Document:

Exhibit 10.20

 

AMENDED AND RESTATED

CREDIT AGREEMENT

 

Dated as of September 22, 2004

 

Among

 

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY,

 

THE BANKS,

as defined herein,

 

and

 

U.S. BANK NATIONAL ASSOCIATION,

as a Bank and as Agent

 

 

execution copy

 

CREDIT AGREEMENT

 

THIS
CREDIT AGREEMENT, dated as  of September 22, 2004 is by and
between AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY, an Iowa corporation
(the “Borrower”), the banks or financial institutions listed on the signature
pages hereof or which hereafter become parties hereto as hereinafter provided
(individually referred to as a “Bank” or collectively as the “Banks”) and U.S.
BANK NATIONAL ASSOCIATION, a national banking association, as agent for the
Banks (together with its successors in such capacity, the “Agent”).

 

ARTICLE I  DEFINITIONS
AND ACCOUNTING TERMS

 

Section 1.1  Defined Terms.
In addition to the terms defined elsewhere in this Agreement, the following
terms shall have the following respective meanings (and such meanings shall be
equally applicable to both the singular and plural form of the terms defined,
as the context may require):

 

“Adjusted
Capital”: As to AEILIC, as of any date, the total amount shown on line 30,
page 27, column 1 of the Annual Statement of AEILIC, or an amount determined in
a consistent manner for any date other than one as of which an Annual Statement
is prepared.  Such amount is intended to
equal the “total adjusted capital” as defined in Iowa Code
Section 521E.1, or such other amount as is used to calculate risk-based
capital level of AEILIC from time to time.

 

“Advance”:
The portion of the outstanding Loans bearing interest at an identical rate for
an identical Interest Period, provided that all Prime Rate Advances shall be
deemed a single Advance. An Advance may be a “LIBOR Advance” or “Prime Rate
Advance” (each, a “type” of Advance).

 

“AEILIC”:
American Equity Investment Life Insurance Company, an Iowa insurance company.

 

“Affiliate”:
Any Person (other than a Subsidiary): (a) which directly or indirectly through
one or more intermediaries controls, or is controlled by, the Borrower; (b)
which beneficially owns or holds 5%  or more of the equity interest of
the Borrower; or (c) 5%  or more of the equity interest of
which is beneficially owned or held by the Borrower or a Subsidiary. The term “control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.

 

“Agent”:
U.S. Bank National Association as agent for the Banks hereunder and each
successor, as provided in Section 12.7, who shall act as Agent.

 

“Agent’s
Fee Letter” means the letter agreement, dated as of September 22, 2004 (as
thereafter amended, modified, renewed or replaced from time to time) between
the Agent and the Borrower pertaining to certain fees.

 

“Agreement”:
This Credit Agreement, as it may be amended, modified, supplemented, restated
or replaced from time to time.

 

2

 

“A.M.
Best”: A.M. Best & Company.

 

“Amounts
Available for Dividends”: For any fiscal year of AEILIC, the maximum amount
of dividends AEILIC is permitted to pay for such fiscal year under the
Applicable Insurance Code of its state of domicile without necessitating
approval of the Insurance Regulatory Authority.

 

“Annual
Statement”: As to any Insurance Subsidiary, the annual financial statements
of such Insurance Subsidiary as required to be filed with the applicable
Insurance Regulatory Authority, together with all exhibits and schedules filed
therewith, prepared in conformity with SAP. References to amounts on particular
exhibits, schedules, lines, pages and columns of the Annual Statement are based
on the format promulgated by the NAIC for 2003 Life, Accident and Health
Insurance Company Annual Statements. If such format is changed in future years
so that different information is contained in such items or they no longer
exist, it is understood that the reference is to information consistent with
that reported in the referenced item in the 2003 Annual Statement of the
Insurance Subsidiary.

 

“Applicable
Insurance Code”: As to any Insurance Subsidiary, the insurance code of any
state where such Insurance Subsidiary is domiciled or doing insurance business
and any successor statute of similar import, together with the regulations
thereunder, as amended or otherwise modified and in effect from time to time.
References to sections of the Applicable Insurance Code shall be construed to also
refer to successor sections.

 

“Borrower
Pledge Agreement”: The Pledge Agreement dated as of September 22, 2004, in
the form of Exhibit B hereto, between the Borrower and the Agent for the
benefit of the Agent and the Banks, as the same may be amended, supplemented
restated or otherwise modified in writing from time to time by the Borrower and
the Agent.

 

“Business
Day”:  Any day (other than a
Saturday, Sunday or legal holiday in the State of Minnesota) on which national
banks are permitted to be open in Minneapolis, Minnesota and New York, New York
and, with respect to LIBOR Advances, a day on which dealings in Dollars may be
carried on by the Agent in the interbank eurodollar market.

 

“Capitalized
Lease Liabilities”: With respect to any Person, all monetary obligations of
such Person under any leasing or similar arrangement which, in accordance with
GAAP, would be classified as a capitalized lease, and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount thereof,
determined in accordance with GAAP, and the stated maturity thereof shall be
the date of the last payment of rent or any other amount due under such lease
prior to the first date upon which such lease may be terminated by the lessee
without payment of a penalty.

 

“Cash
Coverage Ratio”: The ratio, determined on a consolidated basis for the
Borrower and its Subsidiaries at the end of each fiscal quarter for the period
of four consecutive fiscal quarters then ending of:

 

(a)  the total
of the following: (i) Amounts Available for Dividends as of (A) the last day of
the most recently completed fiscal year, if the determination of Cash Coverage
Ratio is 

 

3

 

being made at the end of any of the first three fiscal
quarters of a fiscal year, or (B) the first day of the following fiscal year,
if the determination of Cash Coverage Ratio is being made at the end of the
fourth quarter of a fiscal year; plus (ii) interest paid on the Surplus
Notes; plus (iii) revenues of the Borrower under the Investment Advisory
Agreement (between the Borrower and AEILIC); plus (iv) investments
income of the Borrower (non-consolidated), excluding investments in
Subsidiaries; minus (v) cash operating expenses of the Borrower; and minus
(vi) all Restricted Payments made by the Borrower during the current fiscal
year;

 

to

 

(b)  Fixed
Charges for such period.

 

“Change
of Control”: A Change of Control shall be deemed to have occurred at such
times as: (a) the Borrower ceases to own, free and clear of all Liens other
than the Lien of the Agent pursuant to the Loan Documents, 100% of the
outstanding shares of voting stock of AEILIC; (b) any Person or two or more
Persons acting in concert who shall, as of the date of this Agreement, have
owned 10% or less of the outstanding shares of voting stock of the Borrower
shall directly or indirectly have acquired beneficial ownership (within the
meaning of said Rule 13d-3) of 30% or more of the outstanding shares of voting
stock of the Borrower, or (c) individuals who as of the date of this Agreement
constitute the Borrower’s Board of Directors (together with any new director
whose election or appointment was approved by at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved), for any reason, cease to constitute a majority of the directors at
any time then in office.

 

“Code”:
The Internal Revenue Code of 1986, as amended, or any successor statute,
together with regulations thereunder.

 

“Collections”:  Any payment received by the Agent in respect
of the Obligations or any reduction in the amount of Obligations, whether by
voluntary payment, by realization upon collateral (including payment of any
note or security included thereunder), through the exercise of any right of
set-off, banker’s lien or similar right, by counterclaim or cross action or by
the enforcement of any other right under the Loan Documents, or under any other
guaranties or security agreements or otherwise, or as a distribution, adequate
protection payment or similar amount received in respect of any collateral for
the Obligations or otherwise in any insolvency case or proceeding involving the
Borrower, any guarantor, third-party pledgor or obligee under any collateral.

 

“Commitment
Fees”:  As such term is defined in Section
3.2.

 

“Company
Action Level”:  AEILIC’s “company-action-level
risk-based capital” as calculated under Iowa Code Section 521E,
and the equivalent amount for any other Insurance Subsidiary, as calculated
under the laws or regulations of Insurance Regulatory Authorities applicable to
such other Insurance Subsidiaries.

 

4

 

“Compliance
Certificate”:  A certificate in the
form of Exhibit C, duly completed and signed by an authorized officer of
the Borrower.

 

“Consolidated
Total Indebtedness”:  As of any time
of determination, the amount reported by the Borrower as total indebtedness of
the Borrower and its Subsidiaries on its most recently-filed Consolidated
Statements of Operations as filed with the SEC in its Form 10Q or 10K, minus
the principal amount of Trust Preferred Indebtedness, to the extent that such
Trust Preferred Indebtedness is included in such total indebtedness.

 

“Consolidated
Net Worth”:  As of any time of
determination, the amount reported by the Borrower as the consolidated
stockholders’ equity of the Borrower and its Subsidiaries on its most
recently-filed Consolidated Statements of Operations as filed with the SEC in
its Form 10Q or 10K, excluding unrealized net losses and gains on assets held
for sale pursuant to Statement of Financial Accounting Standards No. 115, plus,
if not otherwise included therein, the principal amount of Trust Preferred
Indebtedness.

 

“Consolidated
Total Capitalization”:  As of any
time of determination, the sum of Consolidated Total Indebtedness plus
Consolidated Net Worth.

 

“Contingent
Obligation”: Any agreement, undertaking or arrangement by which any Person
guarantees, endorses or otherwise becomes or is contingently liable upon (by
direct or indirect agreement, contingent or otherwise, to provide funds for
payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise
to assure a creditor against loss) the debt, obligation or other liability of
any other Person (other than by endorsements of instruments in the course of
collection), or guarantees the payment of dividends or other distributions upon
the shares of any other Person; provided, that the Borrower’s
assumption of the trade debt of its Subsidiaries and obligations of the
Borrower or the Insurance Subsidiaries under Reinsurance Agreements and Surplus
Relief Reinsurance Agreements shall not be deemed Contingent Obligations of the
Borrower or the Insurance Subsidiaries. The amount of any Person’s liability
with respect to any Contingent Obligation shall (subject to any limitation set
forth therein) be deemed to be the outstanding principal amount (or maximum
outstanding principal amount, if larger) of the debt, obligation or other
liability outstanding thereunder.

 

“Default”:
Any event which, with the giving of notice to the Borrower or lapse of time, or
both, would constitute an Event of Default.

 

“ERISA”:
The Employee Retirement Income Security Act of 1974, as amended, and any
successor statute, together with regulations thereunder.

 

“ERISA
Affiliate”: Any trade or business (whether or not incorporated) that is a
member of a group of which the Borrower is a member and which is treated as a
single employer under Section 414 of the Code.

 

“Event
of Default”: Any event described in Section 10.1.

 

“Federal
Reserve Board”: The Board of Governors of the Federal Reserve System or an
successor thereto.

 

5

 

“Fixed
Charges”: With respect to any period of calculation, the total of the
following for the Borrower and its Subsidiaries: (i) interest paid or, without
duplication, accrued but unpaid on the Loans and all other Indebtedness,
including without limitation the Trust Preferred Indebtedness and any
Subordinated Notes Payable (other than Indebtedness in respect of Repurchase
Transactions), plus (ii) one fifth (1/5)  of the
amount of the Revolving Loans outstanding on the last day of such period, or
after the Termination Date (if the Revolving Loans are converted into Tranche A
Loans) the mandatory principal payments of the Tranche A Loans) plus (iii) the
mandatory principal payments of the Tranche B Loans.

 

“GAAP”:
Generally accepted accounting principles as applied in the preparation of the
audited financial statements of the Borrower referred to in Section 7.5,
provided that changes in generally accepted accounting principles shall
be given effect for purposes of this Agreement as provided in Section 1.2.

 

“Hedging
Obligations”: With respect to any Person, all liabilities of such Person
under interest rate swap agreements, total return swap agreements, interest
rate cap agreements, interest rate collar agreements and other agreements
designed to protect the such Person against fluctuations in interest rates or
currency exchange rates.

 

“Indebtedness”:
With respect to any Person at any date, all obligations, contingent or
otherwise, which in accordance with GAAP should be classified upon such Person’s
balance sheet as liabilities, but in any event including the following (whether
or not they should be classified as liabilities upon such balance sheet),
without duplication: (a) all obligations of such Person for borrowed money or
in respect of loans or advances; (b) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments; (c) all obligations
in respect of letters of credit, whether or not drawn, and bankers’ acceptances
issued for the account of such Person; (d) all Capitalized Lease Liabilities of
such Person; (e) all Hedging Obligations of such Person; (f) all obligations of
such Person secured by a contractual Lien; (g) whether or not so included as
liabilities in accordance with GAAP, all obligations of such Person to pay the
deferred purchase price of property or services, and Indebtedness secured by a
Lien on property owned or being purchased by such Person (including
Indebtedness arising under conditional sales or other title retention
agreements) whether or not such Indebtedness shall have been assumed by such
Person or is limited in recourse; (h) any Indebtedness of another Person
secured by a lien on any assets of such first Person, whether or not such
Indebtedness is assumed by such first Person; (i) any Indebtedness of a
partnership in which such Person is a general partner; and (j) all Contingent
Obligations of such Person whether or not in connection with the foregoing.

 

“Insurance
Regulatory Authority”: With respect to any Insurance Subsidiary, each
governmental or regulatory agency with which such Insurance Subsidiary is
required to file its Annual Statement or which exercises regulatory authority
over the primary businesses being conducted by such Insurance Subsidiary.

 

“Insurance
Subsidiaries”: AEILIC and all other Subsidiaries which at the time of
reference are regulated as insurance companies under the laws of any state of
the United States of America or of the District of Columbia.

 

6

 

“Interest
Period” For any LIBOR Advance, the period commencing on the borrowing date
of such LIBOR Advance or the date a Prime Rate Advance is converted into such
LIBOR Advance, or the last day of the preceding Interest Period for such LIBOR
Advance, as the case may be, and ending on the numerically corresponding day
one, two, three or six months thereafter, as selected by the Borrower pursuant
to Section 2.3;  provided, that:

 

(a)  any
Interest Period which would otherwise end on a day which is not a Business Day
shall end on the next succeeding Business Day unless such next succeeding
Business Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Business Day;

 

(b)  any
Interest Period which begins on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last Business Day of
the calendar month at the end of such Interest Period; and

 

(c)  Interest
Periods shall not be chosen for Advances that would require payment of any
amount of any Advance prior to the last day of the Interest Period in order to
pay an installment of the Loans when due.

 

“Investment
Advisory Agreement”:  Each agreement
between the Borrower and an Insurance Subsidiary under which the Borrower will
act as investment advisor for such Insurance Subsidiary in consideration of
fees paid by the Insurance Subsidiary thereunder.

 

“Investment”:  The acquisition, purchase, making or holding
of any stock or other security, any loan, advance, contribution to capital,
extension of credit (except for trade and customer accounts receivable for
inventory sold or services rendered in the ordinary course of business and
payable in accordance with customary trade terms), any acquisitions of real or
personal property (other than real and personal property acquired in the
ordinary course of business) and any purchase or commitment or option to
purchase stock or other debt or equity Securities of or any interest in another
Person or any integral part of any business or the assets comprising such
business or part thereof.

 

“Leverage
Ratio”: As of the last day of any fiscal quarter of the Borrower, that
ratio (expressed as a percentage) of:

 

(a)  Consolidated Total Indebtedness of the
Borrower and its Subsidiaries;

 

to

 

(b)  Consolidated Total Capitalization of the
Borrower and its Subsidiaries.

 

“LIBOR
Advance”: An Advance designated as such in a notice of continuation or
conversion under Section 2.3.

 

“LIBOR
Interbank Rate”:  The offered rate
for deposits in United States Dollars for delivery of such deposits on the
first day of an Interest Period of a LIBOR Advance, for the number of days
comprised therein, quoted by the Agent from Page 3750 of the Telerate Service 

 

7

 

as of approximately 11:00 a.m.,
London time, on the day that is two Banking Days preceding the first day of the
Interest Period of such LIBOR Advance, or the rate for such deposits determined
by the Agent at such time based on such other published service of general
application as shall be selected by the Agent for such purpose; provided, that
in lieu of determining the rate in the foregoing manner, the Agent may
determine the rate based on rates offered to the Agent for deposits in United
States Dollars in the interbank Eurodollar market at such time for delivery on
the first day of the Interest Period for the number of days comprised therein.

 

“LIBOR
Rate (Reserve Adjusted)”:  A rate per
annum calculated for the Interest Period of a LIBOR Advance in accordance with
the following formula:

 

	
  LRRA

  	
  =

  	
  LIBOR Interbank Rate

  
	
   

  	
   

  	
  1.00 - LRR

  

 

In
such formula, “LRR” means “LIBOR Reserve Rate” and “LRRA” means “LIBOR Rate
(Reserve Adjusted)”, in each instance determined by the Agent for the
applicable Interest Period.  The Agent’s
determination of all such rates for any Interest Period shall be conclusive in
the absence of manifest error.

 

“LIBOR
Reserve Rate”:  A percentage equal to
the daily average during such Interest Period of the aggregate maximum reserve
requirements (including all basic, supplemental, marginal and other reserves),
as specified under Regulation D of the Federal Reserve Board, or any other
applicable regulation that prescribes reserve requirements applicable to
Eurocurrency liabilities (as presently defined in Regulation D) or applicable
to extensions of credit by the Agent the rate of interest on which is
determined with regard to rates applicable to Eurocurrency liabilities.  Without limiting the generality of the
foregoing, the Eurocurrency Reserve Rate shall reflect any reserves required to
be maintained by the Agent against (i) any category of liabilities that
includes deposits by reference to which the LIBOR Interbank Rate is to be
determined, or (ii) any category of extensions of credit or other assets that
includes LIBOR Advances.

 

“Licenses”:
As such term is defined in Section 7.18.

 

“Lien”:
Any security interest, mortgage, pledge, lien, hypothecation, judgment lien or
similar legal process, charge, encumbrance, title retention agreement or
analogous instrument or device (including, without limitation, the interest of
the lessors under capitalized leases and the interest of a vendor under any
conditional sale or other title retention agreement).

 

“Loan
Documents”: Collectively, this Agreement, the Notes, the Borrower Pledge
Agreement, the Agent’s Fee Letter and any and all other documents or
instruments furnished or required to be furnished in connection with any of the
foregoing, as the same may be amended or modified in accordance with this
Agreement.

 

“Loan”
and “Loans”:  The Revolving
Loans, the Tranche A Loans and the Tranche B Loans.

 

“Material
Adverse Change” or “Material Adverse Effect”: Any change, event,
action, condition or effect which individually or in the aggregate (a) impairs
the validity or 

 

8

 

enforceability of this
Agreement, any other Loan Document, or (b) materially and adversely affects the
business, operations, financial prospects or condition of the Borrower or
AEILIC on an unconsolidated basis, or (c) materially impairs the ability of the
Borrower and its Subsidiaries to perform their respective Obligations under
this Agreement or any of the other Loan Documents, or (d) materially and
adversely affects the perfection or priority of any Lien granted under any of
the Loan Documents.

 

“NAIC”:
National Association of Insurance Commissioners, or any successor organization.

 

“Notes”:  The Revolving Notes, Tranche A Notes and the
Tranche B Notes.

 

“Obligations”:
All obligations of the Borrower and/or any of its Subsidiaries to the Banks or
the Agent, howsoever created, arising or evidenced, whether direct or indirect,
joint or several, absolute or contingent, or now or hereafter existing, or due
or to become due, which arise under, out of or in connection with this
Agreement, the Notes or the other Loan Documents.

 

“Payment
Date”:  The final maturity date of
each of the Loans, plus (a) the last day of each Interest Period for each LIBOR
Advance and, if such Interest Period is in excess of three months after the
first day of such Interest Period, thereafter each day three months after each
succeeding Payment Date; and (b) the last day of each month for each Prime Rate
Advance.

 

“PBGC”:
The Pension Benefit Guaranty Corporation, established pursuant to Subtitle A of
Title IV of ERISA, and any successor thereto or to the functions thereof.

 

“Person”:
Any natural person, corporation, partnership, joint venture, firm, association,
trust, unincorporated organization, government or governmental agency or
political subdivision or any other entity, whether acting in an individual,
fiduciary or other capacity.

 

“Plan”:
An employee benefit plan or other plan, maintained for employees of the
Borrower or of any ERISA Affiliate, and subject to Title IV of ERISA or Section
412 of the Code.

 

“Prime
Rate”:  The rate of interest from
time to time announced by the Agent as its “prime rate.”  For purposes of determining any interest rate
which is based on the Prime Rate, such interest rate shall be adjusted each
time that the prime rate changes.

 

“Prime
Rate Advance”: An Advance designated as such in a notice of continuation or
conversion under Section 2.3.

 

“Reinsurance
Agreements”: Any agreement, contract, treaty, certificate or other
arrangement (other than a Surplus Relief Reinsurance Agreement) by which any of
the Insurance Subsidiaries agrees to transfer or cede to another insurer all or
part of the liability assumed or assets held by any one of the Insurance
Subsidiaries under a policy or policies of insurance or under a reinsurance
agreement assumed by any one of the Insurance Subsidiaries. Reinsurance
Agreements shall include, but not be limited to, any agreement, contract,
treaty, certificate or other arrangement (other than a Surplus Relief
Reinsurance Agreement) which is treated as such by the applicable Insurance
Regulatory Authority.

 

9

 

“Reportable
Event”: A reportable event as defined in Section 4043 of ERISA and the
-regulations issued under such Section, with respect to a Plan, excluding,
however, such events as to which the PBGC by regulation has waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided that a failure to meet the minimum
funding standard of Section 412 of the Code and Section 302 of ERISA shall be a
reportable event regardless of the issuance of any such waivers in accordance
with Section 4 12(d) of the Code.

 

“Repurchase
Transactions”: Repurchase agreements entered into by the Borrower, as “Seller,”
providing for the sale of certain securities to an investment banking firm, as “Buyer,”
subject to repurchase obligations of the Borrower, the total amount of which
Repurchase Transactions outstanding at any time shall be related to the total
amount of new annuities that the Borrower anticipates will be sold by AEILIC
during the time such Repurchase Transactions are outstanding.

 

“Required
Banks”:  Those Banks whose Total
Percentages equal or exceed 75%, provided,
that if there are two or three Banks, the Required Banks shall include not less
than two of such Banks.

 

“Restricted
Payments”:  Payment by the Borrower
or setting aside of funds to make payments (a) in respect of its stock as
dividends, purchases, redemptions or retirements thereof or other payments
described in Section 9.5(a) or (b), and (b) of interest and
principal of the Trust Preferred Indebtedness and any Subordinated Notes
Payable (payment of which is governed by Section 9.5 hereof) or any
defeasance, retirement, redemption, call or other payment or acquisition
thereof.

 

“Risk-Based
Capital”:  The ratio of Adjusted
Capital of AEILIC to the Company Action Level of AEILIC, expressed as a
percentage, as such formula is determined by the Iowa Insurance Division.

 

“Revolving
Commitments”:  The maximum unpaid
principal amount of the Revolving Loans of all Banks which may from time to
time be outstanding hereunder, being initially as set forth on Schedule 1.1
hereto, as the same may be reduced from time to time pursuant to Section 4.3,
or, if so indicated, the maximum unpaid principal amount of Loans of any Bank
(which amounts are set forth on the signature pages hereof or in the relevant
Assignment and Assumption Agreement for such Bank) and, as the context may
require, the agreement of each Bank to make Revolving Loans to the Borrower
subject to the terms and conditions of this Agreement up to its Revolving
Commitment.

 

“Revolving
Loans”:  The Loans described in Section
2.1(a).

 

“Revolving
Notes”:  The promissory notes of the
Borrower described in Section 2.4(a), substantially in the form of Exhibit
A-1, as such promissory notes may be amended, modified or supplemented from
time to time, and such term shall include any substitutions for, or renewals
of, such promissory notes.

 

10

 

“Revolving
Percentage”:  As to any Bank the
proportion, expressed as a percentage, that such Bank’s Revolving Commitment
bears to the aggregate Revolving Commitments of all Banks, as set forth on Schedule
1.1 hereto.

 

“Revolving
Termination Date” means the earliest of (a) September 22, 2007, (b) the
date designated by the Borrower as the Revolving Termination Date by written
notice to the Agent given not later than five (5) Business Days prior to such
designated Revolving Termination Date, (c) the date on which the Revolving
Commitments are terminated pursuant to Section 10.2 hereof, or (d) the
date on which the Revolving Commitments are reduced to zero pursuant to Section
4.3 hereof.

 

“SAP”:  As to any insurance company, the statutory
accounting practices prescribed or permitted by the Insurance Regulatory
Authority.

 

“Standard
& Poor’s”: Standard & Poor’s Rating Group and any successor
thereto.

 

“Subordinated
Notes Payable”:  All notes or
debentures payable by the Borrower that are subordinated to the Obligations in
accordance with the terms of the documents governing such notes or debentures, excluding,
however, notes or debentures issued in respect of the Trust Preferred
Indebtedness.

 

“Subsidiary”:
Any Person of which or in which the Borrower and its other Subsidiaries own
directly or indirectly 50% or more of: (a) the combined voting power of all
classes of stock having general voting power under ordinary circumstances to
elect a majority of the board of directors of such Person, if it is a
corporation, (b) the capital interest or profit interest of such Person, if it
is a partnership, limited liability company, joint venture or similar entity,
or (c) the beneficial interest of such Person, if it is a trust, association or
other unincorporated organization.

