Exhibit 10.1


 


 




 





AMENDED AND RESTATED CREDIT
AGREEMENT


 


dated as of


 


November 29, 2005


 


among


 


ARCH CAPITAL GROUP LTD.,


 


ARCH CAPITAL GROUP (U.S.) INC.,


 


Various Designated Subsidiary
Borrowers,


 


The Lenders Party Hereto,


 


BARCLAYS BANK PLC,


THE BANK OF NEW YORK,


WACHOVIA BANK, N.A.,


CALYON,


CITIBANK, N.A.,


HSBC BANK USA, N.A.,

and


ING BANK N.V., LONDON BRANCH,


as Documentation Agents,


 


BANK OF AMERICA, N.A.,

as Syndication Agent


 


and


 


JPMORGAN CHASE BANK, N.A.,

as Administrative Agent


 










 


J.P. MORGAN SECURITIES INC.,

and

BANC OF AMERICA SECURITIES LLC,

as Joint Bookrunners and Joint Lead Arrangers




 





 


$800,000,000


 





















 


Table of
Contents


 


	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I Definitions

  	
  1

  
	
   

  	
   

  
	
  Section 1.01. Defined
  Terms

  	
  1

  
	
  Section 1.02.
  Classification of Loans and Borrowings

  	
  31

  
	
  Section 1.03. Terms
  Generally

  	
  31

  
	
  Section 1.04.
  Accounting Terms; GAAP

  	
  32

  
	
   

  	
   

  
	
  ARTICLE II The Credits

  	
  32

  
	
   

  	
   

  
	
  Section 2.01. Tranche
  2 and Tranche 3 Commitments

  	
  32

  
	
  Section 2.02. Loans
  and Borrowings

  	
  34

  
	
  Section 2.03.
  Requests for Borrowings

  	
  34

  
	
  Section 2.04. Funding
  of Borrowings

  	
  35

  
	
  Section 2.05.
  Interest Elections

  	
  36

  
	
  Section 2.06.
  Termination and Reduction of Tranche 1 Commitments

  	
  37

  
	
  Section 2.07.
  Termination and Reduction of Tranche 2 Commitments

  	
  38

  
	
  Section 2.08.
  Termination and Reduction of Tranche 3 Commitments

  	
  38

  
	
  Section 2.09.
  Repayment of Loans; Evidence of Debt

  	
  39

  
	
  Section 2.10.
  Prepayments; Additional Collateral

  	
  40

  
	
  Section 2.11. Fees

  	
  44

  
	
  Section 2.12.
  Interest

  	
  46

  
	
  Section 2.13.
  Alternate Rate of Interest

  	
  47

  
	
  Section 2.14.
  Increased Costs

  	
  48

  
	
  Section 2.15. Break
  Funding Payments

  	
  49

  
	
  Section 2.16. Taxes

  	
  49

  
	
  Section 2.17.
  Payments Generally; Pro Rata Treatment; Sharing of Set-offs

  	
  50

  
	
  Section 2.18.
  Mitigation Obligations; Replacement of Lenders

  	
  52

  
	
  Section 2.19.
  Additional Tranche 1 Commitments

  	
  53

  
	
  Section 2.20.
  Additional Designated Subsidiary Borrowers

  	
  55

  
	
  Section 2.21. Removal
  of Designated Subsidiary Borrowers

  	
  55

  
	
   

  	
   

  
	
  ARTICLE IIIA Tranche 1 Letters of Credit

  	
  56

  
	
   

  	
   

  
	
  Section 3A.01.
  Tranche 1 Letters of Credit

  	
  56

  
	
  Section 3A.02.
  Tranche 1 Letter of Credit Requests

  	
  58

  
	
  Section 3A.03.
  Agreement to Repay Tranche 1 Letter of Credit Drawings

  	
  59

  
	
  Section 3A.04.
  Increased Costs

  	
  59

  
	
  Section 3A.05.
  Tranche 1 Letter of Credit Expiration Extensions

  	
  60

  
	
  Section 3A.06.
  Changes to Stated Amount

  	
  60

  
	
  Section 3A.07. Representations
  and Warranties of Tranche 1 Lenders

  	
  61

  
	
  Section 3A.08.
  Fronted Tranche 1 Letters of Credit

  	
  61

  
	
  Section 3A.09.
  Agreement to Repay Fronted Tranche 1 Letter of Credit Drawings; Fronting Fee

  	
  63

  
	
  Section 3A.10.
  Defined Terms

  	
  64

  
	
  Section 3A.11. Existing
  Tranche 1 Fronted Letters of Credit

  	
  64

  
	
  Section 3A.12.
  Existing Tranche 1 Several Letters of Credit

  	
  64

  
	
   

  	
   

  
	
  ARTICLE IIIB Tranche 2 Letters of Credit

  	
  67

  
	
   

  	
   

  
	
  Section 3B.01.
  Tranche 2 Letters of Credit

  	
  67

  



 


i





















 


	
  Section 3B.02. Tranche 2 Letter of Credit Requests

  	
  69

  
	
  Section 3B.03. Agreement to Repay Tranche 2 Letter of Credit
  Drawings

  	
  70

  
	
  Section 3B.04. Increased Costs

  	
  70

  
	
  Section 3B.05. Tranche 2 Letter of Credit Expiration Extensions

  	
  71

  
	
  Section 3B.06. Changes to Stated Amount

  	
  71

  
	
  Section 3B.07. Representations and Warranties of Tranche 2
  Lenders

  	
  71

  
	
  Section 3B.08. Fronted Tranche 2 Letters of Credit

  	
  71

  
	
  Section 3B.09. Agreement to Repay Fronted Tranche 2 Letter of
  Credit Drawings; Fronting Fee

  	
  74

  
	
  Section 3B.10. Defined Terms

  	
  75

  
	
  Section 3B.11. No Existing Tranche 2 Letters of Credit

  	
  75

  
	
   

  	
   

  
	
  ARTICLE IV
  Representations and Warranties

  	
  75

  
	
   

  	
   

  
	
  Section 4.01. Corporate Status

  	
  75

  
	
  Section 4.02. Corporate Power and Authority

  	
  75

  
	
  Section 4.03. No Contravention of Laws, Agreements or
  Organizational Documents

  	
  76

  
	
  Section 4.04. Litigation and Contingent Liabilities

  	
  76

  
	
  Section 4.05. Use of Proceeds; Margin Regulations

  	
  76

  
	
  Section 4.06. Approvals

  	
  76

  
	
  Section 4.07. Investment Company Act

  	
  77

  
	
  Section 4.08. Public Utility Holding Company Act

  	
  77

  
	
  Section 4.09. True and Complete Disclosure; Projections and
  Assumptions

  	
  77

  
	
  Section 4.10. Financial Condition; Financial Statements

  	
  77

  
	
  Section 4.11. Tax Returns and Payments

  	
  78

  
	
  Section 4.12. Compliance with ERISA

  	
  79

  
	
  Section 4.13. Subsidiaries

  	
  79

  
	
  Section 4.14. Capitalization

  	
  80

  
	
  Section 4.15. Indebtedness

  	
  80

  
	
  Section 4.16. Compliance with Statutes, etc.

  	
  80

  
	
  Section 4.17. Insurance Licenses

  	
  80

  
	
  Section 4.18. Insurance Business

  	
  81

  
	
  Section 4.19. Security Documents

  	
  81

  
	
  Section 4.20. No Section 32 Direction

  	
  81

  
	
   

  	
   

  
	
  ARTICLE V Conditions

  	
  81

  
	
   

  	
   

  
	
  Section 5.01. Restatement Effective Date

  	
  81

  
	
  Section 5.02. Each Credit Event

  	
  84

  
	
   

  	
   

  
	
  ARTICLE VI
  Affirmative Covenants

  	
  85

  
	
   

  	
   

  
	
  Section 6.01. Information Covenants

  	
  85

  
	
  Section 6.02. Books, Records and Inspections

  	
  89

  
	
  Section 6.03. Insurance

  	
  89

  
	
  Section 6.04. Payment of Taxes

  	
  89

  



 


ii





















 


	
  Section 6.05. Maintenance of Existence

  	
  89

  
	
  Section 6.06. Compliance with Statutes, etc.

  	
  90

  
	
  Section 6.07. ERISA

  	
  90

  
	
  Section 6.08. Maintenance of Property

  	
  91

  
	
  Section 6.09. Maintenance of Licenses and Permits

  	
  91

  
	
  Section 6.10. Financial Strength Ratings

  	
  91

  
	
  Section 6.11. End of Fiscal Years; Fiscal Quarters

  	
  91

  
	
  Section 6.12. Borrowing Base Requirement

  	
  91

  
	
  Section 6.13. Further Assurances

  	
  91

  
	
   

  	
   

  
	
  ARTICLE VII Negative
  Covenants

  	
  92

  
	
   

  	
   

  
	
  Section 7.01. Changes in Business and Investments

  	
  92

  
	
  Section 7.02. Consolidations, Mergers, Sales of Assets and
  Acquisitions

  	
  92

  
	
  Section 7.03. Liens

  	
  93

  
	
  Section 7.04. Indebtedness

  	
  96

  
	
  Section 7.05. Issuance of Stock

  	
  96

  
	
  Section 7.06. Dissolution

  	
  97

  
	
  Section 7.07. Restricted Payments

  	
  97

  
	
  Section 7.08. Transactions with Affiliates

  	
  97

  
	
  Section 7.09. Maximum Parent Borrower Leverage Ratio

  	
  97

  
	
  Section 7.10. Minimum Consolidated Tangible Net Worth

  	
  97

  
	
  Section 7.11. Unencumbered Liquid Assets

  	
  98

  
	
  Section 7.12. Limitation on Certain Restrictions on Subsidiaries

  	
  98

  
	
  Section 7.13. Private Act

  	
  99

  
	
   

  	
   

  
	
  ARTICLE VIII Events
  of Default

  	
  99

  
	
   

  	
   

  
	
  Section 8.01. Payments

  	
  99

  
	
  Section 8.02. Representations, etc.

  	
  99

  
	
  Section 8.03. Covenants

  	
  100

  
	
  Section 8.04. Default under other Agreements

  	
  100

  
	
  Section 8.05. Bankruptcy, etc.

  	
  100

  
	
  Section 8.06. ERISA

  	
  101

  
	
  Section 8.07. Judgments

  	
  101

  
	
  Section 8.08. Insurance Licenses

  	
  101

  
	
  Section 8.09. Intermediate Holdings Guaranty

  	
  101

  
	
  Section 8.10. Security Documents

  	
  102

  
	
  Section 8.11. Change of Control

  	
  102

  
	
  Section 8.12. Section 32 Direction

  	
  102

  
	
   

  	
   

  
	
  ARTICLE IX The
  Administrative Agent

  	
  103

  
	
   

  	
   

  
	
  Section 9.01. Appointment

  	
  103

  
	
  Section 9.02. Administrative Agent in its Individual Capacity

  	
  103

  
	
  Section 9.03. Exculpatory Provisions

  	
  103

  



 


iii





















 


	
  Section 9.04. Reliance

  	
  104

  
	
  Section 9.05. Delegation of Duties

  	
  104

  
	
  Section 9.06. Resignation

  	
  104

  
	
  Section 9.07. Non-Reliance

  	
  105

  
	
  Section 9.08. Documentation Agents

  	
  105

  
	
   

  	
   

  
	
  ARTICLE X
  Miscellaneous

  	
  105

  
	
   

  	
   

  
	
  Section 10.01. Notices

  	
  105

  
	
  Section 10.02. Waivers; Amendments

  	
  106

  
	
  Section 10.03. Expenses; Indemnity; Damage Waiver

  	
  107

  
	
  Section 10.04. Successors and Assigns

  	
  109

  
	
  Section 10.05. Survival

  	
  112

  
	
  Section 10.06. Counterparts; Integration; Effectiveness

  	
  113

  
	
  Section 10.07. Severability

  	
  113

  
	
  Section 10.08. Right of Setoff

  	
  113

  
	
  Section 10.09. Governing Law; Jurisdiction; Consent to Service
  of Process

  	
  113

  
	
  Section 10.10. WAIVER OF JURY TRIAL

  	
  114

  
	
  Section 10.11. Headings

  	
  115

  
	
  Section 10.12. Confidentiality

  	
  115

  
	
  Section 10.13. Interest Rate Limitation

  	
  115

  
	
  Section 10.14. Judgment Currency

  	
  116

  
	
  Section 10.15. Calculations

  	
  116

  
	
  Section 10.16. USA Patriot Act

  	
  117

  
	
   

  	
   

  
	
  ARTICLE XI
  Intermediate Holdings Guaranty

  	
  117

  
	
   

  	
   

  
	
  Section 11.01. The Guaranty

  	
  117

  
	
  Section 11.02. Bankruptcy

  	
  118

  
	
  Section 11.03. Nature of Liability

  	
  118

  
	
  Section 11.04. Independent Obligation

  	
  119

  
	
  Section 11.05. Authorization

  	
  119

  
	
  Section 11.06. Reliance

  	
  120

  
	
  Section 11.07. Subordination

  	
  120

  
	
  Section 11.08. Waiver

  	
  120

  



 


SCHEDULES:


 


	
  Schedule 1.01

  	
   

  	
  —

  	
   

  	
  Liability Percentages

  
	
  Schedule 2.01

  	
   

  	
  —

  	
   

  	
  Commitments

  
	
  Schedule 3A.11

  	
   

  	
  —

  	
   

  	
  Existing Tranche 1 Fronted
  Letters of Credit

  
	
  Schedule 3A.12

  	
   

  	
  —

  	
   

  	
  Existing Tranche 1 Several
  Letters of Credit

  
	
  Schedule 3B.11

  	
   

  	
  —

  	
   

  	
  Existing Tranche 2 Fronted
  Letters of Credit

  
	
  Schedule 3B.12

  	
   

  	
  —

  	
   

  	
  Existing Tranche 2 Several
  Letters of Credit

  
	
  Schedule 4.10(c)

  	
   

  	
  —

  	
   

  	
  Material Liabilities

  



 


iv





















 


	
  Schedule 4.13

  	
   

  	
  —

  	
   

  	
  Subsidiaries

  
	
  Schedule 4.14

  	
   

  	
  —

  	
   

  	
  Capitalization

  
	
  Schedule 4.15

  	
   

  	
  —

  	
   

  	
  Existing Indebteness

  
	
  Schedule 4.17

  	
   

  	
  —

  	
   

  	
  Insurance Licenses

  
	
  Schedule 7.02

  	
   

  	
  —

  	
   

  	
  Assets to be Sold

  
	
  Schedule 7.03

  	
   

  	
  —

  	
   

  	
  Liens

  
	
  Schedule 7.04(c)

  	
   

  	
  —

  	
   

  	
  Existing Intermediate Holdings
  Indebtedness

  
	
  Schedule 7.05

  	
   

  	
  —

  	
   

  	
  Preferred Stock

  



 


EXHIBITS:


 


	
  Exhibit A

  	
   

  	
  —

  	
   

  	
  Form of Borrowing Request

  
	
  Exhibit B-1

  	
   

  	
  —

  	
   

  	
  Form of Tranche 2 Note

  
	
  Exhibit B-2

  	
   

  	
  —

  	
   

  	
  Form of Tranche 3 Note

  
	
  Exhibit C-1

  	
   

  	
  —

  	
   

  	
  Form of Tranche 1 Letter of
  Credit Request

  
	
  Exhibit C-2

  	
   

  	
  —

  	
   

  	
  Form of Tranche 2 Letter of
  Credit Request

  
	
  Exhibit D

  	
   

  	
  —

  	
   

  	
  Form of Officers’
  Certificate

  
	
  Exhibit E

  	
   

  	
  —

  	
   

  	
  Form of Account Control
  Agreement

  
	
  Exhibit F

  	
   

  	
  —

  	
   

  	
  Form of Security Agreement

  
	
  Exhibit G-1

  	
   

  	
  —

  	
   

  	
  Form of Opinion of Borrower’s
  Special U.S.Counsel

  
	
  Exhibit G-2

  	
   

  	
  —

  	
   

  	
  Form of Opinion of Borrower’s
  Special Bermuda Counsel

  
	
  Exhibit G-3

  	
   

  	
  —

  	
   

  	
  Form of Opinion of Missouri
  Counsel

  
	
  Exhibit G-4

  	
   

  	
  —

  	
   

  	
  Form of Opinion of Nebraska
  Counsel

  
	
  Exhibit G-5

  	
   

  	
  —

  	
   

  	
  Form of Opinion of
  Wisconsin Counsel

  
	
  Exhibit H

  	
   

  	
  —

  	
   

  	
  Form of Assignment and
  Assumption

  
	
  Exhibit I

  	
   

  	
  —

  	
   

  	
  Form of Additional Tranche
  1 Commitment Agreement

  
	
  Exhibit J

  	
   

  	
  —

  	
   

  	
  Form of Borrowing Base
  Certificate

  
	
  Exhibit K

  	
   

  	
  —

  	
   

  	
  Form of DSB Assumption
  Agreement

  
	
  Exhibit L

  	
   

  	
  —

  	
   

  	
  Form of Non-Continuing
  Lender Agreement

  



 


v





















 


AMENDED AND RESTATED
CREDIT AGREEMENT dated as of November 29, 2005, among ARCH CAPITAL GROUP
LTD., ARCH CAPITAL GROUP (U.S.) INC., various DESIGNATED SUBSIDIARY BORROWERS
party hereto, the LENDERS party hereto, JPMORGAN CHASE BANK, N.A., as
Administrative Agent, THE BANK OF NEW YORK, as Collateral Agent, BANK OF
AMERICA, N.A., as Syndication Agent, and BARCLAYS BANK PLC, THE BANK OF NEW YORK, WACHOVIA BANK, N.A., CALYON,
CITIBANK, N.A., HSBC
BANK USA, N.A. and ING BANK N.V., LONDON BRANCH, as Documentation Agents.


 


WHEREAS, the Parent
Borrower, certain of the Designated Subsidiary Borrowers, the Existing Lenders
and JPMorgan Chase, as Administrative Agent, are parties to a Credit Agreement,
dated as of September 16, 2004 (as the same has been amended, modified or
supplemented to, but not including, the Restatement Effective Date, the “Existing
Credit Agreement”); and


 


WHEREAS, subject to and
on the terms and conditions set forth herein, (i) the parties hereto wish
to amend and restate the Existing Credit Agreement in its entirety in the form
of this Agreement, and (ii) the Lenders are willing to make available to
the Parent Borrower and the Designated Subsidiary Borrowers the credit
facilities provided herein;


 


NOW, THEREFORE, the
Parent Borrower, the Designated Subsidiary Borrowers, the Lenders and the
Administrative Agent agree that, on the Restatement Effective Date, the
Existing Credit Agreement shall be and is hereby amended and restated in its
entirety as follows:


 


ARTICLE I


 


Definitions


 


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


 


“ABR”, when used
in reference to any Loan or Borrowing, refers to whether such Loan, or the
Loans comprising such Borrowing, are bearing interest at a rate determined by
reference to the Alternate Base Rate.


 


“Account Control
Agreement” means the Second Amended and Restated Account Control Agreement,
substantially in the form of Exhibit E, dated as of the date of this
Agreement, among The Bank of New York, as Custodian, the Grantors (as defined
in the Security Agreement) from time to time party thereto and the Collateral
Agent, as amended, restated, modified and supplemented and as in effect from
time to time.


 


“Acquired Indebtedness”
means Indebtedness of the Parent Borrower or a Subsidiary of the Parent
Borrower acquired pursuant to an acquisition not prohibited under this
Agreement (or Indebtedness assumed at the time of such acquisition of an asset
securing such Indebtedness), provided that such Indebtedness was not
incurred in connection with, or in anticipation or contemplation of, such
acquisition.


 





















 


“Additional Tranche 1
Commitment” means, for each Additional Tranche 1 Lender, any commitment
provided by such Additional Tranche 1 Lender pursuant to Section 2.19, in
such amount as agreed to by such Additional Tranche 1 Lender in the respective
Additional Tranche 1 Commitment Agreement; provided that on the
Additional Tranche 1 Commitment Date upon which an Additional Tranche 1
Commitment of any Additional Tranche 1 Lender becomes effective, such Additional
Tranche 1 Commitment of such Additional Tranche 1 Lender shall (x) in the
case of an existing Tranche 1 Lender be added to (and thereafter become a part
of) the existing Tranche 1 Commitment of such existing Tranche 1 Lender for all
purposes of this Agreement as contemplated by Section 2.19 and (y) in the
case of a new Tranche 1 Lender, be converted to a Tranche 1 Commitment and
become a Tranche 1 Commitment for all purposes of this Agreement as
contemplated by Section 2.19.


 


“Additional Tranche 1
Commitment Agreement” means an Additional Tranche 1 Commitment Agreement
substantially in the form of Exhibit I (appropriately completed).


 


“Additional Tranche 1
Commitment Date” means each date upon which an Additional Tranche 1
Commitment under an Additional Tranche 1 Commitment Agreement becomes effective
as provided in Section 2.19.


 


“Additional Tranche 1
Lender” has the meaning provided in Section 2.19.


 


“Adjusted LIBO Rate”
means, with respect to any Eurodollar Borrowing for any Interest Period, an
interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%)
equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the
Statutory Reserve Rate.


 


“Administrative Agent”
means JPMorgan Chase Bank, N.A., in its capacity as administrative agent for
the Lenders hereunder.


 


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


 


“Advance Rate”
means, for any category of Cash or obligation or investment specified below in
the column entitled “Cash and Eligible Securities” (other than Cash, the “Eligible
Securities”), the percentage set forth opposite such category of Cash or
Eligible Securities below in the column entitled “Advance Rate” and, in each
case, subject to the original term to maturity criteria set forth therein:


 


2





















 


	
  Cash and Eligible Securities:

  	
   

  	
  Advance Rate:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Cash:

  

  U.S. Dollars.

  	
   

  	
  100%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Time Deposits,
  CDs and Money Market Deposits:

  

  Time deposits, certificates of deposit and money market deposits of any
  commercial bank incorporated in the United States with a rating of at least (i) AA-
  from Standard & Poor’s Ratings Services (“S&P”) and (ii) Aa3
  from Moody’s Investors Service, Inc. (“Moody’s”) and maturing within two
  years from the date of determination.

  	
   

  	
  90%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  U.S. Government
  Securities:

  

  Securities issued or directly and fully guaranteed or insured by the United
  States or any agency or instrumentality thereof (provided that the full faith
  and credit of the United States is pledged in support thereof).

  	
   

  	
  With maturities
  of (x) two years or less from the date of determination, 95%, (y) more than
  two years to ten years from the date of determination, 90% and (z) more than
  ten years from the date of determination, 85%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Investment Grade
  Municipal Bonds Level I:

  

  Municipal bonds rated at least (i) AAA from S&P and (ii) Aaa
  from Moody’s and maturing within five years from the date of determination.

  	
   

  	
  90%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Investment Grade
  Municipal Bonds Level II:

  

  Municipal bonds rated at least (i) BBB+ from S&P and (ii) Baa1
  from Moody’s and maturing within five years from the date of determination,
  but no higher than (x) AA+ from S&P and (y) Aa1 from Moody’s.

  	
   

  	
  85%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Investment Grade
  Nonconvertible Corporate Bonds Level I:

  

  Nonconvertible corporate bonds that are publicly traded on a nationally
  recognized exchange and rated at least (i) AA— from S&P and (ii) Aa3
  from Moody’s.

  	
   

  	
  

  

  With maturities of (x) two years or less from the date of determination, 90%
  and (y) more than two years to ten years from the date of determination,
  85%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Investment Grade
  Nonconvertible Corporate Bonds Level II:

  

  Nonconvertible corporate bonds that are publicly traded on a nationally
  recognized exchange and rated at least (i) BBB+ from S&P and (ii) Baa1
  from Moody’s, but no higher than (x) A+ from S&P and (y) A1 from Moody’s.

  	
   

  	
  80%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Commercial Paper:

  

  Commercial paper issued by any entity organized in the United States rated at
  least (i) A-1 or the equivalent thereof by S&P and (ii) P-1 or
  the equivalent thereof by Moody’s and maturing not more than one year after
  the date of determination.

  	
   

  	
  90%

  	
   

  



 


3





















 


	
  Cash and Eligible Securities:

  	
   

  	
  Advance Rate:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Agency
  Securities:

  

  (i) Single-class mortgage participation certificates in book-entry form
  backed by single-family residential mortgage loans, the full and timely
  payment of interest at the applicable certificate rate and the ultimate
  collection of principal of which are guaranteed by the Federal Home Loan
  Mortgage Corporation (excluding REMIC or other multi-class pass-through
  certificates, collateralized mortgage obligations, pass-through certificates
  backed by adjustable rate mortgages, securities paying interest or principal only
  and similar derivative securities); (ii) single-class mortgage
  pass-through certificates in book-entry form backed by single-family
  residential mortgage loans, the full and timely payment of interest at the
  applicable certificate rate and ultimate collection of principal of which are
  guaranteed by the Federal National Mortgage Association (excluding REMIC or
  other multi-class pass-through certificates, pass-through certificates backed
  by adjustable rate mortgages, collateralized mortgage obligations, securities
  paying interest or principal only and similar derivative securities); and (iii) single-class
  fully modified pass-through certificates in book-entry form backed by
  single-family residential mortgage loans, the full and timely payment of
  principal and interest of which is guaranteed by the Government National
  Mortgage Association (excluding REMIC or other multi-class pass-through
  certificates, collateralized mortgage obligations, pass-through certificates
  backed by adjustable rate mortgages, securities paying interest or principal
  only and similar derivatives securities).

  	
   

  	
  

  

  With maturities from the date of determination of (x) two years or less from
  the date of determination, 95%, (y) more than two years and less than ten
  years from the date of determination, 90% and (z) more than ten years from
  the date of determination, 85%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Other Securities:

  

  All other cash, investments, obligations or securities

  	
   

  	
  0%

  	
   

  



 


Notwithstanding
the foregoing, (A) the value of Eligible Securities at any time shall be determined
based on the Borrowing Base Report (as defined in the Security Agreement) then
most recently delivered by the Custodian to the Collateral Agent, (B) if
any single corporate issuer (or any Affiliate thereof) represents more than 10%
of the aggregate value of all Cash and Eligible Securities of the aggregate
amount of all Borrowing Bases, the excess over 10% shall be excluded (with such
exclusion being allocated in equal parts to each Borrowing Base at such time), (C) no
more than 10% of all corporate bonds constituting Eligible Securities under
Investment Grade Nonconvertible Corporate Bonds Level II shall at any time be
rated lower than A from S&P or lower than A2 from Moody’s and (D) the
weighted average rating of all corporate bonds constituting Eligible Securities
under both Investment Grade Nonconvertible Corporate Bonds Level I and
Investment Grade Nonconvertible Corporate Bonds Level II shall at all times be
rated at least (x) AA from S&P and (y) Aa2 from Moody’s.


 


“AESIC” means Arch
Excess & Surplus Insurance Company, a corporation organized under the
laws of Nebraska.


 


“Affected Loans”
has the meaning provided in Section 2.10(m).


 


“Affiliate” means,
with respect to a specified Person, another Person that directly, or indirectly
through one or more intermediaries, Controls or is Controlled by or is under
common Control with the Person specified.


 


4





















 


“Agents” means the
Administrative Agent, the Collateral Agent, the Custodian and the Syndication Agent.


 


“Agreement” means
this Credit Agreement, as modified, supplemented, amended, restated (including
any amendment and restatement hereof), extended or renewed from time to time.


 


“AIC” means Arch
Insurance Company, a corporation organized under the laws of Missouri.


 


“Alternate Base Rate”
means, for any day, a rate per annum equal to the greater of (a) the Prime
Rate in effect on such day and (b) the Federal Funds Effective Rate in
effect on such day plus 1⁄2 of 1%. 
Any change in the Alternate Base Rate due to a change in the Prime Rate
or the Federal Funds Effective Rate shall be effective from and including the
effective date of such change in the Prime Rate or the Federal Funds Effective
Rate, respectively.


 


“Alternate Currency”
means each of Euros and Pounds Sterling and, in the case of Letters of Credit
only, Canadian Dollars.


 


“Alternate Currency
Letter of Credit” means any Letter of Credit to the extent denominated in
an Alternate Currency.


 


“Alternate Currency
Letter of Credit Outstandings” means Letter of Credit Outstandings in
respect of an Alternate Currency Letter of Credit.


 


“Alternate Currency
Letter of Credit Sublimit” means $100,000,000.


 


“Alternate Currency
Loan” means a Tranche 2 Loan that is denominated in an Alternate Currency.


 


“Alternate Currency
Loan Sublimit” means $100,000,000.


 


“Alternative Re
Holdings” means Alternative Re Holdings Limited, a company organized under
the laws of Bermuda.


 


“Applicable Grace
Period” means two Business Days.


 


“Applicable Insurance
Regulatory Authority” means, when used with respect to any Regulated
Insurance Company, (x) the insurance department or similar administrative
authority or agency located in each state or jurisdiction (foreign or domestic)
in which such Regulated Insurance Company is domiciled or (y) to the extent
asserting regulatory jurisdiction over such Regulated Insurance Company, the
insurance department, authority or agency in each state or jurisdiction
(foreign or domestic) in which such Regulated Insurance Company is licensed,
and shall include any Federal or national insurance regulatory department,
authority or agency that may be created and that asserts regulatory
jurisdiction over such Regulated Insurance Company.


 


5





















 


“Applicable Percentage”
means, with respect to any Lender, the percentage of the total Commitments
represented by the sum of such Lender’s Commitments.  If the Commitments have terminated or
expired, the Applicable Percentages shall be determined based upon the
Commitments most recently in effect, giving effect to any assignments.


 


“Applicable Rate”
means, for any day:


 


(a)                                  with respect to any Tranche 1 Letter of
Credit Fee and any Tranche 1 Facility Fee, for any Margin Adjustment Period,
from and after any Start Date to and including the corresponding End Date, the
respective percentage per annum set forth below opposite the respective Level (i.e.,
Level 1, Level 2 or Level 3, as the case may be) indicated to have been
achieved on the applicable Test Date for such Start Date (as shown in the
respective officer’s certificate delivered pursuant to Section 6.01(c)):


 




	
   

  	
   

  	
  Level 1:

  	
   

  	
  Level 2:

  	
   

  	
  Level 3:

  	
   

  
	
  Parent Borrower

  Leverage

  Ratio

  	
   

  	
  less than or

  equal to

  0.20:1.00

  	
   

  	
  greater than

  0.20:1.00 and less

  than or equal to

  0.25:1.00

  	
   

  	
  greater than

  0.25:1.00

  	
   

  
	
  Letter of Credit Fee

  	
   

  	
  0.175

  	
  %

  	
  0.20

  	
  %

  	
  0.275

  	
  %

  
	
  Facility Fee

  	
   

  	
  0.075

  	
  %

  	
  0.10

  	
  %

  	
  0.125

  	
  %

  






 


(b)                                 with respect to any Tranche 2 Letter of
Credit Fee, interest on any Tranche 2 Loan or Tranche 3 Loan, any Tranche 2
Facility Fee or Tranche 3 Facility Fee, or any Tranche 2 Utilization Fee
or Tranche 3 Utilization Fee, for any Margin Adjustment Period, from and after
any Start Date to and including the corresponding End Date, the respective
percentage per annum set forth below opposite the respective Level (i.e., Level
1, Level 2 or Level 3, as the case may be) indicated to have been achieved on
the applicable Test Date for such Start Date (as shown in the respective
officer’s certificate delivered pursuant to Section 6.01(c)):


 




	
   

  	
   

  	
  Level 1:

  	
   

  	
  Level 2:

  	
   

  	
  Level 3:

  	
   

  
	
  Parent Borrower

  Leverage

  Ratio

  	
   

  	
  less than or

  equal to

  0.20:1.00

  	
   

  	
  greater than

  0.20:1.00 and less

  than or equal to

  0.25:1.00

  	
   

  	
  greater than

  0.25:1.00

  	
   

  
	
  Letter of
  Credit Fee and Applicable Rate for LIBOR Loans

  	
   

  	
  0.325

  	
  %

  	
  0.40

  	
  %

  	
  0.50

  	
  %

  
	
  Applicable Rate for ABR Loans

  	
   

  	
  0.00

  	
  %

  	
  0.00

  	
  %

  	
  0.00

  	
  %

  
	
  Facility Fee

  	
   

  	
  0.075

  	
  %

  	
  0.100

  	
  %

  	
  0.125

  	
  %

  
	
  Utilization Fee

  	
   

  	
  0.100

  	
  %

  	
  0.100

  	
  %

  	
  0.100

  	
  %

  






 


6





















 


Notwithstanding
the foregoing, (i) if the Parent Borrower fails to deliver the financial
statements required to be delivered pursuant to Section 6.01(a) or (b) (accompanied
by the officer’s certificate required to be delivered pursuant to Section 6.01(c) showing
the applicable Parent Borrower Leverage Ratio on the relevant Test Date) on or
prior to the respective date required by such Sections, then Level 3
pricing shall apply until such time, if any, as the financial statements
required as set forth above and the accompanying officer’s certificate have
been delivered showing the pricing for the respective Margin Adjustment Period
is at a level below Level 3 (it being understood that, in the case of any late
delivery of the financial statements and officer’s certificate as so required,
any reduction in the Applicable Rate shall apply only from and after the date
of the delivery of the complying financial statements and officer’s
certificate); (ii) except when clause (iii) below is applicable,
Level 1 pricing shall apply for the period from the Restatement Effective Date
to the date of the delivery of the Parent Borrower’s consolidated financial
statements (and related officer’s certificate) in respect of its fiscal quarter
ending December 31, 2005; and (iii) Level 3 pricing shall apply at
all times when any Event of Default is in existence.


 


“Approved Fund”
has the meaning assigned to such term in Section 10.04(b).


 


“ARC” means Arch
Reinsurance Company, a corporation organized under the laws of Nebraska.


 


“Arch Shareholder
Group” means Warburg Pincus (Bermuda) Private Equity VIII, L.P., Warburg
Pincus (Bermuda) International Partners, L.P., Warburg Pincus Netherlands
International Partners I, C.V., HFCP IV (Bermuda), L.P., H&F International
Partners IV-A (Bermuda), L.P., H&F International Partners IV-B (Bermuda),
L.P. and H&F Executive Fund IV (Bermuda), L.P.


 


“ARL” means Arch
Reinsurance Ltd., a corporation organized under the laws of Bermuda.


 


“ASIC” means Arch
Specialty Insurance Company, a corporation organized under the laws of
Wisconsin.


 


“Assignment and
Assumption” means an assignment and assumption entered into by a Lender and
an assignee (with the consent of any party whose consent is required by Section 10.04),
and accepted by the Administrative Agent, in the form of Exhibit H or any
other form approved by the Administrative Agent.


 


“Associated Cost Rate”
means, with respect to any Interest Period for Pounds Sterling Loans or Euro
Loans, the amount (expressed as a percentage rate per annum, rounded up to the
nearest four decimal places, as determined by the Administrative Agent on the
first day of such Interest Period) required to compensate the Lenders lending
from facility offices in the United Kingdom for the portion of the cost of each
such Lender of complying with the cash ratio and special deposit requirements
of the Bank of England and/or capital adequacy requirements and banking
supervision or other fees imposed by the United Kingdom Financial Services
Authority, which, in the reasonable determination of such Lender, is
attributable to such Loans 


 


7





















 


made by such
Lender from its facility office in the United Kingdom and outstanding during
such Interest Period.


 


“Authorized Officer”
means, as to any Person, the chief executive officer, the chief financial
officer, the controller, the president, any vice president, the secretary or
any other officer of such Person duly authorized by such Person to act on
behalf of such Person hereunder and under the other Credit Documents.


 


“Bankruptcy Code”
has the meaning provided in Section 8.05.


 


“Bermuda Companies Law”
means the Companies Act 1981 of Bermuda and other relevant Bermuda law.


 


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


 


“Borrower” means
each of the Parent Borrower and each Designated Subsidiary Borrower.


 


“Borrowing” means
Loans of the same Tranche and Type made, converted or continued on the same
date and, in the case of LIBOR Loans, as to which a single Interest Period is
in effect.


 


“Borrowing Base”
means, at any time, and in respect of each Designated Subsidiary Borrower, the
aggregate amount of Cash and Eligible Securities held in the Collateral
Accounts applicable to such Designated Subsidiary Borrower under the Security
Agreement at such time multiplied in each case by the respective Advance Rates
for Cash and such Eligible Securities; provided that all Cash and
Eligible Securities in respect of any Borrowing Base shall only be included in
such Borrowing Base to the extent same are subject to a first priority
perfected security interest in favor of the Collateral Agent pursuant to the
Security Documents.


 


“Borrowing Base
Certificate” means a Borrowing Base Certificate substantially in the form
of Exhibit J.


 


“Borrowing Request”
means a request by any Tranche 2/3 Borrower for a Borrowing in accordance with Section 2.03.


 


“Business Day”
means (i) for all purposes other than as covered by clauses (ii) and (iii) below,
any day excluding Saturday, Sunday and any day which shall be in the City of
New York a legal holiday or a day on which banking institutions are authorized
by law or other governmental actions to close and (ii) with respect to all
notices and determinations in connection with, and payments of principal and
interest on, LIBOR Loans, any day which is a Business Day described in clause (i) and
which is also a day for trading by and between banks in the London interbank
market and, with respect to any notices or determinations in respect of Euros,
which is customarily a “Business Day” for such notices or determinations.


 


“Canadian Dollars”
means freely transferable lawful money of Canada.


 


8





















 


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


 


“Cash Equivalents”
means, as to any Person, (i) securities issued or directly and fully
guaranteed or insured by the United States or any agency or instrumentality
thereof (provided that the full faith and credit of the United States is
pledged in support thereof) having maturities of not more than one year from
the date of acquisition, (ii) time deposits and certificates of deposit of
any commercial bank having, or which is the principal banking subsidiary of a
bank holding company organized under the laws of the United States, any State
thereof, the District of Columbia or any foreign jurisdiction having, capital,
surplus and undivided profits aggregating in excess of $200,000,000, with
maturities of not more than one year from the date of acquisition by such
Person, (iii) repurchase obligations with a term of not more than 90 days
for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause (ii) above,
(iv) commercial paper rated at least A-1 or the equivalent thereof by
S&P or at least P-1 or the equivalent thereof by Moody’s and in each case
maturing not more than one year after the date of acquisition by such Person,
and (v) investments in money market funds substantially all of whose
assets are comprised of securities of the types described in clauses (i) through
(iv) above.


 


“Change in Control”
means (a) any Person or group of Persons (as used in Sections 13 and 14 of
the Securities Exchange Act of 1934 and the rules and regulations
thereunder), other than one or more Permitted Holders, shall have become the
beneficial owner (as defined in rules promulgated by the SEC) of more than
35% of the voting securities of the Parent Borrower, (b) the occupation of
a majority of the seats (other than vacant seats) of the board of directors of
the Parent Borrower by Persons who are neither (i) nominated by the board
of directors of the Parent Borrower nor (ii) appointed by directors so
nominated or (c) the Parent Borrower shall cease to own, directly or
indirectly, 100% of the Equity Interests of any Designated Subsidiary Borrower
or Intermediate Holdings.


 


“Change in Law”
means (a) the adoption of any law, rule or regulation after the date
of this Agreement, (b) any change in any law, rule or regulation or
in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender (or, for
purposes of Section 2.14(b), by any lending office of such Lender or by
such Lender’s holding company, if any) with any request, guideline or directive
(whether or not having the force of law) of any Governmental Authority made or
issued after the date of this Agreement.


 


“Charges” has the
meaning provided in Section 10.13.


 


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


 


“Collateral Account”
has the meaning provided in the Security Agreement.


 


9





















 


“Collateral Agent”
has the meaning provided in the Security Agreement.


 


“Commitment” means
each Tranche 1 Commitment, each Tranche 2 Commitment and each Tranche 3
Commitment.


 


“Commitment Expiration
Date” means November 29, 2010.


 


“Consolidated
Indebtedness” means, as of any date of determination, (i) all
Indebtedness of the Parent Borrower and its Subsidiaries which at such time
would appear on the liability side of a balance sheet of such Persons prepared
on a consolidated basis in accordance with GAAP plus (ii) any
Indebtedness for borrowed money of any other Person (other than the Parent
Borrower or any of its Subsidiaries) as to which the Parent Borrower and/or any
of its Subsidiaries has created a Guarantee (but only to the extent of such
Guarantee).  For the avoidance of doubt, “Consolidated
Indebtedness” shall not include any Guarantees of any Person under or in
connection with letters of credit or similar facilities so long as no
unreimbursed drawings or payments have been made in respect thereof.


 


“Consolidated Net
Income” means, for any Person, for any period, net income (or loss) after
income taxes of the such Person and its Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.


 


“Consolidated Net Worth”
means, for any Person, as of any date of determination, the Net Worth of such
Person and its Subsidiaries determined on a consolidated basis in accordance
with GAAP after appropriate deduction for any minority interests in
Subsidiaries.


 


“Consolidated Tangible
Net Worth” means, for any Person, as of the date of any determination,
Consolidated Net Worth of such Person and its Subsidiaries on such date less
the amount of all intangible items included therein, including, without
limitation, goodwill, franchises, licenses, patents, trademarks, trade names,
copyrights, service marks, brand names and write-ups of assets.


 


“Consolidated Total
Capital” means, as of any date of determination, the sum of (i) Consolidated
Indebtedness and (ii) Consolidated Net Worth of the Parent Borrower at
such time.


 


“Control” means
the possession, directly or indirectly, of the power (i) to vote 10% or
more of the securities having ordinary voting power for the election of
directors of such corporation or (ii) to direct or cause the direction of
the management or policies of a Person, whether through the ability to exercise
voting power, by contract or otherwise.  “Controlling”
and “Controlled” have meanings correlative thereto.


 


“Credit Documents”
means this Agreement, each Note, each Assignment and Assumption, each Security
Document and all other documents, instruments and agreements entered into in
connection herewith or therewith.


 


“Credit Event”
means the making of any Loan or the issuance of any Letter of Credit (or any increase
of the Stated Amount thereof).


 


10





















 


“Credit Party”
means each Borrower and Intermediate Holdings.


 


“Credit Protection
Agreement” means any OTC arrangement designed to transfer credit risk from
one party to another, including credit default swaps (including, without
limitation, single name, basket and first-to-default swaps), total return swaps
and credit-linked notes.


 


“Custodian” has
the meaning provided in the Security Agreement and in the Account Control
Agreement.


 


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


 


“Designated Subsidiary
Borrower” means each of ARC, ARL, AIC, WDCIC, ASIC, AESIC and each Person
which is designated as an additional Designated Subsidiary Borrower after the
Restatement Effective Date in accordance with Section 2.20 (in each case,
unless otherwise removed as such in accordance with Section 2.21).


 


“Dispositions” has
the meaning provided in Section 7.02(b).


 


“Dividends” has
the meaning provided in Section 7.07.


 


“Documentation Agents”
means each of Barclays Bank plc, The
Bank of New York, Wachovia Bank, N.A., Calyon, Citibank, N.A., HSBC Bank USA, N.A. and ING Bank N.V., London Branch, each in its capacity as a documentation
agent under this Agreement.


 


“Dollar Equivalent”
means, at any time for the determination thereof in accordance with Section 10.15,
the amount of Dollars which could be purchased with the amount of the relevant
Alternate Currency involved in such computation at the spot exchange rate
therefor as quoted by the Administrative Agent as of 11:00 a.m. (London
time) on the date two Business Days prior to the date of any determination
thereof for purchase on such date.


 


“Dollar Loans”
means Loans denominated in Dollars.


 


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


 


“DSB Assumption
Agreement” means an assumption agreement in the form of Exhibit K.


 


“Eligible Securities”
has the meaning provided in the definition of “Advance Rates.”


 


“EMU Legislation”
means the legislative measures of the European Council for the introduction of,
changeover to or operation of a single or unified European currency.


 


“End Date” means,
with respect to any Margin Adjustment Period, the last day of such Margin
Adjustment Period.


 


11





















 


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


 


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


 


“Equity Interests”
means, with respect to any Person, shares of capital stock of (or other
ownership or profit interests in) such Person, warrants, options or other
rights for the purchase or other acquisition from such Person of shares of
capital stock of (or other ownership or profit interests in) such Person,
securities convertible into or exchangeable for shares of capital stock of (or
other ownership or profit interests in) such Person or warrants, rights or
options for the purchase or other acquisition from such Person of such shares
(or such other interests), and other ownership or profit interests in such
Person (including, without limitation, partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares,
warrants, options, rights or other interests are authorized or otherwise
existing on any date of determination.


 


“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time
and the regulations promulgated and rulings issued thereunder.  Section references to ERISA are to
ERISA, as in effect at the date of this Agreement and any subsequent provisions
of ERISA, amendatory thereof, supplemental thereto or substituted therefor.


