Document:

Exhibit 10.10

 

EXECUTION
COPY

 

 

 

CREDIT AGREEMENT

 

among

 

BRISTOL WEST HOLDINGS, INC.,

 

The Several Lenders

 

from Time to Time Parties Hereto,

 

CREDIT SUISSE FIRST BOSTON, 

acting through its Cayman Islands branch,

 

as Administrative Agent,

 

 

ING CAPITAL LLC,

 

as Syndication Agent

 

and

 

BEAR STEARNS CORPORATE LENDING INC.

 

and

 

UBS SECURITIES LLC,

 

as Co-Documentation Agents

 

 

Dated as of February 18, 2004

 

 

 

 

CREDIT SUISSE FIRST
BOSTON, 

acting through its Cayman Islands branch, 

and ING CAPITAL LLC

 

as Joint Bookrunners
and Joint Lead Arrangers

 

 

TABLE OF CONTENTS

 

	
  SECTION 1.

  	
  DEFINITIONS

  	
   

  
	
  SECTION 2.

  	
  AMOUNT AND TERMS OF
  CREDIT

  	
   

  
	
   

  	
  2.1

  	
  Commitments

  	
   

  
	
   

  	
  2.2

  	
  Minimum Amount of Each
  Borrowing; Maximum Number of Borrowings

  	
   

  
	
   

  	
  2.3

  	
  Notice of
  Borrowing

  	
   

  
	
   

  	
  2.4

  	
  Disbursement
  of Funds

  	
   

  
	
   

  	
  2.5

  	
  Repayment of
  Loans; Evidence of Debt

  	
   

  
	
   

  	
  2.6

  	
  Conversions and
  Continuations

  	
   

  
	
   

  	
  2.7

  	
  Pro
  Rata Borrowings

  	
   

  
	
   

  	
  2.8

  	
  Interest

  	
   

  
	
   

  	
  2.9

  	
  Interest
  Periods

  	
   

  
	
   

  	
  2.10

  	
  Increased Costs,
  Illegality, etc

  	
   

  
	
   

  	
  2.11

  	
  Compensation

  	
   

  
	
   

  	
  2.12

  	
  Change
  of Lending Office

  	
   

  
	
   

  	
  2.13

  	
  Notice
  of Certain Costs

  	
   

  
	
  SECTION 3.

  	
  LETTERS OF CREDIT

  	
   

  
	
   

  	
  3.1

  	
  Letters of
  Credit

  	
   

  
	
   

  	
  3.2

  	
  Letter of Credit Requests

  	
   

  
	
   

  	
  3.3

  	
  Letter of Credit
  Participations

  	
   

  
	
   

  	
  3.4

  	
  Agreement
  to Repay Letter of Credit Drawings

  	
   

  
	
   

  	
  3.5

  	
  Increased
  Costs

  	
   

  
	
   

  	
  3.6

  	
  Successor Letter of
  Credit Issuer

  	
   

  
	
  SECTION 4.

  	
  FEES; COMMITMENTS

  	
   

  
	
   

  	
  4.1

  	
  Fees

  	
   

  
	
   

  	
  4.2

  	
  Voluntary
  Reduction of Revolving Credit Commitments

  	
   

  
	
   

  	
  4.3

  	
  Mandatory
  Termination of Commitments

  	
   

  
	
  SECTION 5.

  	
  PAYMENTS

  	
   

  
	
   

  	
  5.1

  	
  Voluntary
  Prepayments

  	
   

  
	
   

  	
  5.2

  	
  Mandatory
  Prepayments

  	
   

  
	
   

  	
  5.3

  	
  Method and Place of Payment

  	
   

  

 

i

 

	
   

  	
  5.4

  	
  Net Payments

  	
   

  
	
   

  	
  5.5

  	
  Computations of
  Interest and Fees

  	
   

  
	
  SECTION 6.

  	
  CONDITIONS
  PRECEDENT TO INITIAL BORROWING

  	
   

  
	
   

  	
  6.1

  	
  Credit
  Documents

  	
   

  
	
   

  	
  6.2

  	
  Closing
  Certificate

  	
   

  
	
   

  	
  6.3

  	
  Corporate
  Proceedings of Each Credit Party

  	
   

  
	
   

  	
  6.4

  	
  Corporate
  Documents

  	
   

  
	
   

  	
  6.5

  	
  No Material Adverse Change

  	
   

  
	
   

  	
  6.6

  	
  Fees

  	
   

  
	
   

  	
  6.7

  	
  Offering

  	
   

  
	
   

  	
  6.8

  	
  Refinancing

  	
   

  
	
   

  	
  6.9

  	
  Other
  Indebtedness

  	
   

  
	
   

  	
  6.10

  	
  Closing Date Balance Sheet

  	
   

  
	
   

  	
  6.11

  	
  Solvency
  Certificate

  	
   

  
	
   

  	
  6.12

  	
  Required
  Approvals

  	
   

  
	
   

  	
  6.13

  	
  Legal Opinions

  	
   

  
	
  SECTION 7.

  	
  CONDITIONS
  PRECEDENT TO ALL CREDIT EVENTS

  	
   

  
	
   

  	
  7.1

  	
  No Default;
  Representations and Warranties

  	
   

  
	
   

  	
  7.2

  	
  Notice
  of Borrowing; Letter of Credit Request

  	
   

  
	
  SECTION 8.

  	
  REPRESENTATIONS,
  WARRANTIES AND AGREEMENTS

  	
   

  
	
   

  	
  8.1

  	
  Corporate
  Status

  	
   

  
	
   

  	
  8.2

  	
  Corporate Power and
  Authority

  	
   

  
	
   

  	
  8.3

  	
  No Violation

  	
   

  
	
   

  	
  8.4

  	
  Litigation

  	
   

  
	
   

  	
  8.5

  	
  Margin
  Regulations

  	
   

  
	
   

  	
  8.6

  	
  Governmental
  Approvals

  	
   

  
	
   

  	
  8.7

  	
  Investment
  Company Act

  	
   

  
	
   

  	
  8.8

  	
  True and Complete
  Disclosure

  	
   

  
	
   

  	
  8.9

  	
  Financial
  Condition; Financial Statements

  	
   

  
	
   

  	
  8.10

  	
  Tax
  Returns and Payments

  	
   

  

 

ii

 

	
   

  	
  8.11

  	
  Compliance
  with ERISA

  	
   

  
	
   

  	
  8.12

  	
  Subsidiaries

  	
   

  
	
   

  	
  8.13

  	
  Intellectual
  Property, etc

  	
   

  
	
   

  	
  8.14

  	
  Environmental
  Laws

  	
   

  
	
   

  	
  8.15

  	
  Properties

  	
   

  
	
  SECTION 9.

  	
  AFFIRMATIVE COVENANTS

  	
   

  
	
   

  	
  9.1

  	
  Information Covenants

  	
   

  
	
   

  	
  9.2

  	
  Books, Records and Inspections

  	
   

  
	
   

  	
  9.3

  	
  Maintenance
  of Insurance

  	
   

  
	
   

  	
  9.4

  	
  Payment of
  Taxes

  	
   

  
	
   

  	
  9.5

  	
  Consolidated
  Corporate Franchises

  	
   

  
	
   

  	
  9.6

  	
  Compliance with Statutes,
  etc

  	
   

  
	
   

  	
  9.7

  	
  ERISA

  	
   

  
	
   

  	
  9.8

  	
  Good Repair

  	
   

  
	
   

  	
  9.9

  	
  Transactions with
  Affiliates

  	
   

  
	
   

  	
  9.10

  	
  End of
  Fiscal Years; Fiscal Quarters

  	
   

  
	
   

  	
  9.11

  	
  Additional
  Guarantors

  	
   

  
	
   

  	
  9.12

  	
  Pledges of
  Additional Stock and Evidence of Indebtedness

  	
   

  
	
   

  	
  9.13

  	
  Use of Proceeds

  	
   

  
	
   

  	
  9.14

  	
  Changes
  in Business

  	
   

  
	
   

  	
  9.15

  	
  Maintenance of
  License and Permits

  	
   

  
	
   

  	
  9.16

  	
  Rating
  of Facilities

  	
   

  
	
   

  	
  9.17

  	
  Legal Opinions

  	
   

  
	
  SECTION 10.

  	
  NEGATIVE
  COVENANTS

  	
   

  
	
   

  	
  10.1

  	
  Limitation on Indebtedness

  	
   

  
	
   

  	
  10.2

  	
  Limitation
  on Liens

  	
   

  
	
   

  	
  10.3

  	
  Limitation on
  Fundamental Changes

  	
   

  
	
   

  	
  10.4

  	
  Limitation on Sale of
  Assets

  	
   

  
	
   

  	
  10.5

  	
  Limitation on Investments

  	
   

  
	
   

  	
  10.6

  	
  Limitation
  on Dividends

  	
   

  

 

iii

 

	
   

  	
  10.7

  	
  Limitations
  on Debt Payments and Amendments

  	
   

  
	
   

  	
  10.8

  	
  Consolidated
  Total Debt to Consolidated Total Capitalization Ratio

  	
   

  
	
   

  	
  10.9

  	
  Cash
  Flow to Consolidated Interest Expense Ratio

  	
   

  
	
   

  	
  10.10

  	
  Cash Flow
  to Consolidated Fixed Charges Ratio

  	
   

  
	
   

  	
  10.11

  	
  Minimum Risk-Based
  Capital Ratio

  	
   

  
	
   

  	
  10.12

  	
  Capital
  Expenditures

  	
   

  
	
  SECTION 11.

