and processing fee referred to therein), (vii) the Borrowers
shall pay all additional amounts (if any) required pursuant to Section 2.15,
2.16 or 2.18, as the case may be, in respect of any period prior
to the date on which such replacement shall be consummated, and (viii) any
such replacement shall not be deemed to be a waiver of any rights that the
Borrowers, the Administrative Agent or any other Lender shall have against the
replaced Lender.


 



 43















2.21.  Guaranty
of Payment and Performance.


(a)           Guaranty
by Parent of White Mountains Re’s Obligations.  Parent (being referred to herein in its
capacity as guarantor as a “Guarantor”) hereby guarantees (such guaranty
being hereinafter referred to as the “Parent Guaranty”) to the Lenders
and the Administrative Agent the full and punctual payment when due (whether at
stated maturity, by required pre-payment, by acceleration or otherwise) of all
of the obligations of White Mountains Re hereunder and under the other Loan
Documents (including, but not limited to, the principal of the Loans advanced
to White Mountains Re, all Reimbursement Obligations of White Mountains Re in
respect of Letters of Credit, and all interest, fees, expenses, indemnities and
other amounts payable by White Mountains Re hereunder), including all such
which would become due but for the operation of the automatic stay pursuant to
§362(a) of the Federal Bankruptcy Code and
the operation of §502(b) of the Federal Bankruptcy Code.  The Parent Guaranty is an absolute,
unconditional and continuing guaranty of the full and punctual payment and
performance of all such obligations of White Mountains Re hereunder and under
the other Loan Documents, and not of their collectibility only and is in no way
conditioned upon any requirement that the Administrative Agent or any Lender
first attempt to collect any of White Mountains Re’s obligations from White
Mountains Re or resort to any other means of obtaining payment.  Should an Event of Default occur with respect
to the payment or performance of any such obligations of White Mountains Re,
the obligations of Parent under the Parent Guaranty with respect to such
obligations in default shall, upon demand by the Administrative Agent, become
immediately due and payable to the Administrative Agent, for the benefit of the
Lenders and the Administrative Agent, without demand or notice of any nature,
all of which are expressly waived by Parent. 
Payments by Parent in respect of the Parent Guaranty may be required by
the Administrative Agent on any number of occasions.  All payments by Parent in respect of the
Parent Guaranty shall be made to the Administrative Agent, in the manner and at
the place of payment specified hereunder, for the account of the Lenders and the
Administrative Agent.


(b)           Guaranty by White Mountains Re of
Parent’s Obligations.  White
Mountains Re (being referred to herein in its capacity as guarantor as a “Guarantor”
and together with Parent, in its capacity as a guarantor, as the “Guarantors”)
hereby guarantees (such guaranty being hereinafter referred to as the “White
Mountains Re Guaranty” and together with the Parent Guaranty as the “Guaranties”
and individually as a “Guaranty”) to the Lenders and the Administrative
Agent the full and punctual payment when due (whether at stated maturity, by
required pre-payment, by acceleration or otherwise) of all of the principal of
the Loans advanced to Parent, all Reimbursement Obligations of Parent in
respect of Letters of Credit and all interest payable by Parent hereunder,
including all such which would become due but for the operation of the
automatic stay pursuant to §362(a) of the Federal Bankruptcy Code and the operation of §502(b) of the Federal
Bankruptcy Code.  The White Mountains Re
Guaranty is an absolute, unconditional and continuing guaranty of the full and
punctual payment and performance of all such obligations of Parent hereunder
and under the other Loan Documents, and not of their collectibility only and is
in no way conditioned upon any requirement that the Administrative Agent or any
Lender first attempt to collect any of Parent’s obligations from Parent or
resort to any other means of obtaining payment. 
Should an Event of Default occur with respect to the payment or
performance of any such obligations of Parent, the obligations of White
Mountains Re under the White Mountains Re Guaranty with respect to such
obligations in default shall, upon demand by the Administrative Agent, become
immediately due and payable to the 



 44
 









Administrative Agent,
for the benefit of the Lenders and the Administrative Agent, without demand or
notice of any nature, all of which are expressly waived by White Mountains
Re.  Payments by White Mountains Re in
respect of the White Mountains Re Guaranty may be required by the
Administrative Agent on any number of occasions.  All payments by White Mountains Re in respect
of the White Mountains Re Guaranty shall be made to the Administrative Agent,
in the manner and at the place of payment specified hereunder, for the account
of the Lenders and the Administrative Agent.


(c)           Agreement to Pay Enforcement
Costs, etc.  Each
of the Guarantors further agrees, as the principal obligor and not as a
guarantor only, to pay to the Administrative Agent, on demand, all costs and
expenses (including court costs and legal expenses) incurred or expended by the
Administrative Agent or any Lender in connection with its Guaranty and the
enforcement thereof, together with interest on amounts recoverable under this Section
2.21(c) from the time when such amounts become due until payment, whether
before or after judgment, at the rate of interest for overdue principal set
forth in this Agreement, provided  that if such interest would
exceed the Maximum Rate, then such interest shall be reduced to such Maximum
Rate.


(d)           Waivers by Guarantors; Lenders’
Freedom to Act.  To the fullest
extent permitted by applicable law, each of the Guarantors agrees that the
obligations that it has guaranteed hereunder will be paid and performed
strictly in accordance with their respective terms, regardless of any Law now
or hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Administrative Agent or any Lender with respect thereto.  To the fullest extent permitted by applicable
Law, each of the Guarantors waives promptness, diligences, presentment, demand,
protest, notice of acceptance, notice of any obligations incurred and all other
notices of any kind, all defenses which may be available by virtue of any
valuation, stay, moratorium law or other similar Law now or hereafter in
effect, any right to require the marshalling of assets of either of the
Borrowers or any other entity or other person primarily or secondarily liable
with respect to any of the obligations, and all suretyship defenses
generally.  Without limiting the
generality of the foregoing, each of the Guarantors agrees to the provisions of
any instrument evidencing or otherwise executed in connection with any
obligation and agrees, to the fullest extent permitted by applicable Law, that
its obligations in respect of its Guaranty shall not be released or discharged,
in whole or in part, or otherwise affected by (i) the failure of the
Administrative Agent or any Lender to assert any claim or demand or to enforce
any right or remedy against the Borrowers or any other entity or other person
primarily or secondarily liable with respect to any of the obligations; (ii)
any extensions, compromise, refinancing, consolidation or renewals of any
obligation; (iii) any change in the time, place or manner of payment of any of
the obligations or any rescissions, waivers, compromise, refinancing,
consolidation or other amendments or modifications of any of the terms or
provisions of this Agreement or the other Loan Documents or any other agreement
evidencing or otherwise executed in connection with any of the obligations,
(iv) the addition, substitution or release of any entity or other person
primarily or secondarily liable for any obligation; (v) the adequacy of any
rights which the Administrative Agent or any Lender may have against any means
of obtaining repayment of any of the obligations; or (vi) any other act or
omission which might in any manner or to any extent vary the risk of either of
the Guarantors or otherwise operate as a release or discharge of either of the
Guarantors, all of which may be done without notice to either of the
Guarantors. To the fullest extent permitted by Law, each of the Guarantors



 45
 









hereby expressly
waives any and all rights or defenses arising by reason of (A) any “one action”
or “anti-deficiency” Law which would otherwise prevent the Administrative Agent
or any Lender from bringing any action, including any claim for a deficiency,
or exercising any other right or remedy (including any right of set-off), against
either of the Guarantors before or after the Administrative Agent’s or such
Lender’s commencement or completion of any foreclosure action, whether
judicially, by exercise of power of sale or otherwise, or (B) any other Law
which in any other way would otherwise require any election of remedies by the
Administrative Agent or any Lender.


(e)           Unenforceability of Obligations
Against the Borrowers.  If for any reason either of the
Borrowers has no legal existence or is under no legal obligation to discharge any
of its obligations under this Agreement or under the other Loan Documents
guaranteed by a Guarantor, or if any of such obligations have become
irrecoverable from either of the Borrowers by reason of such Borrower’s
bankruptcy or reorganization or by other operation of Law or for any other
reason, the Guarantees shall, to the fullest extent permitted by applicable
Law, nevertheless be binding on each of the Guarantors to the same extent as if
the affected Guarantor at all times had been the principal obligor on all such
obligations.  In the event that
acceleration of the time for payment of any of the guaranteed obligations of
the Borrowers under this Agreement or the other Loan Documents is stayed upon
the insolvency, bankruptcy or reorganization of either of the Borrowers, or for
any other reason, all such obligations otherwise subject to acceleration under
the terms of this Agreement and the other Loan Documents or any other agreement
evidencing or otherwise executed in connection with any such obligation shall
be immediately due and payable by the applicable Guarantor


(f)            Subrogation.  Until the final payment and performance in
full of all of the obligations of the Borrowers under this Agreement and the
other Loan Documents, neither of the Guarantors shall exercise any rights
against the Borrowers arising as a result of payment by such Guarantor in
respect of its Guaranty, by way of subrogation, reimbursement, restitution,
contribution or otherwise, and will not prove any claim in competition with the
Administrative Agent or any Lender in respect of any payment hereunder in any
bankruptcy, insolvency or reorganization case or proceedings of any nature and
such Guarantor will not claim any setoff, recoupment or counterclaim against
the applicable Borrower in respect of any liability of such Guarantor to the
applicable Borrower.


(g)           Provisions Supplemental.  The provisions of
this Section 2.21 shall be supplemental to and not in derogation of any
other rights and remedies of the Lenders and the Administrative Agent under
this Agreement, the other Loan Documents and any separate subordination
agreement which the Administrative Agent may at any time and from time to time
enter into with either of the Guarantors for the benefit of the Lenders and the
Administrative Agent.


(h)           Further Assurances.   Each of the
Guarantors agrees that it will from time to time, at the request of the
Administrative Agent, do all such things and execute all such documents as the
Administrative Agent may reasonably request to give full effect to the Guaranty
of such Guarantor and to preserve the rights and powers of the Lenders and the
Administrative Agent in respect of such Guaranty.  Each of the Guarantors acknowledges and
confirms that it has established its own adequate means of obtaining from the
applicable



 46
 









Borrower on a
continuing basis all information desired by such Guarantor concerning the
financial condition of the applicable Borrower and that such Guarantor will
look to the applicable Borrower and not to the Administrative Agent or any
Lender in order for such Guarantor to keep adequately informed of changes in
the applicable Borrower’s financial condition.


(i)            Successors and Assigns.  The Guaranty
of each Guarantor shall be binding upon such Guarantor, its successors and
assigns, and shall inure to the benefit of the Administrative Agent and the
Lenders and their respective  permitted transferees and permitted
assigns.  Without limiting the generality
of the foregoing sentence, each Lender may, to the extent permitted by Section
10.7, assign or otherwise transfer this Agreement, the other Loan Documents
or any other agreement or Note held by it evidencing or otherwise executed in
connection with the guaranteed obligations, or sell participations in any
interest therein, to any other entity or other person, and such other entity or
other person shall, to the extent provided by Section 10.7, thereupon
become vested, to the extent set forth in the agreement evidencing such
assignment, transfer or participation, with all the rights in respect thereof
granted to such Lender herein, all in accordance with Section 10.7 of
this Agreement.


2.22.  Increase in Commitments.


(a)           Request
for Increase.  Upon notice to the
Administrative Agent (which shall promptly notify the Lenders), the Borrowers
may from time to time, increase the Total Revolving Credit Commitments by an
amount not to exceed $100,000,000 less the aggregate amount of all prior
increases of the Total Revolving Credit Commitment pursuant to this Section
2.22.  Such increase in the Total
Revolving Credit Commitments may be provided by the Lenders or Eligible
Assignees designated by the Borrowers to become Lenders (pursuant to an
instrument of accession in the form of Exhibit I hereto) that are
willing to provide such increase; provided that (i) any such increase
shall be in a minimum amount of $10,000,000 and (ii) the aggregate amount of
the Total Revolving Credit Commitments after giving effect to any such increase
shall not at any time exceed $600,000,000 less the amount of any reduction of
the Revolving Credit Commitments pursuant to Section 2.7(b).  Nothing contained herein shall constitute, or
otherwise be deemed to be, a commitment on the part of any Lender to increase
its Revolving Credit Commitment hereunder.


(b)           Effective Date and Allocations.  If the Total Revolving Credit Commitments are
increased in accordance with this Section 2.22, the Administrative Agent
and the Borrowers shall determine the effective date (the “Increase
Effective Date”) and the Borrowers, in consultation with the Administrative
Agent, shall determine the final allocation of such increase.  The Administrative Agent shall promptly
notify the Lenders of the final allocation of such increase and the Increase
Effective Date.


(c)           Conditions
to Effectiveness of Increase.  As a
condition precedent to such increase, (i) no Default shall exist, (ii) the
Borrowers shall (x) deliver to the Administrative Agent (1) an Instrument of
Accession executed by the Borrowers and the applicable Lender(s), and (2) a
certificate dated as of the Increase Effective Date (in sufficient copies for
each Lender) signed by a Responsible Officer of each Borrower (A) certifying
and attaching the resolutions adopted by the Borrowers approving or consenting
to such increase, and (B) certifying that,



 47
 









before and after
giving effect to such increase no Default exists and (iii) pursuant to the
terms of the Arranger Fee Letter, pay the fees to the applicable Persons.  The Borrowers shall prepay any Revolving
Credit Loans outstanding on the Increase Effective Date (and pay any additional
amounts required pursuant to Section 2.15) to the extent necessary to
keep the outstanding Revolving Credit Loans ratable with any revised Revolving
Credit Percentages arising from any nonratable increase in the Total Revolving
Credit Commitments under this Section 2.22.


(d)           Conflicting
Provisions.  This Section 2.22
shall supersede any provisions in Section 2.14 or 10.1 to the
contrary.


3.             LETTERS OF CREDIT


3.1.  L/C Commitment.  (a) 
Subject to the terms and conditions hereof, each Issuing Lender, in
reliance on the agreements of the other Lenders set forth in Section 3.3,
agrees to issue Letters of Credit for the account of either of the Borrowers or
any of their Subsidiaries and to amend or extend Letters of Credit previously
issued by it, in accordance with Section 3.2(b), on any Business Day
during the Revolving Credit Commitment Period in such form as may be approved
from time to time by the Issuing Lender; provided, that the Issuing
Lender shall not issue any Letter of Credit if, after giving effect to such
issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the
aggregate amount of the Available Revolving Credit Commitments would be less
than zero.  Each Letter of Credit shall
(i) be denominated in Dollars and (ii) expire no later than the earlier of (x)
the first anniversary of its date of issuance and (y) the date which is five
Business Days prior to the Revolving Credit Termination Date, provided
that any Letter of Credit with a one-year term may provide for the renewal
thereof for additional one-year periods (which shall in no event extend beyond
the date referred to in clause (y) above).  All Existing Letters of Credit shall be
deemed to have been issued pursuant hereto, and from and after the Closing Date
shall be subject to and governed by the terms and conditions hereof.


(b)           No Issuing Lender shall at any time
be obligated to issue any Letter of Credit hereunder if (i) such issuance would
conflict with, or cause the Issuing Lender or any L/C Participant to exceed any
limits imposed by, any applicable Requirement of Law, (ii) such issuance would
violate one or more policies of the Issuing Lender applicable to letters of
credit generally or (iii) any order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or restrain the
Issuing Lender from issuing such Letter of Credit, or any Law applicable to the
Issuing Lender or any request or directive (whether or not having the force of
Law) from any Governmental Authority with jurisdiction over the Issuing Lender
shall prohibit, or request that the Issuing Lender refrain from, the issuance
of letters of credit generally, or such Letter of Credit in particular.


3.2.  Procedure for Issuance and Amendment of
Letter of Credit.  (a) Each Letter of
Credit shall be issued or amended, as the case may be, upon the request of
either of the Borrowers delivered to the Issuing Lender (with a copy to the
Administrative Agent) in the form of an Application, completed and signed by a
Responsible Officer of the relevant Borrower. 
Such Application must be received by the Issuing Lender and the
Administrative Agent not later than 11:00 A.M., New York City time, at least
two Business Days (or such later date and time as the Administrative Agent and
the Issuing Lender may agree in a particular instance in their sole



 48
 









discretion) prior
to the proposed issuance date or date of amendment, as the case may be.  In the case of a request for an initial
issuance of a Letter of Credit, such Application shall specify in form and
detail reasonably satisfactory to the Issuing Lender: (A) the proposed issuance
date of the requested Letter of Credit (which shall be a Business Day); (B) the
amount thereof; (C) the expiry date thereof; (D) the name and address of the
beneficiary thereof; (E) the documents to be presented by such beneficiary in
case of any drawing thereunder; (F) the full text of any certificate to be
presented by such beneficiary in case of any drawing thereunder; and (G) such
other matters as the Issuing Lender may reasonably require.  In the case of a request for an amendment of
any outstanding Letter of Credit, such Application shall specify in form and
detail reasonably satisfactory to the Issuing Lender (A) the Letter of Credit
to be amended; (B) the proposed date of amendment thereof (which shall be a
Business Day); (C) the nature of the proposed amendment; and (D) such other
matters as the Issuing Lender may reasonably require.  Additionally, the relevant Borrower shall
furnish to the Issuing Lender and the Administrative Agent such other
documents and information pertaining to such requested Letter of Credit
issuance or amendment, including any Issuer Documents, as the Issuing Lender or
the Administrative Agent may reasonably require.