 


“ERISA Affiliate”
means any corporation or trade or business which is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of
the Code) as the Parent Borrower or any of its Subsidiaries or is under common
control (within the meaning of Section 414(c) of the Code) with the
Parent Borrower or any of its Subsidiaries.


 


“Euro” or “€”
refers to the lawful currency of the Participating Member States, and when used
in reference to any Loan or Borrowing, refers to whether such Loan, or the
Loans comprising such Borrowing, are bearing interest at a rate determined by
reference to Euro-LIBOR.


 


“Eurodollar”, when
used in reference to any Loan or Borrowing, refers to whether such Loan, or the
Loans comprising such Borrowing, are bearing interest at a rate determined by
reference to the Adjusted LIBO Rate.


 


12





















 


“Euro-LIBOR”
means, with respect to any Euro Borrowing for any Interest Period, the rate
appearing on Page 3750 (or other appropriate page if the relevant
currency does not appear on such page) of the Dow Jones Market Service (or on
any successor or substitute page or pages of such Service, or any
successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page or pages of such
Service, as determined by the Administrative Agent from time to time for
purposes of providing quotations of interest rates applicable to deposits in
Euros in the London interbank market) at approximately 11:00 a.m., London
time, two Business Days prior to the commencement of such Interest Period, as
the rate for deposits in Euros with a maturity comparable to such Interest
Period.  In the event that such rate is
not available at such time for any reason, then “Euro-LIBOR” with
respect to such Euro Borrowing for such Interest Period shall be the rate at
which deposits in Euros of €5,000,000 and for a maturity comparable to such
Interest Period are offered by the Administrative Agent.


 


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


 


“Excluded Taxes”
means, with respect to the Administrative Agent, any Lender, or any other
recipient of any payment to be made by or on account of any obligation of any
Borrower hereunder, (a) income or franchise taxes imposed on (or measured
by) its net income or net profits by any jurisdiction under the laws of which
such recipient is organized or in which its principal office is located or, in
the case of any Lender, in which its applicable lending office is located, (b) any
branch profits taxes imposed by the United States of America or any similar tax
imposed by any other jurisdiction in which the recipient is located and (c) in
the case of a Foreign Lender (other than an assignee pursuant to a request by a
Borrower under Section 2.18(b)), any withholding tax that is imposed on
amounts payable to such Foreign Lender at the time such Foreign Lender becomes
a party to this Agreement (or designates a new lending office) or is
attributable to such Foreign Lender’s failure to comply with Section 2.16(e),
except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new lending office (or assignment),
to receive additional amounts from the Borrower with respect to such
withholding tax pursuant to Section 2.16(a).


 


“Existing Credit
Agreement” has the meaning provided in the first recital of this Agreement.


 


“Existing Lenders”
means each “Lender” under and as defined in the Existing Credit Agreement.


 


“Existing Senior Notes”
means the Parent Borrower’s 7.35% senior notes due 2034, issued pursuant to
that certain Indenture, dated as of May 4, 2004, among the Parent
Borrower, as issuer, and JPMorgan Chase Bank, N.A. (formerly known as JPMorgan
Chase Bank), as trustee, as in effect on the Restatement Effective Date and as
the same may be amended, restated, modified and/or supplemented from time to
time in accordance with the terms hereof and thereof.


 


“Existing Tranche 1
Fronted Letters of Credit” has the meaning provided in Section 3A.11.


 


13





















 


“Existing Tranche 1
Several Letters of Credit” has the meaning provided in Section 3A.12.


 


“Facility Fees”
means, collectively, the Tranche 1 Facility Fee, the Tranche 2 Facility Fee and
the Tranche 3 Facility Fee.


 


“Facility-wide
Liability Percentage” means the percentages set forth on Part III of Schedule 1.01.


 


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


 


“Final Maturity Date”
means the date when the Commitment Expiration Date has occurred, all Letters of
Credit have expired or terminated and all amounts owing hereunder have been
paid in full.


 


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


 


“Foreign Lender”
means, as to any Borrower, any Lender that is organized under the laws of a
jurisdiction other than that in which such Borrower is located.  For purposes of this definition, the United
States of America, each State thereof and the District of Columbia shall be
deemed to constitute a single jurisdiction.


 


“Foreign Pension Plan”
means any plan, fund (including, without limitation, any superannuation fund)
or other similar program established or maintained outside the United States of
America by the Parent Borrower or any one or more of its Subsidiaries primarily
for the benefit of employees of the Parent Borrower or such Subsidiaries
residing outside the United States of America, which plan, fund or other
similar program provides, or results in, retirement income, a deferral of
income in contemplation of retirement or payments to be made upon termination
of employment, and which plan is not subject to ERISA or the Code.


 


“Fronted Letters of Credit” means,
collectively, Fronted Tranche 1 Letters of Credit and Fronted Tranche 2 Letters
of Credit.


 


“Fronted Tranche 1 Letter of Credit”
has the meaning provided in Section 3A.08(a).


 


“Fronted Tranche 1 Unpaid Drawing” has
the meaning provided in Section 3A.09(a).


 


14





















 


“Fronted Tranche 2 Letter of Credit”
has the meaning provided in Section 3B.08(a).


 


“Fronted Tranche 2 Unpaid Drawing” has
the meaning provided in Section 3B.09(a).


 


“Fronting Lender” means JPMorgan Chase
Bank, N.A. (formerly known as JPMorgan Chase Bank), its successors or assigns,
and any other Lender reasonably acceptable to the Administrative Agent (or
their respective Affiliates) which is requested by the Parent Borrower and
which agrees in its sole discretion, in writing, to issue Fronted Letters of Credit
hereunder pursuant to Section 3A.08 or 3B.08; provided that no
Fronting Lender shall be required to issue more than an aggregate Stated Amount
of all Fronted Letters of Credit issued by such Fronting Lender as has been
separately agreed upon by such Fronting Lender and the Parent Borrower in
writing.


 


“Fronting Tranche 1 Participant” has
the meaning provided in Section 3A.08(b).


 


“Fronting Tranche 2
Participant” has the meaning provided in Section 3B.08(b).


 


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


 


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


 


“Guarantee” of or
by any Person (the “guarantor”) means any obligation guaranteeing or
intended to guarantee any Indebtedness, leases, dividends or other obligations
(“primary obligations”) of any other Person (the “primary obligor”)
in any manner, whether directly or indirectly, including, without limitation,
any obligation of such Person, whether or not contingent, (a) to purchase
any such primary obligation or any property constituting direct or indirect
security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (c) 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 (d) otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee shall not include (x) endorsements of
instruments for deposit or collection in the ordinary course of business or (y)
obligations of any Regulated Insurance Company under Insurance Contracts,
Reinsurance Agreements or Retrocession Agreements.  The amount of any Guarantee shall be deemed
to be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.


 


15





















 


“Guaranteed Creditors”
means and includes each of the Administrative Agent, the Collateral Agent, the
Custodian, the Lenders, the Fronting Lenders and the Issuing Agent.


 


“Guaranteed
Obligations” means all reimbursement obligations and Unpaid Drawings with
respect to Letters of Credit issued for the account of any Designated
Subsidiary Borrower other than ARL (collectively, the “Guaranteed Parties”
and each, a “Guaranteed Party”), together with all interest on such
reimbursement obligations and Unpaid Drawings accruing before and after the
filing of any insolvency proceeding and all the other obligations (including
obligations which, but for the automatic stay under Section 362(a) of
the Bankruptcy Code, would become due) and liabilities (including, without
limitation, indemnities, fees and interest thereon) of any Guaranteed Party to
any Lender, the Administrative Agent, the Fronting Lenders and the Issuing
Agent now existing or hereafter incurred under, arising out of or in connection
with, this Agreement and each other Credit Document pursuant to which any
Guaranteed Party is a party and the due performance and compliance by any such
Guaranteed Party with all the terms, conditions and agreements contained in
this Agreement and each such other Credit Document.


 


“Guaranteed Party”
has the meaning provided in the definition of “Guaranteed Obligations.”


 


“Guarantor” means
Intermediate Holdings.


 


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


 


“Hedging Agreements”
means any foreign exchange contracts, currency swap agreements, commodity price
hedging arrangements or other similar arrangements, or arrangements designed to
protect against fluctuations in the currency values.


 


“Indebtedness” of
any Person means, without duplication, (a) all obligations of such Person
for borrowed money or with respect to deposits or advances of any kind, (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such Person under conditional sale or
other title retention agreements relating to property acquired by such Person, (d) all
obligations of such Person in respect of the deferred purchase price of
property or services, (e) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed, provided
that the amount of Indebtedness of such Person shall be the lesser of (A) the
fair market value of such property at such date of determination (determined in
good faith by the Parent Borrower) and (B) the amount of such Indebtedness
of such other Person, (f) all Guarantees by such Person of Indebtedness of
others, (g) all Capital Lease Obligations of such Person, (h) all
obligations of such Person under Interest Rate Protection Agreements, Hedging
Agreements and Credit Protection Agreements, and (i) all reimbursement
obligations of such Person in respect of letters of credit, letters of guaranty,
bankers’ acceptances 


 


16





















 


and similar credit
transactions.  The Indebtedness of any
Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such
Person is liable therefor as a result of such Person’s ownership interest in or
other relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.  For the avoidance of doubt, Indebtedness
shall not include (v) trade payables (including payables under insurance
contracts and reinsurance payables) and accrued expenses in each case arising
in the ordinary course of business, (w) obligations of Regulated Insurance
Companies with respect to Policies, (x) obligations arising under deferred
compensation plans of the Parent Borrower and its Subsidiaries in effect on the
date hereof or which have been approved by the board of directors of the Parent
Borrower, (y) obligations with respect to products underwritten by Regulated
Insurance Companies in the ordinary course of business, including insurance
policies, annuities, performance and surety bonds and any related contingent
obligations and (z) reinsurance agreements entered into by any Regulated
Insurance Company in the ordinary course of business.


 


“Indemnified Taxes”
means Taxes other than Excluded Taxes.


 


“Indemnitee” has
the meaning provided in Section 10.03(b).


 


“Information” has
the meaning provided in Section 10.12.


 


“Insignificant
Subsidiary” means any Subsidiary, other than any Designated Subsidiary
Borrower or Intermediate Holdings, which has assets, earnings or revenues
which, if aggregated with the assets, earnings or revenues, as the case may be,
of all other Subsidiaries of the Parent Borrower with respect to which an event
described under Section 8.05 has occurred and is continuing, would have
assets, earnings or revenues, as the case may be, in an amount less than 10% of
the consolidated assets, earnings or revenues, as the case may be, of the
Parent Borrower and its Subsidiaries as of the end of the most recent fiscal
quarter of year of the Parent Borrower for which financial statements are
available.


 


“Insurance Business”
means one or more aspects of the business of selling, issuing or underwriting
insurance or reinsurance.


 


“Insurance Contract”
means any insurance contract or policy issued by a Regulated Insurance Company
but shall not include any Reinsurance Agreement or Retrocession Agreement.


 


“Insurance Licenses”
has the meaning provided in Section 4.17.


 


“Interest Election
Request” means a request by a Tranche 2/3 Borrower to convert or continue a
Borrowing in accordance with Section 2.05.


 


“Interest Payment Date”
means (a) with respect to any ABR Loan, the last day of each March, June, September and
December and (b) with respect to any LIBOR Loan, the last day of the
Interest Period applicable to the Borrowing of which such Loan is a part and,
in the case of a LIBOR Borrowing with an Interest Period of more than three
months’ duration, each day that would have been an Interest Payment Date had
successive Interest Periods of three months duration been applicable to such
Borrowing.


 


17





















 


“Interest Period”
means, with respect to any LIBOR Borrowing, the period commencing on the date
of such Borrowing and ending on the numerically corresponding day in the
calendar month that is one, two, three or six months (or, with the consent
of each Lender with a Commitment in the respective Tranche, nine or twelve
months) thereafter, as the respective Tranche 2/3 Borrower may elect; provided,
that (i) if any Interest Period would end on a day other than a Business
Day, such Interest Period shall be extended to the next succeeding Business Day
unless such next succeeding Business Day would fall in the next calendar month,
in which case such Interest Period shall end on the next preceding Business
Day, and (ii) any Interest Period pertaining to a LIBOR Borrowing that
commences on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the last calendar month of such
Interest Period) shall end on the last Business Day of the last calendar month
of such Interest Period.  For purposes
hereof, the date of a Borrowing initially shall be the date on which such
Borrowing is made and thereafter shall be the effective date of the most recent
conversion or continuation of such Borrowing.


 


“Interest Rate
Protection Agreement” means any interest rate swap agreement, interest rate
cap agreement, interest rate collar agreement, interest rate hedging agreement,
interest rate floor agreement, interest rate futures contract traded on a
nationally or internationally recognized exchange (including, but not limited
to, the Chicago Board of Trade, Chicago Mercantile Exchange, New York
Mercantile Exchange, New York Futures Exchange and London International
Financial Futures Exchange) or other similar agreement or arrangement.


 


“Intermediate Holdings”
means Arch Capital Group (U.S.) Inc., a corporation organized under the laws of
Delaware.


 


“Intermediate Holdings
Guaranty” means the guaranty of Intermediate Holdings provided in Article XI.


 


“Investment Grade
Securities” means (i) U.S. Government Obligations (other than Cash
Equivalents), (ii) debt securities or debt instruments with a rating of
BBB- or higher by S&P, Baa3 or higher by Moody’s, Class (2) or
higher by NAIC or the equivalent of such rating by S&P, Moody’s or NAIC, or
if none of S&P, Moody’s and NAIC shall then exist, the equivalent of such
rating by any other nationally recognized securities rating agency, but
excluding any debt securities or instruments constituting loans or advances
among the Parent Borrower and its Wholly-Owned Subsidiaries, and (iii) any
fund investing exclusively in investments of the type described in clauses (i) and
(ii) which funds may also hold immaterial amounts of cash pending
investment and/or distribution.


 


“Issuing Agent”
means JPMorgan Chase Bank, N.A..


 


“Judgment Currency”
has the meaning provided in Section 10.14(a).


 


“Judgment Currency
Conversion Date” has the meaning provided in Section 10.14(a).


 


“Legal Requirements”
means all applicable laws, rules and regulations made by any governmental
body or regulatory authority (including, without limitation, any Applicable


 


18





















 


Insurance
Regulatory Authority) having jurisdiction over the Parent Borrower or a
Subsidiary of the Parent Borrower.


 


“Lenders” means
each Tranche 1 Lender, each Tranche 2 Lender and each Tranche 3 Lender.


 


“Letter of Credit
Outstandings” means, collectively, the Tranche 1 Letter of Credit
Outstandings and the Tranche 2 Letter of Credit Outstandings.


 


“Letter of Credit
Request” means each Tranche 1 Letter of Credit Request and each Tranche 2
Letter of Credit Request.


 


“Letter of Credit
Supportable Obligations” means obligations of the Parent Borrower or any of
its Subsidiaries to any other Person which are permitted to exist pursuant to
the terms of this Agreement.


 


“Letters of Credit”
means, collectively, the Tranche 1 Letters of Credit and the Tranche 2 Letters
of Credit.


 


“LIBO Rate” means,
with respect to any Eurodollar Borrowing for any Interest Period, the rate
appearing on Page 3750 (or other appropriate page if the relevant
currency does not appear on such page) of the Dow Jones Market Service (or on
any successor or substitute page or pages of such Service, or any
successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page or pages of such
Service, as determined by the Administrative Agent from time to time for
purposes of providing quotations of interest rates applicable to deposits in
Dollars in the London interbank market) at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period, as the rate for deposits in Dollars with a maturity comparable to such
Interest Period.  In the event that such
rate is not available at such time for any reason, then the “LIBO Rate”
with respect to such Eurodollar Borrowing for such Interest Period shall be the
rate at which deposits in Dollars of $5,000,000 and for a maturity comparable
to such Interest Period are offered by the Administrative Agent.


 


“LIBOR” (i) when
used in reference to any Loan or Borrowing denominated in Dollars, refers to
whether such Loan, or the Loans comprising such Borrowing, are a Eurodollar
Loan or a Eurodollar Borrowing, (ii) when used in reference to any Loan or
Borrowing denominated in Euros, refers to whether such Loan, or the Loans
comprising such Borrowing, are a Euro Loan or a Euro Borrowing, and (iii) when
used in reference to any Loan or Borrowing denominated in Pounds Sterling,
refers to whether such Loan, or the Loans comprising such Borrowing, are a
Pounds Sterling Loan or a Pounds Sterling Borrowing.


 


“LIBOR Rate” means
the applicable Adjusted LIBO Rate, Euro-LIBOR or Pounds Sterling LIBOR, as the
case may be.


 


“Lien” means, with
respect to any asset, (a) any mortgage, deed of trust, lien, pledge,
hypothecation, encumbrance, charge or security interest in, on or of such asset,
(b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of


 


19





















 


the foregoing)
relating to such asset and (c) in the case of securities, any purchase
option, call or similar right of a third party with respect to such securities.


 


“Loan Sublimit”
means, at any time, an amount equal to the sum of the Total Tranche 2
Commitment and Total Tranche 3 Commitment at such time, minus the sum of all
reductions therefore effected pursuant to 2.10(l).


 


“Loans” means each
Tranche 2 Loan and each Tranche 3 Loan.


 


“Long-Term LC Facility”
means the Amended Letter of Credit Reimbursement Agreement, dated as of August 19,
2004 (as the same has been amended, modified or supplemented to, but not
including, the Restatement Effective Date), between ARL and Barclays Bank plc,
which provides for the issuance of letters of credit in an aggregate amount of
up to $175,000,000 (and any replacements, renewals and extensions thereof and
any successor facilities).


 


“Majority Tranche 1
Lenders” means, at any time, Tranche 1 Lenders whose Tranche 1 Commitments
(or, after the Tranche 1 Commitments have terminated, the sum of such Tranche 1
Lenders’ Tranche 1 Percentages of the Tranche 1 Letter of Credit Outstandings
at such time) represent an amount greater than 50% of the Total Tranche 1
Commitment (or after termination thereof, the Tranche 1 Letter of Credit
Outstandings at such time).


 


“Margin Adjustment
Period” means each period which shall commence on the date upon which the
respective officer’s certificate is delivered pursuant to Section 6.01(c) (together
with the related financial statements pursuant to Section 6.01(a) or
(b), as the case may be) and which shall end on the date of actual delivery of
the next officer’s certificate pursuant to Section 6.01(c) (and
related financial statements) or the latest date on which such next officer’s certificate
(and related financial statements) is required to be so delivered; it being
understood that the first Margin Adjustment Period shall commence with the
delivery of the Parent Borrower’s financial statements (and related officer’s
certificate) in respect of its fiscal year ending December 31, 2005.


 


“Margin Stock” has
the meaning provided in Regulation U.


 


“Material Adverse
Effect” means (i) a material adverse effect on the business,
operations, property or financial condition of the Parent Borrower and its
Subsidiaries taken as a whole, (ii) a material adverse effect on the
business, operations, property or financial condition of Intermediate Holdings
and its Subsidiaries taken as a whole or (iii) a material adverse effect
on (x) the rights and remedies of the Administrative Agent or the Lenders under
the Credit Documents, (y) the ability of either the Parent Borrower and its
Subsidiaries taken as a whole, or Intermediate Holdings and its Subsidiaries
taken as a whole, to perform their respective obligations under the Credit
Documents to which such entities are a party or (z) the legality, validity or
enforceability of any Credit Document.


 


“Maximum Rate” has
the meaning provided in Section 10.13.


 


“Multiemployer Plan”
means any multiemployer plan as defined in Section 4001(a)(3) of
ERISA, which is maintained or contributed to by (or to which there is an
obligation


 


20





















 


to contribute of)
the Parent Borrower, any of its Subsidiaries or any of its ERISA Affiliates,
and each such plan for the five year period immediately following the latest
date on which the Parent Borrower, such Subsidiary or such ERISA Affiliate
contributed to or had an obligation to contribute to such plan.


 


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


 


“Net Cash Proceeds”
means, for any issuance of debt or equity, the gross cash proceeds (including
any cash received by way of deferred payment pursuant to a promissory note,
receivable or otherwise, but only as and when received) received from such
issuance, net of reasonable transaction costs (including, as applicable, any
underwriting, brokerage or other customary commissions and reasonable legal,
advisory and other fees and expenses associated therewith).


 


“Net Worth” means,
as to any Person, the sum of its capital stock (including, without limitation,
its preferred stock), capital in excess of par or stated value of shares of its
capital stock (including, without limitation, its preferred stock), retained
earnings and any other account which, in accordance with GAAP, constitutes
stockholders equity, but excluding (i) any treasury stock and (ii) the
effects of Financial Accounting Statement No. 115.


 


“Non-Continuing Lender
Agreement” means the Non-Continuing Lender Agreement substantially in the
form of Exhibit L (appropriately completed).


 


“Note” means each
Tranche 2 Note and each Tranche 3 Note.


 


“Notice of
Non-Extension” has the meaning provided in Section 3A.05.


 


“Obligation Currency”
has the meaning provided in Section 10.14(a).


 


“Obligations”
means all amounts, direct or indirect, contingent or absolute, of every type or
description, and at any time existing, owing to the Administrative Agent, the
Collateral Agent, the Custodian, any Fronting Lender, the Issuing Agent or any
Lender pursuant to the terms of this Agreement or any other Credit Document.


 


“Original Effective
Date” means the “Effective Date” under and as defined in the Existing
Credit Agreement.


 


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


 


“Parent Borrower”
means Arch Capital Group Ltd., a company organized under the laws of Bermuda.


 


“Parent Borrower
Leverage Ratio” means, at any time, the ratio of (i) Consolidated
Indebtedness at such time to (ii) Consolidated Total Capital at such time.


 


21





















 


“Participant” has
the meaning set forth in Section 10.04(c).


 


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


 


“Patriot Act” has
the meaning set forth in Section 10.16.


 


“Payment Office”
means the office of the Administrative Agent located at 270 Park Avenue, New
York, New York or such other office as the Administrative Agent may designate
in writing to the Borrowers and the Lenders from time to time.


 


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


 


“Permitted Holders”
means (i) the Arch Shareholder Group and their respective Subsidiaries and
any other Person of which any member of the Arch Shareholder Group is a direct
or indirect Subsidiary, (ii) any investment fund or vehicle managed by, or
the general partner of, any of the Persons described in preceding clause (i), (iii) each
of the directors and executive officers of the Parent Borrower or any of its
Subsidiaries on the Restatement Effective Date and (iv) with respect to
any of the foregoing who is an individual, any family member of such Person,
any trust or partnership for the benefit, or any corporation that is a
Subsidiary, of such Person or such Person’s family members and any of such
individuals’, heirs, executors, successors and legal representatives.


 


“Permitted Subsidiary
Indebtedness” means:


 


(a)                                  Indebtedness of any Subsidiary of the
Parent Borrower incurred pursuant to this Agreement or any other Credit
Document;


 


(b)                                 Indebtedness of any Subsidiary of the
Parent Borrower existing on the date hereof and listed on Schedule 4.15
and refinancings by such Subsidiary thereof; provided that the aggregate
principal amount of any such refinancing Indebtedness is not greater than the
aggregate principal amount of the Indebtedness being refinanced plus the amount
of any premiums required to be paid thereon and fees and expenses associated
therewith;


 


(c)                                  Indebtedness of any Subsidiary of the
Parent Borrower under any Interest Rate Protection Agreement or Hedging
Agreement, in each case entered into to protect any such Subsidiary against
fluctuations in interest rates, currency exchange rates or other rate
fluctuations and not entered into for speculative purposes;


 


(d)                                 any Indebtedness owed by Subsidiaries of
the Parent Borrower to the Parent Borrower or any of its Subsidiaries;


 


(e)                                  Indebtedness in respect of purchase money
obligations and Capital Lease Obligations of any Subsidiary of the Parent
Borrower, and refinancings thereof; provided that the aggregate
principal amount of all such purchase money obligations and Capital


 


22





















 


Lease Obligations does not exceed at any time
outstanding $25,000,000 at the time of incurrence of any new Indebtedness under
this clause (e);


 


(f)                                    Indebtedness of any Subsidiary of the
Parent Borrower in respect of letters of credit issued to reinsurance cedents,
or to lessors of real property in lieu of security deposits in connection with
leases of any Subsidiary of the Parent Borrower, in each case in the ordinary course
of business;


 


(g)                                 Indebtedness of any Subsidiary of the
Parent Borrower incurred in the ordinary course of business in connection with
workers’ compensation claims, self-insurance obligations, unemployment
insurance or other forms of governmental insurance or benefits and pursuant to
letters of credit or other security arrangements entered into in connection
with such insurance or benefit;


 


(h)                                 Acquired Indebtedness of Subsidiaries of
the Parent Borrower;


 


(i)                                     Indebtedness incurred under securities lending
arrangements entered into in the ordinary course of business;


 


(j)                                     Indebtedness incurred under Credit
Protection Agreements entered into in the ordinary course of business;


 


(k)                                  additional Indebtedness of Subsidiaries
of the Parent Borrower not otherwise permitted under clauses (a) through
(j) of this definition which, when added to the aggregate amount of all
outstanding obligations secured by liens incurred by the Parent Borrower
pursuant to Section 7.03(t), shall not exceed at any time outstanding 5%
of the Parent Borrower’s Consolidated Net Worth at the time of incurrence of
any new Indebtedness under this clause (k); and


 


(l)                                     Indebtedness arising from Guarantees made
by any Subsidiary of the Parent Borrower of Indebtedness of the type described
in clauses (a) through (k) of this definition.


 


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


 


“Plan” means any
pension plan as defined in Section 3(2) of ERISA and subject to Title
IV of ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) the Parent Borrower or any of its Subsidiaries or
any of its ERISA Affiliates, and each such plan for the five year period
immediately following the latest date on which the Parent Borrower, any of its
Subsidiaries or any of its ERISA Affiliates maintained, contributed to or had
an obligation to contribute to such plan.


 


“Policies” means
all insurance policies, annuity contracts, guaranteed interest contracts and
funding agreements (including riders to any such policies or contracts,
certificates issued with respect to group life insurance or annuity contracts
and any contracts issued in connection with retirement plans or arrangements)
and assumption certificates issued or to be issued (or filed pending current
review by applicable Governmental Authorities) by any


 


23





















 


Regulated
Insurance Company and any coinsurance agreements entered into or to be entered
into by any Regulated Insurance Company.


 


“Pounds Sterling”
or “£” refers to the freely transferable lawful money of the United
Kingdom, and when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to Sterling LIBOR.


 


“Prime Rate” means
the rate of interest per annum publicly announced from time to time by the
Administrative Agent as its prime rate in effect at its principal office in New
York City; each change in the Prime Rate shall be effective from and including
the date such change is publicly announced as being effective.


 


“Principal Amount”
means (i) the outstanding principal amount of each Dollar Loan and/or (ii) the
Dollar Equivalent of the outstanding principal amount of each Alternate
Currency Loan, as the context may require.


 


“Private Act”
means separate legislation enacted in Bermuda with the intention that such
legislation apply specifically to any Borrower incorporated in Bermuda, in
whole or in part.


 


“Register” has the
meaning set forth in Section 10.04(b).


 


“Regulated Insurance
Company” means any Subsidiary of the Parent Borrower, whether now owned or
hereafter acquired, that is authorized or admitted to carry on or transact
Insurance Business in any jurisdiction (foreign or domestic) and is regulated
by any Applicable Insurance Regulatory Authority.


 


“Regulation D”
means Regulation D of the Board as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.


 


“Regulation T”
means Regulation T of the Board as from time to time in effect and any
successor to all or a portion thereof establishing margin requirements.


 


“Regulation U”
means Regulation U of the Board as from time to time in effect and any
successor to all or a portion thereof establishing margin requirements.


 


“Regulation X”
means Regulation X of the Board as from time to time in effect and any
successor to all or a portion thereof establishing margin requirements.


 


“Reinsurance Agreement”
means any agreement, contract, treaty, certificate or other arrangement whereby
any Regulated Insurance Company agrees to transfer, cede or retrocede to
another insurer or reinsurer all or part of the liability assumed or assets
held by such Regulated Insurance Company under a policy or policies of
insurance issued by such Regulated Insurance Company or under a reinsurance
agreement assumed by such Regulated Insurance Company.


 


24





















 


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


 


“Required Lenders”
means, at any time, Lenders whose Commitments (or, after the Commitments have
terminated, the sum of such Lenders’ (x) then outstanding Loans plus (y)
Tranche 1 Percentages of the Tranche 1 Letter of Credit Outstandings at such
time plus (z) Tranche 2 Percentages of the Tranche 2 Letter of Credit
Outstandings at such time) represent an amount greater than 50% of the Total
Commitment (or after the termination thereof, the sum of (x) the then total
outstanding Loans plus (y) the Tranche 1 Letter of Credit Outstandings
at such time plus (z) the Tranche 2 Letter of Credit Outstandings at
such time).  For purposes of this
definition, the calculation of the outstanding principal amount of all
Alternate Currency Loans and Tranche 1 Percentage and Tranche 2 Percentage of
Alternate Currency Letter of Credit Outstandings shall be determined by taking
the Dollar Equivalent thereof at the time of any such calculation.


 


“Restatement Effective
Date” means the date on which the conditions specified in Section 5.01
are satisfied (or waived in accordance with Section 10.02).


 


“Retrocession
Agreement” means any agreement, contract, treaty or other arrangement
whereby one or more insurers or reinsurers, as retrocessionaires, assume
liabilities of reinsurers under a Reinsurance Agreement or other
retrocessionaires under another Retrocession Agreement.


 


“SAP” means, with
respect to any Regulated Insurance Company, the accounting procedures and
practices prescribed or permitted by the Applicable Insurance Regulatory Authority
of the state in which such Regulated Insurance Company is domiciled; it being
understood and agreed that determinations in accordance with SAP for purposes
of Article VIII, including defined terms as used therein, are subject (to
the extent provided therein) to Section 1.04.


 


“SEC” means the
Securities and Exchange Commission or any successor thereto.


 


“Security Agreement”
means the Second Amended and Restated Security Agreement, substantially in the
form of Exhibit F, dated as of the date of this Agreement, among The Bank
of New York, as Collateral Agent, the Grantors (as defined therein) from time
to time party thereto and the Custodian, as amended, restated, modified or
supplemented and as in effect from time to time.


 


“Security Documents”
means (i) the Security Agreement, (ii) the Account Control Agreement,
(iii) each other security agreement executed and delivered pursuant to Section 6.13
and (iv) each other document, agreement, certificate and/or financing
statement executed, delivered, made or filed pursuant to the terms of the
documents specified in foregoing clauses (i), (ii) and (iii).


 


“Service of Process
Agent” means CT Corporation System, with offices on the date hereof at 111
Eighth Avenue, 13th Floor, New York, New York 10011.


 


25





















 


“Shareholders
Agreement” means the Shareholders Agreement, dated as of November 20,
2001, by and among the Parent Borrower, each member of the Arch Shareholder
Group and each other party thereto, as amended through the Restatement
Effective Date.


 


“Solvent” means,
with respect to any Person on a particular date, that on such date (a) the
amount of the “present fair saleable value” of each of the business and assets
of such Person will, as of such date, exceed the amount of all “liabilities of
such Person, contingent or otherwise”, as of such date, as such quoted terms
are determined in accordance with applicable federal and state laws governing
determinations of the insolvency of debtors, (b) the present fair saleable
value of each of the business and assets of such Person is greater than the
amount that will be required to be paid on or in respect of the probable “liability”
on the existing debts and other “liabilities contingent or otherwise” of such
Person, (c) the assets of such Person do not constitute unreasonably small
capital for such Person to carry out its business as now conducted and as
proposed to be conducted including the capital needs of such Person, taking
into account the particular capital requirements of the business conducted by
such Person and projected capital requirements and capital availability
thereof, (d) such Person does not intend to incur debts beyond their
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be received by such Person, and of amounts to be payable on
or in respect of debt of such Person) and (e) such Person does not believe
that final judgments against such Person in actions for money damages presently
pending will be rendered at a time when, or in an amount such that, they will
be unable to satisfy any such judgments promptly in accordance with their terms
(taking into account the maximum reasonable amount of such judgments in any
such actions and the earliest reasonable time at which such judgments might be
rendered) and such Person believes that its cash flow, after taking into
account all other anticipated uses of the cash of such Person (including,
without limitation, the payments on or in respect of debt referred to in paragraph
(d) of this definition), will at all times be sufficient to pay all such
judgments promptly in accordance with their terms.  For purposes of this definition, (i) ”debt”
means liability on a “claim”, and (ii) ”claim” means any (A) right to
payment, whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured or (B) right to an equitable remedy
for breach of performance if such breach gives rise to a right to payment,
whether or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured or unmatured, disputed, undisputed, secured or unsecured.


 


“Start Date”
means, with respect to any Margin Adjustment Period, the first day of such
Margin Adjustment Period.


 


“Stated Amount”
means, at any time, (i) if the respective Letter of Credit is denominated
in Dollars, the maximum amount available to be drawn thereunder (regardless of
whether any condition for drawing could then be met), and (ii) if the
respective Letter of Credit is denominated in an Alternate Currency, the Dollar
Equivalent of the maximum amount available to be drawn thereunder (regardless
of whether any conditions for drawing could then be met).


 


“Statutory Reserve
Rate” means a fraction (expressed as a decimal), the numerator of which is
the number one and the denominator of which is the number one minus the
aggregate of the maximum reserve percentages (including any marginal, special,
emergency or supplemental


 


26





















 


reserves)
expressed as a decimal established by the Board to which the Administrative
Agent is subject for Eurocurrency funding (currently referred to as “Eurocurrency
Liabilities” in Regulation D of the Board).  Such reserve percentages shall include those
imposed pursuant to such Regulation D. 
Eurodollar Loans shall be deemed to constitute Eurocurrency funding and
to be subject to such reserve requirements without benefit of or credit for
proration, exemptions or offsets that may be available from time to time to any
Lender under such Regulation D or any comparable regulation.  The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve percentage.


 


“Statutory Statements”
means, with respect to any Regulated Insurance Company for any fiscal year or
fiscal quarter, the annual or quarterly financial statements of such Regulated
Insurance Company as required to be filed with the Insurance Regulatory
Authority of its jurisdiction of domicile and in accordance with the laws of
such jurisdiction, together with all exhibits, schedules, certificates and
actuarial opinions required to be filed or delivered therewith.


 


“Sterling LIBOR”
means, with respect to any Pounds Sterling Borrowing for any Interest Period,
the rate appearing on Page 3750 (or other appropriate page if the
relevant currency does not appear on such page) of the Dow Jones Market Service
(or on any successor or substitute page or pages of such Service, or
any successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page or pages of such
Service, as determined by the Administrative Agent from time to time for
purposes of providing quotations of interest rates applicable to deposits in
Pounds Sterling in the London interbank market) at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period, as the rate for deposits in Pounds Sterling with a maturity comparable
to such Interest Period.  In the event
that such rate is not available at such time for any reason, then “Sterling
LIBOR” with respect to such Pounds Sterling Borrowing for such Interest
Period shall be the rate at which deposits in Pounds Sterling of £5,000,000 and
for a maturity comparable to such Interest Period are offered by the
Administrative Agent.


 


“Sublimit” means,
at any time, an amount equal to (x) in the case of each Designated Subsidiary
Borrower other than ARC, 75% of such Designated Subsidiary Borrower’s capital plus
surplus (each determined in accordance with SAP) as of the last day of the then
most recent quarter for which financial statements have been provided pursuant
to Section 6.01 and (y) in the case of ARC, 75% of ARC’s Consolidated Net
Worth as of the last day of the then most recent quarter for which financial
statements have been provided pursuant to Section 6.01.


 


“Subscription
Agreement” means the Subscription Agreement, dated as of October 24,
2001, as amended as of November 20, 2001, by and among the Parent Borrower
and the Purchasers party thereto.


 


“Subsidiary”
means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other
entity the accounts of which would be consolidated with those of the parent in
the parent’s consolidated financial statements if such financial statements
were prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other
entity of which securities or other ownership interests representing more than
50% of the


 


27





















 


ordinary voting
power or, in the case of a partnership, more than 50% of the general
partnership interests are, as of such date, owned, controlled or held by the
parent or one or more subsidiaries of the parent or by the parent and one or
more subsidiaries of the parent.


 


“Syndication Agent”
means Bank of America, N.A. in its capacity as syndication agent under this
Agreement.


 


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


 


“Test Date” means,
with respect to any Start Date, the last day of the most recent fiscal quarter
of the Parent Borrower ended immediately prior to such Start Date.


 


“Total Commitment”
means the sum of (i) the Total Tranche 1 Commitment plus (ii) the
Total Tranche 2 Commitment plus (iii) the Total Tranche 3
Commitment.


 


“Total Tranche 1
Commitment” means the sum of the Tranche 1 Commitments of each Tranche 1
Lender.


 


“Total Tranche 2
Commitment” means the sum of the Tranche 2 Commitments of each Tranche 2
Lender.


 


“Total Tranche 3
Commitment” means the sum of the Tranche 3 Commitments of each Tranche 3
Lender.


 


“Tranche”
means, at any time, the respective facility and commitments utilized in making
Loans and/or issuing Letters of Credit hereunder, with there being three
separate Tranches hereunder, designated as Tranche 1, Tranche 2 and Tranche 3.


 


“Tranche 1 Commitment”
means, with respect to each Lender, the amount set forth opposite such Lender’s
name on Schedule 2.01 under the heading “Tranche 1 Commitment”, as the
same may be (x) reduced or terminated pursuant to Section 2.06 and/or Article VIII,
(y) increased from time to time pursuant to Section 2.19 or (z) adjusted
from time to time as a result of assignment to or from such Lender pursuant to Section 10.04(b).


 


“Tranche 1 Facility
Fee” has the meaning provided in Section 2.11(a).


 


“Tranche 1 Lenders”
means each Lender and each Additional Tranche 1 Lender with a Tranche 1
Commitment and/or Tranche 1 Letter of Credit Outstandings.


 


“Tranche 1 Letter of
Credit” has the meaning provided in Section 3A.01(a).


 


“Tranche 1 Letter of
Credit Fee” has the meaning provided in Section 2.11(f).


 


“Tranche 1 Letter of
Credit Outstandings” means, at any time, the sum of, without duplication, (i) the
aggregate Stated Amount of all Tranche 1 Letters of Credit plus (ii) the
aggregate amount of all Tranche 1 Unpaid Drawings in respect of all Tranche 1
Letters of Credit.


 


28





















 


“Tranche 1 Letter of
Credit Request” has the meaning provided in Section 3A.02(a).


 


“Tranche 1 Liability
Percentage” means the percentages set forth on Part I of Schedule 1.01.


 


“Tranche 1 Percentage”
means, at any time for each Tranche 1 Lender, the percentage obtained by
dividing such Tranche 1 Lender’s Tranche 1 Commitment at such time by the Total
Tranche 1 Commitment then in effect, provided that, if the Total Tranche
1 Commitment has been terminated, the Tranche 1 Percentage of each Tranche 1
Lender shall be determined by dividing such Tranche 1 Lender’s Tranche 1
Commitment as in effect immediately prior to such termination by the Total
Tranche 1 Commitment as in effect immediately prior to such termination (but
also giving effect to any assignments made in accordance with Section 10.04(b) after
the date on which the Total Tranche 1 Commitment has terminated).


 


“Tranche 1 Unpaid
Drawings” has the meaning provided in Section 3A.03(a).


 


“Tranche 2/3 Borrower”
means each of the Parent Borrower and ARC.


 


“Tranche 2/3 Liability
Percentage” means the percentages set forth in Part II of Schedule 1.01.


 


“Tranche 2 Commitment”
means, with respect to each Lender, the amount set forth opposite such Lender’s
name on Schedule 2.01 under the heading “Tranche 2 Commitment”, as the
same may be (x) reduced or terminated pursuant to Section 2.07 and/or Article VIII
or (y) adjusted from time to time as a result of assignment to or from such
Lender pursuant to Section 10.04(b).


 


“Tranche 2 Credit
Exposure” means, with respect to any Tranche 2 Lender at any time, the sum
of the aggregate outstanding Principal Amount of such Tranche 2 Lender’s
Tranche 2 Loans at such time plus such Tranche 2 Lender’s Tranche 2
Percentage of all Tranche 2 Letter of Credit Outstandings at such time.


 


“Tranche 2 Facility
Fee” has the meaning provided in Section 2.11(b).


 


“Tranche 2 Lenders”
means each Lender with a Tranche 2 Commitment or with outstanding Tranche 2
Loans and/or Tranche 2 Letter of Credit Outstandings.


 


“Tranche 2 Letter of
Credit” has the meaning provided in Section 3B.01(a).


 


“Tranche 2 Letter of
Credit Fee” has the meaning provided in Section 2.11(g).


 


“Tranche 2 Letter of
Credit Outstandings” means, at any time, the sum of, without duplication, (i) the
aggregate Stated Amount of all Tranche 2 Letters of Credit plus (ii) the
aggregate amount of all Tranche 2 Unpaid Drawings in respect of all Tranche 2
Letters of Credit.


 


“Tranche 2 Letter of
Credit Request” has the meaning provided in Section 3B.02(a).


 


29





















 


“Tranche 2 Loans”
has the meaning provided in Section 2.01(a).


 


“Tranche 2 Note”
has the meaning provided in Section 2.09(e).


 


“Tranche 2 Percentage”
means, at any time for each Tranche 2 Lender, the percentage obtained by
dividing such Tranche 2 Lender’s Tranche 2 Commitment at such time by the Total
Tranche 2 Commitment then in effect, provided that, if the Total Tranche
2 Commitment has been terminated, the Tranche 2 Percentage of each Tranche 2
Lender shall be determined by dividing such Tranche 2 Lender’s Tranche 2
Commitment as in effect immediately prior to such termination by the Total
Tranche 2 Commitment as in effect immediately prior to such termination (but
also giving effect to any assignments made in accordance with Section 10.04(b) after
the date on which the Total Tranche 2 Commitment has terminated).


 


“Tranche 2 Revolving
Percentage” means, at any time, a percentage the numerator of which is the
Total Tranche 2 Commitment and the denominator of which is the sum of the Total
Tranche 2 Commitment and the Total Tranche 3 Commitment.


 


“Tranche 2 Unpaid
Drawings” has the meaning provided in Section 3B.03(a).


 


“Tranche 2 Utilization
Fee” has the meaning provided in Section 2.11(d).


 


“Tranche 3 Commitment”
means, with respect to each Tranche 3 Lender, the amount set forth opposite
such Tranche 3 Lender’s name on Schedule 2.01 hereto under the heading “Tranche
3 Commitment”, as the same may be (x) reduced or terminated pursuant to
Sections 2.08 and or Article VIII or (y) adjusted from time to time as a
result of assignment to or from such Tranche 3 Lender pursuant to Section 10.04(b).


 


“Tranche 3 Credit
Exposure” means, with respect to any Tranche 3 Lender at any time, the sum
of the aggregate outstanding Principal Amount of such Tranche 3 Lender’s
Tranche 3 Loans at such time.


 


“Tranche 3 Facility
Fee” has the meaning provided in Section 2.11(c).


 


“Tranche 3 Lenders”
means each Lender with a Tranche 3 Commitment and/or outstanding Tranche 3
Loans.


 


“Tranche 3 Loans”
has the meaning provided in Section 2.01(b).


 


“Tranche 3 Note”
has the meaning provided in Section 2.09(f).


 


“Tranche 3 Percentage”
means, at any time for each Tranche 3 Lender, the percentage obtained by
dividing such Tranche 3 Lender’s Tranche 3 Commitment at such time by the Total
Tranche 3 Commitment then in effect, provided that, if the Total Tranche
3 Commitment has been terminated, the Tranche 3 Percentage of each Tranche 3
Lender shall be determined by dividing such Tranche 3 Lender’s Tranche 3
Commitment as in effect immediately prior to such termination by the Total
Tranche 3 Commitment as in effect immediately prior to such termination (but
also giving effect to any assignments made in accordance with Section 10.04(b) after
the date on which the Total Tranche 3 Commitment has terminated).


 


30





















 


“Tranche 3 Revolving
Percentage” means, at any time, a percentage the numerator of which is the
Total Tranche 3 Commitment and the denominator of which is the sum of the Total
Tranche 2 Commitment and the Total Tranche 3 Commitment.


 


“Tranche 3 Utilization
Fee” has the meaning provided in Section 2.11(e).


 


“Transactions”
means the execution, delivery and performance by each Borrower of this
Agreement, the borrowing of Loans, the issuing of Letters of Credit and the use
of the proceeds thereof.


 


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


 


“Unpaid Drawings”
means, collectively, the Tranche 1 Unpaid Drawings and Tranche 2 Unpaid
Drawings.


 


“Utilization Fees”
means, collectively, the Tranche 2 Utilization Fee and the Tranche 3
Utilization Fee.