  	
  EVENTS OF DEFAULT

  	
   

  
	
   

  	
  11.1

  	
  Payments

  	
   

  
	
   

  	
  11.2

  	
  Representations,
  etc

  	
   

  
	
   

  	
  11.3

  	
  Covenants

  	
   

  
	
   

  	
  11.4

  	
  Default Under Other
  Agreements

  	
   

  
	
   

  	
  11.5

  	
  Bankruptcy, etc

  	
   

  
	
   

  	
  11.6

  	
  ERISA

  	
   

  
	
   

  	
  11.7

  	
  Guaranty

  	
   

  
	
   

  	
  11.8

  	
  Pledge
  Agreement

  	
   

  
	
   

  	
  11.9

  	
  Judgments

  	
   

  
	
   

  	
  11.10

  	
  Change of
  Control

  	
   

  
	
  SECTION 12.

  	
  THE
  ADMINISTRATIVE AGENT

  	
   

  
	
   

  	
  12.1

  	
  Appointment

  	
   

  
	
   

  	
  12.2

  	
  Delegation
  of Duties

  	
   

  
	
   

  	
  12.3

  	
  Exculpatory
  Provisions

  	
   

  
	
   

  	
  12.4

  	
  Reliance by
  Administrative Agent

  	
   

  
	
   

  	
  12.5

  	
  Notice of
  Default

  	
   

  
	
   

  	
  12.6

  	
  Non-Reliance
  on Administrative Agent and Other Lenders

  	
   

  
	
   

  	
  12.7

  	
  Indemnification

  	
   

  
	
   

  	
  12.8

  	
  Administrative
  Agent in Its Individual Capacity

  	
   

  
	
   

  	
  12.9

  	
  Successor Agent

  	
   

  
	
  SECTION 13.

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
  13.1

  	
  Amendments
  and Waivers

  	
   

  
	
   

  	
  13.2

  	
  Notices

  	
   

  

 

iv

 

	
   

  	
  13.3

  	
  No Waiver; Cumulative Remedies

  	
   

  
	
   

  	
  13.4

  	
  Survival of
  Representations and Warranties

  	
   

  
	
   

  	
  13.5

  	
  Payment of Expenses and
  Taxes

  	
   

  
	
   

  	
  13.6

  	
  Successors
  and Assigns; Participations and Assignments

  	
   

  
	
   

  	
  13.7

  	
  Replacements
  of Lenders under Certain Circumstances

  	
   

  
	
   

  	
  13.8

  	
  Adjustments; Set-off

  	
   

  
	
   

  	
  13.9

  	
  Counterparts

  	
   

  
	
   

  	
  13.10

  	
  Severability

  	
   

  
	
   

  	
  13.11

  	
  Integration

  	
   

  
	
   

  	
  13.12

  	
  GOVERNING LAW

  	
   

  
	
   

  	
  13.13

  	
  Submission to Jurisdiction;
  Waivers

  	
   

  
	
   

  	
  13.14

  	
  Acknowledgments

  	
   

  
	
   

  	
  13.15

  	
  WAIVERS
  OF JURY TRIAL

  	
   

  
	
   

  	
  13.16

  	
  Confidentiality

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Schedule 1.1

  	
  Commitments and Addresses of Lenders

  	
   

  
	
  Schedule
  8.12

  	
  Subsidiaries

  	
   

  
	
  Schedule 9.9

  	
  Affiliate Transactions

  	
   

  
	
  Schedule
  10.1

  	
  Other Indebtedness

  	
   

  
	
  Schedule
  10.2

  	
  Other Liens

  	
   

  
	
  Schedule
  13.2

  	
  Notice Addresses

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Form of
  Guaranty

  	
   

  
	
  Exhibit B

  	
  Form of
  Pledge Agreement

  	
   

  
	
  Exhibit C

  	
  Form of
  Notice of Borrowing

  	
   

  
	
  Exhibit D-1

  	
  Form of
  Promissory Note (A Term Loans)

  	
   

  
	
  Exhibit D-2

  	
  Form of
  Promissory Note (B Term Loans)

  	
   

  
	
  Exhibit D-3

  	
  Form of
  Promissory Note (Revolving Credit Loans)

  	
   

  
	
  Exhibit E

  	
  Form of Letter
  of Credit Request

  	
   

  
	
  Exhibit F-1

  	
  Form of
  Legal Opinion of Simpson Thacher & Bartlett

  	
   

  
	
  Exhibit F-2

  	
  Form of
  Legal Opinion of Sonnenschein, Nath and Rosenthal LLP (California)

  	
   

  

 

v

 

	
  Exhibit F-3

  	
  Form of
  Legal Opinion of Sonnenschein, Nath and Rosenthal LLP (Florida)

  	
   

  
	
  Exhibit F-4

  	
  Form of
  Legal Opinion of Alexis Oster, Esq.

  	
   

  
	
  Exhibit F-5

  	
  Form of
  Legal Opinion of George O’Brien, Esq.

  	
   

  
	
  Exhibit G

  	
  Form of
  Assignment and Assumption

  	
   

  
	
  Exhibit H

  	
  Form of
  Closing Certificate

  	
   

  
	
  Exhibit I

  	
  Form of
  Solvency Certificate

  	
   

  
	
  Exhibit J

  	
  Form of
  Confidentiality Agreement

  	
   

  

 

vi

 

CREDIT AGREEMENT dated as of February 18, 2004, among BRISTOL WEST
HOLDINGS, INC., a Delaware corporation (the “Borrower”), the lending
institutions from time to time parties hereto (each a “Lender” and,
collectively, the “Lenders”), CREDIT SUISSE FIRST BOSTON, acting through
its Cayman Islands branch, as Administrative Agent, ING CAPITAL LLC, as
Syndication Agent, and BEAR STEARNS CORPORATE LENDING INC and UBS SECURITIES
LLC, as Co-Documentation Agents (such term and each other capitalized term used
but not defined in this introductory statement having the meaning provided in
Section 1).

 

The Borrower has requested the Lenders to extend credit in the form of
(a) Term Loans, in an aggregate principal amount not in excess of
$75,000,000, and (b) Revolving Credit Loans at any time and from time to
time after the Closing Date and prior to the Revolving Credit Maturity Date, in
an aggregate principal amount at any time outstanding not in excess of
$50,000,000 less the aggregate Letter of Credit Outstandings at such time.  The Borrower has requested the Letter of
Credit Issuer to issue Letters of Credit at any time and from time to time
after the Closing Date and prior to the L/C Maturity Date, in an aggregate face
amount at any time outstanding not in excess of $15,000,000.

 

The proceeds of the Term Loans will be used by the Borrower solely
(a) to consummate the Refinancing, (b) to pay the Refinancing
Expenses and (c) following the completion of (a) and (b) above, for
general corporate purposes.  Proceeds of
Revolving Credit Loans may be used by the Borrower solely for working capital
requirements and other general corporate purposes (including Permitted
Acquisitions), and Letters of Credit will be used by the Borrower for general
corporate purposes.

 

The parties hereto hereby agree as follows:

 

SECTION
1.           Definitions.  As used herein, the following terms shall
have the meanings specified in this Section 1 unless the context otherwise
requires (it being understood that defined terms in this Agreement shall
include in the singular number the plural and in the plural the singular):

 

“A Repayment Amount” shall have the
meaning provided in Section 2.5(b).

 

“A Repayment Date” shall have the
meaning provided in Section 2.5(b).

 

“A Term Loan” shall have the meaning
provided in Section 2.1(a).

 

“A Term Loan Commitment” shall mean,
(a) in the case of each Lender that is a Lender on the date hereof, the
amount set forth opposite such Lender’s name on Schedule 1.1 as such
Lender’s “A Term Loan Commitment” and (b) in the case of any Lender that
becomes a Lender after the date hereof, the amount specified as such Lender’s
“A Term Loan Commitment” in the Assignment and Acceptance pursuant to which
such Lender assumed a portion of the Total A Term Loan Commitment, in each case
as the same may be changed from time to time pursuant to the terms hereof.

 

“A Term Loan Maturity Date” shall mean
the sixth anniversary of the Closing Date, or, if such date is not a Business
Day, the next preceding Business Day.

 

 

“ABR” shall mean, for any day, a rate
per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greater of (a) the Prime Rate in effect on such day, and (b) the
Federal Funds Effective Rate in effect on such day plus 1/2 of 1%.  Any change in the ABR due to a change in the
Prime Rate or the Federal Funds Effective Rate shall be effective as of the
opening of business on the effective day of such change in the Prime Rate or
the Federal Funds Effective Rate, respectively.

 

“ABR Loan” shall mean each Loan
bearing interest at the rate provided in Section 2.8(a).