(b)           Promptly after receipt of any
Application, the Issuing Lender will confirm with the Administrative Agent (by
telephone or in writing) that the Administrative Agent has received a copy of
such Application from the relevant Borrower and, if not, the Issuing Lender
will provide the Administrative Agent with a copy thereof.  Unless the Issuing Lender has received
written notice from any Lender or the Administrative Agent, at least one
Business Day prior to the requested date of issuance or amendment of the
applicable Letter of Credit, that one or more applicable conditions contained
in Section 4 shall not then be satisfied, then, subject to the terms and
conditions hereof, the Issuing Lender shall, on the requested date, issue a
Letter of Credit for the account of the relevant Borrower or enter into the
applicable amendment, as the case may be, in each case in accordance with the
Issuing Lender’s usual and customary business practices.  Immediately upon the issuance of each Letter
of Credit, each Lender shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the Issuing Lender a risk
participation in such Letter of Credit in an amount equal to the product of
such Lender’s Revolving Credit Percentage times the amount of such
Letter of Credit.


(c)           Promptly after its delivery of any
Letter of Credit or any amendment to a Letter of Credit to an advising bank
with respect thereto or to the beneficiary thereof, the Issuing Lender will
also deliver to the relevant Borrower and the Administrative Agent a true and
complete copy of such Letter of Credit or amendment.


3.3.  Drawings and Reimbursements; Funding of
Participations.  (a)  Upon receipt from the beneficiary of any
Letter of Credit of any notice of a drawing under such Letter of Credit, the
Issuing Lender shall notify the relevant Borrower and the Administrative Agent
thereof.  Such Borrower shall reimburse
the Issuing Lender, through the Administrative Agent, for the amount of any
drawing under a Letter of Credit not later than 1:00 P.M., New York City time,
on the date that such drawing is made (if such Borrower has received notice
from the Issuing Lender of such drawing prior to 10:00 A.M., New York City
time, on such date) or, if such Borrower has not received notice of such
drawing prior to such time on such date, then not later than 1:00 P.M., New
York City time, on (i) the Business Day that such Borrower receives such
notice, if such notice is received prior to 10:00 A.M., New York City
time, on the day of



 49
 









receipt, or
(ii) the Business Day immediately following the day that such Borrower
receives such notice, if such notice is not received prior to 10:00 A.M.,
New York City time, on the day of such receipt (the date on which such
reimbursement by such Borrower is due pursuant to this sentence being referred
to herein as the “Requested Reimbursement Date”).  If such Borrower fails to so reimburse the
Issuing Lender by such time, the Administrative Agent shall promptly notify
each Lender of the Requested Reimbursement Date, the amount of the unreimbursed
drawing (the “Unreimbursed Amount”), and the amount of such Lender’s
Revolving Credit Percentage thereof.  In
such event, such Borrower shall be deemed to have requested a borrowing of Base
Rate Loans to be disbursed on the Requested Reimbursement Date in an amount
equal to the Unreimbursed Amount, without regard to the minimum and multiples,
and notice periods, specified in Section 2.2 for the principal amount of
Base Rate Loans.  Such Base Rate Loans
may from time to time be converted to Eurodollar Loans, as determined by such
Borrower and notified to the Administrative Agent in accordance with Section
2.9, provided that no Revolving Credit Loan shall be made as a Eurodollar
Loan after the day that is one month prior to the Revolving Credit Termination
Date.  Any notice given by the Issuing
Lender or the Administrative Agent pursuant to this Section 3.3(a) may
be given by telephone if immediately confirmed in writing; provided that the
lack of such an immediate confirmation shall not affect the conclusiveness or
binding effect of such notice.


(b)           Each Lender (including the Lender
acting as Issuing Lender) shall upon any notice pursuant to Section 3.3(a)
make funds available to the Administrative Agent for the account of the Issuing
Lender at the Administrative Agent’s Office in an amount equal to its Revolving
Credit Percentage of the Unreimbursed Amount not later than 1:00 P.M., New York
City time, on the Business Day specified in such notice by the Administrative
Agent, whereupon, subject to the provisions of Section 3.3(a), each
Lender that so makes funds available shall be deemed to have made a Base Rate
Loan to such Borrower in such amount. 
The Administrative Agent shall remit the funds so received to the Issuing
Lender.


(c)           If any drawing is made under a Letter
of Credit and is not reimbursed or refinanced on the date such drawing is made,
for any reason, such Borrower shall be deemed to have incurred  from the Issuing Lender an L/C Borrowing in the amount of
the Unreimbursed Amount that is not so reimbursed or refinanced, which L/C
Borrowing (i) shall bear interest at the rate applicable to Base Rate
Loans from and including the date that such drawing is paid by the Issuing Bank
to but excluding the earlier of the date that such Unreimbursed Amount is so
reimbursed or refinanced or the date that is the next Business Day following
the Requested Reimbursement Date and, if not so reimbursed or refinanced on or
prior to the date that is the next Business Day following the Requested
Reimbursement Date, then, from and after the date that is the next Business Day
following the Requested Reimbursement Date to but excluding the date so
reimbursed or refinanced, the rate applicable to Base Rate Loans plus 2% and
(ii) shall, on and after the date that is the next Business Day following
the Requested Reimbursement  Date, be due
and payable on demand.  In such event,
each Lender’s payment to the Administrative Agent for the account of the
Issuing Lender pursuant to Section 3.3(b) shall be deemed payment in
respect of its participation in such L/C Borrowing and shall constitute an L/C
Advance from such Lender in satisfaction of its participation obligation under
this Section 3.3.


(d)           Until each Lender funds its Loan or
L/C Advance pursuant to this Section 3.3 to reimburse the Issuing Lender
for any amount drawn under any Letter of Credit, interest in



 50
 









respect of such
Lender’s Revolving Credit Percentage of such amount shall be solely for the
account of the Issuing Lender.


(e)           Each Lender’s obligation to make
Loans or L/C Advances to reimburse the Issuing Lender for amounts drawn under
Letters of Credit, as contemplated by this Section 3.3, shall be
absolute and unconditional and shall not be affected by any circumstance,
including (A) any set-off, counterclaim, recoupment, defense or other right
which such Lender may have against the Issuing Lender, such Borrower or any
other Person for any reason whatsoever, (B) the occurrence or continuance of a
Default, or (C) any other occurrence, event or condition, whether or not
similar to any of the foregoing; provided, however, that each
Lender’s obligation to make Loans pursuant to this Section 3.3 is
subject to the conditions set forth in Section 4.2 (other than delivery
by the relevant Borrower of a Loan Notice). 
No such making of an L/C Advance shall relieve or otherwise impair the
obligation of the relevant Borrower to reimburse the Issuing Lender for the
amount of any payment made by the Issuing Lender under any Letter of Credit, together
with interest as provided herein.


(f)            If any Lender fails to make
available to the Administrative Agent for the account of the Issuing Lender any
amount required to be paid by such Lender pursuant to the foregoing provisions
of this Section 3.3 by the time specified in Section 3.3(b), the
Issuing Lender shall be entitled to recover from such Lender (acting through
the Administrative Agent), on demand, such amount with interest thereon for the
period from the date such payment is required to the date on which such payment
is immediately available to the Issuing Lender at a rate per annum equal to the
greater of the Federal Funds Rate and a rate determined by the Issuing Lender
in accordance with banking industry rules on interbank compensation, plus any
administrative, processing or similar fees customarily charged by the Issuing
Lender in connection with the foregoing. 
If such Lender pays such amount (with interest and fees as aforesaid),
the amount so paid shall constitute such Lender’s Loan included in the relevant
borrowing or L/C Advance in respect of the relevant L/C Borrowing, as the case
may be.  A certificate of the Issuing
Lender submitted to any Lender (through the Administrative Agent) with respect
to any amounts owing under this paragraph (f) shall be conclusive absent
manifest error.


3.4.  Repayment of Participations.  (a)  At
any time after the Issuing Lender has made a payment under any Letter of Credit
and has received from any Lender such Lender’s L/C Advance in respect of such
payment in accordance with Section 3.3(b), if the Administrative Agent
receives for the account of the Issuing Lender any payment in respect of the
related Unreimbursed Amount or interest thereon (whether directly from the
relevant Borrower or otherwise, including proceeds of cash collateral applied
thereto by the Administrative Agent), the Administrative Agent will distribute
to such Lender its Revolving Credit Percentage thereof (appropriately adjusted,
in the case of interest payments, to reflect the period of time during which
such Lender’s L/C Advance was outstanding) in the same funds as those received
by the Administrative Agent.


(b)           If any payment received by the
Administrative Agent for the account of the Issuing Lender pursuant to Section
3.3(b) is required to be returned under any of the circumstances described
in Section 10.8 (including pursuant to any settlement entered into by
the Issuing Lender in its discretion), each Lender shall pay to the
Administrative Agent for the



 51
 









account of the
Issuing Lender its Revolving Credit Percentage thereof on demand of the
Administrative Agent, plus interest thereon from the date of such demand to the
date such amount is returned by such Lender, at a rate per annum equal to the
Federal Funds Rate from time to time in effect.


3.5.  Obligations Absolute.  The obligation of the relevant Borrower to
reimburse the Issuing Lender for each drawing under each Letter of Credit and
to repay each L/C Borrowing shall be absolute, unconditional and irrevocable,
and shall be paid strictly in accordance with the terms of this Agreement under
all circumstances, including the following:


(i)            any lack of validity or
enforceability of such Letter of Credit, this Agreement, or any other Loan
Document;


(ii)           the existence of any claim, counterclaim,
set-off, defense or other right that either of the Borrowers or any of their
Subsidiaries may have at any time against any beneficiary or any transferee of
such Letter of Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), the Issuing Lender or any other Person, whether in
connection with this Agreement, the transactions contemplated hereby or by such
Letter of Credit or any agreement or instrument relating thereto, or any
unrelated transaction;


(iii)          any draft, demand, certificate or
other document presented under such Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect; or any loss or delay in the transmission
or otherwise of any document required in order to make a drawing under such
Letter of Credit;


(iv)          any payment by the Issuing Lender
under such Letter of Credit against presentation of a draft or certificate that
does not strictly comply with the terms of such Letter of Credit; or any
payment made by the Issuing Lender under such Letter of Credit to any Person
purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for
the benefit of creditors, liquidator, receiver or other representative of or
successor to any beneficiary or any transferee of such Letter of Credit,
including any arising in connection with any proceeding under any Debtor Relief
Law; or


(v)           any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing, including any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, either of the Borrowers or any of their Subsidiaries.


3.6.  Role of Issuing Lender.  Each Lender and the
Borrowers agree that, in paying any drawing under a Letter of Credit, the
Issuing Lender shall not have any responsibility to obtain any document (other
than any sight draft, certificates and documents expressly required by the
Letter of Credit) or to ascertain or inquire as to the validity or accuracy of
any such document or the authority of the Person executing or delivering any
such document.  None of the Issuing
Lender, any Agent-Related Person nor any of the respective correspondents,
participants



 52
 









or assignees of
the Issuing Lender shall be liable to any Lender for (a) any action taken or
omitted in connection herewith at the request or with the approval of the
Lenders or the Majority Lenders, as applicable; (b) any action taken or omitted
in the absence of gross negligence or willful misconduct; or (c) the due
execution, effectiveness, validity or enforceability of any document or
instrument related to any Letter of Credit or Application.  The Borrowers hereby assume all risks of the
acts or omissions of any beneficiary or transferee with respect to its use of
any Letter of Credit; provided, however, that this assumption is
not intended to, and shall not, preclude the Borrowers’ pursuing such rights
and remedies as it may have against the beneficiary or transferee at law or
under any other agreement.  None of the
Issuing Lender, any Agent-Related Person, nor any of the respective
correspondents, participants or assignees of the Issuing Lender, shall be
liable or responsible for any of the matters described in clauses (i)
through (v) of Section 3.5; provided, however, that
anything in such clauses (i) through (v) to the contrary
notwithstanding, the Borrowers may have a claim against the Issuing Lender, and
the Issuing Lender may be liable to the Borrowers, to the extent, but only to the
extent, of any direct, as opposed to consequential or exemplary, damages
suffered by the Borrowers which the Borrowers prove were caused by the Issuing
Lender’s willful misconduct or gross negligence or the Issuing Lender’s willful
failure to pay under any Letter of Credit after the presentation to it by the
beneficiary of a sight draft and certificate(s) strictly complying with the
terms and conditions of a Letter of Credit.   In furtherance and not in limitation of the
foregoing, the Issuing Lender may accept documents that appear on their face to
be in order, without responsibility for further investigation, regardless of
any notice or information to the contrary, and the Issuing Lender shall not be
responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may
prove to be invalid or ineffective for any reason.


3.7.  Cash Collateral.  Upon the request of the Administrative Agent,
if, as of the Revolving Credit Termination Date, any Letter of Credit for any
reason remains outstanding and partially or wholly undrawn, the relevant
Borrower shall immediately Cash Collateralize the then outstanding amount of
all L/C Obligations (in an amount equal to such outstanding amount determined
as of the Revolving Credit Termination Date). 
Sections 2.8 and 8.2 set forth certain additional
requirements to deliver Cash Collateral hereunder.  To the extent that the Borrowers are required
to Cash Collateralize L/C Obligations, each of the Borrowers hereby grants to
the Administrative Agent, for the benefit of the Issuing Lender and the
Lenders, a security interest in all cash, deposit accounts and all balances
therein and all proceeds of the foregoing. 
Such cash collateral shall be maintained in blocked, interest bearing
deposit accounts with the Administrative Agent.


3.8.  Applicability of ISP98 and UCP.  Unless otherwise
expressly agreed by the Issuing Lender and the relevant Borrower when a Letter
of Credit is issued including any such agreement as applicable to an Existing
Letter of Credit, (i) the rules of the ISP shall apply to each standby Letter
of Credit, and (ii) the rules of the Uniform Customs and Practice for
Documentary Credits, as most recently published by the International Chamber of
Commerce at the time of issuance shall apply to each commercial Letter of
Credit.


3.9.  Fees and Other Charges.  (a) 
Each Borrower will pay to the Administrative Agent, for the account of
the Lenders, a fee on the daily amount available to be drawn under all



 53
 









outstanding
Letters of Credit issued for its account at a per annum rate equal to the
Applicable Margin then in effect with respect to Eurodollar Loans, to be shared
ratably among the Lenders in accordance with their respective Revolving Credit
Percentages and payable quarterly in arrears on each L/C Fee Payment Date after
the issuance date.  In addition, each
Borrower shall pay to the relevant Issuing Lender for its own account a
fronting fee on the daily amount available to be drawn under all outstanding
Letters of Credit issued by such Issuing Lender for such Borrower’s account at
a rate and at the times to be agreed upon by the Borrowers and such Issuing Lender.  For purposes of computing the average daily
amount available to be drawn under the Letters of Credit, the amount of such
Letters of Credit shall be determined in accordance with Section 1.3.


(b)           In addition to the foregoing fees,
each Borrower shall pay or reimburse each Issuing Lender for such normal and
customary costs and expenses as are incurred or charged by such Issuing Lender
in issuing, negotiating, effecting payment under, amending or otherwise
administering any Letter of Credit issued for the account of such Borrower.


3.10.  Conflict with Issuer Documents.  In the event of any conflict between the
terms hereof and the terms of any Issuer Document, the terms hereof shall
control.


4.             CONDITIONS PRECEDENT


4.1.  Conditions to Closing.  The occurrence of the Closing Date is subject
to the satisfaction on such date of the following conditions precedent:


(a)           The Administrative Agent’s receipt of
the following, each of which shall be originals or telecopies (followed
promptly by originals) unless otherwise specified, each properly executed by a
Responsible Officer of the signing Borrower, each dated the Closing Date (or,
in the case of certificates of governmental officials, a recent date before the
Closing Date) and each in form and substance reasonably satisfactory to the
Administrative Agent:


(i)            executed counterparts of this
Agreement, sufficient in number for distribution to the Administrative Agent,
each Lender party hereto on the date hereof and the Borrowers;


(ii)           a Note executed by each Borrower in
favor of each Lender requesting a Note so long as such request is made at least
3 Business Days prior to the Closing Date;


(iii)          such certificates of resolutions or
other action, incumbency certificates and/or other certificates of Responsible
Officers of each Borrower as the Administrative Agent may reasonably require
evidencing the identity, authority and capacity of each Responsible Officer
thereof authorized to act as a Responsible Officer in connection with this
Agreement and the other Loan Documents to which such Borrower is a party;


(iv)          such documents and certifications as
the Administrative Agent may reasonably require to evidence that each Borrower
is duly organized or



 54
 









formed, and that each Borrower is validly existing, in good standing and qualified
to engage in business in the jurisdiction where such Borrower is organized;


(v)           a Closing Certificate of each of the
Borrowers with appropriate insertions and attachments, if any;


(vi)          a certificate signed by a
Responsible Officer on behalf of each Borrower either (A) attaching copies of
all consents, licenses and approvals required in connection with the execution,
delivery and performance by such Borrower and the validity against such
Borrower of the Loan Documents to which it is a party, and such consents,
licenses and approvals shall be in full force and effect, or (B) stating that
no such consents, licenses or approvals are so required;


(vii)         a certificate signed by a
Responsible Officer on behalf of each Borrower certifying (A) that the conditions
specified in Sections 4.2(a) and (b) have been satisfied, and (B) that there has been no event or
circumstance since December 31, 2005 that has had or could be reasonably
expected to have, either individually or in the aggregate, a Material Adverse
Effect.


(viii)        a Borrowing Request appropriately
completed and signed by a Responsible Officer on behalf of the Borrowers, in
respect of the initial borrowing of Loans;


(ix)           copies certified by a Responsible
Officer on behalf of the Borrowers of each of the Fund American Loan Documents
duly executed by the parties thereto;


(b)           Fees.  (i) 
The Administrative Agent and the Arrangers shall have received all fees
required to be paid by the Borrowers on or prior to the Closing Date.


(ii)           The Borrowers shall have paid all
fees, charges and disbursements of Bingham McCutchen LLP, as counsel to the
Administrative Agent (directly to such counsel if requested by the
Administrative Agent), to the extent required to be paid by the Borrowers and
invoiced prior to the Closing Date.