 


“WDCIC” means
Western Diversified Casualty Insurance Company, a corporation organized under
the laws of Wisconsin.


 


“Wholly-Owned
Subsidiary” of any Person means any Subsidiary of such Person to the extent
all of the capital stock or other ownership interests in such Subsidiary, other
than directors’ or nominees’ qualifying shares, is owned directly or indirectly
by such Person.


 


Section 1.02.  Classification of Loans and Borrowings.  For purposes of this Agreement, Loans may be
classified and referred to by Type (e.g., a “Eurodollar Loan”).  In addition, Borrowings and Letters of Credit
also may be classified and referred to by Tranche (e.g., a “Tranche 2
Borrowing”).


 


Section 1.03.  Terms Generally.  The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms.  The words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”.  The word “will” shall be construed to have
the same meaning and effect as the word “shall”.  Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument or other
document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (b) any reference herein to any Person shall be
construed to include such Person’s successors and assigns, (c) the words “herein”,
“hereof” and “hereunder”, and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision
hereof, (d) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, this Agreement and (e) the words “asset” and “property”
shall be construed to have the same


 


31





















 


meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, securities, accounts and contract
rights.


 


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


 


ARTICLE II


 


The Credits


 


Section 2.01.  Tranche 2 and Tranche 3 Commitments.  (a)  Subject to and upon the terms and
conditions set forth herein, each Tranche 2 Lender severally agrees, at any
time and from time to time on and after the Restatement Effective Date and
prior to the Commitment Expiration Date, to make a revolving loan or loans
(each, a “Tranche 2 Loan” and, collectively, the “Tranche 2 Loans”)
to one or more of the Tranche 2/3 Borrowers (on a several basis), which Tranche
2 Loans (i) shall be denominated in Dollars or in an Alternate Currency; provided,
however, in no event shall the aggregate Principal Amount of all
outstanding Alternate Currency Loans at any time exceed the Alternate Currency
Loan Sublimit; (ii) may be repaid and reborrowed in accordance with the
provisions hereof; (iii) except as hereinafter provided, shall, at the
option of the respective Tranche 2/3 Borrower, (x) in the case of Dollar Loans,
be incurred and maintained as, and/or converted into, ABR Loans or Eurodollar
Loans, and (y) in the case of Alternate Currency Loans, be incurred and maintained
as LIBOR Loans in the respective Alternate Currency, provided that (in
either case) all Tranche 2 Loans made as part of the same Borrowing shall,
unless otherwise specified herein, consist of Tranche 2 Loans of the same Type;
(iv) shall not exceed for any Tranche 2 Lender at any time outstanding
that aggregate Principal Amount which, when added to such Tranche 2 Lender’s
Tranche 2 Percentage of all Tranche 2 Letter of Credit Outstandings (if any)
(exclusive of Tranche 2 Unpaid Drawings which are repaid with the proceeds of,
and simultaneously with the incurrence of, the respective incurrence of Tranche
2 Loans) at such time, equals the Tranche 2 Commitment of such Tranche 2 Lender
at such time; (v) may not be incurred by any Tranche 2/3 Borrower if the
Principal Amount of such Tranche 2 Loans, when added to (x) all Tranche 2
Letter of Credit Outstandings and (y) the aggregate Principal Amount of all
Tranche 2 Loans then outstanding, exceeds the Total Tranche 2 Commitment at
such time; (vi) may not be incurred by any Tranche 2/3 Borrower if the
Principal Amount of such Tranche 2 Loans, when added to the aggregate Principal
Amount of all Tranche 2 Loans and Tranche 3 Loans then outstanding, exceeds the
Loan Sublimit at such time; (vii) may not be incurred by ARC if the
Principal Amount of such Tranche 2 Loans, when added


 


32





















 


to (x) the Tranche 2 Letter of Credit Outstandings in respect of
Tranche 2 Letters of Credit issued for the account of ARC at such time and (y)
the aggregate Principal Amount of all Tranche 2 Loans and Tranche 3 Loans
incurred by ARC and then outstanding, exceeds an amount equal to $100,000,000
at such time; and (viii) may not be incurred by ARC if the Principal
Amount of such Tranche 2 Loans, when added to (w) the Tranche 1 Letter of
Credit Outstandings in respect of Tranche 1 Letters of Credit issued for the
account of ARC at such time, (x) the Tranche 2 Letter of Credit Outstandings in
respect of Tranche 2 Letters of Credit issued for the account of ARC at
such time, (y) the aggregate Principal Amount of all Tranche 2 Loans incurred
by ARC and then outstanding and (z) the aggregate Principal Amount of all
Tranche 3 Loans incurred by ARC and then outstanding, exceeds ARC’s Sublimit at
such time.


 


(b)                                 Subject to and upon the terms
and conditions set forth herein, each Tranche 3 Lender severally agrees, at any
time and from time to time on and after the Restatement Effective Date and
prior to the Commitment Expiration Date, to make a revolving loan or loans
(each, a “Tranche 3 Loan” and, collectively, the “Tranche 3 Loans”) to one or
more of the Tranche 2/3 Borrowers, which Tranche 3 Loans (i) shall be
denominated in Dollars; (ii) except as hereinafter provided, shall, at the
option of the respective Tranche 2/3 Borrower, be incurred and maintained as
and/or converted into ABR Loans or Eurodollar Loans, provided that all
Tranche 3 Loans comprising the same Borrowing shall at all times be of the same
Type; (iii) may be repaid and reborrowed at any time in accordance with
the provisions hereof; (iv) shall not exceed for any Tranche 3 Lender at
any time outstanding that aggregate Principal Amount which equals the Tranche 3
Commitment of such Tranche 3 Lender at such time; (v) may not be incurred
by any Tranche 2/3 Borrower if such Tranche 3 Loan, when added to the aggregate
principal amount of all Tranche 3 Loans then outstanding, exceeds the Total
Tranche 3 Commitment at such time; (vi) may not be incurred by any Tranche
2/3 Borrower if the Principal Amount of such Tranche 3 Loans, when added to the
aggregate Principal Amount of all Tranche 2 Loans and Tranche 3 Loans then
outstanding, exceeds the Loan Sublimit at such time; (vii) may not be
incurred by ARC if the Principal Amount of such Tranche 3 Loans, when added to
(x) the Tranche 2 Letter of Credit Outstandings in respect of Tranche 2 Letters
of Credit issued for the account of ARC at such time and (y) the aggregate
Principal Amount of all Tranche 2 Loans and Tranche 3 Loans incurred by ARC and
then outstanding, exceeds $100,000,000 at such time; and (viii) may not be
incurred by ARC if the Principal Amount of such Tranche 3 Loan, when added to
(w) the Tranche 1 Letter of Credit Outstandings in respect of Tranche 1 Letters
of Credit issued for the account of ARC at such time, (x) the Tranche 2 Letter
of Credit Outstandings in respect of Tranche 2 Letters of Credit issued for the
account of ARC at such time, (y) the aggregate Principal Amount of all Tranche
2 Loans incurred by ARC and then outstanding and (z) the aggregate Principal
Amount of all Tranche 3 Loans incurred by ARC and then outstanding, exceeds ARC’s
Sublimit at such time.


 


(c)                                  Notwithstanding anything to the
contrary contained in this Section 2.01 or elsewhere in this Agreement,
each incurrence of Tranche 2 Loans or Tranche 3 Loans shall, in each case,
consist of a Borrowing of Tranche 2 Loans and a Borrowing of Tranche 3 Loans,
with such Borrowings to be made pro  rata on the basis of the
Tranche 2 Revolving Percentage and the Tranche 3 Revolving Percentage, in each
case as in effect at the time of such Borrowings (and, in the case of any
Borrowing of Alternate Currency Loans, taking the Dollar Equivalent thereof at
the time of such Borrowing).


 


33





















 


Section 2.02.  Loans and Borrowings.  (a)  All Borrowings of Loans under this
Agreement shall be incurred by the respective Tranche 2/3 Borrower from the
Lenders pro  rata on the basis of their respective Tranche 2
Commitments or Tranche 3 Commitments, as the case may be.  The failure of any Lender to make any Loans
required to be made by it shall not relieve any other Lender of its obligations
hereunder. 


 


(b)                                 Subject to Section 2.13,
each Borrowing shall be comprised entirely of ABR Loans, Eurodollar Loans, Euro
Loans or Pounds Sterling Loans as the respective Tranche 2/3 Borrower may
request in accordance herewith.  Each
Lender at its option may make any LIBOR Loan by causing any domestic or foreign
branch or Affiliate of such Lender to make such Loan; provided that any
exercise of such option shall not affect the obligation of the respective
Tranche 2/3 Borrower to repay such Loan in accordance with the terms of this
Agreement.


 


(c)                                  At the commencement of each
Interest Period for any LIBOR Borrowing, such Borrowing shall be in an
aggregate amount that is an integral multiple of $1,000,000 and not less than
$5,000,000 (in either case, using the Dollar Equivalent thereof in the case of
an Alternate Currency Loan).  At the time
that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount
that is an integral multiple of $1,000,000 and not less than $5,000,000.  Borrowings of more than one Type may be
outstanding at the same time under each respective Tranche; provided
that there shall not at any time be more than a total of ten LIBOR Borrowings
outstanding in the aggregate for all Tranches.


 


(d)                                 Notwithstanding any other
provision of this Agreement, no Tranche 2/3 Borrower shall be entitled to
request, or to elect to convert or continue, any Borrowing if the Interest
Period requested with respect thereto would end after the Commitment Expiration
Date.


 


Section 2.03.  Requests for Borrowings.  To request a Borrowing, a Tranche 2/3
Borrower shall notify the Administrative Agent of such request by telephone (a) in
the case of a Eurodollar Borrowing, not later than 10:00 a.m., New
York City time, three Business Days before the date of the proposed
Borrowing, (b) in the case of a Euro Borrowing or a Pounds Sterling
Borrowing, not later than 10:00 a.m., New York City time, four
Business Days before the date of the proposed Borrowing, or (c) in the
case of an ABR Borrowing, not later than 11:00 a.m., New York City
time, on the date of the proposed Borrowing. 
Each such telephonic Borrowing Request shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy to the Administrative Agent of
a written Borrowing Request in the form of Exhibit A appropriately
completed and signed by such Tranche 2/3 Borrower.  Each such telephonic and written Borrowing
Request shall specify the following information in compliance with Section 2.02:


 


(i)                                     the
aggregate Principal Amount of the requested Borrowing;


 


(ii)                                  in
the case of an Alternate Currency Loan, the Alternate Currency for such Borrowing;


 


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


 


34





















 


(iv)                              whether
such Borrowing shall consist of Tranche 2 Loans or Tranche 3 Loans;


 


(v)                                 whether
such Borrowing is to be an ABR Borrowing, a Eurodollar Borrowing, a Euro
Borrowing or a Pounds Sterling Borrowing;


 


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


 


(vii)                           the
location and number of such Tranche 2/3 Borrower’s account to which funds are
to be disbursed.


 


If no election as to the
Type of Borrowing is specified, then such Borrowing shall be an ABR
Borrowing.  If no Interest Period is
specified with respect to any requested LIBOR Borrowing, then such Tranche 2/3
Borrower shall be deemed to have selected an Interest Period of one month’s
duration.  Promptly following receipt of
a Borrowing Request in accordance with this Section, the Administrative Agent
shall advise each Lender which is required to make Loans under the respective
Tranche specified in the respective Borrowing Request of the details thereof
and of the amount of such Lender’s Loan to be made as part of the requested
Borrowing.


 


Section 2.04.  Funding of Borrowings.  (a)  Each Lender shall make each Loan to
be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds by 12:00 noon, New York City time, to the account
of the Administrative Agent most recently designated by it for such purpose by
notice to the Lenders.  All such amounts
shall be made available to the Administrative Agent (x) in Dollars in the case
of Dollar Loans and (y) in the applicable Alternate Currency in the case of
Alternate Currency Loans.  The
Administrative Agent will make such Loans available to the respective Tranche
2/3 Borrower by wire transfer of immediately available funds not later than
2:00 p.m. New York City time to the account of such Tranche 2/3 Borrower
designated by such Tranche 2/3 Borrower in the applicable Borrowing Request.


 


(b)                                 Unless the Administrative Agent
shall have received notice from a Lender prior to the proposed date of any
Borrowing that such Lender will not make available to the Administrative Agent
its respective share of such Borrowing, the Administrative Agent may assume
that such Lender has made such share available on such date in accordance with
paragraph (a) of this Section and may, in reliance upon such
assumption, make available to each Tranche 2/3 Borrower a corresponding
amount.  In such event, if a Lender has
not in fact made its share of the applicable Borrowing available to the
Administrative Agent, then the applicable Lender and the respective Tranche 2/3
Borrower severally agree to pay to the Administrative Agent forthwith on demand
such corresponding amount with interest thereon, for each day from and
including the date such amount is made available to such Tranche 2/3 Borrower
to but excluding the date of payment to the Administrative Agent, at (i) in
the case of such Lender, the greater of the Federal Funds Effective Rate and a
rate determined by the Administrative Agent in accordance with banking industry
rules on interbank compensation or (ii) in the case of such Tranche
2/3 Borrower, the interest rate applicable to ABR Loans.  If such Lender pays such


 


35





















 


amount to the Administrative Agent, then such
amount shall constitute such Lender’s Loan included in such Borrowing.


 


Section 2.05.  Interest Elections.  (a)  Each Borrowing initially
shall be of the Type and Tranche specified in the applicable Borrowing Request
and, in the case of a LIBOR Borrowing, shall have an initial Interest Period as
specified in such Borrowing Request. 
Thereafter, the respective Tranche 2/3 Borrower may (x) in the case of
Dollar Loans, elect to convert such Borrowing of the same Tranche to a
different Type of Dollar Loan of such Tranche or (y) in the case of each Type
of Loan of such Tranche, to continue such Borrowing and, in the case of a LIBOR
Borrowing, may elect Interest Periods therefor, all as provided in this
Section.  Subject to the other provisions
of this Section 2.05, the respective Tranche 2/3 Borrower may elect
different options with respect to different portions of the affected Borrowing,
in which case each such portion shall be allocated ratably among the respective
Lenders holding the Loans comprising such Borrowing, and the Loans comprising
each such portion shall be considered a separate Borrowing.


 


(b)                                 To make an election pursuant to
this Section 2.05, a Tranche 2/3 Borrower shall notify the Administrative
Agent of such election by telephone by the time that a Borrowing Request would
be required under Section 2.03 if such Tranche 2/3 Borrower were
requesting a Borrowing of the Type and Tranche resulting from such election to
be made on the effective date of such election. 
Each such telephonic Interest Election Request shall be irrevocable and
shall be confirmed promptly by hand delivery or telecopy to the Administrative
Agent of a written Interest Election Request in a form approved by the
Administrative Agent and signed by such Tranche 2/3 Borrower.


 


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


 


(i)                                     the
Borrowing to which such Interest Election Request applies and, if different
options are being elected with respect to different portions thereof, the
portions thereof to be allocated to each resulting Borrowing (in which case the
information to be specified pursuant to clauses (iv) and (v) below
shall be specified for each resulting Borrowing);


 


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


 


(iii)                               whether
such Borrowing consists of Tranche 2 Loans or Tranche 3 Loans;


 


(iv)                              whether
the resulting Borrowing is to be an ABR Borrowing, a Eurodollar Borrowing, a
Euro Borrowing or a Pounds Sterling Borrowing; and


 


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


 


36





















 


If any such Interest
Election Request requests a LIBOR Borrowing but does not specify an Interest
Period, then such Tranche 2/3 Borrower shall be deemed to have selected an
Interest Period of one month’s duration.


 


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


 


(e)                                  If any Tranche 2/3 Borrower
fails to deliver a timely Interest Election Request with respect to a LIBOR Borrowing
prior to the end of the Interest Period applicable thereto, then, unless such
Borrowing is repaid as provided herein, at the end of such Interest Period such
Borrowing shall (x) in the case of a Eurodollar Borrowing, be converted to an
ABR Borrowing and (y) in the case of a Euro Borrowing or a Pounds Sterling
Borrowing, be continued as a LIBOR Borrowing of the same Type and with an
Interest Period of one month’s duration. 
Notwithstanding any contrary provision hereof, if an Event of Default
has occurred and is continuing and the Administrative Agent, at the request of
the Required Lenders, so notifies such Tranche 2/3 Borrower, then, so long as
an Event of Default is continuing (i) no outstanding Borrowing may be
converted to or continued as a Eurodollar Borrowing, (ii) unless repaid,
each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of
the Interest Period applicable thereto and (iii) unless repaid, each Euro
Borrowing and Pounds Sterling Borrowing shall be continued as a LIBOR Borrowing
of the same Type with an Interest Period of one month’s duration.


 


Section 2.06.  Termination and Reduction of Tranche 1
Commitments.  (a)  Unless
previously terminated, the Tranche 1 Commitments shall terminate on the
Commitment Expiration Date.


 


(b)                                 In addition to any other Tranche
1 Commitment reductions hereunder, the Tranche 1 Commitments shall be reduced
on the dates and in the amounts specified in Section 2.10.


 


(c)                                  The Designated Subsidiary
Borrowers may at any time terminate, or from time to time reduce, the Tranche 1
Commitments; provided that (i) each reduction of the Tranche 1
Commitments shall be in an amount that is an integral multiple of $5,000,000
and not less than $5,000,000 and (ii) the Designated Subsidiary Borrowers
shall not terminate or reduce the Tranche 1 Commitments if, as a result
thereof, the aggregate amount of all Tranche 1 Letter of Credit Outstandings
would exceed the Total Tranche 1 Commitments. 
Each such reduction shall be applied to the Tranche 1 Commitments of the
Tranche 1 Lenders on a pro  rata basis based on the amount of such
Tranche 1 Lenders’ respective Tranche 1 Commitments.


 


(d)                                 The Designated Subsidiary
Borrowers shall notify the Administrative Agent of any election to terminate or
reduce the Tranche 1 Commitments under paragraph (c) of this Section at
least three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof.  Promptly following receipt of any notice, the
Administrative Agent shall advise the Tranche 1 Lenders of the contents
thereof.  Each notice delivered by the
Designated Subsidiary Borrowers pursuant to this Section 2.06 shall be
irrevocable; provided that a notice of termination of Tranche 1
Commitments delivered by the


 


37





















 


Designated Subsidiary Borrowers may state
that such notice is conditioned upon the effectiveness of other credit
facilities, in which case such notice may be revoked by the Designated
Subsidiary Borrowers (by notice to the Administrative Agent on or prior to the
specified effective date) if such condition is not satisfied.  Any termination or reduction of any Tranche 1
Commitments shall be permanent.


 


Section 2.07.  Termination and Reduction of Tranche 2
Commitments.  (a) Unless
previously terminated, the Tranche 2 Commitments shall terminate on the
Commitment Expiration Date.


 


(b)                                 In addition to any other Tranche
2 Commitment reductions hereunder, the Tranche 2 Commitments shall be reduced
on the dates and in the amounts specified in Section 2.10.


 


(c)                                  The Tranche 2/3 Borrowers may at
any time terminate, or from time to time reduce, Tranche 2 Commitments; provided
that (i) each reduction of the Tranche 2 Commitments, when combined with
the pro  rata reduction to the Tranche 3 Commitments as required
below, shall be in an aggregate amount that is an integral multiple of
$5,000,000 and not less than $5,000,000 and (ii) the Tranche 2/3 Borrowers
shall not terminate or reduce the Tranche 2 Commitments if, after giving effect
to any concurrent prepayment of the Tranche 2 Loans in accordance with Section 2.10,
(x) any Tranche 2 Lender’s Tranche 2 Credit Exposure would exceed such Tranche
2 Lender’s Tranche 2 Commitment or (y) the sum of the aggregate Principal
Amount of all Tranche 2 Loans outstanding plus the aggregate amount
of all Tranche 2 Letter of Credit Outstandings would exceed the Total Tranche 2
Commitment.  Notwithstanding anything to
the contrary contained in this Section or elsewhere in this Agreement, any
reduction to the Tranche 2 Commitment shall be applied pro  rata
to the Total Tranche 2 Commitment and the Total Tranche 3 Commitment based on
the Tranche 2 Revolving Percentage and the Tranche 3 Revolving Percentage, in
each case as in effect at the time of any such reduction.  Each reduction to the Total Tranche 2
Commitment shall be applied to the Tranche 2 Commitments of each Tranche 2
Lender on a pro  rata basis based on the amount of such
Tranche 2 Lenders’ respective Tranche 2 Commitments.


 


(d)                                 The Tranche 2/3 Borrowers shall
notify the Administrative Agent of any election to terminate or reduce the
Tranche 2 Commitments under paragraph (c) of this Section at
least three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof.  Promptly following receipt of any notice, the
Administrative Agent shall advise the Tranche 2 Lenders of the contents
thereof.  Each notice delivered by the
Tranche 2/3 Borrowers pursuant to this Section 2.07 shall be irrevocable; provided
that a notice of termination of Tranche 2 Commitments delivered by the Tranche
2/3 Borrowers may state that such notice is conditioned upon the effectiveness
of other credit facilities, in which case such notice may be revoked by the
Tranche 2/3 Borrowers (by notice to the Administrative Agent on or prior to the
specified effective date) if such condition is not satisfied.  Any termination or reduction of any Tranche 2
Commitments shall be permanent.


 


Section 2.08.  Termination and Reduction of Tranche 3
Commitments.  (a)  Unless
previously terminated, the Tranche 3 Commitments shall terminate on the
Commitment Expiration Date.


 


38





















 


(b)                                 In addition to any other Tranche
3 Commitment reductions hereunder, the Tranche 3 Commitments shall be reduced
on the dates and in the amounts specified in Section 2.10.


 


(c)                                  The Tranche 2/3 Borrowers may at
any time terminate, or from time to time reduce, the Tranche 3 Commitments; provided
that (i) each reduction of the Tranche 3 Commitments, when combined with
the pro  rata reduction of the Tranche 2 Commitments as required
below, shall be in an aggregate amount that is an integral multiple of
$5,000,000 and not less than $5,000,000 and (ii) the Tranche 2/3 Borrowers
shall not terminate or reduce the Tranche 3 Commitments if, after giving effect
to any concurrent prepayment of the Tranche 3 Loans in accordance with Section 2.10,
(x) any Tranche 3 Lender’s Tranche 3 Credit Exposure would exceed such Tranche
3 Lender’s Tranche 3 Commitment or (y) the sum of the aggregate Principal
Amount of all Tranche 3 Loans outstanding would exceed the Total Tranche 3
Commitment.  Notwithstanding anything to
the contrary contained in this Section or elsewhere in this Agreement, any
reduction to the Tranche 3 Commitment shall be applied pro  rata
to the Total Tranche 2 Commitment and the Total Tranche 3 Commitment based on
the Tranche 2 Revolving Percentage and the Tranche 3 Revolving Percentage, in
each case as in effect at the time of any such reduction.  Each reduction to the Total Tranche 3
Commitment shall be applied to the Tranche 3 Commitments of each Tranche 3
Lender on a pro  rata basis based on the respective amount of such
Tranche 3 Lender’s Tranche 3 Commitments.


 


(d)                                 The Tranche 2/3 Borrowers shall
notify the Administrative Agent of any election to terminate or reduce the
Tranche 3 Commitments under paragraph (c) of this Section at
least three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof.  Promptly following receipt of any notice, the
Administrative Agent shall advise the Tranche 3 Lenders of the contents
thereof.  Each notice delivered by the
Tranche 2/3 Borrowers pursuant to this Section 2.08 shall be irrevocable; provided
that a notice of termination of Tranche 3 Commitments delivered by the Tranche
2/3 Borrowers may state that such notice is conditioned upon the effectiveness
of other credit facilities, in which case such notice may be revoked by the
Tranche 2/3 Borrowers (by notice to the Administrative Agent on or prior to the
specified effective date) if such condition is not satisfied.  Any termination or reduction of any Tranche 3
Commitments shall be permanent.


 


Section 2.09.  Repayment of Loans; Evidence of Debt.  (a)  Each Tranche 2/3 Borrower hereby
severally and unconditionally promises to pay to the Administrative Agent for
the account of each Lender with any Loans outstanding to such Tranche 2/3 Borrower
the then unpaid principal amount of all such Loans on the Commitment Expiration
Date.


 


(b)                                 Each Lender shall maintain in
accordance with its usual practice an account or accounts evidencing the
indebtedness of each Tranche 2/3 Borrower to such Lender resulting from each
Loan made by such Lender, including the amounts of principal and interest
payable and paid to such Lender from time to time hereunder.


 


(c)                                  The Administrative Agent shall
maintain accounts in which it shall record (i) the amount of each Loan
made hereunder, the Tranche and Type thereof and the Interest Period applicable
thereto, (ii) the amount of any principal or interest due and payable or
to become due and payable from each Tranche 2/3 Borrower to each Lender
hereunder and (iii) the


 


39





















 


amount of any sum received by the
Administrative Agent hereunder for the account of the Lenders and each such
Lender’s share thereof.


 


(d)                                 The entries made in the accounts
maintained pursuant to paragraph (b) or (c) of this Section shall
be prima  facie evidence of the existence and amounts of the
obligations recorded therein; provided that the failure of any Lender or
the Administrative Agent to maintain such accounts or any error therein shall
not in any manner affect the obligation of any Tranche 2/3 Borrower to repay
the Loans in accordance with the terms of this Agreement.


 


(e)                                  Any Tranche 2 Lender may request
that Tranche 2 Loans made by it be evidenced by a promissory note.  In such event, the relevant Tranche 2/3
Borrower shall prepare, execute and deliver to such Tranche 2 Lender a
promissory note payable to the order of such Tranche 2 Lender (or, if requested
by such Tranche 2 Lender, to such Tranche 2 Lender and its registered assigns)
substantially in the form of Exhibit B-1 with blanks appropriately
completed in conformity herewith (each, a “Tranche 2 Note” and
collectively, the “Tranche 2 Notes”). 
Thereafter, the Tranche 2 Loans evidenced by such Tranche 2 Note
and interest thereon shall at all times (including after assignment pursuant to
Section 10.04) be represented by one or more Tranche 2 Notes payable to
the order of the payee named therein (or, if such promissory note is a
registered note, to such payee and its registered assigns).


 


(f)                                    Any Tranche 3 Lender may request
that Tranche 3 Loans made by it be evidenced by a promissory note.  In such event, the relevant Tranche 2/3
Borrower shall prepare, execute and deliver to such Tranche 3 Lender a promissory
note payable to the order of such Tranche 3 Lender (or, if requested by such
Tranche 3 Lender, to such Tranche 3 Lender and its registered assigns)
substantially in the form of Exhibit B-2 with blanks appropriately
completed in conformity herewith (each, a “Tranche 3 Note” and collectively,
the “Tranche 3 Notes”). 
Thereafter, the Tranche 3 Loans evidenced by such Tranche 3 Note and
interest thereon shall at all times (including after assignment pursuant to Section 10.04)
be represented by one or more Tranche 3 Notes payable to the order of the payee
named therein (or, if such promissory note is a registered note, to such payee
and its registered assigns).


 


Section 2.10.  Prepayments; Additional Collateral.  (a)  Each
Tranche 2/3 Borrower shall have the right at any time and from time to time to
prepay any of its Borrowings in whole or in part, without premium or penalty,
except as provided in Section 2.15, subject to the terms and conditions
set forth in paragraph (b) of this Section.


 


(b)                                 Such Tranche 2/3 Borrower shall
notify the Administrative Agent by telephone (confirmed by telecopy) of any
prepayment of Loans hereunder (i) in the case of prepayment of a LIBOR
Borrowing, not later than 11:00 a.m., New York City time, three Business
Days before the date of prepayment, or (ii) in the case of prepayment of
an ABR Borrowing, not later than 11:00 a.m., New York City time, one
Business Day before the date of prepayment. 
Each such notice shall be irrevocable and shall specify (i) whether
the prepayment is in respect to Tranche 2 Loans or Tranche 3 Loans, (ii) the
prepayment date, (iii) in the case of LIBOR Loans, the specific Borrowing
or Borrowings which are to be prepaid and (iv) the principal amount of
each such Borrowing or portion thereof to be prepaid (stated in Dollars or in
the applicable Alternate Currency, as the case may be); provided that,
if a notice of prepayment is given in connection with a conditional notice of
termination of the Commitments as contemplated by


 


40





















 


Section 2.07 or 2.08, as the case may
be, then such notice of prepayment may be revoked if such notice of termination
is revoked in accordance with such Section 2.07 or 2.08.  Promptly following receipt of any such notice
relating to a Borrowing, the Administrative Agent shall advise the Lenders of
the contents thereof.  Each partial
prepayment of any Borrowing shall be in an amount that would be permitted in
the case of an advance of a Borrowing of the same Type as provided in Section 2.02.  Each prepayment of a Borrowing shall be
applied ratably to the Loans included in the prepaid Borrowing of the
respective Tranche. Prepayments shall be accompanied by accrued interest to the
extent required by Section 2.12. 
Each prepayment of a Loan pursuant to this Section shall consist of
a pro  rata prepayment of Tranche 2 Loans and Tranche 3 Loans on
the basis of the Tranche 2 Revolving Percentage and Tranche 3 Revolving
Percentage, in each case as in effect at the time of any such prepayment (using
the Dollar Equivalent thereof in the case of Alternate Currency Loans).


 


(c)                                  If on any date prior to the
Commitment Expiration Date, the Tranche 1 Letter of Credit Outstandings exceed
the Total Tranche 1 Commitment, each Designated Subsidiary Borrower for whose
account Tranche 1 Letters of Credit were issued shall pay to the Administrative
Agent at the Payment Office on such date an amount of cash and/or Cash
Equivalents equal to the amount of such excess, such cash and/or Cash
Equivalents to be held as security for all obligations of the respective
Designated Subsidiary Borrower to the Tranche 1 Lenders hereunder in the
Collateral Account applicable to such Designated Subsidiary Borrower.


 


(d)                                 If on any date the Tranche 1
Letter of Credit Outstandings applicable to a Designated Subsidiary Borrower
(other than ARC) exceed the lesser of (i) such Designated Subsidiary
Borrower’s Borrowing Base and (ii) such Designated Subsidiary Borrower’s
Sublimit, such Designated Subsidiary Borrower shall pay or deliver to the
Collateral Agent within the Applicable Grace Period an amount of Cash and/or
Eligible Securities (valued for this purpose based on the respective Advance
Rate applicable thereto) in an aggregate amount equal to the amount of such
excess, with any such Cash or Eligible Securities to be held as additional
security for all obligations of the respective Designated Subsidiary Borrower
hereunder in the Collateral Account applicable to such Designated Subsidiary
Borrower.


 


(e)                                  If on any date the Tranche 1
Letter of Credit Outstandings applicable to ARC exceed ARC’s Borrowing Base,
ARC shall pay or deliver to the Collateral Agent within the Applicable Grace
Period an amount of Cash and/or Eligible Securities (valued for this purpose
based on the respective Advance Rate applicable thereto) in an aggregate amount
equal to the amount of such excess, with any such Cash or Eligible Securities
to be held as additional security for all obligations of ARC hereunder in the
Collateral Account applicable to ARC.


 


(f)                                    If on any date the sum of (i) the
Tranche 1 Letter of Credit Outstandings applicable to ARC, (ii) the
Tranche 2 Letter of Credit Outstandings applicable to ARC, (iii) the
aggregate outstanding Principal Amount of all Tranche 2 Loans incurred by ARC
and (iv) the aggregate outstanding Principal Amount of all Tranche 3 Loans
incurred by ARC shall exceed ARC’s Sublimit, ARC shall pay or deliver to the
Administrative Agent at the Payment Office on such date an amount of cash
and/or Cash Equivalents equal to the amount of such excess, such cash and/or Cash
Equivalents to be held as security for all obligations of ARC to the respective
Lenders hereunder in a cash collateral account to be established by the
Administrative Agent on terms reasonably satisfactory to the Administrative
Agent.


 


41





















 


(g)                                 If on any date prior to the
Commitment Expiration Date, the sum of the aggregate outstanding Principal
Amount of Tranche 2 Loans plus the Tranche 2 Letter of Credit
Outstandings exceeds the Total Tranche 2 Commitment as then in effect, each
Tranche 2/3 Borrower to whom Tranche 2 Loans were made and/or for whose account
Tranche 2 Letters of Credit were issued shall on such date repay the
outstanding Tranche 2 Loans in an aggregate Principal Amount equal to the amount
by which the aggregate outstanding Principal Amount of Tranche 2 Loans plus
the Tranche 2 Letter of Credit Outstandings exceeds the Total Tranche 2
Commitment as then in effect.  If, after
giving effect to the prepayment of all outstanding Tranche 2 Loans, as set
forth above, the Tranche 2 Letter of Credit Outstandings exceed the Total
Tranche 2 Commitment as then in effect, each Tranche 2/3 Borrower for whose
account Tranche 2 Letters of Credit were issued shall on such date pay to the
Administrative Agent at the Payment Office an amount of cash and/or Cash
Equivalents equal to the amount of such excess, such cash and/or Cash
Equivalents to be held as security for all obligations of the respective
Tranche 2/3 Borrower to the Tranche 2 Lenders hereunder in a cash collateral
account to be established by the Administrative Agent on terms reasonably
satisfactory to the Administrative Agent.


 


(h)                                 If on any date prior to the
Commitment Expiration Date, the aggregate outstanding Principal Amount of all
Alternate Currency Loans exceeds the Alternate Currency Loan Sublimit, each
Tranche 2/3 Borrower to whom Alternate Currency Loans were made shall on such
date repay the outstanding Alternate Currency Loans in an aggregate Principal
Amount equal to the amount by which the aggregate outstanding Principal Amount
of Alternate Currency Loans exceeds the Alternate Currency Loan Sublimit.


 


(i)                                     If on any date prior to the
Commitment Expiration Date, the aggregate Alternate Currency Letter of Credit
Outstandings exceeds the Alternate Currency Letter of Credit Sublimit, each
Borrower for whose account Alternate Currency Letters of Credit were issued
shall on such date pay to the Administrative Agent at the Payment Office an
amount of cash and/or Cash Equivalents equal to the amount of such excess, such
cash and/or Cash Equivalents to be held as security for all obligations of the
respective Borrower hereunder in a cash collateral account to be established by
the Administrative Agent on terms reasonably satisfactory to the Administrative
Agent.


 


(j)                                     If on any date the aggregate
outstanding Principal Amount of Tranche 3 Loans exceeds the Total Tranche 3
Commitment as then in effect, each Tranche 2/3 Borrower to whom such Tranche 3
Loans were made shall on such date repay the outstanding Tranche 3 Loans in an
aggregate Principal Amount equal to the amount by which the aggregate
outstanding Principal Amount of Tranche 3 Loans exceeds the Total Tranche 3
Commitment as then in effect.


 


(k)                                  If on any date, after giving
effect to any other prepayment of outstanding Loans on such date, the sum of
the aggregate outstanding Principal Amount of all Tranche 2 Loans and Tranche 3
Loans incurred by ARC plus the Tranche 2 Letter of Credit Outstandings
attributable to ARC exceeds $100,000,000, ARC shall on such date repay the
outstanding Loans incurred by it in an aggregate Principal Amount equal to such
excess (with such repayment to be applied pro  rata to the
outstanding Tranche 2 Loans and Tranche 3 Loans (and using the Dollar
Equivalent thereof in the case of Alternate Currency Loans)).  If, after giving effect to the


 


42





















 


prepayment of all outstanding Loans incurred
by ARC, as set forth above, the Tranche 2 Letter of Credit Outstandings
applicable to ARC exceed $100,000,000, ARC shall pay or deliver to the
Administrative Agent at the Payment Office on such date an amount of cash
and/or Cash Equivalents in an aggregate amount equal to the amount of such
excess, with any such cash and/or Cash Equivalents to be held as additional
security for all obligations of ARC hereunder in a cash collateral account to
be established by the Administrative Agent on terms reasonably satisfactory to
the Administrative Agent.


 


(l)                                     In addition to any other
mandatory repayments or commitment reductions provided herein, on each date on
or after the Restatement Effective Date on which the Parent Borrower or any of
its Subsidiaries receives any cash proceeds from any issuance of public debt by
the Parent Borrower or any of its Subsidiaries in a capital markets
transaction, an amount equal to 50% of the Net Cash Proceeds of the respective
issuance of public debt shall be applied to reduce the Loan Sublimit.  If on any date the aggregate outstanding
Principal Amount of all Tranche 2 Loans and Tranche 3 Loans exceeds the Loan
Sublimit, each Tranche 2/3 Borrower to whom Tranche 2 Loans and Tranche 3 Loans
were made shall on such date repay the outstanding Tranche 2 Loans and Tranche
3 Loans in an aggregate Principal Amount equal to the amount by which the
aggregate outstanding Principal Amount of Tranche 2 Loans and Tranche 3 Loans
exceeds the Loan Sublimit as then in effect (with such repayment to be applied pro
rata to the outstanding Tranche 2 Loans and Tranche 3 Loans (and using the
Dollar Equivalent thereof in the case of Alternate Currency Loans)).


 


(m)                               With respect to each prepayment
of Loans required by Sections 2.10(g), (h), (j), (k) or (l), (x) the respective
Tranche 2/3 Borrower may designate the Type (and, in the case of prepayments
required by Section 2.10(k), the Tranche) of Loans to be prepaid and the
specific Borrowing or Borrowings pursuant to which such Loans were made, provided
that (i) if any prepayment of Eurodollar Loans made pursuant to a single
Borrowing shall reduce the outstanding Eurodollar Loans made pursuant to such
Borrowing to an amount less than $5,000,000 for such Borrowing, then all
Eurodollar Loans outstanding pursuant to such Borrowing shall be immediately
converted into a Borrowing of ABR Loans, (ii) if any prepayment of
Alternate Currency Loans made pursuant to a single Borrowing shall reduce the
outstanding Alternate Currency Loans made pursuant to such Borrowing to an
amount less than the Dollar Equivalent of $5,000,000 for such Borrowing, then
all Alternate Currency Loans outstanding pursuant to such Borrowing shall be
immediately repaid, (iii) each prepayment of Loans made pursuant to the
same Borrowing shall be applied pro  rata among the Loans
comprising such Borrowing and (iv) each such prepayment of Loans shall
consist of a pro  rata prepayment of Tranche 2 Loans and Tranche 3
Loans on the basis of the Tranche 2 Revolving Percentage and the Tranche 3
Revolving Percentage, in each case as in effect at the time of any such
prepayment (and using the Dollar Equivalent thereof in the case of Alternate
Currency Loans).  In the absence of a
designation by the respective Tranche 2/3 Borrower as described in the
preceding sentence, the Administrative Agent shall, subject to the above, make
such designation in its sole discretion.


 


(n)                                 Notwithstanding the foregoing
provisions of this Section 2.10, if at any time the mandatory repayment of
Loans pursuant to Section 2.10(g), (h), (j), (k) or (l) would result in
any Tranche 2/3 Borrower incurring breakage costs under Section 2.15 as a
result of LIBOR Loans being repaid other than on the last day of an Interest
Period applicable hereto (any


 


43





















 


such LIBOR Loans, “Affected Loans”),
such Tranche 2/3 Borrower may elect, by written notice to the Administrative
Agent, to have the provisions of the following sentence be applicable so long
as no Default or Event of Default then exists. 
At the time any Affected Loans are otherwise required to be prepaid,
such Tranche 2/3 Borrower may elect to deposit 100% (or such lesser percentage
elected by such Tranche 2/3 Borrower as not being repaid) of the Principal
Amounts that otherwise would have been paid in respect of the Affected Loans
with the Administrative Agent to be held as security for the obligations of
such Tranche 2/3 Borrower hereunder pursuant to a cash collateral agreement to
be entered into in form and substance satisfactory to the Administrative Agent
and shall provide for investments of such deposits as directed by such Tranche
2/3 Borrower and satisfactory to the Administrative Agent, with such cash
collateral to be released from such cash collateral account (and applied to
repay the principal amount of such LIBOR Loans) upon each occurrence thereafter
of the last day of an Interest Period applicable to such LIBOR Loans (or such
earlier date or dates as shall be requested by such Tranche 2/3 Borrower, with
the amount to be so released and applied on the last day of each Interest
Period to be the amount of such LIBOR Loans to which such Interest Period
applies (or, if less, the amount remaining in such cash collateral account); provided
that (i) interest in respect of such Affected Loans shall continue to
accrue thereon at the rate provided hereunder until such Affected Loans have
been repaid in full and (ii) at any time while an Event of Default has
occurred and is continuing or upon written notice from the Required Lenders,
the Required Lenders may direct the Administrative Agent (in which case the
Administrative Agent shall, and is hereby authorized by such Tranche 2/3
Borrower to, follow said directions) to apply any or all proceeds then on
deposit in such collateral account to the payment of such Affected Loans.  Each Tranche 2/3 Borrower agrees to pay the
balance of any Affected Loan if the amount on deposit is not sufficient.  All risk of loss in respect of investments
made as contemplated in this Section 2.10(n) shall be on such Tranche 2/3
Borrower.  Under no circumstances shall
the Administrative Agent be liable or accountable to such Tranche 2/3 Borrower
or any other Person for any decrease in the value of the cash collateral
account or for any loss resulting from the sale of any investment so made.


 


Section 2.11.  Fees. 
(a)  ARL, ARC and AIC each agrees to pay, severally in accordance
with its respective Tranche 1 Liability Percentage and not jointly, to the
Administrative Agent a facility fee (the “Tranche 1 Facility Fee”) for
the account of the Tranche 1 Lenders pro  rata on the basis of (i) prior
to the earlier of the date the Total Tranche 1 Commitment terminates and the
Commitment Expiration Date, their respective Tranche 1 Commitments and (ii) on
or after the earlier of the date the Total Tranche 1 Commitment terminates and
the Commitment Expiration Date, their respective Tranche 1 Percentages of
Tranche 1 Letter of Credit Outstandings at such time, in each case for the
period from and including the Restatement Effective Date to but not including
the Final Maturity Date, computed at a per
annum rate equal to the Applicable Rate for Tranche 1 Facility Fees of (x)
in the case of clause (i) of this Section 2.11(a), the Total Tranche
1 Commitment (as in effect from time to time) (regardless of utilization) and
(y) in the case of clause (ii) of this Section 2.11(a), the Tranche 1
Letter of Credit Outstandings at such time. 
Accrued Tranche 1 Facility Fees shall be due and payable quarterly in
arrears on the last Business Day of each calendar quarter and on the Final
Maturity Date and, with respect to any Tranche 1 Facility Fee owing to any
Tranche 1 Lender which is replaced pursuant to Section 2.18, on the date
on which such Tranche 1 Lender is replaced.


 


44





















 


(b)                                 The Parent Borrower and ARC each
agrees to pay, severally in accordance with its respective Tranche 2/3
Liability Percentage and not jointly, to the Administrative Agent a facility
fee (the “Tranche 2 Facility Fee”) for the account of the Tranche 2
Lenders pro  rata on the basis of (i) prior to the earlier of
the date the Total Tranche 2 Commitment terminates and the Commitment
Expiration Date, their respective Tranche 2 Commitments and (ii) on or
after the earlier of the date the Total Tranche 2 Commitment terminates and the
Commitment Expiration Date, their respective Tranche 2 Percentage of Tranche 2
Letter of Credit Outstandings at such time, in each case for the period from
and including the Restatement Effective Date to but not including the Final
Maturity Date, computed at a per annum rate
equal to the Applicable Rate for Tranche 2 Facility Fees of (x) in the case of
clause (i) of this Section 2.11(b), the Total Tranche 2
Commitment (as in effect from time to time) (regardless of utilization) and (y)
in the case of clause (ii) of this Section 2.11(b), the Tranche 2
Letter of Credit Outstandings at such time. 
Accrued Tranche 2 Facility Fees shall be due and payable quarterly in
arrears on the last Business Day of each calendar quarter and on the Final
Maturity Date and, with respect to any Tranche 2 Facility Fee owing to any
Tranche 2 Lender which is replaced pursuant to Section 2.18, on the date
on which such Tranche 2 Lender is replaced.


 


(c)                                  The Parent Borrower and ARC each
agrees to pay, severally in accordance with its respective Tranche 2/3
Liability Percentage and not jointly, to the Administrative Agent a facility
fee (the “Tranche 3 Facility Fee”) for the account of the Tranche 3
Lenders pro  rata on the basis of their respective Tranche 3
Commitments for the period from and including the Restatement Effective Date to
but not including the earlier of the date the Total Tranche 3 Commitment
terminates and the Commitment Expiration Date, computed at a per annum rate equal to the Applicable Rate
for Tranche 3 Facility Fees of the Total Tranche 3 Commitment (as in
effect from time to time) (regardless of utilization).  Accrued Tranche 3 Facility Fees shall be due
and payable quarterly in arrears on the last Business Day of each calendar
quarter and on the earlier of the date the Total Tranche 3 Commitment terminates
and the Commitment Expiration Date and, with respect to any Tranche 3 Facility
Fee owing to any Tranche 3 Lender which is replaced pursuant to Section 2.18,
on the date on which such Tranche 3 Lender is replaced.