 

“ABR Revolving Credit Loan” shall mean
any Revolving Credit Loan bearing interest at a rate determined by reference to
the ABR.

 

“Acquired Cash Flow” shall mean, with
respect to any Acquired Entity or Business or any Converted Restricted
Subsidiary (any of the foregoing, a “Pro Forma Entity”), for any Test
Period, the Cash Flow of such Pro Forma Entity for such Test Period (determined
as if such Pro Forma Entity was a Regulated Insurance Company or an Unregulated
Subsidiary for such entire Test Period).

 

“Acquired Entity or Business” shall
have the meaning provided in the definition of the term “Adjusted EBITDA”.

 

“Acquired Surplus” shall mean, with
respect to any Acquired Entity or Business or Converted Restricted Subsidiary
(any of the foregoing, a “Pro Forma Entity”), at any time, the Surplus
of such Pro Forma Entity at such time (determined as if such Pro Forma Entity
was a Regulated Insurance Company at such time).

 

“Adjusted EBITDA” shall mean, for any
period, the consolidated net income from continuing operations before income
taxes and extraordinary items of the Borrower and its Restricted
Subsidiaries (excluding net income (or loss) before taxes and extraordinary
items of the Regulated Insurance Subsidiaries) for such period, all determined
in accordance with GAAP,  plus
(a) to the extent deducted in determining such net income, and without
duplication, the sum of the amounts for such period of (i) interest expense,
(ii) depreciation expense, (iii) amortization expense, including amortization
of deferred financing fees, (iv) non-recurring charges, (v) non-cash charges,
(provided that in the case of non-cash charges on account of future cash
expenditures, any such cash expenditures, when actually paid by the Borrower or
a Restricted Subsidiary, shall be deducted from Adjusted EBITDA to the extent
(i) such cash expenditure does not otherwise have the effect of reducing
Adjusted EBITDA and (ii) the non-cash charge in respect of such cash
expenditure was previously added to consolidated net income in determining
Adjusted EBITDA pursuant to this clause (v)), (vi) losses on asset sales, (vii)
restructuring charges, (viii) Refinancing Expenses, (ix) any expenses or
charges incurred in connection with any issuance of debt or equity securities,
(x) any fees and expenses related to Permitted Acquisitions and (xi) any
deduction for minority interest expense, less (b) to the extent included
in determining such net income and without duplication, the sum of the amounts
for such period of (i) non-recurring gains, (ii) non-cash gains and (iii) gains
on asset sales, all as determined on a

 

2

 

consolidated basis for the Borrower and the
Unregulated Subsidiaries in accordance with GAAP, provided that (i)
except as provided in clause (ii) below, there shall be excluded from Adjusted
EBITDA the earnings or net income of all Unrestricted Subsidiaries for such
period to the extent otherwise included in such amount, except to the extent
actually received in cash by the Borrower or its Restricted Subsidiaries during
such period through dividends or other distributions and (ii) there shall be
included in determining Adjusted EBITDA for any period (x) the Acquired Cash
Flow of any Person, property, business or asset (other than an Unrestricted
Subsidiary) acquired to the extent not subsequently sold, transferred or
otherwise disposed of (but not including the Acquired Cash Flow of any related
Person, property, business or assets to the extent not so acquired) by the
Borrower or any Restricted Subsidiary during such period (each such Person,
property, business or asset acquired and not subsequently so disposed of, an “Acquired
Entity or Business”), and the Acquired Cash Flow of an Unrestricted
Subsidiary that is converted into a Restricted Subsidiary during such period
(each a “Converted Restricted Subsidiary”), in each case based on the
actual Acquired Cash Flow of such Acquired Entity or Business or Converted
Restricted Subsidiary for such period (including the portion thereof occurring
prior to such acquisition or conversion) and (y) an adjustment with respect to
each Acquired Entity or Business equal to the amount of the Pro Forma
Adjustment with respect to such Acquired Entity or Business for such period (including
the portion thereof occurring prior to such acquisition or conversion) as
specified in the Pro Forma Adjustment Certificate delivered to the Lenders and
the Administrative Agent.

 

“Adjusted Surplus” shall mean, at any
time, Surplus at such time, provided that (i) except as provided in
clause (ii) below, there shall be excluded from Adjusted Surplus the Surplus of
all Unrestricted Subsidiaries to the extent otherwise included in such amount,
and (ii) there shall be included in determining Adjusted Surplus at any time
the Acquired Surplus of any Person, property, business or asset (other than an
Unrestricted Subsidiary) acquired to the extent not subsequently sold,
transferred or otherwise disposed of (but not including the Acquired Surplus of
any related Person, property, business or assets to the extent not so acquired)
by the Borrower or any Restricted Subsidiary during such period (each such
Person, property, business or asset acquired and not subsequently so disposed
of, an “Acquired Entity or Business”), and the Acquired Surplus of an
Unrestricted Subsidiary that is converted into a Restricted Subsidiary during
such period (each a “Converted Restricted Subsidiary”), in each case
based on the actual Acquired Surplus of such Acquired Entity or Business or
Converted Restricted Subsidiary as of the relevant date.

 

“Adjusted Total Revolving Credit
Commitment” shall mean at any time the Total Revolving Credit Commitment
less the aggregate Revolving Credit Commitments of all Defaulting Lenders.

 

“Administrative Agent” shall mean
CSFB, together with its affiliates, as the arranger of the Commitments and as
the administrative agent for the Lenders under this Agreement and the other
Credit Documents, or any successor appointed pursuant to Section 12.9.

 

3

 

“Administrative Agent’s Office” shall
mean the office of the Administrative Agent located at Eleven Madison Avenue,
New York, New York 10010-3629, or such other office in New York City as the
Administrative Agent may hereafter designate in writing as such to the other
parties hereto.

 

“Affiliate” shall mean, with respect
to any Person, any other Person directly or indirectly controlling, controlled
by, or under direct or indirect common control with such Person.  A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power
(a) to vote 10% or more of the securities having ordinary voting power for
the election of directors of such corporation or (b) to direct or cause
the direction of the management and policies of such corporation, whether
through the ownership of voting securities, by contract or otherwise.

 

“Aggregate Revolving Credit Outstandings”
shall have the meaning provided in Section 5.2(b).

 

“Agreement” shall mean this Credit
Agreement, as the same may be amended, supplemented or otherwise modified from
time to time.

 

“Applicable ABR Margin” shall mean,
with respect to each ABR Loan at any date, the applicable percentage per annum
set forth below based upon (a) whether such loan is a Revolving Credit
Loan, an A Term Loan or a B Term Loan and (b) the Status in effect on such
date:

 

	
  Loan

  	
   

  	
  Status

  	
   

  	
  Applicable
  ABR

  Margin

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Revolving Credit Loans

  	
   

  	
  Level I
  Status

  	
   

  	
  0.50

  	
  %

  
	
  and A Term Loans

  	
   

  	
  Level II
  Status

  	
   

  	
  0.25

  	
  %

  
	
   

  	
   

  	
  Level III
  Status

  	
   

  	
  0.00

  	
  %

  
	
   

  	
   

  	
  Level IV
  Status

  	
   

  	
  0.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B Term Loans

  	
   

  	
  Level I
  Status

  	
   

  	
  1.00

  	
  %

  
	
   

  	
   

  	
  Level II
  Status

  	
   

  	
  0.75

  	
  %

  
	
   

  	
   

  	
  Level III
  Status

  	
   

  	
  0.50

  	
  %

  
	
   

  	
   

  	
  Level IV
  Status

  	
   

  	
  0.25

  	
  %

  

 

“Applicable Eurodollar Margin” shall
mean, with respect to each Eurodollar Term Loan and Eurodollar Revolving Credit
Loan at any date, the applicable percentage per annum set forth below based
upon (a) whether such loan is a Revolving Credit Loan, an A Term Loan or a
B Term Loan and (b) the Status in effect on such date:

 

	
  Loan

  	
   

  	
  Status

  	
   

  	
  Applicable
  Eurodollar 

  Margin

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Revolving Credit Loans

  	
   

  	
  Level I
  Status

  	
   

  	
  1.75

  	
  %

  
	
  and A Term Loans

  	
   

  	
  Level II
  Status

  	
   

  	
  1.50

  	
  %

  
	
   

  	
   

  	
  Level III
  Status

  	
   

  	
  1.25

  	
  %

  
	
   

  	
   

  	
  Level IV
  Status

  	
   

  	
  1.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B Term Loans

  	
   

  	
  Level I
  Status

  	
   

  	
  2.25

  	
  %

  
	
   

  	
   

  	
  Level II
  Status

  	
   

  	
  2.00

  	
  %

  
	
   

  	
   

  	
  Level III
  Status

  	
   

  	
  1.75

  	
  %

  
	
   

  	
   

  	
  Level IV
  Status

  	
   

  	
  1.50

  	
  %

  

 

4

 

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

 

“Approved Fund” shall mean, with
respect to any Lender that is a fund that invests in commercial loans, the
investment advisor thereof or any other fund that invests in commercial loans
and that is managed or advised by the same investment advisor as such Lender or
by an Affiliate of such investment advisor.