 

“Surplus
Note”: Any surplus note or debenture issued at any time by AEILIC to the
Borrower, as such surplus note or debenture may be amended or modified in
accordance with this Agreement and approved by the Insurance Regulatory
Authority.

 

“Surplus
Relief Reinsurance Agreements”: Any agreement whereby any of the Insurance
Subsidiaries assumes or cedes business under a reinsurance agreement that would
be considered a “financing-type” reinsurance agreement as determined in
accordance with the Statement of Financial Accounting Standards 113 or any
successor thereto.

 

“Total
Percentage”: As to any Bank the proportion, expressed as a percentage, that
(a) the sum of such Bank’s Revolving Commitments until the Revolving
Termination Date (whether used or unused) plus such Bank’s outstanding
Tranche A Loans and Tranche B Loans, bears to (b) the sum of the
aggregate Revolving Commitments of all Banks plus the outstanding Tranche A
Loans and Tranche B Loans of all Banks.

 

“Tranche
A Loans”:  The loans described in Section
2.1(b).

 

“Tranche
A Notes”:  The promissory notes
defined and described in Section 2.4(b) Substantially in the form of Exhibit
A-2, as such promissory notes may be amended, modified or 

 

11

 

supplemented from time to time,
and such term shall include any substitutions for, or renewals of, such
promissory notes.

 

“Tranche
A Percentage”: As to any Tranche A Bank the proportion, expressed as a
percentage, that such Tranche A Bank’s outstanding Tranche A Loans bears to the
outstanding Tranche A Loans of all Tranche A Banks, as initially shown on Schedule
1.1 hereto.

 

“Tranche
B Banks”:  The Banks funding the
Tranche B Loans, as designated on Schedule 1.1 attached hereto.

 

“Tranche
B Loans”:  The loans described in Section
2.1(c).

 

“Tranche
B LIBOR Margins”:  Is defined in Section
3.1(a).

 

“Tranche
B Notes”:  The promissory notes
defined and described in Section 2.4(c) substantially in the form of Exhibits
A-3, A-4 and A-5, as such promissory notes may be amended,
modified or supplemented from time to time, and such term shall include any
substitutions for, or renewals of, such promissory notes.

 

“Tranche
B Percentage”: As to any Tranche B Bank the proportion, expressed as a
percentage, that such Tranche B Bank’s outstanding Tranche B Loans bears to the
outstanding Tranche B Loans of all Tranche B Banks, as initially shown on Schedule
1.1 hereto.

 

“Trust
Preferred Indebtedness”: 
Indebtedness of the Borrower under the following subordinated notes or
debentures:

 

(a)  The 8% Convertible Junior Subordinated
Debentures issued by the Borrower in the aggregate amount of $26,773,237 in
exchange for the proceeds received by American Equity Capital Trust I, a
statutory trust created under the laws of the State of Delaware (“Trust I”)
upon issuance of preferred securities and common securities by Trust I;

 

(b)
 The 5% Convertible Junior Subordinated
Debentures issued by the Borrower in the nominal amount of $100,000,000 in
exchange for the proceeds received by American Equity Capital Trust II, a
statutory trust created under the laws of the State of Delaware (“Trust II”)
upon issuance of preferred securities and common securities by Trust II;

 

(c)  Subordinated Debentures issued by the
Borrower in the nominal amount of $12,400,000 in exchange for the proceeds
received by American Equity Capital Trust IV, a statutory trust created under
the laws of the State of Delaware (“Trust IV”) upon issuance of preferred
securities and common securities by Trust IV;

 

(d)  Such other subordinated notes or debentures
that may hereafter be issued by the Borrower payable to a trust in connection
with issuance by such trust of preferred or common securities, provided that
the terms of such notes or debentures (including tenors and subordination
provisions) are accepted by written approval of the Required Banks.

 

12

 

Section
1.2  Accounting Terms and Calculations.  Except as may be expressly provided to the
contrary herein, all accounting terms used herein shall be interpreted and all
accounting determinations hereunder (including, without limitation,
determination of compliance with financial ratios and restrictions in Articles
VIII and IX hereof) shall be made in accordance with GAAP, of if so
provided, SAP, consistently applied.  Any
reference to “consolidated” financial terms shall be deemed to refer to those
financial terms as applied to the Borrower and its Subsidiaries in accordance
with GAAP.  Notwithstanding the
foregoing, further changes in accounting principles and policies (whether GAAP
or SAP or both) may be given effect for purposes of this Agreement provided
that:

 

(a)
 if any such changes shall affect
computations determining compliance with the financial ratios and restrictions Articles
VIII and IX hereof, the Borrower shall give reasonable notice
thereof to the Agent and each of the Banks, and shall not give effect to such
change unless and until this Agreement shall be amended to give effect to such
change, and

 

(b)  if at any time the computations determining
compliance with financial ratios and restrictions in Articles VIII and IX
hereof utilize accounting principles different from those utilized in the
financial statements then being furnished to the Banks pursuant to Section
8.1, such financial statements shall be accompanied by reconciliation
work-sheets.

 

Section
1.3  Computation of Time Periods.
In this Agreement, in the computation of a period of time from a specified date
to a later specified date, unless otherwise stated the word “from” means “from
and including” and the word “to” or “until” each means “to but excluding.”

 

Section
1.4  Other Definitional Terms. The
words “hereof’, “herein” and “hereunder” and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. References to Sections, Exhibits,
schedules and like references are to this Agreement unless otherwise expressly
provided.

 

ARTICLE II  TERMS OF
LENDING

 

Section
2.1  The Loans.

 

(a)
 Revolving Loans.  Subject to the terms and conditions hereof
and in reliance upon the warranties of the Borrower herein, each Bank agrees,
severally and not jointly to make loans (the “Revolving Loans”) to the Borrower
from time to time from the date hereof until the Revolving Termination Date,
during which period the Borrower may repay and reborrow in accordance with the
provisions hereof, provided, that the aggregate unpaid principal amount of the
Revolving Loans of any Bank at any one time outstanding shall not exceed its
Revolving Commitment.  The Revolving
Loans shall be made by the Banks on a pro rata basis, calculated for each Bank
based on its Revolving Percentage.

 

(b)  Tranche A Loans.  Subject to the terms and conditions hereof
and in reliance upon the warranties of the Borrower herein (including
satisfaction of the conditions set forth in Section 6.2 hereof, as if the
making of the Tranche A Loans is a new Loan hereunder), each 

 

13

 

Bank
agrees, severally and not jointly to make loans (the “Tranche A Loans”) to the
Borrower on the Revolving Termination Date in such amount as the Borrower shall
request, but not exceeding the Revolving Commitment of such Bank immediately
prior to the Revolving Termination Date; the proceeds of the Tranche A Loans
being applied to the extent necessary to the concurrent payment in full of the
aggregate principal amount of the Revolving Loans outstanding on the Revolving
Termination Date.

 

(c)  Tranche B Loans.  Subject to the terms and conditions hereof
and in reliance upon the warranties of the Borrower herein, each Tranche B Bank
agrees, severally and not jointly to make loans (the “Tranche B Loans”) to the
Borrower (which shall constitute a refinancing of certain loans outstanding
under prior credit agreements between the Tranche B Bank and the Borrower or
Affiliates) in the amounts set forth on Schedule 1.1 hereto.  The Tranche B Loan evidenced by the Tranche B
Note in the form of Exhibit A-3 hereof shall refinance an existing loan
made under a prior Credit Agreement and shall be deemed funded on the date of
this Agreement.  The Tranche B Loans
evidenced by the Tranche B Notes in the form of Exhibits A-4 and A-5
will be funded upon assumption by the Borrower of certain assets and
indebtedness formerly held by and owed by American Equity Investment Service
Company, and will be funded on or before December 31, 2004 (after which date
the Tranche B Banks shall have no obligation to fund such Tranche B Loans).

 

Section
2.2  Advance Options. The Loans
shall be constituted of LIBOR Advances and Prime Rate Advances, as shall be
selected by the Borrower, except as otherwise provided herein. Any combination
of types of Advances may be outstanding at the same time. Each LIBOR Advance
shall be in a minimum amount of $500,000. Each Prime Rate Advance shall be in a
minimum amount of $100,000.

 

Section
2.3  Borrowing Procedures and
Continuation or Conversion of Loans.

 

(a)  The Borrower may elect to (i) borrow a
Revolving Loan, (ii) continue any outstanding LIBOR Advance from one Interest
Period into a subsequent Interest Period to begin on the last day of the
earlier Interest Period, or (iii) convert any outstanding Advance into another
type of Advance (on the last day of an Interest Period only, in the instance of
a LIBOR Advance), by giving the Agent notice in writing, or by telephone
promptly confirmed in writing, given so as to be received by the Agent not
later than:

 

(i)  12:00 noon,
Minneapolis time, on the Business Day of the requested borrowing, continuation
or conversion, if the continuing or converted Advance shall be a Prime Rate
Advance; or

 

(ii)  12:00 noon,
Minneapolis time, three Business days prior to the date of the requested
borrowing, continuation or conversion, if the continuing or converted Advance
shall be a LIBOR Advance.

 

Each
notice of continuation or conversion of an Advance shall specify (i) the
effective date of the borrowing, continuation or conversion date (which shall
be a Business Day), (ii) the amount and the type or types of Advances following
such continuation or conversion (subject to the limitation on amount set forth
in Section 2.2), and (iii) for 

 

14

 

borrowing
or continuation as, or conversion into, LIBOR Advances, the Interest Periods
for such Advances.  Absent timely notice
of continuation or conversion, following expiration of an Interest Period
unless the LIBOR Advance is paid in full the Agent may at any time thereafter
convert the LIBOR Advance into a Prime Rate Advance.  Until such time as such Advance is converted
into a Prime Rate Advance by the Agent or the Borrower or is continued as a
LIBOR Advance with a new Interest Period by notice by the Borrower as provided
above, such Advance shall continue to accrue interest at a rate equal to the
interest rate applicable during the expired Interest Period.  No Advance shall be continued as, or
converted into, a LIBOR Advance if a Default or Event of Default shall exist.

 

(b)  Funding of Agent.  For new borrowings, the Agent shall promptly
notify each other Bank of the receipt of such request, the matters specified
therein, and of such Bank’s Revolving Percentage, Tranche A Percentage or
Tranche B Percentage (as applicable) of the requested Loans.  On the date of the requested Loans, each Bank
shall provide its share of the requested Loans to the Agent in immediately
available funds not later than 2:00 p.m., Minneapolis time.  Unless the Agent determines that any
applicable condition specified in Article VI has not been satisfied, the
Agent will make the requested Loans available to the Borrower at the Agent’s
principal office in Minneapolis, Minnesota in immediately available funds not
later than 5:00 p.m. (Minneapolis time) on the lending date so requested.  If the Agent has made a Loan to the Borrower
on behalf of a Bank but has not received the amount of such Loan from such Bank
by the time herein required, such Bank shall pay interest to the Agent on the
amount so advanced at the overnight Federal Funds rate from the date of such
Loan to the date funds are received by the Agent from such Bank, such interest
to be payable with such remittance from such Bank of the principal amount of
such Loan (provided, however, that the Agent shall not make any Loan on behalf
of a Bank if the Agent has received prior notice from such Bank that it will
not make such Loan).  If the Agent does
not receive payment from such Bank by the next Business Day after the date of
any Loan, the Agent shall be entitled to recover such Loan, with interest
thereon at the rate then applicable to the such Loan, on demand, from the
Borrower, without prejudice to the Agent’s and the Borrower’s rights against
such Bank.  If such Bank pays the Agent
the amount herein required with interest at the overnight rate before the Agent
has recovered from the Borrower, such Bank shall be entitled to the interest payable
by the Borrower with respect to the Loan in question accruing from the date the
Agent made such Loan.

 

(c)  Notification of Advances, Interest Rates,
Prepayments and Revolving Commitment Reductions.  In addition to new borrowings, the Agent will
promptly notify each Bank of the contents of each Revolving Commitment
reduction notice, conversion or continuation notice and repayment or prepayment
notice received by it hereunder.  The
Agent will notify each Bank of the interest rate applicable to each LIBOR
Advance promptly upon determination of such interest rate and will (if there
are Prime Rate Advances outstanding) give each Bank prompt notice of each
change in the Prime Rate.

 

15

 

Section
2.4  The Notes.  The Loans shall be evidenced by the following
Notes:

 

(a)
 Revolving Note.  The Revolving Loans of each Bank shall be
evidenced by a promissory note of the Borrower (the “Revolving Notes”),
substantially in the form of Exhibit A-1 hereto duly completed, in the
amount of such Bank’s Revolving Commitment originally in effect and dated as of
the date of this Agreement.  The Banks
shall enter in their respective records the amount of each Revolving Loan and
each Advance, the rate of interest borne by each Advance and the payments made
on the Revolving Loans, and such records shall be deemed conclusive evidence of
the subject matter thereof, absent manifest error.

 

(b)  Tranche A Loans.  The Tranche A Loans of each Bank shall be
evidenced by a promissory note of the Borrower (the “Tranche A Notes”),
substantially in the form of Exhibit A-2 hereto duly completed, in the
amount of such Bank’s Tranche A Loan, when made.  The Banks shall enter in their respective
records each Advance, the rate of interest borne by each Advance and the payments
made on the Tranche A Loans, and such records shall be deemed conclusive
evidence of the subject matter thereof, absent manifest error.

 

(c)  Tranche B Loans.  The Tranche B Loans of each Tranche B Bank
shall be evidenced by promissory notes of the Borrower (the “Tranche B Notes”),
substantially in the form of Exhibits A-3, A-4 and A-5
hereto duly completed, in the amount of such Tranche B Bank’s Tranche B Loans,
when made.  The Tranche B Banks shall
enter in their respective records each Advance, the rate of interest borne by
each Advance and the payments made on the Tranche B Loans, and such records
shall be deemed conclusive evidence of the subject matter thereof, absent
manifest error.

 

Section
2.5  Funding Losses.  In the event of (a) any failure of the
Borrower to borrow, continue or convert a LIBOR Advance on a date specified in
a notice thereof, or (b) any payment (including, without limitation, any
payment pursuant to Section 4.2, 4.3 or 10.2), prepayment
or conversion of any LIBOR Advance on a date other than the last day of the
Interest Period for such Advance, the Borrower agrees to pay each Bank’s costs,
expenses and Interest Differential (as determined by such Bank) incurred as a
result of such event.  The term “Interest
Differential” shall mean that amount (not less than $0) of the financial loss
incurred by each Bank resulting from such event, calculated as the difference
between the amount of interest such Bank would have earned (from like
investments in the Money Markets as of the first day of the Interest Period of
the relevant Advance) had such event not occurred and the interest the Bank
will actually earn (from like investments in the Money Markets as of the date
of such event) as a result of the redeployment of funds from such event.  Because of the short-term nature of this
facility, the Borrower agrees that the Interest Differential shall not be
discounted to its present value.  The
term “Money Markets” refers to one or more wholesale funding markets available
to the Banks, including negotiable certificates of deposit, commercial paper,
LIBOR deposits, bank notes, federal funds and others.  Such determinations by each Bank of shall be
conclusive in the absence of manifest error.

 

16

 

ARTICLE III  INTEREST
AND FEES

 

Section 3.1  Interest.

 

(a)  LIBOR
Advances. The unpaid principal amount of each LIBOR Advance shall bear
interest prior to maturity at a rate per annum equal to the LIBOR Rate (Reserve
Adjusted) in effect for each Interest Period for such LIBOR Advance plus
(i) 1.75% per annum, in the instance of the Revolving Loans and the Tranche A
Loans, or (ii) the interest rate margins (the “Tranche B LIBOR Margins”) as set
forth on each of the Tranche B Notes for the principal outstanding under such
Tranche B Notes.

 

(b)  Prime
Rate Advances. The unpaid principal amount of each Prime Rate Advance shall
bear interest prior to maturity at a rate per annum equal to the Prime Rate per
annum.

 

(c)  Interest
After Maturity. Any amount of the Loans not paid when due, whether at the
date scheduled therefor or earlier upon acceleration, shall bear interest until
paid in full at a rate per annum equal to the greater of (i) 2.00% in excess of
the rate applicable to the unpaid principal amount immediately before it became
due, or (ii) 2.00% in excess of the Prime Rate in effect from time to time.

 

Section
3.2  Commitment Fee.  The Borrower shall pay fees (the “Commitment
Fees”) to the Agent for the account of the Banks in an amount determined by
applying a rate of 0.25% per annum to the average daily unused amount of the
Revolving Commitments of the respective Banks for the period from the date
hereof to the Revolving Termination Date.

 

Section
3.3  Computation.  Interest and Commitment Fees shall be computed
on the basis of actual days elapsed and a year of 360 days.

 

Section 3.4  Agent’s Fee Letter.  The Borrower agrees to pay the Agent the
amounts described in the Agent’s Fee Letter.

 

Section
3.5  Payment Dates. Accrued
interest under Sections 3.1(a) and (b) shall be payable on the
Payment Dates for the applicable types of Advances.  Accrued interest under Section 3.1(c)
shall be payable on demand.  Accrued
unpaid Commitment Fees shall be payable on the last day of March, June,
September and December of each year. 
Fees under Section 3.2 shall be payable as provided in the Agent’s
Fee Letter.

 

ARTICLE IV  PAYMENTS,
PREPAYMENTS, REDUCTION 

OR TERMINATION OF THE CREDIT AND SETOFF

 

Section 4.1  Repayment.  The principal amount of the Loans shall be
paid as follows:

 

(a)  Revolving Loans.  Principal of the Revolving Loans of each Bank
shall be payable in full on the Revolving Termination Date (whether or not the
Tranche A Loans shall be made on the Revolving Termination Date, but applying
the proceeds of any Tranche A Loans to payment of the Revolving Loans.

 

17

 

(b)  Tranche A Loans.  Principal of the Tranche A Loans of each Bank
shall be payable in eight (8) quarterly installments, each in the amount of one
eighth (1/8th) of the amount of the Tranche A Loan of such Bank when made,
commencing on the date three (3) months after the Revolving Termination Date,
and continuing at intervals of three (3) months thereafter, with the final such
payment to equal all outstanding principal of the Tranche A Loans of each Bank.

 

(c)  Tranche B Loans.  Principal of the Tranche B Loans of each
Tranche B Bank shall be payable in installments, as described on Schedule I
attached to each of the Tranche B Notes.

 

Section
4.2  Prepayments.

 

Section
4.2  Optional Prepayments.  The Borrower may prepay the Loans, in whole
or in part, at any time subject to the provisions of Section 2.5 without
any other premium or penalty.  Each
partial prepayment shall be in an amount of $100,000 or an integral multiple
thereof.  Any prepayment of a Eurodollar
Advance shall be in an amount equal to the remaining entire principal balance
of such Advance.  Each prepayment of the
Tranche A Loans or the Tranche B Loans shall be applied to the unpaid installments
of the Tranche A Loans or the Tranche B Loans in the inverse order of their
maturities.

 

Section
4.3  Optional Reduction or Termination
of Revolving Commitment.  The
Borrower may, at any time, upon no less than three (3) Business Days prior
written or telephonic notice received by the Agent, reduce the Revolving
Commitments of all Banks, such reduction to be in a minimum amount of
$1,000,000 or an integral multiple thereof and to be applied ratably to the
Revolving Commitments of the respective Banks. 
Upon any reduction in the Revolving Commitments pursuant to this
Section, the Borrower shall pay to the Agent for the account of the Banks the
amount, if any, by which the aggregate unpaid principal amount of outstanding
Revolving Loans exceeds the total Revolving Commitments of all Banks as so
reduced.  Amounts so paid cannot be
reborrowed.  The Borrower may, at any
time, upon not less than three (3) Business Days prior written notice to the
Agent, terminate the Revolving Commitments in their entirety.  Upon termination of the Revolving Commitments
pursuant to this Section, the Borrower shall pay to the Agent for the account
of the Banks the full amount of all outstanding Revolving Loans, all accrued
and unpaid interest thereon, all unpaid Commitment Fees accrued to the date of
such termination and all other unpaid obligations of the Borrower to the Banks
hereunder.  All payment described in this
Section is subject to the provisions of Section 2.5.  The initial amount of the Tranche A Loan
shall not exceed the amount of the Revolving Commitment as reduced (or
terminated) hereunder.

 

Section 4.4  Payments.
Payments and prepayments of principal of, and interest on, the Notes and all
fees, expenses and other Obligations under the Loan Documents shall be made
without set-off or counterclaim in immediately available funds not later than
2:00 p.m., Minneapolis time, on the dates due at the main office of the Agent
in Minneapolis, Minnesota. Funds received on any day after such time shall be
deemed to have been received on the next Business Day.  The Agent shall promptly distribute in like
funds to each Bank its respective Revolving Percentage, Tranche A Percentage or
Tranche B Percentage share of each such payment of principal and interest and
its Revolving Percentage of Commitment Fees. 
Following 

 

18

 

an Event of Default and
acceleration of the Obligations, allocation of any payments to the Revolving
Loans, Tranche A Loans and Tranche B Loans shall be made as provided in Section
10.4, and the Agent shall distribute to each Bank its respective Revolving
Percentage, Tranche A Percentage or Tranche B Percentage (as applicable) share
of each payment applied to the Revolving Loans, Tranche A Loan or Tranche B
Loans as provided therein Subject to the definition of the term “Interest
Period”, whenever any payment to be made hereunder or on the Notes shall be
stated to be due on a day which is not a Business Day, such payment shall be
made on the next succeeding Business Day and such extension of time shall be
included in the computation of any interest or fees.

 

Section 4.5  Proration of
Payments.  If any Bank or other
holder of a Loan shall obtain any payment or other recovery (whether voluntary,
involuntary, by application of offset, pursuant to the guaranty hereunder, or
otherwise) on account of principal of, interest on, or fees with respect to any
Loan, in any case in excess of the share of payments and other recoveries of
other Banks or holders, such Bank or other holder shall purchase from the other
Banks or holders, in a manner to be specified by the Agent. such participations
in the Loans held by such other Banks or holders as shall be necessary to cause
such purchasing Bank or other holder to share the excess payment or other
recovery ratably with each of such other Banks or holders; provided, however,
that if all or any portion of the excess payment or other recovery is
thereafter recovered from such purchasing Bank or holder, the purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest.  Notwithstanding the
foregoing, prior to occurrence of an Event of Default, payments of the
Revolving Loans, Tranche A Loans and Tranche B Loans, as designated by the
Borrower or otherwise determined by the Agent, shall be applied to the
respective Loans and remitted by the Agent to the Banks holding the respective
Loans.  Following an Event of Default and
acceleration of the Obligations, the recoveries applied to the Revolving Loans,
Tranche A Loans and Tranche B Loans shall be determined under Section 10.4.

 

Section
4.6  Debit of Account for Interest and
Fees.  The Agent is authorized to
charge a demand deposit account maintained by the Borrower at the Agent (the
account number to be agreed from time to time between the Agent and the
Borrower) with the amount of any interest payment, Commitment Fees and other
fees hereunder when due.  The Borrower
shall remain liable to the Banks for such payment in the event such account
does not contain a sufficient amount to cover such required payment.  The Borrower agrees to execute any additional
authorizations which may be required at any time by the Agent in order to
effectuate the making of such payment.

 

ARTICLE V  ADDITIONAL
PROVISIONS RELATING TO LOANS

 

Section 5.1  Increased Costs.
If, as a result of any law, rule, regulation, treaty or directive, or any
change therein or in the interpretation or administration thereof, or
compliance by the Banks with any request or directive (whether or not having
the force of law) from any court, central bank. governmental authority, agency
or instrumentality, or comparable agency:

 

(a)  any tax,
duty or other charge with respect to any Loan, the Notes or the Commitments is
imposed, modified or deemed applicable, or the basis of taxation of 

 

19

 

payments to any Bank of interest or principal of the
Loans or of the Commitment Fees (other than taxes imposed on the overall net
income of such Bank by the jurisdiction in which such Bank has its principal
office) is changed;

 

(b)  any
reserve, special deposit, special assessment or similar requirement against
assets of, deposits with or for the account of, or credit extended by, any Bank
is imposed, modified or deemed applicable;

 

(c)  any
increase in the amount of capital required or expected to be maintained by any
Bank or any Person controlling such Bank is imposed, modified or deemed
applicable; or

 

(d)  any other
condition affecting this Agreement or the Commitments is imposed on any Bank or
the relevant funding markets;

 

and
such Bank determines that, by reason thereof, the cost to such Bank of making
or maintaining the Loans or extending the Commitments is increased, or the
amount of any sum receivable by such Bank hereunder or under the Notes in
respect of any Loan is reduced;

 

then, the Borrower shall pay to such Bank upon
demand such additional amount or amounts as will compensate such Bank (or the
controlling Person in the instance of (c) above) for such additional costs or
reduction (provided that the Banks have not been compensated for such
additional cost or reduction in the calculation of the LIBOR Reserve Rate).
Determinations by each Bank for purposes of this Section 5.1 of the
additional amounts required to compensate such Bank shall be conclusive in the
absence of manifest error. In determining such amounts, the Banks may use any
reasonable averaging. attribution and allocation methods.