 


(d)                                 The Parent Borrower and ARC each
agrees to pay, severally in accordance with its respective Tranche 2/3
Liability Percentage and not jointly, to the Administrative Agent a utilization
fee (the “Tranche 2 Utilization Fee”) for the account of the Tranche 2
Lenders pro  rata on the basis of their respective Tranche 2 Loans
then outstanding for the period from and including the Restatement Effective
Date to but not including the earlier of the date the Total Tranche 2
Commitment terminates and the Commitment Expiration Date, computed at a rate
per annum equal to the Applicable Rate for Tranche 2 Utilization Fees of the
aggregate outstanding Principal Amount of Tranche 2 Loans at any time when the
aggregate outstanding Principal Amount of Tranche 2 Loans and Tranche 3 Loans
incurred by all Tranche 2/3 Borrowers is greater than 50% of the sum of the
Total Tranche 2 Commitment and the Total Tranche 3 Commitment (each as in
effect from time to time).  Accrued
Tranche 2 Utilization Fees shall be due and payable quarterly in arrears on the
last Business Day of each calendar quarter and, with respect to any Tranche 2
Utilization Fee owing to any Tranche 2 Lender which is replaced pursuant to Section 2.18,
on the date on which such Tranche 2 Lender is replaced.


 


(e)                                  The Parent Borrower and ARC each
agrees to pay, severally in accordance with its respective Tranche 2/3
Liability Percentage and not jointly, to the Administrative Agent


 


45





















 


a utilization fee (the “Tranche 3
Utilization Fee”) for the account of the Tranche 3 Lenders pro  rata
on the basis of their respective Tranche 3 Loans then outstanding for the
period from and including the Restatement Effective Date to but not including
the earlier of the date the Total Tranche 3 Commitment terminates and the
Commitment Expiration Date, computed at a rate per annum equal to the
Applicable Rate for Tranche 3 Utilization Fees of the aggregate outstanding
Principal Amount of Tranche 3 Loans at any time when the aggregate outstanding
Principal Amount of Tranche 2 Loans and Tranche 3 Loans incurred by all Tranche
2/3 Borrowers is greater than 50% of the sum of the Total Tranche 2
Commitment and the Total Tranche 3 Commitment (each as in effect from time to
time).  Accrued Tranche 3 Utilization
Fees shall be due and payable quarterly in arrears on the last Business Day of
each calendar quarter and, with respect to any Tranche 3 Utilization Fee owing
to any Tranche 3 Lender which is replaced pursuant to Section 2.18, on the
date on which such Tranche 3 Lender is replaced.


 


(f)                                    Each Borrower agrees to pay to
the Administrative Agent for pro  rata distribution to each
Tranche 1 Lender (based on their respective Tranche 1 Percentages), a fee in
respect of each Tranche 1 Letter of Credit (the “Tranche 1 Letter of Credit
Fee”) issued for the account of such Borrower computed at a rate per
annum equal to the Applicable Rate for Tranche 1 Letter of Credit Fees,
on the daily Stated Amount of such Tranche 1 Letter of Credit.  Accrued Tranche 1 Letter of Credit Fees shall
be due and payable quarterly in arrears on the last Business Day of each
calendar quarter and upon the first day on or after the termination of the
Total Tranche 1 Commitment upon which no Tranche 1 Letters of Credit remain
outstanding.


 


(g)                                 Each Borrower agrees to pay to
the Administrative Agent for pro  rata distribution to each
Tranche 2 Lender (based on their respective Tranche 2 Percentages), a fee in
respect of each Tranche 2 Letter of Credit (the “Tranche 2 Letter of Credit
Fee”) issued for the account of such Borrower computed at a rate per
annum equal to the Applicable Rate for Tranche 2 Letter of Credit Fees,
on the daily Stated Amount of such Tranche 2 Letter of Credit. Accrued Tranche
2 Letter of Credit Fees shall be due and payable quarterly in arrears on the
last Business Day of each calendar quarter and upon the first day on or after
the termination of the Total Tranche 2 Commitment upon which no Tranche 2
Letters of Credit remain outstanding.


 


Section 2.12.  Interest.  (a)  The Loans comprising each ABR Borrowing
shall bear interest at the Alternate Base Rate plus the Applicable Rate.


 


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


 


(c)                                  The Loans comprising each Euro
Borrowing shall bear interest at Euro-LIBOR for the Interest Period in effect
for such Borrowing plus the Applicable Rate plus the Associated Costs Rate, if
any.


 


(d)                                 The Loans comprising each Pounds
Sterling Borrowing shall bear interest at Pounds Sterling LIBOR for the
Interest Period in effect for such Borrowing plus the Applicable Rate plus the
Associated Costs Rate, if any.


 


46





















 


(e)                                  Notwithstanding
the foregoing, if any principal of or interest on any Loan or any fee or other
amount payable by any Borrower hereunder is not paid when due, whether at
stated maturity, upon acceleration or otherwise, such overdue amount shall bear
interest, after as well as before judgment, at a rate per annum equal to (i) in
the case of overdue principal of any Loan, 2% plus the rate otherwise
applicable to such Loan as provided in the preceding paragraphs of this Section 2.12
or (ii) in the case of any other amount, 2% plus the rate applicable to
ABR Loans as provided in paragraph (a) of this Section 2.12.


 


(f)                                    Accrued
interest on each Loan shall be payable in arrears on each Interest Payment Date
for such Loan and on the Commitment Expiration Date; provided that (i) interest
accrued pursuant to paragraph (e) of this Section 2.12 shall be
payable on demand, (ii) in the event of any repayment or prepayment of any
Loan (other than a prepayment of an ABR Loan prior to the Commitment Expiration
Date), accrued interest on the principal amount repaid or prepaid shall be
payable on the date of such repayment or prepayment and (iii) in the event
of any conversion of any Eurodollar Loan prior to the end of the current
Interest Period therefor, accrued interest on such Loan shall be payable on the
effective date of such conversion.


 


(g)                                 All
interest hereunder shall be computed on the basis of a year of 360 days, except
that interest computed by reference to the Alternate Base Rate at times when
the Alternate Base Rate is based on the Prime Rate shall be computed on the
basis of a year of 365 days (or 366 days in a leap year), and in each case
shall be payable for the actual number of days elapsed (including the first day
but excluding the last day).  The
applicable Alternate Base Rate or LIBOR Rate shall be determined by the
Administrative Agent, and such determination shall be conclusive absent
manifest error.


 


Section 2.13.  Alternate Rate of Interest.  If prior to the commencement of any Interest
Period for a LIBOR Borrowing:


 


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


 


(b)                                 the Administrative Agent is advised by the
Required Lenders that the applicable LIBOR Rate for such Interest Period will
not adequately and fairly reflect the cost to such Lenders of making or
maintaining their Loans included in such Borrowing for such Interest Period; or


 


(c)                                  in the case of any Alternate Currency Loan,
the Administrative Agent determines (which determination shall be conclusive
absent manifest error) that the requested Alternate Currency is not available
in sufficient amounts;


 


then
the Administrative Agent shall give notice thereof to the respective Tranche
2/3 Borrower and the relevant Lenders by telephone or telecopy as promptly as
practicable thereafter and, until the Administrative Agent notifies such
Tranche 2/3 Borrower and the relevant Lenders that the circumstances giving
rise to such notice no longer exist, (i) in the case of clauses (a), (b) and
(c) above, any Interest Election Request that requests the conversion of
any Borrowing to, or continuation of any Borrowing as, the affected LIBOR Borrowing
shall be ineffective, (ii) if any


 


47





















 


Borrowing
Request requests a LIBOR Borrowing of the affected Type, such Borrowing shall
be made as an ABR Borrowing and (iii) in the case of clause (c) above
in which the affected Alternate Currency Loan is outstanding, the respective
Tranche 2/3 Borrower shall repay such Alternate Currency Loan in full.


 


Section 2.14.  Increased Costs.  (a)  If any Change in Law shall:


 


(i)                                     impose, modify or deem applicable any
reserve, special deposit or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Lender (except any such
reserve requirement reflected in the Adjusted LIBO Rate or included in the
Associated Costs Rate pursuant to Section 2.12(c) or (d));  or


 


(ii)                                  impose on any Lender or the London interbank
market any other condition affecting this Agreement or LIBOR Loans made by such
Lender;


 


and
the result of any of the foregoing shall be to increase the cost to such Lender
of making or maintaining any LIBOR Loan (or of maintaining its obligation to
make any such Loan) or to increase the cost to such Lender or to reduce the
amount of any sum received or receivable by such Lender hereunder (whether of
principal, interest or otherwise), then the Parent Borrower, ARL, ARC and AIC
each will pay, severally in accordance with its respective Facility-wide
Liability Percentage and not jointly,  to
such Lender, as the case may be, such additional amount or amounts as will
compensate such Lender, as the case may be, for such additional costs incurred
or reduction suffered.


 


(b)                                 If any
Lender determines that any Change in Law regarding capital requirements has or
would have the effect of reducing the rate of return on such Lender’s capital
or on the capital of such Lender’s holding company, if any, as a consequence of
this Agreement or the Loans made by such Lender, to a level below that which
such Lender or such Lender’s holding company could have achieved but for such
Change in Law (taking into consideration such Lender’s policies and the
policies of such Lender’s holding company with respect to capital adequacy),
then from time to time the Parent Borrower ARL, ARC and AIC each will pay,
severally in accordance with its respective Facility-wide Liability Percentage
and not jointly, to such Lender such additional amount or amounts as will
compensate such Lender or such Lender’s holding company for any such reduction
suffered.


 


(c)                                  A
certificate of a Lender setting forth the amount or amounts necessary to
compensate such Lender or its holding company, as the case may be, as specified
in paragraph (a) or (b) of this Section shall be delivered
to the respective Tranche 2/3 Borrower and shall be conclusive absent manifest
error.  Such Tranche 2/3 Borrower shall
pay such Lender the amount shown as due on any such certificate within
10 days after receipt thereof.


 


(d)                                 Failure
or delay on the part of any Lender to demand compensation pursuant to this Section shall
not constitute a waiver of such Lender’s right to demand such compensation; provided
that no Tranche 2/3 Borrower shall be required to compensate a Lender pursuant
to this Section for any increased costs or reductions incurred more than
90 days prior to the date that such Lender notifies such Tranche 2/3 Borrower
of the Change in Law giving rise to such increased costs or reductions and of
such Lender’s intention to claim compensation


 


48





















 


therefor;
provided, further, that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the 90-day period referred
to above shall be extended to include the period of retroactive effect thereof.


 


Section 2.15.  Break Funding Payments.  In the event of (a) the payment of any
principal of any LIBOR Loan other than on the last day of an Interest Period
applicable thereto (including as a result of a mandatory prepayment under Section 2.10
or an Event of Default), (b) the conversion of any LIBOR Loan other than
on the last day of the Interest Period applicable thereto, (c) the failure
to borrow, convert, continue or prepay any LIBOR Loan on the date specified in
any notice delivered pursuant hereto (regardless of whether such notice may be
revoked under Section 2.10(b) and is revoked in accordance
therewith), or (d) the assignment of any LIBOR Loan other than on the last
day of the Interest Period applicable thereto as a result of a request by a
Borrower pursuant to Section 2.18, then, in any such event, such Tranche
2/3 Borrower shall compensate each Lender for the loss, cost and expense
attributable to such event.  In the case
of a LIBOR Loan, such loss, cost or expense to any Lender shall be deemed to
include an amount determined by such Lender to be the excess, if any, of (i) the
amount of interest which would have accrued on the principal amount of such
Loan had such event not occurred, at the applicable LIBOR Rate that would have
been applicable to such Loan, for the period from the date of such event to the
last day of the then current Interest Period therefor (or, in the case of a
failure to borrow, convert or continue, for the period that would have been the
Interest Period for such Loan), over (ii) the amount of interest which
would accrue on such principal amount for such period at the interest rate
which such Lender would bid were it to bid, at the commencement of such period,
for dollar or the applicable Alternate Currency deposits of a comparable amount
and period from other banks in the Eurodollar or other relevant market.  A certificate of any Lender setting forth any
amount or amounts that such Lender is entitled to receive pursuant to this Section shall
be delivered to the respective Tranche 2/3 Borrower and shall be conclusive
absent manifest error.  Such Tranche 2/3
Borrower shall pay such Lender the amount shown as due on any such certificate
within 10 days after receipt thereof.


 


Section 2.16.  Taxes.  (a)  Any and all payments by or on
account of any obligation of any Borrower hereunder shall be made free and
clear of and without deduction for any Indemnified Taxes or Other Taxes; provided
that if any Borrower shall be required to deduct any Indemnified Taxes or Other
Taxes from such payments, then (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) the Administrative
Agent or Lender (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made, (ii) such Borrower
shall make such deductions and (iii) such Borrower shall pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable law.


 


(b)                                 In
addition, each Borrower shall pay, severally and not jointly, any Other Taxes
to the relevant Governmental Authority in accordance with applicable law.


 


(c)                                  Each
Borrower shall indemnify, severally and not jointly, the Administrative Agent
and each Lender within 10 days after written demand therefor, for the full amount
of any Indemnified Taxes or Other Taxes that such Borrower failed to deduct or
withhold and that were paid by the Administrative Agent or such Lender on or
with respect to any payment by or on account of any obligation of such Borrower
hereunder (including


 


49





















 


Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority.  A certificate as
to the amount of such payment or liability delivered to such Borrower by a
Lender or by the Administrative Agent on its own behalf or on behalf of a
Lender, shall be conclusive absent manifest error.


 


(d)                                 As
soon as practicable after any payment of Indemnified Taxes or Other Taxes by
any Borrower to a Governmental Authority, such Borrower shall deliver to the
Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.


 


(e)                                  Each
Foreign Lender shall deliver to each Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law, such
properly completed and executed documentation prescribed by applicable law or reasonably
requested by such Borrower (if any), or will comply with such other
requirements, if any, as is currently applicable, as will permit payments under
this Agreement to be made without withholding or at a reduced rate; provided,
however, that such Borrower shall have furnished to each such Lender in
a reasonably timely manner copies of such documentation and notice of such
requirements together with applicable instructions; provided, further,
that no such Lender shall have any obligation to provide such documentation or
comply with such requirements if it would result in a material economic, legal
or regulatory disadvantage to any such Lender.


 


(f)                                    If the
Administrative Agent or a Lender determines, in its sole discretion, that it
has received a refund of any Taxes or Other Taxes as to which it has been
indemnified by a Borrower or with respect to which a Borrower has paid
additional amounts pursuant to this Section 2.16, it shall pay over such
refund to such Borrower (but only to the extent of indemnity payments made, or
additional amounts paid, by such Borrower under this Section 2.16 with
respect to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the Administrative Agent or such Lender and without
interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund); provided, that such Borrower, upon the
request of the Administrative Agent or such Lender, agrees to repay the amount
paid over to such Borrower (plus any penalties, interest or other charges
imposed by the relevant Governmental Authority) to the Administrative Agent or
such Lender in the event the Administrative Agent or such Lender is required to
repay such refund to such Governmental Authority.  This Section shall not be construed to
require the Administrative Agent or any Lender to make available its tax
returns (or any other information relating to its taxes which it deems
confidential) to such Borrower or any other Person.


 


(g)                                 Any
Lender that is not a Lender as of the Restatement Effective Date shall not be
entitled to any greater payment under this Section 2.16 than such Lender’s
assignor could have been entitled to absent such assignment except to the
extent that the entitlement to a greater payment resulted from a Change in Law.


 


Section 2.17.  Payments Generally; Pro Rata Treatment;
Sharing of Set-offs.  (a) 
Each Borrower shall make each payment required to be made by it hereunder
(whether of


 


50





















 


principal,
interest, fees or of amounts payable under Section 2.14, 2.15 or 2.16, or
otherwise) prior to 12:00 noon, New York City time, on the date when due, in
immediately available funds, without set-off or counterclaim (x) in Dollars, if
such payment is made in respect of any obligation of the Borrowers under this
Agreement or any other Credit Document except as otherwise provided in the
immediately succeeding clause (y), and (y) in the applicable Alternate
Currency, if such payment is made in respect of (i) principal of, or
interest on, Alternate Currency Loans, (ii) Unpaid Drawings on Alternate
Currency Letters of Credit or (iii) increased costs, indemnities or other
amounts owing with respect to Alternate Currency Loans or Alternate Currency
Letters of Credit (except for fees payable under Section 2.11, which fees
shall be paid in Dollars calculated by using the applicable Dollar Equivalent
thereof of any amounts denominated in an Alternate Currency).  Any amounts received after such time on any
date may, in the discretion of the Administrative Agent, be deemed to have been
received on the next succeeding Business Day for purposes of calculating
interest thereon.  All such payments
shall be made (including, without limitation, by way of wire transfer) to the Administrative
Agent at the Payment Office, except that payments pursuant to Sections 2.14,
2.15, 2.16 and 10.03 shall be made directly to the Persons entitled
thereto.  The Administrative Agent shall
distribute any such payments received by it for the account of any other Person
to the appropriate recipient promptly following receipt thereof.  If any payment hereunder shall be due on a
day that is not a Business Day, the date for payment shall be extended to the
next succeeding Business Day, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such extension.


 


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


 


(c)                                  If any
Lender shall, by exercising any right of set-off or counterclaim or otherwise,
obtain payment in respect of any particular Obligation resulting in such Lender
receiving payment of a greater proportion of such Obligation than the
proportion of such Obligation received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
participations in the related Obligations of other Lenders to the extent
necessary so that the benefit of all such payments shall be shared by the
Lenders ratably in accordance with the aggregate of such Obligations; provided
that (i) if any such participations are purchased and all or any portion
of the payment giving rise thereto is recovered, such participations shall be
rescinded and the purchase price restored to the extent of such recovery,
without interest, (ii) the provisions of this paragraph shall not be
construed to apply to any payment made by a Borrower pursuant to and in
accordance with the express terms of this Agreement or any payment obtained by
a Lender as consideration for the assignment of or sale of a participation in
any of its Loans to any assignee or participant, other than to any Borrower or
any Subsidiary or Affiliate thereof (as to which the provisions of this
paragraph shall apply) and (iii) the provisions of this paragraph shall
not be construed to apply to any payment received by any Tranche 1 Lender
pursuant to the terms of the Security Documents.  Each Borrower consents to the foregoing and
agrees, to the extent it may effectively do so under applicable law, that any


 


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Lender
acquiring a participation pursuant to the foregoing arrangements may exercise
against such Borrower rights of set-off and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of such
Borrower in the amount of such participation.


 


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


 


(e)                                  If any
Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(b) or
2.17(d), then the Administrative Agent may, in its discretion (notwithstanding
any contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender’s
obligations under such Sections until all such unsatisfied obligations are
fully paid.


 


Section 2.18.  Mitigation Obligations; Replacement of
Lenders.  (a)  If any
Lender requests compensation under Section 2.14, 3A.04 or 3B.04, or if a
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.16,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans or Letters of Credit hereunder or to
assign its rights and obligations hereunder to another of its offices, branches
or affiliates, if, in the judgment of such Lender, such designation or
assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.14,
2.16, 3A.04 or 3B.04, as the case may be, in the future and (ii) would not
subject such Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to such Lender.  The
Parent Borrower, ARL, ARC and AIC each agrees to pay, severally in accordance
with its respective Facility-wide Liability Percentage and not jointly, all
reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.


 


(b)                                 If any
Lender requests compensation under Section 2.14, 3A.04 or 3B.04, or if a
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.16,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
respective Borrower may, at its sole expense and effort, upon notice to such
Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in Section 10.04), all its interests, rights and obligations
under this Agreement to an assignee that shall assume such obligations (which
assignee may be another Lender, if such Lender accepts such assignment); provided
that (i) such Borrower shall have received the prior written consent of
the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such
Lender shall have received payment of an amount equal to the outstanding
principal of its Loans,


 


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accrued
interest thereon, accrued fees and all other amounts payable to it hereunder,
from the assignee (to the extent of such outstanding principal and accrued
interest and fees) or the respective Borrower (in the case of all other
amounts), (iii) in the case of any such assignment resulting from a claim
for compensation under Section 2.14, 3A.04 or 3B.04 or payments required
to be made pursuant to Section 2.16, such assignment will result in a
reduction in such compensation or payments and (iv) no assignments
pursuant to this Section 2.18 shall be effective until all then
outstanding Letters of Credit are returned by each respective beneficiary to the
Issuing Agent for cancellation or exchange for new or amended Letters of Credit
which give effect to such assignment (it being understood that to the extent
the respective beneficiaries do not consent to such assignment, such assignment
cannot occur).  A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling
such Borrower to require such assignment and delegation cease to apply.


 


Section 2.19.  Additional Tranche 1 Commitments.  (a)  The Designated Subsidiary Borrowers
shall have the right at any time and from time to time after the Restatement
Effective Date and prior to the Commitment Expiration Date to request (so long
as no Default or Event or Default is then in existence or would result
therefrom) on one or more occasions that one or more Tranche 1 Lenders (and/or
one or more other Persons which will become Tranche 1 Lenders as provided
pursuant to clause (vi) below) provide Additional Tranche 1 Commitments
and, subject to the applicable terms and conditions contained in this Agreement
and the relevant Additional Tranche 1 Commitment Agreement, issue Tranche 1
Letters of Credit; it being understood and agreed, however, that (i) no
Tranche 1 Lender shall be obligated to provide an Additional Tranche 1
Commitment as a result of any request by the Designated Subsidiary Borrowers, (ii) until
such time, if any, as (x) such Tranche 1 Lender has agreed in its sole
discretion to provide an Additional Tranche 1 Commitment and executed and
delivered to the Administrative Agent an Additional Tranche 1 Commitment
Agreement in respect thereof as provided in Section 2.19(b) and (y)
such other conditions set forth in Section 2.19(b) shall have been
satisfied, such Tranche 1 Lender shall not be obligated to issue any Tranche 1
Letters of Credit, in excess of the amounts provided for in Section 3A.01,
as the case may be, before giving effect to such Additional Tranche 1
Commitments provided pursuant to this Section 2.19, (iii) any Tranche
1 Lender (and/or one or more other Persons which will become Tranche 1 Lenders
as provided pursuant to clause (vi) below) may so provide an Additional
Tranche 1 Commitment without the consent of any other Tranche 1 Lender (it
being understood and agreed that the consent of the Administrative Agent and
the Issuing Agent (such consent (in either case) not to be unreasonably
withheld or delayed) shall be required if any such Additional Tranche 1
Commitments are to be provided by a Person which is not already a Tranche 1
Lender), (iv) (x) each provision of Additional Tranche 1 Commitments on a
given date pursuant to this Section 2.19 shall be in a minimum aggregate
amount (for all Tranche 1 Lenders (including, in the circumstances contemplated
by clause (vi) below, banks or other financial institutions who will
become Tranche 1 Lenders)) of at least $1,000,000 and (y) the aggregate amount
of Additional Tranche 1 Commitments provided pursuant to this Section 2.19
shall not exceed $300,000,000, (v) the up-front fees payable to any Person
providing an Additional Tranche 1 Commitment in accordance with this Section 2.19
shall be as set forth in the relevant Additional Tranche 1 Commitment
Agreement, (vi) if, on or after the tenth Business Day following the
request by the Designated Subsidiary Borrowers of the then existing
Tranche 1 Lenders to provide Additional Tranche 1 Commitments pursuant to
this Section 2.19


 


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on
the terms to be applicable thereto, the Designated Subsidiary Borrowers have
not received Additional Tranche 1 Commitments in an aggregate amount equal to
that amount of the Additional Tranche 1 Commitments which the Designated
Subsidiary Borrowers desire to obtain pursuant to such request (as set forth in
the notice provided by the Designated Subsidiary Borrowers to the
Administrative Agent as provided above), then the Designated Subsidiary
Borrowers may request Additional Tranche 1 Commitments from other Lenders
and/or other NAIC approved banks or financial institutions (unless otherwise
agreed by the Designated Subsidiary Borrowers and the Administrative Agent) in
an aggregate amount equal to such deficiency on terms which are no more
favorable to such other bank or financial institution in any respect than the
terms offered to the existing Tranche 1 Lenders, and (vii) all actions
taken by the Designated Subsidiary Borrowers pursuant to this Section 2.19
shall be done in coordination with the Administrative Agent.


 


(b)                                 At the
time of any provision of Additional Tranche 1 Commitments pursuant to this Section 2.19,
(i) each Designated Subsidiary Borrower, the Administrative Agent, the
Guarantor and each such Tranche 1 Lender or other bank or financial institution
which agrees to provide an Additional Tranche 1 Commitment (each, an “Additional
Tranche 1 Lender”) shall execute and deliver to the Administrative Agent an
Additional Tranche 1 Commitment Agreement substantially in the form of Exhibit I,
subject to such modifications in form and substance reasonably satisfactory to
the Administrative Agent as may be necessary or appropriate (with the
effectiveness of such Additional Tranche 1 Lender’s Additional Tranche 1
Commitment to occur upon delivery of such Additional Tranche 1 Commitment
Agreement to the Administrative Agent, the payment of any fees required in
connection therewith and the satisfaction of the other conditions in this Section 2.19
to the reasonable satisfaction of the Administrative Agent), (ii) all of
the outstanding Tranche 1 Letters of Credit shall have been returned by each
respective beneficiary to the Issuing Agent and shall either have been
cancelled and/or exchanged for new or amended Tranche 1 Letters of Credit which
give effect to such Additional Tranche 1 Commitment, (iii) if such
Additional Tranche 1 Lender is not a United States person (as such term is
defined in Section 7701(a)(3) of the Code) for U.S. Federal income
tax purposes and such Additional Tranche 1 Lender is issuing Letters of Credit
for the account of a U.S. Borrower or U.S. Borrowers, such Additional Tranche 1
Lender shall provide to such U.S. Borrower or U.S. Borrowers the appropriate
Internal Revenue Service documentation described in Section 2.16, (iv) each
Designated Subsidiary Borrower shall deliver to the Administrative Agent
resolutions authorizing the incurrence of the Obligations to be incurred
pursuant to each Additional Tranche 1 Commitment, together with evidence of
good standing of such Designated Subsidiary Borrower (if requested) and (v) each
Designated Subsidiary Borrower shall deliver to the Administrative Agent an
opinion, in form and substance reasonably satisfactory to the Administrative
Agent, from counsel to such Designated Subsidiary Borrowers reasonably
satisfactory to the Administrative Agent and dated such date, covering such
matters similar to those set forth in the opinions of counsel delivered to the
Lenders on the Restatement Effective Date pursuant to Section 5.01(b) and
such other matters as the Administrative Agent may reasonably request.  The Administrative Agent shall promptly
notify each Tranche 1 Lender as to the occurrence of each Additional Tranche 1
Commitment Date, and (x) on each such date, the Total Tranche 1 Commitment
under, and for all purposes of, this Agreement shall be increased by the
aggregate amount of such Additional Tranche 1 Commitments and (y) on each such
date, Schedule 2.01 shall be deemed modified to reflect the revised
Tranche 1 Commitments of the affected Tranche 1 Lenders.


 


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Section 2.20.  Additional Designated Subsidiary Borrowers.  The Parent Borrower may from time to time
after the Restatement Effective Date, with the prior written consent of the
Agents, designate one or more Persons as an additional Designated Subsidiary
Borrower, subject to the following terms and conditions:


 


(a)                                  each
such Person shall be a Wholly-Owned Subsidiary of the Parent Borrower;


 


(b)                                 on or
prior to the date of designation, each such Person shall enter into an
appropriately completed DSB Assumption Agreement;


 


(c)                                  on or
prior to the date of designation, the Administrative Agent shall have received
from such Person a certificate, signed by an Authorized Officer of such Person
in the form of Exhibit D with appropriate insertions or deletions,
together with (x) copies of its certificate of incorporation, by-laws or other
equivalent organizational documents and (y) resolutions relating to the Credit
Documents which shall be satisfactory to the Administrative Agent;


 


(d)                                 on or
prior to the date of designation, the Administrative Agent shall have received
an opinion, addressed to the Administrative Agent and each of the Lenders and
dated the date of designation, from counsel to such Person, which opinion shall
(x) in the case of an additional Designated Subsidiary Borrower located in the
United States, be substantially in the form of Exhibit G-l and otherwise
satisfactory to the Administrative Agent, (y) in the case of an additional
Designated Subsidiary Borrower located in Bermuda, be substantially in the form
of Exhibit G-2 and otherwise satisfactory to the Administrative Agent, and
(z) in the case of an additional Designated Subsidiary Borrower located in a
jurisdiction other than the United States or Bermuda, be in form and substance
satisfactory to the Administrative Agent; and


 


(e)                                  on or
prior to the date of designation, the Administrative Agent shall have received
such other documentation and/or certificates (including, without limitation,
certificates of existence and/or good standing certificates in the case of
additional Designated Subsidiary Borrowers organized under the laws of the
United States or any State thereof, or any other jurisdiction where the concept
of “good standing” is applicable) as the Administrative Agent may reasonably
request.


 


Section 2.21.  Removal of Designated Subsidiary Borrowers.  The Parent Borrower may from time to time
after the Restatement Effective Date, by written notice to the Administrative
Agent (which notice the Administrative Agent shall promptly forward to each
Lender), remove one or more Designated Subsidiary Borrowers, provided that on
the date of removal (i) no Letters of Credit shall be outstanding for the
account of such Designated Subsidiary Borrower; (ii) no Loans shall be
outstanding for the account of such Designated Subsidiary Borrower; (iii) all
fees, interest or other amounts payable under this Agreement or the other
Credit Documents by such Designated Subsidiary Borrower shall have been paid in
full and (iv) no other Obligations of such Designated Subsidiary Borrower
shall remain outstanding.


 


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ARTICLE IIIA


 


Tranche 1 Letters of Credit


 


Section 3A.01.  Tranche 1 Letters of Credit.  (a)  Subject to and upon the terms and
conditions set forth herein, each Designated Subsidiary Borrower may request
the Issuing Agent, at any time and from time to time after the Restatement
Effective Date and prior to the date which is 30 days prior to the Commitment
Expiration Date, to issue on behalf of the Tranche 1 Lenders, for the account
of such Designated Subsidiary Borrower and in support of, on a standby basis,
Letter of Credit Supportable Obligations and, subject to and upon the terms and
conditions set forth herein, the Issuing Agent agrees to issue on behalf of the
Tranche 1 Lenders at any time and from time to time after the Restatement
Effective Date and prior to the date which is 30 days prior to the Commitment
Expiration Date, one or more irrevocable standby letters of credit in such form
as may be approved by the Issuing Agent (each such letter of credit, a “Tranche
1 Letter of Credit” and, collectively, the “Tranche 1 Letters of Credit”).  Notwithstanding the foregoing, the Issuing
Agent shall be under no obligation to issue any Tranche 1 Letter of Credit if
at the time of such issuance:


 


(i)                                     any order, judgment or decree of any
Governmental Authority or arbitrator shall purport by its terms to enjoin or
restrain the Issuing Agent from issuing such Tranche 1 Letter of Credit or any
requirement of law applicable to such Issuing Agent or any Tranche 1 Lender or
any request or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Issuing Agent or any Tranche
1 Lender shall prohibit, or request that the Issuing Agent or any Tranche 1
Lender refrain from, the issuance of letters of credit generally or such
Tranche 1 Letter of Credit in particular or shall impose upon the Issuing Agent
or any Lender with respect to such Tranche 1 Letter of Credit any restriction
or reserve or capital requirement (for which the Issuing Agent or any Tranche 1
Lender is not otherwise compensated) not in effect on the Restatement Effective
Date, or any unreimbursed loss, cost or expense which was not applicable, in
effect or known to the Issuing Agent or any Tranche 1 Lender as of the
Restatement Effective Date;


 


(ii)                                  the conditions precedent set forth in Section 5.02
are not satisfied at that time; or


 


(iii)                               the Issuing Agent shall have received notice
from any Borrower or the Required Lenders prior to the issuance of such Tranche
1 Letter of Credit of the type described in clause (viii) of Section 3A.01(b).


 


(b)                                 Notwithstanding anything to the contrary
contained in this Section 3A.01 or elsewhere in this Agreement (i) no
Tranche 1 Letter of Credit shall be issued the Stated Amount of which, when
added to the Tranche 1 Letter of Credit Outstandings (exclusive of Tranche 1
Unpaid Drawings which are repaid on the date of, and prior to the issuance of,
the respective Tranche 1 Letter of Credit) at such time, would exceed an amount
equal to the Total Tranche 1 Commitment at such time; (ii) no Tranche 1
Letter of Credit shall be issued for the account of any Designated Subsidiary
Borrower (other than ARC) the Stated Amount of which, when added to the Tranche
1 Letter of Credit Outstandings in respect of outstanding Tranche 1


 


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Letters
of Credit issued for the account of such Designated Subsidiary Borrower (exclusive
of Tranche 1 Unpaid Drawings in respect of Tranche 1 Letters of Credit issued
for the account of such Designated Subsidiary Borrower which are repaid on the
date of, and prior to the issuance of, the respective Tranche 1 Letter of
Credit) at such time, would exceed an amount equal to the lesser of (x) such
Designated Subsidiary Borrower’s Borrowing Base and (y) such Designated
Subsidiary Borrower’s Sublimit; (iii) no Tranche 1 Letter of Credit shall
be issued for the account of ARC the Stated Amount of which, when added to the
Tranche 1 Letter of Credit Outstandings in respect of outstanding Tranche 1
Letters of Credit issued for the account of ARC (exclusive of Tranche 1 Unpaid
Drawings in respect of Tranche 1 Letters of Credit issued for the account of
ARC which are repaid on the date of, and prior to the issuance of, the
respective Tranche 1 Letter of Credit) at such time, would exceed an amount
equal to ARC’s Borrowing Base; (iv) no Tranche 1 Letter of Credit shall be
issued for the account of ARC the Stated Amount of which, when added to (x) the
Tranche 1 Letter of Credit Outstandings applicable to ARC (exclusive of Tranche
1 Unpaid Drawings which are repaid on the date of, and prior to the issuance
of, the respective Tranche 1 Letter of Credit) at such time, (y) the Tranche 2
Letter of Credit Outstandings applicable to ARC at such time and (z) the
aggregate Principal Amount of all Tranche 2 Loans and Tranche 3 Loans incurred
by ARC and then outstanding, would exceed an amount equal to ARC’s Sublimit; (v) no
Tranche 1 Letter of Credit denominated in an Alternate Currency shall be issued
the Stated Amount of which, when added to the Alternate Currency Letter of
Credit Outstandings at such time in respect of all Alternate Currency Letters
of Credit, would exceed the Alternate Currency Letter of Credit Sublimit; (vi) each
Tranche 1 Letter of Credit shall have an expiry date occurring not later than
one year after such Tranche 1 Letter of Credit’s date of issuance; provided
that each such Tranche 1 Letter of Credit may by its terms automatically renew
annually for one additional year unless the Issuing Agent notifies the
beneficiary thereof, in accordance with the terms of such Tranche 1 Letter of
Credit, that such Tranche 1 Letter of Credit will not be renewed; (vii) each
Tranche 1 Letter of Credit shall be denominated in Dollars or, subject to
preceding clause (v), an Alternate Currency; and (viii) the Issuing Agent
will not issue any Tranche 1 Letter of Credit after it has received written
notice from any Borrower or the Required Lenders stating that a Default or an
Event of Default exists until such time as the Issuing Agent shall have
received a written notice of (x) rescission of such notice from the party or
parties originally delivering the same or (y) a waiver of such Default or Event
of Default by the Required Lenders (or, to the extent provided by Section 10.02,
each of the Lenders).


 


(c)                                  Each Tranche 1 Letter of Credit will be
issued by the Issuing Agent on behalf of the Tranche 1 Lenders and each Tranche
1 Lender will participate in each Tranche 1 Letter of Credit pro  rata
in accordance with its Tranche 1 Percentage. 
The obligations of each Tranche 1 Lender under and in respect of each
Tranche 1 Letter of Credit are several, and the failure by any Tranche 1 Lender
to perform its obligations hereunder or under any Tranche 1 Letter of Credit
shall not affect the obligations of the respective Designated Subsidiary
Borrower toward any other party hereto nor shall any other such party be liable
for the failure by such Tranche 1 Lender to perform its obligations hereunder
or under any Tranche 1 Letter of Credit.


 


(d)                                 Subject to and on the terms and conditions
set forth herein, the Issuing Agent is hereby authorized by each Designated
Subsidiary Borrower and the Tranche 1 Lenders to arrange for the issuance of
any Tranche 1 Letter of Credit pursuant to Section 3A.01(a) and


 


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the
amendment of any Tranche 1 Letter of Credit pursuant to Section 2.18, Section 2.19,
Section 3A.06 and/or Section 10.04(b) by:


 


(i)                                     completing the commencement date and the
expiry date of such Tranche 1 Letter of Credit;


 


(ii)                                  in the case of an amendment increasing or
reducing the amount thereof, amending such Tranche 1 Letter of Credit in such
manner as the Issuing Agent and the respective beneficiary may agree;


 


(iii)                               completing such Tranche 1 Letter of Credit
with the participation of each Tranche 1 Lender as allocated pursuant to the
terms hereof; and


 


(iv)                              executing such Tranche 1 Letter of Credit on
behalf of each Tranche 1 Lender and following such execution delivering such
Tranche 1 Letter of Credit to the beneficiary of such Tranche 1 Letter of
Credit.


 


(e)                                  Each Tranche 1 Letter of Credit shall be
executed and delivered by the Issuing Agent in the name and on behalf of, and
as attorney-in-fact for, each Tranche 1 Lender party to such Tranche 1 Letter
of Credit, and the Issuing Agent shall act under each Tranche 1 Letter of
Credit, and each Tranche 1 Letter of Credit shall expressly provide that the
Issuing Agent shall act, as the agent of each Tranche 1 Lender to (a) receive
drafts, other demands for payment and other documents presented by the
beneficiary under such Tranche 1 Letter of Credit, (b) determine whether
such drafts, demands and documents are in compliance with the terms and
conditions of such Tranche 1 Letter of Credit and (c) notify such Tranche
1 Lender and such Designated Subsidiary Borrower that a valid drawing has been
made and the date that the related Tranche 1 Unpaid Drawing is to be made; provided
that the Issuing Agent shall have no obligation or liability for any Tranche 1
Unpaid Drawing under such Tranche 1 Letter of Credit, and each Tranche 1 Letter
of Credit shall expressly so provide. 
Each Tranche 1 Lender hereby irrevocably appoints and designates the
Issuing Agent as its attorney-in-fact, acting through any duly authorized
officer of the Issuing Agent, solely for the purpose of executing and
delivering in the name and on behalf of such Tranche 1 Lender each Tranche 1
Letter of Credit to be issued by such Tranche 1 Lender hereunder.  Promptly upon the request of the Issuing
Agent, each Tranche 1 Lender will furnish to the Issuing Agent such powers of
attorney or other evidence as any beneficiary of any Tranche 1 Letter of Credit
may reasonably request in order to demonstrate that the Issuing Agent has the
power to act as attorney-in-fact for such Tranche 1 Lender to execute and
deliver such Tranche 1 Letter of Credit.


 


Section 3A.02.  Tranche 1 Letter of Credit Requests.  (a)  Whenever a Designated Subsidiary
Borrower desires that a Tranche 1 Letter of Credit be issued, such Designated
Subsidiary Borrower shall give the Administrative Agent and the Issuing Agent
written notice (including by way of facsimile transmission, immediately
confirmed in writing by submission of the original of such request by mail to
the Issuing Agent) thereof prior to 11:00 a.m. (New York time) at least
five Business Days (or such shorter period as may be acceptable to the Issuing
Agent) prior to the proposed date of issuance (which shall be a Business Day),
which written notice shall be in the form of Exhibit C-1 (each, a “Tranche
1 Letter of Credit Request”).  Each


 


58





















 


Tranche
1 Letter of Credit Request shall include any other documents as the Issuing
Agent customarily requires in connection therewith.


 


(b)                                 The making of each Tranche 1 Letter of Credit
Request shall be deemed to be a representation and warranty by the applicable
Designated Subsidiary Borrower that such Tranche 1 Letter of Credit may be
issued in accordance with, and it will not violate the requirements of, Section 3A.01(a) or
(b).


 


(c)                                  Upon its issuance of, or amendment to, any
Tranche 1 Letter of Credit, the Issuing Agent shall promptly notify the
respective Designated Subsidiary Borrower and the Tranche 1 Lenders of such
issuance or amendment, which notice shall include a summary description of the
Tranche 1 Letter of Credit actually issued and any amendments thereto.


 


Section 3A.03.  Agreement to Repay Tranche 1 Letter of
Credit Drawings.  (a)  Each
Designated Subsidiary Borrower agrees to reimburse each Tranche 1 Lender, by
making payment to the Administrative Agent in immediately available funds at
the Payment Office, for any payment or disbursement made by such Tranche 1
Lender under any Tranche 1 Letter of Credit which has been issued for such
Designated Subsidiary Borrower’s account (each such amount so paid or disbursed
until reimbursed by such Designated Subsidiary Borrower, a “Tranche 1 Unpaid
Drawing”) no later than one Business Day following the date of such payment
or disbursement, with interest on the amount so paid or disbursed by such
Lender, to the extent not reimbursed prior to 1:00 p.m. (New York time) on
the date of such payment or disbursement, from and including the date paid or
disbursed to but not including the date such Tranche 1 Lender is reimbursed
therefor at a rate per annum which shall be the Alternative Base Rate plus the
Applicable Rate for Loans maintained as ABR Loans as in effect from time to
time (plus an additional 2% per annum, payable on demand, if not reimbursed by
the third Business Day after the date of such payment or disbursement).


 


(b)                                 Each Designated Subsidiary Borrower’s
obligation under this Section 3A.03 to reimburse each Tranche 1 Lender
with respect to Tranche 1 Unpaid Drawings (including, in each case, interest
thereon) shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff, counterclaim or defense to payment which such
Designated Subsidiary Borrower may have or have had against such Tranche 1
Lender or the Issuing Agent, including, without limitation, any defense based
upon the failure of any drawing under a Tranche 1 Letter of Credit to conform
to the terms of the Tranche 1 Letter of Credit or any non-application or
misapplication by the beneficiary of the proceeds of such drawing; provided,
however, that no Designated Subsidiary Borrower shall be obligated to
reimburse any Tranche 1 Lender for any wrongful payment made by such Tranche 1
Lender under a Tranche 1 Letter of Credit as a result of acts or omissions
constituting willful misconduct or gross negligence on the part of such Tranche
1 Lender (as determined by a court of competent jurisdiction in a final and
non-appealable decision).


 


Section 3A.04.  Increased Costs.  If after the Restatement Effective Date, a
Change in Law shall either (i) impose, modify or make applicable any
reserve, deposit, capital adequacy or similar requirement against letters of
credit issued by or participated in by such Tranche 1 Lender, or (ii) impose
on such Tranche 1 Lender any other conditions directly or indirectly affecting
this Agreement or any Tranche 1 Letter of Credit; and the result of any of the


 


59





















 


foregoing
is to increase the cost to such Tranche 1 Lender of issuing, maintaining or
participating in any Tranche 1 Letter of Credit, or to reduce the amount of any
sum received or receivable by such Tranche 1 Lender hereunder or reduce the
rate of return on its capital with respect to Tranche 1 Letters of Credit,
then, upon written demand to the respective Designated Subsidiary Borrower by
such Tranche 1 Lender (with a copy to the Administrative Agent), such
Designated Subsidiary Borrower agrees to pay to such Tranche 1 Lender such
additional amount or amounts as will compensate such Tranche 1 Lender for such
increased cost or reduction.  A
certificate submitted to the respective Designated Subsidiary Borrower by such
Tranche 1 Lender (with a copy to the Administrative Agent), setting forth the
basis for the determination of such additional amount or amounts necessary to
compensate such Tranche 1 Lender as aforesaid shall be final and conclusive and
binding on such Designated Subsidiary Borrower absent manifest error, although
the failure to deliver any such certificate shall not release or diminish any
Designated Subsidiary Borrower’s obligations to pay additional amounts pursuant
to this Section 3A.04 upon subsequent receipt of such certificate; provided
that such Designated Subsidiary Borrower shall not be required to compensate
such Tranche 1 Lender pursuant to this Section 3A.04 for any increased
costs or reductions incurred more than 90 days prior to the date that such
Tranche 1 Lender notifies such Designated Subsidiary Borrower of the Change in
Law giving rise to such increased costs or reductions and of such Tranche 1
Lender’s intention to claim compensation therefor; provided, further,
that, if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the 90-day period referred to above shall be extended to
include the period of retroactive effect thereof.