 

“Asset Sale Prepayment Event” shall
mean any sale, transfer or other disposition of any business units, assets or
other properties of the Borrower or any of the Restricted Subsidiaries not in
the ordinary course of business. 
Notwithstanding the foregoing, the term “Asset Sale Prepayment Event”
shall not include any transaction permitted by Section 10.4 (other than
Section 10.4(b)).

 

“Authorized Control Level” shall mean
“Authorized Control Level Risk-Based Capital” as defined by the NAIC as of
December 31, 1994, as such definition has been amended from time to time, and
as applied in the context of the Risk-Based Capital Guidelines promulgated by
the NAIC.

 

“Authorized Officer” shall mean the
Chairman of the Board, the President, the Chief Financial Officer, the
Treasurer or any other senior officer of the Borrower designated as such in
writing to the Administrative Agent by the Borrower.

 

“Available Amount” shall mean, on any
date (the “Reference Date”), an amount equal to (a) the sum of (i)
$10,000,000, (ii) 50% of the cumulative amount of Excess Cash Flow for all
fiscal years completed after the Closing Date but prior to the Reference Date,
(iii)  the amount of any common or preferred capital contributions
(other than any equity contribution made in accordance with
Section 10.5(c)(i)) made in cash to the Borrower from and including the
Business Day immediately following the Closing Date through and including the
Reference Date, (iv) an amount equal to the Net Cash Proceeds received by
the Borrower on or prior to the Reference Date from any issuance of common or
preferred equity securities by the Borrower, (v) the aggregate amount of
all cash dividends and other cash distributions received by the Borrower or any
Guarantor

 

5

 

from any Minority Investments or Unrestricted
Subsidiaries on or prior to the Reference Date (other than the portion of any
such dividends and other distributions that is used by the Borrower or any
Guarantor to pay taxes), (vi) the aggregate amount of all cash repayments
of principal received by the Borrower or any Guarantor from any Minority
Investments or Unrestricted Subsidiaries on or prior to the Reference Date in
respect of loans made by the Borrower or any Guarantor to such Minority
Investments or Unrestricted Subsidiaries and (vii) the aggregate amount of
all net cash proceeds received by the Borrower or any Guarantor in connection
with the sale, transfer or other disposition of its ownership interest in any
Minority Investment or Unrestricted Subsidiary on or prior to the Reference
Date minus (b) the sum of (i) the aggregate amount of any investments
(including loans) made by the Borrower or any Restricted Subsidiary pursuant to
Section 10.5(l)(ii) on or prior to the Reference Date, (ii) cash dividends
paid on Permitted Preferred Stock on or prior to the Reference Date (to the
extent that the proceeds of such Permitted Preferred Stock were used to make an
investment in an Unrestricted Subsidiary pursuant to Section 10.5(l)(ii)), and
(iii) the aggregate amount of Capital Expenditures made by the Borrower and its
Restricted Subsidiaries in any fiscal year pursuant to Section 10.12 in excess
of the sum of (x) $10,000,000 and (y) the amount carried forward pursuant to
the proviso therein.

 

“Available Commitment” shall mean an
amount equal to the excess, if any, of (a) the amount of the Total
Revolving Credit Commitment over (b) the sum of (i) the aggregate
principal amount of all Revolving Credit Loans then outstanding and
(ii) the aggregate Letter of Credit Outstandings at such time.

 

“B Repayment Amount” shall have the
meaning provided in Section 2.5(c).

 

“B Repayment Date” shall have the
meaning provided in Section 2.5(c).

 

“B Term Loan” shall have the meaning
provided in Section 2.1(b).

 

“B Term Loan Commitment” shall mean,
(a) in the case of each Lender that is a Lender on the date hereof, the
amount set forth opposite such Lender’s name on Schedule 1.1 as such
Lender’s “B Term Loan Commitment” and (b) in the case of any Lender that
becomes a Lender after the date hereof, the amount specified as such Lender’s
“B Term Loan Commitment” in the Assignment and Acceptance pursuant to which
such Lender assumed a portion of the Total B Term Loan Commitment, in each case
as the same may be changed from time to time pursuant to the terms hereof.

 

“B Term Loan Maturity Date” shall mean
the seventh anniversary of the Closing Date, or, if such Date is not a Business
Day, the next preceding Business Day.

 

“Bankruptcy Code” shall have the
meaning provided in Section 11.5.

 

“Benefited Lender” shall have the
meaning provided in Section 13.8.

 

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

 

6

 

“Borrower” shall have the meaning
provided in the preamble to this Agreement.

 

“Borrower Common Stock” shall mean any
class of outstanding common stock of the Borrower after the Transaction.

 

“Borrowing” shall mean and include
(a) the incurrence of one Type of Term Loan of a single Facility on the
Closing Date (or resulting from conversions on a given date after the Closing
Date) having, in the case of Eurodollar Term Loans, the same Interest Period (provided
that ABR Loans incurred pursuant to Section 2.10(b) shall be considered
part of any related Borrowing of Eurodollar Term Loans) and (b) the
incurrence of one Type of Revolving Credit Loan on a given date (or resulting from
conversions on a given date) having, in the case of Eurodollar Revolving Credit
Loans, the same Interest Period (provided that ABR Loans incurred
pursuant to Section 2.10(b) shall be considered part of any related
Borrowing of Eurodollar Revolving Credit Loans).

 

“Business Day” shall mean (a) for all
purposes other than as covered by clause (b) below, any day excluding Saturday,
Sunday and any day that shall be in The City of New York a legal holiday or a
day on which banking institutions are authorized by law or other governmental
actions to close and (b) with respect to all notices and determinations in
connection with, and payments of principal and interest on, Eurodollar Loans,
any day that is a Business Day described in clause (a) and which is also a
day for trading by and between banks in Dollar deposits in the relevant
interbank Eurodollar market.

 

“BWCIC”
shall mean Bristol West Casualty Insurance Company.

 

“BWIC”
shall mean Bristol West Insurance Company.

 

“Capital Expenditures” shall mean, for
any period, the aggregate of all expenditures (whether paid in cash or accrued
as liabilities and including in all events all amounts expended or capitalized
under Capital Leases, but excluding any amount representing capitalized
interest) by the Borrower and the Restricted Subsidiaries during such period
that, in conformity with GAAP, are or are required to be included as additions
during such period to property, plant or equipment reflected in the
consolidated balance sheet of the Borrower and its Subsidiaries, provided
that the term “Capital Expenditures” shall not include (a) expenditures
made in connection with the replacement, substitution or restoration of assets
(i) to the extent financed from insurance proceeds paid on account of the
loss of or damage to the assets being replaced or restored or (ii) with
awards of compensation arising from the taking by eminent domain or
condemnation of the assets being replaced, (b) the purchase price of
equipment that is purchased simultaneously with the trade-in of existing
equipment to the extent that the gross amount of such purchase price is reduced
by the credit granted by the seller of such equipment for the equipment being
traded in at such time or (c) the purchase of plant, property or equipment
made within one year of the sale of any asset to the extent purchased with the
proceeds of such sale.

 

7

 

“Capitalized Lease Obligations” shall
mean, as applied to any Person, all obligations under Capital Leases of such
Person or any of its Subsidiaries, in each case taken at the amount thereof
accounted for as liabilities in accordance with GAAP.

 

“Capital Lease”, as applied to any
Person, shall mean any lease of any property (whether real, personal or mixed)
by that Person as lessee that, in conformity with GAAP, is, or is required to
be, accounted for as a capital lease on the balance sheet of that Person.

 

“Cash Flow” shall mean, for any Test
Period, the sum, without duplication, of (a) the greater of (i) Combined
Statutory Pre-Tax Earnings for all Regulated Insurance Companies for such Test
Period and (ii) the sum of 10% of Adjusted Surplus as of the last day of the
fiscal year most recently ended prior to the end of such Test Period plus all
tax sharing payments made by Regulated Insurance Companies to the Borrower
during such Test Period and (b) Adjusted EBITDA for such Test Period.

 

“Cash Flow Available for Fixed Charges”
shall mean, for any Test Period, the sum, without duplication, of (a) the
greater of (i) Combined Statutory Pre-Tax Earnings for all Regulated Insurance
Companies for such Test Period and (ii) the sum of 10% of Adjusted Surplus as
of the last day of the fiscal year most recently ended prior to the end of such
Test Period plus all tax sharing payments made by Regulated Insurance Companies
to the Borrower during such Test Period and (b) Adjusted EBITDA for such Test
Period less (i) Capital Expenditures made by the Borrower and its
Restricted Subsidiaries (other than Regulated Insurance Companies) for such
Test Period and (ii) provisions for taxes based on income of the Borrower and
its Restricted Subsidiaries (other than Regulated Insurance Companies) for such
Test Period.

 

“Cash Flow to Consolidated Fixed Charges
Ratio” shall mean, for any Test Period, the ratio of (a) Cash Flow
Available for Fixed Charges for such Test Period to (b) Consolidated Fixed
Charges for such Test Period.

 

“Cash Flow to Consolidated Interest
Expense Ratio” shall mean, for any Test Period, the ratio of (a) Cash Flow
for such Test Period to (b) Consolidated Interest Expense for such Test
Period.