(c)           Legal Opinions.  The Administrative Agent shall have received
(i) the legal opinion of Robert Seelig, Esquire, counsel to the Borrowers,
substantially in the form of Exhibit F and (ii) the legal opinion of
Conyers Dill & Pearman, Bermuda counsel to the Borrowers, substantially in
the form of Exhibit G.


(d)           Termination of Existing Credit
Facility.  The Administrative Agent
shall have received evidence (including, without limitation, payoff letters),
reasonably satisfactory to the Administrative Agent in its reasonable
discretion, that the Existing Credit
Agreement has been or concurrently with the Closing Date is being terminated.


(e)           Initial Public Offering.  OneBeacon Limited shall have consummated
the IPO.



 55















(f)            Closing Date.  The Closing Date shall occur on or before
April 30, 2007.


(g)           Economic Defeasance of Fund
American Preferred Stock. 
Arrangements reasonably satisfactory to the Administrative Agent shall
have been made for the establishment of grantor trusts to provide for the
payment or redemption of the Fund American Preferred Stock.


(h)           Material Adverse Effect.  Up to and including the Closing Date, since
December 31, 2005 there has been no development or event that has had or could
reasonably be expected to have a Material Adverse Effect.


4.2.  Conditions to Closing and Each Extension
of Credit.  The occurrence of the
Closing Date and the agreement of each Lender to make any extension of credit
requested to be made by it hereunder on any date (including, without
limitation, its initial extension of credit but excluding conversions or
continuations of Loans) is subject to the satisfaction of the following
conditions precedent:


(a)           Representations and Warranties.  Each of the representations and warranties
made by the Borrowers in Section 5 (other than Section 5.5) or
pursuant to any of the other Loan Documents shall be true and correct in all
material respects on and as of such date as if made on and as of such date,
except to the extent that they expressly relate to an earlier date, in which
case they shall be true and correct in all material respects as of such earlier
date.


(b)           No Default.  No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the extensions
of credit requested to be made on such date.


(c)           Borrowing Request.  Except as provided in Section 3.3, the
Administrative Agent shall have received a Borrowing Request or, as applicable,
an Application.


Each borrowing by and
issuance of a Letter of Credit on behalf of a Borrower hereunder shall
constitute a representation and warranty by such Borrower as of the date of
such extension of credit that the conditions contained in this Section 4.2
(a) and (b) have been satisfied on and as of the date of the
applicable extension of credit.


5.             REPRESENTATIONS AND
WARRANTIES


To
induce the Administrative Agent and the Lenders to enter into this Agreement
and to make the Loans and issue or participate in the Letters of Credit, the
Borrowers hereby jointly and severally represent and warrant to the
Administrative Agent and each Lender that:


5.1.  Financial Statements.


(a)           The audited consolidated balance
sheet of Parent and its consolidated Subsidiaries, as at December 31, 2005 and
the related consolidated statements of income and of cash flows for the fiscal
year ended on such date, reported on and accompanied by unqualified reports
from PricewaterhouseCoopers LLP or another independent certified public
accounting firm of nationally recognized standing, present fairly in all
material respects the consolidated financial condition of Parent and its
consolidated Subsidiaries, as at such date, and the



 56
 









consolidated
results of their operations and their consolidated cash flows for such fiscal
year then ended in accordance with GAAP applied consistently throughout the
periods involved (except as approved by the aforementioned firm of accountants
and disclosed therein).


(b)           The unaudited consolidated balance
sheet of Parent and its consolidated Subsidiaries, as of and for the fiscal
quarters ended June 30, 2006 and September 30, 2006, and the related unaudited
consolidated statements of income and cash flows for such fiscal quarters ended
on such dates, present fairly in all material respects the consolidated financial
condition of Parent and its consolidated Subsidiaries as at such dates, and the
consolidated results of their operations and their consolidated cash flows for
the fiscal quarters then ended in accordance with GAAP applied consistently
throughout the periods involved (except (x) as approved by the aforementioned
firms of accountants and disclosed therein or (y) for normal year-end audit
adjustments and the absence of 
footnotes).


5.2.  Corporate Existence; Compliance with Law.  Each of the Borrowers and their Subsidiaries
(a) is duly organized, validly existing and in good standing under the Laws of
the jurisdiction of its organization, except to the extent that the failure of
the Subsidiaries (other than White Mountains Re) to be so organized, validly
existing and in good standing could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect, 
(b) has the corporate or other power and authority, and the legal right,
to own and operate its Property, to lease the Property it operates as lessee
and to conduct the business in which it is currently engaged, except to the
extent that the failure to have such power, authority and legal right could
not, in the aggregate, reasonably be expected to have a Material Adverse
Effect, (c) is duly qualified as a foreign corporation and in good standing
under the Laws of each jurisdiction where its ownership, lease or operation of
Property or the conduct of its business requires such qualification, except to
the extent failure to so qualify or be in good standing could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect, and (d) is
in compliance with all Requirements of Law, including, without limitation, with
respect to environmental laws, except to the extent that the failure to comply
therewith could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.


5.3.  Corporate Power; Authorization;
Enforceable Obligations.  Each of the
Borrowers has the corporate or other power and authority, and the legal right,
to make, deliver and perform the Loan Documents to which it is a party and to
borrow hereunder.  Each of the Borrowers
has taken all necessary corporate or other action to authorize the execution,
delivery and performance of the Loan Documents to which it is a party and to
authorize the borrowings on the terms and conditions of this Agreement.  No consent or authorization of, filing with,
notice to or other act by or in respect of, any Governmental Authority or any
other Person is required in connection with the borrowings hereunder or the
execution, delivery, performance, validity or enforceability of this Agreement
or any of the other Loan Documents, except consents, authorizations, filings
and notices described in Schedule 5.3, which consents, authorizations,
filings and notices have been obtained or made and are in full force and effect
and except to the extent failure to obtain any consents, authorizations,
filings, and notices could not, in the aggregate, reasonably be expected to
have a Material Adverse Effect.  Each
Loan Document has been duly executed and delivered on behalf of each Borrower
that is a party thereto.  This Agreement
constitutes, and each other Loan Document upon execution will constitute, a
legal, valid and binding obligation of each Borrower that is a party thereto,



 57
 









enforceable
against each such Borrower in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting the enforcement of
creditors’ rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at Law).


5.4.  No Legal Bar.  The execution, delivery and performance of
this Agreement and the other Loan Documents, the issuance of Letters of Credit,
the borrowings hereunder and the use of the proceeds thereof will not violate
any Requirement of Law or any Contractual Obligation of the Borrowers or any of
their Subsidiaries and will not result in, or require, the creation or imposition
of any Lien on any of their respective properties or revenues pursuant to any
Requirement of Law or any such Contractual Obligation, except to the extent
such violation or Lien could not, in the aggregate, reasonably be expected to
have a Material Adverse Effect.


5.5.  No Material Litigation.  No litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrowers, threatened by or against the Borrowers or any of
their Subsidiaries or against any of their respective properties or assets that
(a) purport to affect or pertain to this Agreement or  any other Loan Document or any of the
transactions contemplated hereby or thereby, or (b) could reasonably be
expected to have a Material Adverse Effect.


5.6.  Ownership of Property; Liens.  Each of the Borrowers and their Subsidiaries
has title in fee simple to, or a valid leasehold interest in, all its real
property, and good title to, or a valid leasehold interest in, all its other Property,
and none of such Property is subject to any Lien except as permitted by Section
7.3, except to the extent such defects in title could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.


5.7.  Intellectual Property.  Each of the Borrowers and each of their
Subsidiaries owns, or is licensed to use, all Intellectual Property material to
the conduct of its business as currently conducted.  No material claim has been asserted and is
pending by any Person challenging or questioning the use of any Intellectual
Property or the validity or effectiveness of any Intellectual Property, nor do
the Borrowers know of any valid basis for any such claim, other than claims
that could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.  The use of Intellectual
Property by the Borrowers and their Subsidiaries does not infringe on the
rights of any Person in any material respect, except for infringements that
could not, in the aggregate, reasonably be expected to have a Material Adverse
Effect.


5.8.  Taxes. 
Each of the Borrowers and their Subsidiaries has filed or caused to be
filed all material Federal, state and other tax returns that are required to be
filed (taking into account any applicable extensions) and has paid all taxes
shown to be due and payable on said returns or on any assessments made against
it or any of its Property and all other material taxes, fees or other charges
imposed on it or any of its Property by any Governmental Authority and, to the
knowledge of the Borrowers, no tax Lien has been filed, and no claim is being
asserted, with respect to any such tax, fee or other charge, except (i) those
in respect of which the amount or validity are currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with SAP or GAAP, as applicable, have been provided on the books of
the Borrowers or their Subsidiaries, as the case may be, and (ii) any amount
the failure of which to pay could not reasonably be expected to result in a
Material Adverse Effect.



 58
 









5.9.  Federal Regulations.  No part of the proceeds of any Loans will be
used for “purchasing” or “carrying” any “margin stock” within the respective
meanings of each of the quoted terms under Regulation U as now and from time to
time hereafter in effect or for any purpose that violates the provisions of the
Regulations of the Board.  If requested
by any Lender or the Administrative Agent, the Borrowers will furnish to the
Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form G-3 or FR Form U-1 referred
to in Regulation U.


5.10.  ERISA. 
Except as could not reasonably be expected to result in a Material
Adverse Effect, neither a Reportable Event nor an “accumulated funding
deficiency” (within the meaning of Section 412 of the Code or Section 302
of ERISA) has occurred during the five-year period prior to the date on
which this representation is made or deemed made with respect to any Plan, and each
Plan has complied in all material respects with the applicable provisions of
ERISA and the Code.  No termination of a
Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan
has arisen, during such five-year period. 
The present value of all accrued benefits under each Single Employer
Plan (based on those assumptions used to fund such Plans) did not, as of the
last annual valuation date prior to the date on which this representation is
made or deemed made, exceed the value of the assets of such Plan allocable to
such accrued benefits by an amount which could reasonably be expected to result
in a Material Adverse Effect.  Neither
the Borrowers nor any Commonly Controlled Entity has had a complete or partial
withdrawal from any Multiemployer Plan that has resulted or could reasonably be
expected to result in a Material Adverse Effect.  Except as could not reasonably be expected to
result in a Material Adverse Effect, no such Multiemployer Plan is in
Reorganization or Insolvent.


5.11.
 Investment Company Act; Other
Regulations.  Neither of the
Borrowers is an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.  Neither
of the Borrowers is subject to regulation under any Requirement of Law (other
than Regulation X of the Board) which limits its ability to incur Indebtedness
hereunder.


5.12.  Use of Proceeds.  The proceeds of the Loans and the Letters of
Credit shall be used for working capital and general corporate purposes of the
Borrowers and their respective Subsidiaries, including, without limitation, (a)
acquisitions and the issuance of Letters of Credit, (b) refinancings of
outstanding indebtedness, if any, of the Borrowers and their respective
subsidiaries under the Existing Credit Agreement (and the Existing Letters of
Credit), (c) to provide for the payment or redemption of obligations in respect
of the Fund American Preferred Stock, and (d) payment of fees and expenses
incurred in connection with this Agreement.


5.13.  Accuracy of Information, etc.  No statement or information contained in any
document, certificate or statement furnished to the Administrative Agent or the
Lenders or any of them, by or on behalf of either of the Borrowers for use in
connection with the transactions contemplated by this Agreement or the other
Loan Documents, taken as a whole contained, as of the date such statement,
information, document or certificate was so furnished, any untrue statement of
a material fact or omitted to state a material fact necessary in order to make
the statements contained therein not materially misleading in light of the
circumstances under which such statement, information, document or certificate
was made or furnished.  The projections
and pro forma financial information contained in the materials referenced above
were



 59
 









prepared in good
faith based on assumptions believed by management of the Borrowers to be
reasonable at the time made, it being recognized by the Lenders that such
financial information as it relates to future events is not to be viewed as
fact and that actual results during the period or periods covered by such
financial information may differ from the projected results set forth therein
by a material amount.


5.14.  Insurance Regulatory Matters.  No License of any Insurance Subsidiary, the
loss of which could reasonably be expected to have a Material Adverse Effect,
is the subject of a proceeding for suspension or revocation.  To the knowledge of the Borrowers, there is
no sustainable basis for such suspension or revocation, and no such suspension
or revocation has been threatened by any Governmental Authority.


5.15.  Indebtedness and Liens.  As of the Closing Date, (i) no Subsidiary
(other than White Mountains Re) of either of the Borrowers had outstanding any
Indebtedness that was created, incurred or assumed after September 30,  2006,  except
Indebtedness that would have been permitted by Section 7.2 (without
giving effect to the Indebtedness permitted by Section 7.2(a)(i)) if
created, incurred or assumed by such Subsidiary on the Closing Date and (ii)
there does not exist (a) any Lien that was created, incurred or assumed after
September 30,  2006, upon any stock
or Indebtedness of any Subsidiary to secure any Debt of the Borrowers or any of
their Subsidiaries or any other Person (other than the obligations hereunder)
or (b) any Lien that was created, incurred or assumed after September 30, 2006,
upon any other Property, to secure any Debt of the Borrowers or any of their
Subsidiaries or any other Person (other than the obligations hereunder),
except, in the case of (a) or (b), Liens that would have been permitted by Section
7.3 hereof (without giving effect to the Liens that would have been
permitted by Section 7.3(i)(x)) if so created, incurred or assumed on
the Closing Date.


5.16.  Taxpayer
Identification Number.  As of
the date hereof, each Borrower’s true and correct U.S. taxpayer identification
number is set forth on Schedule 10.02.


6.             AFFIRMATIVE COVENANTS


The Borrowers hereby
jointly and severally agree that, from and after the Closing Date and so long
as, the Commitments remain in effect, any Letter of Credit remains outstanding,
there exists any unpaid Reimbursement Obligations or any principal or interest
on any Loan or any fee payable hereunder is owing to any Lender or the
Administrative Agent hereunder, each of the Borrowers shall and shall cause
each of their Subsidiaries to:


6.1.  Financial Statements.  Furnish to the Administrative Agent (either
electronically or with sufficient copies for distribution by the Administrative
Agent to each Lender):


(a)           (i) not later than the
date required to be filed pursuant to the Act of 1934 (after giving effect to
any extension permitted or granted by the SEC), but in any event not later than
95 days after the end of each fiscal year
of Parent ending subsequent to the Closing Date, a copy of the audited consolidated balance sheet of Parent and
its consolidated Subsidiaries as at the end of such fiscal year, and the
related audited consolidated statements of income and of cash flows for such
fiscal year, setting forth in each case in comparative form the figures as of
the end



 60
 









of and for the
previous fiscal year, accompanied by an opinion by PricewaterhouseCoopers LLP,
or other independent certified public accounting firm of nationally recognized
standing, which report shall be prepared in accordance with generally accepted
auditing standards and applicable securities laws and shall not be subject to a
“going concern” or like qualification or exception, or qualification as to the
scope of the audit (for purposes hereof, delivery of Parent’s Annual Report on
Form 10-K (which shall be deemed delivered on the date when such document is
posted on the SEC’s website at www.sec.gov or any replacement website) will be
sufficient in lieu of delivery of such financial statements); and (ii) not later than the date required to be filed
pursuant to the Act of 1934 (after giving effect to any extension permitted or
granted by the SEC), but in any event not later than 60 days after the end of each of the first three fiscal
quarters of each fiscal year of Parent ending subsequent to the Closing Date, a copy of the unaudited consolidated
balance sheet of Parent and its consolidated Subsidiaries as at the end of such
fiscal quarter and the related unaudited consolidated statements of income and
of cash flows for such fiscal quarter and the portion of the fiscal year
through the end of such fiscal quarter, setting forth in each case in
comparative form the figures as of the end of and for the corresponding period
in the previous year, certified by a Responsible Officer on behalf of Parent as
being fairly stated in all material respects in accordance with GAAP (subject
to normal year-end audit adjustments and the absence of footnotes) (for
purposes hereof, delivery of Parent’s Quarterly Report on Form 10-Q (which
shall be deemed delivered on the date when such document is posted on the SEC’s
website at www.sec.gov or any replacement website) will be sufficient in lieu
of delivery of such financial statements and certifications); all such
financial statements, together with notes to such financial statements, to
fairly present in all material respects the financial condition and income and
cash flows of the subject thereof as at the dates and for the periods covered
thereby in accordance with GAAP applied consistently throughout the periods
reflected therein and with prior periods (except (x) as approved by such
accountants or officer, as the case may be, and disclosed therein or (y) in the
case of unaudited financial statements, subject to normal year-end adjustments
and the absence of footnotes);


(b)           (i) not later than the date required
to be filed pursuant to the Act of 1934 (after giving effect to any extension
permitted or granted by the SEC), but in any event not later than 95 days after the end of each fiscal year of OneBeacon Limited ending subsequent to
the Closing Date (so long as OneBeacon Limited is required to be
consolidated on the balance sheet of Parent in accordance with GAAP), a copy of
the audited consolidated balance sheet of OneBeacon Limited and its
consolidated Subsidiaries as at the end of such fiscal year of OneBeacon
Limited ending subsequent to the Closing Date, and the related audited
consolidated statements of income and of cash flows for such fiscal year,
setting forth in each case in comparative form the figures for the previous
fiscal year, accompanied by an opinion by PricewaterhouseCoopers LLP, or other
independent certified public accounting firm of nationally recognized standing,
which report shall be prepared in accordance with generally accepted auditing
standards and applicable securities laws and shall not be subject to a “going
concern” or like qualification or exception, or qualification as to the scope
of the audit (for purposes hereof, delivery of OneBeacon Limited’s Annual
Report on Form 10-K (which shall be deemed delivered on the date when such
document is posted on the SEC’s website at www.sec.gov or any replacement
website) will be sufficient in lieu of delivery of such financial statements);
and (ii) not later than the date
required to be filed pursuant to the Act of 1934 (after giving effect to any
extension permitted or granted by the SEC), but in any event not later than 60
days after the end of each of the first
three fiscal quarters of each fiscal year of OneBeacon