 


Section 3A.05.  Tranche 1 Letter of Credit Expiration
Extensions.  Each Tranche 1
Lender acknowledges that to the extent provided under the terms of any Tranche
1 Letter of Credit, the expiration date of such Tranche 1 Letter of Credit will
be automatically extended for an additional year, without written amendment,
unless at least 30 days, or 60 days if so required by any Applicable Regulatory
Authority, prior to the expiration date of such Tranche 1 Letter of Credit,
notice is given by the Issuing Agent to the beneficiary of such Tranche 1
Letter of Credit in accordance with the terms of the respective Tranche 1
Letter of Credit (a “Notice of Non-Extension”) that the expiration date
of such Tranche 1 Letter of Credit will not be extended beyond its current
expiration date.  The Issuing Agent will
give Notices of Non-Extension as to any or all outstanding Tranche 1 Letters of
Credit if requested to do so by the Required Lenders pursuant to Article VIII.  The Issuing Agent will give Notices of
Non-Extension as to all outstanding Tranche 1 Letters of Credit if the
Commitment Expiration Date has occurred. 
The Issuing Agent will send a copy of each Notice of Non-Extension to
the respective Designated Subsidiary Borrower concurrently with delivery
thereof to the respective beneficiary, unless prohibited by law from doing so.


 


Section 3A.06.  Changes to Stated Amount.  At any time when any Tranche 1 Letter of
Credit is outstanding, at the request of the respective Designated Subsidiary
Borrower, the Issuing Agent will enter into an amendment increasing or reducing
the Stated Amount of such Tranche 1 Letter of Credit, provided that (i) in
no event shall the Stated Amount of any Tranche 1 Letter of Credit be increased
to an amount which would exceed the applicable limitations set forth in Section 3A.01(b),
(ii) the Stated Amount of a Tranche 1 Letter of Credit may not be
increased at any time if the conditions precedent set forth in Section 5.02
are not satisfied at such time, and (iii) the Stated Amount of a Tranche 1
Letter of Credit may not be increased at any time after the date which is 30
days prior to the Commitment Expiration Date.


 


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Section 3A.07.  Representations and Warranties of Tranche
1 Lenders.  Each Tranche 1
Lender represents and warrants that each Tranche 1 Letter of Credit constitutes
a legal, valid and binding obligation of such Tranche 1 Lender enforceable in
accordance with its terms.


 


Section 3A.08.  Fronted Tranche 1 Letters of Credit  Notwithstanding the foregoing in this Article IIIA:


 


(a)                                  Subject
to and upon the terms and conditions set forth herein, each Designated
Subsidiary Borrower may request that any Fronting Lender at any time and from
time to time on or after the Restatement Effective Date and prior to the date
which is 30 days prior to the Commitment Expiration Date, to issue for its own
account a letter of credit designated as a Tranche 1 Letter of Credit for the
account of such Designated Subsidiary Borrower subject to and upon the terms
and conditions herein set forth.  Each
Fronting Lender agrees to issue at any time and from time to time on or after
the Restatement Effective Date and prior to the date which is 30 days prior to
the Commitment Expiration Date one or more irrevocable standby letters of
credit designated as a Tranche 1 Letter of Credit in such form as may be
approved by such Fronting Lender (each such letter of credit, a “Fronted
Tranche 1 Letter of Credit” and, collectively, the “Fronted Tranche 1
Letters of Credit”), provided that no Fronted Tranche 1 Letter of
Credit will be issued by any Fronting Lender if after giving effect thereto (x)
the Stated Amount thereof, when added to the aggregate Stated Amount of all
Fronted Letters of Credit then outstanding, shall exceed $100,000,000, or (y)
any provision set forth in Section 3A.01 shall be violated as a result
thereof.  Except as expressly provided in
this Section 3A.08 or in Section 3A.09 or 3A.10, for all purposes of
this Agreement and the other Credit Documents, Fronted Tranche 1 Letters of
Credit shall be deemed to be Tranche 1 Letters of Credit.


 


(b)                                 Immediately
upon the issuance by any Fronting Lender of any Fronted Tranche 1 Letter of
Credit, such Fronting Lender shall be deemed to have sold and transferred to
each Tranche 1 Lender other than such Fronting Lender (each such Tranche 1
Lender in its capacity as a “participant” under any Fronted Tranche 1 Letter of
Credit, a “Fronting Tranche 1 Participant”), and each such Fronting
Tranche 1 Participant shall be deemed irrevocably and unconditionally to have
purchased and received from such Fronting Lender, without recourse or warranty,
an undivided interest and participation, to the extent of such Fronting Tranche
1 Participant’s Tranche 1 Percentage in such Fronted Tranche 1 Letter of
Credit, each drawing made thereunder and the obligations of each Designated
Subsidiary Borrower under this Agreement with respect thereto, and any security
therefor or guaranty pertaining thereto. 
Upon any change in the Tranche 1 Commitments or Tranche 1 Percentages of
the Tranche 1 Lenders pursuant to this Agreement, it is hereby agreed that,
with respect to all then outstanding Fronted Tranche 1 Letters of Credit and
Fronted Tranche 1 Unpaid Drawings, there shall be an automatic adjustment to
the participations pursuant to this Section 3A.08 to reflect the new
Tranche 1 Percentages resulting from such change or changes, as the case may
be.


 


(c)                                  In
determining whether to pay under any Fronted Tranche 1 Letter of Credit, such
Fronting Lender shall have no obligation relative to the other Tranche 1
Lenders other than to confirm that any documents required to be delivered under
such Fronted Tranche 1 Letter of Credit appear to have been delivered and that
they appear to substantially comply on


 


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their
face with the requirements of such Fronted Tranche 1 Letter of Credit.  Any action taken or omitted to be taken by
any Fronting Lender under or in connection with any Fronted Tranche 1 Letter of
Credit shall not create for such Fronting Lender any resulting liability to any
Designated Subsidiary Borrower or any of its Affiliates or any Tranche 1 Lender
unless such action is taken or omitted to be taken with gross negligence or
willful misconduct on the part of such Fronting Lender (as determined by a
court of competent jurisdiction).


 


(d)                                 In the
event that any Fronting Lender makes any payment under any Fronted Tranche 1
Letter of Credit and the respective Designated Subsidiary Borrower shall not
have reimbursed such amount in full to such Fronting Lender pursuant to Section 3A.09,
such Fronting Lender shall promptly notify the Administrative Agent, which
shall promptly notify each Fronting Tranche 1 Participant, of such failure, and
each Fronting Tranche 1 Participant shall promptly and unconditionally pay to
such Fronting Lender the amount of such Fronting Tranche 1 Participant’s
Tranche 1 Percentage of such unreimbursed payment in Dollars (or, in the case
of an Alternate Currency Letter of Credit, in the applicable Alternate
Currency) and in immediately available funds. 
If, prior to 11:00 a.m. (New York time) on any Business Day, the
Administrative Agent so notifies any Fronting Tranche 1 Participant required to
fund a payment under a Fronted Tranche 1 Letter of Credit, such Fronting
Tranche 1 Participant shall make available to such Fronting Lender in Dollars
(or, in the case of an Alternate Currency Letter of Credit, in the applicable
Alternate Currency) and in immediately available funds such Fronting Tranche 1
Participant’s Tranche 1 Percentage of the amount of such payment on such
Business Day (or, if notice is given after 11:00 a.m. (New York time) on
any Business Day, on the next Business Day). 
If and to the extent such Fronting Tranche 1 Participant shall not have
so made its Tranche 1 Percentage of the amount of such payment available to
such Fronting Lender, such Fronting Tranche 1 Participant agrees to pay to such
Fronting Lender, forthwith on demand such amount, together with interest
thereon, for each day from such date to but excluding the date such amount is
paid to such Fronting Lender at the greater of the Federal Funds Effective Rate
and a rate determined by such Fronting Lender in accordance with banking
industry rules on interbank compensation. 
The failure of any Fronting Tranche 1 Participant to make available to
such Fronting Lender its Tranche 1 Percentage of any payment under any Fronted
Tranche 1 Letter of Credit shall not relieve any other Fronting Tranche 1
Participant of its obligation hereunder to make available to such Fronting
Lender its Tranche 1 Percentage of any payment on the date required, as
specified above, but no Fronting Tranche 1 Participant shall be responsible for
the failure of any other Fronting Tranche 1 Participant to make available to
such Fronting Lender such other Fronting Tranche 1 Participant’s Tranche 1
Percentage of any such payment.


 


(e)                                  Whenever
any Fronting Lender receives any payment by any Designated Subsidiary Borrower
as to which it has also received payments from the Fronting Tranche 1 Participants
pursuant to clause (d) above, such Fronting Lender shall forward such
payment to the Administrative Agent, which in turn shall distribute to each
Fronting Tranche 1 Participant which has paid its Tranche 1 Percentage thereof,
in Dollars (or, in the case of an Alternate Currency Letter of Credit, in the
applicable Alternate Currency) and in immediately available funds, an amount
equal to such Fronting Tranche 1 Participant’s share (based upon the amount
funded by such Fronting Tranche 1 Participant to the aggregate amount funded by
all Fronting Tranche 1 Participants and retained by such Fronting Lender) of
the principal amount of such payment and interest thereon accruing after the
purchase of the respective participations.


 


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(f)                                    Upon
the request of any Fronting Tranche 1 Participant, each Fronting Lender shall
furnish to such Fronting Tranche 1 Participant copies of any Fronted Tranche 1
Letter of Credit issued by it and such other documentation as may reasonably be
requested by such Fronting Tranche 1 Participant.


 


(g)                                 The
obligations of the Fronting Tranche 1 Participants to make payments to each
Fronting Lender with respect to Fronted Tranche 1 Letters of Credit issued by
it shall be irrevocable and not subject to any qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of
this Agreement under all circumstances, including, without limitation, any of
the following circumstances:


 


(i)                                     any lack of validity or enforceability of
this Agreement or any of the other Credit Documents or any amendment,
supplement or modification to any of the foregoing;


 


(ii)                                  the existence of any claim, setoff, defense
or other right which the Fronting Tranche 1 Participant or any of its
Affiliates may have at any time against a beneficiary named in a Fronted
Tranche 1 Letter of Credit, any transferee of any Fronted Tranche 1 Letter of
Credit (or any Person for whom any such transferee may be acting), the
Administrative Agent, any Fronting Lender, any Fronting Tranche 1 Participant,
any Tranche 1 Lender, or any other Person, whether in connection with this
Agreement, any Fronted Tranche 1 Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transaction between any Designated Subsidiary Borrower or any of its Affiliates
and the beneficiary named in any such Fronted Tranche 1 Letter of Credit);


 


(iii)                               any draft, certificate or any other document
presented under any Fronted Tranche 1 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;


 


(iv)                              the surrender or impairment of any security
for the performance or observance of any of the terms of any of the Credit
Documents;


 


(v)                                 the occurrence of any Default or Event of
Default; or


 


(vi)                              any matter or event set forth in Section 3A.03
or 3A.09.


 


(h)                                 Notwithstanding
anything to the contrary contained in this Agreement, the provisions of this Article IIIA
shall not be amended, modified or waived in a manner adverse to the rights or
obligations of any Fronting Lender without the consent of each Fronting Lender
affected thereby.


 


Section 3A.09.  Agreement to Repay Fronted Tranche 1 Letter
of Credit Drawings; Fronting Fee 
(a)  Each Designated Subsidiary Borrower hereby agrees to
reimburse the respective Fronting Lender for any payment or disbursement made
by such Fronting Lender under any Fronted Tranche 1 Letter of Credit (each such
amount so paid, until reimbursed by such Designated Subsidiary Borrower, a “Fronted
Tranche 1 Unpaid Drawing”) in the manner and subject to the terms of Section 3A.03.  The respective Fronting Lender shall give the


 


63





















 


respective
Designated Subsidiary Borrower and the Administrative Agent prompt notice of
any payment or disbursement made under any Fronted Tranche 1 Letter of Credit, provided
that the failure to give any such notice shall in no way affect, impair or
diminish such Designated Subsidiary Borrower’s obligations hereunder.


 


(b)                                 Any
action taken or omitted to be taken by any Fronting Lender under or in
connection with any Fronted Tranche 1 Letter of Credit shall not create for
such Fronting Lender any resulting liability to any Designated Subsidiary
Borrower or any of its Affiliates or any Tranche 1 Lender unless such action is
taken or omitted to be taken with gross negligence or willful misconduct on the
part of such Fronting Lender (as determined by a court of competent
jurisdiction).


 


(c)                                  Each
Designated Subsidiary Borrower agrees to pay to each Fronting Lender, for its
own account, a fronting fee in an amount and on dates as shall have separately
been agreed to by the Designated Subsidiary Borrowers and such Fronting Lender.


 


Section 3A.10.  Defined Terms.  For purposes of this Article IIIA and
except as expressly provided in Section 3A.08 or 3A.09, (a) all
references to (i) the Issuing Agent shall be deemed to include the
Fronting Lender and (ii) Tranche 1 Letters of Credit shall be deemed to
include the Fronted Tranche 1 Letters of Credit and (b) all terms and
conditions herein applicable to the Issuing Agent and Tranche 1 Letters of
Credit shall apply in all respects to the Fronting Lender and Fronted Tranche 1
Letters of Credit.


 


Section 3A.11.  Existing Tranche 1 Fronted Letters of
Credit.  It is hereby agreed
and acknowledged that all Fronted Tranche 1 Letters of Credit described on Schedule 3A.11
(the “Existing Tranche 1 Fronted Letters of Credit”) which were issued
under the Existing Credit Agreement and which remain outstanding on the
Restatement Effective Date shall be deemed issued under this Agreement as a “Fronted
Tranche 1 Letter of Credit” on the Restatement Effective Date.


 


Section 3A.12.  Existing Tranche 1 Several Letters of
Credit.  (a)  It is
hereby agreed and acknowledged that all Tranche 1 Letters of Credit described
on Schedule 3A.12 that are not Existing Tranche 1 Fronted Letters of
Credit (the “Existing Tranche 1 Several Letters of Credit”) which were
issued and which remain outstanding on the Restatement Effective Date shall be
deemed issued under this Agreement as a “Tranche 1 Letter of Credit” on
the Restatement Effective Date.  As soon
as possible following the Restatement Effective Date, each Existing Tranche 1
Several Letter of Credit shall be amended to replace each Existing Lender with
each Tranche 1 Lender party to this Agreement at the time of such amendment in
accordance with each such Tranche 1 Lender’s Tranche 1 Percentage.  Until an Existing Tranche 1 Several Letter of
Credit has been amended in accordance with this Section 3A.12, each
Existing Lender shall be deemed to have sold and transferred to each Tranche 1
Lender, and each such Tranche 1 Lender shall be deemed irrevocably and
unconditionally to have purchased and received from such Existing Lender,
without recourse or warranty, an undivided interest and participation, to the
extent of such Tranche 1 Lender’s Tranche 1 Percentage, in such Existing
Tranche 1 Several Letter of Credit, each substitute Existing Tranche 1 Several
Letter of Credit, each drawing made thereunder, the obligations of the
respective Designated Subsidiary Borrower under this Agreement with respect
thereto and any security therefore or guaranty pertaining


 


64





















 


thereto.  Upon any change in the Tranche 1 Commitments
or Tranche 1 Percentages of the Tranche 1 Lenders pursuant to this Agreement,
it is hereby agreed that, with respect to all outstanding Existing Tranche 1
Several Letters of Credit and Tranche 1 Unpaid Drawings with respect thereto,
there shall be an automatic adjustment to the participations pursuant to this Section 3A.12
to reflect the new Tranche 1 Percentages from such change or changes, as the
case may be.


 


(b)                                 In
determining whether to pay under any Existing Tranche 1 Several Letter of
Credit, no Existing Lender shall have any obligation relative to the Tranche 1
Lenders other than to determine that any documents required to be delivered
under such Existing Tranche 1 Several Letter of Credit have been delivered and
that they appear to substantially comply on their face with the requirements of
such Existing Tranche 1 Several Letter of Credit, which obligation, it is
understood, is being performed by the Issuing Agent, and upon whom each
Existing Lender shall be entitled to rely. 
Any action taken or omitted to be taken by the Issuing Agent or any
Existing Lender under or in connection with any Existing Tranche 1 Several
Letter of Credit issued by it shall not create for the Issuing Agent or such
Existing Lender any resulting liability to any Borrower, any Tranche 1 Lender
or any other Person unless such action is taken or omitted to be taken with
gross negligence or willful misconduct on the part of the Issuing Agent or such
Existing Lender, as the case may be (as determined by a court of competent
jurisdiction).


 


(c)                                  In the
event that any Existing Lender makes any payment under any Existing Tranche 1
Several Letter of Credit issued by it and the respective Designated Subsidiary
Borrower shall not have reimbursed such amount in full as provided in Section 3A.03,
such Existing Lender shall promptly notify the Administrative Agent, and the
Administrative Agent shall promptly notify each Tranche 1 Lender of such
failure, and each such Tranche 1 Lender shall promptly and unconditionally pay
to the Administrative Agent for the account of such Existing Lender, the amount
of such Tranche 1 Lender’s Tranche 1 Percentage of such payment in Dollars (or,
in the case of an Alternate Currency Letter of Credit, in the applicable
Alternate Currency) and in immediately available funds.  If the Administrative Agent so notifies any
Tranche 1 Lender required to fund a payment under an Existing Tranche 1 Several
Letter of Credit prior to 11:00 a.m. (New York time) on any Business Day,
such Tranche 1 Lender shall make available to the Administrative Agent at the
Payment Office for the account of the respective Existing Lender such Tranche 1
Lender’s Tranche 1 Percentage of the amount of such payment on such Business
Day in immediately available funds (and, to the extent such notice is given
after 11:00 a.m. (New York time) on any Business Day, such Tranche 1
Lender shall make such payment on the immediately following Business Day).  If and to the extent such Tranche 1 Lender
shall not have so made its Tranche 1 Percentage of the amount of such payment
available to the Administrative Agent for the account of the respective Existing
Lender, such Tranche 1 Lender agrees to pay to the Administrative Agent for the
account of such Existing Lender, forthwith on demand such amount, together with
interest thereon, for each day from such date until the date such amount is
paid to the Administrative Agent for the account of the Existing Lender at the
greater of the Federal Funds Effective Rate and a rate determined by such
Existing Lender in accordance with banking industry rules on interbank
compensation.  The failure of any Tranche
1 Lender to make available to the Administrative Agent for the account of the
respective Existing Lender its Tranche 1 Percentage of any payment under any
Existing Tranche 1 Several Letter of Credit issued by it shall not relieve any
other Tranche 1 Lender of its obligation


 


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hereunder
to make available to the Administrative Agent for the account of such Existing
Lender its Tranche 1 Percentage of any payment under any such Existing Tranche
1 Several Letter of Credit on the date required, as specified above, but no
Tranche 1 Lender shall be responsible for the failure of any other Tranche 1
Lender to make available to the Administrative Agent for the account of such
Existing Lender such other Tranche 1 Lender’s Tranche 1 Percentage of any such
payment.


 


(d)                                 Whenever
any Existing Tranche 1 Lender receives a payment of a reimbursement obligation
as to which the Administrative Agent has received for the account of such
Existing Tranche 1 Lender any payments from the Tranche 1 Lenders pursuant to
clause (c) above, such Existing Tranche 1 Lender shall pay to the
Administrative Agent and the Administrative Agent shall promptly pay to each
Tranche 1 Lender which has paid its Tranche 1 Percentage thereof in immediately
available funds, an amount equal to such Tranche 1 Lender’s Tranche 1
Percentage of the principal amount thereof and interest thereon accruing after
the purchase of the respective participations.


 


(e)                                  The
obligations of the Tranche 1 Lenders to make payments to the Administrative
Agent for the account of the respective Existing Lender with respect to
Existing Tranche 1 Several Letters of Credit issued by it shall be irrevocable
and not subject to counterclaim, set-off or other defense or any other
qualification or exception whatsoever and shall be made in accordance with the
terms and conditions of this Agreement under all circumstances, including,
without limitation, any of the following circumstances:


 


(i)                                     any lack of validity or enforceability of
this Agreement or any of the other Credit Documents;


 


(ii)                                  the existence of any claim, set-off, defense
or other right which the Parent Borrower or any of its Subsidiaries may have at
any time against a beneficiary named in an Existing Tranche 1 Several Letter of
Credit, any transferee of any Existing Tranche 1 Several Letter of Credit (or
any Person for whom any such transferee may be acting), the Administrative
Agent, any Existing Lender, or other Person, whether in connection with this
Agreement, any Existing Tranche 1 Several Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transaction between the Parent Borrower or any of its Subsidiaries and the
beneficiary named in any such Existing Tranche 1 Several Letter of Credit);


 


(iii)                               any draft, certificate or other document
presented under the Existing Tranche 1 Several 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;


 


(iv)                              the surrender or impairment of any security
for the performance or observance of any of the terms of any of the Credit
Documents; or


 


(v)                                 the occurrence of any Default or Event of
Default.


 


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ARTICLE IIIB


 


Tranche 2 Letters of Credit


 


Section 3B.01. 
Tranche 2 Letters of Credit. 
(a)  Subject to and upon the terms and conditions set forth herein,
each Tranche 2/3 Borrower may request the Issuing Agent, at any time and from
time to time after the Restatement Effective Date and prior to the date which
is 30 days prior to the Commitment Expiration Date, to issue on behalf of the
Tranche 2 Lenders, for the account of such Tranche 2/3 Borrower and in support
of, on a standby basis, Letter of Credit Supportable Obligations and, subject
to and upon the terms and conditions set forth herein, the Issuing Agent agrees
to issue on behalf of the Tranche 2 Lenders at any time and from time to time
after the Restatement Effective Date and prior to the date which is 30 days
prior to the Commitment Expiration Date, one or more irrevocable standby
letters of credit in such form as may be approved by the Issuing Agent (each
such letter of credit, a “Tranche 2 Letter of Credit” and, collectively,
the “Tranche 2 Letters of Credit”). 
Notwithstanding the foregoing, the Issuing Agent shall be under no
obligation to issue any Tranche 2 Letter of Credit if at the time of such
issuance:


 


(i)                                     any order, judgment or decree of any
Governmental Authority or arbitrator shall purport by its terms to enjoin or restrain
the Issuing Agent from issuing such Tranche 2 Letter of Credit or any
requirement of law applicable to such Issuing Agent or any Tranche 2 Lender or
any request or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Issuing Agent or any Tranche
2 Lender shall prohibit, or request that the Issuing Agent or any Tranche 2
Lender refrain from, the issuance of letters of credit generally or such
Tranche 2 Letter of Credit in particular or shall impose upon the Issuing Agent
or any Tranche 2 Lender with respect to such Tranche 2 Letter of Credit any
restriction or reserve or capital requirement (for which the Issuing Agent or
any Tranche 2 Lender is not otherwise compensated) not in effect on the Restatement
Effective Date, or any unreimbursed loss, cost or expense which was not
applicable, in effect or known to the Issuing Agent or any Tranche 2 Lender as
of the Restatement Effective Date;


 


(ii)                                  the conditions precedent set forth in Section 5.02
are not satisfied at that time; or


 


(iii)                               the Issuing Agent shall have received notice
from any Borrower or the Required Lenders prior to the issuance of such Tranche
2 Letter of Credit of the type described in clause (viii) of Section 3B.01(b).


 


(b)                                 Notwithstanding
anything to the contrary contained in this Section 3B.01 or elsewhere in
this Agreement, (i) no Tranche 2 Letter of Credit shall be issued the
Stated Amount of which, when added to (x) the Tranche 2 Letter of Credit
Outstandings (exclusive of Tranche 2 Unpaid Drawings which are repaid on the
date of, and prior to the issuance of, the respective Tranche 2 Letter of
Credit) at such time and (y) the aggregate Principal Amount of all Tranche 2
Loans then outstanding, would exceed, an amount equal to the Total Tranche 2
Commitment at such time; (ii) no Tranche 2 Letter of Credit shall be
issued if any Tranche 2 Lender’s Tranche 2 Percentage of the Stated Amount of
such Tranche 2 Letter of Credit, when


 


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added
to such Tranche 2 Lender’s Tranche 2 Credit Exposure, would exceed the Tranche
2 Commitment of such Tranche 2 Lender at such time; (iii) no Tranche 2
Letter of Credit shall be issued for the account of ARC the Stated Amount of
which, when added to (x) the Tranche 2 Letter of Credit Outstandings applicable
to ARC (exclusive of Tranche 2 Unpaid Drawings which are repaid on the date of,
and prior to the issuance of, the respective Tranche 2 Letter of Credit) at
such time and (y) the aggregate Principal Amount of all Tranche 2 Loans and
Tranche 3 Loans incurred by ARC and then outstanding, would exceed an amount
equal to $100,000,000 at such time; (iv) no Tranche 2 Letter of Credit
shall be issued for the account of ARC if the Stated Amount thereof, when added
to (x) the Tranche 1 Letter of Credit Outstandings in respect of Tranche 1
Letters of Credit issued for the account of ARC, (y) the Tranche 2 Letter of
Credit Outstandings in respect of Tranche 2 Letters of Credit issued for the
account of ARC and (z) the aggregate Principal Amount of all Tranche 2 Loans
and Tranche 3 Loans incurred by ARC and then outstanding, would exceed an
amount equal to ARC’s Sublimit at such time; (v) no Tranche 2 Letter of
Credit denominated in an Alternate Currency shall be issued the Stated Amount
of which, when added to the Alternate Currency Letter of Credit Outstandings at
such time in respect of all Alternate Currency Letters of Credit, would exceed
the Alternate Currency Letter of Credit Sublimit; (vi) each Tranche 2
Letter of Credit shall have an expiry date occurring not later than one year
after such Tranche 2 Letter of Credit’s date of issuance; provided that
each such Tranche 2 Letter of Credit may by its terms automatically renew
annually for one additional year unless the Issuing Agent notifies the
beneficiary thereof, in accordance with the terms of such Tranche 2 Letter of
Credit, that such Tranche 2 Letter of Credit will not be renewed; (vii) each
Tranche 2 Letter of Credit shall be denominated in Dollars or, subject to
preceding clause (v), an Alternate Currency; and (viii) the Issuing Agent
will not issue any Tranche 2 Letter of Credit after it has received written
notice from any Borrower or the Required Lenders stating that a Default or an
Event of Default exists until such time as the Issuing Agent shall have
received a written notice of (x) rescission of such notice from the party or
parties originally delivering the same or (y) a waiver of such Default or Event
of Default by the Required Lenders (or, to the extent provided by Section 10.02,
each of the Lenders).


 


(c)                                  Each
Tranche 2 Letter of Credit will be issued by the Issuing Agent on behalf of the
Tranche 2 Lenders and each Tranche 2 Lender will participate in each Tranche 2
Letter of Credit pro  rata in accordance with its Tranche 2
Percentage.  The obligations of each
Tranche 2 Lender under and in respect of each Tranche 2 Letter of Credit are
several, and the failure by any Tranche 2 Lender to perform its obligations hereunder
or under any Tranche 2 Letter of Credit shall not affect the obligations of the
respective Tranche 2/3 Borrower toward any other party hereto nor shall any
other such party be liable for the failure by such Tranche 2 Lender to perform
its obligations hereunder or under any Tranche 2 Letter of Credit.


 


(d)                                 Subject
to and on the terms and conditions set forth herein, the Issuing Agent is
hereby authorized by each Tranche 2/3 Borrower and the Tranche 2 Lenders to
arrange for the issuance of any Tranche 2 Letter of Credit pursuant to Section 3B.01(a) and
the amendment of any Tranche 2 Letter of Credit pursuant to Section 2.18, Section 3B.06
and/or Section 10.04(b) by:


 


(i)                                     completing the commencement date and the
expiry date of such Tranche 2 Letter of Credit;


 


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(ii)                                  in the case of an amendment increasing or
reducing the amount thereof, amending such Tranche 2 Letter of Credit in such
manner as the Issuing Agent and the respective beneficiary may agree;


 


(iii)                               completing such Tranche 2 Letter of Credit
with the participation of each Tranche 2 Lender as allocated pursuant to the
terms hereof; and


 


(iv)                              executing such Tranche 2 Letter of Credit on
behalf of each Tranche 2 Lender and following such execution delivering such
Tranche 2 Letter of Credit to the beneficiary of such Tranche 2 Letter of
Credit.


 


(e)                                  Each
Tranche 2 Letter of Credit shall be executed and delivered by the Issuing Agent
in the name and on behalf of, and as attorney-in-fact for, each Tranche 2
Lender party to such Tranche 2 Letter of Credit, and the Issuing Agent shall
act under each Tranche 2 Letter of Credit, and each Tranche 2 Letter of Credit
shall expressly provide that the Issuing Agent shall act, as the agent of each
Tranche 2 Lender to (a) receive drafts, other demands for payment and
other documents presented by the beneficiary under such Tranche 2 Letter of
Credit, (b) determine whether such drafts, demands and documents are in
compliance with the terms and conditions of such Tranche 2 Letter of Credit and
(c) notify such Tranche 2 Lender and such Tranche 2/3 Borrower that a
valid drawing has been made and the date that the related Tranche 2 Unpaid
Drawing is to be made; provided that the Issuing Agent shall have no
obligation or liability for any Tranche 2 Unpaid Drawing under such Tranche 2
Letter of Credit, and each Tranche 2 Letter of Credit shall expressly so
provide.  Each Tranche 2 Lender hereby
irrevocably appoints and designates the Issuing Agent as its attorney-in-fact, acting
through any duly authorized officer of the Issuing Agent, solely for the
purpose of executing and delivering in the name and on behalf of such Tranche 2
Lender each Tranche 2 Letter of Credit to be issued by such Tranche 2 Lender
hereunder.  Promptly upon the request of
the Issuing Agent, each Tranche 2 Lender will furnish to the Issuing Agent such
powers of attorney or other evidence as any beneficiary of any Tranche 2 Letter
of Credit may reasonably request in order to demonstrate that the Issuing Agent
has the power to act as attorney-in-fact for such Tranche 2 Lender to execute
and deliver such Tranche 2 Letter of Credit.


 


Section 3B.02. 
Tranche 2 Letter of Credit Requests.  (a)  Whenever a Tranche 2/3
Borrower desires that a Tranche 2 Letter of Credit be issued, such Tranche 2/3
Borrower shall give the Administrative Agent and the Issuing Agent written
notice (including by way of facsimile transmission, immediately confirmed in
writing by submission of the original of such request by mail to the Issuing
Agent) thereof prior to 11:00 a.m. (New York time) at least five Business
Days (or such shorter period as may be acceptable to the Issuing Agent) prior
to the proposed date of issuance (which shall be a Business Day), which written
notice shall be in the form of Exhibit C-2 (each, a “Tranche 2 Letter
of Credit Request”).  Each Tranche 2
Letter of Credit Request shall include any other documents as the Issuing Agent
customarily requires in connection therewith.


 


(b)                                 The making of each Tranche 2 Letter of Credit
Request shall be deemed to be a representation and warranty by the applicable
Tranche 2/3 Borrower that such Tranche 2 Letter of Credit may be issued in
accordance with, and it will not violate the requirements of, Section 3B.01(a) or
(b).


 


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(c)                                  Upon its issuance of, or amendment to, any
Tranche 2 Letter of Credit, the Issuing Agent shall promptly notify the
respective Tranche 2/3 Borrower and the Tranche 2 Lenders of such issuance or
amendment, which notice shall include a summary description of the Tranche 2
Letter of Credit actually issued and any amendments thereto.


 


Section 3B.03. 
Agreement to Repay Tranche 2 Letter of Credit Drawings.  (a)  Each Tranche 2/3 Borrower
agrees to reimburse each Tranche 2 Lender, by making payment to the
Administrative Agent in immediately available funds at the Payment Office, for
any payment or disbursement made by such Tranche 2 Lender under any Tranche 2
Letter of Credit which has been issued for such Tranche 2/3 Borrower’s account
(each such amount so paid or disbursed until reimbursed by such Tranche 2/3
Borrower, a “Tranche 2 Unpaid Drawing”) no later than one Business Day
following the date of such payment or disbursement, with interest on the amount
so paid or disbursed by such Tranche 2 Lender, to the extent not reimbursed
prior to 1:00 p.m. (New York time) on the date of such payment or
disbursement, from and including the date paid or disbursed to but not
including the date such Tranche 2 Lender is reimbursed therefor at a rate per
annum which shall be the Alternative Base Rate plus the Applicable Rate for
Loans maintained as ABR Loans as in effect from time to time (plus an
additional 2% per annum, payable on demand, if not reimbursed by the third
Business Day after the date of such payment or disbursement).


 


(b)                                 Each Tranche 2/3 Borrower’s obligation under
this Section 3B.03 to reimburse each Tranche 2 Lender with respect to
Tranche 2 Unpaid Drawings (including, in each case, interest thereon) shall be
absolute and unconditional under any and all circumstances and irrespective of
any setoff, counterclaim or defense to payment which such Tranche 2/3 Borrower
may have or have had against such Tranche 2 Lender or the Issuing Agent,
including, without limitation, any defense based upon the failure of any
drawing under a Tranche 2 Letter of Credit to conform to the terms of the
Tranche 2 Letter of Credit or any non-application or misapplication by the
beneficiary of the proceeds of such drawing; provided, however,
that no Tranche 2/3 Borrower shall be obligated to reimburse any Tranche 2
Lender for any wrongful payment made by such Tranche 2 Lender under a Tranche 2
Letter of Credit as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of such Tranche 2 Lender (as
determined by a court of competent jurisdiction in a final and non-appealable
decision).


 


Section 3B.04. 
Increased Costs.  If after
the Restatement Effective Date, a Change in Law shall either (i) impose,
modify or make applicable any reserve, deposit, capital adequacy or similar
requirement against letters of credit issued by or participated in by such
Tranche 2 Lender, or (ii) impose on such Tranche 2 Lender any other
conditions directly or indirectly affecting this Agreement or any Tranche 2 Letter
of Credit; and the result of any of the foregoing is to increase the cost to
such Tranche 2 Lender of issuing, maintaining or participating in any Tranche 2
Letter of Credit, or to reduce the amount of any sum received or receivable by
such Tranche 2 Lender hereunder or reduce the rate of return on its capital
with respect to Tranche 2 Letters of Credit, then, upon written demand to the
respective Tranche 2/3 Borrower by such Tranche 2 Lender (with a copy to the
Administrative Agent), such Tranche 2/3 Borrower agrees to pay to such Tranche
2 Lender such additional amount or amounts as will compensate such Tranche 2
Lender for such increased cost or reduction. 
A certificate submitted to the respective Tranche 2/3 Borrower by such
Tranche 2 Lender (with a copy to the Administrative Agent), setting forth the
basis for the determination of such additional amount or amounts


 


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necessary
to compensate such Tranche 2 Lender as aforesaid shall be final and conclusive
and binding on such Tranche 2/3 Borrower absent manifest error, although the
failure to deliver any such certificate shall not release or diminish any
Tranche 2/3 Borrower’s obligations to pay additional amounts pursuant to this Section 3B.04
upon subsequent receipt of such certificate; provided that such Tranche
2/3 Borrower shall not be required to compensate such Tranche 2 Lender pursuant
to this Section 3B.04 for any increased costs or reductions incurred more
than 90 days prior to the date that such Tranche 2 Lender notifies such Tranche
2/3 Borrower of the Change in Law giving rise to such increased costs or
reductions and of such Tranche 2 Lender’s intention to claim compensation
therefor; provided, further, that, if the Change in Law giving
rise to such increased costs or reductions is retroactive, then the 90-day
period referred to above shall be extended to include the period of retroactive
effect thereof.


 


Section 3B.05. 
Tranche 2 Letter of Credit Expiration Extensions.  Each Tranche 2 Lender acknowledges that to
the extent provided under the terms of any Tranche 2 Letter of Credit, the
expiration date of such Tranche 2 Letter of Credit will be automatically
extended for an additional year, without written amendment, unless at least 30
days, or 60 days if so required by any Applicable Regulatory Authority, prior
to the expiration date of such Tranche 2 Letter of Credit, a Notice of
Non-Extension is given by the Issuing Agent to the beneficiary of such Tranche
2 Letter of Credit in accordance with the terms of the respective Tranche 2
Letter of Credit that the expiration date of such Tranche 2 Letter of Credit
will not be extended beyond its current expiration date.  The Issuing Agent will give Notices of Non-Extension
as to any or all outstanding Tranche 2 Letters of Credit if requested to do so
by the Required Lenders pursuant to Article VIII.  The Issuing Agent will give Notices of
Non-Extension as to all outstanding Tranche 2 Letters of Credit if the
Commitment Expiration Date has occurred. 
The Issuing Agent will send a copy of each Notice of Non-Extension to
the respective Tranche 2/3 Borrower concurrently with delivery thereof to the
respective beneficiary, unless prohibited by law from doing so.


 


Section 3B.06. 
Changes to Stated Amount. 
At any time when any Tranche 2 Letter of Credit is outstanding, at the
request of the respective Tranche 2/3 Borrower, the Issuing Agent will enter
into an amendment increasing or reducing the Stated Amount of such Tranche 2
Letter of Credit, provided that (i) in no event shall the Stated
Amount of any Tranche 2 Letter of Credit be increased to an amount which would
exceed the applicable limitations set forth in Section 3B.01(b); (ii) the
Stated Amount of a Tranche 2 Letter of Credit may not be increased at any time
if the conditions precedent set forth in Section 5.02 are not satisfied at
such time; and (iii) the Stated Amount of a Tranche 2 Letter of Credit may
not be increased at any time after the date which is 30 days prior to the
Commitment Expiration Date.


 


Section 3B.07. 
Representations and Warranties of Tranche 2 Lenders.  Each Tranche 2 Lender represents and warrants
that each Tranche 2 Letter of Credit constitutes a legal, valid and binding
obligation of such Tranche 2 Lender enforceable in accordance with its terms.


 


Section 3B.08. 
Fronted Tranche 2 Letters of Credit.  Notwithstanding the foregoing in this Article IIIB:


 


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(a)                                  Subject to and upon the terms and conditions
set forth herein, each Tranche 2/3 Borrower may request that any Fronting
Lender at any time and from time to time on or after the Restatement Effective
Date and prior to the date which is 30 days prior to the Commitment Expiration
Date, to issue for its own account a letter of credit designated as a Tranche 2
Letter of Credit for the account of such Tranche 2/3 Borrower subject to and
upon the terms and conditions herein set forth. 
Each Fronting Lender agrees to issue at any time and from time to time
on or after the Restatement Effective Date and prior to the date which is 30
days prior to the Commitment Expiration Date one or more irrevocable standby
letters of credit designated as a Tranche 2 Letter of Credit in such form as
may be approved by such Fronting Lender (each such letter of credit, a “Fronted
Tranche 2 Letter of Credit” and, collectively, the “Fronted Tranche 2
Letters of Credit”), provided that no Fronted Tranche 2 Letter of
Credit will be issued by any Fronting Lender if after giving effect thereto (x)
the Stated Amount thereof, when added to the aggregate Stated Amount of all
Fronted Letters of Credit then outstanding, shall exceed $100,000,000, or (y)
any provision set forth in Section 3B.01 shall be violated as a result
thereof.  Except as expressly provided in
this Section 3B.08 or in Section 3B.09 or 3B.10, for all purposes of
this Agreement and the other Credit Documents, Fronted Tranche 2 Letters of
Credit shall be deemed to be Tranche 2 Letters of Credit.


 


(b)                                 Immediately upon the issuance by any Fronting
Lender of any Fronted Tranche 2 Letter of Credit, such Fronting Lender shall be
deemed to have sold and transferred to each Tranche 2 Lender other than such
Fronting Lender (each such Tranche 2 Lender in its capacity as a “participant”
under any Fronted Tranche 2 Letter of Credit, a “Fronting Tranche 2
Participant”), and each such Fronting Tranche 2 Participant shall be deemed
irrevocably and unconditionally to have purchased and received from such
Fronting Lender, without recourse or warranty, an undivided interest and
participation, to the extent of such Fronting Tranche 2 Participant’s Tranche 2
Percentage in such Fronted Tranche 2 Letter of Credit, each drawing made
thereunder and the obligations of each Tranche 2/3 Borrower under this
Agreement with respect thereto, and any security therefor or guaranty
pertaining thereto.  Upon any change in
the Tranche 2 Commitments or Tranche 2 Percentages of the Tranche 2 Lenders
pursuant to this Agreement, it is hereby agreed that, with respect to all then
outstanding Fronted Tranche 2 Letters of Credit and Fronted Tranche 2 Unpaid
Drawings, there shall be an automatic adjustment to the participations pursuant
to this Section 3B.08 to reflect the new Tranche 2 Percentages resulting
from such change or changes, as the case may be.


 


(c)                                  In determining whether to pay under any
Fronted Tranche 2 Letter of Credit, such Fronting Lender shall have no
obligation relative to the other Tranche 2 Lenders other than to confirm that
any documents required to be delivered under such Fronted Tranche 2 Letter of
Credit appear to have been delivered and that they appear to substantially
comply on their face with the requirements of such Fronted Tranche 2 Letter of
Credit.  Any action taken or omitted to
be taken by any Fronting Lender under or in connection with any Fronted Tranche
2 Letter of Credit shall not create for such Fronting Lender any resulting
liability to any Tranche 2/3 Borrower or any of its Affiliates or any Tranche 2
Lender unless such action is taken or omitted to be taken with gross negligence
or willful misconduct on the part of such Fronting Lender (as determined by a
court of competent jurisdiction).


 


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(d)                                 In
the event that any Fronting Lender makes any payment under any Fronted Tranche
2 Letter of Credit and the respective Tranche 2/3 Borrower shall not have
reimbursed such amount in full to such Fronting Lender pursuant to Section 3B.09,
such Fronting Lender shall promptly notify the Administrative Agent, which
shall promptly notify each Fronting Tranche 2 Participant, of such failure, and
each Fronting Tranche 2 Participant shall promptly and unconditionally pay to
such Fronting Lender the amount of such Fronting Tranche 2 Participant’s
Tranche 2 Percentage of such unreimbursed payment in Dollars (or, in the case
of an Alternate Currency Letter of Credit, in the applicable Alternate
Currency) and in immediately available funds. 
If, prior to 11:00 a.m. (New York time) on any Business Day, the
Administrative Agent so notifies any Fronting Tranche 2 Participant required to
fund a payment under a Fronted Tranche 2 Letter of Credit, such Fronting
Tranche 2 Participant shall make available to such Fronting Lender in Dollars
(or, in the case of an Alternate Currency Letter of Credit, in the applicable
Alternate Currency) and in immediately available funds such Fronting Tranche 2
Participant’s Tranche 2 Percentage of the amount of such payment on such
Business Day (or, if notice is given after 11:00 a.m. (New York time) on
any Business Day, on the next Business Day). 
If and to the extent such Fronting Tranche 2 Participant shall not have
so made its Tranche 2 Percentage of the amount of such payment available to
such Fronting Lender, such Fronting Tranche 2 Participant agrees to pay to such
Fronting Lender, forthwith on demand such amount, together with interest
thereon, for each day from such date to but excluding the date such amount is
paid to such Fronting Lender at the greater of the Federal Funds Effective Rate
and a rate determined by such Fronting Lender in accordance with banking
industry rules on interbank compensation. 
The failure of any Fronting Tranche 2 Participant to make available to
such Fronting Lender its Tranche 2 Percentage of any payment under any Fronted
Tranche 2 Letter of Credit shall not relieve any other Fronting Tranche 2
Participant of its obligation hereunder to make available to such Fronting
Lender its Tranche 2 Percentage of any payment on the date required, as
specified above, but no Fronting Tranche 2 Participant shall be responsible for
the failure of any other Fronting Tranche 2 Participant to make available to
such Fronting Lender such other Fronting Tranche 2 Participant’s Tranche 2
Percentage of any such payment.


 


(e)                                  Whenever
any Fronting Lender receives any payment by any Tranche 2/3 Borrower as to
which it has also received payments from the Fronting Tranche 2 Participants
pursuant to clause (d) above, such Fronting Lender shall forward such
payment to the Administrative Agent, which in turn shall distribute to each
Fronting Tranche 2 Participant which has paid its Tranche 2 Percentage thereof,
in Dollars (or, in the case of an Alternate Currency Letter of Credit, in the applicable
Alternate Currency) and in immediately available funds, an amount equal to such
Fronting Tranche 2 Participant’s share (based upon the amount funded by such
Fronting Tranche 2 Participant to the aggregate amount funded by all Fronting
Tranche 2 Participants and retained by such Fronting Lender) of the principal
amount of such payment and interest thereon accruing after the purchase of the
respective participations.


 


(f)                                    Upon
the request of any Fronting Tranche 2 Participant, each Fronting Lender shall
furnish to such Fronting Tranche 2 Participant copies of any Fronted


 


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Tranche 2 Letter of Credit issued by it and
such other documentation as may reasonably be requested by such Fronting
Tranche 2 Participant.