 

“Change of Control” shall mean and be
deemed to have occurred if (a) (i) any person, entity or “group”
(within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended) (other than KKR, its Affiliates and the Management Group,
collectively) shall at any time have acquired direct or indirect beneficial
ownership of more than 35% of the outstanding Voting Stock of the Borrower and
(ii) KKR, its Affiliates and the Management Group  beneficially own, in the
aggregate, a lesser percentage of the outstanding Voting Stock of the Borrower
than the person, entity or “group” referred to in clause (i) above, unless, in
the case of either clause (i) or (ii) above, KKR, its Affiliates and the
Management Group have, at such time, the right or the ability by voting power,
contract or otherwise to elect or designate for election a majority of the
Board of Directors of the Borrower; and/or (b) at any time Continuing Directors
shall not constitute a majority of the Board of Directors of the Borrower.

 

8

 

“Closing Date” shall mean the date on
or before February 18, 2004 on which the initial Borrowing is made
hereunder.

 

“Coast” shall mean Coast National
Insurance Company.

 

“Code” shall mean the Internal Revenue
Code of 1986, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.  Section
references to the Code are to the Code, as in effect at the date of this
Agreement, and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.

 

“Co-Documentation Agents” shall mean
Bear Stearns Corporate Lending Inc. and UBS Securities LLC, together with their
respective affiliates, as the co-documentation agents for the Lenders under
this Agreement and the other Credit Documents.

 

“Collateral” shall have the meaning
provided in the Pledge Agreement.

 

“Combined” shall mean, when used with
reference to any amount or financial statement, such amount as determined, or
financial statement as prepared, on a combined basis for all of the specified
entities and their respective Subsidiaries; provided that any such
amount or financial statement determined or prepared for any specified entity
and its Subsidiaries separately shall be determined or prepared on a
consolidated basis in accordance with SAP or GAAP, as applicable.

 

“Combined Risk-Based Capital Ratio”
shall mean the ratio (expressed as a percentage), at any time, of (i) the sum,
without duplication, of the Total Adjusted Capital of each Regulated Insurance
Company to (ii) the sum, without duplication, of the Authorized Control Level
of each Regulated Insurance Company.

 

“Commitment Fee Rate” shall mean, with
respect to the Available Commitment on any day, the rate per annum set forth
below opposite the Status in effect on such day:

 

	
  Status

  	
   

  	
  Commitment

  Fee Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Level I Status

  	
   

  	
  0.500

  	
  %

  
	
  Level II Status

  	
   

  	
  0.500

  	
  %

  
	
  Level III Status

  	
   

  	
  0.375

  	
  %

  
	
  Level IV Status

  	
   

  	
  0.300

  	
  %

  

 

“Commitments” shall mean, with respect
to each Lender, such Lender’s A Term Loan Commitment, B Term Loan Commitment
and Revolving Credit Commitment.

 

“Confidential Information” shall have
the meaning provided in Section 13.16.

 

“Consolidated Fixed Charges” shall
mean, for any period, the sum, without duplication, of (i) Consolidated
Interest Expense, (ii) scheduled payments made by the

 

9

 

Borrower and the Restricted Subsidiaries
during such period on account of principal of funded Indebtedness (including,
without limitation, scheduled principal payments in respect of the Term Loans,
but excluding any principal payments of Revolving Credit Loans, if any) and
(iii)  Dividends paid by the Borrower and its Restricted Subsidiaries
during such period other than Dividends described in Section 10.6(b); provided
that (a) except as provided in clause (b) below, there shall be excluded from
Consolidated Fixed Charges for any period, items that would otherwise fall within
clauses (ii)-(iii) above of all Unrestricted Subsidiaries for such period to
the extent otherwise included in Consolidated Fixed Charges and (b) for
purposes of the definition of the term “Permitted Acquisition” and
Sections 10.3 and 10.10, there shall be included in determining
Consolidated Fixed Charges for any period the scheduled payments on account of
principal of funded Indebtedness made by any Acquired Entity or Business
acquired during such period and of any Converted Restricted Subsidiary converted
during such period (including the portion thereof occurring prior to such
acquisition or conversion) assuming any Indebtedness incurred or repaid in
connection with any such acquisition or conversion had been incurred or prepaid
on the first day of such period.

 

“Consolidated Interest Expense” shall
mean, for any period, the sum of (i) cash interest expense (including that
attributable to Capital Leases in accordance with GAAP), net of cash interest
income, of the Borrower and the Restricted Subsidiaries on a consolidated basis
with respect to all outstanding Indebtedness of the Borrower and the Restricted
Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers’
acceptance financing and net costs under Hedge Agreements (other than currency
swap agreements, currency future or option contracts and other similar
agreements), but excluding, however, amortization of deferred financing costs
and any other amounts of non-cash interest, all as calculated on a consolidated
basis in accordance with GAAP, and (ii) cash dividends paid on Permitted
Preferred Stock during such period; provided that (a) except as provided
in clause (b) below, there shall be excluded from Consolidated Interest Expense
for any period the cash interest expense (or income to the extent excluded from
Cash Flow) of all Unrestricted Subsidiaries for such period to the extent
otherwise included in Consolidated Interest Expense and (b) for purposes of the
definition of the term “Permitted Acquisition” and Sections 10.3 and 10.9,
there shall be included in determining Consolidated Interest Expense for any
period the cash interest expense (or income to the extent excluded from
Acquired Cash Flow) of any Acquired Entity or Business acquired during such
period and of any Converted Restricted Subsidiary converted during such period,
in each case based on such cash interest expense (or income) of such Acquired
Entity or Business or Converted Restricted Subsidiary for such period
(including the portion thereof occurring prior to such acquisition or
conversion) assuming any Indebtedness incurred or repaid in connection with any
such acquisition or conversion had been incurred or prepaid on the first day of
such period.

 

“Consolidated Net Income” shall mean,
for any period, the consolidated net income (or loss) of the Borrower and the
Restricted Subsidiaries, determined on a consolidated basis in accordance with
GAAP.

 

10

 

“Consolidated Net Worth” shall mean
the Net Worth of the Borrower and its Restricted Subsidiaries determined on a
consolidated basis.

 

“Consolidated Total Capitalization”
shall mean, as of any date of determination, the sum of (i) Consolidated Total
Debt and (ii) Consolidated Net Worth.

 

“Consolidated Total Debt” shall mean,
as of any date of determination, (a) the sum of (i) all Indebtedness of
the Borrower and the Restricted Subsidiaries for borrowed money outstanding on
such date, (ii) all net liabilities of the Borrower and the Restricted
Subsidiaries under Financial Reinsurance Agreements and (iii) all
Capitalized Lease Obligations of the Borrower and the Restricted Subsidiaries
outstanding on such date, all calculated on a consolidated basis in accordance
with GAAP minus (b) the aggregate amount of cash included in the cash
account on the balance sheet of the Borrower (on a stand-alone basis), to the
extent held by or for the account of the Borrower and deposited with the
Administrative Agent or any Lender domiciled in the United States as at such
date and to the extent that the use thereof for application to payment of
Indebtedness is not prohibited by law or any contract to which the Borrower is
a party.

 

“Consolidated Total Debt to Consolidated Total
Capitalization Ratio” shall mean, as of any date of determination, the
ratio of (a) Consolidated Total Debt to (b) Consolidated Total
Capitalization.

 

“Consolidated Working Capital” shall
mean, at any date, the excess of (a) the sum of all amounts (other than cash,
cash equivalents and bank overdrafts) that would, in conformity with GAAP, be
set forth opposite the caption “total current assets” (or any like caption) on
a consolidated balance sheet of the Borrower and the Restricted Subsidiaries at
such date over (b) the sum of all amounts that would, in conformity with GAAP,
be set forth opposite the caption “total current liabilities” (or any like
caption) on a consolidated balance sheet of the Borrower and the Restricted
Subsidiaries on such date, but excluding (i) the current portion of any funded
Indebtedness, (ii) without duplication of clause (i) above, all Indebtedness
consisting of Loans and Letter of Credit Exposure to the extent otherwise
included therein and (iii) the current portion of deferred income taxes.

 

“Continuing Director” shall mean, at
any date, an individual (a) who is a member of the Board of Directors of
the Borrower on the date hereof, (b) who, as at such date, has been a
member of such Board of Directors for at least the 12 preceding months,
(c) who has been nominated to be a member of such Board of Directors,
directly or indirectly, by KKR or Persons nominated by KKR or (d) who has
been nominated to be a member of such Board of Directors by a majority of the
other Continuing Directors then in office.

 

“Converted Restricted Subsidiary”
shall have the meaning provided in the definition of the term “Adjusted
EBITDA”.

 

“Credit Documents” shall mean this
Agreement, the Guaranty, the Pledge Agreement and any promissory notes issued
by the Borrower hereunder.

 

11

 

“Credit Event” shall mean and include
the making (but not the conversion or continuation) of a Loan and the issuance
of a Letter of Credit.

 

“Credit Party” shall mean each of the
Borrower and the Guarantors.

 

“CSFB” shall mean Credit Suisse First
Boston, acting through its Cayman Islands branch, and any successor thereto by
merger, consolidation or otherwise.