 

Section 5.2  Deposits
Unavailable or Interest Rate Unascertainable or Inadequate: Impracticability.
If the Agent determines (which determination shall be conclusive and binding on
the parties hereto) that:

 

(a)  deposits of
the necessary amount for the relevant Interest Period for any LIBOR Advance are
not available in the relevant markets or that, by reason of circumstances
affecting such market, adequate and reasonable means do not exist for
ascertaining the LIBOR Interbank Rate for such Interest Period;

 

(b)  the LIBOR
Rate (Reserve Adjusted) will not adequately and fairly reflect the cost to the
Banks of making or funding the LIBOR Advance for a relevant Interest Period; or

 

(c)  the making
or funding of LIBOR Advances has become impracticable as a result of any event
occurring after the date of this Agreement which, in the opinion of the Agent,
materially and adversely affects such Advances or the Banks’ Commitments to
make such Advances or the relevant market;

 

the
Agent shall promptly give notice of such determination to the Borrower, and (i)
any notice of a new LIBOR Advance previously given by the Borrower and not yet
borrowed or converted shall be deemed to be a notice to make a Prime Rate
Advance, and (ii) the Borrower shall be obligated to either prepay in full any
outstanding LIBOR Advances, without premium or penalty 

 

20

 

on
the last day of the current Interest Period with respect thereto or convert any
such LIBOR Advance to a Prime Rate Advance on such last day.

 

Section
5.3  Changes in Law Rendering LIBOR Advances
Unlawful. If at any time due to the adoption of any law, rule, regulation,
treaty or directive, or any change therein or in the interpretation or
administration thereof by any court, central bank, governmental authority,
agency or instrumentality, or comparable agency charged with the interpretation
or administration thereof, or for any other reason arising subsequent to the
date of this Agreement, it shall become unlawful or impossible for any Bank to
make or fund any LIBOR Advance, the obligation of such Bank to provide such
Advance shall, upon the happening of such event, forthwith be suspended for the
duration of such illegality or impossibility. If any such event shall make it
unlawful or impossible for any Bank to continue any LIBOR Advance previously
made by it hereunder, such Bank shall, upon the happening of such event, notify
the Agent and the Borrower thereof in writing, and the Borrower shall, at the
time notified by such Bank, either convert each such unlawful Advance to a
Prime Rate Advance or repay such Advance in full, together with accrued
interest thereon, subject to the provisions of Section 2.5.

 

Section 5.4  Discretion of the
Banks as to Manner of Funding. Notwithstanding any provision of this
Agreement to the contrary, each Bank shall be entitled to fund and maintain its
funding of all or any part of the Loans in any manner it elects; it being
understood, however, that for purposes of this Agreement, all determinations
hereunder shall be made as if the Banks had actually funded and maintained each
LIBOR Advance during the Interest Period for such Advance through the purchase
of deposits having a term corresponding to such Interest Period and bearing an
interest rate equal to the LIBOR Interbank Rate for such Interest Period (whether
or not any Bank shall have granted any participations in such Advances).

 

ARTICLE VI  CONDITIONS
PRECEDENT

 

Section
6.1  Conditions of Initial Loan.  The obligation of the Banks to make the
initial Loan hereunder shall be subject to the satisfaction of the conditions
precedent, in addition to the applicable conditions precedent set forth in Section
6.2 below, that the Agent shall have received all of the following, in form
and substance satisfactory to the Agent, each duly executed and certified or
dated as of the date of this Agreement or such other date as is satisfactory to
the Agent:

 

(a)  This
Agreement and the Notes .

 

(b)  The
Borrower Pledge Agreement, together with delivery of certificates evidencing
all stock pledged thereunder, together with stock powers in blank, and all
Surplus Notes pledged thereunder, together with bond powers in blank.

 

(c)  Copies of
the corporate resolutions of the Borrower authorizing the execution, delivery
and performance of the Loan Documents to which it is a party, certified duly
authorized officers thereof.

 

21

 

(d)  Incumbency
certificates showing the names and titles, and bearing the signatures of, the
officers of the Borrower authorized to execute the Loan Documents to which it
is a party, certified by duly authorized officers thereof.

 

(e)  Copies of
the Articles or Certificates of Incorporation and By-Laws of the Borrower with
all amendments thereto, certified by duly authorized officers thereof.

 

(f) 
Certificates of Good Standing for the Borrower in the jurisdictions of
its incorporation, certified by the appropriate governmental officials.

 

(g)  A
Certificate of Good Standing for AEILIC from the appropriate Insurance
Regulatory Authority.

 

(h)  An opinion
of the Borrower’s general counsel, addressed to the Agent and the Banks, in
substantially the form of Exhibit D.

 

(i)  The Agent’s
Fee Letter, and payment of the fees provided therein and in Section 12.4.

 

(j)
 UCC, tax and judgment lien searches with
respect to the Borrower and its Subsidiaries.

 

Section
6.2  Conditions Precedent to all Loans.  The obligation of the Banks to make any Loan
hereunder (including the initial Loan, and treating any conversion of the
Revolving Loans into Tranche A Loans) shall be subject to the satisfaction of
the following conditions precedent (and any request for a Loan shall be deemed
a representation by the Borrower that the following are satisfied):

 

(a)  Before and after giving effect to such Loan,
the representation and warranties contained in Article VII shall be true
and correct, as though made on the date of such Loan.

 

(b)  Before and after giving effect to such Loan,
no Default or Event of Default shall have occurred and be continuing.

 

ARTICLE VII 
REPRESENTATIONS AND WARRANTIES

 

To
induce the Agent and the Banks to enter into this Agreement and to make or
continue the Loans hereunder, the Borrower represents and warrants to the Agent
and the Banks:

 

Section 7.1  Organization,
Standing. Etc. The Borrower and each of its corporate Subsidiaries are
corporations duly incorporated and validly existing and in good standing under
the laws of the jurisdiction of their respective incorporation and have all
requisite corporate power and authority to carry on their respective businesses
as now conducted, to (in the instance of the Borrower) enter into the Loan
Documents to which it is a party and to pay and perform its Obligations under
such Loan Documents. The Borrower and each of its Subsidiaries are duly
qualified and in good standing as a foreign corporation in each jurisdiction in
which the character 

 

22

 

of the properties owned, leased
or operated by it or the business conducted by it makes such qualification
necessary.

 

Section
7.2  Authorization and Validity.
The execution, delivery and performance by the Borrower of the Loan Documents
to which it is a party have been duly authorized by all necessary corporate
action by the Borrower, and such Loan Documents constitute the legal, valid and
binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms, subject to limitations as to
enforceability which might result from bankruptcy, insolvency, moratorium and
other similar laws affecting creditors’ rights generally and subject to
limitations on the availability of equitable remedies.

 

Section
7.3  No Conflict: No Default. The
execution, delivery and performance by the Borrower of the Loan Documents to
which it is a party will not (a) violate any provision of any law, statute,
rule or regulation or any order, writ, judgment, injunction, decree,
determination or award of any court, governmental agency or arbitrator
presently in effect having applicability to the Borrower, (b) violate or
contravene any provisions of the Articles (or Certificate) of Incorporation or
by-laws of the Borrower, or (c) result in a breach of or constitute a default
under any indenture, loan or credit agreement or any other agreement, lease or
instrument to which the Borrower is a party or by which it or any of its
properties may be bound or result in the creation of any Lien on any asset of
the Borrower or any Subsidiary.  Neither
the Borrower nor any Subsidiary is in default under or in violation of any such
law, statute, rule or regulation, order, writ, judgment, injunction, decree,
determination or award or any such indenture, loan or credit agreement or other
agreement, lease or instrument in any case in which the consequences of such
default or violation could constitute a Material Adverse Change.  No Default or Event of Default has occurred
and is continuing.

 

Section
7.4  Government Consent. No order,
consent, approval, license, authorization or validation of, or filing,
recording or registration with, or exemption by, any governmental or public
body or authority is required on the part of the Borrower to authorize, or is
required in connection with the execution, delivery and performance of, or the
legality, validity, binding effect or enforceability of, the Loan Documents.

 

Section
7.5  Financial Statements and
Condition.

 

(a)  The Borrower’s audited consolidated and
consolidating financial statements as at December 31, 2003 and its unaudited
consolidated and consolidating financial statements as at June 30, 2004, as heretofore
furnished to the Banks, have been prepared in accordance with GAAP on a
consistent basis and fairly present the financial condition of the Borrower and
its Subsidiaries as at such dates and the results of their operations and
changes in financial position for the respective periods then ended.  As of the dates of such financial statements,
neither the Borrower nor any Subsidiary had any material obligation, contingent
liability, liability for taxes or long-term lease obligation which is not reflected
in such financial statements or in the notes thereto.  Since June 30, 2004, no Material Adverse
Change has occurred.

 

(a) AEILIC’s
statutory annual statement as at December 31, 2003 and its quarterly statement
as at June 30, 2004, as heretofore furnished to the Banks, have been prepared
in accordance 

 

23

 

with SAP on a
consistent basis and fairly present the financial condition of AEILIC as at
such dates and the results of its operations and changes in financial position
for the respective periods then ended. 
Since June 30, 2004, no Material Adverse Change in respect of AEILIC has
occurred.

 

Section
7.6  Litigation and Contingent
Liabilities. There are no actions, suits or proceedings pending or, to the knowledge
of the Borrower, threatened against or affecting the Borrower or any Subsidiary
or any of their properties before any court or arbitrator, or any governmental
department, board, agency or other instrumentality which singly or in the
aggregate, if determined adversely to the Borrower or such Subsidiary, could
constitute a Material Adverse Change. Neither the Borrower nor any Subsidiary
has any contingent liabilities which are material to the Borrower and the
Subsidiaries as a consolidated enterprise.

 

Section
7.7  Compliance with Laws. Neither
the Borrower nor any Subsidiary is in violation of any law, ordinance, rule,
regulation, order, policy, guideline or other requirement of any governmental
agency or authority, if the effect of such violation could reasonably be
expected to have a Material Adverse Effect and, to the best of the Borrower’s
knowledge, no such violation has been alleged and the Borrower and each
Subsidiary (a) has filed in a timely manner all reports, documents and other
materials required to be filed by it with any governmental agency or authority,
if such failure to so file could reasonably be expected to have a Material
Adverse Effect; and the information contained in each of such filings is true,
correct and complete in all material respects and (b) has retained all records
and documents required to be retained by it pursuant to any law, ordinance,
rule, regulation, order, policy, guideline or other requirement of any
governmental agency or authority, if the failure to so retain such records and
documents could reasonably be expected to have a Material Adverse Effect.

 

Section
7.8  Environmental. Health and Safety
Laws. There does not exist any violation by the Borrower or any Subsidiary
of any applicable federal, state or local law, rule or regulation or order of
any government, governmental department, board, agency or other instrumentality
relating to -environmental, pollution, health or safety matters which will or
threatens to impose a material liability on the Borrower or a Subsidiary or
which would require a material expenditure by the Borrower or such Subsidiary
to cure. Neither the Borrower nor any Subsidiary has received any notice to the
effect that any part of its operations or properties is not in material
compliance with any such law, rule, regulation or order or notice that it or
its property is the subject of any governmental investigation evaluating
whether any remedial action is needed to respond to any release of any toxic or
hazardous waste or substance into the environment, the consequences of which
noncompliance or remedial action could constitute a Material Adverse Change.

 

Section
7.9  ERISA. Each Plan complies
with all material applicable requirements of ERISA and the Code and with all
material applicable rulings and regulations issued under the provisions of
ERISA and the Code setting forth those requirements. No Reportable Event, other
than a Reportable Event for which the reporting requirements have been waived
by regulations of the PBGC, has occurred and is continuing with respect to any
Plan. All of the minimum funding standards applicable to such Plans have been
satisfied and there exists no event or condition which would permit the
institution of proceedings to terminate any Plan under Section 

 

24

 

4042 of ERISA. The current
value of the Plans’ benefits guaranteed under Title IV or ERISA does not exceed
the current value of the Plans’ assets allocable to such benefits.

 

Section
7.10  Regulation U. The Borrower
is not engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) and no part of the proceeds of any
Loan will be used to purchase or carry margin stock or for any other purpose
which would violate any of the margin requirements of the Board of Governors of
the Federal Reserve System.

 

Section
7.11  Ownership of Property: Liens.
Each of the Borrower and the Subsidiaries has good and marketable title to its
real properties and good and sufficient title to its other properties.
including all properties and assets referred to as owned by the Borrower and
its Subsidiaries in the audited financial statements of the Borrower referred
to in Section 7.5 (other than property disposed of since the date of
such financial statements in the ordinary course of business). None of the
properties. revenues or assets of the Borrower or any of its Subsidiaries is
subject to a Lien, except for (a) Liens disclosed in the financial statements
referred to in Section 7.5 or (b) Liens allowed under Section 9.2.

 

Section
7.12  Taxes. Each of the Borrower
and the Subsidiaries has filed all federal, state and local tax returns
required to be filed and has paid or made provision for the payment of all
taxes due and payable pursuant to such returns and pursuant to any assessments
made against it or any of its property and all other taxes, fees and other
charges imposed on it or any of its property by any governmental authority
(other than taxes, fees or charges the amount or validity of which is currently
being contested in good faith by appropriate proceedings and with respect to
which reserves in accordance with GAAP have been provided on the books of the
Borrower). No tax Liens have been filed and no material claims are being
asserted with respect to any such taxes, fees or charges. The charges, accruals
and reserves on the books of the Borrower in respect of taxes and other
governmental charges are adequate.

 

Section
7.13  Trademarks, Patents. Each of
the Borrower and the Subsidiaries possesses or has the right to use all of the
patents, trademarks, trade names, service marks and copyrights, and
applications therefor, and all technology, know-how, processes, methods and
designs used in or necessary for the conduct of its business, without known
conflict with the rights of others.

 

Section
7.14  Investment Company Act.
Neither the Borrower nor any Subsidiary 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
7.15  Public Utility Holding Company
Act. Neither the Borrower nor any Subsidiary 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
7.16  Subsidiaries.  Schedule 7.16 sets forth as of the date of
this Agreement a list of all Subsidiaries and the number and percentage of the
shares of each class of capital stock owned beneficially or of record by the
Borrower or any Subsidiary therein, and the jurisdiction of incorporation of
each Subsidiary.

 

25

 

Section
7.17  Partnerships and Joint Ventures.  As of the date of this Agreement, there are
no partnerships or joint ventures in which the Borrower or any Subsidiary is a
partner (limited or general) or joint venturer.

 

Section
7.18  Insurance Licenses.  Schedule 7.18 lists all of the
jurisdictions in which each of the Insurance Subsidiaries hold licenses
(including, without limitation, licenses or certificates of authority from
applicable insurance departments), permits or authorizations to transact insurance
and reinsurance business (collectively, the “Licenses”). Except as set forth on
Schedule 7.18, no such License is the subject of a proceeding for
suspension or revocation or any similar proceedings, there is no sustainable
basis for such a suspension or revocation, and, to the best of the Borrower’s
knowledge, no such suspension or revocation is threatened by any Insurance
Regulatory Authority which, in either case, could reasonably be expected to
have a Material Adverse Effect.  Schedule
7.18 indicates that line or lines of insurance which the Insurance
Subsidiaries are permitted to be engaged in with respect to each License
therein listed. The Insurance Subsidiaries do not transact any insurance
business, directly or indirectly, in any state or jurisdiction other than those
enumerated on Schedule 7.18, where such business requires any license,
permit, governmental approval, consent or other authorization.

 

Section
7.19  Reinsurance. All persons
with whom any Insurance Subsidiaries have ceded any obligations with respect to
any Reinsurance Agreement or Surplus Relief Reinsurance Agreements have a
financial strength rating of “A” or better by A.M. Best.

 

Section
7.20  Pledged Shares. All of the
shares of capital stock of AEILIC are duly authorized and validly issued, fully
paid and non-assessable, and pledged to the Agent pursuant to the terms of the
Borrower Pledge Agreement.

 

Section 7.21  Pledged Surplus Notes.  All of the Surplus Notes of AEILIC are duly
authorized and validly issued, and pledged to the Agent pursuant to the terms
of the Borrower Pledge Agreement.  There
is no order of preference or priority among the Surplus Notes (i.e., no Surplus
Note is paid on a higher priority than any other Surplus Note) under any
instrument or agreement related thereto or under applicable law respecting
insolvency or liquidation of AEILIC.

 

Section 7.22.  Insurance
Subsidiaries.  No Insurance
Subsidiary is subject to any regulatory prohibition regarding the declaration
or payment of dividends that is not generally applicable to all insurance
companies which are domiciled in the same jurisdiction and are engaged in the
same line of business as such Insurance Subsidiary.

 

ARTICLE VIII  AFFIRMATIVE
COVENANTS

 

From
the date of this Agreement and thereafter until the Loans and all other
Obligations of the Borrower to the Banks hereunder and under the Notes and the
other Loan Documents have been paid in full, the Borrower will do, and will
cause each Subsidiary to do, all of the following:

 

26

 

Section
8.1  Reports, Certificates and Other
Information. Unless otherwise provided herein, furnish or cause to be
furnished to the Agent (who will forward copies to each Bank):

 

8.1.1  Audit Report.

 

(a)  As soon as available and in any event within
120 days after the end of each fiscal year of the Borrower, the annual audit
report of the Borrower and its Subsidiaries prepared on a consolidated basis
and in conformity with GAAP, consisting of at least statements of income, cash flows,
changes in stockholders’ equity, and a consolidated balance sheet as at the end
of such year, setting forth in each case in consolidated form corresponding
figures from the previous annual audit, certified without qualification by
independent certified public accountants of recognized standing selected by the
Borrower and acceptable to the Required Banks, together with any -management
letters, management reports or other supplementary comments or reports to the
Borrower or its board of directors furnished by such accountants and together
with unaudited consolidating statements prepared for Borrower’s management.

 

(b)  Together with the audited financial
statements required under Section 8.1(a), a statement by the accounting
firm performing each such audit stating that it has reviewed this Agreement and
that in performing its examination nothing came to its attention that caused it
to believe that any Default or Event of Default exists, or, if such Default or
Event of Default exists, describing its nature.

 

8.1.2  Quarterly Reports. As soon as
available and in any event within 60 days after the end of each fiscal quarter
of each fiscal year, a copy of the unaudited financial statement of the
Borrower and its Subsidiaries prepared in the same manner as the audit report
referred to in Section 8.1.l(a), signed by the Borrower’s responsible
officer, consisting of at least consolidated statements of income, cash flow,
changes in stockholders’ equity for the Borrower and its Subsidiaries for such
quarter and for the period from the beginning of such fiscal year to the end of
such quarter, and the consolidated balance sheet of the Borrower as at the end
of such quarter.

 

8.1.3  Tax Returns and Reports. If requested
by the Agent or the Required Banks, copies of all federal, state, local and
foreign Tax Returns and Reports filed by the Borrower or any of its
Subsidiaries.

 

8.1.4  SAP Financial Statements.

 

(a)  As soon as possible, but in any event within
sixty (60) days after the end of each fiscal year of each of the Insurance
Subsidiaries, a copy of the Annual Statement of such Insurance Subsidiaries for
such fiscal year prepared in accordance with SAP and accompanied by the
certification of the responsible officer of such Insurance Subsidiaries that
such financial statements present fairly, in accordance with SAP, the financial
position of such Insurance Subsidiaries for the period then ended;

 

27

 

(b)  As soon as possible, but in any event within
sixty (60) days after the end of each of the first three fiscal quarters of
each fiscal year of each of the Insurance Subsidiaries, a copy of the quarterly
statement of such Insurance Subsidiaries for such fiscal quarter, all prepared
in accordance with SAP and accompanied by the certification of the responsible
officer of such Insurance Subsidiaries that all such financial statements
present fairly in accordance with SAP the financial position of such Insurance
Subsidiaries for the periods then ended (subject to normal year-end and audit
adjustments);

 

(c)  Within fifteen (15) days after being
delivered to any of the Insurance Subsidiaries, any final examination report
issued from time to time by the applicable Insurance Regulatory Authority or
the NAIC;

 

(d)  Within ninety (90) days after the close of
each Fiscal Year of each of the Insurance Subsidiaries, a copy of the “Statement
of Actuarial Opinion” for each of the Insurance Subsidiaries which is provided
to the applicable Insurance Regulatory Authority (or equivalent information
should the Insurance Regulatory Authority no longer require such a statement).
Such statement shall be in the format prescribed by the Applicable Insurance
Code of the state of domicile of such Insurance Subsidiary.

 

8.1.5  Compliance Certificate and Risk-Based
Capital Calculations.

 

(a)  Together with the financial statements
furnished by the Borrower under Sections 8.1.1 and 8.1.2, a
Compliance Certificate signed by the chief financial officer of the Borrower,
duly completed.

 

(b) Together with the financial
statements furnished by the Borrower under Sections 8.1.1 and 8.1.2,
calculations of the Risk Based Capital for all or any of Insurance Subsidiaries
based on the quarterly or annual financial statements being delivered.

 

8.1.6  Reports to SEC and to Stockholders.
Promptly upon the mailing or filing thereof, copies of all financial
statements, reports and proxy statements mailed to the Borrower’s shareholders,
and copies of all registration statements, periodic reports and other documents
filed with the Securities and Exchange Commission (or any successor thereto) or
any national securities exchange.

 

8.1.7  Notice of Default and Litigation.
Promptly upon learning of the occurrence of any of the following, written
notice thereof, describing the same and the steps being taken by the Borrower
with respect thereto:

 

(a)  the occurrence of a Default or Event of
Default;

 

(b) the institution of
any material litigation or the occurrence of any material litigation
development;

 

28

 

(c) the commencement of
any dispute which might reasonably be expected to lead to the material
modification, transfer, revocation, suspension or termination or any Loan
Document; or

 

(d) any Material Adverse
Change.

 

8.1.8  ERISA Liability. Immediately upon
becoming aware of the occurrence, with respect to any Plan, of any Reportable
Event (other than a Reportable Event for which the reporting requirements have
been waived by PBGC regulations) or any “prohibited transaction” (as defined in
Section 4975 of the Code), a notice specifying the nature thereof and what
action the Borrower proposes to take with respect thereto,. and, when received,
copies of any notice from PBGC of intention to terminate or have a trustee
appointed for any Plan.

 

8.1.9  Environmental Liabilities. Immediately
upon becoming aware of the occurrence thereof, notice of any violation as to
any environmental matter by the Borrower or any Subsidiary and of the
commencement of any judicial or administrative proceeding relating to health,
safety or environmental matters (i) in which an adverse determination or result
could result in the revocation of or have a material adverse effect on any
operating permits, air emission permits, water discharge permits, hazardous waste
permits or other permits held by the Borrower or any Subsidiary which are
material to the operations of the Borrower or such Subsidiary, or (ii) which
will or threatens to impose a material liability on the Borrower or such
Subsidiary to any Person or which will require a material expenditure by the
Borrower or such Subsidiary to cure any alleged problem or violation.

 

8.1.10  Insurance Holding Company Filings.
Copies of all material Insurance Holding Company System Act filings with
Governmental Authorities by the Borrower or any Insurance Subsidiary not later
than ten (10) Business Days after such filings are made, including, without
limitation. filings which seek approval of Governmental Authorities with
respect to transactions between the Borrower and its Affiliates.

 

8.1.11  Insurance Licenses. Within five (5)
Business Days of such notice, notice of actual suspension, termination or
revocation of any License or restriction thereon (material to the Insurance
Subsidiaries) of any of the Insurance Subsidiaries by any Insurance Regulatory
Authority or of receipt of notice from any Insurance Regulatory Authority
notifying any of the Insurance Subsidiaries of a hearing (which is not
withdrawn within ten (10) days) relating to such a suspension, termination, revocation
or restriction, including any request by an Insurance Regulatory Authority
which commits any of the Insurance Subsidiaries to take, or refrain from
taking, any action or which otherwise materially and adversely affects the
authority of any of the Insurance Subsidiaries to conduct its business.

 

8.1.12  Insurance Proceedings. Within three
(3) Business Days of such notice, notice of any pending or threatened
investigation or regulatory proceeding (other than routine periodic
investigations or reviews) by any Insurance Regulatory Authority concerning the

 

29

 

business, practices or
operations of any of the Insurance Subsidiaries, including any agent or
managing general agent thereof.

 

8.1.13  Changes in Applicable Insurance Code.
Promptly, upon knowledge of the Borrower or any Insurance Subsidiary, to the
Agent (who shall promptly deliver such reports to the Banks), notice of any
actual or proposed changes in any Applicable Insurance Code, if such changes could
reasonably be expected to have a Material Adverse Effect.

 

8.1.14  Reinsurance Agreements.

 

(a)  Promptly, notice of any material change or
modification to any Reinsurance Agreements or Surplus Relief Reinsurance
Agreements whether entered into before or after the date of this Agreement
including Reinsurance Agreements, if any, which are in a runoff mode on the
date of this Agreement, which change or modification could reasonably be
expected to have a Material Adverse Effect;

 

(b)  promptly, notice of any written notice
received by any of the Insurance Subsidiaries of any material denial of
coverage, litigation or arbitration arising out of any Surplus Relief
Reinsurance Agreement or any material Reinsurance Agreement to which any of the
Insurance Subsidiaries is a party; and

 

(c)  promptly, such other financial, actuarial and
other information with respect to Surplus Relief Reinsurance Agreements and
Reinsurance Agreements as the Agent may reasonably request.

 

8.1.15  Ratings.  Promptly and in any event within ten Business
Days after (i) learning thereof, notification of any changes after the
date hereof in the rating given by A.M. Best in respect of the Borrower or any
Insurance Subsidiary and (ii) receipt thereof, copies of any ratings analysis
by A.M. Best, S&P or Moody’s relating to the Borrower or any Insurance
Subsidiary.