 


(g)                                 The
obligations of the Fronting Tranche 2 Participants to make payments to each
Fronting Lender with respect to Fronted Tranche 2 Letters of Credit issued by
it shall be irrevocable and not subject to any qualification or exception whatsoever
and shall be made in accordance with the terms and conditions of this Agreement
under all circumstances, including, without limitation, any of the following
circumstances:


 


(i)                                     any
lack of validity or enforceability of this Agreement or any of the other Credit
Documents or any amendment, supplement or modification to any of the foregoing;


 


(ii)                                  the
existence of any claim, setoff, defense or other right which the Fronting
Tranche 2 Participant or any of its Affiliates may have at any time against a
beneficiary named in a Fronted Tranche 2 Letter of Credit, any transferee of
any Fronted Tranche 2 Letter of Credit (or any Person for whom any such
transferee may be acting), the Administrative Agent, any Fronting Lender, any
Fronting Tranche 2 Participant, any Tranche 2 Lender, or any other Person,
whether in connection with this Agreement, any Fronted Tranche 2 Letter of
Credit, the transactions contemplated herein or any unrelated transactions
(including any underlying transaction between any Tranche 2/3 Borrower or any
of its Affiliates and the beneficiary named in any such Fronted Tranche 2
Letter of Credit);


 


(iii)                               any
draft, certificate or any other document presented under any Fronted Tranche 2
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;


 


(iv)                              the
surrender or impairment of any security for the performance or observance of
any of the terms of any of the Credit Documents;


 


(v)                                 the
occurrence of any Default or Event of Default; or


 


(vi)                              any
matter or event set forth in Section 3B.03 or 3B.09.


 


(h)                                 Notwithstanding
anything to the contrary contained in this Agreement, the provisions of this Article IIIB
shall not be amended, modified or waived in a manner adverse to the rights or
obligations of any Fronting Lender without the consent of each Fronting Lender
affected thereby.


 


Section 3B.09.  Agreement to Repay Fronted Tranche 2
Letter of Credit Drawings; Fronting Fee. 
(a)  Each Tranche 2/3 Borrower hereby agrees to reimburse the
respective Fronting Lender for any payment or disbursement made by such
Fronting Lender under any Fronted Tranche 2 Letter of Credit (each such amount
so paid, until reimbursed by such Tranche 2/3 Borrower, a “Fronted Tranche 2
Unpaid Drawing”) in the manner and subject to the terms of Section 3B.03.  The respective Fronting Lender shall give the
respective Tranche


 


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2/3 Borrower and the Administrative Agent prompt notice of any payment
or disbursement made under any Fronted Tranche 2 Letter of Credit, provided
that the failure to give any such notice shall in no way affect, impair or
diminish such Tranche 2/3 Borrower’s obligations hereunder.


 


(b)                                 Any action taken or
omitted to be taken by any Fronting Lender under or in connection with any
Fronted Tranche 2 Letter of Credit shall not create for such Fronting Lender
any resulting liability to any Tranche 2/3 Borrower or any of its Affiliates or
any Tranche 2 Lender unless such action is taken or omitted to be taken with
gross negligence or willful misconduct on the part of such Fronting Lender (as
determined by a court of competent jurisdiction).


 


(c)                                  Each Tranche 2/3
Borrower agrees to pay to each Fronting Lender, for its own account, a fronting
fee in an amount and on dates as shall have separately been agreed to by the
Tranche 2/3 Borrowers and such Fronting Lender.


 


Section 3B.10.  Defined Terms.  For purposes of this Article IIIB and
except as expressly provided in Section 3B.08 or 3B.09, (a) all
references to (i) the Issuing Agent shall be deemed to include the
Fronting Lender and (ii) Tranche 2 Letters of Credit shall be deemed to
include the Fronted Tranche 2 Letters of Credit and (b) all terms and
conditions herein applicable to the Issuing Agent and Tranche 2 Letters of
Credit shall apply in all respects to the Fronting Lender and Fronted Tranche 2
Letters of Credit.


 


Section 3B.11.  No Existing Tranche 2 Letters of Credit.  It is hereby agreed and acknowledged that there
are no outstanding Tranche 2 Letters of Credit as of the Restatement Effective
Date.


 


ARTICLE IV


 


Representations
and Warranties


 


Each Credit Party (solely as to itself and
its Subsidiaries) represents and warrants to the Lenders that:


 


Section 4.01.  Corporate Status.  Each of the Parent Borrower and each of its
Subsidiaries (i) is a duly organized and validly existing corporation or
business trust or other entity in good standing under the laws of the
jurisdiction of its organization and has the corporate or other organizational
power and authority to own its property and assets and to transact the business
in which it is engaged and presently proposes to engage, and (ii) has been
duly qualified and is authorized to do business and is in good standing in all
jurisdictions where it is required to be so qualified, except, in the case of
this clause (ii), where the failure to be so qualified, authorized or in good
standing would not reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect.


 


Section 4.02.  Corporate Power and Authority.  Each Credit Party has the corporate power and
authority to execute, deliver and carry out the terms and provisions of the


 


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Credit Documents to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance of such
Credit Documents.  Each Credit Party has
duly executed and delivered each Credit Document to which it is a party and each
such Credit Document constitutes the legal, valid and binding obligation of
such Credit Party enforceable against such Credit Party in accordance with its
terms, except to the extent that enforceability thereof may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws affecting
creditors’ rights generally and general principles of equity regardless of
whether enforcement is sought in a proceeding in equity or at law.


 


Section 4.03.  No Contravention of Laws, Agreements or
Organizational Documents.  Neither
the execution, delivery and performance by any Credit Party of this Agreement
or the other Credit Documents to which it is a party nor compliance with the
terms and provisions hereof or thereof, nor the consummation of the transactions
contemplated herein or therein, (i) will contravene any applicable
provision of any law, statute, rule, regulation, order, writ, injunction or
decree of any court or governmental instrumentality, (ii) will conflict or
be inconsistent with or result in any breach of any of the terms, covenants,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of (or the obligation to create or impose) any Lien upon
any of the property or assets of any Credit Party or any of its Subsidiaries
pursuant to the terms of, any indenture, mortgage, deed of trust, loan
agreement, credit agreement or any other material instrument to which such
Credit Party or any of its Subsidiaries is a party or by which it or any of its
property or assets are bound or to which it may be subject or (iii) will
violate any provision of the certificate of incorporation, by-laws or other
organizational documents of any Credit Party or any of its Subsidiaries.


 


Section 4.04.  Litigation and Contingent Liabilities.  There are no actions, suits or proceedings
pending or threatened in writing involving the Parent Borrower or any of its
Subsidiaries (including, without limitation, with respect to this Agreement or
any other Credit Document) that have had, or would reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect.


 


Section 4.05.  Use of Proceeds; Margin Regulations.  (a)  All proceeds of each Credit Event
shall be utilized for the general corporate and working capital purposes of the
Parent Borrower and its Subsidiaries.


 


(b)                                 Neither the making of any Loan
hereunder, the issuance of any Letter of Credit nor the use of the proceeds
thereof, will violate or be inconsistent with the provisions of Regulation T, U
or X and no part of the proceeds of any Credit Event will be used to purchase
or carry any Margin Stock or to extend credit for the purpose of purchasing or
carrying any Margin Stock.


 


Section 4.06.  Approvals.  Any order, consent, approval, license, authorization,
or validation of, or filing, recording or registration with, or exemption by,
any foreign or domestic governmental or public body or authority, or any
subdivision thereof, which is required to authorize or is required in
connection with (i) the execution, delivery and performance of any Credit
Document or (ii) the legality, validity, binding effect or enforceability
of any Credit Document, has been obtained.


 


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Section 4.07.  Investment Company Act.  Neither the Parent Borrower nor any of its
Subsidiaries is an “investment company” or a company “controlled” by an “investment
company,” within the meaning of the Investment Company Act of 1940, as amended.


 


Section 4.08.  Public Utility Holding Company Act.  Neither the Parent Borrower nor any of its
Subsidiaries is a “holding company,” or a “subsidiary company” of a “holding
company,” or an “affiliate” of a “holding company” or of a “subsidiary company”
of a “holding company,” within the meaning of the Public Utility Holding
Company Act of 1935, as amended.


 


Section 4.09.  True and Complete Disclosure; Projections
and Assumptions.  All factual
information (taken as a whole) heretofore or contemporaneously furnished by the
Parent Borrower or any of its Subsidiaries to the Administrative Agent or any
Lender in writing (including, without limitation, all information contained in
the Credit Documents) for purposes of or in connection with this Agreement or
any transaction contemplated herein is, and all other factual information
(taken as a whole with all other such information theretofore or
contemporaneously furnished) hereafter furnished by any such Persons in writing
to the Administrative Agent will be, true and accurate in all material respects
on the date as of which such information is dated and not incomplete by
omitting to state any material fact necessary to make such information (taken
as a whole with all other such information theretofore or contemporaneously
furnished) not misleading at such time in light of the circumstances under
which such information was provided; provided that, with respect to
projections, the Credit Parties represent only that the projections contained
in such materials are based on good faith estimates and assumptions believed by
the Credit Parties to be reasonable and attainable at the time made, it being
recognized by the Lenders that such projections as to future events are not to
be viewed as facts and are subject to significant uncertainties and
contingencies many of which are beyond the Credit Parties’ control and that
actual results during the period or periods covered by any such projections may
differ from the projected results.


 


Section 4.10.  Financial Condition; Financial Statements.  (a)  (i)  The
consolidated balance sheet of the Parent Borrower and its Subsidiaries for the
fiscal year ended December 31, 2004 and the related consolidated
statements of income, shareholders’ equity and cash flows, reported on by
PricewaterhouseCoopers LLP, copies of which have been delivered to each of the
Lenders, and the unaudited consolidated balance sheet of the Parent Borrower
and its Subsidiaries for its fiscal quarter ended September 30, 2005 and
the related consolidated statements of income, shareholders’ equity and cash flows,
copies of which have been delivered to each of the Lenders, fairly present in
all material respects, in each case in conformity with GAAP, consistently
applied, the consolidated financial position of the Parent Borrower and its
Subsidiaries as of such dates and their consolidated results of operations and
cash flows for such periods stated (subject, in the case of the aforementioned
quarterly financial statement, to normal year-end audit adjustments and the
absence of full footnote disclosure).


 


(ii)                                  The summary unaudited
consolidated balance sheet of ARL for the fiscal year ended December 31,
2004 and the related summary unaudited consolidated statement of income, copies
of which have been delivered to each of the Lenders, and the summary unaudited
consolidated balance sheet of ARL for its fiscal quarter ended September 30,
2005 and the related summary unaudited consolidated statement of income, copies
of which have been delivered to each of the Lenders, fairly present in all
material respects, the consolidated financial


 


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position of ARL and its Subsidiaries as of such dates and their
consolidated results of operations for such periods stated (subject to normal
year-end audit adjustments and the absence of full footnote disclosure).


 


(iii)                               The summary unaudited
financial information of Intermediate Holdings for the fiscal year ended December 31,
2004, copies of which have been delivered to each of the Lenders, and the
summary unaudited financial information of Intermediate Holdings for its fiscal
quarter ended September 30, 2005, copies of which have been delivered to
each of the Lenders, fairly present in all material respects the consolidated
financial position of Intermediate Holdings and its Subsidiaries as of such
dates (subject to normal year-end audit adjustments and the absence of full
footnote disclosure).


 


(iv)                              The Statutory Statements
of each Designated Subsidiary Borrower for the fiscal year ended December 31,
2004 and for its fiscal quarter ended September 30, 2005 (other than ARL),
copies of which have been delivered to each of the Lenders, fairly present in
all material respects the financial position of such Designated Subsidiary
Borrower as of such dates and such periods stated.


 


(b)                                 Since December 31, 2004,
nothing has occurred which has had, or would reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.


 


(c)                                  Except (i) for the Loans
and Letters of Credit, (ii) for letters of credit issued under the
Long-Term LC Facility, (iii) for the Existing Senior Notes, (iv) as
set forth in the unaudited consolidated balance sheet of the Parent Borrower
for its fiscal quarter ended September 30, 2005, (v) for liabilities
set forth on Schedule 4.10(c) and (vi) for liabilities incurred
by the Parent Borrower and its Subsidiaries in the ordinary course of business,
on the Restatement Effective Date there are no material liabilities of the
Parent Borrower and its Subsidiaries.


 


(d)                                 On and as of the Restatement Effective
Date, on a pro  forma basis after giving effect to the
Transactions, the Parent Borrower and each of its Subsidiaries is Solvent.


 


Section 4.11.  Tax Returns and Payments.  The Parent Borrower and its Subsidiaries (i) have
timely filed or caused to be timely filed with the appropriate taxing authority
(taking into account any applicable extension within which to file) all
material income and other material tax returns (including any statements, forms
and reports), domestic and foreign, required to be filed by the Parent Borrower
and its Subsidiaries, and (ii) have timely paid or caused to have timely
paid all material taxes payable by them which have become due and assessments
which have become due, except for those contested in good faith and adequately
disclosed and for which adequate reserves have been established in accordance
with GAAP.  There is no action, suit,
proceeding, investigation, audit or claim now pending or, to the best knowledge
of the Parent Borrower and its Subsidiaries, proposed or threatened by any
authority regarding any income taxes or any other taxes relating to the Parent
Borrower or any of its Subsidiaries that would reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.  Neither the Parent Borrower nor any of its
Subsidiaries has entered into an agreement or waiver or been requested to enter
into an agreement or waiver extending


 


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any statute of limitations relating to the payment or collection of
taxes of the Parent Borrower or any of its Subsidiaries that would reasonably
be expected to have, either individually or in the aggregate, a Material
Adverse Effect.  No tax Liens have been
filed and no claims are pending or, to the best knowledge of the Parent
Borrower or any of its Subsidiaries, proposed or threatened with respect to any
taxes, fees or other charges for any taxable period that would reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect.


 


Section 4.12.  Compliance with ERISA.  (a)  Except as could not reasonably be
expected to result, either individually or in the aggregate, in a Material
Adverse Effect, the Parent Borrower and its Subsidiaries and ERISA Affiliates (i) 
have fulfilled their respective obligations under the minimum funding standards
of ERISA and the Code with respect to each Plan and are in compliance with the
applicable provisions of ERISA and the Code, and (ii) have not incurred
any liability to the PBGC or any Plan or Multiemployer Plan (other than to make
contributions in the ordinary course of business).


 


(b)                                 Except as could not reasonably
be expected to result, either individually or in the aggregate, in a Material
Adverse Effect, (i) each Foreign Pension Plan has been maintained in
compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities, (ii) all
contributions required to be made with respect to a Foreign Pension Plan have
been timely made, (iii) neither the Parent Borrower nor any of its
Subsidiaries has incurred any obligation in connection with the termination of,
or withdrawal from, any Foreign Pension Plan and (iv) the present value of
the accrued benefit liabilities (whether or not vested) under each Foreign
Pension Plan that is required to be funded, determined as of the end of the
Parent Borrower’s most recently ended fiscal year on the basis of actuarial
assumptions, each of which is reasonable, did not exceed the current value of
the assets of such Foreign Pension Plan allocable to such benefit liabilities.


 


Section 4.13.  Subsidiaries.  (a)  Set forth on Schedule 4.13 is
a complete and correct list of all of the Subsidiaries of the Parent Borrower
as of the Restatement Effective Date, together with, for each such Subsidiary, (i) the
jurisdiction of organization of such Subsidiary, (ii) each Person holding
direct ownership interests in such Subsidiary and (iii) the percentage of
ownership of such Subsidiary represented by such ownership interests.  Except as disclosed on Schedule 4.13,
each of the Parent Borrower and its Subsidiaries owns, free and clear of Liens,
and has the unencumbered right to vote, all outstanding ownership interests in
each Person shown to be held by it on Schedule 4.13.


 


(b)                                 As of the Restatement Effective
Date, there are no restrictions on the Parent Borrower or any of its
Subsidiaries which prohibit or otherwise restrict the transfer of cash or other
assets from any Subsidiary of the Parent Borrower to the Parent Borrower, other
than (i) prohibitions or restrictions existing under or by reason of this
Agreement or the other Credit Documents, (ii) prohibitions or restrictions
existing under or by reason of the Long-Term LC Facility, (iii) prohibitions
or restrictions existing under or by reason of the Existing Senior Notes (iv) prohibitions
or restrictions existing under or by reason of Legal Requirements, (v) prohibitions
or restrictions permissible under Section 7.03 and (vi) other
prohibitions or


 


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restrictions which, either individually or in
the aggregate, would not reasonably be expected to have a Material Adverse Effect.


 


Section 4.14.  Capitalization.  As of September 30, 2005, the authorized
capital stock of the Parent Borrower consists of (i) 200,000,000 common
shares, $.01 par value per share, 35,504,734 of which shares are issued and
outstanding, and (ii) 50,000,000 preference shares, $.01 par value per
share, of which 37,327,502 are issued and outstanding Series A Convertible
Preference Shares.  As of the Restatement
Effective Date, none of the Parent Borrower’s Subsidiaries has outstanding any
securities convertible into or exchangeable for its capital stock or
outstanding any rights to subscribe for or to purchase, or any options for the
purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating
to, its capital stock except for options, warrants and grants outstanding in
the aggregate amounts set forth on Schedule 4.14.


 


Section 4.15.  Indebtedness.  The Parent Borrower and its Subsidiaries do
not have any Indebtedness on the Restatement Effective Date other than (i) the
Obligations, (ii) Indebtedness under the Long-Term LC Facility, (iii) Indebtedness
under the Existing Senior Notes and (iv) Indebtedness listed on Schedule 4.15.


 


Section 4.16.  Compliance with Statutes, etc.  The Parent Borrower and each of its
Subsidiaries are in compliance with all applicable statutes, regulations, rules and
orders of, and all applicable restrictions imposed by, and have filed or
otherwise provided all material reports, data, registrations, filings,
applications and other information required to be filed with or otherwise
provided to, all governmental bodies, domestic or foreign, in respect of the
conduct of its business and the ownership of its property (including compliance
with all applicable environmental laws), except where the failure to comply or
file or otherwise provide would not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.  All required regulatory approvals are in full
force and effect on the date hereof, except where the failure of such approvals
to be in full force and effect would not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.


 


Section 4.17.  Insurance Licenses.  Schedule 4.17 lists with respect to each
Regulated Insurance Company, as of the Restatement Effective Date, all of the
jurisdictions in which such Regulated Insurance Company holds licenses
(including, without limitation, licenses or certificates of authority from
Applicable Insurance Regulatory Authorities), permits or authorizations to
transact insurance and reinsurance business (collectively, the “Insurance
Licenses”), and indicates the type or types of insurance in which each such
Regulated Insurance Company is permitted to be engaged with respect to each
Insurance License therein listed.  There
is (i) no such Insurance License that is the subject of a proceeding for
suspension, revocation or limitation or any similar proceedings, (ii) no
sustainable basis for such a suspension, revocation or limitation, and (iii) no
such suspension, revocation or limitation threatened by any Applicable
Insurance Regulatory Authority, that, in each instance under (i), (ii) and
(iii) above, has had, or would reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.  No Regulated Insurance Company transacts any
insurance business, directly or indirectly, in any jurisdiction other than
those listed on Schedule 4.17, where such business requires any Insurance
License of an Applicable Insurance Regulatory Authority or such jurisdiction.


 


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Section 4.18.  Insurance Business.  All insurance policies issued by any
Regulated Insurance Company are, to the extent required under applicable law,
on forms approved by the insurance regulatory authorities of the jurisdiction
where issued or have been filed with and not objected to by such authorities
within the period provided for objection, except for those forms with respect
to which a failure to obtain such approval or make such a filing without it
being objected to, would not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.


 


Section 4.19.  Security Documents.  The Security Documents create, as security
for the Tranche 1 Obligations of each Designated Subsidiary Borrower, valid and
enforceable security interests in and Liens on all of the Collateral, superior
to and prior to the rights of all third persons and subject to no other
Liens.  No filings or recordings are
required in order to ensure the enforceability, perfection or priority of the
security interests created under the Security Documents, except for filings or
recordings which have been previously made.


 


Section 4.20.  No Section 32 Direction.  ARL has not received any direction or other
notification from the Bermuda Monetary Authority pursuant to Section 32 of
the Insurance Act, 1978 of Bermuda.


 


Section 4.21.  Events since December 31, 2004.  In making the representations and warranties
set forth herein, the Credit Parties acknowledge that certain events that have
occurred since December 31, 2004 (including Hurricanes Katrina, Rita and
Wilma) have had an impact on the businesses of the Parent Borrower and its
Subsidiaries as described in filings made by the Parent Borrower with the
SEC.  Notwithstanding the foregoing, the
representations and warranties made by the Credit Parties herein (including,
without limitation, in Sections 4.10(b) and 5.01(d)) are not qualified by
such disclosed events.


 


ARTICLE V


 


Conditions


 


Section 5.01.  Restatement Effective Date.  The obligations of the Lenders to make Loans
and the Issuing Agent to issue Letters of Credit hereunder shall not become
effective until the date (the “Restatement Effective Date”) on which
each of the following conditions is satisfied (or waived in accordance with Section 10.02):


 


(a)                                  On
the Restatement Effective Date, (i) each of the Credit Parties, the
Administrative Agent and each of the Lenders shall have signed a counterpart
hereof (whether the same or different counterparts) and shall have delivered
the same to the Administrative Agent in accordance with Section 10.01(a) or,
in the case of the Lenders, shall have given to the Administrative Agent
telephonic (confirmed in writing), written or facsimile transmission notice
(actually received) in accordance with Section 10.01(a) that the same
has been signed and mailed to the Administrative Agent; and (ii) there
shall have been delivered to the Administrative Agent for the account of each
Lender that has requested the same pursuant to Section 2.09(e) or
(f), as the case may be, the appropriate Note or Notes, executed by the
respective Tranche 2/3 Borrower, in each case, in the amount, maturity and as
otherwise provided herein.


 


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(b)                                 On
the Restatement Effective Date, the Administrative Agent shall have received an
opinion, in form and substance reasonably satisfactory to the Administrative
Agent, addressed to the Administrative Agent and each of the Lenders and dated
the Restatement Effective Date, from (i) Cahill Gordon & Reindel
LLP, special U.S. counsel to the Credit Parties, which opinion shall cover the
matters contained in Exhibit G-1, (ii) Conyers, Dill &
Pearman, special Bermuda counsel to the Credit Parties, which opinion shall
cover the matters covered in Exhibit G-2, (iii) Inglish and Monaco,
P.C., special Missouri counsel to AIC, which opinion shall cover the matters
covered in Exhibit G-3, (iv) Lamson, Dugan & Murray, LLP,
special Nebraska counsel to ARC and AESIC, which opinion shall cover the
matters covered in Exhibit G-4 and (v) Quarles & Brady LLP,
special Wisconsin counsel to ASIC and WDCIC, which opinion shall cover the
matters covered in Exhibit G-5.


 


(c)                                  (i) On
the Restatement Effective Date, the Administrative Agent shall have received
from each Credit Party a certificate, dated the Restatement Effective Date,
signed by the President, any Vice President, Chief Executive Officer,
Controller or Chief Operating Officer of such Credit Party, and attested to by
the Secretary or any Assistant Secretary of such Credit Party, in the form of Exhibit D
with appropriate insertions and deletions, together with (x) copies of its
certificate of incorporation, by-laws or other organizational documents (or, if
such organizational documents and/or by-laws have not been amended, modified or
supplemented since the Original Effective Date, such certificate shall certify
that there have been no amendments, modifications or supplements to such
organizational documents since the Original Effective Date) and (y) the
resolutions relating to the Credit Documents which shall be satisfactory to the
Administrative Agent.


 


(ii)                                  On
or prior to the Restatement Effective Date, all corporate and legal proceedings
and all instruments and agreements in connection with the transactions
contemplated by this Agreement and the other Credit Documents shall be
reasonably satisfactory in form and substance to the Administrative Agent, and
the Administrative Agent shall have received all information and copies of all
certificates, documents and papers, including certificates of existence or good
standing certificates, as applicable, and any other records of corporate proceedings
and governmental approvals, if any, which the Administrative Agent reasonably
may have requested in connection therewith, such documents and papers where
appropriate to be certified by proper corporate or governmental authorities.


 


(d)                                 Since
December 31, 2004, nothing shall have occurred or become known to the
Administrative Agent or the Required Lenders which has had, or would reasonably
be expected to have, either individually or in the aggregate, a Material
Adverse Effect.


 


(e)                                  On
the Restatement Effective Date, no actions, suits or proceedings by any entity
(private or governmental) shall be pending against the Parent Borrower or any
of its Subsidiaries (i) with respect to this Agreement, any other Credit
Document, the Transactions or any of the transactions contemplated hereby or
thereby or (ii) which has had, or would reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.


 


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(f)                                    On
the Restatement Effective Date, all governmental and third party approvals,
permits and licenses required to be obtained in connection with the
Transactions on or prior to the Restatement Effective Date shall have been
obtained and remain in full force and effect.


 


(g)                                 On
the Restatement Effective Date, the Parent Borrower and its Subsidiaries shall
have no Indebtedness except (i) Obligations, (ii) Indebtedness under
the Long-Term LC Facility, (iii) Indebtedness under the Existing Senior
Notes and (iv) Indebtedness set forth on Schedule 4.15.


 


(h)                                 On
the Restatement Effective Date, there shall exist no Default or Event of
Default, and all representations and warranties made by each Credit Party
contained herein and in any other Credit Document shall be true and correct in
all material respects (it being understood and agreed that any representation
or warranty which by its terms is made as of a specified date shall be required
to be true and correct in all material respects only as of such specified
date).


 


(i)                                     On
the Restatement Effective Date, each Regulated Insurance Company (other than
WDCIC) shall have an A.M. Best financial strength rating of at least “B++”.


 


(j)                                     On
the Restatement Effective Date, the Borrowers shall have paid the
Administrative Agent and the Lenders all fees, reasonable out-of-pocket
expenses (including, without limitation, reasonable legal fees and expenses of
the Administrative Agent) and other compensation contemplated by this Agreement
and the other Credit Documents, agreed upon by such parties to be paid on or
prior to the Restatement Effective Date.


 


(k)                                  On
or prior to the Restatement Effective Date, the Administrative Agent shall have
received counterparts of the Security Agreement executed by each Designated
Subsidiary Borrower, together with:


 


(i)                                     all
documents and instruments, including Uniform Commercial Code financing
statements where applicable, required by law in each applicable jurisdiction or
reasonably requested by the Administrative Agent to be filed, registered or
recorded to create or perfect the Liens intended to be created under the
Security Agreement;


 


(ii)                                  results
of a recent search of the Uniform Commercial Code (or equivalent) filings made
with respect to each Designated Subsidiary Borrower in the jurisdictions
contemplated in clause (i) above (including, without limitation,
Washington, D.C., and Bermuda) and in such other jurisdictions in which
Collateral is located on the Restatement Effective Date which may be reasonably
requested by the Administrative Agent, and copies of the financing statements
(or similar documents) disclosed by such search and evidence reasonably
satisfactory to the Administrative Agent that the Liens indicated by such
financing statements (or similar documents) are permitted by the Security
Agreement or have been released; and


 


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(iii)                               for
each Collateral Account, an Account Control Agreement with The Bank of New York
executed by the respective Designated Subsidiary Borrower, and each such
Account Control Agreement shall be in full force and effect;


 


and the Security Agreement shall be in full
force and effect.


 


(l)                                     On
the Restatement Effective Date, all loans outstanding under the Existing Credit
Agreement shall have been repaid in full, and all other amounts under the
Existing Credit Agreement (other than indemnities not then due and payable)
shall have been paid in full.


 


(m)                               On
the Restatement Effective Date, any Existing Lender that will not be a Lender
under this Agreement on the Restatement Effective Date shall have executed a
Non-Continuing Lender Agreement.


 


(n)                                 On
the Restatement Effective Date, the Administrative Agent shall have received a
letter from the Service of Process Agent, presently located at 111 Eighth
Avenue, 13th Floor, New York, New York 10011, indicating its consent
to its appointment by the Parent Borrower and each Designated Subsidiary
Borrower as their agent to receive service of process as specified in this
Agreement shall be in full force and effect and shall apply to this Agreement
in all respects.


 


The Administrative Agent shall notify the
Borrowers and the Lenders of the Restatement Effective Date, and such notice
shall be conclusive and binding. 
Notwithstanding the foregoing, the obligations of the Lenders to make
Loans and the Issuing Agent to issue Letters of Credit on behalf of the
respective Lenders hereunder shall not become effective unless each of the
foregoing conditions is satisfied (or waived pursuant to Section 10.02) at
or prior to 5:00 p.m., New York City time, on December 15, 2005 (and,
in the event such conditions are not so satisfied or waived, the Commitments
shall terminate at such time).


 


Section 5.02.  Each Credit Event.  The obligation of each Lender to make each
Loan and the Issuing Agent to issue each Letter of Credit is subject to the
satisfaction of the following conditions:


 


(a)                                  The Restatement
Effective Date shall have occurred.


 


(b)                                 (i) 
There shall exist no Default or Event of Default and (ii) all
representations and warranties contained herein or in the other Credit
Documents shall be true and correct in all material respects with the same
effect as though such representations and warranties had been made on the date
of the making of such Loan or the issuance of such Letter of Credit (it being
understood and agreed that any representation or warranty which by its terms is
made as of a specified date shall be required to be true and correct in all
material respects only as of such specified date).


 


(c)                                  The
Administrative Agent shall have received a Borrowing Request meeting the
requirements of Section 2.03 with respect to each incurrence of Loans.


 


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(d)                                 The
Administrative Agent shall have received a Letter of Credit Request meeting the
requirements of Section 3A.02 or 3B.02, as the case may be, with respect
to each Letter of Credit to be issued.


 


Each incurrence of a Loan and each issuance of a Letter of Credit shall
be deemed to constitute a representation and warranty by the respective
Borrower on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section 5.02.


 


ARTICLE VI


 


Affirmative
Covenants


 


Until the Commitments have expired or been
terminated, no Notes or Letters of Credit are outstanding (or, in the case of
Letters of Credit, such Letters of Credit are either (i) collateralized by
cash and/or Cash Equivalents equal to not less than 100% of the amounts
outstanding or available for drawing in a manner satisfactory to the Agents or (ii) supported
by back-to-back letters of credit the terms, conditions and issuer of which are
satisfactory to the Agents), and the principal of and interest on each Loan,
all Tranche 1 Unpaid Drawings and Tranche 2 Unpaid Drawings and all fees
payable hereunder shall have been paid in full, each Borrower covenants and
agrees (solely as to itself and its Subsidiaries) with the Lenders that:


 


Section 6.01.  Information Covenants.  The Parent Borrower will furnish to the
Administrative Agent (for distribution to each Lender):


 


(a)                                  Annual Financial Statements.  (i)  As soon as available and in any
event within 90 days after the close of each fiscal year of the Parent
Borrower, the consolidated balance sheet of the Parent Borrower and its
Subsidiaries as at the end of such fiscal year and the related consolidated
statements of income, changes in shareholders’ equity and cash flows of the
Parent Borrower and its Subsidiaries for such fiscal year, setting forth in
comparative form the consolidated figures for the previous fiscal year, all in
reasonable detail and accompanied by a report thereon of PricewaterhouseCoopers
LLP or other independent public accountants of recognized national standing
selected by the Parent Borrower, which report shall state that such
consolidated financial statements present fairly in all material respects the
consolidated financial position of the Parent Borrower and its Subsidiaries as
at the dates indicated and their consolidated results of operations and cash
flows for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years (except as otherwise specified in such report;
provided any exceptions or qualifications thereto must be acceptable to the
Required Lenders) and that the audit by such accountants in connection with
such consolidated financial statements has been made in accordance with
generally accepted auditing standards.


 


(ii)                                  As soon as available
and in any event within 90 days after the close of each fiscal year of ARL, the
summary consolidated balance sheet of ARL and its Subsidiaries as at the end of
such fiscal year and the related summary consolidated statement of income of
ARL and its Subsidiaries for such fiscal year, setting forth in comparative
form the consolidated figures for the previous fiscal year, all in form and
scope consistent in all material respects with the financial statements of ARL
previously delivered pursuant to Section 4.10(a)(ii) and certified by
the chief financial officer or controller of ARL, which certificate shall state
that such


 


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consolidated financial statements present fairly in all material
respects the consolidated financial position of ARL and its Subsidiaries as at
the dates indicated (subject to normal year-end audit adjustments and the
absence of full footnote disclosure).


 


(iii)                               As soon as available and
in any event within 90 days after the close of each fiscal year of Intermediate
Holdings, the summary consolidated financial information of Intermediate
Holdings and its Subsidiaries as at the end of and for such fiscal year,
setting forth in comparative form the consolidated figures for the previous
fiscal year, all in form and scope consistent in all material respects with the
financial information of Intermediate Holdings previously delivered pursuant to
Section 4.10(a)(iii) and certified by the chief financial officer or
controller of Intermediate Holdings, which certificate shall state that such
financial information presents fairly in all material respects the consolidated
financial position of Intermediate Holdings and its Subsidiaries as at the
dates indicated (subject to normal year-end audit adjustments and the absence
of full footnote disclosure).


 


(iv)                              As soon as available and
in any event within 90 days after the close of each fiscal year of each
Designated Subsidiary Borrower (or, in the case of ARL, such later date as may
be required by the Bermuda Companies Law), the Statutory Statements for each
such Designated Subsidiary Borrower for such fiscal year.


 


(b)                                 Quarterly Financial Statements.  (i)  As soon as available and in any
event within 60 days after the close of each of the first three quarterly
accounting periods in each fiscal year of the Parent Borrower, consolidated
balance sheets of the Parent Borrower and its Subsidiaries as at the end of
such period and the related consolidated statements of income, changes in
shareholders’ equity and cash flows of the Parent Borrower and its Subsidiaries
for such period and (in the case of the second and third quarterly periods) for
the period from the beginning of the current fiscal year to the end of such
quarterly period, setting forth in each case in comparative form the
consolidated figures for the corresponding periods of the previous fiscal year,
all in reasonable detail and certified by the chief financial officer of the
Parent Borrower as presenting fairly in all material respects, in accordance
with GAAP (except as specifically set forth therein; provided any exceptions or
qualifications thereto must be acceptable to the Administrative Agent) on a
basis consistent with such prior fiscal periods, the information contained
therein, subject to changes resulting from normal year-end audit adjustments
and the absence of full footnote disclosure.


 


(ii)                                  As soon as available
and in any event within 60 days after the close of each of the first three
quarterly accounting periods in each fiscal year of ARL, a summary consolidated
balance sheet of ARL and its Subsidiaries as at the end of such period and the
related summary consolidated statement of income of ARL and its Subsidiaries
for such period and (in the case of the second and third quarterly periods) for
the period from the beginning of the current fiscal year to the end of such
quarterly period, setting forth in each case in comparative form the
consolidated figures for the corresponding periods of the previous fiscal year,
all in form and scope consistent in all material respects with the financial
statements of ARL previously provided pursuant to Section 4.10(a)(ii) and
certified by the chief financial officer or controller of ARL, as presenting
fairly in all material respects, on a basis consistent with such prior fiscal
periods, the information contained therein, subject to changes resulting from
normal year-end audit adjustments and the absence of full footnote disclosure.


 


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(iii)                               As soon as available and
in any event within 60 days after the close of each of the first three
quarterly accounting periods in each fiscal year of Intermediate Holdings,
summary consolidated financial information of Intermediate Holdings and its
Subsidiaries as at the end of such period and (in the case of the second and
third quarterly periods) for the period from the beginning of the current
fiscal year to the end of such quarterly period, setting forth in each case in
comparative form the consolidated figures for the corresponding periods of the
previous fiscal year, all in form and scope consistent in all material respects
with the financial information of Intermediate Holdings previously provided
pursuant to Section 4.10(a)(iii) and certified by the chief financial
officer or controller of Intermediate Holdings as presenting fairly in all
material respects on a basis consistent with such prior fiscal periods, the information
contained therein, subject to changes resulting from normal year-end audit
adjustments and the absence of full footnote disclosure.


 


(iv)                              As soon as available and
in any event within 60 days after the close of each of the first three
quarterly accounting periods in each fiscal year of each Designated Subsidiary
Borrower (other than ARL), the Statutory Statements for each such Designated
Subsidiary Borrower for each such period.


 


(c)                                  Officer’s Certificates.  At the time of the delivery of the financial
statements provided for in Sections 6.01(a) and 6.01(b), a certificate of
the chief financial officer of the Parent Borrower to the effect that no
Default or Event of Default exists or, if any Default or Event of Default does
exist, specifying the nature and extent thereof, which certificate shall set
forth the calculations required to establish whether the Parent Borrower and
its Subsidiaries were in compliance with the provisions of Sections 7.03, 7.09,
7.10 and 7.11 as at the end of such fiscal year or quarter, as the case may be.


 


(d)                                 Notice of Default or Litigation.  (x) 
Within five Business Days after any Borrower becomes aware of the
occurrence of any Default or Event of Default and/or any event or condition
constituting, or which would reasonably be expected to have, a Material Adverse
Effect, a certificate of a Financial Officer of such Borrower setting forth the
details thereof and the actions which such Borrower (or the Parent Borrower or
any of its Subsidiaries) is taking or proposes to take with respect thereto and
(y) promptly after any Borrower knows of the commencement thereof, notice
of any litigation, dispute or proceeding involving a claim against any Borrower
and/or any Subsidiary which claim would reasonably be expected to have a Material
Adverse Effect.


 


(e)                                  Other Statements and Reports.  Promptly upon the mailing thereof to the
security holders of the Parent Borrower generally, copies of all financial
statements, reports and proxy statements so mailed (unless same is publicly
available via the SEC’s “EDGAR” filing system).


 


(f)                                    SEC Filings.  Promptly upon the filing thereof, (i) copies
of all registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and annual,
quarterly or monthly reports which the Parent Borrower shall have filed with
the SEC or any national securities exchange (unless same is publicly available
via the SEC’s “EDGAR” filing system) or (ii) written notification of the
filing of a Form 10-Q or Form 10-K with the SEC.


 


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(g)                                 Insurance Reports and Filings.  (i)  Promptly after the filing thereof,
a copy of each Statutory Statement filed by each Regulated Insurance Company.


 


(ii)                                  Promptly following
the delivery or receipt, as the case may be, by any Regulated Insurance Company
or any of their respective Subsidiaries, copies of (a) each material
registration, filing or submission made by or on behalf of any Regulated
Insurance Company with any Applicable Insurance Regulatory Authority, except
for policy form or rate filings, (b) each material examination and/or
audit report submitted to any Regulated Insurance Company by any Applicable
Insurance Regulatory Authority, (c) all material information which the
Lenders may from time to time request with respect to the nature or status of
any material deficiencies or violations reflected in any examination report or
other similar report, and (d) each material report, order, direction,
instruction, approval, authorization, license or other notice which any
Borrower or any Regulated Insurance Company may at any time receive from any
Applicable Insurance Regulatory Authority. 
For the purpose of this clause (ii) only, determinations of “material”
shall be made by the Borrowers in good faith.


 


(iii)                               As soon as available and
in any event within 120 days after the end of each fiscal year of the Parent
Borrower (but subject to the consent of the actuarial consulting firm referred
to below), a report by an independent actuarial consulting firm of recognized
national standing reviewing the adequacy of loss and loss adjustment expense
reserves as at the end of the last fiscal year of the Parent Borrower and its
Subsidiaries on a consolidated basis, determined in accordance with SAP and
stating that the Regulated Insurance Companies have maintained adequate
reserves, it being agreed that in each case such independent firm will be
provided access to or copies of all relevant valuations relating to the
insurance business of each such Regulated Insurance Company in the possession
of or available to the Parent Borrower or its Subsidiaries.


 


(iv)                              Promptly following
notification thereof from a Governmental Authority, notification of the
suspension, limitation, termination or non-renewal of, or the taking of any
other materially adverse action in respect of, any Insurance License.


 


(h)                                 Borrowing Base Certificate.  No later than the tenth Business Day of each
month, a Borrowing Base Certificate from each Designated Subsidiary Borrower
for whose account a Tranche 1 Letter of Credit has been issued as of the last
day of the immediately preceding month, executed by an Authorized Officer of
such Designated Subsidiary Borrower.  In
the event that any Borrowing Base Certificate reflects a Borrowing Base
deficiency for any Designated Subsidiary Borrower for whose account a Tranche 1
Letter of Credit has been issued, on the date such Borrowing Base deficiency is
cured, such Designated Subsidiary Borrower shall issue a revised Borrowing Base
Certificate reflecting such cure.


 


(i)                                     Section 32 Direction.  Promptly following receipt thereof by ARL,
notice of any direction or other notification received by ARL from the Bermuda
Monetary Authority pursuant to Section 32 of the Insurance Act, 1978 of
Bermuda.


 


(j)                                     Other Information.  With reasonable promptness, such other
information or existing documents (financial or otherwise) as the
Administrative Agent or any Lender may reasonably request from time to time.


 


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(k)                                  Delivery of Information.  Each Credit Party and each Lender hereby
acknowledges and agrees that the Administrative Agent and/or the Credit Parties
may make available to the Lenders materials and/or information provided by or
on behalf of any Credit Party under this Agreement or any other Credit Document
by posting such materials and/or information on IntraLinks or another similar
electronic system reasonably acceptable to the Administrative Agent and the
Credit Parties (it being understood and agreed that the posting of such
materials and/or information on IntraLinks or another similar electronic system
shall not be deemed a violation of Section 10.12 of this Agreement).


 


Section 6.02.  Books, Records and Inspections.  Each Borrower will (i) keep, and will
cause each of its Subsidiaries to keep, proper books of record and account in
which full, true and correct entries in conformity with GAAP or SAP, as
applicable, shall be made of all dealings and transactions in relation to its
business and activities; and (ii) subject to binding contractual
confidentiality obligations of such Borrower and its Subsidiaries to third
parties and to Section 10.12, permit, and will cause each of its
Subsidiaries to permit, representatives of any Lender (at such Lender’s expense
prior to the occurrence of an Event of Default and at such Borrower’s expense
after an Event of Default has occurred and is continuing) to visit and inspect
any of their respective properties, to examine their respective books and
records and to discuss their respective affairs, finances and accounts with
their respective officers, employees and independent public accountants, in
each case at such reasonable times and as often as may reasonably be
desired.  Each Borrower agrees to
cooperate and assist in such visits and inspections.


 


Section 6.03.  Insurance.  Each Borrower will maintain, and will cause
each of its Subsidiaries to maintain (either in the name of such Borrower or in
the Subsidiary’s own name) with financially sound and reputable insurance companies,
insurance on all their property in at least such amounts and against at least
such risks as are usually insured against in the same general area by companies
of established repute engaged in the same or similar businesses.


 


Section 6.04.  Payment of Taxes.  Each Borrower will pay and discharge, and
will cause each of its Subsidiaries to pay and discharge, all income taxes and
all other material taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits, or upon any properties belonging
to it, in each case, on a timely basis prior to the date on which penalties
attach thereto, and all lawful claims which, if unpaid, might become a Lien or
charge upon any properties of such Borrower or any of its Subsidiaries; provided
that neither any Borrower nor any Subsidiary of any Borrower shall be required
to pay any such tax, assessment, charge, levy or claim which is being contested
in good faith and by proper proceedings if it has maintained adequate reserves
with respect thereto in accordance with GAAP.


 


Section 6.05.  Maintenance of Existence.  Each Borrower will maintain, and will cause
each of its Subsidiaries to maintain, its existence, provided that a
Borrower shall not be required to maintain the existence of any of its
Subsidiaries (other than each Credit Party the existence of which will be
maintained at all times) if such Borrower shall determine in good faith that
the preservation thereof is no longer desirable in the conduct of the business
of such Borrower and its Subsidiaries taken as a whole.  Each Borrower will qualify and remain
qualified, and cause each of its Subsidiaries to qualify and remain qualified,
as a foreign corporation in each jurisdiction where such Borrower or such
Subsidiary, as the case may be, is required to be qualified, except in those
jurisdictions in which the failure to receive or retain such


 


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qualifications would not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.


 


Section 6.06.  Compliance with Statutes, etc.  Each Borrower will, and will cause each
Subsidiary to, comply with all applicable statutes, regulations and orders of,
and all applicable restrictions imposed by, all governmental bodies, domestic
or foreign, in respect of the conduct of its business and the ownership of its
property (including applicable statutes, regulations, orders and restrictions
relating to environmental standards and controls) other than those the non-compliance
with which would not reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect.