 

“Debt Incurrence Prepayment Event”
shall mean any issuance or incurrence by the Borrower or any of the Restricted
Subsidiaries of any Indebtedness (excluding any Indebtedness permitted to be
issued or incurred under Section 10.1).

 

“Default” shall mean any event, act or
condition that with notice or lapse of time, or both, would constitute an Event
of Default.

 

“Defaulting Lender” shall mean any
Lender with respect to which a Lender Default is in effect.

 

“Dividends” shall have the meaning
provided in Section 10.6.

 

“Dollars” and “$” shall mean
dollars in lawful currency of the United States of America.

 

“Domestic Subsidiary” shall mean each
Subsidiary of the Borrower that is organized under the laws of the
United States, any state or territory thereof, or the District of
Columbia.

 

“Drawing” shall have the meaning
provided in Section 3.4(b).

 

“EDGAR” shall have the meaning
provided in Section 9.1(a).

 

“Electronic Settlement System”
shall have the meaning provided in Section 13.6(a).

 

“Eligible Assignee”
means (i) any Lender, any Affiliate of any Lender and any Approved Fund of
any Lender; and (ii) (a) a commercial bank organized under the laws
of the United States or any state thereof or the District of Columbia;
(b) a savings and loan association or savings bank organized under the
laws of the United States or any state thereof or the District of Columbia;
(c) a commercial bank organized under the laws of any other country or a
political subdivision thereof; provided that (1) such bank is
acting through a branch or agency located in the United States or (2) such
bank is organized under the laws of a country that is a member of the
Organization for Economic Cooperation and Development or a political
subdivision of such country; and (d) any other entity that is an
“accredited investor” (as defined in Regulation D under the Securities
Act) that extends credit or buys loans as one of its businesses including
insurance companies, mutual funds and lease financing companies that, in each
case, have at least $2,000,000 in net assets; provided that neither
(x) the Company nor (y) any

 

12

 

Person known to the assigning Lender to be a
competitor of the Company shall be an Eligible Assignee.

 

“Environmental Claims” shall mean any
and all administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation, investigations
(other than internal reports prepared by the Borrower or any of its
Subsidiaries (a) in the ordinary course of such Person’s business or (b) as
required in connection with a financing transaction or an acquisition or
disposition of real estate) or proceedings relating in any way to any
Environmental Law or any permit issued, or any approval given, under any such
Environmental Law (hereinafter, “Claims”), including, without
limitation, (i) any and all Claims by governmental or regulatory
authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law and
(ii) any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting
from Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.

 

“Environmental Law” shall mean any
applicable Federal, state, foreign or local statute, law, rule, regulation,
ordinance, code and rule of common law now or hereafter in effect and in each
case as amended, and any binding judicial or administrative interpretation
thereof, including any binding judicial or administrative order, consent decree
or judgment, relating to the environment, human health or safety or Hazardous
Materials.

 

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

 

“ERISA Affiliate” shall mean each
person (as defined in Section 3(9) of ERISA) that together with the Borrower or
a Subsidiary would be deemed to be a “single employer” within the meaning of
Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of
ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.

 

“Eurodollar Loan” shall mean any
Eurodollar Term Loan or Eurodollar Revolving Credit Loan.

 

“Eurodollar Rate” means, for any
Interest Period for a Eurodollar Loan, the rate per annum obtained by dividing
(i) (A) the rate per annum determined by the Administrative Agent at
approximately 11:00 A.M. (London time) on the date that is two Business Days
prior to the beginning of such Interest Period by reference to the British
Bankers’ Association Interest Settlement Rates for deposits in Dollars (as set
forth by any service selected by the Administrative Agent that has been
nominated by the British Bankers’ Association as an authorized information
vendor for the purpose of displaying such rates) for a period equal to such Interest
Period, or (B) if an interest rate is not ascertainable pursuant to the
foregoing provisions of this definition, the rate per annum

 

13

 

determined by the Administrative Agent to be
the average of the rates per annum at which deposits in Dollars are offered for
such Interest Period to major banks in the London interbank market in London,
England, by the Administrative Agent at approximately 11:00 A.M. (London time)
on the date that is two Business Days prior to the beginning of such Interest
Period by (ii) a percentage equal to 100% minus the stated maximum rate of
all reserve requirements (including any marginal, emergency, supplemental,
special or other reserves) applicable on such Interest Rate Determination Date
to any member bank of the Federal Reserve System in respect of “Eurocurrency
Liabilities” as defined in Regulation D (or any successor category of
liabilities under Regulation D). 
Each determination by the Administrative Agent pursuant to this definition
shall be conclusive absent manifest error.

 

“Eurodollar Revolving Credit Loan”
shall mean any Revolving Credit Loan bearing interest at a rate determined by
reference to the Eurodollar Rate.

 

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

 

“Event of Default” shall have the
meaning provided in Section 11.

 

“Excess Cash Flow” shall mean, for any
period, an amount equal to the excess of (a) the sum, without duplication, of (i)
dividends actually paid to the Borrower by Regulated Insurance Companies during
such period, (ii) the portion of the aggregate amount of cash tax allocation
payments made during such period by the Regulated Insurance Companies to the
Borrower or its Unregulated Restricted Subsidiaries that is not treated as
intercompany obligations under the applicable tax allocation agreements, (iii)
consolidated net income before taxes from continuing operations of the Borrower
and its Restricted Subsidiaries (excluding net income (or loss) before taxes of
the Regulated Insurance Companies), all determined in accordance with GAAP (“Unregulated
Earnings”), (iv) an amount equal to the amount of all non-cash charges to
the extent deducted in arriving at such Unregulated Earnings, (v) decreases in
Consolidated Working Capital of the Borrower and its Restricted Subsidiaries
(excluding Regulated Insurance Companies) for such period and (vi) an amount
equal to the aggregate net non-cash loss on the sale, lease, transfer or other
disposition of assets by the Borrower and the Restricted Subsidiaries during
such period (other than sales in the ordinary course of business) to the extent
deducted in arriving at such Unregulated Earnings over (b) the sum,
without duplication, of (i) cash taxes paid or payable in respect of the income
of the Borrower and its Restricted Subsidiaries for or during such period
(excluding such taxes that are separately assessed on the income of and paid
directly by any Regulated Insurance Company), (ii) an amount equal to the
amount of all non-cash credits included in arriving at such Unregulated
Earnings, (iii) the aggregate amount actually paid by the Borrower and the
Unregulated Subsidiaries in cash during such period on account of Capital
Expenditures to the extent not deducted in determining such Unregulated
Earnings (excluding the principal amount of Indebtedness incurred in connection
with such Capital Expenditures, whether incurred in such period or in a
subsequent period), (iv) the aggregate amount of all scheduled principal
payments of Indebtedness of the Borrower or the Unregulated Subsidiaries
(including, without

 

14

 

limitation, any Term Loans and the principal
component of payments in respect of Capitalized Lease Obligations but excluding
Revolving Credit Loans) made during such period (other than in respect of any
revolving credit facility to the extent there is not an equivalent permanent
reduction in commitments thereunder), (v) an amount equal to the aggregate net
non-cash gain on the sale, lease, transfer or other disposition of assets
(other than sales in the ordinary course of business) by the Borrower and the
Unregulated Subsidiaries during such period to the extent included in arriving
at such Unregulated Earnings, (vi) increases in Consolidated Working Capital of
the Borrower and its Restricted Subsidiaries (excluding Regulated Insurance
Subsidiaries) for such period, (vii) payments by the Borrower and the
Unregulated Subsidiaries during such period in respect of long-term liabilities
of the Borrower and the Restricted Subsidiaries other than Indebtedness, (viii)
the amount of investments, loans and advances made during such period pursuant
to Sections 10.5(a), (c), (i), (j) and (k) to the extent that such investments
were financed with internally generated cash flow of the Borrower and the
Unregulated Subsidiaries and/or dividends by Regulated Insurance Companies
included in clause (a)(i) above, (ix) the amount of dividends paid during such
period pursuant to clause (b) of the proviso to Section 10.6, (x) the aggregate
amount of expenditures actually made by the Borrower and the Unregulated
Subsidiaries in cash during such period (including, without limitation,
expenditures for the payment of financing fees) to the extent that such
expenditures are not expensed during such period, (xi) the aggregate amount of
any premium, make-whole or penalty payments actually paid in cash by the
Borrower and the Unregulated Subsidiaries during such period that are required
to be made in connection with any prepayment of Indebtedness and that are
accounted for as extraordinary items, (xii) cash tax allocation payments made
during such period by the Borrower or any Unregulated Restricted Subsidiary to
any Regulated Insurance Company and (xiii) payments applied during such period
in respect of reserves (to the extent not included in Consolidated Working
Capital for such period) created by the Borrower or any Unregulated Restricted
Subsidiary in a period prior to such period.

 

“Existing Credit Agreement” shall mean
that certain Credit Agreement, dated as of July 10, 1998, among Bristol
West Holdings, Inc. (formerly known as BRW Acquisition, Inc.), the lending
institutions from time to time parties thereto, The Chase Manhattan Bank, as
administrative agent and The Bank of New York, as syndication agent, as amended
by that certain First Amendment to Credit Agreement, dated as of July 31,
1999.