 61
 









Limited ending subsequent to the Closing Date (so long as OneBeacon
Limited is required to be consolidated on the balance sheet of Parent in
accordance with GAAP), a
copy of the unaudited consolidated balance sheet of OneBeacon Limited and its
consolidated Subsidiaries as at the end of such fiscal quarter and the related
unaudited consolidated statements of income and of cash flows for such fiscal
quarter and the portion of the fiscal year through the end of such fiscal
quarter, setting forth in each case in comparative form the figures as of the
end of and for the corresponding period in the previous fiscal year, certified
by a Responsible Officer on behalf of OneBeacon Limited as being fairly stated
in all material respects in accordance with GAAP (subject to normal year-end
audit adjustments and the absence of footnotes) (for purposes hereof, delivery
of OneBeacon Limited’s Quarterly Report on Form 10-Q (which shall be deemed
delivered on the date when such document is posted on the SEC’s website at
www.sec.gov or any replacement website) will be sufficient in lieu of delivery
of such financial statements and certifications); all such financial
statements, together with notes to such financial statements, to fairly present
in all material respects the financial condition and income and cash flows of
the subject thereof as at the dates and for the periods covered thereby in
accordance with GAAP applied consistently throughout the periods reflected
therein and with prior periods (except (x) as approved by such accountants or
officer, as the case may be, and disclosed therein or (y) in the case of
unaudited financial statements, subject to normal year-end adjustments and the
absence of footnotes);


(c)           not later than the date required by
Law to be prepared (or such later date as may be allowed by the applicable
Governmental Authority), but
in any event not later than 95 days after
the end of each fiscal year of (i) OneBeacon Insurance Group, copies of
the unaudited combined Annual Statement of OneBeacon Insurance Group, certified
by a Responsible Officer on behalf of OneBeacon Limited; provided, that
any such combined Annual Statement shall only be required to be so furnished on
any date if OneBeacon Limited is a Subsidiary of Parent on such date, and (ii)
a Material Insurance Subsidiary (as of the date of delivery pursuant hereto),
copies of the unaudited Annual Statement of such Material Insurance Subsidiary,
certified by a Responsible Officer on behalf of such Material Insurance
Subsidiary; all such statements to be prepared in accordance with SAP
consistently applied throughout the periods reflected therein and, if required
by the applicable Governmental Authority, audited and certified by independent
certified public accounting firm of recognized national standing (it being
understood that delivery of audited statements shall be made within 10 days
following the delivery of such statements to the applicable Governmental
Authority); provided, however, that in the case of Sirius, such
Annual Statement shall be due not later than 150 days after the end of each
fiscal year;


(d)           not later than the date required by
Law to be prepared (or such later date as may be allowed by the applicable
Governmental Authority), but
in any event not later than 70 days after the end of each of the first
three fiscal quarters of each fiscal year of each Material Insurance Subsidiary
(as of the date delivery of such Quarterly Statements or Interim Report is
required), copies of the Quarterly Statement (or, in the case of Sirius, one
Interim Report) of such Material Insurance Subsidiary for such fiscal quarter,
all such statements to be prepared in accordance with SAP consistently applied
throughout the period reflected herein; provided, that, in the
case of Sirius, such Interim Report shall be due not later than 90 days after
the end of such interim period;



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(e)           within 15 days after being delivered
to any Material Insurance Subsidiary subsequent to the Closing Date, any final
Report on Examination issued by the applicable Department or the NAIC that
results in material adjustments to the financial statements referred to in paragraphs
(c) or (d) above;


(f)            to the extent such a statement is
required by Law to be prepared, within 10 days following the delivery to the
applicable Department, a copy of each “Statement of Actuarial Opinion” and “Management
Discussion and Analysis” for a Material Insurance Subsidiary which is provided
to the applicable Department as to the adequacy of loss reserves of such
Material Insurance Subsidiary, such opinion to be in the format prescribed by
the insurance code of the state of domicile of such Material Insurance
Subsidiary; and


(g)           promptly after Parent’s receipt
thereof, subject to any restrictions imposed by such independent accountants,
copies of any management letters submitted to the board of directors (or the
audit committee of the board of directors) of Parent by independent accountants
in connection with the annual audit of Parent or any of its Subsidiaries.


6.2.  Certificates; Other Information.  Furnish to the Administrative Agent (either
electronically or with sufficient copies for distribution by the Administrative
Agent to each Lender) or, in the case of clause (d), to the relevant
Lender:


(a)           concurrently with the delivery of the
audited financial statements referred to in Section 6.1(a)(i), a
certificate of the independent certified public accounting firm reporting on
such financial statements stating that in making the examination necessary
therefor no knowledge was obtained of any Default or Event of Default (it being
understood that (i) such certificate shall only be required if delivery by such
independent certified public accounting firm of such a certificate is not
prohibited by its policies and (ii) any such certificate may be limited in
scope and qualified in accordance with customary practices of the accounting
profession), except as specified in such certificate;


(b)           not
later than the deadline for the delivery of any financial statements pursuant
to Section 6.1(a), (i) a certificate of a Responsible Officer of
Parent stating that such Responsible Officer has obtained no knowledge of any
continuing Default or Event of Default except as specified in such certificate
and (ii) a Compliance Certificate containing all information and calculations
necessary for determining compliance by Parent with Section 7.1 and
OneBeacon Limited with Section 7.2(b), if applicable, as of the last day
of the fiscal quarter or fiscal year of Parent.


(c)           within 10 days after the same are
filed with the SEC (unless posted on the SEC’s website at www.sec.gov or any
replacement website), all reports and filings on Forms 10-K, 10-Q and 8-K that
the Borrowers may make to, or file with, the SEC, including any request of an extension
of time for the filing of any such reports; and


(d)           promptly, such additional financial
and other information as the Administrative Agent or any Lender may from time
to time reasonably request.


(e)           The Borrowers hereby acknowledge that
(a) unless otherwise directed by a Borrower, the Administrative Agent and/or
the Arrangers will make available to the Lenders and



 63
 









the Issuing Bank
materials and/or information provided by or on behalf of the Borrowers
hereunder (collectively, “Borrower Materials”) by posting the Borrower
Materials on IntraLinks or another similar electronic system (the “Platform”),
subject to confidentiality undertakings reasonably acceptable to the Borrowers
and the Arrangers, and (b) certain of the Lenders may be “public-side” Lenders
(i.e., Lenders that do not wish
to receive material non-public information with respect to the Borrower or its
securities) (each, a “Public Lender”). 
Each of the Borrowers hereby agrees that (w) all Borrower Materials that
are to be made available to Public Lenders shall be clearly and conspicuously
marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall
appear prominently on the first page thereof; (x) by marking Borrower Materials
“PUBLIC,” the Borrowers shall be deemed to have authorized the Administrative
Agent, the Arrangers, the Issuing Bank and the Lenders to treat such Borrower
Materials as either publicly available information or not material information
(although it may be sensitive and proprietary) with respect to the Borrowers or
their securities for purposes of United States Federal and state securities
laws; (y) all Borrower Materials marked “PUBLIC” are permitted to be made
available through a portion of the Platform designated “Public Investor;” and
(z) the Administrative Agent and the Arrangers shall be entitled to treat any
Borrower Materials that are not marked “PUBLIC” as being suitable only for
posting on a portion of the Platform not designated “Public Investor.”  Notwithstanding any of the foregoing, if any
Borrower also delivers any materials and/or information pursuant to this Section
6.2(e) in paper format to the Administrative Agent, such paper materials
shall be deemed to be Borrower Materials for all purposes.  Nothing in this Section 6.2(e) shall
limit the obligations of the Administrative Agent and the Lenders under Section
10.16.


6.3.  Payment of Obligations.  Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature (other than Indebtedness), except where
the amount or validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP with respect
thereto have been provided on the books of the Borrowers or their Subsidiaries,
as the case may be; provided, that the Borrowers may, in the ordinary
course of business, extend payments on those payables if beneficial to the
operation of their businesses.


6.4.  Conduct of Business and Maintenance of
Existence, etc.  (a)(i) With respect
to each Subsidiary of Parent, preserve, renew and keep in full force and effect
its corporate existence and (ii) with respect to Parent and each of its
Subsidiaries, take all reasonable action to maintain all licenses, permits,
rights, privileges and franchises necessary or desirable in the normal conduct
of its business, except, in each case, as otherwise would not be a Fundamental
Change and except, in the case of clause (i) above and clause (ii)
above, to the extent that failure to do so could not reasonably be expected to
have a Material Adverse Effect; and (b) comply with all Contractual Obligations
(other than in respect of Indebtedness) and Requirements of Law, except to the
extent that failure to comply therewith could not, in the aggregate, reasonably
be expected to have a Material Adverse Effect.


6.5.  Maintenance of Property; Insurance.  (a) 
Keep all Property and systems useful and necessary in its business in
good working order and condition, ordinary wear and tear excepted and
(b) maintain with financially sound and reputable insurance companies
(other than with the Borrowers or their Subsidiaries) insurance on all its
Property in at least such amounts and against at least such risks (but
including in any event public liability, product liability and



 64
 









business
interruption) as are usually insured against in the same general area by
companies engaged in the same or a similar business (it being understood that,
to the extent consistent with prudent business practices of Persons carrying on
a similar business in a similar location, a program of self-insurance for first
and other loss layers may be utilized).


6.6.  Inspection of Property; Books and Records;
Discussions.  (a)  Keep proper books of records and account in
which full, true and correct entries in conformity with GAAP (or SAP as
applicable) and all Requirements of Law shall be made of all material dealings
and transactions in relation to its business and activities and (b) upon
reasonable prior notice, permit representatives of the Administrative Agent
(who may be accompanied by representatives of other Lenders) and, during the
continuance of an Event of Default, any Lender to (x) visit and inspect any of
its properties, (y) during the continuance of an Event of Default, conduct
reasonable examinations of (and, with the consent of the Borrowers, such
consent not to be unreasonably withheld, make abstracts from) any of its books
and records at any reasonable time and as often as may reasonably be requested
and (z) discuss the business, operations, properties and financial and other
condition of the Borrowers with officers and employees of the Borrowers.  It is understood that (i) any information
obtained by the Administrative Agent or any Lender in any visit or inspection
pursuant to this Section 6.6 shall be subject to the confidentiality
requirements of Section 10.16, (ii) the Borrowers may impose, with
respect to any Lender or any Affiliate of any Lender reasonably deemed by the
Borrowers to be engaged significantly in a business which is directly
competitive with any material business of the Borrowers and their Subsidiaries,
reasonable restrictions on access to proprietary information of the Borrowers
and their Subsidiaries and (iii) the Lenders will coordinate their visits
through the Administrative Agent with a view to preventing the visits provided
for by this Section 6.6 from becoming unreasonably burdensome to the
Borrowers and their Subsidiaries.


6.7.  Notices.  Give notice to the Administrative Agent (it
being agreed that the Administrative Agent shall, upon receipt of such notice,
notify each Lender thereof) of the following within the time periods specified:


(a)           Promptly after any Responsible
Officer of a Borrower obtains knowledge thereof, the occurrence of any Default
or Event of Default;


(b)           Within five days after any
Responsible Officer of a Borrower obtains knowledge thereof, the occurrence of:


(i)            any default or event of default
under any Contractual Obligation (other than in respect of Indebtedness) of the
Borrowers or any of their Subsidiaries or any litigation, investigation or
proceeding which may exist at any time between the Borrowers or any of their
Subsidiaries and any Governmental Authority, that in either case, if not cured
or if adversely determined, as the case may be, could reasonably be expected to
have a Material Adverse Effect; and


(ii)           (A) any litigation or proceeding
affecting the Borrowers or any of their Subsidiaries (other than claims-related
litigation involving an Insurance Subsidiary) in which (x) the amount involved
(and not covered by insurance) is $50,000,000 or more or (y) in which
injunctive or similar relief is sought that 



 65
 









could reasonably be expected to have a Material
Adverse Effect and (B) any claims-related litigation affecting any Insurance
Subsidiary which could reasonably be expected to have a Material Adverse
Effect; and


(c)           As soon as possible and, in any
event, within 30 days after a Responsible Officer of the Borrowers obtains
knowledge thereof:  (A) the occurrence of
any Reportable Event with respect to any Plan, a failure to make any required
contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan
or any withdrawal from, or the termination, Reorganization or Insolvency of,
any Multiemployer Plan or (B) the institution of proceedings or the taking of
any other action by the PBGC or the Borrowers or any Commonly Controlled Entity
or any Multiemployer Plan with respect to the withdrawal from, or the
termination, Reorganization or Insolvency of, any Plan.


Each notice pursuant to
this Section 6.7 shall be accompanied by a statement of a Responsible
Officer on behalf of Parent setting forth details of the occurrence or such
default referred to therein and stating what action the Borrowers or the relevant
Subsidiary proposes to take with respect thereto.


6.8.  Taxes. 
Pay, discharge, or otherwise satisfy before the same shall become
overdue, all taxes, assessments and other governmental charges imposed upon it
and its real estate, sales and activities, or any part thereof, or upon the
income or profits therefrom, other than where failure to pay such taxes could
not reasonably be expected to result in a Material Adverse Effect; provided
that any such tax, assessment, charge, levy or claim need not be paid if the
validity or amount thereof shall currently be contested in good faith by
appropriate proceedings and reserves in conformity with SAP or GAAP, as
applicable, have been provided on the books of the Borrowers and their
Subsidiaries, as the case may be.


6.9.  Use of Proceeds.  Use the proceeds of the Loans and the Letters
of Credit solely for the purposes set forth in Section 5.12.


6.10.  Further Assurances.  Each of the Borrowers will, and will cause
each of their Subsidiaries to, cooperate with the Lenders and the
Administrative Agent and execute such further instruments and documents as the
Lenders or the Administrative Agent shall reasonably request to give effect to
the transactions contemplated by this Agreement and the other Loan Documents.


7.             NEGATIVE COVENANTS


The
Borrowers hereby jointly and severally agree that, from and after the Closing
Date and so long as the Commitments remain in effect, any Letter of Credit
remains outstanding, there exist any unpaid Reimbursement Obligations or any principal
or interest on any Loan or any fee payable hereunder is owing to any Lender or
the Administrative Agent hereunder:


7.1.  Financial Condition Covenants.


(a)           Maintenance of Consolidated Net
Worth.  Parent shall not permit its
Consolidated Net Worth, as of the end of any fiscal quarter, commencing with
the first fiscal quarter ending after the Closing Date, to be less than the sum
of (i) sixty-five percent (65%) of 



 66
 









Consolidated Net
Worth of Parent as at the fiscal quarter ended September 30, 2006 (if OneBeacon
Limited is required to be consolidated on a balance sheet of Parent in
accordance with GAAP as of the end of such fiscal quarter, adjusted to add
sixty-five percent (65%) of the minority interests created pursuant to the
IPO), plus (ii) fifty percent (50%) of positive Consolidated Net Income for
each fiscal quarter ending after September 30, 2006.


(b)           Maintenance of Total Consolidated
Debt to Total Consolidated Capitalization Ratio. Parent shall not permit
its Total Consolidated Debt to Total Consolidated Capitalization Ratio, as of
the end of any fiscal quarter, commencing with the first fiscal quarter ending
after the Closing Date, to exceed thirty-five percent (35%).  Notwithstanding the foregoing, in the event
there shall be a breach of this financial covenant, at any time that the (i)
Fund American Notes are guaranteed by the Parent, (ii) the Parent no longer
consolidates OneBeacon Limited in its consolidated financial statements in
accordance with GAAP, and (iii) such breach would not have occurred if the Fund
American Notes were no longer guaranteed by the Parent, then such breach shall
not result in the occurrence of an Event of Default under Section 8.1(c)
until a period of up to 180 days (“Cure Period”) has passed since the
occurrence of such breach; provided that, during such Cure Period, (x)
the Total Consolidated Debt to Total Consolidated Capitalization Ratio shall
not exceed thirty-five percent (35%) on a pro forma basis excluding the
Indebtedness attributable to the guarantee of the Fund American Notes and (y)
Fund American maintains investment grade senior unsecured credit ratings on the
Fund American Notes from at least two of the following: Moody’s, S&P and
Fitch.


(c)           Maintenance of Parent Only
Interest Coverage Ratio.  Parent
shall not permit the Parent Only Interest Coverage Ratio, as of the end of any
fiscal quarter (commencing with the first fiscal quarter ending after the
Closing Date) for the Reference Period then ended, to be less than 2.50:1.