 

8.1.16  Other Information. From time to time,
such other information regarding the business, operation and financial
condition of the Borrower and the Subsidiaries as the Agent or the Required
Banks may reasonably request.

 

Section
8.2  Corporate Existence. Subject
to Section 9.3 in the instance of a Subsidiary, maintain its corporate
existence in good standing under the laws of its jurisdiction of incorporation
and its qualification to transact business in each jurisdiction in which the
character of the properties owned, leased or operated by it or the business
conducted by it makes such qualification necessary.

 

Section
8.3  Insurance. Maintain with
financially sound and reputable insurance companies such insurance as may be
required by law and such other insurance in such amounts and against such
hazards as is customary in the case of reputable corporations engaged in the
same or similar business and similarly situated.

 

30

 

Section
8.4  Payment of Taxes and Claims.
File all tax returns and reports which are required by law to be filed by it
and pay before they become delinquent all taxes, assessments and governmental
charges and levies imposed upon it or its property and all claims or demands of
any kind (including, without limitation, those of suppliers, mechanics,
carriers, warehouses, landlords and other like Persons) which, if unpaid, might
result in the creation of a Lien upon its property; provided that the foregoing
items need not be paid if they are being contested in good faith by appropriate
proceedings, and as long as the Borrower’s or such Subsidiary’s title to its
property is not materially adversely affected, its use of such property in the
ordinary course of its business is not materially interfered with and adequate
reserves with respect thereto have been set aside on the Borrower’s or such
Subsidiary’s books in accordance with GAAP.

 

Section
8.5  Inspection. Permit any Person
designated by any Bank to visit and inspect any of its properties, corporate
books and financial records, to examine and to make copies of its books of
accounts and other financial records, and to discuss the affairs, finances and
accounts of the Borrower and the Subsidiaries with, and to be advised as to the
same by, its officers at such reasonable times and intervals as such Bank may
designate. So long as no Event of Default exists, the expenses of the Banks for
such visits, inspections and examinations shall be at the expense of the Banks,
but any such visits, inspections, and examinations made while any Event of
Default is continuing shall be at the expense of the Borrower.

 

Section
8.6  Maintenance of Properties.
Maintain its properties used or useful in the conduct of its business in good
condition, repair and working order, and supplied with all necessary equipment,
and make all necessary repairs, renewals, replacements, betterments and
improvements thereto, all as may be necessary so that the business carried on
in connection therewith may be properly and advantageously conducted at all
times.

 

Section
8.7  Books and Records. Keep
adequate and proper records and books of account in which full and correct
entries will be made of its dealings, business and affairs.

 

Section
8.8  Compliance. Comply in all
material respects with all laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be subject.

 

Section
8.9  ERISA. Maintain each Plan in
compliance with all material applicable requirements of ERISA and of the Code
and with all material applicable rulings and regulations issued under the
provisions of ERISA and of the Code.

 

Section
8.10  Environmental Matters.
Observe and comply with all laws, rules, regulations and orders of any
government or government agency relating to health, safety, pollution,
hazardous materials or other environmental matters to the extent non-compliance
could result in a material liability or otherwise constitute or result in a Material
Adverse Change.

 

ARTICLE IX  NEGATIVE
COVENANTS

 

From
the date of this Agreement and thereafter until the Loans and all other
Obligations of the Borrower to the Banks hereunder and under the Notes and the
other Loan Documents have been paid in full, the Borrower will not, and will
not permit any Subsidiary to, do any of the following:

 

31

 

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

 

(a)
Indebtedness under this Agreement;

 

(b)
Current liabilities, other than for borrowed money, incurred in the ordinary
course of business;

 

(c)
Indebtedness secured by Liens permitted under Section 9.2 hereof;

 

(d)
Indebtedness consisting of endorsements for collection, deposit or negotiation
and warranties of products or services, in each case incurred in the ordinary
course of business;

 

(e)
Indebtedness arising under Hedging Obligations related to the Loans;

 

(f)
Indebtedness owing by the Borrower to any Subsidiary or by any Subsidiary to
the Borrower or any other Subsidiary;

 

(g)
The Trust Preferred Indebtedness; and

 

(h)  Unsecured Indebtedness not otherwise
permitted by this Section 9.1 so long as (i) at the time of incurrence
or assumption thereof, the Borrower would be in compliance with Section 9.12
hereof applied on a pro forma basis as of such time, (ii) such Indebtedness
shall mature in accordance with its terms after the Revolving Termination Date,
and (iii) the documents pertaining to such Indebtedness shall not include
financial covenants, ratios or financial performance tests (other than by
inclusion of a cross-default or cross-acceleration to this Agreement).

 

Section
9.2  Liens. Create, incur, assume
or suffer to exist any Lien with respect to any property, revenues or assets
now owned or hereafter arising or acquired, except the following Liens:

 

(a) Deposits or pledges
to secure payment of workers’ compensation, unemployment insurance, old age
pensions or other social security obligations, in the ordinary course of
business of the Borrower or a Subsidiary;

 

(b) Liens for taxes,
fees, assessments and governmental charges not delinquent or to the extent that
payments therefor shall not at the time be required to be made in accordance
with the provisions of Section 8.4;

 

(c) Liens of carriers,
warehousemen, mechanics and materialmen, and other like Liens arising in the
ordinary course of business, for sums not due or to the extent that payment
therefor shall not at the time be required to be made in accordance with the
provisions of Section 8.4;

 

32

 

(d) Deposits to secure
the performance of bids, trade contracts, leases, statutory obligations and
other obligations of a like nature incurred in the ordinary course of business:

 

(f) Liens described on Schedule
9.2 hereof, and Liens securing refinancing of the Indebtedness described
therein which shall not exceed the amount of Indebtedness currently secured by
such Liens;

 

(g) Liens in favor of the
Agent for the benefit of the Banks pursuant to this Agreement and the other
Loan Documents; and

 

(h) the interests of
sellers in Repurchase Transactions.

 

Section
9.3  Merger. Merge or consolidate
or enter into any analogous reorganization or transaction with any Person;
provided, however, any wholly-owned Subsidiary may be merged with or liquidated
into the Borrower (if the Borrower is the surviving corporation) or any other
wholly-owned Subsidiary.

 

Section
9.4  Sale of Assets. Sell, assign,
lease, transfer, contribute, reinsure, cede, convey or otherwise dispose of, or
grant options, warrants or other rights with respect to, any of its assets
(including, without limitation, any books of business) to any Person, unless:

 

(a) such sale,
assignment, transfer, lease, contribution, reinsurance, cession, conveyance or
other disposition is in the ordinary course of its business including, without
limitation, sales of assets in connection with the management of the investment
portfolio of the Borrower and its Subsidiaries;

 

(b) the aggregate net
book value of all assets sold, transferred, leased, contributed, reinsured,
ceded or conveyed (other than in the ordinary course of business) by the
Borrower or any of its Subsidiaries pursuant to this clause (b) does not exceed
$500,000; or

 

(c) such sale,
assignment, transfer, lease, contribution, reinsurance, cession, conveyance or
other disposition is with respect to the sale of its capital assets and the net
proceeds of such sale are used to replace such capital assets within ninety
(90) days after receipt of such net proceeds.

 

Section
9.5  Restricted Payments. Except
as hereinafter provided, do any of the following:

 

(a) Declare or pay any
dividends, either in cash or property, on any shares of its capital stock of
any class (except dividends or other distributions payable solely in shares of
common stock of the Borrower and except for dividends or other distributions
payable solely to the Borrower) or make any other payment or distribution,
either directly or indirectly or through any Subsidiary, in respect of its
capital stock (except for payments or distributions made solely to the
Borrower) if before or after giving effect to such payment any Default or Event
of Default shall have occurred and be continuing or if the sum of the aggregate
amount of such payments made during any fiscal year of the

 

33

 

Borrower shall exceed 33%
of the consolidated net income of the Borrower (determined in accordance with
GAAP) for the prior fiscal year;

 

(b) Directly or
indirectly, or through any Subsidiary, purchase, redeem or retire any shares of
its capital stock of any class or any warrants, rights or options to purchase
or acquire any shares of its capital stock (other than in exchange for or out
of the net cash proceeds to the Borrower from the substantially concurrent
issue or sale of other shares of common stock of the Borrower or warrants,
rights or options to purchase or acquire any shares of its common stock); or

 

(c) Make payments of the
principal or interest of any Trust Preferred Indebtedness or Subordinated Note
Payable at any time that the terms of the documents pertaining thereto shall
prevent or defer such payment or shall provide that the recipient of such
payments may not retain such payment (it being expressly acknowledged that the
Borrower may pay accrued interest at the stated rates of the Trust Preferred
Indebtedness and Subordinated Notes Payable at any time that the foregoing
clause shall not apply).

 

Notwithstanding
the foregoing, so long as no Default or Event of Default shall have occurred
and be continuing (i) the Borrower or any Subsidiary may acquire shares of the
Borrower’s common stock to be held in trust to fund the obligations of AEILIC
under its NMO Deferred Stock Compensation Plans; and (ii) the Borrower may
redeem shares of its capital stock of any class, provided that (A) the number
of shares of voting capital stock redeemed in any one fiscal year shall not
exceed 1% of the total number of such shares outstanding at January 1 of such
year, and (B) the aggregate redemption price paid for all such shares redeemed
in any fiscal year of the Borrower shall not exceed $750,000.

 

Section
9.6  Plans. Permit any condition
to exist in connection with any Plan which might constitute grounds for the
PBGC to institute proceedings to have such Plan terminated or a trustee
appointed to administer such Plan, permit any Plan to terminate under any
circumstances which would cause the lien provided for in Section 4068 of ERISA
to attach to any property, revenue or asset of the Borrower or any Subsidiary
or permit the underfunded amount of Plan benefits guaranteed under Title IV of
ERISA to exceed $200,000.

 

Section
9.7  Change in Nature of Business.
Make any material change in the nature of the business of the Borrower or such
Subsidiary, as carried on at the date hereof.

 

Section
9.8  Other Agreements. Enter into
any agreement, bond, note or other instrument with or for the benefit of any
Person other than the Banks which would: (a) prohibit the Borrower or such
Subsidiary from granting, or otherwise limit the ability of the Borrower or
such Subsidiary to grant, to the Banks any Lien on any assets or properties of
the Borrower or such Subsidiary; or (b) be violated or breached by the Borrower’s
payment and performance of its Obligations under the Loan Documents.

 

Section
9.9  Transactions with Affiliates.
Enter into or be a party to any transaction or arrangement, including, without
limitation, the purchase, sale, lease or exchange of property or the rendering
of any service, with any Affiliate, except in the ordinary course of and
pursuant to the reasonable requirements of the Borrower’s or the applicable
Subsidiary’s business and upon

 

34

 

fair and reasonable terms no
less favorable to the Borrower or such Subsidiary than would obtain in a
comparable arm’s-length transaction with a Person not a Affiliate.

 

Section
9.10  Use of Proceeds. Permit any
proceeds of the Loans to be used, either directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of “purchasing or carrying
any margin stock” within the meaning of Regulation U of the Federal Reserve
Board, as amended from time to time, and furnish to any Bank, upon its request,
a statement in conformity with the requirements of Federal Reserve Form U-1
referred to in Regulation U.

 

Section
9.11  Reinsurance.

 

(a)  Enter into or amend any Surplus Relief
Reinsurance Agreements except (i) those treaties existing on the date of this
Agreement and described on Schedule 9.11 hereto, and (ii) additional or
replacement Surplus Relief Reinsurance Agreements so long as such Agreements
and those listed in clause (i) above, individually or in the aggregate, do not
provide statutory pre-tax gain of more than an aggregate benefit of the amount
then outstanding of more than $250,000. Any additional Surplus Relief
Reinsurance Agreements entered into under this Section 9.11(a) shall be
with reinsurers having a financial strength rating of “A” or better by A.M.
Best.

 

(b) Enter into any
Reinsurance Agreement pursuant to which the Borrower or any of the Insurance
Subsidiaries cede any liabilities with any reinsurers having a financial
strength rating of “A” or less by A.M. Best.

 

Section
9.12  Leverage Ratio.  Permit the Leverage Ratio to be greater than
40% at any time.

 

Section
9.13  Cash Coverage Ratio.  Permit the Cash Coverage Ratio for any period
of four consecutive fiscal quarters to be less than 1.30 to 1.00.

 

Section
9.14  Risk-Based Capital.  As of the end of any fiscal quarter or fiscal
year, permit the Risk-Based Capital of AEILIC to fall below 200%.

 

Section 9.15  Payment of Other Indebtedness.  Directly or indirectly voluntarily prepay,
defease or in substance defease, purchase, redeem, retire or otherwise acquire,
any Indebtedness prior to the date due (other than the Loans) while a Default
or Event of Default has occurred and is continuing or would occur after giving
effect thereto.

 

Section
9.16  Investments.  Acquire for value, make, have or hold any
Investments, except:

 

(a)  Investments by the Borrower
in its wholly-owned Subsidiaries;

 

(b)  Investments consisting of
loans or advances made by the Borrower to any Subsidiary and made by any
Subsidiary to the Borrower or any other Subsidiary;

 

(c)  Investments that would be
permitted under the investment provisions of the laws and regulations
administered and enforced by each Insurance Regulatory Authority of any
Insurance Subsidiary (whether made by the Borrower or any Subsidiary);

 

35

 

(d)  Acquisitions of insurance
related businesses or entities so long as the acquired business or entity is in
a substantially related line of business as the Borrower or any of its
Subsidiaries; and

 

(e)  Investments by the Borrower
or any Subsidiary that is not an Insurance Subsidiary that are not otherwise
permitted hereunder in an aggregate amount not exceeding $10,000,000.

 

ARTICLE X  EVENTS OF
DEFAULT AND REMEDIES

 

Section
10.1  Events of Default. The
occurrence of any one or more of the following events shall constitute an Event
of Default:

 

(a) The Borrower shall
fail to make when due, whether by acceleration or otherwise, any payment of
principal of or interest on the Notes or any fee or other amount required to be
made to the Banks pursuant to the Loan Documents;

 

(b) Any representation or
warranty made or deemed to have been made by or on behalf of the Borrower or
any Subsidiary by any of the Loan Documents or by or on behalf of the Borrower
or any Subsidiary in any certificate, statement, report or other writing
furnished by or on behalf of the Borrower to the Banks pursuant to the Loan
Documents shall prove to have been false or misleading in any material respect
on the date as of which the facts set forth are stated or certified or deemed
to have been stated or certified;

 

(c) The Borrower shall
fail to comply with and of Sections 8.2, 9.1, 9.2, 9.4,
9.5, 9.12, 9.13, 9.14, 9.15 or 9.16
hereof;

 

(d) The Borrower shall
fail to comply with any agreement, covenant, condition, provision or term
contained in the Loan Documents (and such failure shall not constitute an Event
of Default under any of the other provisions of this Section 10.1) and
such failure to comply shall continue for 30 days after whichever of the
following dates is the earliest: (i) the date the Borrower gives notice of such
failure to the Agent; (ii) the date the Borrower should have given notice of
such failure to the Agent pursuant to Section 8.1.7; or (iii) the date the
Agent gives notice of such failure to the Borrower.

 

(e) The Borrower or any
Subsidiary shall become insolvent or shall generally not pay its debts as they
mature or shall apply for, shall consent to, or shall acquiesce in the
appointment of a custodian, trustee or receiver of the Borrower or such
Subsidiary or for a substantial part of the property thereof or, in the absence
of such application, consent or acquiescence, a custodian, trustee or receiver
shall be appointed for the Borrower or a Subsidiary or for a substantial part
of the property thereof and shall not be discharged within 30 days;

 

(f) Any bankruptcy,
reorganization, debt arrangement or other proceedings under any bankruptcy or
insolvency law shall be instituted by or against the Borrower or a Subsidiary,
and, if instituted against the Borrower or a Subsidiary, shall have been
consented to or acquiesced in by the Borrower or such Subsidiary, or shall
remain 

 

36

 

undismissed for 30 days,
or an order for relief shall have been entered against the Borrower or such
Subsidiary, or the Borrower or any Subsidiary shall take any corporate action
to approve institution of, or acquiescence in, such a proceeding;

 

(g) Any dissolution or
liquidation proceeding shall be instituted by or against the Borrower or a
Subsidiary and, if instituted against the Borrower or such Subsidiary, shall be
consented to or acquiesced in by the Borrower or such Subsidiary or shall
remain for 30 days undismissed, or the Borrower or any Subsidiary shall take
any corporate action to approve institution of, or acquiescence in, such a
proceeding;

 

(h) A judgment or
judgments for the payment of money in excess of the sum of $500,000 in the
aggregate shall be rendered against the Borrower or a Subsidiary and the
Borrower or such Subsidiary shall not discharge the same or provide for its
discharge in accordance with its terms, or procure a stay of execution thereof,
prior to any execution on such judgments by such judgment creditor, within 30
days from the date of entry thereof, and within said period of 30 days, or such
longer period during which execution of such judgment shall be stayed, appeal
therefrom and cause the execution thereof to be stayed during such appeal;

 

(i) The institution by
the Borrower or any ERISA Affiliate of steps to terminate any Plan if in order
to effectuate such termination, the Borrower or any ERISA Affiliate would be
required to make a contribution to such Plan, or would incur a liability or
obligation to such Plan, in excess of $500,000, or the institution by the PBGC
of steps to terminate any Plan;

 

(j) The maturity of any
Indebtedness of the Borrower (other than Indebtedness under this Agreement) or
a Subsidiary shall be accelerated, or the Borrower or a Subsidiary shall fail to
pay any such Indebtedness when due or, in the case of such Indebtedness payable
on demand, when demanded, or any event shall occur or condition shall exist and
shall continue for more than the period of grace, if any, applicable thereto
and shall have the effect of causing, or permitting (any required notice having
been given and grace period having expired) the holder of any such Indebtedness
or any trustee or other Person acting on behalf of such holder to cause, such
Indebtedness to become due prior to its stated maturity or to realize upon any
collateral given as security therefor;

 

(k) Any Change of Control
shall occur;

 

(l)  Any License of any material Insurance
Subsidiary issued in its state of domicile or in a state in which its earned
premiums in the prior fiscal year constituted 15% or more of net earned
premiums, on a consolidated basis, in such period (a) shall be revoked by
the Insurance Regulatory Authority which issued such License, or any formal
action (administrative or judicial) to revoke such License shall have been
commenced against such Insurance Subsidiary and shall not have been dismissed
within 30 days after the commencement thereof, (b) shall be suspended by
such Insurance Regulatory Authority for a period in excess of 30 days or (c) shall
not be reissued or renewed by such Insurance Regulatory Authority upon the
expiration thereof following application for such reissuance or renewal of such
Insurance Subsidiary;

 

37

 

(m)
Any Insurance Subsidiary shall become subject to (a) any conservation or
liquidation order, directive or mandate issued by any Insurance Regulatory
Authority or (b) any other directive or mandate issued by any Insurance
Regulatory Authority which could reasonably be expected to have a Material
Adverse Effect, which in either case is not stayed within twenty (20) days.

 

(n)
Any Insurance Subsidiary shall be the subject of a final non-appealable order
imposing a fine in an amount in excess of $5,000,000 in any single instance or
other such orders imposing fines in excess of $10,000,000 in the aggregate
after the date of this Agreement in any fiscal year by or at the request of any
Insurance Regulatory Authority as a result of the violation by such Insurance
Subsidiary of such state’s applicable insurance laws or the regulations
promulgated in connection therewith; or

 

(o)
The Borrower Pledge Agreement ceases to be in full force and effect, or shall
cease to give the Agent the Liens, rights, powers and privileges purported to be
created thereby (including, without limitation, a first priority perfected
security interest in, and Lien on, all of the collateral subject thereto, in
favor of the Agent for the benefit of the Banks, superior to and prior to the
rights of all third Persons and subject to no other Liens).

 

Section
10.2  Remedies.  If (a) any Event of Default described in Sections
10.1(e), (f) or (g) shall occur with respect to the Borrower,
the Commitments shall automatically terminate and the outstanding unpaid
principal balance of the Notes, the accrued interest thereon and all other
Obligations of the Borrower to the Banks and the Agent under the Loan Documents
shall automatically become immediately due and payable; or (b) any other Event
of Default shall occur and be continuing, then the Agent may take any or all of
the following actions (and shall take any or all of the following actions on
direction of the Required Banks): (i) declare the Commitments terminated,
whereupon the Commitments shall terminate, (ii) declare that the outstanding
unpaid principal balance of the Notes, the accrued and unpaid interest thereon
and all other Obligations of the Borrower to the Banks and the Agent under the
Loan Documents to be forthwith due and payable, whereupon the Notes, all accrued
and unpaid interest thereon and all such Obligations shall immediately become
due and payable, in each case without demand or notice of any kind, all of
which are hereby expressly waived, anything in this Agreement or in the Notes
to the contrary notwithstanding, (iii) exercise all rights and remedies under
any other instrument, document or agreement between the Borrower and the Agent
or the Banks, and (iv) enforce all rights and remedies under any applicable
law.

 

Section
10.3  Offset. In addition to the
remedies set forth in Section 10.2, upon the occurrence of any Event of
Default or at any time thereafter while such Event of Default continues, each
Bank or any other holder of any Note may offset any and all balances, credits,
deposits (general or special, time or demand, provisional or final), accounts
or monies of the Borrower then or thereafter with such Bank or such other
holder, or any obligations of such Bank or such other holder of the Note,
against the Indebtedness then owed by the Borrower to such Bank subject,
however, to the provisions of Section 4.5.

 

38

 

Section 10.4  Application of Proceeds.  After the occurrence of an Event of Default
and acceleration of the Obligations, all Collections shall be applied by the
Agent as follows:

 

First, to
the payment of all costs and expenses incurred by or on behalf of the Agent,
including the costs and expenses of any sale or enforcement, including
reasonable compensation to the Agent’s agents and counsels, and all expenses,
liabilities and advances made or incurred by or on behalf of the Agent in
connection therewith;

 

Second, to
the payment of the costs and expenses of such sale or enforcement, including
reasonable compensation to the Banks’ agents and counsel, and all expenses,
liabilities and advances made or incurred by or on behalf of any Bank in
connection therewith;

 

Third, to
the payment of all amounts due (other than principal and interest) under the
Notes or this Agreement, payable ratably to the Agent and each Bank in
accordance with the amount of such obligations owed to each of them, until such
obligations are paid in full;

 

Fourth, to
the payment of interest accrued and unpaid on the Loans and the Notes, payable
ratably to each Bank in accordance with the amount of accrued interest owed to
each of them until such interest is paid in full;

 

Fifth, to
the payment of the outstanding principal amounts of all Loans, payable ratably
to each Bank in accordance with the principal amount owed to each of them until
such principal is paid in full;

 

Sixth, to
the payment of all other Obligations, payable ratably to the Agent and the
Banks in the proportion that the Agent’s and each Bank’s share of those amounts
bears to the total of those amounts for the Agent and all Banks; and

 

Finally, to
the payment to the Borrower, or to its successors or assigns, or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.

 

If the proceeds of any
Collections are insufficient to cover the costs and expenses of such sale, as
aforesaid, and the payment in full of all Obligations of the Borrower, the
Borrower shall remain liable for any deficiency.

 

ARTICLE XI  THE AGENT

 

Section
11.1  Appointment and Grant of
Authority.  Each Bank hereby appoints
the Agent, and the Agent hereby agrees to act, as agent under this Agreement
and the other Loan Documents. The Agent shall have and may exercise such powers
under the Loan Documents as are specifically delegated to the Agent by the
terms hereof and thereof, together with such other powers as are reasonably
incidental thereto.  Each Bank hereby
authorizes, consents to, and directs the Borrower to deal with the Agent as the
true and lawful agent of such Bank to the extent set forth herein.

 

39

 

Section
11.2  Non-Reliance on Agent.  Each Bank agrees that it has, independently
and without reliance on the Agent or any other Bank, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis of the Borrower and decision to enter into this Agreement and that it
will, independently and without reliance upon the Agent, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking action under the
Loan Documents. The Agent shall not be required to keep informed as to the
performance or observance by the Borrower of this Agreement and the Loan
Documents or to inspect the properties or books of the Borrower. Except for
notices, reports and other documents and information expressly required to be
furnished to the Banks by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition or business of the Borrower (or any
of its related companies) which may come into the Agent’s possession.

 

Section
11.3  Responsibility of the Agent and
Other Matters.

 

(a) The Agent shall have
no duties or responsibilities except those expressly set forth in this
Agreement (including, without limitation, the duty to forward copies of
reports, certificates and other information to the Banks pursuant to Section
8.1) and those duties and liabilities shall be subject to the limitations
and qualifications set forth in this Section. 
The duties of the Agent shall be mechanical and administrative in
nature.

 

(b) Neither the Agent nor
any of its directors, officers or employees shall be liable for any action
taken or omitted (whether or not such action taken or omitted is within or
without the Agent’s responsibilities and duties expressly set forth in this
Agreement) under or in connection with this Agreement, or any other instrument
or document in connection herewith, except for gross negligence or willful
misconduct. Without limiting the foregoing, neither the Agent nor any of its
directors, officers or employees shall be responsible for, or have any duty to
examine:

 

(i) the genuineness,
execution, validity, effectiveness, enforceability, value or sufficiency of (A)
the Loan Documents, or the Notes, or (B) any document or instrument furnished
pursuant to or in connection with the Loan Documents or the Notes,

 

(ii) the collectibility
of any amounts owed by the Borrower,

 

(iii) any recitals or
statements or representations or warranties in connection with the Loan
Documents or the Notes,

 

(iv) any failure of any
party to this Agreement to receive any communication sent, or

 

(v) the assets,
liabilities, financial condition, results of operations, business or
creditworthiness of the Borrower.