 


Section 6.07.  ERISA. 
Promptly after any Borrower, any of its Subsidiaries or, in the case of
clauses (i) through (v) below, any of its ERISA Affiliates knows or
has reason to know that any of the events or conditions specified below with
respect to any Plan or Multiemployer Plan or Foreign Pension Plan has occurred
or exist, a certificate of the chief financial officer of such Borrower setting
forth details respecting such event or condition and the action if any, that
such Borrower, such Subsidiary or such ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed with or
given to PBGC or an applicable foreign governmental agency by such Borrower,
such Subsidiary or such ERISA Affiliate with respect to such event or
condition):


 


(i)                                     any
reportable event, as defined in subsections (c)(1), (2), (5) and (6), and
subsection (d)(2) of Section 4043 of ERISA and the regulations
issued thereunder, with respect to a Plan;


 


(ii)                                  the
filing under Section 4041(c) of ERISA of a notice of intent to
terminate any Plan under a distress termination or the distress termination of
any Plan;


 


(iii)                               the
institution by PBGC of proceedings under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, or the
receipt by any Borrower, any of its Subsidiaries or any of its ERISA Affiliates
of a notice from a Multiemployer Plan that such action has been taken by PBGC
with respect to such Multiemployer Plan which could reasonably be expected to
result in a liability to such Borrower or any of its Subsidiaries in excess of  $5,000,000;


 


(iv)                              the
receipt by any Borrower, any of its Subsidiaries or any of its ERISA Affiliates
of notice from a Multiemployer Plan that such Borrower, any of its Subsidiaries
or any of its ERISA Affiliates has incurred withdrawal liability under Section 4201
of ERISA in excess of $5,000,000 or that such Multiemployer Plan is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or
that it intends to terminate or has terminated under Section 4041A of
ERISA whereby a deficiency or additional assessment is levied or threatened to
be levied in excess of $5,000,000 against such Borrower, any of its
Subsidiaries or any of its ERISA Affiliates;


 


(v)                                 the
institution of a proceeding by a fiduciary of any Plan or Multiemployer Plan
against any Borrower, any of its Subsidiaries or any of its ERISA Affiliates to


 


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enforce Section 515 or
4219(c)(5) of ERISA asserting liability in excess of $5,000,000, which
proceeding is not dismissed within 30 days; and


 


(vi)                              that
any material contribution required to be made with respect to a Foreign Pension
Plan has not been timely made, or that any Borrower or any Subsidiary of such
Borrower may incur any material liability pursuant to any Foreign Pension Plan
(other than to make contributions in the ordinary course of business).


 


Section 6.08.  Maintenance of Property.  Each Borrower shall, and will cause each of
its Subsidiaries to, maintain all of their properties and assets in good
condition, repair and working order, ordinary wear and tear excepted, except
where failure to maintain the same would not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.


 


Section 6.09.  Maintenance of Licenses and Permits.  Each Borrower will, and will cause each of
its Subsidiaries to, maintain all permits, licenses and consents as may be
required for the conduct of its business by any state, federal or local
government agency or instrumentality, except where failure to maintain the same
would not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.


 


Section 6.10.  Financial Strength Ratings.  Each Borrower shall cause each Regulated
Insurance Company (other than the Excluded Subsidiaries) to maintain at all
times a financial strength rating of at least “B++” from A.M. Best &
Co. (or its successor); provided that any Regulated Insurance Company
acquired or created after the Restatement Effective Date shall not be required
to comply with this Section 6.10 until the date occurring 180 days after
the date of such acquisition or creation.


 


Section 6.11.  End of Fiscal Years; Fiscal Quarters.  Each Borrower will cause (i) each of
its, and each of its Subsidiaries’, fiscal years to end on December 31 of
each year and (ii) each of its, and each of its Subsidiaries’, fiscal
quarters to end on dates which are consistent with a fiscal year end as
described above, provided that the Borrowers shall not be required to
comply with the foregoing with respect to any Subsidiary of any Borrower
acquired after the Restatement Effective Date having a fiscal year ending on a
date other than December 31 at the time of such acquisition.


 


Section 6.12.  Borrowing Base Requirement.  Subject to Sections 2.10(d) and (e),
each Designated Subsidiary Borrower shall at all times cause its respective
Borrowing Base to equal or exceed the Tranche 1 Letter of Credit Outstandings
attributable to such Designated Subsidiary Borrower at such time.


 


Section 6.13.  Further Assurances.  Each Borrower shall promptly and duly execute
and deliver to the Administrative Agent and/or the Collateral Agent such
documents and assurances and take such further action as the Administrative
Agent may from time to time reasonably request in order to carry out more
effectively the intent and purpose of the Credit Documents and to establish,
protect and perfect the rights and remedies created or intended to be created
in favor of the Collateral Agent, the Administrative Agent or the Lenders
pursuant to the Credit Documents.


 


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ARTICLE VII


 


Negative
Covenants


 


Until the Commitments have expired or
terminated, no Notes or Letters of Credit are outstanding (or, in the case of
Letters of Credit, such Letters of Credit are either (i) collateralized by
cash and/or Cash Equivalents equal to not less than 100% of the accounts
outstanding or available for drawing in a manner satisfactory to the Agents or (ii) supported
by back-to-back letters of credit the terms, conditions and issuer of which are
satisfactory to the Agents), and the principal of and interest on each Loan,
all Tranche 1 Unpaid Drawings and Tranche 2 Unpaid Drawings and all fees
payable hereunder have been paid in full, each Borrower covenants and agrees
(solely as to itself and its Subsidiaries) with the Lenders that:


 


Section 7.01.  Changes in Business and Investments.  No Borrower will, nor will it permit any of
its Subsidiaries to, engage (directly or indirectly) in any business other than
businesses in which they are engaged on the Restatement Effective Date and
reasonable extensions thereof and other businesses that are complementary or
reasonably related thereto.


 


Section 7.02.  Consolidations, Mergers, Sales of Assets
and Acquisitions.  (a)  No
Borrower will, nor will it permit any of its Subsidiaries to, consolidate or
merge with or into any other Person, provided that (i) the Parent Borrower
may merge with another Person if (x) the Parent Borrower is the corporation
surviving such merger and (y) immediately after giving effect to such merger,
no Default or Event of Default shall have occurred and be continuing, (ii) Intermediate
Holdings may merge with another Person if (x) Intermediate Holdings is the
corporation surviving such merger and (y) immediately after giving effect to
such merger, no Default or Event of Default shall have occurred and be
continuing, and (iii) Subsidiaries of any Borrower (other than
Intermediate Holdings) may merge with one another provided that if any such
merger involves a Designated Subsidiary Borrower, then the corporation
surviving such merger must be a Designated Subsidiary Borrower.


 


(b)                         No Borrower will, nor will it
permit any of its Subsidiaries to, sell, convey, assign, lease, abandon or
otherwise transfer or dispose of, voluntarily or involuntarily (any of the
foregoing being referred to in this Section 7.02(b) as a “Disposition”
and any series of related Dispositions constituting but a single Disposition),
any of its properties or assets, tangible or intangible (including but not
limited to sale, assignment, discount or other disposition of accounts,
contract rights, chattel paper or general intangibles with or without
recourse), except:


 


(i)                                     any Disposition of used, worn
out, obsolete or surplus property of the Parent Borrower or any Subsidiary in
the ordinary course of business;


 


(ii)                                  the license (as licensor) of
intellectual property so long as such license does not materially interfere
with the business of the Parent Borrower or any of its Subsidiaries;


 


(iii)                               the Disposition of cash, cash
equivalents and investment securities;


 


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(iv)                              the release, surrender or waiver
of contract, tort or other claims of any kind as a result of the settlement of
any litigation or threatened litigation;


 


(v)                                 the granting or existence of
Liens (and foreclosure thereon) not prohibited by this Agreement;


 


(vi)                              the lease or sublease of real
property so long as such lease or sublease does not materially interfere with
the business of the Parent Borrower or any of its Subsidiaries;


 


(vii)                           Dividends not prohibited by Section 7.07;


 


(viii)                        any ceding of insurance or
reinsurance in the ordinary course of business;


 


(ix)                                any Disposition by the Parent
Borrower or any of its Subsidiaries of any Non-Core Asset (as defined in the
Subscription Agreement) or as set forth on Schedule 7.02;


 


(x)                                   Dispositions of properties or
assets having an aggregate fair value (as determined in good faith by the board
of directors of the Parent Borrower) of less than $1,000,000;


 


(xi)                                Dispositions by the Parent
Borrower or any of its Subsidiaries of any of their respective properties or
assets to the Parent Borrower, to any Wholly-Owned Subsidiary of the Parent
Borrower or (except as to property or assets consisting of the capital stock of
Subsidiaries) to Alternative Re Holdings; and


 


(xii)                             other Dispositions to the extent
that the fair market value of the assets the subject thereof (as determined in
good faith by the board of directors or senior management of the Parent
Borrower), when added to the fair market value of the assets the subject of any
such other Disposition or Dispositions under this clause (xii) previously
consummated during the same fiscal year of the Parent Borrower (as determined
in good faith by the board of directors or senior management of the Parent
Borrower), does not constitute more than 20% of the consolidated assets of the
Parent Borrower and its Subsidiaries as of the last day of the most recently
ended fiscal year of the Parent Borrower.


 


(c)                                  No Borrower will, nor will it
permit any of its Subsidiaries to, acquire all or substantially all of the
capital stock or assets of another Person unless at such time and immediately
after giving effect thereto no Default or Event of Default exists or would
result therefrom.


 


Section 7.03.  Liens. 
No Borrower will, nor will it permit any of its Subsidiaries to, permit,
create, assume, incur or suffer to exist any Lien on any asset tangible or
intangible now owned or hereafter acquired by it, except:


 


(a)                                  Liens created pursuant to the
Credit Documents;


 


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(b)                                 Liens existing on the
Restatement Effective Date and listed on Schedule 7.03;


 


(c)                                  Liens securing repurchase
agreements constituting a borrowing of funds by the Parent Borrower or any
Subsidiary of the Parent Borrower in the ordinary course of business for
liquidity purposes and in no event for a period exceeding 90 days in each case;


 


(d)                                 Liens arising pursuant to
purchase money mortgages, capital leases or security interests securing
Indebtedness representing the purchase price (or financing of the purchase
price within 90 days after the respective purchase) of assets acquired after
the Restatement Effective Date;


 


(e)                                  Liens (x) on any asset of any
Person existing at the time such Person is merged or consolidated with or into
the Parent Borrower or any of its Subsidiaries and not created in contemplation
of such event or (y) securing Acquired Indebtedness so long as such Lien
existed prior to the contemplated acquisition, was not created in contemplation
of such acquisition and only relates to assets of the Person so acquired;


 


(f)                                    Liens securing obligations owed
by the Parent Borrower to any of its Subsidiaries or owed by any Subsidiary of
the Parent Borrower to the Parent Borrower or any other Subsidiary of the
Parent Borrower, in each case solely to the extent that such Liens are required
by an Applicable Insurance Regulatory Authority for such Person to maintain
such obligations;


 


(g)                                 Liens securing insurance
obligations of Subsidiaries of the Parent Borrower owed by any Subsidiary of
the Parent Borrower to the Parent Borrower or any other Subsidiary of the
Parent Borrower, in each case solely to the extent that such Liens are required
or requested by ratings agencies, clients or brokers for such Person to
maintain such insurance obligations;


 


(h)                                 Liens on investments and cash
balances of any Regulated Insurance Company securing obligations of such
Regulated Insurance Company in respect of trust or similar arrangements formed,
letters of credit issued or funds withheld balances established, in each case,
in the ordinary course of business for the benefit of cedents to secure
reinsurance recoverables owed to them by such Regulated Insurance Company;


 


(i)                                     inchoate Liens for taxes,
assessments or governmental charges or levies not yet due or Liens for taxes,
assessments or governmental charges or levies being contested in good faith and
by appropriate proceedings for which adequate reserves have been established in
accordance with GAAP;


 


(j)                                     Liens in respect of property or
assets of the Parent Borrower or any of its Subsidiaries imposed by law, which
were incurred in the ordinary course of business and do not secure Indebtedness
for borrowed money, such as carriers’, warehousemen’s, materialmen’s and
mechanics’ liens and other similar Liens arising in the ordinary course of
business, and (x) which do not in the aggregate materially detract from the
value of the Parent Borrower’s or such Subsidiary’s property or assets or
materially impair the use


 


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thereof in the operation of the business of the Parent Borrower or such
Subsidiary or (y) which are being contested in good faith by appropriate
proceedings, which proceedings have the effect of preventing the forfeiture or
sale of the property or assets subject to any such Lien;


 


(k)                                  Licenses, sublicenses, leases,
or subleases granted to other Persons not materially interfering with the
conduct of the business of the Parent Borrower or any of its Subsidiaries;


 


(l)                                     easements, rights-of-way,
restrictions, encroachments and other similar charges or encumbrances, and
minor title deficiencies, in each case not securing Indebtedness and not
materially interfering with the conduct of the business of the Parent Borrower
or any of its Subsidiaries;


 


(m)                               Liens arising out of the
existence of judgments or awards not constituting an Event of Default under Section 8.07;


 


(n)                                 Liens (other than Liens imposed
under ERISA) incurred in the ordinary course of business in connection with
workers compensation claims, unemployment insurance and social security
benefits and Liens securing the performance of bids, tenders, leases and
contracts in the ordinary course of business, statutory obligations, surety
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business and consistent with past practice (exclusive of
obligations in respect of the payment for borrowed money);


 


(o)                                 bankers’ Liens, rights of setoff
and other similar Liens existing solely with respect to cash and cash
equivalents on deposit in one or more accounts maintained by the Parent
Borrower or any of its Subsidiaries, in each case granted in the ordinary
course of business in favor of the bank or banks with which such accounts are
maintained;


 


(p)                                 Liens arising out of the
refinancing, extension, renewal or refunding of any Indebtedness secured by any
Lien permitted by any of the clauses of this Section 7.03, provided that
such Indebtedness is not increased and is not secured by any additional assets;


 


(q)                                 Liens in respect of property or
assets of any Subsidiary of the Parent Borrower securing Indebtedness of the
type described in clause (f) or (j) of the definition of “Permitted
Subsidiary Indebtedness”;


 


(r)                                    Liens in respect of property or
assets of any Subsidiary of the Parent Borrower securing Indebtedness of the
type described in clause (i) of the definition of “Permitted Subsidiary
Indebtedness”; provided that the aggregate amount of the Indebtedness secured
by such Liens shall not, when added to the aggregate amount of all outstanding
obligations of the Parent Borrower secured by Liens incurred pursuant to Section 7.03(s),
exceed at any time 10% of Consolidated Net Worth of the Parent Borrower at the
time of incurrence of any new Liens under this clause (r);


 


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(s)                                  Liens arising in connection with
securities lending arrangements entered into by the Parent Borrower or any of
its Subsidiaries with financial institutions in the ordinary course of business
so long as any securities subject to any such securities lending arrangement do
not constitute collateral under any Security Document; and


 


(t)                                    in addition to the Liens
described in clauses (a) through (s) above, Liens securing obligations of
the Parent Borrower; provided that the aggregate amount of the
obligations secured by such Liens shall not, when added to the aggregate amount
of outstanding Indebtedness of Subsidiaries incurred pursuant to clause (k) of
the definition of “Permitted Subsidiary Indebtedness”, exceed at any time 10% of Consolidated Net Worth of the Parent
Borrower at the time of incurrence of any Liens under this clause (t).


 


Section 7.04.  Indebtedness.  (a)  No Borrower will, nor will it
permit any of its Subsidiaries to, create, incur, assume or permit to exist any
Indebtedness, or agree, become or remain liable (contingent or otherwise) to do
any of the foregoing, except for the Loans and other Indebtedness which is
either pari passu with, or subordinated in right of payment to, the Loans and
the other Obligations.


 


(b)                                 No Borrower will permit any of
its Subsidiaries to create, incur, assume or permit to exist any Indebtedness,
or agree, become or remain liable (contingent or otherwise) to do any of the
foregoing, except for (i) the Obligations, (ii) Indebtedness under
the Long-Term LC Facility, (iii) Indebtedness under the Existing Senior
Notes and (iv) Permitted Subsidiary Indebtedness.


 


(c)                                  Intermediate Holdings will not
create, incur, assume or permit to exist any Indebtedness, or agree, become or
remain liable (contingent or otherwise) to do any of the foregoing, except for (i) the
Intermediate Holdings Guaranty, (ii) Indebtedness owing to the Parent
Borrower or any of its Subsidiaries (including, without limitation, any such
Indebtedness arising from capital commitments requested or required by an
Applicable Insurance Regulatory Authority) in an aggregate principal amount not
to exceed $50,000,000 at any time, (iii) other Indebtedness listed on Schedule 7.04(c) and
(iv) Indebtedness of the type described in clause (g) of the
definition of Permitted Subsidiary Indebtedness.


 


Section 7.05.  Issuance of Stock.  No Borrower will, nor will it permit any of
its Subsidiaries to, directly or indirectly issue, sell, assign, pledge, or
otherwise encumber or dispose of any shares of its preferred or preference
equity securities or options to acquire preferred or preference equity
securities, except the issuance of preferred or preference equity securities,
so long as (i) (x) no part of such preferred or preference equity
securities is mandatorily redeemable (whether on a scheduled basis or as a
result of the occurrence of any event or circumstance) prior to the first
anniversary of the Commitment Expiration Date or (y) all such preferred or
preference equity securities or options therefor are issued to and held by the
Parent Borrower and its Wholly-Owned Subsidiaries and (ii) such preferred
or preference equity securities do not contain any financial performance
related covenants or incurrence covenants which restrict the operations of the
issuer thereof; provided that the Parent Borrower and its Subsidiaries
may issue preferred stock as described on Schedule 7.05.


 


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Section 7.06.  Dissolution.  No Borrower will, nor will it permit any of
its Subsidiaries that is a Credit Party to, suffer or permit dissolution or
liquidation either in whole or in part, except through corporate reorganization
to the extent permitted by Section 7.02.


 


Section 7.07.  Restricted Payments.  The Parent Borrower will not declare or pay
any dividends, purchase, redeem, retire, defease or otherwise acquire for value
any of its Equity Interests now or hereafter outstanding, return any capital to
its stockholders, partners or members (or the equivalent Persons thereof) as
such, make any distribution of assets, Equity Interests, obligations or
securities to its stockholders, partners or members (or the equivalent Persons
thereof) as such, or permit any of its Subsidiaries to purchase, redeem,
retire, defease or otherwise acquire for value any Equity Interests in the
Parent Borrower or to sell any Equity Interests therein (each of the foregoing
a “Dividend” and, collectively, “Dividends”) unless no Default or
Event of Default shall have occurred and be continuing at the time of such
Dividend or would result therefrom.


 


Section 7.08.  Transactions with Affiliates.  No Borrower will, nor will it permit any of
its Subsidiaries to, enter into or be a party to a transaction with any
Affiliate of such Borrower or such Subsidiary (which Affiliate is not the
Parent Borrower or a Subsidiary), except (i) transactions with Affiliates
on terms (x) no less favorable to the Parent Borrower or such Subsidiary than
those that could have been obtained in a comparable transaction on an arm’s
length basis from an unrelated Person or (y) approved by a majority of the
disinterested members of the board of directors of the Parent Borrower, (ii) transactions
and payments pursuant to agreements and arrangements disclosed in, or listed as
an exhibit to, the Parent Borrower’s annual report on Form 10-K filed with
the SEC on March 15, 2005 or any subsequent other filing with the SEC
through the Restatement Effective Date or any such agreement or arrangement as
thereafter amended, extended or replaced on terms that are, in the aggregate,
no less favorable to the Parent Borrower and its Subsidiaries than the terms of
such agreement on the Restatement Effective Date, as the case may be, (iii) Dividends
not prohibited by Section 7.07, (iv) fees and compensation paid to
and indemnities provided on behalf of officers and directors of the Parent
Borrower or any of its Subsidiaries as reasonably determined in good faith by
the board of directors or senior management of Parent Borrower and (v) the
issuance of common stock of the Parent Borrower.


 


Section 7.09.  Maximum Parent Borrower Leverage Ratio.  The Parent Borrower will not permit the
Parent Borrower Leverage Ratio on the last day of any fiscal quarter or fiscal
year of the Parent Borrower to be greater than 0.35:1.00.


 


Section 7.10.  Minimum Consolidated Tangible Net Worth.  (a)  The Parent Borrower will not permit
its Consolidated Tangible Net Worth at any time to be less than (x) during the
period from and including the Restatement Effective Date to but not including December 31,
2005, the sum of (i) $1,500,000,000 plus (ii) 25% of the
aggregate Net Cash Proceeds received from any issuance of common or preferred
equity interests of the Parent Borrower consummated on or after the Restatement
Effective Date and prior to December 31, 2005, and (y) thereafter, an
amount equal to the sum of (i) $1,500,000,000 plus (ii) 25% of
its Consolidated Net Income (if positive) for each semi-annual fiscal period
ending on or after the Restatement Effective Date (commencing December 31,
2005) plus (iii) 25% of the aggregate


 


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Net Cash Proceeds received from any issuance of common or preferred
equity interests of the Parent Borrower consummated on or after the Restatement
Effective Date.


 


(b)                                 Neither ARC, ARL nor
Intermediate Holdings will permit its respective Consolidated Tangible Net
Worth at any time to be less than (A) in the case of ARC, (x) during the
period from and including the Restatement Effective Date to but not including December 31,
2005, $360,000,000 and (y) thereafter, an amount equal to the sum of (i) $360,000,000
plus (ii) 25% of its Consolidated Net Income (if positive) for each
semi-annual fiscal period ending on or after the Restatement Effective Date
(commencing December 31, 2005); (B) in the case of ARL, (x) during
the period from and including the Restatement Effective Date to but not
including December 31, 2005, $1,600,000,000 and (y) thereafter, an amount
equal to the sum of (i) $1,600,000,000 plus (ii) 25% of its
Consolidated Net Income (if positive) for each semi-annual fiscal period ending
on or after the Restatement Effective Date (commencing December 31, 2005);
and (C) in the case of Intermediate Holdings, (x) during the period from
and including the Restatement Effective Date to but not including December 31,
2005, $360,000,000 and (y) thereafter, an amount equal to the sum of (i) $360,000,000
plus (ii) 25% of its Consolidated Net Income (if positive) for each
semi-annual fiscal period ending on or after the Restatement Effective Date
(commencing December 31, 2005).


 


Section 7.11.  Unencumbered Liquid Assets.  The Parent Borrower will not at any time
permit the sum of (i) cash held by the Parent Borrower and/or any of its
Subsidiaries plus (ii) Cash Equivalents held by the Parent Borrower and/or
any of its Subsidiaries plus (iii) Investment Grade Securities held by the
Parent Borrower and/or any of its Subsidiaries which, in each case, is not
subject to any Lien to be reduced to an aggregate amount of less than
$300,000,000.


 


Section 7.12.  Limitation on Certain Restrictions on
Subsidiaries.  No Borrower will, nor
will it permit any of its Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or consensual restriction on the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by such Borrower or any of its
Subsidiaries, or pay any Indebtedness owed to such Borrower or any of its
Subsidiaries, (b) make loans or advances to such Borrower or any of its
Subsidiaries or (c) transfer any of its properties or assets to such
Borrower or any of its Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) the
Long-Term LC Facility (and any replacements, renewals and extensions thereof
and any successor facilities, provided that the encumbrances and restrictions
contained in any such replacements, renewals or extensions or any such
successor facilities are not materially more disadvantageous to the Lenders
than is customary in comparable financings and such encumbrances and
restrictions will not materially affect any Borrower’s ability to make
principal or interest payments on the Loans or to reimburse Unpaid Drawings and
do not restrict the ability to grant any Lien contemplated or required by the
Agreement), (iii) the Existing Senior Notes (and any additional issuances
of notes, provided that the encumbrances and restrictions contained in any such
additional notes shall not be materially more disadvantageous to the Lenders
than is customary in comparable financings and such encumbrances and
restrictions will not materially affect any Borrower’s ability to make
principal or interest payments on the Loans or to reimburse Unpaid Drawings and
do not restrict the ability to grant any Lien contemplated or required by the
Agreement), (iv) the Shareholders Agreement,


 


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(v) this Agreement and the other Credit Documents, (vi) customary
provisions restricting subletting or assignment of any lease governing any
leasehold interest of such Borrower or any of its Subsidiaries, (vii) customary
provisions restricting assignment of any licensing agreement (in which such
Borrower or any of its Subsidiaries is the licensee) or other contract
(including leases) entered into by such Borrower or any of its Subsidiaries in
the ordinary course of business, (viii) restrictions on the transfer of
any asset pending the close of the sale of such asset, (ix) restrictions
on the transfer of any asset subject to a Lien permitted by Section 7.03,
(x) agreements entered into by a Regulated Insurance Company with an Applicable
Insurance Regulatory Authority, (xi) any instrument governing Acquired
Indebtedness, which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person or the
properties or assets of the Person so acquired, (xii) customary provisions in
partnership agreements, limited liability company organizational governance
documents, joint venture agreements and other similar agreements entered into
in the ordinary course of business that restrict the transfer of ownership
interests in such partnership, limited liability company, joint venture or
similar Person, (xiii) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary course of
business, (xiv) pursuant to an agreement or instrument relating to any
Permitted Subsidiary Indebtedness of the type described in clause (e), (h) or
(i) of the definition thereof if such encumbrance or restriction is not
materially more disadvantageous to the Lenders than is customary in comparable
financings and such encumbrance or restriction will not materially affect such
Borrower’s ability to make principal or interest payments on the Loans or to
reimburse Unpaid Drawings, and (xv) any encumbrances or restrictions imposed by
any amendments or refinancings of the contracts, instruments or obligations
referred to in clause (xi) above, provided that such amendments or
refinancings are no more materially restrictive with respect to such
encumbrances and restrictions that those prior to such amendment or
refinancing.


 


Section 7.13.  Private Act.  No Borrower will become subject to a Private
Act.


 


ARTICLE VIII


 


Events of
Default


 


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


 


Section 8.01.  Payments.  Any Borrower shall (a) default in the
payment when due of any principal of any Loan, any Tranche 1 Unpaid Drawing or
any Tranche 2 Unpaid Drawing, (b) default, and such default shall continue
for three or more Business Days, in the payment when due of any interest on any
Loan or Unpaid Drawing or any fees payable pursuant to the Credit Documents or (c) default
in the prompt payment following notice or demand in respect of any other
amounts owing hereunder or under any other Credit Document; or


 


Section 8.02.  Representations, etc. Any
representation, warranty or material statement made or deemed made pursuant to
the last sentence of Section 5.02 by any Borrower herein or in any other
Credit Document or in any certificate or material statement delivered or
required to be delivered pursuant hereto or thereto shall prove to be untrue in
any material respect on the date as of which made or deemed made; or


 


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Section 8.03.  Covenants.  Any Borrower shall (a) default in the
due performance or observance by it of any term, covenant or agreement
contained in Section 6.01(d), 6.02(ii), 6.05 (but only with respect to the
first sentence thereof), 6.10 or Article VII, or (b) default in the
due performance or observance by it of any term, covenant or agreement (other
than those referred to in Section 8.01 or clause (a) of this Section 8.03)
contained in this Agreement and such default shall continue unremedied for a
period of at least 45 days after written notice to such Borrower from the
Administrative Agent or the Required Lenders; or


 


Section 8.04.  Default under other Agreements.  (a)  The Parent Borrower or any of its
Subsidiaries shall (i) default in any payment with respect to Indebtedness
(other than the Obligations) in excess of $50,000,000 individually or in the
aggregate, for the Parent Borrower and its Subsidiaries, beyond the period of
grace, if any, provided in the instrument or agreement under which such
Indebtedness was created or (ii) default in the observance or performance
of any agreement or condition relating to any such Indebtedness or contained in
any instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of which default or
other event or condition is to cause, or to permit the holder or holders of
such Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause (determined without regard to whether any notice of acceleration, or any
lapse of time prior to the effectiveness of any notice of acceleration, is
required), any such Indebtedness to become due prior to its stated maturity; or
(b) Indebtedness of the Parent Borrower or its Subsidiaries in excess of
$50,000,000 shall be declared to be due and payable other than in accordance
with the terms of such Indebtedness or required to be prepaid, other than by a
regularly scheduled required prepayment or as a mandatory prepayment (unless
such required prepayment or mandatory prepayment results from a default
thereunder or an event of the type that constitutes an Event of Default), prior
to the stated maturity thereof; or


 


Section 8.05.  Bankruptcy, etc.  The Parent Borrower or any of its
Subsidiaries (other than Insignificant Subsidiaries) shall commence a voluntary
case concerning itself under Title 11 of the United States Code entitled “Bankruptcy,”
as now or hereafter in effect, or any successor thereto (the “Bankruptcy
Code”); or an involuntary case is commenced against the Parent Borrower or
any of its Subsidiaries (other than Insignificant Subsidiaries) and the
petition is not controverted within 10 days, or is not dismissed within 60
days, after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or substantially all
of the property of the Parent Borrower or any of its Subsidiaries (other than
Insignificant Subsidiaries); or the Parent Borrower or any of its Subsidiaries
(other than Insignificant Subsidiaries) commences (including by way of applying
for or consenting to the appointment of, or the taking of possession by, a
rehabilitator, receiver, custodian, trustee, conservator or liquidator
(collectively, a “conservator”) of itself or all or any substantial
portion of its property) any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency,
liquidation, rehabilitation, supervision, conservatorship or similar law of any
jurisdiction or the Bermuda Companies Law whether now or hereafter in effect
relating to the Parent Borrower or any of its Subsidiaries (other than
Insignificant Subsidiaries); or any such proceeding is commenced against (a) any
Regulated Insurance Company (other than any Regulated Insurance Company that is
an Insignificant Subsidiary) which is engaged in the business of underwriting
insurance and/or reinsurance in the United States, or (b) the Parent
Borrower or any of its Subsidiaries (other than Insignificant Subsidiaries or
any Regulated Insurance Company described in the immediately preceding clause
(a)) to the


 


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extent such proceeding is consented to by such Person, and in the case
of either clause (a) or (b) remains undismissed for a period of 60
days; or the Parent Borrower or any of its Subsidiaries (other than
Insignificant Subsidiaries) is adjudicated insolvent or bankrupt; or any order
of relief or other order approving any such case or proceeding is entered; or
(x) any Regulated Insurance Company (other than any Regulated Insurance
Company that is an Insignificant Subsidiary) which is engaged in the business
of underwriting insurance and/or reinsurance in the United States suffers any
appointment of any conservator or the like for it or any substantial part of
its property, or (y) the Parent Borrower or any of its Subsidiaries (other than
Insignificant Subsidiaries or any Regulated Insurance Company described in the
immediately preceding clause (x)) consents to any appointment of any
conservator or the like for it or any substantial part of its property which
continues undischarged or unstayed for a period of 60 days; or the Parent
Borrower or any of its Subsidiaries (other than Insignificant Subsidiaries)
makes a general assignment for the benefit of creditors; or any corporate
action is taken by the Parent Borrower or any of its Subsidiaries (other than
Insignificant Subsidiaries) for the purpose of effecting any of the foregoing;
or


 


Section 8.06.  ERISA. 
(i)  An event or condition specified in Section 6.07 shall
occur or exist with respect to any Plan or Multiemployer Plan or Foreign
Pension Plan, (ii) any Borrower, any of its Subsidiaries or any of its
ERISA Affiliates shall fail to pay when due any amount which they shall have
become liable to pay to the PBGC or to a Plan or a Multiemployer Plan under
Title IV of ERISA, or (iii) a condition shall exist by reason of which the
PBGC would be entitled to obtain a decree adjudicating that any Plan must be
terminated, and as a result of such event, failure or condition, together with
all such other events, failures or conditions, any Borrower, any of its
Subsidiaries or any of its ERISA Affiliates shall be reasonably likely in the
opinion of the general counsel of such Borrower to incur a liability to a Plan,
a Multiemployer Plan, a Foreign Pension Plan or PBGC (or any combination of the
foregoing) which could reasonably be expected to have, either individually or
in the aggregate, a Material Adverse Effect; or


 


Section 8.07.  Judgments.  One or more judgments or decrees shall be
entered against the Parent Borrower or any of its Subsidiaries involving a
liability, net of undisputed insurance and reinsurance, of $50,000,000 or more
in the case of any one such judgment or decree or in the aggregate for all such
judgments and decrees for the Parent Borrower and its Subsidiaries and any such
judgments or decrees shall not have been vacated, discharged, satisfied, stayed
or bonded pending appeal within 60 days from the entry thereof; or


 


Section 8.08.  Insurance Licenses.  Any one or more Insurance Licenses of the
Parent Borrower or any of its Subsidiaries shall be suspended, limited or
terminated or shall not be renewed, or any other action shall be taken by any
Governmental Authority, and such action would reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect; or


 


Section 8.09.  Intermediate Holdings Guaranty.  The Intermediate Holdings Guaranty shall
terminate or cease, in whole or part, to be a legally valid and binding
obligation of the Guarantor, if the Guarantor, or any Person acting for or on
behalf of the Guarantor, shall contest such validity or binding nature of the
Intermediate Holdings Guaranty, or any other Person shall assert any of the
foregoing; or


 


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Section 8.10.  Security Documents.  Any Security Document shall cease to be in
full force and effect, or shall cease to give the Collateral Agent the Liens,
rights, powers and privileges purported to be created thereby (including,
without limitation, a first priority security interest in, and Lien on, all of
the Collateral subject thereto, in favor of the Collateral Agent, superior to
and prior to the rights of all third Persons and subject to no other Liens); or
any Designated Subsidiary Borrower party to any Security Documents or any other
pledgor thereunder shall default in any material respect in the due performance
or observance of any term, covenant or agreement on its part to be performed or
observed pursuant to any Security Document; or


 


Section 8.11.  Change of Control.  A Change in Control shall occur; or


 


Section 8.12.  Section 32 Direction.  ARL shall receive any direction or other
notification from the Bermuda Monetary Authority pursuant to Section 32 of
the Insurance Act, 1978 of Bermuda;


 


then, and in any such event, and at any time thereafter, if any Event
of Default shall then be continuing, the Administrative Agent shall, upon the
written request of the Required Lenders, by written notice to the Parent
Borrower, take any or all of the following actions, without prejudice to the
rights of the Administrative Agent or any Lender to enforce its claims against
any Borrower, except as otherwise specifically provided for in this Agreement
(provided that if an Event of Default specified in Section 8.05 shall
occur with respect to any Borrower, the result which would occur upon the
giving of written notice by the Administrative Agent as specified in clauses (i) and
(ii) below shall occur automatically without the giving of any such
notice):  (i) declare the
Commitments (or the unused portion thereof) terminated, whereupon the
Commitment of each Lender (or such unused portion) shall forthwith terminate
immediately and any Facility Fees and any Utilization Fees shall forthwith
become due and payable without any other notice of any kind, (ii) declare
the principal of, and any accrued interest in respect of, all Loans and all
other Obligations owing hereunder and under the other Credit Documents to be,
whereupon the same shall become, forthwith due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
each Borrower, (iii) terminate any Letter of Credit or give a Notice of
Non-Extension in respect thereof if permitted in accordance with its terms, (iv) direct
the applicable Borrower to pay (and the applicable Borrower hereby agrees upon
receipt of such notice, or upon the occurrence of any Event of Default
specified in Section 8.05, to pay) to the Administrative Agent an amount
of cash to be held as security for the respective Borrower’s reimbursement
obligations in respect of all Letters of Credit then outstanding which were
issued for the account of such Borrower, equal to the aggregate Stated Amount
of all such Letters of Credit at such time, and/or (v)  direct the
Collateral Agent to enforce any or all of the Liens and security interests
created pursuant to the Security Documents and/or exercise any of the rights
and remedies provided therein. 
Notwithstanding the foregoing, the Administrative Agent shall have
available to it all other remedies at law or equity, and shall exercise any one
or all of them at the request of the Required Lenders.


 


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ARTICLE IX


 


The
Administrative Agent


 


Section 9.01.  Appointment.  Each of the Lenders hereby irrevocably
appoints (i) JPMorgan Chase Bank, N.A. (formerly known as JPMorgan Chase
Bank) as Administrative Agent to act as specified herein and in the other Credit
Documents and authorizes the Administrative Agent to take such actions on its
behalf and to exercise such powers as are delegated to the Administrative Agent
by the terms hereof and in the other Credit Documents, together with such
actions and powers as are reasonably incidental thereto and (ii) The Bank
of New York as Collateral Agent to act as specified herein and in the other
Credit Documents and authorizes the Collateral Agent to take such actions on
its behalf and to exercise such powers as are delegated to the Collateral Agent
by the terms hereof and in the other Credit Documents, together with such
actions and powers as are reasonably incidental thereto.


 


Section 9.02.  Administrative Agent in its Individual
Capacity.  Each bank serving as an
Agent hereunder shall have the same rights and powers in its capacity as a
Lender as any other Lender and may exercise the same as though it were not the
an Agent, and such bank and its Affiliates may accept deposits from, lend money
to and generally engage in any kind of business with any Borrower or any
Subsidiary or other Affiliate thereof as if it were not an Agent hereunder.


 


Section 9.03.  Exculpatory Provisions.  No Agent shall have any duties or obligations
except those expressly set forth herein. 
Without limiting the generality of the foregoing, (a) no Agent
shall be subject to any fiduciary or other implied duties, regardless of
whether a Default or an Event of Default has occurred and is continuing, (b) no
Agent shall have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby that such Agent is required to exercise in writing as
directed by the Required Lenders (or such other number or percentage of the Lenders
as shall be necessary under the circumstances as provided in Section 10.02),
and (c) except as expressly set forth herein, no Agent shall have any duty
to disclose, and shall not be liable for the failure to disclose, any
information relating to any Borrower or any of its Subsidiaries that is
communicated to or obtained by the bank serving as an Agent or any of its
Affiliates in any capacity.  No Agent
shall be liable for any action taken or not taken by it with the consent or at
the request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section 10.02)
or in the absence of its own gross negligence or willful misconduct.  No Agent shall be deemed to have knowledge of
any Default or Event of Default unless and until written notice thereof is
given to such Agent by the Borrowers or a Lender, and no Agent shall be
responsible for or have any duty to ascertain or inquire into (i) any
statement, warranty or representation made in or in connection with this
Agreement, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection herewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein, (iv) the validity, enforceability, effectiveness or
genuineness of this Agreement or any other agreement, instrument or document,
or (v) the satisfaction of any condition set forth in Article V or
elsewhere herein, other than to confirm receipt of items expressly required to
be delivered to such Agent.


 


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Section 9.04.  Reliance.  Each Agent shall be entitled to rely upon,
and shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing believed
by it to be genuine and to have been signed or sent by the proper Person.  Each Agent also may rely upon any statement
made to it orally or by telephone and believed by it to be made by the proper
Person, and shall not incur any liability for relying thereon.  Each Agent may consult with legal counsel
(who may be counsel for the Borrowers), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.


 


Section 9.05.  Delegation of Duties.  Each Agent may perform any and all its duties
and exercise its rights and powers by or through any one or more sub-agents
appointed by such Agent.  Each Agent and
any such sub-agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties.  The exculpatory provisions of the preceding
paragraphs shall apply to any such sub-agent and to the Related Parties of any
such Agent and any such sub-agent, and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as Agent.


 


Section 9.06.  Resignation.  (a)  Subject to the appointment and
acceptance of a successor Administrative Agent as provided in this paragraph,
the Administrative Agent may resign at any time by notifying the Lenders and
the Borrowers in accordance with Section 10.01.  Upon any such resignation, the Required
Lenders shall have the right to appoint a successor administrative agent, with
the consent of the Borrowers (not to be unreasonably withheld or delayed),
provided that no such consent shall be required at any time when a Default or
an Event of Default exists.  If no
successor shall have been so appointed by the Required Lenders and shall have
accepted such appointment within 30 days after the retiring Administrative
Agent gives notice of its resignation, then the retiring Administrative Agent
may, on behalf of the Lenders, appoint a successor Administrative Agent which
shall be a bank with an office in New York, New York, or an Affiliate of any
such bank.  Upon the acceptance of its
appointment as Administrative Agent hereunder by a successor, such successor
shall succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder.  The fees payable by the Borrowers to a
successor Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrowers and such successor.  After the Administrative Agent’s resignation
hereunder, the provisions of this Article and Section 10.03 shall
continue in effect for the benefit of such retiring Administrative Agent, its
sub-agents and their respective Related Parties in respect of any actions taken
or omitted to be taken by any of them while it was acting as Administrative
Agent.


 


(b)                                 Subject to the appointment and acceptance
of a successor Collateral Agent as provided in this paragraph, the Collateral
Agent may resign at any time by notifying the Lenders and the Borrowers in
accordance with Section 10.01.  Upon
any such resignation, the Required Lenders shall have the right to appoint a
successor collateral agent, with the consent of the Borrowers (not to be
unreasonably withheld or delayed), provided that no such consent shall be
required at any time when a Default or an Event of Default exists.  If no successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within
30 days after the retiring Collateral Agent gives notice of its
resignation, then the Administrative


 


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Agent shall, on
behalf of the Lenders, appoint a successor Collateral Agent which shall be a
bank with an office in New York, New York, or an Affiliate of any such bank.  Upon the acceptance of its appointment as
Collateral Agent hereunder by a successor, such successor shall succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring Collateral Agent, and the retiring Collateral Agent shall be
discharged from its duties and obligations hereunder.  Fees, if any, payable by the Borrowers to a
successor Collateral Agent shall be agreed upon between the Borrowers and such
successor.  After the Collateral Agent’s
resignation hereunder, the provisions of this Article and Section 10.03
shall continue in effect for the benefit of such retiring Collateral Agent, its
sub-agents and their respective Related Parties in respect of any actions taken
or omitted to be taken by any of them while it was acting as Collateral Agent.


 


Section 9.07.  Non-Reliance.  Each Lender acknowledges that it has,
independently and without reliance upon the any Agent or any other Lender and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement.  Each Lender also acknowledges that it will,
independently and without reliance upon any Agent or any other Lender and based
on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any related agreement or any document
furnished hereunder or thereunder.


 


Section 9.08.  Documentation Agents.  Notwithstanding any other provision of this
Agreement or any provision of any other Credit Document, each of the
Documentation Agents are named as such for recognition purposes only, and in
their respective capacities as such shall have no powers, duties,
responsibilities or liabilities with respect to this Agreement or the other
Credit Documents or the transactions contemplated hereby and thereby.  Without limitation of the foregoing, none of
the Documentation Agents shall, solely by reason of this Agreement or any other
Credit Documents, have any fiduciary relationship with any Lender or any other
Person.


 


ARTICLE X


 


Miscellaneous


 


Section 10.01.  Notices.  (a)  Except in the case of notices and
other communications expressly permitted to be given by telephone (and subject
to paragraph (b) below), all notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as
follows:


 


(i)                                     if
to the Parent Borrower, to it at Arch Capital Group Ltd., Wessex House, 4th
Floor, 45 Reid Street, Hamilton HM 12 Bermuda, Attention of Chief Financial
Officer (Telecopy No. 441-278-9255);


 


(ii)                                  if
to ARL, to it at Arch Reinsurance Ltd., Wessex House, 3rd Floor, 45
Reid Street, Hamilton HM 12 Bermuda, Attention of Controller (Telecopy No. 441-278-9230);


 


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(iii)                               if
to ARC, to it at Arch Reinsurance Company, 55 Madison Avenue, Morristown, New
Jersey, 07962, Attention of Controller (Telecopy No. 973-889-6467);


 


(iv)                              if
to Intermediate Holdings, to it at Arch Capital Group (U.S.) Inc., c/o Arch
Capital Services Inc., 360 Hamilton Avenue, Suite 600, White Plains, New
York, 10601-2908, Attention of President (Telecopy No. 203-861-7240), with
a copy to: Arch Capital Group (U.S.) Inc., One Liberty Plaza, New York, New
York, 10006, Attention of Controller (Telecopy No. 646-746-8109);


 


(v)                                 if
to AIC, ASIC, AESIC and WDCIC, to Arch Insurance Company, Arch Specialty
Insurance Company, Arch Excess & Surplus Insurance Company and Western
Diversified Casualty Insurance Company, respectively, at One Liberty Plaza,
53rd Floor, New York, New York, 10006, Attention of Controller (Telecopy No. 646-746-8109);


 


(vi)                              if
to the Administrative Agent, to (x) JPMorgan Chase Bank, N.A., Loan and Agency
Services Group, 1111 Fanin Street, Houston, Texas 77002, Attention of Melissa
Rivas (Telecopy No. (713) 750-2223), with a copy to JPMorgan Chase Bank,
N.A., 270 Park Avenue, Twenty-Second Floor, New York 10017, Attention of
Heather Lindstrom (Telecopy No. (212) 270-1511); and


 


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


 


(b)                                 Notices and other communications
to the Lenders hereunder may be delivered or furnished by electronic
communications pursuant to procedures approved by the Administrative Agent;
provided that the foregoing shall not apply to notices pursuant to (x) Article II
unless otherwise agreed by the Administrative Agent and the applicable Lender
or (y) Section 6.01(d)(x).  The
Administrative Agent or the Borrowers may, in its discretion, agree to accept
notices and other communications to it hereunder by electronic communications
pursuant to procedures approved by it; provided that approval of such
procedures may be limited to particular notices or communications.