7.2.  Limitation on Indebtedness and Issuance of
Preferred Stock.  (a) The Parent  will not permit any of its Subsidiaries
(other than White Mountains Re and OneBeacon Limited and its Subsidiaries) to
create, incur or assume or suffer to exist any Indebtedness or issue any
preferred stock, except:


(i)            Indebtedness and preferred stock
outstanding as of the Closing Date and any refinancings, refundings, renewals
or extensions thereof (without any increase in the principal amount thereof,
other than by the amount of any necessary pre-payment premiums, unpaid accrued
interest and other costs of refinancing, or any shortening of the final
maturity of any principal amount thereof to a date prior to the Revolving
Credit Termination Date);


(ii)           Indebtedness or preferred stock of
any Insurance Subsidiary incurred or issued in the ordinary course of its
business or in securing insurance-related obligations (that do not constitute
Indebtedness) of such Insurance Subsidiary and letters of credit, bank
guarantees, surety bonds or similar instruments issued for the account of any
Insurance Subsidiary in the ordinary course of its business or in securing
insurance-related obligations (that do not constitute Indebtedness) of such
Insurance Subsidiary;


 


 



 67















(iii)          Indebtedness in respect of letters of
credit, bank guarantees, surety and appeal bonds, or performance bonds or other
obligations of a like nature arising in the ordinary course of business and not
for capital raising purposes and issued for the account of any Non-Regulated
Operating Subsidiary;


(iv)          short-term Indebtedness (i.e. with a
maturity of less than one year when issued, provided that such Indebtedness may
include an option to extend for up to an additional one year period) of any
Insurance Subsidiary incurred to provide short-term liquidity to facilitate
claims payment in the event of catastrophe;


(v)           Indebtedness or preferred stock of a
Subsidiary acquired after the Closing Date or a corporation merged into or
consolidated with a Subsidiary after the Closing Date and Indebtedness assumed
in connection with the acquisition of assets, which Indebtedness, in each case,
exists at the time of such acquisition, merger or consolidation and is not
created in contemplation of such event, as well as any refinancings, refunds,
renewals or extensions of such Indebtedness (without increase in the principal
amount thereof other than by the amount of any necessary pre-payment premiums,
unpaid accrued interest and other costs of refinancing);


(vi)          Indebtedness or preferred stock owing
or issued by a Subsidiary to any other Subsidiary or to any Borrower;


(vii)         Guarantee Obligations made by a
Subsidiary in respect of obligations of another Subsidiary (other than White
Mountains Re);


(viii)        Indebtedness under the Loan Documents;


(ix)           other Indebtedness or preferred stock
of Persons, provided that at the time such Indebtedness or preferred
stock is incurred or issued, the aggregate principal amount or liquidation
preference of such Indebtedness or preferred stock when added to all other
Indebtedness and preferred stock incurred or issued pursuant to this clause
(ix) and then outstanding, does not exceed 10% of the Consolidated Net
Worth of Parent; provided that, in calculating Indebtedness and
preferred stock incurred pursuant to this clause (ix), the Indebtedness
and preferred stock of OneBeacon Limited and its Subsidiaries and White
Mountains Re shall be excluded.


(b)           At any time when OneBeacon Limited is
required to be consolidated on the balance sheet of Parent in accordance with
GAAP, Parent will not permit the OneBeacon Limited Debt to Capitalization Ratio
(i) as of the end of any fiscal quarter ending after the Closing Date and prior
to the second anniversary of the Closing Date to be greater than thirty-seven and
one half of one percent (37.5%) and (ii) as of the end of any fiscal quarter
ending on or after the second anniversary of the Closing Date to be greater
than thirty-five percent (35%).


7.3.  Limitation on Liens.  The Borrowers will not, and will not permit
any of their Subsidiaries to, create, incur, assume or suffer to exist (a) any
Lien upon any stock or 



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indebtedness of
any Subsidiary, whether owned on the date of this Agreement or hereafter
acquired, to secure any Debt of the Borrowers or any of their Subsidiaries or
any other person (other than the obligations hereunder) or (b) any Lien
upon any other Property of the Borrowers or their respective Subsidiaries,
whether owned or leased on the date of this Agreement, or thereafter acquired,
to secure any Debt of the Borrowers or any of their Subsidiaries or any other
person (other than the obligations hereunder), except:


(i)            (x) any Lien existing on the date of
this Agreement or (y) any Lien upon stock or Indebtedness or other Property of
any Person existing at the time such Person becomes a Subsidiary or existing
upon stock or Indebtedness of a Subsidiary or any other Property at the time of
acquisition of such stock or Indebtedness or other Property (provided
that such Lien was not created in connection with the acquisition of such
Person or such Property), and any extension, renewal or replacement (or
successive extensions, renewals or replacements) in whole or in part of any
such Lien in clauses (x) or (y) above; provided, however,
that the principal amount of Debt secured by such Lien shall not exceed the
principal amount of Debt so secured at the time of such extension, renewal or
replacement; and provided,  further, that such Lien shall be
limited to all or such part of the stock or Indebtedness or other Property
which secured the Lien so extended, renewed or replaced;


(ii)           any Permitted Liens; and


(iii)          any Lien upon any Property if the
aggregate amount of all Debt then outstanding secured by such Lien and all
other Liens permitted pursuant to this clause (iii) does not exceed 10%
of the total consolidated stockholders’ equity (including preferred stock) of
Parent as shown on the audited consolidated balance sheet contained in the
latest annual report to stockholders of Parent; provided that Debt secured
by Liens permitted by clauses (i) and (ii) shall not be included
in the amount of such secured Debt.


7.4.  Limitation on Changes in Fiscal Periods.  Neither of the Borrowers shall permit its
fiscal year to end on a day other than December 31 or change its method of
determining fiscal quarters.


7.5.  Limitation on Lines of Business.  Neither of the Borrowers shall engage to any
extent that is material for such Borrower and its Subsidiaries, taken as a
whole, in any business, either directly or through any Subsidiary, other than a
Principal Business.


8.             EVENTS OF DEFAULT


8.1.  Events
of Default.  If any of the following
events shall occur and be continuing:


(a)           The Borrowers shall fail to pay any
principal of any Loan made to the Borrowers or Reimbursement Obligation owing
by the Borrowers when due in accordance with the terms hereof; or the Borrowers
shall fail to pay any interest on any Loan made to the Borrowers or
Reimbursement Obligation owing to the Borrowers, or any other amount payable 



 69
 









by the Borrowers
hereunder or under any other Loan Document, within three Business Days after
any such interest or other amount becomes due in accordance with the terms
hereof; or


(b)           Either of the Borrowers shall default
in the observance or performance of any agreement contained in Section
6.7(a) or Section 7; or


(c)           (i) The Borrowers or any of their
Material Insurance Subsidiaries shall voluntarily commence any case, proceeding
or other action (A) under any Debtor Relief Law, (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for it or
for all or any substantial part of its assets, or the Borrowers or any of their
Material Insurance Subsidiaries shall make a general assignment for the benefit
of its creditors; or (ii) there shall be commenced against the Borrowers or any
of their Material Insurance Subsidiaries any case, proceeding or other action
under any Debtor Relief Law that (A) results in the entry of an order for
relief or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) the Borrowers or any
of their Material Insurance Subsidiaries shall take any corporate action to
authorize or effect any of the acts set forth in clause (i), or (ii),
above; or (iv) the Borrowers or any of their Material Insurance
Subsidiaries shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or


(d)           A
Change of Control; or


(e)           A Fundamental Change; or


(f)            Any representation or warranty made
or deemed made by either of the Borrowers herein or in any other Loan Document
or that is contained in any certificate, document or financial or other
statement furnished by it at any time under or in connection with this
Agreement or any such other Loan Document shall prove to have been inaccurate
in any material respect on or as of the date made or deemed made or furnished;
or


(g)           Either of the Borrowers shall default
in the observance or performance of any other agreement, covenant, term or
condition contained in this Agreement or any other Loan Document (not specified
in Sections 8.1(a), 8.1(b) or 8.1(f)); or


(h)           The Borrowers or any of their
Subsidiaries shall (i) default in making any payment of any principal of any
Indebtedness (including, without limitation, any Guarantee Obligation, but
excluding the Loans and Reimbursement Obligations) on the scheduled or original
due date with respect thereto (after giving effect to any applicable grace
periods); or (ii) default in making any payment of any interest on any such
Indebtedness beyond the period of grace, if any, provided in the instrument or
agreement under which such Indebtedness was created; or (iii) default in the
observance or performance of any other agreement or condition relating to any
such Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, the effect of which default is to cause, or to
permit the holder or beneficiary of such Indebtedness (or a trustee or agent on
behalf of such holder or beneficiary) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity or to
become subject to a mandatory offer to purchase by the obligor thereunder as a
result of the occurrence of such default thereunder or (in the case of any such
Indebtedness



 70
 









constituting a
Guarantee Obligation) to become payable; provided, that a default
described in clause (i), (ii) or (iii) of this paragraph
(h) shall not at any time constitute an Event of Default unless, at such
time, one or more defaults of the type described in clauses (i), (ii)
and (iii) of this paragraph (h) shall have occurred and be
continuing with respect to Indebtedness the outstanding principal amount of
which exceeds in the aggregate $25,000,000; or


(i)            (i) Any person shall engage in
any “prohibited transaction” (as defined in Section 406 of ERISA or Section
4975 of the Code) involving any Plan, (ii) any “accumulated funding deficiency”
(as defined in Section 302 of ERISA), whether or not waived, shall exist with
respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on
the assets of the Borrowers or any Commonly Controlled Entity, (iii) a
Reportable Event shall occur with respect to, or proceedings shall commence to
have a trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of the
Majority Lenders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA or, (v) the Borrowers or any Commonly Controlled
Entity shall, or in the reasonable opinion of the Majority Lenders is likely
to, incur any liability in connection with a withdrawal from, or the Insolvency
or Reorganization of, a Multiemployer Plan and in each case in clauses (i)
through (v) above, such event or condition, together with all other such
events or conditions for which liability to the Borrowers is reasonably
expected to occur, if any, could, in the reasonable judgment of the Majority
Lenders, reasonably be expected to have a Material Adverse Effect; or


(j)            One or more judgments or decrees
shall be entered against the Borrowers or any of their Subsidiaries involving
for the Borrowers and their Subsidiaries taken as a whole a liability (to the
extent not paid or fully covered by insurance above applicable deductions) of
$25,000,000 or more, and all such judgments or decrees shall not have been
vacated, discharged, stayed or bonded pending appeal within 45 days from the
entry thereof; or


(k)           The guarantees, set forth in Section
2.21 herein, shall cease, for any reason (other than as provided in Section
10.17) to be in full force and effect or either of the Borrowers or any
Affiliate of either of the Borrowers shall so assert in writing; or


(l)            Any License of any Insurance
Subsidiary (i) shall be revoked by the Governmental Authority which issued
such License, or any action (administrative or judicial) to revoke such License
shall have been commenced against such Insurance Subsidiary and shall not have
been dismissed within thirty days after the commencement thereof,
(ii) shall be suspended by such Governmental Authority for a period in
excess of thirty days or (iii) shall not be reissued or renewed by such
Governmental Authority upon the expiration thereof following application for
such reissuance or renewal of such Insurance Subsidiary, which, in the case of
each of clauses (i), (ii) and (iii) above, could
reasonably be expected to have a Material Adverse Effect.


Notwithstanding the foregoing, in the case of each of
paragraphs (f) through (l) of this Section 8.1, such event shall not
constitute an Event of Default unless such event continues unremedied for a
period of 30 days after the Borrowers shall have received written notice of
such event from the Administrative Agent.



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8.2.  Remedies
Upon Event of Default.  If any Event
of Default specified in Section 8.1 occurs and is continuing, then, and
in any such event, (a) if such event is an Event of Default specified in clause
(i) or (ii) of Section 8.1(c) above with respect to either of
the Borrowers, automatically the commitment of each Lender to make Loans and
any obligation of the Issuing Lender to make L/C Credit Extensions shall
immediately terminate and the Loans hereunder (with accrued interest thereon)
and all other amounts owing under this Agreement and the other Loan Documents (including,
without limitation, all amounts of L/C Obligations, whether or not the
beneficiaries of the then outstanding Letters of Credit shall have presented
the documents required thereunder) shall immediately become due and payable,
and (b) if such event is any other Event of Default specified in Section 8.1,
either or both of the following actions may be taken:  (i) with the consent of the Majority Lenders,
the Administrative Agent may, or upon the request of the Majority Lenders, the
Administrative Agent shall, by notice to the Borrowers declare the Revolving
Credit Commitments and the obligation of the Issuing Lender to issue Letters of
Credit to be terminated forthwith, whereupon the Revolving Credit Commitments
and the L/C Commitment shall immediately terminate; and (ii) with the consent
of the Majority Lenders, the Administrative Agent may, or upon the request of
the Majority Lenders, the Administrative Agent shall, by notice to the
Borrowers, declare the Loans hereunder (with accrued interest thereon) and all
other amounts owing under this Agreement and the other Loan Documents
(including, without limitation, all amounts of L/C Obligations, whether or not
the beneficiaries of the then outstanding Letters of Credit shall have
presented the documents required thereunder) to be due and payable forthwith,
whereupon the same shall immediately become due and payable.  In the case of any Letter of Credit issued
for the account of a Borrower with respect to which presentment for honor shall
not have occurred at the time of an acceleration pursuant to this paragraph,
such Borrower shall at such time Cash Collateralize such L/C Obligations in an
amount equal to the aggregate then undrawn and unexpired amount of such Letters
of Credit.  Such cash collateral shall be
applied by the Administrative Agent to the payment of drafts drawn under such
Letters of Credit, and the unused portion thereof after all such Letters of
Credit shall have expired or been fully drawn upon, if any, shall be applied to
repay other obligations of the Borrowers hereunder and under the other Loan
Documents.  After (a) all such Letters of
Credit shall have expired or been fully drawn upon, all Reimbursement
Obligations shall have been satisfied and all other obligations of the
Borrowers hereunder and under the other Loan Documents shall have been paid in
full or (b) all Defaults and Events of Default hereunder and under the other
Loan Document shall have been cured or waived, the balance, if any, in such
cash collateral account shall be returned to the applicable Borrower (or such
other Person as may be lawfully entitled thereto).


9.             THE ADMINISTRATIVE AGENT


9.1.  Appointment.  (a) 
Each Lender hereby irrevocably appoints, designates and authorizes the
Administrative Agent to take such action on its behalf under the provisions of
this Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. 
Notwithstanding any provision to the contrary contained elsewhere herein
or in any other Loan Document, the Administrative Agent shall not have any
duties or responsibilities, except those expressly set forth herein, nor shall
the Administrative Agent have or be deemed to have any fiduciary relationship
with any Lender or participant, and no implied covenants, functions,
responsibilities, duties, obligations or



 72
 









 liabilities shall be read into this Agreement
or any other Loan Document or otherwise exist against the Administrative
Agent.  Without limiting the generality
of the foregoing sentence, the use of the term “agent” herein and in the other
Loan Documents with reference to the Administrative Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable Law.  Instead,
such term is used merely as a matter of market custom, and is intended to
create or reflect only an administrative relationship between independent
contracting parties.


(b)           The Issuing Lender shall act on
behalf of the Lenders with respect to any Letters of Credit issued by it and
the documents associated therewith, and the Issuing Lender shall have all of
the benefits and immunities (i) provided to the Administrative Agent in
this Section 9 with respect to any acts taken or omissions suffered by
the Issuing Lender in connection with Letters of Credit issued by it or
proposed to be issued by it and the Applications and agreements for letters of
credit pertaining to such Letters of Credit as fully as if the term “Administrative
Agent” as used in this Section 9 and in the definition of “Agent-Related
Person” included the Issuing Lender with respect to such acts or omissions, and
(ii) as additionally provided herein with respect to the Issuing Lender; provided
that nothing in this Agreement shall be construed to excuse the Issuing Lender
from any liability to the Borrowers for damages caused by the gross negligence
or willful misconduct of the Issuing Lender or any Agent-Related Person.


9.2.  Delegation of Duties.  The Administrative Agent may execute any of
its duties under this Agreement or any other Loan Document by or through
agents, employees or attorneys-in-fact and shall be entitled to advice of
counsel and other consultants or experts concerning all matters pertaining to
such duties.  The Administrative Agent
shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects in the absence of gross negligence or willful
misconduct.


9.3.  Liability of Administrative Agent.  No Agent-Related Person shall (a) be liable
for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct
in connection with its duties expressly set forth herein), or (b) be
responsible in any manner to any Lender or participant for any recital,
statement, representation or warranty made by either of the Borrowers or any
officer thereof, contained herein or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for
in, or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of either of the Borrowers or any other party to
any Loan Document to perform its obligations hereunder or thereunder.  No Agent-Related Person shall be under any
obligation to any Lender or participant to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of the Borrowers or any Affiliate thereof.


9.4.  Reliance by Administrative Agent.  (a) 
The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, communication, signature, resolution,
representation, notice, consent, certificate, affidavit, letter, telegram, 



 73
 









facsimile, telex
or telephone message, electronic mail message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, and upon advice and statements of
legal counsel (including counsel to the Borrowers), independent accountants and
other experts selected by the Administrative Agent.  The Administrative Agent may deem and treat
the payee of any Note as the owner thereof for all purposes unless such Note
shall have been transferred in accordance with Section 10.7 and all
actions required by such Section 10.7 in connection with such transfer
shall have been taken.  The
Administrative Agent shall be fully justified in failing or refusing to take
any action under any Loan Document unless it shall first receive such advice or
concurrence of the Majority Lenders (or, if so specified by this Agreement, all
Lenders) as it deems appropriate and, if it so requests, it shall first be
indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action.  The Administrative
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement or any other Loan Document in accordance with a
request or consent of the Majority Lenders (or such greater number of Lenders
as may be expressly required hereby in any instance) and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders; provided that the Administrative Agent shall not be required to
take any action that, in its opinion or the opinion of its counsel, may expose
the Administrative Agent to liability or that is contrary to any Loan Document
or applicable Law.


(b)           For purposes of determining
compliance with the conditions specified in Section 4.1, each Lender
that has signed this Agreement shall be deemed to have consented to, approved
or accepted or to be satisfied with, each document or other matter required
thereunder to be consented to or approved by or acceptable or satisfactory to a
Lender unless the Administrative Agent shall have received notice from such
Lender prior to the proposed Closing Date specifying its objection thereto.


9.5.  Notice of Default.  The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default unless the
Administrative Agent shall have received written notice from a Lender or a
Borrower referring to this Agreement, describing such Default and stating that
such notice is a “notice of default.” The Administrative Agent will notify the
Lenders of its receipt of any such notice. 
The Administrative Agent shall take such action with respect to such
Default as may be directed by the Majority Lenders in accordance with Section
8.2; provided, however, that unless and until the Administrative Agent has
received any such direction, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Default as it shall deem advisable or in the best interest of
the Lenders.