 

(c ) The Agent shall be
entitled to act, and shall be fully protected in acting upon, any communication
in whatever form believed by the Agent in good faith to be genuine and 

 

40

 

correct and to have been
signed or sent or made by a proper person or persons or entity. The Agent may
consult counsel and shall be entitled to act, and shall be fully protected
in-any action taken in good faith, in accordance with advice given by counsel.
The Agent may employ agents and attorneys-in-fact and shall not be liable for
the default or misconduct of any such agents or attorneys-in-fact selected by
the Agent with reasonable care. The Agent shall not be bound to ascertain or
inquire as to the performance or observance of any of the terms, provisions or
conditions of the Loan Documents or the Notes on the Borrower’s part.

 

Section
11.4  Action on Instructions.  The Agent shall be entitled to act or refrain
from acting, and in all cases shall be fully protected in acting or refraining
from acting under the Loan Documents or the Notes or any other instrument or
document in connection herewith or therewith in accordance with instructions in
writing from (i) the Required Banks except for instructions which under the
express provisions hereof must be received by the Agent from all the Banks, and
(ii) in the case of such instructions, from all the Banks.

 

Section
11.5  Indemnification.  To the extent the Borrower does not reimburse
and save the Agent harmless according to the terms hereof for and from all
costs, expenses and disbursements in connection herewith or with the other Loan
Documents, such costs, expenses and disbursements to the extent reasonable
shall be borne by the Banks ratably in accordance with their Percentages and
the Banks hereby agree on such basis (a) to reimburse the Agent for all such
reasonable costs, expenses and disbursements on request and (b) to indemnify
and save harmless the Agent against and from any and all losses, obligations,
penalties, actions, judgments and suits and other reasonable costs, expenses
and disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against the Agent, other than as a consequence of
actual gross negligence or willful misconduct on the part of the Agent, arising
out of or in connection with the Loan Documents or the Notes or any instrument
or document in connection herewith or therewith, or any request of the Banks,
including without limitation the reasonable costs, expenses and disbursements
in connection with defending itself against any claim or liability, or
answering any subpoena, related to the exercise or performance of any of its
powers or duties under this Agreement or the other Loan Documents or the taking
of any action under or in connection with the Loan Documents or the Notes.

 

Section
11.6  U.S. Bank National Association
and Affiliates.  With respect to U.S.
Bank National Association’s Commitment and any Loans by U.S. Bank National
Association under this Agreement and any Note and any interest of U.S. Bank
National Association in any Note, U.S. Bank National Association shall have the
same rights, powers and duties under this Agreement and such Note as any other
Bank and may exercise the same as though it were not the Agent. U.S. Bank
National Association and its affiliates may accept deposits from, lend money
to, and generally engage, and continue to engage, in any kind of business with
the Borrower as if U.S. Bank National Association were not the Agent.

 

Section
11.7  Notice to Holder of Notes.  The Agent may deem and treat the payees of
the Notes as the owners thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof has been filed with the Agent. Any
request, authority or consent of any holder of any Note shall be conclusive and
binding on any subsequent holder, transferee or assignee of such Note.

 

41

 

Section
11.8  Successor Agent.  The Agent may resign at any time by giving at
least 30 days written notice thereof to the Banks and the Borrower. Upon any
such resignation, the Required Banks shall have the right to appoint a
successor Agent. If no successor Agent shall have been appointed by the
Required Banks and shall have accepted such appointment within 30 days after
the retiring Agent’s giving notice of resignation, then the retiring Agent may,
but shall not be required to, on behalf of the Banks, appoint a successor
Agent.

 

ARTICLE XII 
MISCELLANEOUS

 

Section
12.1  No Waiver and Amendment.  No failure on the part of the Banks or the
holders of the Notes to exercise and no delay in exercising any power or right
hereunder or under any other Loan Document shall operate as a waiver thereof;
nor shall any single or partial exercise of any power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
The remedies herein and in any other instrument, document or agreement
delivered or to be delivered to the Banks hereunder or in connection herewith
are cumulative and not exclusive of any remedies provided by law. No notice to
or demand on the Borrower not required hereunder or under the Notes shall in
any event entitle the Borrower to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the right of the Banks
or the holders of the Notes to any other or further action in any circumstances
without notice or demand.

 

Section
12.2  Amendments, Etc.  No amendment or waiver of any provision of
this Agreement or any of the other Loan Documents, nor consent to any departure
by the Borrower therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Borrower and the Agent upon direction of
the Required Banks and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent shall, unless agreed to by the
Agent and all of the Banks:

 

(a) increase the amounts
of or extend the terms of the Commitments or subject the Banks to any
additional obligations;

 

(b) reduce the principal
of, or interest on, the Notes or any fees or other amounts payable hereunder;

 

(c) postpone any date
fixed for any payment of principal of, or interest on, the Notes or any fees or
other amounts payable hereunder;

 

(d) change the definition
of Required Banks or amend this Section 12.2; or

 

(e) release any collateral
or security interest securing the Loans.

 

provided, further that amendments, waivers or
consents affecting the rights of the Agent shall also require the consent of
the Agent.

 

42

 

Section
12.3  Assignments and Participations.

 

(a) Assignments.
Each Bank shall have the right, subject to the further provisions of this
Sections 12.3, to sell or assign all or any part of its Commitment, Loans,
Note, and other rights and obligations under this Agreement and related
documents (such transfer, an “Assignment”) to any of its affiliates and to any
commercial lender, other financial institution or other entity (an “Assignee”).
Upon such Assignment becoming effective as provided in Section 12.3(b),
the assigning Bank shall be relieved from the portion of the Commitments,
obligations to indemnify the Agent and other obligations hereunder to the
extent assumed and undertaken by the Assignee, and to such extent the Assignee
shall have the rights and obligations of a “Bank” hereunder. Notwithstanding
the foregoing, unless otherwise consented to by the Borrower and the Agent
(which consent, in the case of the Borrower, shall not be required if such
assignment is to an affiliate of the assigning Bank or if an Event of Default
has occurred and is continuing and, in any other case, shall not be
unreasonably withheld or delayed by the Borrower or the Agent, as the case may
be), each Assignment shall be in the initial principal amount of not less than
$2,000,000 in the aggregate for all Loans and Commitments assigned, or an
integral multiple of $1,000,000 if above such amount (or the remaining portion
of such assigning Bank’s commitment, if less than $2,000,000). Each Assignment
shall be documented by an agreement between the assigning Bank and the Assignee
(an “Assignment and Assumption Agreement”) in form and substance satisfactory
to the Agent.

 

(b) Effectiveness of
Assignments. An Assignment shall become effective hereunder when all of the
following shall have occurred: (i) the Assignee shall have submitted an
Assignment Agreement in the form attached hereto as Exhibit E, duly
completed and executed, in which the Assignee shall have agreed in writing to
have irrevocably assumed and undertaken the transferred portion of the assigning
Bank’s obligations hereunder (including without limitation the obligations to
indemnify the Agent hereunder), to the Agent with a copy for the Borrower, and
shall have provided to the Agent information the Agent shall have reasonably
requested to make payments to the Assignee, (ii) either the assigning Bank or
the Assignee shall have paid a processing fee of $3,500 to the Agent for its
own account, (iii) the assigning Bank and the Agent shall have agreed upon a
date upon which the Assignment shall become effective, and (iv) the Agent and
the Borrower shall have given their consent to such Assignment by executing
such Assignment Agreement. Upon the Assignment becoming effective, (x) if
requested by the assigning Bank, the Agent and the Borrower shall make
appropriate arrangements so that new Notes are issued to the assigning Bank and
the Assignee; and (y) the Agent shall forward all payments of interest,
principal, fees and other amounts that would have been made to the assigning
Bank, in proportion to the percentage of the assigning Bank’s rights
transferred, to the Assignee.

 

(c) Participations.
Each Bank shall have the right, subject to the further provisions of this Section
12.3, to grant or sell a participation in all or any part of its Loans,
Note and Commitment (a “Participation”) to any commercial lender, other
financial institution or other entity (a “Participant”) without the consent of
the Borrower, the Agent of any other party hereto. The Borrower agrees that if
amounts outstanding under this Agreement and the Notes are due and unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of setoff in respect of its Participation in amounts owing under this

 

43

 

Agreement and any Note to
the same extent as if the amount of its Participation were owing directly to it
as a Bank under this agreement or any note; provided, that such right of setoff
shall be subject to the obligation of such Participant to share with the Banks,
and the Banks agree to share with such Participant, as provided in Section
4.4 hereof. The Borrower also agrees that each Participant shall be
entitled to the benefits of Article V with respect to its Participation,
provided, that no Participant shall be entitled to receive any greater amount
pursuant to such Sections than the transferor Bank would have been entitled to
receive in respect of the amount of the Participation transferred by such
transferor Bank to such Participant had no such transfer occurred.

 

(d) Limitation of
Rights of any Assignee or Participant. Notwithstanding anything in the
foregoing to the contrary, except in the instance of an Assignment that has
become effective as provided in Section 12.3(b), (i) no Assignee or
Participant shall have any direct rights hereunder, (ii) the Borrower, the
Agent and the Banks other than the assigning or selling Bank shall deal solely
with the assigning or selling Bank and shall not be obligated to extend any
rights or make any payment to, or seek any consent of, the Assignee or
Participant, (iii) no Assignment or Participation shall relieve the assigning
or selling Bank from its Commitment to make Loans hereunder or any of its other
obligations hereunder and such Bank shall remain solely responsible for the
performance hereof, the (iv) no Assignee or Participant, other than an
affiliate of the assigning or selling Bank, shall be entitled to require such
Bank to take or omit to take any action hereunder, except that such Bank may
agree with such Assignee or Participant that such Bank will not, without such
Assignee’s or Participant’s consent, take any action which would, in the case
of any principal, interest or fee in which the Assignee or Participant has an
ownership or beneficial interest: (A) extend the final maturity of any Loans or
extend the Termination Date, (B) reduce the interest rate on the Loans or the
rate of Commitment Fees, (C) forgive any principal of, or interest on, the
Loans or any fees, or (D) release all or substantially all of the collateral
for the Loans.

 

(d)  Tax Matters. No Bank shall be
permitted to enter into any Assignment or Participation with any Assignee or
Participant who is not a United States Person, and no New Bank who is not a
United States Person shall be permitted to become a Bank, unless such Assignee,
Participant or New Bank represents and warrants to such the assigning or
participating Bank, as applicable, and to the Agent that, as at the date of
such Assignment or Participation, or as of the date such New Bank is to become
a Bank, as the case may be, it is entitled to receive interest payments without
withholding or deduction of any taxes and such Assignee, Participant or New
Bank, as the case may be, executes and delivers to the Agent and to the
assigning or participating Bank, as applicable, on or before the date of
execution and delivery of documentation of such Participation or Assignment or
on the date such New Bank is to become a Bank, as the case may be, a United
States Internal Revenue Service Form W-8ECI or W-8BEN, or any successor to
either of such forms, as appropriate, properly completed an claiming complete
exemption from withholding and deduction of all Federal Income Taxes. A “United
States Person” means any citizen, national or resident of the United States,
any corporation or other entity created or organized in or under the laws of
the United States or any political subdivision hereof or any estate or trust,
in each case that is not subject to withholding of

 

44

 

United States Federal
income taxes or other taxes on payment of interest, principal of fees
hereunder.

 

(e) Information.
Each Bank may furnish any information concerning the Borrower in the possession
of such Bank from time to time to Assignees and Participants and potential
Assignees and Participants.

 

(f) Federal Reserve
Bank. Nothing herein stated shall limit the right of any Bank to assign any
interest herein and in any Note to a Federal Reserve Bank.

 

Section
12.4  Costs, Expenses and Taxes.
The Borrower agrees, whether or not any Loan is made hereunder, to pay on
demand all costs and expenses of the following persons (including the
reasonable fees and expenses of counsel and paralegals for such persons who may
be employees of such persons), incurred in connection with the following
matters: (i) the Agent in connection with the preparation, execution and
delivery of the Loan Documents and the preparation, negotiation and execution
of any and all amendments to each thereof and (ii) the Agent and the Banks in
connection with the enforcement of the Loan Documents. The Borrower agrees to
pay, and save the Agent and the Banks harmless from all liability for, any
stamp or other taxes which may be payable with respect to the execution or
delivery of the Loan Documents. The Borrower agrees to indemnify and hold the
Agent and the Banks harmless from any loss or expense which may arise or be
created by the acceptance of telephonic or other instructions for making Loans
or disbursing the proceeds thereof. The obligations of the Borrower under this Section
12.4 shall survive any termination of this Agreement.

 

Section
12.5  Notices. Except when
telephonic notice is expressly authorized by this Agreement, any notice or
other communication to any party in connection with this Agreement shall be in
writing and shall be sent by manual delivery, telegram, telex, facsimile
transmission, overnight courier or United States mail (postage prepaid)
addressed to such party at the address specified on the signature page hereof,
or at such other address as such party shall have specified to the other party
hereto in writing. All periods of notice shall be measured from the date of
delivery thereof if manually delivered, from the date of sending thereof if
sent by telegram, telex or facsimile transmission, from the first Business Day
after the date of sending if sent by overnight courier, or from four days after
the date of mailing if mailed; provided, however, that any notice to the Agent
under Article II hereof shall be deemed to have been given only when received
by the Agent.

 

Section
12.6  Confidentiality. The Agent
and the Banks may have received, and may hereafter receive, confidential
financial and business information concerning the Borrower and its Subsidiaries
and Affiliates. The Agent and each Bank agrees to hold non-public information
received from the Borrower in confidence, and not disclose such information to
persons other than the Agent’s or Bank’s officers, employees, agents and other
representatives (who, if they are not employees of the Agent or the Bank, shall
be informed of this confidentiality provision) except: (a) as required to
disclose such information to a bank regulatory agency or in connection with an
examination of its records by bank examiners or at the express direction of any
other authorized government agency; (b) pursuant to a subpoena or other court
order; (c) in connection with legal process in the Agent’s or Bank’s lending
capacity; or (d) to participants, assignees, potential participants and
potential assignees with respect to the financing who agree to be bound

 

45

 

by confidentiality provisions
substantially similar to this paragraph. Confidential information shall not
include (i) information already in the Agent’s or Bank’s possession prior to
receipt from the Borrower, or (ii) information which becomes generally
available to the public, other than as a result of disclosure by the Agent or a
Bank, or its directors, officers, employees, advisors or agents or becomes
available to the Agent or a Bank on a non-confidential basis from a source
other than the Borrower or its advisors, provided that such source is not known
by the Agent or Bank to be bound by a confidentiality agreement with, or other
obligation of confidentiality to, the Borrower or another party.

 

Section
12.7  Indemnity.  The Borrower hereby further agrees to
indemnify the Agent and each Bank and the directors, officers and employees of
each against all losses, claims, damages, penalties, judgments, liabilities and
expenses (including, without limitation, all expenses of litigation or
preparation therefor whether or not the Agent or any Bank is a party thereto)
which any of them may pay or incur arising out of or relating to this
Agreement, the other Loan Documents, the transactions contemplated hereby or
the direct or indirect application or proposed application of the proceeds of
any Loan hereunder except to the extent that (i) they are determined in a
final non-appealable judgment by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of the party seeking
indemnification or (ii) that they arise solely from any dispute of or any
litigation or other proceeding instituted by any Bank against the Agent (if the
Agent was determined to have breached its obligations to such Bank hereunder)
or (for Persons other than the Agent and its directors, officers and employees)
any other Bank.  The obligations of the
Borrower under this Section 12.7 shall survive the termination of this
Agreement.

 

Section
12.8  Successors. This Agreement
shall be binding upon the Borrower, the Banks and the Agent and their
respective successors and assigns, and shall inure to the benefit of the
Borrower, the Banks and the Agent and the successors and assigns of the Banks.
The Borrower shall not assign its rights or duties hereunder without the
written consent of the Banks.

 

Section
12.9  Severability. Any provision
of the Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof or affecting the validity or enforceability of such provision in any
other jurisdiction.

 

Section
12.10  Subsidiary References. The
provisions of this Agreement relating to Subsidiaries shall apply only during
such times as the Borrower has one or more Subsidiaries.

 

Section
12.11  Captions. The captions or
headings herein and any table of contents hereto are for convenience only and
in no way define, limit or describe the scope or intent of any provision of
this Agreement.

 

Section
12.12  Entire Agreement. The Loan
Documents embody the entire agreement and understanding between the Borrower,
the Banks and the Agent with respect to the subject matter hereof and thereof.
This Agreement supersedes all prior agreements and understandings relating to
the subject matter hereof.

 

46

 

Section
12.13  Counterparts. This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument, and either of the
parties hereto may execute this Agreement by signing any such counterpart.

 

Section
12.14  Governing Law. THE
VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT AND THE NOTES SHALL
BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT
TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF
THE UNITED STATES APPLICABLE TO NATIONAL BANKS.

 

Section
12.15  Consent to Jurisdiction. AT
THE OPTION OF THE BANKS, THIS AGREEMENT AND THE NOTES MAY BE ENFORCED IN ANY
FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN MINNEAPOLIS OR ST. PAUL,
MINNESOTA; AND THE BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH
COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN
THE EVENT THE BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE
UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE
RELATIONSHIP CREATED BY THIS AGREEMENT, THE BANKS AT ITS OPTION SHALL BE
ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES
ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE
LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.

 

Section
12.16  Waiver of Jury Trial. EACH
OF THE BORROWER, THE AGENT, THE CO-AGENT, THE DOCUMENTATION AGENT AND THE BANKS
(a) WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE
OR DEFEND ANY RIGHTS (i) UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR (ii) ARISING FROM ANY BANKING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND (b) WAIVES
ANY RIGHT TO SEEK OR RECEIVE CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES IN
ANY SUCH ACTION OR PROCEEDING.

 

 

(signature pages follow)

 

47

 

IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the date first above written.

 

	
   

  	
   

  	
  AMERICAN
  EQUITY INVESTMENT LIFE

  
	
   

  	
   

  	
  HOLDING
  COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Wendy L. Carlson

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  CFO
  & General Counsel

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  5000
  Westown Parkway, Suite 200

  
	
   

  	
   

  	
  West
  Des Moines, Iowa 50266

  
	
   

  	
   

  	
  Attention:
  Mr. David J. Noble, President

  
	
   

  	
   

  	
  Telephone:
  (515) 221-0002

  
	
   

  	
   

  	
  Fax:
  (515) 221-9947

  
							

 

1

 

	
   

  	
  U.S.
  BANK NATIONAL ASSOCIATION, as

  
	
   

  	
  Agent
  and as a Bank

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  Ziad W. Amra

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:
  

  	
  Corporate
  Banking Officer

  	
   

  
	
   

  	
   

  
	
   

  	
  800
  Nicollet Mall

  
	
   

  	
  Mail
  Code BC-MN-H03N

  
	
   

  	
  Minneapolis,
  MN 55402

  
	
   

  	
  Attention:
  Mr. Ziad W. Amra

  
	
   

  	
  Telephone:
  (612) 303-3757

  
	
   

  	
  Fax:
  (612) 303-2265

  
						

 

2

 

	
   

  	
  WEST
  BANK, as a Bank

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  Brad L. Winterbottom

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:
  

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
  1601
  22nd St.

  
	
   

  	
  West
  Des Moines, Iowa 50266

  
	
   

  	
  Attention:
  Mr. Brad L. Winterbottom

  
	
   

  	
  Telephone:
  (515) 222-2320

  
	
   

  	
  Fax:
  (515) 222-2346

  
					

 

3

 

	
   

  	
  LaSALLE NATIONAL BANK, as a Bank

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brandon S. Allison

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Assistant Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
  135 South LaSalle Street

  
	
   

  	
  Chicago, IL 60603

  
	
   

  	
  Attention: Mr. Brandon S. Allison

  
	
   

  	
  Telephone: (312) 904-6324

  
	
   

  	
  Fax: (312) 904-6189

  
					

 

4

 

EXHIBIT

 

	
  Exhibit

  	
   

  	
  Contents

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  A-1, A-2, A-3,

  A-4 and A-5

  	
   

  	
  Form of Notes

  
	
   

  	
   

  	
   

  
	
  B

  	
   

  	
  Borrower Pledge Agreement

  
	
   

  	
   

  	
   

  
	
  C

  	
   

  	
  Compliance Certificate

  
	
   

  	
   

  	
   

  
	
  D

  	
   

  	
  Form of Legal Opinion

  
	
   

  	
   

  	
   

  
	
  E

  	
   

  	
  Assignment and Assumption

  
	
   

  	
   

  	
   

  
	
  Schedules

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1.1

  	
   

  	
  Amounts and Percentages

  
	
   

  	
   

  	
   

  
	
  7.16

  	
   

  	
  Subsidiaries

  
	
   

  	
   

  	
   

  
	
  7.18

  	
   

  	
  Insurance Licenses

  
	
   

  	
   

  	
   

  
	
  9.2

  	
   

  	
  Existing Liens

  
	
   

  	
   

  	
   

  
	
  9.11

  	
   

  	
  Surplus Relief Reinsurance Agreements

  

 

 

EXHIBIT A-1

 

REVOLVING NOTE

 

	
  [$Revolving Amount]

  	
  Minneapolis,
  Minnesota: September 22, 2004

  

 

FOR VALUE RECEIVED, the undersigned AMERICAN EQUITY INVESTMENT LIFE
HOLDING COMPANY, an Iowa corporation (the “Borrower”), promises to pay to the
order of [BANK] (the “Bank”), on the Revolving Termination Date, or other due
date or dates determined under the Credit Agreement hereinafter referred to,
the principal sum of                                     DOLLARS
($[Commitment]), or if less, the then aggregate unpaid principal amount of the
Revolving Loans (as such terms are defined in the Credit Agreement) as may be
made by the Bank under the Credit Agreement. 
All Revolving Loans and all payments of principal shall be recorded by
the holder in its records which records shall be conclusive evidence of the
subject matter thereof, absent manifest error.

 

The Borrower further promises to pay to the
order of the Bank interest on the aggregate unpaid principal amount hereof from
time to time outstanding from the date hereof until paid in full at the rates
per annum which shall be determined in accordance with the provisions of the
Credit Agreement.  Accrued interest shall
be payable on the dates specified in the Credit Agreement.

 

All payments of principal and interest under
this Note shall be made in lawful money of the United States of America in immediately
available funds at the office of U.S. Bank National Association, at 800
Nicollet Mall, Minneapolis, Minnesota 55402, or at such other place as may be
designated by the Agent to the Borrower in writing.

 

This Note is one of the Revolving Notes and
Notes referred to in, and evidences indebtedness incurred under, a Credit
Agreement dated as of September 22, 2004 (herein, as it may be amended,
modified or supplemented from time to time, called the “Credit Agreement”)
among the Borrower, the Banks, as defined therein (including the Bank) and U.S.
Bank National Association, as Agent, to which Credit Agreement reference is
made for a statement of the terms and provisions thereof, including those under
which the Borrower is permitted and required to make prepayments and repayments
of principal of such indebtedness and under which such indebtedness may be
declared to be immediately due and payable.

 

All parties hereto, whether as makers,
endorsers or otherwise, severally waive presentment, demand, protest and notice
of dishonor in connection with this Note.

 

This Note is made under and governed by the
internal laws of the State of Minnesota.

 

	
   

  	
  AMERICAN EQUITY INVESTMENT LIFE

  
	
   

  	
  HOLDING COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

6

 

EXHIBIT A-2

TRANCHE A NOTE

 

	
  $[Tranche A Amount]

  	
  Minneapolis,
  Minnesota:  September 22, 2004

  

 

FOR VALUE RECEIVED, the undersigned AMERICAN
EQUITY INVESTMENT LIFE HOLDING COMPANY, an Iowa corporation (the “Borrower”),
promises to pay to the order of [BANK] (the “Bank”), payable in installments in
amounts set forth in, and on the due dates determined under, the Credit
Agreement hereinafter referred to, the principal sum of
                                    DOLLARS
($Tranche A Amount).

 

The Borrower further promises to pay to the
order of the Bank interest on the aggregate unpaid principal amount hereof from
time to time outstanding from the date hereof until paid in full at the rates
per annum which shall be determined in accordance with the provisions of the
Credit Agreement.  Accrued interest shall
be payable on the dates specified in the Credit Agreement.

 

All payments of principal and interest under
this Note shall be made in lawful money of the United States of America in
immediately available funds at the office of U.S. Bank National Association, at
800 Nicollet Mall., Minneapolis, Minnesota 55402, or at such other place as may
be designated by the Agent to the Borrower in writing.

 

This Note is one of the Tranche A Notes and
the Notes referred to in, and evidences indebtedness incurred under, a Credit
Agreement dated as of September 22, 2004 (herein, as it may be amended,
modified or supplemented from time to time, called the “Credit Agreement”)
among the Borrower, the Banks, as defined therein (including the Bank) and U.S.
Bank National Association, as Agent, to which Credit Agreement reference is
made for a statement of the terms and provisions thereof, including those under
which the Borrower is permitted and required to make prepayments and repayments
of principal of such indebtedness and under which such indebtedness may be
declared to be immediately due and payable.

 

All parties hereto, whether as makers,
endorsers or otherwise, severally waive presentment, demand, protest and notice
of dishonor in connection with this Note.