 

“Facility” shall mean any of the
credit facilities established under this Agreement, i.e., the credit
facilities providing for A Term Loans, B Term Loans or Revolving Credit Loans.

 

“Federal Funds Effective Rate” shall
mean, for any day, the weighted average of the per annum rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published
for any day that is a Business Day, the average of the quotations for the day
of such transactions received by the Administrative Agent from three federal
funds brokers of recognized standing selected by it.

 

15

 

“Fees” shall mean all amounts payable
pursuant to, or referred to in, Section 4.1.

 

“Final Date” shall mean the date on
which the Revolving Credit Commitments shall have terminated, no Revolving
Credit Loans shall be outstanding and the Letter of Credit Outstandings shall
have been reduced to zero.

 

“Financial Reinsurance Agreement”
shall mean a reinsurance agreement covering any transaction in which any
Regulated Insurance Company cedes business that does not meet the conditions
for reinsurance accounting as provided by the Financial Accounting Standards
Board in Statement of Financial Accounting Standards No. 113, as the same may
be revised, replaced, or supplemented from time to time.

 

“Foreign Subsidiary” shall mean each
Subsidiary of the Borrower that is not a Domestic Subsidiary.

 

“Fronting Fee” shall have the meaning
provided in Section 4.1(c).

 

“GAAP” shall mean generally accepted
accounting principles in the United States of America as in effect from time to
time; provided, however, that if there occurs after the date
hereof any change in GAAP that affects in any respect the calculation of any
covenant contained in Section 10, the Lenders and the Borrower shall
negotiate in good faith amendments to the provisions of this Agreement that
relate to the calculation of such covenant with the intent of having the
respective positions of the Lenders and the Borrower after such change in GAAP
conform as nearly as possible to their respective positions as of the date of
this Agreement and, until any such amendments have been agreed upon, the
covenants in Section 10 shall be calculated as if no such change in GAAP
has occurred.

 

“Governmental Authority” shall mean
any nation or government, any state or other political subdivision thereof, and
any entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government (including, without limitation, any
Applicable Insurance Regulatory Authority).

 

“Granting Lender” has the meaning
specified in Section 13.6.

 

“Guarantor” shall mean each Domestic
Subsidiary of the Borrower that is a Restricted Subsidiary (excluding any
Regulated Insurance Company) and that is or becomes a party to the Guaranty.

 

“Guaranty” shall mean and include the
Guaranty, made by each Guarantor in favor of the Administrative Agent for the
benefit of the Lenders, substantially in the form of Exhibit A, as the same may
be amended, supplemented or otherwise modified from time to time.

 

“Guaranty Obligations” shall mean, as
to any Person, any obligation of such Person guaranteeing or intended to
guarantee any Indebtedness of any other Person (the “primary obligor”)
in any manner, whether directly or indirectly, including, without limitation,
any obligation of such Person, whether or not contingent, (a) to purchase any

 

16

 

such Indebtedness or any property
constituting direct or indirect security therefor, (b) to advance or supply
funds (i) for the purchase or payment of any such Indebtedness or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the
owner of any such Indebtedness of the ability of the primary obligor to make payment
of such Indebtedness or (d) otherwise to assure or hold harmless the owner of
such Indebtedness against loss in respect thereof; provided, however,
that the term “Guaranty Obligations” shall not include (x) endorsements of
instruments for deposit or collection in the ordinary course of business or (y)
obligations of Regulated Insurance Companies under Insurance Contracts,
Reinsurance Agreements or Retrocession Agreements.  The amount of any Guaranty Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the Indebtedness in
respect of which such Guaranty Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.

 

“Hazardous Materials” shall mean (a)
any petroleum or petroleum products, radioactive materials, friable asbestos,
urea formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing regulated levels of polychlorinated biphenyls, and
radon gas; (b) any chemicals, materials or substances defined as or included in
the definition of “hazardous substances”, “hazardous waste”, “hazardous
materials”, “extremely hazardous waste”, “restricted hazardous waste”, “toxic
substances”, “toxic pollutants”, “contaminants”, or “pollutants”, or words of
similar import, under any applicable Environmental Law; and (c) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any Governmental Authority.

 

“Hedge Agreements” shall mean interest
rate swap, cap or collar agreements, interest rate future or option contracts,
currency swap agreements, currency future or option contracts and other similar
agreements entered into by the Borrower in order to protect the Borrower or any
of the Restricted Subsidiaries against fluctuations in interest rates or
currency exchange rates or against other risks to which the Borrower and its
Restricted Subsidiaries may be subject in the ordinary course of business.

 

“Indebtedness” of any Person shall
mean (a) all indebtedness of such Person for borrowed money, (b) the deferred
purchase price of assets or services that in accordance with GAAP would be
shown on the liability side of the balance sheet of such Person, (c) the face
amount of all letters of credit issued for the account of such Person and,
without duplication, all drafts drawn thereunder, (d) all Indebtedness of a
second Person secured by any Lien on any property owned by such first Person,
whether or not such Indebtedness has been assumed, (e) all Capitalized Lease
Obligations of such Person, (f) all net liabilities of such Person under
interest rate swap, cap or collar agreements, interest rate future or option
contracts, currency swap agreements, currency future or option contracts,
credit derivative contracts and other similar agreements, (g) all obligations
of such Person under Financial Reinsurance Agreements and (h) without
duplication, all Guaranty Obligations of such Person, provided that
Indebtedness shall not

 

17

 

include trade payables and accrued expenses,
in each case arising in the ordinary course of business.

 

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

 

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

 

“Interest Period” shall mean, with
respect to any Term Loan or Revolving Credit Loan, the interest period
applicable thereto, as determined pursuant to Section 2.9.

 

“KKR” shall mean each of Kohlberg
Kravis Roberts & Co., L.P. and KKR Associates, L.P.

 

“L/C Maturity Date” shall mean the
date that is five Business Days prior to the Revolving Credit Maturity Date.

 

“L/C Participant” shall have the
meaning provided in Section 3.3(a).

 

“L/C Participation” shall have the
meaning provided in Section 3.3(a).

 

“Lender” shall have the meaning
provided in the preamble to this Agreement.

 

“Lender Default” shall mean (a) the
failure (which has not been cured) of a Lender to make available its portion of
any Borrowing or to fund its portion of any unreimbursed payment under Section
3.3 or (b) a Lender having notified the Administrative Agent and/or the
Borrower that it does not intend to comply with the obligations under Section
2.1(c) or 3.3, in the case of either clause (a) or clause (b) above,
as a result of the appointment of a receiver or conservator with respect to
such Lender at the direction or request of any regulatory agency or authority.

 

“Letter of Credit” shall mean each
standby letter of credit issued pursuant to Section 3.1.

 

“Letter of Credit Commitment” shall
mean $15,000,000, as the same may be reduced from time to time pursuant to
Section 3.1.

 

“Letter of Credit Exposure” shall
mean, with respect to any Lender, such Lender’s Revolving Credit Commitment
Percentage of the Letter of Credit Outstandings.

 

“Letter of Credit Fee” shall have the
meaning provided in Section 4.1(b).

 

“Letter of Credit Issuer” shall mean
CSFB, any of its Affiliates or any successor pursuant to Section 3.6.

 

18

 

“Letter of Credit Outstandings” shall
mean, at any time, the sum of, without duplication, (a) the aggregate Stated
Amount of all outstanding Letters of Credit and (b) the aggregate amount of all
Unpaid Drawings in respect of all Letters of Credit.

 

“Letter of Credit Request” shall have
the meaning provided in Section 3.2.

 

“Level I Status” shall mean, on any
date, the then applicable Consolidated Total Debt to Consolidated Total
Capitalization Ratio is greater than 0.30:1.00.

 

“Level II Status” shall mean, on any
date, the circumstance that Level I Status does not exist and the then
applicable Consolidated Total Debt to Consolidated Total Capitalization Ratio
is greater than 0.15:1.00.

 

“Level III Status” shall mean, on any
date, the circumstance that neither Level I Status nor Level II
Status exists and the then applicable Consolidated Total Debt to Consolidated
Total Capitalization Ratio is greater than 0.10:1.00.

 

“Level IV Status” shall mean, on any
date, the circumstance that the then applicable Consolidated Total Debt to
Consolidated Total Capitalization Ratio is less than or equal to 0.10:1.00.

 

“Lien” shall mean any mortgage,
pledge, security interest, hypothecation, assignment, lien (statutory or other)
or similar encumbrance (including any agreement to give any of the foregoing,
any conditional sale or other title retention agreement or any lease in the
nature thereof).

 

“Loan” shall mean any Revolving Credit
Loan or Term Loan made by any Lender hereunder.

 

“Management Group” shall mean, at any
time, the Chairman of the Board, the President, any Executive Vice President or
Vice President, the Treasurer and the Secretary of the Borrower at such time
and James R. Fisher, Jeffrey J. Dailey, Randy Sutton and any officers of the
Borrower from time to time holding offices corresponding to those of the
foregoing individuals as of the Closing Date.

 

“Margin Stock” shall have the meaning
provided in Regulation U.