9.6.  Credit Decision; Disclosure of Information
by Administrative Agent.  Each Lender
acknowledges that no Agent-Related Person has made any representation or
warranty to it, and that no act by the Administrative Agent hereafter taken,
including any consent to and acceptance of any assignment or review of the
affairs of the Borrowers or any Affiliate thereof, shall be deemed to
constitute any representation or warranty by any Agent-Related Person to any
Lender as to any matter, including whether Agent-Related Persons have disclosed
material information in their possession. 
Each Lender represents to the Administrative Agent that it has,
independently and without reliance upon any Agent-Related Person and based on
such 



 74
 









documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Borrowers and their Subsidiaries,
and all applicable bank or other regulatory Laws relating to the transactions
contemplated hereby, and made its own decision to enter into this Agreement and
to extend credit to the Borrowers hereunder. 
Each Lender also represents that it will, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement
and the other Loan Documents, and to make such investigations as it deems
necessary to inform itself as to the business, prospects, operations, property,
financial and other condition and creditworthiness of the Borrowers.  Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Administrative Agent
herein, the Administrative Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the
business, prospects, operations, property, financial and other condition or
creditworthiness of any of the Borrowers or any of their Affiliates which may
come into the possession of any Agent-Related Person.


9.7.  Indemnification of Administrative Agent.  Whether or not the transactions contemplated
hereby are consummated, the Lenders shall indemnify upon demand each
Agent-Related Person (to the extent not reimbursed by or on behalf of the
Borrowers and without limiting the obligation of the Borrowers), pro rata, and
hold harmless each Agent-Related Person from and against any and all
Indemnified Liabilities incurred by it; provided, however, that
no Lender shall be liable for the payment to any Agent-Related Person of any
portion of such Indemnified Liabilities to the extent determined in a final,
nonappealable judgment by a court of competent jurisdiction to have resulted
from such Agent-Related Person’s own gross negligence or willful misconduct, provided,
however, that no action taken in accordance with the directions of the
Majority Lenders (or such greater percentage of Lenders as may be required
hereunder) shall be deemed to constitute gross negligence or willful misconduct
for purposes of this Section 9.7. 
Without limitation of the foregoing, each Lender shall reimburse the Administrative
Agent upon demand for its ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) incurred by the Administrative Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement, any other Loan Document, or any document contemplated by or
referred to herein, to the extent that the Administrative Agent is not
reimbursed for such expenses by or on behalf of the Borrowers.  The undertaking in this Section 9.7
shall survive termination of the Total Revolving Credit Commitments, the
payment of all other obligations and the resignation of the Administrative
Agent.


9.8.  Administrative Agent in its Individual
Capacity.  Bank of America, N.A. and
its Affiliates may make loans to, issue letters of credit for the account of,
accept deposits from, acquire equity interests in and generally engage in any
kind of banking, trust, financial advisory, underwriting or other business with
the Borrowers and their respective Affiliates as though Bank of America, N.A.
were not the Administrative Agent or the Issuing Lender hereunder and without
notice to or consent of the Lenders.  The
Lenders acknowledge that, pursuant to such activities, Bank of America, N.A. or
its Affiliates may receive information regarding the Borrowers or their
Affiliates (including information that may be subject to confidentiality 



 75
 









obligations in
favor of the Borrowers or such Affiliate) and acknowledge that the
Administrative Agent shall be under no obligation to provide such information
to them.  With respect to its Loans, Bank
of America, N.A. shall have the same rights and powers under this Agreement as
any other Lender and may exercise such rights and powers as though it were not
the Administrative Agent or the Issuing Lender, and the terms “Lender” and “Lenders”
include Bank of America, N.A. in its individual capacity.


9.9.  Successor Administrative Agent.  The Administrative Agent may resign as
Administrative Agent upon 30 days’ notice to the Lenders and the Borrowers; provided
that any such resignation by Bank of America, N.A. shall also constitute its
resignation as Issuing Lender and Swing Line Lender, so long as a successor
Issuing Lender and a successor Swing Line Lender (each consented to by the
Borrowers, such consent not to be unreasonably withheld or delayed) is
appointed. If the Administrative Agent resigns under this Agreement, the
Majority Lenders shall appoint from among the Lenders a successor
administrative agent for the Lenders, which successor administrative agent
shall be consented to by the Borrowers at all times other than during the
continuance of a Specified Event of Default (which consent of the Borrowers
shall not be unreasonably withheld or delayed). 
If no successor administrative agent is appointed prior to the effective
date of the resignation of the Administrative Agent, the Administrative Agent
may appoint, after consulting with the Lenders and the Borrowers, a successor
administrative agent from among the Lenders. 
Upon the acceptance of its appointment as successor administrative agent
hereunder, the Person acting as such successor administrative agent shall
succeed to all of the rights, powers and duties of the retiring Administrative
Agent, Issuing Lender and Swing Line Lender and the respective terms “Administrative
Agent,” “Issuing Lender” and “Swing Line Lender” shall mean such successor administrative
agent, Letter of Credit issuer and swing line lender, and the retiring
Administrative Agent’s appointment, powers and duties as Administrative Agent
shall be terminated and the retiring Issuing Lender’s and Swing Line Lender’s
rights, powers and duties as such shall be terminated, without any other or
further act or deed on the part of such retiring Issuing Lender or Swing Line
Lender or any other Lender, other than the obligation of the successor Issuing
Lender to issue letters of credit in substitution for the Letters of Credit, if
any, outstanding at the time of such succession or to make other arrangements
satisfactory to the retiring Issuing Lender to effectively assume the
obligations of the retiring Issuing Lender with respect to such Letters of
Credit.  After any retiring
Administrative Agent’s resignation hereunder as Administrative Agent, the
provisions of this Section 9 and Sections 10.5 and 10.6
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement.  If no successor administrative agent has
accepted appointment as Administrative Agent by the date which is 30 days
following a retiring Administrative Agent’s notice of resignation, the retiring
Administrative Agent’s resignation shall nevertheless thereupon become
effective and the Lenders shall perform all of the duties of the Administrative
Agent hereunder until such time, if any, as the Majority Lenders appoint a
successor agent as provided for above.


9.10.  Administrative Agent May File Proofs of
Claim.  In case of the pendency of
any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
either of the Borrowers, the Administrative Agent (irrespective of whether the
principal of any Loan or L/C Obligation shall then be due and payable as herein
expressed or by declaration or otherwise and irrespective of whether the 



 76
 









Administrative
Agent shall have made any demand on either of the Borrowers) shall be entitled
and empowered, by intervention in such proceeding or otherwise:


(a)           to file and prove a claim for the
whole amount of the principal and interest owing and unpaid in respect of the
Loans, L/C Obligations and all other obligations that are owing and unpaid and
to file such other documents as may be necessary or advisable in order to have
the claims of the Lenders and the Administrative Agent (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Lenders and the Administrative Agent and their respective agents and counsel
and all other amounts due the Lenders and the Administrative Agent under Sections
2.5, 3.9 and 10.5) allowed in such judicial proceeding; and


(b)           to collect and receive any monies or
other property payable or deliverable on any such claims and to distribute the
same;


and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Lender to make
such payments to the Administrative Agent and, in the event that the
Administrative Agent shall consent to the making of such payments directly to
the Lenders, to pay to the Administrative Agent any amount due for the reasonable
compensation, expenses, disbursements and advances of the Administrative Agent
and its agents and counsel, and any other amounts due the Administrative Agent
under Sections 2.5, 3.9 and 10.5.


Nothing contained herein
shall be deemed to authorize the Administrative Agent to authorize or consent
to or accept or adopt on behalf of any Lender any plan of reorganization,
arrangement, adjustment or composition affecting the obligations of the
Borrowers hereunder or under any of the other Loan Documents or the rights of
any Lender or to authorize the Administrative Agent to vote in respect of the
claim of any Lender in any such proceeding.


9.11.  Guarantee and Collateral Matters.  The Lenders irrevocably authorize the
Administrative Agent, at its option and in its discretion,


(a)           to release any Lien on any property
granted to or held by the Administrative Agent under any Loan Document (i) upon
termination of the Total Revolving Credit Commitments and payment in full of
all obligations of the Borrowers hereunder or under any of the other Loan
Documents (other than contingent indemnification obligations) and the
expiration or termination of all Letters of Credit, (ii) that is sold or to be
sold as part of or in connection with any sale permitted hereunder or under any
other Loan Document, or (iii) subject to Section 10.1, if approved,
authorized or ratified in writing by the Majority Lenders; and


(b)           to subordinate any Lien on any
property granted to or held by the Administrative Agent under any Loan Document
to the holder of any Lien on such property that is permitted by Section 7.3,
and


(c)           to effect any release of Guarantee
Obligations contemplated by Section 10.17.



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9.12.  Other Agents; Arrangers and Managers.  None of the Lenders or other Persons
identified on the facing page or signature pages of this Agreement as a “syndication
agent,” “documentation agent,” “co-agent,” “book manager,” “lead manager,” “arranger,”
“lead arranger” or “co-arranger” shall have any right, power, obligation,
liability, responsibility or duty under this Agreement other than, in the case
of such Lenders, those applicable to all Lenders as such.  Without limiting the foregoing, none of the
Lenders or other Persons so identified shall have or be deemed to have any
fiduciary relationship with any Lender. 
Each Lender acknowledges that it has not relied, and will not rely, on
any of the Lenders or other Persons so identified in deciding to enter into
this Agreement or in taking or not taking action hereunder.


10.          MISCELLANEOUS


10.1.  Amendments, Etc.  No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent to any departure by
the Borrowers therefrom, shall be effective unless in writing signed by the
Majority Lenders and the Borrowers and delivered to the Administrative Agent,
and each such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however,
that no such amendment, waiver or consent shall:


(a)           extend the expiration date of or
increase the Revolving Credit Commitment of any Lender (or reinstate any
Revolving Credit Commitment terminated pursuant to Section 8.2) without
the written consent of such Lender;


(b)           postpone any date fixed by this
Agreement or any other Loan Document for any payment (excluding mandatory
prepayments) of principal, interest or fees payable hereunder or under any
other Loan Document without the written consent of each Lender directly
affected thereby;


(c)           reduce the principal of, or the rate
of interest specified herein on, any Loan or L/C Borrowing, or, subject to clause
(v) of the second proviso to this Section 10.1, any fees or other
amounts payable hereunder or under any other Loan Document without the written
consent of each Lender directly affected thereby; provided, however,
that only the consent of the Majority Lenders shall be necessary to amend the
definition of “Default Rate” or to waive any obligation of the Borrowers to pay
interest or Letter of Credit Fees at the Default Rate;


(d)           change Section 2.14 in a
manner that would alter the pro rata sharing of payments required thereby
without the written consent of each Lender directly affected thereby; or


(e)           change any provision of this Section
10.1 or the percentage in the definition of “Majority 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, without the written consent of each Lender;


(f)            amend, modify or waive any provision
of Section 2.3 or 2.4 without the written consent of the Swing
Line Lender;


 



 78















(g)           amend, modify or waive any provision
of Section 3 without the consent of the Issuing Lender;


(h)           amend, modify or waive the provisions
of the definition of Interest Period regarding nine or twelve month Interest
Periods for Eurodollar Loans without the consent of each relevant Lender;


(i)            consent to the assignment or
transfer by either of the Borrowers of any of its rights and obligations under
this Agreement and the other Loan Documents; or


(j)            release either of the Borrowers from
their Guarantee Obligations under the Guaranties except as provided in Section
10.17, without the consent of all Lenders;


and, provided  further,
that (i) no amendment, waiver or consent shall, unless in writing and signed by
the Issuing Lender in addition to the Lenders required above, modify the rights
or duties of the Issuing Lender under this Agreement or any Application
relating to any Letter of Credit issued or to be issued by it; (ii) no
amendment, waiver or consent shall, unless in writing and signed by the Swing
Line Lender in addition to the Lenders required above, modify the rights or
duties of the Swing Line Lender under this Agreement; (iii) no amendment,
waiver or consent shall, unless in writing and signed by the Administrative
Agent in addition to the Lenders required above, modify the rights or duties of
the Administrative Agent under this Agreement or any other Loan Document; and
(iv) Section 10.7(h) may not be amended, waived or otherwise modified
without the consent of each Granting Lender all or any part of whose Loans are
being funded by an SPC at the time of such amendment, waiver or other
modification; and (v) the Fee Letters may be amended, or rights or privileges
thereunder waived, in a writing executed only by the parties thereto.  Notwithstanding anything to the contrary
herein, no Defaulting Lender shall have any right to approve or disapprove any
amendment, waiver or consent hereunder, except that the Revolving Credit
Commitment of such Lender may not be increased or extended without the consent
of such Lender.


Any such waiver and any
such amendment, supplement or modification shall apply equally to each of the
Lenders and shall be binding upon the Borrowers, the Lenders, the
Administrative Agent and all future holders of the Loans.  In the case of any waiver, the Borrowers, the
Lenders and the Administrative Agent shall be restored to their former position
and rights hereunder and under the other Loan Documents, and any Default or
Event of Default waived shall be deemed to be cured and not continuing; but no
such waiver shall extend to any subsequent or other Default or Event of
Default, or impair any right consequent thereon.  Any such waiver, amendment, supplement or
modification shall be effected by a written instrument signed by the parties
required to sign pursuant to the foregoing provisions of this Section 10.1;
provided, that delivery of an executed signature page of any such
instrument by facsimile transmission shall be effective as delivery of a
manually executed counterpart thereof.


For the avoidance of
doubt, this Agreement may be amended (or amended and restated) with the written
consent of the Majority Lenders, the Administrative Agent and the Borrowers
party to each relevant Loan Document (x) to add one or more additional credit
facilities to this Agreement and to permit the extensions of credit from time
to time outstanding thereunder and the accrued interest and fees in respect
thereof to share ratably in the benefits of this Agreement 



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and the other Loan
Documents with the Loans, the L/C Obligations and the accrued interest and fees
in respect thereof and (y) to include appropriately the Lenders holding such
credit facilities in any determination of the Majority Lenders.


10.2.  Notices; Effectiveness; Electronic
Communication.


(a)           Notices Generally.  Except in the case of notices and other
communications expressly permitted to be given by telephone (and except as
provided in subsection (b) below), all notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail, sent by
telecopier or by electronic mail as follows, and all notices and other
communications expressly permitted hereunder to be given by telephone shall be
made to the applicable telephone number, as follows:


(i)            if to the Borrowers, the
Administrative Agent, the Issuing Lender or the Swing Line Lender, to the
address, telecopier number, electronic mail address or telephone number
specified for such Person on Schedule 10.2; and


(ii)           if to any other Lender, to the
address, telecopier number, electronic mail address or telephone number
specified in its Administrative Questionnaire.


Notices sent by hand or
overnight courier service, or mailed by certified or registered mail, shall be
deemed to have been given when received; notices sent by telecopier shall be
deemed to have been given when sent (except that, if not given during normal
business hours for the recipient, shall be deemed to have been given at the
opening of business on the next business day for the recipient).  Notices delivered through electronic
communications to the extent provided in subsection (b) below, shall be
effective as provided in such subsection (b).


(b)           Electronic Communications.  Notices and other communications to the
Lenders and the Issuing Lender hereunder may be delivered or furnished by
electronic communication (including e-mail and Internet or intranet
websites) pursuant to procedures approved by the Administrative Agent, provided
that the foregoing shall not apply to service of process or to notices to any
Lender or the Issuing Lender pursuant to Section 2.  The Administrative Agent or any Borrower may,
in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it, provided
that approval of such procedures may be limited to particular notices or
communications.


Unless the Administrative
Agent otherwise prescribes, (i) notices and other communications sent to
an e-mail address shall be deemed received upon the sender’s receipt of an
acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written
acknowledgement), provided that if such notice or other communication 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, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or
communication



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is available and identifying
the website address therefor.


(c)           The Platform.  THE PLATFORM IS PROVIDED “AS IS” AND “AS
AVAILABLE.” THE AGENT-RELATED PERSONS DO NOT WARRANT THE ACCURACY OR
COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND
EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER
MATERIALS.  NO WARRANTY OF ANY KIND,
EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR
FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT-RELATED
PERSONS OR BORROWER IN CONNECTION WITH THE BORROWER MATERIALS OR THE
PLATFORM.  In no event shall the
Agent-Related Persons or any Borrower have any liability to any Agent-Related
Person, any Borrower, any Lender, or the Issuing Lender for losses, claims,
damages, liabilities or expenses of any kind (whether in tort, contract or
otherwise) arising out of any Borrower’s or the Administrative Agent’s
transmission of Borrower Materials through the Internet, except to the extent
that such losses, claims, damages, liabilities or expenses are determined by a
court of competent jurisdiction by a final and nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such Agent-Related
Persons or Borrower; provided, however, that in no event shall
any Agent-Related Persons or Borrower have any liability to any Agent-Related
Person, any Borrower, any Lender, or the Issuing Lender for indirect, special,
incidental, consequential or punitive damages (as opposed to direct or actual
damages).  Each Lender agrees that the
Borrowers shall be responsible only for the Borrower Materials and shall not
have any liability (unless otherwise agreed in writing by the Borrowers) for
any other materials made available to the Lenders and shall not have any
liability for any errors or omissions other than errors or omissions in the
materials delivered to the Administrative Agent by any Borrower.  Nothing in this Section 10.2(c) shall
limit the obligation of the Administrative Agent and the Lenders under Section
10.16.


(d)           Change of Address, Etc.  Each of the Borrowers, the Administrative
Agent, the Issuing Lender and the Swing Line Lender may change its address,
telecopier or telephone number for notices and other communications hereunder
by notice to the other parties hereto. 
Each other Lender may change its address, telecopier or telephone number
for notices and other communications hereunder by notice to the Borrowers, the
Administrative Agent, the Issuing Lender and the Swing Line Lender.  In addition, each Lender agrees to notify the
Administrative Agent from time to time to ensure that the Administrative Agent
has on record (i) an effective address, contact name, telephone number,
telecopier number and electronic mail address to which notices and other
communications may be sent and (ii) accurate wire instructions for such Lender.