 


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


 


Section 10.02.  Waivers; Amendments.  (a)  No failure or delay by the
Administrative Agent or any Lender in exercising any right or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof
or the exercise of any other right or power. 
The rights and remedies of the Administrative Agent and the Lenders
hereunder are cumulative and are not exclusive of any rights or remedies that
they would otherwise have.  No waiver of
any provision of this Agreement or consent to any departure by any Borrower
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section, and then such waiver or consent shall
be effective only in the specific instance and for the purpose for which given.


 


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Without limiting the generality of the foregoing, the making of a Loan
or issuance of a Letter of Credit shall not be construed as a waiver of any
Default or Event of Default, regardless of whether the Administrative Agent,
the Issuing Agent, any Fronting Lender or any Lender may have had notice or
knowledge of such Default at the time.


 


(b)                                 Neither this Agreement nor any
other Credit Document nor any provision hereof or thereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by each Borrower and the Required Lenders or by each Borrower and
the Administrative Agent with the consent of the Required Lenders; provided
that no such agreement shall (i) increase the Commitment of any Lender
without the written consent of such Lender, (ii) reduce the principal
amount of any Loan or the amount of any Tranche 1 Unpaid Drawing or Tranche 2
Unpaid Drawing or reduce the rate of interest thereon, or reduce any fees
payable hereunder, without the written consent of each Lender affected thereby,
(iii) postpone the scheduled date of payment of the principal amount of
any Loan or the amount of any Tranche 1 Unpaid Drawing or Tranche 2 Unpaid
Drawing or any interest thereon, or any fees payable hereunder, or reduce the
amount of, waive or excuse any such payment, or postpone the scheduled date of
expiration of any Commitment, without the written consent of each Lender affected
thereby, (iv) change Section 2.17(b) or (c) in a manner
that would alter the pro rata sharing of payments required thereby, without the
written consent of each Lender, (v) change any of the provisions of this Section or
the definition of “Required Lenders” or “Majority Tranche 1 Lenders” or any
other provision hereof specifying the number or percentage of Lenders required
to waive, amend or modify any rights hereunder or make any determination or
grant any consent hereunder, without the written consent of each Lender, (vi) release
all or substantially all of the security provided by the Designated Subsidiary
Borrowers to secure the Tranche 1 Obligations, without the written consent of
each Tranche 1 Lender, (vii) modify the definitions in Section 1.01
of “Advance Rates,” “Borrowing Base” or “Eligible Securities” without the
consent of the Agents and any additional Lender required to constitute the
Majority Tranche 1 Lenders, (viii) modify, change, waive, discharge or
terminate any provision of any Security Document without the consent of the
Majority Tranche 1 Lenders or (ix) release Intermediate Holdings from the
Intermediate Holdings Guaranty without the consent of all Lenders; provided,
further, that no such agreement shall amend, modify or otherwise affect
the rights or duties of the Administrative Agent, any Fronting Lender or the
Issuing Agent hereunder without the prior written consent of the Administrative
Agent, such Fronting Lender or the Issuing Agent, as the case may be.


 


Section 10.03.  Expenses; Indemnity; Damage Waiver.  (a)  Each Borrower shall pay, severally
in accordance with its respective Facility-wide Liability Percentage and not
jointly, (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates, including the reasonable fees, charges
and disbursements of counsel for the Administrative Agent, in connection with
the syndication of the credit facility provided for herein, the preparation,
negotiation and administration of this Agreement and the other Credit Documents
or any amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions contemplated hereby or thereby shall be
consummated), and (ii) all out-of-pocket expenses incurred by the
Administrative Agent, the Collateral Agent, the Custodian, the Issuing Agent,
any Fronting Lender, or any Lender, including the fees, charges and
disbursements of any counsel for the Administrative Agent or any Lender, in
connection with the enforcement or protection of its rights in connection with
this Agreement and/or other


 


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Credit Documents, including its rights under this Section, or in
connection with the Loans and Letters of Credit made hereunder, including all
such out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or other Obligations.


 


(b)                                 The Parent Borrower shall
indemnify the Administrative Agent, the Collateral Agent, the Custodian, the
Issuing Agent, each Fronting Lender, and each Lender, and each Related Party of
any of the foregoing Persons (each such Person being called an “Indemnitee”)
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including the fees, charges and
disbursements of any counsel for any Indemnitee, incurred by or asserted
against any Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of this Agreement and/or any other Credit Document, or
any agreement or instrument contemplated hereby or thereby, the performance by
the parties hereto or thereto of their respective obligations hereunder or
thereunder or any other transactions contemplated hereby or thereby, (ii) any
Loan, Letter of Credit or the use of the proceeds therefrom, (iii) any
actual or alleged presence or release of Hazardous Materials on or from any
property owned or operated by the Parent Borrower or any of its Subsidiaries,
or any Environmental Liability related in any way to the Parent Borrower or any
of its Subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is
a party thereto; provided that such indemnity shall not, as to any
Indemnitee or any Related Party of such Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and non-appealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee or any Related Party of such Indemnitee.  Notwithstanding the foregoing, for the sake
of clarity, the parties hereto acknowledge and agree that the obligations of
the Parent Borrower under this Section 10.03(b) shall not include the
payment of principal or interest on the Loans, any Unpaid Drawing in respect of
any Letter of Credit, or any amounts payable pursuant to Section 2.11,
2.12, 2.14, 2.15, 2.16 or 10.03(a) of this Agreement.


 


(c)                                  To the extent that any Borrower
fails to pay any amount required to be paid by it to the Administrative Agent,
the Collateral Agent, the Custodian, any Fronting Lender or the Issuing Agent,
under paragraph (a) or (b) of this Section, each Lender severally
agrees to pay to the Administrative Agent, the Collateral Agent, the Custodian,
such Fronting Lender, or the Issuing Agent, as the case may be, such Lender’s
Applicable 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, the Collateral Agent, the Custodian, such Fronting Lender
or the Issuing Agent, as the case may be, in its capacity as such.


 


(d)                                 To the extent permitted by
applicable law, no Borrower shall assert, and each Borrower hereby waives, any
claim against any Indemnitee, on any theory of liability, for special,
indirect, consequential or punitive damages (as opposed to direct or actual
damages) arising out of, in connection with, or as a result of, this Agreement
or any other Credit Document or any agreement or instrument contemplated hereby
or thereby, any Loan, any Letter of Credit or the use of the proceeds thereof.


 


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(e)                                  All amounts due under this Section shall
be payable promptly after written demand therefor.


 


Section 10.04.  Successors and Assigns.  (a)  The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby except that (i) no
Borrower may assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by such Borrower without such consent shall be null and
void) and (ii) no Lender may assign or otherwise transfer its rights or
obligations hereunder except in accordance with this Section.  Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby, Participants
(to the extent provided in paragraph (c) of this Section) and, to the
extent expressly contemplated hereby, the Related Parties of each of the
Administrative Agent and the Lenders) any legal or equitable right, remedy or
claim under or by reason of this Agreement.


 


(b)                                 (i)  Subject to the
conditions set forth in paragraph (b)(ii) below, any Lender may assign to
one or more banks, investment funds or other institutions that make or hold
commercial loans in the ordinary course of their businesses (so long as such
bank, fund or institution is an NAIC approved bank or institution) all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it) with the prior
written consent (such consent not to be unreasonably withheld) of:


 


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


 


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


 


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


 


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


 


(A)                              except in the case of an
assignment to a Lender or an Affiliate of a Lender or an assignment of the
entire remaining amount of the assigning Lender’s Commitment or Loans of any
Tranche, the amount of the Commitment or Loans of the assigning Lender subject
to each such assignment (determined as of the date the Assignment and
Assumption with respect to such assignment is delivered to the Administrative
Agent) shall not be less than $5,000,000 unless each of the Parent Borrower and
the Administrative Agent otherwise consent, provided that


 


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no such consent of the Parent Borrower shall be required if an Event of
Default under Section 8.01, 8.02 or 8.05 has occurred and is continuing;


 


(B)                                each partial assignment
shall be made as an assignment of a proportionate part of all the assigning
Lender’s rights and obligations under this Agreement, provided that this
clause shall not be construed to prohibit the assignment of a proportionate
part of all the assigning Lender’s rights and obligations in respect of one
Tranche of Commitments or Loans;


 


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


 


(D)                               the assignee, if it
shall not be a Lender, shall deliver to the Administrative Agent an
Administrative Questionnaire.


 


For the purposes of this Section 10.04(b),
the term “Approved Fund” has the following meaning:


 


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


 


(i)                                     Subject
to acceptance and recording thereof pursuant to paragraph (b)(iv) of
this Section, from and after the effective date specified in each Assignment
and Assumption the assignee thereunder shall be a party hereto and, to the
extent of the interest assigned by such Assignment and Assumption, have the
rights and obligations of a Lender under this Agreement (provided that any liability of any Borrower to such assignee under Section 2.14,
2.15 or 2.16 shall be limited to the amount, if any, that would have been
payable thereunder by such Borrower in the absence of such assignment, except
to the extent any such amounts are attributable to a Change in Law), 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 2.14, 2.15, 2.16 and 10.03).  Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this Section 10.04
shall be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (c) of
this Section.


 


(ii)                                  The
Administrative Agent, acting for this purpose as an agent of the Borrowers,
shall maintain at one of its offices a copy of each Assignment and Assumption
delivered to it and a register for the recordation of the names and addresses
of the Lenders, and the Commitment of, and principal amount of the Loans and
other


 


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Obligations and owing to, each
Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be
conclusive, and the Borrowers, the Administrative Agent 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.


 


(iii)                               Upon
its receipt of a duly completed Assignment and Assumption executed by an
assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section and
any written consent to such assignment required by paragraph (b) of this
Section, the Administrative Agent shall accept such Assignment and Assumption
and record the information contained therein in the Register; provided
that no such assignment shall become effective until all then outstanding
Tranche 1 Letters of Credit and/or Tranche 2 Letters of Credit, as the case may
be, shall be returned by each respective beneficiary to the Issuing Agent
either for cancellation and/or to be exchanged for new or amended Letters of
Credit to reflect such assignment (it being understood that to the extent the
respective beneficiaries do not consent to such assignment, such assignment
cannot occur).  No assignment shall be
effective for purposes of this Agreement unless it has been recorded in the
Register as provided in this paragraph.


 


(c)                                  (i)  Any Lender may,
without the consent of any Borrower or the Administrative Agent, sell
participations to one or more banks or other entities (a “Participant”)
in all or a portion of such Lender’s rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans owing to
it); provided that (A) such Lender’s obligations under this
Agreement shall remain unchanged, (B) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (C) the Borrowers, the Administrative Agent and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that
such agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the first proviso to Section 10.02(b) that affects such
Participant.  Subject to paragraph (c)(ii) of
this Section, the Borrower agrees that each Participant shall be entitled to
the benefits of Sections 2.14, 2.15 and 2.16 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section.  To the extent permitted by
law, each Participant also shall be entitled to the benefits of Section 10.08
as though it were a Lender, provided such Participant agrees to be subject to Section 2.17(c) as
though it were a Lender.


 


(ii)                                  A
Participant shall not be entitled to receive any greater payment under Section 2.14
or 2.16 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 Parent Borrower’s prior
written consent and the entitlement to greater payment


 


111





















 


results solely
from a Change in Law.  A Participant that
would be a Foreign Lender if it were a Lender shall not be entitled to the
benefits of Section 2.16 unless the Parent Borrower is notified of the
participation sold to such Participant and such Participant agrees, for the
benefit of the Borrowers, to comply with Section 2.16(e) as though it
were a Lender.


 


(d)                                 Any Lender may at any time
pledge or assign a security interest in all or any portion of its rights under
this Agreement to secure obligations of such Lender, including without
limitation any pledge or assignment to secure obligations to a Federal Reserve
Bank, and this Section shall not apply to any such pledge or assignment of
a security interest; provided that no such pledge or assignment of a
security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party hereto.


 


(e)                                  Notwithstanding anything to the contrary
contained herein, any Lender (a “Granting Lender”) may grant to a
special purpose funding vehicle (an, “SPC”) of such Granting Lender,
identified as such in writing from time to time by the Granting Lender to the
Administrative Agent and the Parent Borrower, the option to provide to the
applicable Borrower all or any part of any Loan that such Granting Lender would
otherwise be obligated to make to such Borrower pursuant to Section 2.01, provided
that (i) nothing herein shall constitute a commitment to make any Loan by
any SPC and (ii) if an SPC elects not to exercise such option or otherwise
fails to provide all or any part of such Loan, the Granting Lender shall be
obligated to make such Loan pursuant to the terms hereof.  The making of a Loan by an SPC hereunder
shall utilize the Commitment of the Granting Lender to the same extent, and as
if, such Loan were made by the Granting Lender. 
Each party hereto hereby agrees that (x) no SPC shall be liable for any
payment under this Agreement for which a Lender would otherwise be liable and
(y) the Granting Lender for any SPC shall be (and hereby agrees that it is)
liable for any payment under this Agreement for which the SPC would be liable
in the absence of preceding clause (x). 
In furtherance of the foregoing, each party hereto hereby agrees that,
prior to the date that is one year and one day after the payment in full of all
outstanding senior indebtedness of any SPC, it will not institute against, or
join any other person in instituting against, such SPC any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or similar
proceedings under the laws of the United States or any State thereof.  In addition, notwithstanding anything to the contrary
contained in this Section 10.04 any SPC may (i) with notice to, but
without the prior written consent of, the Parent Borrower or the Administrative
Agent and without paying any processing fee therefor, assign all or a portion
of its interests in any Loans to its Granting Lender or to any financial
institutions (if consented to by the Parent Borrower and the Administrative
Agent) providing liquidity and/or credit facilities to or for the account of
such SPC to fund the Loans made by such SPC or to support the securities (if
any) issued by such SPC to fund such Loans and (ii) disclose on a
confidential basis any non-public information relating to its Loans to any
rating agency, commercial paper dealer or provider of a surety, guarantee or
credit or liquidity enhancement to such SPC.


 


Section 10.05.  Survival.  All covenants, agreements, representations
and warranties made by each Credit Party herein and in the certificates or
other instruments delivered in connection with or pursuant to this Agreement
shall be considered to have been relied upon by the other parties hereto and
shall survive the execution and delivery of this Agreement and the making of
any Loans and issuance of Letters of Credit regardless of any investigation
made by any such other party or on its behalf and notwithstanding that the
Administrative Agent or any


 


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Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as any Letter of Credit is
outstanding, the principal of or any accrued interest on any Loan or any fee or
any other amount payable under this Agreement is outstanding and unpaid and so
long as the Total Commitments have not expired or terminated.  The provisions of Sections 2.14, 2.15, 2.16
and 10.03 and Article IX shall survive and remain in full force and effect
regardless of the consummation of the transactions contemplated hereby, the
repayment of the Loans, the expiration or termination of the Total Commitments
or the termination of this Agreement or any provision hereof.


 


Section 10.06.  Counterparts; Integration; Effectiveness.  This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract.  This
Agreement and any separate letter agreements with respect to fees payable to
the Administrative Agent constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof.  Except as provided in Section 5.01,
this Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof which, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.  Delivery of an executed counterpart of a
signature page of this Agreement by telecopy shall be effective as
delivery of a manually executed counterpart of this Agreement.


 


Section 10.07.  Severability.  Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.


 


Section 10.08.  Right of Setoff.  If an Event of Default shall have occurred
and be continuing, each Lender and each of its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations at any time owing
by such Lender or Affiliate to or for the credit or the account of any Credit
Party against any of and all the obligations of such Credit Party now or
hereafter existing under this Agreement held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement and
although such obligations may be unmatured. 
The rights of each Lender under this Section are in addition to
other rights and remedies (including other rights of setoff) which such Lender
may have.


 


Section 10.09.  Governing Law; Jurisdiction; Consent to
Service of Process.  (a)  This
Agreement shall be construed in accordance with and governed by the law of the
State of New York (without giving regard to any conflict of laws principles
thereof).


 


(b)                                 Each party hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of the Supreme Court of the State of


 


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New York sitting in New York County and
of the United States District Court of the Southern District of New York, and
any appellate court from any thereof, in any action or proceeding arising out
of or relating to this Agreement, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law,
in such Federal court.  Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.  Nothing in this Agreement shall affect any
right that the Administrative Agent, or any Lender may otherwise have to bring
any action or proceeding relating to this Agreement against any Credit Party or
its properties in the courts of any jurisdiction.


 


(c)                                  Each party hereto hereby
irrevocably and unconditionally waives, to the fullest extent it may legally
and effectively do so, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Agreement in any court referred to in paragraph (b) of this
Section.  Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.


 


(d)                                 Each party to this Agreement
irrevocably consents to service of process in the manner provided for notices
in Section 10.01.  Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.


 


(e)                                  Each Borrower hereby irrevocably
designates, appoints and empowers the Service of Process Agent as its designee,
appointee and agent to receive, accept and acknowledge for and on its behalf,
and in respect of its property, service of any and all legal process, summons,
notices and documents which may be served in any action or proceeding arising
under or as a result of this Agreement or any other Credit Document.  If for any reason such designee, appointee
and agent shall cease to be available to act as such, each Borrower agrees to
designate a new designee, appointee and agent in New York City on the terms and
for the purposes of this provision reasonably satisfactory to the
Administrative Agent under this Agreement.


 


Section 10.10.  WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY).  EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT
IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.


 


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Section 10.11.  Headings.  Article and Section headings and
the Table of Contents used herein are for convenience of reference only, are
not part of this Agreement and shall not affect the construction of, or be
taken into consideration in interpreting, this Agreement.


 


Section 10.12.  Confidentiality.  Each of the Administrative Agent and each of
the Lenders agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its and
its Affiliates’ directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that (i) 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
in accordance with the terms of this Agreement and (ii) that the
Administrative Agent and each Lender shall be responsible for any breach of
this Section 10.12 by any of its and its Affiliates’ directors, officers,
employees and agents, including accountants, legal counsel and other advisors),
(b) to the extent requested by any regulatory authority or self-regulatory
body, (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (d) to any other party to this
Agreement, (e) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Agreement or the enforcement
of rights hereunder, (f) subject to an agreement containing provisions
substantially the same as those of this Section, to (i) any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement or (ii) any actual or
prospective counterparty (or its advisors) to any swap or derivative
transaction relating to any Credit Party and its obligations, (g) with the
consent of the Parent Borrower or (h) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section or (ii) becomes
available to the Administrative Agent or any Lender on a nonconfidential basis
from a source other than the Credit Parties. 
For the purposes of this Section, “Information” means all
information received from any Credit Party relating to the Parent Borrower or
any Subsidiary of the Parent Borrower or 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 any Credit Party.  Any Person required to maintain the
confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information or,
in the case of any Lender, such Lender has treated such Information in a manner
consistent with banking industry standards for the treatment of confidential
information.  Notwithstanding anything
herein to the contrary, each party to this Agreement (and any employee,
representative or other agent of each such party) may disclose to any and all
persons, without limitation of any kind, the U.S. federal income tax treatment
and the U.S. federal income tax structure of the transactions contemplated
hereby and all materials of any kind (including opinions or other tax analyses)
that are provided to it relating to such tax treatment and tax structure.  However, no disclosure of any information
relating to such tax treatment or tax structure may be made to the extent
nondisclosure is reasonably necessary in order to comply with applicable
securities laws.  The provisions of this Section 10.12
shall survive the termination of the Total Commitments and repayment of the
Loans and other Obligations hereunder.


 


Section 10.13.  Interest Rate Limitation.  Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together
with all fees, charges and other amounts which are treated as interest on such
Loan under applicable law (collectively


 


115





















 


the “Charges”), shall exceed the maximum lawful rate (the “Maximum
Rate”) which may be contracted for, charged, taken, received or reserved by
the Lender holding such Loan in accordance with applicable law, the rate of
interest payable in respect of such Loan hereunder, together with all Charges
payable in respect thereof, shall be limited to the Maximum Rate and, to the
extent lawful, the interest and Charges that would have been payable in respect
of such Loan but were not payable as a result of the operation of this Section shall
be cumulated and the interest and Charges payable to such Lender in respect of
other Loans or periods shall be increased (but not above the Maximum Rate
therefor) until such cumulated amount, together with interest thereon at the
Federal Funds Effective Rate to the date of repayment, shall have been received
by such Lender.


 


Section 10.14.  Judgment Currency.  (a)  Each Borrower’s obligations
hereunder and under the other Credit Documents to make payments in Dollars or
in the applicable Alternate Currency as provided for herein, (in any such case,
the “Obligation Currency”) shall not be discharged or satisfied by any
tender or recovery pursuant to any judgment expressed in or converted into any
currency other than the Obligation Currency, except to the extent that such
tender or recovery results in the effective receipt by the Administrative
Agent, the Issuing Agent, the respective Fronting Lender or the respective
Lender of the full amount of the Obligation Currency expressed to be payable to
the Administrative Agent, the Issuing Agent, such Fronting Lender or such
Lender under this Agreement or the other Credit Documents.  If, for the purpose of obtaining or enforcing
judgment against any Credit Party in any court or in any jurisdiction, it
becomes necessary to convert into or from any currency other than the
Obligation Currency (such other currency being hereinafter referred to as the “Judgment
Currency”) an amount due in the Obligation Currency, the conversion shall
be made based on the respective spot exchange rate as quoted by the
Administrative Agent as of 11:00 a.m. (London time) on the Business Day
immediately preceding the day on which the judgment is given (such Business Day
being hereinafter referred to as the “Judgment Currency Conversion Date”).


 


(b)                                 If there is a change in the rate of
exchange prevailing between the Judgment Currency Conversion Date and the date
of actual payment of the amount due, each Credit Party covenants and agrees to
pay, or cause to be paid, such additional amounts, if any (but in any event not
a lesser amount) as may be necessary to ensure that the amount paid in the
Judgment Currency, when converted at the rate of exchange prevailing on the
date of payment, will produce the amount of the Obligation Currency which could
have been purchased with the amount of Judgment Currency stipulated in the
judgment or judicial award at the rate of exchange prevailing on the Judgment
Currency Conversion Date.


 


(c)                                  For purposes of determining any rate of
exchange for this Section, such amounts shall include any premium and costs
payable in connection with the purchase of the Obligation Currency.


 


Section 10.15.  Calculations.  For purposes of this Agreement, the Dollar
Equivalent of each Alternate Currency Loan and the Dollar Equivalent of the
Stated Amount of each Alternate Currency Letter of Credit shall be calculated
on the date when any such Loan is made, such Letter of Credit is issued, on the
first Business Day of each month thereafter and, upon at least two Business
Days prior notice to the Borrowers, at such other times as reasonably
designated by the Administrative Agent. 
Such Dollar Equivalent shall remain in effect until the


 


116





















 


same is recalculated by the Administrative Agent as provided above and
notice of such recalculation is received by the Borrowers, it being understood
that until such notice of such recalculation is received, the Dollar Equivalent
shall be that Dollar Equivalent as last reported to the Borrowers by the
Administrative Agent.  The Administrative
Agent shall promptly notify the Borrowers and the Lenders of each such
determination of the Dollar Equivalent.


 


Section 10.16.  USA Patriot Act.  Each Lender hereby notifies each Borrower
that, pursuant to the requirements of the USA Patriot Act (Title III of Pub. L.
107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it
is required to obtain, verify and record information that identifies each
Borrower, which information includes the name and address of each Borrower and
other information that will allow such Lender to identify each Borrower in
accordance with the Patriot Act.


 


Section 10.17. Euro.
(a) If at any time that an Alternate Currency Loan or Alternate Currency
Letter of Credit denominated in Pounds Sterling is outstanding, the Pounds
Sterling is replaced as the lawful currency of the United Kingdom by the Euro
so that all payments are to be made in the United Kingdom in Euros and not in
Pounds Sterling, then such Alternate Currency Loan or Alternate Currency Letter
of Credit shall be automatically converted into an Alternate Currency Loan or
Alternate Currency Letter of Credit denominated in Euros in a principal amount
equal to the amount of Euros into which the principal amount of such Alternate
Currency Loan or Alternate Currency Letter of Credit would be converted
pursuant to the EMU Legislation and thereafter no further Alternate Currency
Loans or Alternate Currency Letters of Credit will be available in Pounds
Sterling, with the basis of accrual of interest, notice requirements and
payment offices with respect to such converted Alternate Currency Loan or
Alternate Currency Letter of Credit to be consistent with the convention and
practices in the Euro-zone interbank market for Euro denominated loans.


 


(b) In
each case, to the maximum extent permitted under applicable law, the applicable
Borrowers shall from time to time, at the request of any Lender, pay to such
lender the amount of any losses, damages, liabilities, claims, reduction in
yield, additional expense, increased cost, reduction in any amount payable,
reduction in the effective return of its capital, the decrease or delay in the
payment of interest or any other return foregone by such Lender or its
affiliates with respect to an Alternate Currency Loan or Alternate Currency
Letter of Credit affected by this Section 10.17 as a result of the tax or
currency exchange resulting from the introduction, changeover to or operation
of the Euro in any applicable nation or eurocurrency market.


 


ARTICLE XI


 


Intermediate
Holdings Guaranty


 


Section 11.01.  The Guaranty.  In order to induce the Lenders to enter into
this Agreement and to extend credit hereunder and in recognition of the direct
benefits to be received by Intermediate Holdings from the proceeds of the Loans
to be incurred by the Guaranteed Parties and the issuance of the Letters of
Credit for the account of the Guaranteed Parties, Intermediate Holdings hereby
agrees with the Guaranteed Creditors as follows:  Intermediate Holdings hereby unconditionally
and irrevocably guarantees, as primary obligor and not merely


 


117





















 


as surety, the full and prompt payment when due, whether upon maturity,
acceleration or otherwise, of any and all of the Guaranteed Obligations of each
Guaranteed Party to the Guaranteed Creditors. 
If any or all of the Guaranteed Obligations of any Guaranteed Party to
the Guaranteed Creditors becomes due and payable hereunder, Intermediate
Holdings unconditionally promises to pay such indebtedness to the Guaranteed
Creditors, or order, on demand, together with any and all expenses which may be
incurred by the Guaranteed Creditors in collecting any of the Guaranteed
Obligations.  This Intermediate Holdings
Guaranty is a guaranty of payment and not of collection.  If a claim is ever made upon any Guaranteed
Creditor for repayment or recovery of any amount or amounts received in payment
or on account of any of the Guaranteed Obligations and any of the aforesaid
payees repays all or part of said amount by reason of (i) any judgment,
decree or order of any court or administrative body having jurisdiction over
such payee or any of its property or (ii) any settlement or compromise of
any such claim effected by such payee with any such claimant, then and in such
event Intermediate Holdings agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon Intermediate Holdings,
notwithstanding any revocation of this Intermediate Holdings Guaranty or any
other instrument evidencing any liability of any Guaranteed Party, and
Intermediate Holdings shall be and remain liable to the aforesaid payees
hereunder for the amount so repaid or recovered to the same extent as if such
amount had never originally been received by any such payee.


 


Section 11.02.  Bankruptcy.  Additionally, Intermediate Holdings
unconditionally and irrevocably guarantees the payment of any and all of the
Guaranteed Obligations of each Guaranteed Party hereunder to the Guaranteed
Creditors whether or not due or payable by any Guaranteed Party upon the
occurrence of any of the events specified in Section 8.05 with respect to
such Guaranteed Party, and unconditionally promises to pay such indebtedness to
the Guaranteed Creditors, or order, on demand, in lawful money of the United
States.


 


Section 11.03.  Nature of Liability.  The liability of Intermediate Holdings
hereunder is exclusive and independent of any security for or other guaranty of
the Guaranteed Obligations of any Guaranteed Party whether executed by
Intermediate Holdings, any other guarantor or by any other party, and the
liability of Intermediate Holdings hereunder is not affected or impaired by (a) any
direction as to application of payment by each Guaranteed Party or by any other
party (other than a direction by the Guaranteed Creditor receiving such
payment), or (b) any other continuing or other guaranty, undertaking or
maximum liability of a guarantor or of any other party as to the Guaranteed
Obligations of each Guaranteed Party, or (c) any payment on or in
reduction of any such other guaranty or undertaking, or (d) any
dissolution, termination or increase, decrease or change in personnel by any
Guaranteed Party, or (e) any payment made to the Guaranteed Creditors on
the Guaranteed Obligations which any such Guaranteed Creditor repays to any
Guaranteed Party pursuant to court order in any bankruptcy, reorganization,
arrangement, moratorium or other debtor relief proceeding, and Intermediate Holdings
waives any right to the deferral or modification of its obligations hereunder
by reason of any such proceeding or (f) any action or inaction of the type
described in Section 11.05. 
Notwithstanding anything to the contrary contained herein, any guaranty
provided under this Agreement or any other Credit Document will continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any Guaranteed Obligation is rescinded or must otherwise be returned by the
Guaranteed Creditors upon the insolvency, bankruptcy or reorganization of any
Guaranteed Party or otherwise, all as though such payment had not been made.


 


118





















 


Section 11.04.  Independent Obligation.  The obligations of Intermediate Holdings
under this Article XI are independent of the obligations of any other
guarantor, any other party or any Guaranteed Party, and a separate action or
actions may be brought and prosecuted against Intermediate Holdings whether or
not action is brought against any other guarantor, any other party or any
Guaranteed Party and whether or not any other guarantor, any other party or any
Guaranteed Party be joined in any such action or actions.  Intermediate Holdings waives, to the full
extent permitted by law, the benefit of any statute of limitations affecting
its liability under this Article XI or the enforcement thereof.  Any payment by any Guaranteed Party or other
circumstance which operates to toll any statute of limitations as to any
Guaranteed Party shall operate to toll the statute of limitations as to
Intermediate Holdings.


 


Section 11.05.  Authorization.  The obligations of Intermediate Holdings
under this Article XI shall be unconditional and absolute and, without
limiting the generality of the foregoing, shall not be released, discharged or
otherwise affected by any action taken by any Guaranteed Creditor to:


 


(a)                                  change the manner, place or
terms of payment of, and/or change or extend the time of payment of, renew,
increase, accelerate or alter, any of the Guaranteed Obligations (including any
increase or decrease in the rate of interest thereon), any security therefor,
or any liability incurred directly or indirectly in respect thereof, and the
Guaranty herein made shall apply to the Guaranteed Obligations as so changed,
extended, renewed or altered;


 


(b)                                 take and hold security for the
payment of the Guaranteed Obligations and sell, exchange, release, impair,
surrender, realize upon or otherwise deal with in any manner and in any order
any property by whomsoever at any time pledged or mortgaged to secure, or
howsoever securing, the Guaranteed Obligations or any liabilities (including
any of those hereunder) incurred directly or indirectly in respect thereof or
hereof, and/or any offset there against;


 


(c)                                  exercise or refrain from
exercising any rights against any Guaranteed Party or others or otherwise act
or refrain from acting;


 


(d)                                 release or substitute any one or
more endorsers, guarantors, any Guaranteed Party or other obligors;


 


(e)                                  settle or compromise any of the
Guaranteed Obligations, any security therefor or any liability (including any
of those hereunder) incurred directly or indirectly in respect thereof or
hereof, and may subordinate the payment of all or any part thereof to the payment
of any liability (whether due or not) of any Guaranteed Party to its creditors
other than the Guaranteed Creditors;


 


(f)                                    apply any sums by whomsoever
paid or howsoever realized to any liability or liabilities of any Guaranteed
Party to the Guaranteed Creditors regardless of what liability or liabilities
of any Guaranteed Party remain unpaid;


 


(g)                                 consent to or waive any breach
of, or any act, omission or default under, this Agreement or any other Credit
Document or any of the instruments or agreements


 


119





















 


referred to herein or therein, or otherwise amend, modify or supplement
this Agreement, any other Credit Document or any of such other instruments or
agreements; and/or


 


(h)                                 take any other action which
would, under otherwise applicable principles of common law, give rise to a
legal or equitable discharge of Intermediate Holdings from its liabilities
under this Intermediate Holdings Guaranty.


 


Section 11.06.  Reliance.  It is not necessary for the Guaranteed
Creditors to inquire into the capacity or powers of any Guaranteed Party or the
officers, directors, partners or agents acting or purporting to act on their
behalf, and any Guaranteed Obligations made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.


 


Section 11.07.  Subordination.  Any indebtedness of any Guaranteed Party now
or hereafter owing to Intermediate Holdings is hereby subordinated to
Guaranteed Obligations of any Guaranteed Party owing to the Guaranteed
Creditors; and if the Administrative Agent so requests at a time when an Event
of Default exists, no Guaranteed Party shall make, or be permitted to make, any
payment to Intermediate Holdings in respect of such indebtedness owed to
Intermediate Holdings, but without affecting or impairing in any manner the
liability of Intermediate Holdings under the other provisions of this
Intermediate Holdings Guaranty.  Prior to
the transfer by Intermediate Holdings of any note or negotiable instrument
evidencing any of the indebtedness of any Guaranteed Party to Intermediate
Holdings, Intermediate Holdings shall mark such note or negotiable instrument
with a legend that the same is subject to this subordination.  Without limiting the generality of the foregoing,
Intermediate Holdings hereby agrees with the Guaranteed Creditors that it will
not exercise any right of subrogation which it may at any time otherwise have
as a result of this Intermediate Holdings Guaranty (whether contractual, under Section 509
of the Bankruptcy Code or otherwise) until all Guaranteed Obligations have been
irrevocably paid in full in cash.


 


Section 11.08.  Waiver.  (a)  Intermediate Holdings waives any
right (except as shall be required by applicable statute and cannot be waived)
to require any Guaranteed Creditor to (i) proceed against each Guaranteed
Party, any other guarantor or any other party, (ii) proceed against or
exhaust any security held from any Guaranteed Party, any other guarantor or any
other party or (iii) pursue any other remedy in any Guaranteed Creditor’s
power whatsoever.  Intermediate Holdings
waives any defense based on or arising out of any defense of any Guaranteed
Party, any other guarantor or any other party, other than payment in full of
the Guaranteed Obligations, based on or arising out of the disability of each
Guaranteed Party, any other guarantor or any other party, or the
unenforceability of the Guaranteed Obligations or any part thereof from any
cause, or the cessation from any cause of the liability of any Guaranteed Party
other than payment in full of the Guaranteed Obligations.  The Guaranteed Creditors may, at their
election, foreclose on any security held by the Administrative Agent or any
other Guaranteed Creditor by one or more judicial or nonjudicial sales, whether
or not every aspect of any such sale is commercially reasonable (to the extent
such sale is permitted by applicable law), or exercise any other right or
remedy the Guaranteed Creditors may have against any Guaranteed Party or any
other party, or any security, without affecting or impairing in any way the
liability of the Intermediate Holdings hereunder except to the extent the
Guaranteed Obligations have been paid. 
Intermediate Holdings waives any defense arising out of any such election
by the Guaranteed Creditors, even though such election operates to impair or
extinguish any right of


 


120





















 


reimbursement or subrogation or other right or remedy of Intermediate
Holdings against any Guaranteed Party or any other party or any security.


 


(b)                                 Intermediate Holdings waives all
presentments, demands for performance, protests and notices, including, without
limitation, notices of nonperformance, notices of protest, notices of dishonor,
notices of acceptance of this Intermediate Holdings Guaranty, and notices of
the existence, creation or incurring of new or additional Guaranteed
Obligations.  Intermediate Holdings
assumes all responsibility for being and keeping itself informed of each
Guaranteed Party’s financial condition and assets, and of all other
circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations
and the nature, scope and extent of the risks which Intermediate Holdings
assumes and incurs hereunder, and agrees that the Guaranteed Creditors shall
have no duty to advise the Intermediate Holdings of information known to them
regarding such circumstances or risks.


 


(c)                                  Intermediate Holdings warrants
and agrees that each of the waivers set forth above in this Article XI is made
with full knowledge of its significance and consequences, and such waivers
shall be effective to the maximum extent permitted by law.


 


*          *          *


 


121





















 


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


 


	
  Address:

  	
   

  	
   

  
	
  Wessex House, 4th floor

  	
   

  	
  ARCH CAPITAL GROUP LTD.

  
	
  45 Reid Street

  	
   

  	
   

  
	
  Hamilton, HM 12 Bermuda

  	
   

  	
   

  
	
  Attention: John D. Vollaro

  	
   

  	
  By:

  	
  /s/ John D. Vollaro

  	
   

  
	
  Telephone: (441) 278-9253

  	
   

  	
   

  	
  Title:

  	
  Executive Vice President &

  
	
  Facsimile: (441) 278-9255

  	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  c/o Arch Capital Services Inc.

  	
   

  	
  ARCH CAPITAL GROUP (U.S.) INC.

  
	
  360 Hamilton Avenue, Suite 600

  	
   

  	
   

  
	
  White Plains, New York 10601-2908

  	
   

  	
   

  
	
  Attention: President

  	
   

  	
  By:

  	
  /s/ Ramin Taraz

  	
   

  
	
  Telephone: (914) 872-3600

  	
   

  	
   

  	
  Title:

  	
  Vice President & Controller

  
	
  Facsimile: (914) 872-3660

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Wessex House

  	
   

  	
  ARCH REINSURANCE LTD.

  
	
  45 Reid Street, 3rd Floor

  	
   

  	
   

  
	
  Hamilton, HM 12 Bermuda

  	
   

  	
   

  
	
  Attn: Michelle Seymour

  	
   

  	
  By:

  	
  /s/ Michelle Seymour

  	
   

  
	
  Telephone: (441) 278-9250

  	
   

  	
   

  	
  Title:

  	
  Vice President, Controller

  
	
  Facsimile: (441) 278-9230

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  55 Madison Avenue,

  	
   

  	
  ARCH REINSURANCE COMPANY

  
	
  P.O. Box 1988

  	
   

  	
   

  
	
  Morristown, NJ 07962

  	
   

  	
   

  
	
  Attn: Barry Golub

  	
   

  	
  By:

  	
  /s/ Barry Golub

  	
   

  
	
  Telephone: (973) 889-6467

  	
   

  	
   

  	
  Title:

  	
  Controller

  
	
  Facsimile: (973) 898-9570

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  One Liberty Plaza

  	
   

  	
  ARCH INSURANCE COMPANY

  
	
  New York, NY 10006

  	
   

  	
   

  
	
  Attn: Ramin Taraz

  	
   

  	
   

  
	
  Telephone: (212) 651-6502

  	
   

  	
  By:

  	
  /s/ Ramin Taraz

  	
   

  
	
  Facsimile: (646) 746-8109

  	
   

  	
   

  	
  Title:

  	
  Vice President & Controller

  
	
   

  	
   

  	
   

  
	
  One Liberty Plaza

  	
   

  	
  WESTERN DIVERSIFIED CASUALTY

  
	
  New York, NY 10006

  	
   

  	
  INSURANCE COMPANY

  
	
  Attn: Ramin Taraz

  	
   

  	
   

  
	
  Telephone: (212) 651-6502

  	
   

  	
   

  
	
  Facsimile: (646) 746-8109

  	
   

  	
  By:

  	
  /s/ Ramin Taraz

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice President & Controller

  
						



 





















 


	
  One Liberty Plaza

  	
   

  	
  ARCH SPECIALTY INSURANCE COMPANY

  
	
  New York, NY 10006

  	
   

  	
   

  
	
  Attn: Ramin Taraz

  	
   

  	
   

  
	
  Telephone: (212) 651-6502

  	
   

  	
  By:

  	
  /s/ Ramin Taraz

  	
   

  
	
  Facsimile: (646) 746-8109

  	
   

  	
   

  	
  Title:

  	
  Vice President & Controller

  
	
   

  	
   

  	
   

  
	
  One Liberty Plaza

  	
   

  	
  ARCH EXCESS & SURPLUS INSURANCE

  
	
  New York, NY 10006

  	
   

  	
  COMPANY

  
	
  Attn: Ramin Taraz

  	
   

  	
   

  
	
  Telephone: (212) 651-6502

  	
   

  	
   

  
	
  Facsimile: (646) 746-8109

  	
   

  	
  By:

  	
  /s/ Ramin Taraz

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice President & Controller

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  JPMORGAN CHASE BANK, N.A., Individually

  
	
   

  	
   

  	
  and as Administrative Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Heather Lindstrom

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BANK OF AMERICA, N.A., Individually and as

  
	
   

  	
   

  	
  Syndication
  Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Timothy Cassidy

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  THE BANK OF NEW YORK, Individually and as

  
	
   

  	
   

  	
  Collateral
  Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Richard G. Shaw

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  WACHOVIA BANK N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Grainne M. Pengolini

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice President

  
						



 





















 


	
   

  	
   

  	
  ING BANK N.V., LONDON BRANCH

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Nick Marchant

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Mike Sharman

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  HSBC BANK USA, NATIONAL

  
	
   

  	
   

  	
  ASSOCIATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Daniel Serrao

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BARCLAYS BANK PLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Alastair Sinclair

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CITIBANK, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Michael A. Taylor

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CALYON

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Sebastian Rocco

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Charles Kornberger

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ROYAL BANK OF SCOTLAND PLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Maria Amaral-LeBlanc

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  
						



 





















 


	
   

  	
   

  	
  LLOYDS TSB BANK PLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jason Eperon

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Assistant Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Candi Obrentz

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Assistant Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  US BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Christine G. Dean

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Assistant Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CHANG HWA COMMERCIAL BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jim D. Y. Chen

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice President & General Manager

  
						



 





















 


Schedule 2.01


 


Schedule of
Commitments


 


	
  Lender Name

  	
   

  	
  Tranche 1

  Commitment

  	
   

  	
  Tranche 2

  Commitment

  	
   

  	
  Tranche 3

  Commitment

  	
   

  	
  Total

  	
   

  
	
  JPMorgan Chase Bank, N.A.

  	
   

  	
  $

  	
  52,215,189.87

  	
   

  	
  $

  	
  30,284,810.13

  	
   

  	
   

  	
   

  	
  $

  	
  82,500,000.00

  	
   

  
	
  Bank of America, N.A.

  	
   

  	
  $

  	
  52,215,189.87

  	
   

  	
  $

  	
  30,284,810.13

  	
   

  	
   

  	
   

  	
  $

  	
  82,500,000.00

  	
   

  
	
  Barclays Bank Plc

  	
   

  	
  $

  	
  44,303,797.47

  	
   

  	
  $

  	
  25,696,202.53

  	
   

  	
   

  	
   

  	
  $

  	
  70,000,000.00

  	
   

  
	
  The Bank of New York

  	
   

  	
  $

  	
  44,303,797.47

  	
   

  	
  $

  	
  25,696,202.53

  	
   

  	
   

  	
   

  	
  $

  	
  70,000,000.00

  	
   

  
	
  Wachovia Bank, N.A.

  	
   

  	
  $

  	
  44,303,797.47

  	
   

  	
  $

  	
  25,696,202.53

  	
   

  	
   

  	
   

  	
  $

  	
  70,000,000.00

  	
   

  
	
  Calyon

  	
   

  	
  $

  	
  44,303,797.47

  	
   

  	
  $

  	
  25,696,202.53

  	
   

  	
   

  	
   

  	
  $

  	
  70,000,000.00

  	
   

  
	
  Citibank, N.A.

  	
   

  	
  $

  	
  44,303,797.47

  	
   

  	
  $

  	
  25,696,202.53

  	
   

  	
   

  	
   

  	
  $

  	
  70,000,000.00

  	
   

  
	
  HSBC Bank USA,
  N.A.

  	
   

  	
  $

  	
  44,303,797.47

  	
   

  	
  $

  	
  25,696,202.53

  	
   

  	
   

  	
   

  	
  $

  	
  70,000,000.00

  	
   

  
	
  ING Bank N.V., London Branch

  	
   

  	
  $

  	
  44,303,797.47

  	
   

  	
  $

  	
  25,696,202.53

  	
   

  	
   

  	
   

  	
  $

  	
  70,000,000.00

  	
   

  
	
  Lloyds TSB Bank plc

  	
   

  	
  $

  	
  34,810,126.58

  	
   

  	
  $

  	
  20,189,873.42

  	
   

  	
   

  	
   

  	
  $

  	
  55,000,000.00

  	
   

  
	
  The Royal Bank of Scotland plc

  	
   

  	
  $

  	
  34,810,126.58

  	
   

  	
  $

  	
  20,189,873.42

  	
   

  	
   

  	
   

  	
  $

  	
  55,000,000.00

  	
   

  
	
  U.S. Bank National Association

  	
   

  	
  $

  	
  15,822,784.81

  	
   

  	
  $

  	
  9,177,215.19

  	
   

  	
   

  	
   

  	
  $

  	
  25,000,000.00

  	
   

  
	
  Chang Hwa Commercial Bank

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  10,000,000.00

  	
   

  	
  $

  	
  10,000,000.00

  	
   

  
	
  Total:

  	
   

  	
  $

  	
  500,000,000

  	
   

  	
  $

  	
  290,000,000

  	
   

  	
  $

  	
  10,000,000

  	
   

  	
  $

  	
  800,000,000