 

This Note is made under and governed by the
internal laws of the State of Minnesota.

 

	
   

  	
  AMERICAN EQUITY INVESTMENT LIFE

  
	
   

  	
  HOLDING COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

7

 

EXHIBIT A-3

TRANCHE B NOTE

 

	
  $8,500,000

  	
  Minneapolis,
  Minnesota:  September 22, 2004

  

 

FOR VALUE RECEIVED, the undersigned AMERICAN
EQUITY INVESTMENT LIFE HOLDING COMPANY, an Iowa corporation (the “Borrower”),
promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION (the “Bank”),
payable in installments in the amounts and on due dates set forth on Schedule I
attached hereto, the principal sum of EIGHT MILLION FIVE HUNDRED THOUSAND
DOLLARS ($8,500,000).

 

The Borrower further promises to pay to the order
of the Bank interest on the aggregate unpaid principal amount hereof from time
to time outstanding from the date hereof until paid in full at the rates per
annum which shall be determined in accordance with the provisions of the Credit
Agreement.  Accrued interest shall be
payable on the dates specified in the Credit Agreement.

 

The Tranche B LIBOR Margin for this Note and
the indebtedness evidenced hereby is 3.00% per annum.

 

All payments of principal and interest under
this Note shall be made in lawful money of the United States of America in
immediately available funds at the office of U.S. Bank National Association, at
800 Nicollet Mall., Minneapolis, Minnesota 55402, or at such other place as may
be designated by the Agent to the Borrower in writing.

 

This Note is one of the Tranche B Notes and
the Notes referred to in, and evidences indebtedness incurred under, a Credit
Agreement dated as of September 22, 2004 (herein, as it may be amended,
modified or supplemented from time to time, called the “Credit Agreement”)
among the Borrower, the Banks, as defined therein (including the Bank) and U.S.
Bank National Association, as Agent, to which Credit Agreement reference is
made for a statement of the terms and provisions thereof, including those under
which the Borrower is permitted and required to make prepayments and repayments
of principal of such indebtedness and under which such indebtedness may be
declared to be immediately due and payable.

 

All parties hereto, whether as makers,
endorsers or otherwise, severally waive presentment, demand, protest and notice
of dishonor in connection with this Note.

 

This Note is made under and governed by the
internal laws of the State of Minnesota.

 

	
   

  	
  AMERICAN EQUITY INVESTMENT LIFE

  
	
   

  	
  HOLDING COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

8

 

Schedule I to

Tranche B Note in the original

principal amount of $8,500,000

 

Principal of this Note shall be payable in installments of $425,000
each, due on the last day of March, June, September and December of each year,
commencing on December 31, 2004, with a final principal payment due on
September 30, 2009 equal in principal amount to the outstanding principal
balance hereunder on such date, if different from such other installments.

 

9

 

EXHIBIT A-4

TRANCHE B NOTE

 

	
  $2,379,053

  	
  Minneapolis,
  Minnesota: September 22, 2004

  

 

FOR VALUE RECEIVED, the undersigned AMERICAN
EQUITY INVESTMENT LIFE HOLDING COMPANY, an Iowa corporation (the “Borrower”),
promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION (the “Bank”),
payable in installments in the amounts and on due dates set forth on Schedule I
attached hereto, the principal sum of TWO MILLION THREE HUNDRED SEVENTY NINE
THOUSAND FIFTY THREE DOLLARS ($2,379,053), payable at times provided in the
Credit Agreement, as defined below.

 

The Borrower further promises to pay to the
order of the Bank interest on the aggregate unpaid principal amount hereof from
time to time outstanding from the date hereof until paid in full at the rates
per annum which shall be determined in accordance with the provisions of the
Credit Agreement.  Accrued interest shall
be payable on the dates specified in the Credit Agreement.

 

The Tranche B LIBOR Margin for this Note and
the indebtedness evidenced hereby is 2.25% per annum.

 

All payments of principal and interest under
this Note shall be made in lawful money of the United States of America in
immediately available funds at the office of U.S. Bank National Association, at
800 Nicollet Mall., Minneapolis, Minnesota 55402, or at such other place as may
be designated by the Agent to the Borrower in writing.

 

This Note is one of the Tranche B Notes and
the Notes referred to in, and evidences indebtedness incurred under, a Credit
Agreement dated as of September 22, 2004 (herein, as it may be amended,
modified or supplemented from time to time, called the “Credit Agreement”)
among the Borrower, the Banks, as defined therein (including the Bank) and U.S.
Bank National Association, as Agent, to which Credit Agreement reference is
made for a statement of the terms and provisions thereof, including those under
which the Borrower is permitted and required to make prepayments and repayments
of principal of such indebtedness and under which such indebtedness may be
declared to be immediately due and payable.

 

All parties hereto, whether as makers,
endorsers or otherwise, severally waive presentment, demand, protest and notice
of dishonor in connection with this Note.

 

This Note is made under and governed by the
internal laws of the State of Minnesota.

 

	
   

  	
  AMERICAN EQUITY INVESTMENT LIFE

  
	
   

  	
  HOLDING COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

10

 

Schedule I to

Tranche B Note in the original

principal amount of $2,379,053

 

Principal of this Note shall be payable in (a) one installment of
$1,075,000, due on               ,
2004 and (b) $1,304,053, due on October 8, 2004.

 

11

 

EXHIBIT A-5

TRANCHE B NOTE

 

	
  $7,500,000

  	
  Minneapolis,
  Minnesota: September 22, 2004

  

 

FOR VALUE RECEIVED, the undersigned AMERICAN
EQUITY INVESTMENT LIFE HOLDING COMPANY, an Iowa corporation (the “Borrower”),
promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION (the “Bank”),
payable in installments in the amounts and on due dates set forth on Schedule I
attached hereto, the principal sum of SEVEN MILLION FIVE HUNDRED THOUSAND
DOLLARS ($7,500,000), payable at times provided in the Credit Agreement, as
defined below.

 

The Borrower further promises to pay to the
order of the Bank interest on the aggregate unpaid principal amount hereof from
time to time outstanding from the date hereof until paid in full at the rates
per annum which shall be determined in accordance with the provisions of the
Credit Agreement.  Accrued interest shall
be payable on the dates specified in the Credit Agreement.

 

The Tranche B LIBOR Margin for this Note and
the indebtedness evidenced hereby is 3.00% per annum.

 

All payments of principal and interest under
this Note shall be made in lawful money of the United States of America in
immediately available funds at the office of U.S. Bank National Association, at
800 Nicollet Mall., Minneapolis, Minnesota 55402, or at such other place as may
be designated by the Agent to the Borrower in writing.

 

This Note is one of the Tranche B Notes and
the Notes referred to in, and evidences indebtedness incurred under, a Credit
Agreement dated as of September 22, 2004 (herein, as it may be amended,
modified or supplemented from time to time, called the “Credit Agreement”)
among the Borrower, the Banks, as defined therein (including the Bank) and U.S.
Bank National Association, as Agent, to which Credit Agreement reference is
made for a statement of the terms and provisions thereof, including those under
which the Borrower is permitted and required to make prepayments and repayments
of principal of such indebtedness and under which such indebtedness may be
declared to be immediately due and payable.

 

All parties hereto, whether as makers,
endorsers or otherwise, severally waive presentment, demand, protest and notice
of dishonor in connection with this Note.

 

This Note is made under and governed by the
internal laws of the State of Minnesota.

 

	
   

  	
  AMERICAN EQUITY INVESTMENT LIFE

  
	
   

  	
  HOLDING COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

12

 

Schedule I to

Tranche B Note in the original

principal amount of $5,500,000

 

Principal of this Note shall be payable in (a) one installment of
$1,000,000, due on September 30, 2004, and (b) additional installments of
$500,000 each, due on the last day of March, June, September and December of
each year, commencing on December 31, 2004, with a final principal payment due
on December 31, 2007 equal in principal amount to the outstanding principal
balance hereunder on such date, if different from such other installments.

 

13

 

Exhibit D

Opinion of Counsel

 

To:  The Agent and Banks party

to the Credit Agreement described herein

 

[address to each bank]

 

U.S. Bank National Association

800 Nicollet Mall

Mail Code BC-MN-H03N

Minneapolis, MN 55402

Attention: Mr. Ziad W. Amra

 

Ladies/Gentlemen:

 

We have acted as counsel for AMERICAN EQUITY
INVESTMENT LIFE HOLDING COMPANY, (the “Borrower”), and we are delivering to you
this opinion of counsel upon which you may rely, in connection with a Credit
Agreement, dated as of September 22, 2004, entered into among the Borrower, the
Banks, as defined therein, and U.S. Bank National Association, as Agent (the “Credit
Agreement”), and the transactions and other Loan Documents described
therein.  Unless otherwise defined
herein, capitalized terms used herein shall have the respective meanings
assigned to such terms in the Credit Agreement.

 

In so acting, we, as counsel for the
Borrower, have made such factual inquiries, and have examined or caused to be
examined such questions of law, as we have considered necessary or appropriate
for the purposes of this opinion and, upon the basis of such inquiries and
examinations, advise you that, in our opinion:

 

(1) 
The Borrower and each of its Subsidiaries are corporations duly
organized, validly existing and in good standing under the laws of the state of
their respective incorporation, and each is duly qualified and in good standing
as a foreign corporation in all other jurisdictions in which its respective
present operations or properties require such qualification.

 

(2) 
The Borrower has full corporate power and authority to own and operate
its properties and assets, carry on its business as presently conducted, and
enter into and perform its obligations under the Loan Documents to which it is
a party.

 

(3) 
The execution and delivery of the Loan Documents to which the Borrower
is a party, the performance by the Borrower of its obligations thereunder, and
the borrowing by the Borrower under the Credit Agreement, have been duly
authorized by all necessary corporate action, and all of said Loan Documents
have been duly executed and delivered on behalf of the Borrower and constitute
valid and binding obligations of the Borrower, enforceable in accordance with
their respective terms.

 

14

 

(4) 
There is no provision in the Borrower’s Articles of Incorporation or
By-Laws, nor any provision in any indenture, mortgage, contract or agreement to
which the Borrower is a party or by which it or its properties may be bound,
nor any law, statute, rule or regulation, nor any writ, order or decision of
any court or governmental instrumentality binding on the Borrower which would
be contravened by the execution and delivery of the Loan Documents to which the
Borrower is a party, nor do any of the foregoing prohibit the Borrower’s
performance of any term, provision, condition, covenant or any other obligation
of the Borrower contained therein.

 

(5) 
There are no actions, suits or proceedings pending or, to the best of
our knowledge after due inquiry, threatened against or affecting the Borrower
before any court or arbitrator or by or before any administrative agency or
government authority, which, if adversely determined, could constitute an
Adverse Event.

 

(6) 
Neither the making nor performance of the Loan Documents, nor the
borrowing(s) under the Credit Agreement, requires the consent or approval of
any governmental instrumentality.

 

(7) 
The Borrower is not a “holding company”, a “subsidiary company” of a “holding
company” or an “affiliate” of a “holding company”, within the meaning of the
Public Utility Holding Company Act of 1935, as amended.

 

(8) 
The Borrower is not an “investment company” or a company “controlled” by
an “investment company”, within the meaning of the Investment Company Act of
1940, as amended.

 

(9) 
The Borrower is not engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System), and, to
the best of our knowledge after due inquiry, no part of the proceeds of any
loan under the Credit Agreement will be used to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock.

 

(10) 
Assuming that the Agent has taken and is retaining possession of the
stock certificates evidencing the shares of stock described in the Borrower
Pledge Agreement (the “Pledged Stock”) or entered into a satisfactory bailee
arrangement with a third party who has taken and is retaining possession of the
Pledged Stock on the Agent’s behalf, and the Agent has taken such Pledged Stock
in good faith without notice (actual or constructive) of any adverse claim
within the meaning of the Code, there has been created under the Borrower
Pledge Agreement, and there has been granted to the Agent a valid and perfected
security interest and lien upon the Pledged Stock to the extent a security
interest may be obtained by possession under the Code.

 

Very truly yours,

 

15

 

Schedule 1.1

Revolving Commitments,

Tranche B Amounts and Percentages

 

Revolving
Loans

 

	
  Banks:

  	
   

  	
  Revolving Commitment:

  	
   

  	
  Revolving Percentage:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  U.S. Bank

  	
   

  	
  $

  	
  20,000,000

  	
   

  	
  40.000000

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LaSalle Bank

  	
   

  	
  $

  	
  20,000,000

  	
   

  	
  40.000000

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  West Bank

  	
   

  	
  $

  	
  10,000,000

  	
   

  	
  20.000000

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total:

  	
   

  	
  $

  	
  50,000,000

  	
   

  	
  100.000000

  	
  %

  

 

Tranche A Loans

 

	
  Banks:

  	
   

  	
  Tranche A Amount:

  	
   

  	
  Tranche A Percentage:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  U.S. Bank

  	
   

  	
  $

  	
  20,000,000

  	
   

  	
  40.000000

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LaSalle Bank

  	
   

  	
  $

  	
  20,000,000

  	
   

  	
  40.000000

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  West Bank

  	
   

  	
  $

  	
  10,000,000

  	
   

  	
  20.000000

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total:

  	
   

  	
  $

  	
  50,000,000

  	
   

  	
  100.000000

  	
  %

  

 

Tranche B Loans:

 

	
  Tranche B Banks:

  	
   

  	
  Tranche B Amounts:

  	
   

  	
  Tranche B Percentage:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  U.S. Bank

  	
   

  	
  $

  	
  18,379,053

  	
   

  	
  100.000000

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Amount:

  	
   

  	
  $

  	
  68,379,053

  	
   

  	
   

  	
   

  

 

Total
Percentages:  Note that this assumes all
Tranche B Loans are funded (Total Percentage will be calculated as provided in
the definition thereof

 

	
  Banks:

  	
   

  	
  Percentage:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  U.S. Bank:

  	
   

  	
  56.1269152

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  LaSalle:

  	
   

  	
  29.2487232

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  West Bank

  	
   

  	
  14.6243616

  	
  %

  
	
   

  	
   

  	
  100.000000

  	
  %

  

 

16

 

Schedule 7.16

Subsidiaries

 

 

American Equity
Investment Life Insurance Company

American Equity Investment Life Insurance Company of New York

American Equity Properties, LC

American Equity Capital, Inc.

American Equity Capital Trust I

American Equity Capital Trust II

American Equity Capital Trust III

American Equity Capital Trust IV

American Equity Capital Trust VII

 

17

 

Schedule 7.18

Licenses, etc. (Section 7.18)

 

AMERICAN EQUITY Investment Life Insurance
Company

 

Geographic Coverage*

1. Alabama

2. Alaska

3. Arkansas

4. Arizona

5. California

6. Colorado

7. Delaware

8. Florida

9. Georgia

10. Hawaii

11. Idaho

12. Illinois

13. Indiana

14. Iowa

15. Kansas

16. Kentucky

17. Louisiana

18. Maine

19. Maryland

20. Massachusetts

21. Michigan

22. Minnesota

23. Mississippi

24. Missouri

25. Montana

26. Nebraska

27. Nevada

28. New Hampshire

29. New Jersey

30. New Mexico

31. New York**

32. North Dakota

33. Ohio

34. Oklahoma

35. Oregon

36. Pennsylvania

37. Rhode Island

38. South Carolina

39. South Dakota

40. Tennessee

41. Texas

42. Utah

43. Vermont

44. Virginia

 

18

 

45. Washington

46. West Virginia

47. Wisconsin

48. Wyoming

and District of Columbia

 

* The
above listed states represent those which the Company is licensed to conduct
business.

Additional
state filings are in process.

**
American Equity Investment Life Insurance Company of New York Map-3 09/08/04

 

19

 

Schedule 9.2

 

Liens (Section 9.2)

 

 

None

 

20

 

Schedule 9.11

 

Surplus Relief Reinsurance
Agreements (Section 9.11)

 

 

2002 Coinsurance and Yearly Renewable Term Reinsurance Agreement dated
November 1, 2002 between American Equity Investment Life Holding Company and
Hannover Life Reassurance Company of America.

 

2003 Coinsurance and Yearly Renewable Term Reinsurance Agreement dated
September 30, 2003 between American Equity Investment Life Holding Company and
Hannover Life Reassurance Company of America.

 

21

 

[Suggested Form of Board of
Directors’ Resolutions—

Revolving Credit Agreement]

 

CERTIFICATE

 

I,                   ,
do hereby certify that I am the duly elected and qualified Secretary and the
keeper of the records and corporate seal of AMERICAN EQUITY INVESTMENT LIFE
HOLDING COMPANY, a corporation organized and existing under the laws of the
State of [State] and that the following is a true and correct copy of certain
resolutions duly adopted at a meeting of the Board of Directors thereof,
convened and held in accordance with law and the by-laws of said corporation,
and that such resolutions are now in full force and effect, unamended,
unaltered and unrepealed:

 

WHEREAS, there has been presented to this
meeting a form of Credit Agreement (the “Credit Agreement”) among this
Corporation, the Banks named therein (the “Banks”) and U.S. Bank National
Association, as Agent (the “Agent”) providing for, among other things, loans
from time to time to this Corporation up to the amount of $68,400,000 (as such
amount may hereafter be amended);

 

NOW, THEREFORE, BE IT RESOLVED, that the [insert
officers and the number necessary to act] of this Corporation is/are authorized
to execute and deliver a Credit Agreement, substantially in the form of the
Credit Agreement presented to this meeting, except such changes of the terms
and provisions thereof as the officer(s) executing such Credit Agreement on
behalf of this Corporation shall deem proper, such execution to be conclusive
evidence that such officer(s) deem(s) all of the terms and provisions thereof
to be proper;

 

FURTHER RESOLVED, that the [insert
officers and the number necessary to act]of this Corporation is/are authorized
to borrow from time to time on behalf of this Corporation amounts permitted to
be borrowed by this Corporation under the Credit Agreement and to designate
officers, agents or employees to borrow such amounts and to set rates of
interest if applicable, to execute and deliver on behalf of this Corporation a
promissory note or notes, substantially in the form provided for in the Credit
Agreement, and to execute all amendments, waivers, modifications, supplements
to, and restatements of, the Credit Agreement from time to time as such
officers shall deem proper, such execution by such officer(s) to be conclusive
evidence that such officer(s) deem(s) all of the terms and provisions thereof
to be proper;

 

FURTHER RESOLVED, that each and every officer
of this Corporation is authorized to take such action from time to time on
behalf of this Corporation as he may deem necessary, advisable or proper in
order to carry out and perform the obligations of this Corporation under the
Credit Agreement and other agreements and documents executed and delivered by
this Corporation pursuant to or in connection with the Credit Agreement.

 

FURTHER RESOLVED, that the Secretary or any
other officer of this Corporation is authorized to certify to the Banks and the
Agent a copy of these resolutions and the names and signatures of this
Corporation’s officers or employees hereby authorized to act hereunder, and the
Banks and Agent are hereby authorized to rely upon such certificate until
formally advised by a like certificate of any change therein, and is hereby
authorized to rely on any such additional certificates.

 

22

 

I FURTHER CERTIFY THAT the following persons
have been appointed or elected and are now acting as officers or employees of
said corporation in the capacity set before their respective names:

 

	
  NAME

  	
   

  	
  TITLE

  	
   

  	
  SIGNATURE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

I FURTHER CERTIFY THAT the Articles of
Incorporation attached hereto as Exhibit A and the Bylaws attached
hereto as Exhibit B are, respectively, true, complete and correct copies
of this Corporation’s Articles of Incorporation, duly filed with the Secretary
of State of the state of [state], and the Bylaws of this Corporation, which
Articles and Bylaws have been duly adopted by this Corporation and are
presently in full force and effect.

 

IN WITNESS WHEREOF, I have subscribed my name
as Secretary as of September 22, 2004.

 

 

	
   

  	
  Secretary

  
	
   

  	
  AMERICAN EQUITY INVESTMENT LIFE

  
	
   

  	
  HOLDING COMPANY

  

 

23

 

Exhibit B

PLEDGE AGREEMENT

 

THIS PLEDGE AGREEMENT (this “Agreement”),
dated as of September 22, 2004, is made between AMERICAN EQUITY INVESTMENT LIFE
HOLDING COMPANY, an Iowa corporation (herein, called the “Pledgor”), and U.S.
BANK NATIONAL ASSOCIATION, as agent (in such capacity, the “Agent”) for the
Banks party to the Credit Agreement, as hereinafter defined.

 

RECITALS

 

A.                                   The Pledgor, the Banks named
therein and the Agent have entered into a Credit Agreement dated as of December
30, 2002 (the “Existing Credit Agreement”), pursuant to which the Banks have
made certain credit facilities available to the Pledgor, said credit facilities
being evidenced by the Notes of the Pledgor in favor such Banks (the “Existing
Note”).

 

B.                                     The Pledgor’s obligations under the
Existing Credit Agreement, the Existing Notes have the benefit of, inter
alia, a Second Amended and Restated Borrower Pledge Agreement dated as
of April 6, 2000 (the “Existing Pledge Agreement”).

 

C.                                     The parties are, concurrently
herewith, amending and restating the Existing Credit Agreement in the form of a
Credit Agreement, dated as of September 22, 2004 (as the same may be further
amended, supplemented, restated or otherwise modified from time to time, the “Credit
Agreement”).

 

D.                                    It is a condition precedent to
the execution and delivery of the Credit Agreement by the Agent that the
Existing Pledge Agreement be amended and restated in the form of this
Agreement.

 

NOW, THEREFORE, in consideration of the
premises, the extension of financial accommodations by the Banks to the Pledgor
under the Credit Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Pledgor agrees
with the Agent, for the benefit of the Agent and the Banks, that the Existing
Pledge Agreement is hereby amended and restated in its entirety to read as
follows:

 

SECTION 1   Definitions.

 

Capitalized terms used herein, unless
otherwise specified, shall have the meanings assigned thereto in the Credit
Agreement; provided that such definitions shall survive any termination of the
Credit Agreement. In addition, when used herein the following terms shall have
the following meanings:

 

“AEILIC “ shall mean American Equity
Investment Life Insurance Company, an Iowa corporation.

 

“Collateral” see Section 2.

 

“Credit Agreement” see Recital C.

 

24

 

“Indemnified Obligations” see Section
7(b)(vi).

 

“Permitted Actions” see Section 5(b).

 

“Pledged Shares” see Section 2.

 

“Pledged Surplus Notes” see Section 2.

 

“Securities” shall mean securities (whether
debt or equity) issued by AELLIC (other than insurance policies or other
insurance products which may constitute securities) including, without
limitation, the common and preferred stock, partnership units and
participations, notes, bonds, debentures, trust receipts and other obligations
or instruments, including debt instruments and tax-exempt securities of AEILIC
(including, without limitation, warrants, rights tied to AEILIC’s earnings, put
and call options and other options relating thereto or any combination thereof,
or any instruments convertible into any of the foregoing.

 

“Uniform Commercial Code” shall mean the
Uniform Commercial Code as in effect from time to time in the State of Minnesota.

 

SECTION 2   Pledge.

 

To secure the prompt and complete payment and
performance of the Obligations, the Pledgor hereby grants, pledges,
hypothecates, assigns, transfers, sets over and delivers unto the Agent for the
benefit of the Agent and the Banks a Lien on the following (herein collectively
called the “Collateral”):

 

(a) the shares of capital stock of AEILIC and
all other Securities, if any, described in Attachment 1 hereto whether in
certificated form or otherwise, including the certificates representing or
evidencing the certificated Securities, and with respect to any uncertificated
Securities, such uncertificated Securities shall contain a notation of the Lien
and pledge granted to the Agent hereunder on the books and records of AEILIC
(herein called the “Pledged Shares”), together with all cash, securities,
interests, dividends, rights, notes, instruments and other property at any time
and from time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such Pledged Shares;

 

(b)                                 all additional shares of capital
stock of AEILIC and other Securities from time to time acquired by the Pledgor
in any manner including, without limitation, any uncertificated Securities
(which additional shares of capital stock and Securities shall constitute a
part of, and be, “Pledged Shares”), and, in the case of certificated
Securities, the certificates representing or evidencing such additional shares,
together with all cash, securities, interest, dividends, rights, notes,
instruments and other property at any time and from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such additional shares;

 

(c)                                  all surplus notes or debentures
issued at any time by AEILIC to the Pledgor (as the same shall thereafter be
amended, extended, renewed, modified or replaced from time to time, called the “Pledged
Surplus Notes”) and all cash, securities, interests, rights, notes, instruments
and other property at any time and from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
Pledged Surplus Notes;

 

25

 

(d)                                 all other property hereafter
delivered to the Agent in substitution for or in addition to any of the
foregoing, all certificates and instruments representing or evidencing such
other property, together with all cash, securities, interest, dividends, rights
and other property at any time and from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all thereof; and

 

(e)                                  all proceeds of all of the
foregoing.

 

TO HAVE AND TO HOLD the Collateral, together
with all rights, titles, interests, privileges and preferences appertaining or
incidental thereto, unto the Agent, its successors and assigns, forever; subject,
however, to the terms, covenants and conditions and termination
provisions hereafter set forth.

 

The Pledgor agrees to deliver to the Agent,
promptly upon receipt and in the case of the Pledged Shares and the Pledged
Surplus Notes, in due form for transfer (i.e., endorsed
in blank accompanied by undated stock or bond powers executed in blank or
registered on the books of AEILIC) and, subject to the provisions of Section
6 hereof, any Collateral which may at any time or from time to time be in
or come into possession or control of the Pledgor; and prior to the delivery
thereof to the Agent, such Collateral shall be held by the Pledgor separate and
apart from its other property and in express trust for the Agent.