(e)           Reliance by Administrative Agent,
Issuing Lender and Lenders.  The Administrative Agent, the
Issuing Lender and the Lenders shall be entitled to rely and act upon any
notices (including telephonic and written Borrowing Requests and notices of
Swing Line Loans) purportedly given by or on behalf of either of the Borrowers;
provided  that the foregoing shall not apply to losses, costs,
expenses and liabilities caused by the gross negligence or willful misconduct
of the relevant Lender or any Agent-Related Person even if (i) such notices
were not made in a manner specified herein, were incomplete or were not preceded
or followed by any 



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other form of
notice specified herein, or (ii) the terms thereof, as understood by the
recipient, varied from any confirmation thereof.  Each of the Borrowers shall indemnify the
Administrative Agent, the Issuing Lender, each Lender and the Agent-Related
Persons from all losses, costs, expenses and liabilities resulting from the
reliance by such Person on each notice purportedly given by or on behalf of
either of the Borrowers; provided  that the foregoing shall not
apply to losses, costs, expenses and liabilities caused by the gross negligence
or willful misconduct of the relevant Lender or any Agent-Related Person.  All telephonic notices to and other
telephonic communications with the Administrative Agent may be recorded by the
Administrative Agent, and each of the parties hereto hereby consents to such
recording.


(f)            Effectiveness of Facsimile
Documents and Signatures.  Loan
Documents may be transmitted and/or signed by facsimile.  The effectiveness of any such documents and
signatures shall, subject to applicable Law, have the same force and effect as
manually-signed originals and shall be binding on the Borrowers, the
Administrative Agent and the Lenders. 
The Administrative Agent may also require that any such documents and
signatures be confirmed by a manually-signed original thereof; provided,
however, that the failure to request or deliver the same shall not limit
the effectiveness of any facsimile document or signature.


10.3.  No Waiver; Cumulative Remedies.  No failure to exercise and no delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
remedy, power or privilege hereunder or under the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege.  The rights, remedies, powers
and privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by Law.


10.4.  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 Administrative Agent and each Lender, regardless of any investigation made
by the Administrative Agent or any Lender or on their behalf and
notwithstanding that the Administrative Agent or any Lender may have had notice
or knowledge of any Default at the time of any extension of credit, and shall
continue in full force and effect as long as any Loan or any other obligation
hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall
remain outstanding.


10.5.  Attorney Costs and Expenses.  The Borrowers agree (a) to pay or reimburse
the Administrative Agent and the Arrangers for all reasonable out-of-pocket
costs and expenses incurred in connection with the development, preparation,
negotiation and execution of this Agreement and the other Loan Documents and
any amendment, waiver, consent or other modification of the provisions hereof
and thereof (whether or not the transactions contemplated hereby or thereby are
consummated), and the consummation and administration of the transactions
contemplated hereby and thereby, including all Attorney Costs, and (b) to pay
or reimburse the Administrative Agent and each Lender for all reasonable
out-of-pocket costs and expenses (which may include, to the extent reasonably
incurred, all search, filing, recording, title insurance and appraisal charges
and fees and taxes related thereto, and other out-of-pocket 



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expenses incurred
by the Administrative Agent and the cost of independent public accountants and
other outside experts) incurred in connection with the enforcement, attempted
enforcement, or preservation of any rights or remedies under this Agreement or
the other Loan Documents (including all such costs and expenses incurred during
any “workout” or restructuring in respect of the obligations of the Borrowers
hereunder or under any of the other Loan Documents and during any legal
proceeding, including any proceeding under any Debtor Relief Law), including
all Attorney Costs.  All amounts due
under this Section 10.5 shall be payable not later than 30 days
following written demand.  The agreements
in this Section 10.5 shall survive the termination of the Total
Revolving Credit Commitments and repayment of all other obligations.


10.6.  Indemnification.  (a) Whether or not the transactions
contemplated hereby are consummated, the Borrowers shall indemnify and hold
harmless each Agent-Related Person, each Arranger, each Lender and their
respective Affiliates, directors, officers, employees, counsel, agents,
shareholders and attorneys-in-fact (collectively the “Indemnitees”) from
and against any and all liabilities, obligations, losses, damages, penalties,
claims, demands, actions, judgments, suits, settlement payments and causes of
action of any kind or nature whatsoever and reasonable related out-of-pocket
costs and expenses which may at any time be imposed on, incurred, suffered,
sustained, required to be paid by or asserted against any such Indemnitee in
any way relating to or arising out of or in connection with (a) the execution,
delivery, enforcement, performance or administration of any Loan Document or
any other agreement, letter or instrument delivered in connection with the
transactions contemplated thereby or the consummation of the transactions
contemplated thereby, (b) any Revolving Credit Commitment, Loan or Letter of
Credit or the use or proposed use of the proceeds therefrom (including any refusal
by the Issuing Lender to honor a demand for payment under a Letter of Credit if
the documents presented in connection with such demand do not strictly comply
with the terms of such Letter of Credit), (c) any actual or alleged presence or
release of Hazardous Materials on or from any property currently or formerly
owned or operated by the Borrowers or any Subsidiary, or any Environmental
Liability related in any way to the Borrowers or any of their Subsidiaries, or
(d) any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other
theory (including any investigation of, preparation for, or defense of any
pending or threatened claim, investigation, litigation or proceeding) and
regardless of whether any Indemnitee is a party thereto (all the foregoing,
collectively, the “Indemnified Liabilities”), in all cases, whether or
not caused by or arising, in whole or in part, out of the negligence of the
Indemnitee; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such liabilities, obligations,
losses, damages, penalties, claims, demands, actions, judgments, suits,
settlement payments, causes of action or costs or 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.  In all such litigation, or
the preparation therefor, the Indemnitees shall be entitled to select counsel
to the Indemnitees.  To the extent
reasonably practicable and not disadvantageous to any Indemnitee (as reasonably
determined by the relevant Indemnitee), it is anticipated that a single counsel
selected by the affected Lenders will be used. 
No Indemnitee shall be liable to the Borrowers 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, and, to the fullest extent permitted by
applicable Law, each Borrower shall not assert, and hereby 



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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 Letter of Credit or
the use of the proceeds thereof (whether before or after the Closing Date); provided
that this sentence shall not, as to any Indemnitee, apply to the extent such
Indemnitee is found by a final non-appealable judgment of a court of competent
jurisdiction to have acted with willful misconduct or gross negligence.  All amounts due under this Section 10.6
shall be payable not later than 30 days following written demand.  The agreements in this Section 10.6
shall survive the resignation of the Administrative Agent, the replacement of
any Lender, the termination of the Total Revolving Credit Commitments and the
repayment, satisfaction or discharge of all the other obligations of the
Borrowers hereunder.


(b)           To the extent that the Borrowers for
any reason fail to indefeasibly pay any amount required under Section 10.5
and Section 10.6(a) to be paid by them to the Administrative Agent (or any
sub-agent thereof), the Issuing Lender or any Agent-Related Person of any of
the foregoing, each Lender severally agrees to pay to the Administrative Agent
(or any such sub-agent), the Issuing Lender or such Agent-Related Person, as
the case may be, such Lender’s Revolving Credit Percentage (determined as of
the time that the applicable unreimbursed expense or indemnity payment is
sought) of such unpaid amount, provided that the unreimbursed expense or
indemnified loss, claim, damage, liability or related expense, as the case may
be, was incurred by or asserted against the Administrative Agent (or any such
sub-agent) or the Issuing Lender in its capacity as such, or against any
Agent-Related Person of any of the foregoing acting for the Administrative Agent
(or any such sub-agent) or Issuing Lender in connection with such
capacity.  The obligations of the Lenders
under this Section 10.6(b) are subject to the provisions of Section 2.14(f).


10.7.  Successors
and Assigns.


(a)           Successors and Assigns Generally.  The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that the Borrowers
may not assign or otherwise transfer any of their rights or obligations
hereunder without the prior written consent of the Administrative Agent and
each Lender and no Lender may assign or otherwise transfer any of its rights or
obligations hereunder except (i) to an Eligible Assignee in accordance with the
provisions of Section 10.7(b), (ii) by way of participation in
accordance with the provisions of Section 10.7(d), (iii) by way of
pledge or assignment of a security interest subject to the restrictions of Section
10.7(f), or (iv) to an SPC in
accordance with the provisions of Section 10.7(h) (and any other
attempted assignment or transfer by any party hereto shall be null and
void).  Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby,
Participants to the extent provided in Section 10.7(d) and, to the
extent expressly contemplated hereby, the Indemnitees) any legal or equitable
right, remedy or claim under or by reason of this Agreement.


(b)           Assignments by Lenders.  Any Lender may at any time assign to one or
more Eligible Assignees all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Revolving Credit Commitment
and the Loans (including for 



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purposes of this subsection
(b), participations in L/C Obligations and in Swing Line Loans) at the time
owing to it); provided that any such assignment shall be subject to the
following conditions:


(i)            Minimum Amounts.


(A)          in the case of an assignment of the
entire remaining amount of the assigning Lender’s Revolving Credit Commitment
and the Loans at the time owing to it or in the case of an assignment to a
Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be
assigned; and


(B)           in any case not described in subsection
(b)(i)(A) of this Section 10.7, the aggregate amount of the
Revolving Credit Commitment (which for this purpose includes Loans outstanding
thereunder) or, if the Revolving Credit Commitment is not then in effect, the principal
outstanding balance of the Loans of the assigning Lender subject to each such
assignment, determined as of the date the Assignment and Assumption with
respect to such assignment is delivered to the Administrative Agent or, if “Trade
Date” is specified in the Assignment and Assumption, as of the Trade Date,
shall not be less than $5,000,000  unless each of
the Administrative Agent and, so long as no Specified Event of Default has
occurred and is continuing, the Borrowers otherwise consent (each such consent
not to be unreasonably withheld or delayed); provided, however,
that concurrent assignments to members of an Assignee Group and concurrent
assignments from members of an Assignee Group to a single assignee (or to an
assignee and members of its Assignee Group) will be treated as a single
assignment for purposes of determining whether such minimum amount has been
met.


(ii)           Proportionate Amounts.  Each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender’s rights and
obligations under this Agreement with respect to the Loans or the Revolving
Credit Commitment assigned, except that this clause (ii) shall not apply
to the Swing Line Lender’s rights and obligations in respect of Swing Line
Loans;


(iii)          Required Consents.  No consent shall be required for any
assignment except to the extent required by subsection (b)(i)(B) of this
Section 10.7 and, provided that:


(A)          the consent of the Borrowers (such
consent not to be unreasonably withheld or delayed) shall be required unless
(1) a Specified Event of Default has occurred and is continuing at the time of
such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender
or an Approved Fund;


(B)           the consent of the Administrative
Agent (such consent not to be unreasonably withheld or delayed) shall be
required if such 



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assignment is to a Person that is not a Lender or an
Affiliate of the assigning Lender;


(C)           the consent of the Issuing Lender
(such consent not to be unreasonably withheld or delayed) shall be required for
any assignment that increases the obligation of the assignee to participate in
exposure under one or more Letters of Credit (whether or not then outstanding);
and


(D)          the consent of the Swing Line Lender
(such consent not to be unreasonably withheld or delayed) shall be required for
any assignment.


(iv)          Assignment and Assumption.  The parties to each assignment shall execute
and deliver to the Administrative Agent an Assignment and Assumption, together
with a processing and recordation fee in the amount of $3,500; provided,
however, that the Administrative Agent may, in its sole discretion,
elect to waive such processing and recordation fee in the case of any
assignment.  The assignee, if it is not a
Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire.


(v)           No Assignment to Borrowers.  No such assignment shall be made to either
Borrower or any Affiliates or Subsidiaries of the Borrowers.


(vi)          No Assignment to Natural Persons.  No such assignment shall be made to a natural
person.


(vii)         No Assignment to Approved Funds
Prior to Specified Event of Default. 
No such assignment shall be made to an Approved Fund prior to the
occurrence of a Specified Event of Default. 
After the occurrence and during the continuance of any Specified Event
of Default, an Approved Fund shall be an Eligible Assignee hereunder.


(viii)        Creditworthiness of Affiliates and
Approved Funds.  Notwithstanding the
foregoing, no such assignment shall be made to an Affiliate of a Lender or to
an Approved Fund unless such Affiliate or Approved Fund shall be a financial
institution having a senior unsecured debt rating of not less than  “A-”, or its equivalent, by S&P.


Subject to acceptance and
recording thereof by the Administrative Agent pursuant to Section 10.7(c),
from and after the effective date specified in each Assignment and Assumption,
the Eligible Assignee thereunder shall be a party to this Agreement and, to the
extent of the interest assigned by such Assignment and Assumption, have the rights
and obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto) but shall continue to be entitled to the benefits of Sections
2.15, 2.16, 2.17, 2.18, 10.5 and 10.6  with respect to
facts and circumstances occurring prior to the effective date of such 



 86
 









assignment.  Upon request, the Borrowers (at their
expense) shall execute and deliver a Note to the assignee Lender and a
replacement Note, as applicable, to the assigning Lender.


(c)           Register.  The Administrative Agent, acting solely for
this purpose as an agent of the Borrowers, shall maintain at the Administrative
Agent’s Office a copy of each Assignment and Assumption delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the
Revolving Credit Commitments of, and principal amounts of the Loans and L/C
Obligations owing to, each Lender pursuant to the terms hereof from time to
time (the “Register”).  The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrowers, the Administrative Agent and the Lenders may treat each
Person whose name is recorded in the Register pursuant to the terms hereof as a
Lender hereunder for all purposes of this Agreement, notwithstanding notice to
the contrary.  The Register shall be
available for inspection by the Borrowers and any Lender, at any reasonable
time and from time to time upon reasonable prior notice.


(d)           Participations.  Any Lender may at any time, without the
consent of, or notice to, the Borrowers or the Administrative Agent, sell
participations to any Person (other than a natural person or the Borrowers or
any Affiliates or Subsidiaries of the Borrowers) (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 Revolving Credit Commitment and/or
the Loans (including such Lender’s participations in L/C Obligations and/or
Swing Line 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 Borrowers, the Administrative Agent, the
Lenders and the Issuing Lender shall continue to deal solely and directly with
such Lender in connection with such Lender’s rights and obligations under this
Agreement.


Any agreement or
instrument pursuant to which a Lender sells such a participation shall provide
that such Lender shall retain the sole right to enforce this Agreement and to
approve any amendment, modification or waiver of any  provision of this Agreement; provided
that such agreement or instrument may provide that such Lender will not,
without the consent of the Participant, agree to any amendment, waiver or other
modification described in the first proviso to Section 10.1 that
directly affects such Participant. 
Subject to Section 10.7(e), each Borrower agrees that each
Participant shall be entitled to the benefits of Sections 2.15, 2.16
or 2.17 to the same
extent as if it were a Lender and had acquired its interest by assignment
pursuant to Section 10.7(b).  To
the extent permitted by Law, each Participant also shall be entitled to the
benefits of Section 10.8  as though it
were a Lender, provided such Participant agrees to be subject to Section
2.14 as though it were a Lender.


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



 87
 









(f)            Certain Pledges.  Notwithstanding anything to the contrary
contained herein, any Lender may, with notice to, but without prior consent of
the Borrowers and the Administrative Agent, at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement
(including under its Note, if any) to secure obligations of such Lender,
including any pledge or assignment to secure obligations to a Federal Reserve
Bank (provided that notice to the Borrowers and the Administrative Agent shall
not be required in the case of a pledge or assignment to secure obligations to
a Federal Reserve Bank); provided further that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or
substitute, or permit the substitution of, any such pledgee or assignee for
such Lender as a party hereto.


(g)           Electronic Execution of
Assignments.  The words “execution,” “signed,”
“signature,” and words of like import in any Assignment and Assumption shall be
deemed to include electronic signatures or the keeping of records in electronic
form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable Law, including the Federal Electronic Signatures in Global and
National Commerce Act, the New York State Electronic Signatures and Records
Act, or any other similar state laws based on the Uniform Electronic
Transactions Act.


(h)           Special Purpose Funding Vehicles.  Notwithstanding anything to the
contrary contained herein, any Lender (a “Granting Lender”) may, with
notice to, but without prior consent of the Borrowers and the Administrative
Agent grant to a special purpose funding vehicle identified as such in writing
from time to time by the Granting Lender to the Administrative Agent and the
Borrowers (an “SPC”) the option to provide all or any part of any Loan
that such Granting Lender would otherwise be obligated to make pursuant to this
Agreement; provided that (i) nothing herein shall constitute a
commitment by any SPC to fund any Loan, and (ii) if an SPC elects not to
exercise such option or otherwise fails to make all or any part of such Loan,
the Granting Lender shall be obligated to make such Loan pursuant to the terms
hereof and, if it fails to do so, to make such payment to the Administrative
Agent as is required under Section 2.14(e)(ii).  Each party hereto hereby agrees that (i)
neither the grant to any SPC nor the exercise by any SPC of such option shall
increase the costs or expenses or otherwise increase or change the obligations
of the Borrowers under this Agreement (including its obligations under Section
2.15), (ii) no SPC shall be liable for any indemnity or similar payment
obligation under this Agreement for which a Lender would be liable, and (iii)
the Granting Lender shall for all purposes, including the approval of any
amendment, waiver or other modification of any provision of any Loan Document,
remain the lender of record hereunder. 
The making of a Loan by an SPC hereunder shall utilize the Revolving
Credit Commitment of the Granting Lender to the same extent, and as if, such
Loan were made by such Granting Lender. 
In furtherance of the foregoing, each party hereto hereby agrees (which
agreement shall survive the termination of this Agreement) that, prior to the
date that is one year and one day after the payment in full of all outstanding
commercial paper or other senior debt of any SPC, it will not institute
against, or join any other Person in instituting against, such SPC any
bankruptcy, reorganization, arrangement, insolvency, or liquidation proceeding
under any Debtor Relief Laws or any other Laws. 
Notwithstanding anything to the contrary contained herein, any SPC may
(i) with notice to, but without prior consent of the Borrowers and the
Administrative Agent and with the payment of a processing fee in the amount of
$3,500 (which processing fee 



 88
 









may be waived by the Administrative Agent in its sole discretion), assign
all or any portion of its right to receive payment with respect to any Loan to
the Granting Lender and (ii) disclose on a confidential basis any non-public
information relating to its funding of Loans to any rating agency, commercial
paper dealer or provider of any surety or guarantee or credit or liquidity
enhancement to such SPC.