 

SECTION 3   Representations,
Warranties and Covenants.

 

(a)                                  The Pledgor represents and
warrants to the Agent that: (i) the Pledged Shares are duly authorized and
validly issued and are fully paid and non-assessable; (ii) except for Liens in
favor of the Agent hereunder and claims and rights of third parties arising
solely through acts of the Agent, the Agent has and will continue to have at
all times as security for the Obligations a valid, first priority perfected
Lien on the Collateral and the proceeds thereof free of all other Liens, claims
and rights of third parties whatsoever; (iii) to the extent any Securities are
evidenced by certificates, the Pledgor has delivered to the Agent, for the
benefit of the Banks, for pledge under this Agreement on the date hereof the
certificates representing all the Securities which it owns; (iv) the Pledged
Shares and the Pledged Surplus Notes represent and will continue to represent
all shares of the issued and outstanding shares of capital stock and other
Securities of AEILIC and (v) the Pledgor will, at all times, keep pledged to
the Agent, for the benefit of the Banks, pursuant hereto all of the capital
stock, surplus notes and other Securities of AEILIC. The Pledgor agrees to
endorse and deliver to the Agent for pledge hereunder, promptly upon its
obtaining any thereof, any additional Collateral and to hold such additional
Collateral, pending such delivery, in trust for the Agent, separate and
distinct from any other property of the Pledgor. As of the date of any such
delivery of additional Securities, surplus notes, certificates or instruments
to the Agent, the Pledgor represents and warrants that (1) it will own such
Securities, surplus notes, certificates and instruments free and clear of any
rights of any other Person (other than the rights created in the Agent
hereunder), (2) it will have good and marketable title to said Securities,
surplus notes, certificates and instruments and have the right to pledge such
Securities, surplus notes, certificates and instruments to the Agent pursuant
to this Agreement and (3) it will have pledged to the Agent, as at such date,
all of the capital stock, surplus notes and other Securities of AEILIC owned,
directly or indirectly by the Pledgor. The Pledgor shall have represented and
warranted by delivery of any additional Securities, surplus notes, certificates
or instruments, that at the time of such

 

26

 

delivery the Agent has a valid,
first priority perfected Lien on said Securities, surplus notes, certificates
or instruments and the proceeds thereof free of all Liens, claims and rights of
third parties whatsoever (except for the Lien of the Agent created under this
Agreement). All documentary, stamp and other taxes and fees owing in connection
with the issuance, transfer and/or pledge of the Pledged Shares, the Pledged
Surplus Notes and other Securities, certificates or instruments have been paid
and will hereafter be paid by the Pledgor as such become due and payable.

 

(b)                                 The Pledgor further represents
and warrants to the Agent that it is the lawful owner of the Collateral, free
of all Liens, (except for the Lien of the Agent created under this Agreement),
with full right to deliver, pledge, assign and transfer such Collateral to the
Agent as Collateral hereunder. The pledge of the Collateral effected by this
Agreement is effective to vest in the Agent the rights of Agent in the
Collateral set forth herein.

 

(c)                                  The Pledgor additionally
represents and warrants to the Agent that (i) each of the Pledgor and its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of its state of formation, (ii) the execution and delivery of this
Agreement and the performance by the Pledgor of its obligations hereunder are
within its corporate powers, have been duly authorized by all necessary
corporate action (including, without limitation, shareholder approval if
required), (iii) each of the Pledgor and its Subsidiaries has received all material
governmental consents and approvals (if any shall be required) necessary for
such execution, delivery and performance (except governmental consents required
by any Applicable Insurance Code to foreclose on the Pledged Shares or Pledged
Surplus Notes) and such execution, delivery and performance do not and will not
contravene or conflict with, result in any breach of, or constitute a default
under, any material agreement or instrument binding on it or result in the
creation or imposition of or the obligation to create or impose any Lien
(except for the Lien of the Agent created under this Agreement) and (iv) this
Agreement is the legal, valid and binding obligation of the Pledgor,
enforceable against the Pledgor in accordance with its terms, except to the
extent such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws affecting
the enforcement of creditors’ rights generally and by the effect of general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity (including, without limitation, good faith, materiality
and reasonableness) or at law).

 

(d)                                 The Pledgor additionally
covenants and agrees with the Agent that, until the expiration or termination
of the Commitments and thereafter so long as any of the Obligations remain
outstanding, the Pledgor will, unless the Agent shall otherwise consent in
writing:

 

(i)                                     at the Pledgor’s sole expense,
promptly deliver to the Agent, from time to time upon request of the Agent,
such stock powers and other documents (including UCC financing statements),
satisfactory in form and substance to the Agent, with respect to the Collateral
as the Agent may reasonably request, to perfect, preserve and protect, and to
enable the Agent to enforce, its rights and remedies hereunder;

 

(ii)                                  not sell, assign, exchange,
pledge or otherwise dispose of or transfer any of its rights to any of the
Collateral;

 

27

 

(iii) not create or suffer to exist any Lien
in or with respect to any of the Collateral (except for the Lien of the Agent
created under this Agreement);

 

(iv) not make or consent to any amendment or
other modification or waiver with respect to any of the Collateral, or enter
into any agreement or permit to exist any restriction with respect to any of
the Collateral other than pursuant hereto; and

 

(v)                                 not take or fail to take any
action which would in any manner impair the enforceability of the Agent’s Lien
on any of the Collateral.

 

(e)                                  The information contained in
Attachment 1 is true and accurate in all respects.

 

SECTION 4   Care of
Collateral.

 

The Agent shall exercise reasonable care in
the custody and preservation of the Collateral. In addition, the Agent shall be
deemed to have exercised reasonable care in the custody and preservation of the
Collateral if it takes such action for that purpose as the Pledgor requests in
writing, but failure of the Agent to comply with any such request shall not of
itself be deemed a failure to exercise reasonable care, and no failure of the
Agent to preserve or protect any rights with respect to the Collateral against
prior or other parties, or to do any act with respect to preservation of the
Collateral not so requested by the Pledgor, shall be deemed a failure to
exercise reasonable care in the custody or preservation of the Collateral.

 

SECTION 5   Certain Rights
Regarding Collateral and Obligations.

 

(a)                                  Subject to Sections 5(c)
and 6 hereof, the Agent may, and upon the request of the Required Banks
shall, from time to time, after the occurrence and during the continuance of an
Event of Default under the Credit Agreement, without notice to the Pledgor, (i)
transfer all or any part of the Collateral into the name of the Agent or its
nominee or sub-agent, with or without disclosing that such Collateral is
subject to the Lien created hereunder, (ii) notify any Person obligated on any
of the Collateral to make payment to the Agent of any amounts due or to become
due thereunder, and (iii) enforce collection of any of the Collateral by suit
or otherwise.

 

(b)                                 If
at any time the Agent takes any or all of the Permitted Actions (as hereinafter
defined) whether such actions are taken before or after any of the Obligations
shall be due and payable and without notice to the Pledgor, such actions shall
not affect the enforceability of this Agreement. The Agent shall have taken a “Permitted
Action” if it shall (to the extent permitted by the Credit Agreement and the
other Loan Documents): (i) retain or obtain a Lien upon any property to secure
payment and performance of any of the Obligations or any obligation hereunder,
(ii) retain, obtain or release the primary or secondary obligation of any
Person, in addition to the Pledgor, with respect to one or more of the
Obligations, (iii) create, extend or renew for any periods (whether or not
longer than the original period) or alter or exchange any of the Obligations,
or release or compromise any obligation of any nature of any Person with respect
to any of the Obligations, (iv) release or fail to perfect its Lien upon, or
impair, surrender, release or permit any substitution or exchange for, all or
any part of any property securing any of the Obligations or any obligation
hereunder, or create, extend or renew for one or more periods (whether or not
longer than the original period) or release, compromise, alter or exchange any
obligations of any nature of any Person with respect to any such property
(provided, that the Agent may release all or any

 

28

 

portion of the Collateral to the Pledgor, and
that upon such release, the rights of the Agent under this Agreement shall, to
the extent of such Collateral, be deemed terminated), or (v) resort to the
Collateral for payment of any of the Obligations whether or not the Agent (1)
shall have resorted to any other property securing any of the Obligations or
any obligation hereunder or (2) shall have proceeded against any Person
primarily or secondarily obligated with respect to any of the Obligations (all
of the actions referred to in preceding clauses (1) and (2) being hereby
expressly waived by the Pledgor).

 

(c)           The
Agent shall have no right to vote the Pledged Shares or other Collateral or
give consents, waivers or ratifications in respect thereof prior to the
occurrence and during the continuance of an Event of Default. After the
occurrence and during the continuance of an Event of Default, the Pledgor shall
have the right to vote any and all of the Pledged Shares and other Collateral
and give consents, waivers and ratifications in respect thereof unless and
until it receives notice from the Agent that such right has been terminated.
The Pledgor agrees to deliver (properly endorsed when required) to the Agent,
after the occurrence of and during the continuance of an Event of Default shall
have occurred and shall be continuing, promptly upon request of the Agent, such
proxies and other documents as may be necessary for the Agent to exercise the
voting power with respect to the Pledged Shares and other Collateral then or
previously owned by the Pledgor.

 

SECTION 6   Dividends, etc.

 

(a)           So
long as no Event of Default shall have occurred and shall be continuing:

 

(i)            Subject
to the provisions of the Credit Agreement and notwithstanding the provisions of
Section 2(a) of this Agreement, the Pledgor shall be entitled to receive
any and all cash dividends and payments on the Collateral which it is otherwise
entitled to receive, but any and all Securities and/or liquidating dividends,
payments, distributions in property, returns of capital made on or in respect
of the Collateral, whether resulting from a subdivision, combination,
reclassification or conversion of the outstanding capital stock or other
Securities of AEILIC, or received in exchange for the Collateral or any part
thereof, or as a result of any merger, consolidation, acquisition or other
exchange of assets to which AEILIC may be a party or otherwise, and any and all
cash and other property received in exchange for any Collateral shall be and
become part of the Collateral pledged hereunder and, if received by the
Pledgor, shall forthwith be delivered to the Agent or its designated nominee
(accompanied, if appropriate, by proper instruments of assignment and/or stock
powers executed by the Pledgor in accordance with the Agent’s instructions) to
be held by the Agent subject to the terms of this Agreement and, until delivery
to the Agent, shall be held by the Pledgor separate and apart from its other
property in trust for the Agent, for the benefit of the Banks.

 

(ii)           If
the Collateral or any part thereof shall have been registered in the name of
the Agent or its sub-agent, the Agent shall execute and deliver (or cause to be
executed and delivered) to the Pledgor all such dividend orders and other
instruments as the Pledgor may request for the purpose of enabling the Pledgor
to receive the dividends or other payments which it is authorized to receive
and retain pursuant to Section 6(a)(i) above.

 

29

 

(b)           Upon
the occurrence and during the continuance of an Event of Default, all rights of
the Pledgor pursuant to Section 6(a)(i) hereof shall cease and the Agent shall
have the sole and exclusive right and authority to receive and retain the
dividends and other payments with respect of the Collateral which the Pledgor
would otherwise be authorized to retain. All such dividends, payments, and all
other distributions and payments made on or in respect of the Collateral which
may at any time and from time to time be held by the Pledgor, shall, until
delivery to the Agent, be held by the Pledgor separate and apart from its other
property in trust for the Agent. Any and all money and other property paid over
to or received by the Agent pursuant to the provisions of this paragraph (b)
shall be retained by the Agent as additional Collateral hereunder and be
applied in accordance with the provisions hereof.

 

SECTION 7   Default.

 

(a)           Upon
the occurrence and during the continuance of an Event of Default, the Agent may
exercise from time to time any rights and remedies available to it under the
Credit Agreement, the Uniform Commercial Code or the other Loan Documents or
otherwise available to it, including, without limitation, sale, assignment, or
other disposal of the Collateral in exchange for cash or credit. If any
notification of intended disposition of any of the Collateral is required by
law, such notification, if mailed, shall be deemed reasonably and properly
given if mailed to the Pledgor at least ten (10) days before such disposition
as provided in Section 12.5 of the Credit Agreement. Any proceeds of any
disposition of Collateral shall be applied as provided in Section 8
hereof. No rights and remedies of the Agent expressed hereunder are intended to
be exclusive of any other right or remedy, but every such right or remedy shall
be cumulative and shall be in addition to all other rights and remedies herein
conferred, or conferred upon the Agent under any other agreement or instrument
relating to any of the Obligations or security therefor or now or hereafter
existing at law or in equity or by statute. No delay on the part of the Agent
in the exercise of any right or remedy shall operate as a waiver thereof, and
no single or partial exercise by the Agent of any right or remedy shall
preclude any other or further exercise thereof or the exercise of any other
right or remedy.

 

(b)(i)       The
Pledgor agrees that in any sale of any of the Collateral, the Agent is
authorized to comply with any limitation or restriction in connection with such
sale as counsel may advise the Agent is necessary in order to avoid any
violation of applicable law (including, without limitation, compliance with
such procedures as may restrict the number of prospective bidders and
purchasers, require that such prospective bidders and purchasers have certain
qualifications, and restrict such prospective bidders and purchasers to persons
who will represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or resale of such
Collateral), or in order to obtain any required approval of the sale or of the
purchaser by any governmental regulatory authority or official, and the Pledgor
further agrees that such compliance shall not result in such sale being considered
or deemed not to have been made in a commercially reasonable manner, nor shall
the Agent or any Bank be liable or accountable to the Pledgor for any discount
allowed by reason of the fact that such Collateral is sold in compliance with
any such limitation or restriction.

 

(ii)           Without limiting
the rights of the Agent under any other provision of this Agreement, and in
addition thereto, the Pledgor agrees that, to the maximum extent permitted by
law, after an Event of Default shall have occurred and shall be continuing,

 

30

 

upon written
request from the Agent, the Pledgor shall or shall cause AEILIC to prepare,
file and cause to become effective promptly, registration statements complying
with the Securities Act of 1933, as amended, for the public sale of such of the
Collateral as the Agent may elect, and to take comparable action to permit such
sales under the securities laws of such jurisdictions as the Agent may
designate. The Pledgor further agrees to cause AEILIC to enter into and perform
its obligations under one or more underwriting agreements in connection
therewith, containing customary representations, warranties, covenants and
indemnities and contribution provisions if requested by the Agent. if such
registration statements are filed, the Pledgor agrees to cause AEILIC (A) to
keep any such registration statement and related prospectus current and in
compliance with applicable federal and state securities laws so long as
required to satisfy applicable prospectus delivery requirements and (B) at the
request of the Agent at any time after the effective date of any such
registration statement, to use reasonable efforts to file post-effective
amendments to such registration statement so that the Agent’s sales of Pledged
Shares or other Collateral will be covered by a current prospectus and can be
made in compliance with all applicable federal and state securities laws.

 

(iii)          The
Pledgor further agrees, after an Event of Default shall have occurred and shall
be continuing, and upon written request from the Agent, to (x) deliver, and
cause AEILIC to deliver, to the Agent such information as the Agent shall
reasonably request for inclusion in any registration statement, prospectus or
offering memorandum or in any preliminary prospectus or preliminary offering
memorandum or any amendment or supplement to any thereof or in any other
writing prepared in connection with the offer, sale or resale of all or any
portion of the Pledged Shares or other Collateral, which information shall not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated or necessary to make such information not
misleading, and (y) do or cause to be done all such other acts and things as
may be necessary to make such offer, sale or resale of all or any portion of
the Pledged Shares or other Collateral valid and binding and in compliance with
any and all applicable laws, regulations, orders, writs, injunctions, decrees
or awards of any and all courts, arbitrators or governmental agencies or
instrumentalities, domestic or foreign, having jurisdiction over any such
offer, sale or resale.

 

Without limiting the foregoing paragraph, if
the Agent decides to exercise its right to sell all or any of the Pledged
Shares or other Collateral, upon written request, the Pledgor shall furnish or
cause to be furnished to the Agent all such information as the Agent may
request in order to qualify such Pledged Shares or other Collateral as exempt
securities, or the sale or resale of such Pledged Shares or other Collateral as
exempt transactions, under federal and state securities laws. The Pledgor
agrees to allow, and to cause AEILIC to allow, upon request by the Agent, the
Agent and any underwriter access at reasonable times and places to the books,
records and premises of AEILIC; the Pledgor further agree~ to assist, and cause
AEILIC to assist, the Agent, any underwriter, any agent of any thereof, and any
counsel, accountant or other expert for any thereof, an inspection, evaluation,
and any other “due diligence” action of or with respect to any such books,
records and premises; and the Pledgor further agrees to cause any independent
public accountant for AEILIC to furnish a letter to the Agent and the
underwriters in customary form and covering matters of the type customarily
covered by letters of accountants for issuers to underwriters.

 

31

 

(iv)          The
Pledgor, upon the occurrence and during the continuance of an Event of Default,
further agrees that the Agent shall have the right, for and in the name, place
and stead of the Pledgor to execute endorsements, assignments, stock powers and
other instruments of conveyance or transfer with respect to all or any of the
Collateral, and may, without demand, presentment or notice of any kind
appropriate and apply toward the payment of the Obligations in order of
application set forth in Section 8 any balances, credits, deposits, accounts or
monies of the Pledgor held by the Agent.

 

(v)           Without
limiting the foregoing paragraph, upon the occurrence and during the
continuance of an Event of Default, the Agent may, to the fullest extent
permitted by applicable law, without notice, advertisement, hearing or process
of law of any kind, (x) sell any or all of the Collateral, free of all rights
and claims of the Pledgor therein and thereto at any public or private sale or
brokers’ board, and (y) bid for and purchase any or all of the Collateral at
any such public sale free from rights of redemption, stay or appraisal of the
Pledgor.

 

(vi)          The
Pledgor further agrees to indemnify and hold harmless the Agent and the Banks
and each of their respective officers, directors, employees, agents, successors
and assigns, and any Person in control of any thereof, from and against any
loss, liability, claim, damage and expense, including, without limitation,
reasonable attorneys’ fees actually incurred (in this paragraph collectively
called the “Indemnified Obligations”), under federal and state securities laws
or otherwise insofar as such loss, liability, claim, damage or expense was
caused by any untrue statement or alleged untrue statement of a material fact
contained in any registration statement, any preliminary prospectus or the
prospectus, or was caused by any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or Obligations were caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to the
Agent furnished to the Pledgor in writing by the Agent expressly for use
therein, such indemnification to remain operative regardless of any
investigation made by or on behalf of the Agent or any successors thereof, or
any Person in control of any thereof. In connection with a public sale or other
distribution, the Pledgor will provide customary indemnification to any
underwriters, their respective successors and assigns, their respective
officers and directors and each Person who controls any such underwriter
(within the meaning of the Securities Act of 1933, as amended). If and to the
extent that the foregoing undertakings in this paragraph may be unenforceable for
any reason, the Pledgor agrees to make the maximum contribution to the payment
and satisfaction of each of the Indemnified Obligations which is permissible
under applicable law. The obligations of the Pledgor under this Section
7(b)(vi) shall survive any termination of this Agreement.

 

(vii)         The
Pledgor and the Agent acknowledge that the commissioners or departments of
insurance of various states under all Applicable Insurance Codes, rules and
regulations may have to consent to or approve any such sale, transfer or other
disposition of the Collateral and the terms and conditions thereof. The Pledgor
hereby waives and agrees not to assert against the Agent any claim that any
such sale, transfer or other disposition hereunder, or the terms or conditions thereof,
were not commercially reasonable because of any provision of any such insurance
law, rule or regulation or any matter related thereto.

 

32

 

SECTION 8   Application of
Proceeds.

 

All of the proceeds from the sale or
disposition of any item of the Collateral sold pursuant to the terms of Section
7 hereof and/or, after an Event of Default shall have occurred and shall be
continuing, the cash held as Collateral hereunder shall be applied by the Agent
as follows:

 

First: to the payment of all of the
reasonable costs and expenses of the Agent actually incurred by retaking,
holding, preparing for sale or lease, selling, leasing and the like, including
(i) the reasonable costs and expenses actually incurred by the Agent and the
reasonable fees, costs and expenses of counsel actually incurred by the Agent
(whether or not such costs and expenses are incurred by the Agent on its own
behalf or on behalf of the Banks), and (ii) the payment of all reasonable costs
and expenses actually incurred by the Agent in connection with the
administration and enforcement of this Agreement, to the extent that such
advances, costs and expenses shall not have been reimbursed to the Agent;

 

Second: to the payment in full of the
Obligations in such order as is consistent with the Credit Agreement and to the
extent not addressed in the Credit Agreement as the Agent may determine from
time to time in its sole discretion (such application to be made ratably among
the Banks); and

 

Third: the balance, if any, of such
proceeds shall be paid to the Pledgor, its successors and assigns, or as a
court of competent jurisdiction may direct.

 

SECTION 9   Authority of
the Agent.

 

The Agent shall have, and be entitled to
exercise, all such powers hereunder (to the extent permitted by the Credit
Agreement) as are specifically delegated to the Agent by the terms hereof,
together with such powers as are incidental thereto, for the benefit of the
Banks. As to matters not expressly provided for by this Pledge Agreement
(including, without limitation, enforcement or collection of this Pledge
Agreement) the Agent shall not be required to exercise any discretion, but
shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Required Banks and such instructions shall be binding upon all Banks. The Agent
may execute any of its duties hereunder by or through agents or employees and
shall be entitled to retain counsel and to act in reliance upon the reasonable
advice of such counsel concerning all matters pertaining to its duties
hereunder. Neither the Agent, the Banks nor any director, officer or employee
thereof shall be liable for any action taken or omitted to be taken by it
hereunder or in connection herewith, except for its own gross negligence or
willful misconduct. Without limiting the generality of the foregoing, the Agent
shall not be responsible to any Bank for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Pledge Agreement or
any other Loan Document or other support or security (including the validity,
priority or perfection of any Lien), or any other document furnished in
connection with any of the foregoing; provided that, notwithstanding the
foregoing, the Agent shall comply with Section 4 hereof. The Pledgor
agrees to reimburse the Agent, on demand, for all reasonable costs and expenses
actually incurred by the Agent in connection with the administration and
enforcement of this Agreement (including, without limitation, reasonable costs
and expenses actually incurred by any agent employed by the Agent) and agrees
to indemnify (which indemnification shall survive any termination of this
Agreement) and hold harmless the Agent and the Banks (and any such

 

33

 

agent) from and against any and all liability
incurred by the Agent or any Bank or any such agent thereof, hereunder or in
connection herewith, unless such liability shall be due to gross negligence or
willful misconduct on the part of the Agent or any Bank or such agent, as the
case may be.

 

SECTION 10   Termination.

 

The Pledgor agrees that its pledge hereunder
shall (notwithstanding, without limitation, that at any time or from time to
time all Obligations may have been paid in full) terminate only when all
Obligations (except Obligations which by the terms of the Credit Agreement
survive the payment in full of the Loans and the termination of this Agreement)
(including, without limitation, any extensions or renewals of any thereof) and
all expenses (including, without limitation, reasonable attorneys’ fees and
legal expenses) paid or actually incurred by the Agent or the holder or the
holders of the Notes in endeavoring to enforce this Agreement, the Credit
Agreement and the other Loan Documents to which the Agent is a party or of
which it is a beneficiary shall have been finally paid in full and all other
obligations of the Pledgor hereunder and thereunder have been fully performed,
and all Commitments under the Credit Agreement have been terminated, at which
time the Agent shall reassign and redeliver (or cause to be reassigned and
redelivered) to the Pledgor, or to such Person or Persons as the Pledgor shall
designate, such of the Collateral (if any) as shall not have been sold or
otherwise applied by the Agent pursuant to the terms hereof and shall still be
held by it hereunder, together with appropriate instruments of reassignment and
release. Any such reassignment shall be without recourse upon, or
representation or warranty by, the Agent or any Bank and at the sole cost and
expense of the Pledgor.

 

SECTION 11   Miscellaneous.

 

(a)           All
notices or other communications hereunder shall be given in the manner
specified under Section 12.5 of the Credit Agreement, whether or not
then in effect.

 

(b)           This
Agreement, and the terms, covenants and conditions hereof, shall be binding
upon and inure to the benefit of the parties hereto, and their respective
successors and assigns, except the Pledgor shall not be permitted to assign
this Agreement nor any interest herein nor in the Collateral, nor any part
thereof, nor otherwise pledge, encumber or grant any option with respect to the
Collateral, nor any part thereof.

 

(c)           SUBMISSION
TO JURISDICTION: WAIVER OF VENUE. EACH OF THE PLEDGOR AND THE AGENT (A) HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY MINNESOTA STATE OR FEDERAL COURT
SITTING IN HENNEPIN COUNTY OR RAMSEY COUNTY, MINNESOTA OVER ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS, AND EACH OF THE PLEDGOR AND THE AGENT “HEREBY IRREVOCABLY AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH MINNESOTA STATE OR FEDERAL COURT, AND (B) AGREES NOT TO
INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST THE OTHER PARTY HERETO OR THE
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY OF ANY THEREOF, ARISING OUT
OF OR RELATING TO THIS AGREEMENT, IN ANY COURT OTHER THAN AS HEREINABOVE SPECIFIED
IN THIS SECTION 11(C). EACH OF THE PLEDGOR AND THE AGENT

 

34

 

HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE IN ANY ACTION OR PROCEEDING (WHETHER BROUGHT BY THE PLEDGOR,
ANY OF ITS SUBSIDIARIES, THE AGENT, ANY BANK OR OTHERWISE) IN ANY COURT
HEREINABOVE SPECIFIED IN THIS SECTION 11(c) AS WELL AS ANY RIGHT IT MAY
NOW OR HEREAFTER HAVE TO REMOVE ANY SUCH ACTION OR PROCEEDING, ONCE COMMENCED,
TO ANOTHER COURT ON THE GROUNDS OF FORUM NON CON VENIENS OR OTHERWISE. EACH OF
THE PLEDGOR AND THE AGENT 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.

 

(d)           At
the option of the Agent, this Agreement, or a carbon, photographic or other
reproduction of this Agreement or of any Uniform Commercial Code financing
statement covering the Collateral or any portion thereof, shall be sufficient
as a Uniform Commercial Code financing statement and may be filed as such.

 

(e)           Subject
to Section 12.1 of the Credit Agreement, no amendment to, modification
or waiver of, or consent with respect to, any provision of this Agreement shall
in any event be effective unless the same shall be in writing and signed and
delivered by the Agent at the request of the Required Banks, and then any such
amendment, modification, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.

 

(f)            The
section headings in this Agreement are inserted for convenience of reference
and shall not be considered a part of this Agreement or used in its
interpretation.

 

(g)           The
Pledgor hereby expressly waives: (i) notice of the acceptance by the Agent of
this Agreement, (ii) notice of the existence or creation or non-payment of all
or any of the Obligations, (iii) presentment, demand, notice of dishonor,
protest, and all other notices whatsoever (except as otherwise required
herein), and (iv) all diligence in collection or protection of or realization
upon the Obligations, or any security for or guaranty of any of the foregoing.

 

(h)           The
Agent may, from time to time, without notice to the Pledgor, assign or transfer
any or all of the Obligations or any interest therein; and, notwithstanding any
such assignment or transfer or any subsequent assignment or transfer thereof,
such Obligations shall be and remain Obligations for the purposes of this Agreement,
and each and every immediate and successive assignee or transferee of any of
the Obligations or of any interest therein shall, to the extent of the interest
of such assignee or transferee in the Obligations, be entitled to the benefits
of this Agreement to the same extent as if such assignee or transferee were the
Agent; provided,  however, that, unless the Agent shall otherwise
consent in writing, the Agent shall have an unimpaired right, prior and
superior to that of any such assignee or transferee, to enforce this Agreement,
for the benefit of the Agent, as to those of the Obligations which the Agent
has not assigned or transferred.

 

(i)            The
Pledgor agrees that, if at any time all or any part of any payment theretofore
applied by the Agent to any of the Obligations is or must be rescinded or
returned by the Agent for any reason whatsoever (including, without limitation,
the insolvency, bankruptcy or reorganization of any of the Pledgor, AEILIC),
such Obligations shall, for the purposes of this Agreement, to the

 

35

 

extent that such payment is or must be
rescinded or returned, be deemed to have continued in existence,
notwithstanding such application by the Agent, and the pledge by the Pledgor
hereunder shall continue to be effective or be reinstated, as the case may be,
as to such Obligations, all as though such application by the Agent had not
been made.

 

(j)            No
action of the Agent permitted hereunder shall in any way affect or impair the
rights of the Agent and the obligations of the Pledgor under this Agreement.
The Pledgor hereby acknowledges that there are no conditions to the
effectiveness of this Agreement.

 

(k)           All
obligations of the Pledgor and rights of the Agent or obligation expressed in
this Agreement shall be in addition to and not in limitation of those provided
in applicable law or in any other written instrument or agreement relating to
any of the Obligations.

 

(l)            GOVERNING
LAW. THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS
OF THE STATE OF MINNESOTA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. ALL
OBLIGATIONS OF THE PLEDGOR AND RIGHTS OF THE AGENT SHALL BE IN ADDITION TO AND
NOT IN LIMITATION OF THOSE PROVIDED BY APPLICABLE LAW.

 

(m)          This
Agreement may be executed in any number of counterparts, each of which shall
for all purposes be deemed an original, but all such counterparts shall
constitute but one and the same Agreement. The Pledgor hereby acknowledges
receipt of a true, correct and complete counterpart of this Agreement.

 

(n)           The
Agent acts herein as agent for itself, the Banks and any and all future holders
of the Obligations.

 

(o)           The
Agent hereby acknowledges that its exercise of any rights or remedies hereunder
shall be subject to any Applicable Insurance Code and agrees to first comply
with any Applicable Insurance Code in exercising its rights hereunder.

 

(p)           WAIVER
OF JURY TRIAL. EACH OF THE PLEDGOR AND THE AGENT HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT,
ANY OTHER LOAN DOCUMENT OR UNDER ANY OTHER DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR
ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT, AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY; THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY
LEFT BLANK]

 

36

 

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

 

	
   

  	
  AMERICAN EQUITY INVESTMENT LIFE

  HOLDING COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Wendy L. Carlson

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  CFO & General Counsel

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  U.S. BANK NATIONAL ASSOCIATION, as

  Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ziad W. Amra

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Corporate Banking Officer

  	
   

  
									

 

37

 

ATTACHMENT 1

 

LISTING
OF AMERICAN EQUITY’S STOCK PLEDGED

 

	
  Certificate

  Number

  	
   

  	
  Number of

  Shares of

  Stock

  	
   

  	
  % Ownership

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  01

  	
   

  	
   

  	
  2,500,000

  	
   

  	
  100

  	
  %

  
							

 

LISTING OF AMERICAN EQUITY’S SURPLUS NOTES
PLEDGED

 

	
  Note Number

  	
   

  	
  Face Amount

  	
   

  	
  % Ownership

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
   

  	
  $

  	
  2,500,000

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
   

  	
  $

  	
  5,500,000

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
   

  	
  $

  	
  17,000,000

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
   

  	
  $

  	
  16,000,000

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
   

  	
  $

  	
  10,000,000

  	
   

  	
  100

  	
  %

  

 

 

REVOLVING NOTE

 

	
  $20,000,000

  	
  Minneapolis,
  Minnesota: September 22, 2004

  

 

FOR VALUE RECEIVED, the undersigned AMERICAN EQUITY INVESTMENT LIFE
HOLDING COMPANY, an Iowa corporation (the “Borrower”), promises to pay to the
order of U.S. BANK NATIONAL ASSOCIATION (the “Bank”), on the Revolving
Termination Date, or other due date or dates determined under the Credit
Agreement hereinafter referred to, the principal sum of TWENTY MILLION DOLLARS
($20,000,000), or if less, the then aggregate unpaid principal amount of the
Revolving Loans (as such terms are defined in the Credit Agreement) as may be
made by the Bank under the Credit Agreement. 
All Revolving Loans and all payments of principal shall be recorded by
the holder in its records which records shall be conclusive evidence of the
subject matter thereof, absent manifest error.

 

The Borrower further promises to pay to the
order of the Bank interest on the aggregate unpaid principal amount hereof from
time to time outstanding from the date hereof until paid in full at the rates
per annum which shall be determined in accordance with the provisions of the
Credit Agreement.  Accrued interest shall
be payable on the dates specified in the Credit Agreement.

 

All payments of principal and interest under
this Note shall be made in lawful money of the United States of America in
immediately available funds at the office of U.S. Bank National Association, at
800 Nicollet Mall, Minneapolis, Minnesota 55402, or at such other place as may
be designated by the Agent to the Borrower in writing.

 

This Note is one of the Revolving Notes and
Notes referred to in, and evidences indebtedness incurred under, a Credit
Agreement dated as of September 22, 2004 (herein, as it may be amended,
modified or supplemented from time to time, called the “Credit Agreement”)
among the Borrower, the Banks, as defined therein (including the Bank) and U.S.
Bank National Association, as Agent, to which Credit Agreement reference is
made for a statement of the terms and provisions thereof, including those under
which the Borrower is permitted and required to make prepayments and repayments
of principal of such indebtedness and under which such indebtedness may be
declared to be immediately due and payable.

 

All parties hereto, whether as makers,
endorsers or otherwise, severally waive presentment, demand, protest and notice
of dishonor in connection with this Note.

 

This Note is made under and governed by the
internal laws of the State of Minnesota.

 

	
   

  	
  AMERICAN EQUITY INVESTMENT LIFE

  HOLDING COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Wendy L. Carlson

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  CFO & General Counsel

  	
   

  
						

 

 

REVOLVING NOTE

 

	
  $20,000,000

  	
  Minneapolis,
  Minnesota: September 22, 2004

  

 

FOR VALUE RECEIVED, the undersigned AMERICAN EQUITY INVESTMENT LIFE
HOLDING COMPANY, an Iowa corporation (the “Borrower”), promises to pay to the
order of LaSALLE NATIONAL BANK (the “Bank”), on the Revolving Termination Date,
or other due date or dates determined under the Credit Agreement hereinafter
referred to, the principal sum of TWENTY MILLION DOLLARS ($20,000,000), or if
less, the then aggregate unpaid principal amount of the Revolving Loans (as
such terms are defined in the Credit Agreement) as may be made by the Bank
under the Credit Agreement.  All
Revolving Loans and all payments of principal shall be recorded by the holder
in its records which records shall be conclusive evidence of the subject matter
thereof, absent manifest error.

 

The Borrower further promises to pay to the
order of the Bank interest on the aggregate unpaid principal amount hereof from
time to time outstanding from the date hereof until paid in full at the rates
per annum which shall be determined in accordance with the provisions of the
Credit Agreement.  Accrued interest shall
be payable on the dates specified in the Credit Agreement.

 

All payments of principal and interest under
this Note shall be made in lawful money of the United States of America in
immediately available funds at the office of U.S. Bank National Association, at
800 Nicollet Mall, Minneapolis, Minnesota 55402, or at such other place as may
be designated by the Agent to the Borrower in writing.

 

This Note is one of the Revolving Notes and
Notes referred to in, and evidences indebtedness incurred under, a Credit
Agreement dated as of September 22, 2004 (herein, as it may be amended,
modified or supplemented from time to time, called the “Credit Agreement”)
among the Borrower, the Banks, as defined therein (including the Bank) and U.S.
Bank National Association, as Agent, to which Credit Agreement reference is
made for a statement of the terms and provisions thereof, including those under
which the Borrower is permitted and required to make prepayments and repayments
of principal of such indebtedness and under which such indebtedness may be
declared to be immediately due and payable.

 

All parties hereto, whether as makers,
endorsers or otherwise, severally waive presentment, demand, protest and notice
of dishonor in connection with this Note.

 

This Note is made under and governed by the
internal laws of the State of Minnesota.

 

	
   

  	
  AMERICAN EQUITY INVESTMENT LIFE

  HOLDING COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Wendy L. Carlson

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  CFO & General Counsel

  	
   

  
						

 

 

REVOLVING NOTE

 

	
  $10,000,000

  	
  Minneapolis,
  Minnesota: September 22, 2004

  

 

FOR VALUE RECEIVED, the undersigned AMERICAN EQUITY INVESTMENT LIFE
HOLDING COMPANY, an Iowa corporation (the “Borrower”), promises to pay to the
order of WEST BANK (the “Bank”), on the Revolving Termination Date, or other
due date or dates determined under the Credit Agreement hereinafter referred
to, the principal sum of TEN MILLION DOLLARS ($10,000,000), or if less, the
then aggregate unpaid principal amount of the Revolving Loans (as such terms
are defined in the Credit Agreement) as may be made by the Bank under the
Credit Agreement.  All Revolving Loans
and all payments of principal shall be recorded by the holder in its records
which records shall be conclusive evidence of the subject matter thereof,
absent manifest error.

 

The Borrower further promises to pay to the
order of the Bank interest on the aggregate unpaid principal amount hereof from
time to time outstanding from the date hereof until paid in full at the rates
per annum which shall be determined in accordance with the provisions of the
Credit Agreement.  Accrued interest shall
be payable on the dates specified in the Credit Agreement.

 

All payments of principal and interest under
this Note shall be made in lawful money of the United States of America in
immediately available funds at the office of U.S. Bank National Association, at
800 Nicollet Mall, Minneapolis, Minnesota 55402, or at such other place as may
be designated by the Agent to the Borrower in writing.

 

This Note is one of the Revolving Notes and
Notes referred to in, and evidences indebtedness incurred under, a Credit
Agreement dated as of September 22, 2004 (herein, as it may be amended,
modified or supplemented from time to time, called the “Credit Agreement”)
among the Borrower, the Banks, as defined therein (including the Bank) and U.S.
Bank National Association, as Agent, to which Credit Agreement reference is
made for a statement of the terms and provisions thereof, including those under
which the Borrower is permitted and required to make prepayments and repayments
of principal of such indebtedness and under which such indebtedness may be
declared to be immediately due and payable.

 

All parties hereto, whether as makers,
endorsers or otherwise, severally waive presentment, demand, protest and notice
of dishonor in connection with this Note.

 

This Note is made under and governed by the
internal laws of the State of Minnesota.

 

	
   

  	
  AMERICAN EQUITY INVESTMENT LIFE

  HOLDING COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Wendy L. Carlson

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  CFO & General Counsel

  	
   

  
						

 

 

TRANCHE B NOTE

 

	
  $8,500,000

  	
  Minneapolis,
  Minnesota: September 22, 2004

  

 

FOR VALUE RECEIVED, the undersigned AMERICAN
EQUITY INVESTMENT LIFE HOLDING COMPANY, an Iowa corporation (the “Borrower”),
promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION (the “Bank”),
payable in installments in the amounts and on due dates set forth on Schedule I
attached hereto, the principal sum of EIGHT MILLION FIVE HUNDRED THOUSAND
DOLLARS ($8,500,000).

 

The Borrower further promises to pay to the
order of the Bank interest on the aggregate unpaid principal amount hereof from
time to time outstanding from the date hereof until paid in full at the rates
per annum which shall be determined in accordance with the provisions of the
Credit Agreement.  Accrued interest shall
be payable on the dates specified in the Credit Agreement.

 

The Tranche B LIBOR Margin for this Note and
the indebtedness evidenced hereby is 3.00% per annum.

 

All payments of principal and interest under
this Note shall be made in lawful money of the United States of America in
immediately available funds at the office of U.S. Bank National Association, at
800 Nicollet Mall., Minneapolis, Minnesota 55402, or at such other place as may
be designated by the Agent to the Borrower in writing.

 

This Note is one of the Tranche B Notes and
the Notes referred to in, and evidences indebtedness incurred under, a Credit
Agreement dated as of September 22, 2004 (herein, as it may be amended,
modified or supplemented from time to time, called the “Credit Agreement”)
among the Borrower, the Banks, as defined therein (including the Bank) and U.S.
Bank National Association, as Agent, to which Credit Agreement reference is
made for a statement of the terms and provisions thereof, including those under
which the Borrower is permitted and required to make prepayments and repayments
of principal of such indebtedness and under which such indebtedness may be
declared to be immediately due and payable.

 

All parties hereto, whether as makers,
endorsers or otherwise, severally waive presentment, demand, protest and notice
of dishonor in connection with this Note.

 

This Note is made under and governed by the
internal laws of the State of Minnesota.

 

	
   

  	
  AMERICAN EQUITY INVESTMENT LIFE

  HOLDING COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Wendy L. Carlson

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  CFO & General Counsel

  	
   

  
						

 

 

Schedule I to

Tranche B Note in the original

principal amount of $8,500,000

 

Principal of this Note shall be payable in installments of $425,000
each, due on the last day of March, June, September and December of each year,
commencing on December 31, 2004, with a final principal payment due on
September 30, 2009 equal in principal amount to the outstanding principal
balance hereunder on such date, if different from such other installments.Exhibit 10.1

Subject to
Confidential Treatment Request

Positions redacted as indicated

 

SECOND
AMENDMENT TO AMENDED AND RESTATED SUPPLY AGREEMENT

 

This Second Amendment to
Amended and Restated Supply Agreement (this “Amendment”) is made as of
the 1st day of July 2004 by and between Cabot Corporation, Cabot
Supermetals Division, formerly Cabot Performance Materials Division (“CSM”)
and Kemet Electronics Corporation (“Buyer”).

 

The parties to this Agreement
are parties to an Amended and Restated Supply Agreement dated as of December
10, 2002 (the “Original  Agreement”) regarding the supply of
tantalum products, as amended by a First Amendment to Amended and Restated
Supply Agreement dated as of March 18, 2004 (the “First Amendment”).
Collectively, the Original Agreement and the First Amendment are referred to
herein as the Agreement”.

 

The parties desire to further
amend the Agreement in certain respects on the terms and conditions set forth
herein. Capitalized terms used herein that are not defined herein shall have
the same meanings as in the Original Agreement.

 

NOW THEREFORE:

 

 In consideration of the mutual promises herein
contained and other good and valuable consideration, Buyer and CSM hereby agree
as follows:

 

1.               
PERIOD OF AGREEMENT.

 

The term of
the Agreement is extended for an additional three Contract Years and shall end
on December 31, 2009.

 

 

2.               
PRICE FOR REQUIRED PRODUCT QUANTITY OF POWDER.

 

Effective for purchases made on
or after July 1, 2004, the price for the Required Product Quantity of Powder
shall be REDACTED per pound.

 

3.               AMOUNT
OF REQUIRED PRODUCT QUANTITY OF POWDER FOR 2005 AND 2006.

 

The Required
Product Quantity of Powder for Contract Years 2005 and 2006 shall be REDACTED pounds per Contract Year.

 

 

4.               ADDITIONAL
ANNUAL QUANTITIES OF POWDER; PRICE.

 

Section 3 of
the Agreement is hereby amended in its entirety to read as follows:

 

Additional Annual Quantity.  In addition to purchasing in each Contract
Year any Required Product Quantity of each Product for such Contract Year,
Buyer shall offer to purchase, and agrees to purchase from CSM if CSM accepts
such offer, in each Contract Year, an aggregate additional quantity of Powder
equal to the quantity (the “Additional Annual Quantity”) that, when
added to the Required Product Quantity of Powder to be purchased by Buyer in
such Contract Year pursuant to section 2, shall be (i)  an additional REDACTED
pounds for Contract Year 2004 and (ii) REDACTED of the
aggregate quantity of Powder that is purchased by Buyer and its affiliates
(collectively, the “Buyer Group”) 
during such Contract Year for each Contract Year during the period
beginning January 1, 2005 through December 31, 2009 from all sources during the
applicable Contract Year.

 

 Forecast.  Solely for planning purposes, at least 30
days prior to the beginning of each Contract Year, Buyer will send a written
forecast (the “Annual Forecast “) to CSM setting forth the projected
Additional Annual Quantity for such Contract Year, the grades of Powder
proposed by Buyer to be included in such Additional Annual Quantity, and the

 

 

projected
delivery schedule for such Additional Annual Quantity. Buyer will send CSM a
written update of the Annual Forecast within thirty days before the beginning
of each Quarter.

 

Grades and Grade Mix.  The grades of Powder selected by Buyer to be
included in the Additional Annual Quantity for a Contract Year will be selected
by Buyer as needed in the operation of its business, from grades that are
commercially offered for sale by CSM in such Contract Year.

 

Order. 
Buyer shall send a written order (the “Order”) approximately thirty days
before the beginning of each Quarter to reflect the actual amount of the
Additional Annual Quantity (and the grade mix) being ordered in such Quarter.
The Order shall constitute an offer in accordance with the terms hereof to
purchase from CSM by Buyer the ordered amount of the Additional Annual Quantity
(and grade mix) at the respective Adjusted Prices for each such grade, and CSM
shall promptly accept such offer (an “Accepted Order”) if made within the terms
of this Amendment by delivering an acceptance notice (“Acceptance Notice”) to
Buyer.

 

Effect of CSM Non-Acceptance.  In the event CSM does not deliver an
Acceptance Notice in respect of an Order within 15 days after receipt of such Order,
Buyer shall have satisfied its obligation under this Section 3 to have offered
and agreed to purchase the quantity of Powder set forth in such Order to the
extent the information including without limitation quantities and grades
offered and prices stated in such Order complied with the requirements of this
Agreement.  In the event CSM is unable or
unwilling to supply Buyer with additional Powder for a determinable period
under this Section 3, CSM shall so notify Buyer, and Buyer shall not be required
to comply with this paragraph during such period of time.  In the event that CSM notifies Buyer that it
is putting Buyer on allocation due to capacity constraints, or takes actions
that are consistent with an allocation, Buyer’s obligation to purchase amounts
required to be purchased hereunder shall be reduced by an amount equal to the
proportion that CSM is reducing sales to Buyer due to such allocation during
the Contract Year in which such allocation occurs and any subsequent Contract
Years until such allocation shall cease.

 

Monthly Deliveries.  The quantity of Powder (and each grade) to be
delivered in a Quarter shall be delivered in approximately equal monthly
amounts during each month of such Quarter.

 

 Base Price.
The “Base Price” for the following Products shall be:

 

Product                             Base
Price per Pound

 

REDACTED

 

*Availability
subject to agreement on applicable specification.

** Subject to
commercial availability and agreement on applicable specification.

 

Base prices
for additional Products shall be as agreed by the parties from time to time as
such Products are made commercially available by CSM.

 

 

 Adjusted Price. The “Adjusted Price”
for a grade of Powder for a purchase under an Order shall mean REDACTED.

 

 

For purposes
of determining Adjusted Price, “equivalent grades of powder” shall mean powder
grades having the same REDACTED as the
powder grades being purchased hereunder and sold by CSM Boyertown in the case
of powders sold at CSM Boyertown and sold by CSM Aizu in the case of Powders
sold at CSM Aizu.

 

Purchase and Sale.  For each Accepted Order, Buyer shall purchase
and CSM shall sell the quantity of an Order at a price per pound for each grade
equal to the applicable Adjusted Price for such grade. All prices will be
payable in U.S. dollars.

 

CSM Audit Right.  CSM shall have the right at its expense once
each Contract Year to have an independent third party auditor selected by CSM
and reasonably acceptable to Buyer, review the books and records of the Buyer
to determine compliance with the terms and conditions of this Section 3.  Such auditor shall enter into customary
confidentiality agreements with Buyer, and, except in connection with any
proceeding to enforce the provisions of this Agreement, shall only disclose the
results of the audit to CSM, and not the particulars of any purchases by Buyer,
or the identity of the alternate suppliers.

 

Buyer Audit Right.  Buyer shall have the right at its expense
once each Contract Year to have an independent third party auditor selected by
Buyer and reasonably acceptable to CSM, review the books and records of CSM to
determine compliance with the terms and conditions of this Section 3.  Such auditor shall enter into customary
confidentiality agreements with CSM, and, except in connection with any
proceeding to enforce the provisions of this Agreement, shall only disclose the
results of the audit to the Buyer, and not the particulars of any sales by CSM,
or the identity of their customers.

 

5.               SCRAP
SALE BY BUYER.

 

For Scrap
sales by Buyer under Section 9 of the Agreement, effective July 1, 2004, the
Scrap prices per pound for purchases of Scrap in Contract Years 2005 and 2006
as set forth in Appendix C of
the Agreement shall be reduced to the following:

 

	
   

  	
  Price Per

  
	
  Scrap
  Category

  	
  Pound

  

 

REDACTED

 

CSM agrees to
purchase from Buyer in Contract Years 2007, 2008 and 2009 a quantity of Scrap
equal to REDACTED. The price to be paid to Buyer
by CSM for Scrap purchases in Contract Years 2007, 2008 and 2009 will be based
upon the weighted average market price for scrap obtained by the Buyer. The
price and quantity for each Scrap category listed above will be determined 30
days prior to the beginning of each of Contract Years 2007, 2008 and 2009 and
will be changed in a corresponding amount whenever there is a change in the
prices charged to Buyer pursuant to Section 4 hereof.

 

 

6.  REQUIRED PRODUCT QUANTITIES OF WIRE;
PRICE.

 

Section 2 and
Appendix A of the Agreement are hereby amended as follows:

 

The price for
the Required Product Quantities of Wire shall be reduced from REDACTED per pound to REDACTED per
pound for the Required Product Quantities of Wire for Contract Years 2005 and
2006 only; provided, that the Required
Product Quantities of Wire for Contract Years 2005 and 2006 shall be purchased
by Buyer on or before September 30, 2004. 
In the event that Buyer purchases the Required Product Quantities of
Wire for Contract Years 2005 and 2006 on or before September 30, 2004, such
purchases shall be deemed to satisfy the Required Product Quantities of Wire
required to be purchased in Contract Years 2005 and 2006.

 

 

7.  ORIGINAL AGREEMENT.

Except as
specifically modified herein, all terms and conditions of the Original
Agreement and the First Amendment, shall remain in full force and effect, and
shall remain unmodified and shall otherwise be applicable to all purchases and
sales hereunder.

 

 

IN WITNESS WHEREOF, the parties
have executed this Amendment as of the day, month and year first above written.

 

	
  Cabot
  Corporation

  	
  Kemet
  Electronics Corporation

  
	
  Cabot
  Supermetals Division

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   /s/
  Carol A. Flack

  	
   

  	
  By:

  	
  /s/ James P.
  McClintock

  	
   

  
	
   

  	
  Carol A. Flack

  	
   

  	
   

  	
  James P.
  McClintock

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Vice President and General Manager

  	
   

  	
  Title:

  	
  President
  and Chief Operating Officer

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