(i)            Resignation as Issuing Lender or
Swing Line Lender after Assignment. 
Notwithstanding anything to the contrary contained herein, if at any
time Bank of America, N.A. assigns all of its Revolving Credit Commitment and
Loans pursuant to Section 10.7(b), Bank of America, N.A. may, (i) upon 30 days’ notice to the Borrowers and
the Lenders, resign as Issuing Lender, so long as a successor Issuing Lender
(consented to by the Borrowers, such consent not to be unreasonably withheld or
delayed) has been appointed and/or (ii) upon 30 days’ notice to the Borrowers, resign as Swing Line Lender, so
long as a successor Swing Line Lender (consented to by the Borrowers, such
consent not to be unreasonably withheld or delayed) has been appointed.  In the event of any such resignation as
Issuing Lender or Swing Line Lender, the Borrowers shall be entitled to appoint
from among the Lenders a successor Issuing Lender or Swing Line Lender
hereunder; provided, however, that no failure by the Borrowers to
appoint any such successor shall affect the resignation of Bank of America,
N.A. as Issuing Lender or Swing Line Lender, as the case may be.  If Bank of America, N.A. resigns as Issuing
Lender, it shall retain all the rights and obligations of the Issuing Lender
hereunder with respect to all Letters of Credit outstanding as of the effective
date of its resignation as Issuing Lender and all L/C Obligations with respect
thereto (including the right to require the Lenders to make Base Rate Loans or
fund risk participations in Unreimbursed Amounts pursuant to Section 3.3).  If Bank of America, N.A. resigns as Swing Line
Lender, it shall retain all the rights of the Swing Line Lender provided for
hereunder with respect to Swing Line Loans made by it and outstanding as of the
effective date of such resignation, including the right to require the Lenders
to make Base Rate Loans or fund risk participations in outstanding Swing Line
Loans pursuant to Section 2.4. 
Upon the appointment of a successor Issuing Lender and/or Swing Line
Lender, (a) such successor shall succeed to and become vested with all of the
rights and obligations of the retiring Issuing Lender or Swing Line Lender, as
the case may be, and (b) the successor Issuing Lender shall issue letters of
credit in substitution for the Letters of Credit, if any, outstanding at the
time of such succession or make other arrangements satisfactory to Bank of
America, N.A. to effectively assume the obligations of Bank of America, N.A.
with respect to such Letters of Credit.


10.8.  Adjustments; Set-off.  (a) Except to the extent that this Agreement
provides for a payment to be allocated to a particular Lender, if any Lender (a
“Benefitted Lender”) shall at any time receive any payment of all or
part of the obligations under the Credit Agreement or the other Loan Documents,
owing to it, or receive any collateral in respect thereof (whether voluntarily
or involuntarily, by set-off, pursuant to events or proceedings of the
nature referred to in Section 8.1(c), or otherwise), in a greater
proportion than any such payment to or collateral received by any other Lender,
if any, in respect of such other Lender’s obligations under the Credit
Agreement or the other Loan Documents, such Benefitted Lender shall purchase
for cash from the other Lenders a participating interest in such portion of
each such other Lender’s obligations under the Credit Agreement or the other
Loan Documents, or shall provide such other Lenders with the benefits of any
such collateral, as shall be necessary to cause such Benefitted Lender to share
the excess payment or benefits of such collateral ratably with each of 



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the Lenders;
provided, however, that if all or any portion of such excess payment or
benefits is thereafter recovered from such Benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest.


(b)           In addition to any rights and
remedies of the Lenders provided by Law, each Lender shall have the right,
without prior notice to the Borrowers, any such notice being expressly waived
by the Borrowers to the extent permitted by applicable Law, upon any amount
becoming due and payable by a Borrower hereunder (whether at the stated
maturity, by acceleration or otherwise), to set-off and appropriate and apply
against such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender or
any branch or agency thereof to or for the credit or the account of such
Borrower.  Each Lender agrees promptly to
notify the Borrowers, as the case may be, and the Administrative Agent after
any such set-off and application made by such Lender, provided that the
failure to give such notice shall not affect the validity of such set-off and
application.


10.9.  Counterparts.  This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts, and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument.  Delivery of an
executed signature page of this Agreement by facsimile transmission shall be
effective as delivery of a manually executed counterpart hereof.  A set of the copies of this Agreement signed
by all the parties shall be lodged with the Borrowers and the Administrative
Agent.


10.10.  Severability.  Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.


10.11.  Integration.  This Agreement, the other Loan Documents and
the Fee Letters represent the entire agreement of the Borrowers the
Administrative Agent, the Arrangers, the Syndication Agent and the Lenders with
respect to the subject matter hereof and thereof, and there are no promises,
undertakings, representations or warranties by the Arrangers, the
Administrative Agent, the Syndication Agent or any Lender relative to subject
matter hereof not expressly set forth or referred to herein, in the other Loan
Documents or in the Fee Letters.  Each of
the Borrowers agrees that its obligations under the Fee Letters shall survive
the execution and delivery of this Agreement.


10.12.  GOVERNING LAW.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK (EXCLUDING THE
LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY).


 



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10.13.  SUBMISSION TO JURISDICTION; WAIVERS.  EACH OF THE BORROWERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY:


(a)           SUBMITS FOR ITSELF AND ITS PROPERTY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY
JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF
THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM
ANY THEREOF;


(b)           CONSENTS THAT ANY SUCH ACTION OR
PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY
NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT
AND AGREES NOT TO PLEAD OR CLAIM THE SAME;


(c)           AGREES THAT SERVICE OF PROCESS IN ANY
SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY
REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL),
POSTAGE PREPAID, TO THE BORROWERS, AS THE CASE MAY BE, AT ITS ADDRESS SET FORTH
IN SECTION 10.2 OR AT SUCH OTHER ADDRESS OF WHICH THE ADMINISTRATIVE
AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO;


(d)           AGREES THAT NOTHING HEREIN SHALL
AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION; AND


(e)           WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION
OR PROCEEDING REFERRED TO IN THIS SECTION 10.13 ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES.


10.14.  WAIVERS
OF JURY TRIAL.  EACH PARTY TO THIS
AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO
OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED
THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 10.14 WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.



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10.15.  No
Advisory or Fiduciary Responsibility.  In connection with this Agreement,
each of the Borrowers acknowledges and agrees that: (a) the credit facility
provided for hereunder and any related arranging or other services in
connection therewith (including in connection with any amendment, waiver or
other modification hereof or of any other Loan Document) are an arm’s-length
commercial transaction between the Borrowers and their respective Affiliates,
on the one hand, and the Administrative Agent and the Arrangers, on the other
hand, and each of the Borrowers is capable of evaluating and understanding and
understands and accepts the terms, risks and conditions of the transactions
contemplated hereby and by the other Loan Documents (including any amendment,
waiver or other modification hereof or thereof); (b) in connection with the
process leading to such transaction, the Administrative Agent and the
Arrangers, each is and has been acting solely as a principal and is not the
financial advisor, agent or fiduciary, for the Borrowers or any of their
respective Affiliates, stockholders, creditors or employees or any other
Person; (c) neither the Administrative Agent nor the Arrangers have assumed or
will assume an advisory, agency or fiduciary responsibility in favor of either
Borrower with respect to this Agreement or the process leading thereto,
including with respect to any amendment, waiver or other modification hereof or
of any other Loan Document (irrespective of whether the Administrative Agent or
the Arrangers have advised or is currently advising the Borrowers or any of
their respective Affiliates on other matters) and neither the Administrative
Agent nor the Arrangers have any obligation to the Borrowers or any of their
respective Affiliates with respect to this Agreement except those obligations
expressly set forth herein and in the other Loan Documents; (d) the
Administrative Agent and the Arrangers and their respective Affiliates may be
engaged in a broad range of transactions that involve interests that differ
from those of the Borrowers and their respective Affiliates, and neither the
Administrative Agent nor the Arrangers have any obligation to disclose any of
such interests by virtue of any advisory, agency or fiduciary relationship; and
(e) the Administrative Agent and the Arrangers have not provided and will not
provide any legal, accounting, regulatory or tax advice with respect to this
Agreement (including any amendment, waiver or other modification hereof or of
any other Loan Document) and each of the Borrowers has consulted its own legal,
accounting, regulatory and tax advisors to the extent it has deemed
appropriate.


10.16.  Confidentiality.  Each of the Administrative Agent and the
Lenders agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its Affiliates and to
its and its Affiliates’ respective partners, directors, officers, employees,
agents, advisors and representatives (it being understood that the Persons to
whom such disclosure is made will be informed of the confidential nature of
such Information and instructed to keep such Information confidential), (b) to
the extent requested by any regulatory authority purporting to have
jurisdiction over it (including any self-regulatory authority, such as the
NAIC), (c) to the extent required by applicable Laws or by any subpoena or
similar legal process, (d) to any other party hereto, (e) 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, (f) subject to an agreement
containing provisions substantially the same as those of this Section 10.16,
to (i) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement or (ii)
any actual or prospective counterparty (or its advisors) to any swap or
derivative transaction relating to either of the Borrowers and its obligations,
(g) with the consent of the Borrowers or (h) to the extent 



 92
 









such Information
(x) becomes publicly available other than as a result of a breach of this Section
10.16 or (y) becomes available to the Administrative Agent or any Lender on
a nonconfidential basis from a source other than the Borrowers.  For purposes of this Section 10.16, “Information”
means all information received from either of the Borrowers or any of its
Subsidiaries relating to either of the Borrowers or any Subsidiary or any of
their respective businesses, other than any such information that is available
to the Administrative Agent or any Lender on a nonconfidential basis prior to
disclosure by a Borrower or any Subsidiary, provided that, in the case
of information received from a Borrower or any Subsidiary after the date
hereof, such information is clearly identified at the time of delivery as
confidential.  Any Person required to
maintain the confidentiality of Information as provided in this Section
10.16 shall be considered to have complied with its obligation to do so if
such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.


Each of the
Administrative Agent, the Lenders and the Issuing Lender acknowledges that (a)
the Information may include material non-public information concerning each
Borrower or a Subsidiary thereof, as the case may be, (b) it has developed
compliance procedures regarding the use of material non-public information and
(c) it will handle such material non-public information in accordance with
applicable Law, including Federal and state securities Laws.


10.17.  Release of Guarantee Obligations.  Notwithstanding anything to the contrary
contained herein or any other Loan Document, when all obligations of a Borrower
hereunder and under the other Loan Documents that are guaranteed by a Guarantor
have been paid in full, all Revolving Credit Commitments have terminated, there
exist no unpaid Reimbursement Obligations and no Letter of Credit issued for
the account of such Borrower shall be outstanding, upon request of the
Borrowers, the Administrative Agent shall (without notice to, or vote or
consent of, any Lender) take such actions as may be required to release all
Guarantee Obligations of such Guarantor under any Loan Document, including,
without limitation, its Guaranty.  Any
such release of Guarantee Obligations shall be deemed subject to the provision
that such Guarantee Obligations shall be reinstated if after such release any
portion of any payment in respect of the obligations guaranteed thereby shall
be rescinded or must otherwise be restored or returned upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of such Borrower or such
Guarantor, or upon or as a result of the appointment of a receiver, intervener
or conservator of, or trustee or similar officer for, such Borrower or such
Guarantor or any substantial part of its property, or otherwise, all as though
such payment had not been made.


10.18.  Accounting Changes.  In the event that any “Accounting Change” (as
defined below) shall occur and such change results in a change in the method of
calculation of financial covenants, standards or terms in this Agreement, then
the Borrowers and the Administrative Agent agree to enter into negotiations in
order to amend such provisions of this Agreement so as to equitably reflect
such Accounting Changes with the desired result that the criteria for
evaluating the Borrowers’ financial condition shall be the same after such
Accounting Changes as if such Accounting Changes had not been made.  Until such time as such an amendment shall
have been executed and delivered by the Borrowers, the Administrative Agent and
the Majority Lenders, all financial covenants, standards and terms in this
Agreement shall continue to be calculated or construed as if such Accounting
Changes had not occurred.  



 93
 









“Accounting
Changes” refers to changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants, applicable Insurance Regulators, the NAIC or, if applicable, the
SEC.


10.19.    USA PATRIOT Act Notice.  Each Lender that is subject to the Act (as
hereinafter defined) and the Administrative Agent (for itself and not on behalf
of any Lender) hereby notifies the Borrowers that pursuant to the requirements
of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October
26, 2001)) (the “Act”), it is required to obtain, verify and record
information that identifies the Borrowers, which information includes the name
and address of the Borrowers and other information that will allow such Lender
or the Administrative Agent, as applicable, to identify the Borrowers in
accordance with the Act.


10.20.  Interest Rate Limitation.


(a)           Notwithstanding anything to the
contrary contained in any Loan Document, if at any time the rate of interest
payable under any Loan Document (the “Stated Rate”) would exceed the
rate of interest permitted to be charged under any applicable Law (the “Maximum
Rate”), then for so long as the Maximum Rate would be so exceeded, the rate
of interest payable shall be equal to the Maximum Rate; provided that if
at any time thereafter, the Stated Rate is less than the Maximum Rate, each
Borrower shall, to the extent permitted by applicable Law, continue to pay
interest at the Maximum Rate until such time as the total interest received is
equal to the total interest which would have been received had the Stated Rate
been (but for the operation of this provision) the interest rate payable.  Thereafter, the interest rate payable shall
be the Stated Rate unless and until the Stated Rate again would exceed the
Maximum Rate, in which event this provision shall again apply.


(b)           In no event shall the total interest
received by a Lender exceed the amount which it could lawfully have received
had the interest been calculated for the full term hereof at the Maximum Rate.


[Remainder of Page Left Intentionally Blank]


 



 94














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.


	
  

  	
  The Borrowers:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WHITE MOUNTAINS INSURANCE GROUP, LTD.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
             

  	
  By:

  	
   

  	 

	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WHITE MOUNTAINS RE GROUP, LTD.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	 

	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
						



 


 
















	
  

  	
   

  	
  BANK OF AMERICA, N.A., as

  	
   

  	
   

  
	
   

  	
   

  	
  Administrative Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  BANK OF AMERICA, N.A., as

  	
   

  	
   

  
	
   

  	
   

  	
  a Lender, Issuing Lender and Swing Line Lender

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
							



 



 2
 









 


 


	
  

  	
   

  	
  LEHMAN BROTHERS BANK, FSB, as

  	
   

  	
   

  
	
   

  	
   

  	
  a Lender

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
						



 



 3














SCHEDULE
10.02


ADMINISTRATIVE
AGENT’S OFFICE;

CERTAIN ADDRESSES FOR NOTICES


BORROWERS:
 White Mountains Insurance Group, Ltd.
 80 South Main Street
 Hanover, NH 03755

Attention: Robert Seelig, Esq.

Telephone: 603-640-2202

Telecopier: 603-643-4592

Electronic Mail: rseelig@whitemountains.com

U.S. Taxpayer Identification Number (White Mountains Insurance Group,
Ltd.):  94-2708455


U.S. Taxpayer Identification Number (White Mountains
Re Group, Ltd.): 98-0422761


 


with a copy to:


Cravath, Swaine and Moore
LLP

WorldWide Plaza

825 Eighth Avenue

New York, NY 10019-7475

Attention: Paul Michalski

Telecopier: 212-474-3700


ADMINISTRATIVE AGENT:


Administrative Agent’s Office

(for payments and Requests for Credit Extensions):

Bank of America, N.A.

2001 Clayton Road

Mail Code” CA4-702-02-25

Concord, CA 94520

Attention: Tina Obcena

Telephone: 925-675-8768

Telecopier: 888-969-9246

Electronic Mail: tina.obcena@bankofamerica.com

Account No.: 3750836479

Ref:  White Mountains Insurance Group

ABA# 026009593


 
















Other
Notices as Administrative Agent:

Bank of America, N.A.

Agency Management

1455 Market Street, 5th Floor

Mail Code: CA5-701-05-19

San Francisco, CA 94103

Attention: Aamir Saleem

Telephone: 415-436-2769

Telecopier: 415-503-5089

Electronic Mail:  aamir.saleem@bankofamerica.com


ISSUING LENDER:


Bank of America, N.A.

Trade Operations

1000 W. Temple Street

Mail Code: CA9-705-07-05

Los Angeles, CA 90012-1514

Attention: Stella Rosales

Telephone: 213-481-7828

Telecopier: 213-580-8441

Electronic Mail:  stella.rosales@bankofamerica.com


SWING LINE LENDER:


Bank of America, N.A.

2001 Clayton Road

Mail Code” CA4-702-02-25

Concord, CA 94520

Attention: Tina Obcena

Telephone: 925-675-8768

Telecopier: 888-969-9246

Electronic Mail: tina.obcena@bankofamerica.com

Account No.: 3750836479

Ref:  White Mountains Insurance Group

ABA# 026009593


 



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