 

“Material Adverse Change” shall mean
any material adverse change in the business, operations, property or financial
condition of the Borrower and its Subsidiaries taken as a whole.

 

“Material Adverse Effect” shall mean
any material adverse effect on the business, operations, property or financial
condition of the Borrower and its Subsidiaries taken as a whole.

 

“Material Subsidiary” shall mean, at
any date of determination, any Restricted Subsidiary of the Borrower
(a) whose total assets at the last day of the Test Period ending on the
last day of the most recent fiscal period for which Section 9.1 Financials
have been

 

19

 

delivered were equal to or greater than 5% of
the consolidated total assets of the Borrower and the Restricted Subsidiaries
at such date, (b) whose gross revenues for such Test Period were equal to
or greater than 5% of the consolidated gross revenues of the Borrower and the
Restricted Subsidiaries for such period, or (c) whose Cash Flow for such Test
Period was equal to or greater than 5% of the Cash Flow of Borrower and the
Restricted Subsidiaries for such period, in each case determined in accordance
with GAAP.

 

“Maturity Date” shall mean the A Term
Loan Maturity Date, the B Term Loan Maturity Date or the Revolving Credit
Maturity Date.

 

“Minimum Borrowing Amount” shall mean,
with respect to a Borrowing of Term Loans or Revolving Credit Loans,
$1,000,000.

 

“Minority Investment” shall mean any
Person (other than a Subsidiary) in which the Borrower or any Restricted
Subsidiary owns capital stock or other equity interests.

 

“Moody’s” shall mean Moody’s Investors
Service, Inc., or any successor by merger or consolidation to its business.

 

“NAIC” shall mean the National
Association of Insurance Commissioners or any successor organization thereto.

 

“Net Cash Proceeds” shall mean, with
respect to any Prepayment Event or any issuance by the Borrower of equity
securities, (a) the gross cash proceeds (including payments from time to
time in respect of installment obligations, if applicable) received by or on
behalf of the Borrower or any of the Restricted Subsidiaries in respect of such
Prepayment Event or issuance, as the case may be, less (b) the sum of:

 

(i)            in the case of any Prepayment Event,
the amount, if any, of all taxes paid or estimated to be payable by the
Borrower or any of the Restricted Subsidiaries in connection with such
Prepayment Event,

 

(ii)           in the case of any Prepayment Event,
the amount of any reasonable reserve established in accordance with GAAP
against any liabilities (other than any taxes deducted pursuant to clause
(i) above) (A) associated with the assets that are the subject of
such Prepayment Event and (B) retained by the Borrower or any of the
Restricted Subsidiaries, provided that the amount of any subsequent
reduction of such reserve (other than in connection with a payment in respect
of any such liability) shall be deemed to be Net Cash Proceeds of such a
Prepayment Event occurring on the date of such reduction,

 

(iii)          in the case of any Prepayment Event,
the amount of any Indebtedness secured by a Lien on the assets that are the
subject of such Prepayment Event to the extent that the instrument creating or
evidencing such Indebtedness requires that such Indebtedness be repaid upon
consummation of such Prepayment Event,

 

20

 

(iv)          in the case of any Asset Sale
Prepayment Event, the amount of any proceeds of such Asset Sale Prepayment
Event that the Borrower has reinvested (or intends to reinvest within one year
of the date of such Asset Sale Prepayment Event) in the business (including by
contribution to or retention as surplus of any Regulated Insurance Company) of
the Borrower or any of the Restricted Subsidiaries (subject to
Section 9.14), provided that any portion of such proceeds that has
not been so reinvested within such one-year period shall (x) be deemed to
be Net Cash Proceeds of an Asset Sale Prepayment Event occurring on the last
day of such one-year period and (y) be applied to the repayment of Term
Loans in accordance with Section 5.2(a), and

 

(v)           in the case of any Prepayment Event
or any issuance by the Borrower of equity securities, reasonable and customary
fees, commissions, expenses, issuance costs, discounts and other costs paid by
the Borrower or any of the Restricted Subsidiaries in connection with such
Prepayment Event or issuance, as the case may be (other than those payable to
the Borrower or any Subsidiary of the Borrower), in each case only to the
extent not already deducted in arriving at the amount referred to in
clause (a) above.

 

“Net Worth” shall mean, as to any
Person, the sum of its capital stock (including, without limitation, Permitted
Preferred Stock), capital in excess of par or stated value of shares of its
capital stock, retained earnings and any other account which, in accordance
with GAAP, constitutes stockholders equity, excluding any treasury stock.

 

“Non-Defaulting Lender” shall mean and
include each Lender other than a Defaulting Lender.

 

“Non-Excluded Taxes” shall have the
meaning provided in Section 5.4(a).

 

“Notice of Borrowing” shall have the
meaning provided in Section 2.3.

 

“Notice of Conversion or Continuation”
shall have the meaning provided in Section 2.6.

 

“Obligations” shall mean all monetary
amounts of every type or description at any time owing to the Administrative
Agent, any Lender or, in the case of Hedge Agreements, any affiliate of a
Lender pursuant to the terms of this Agreement, any other Credit Document or
any Hedge Agreement.

 

“Offering” shall mean the initial
public offering of the common stock of the Borrower as described in the
Registration Statement.

 

“Participant” shall have the meaning
provided in Section 13.6(a)(ii).

 

“PBGC” shall mean the Pension Benefit
Guaranty Corporation established pursuant to Section 4002 of ERISA, or any
successor thereto.

 

21

 

“Permitted Acquisition” shall mean the
acquisition, by merger or otherwise, by the Borrower or any of the Restricted
Subsidiaries of assets or capital stock or other equity interests, so long as
(a) such acquisition and all transactions related thereto shall be
consummated in accordance with applicable law; (b) such acquisition shall,
in the case of the acquisition of capital stock or other equity interests by
the Borrower or any Restricted Subsidiary, result in the issuer of such capital
stock or other equity interests becoming a Restricted Domestic Subsidiary and a
direct Restricted Domestic Subsidiary in the case of such an acquisition by the
Borrower; (c) after giving effect to such acquisition, no Default or Event
of Default shall have occurred and be continuing; and (d) the Borrower
shall be in compliance, on a pro forma basis after giving effect to such
acquisition (including any Indebtedness assumed or permitted to exist or
incurred pursuant to Sections 10.1(i) and 10.1(j), respectively, and any
related Pro Forma Adjustment), with the covenants set forth in Sections 10.8,
10.9, 10.10 and 10.11, as such covenants are recomputed as at the last day of
the most recently ended Test Period under such Sections as if such acquisition
had occurred on the first day of such Test Period.

 

“Permitted Investments” shall mean (a)
securities issued or unconditionally guaranteed by the United States government
or any agency or instrumentality thereof, in each case having maturities of not
more than 24 months from the date of acquisition thereof; (b) securities issued
by any state of the United States of America or any political subdivision of
any such state or any public instrumentality thereof or any political
subdivision of any such state or any public instrumentality thereof having
maturities of not more than 24 months from the date of acquisition thereof and,
at the time of acquisition, having an investment grade rating generally
obtainable from either S&P or Moody’s (or, if at any time neither S&P
nor Moody’s shall be rating such obligations, then from another nationally
recognized rating service); (c) commercial paper issued by any Lender or any
bank holding company owning any Lender; (d) commercial paper maturing no
more than 12 months after the date of creation thereof and, at the time of
acquisition, having a rating of at least A-2 or P-2 from either S&P or
Moody’s (or, if at any time neither S&P nor Moody’s shall be rating such
obligations, an equivalent rating from another nationally recognized rating
service); (e) domestic and eurodollar certificates of deposit or bankers’
acceptances maturing no more than two years after the date of acquisition
thereof issued by any Lender or any other bank having combined capital and
surplus of not less than $250,000,000 in the case of domestic banks and
$100,000,000 (or the dollar equivalent thereof) in the case of foreign banks;
(f) repurchase agreements with a term of not more than 30 days for
underlying securities of the type described in clauses (a), (b) and (e) above
entered into with any bank meeting the qualifications specified in clause (e)
above or securities dealers of recognized national standing; (g) shares of
investment companies that are registered under the Investment Company Act of
1940 and invest solely in one or more of the types of securities described in
clauses (a) through (f) above; and (h) in the case of investments by any
Restricted Foreign Subsidiary, other customarily utilized high-quality
investments in the country where such Restricted Foreign Subsidiary is located.

 

“Permitted Liens” shall mean (a) Liens
for taxes, assessments or governmental charges or claims not yet due or which
are being contested in good faith and by appropriate proceedings for which
appropriate reserves have been established in

 

22

 

accordance with GAAP; (b) Liens in respect of
property or assets of the Borrower or any of its Subsidiaries imposed by law,
such as carriers’, warehousemen’s and mechanics’ Liens and other similar Liens
arising in the ordinary course of business, in each case so long as such Liens
arise in the ordinary course of business and do not individually or in the
aggregate have a Material Adverse Effect; (c) Liens arising from judgments or
decrees in circumstances not constituting an Event of Default under Section
11.9; (d) Liens incurred or deposits made in connection with workers’
compensation, unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, performance and return-of-money
bonds and other similar obligations incurred in the ordinary course of
business; (e) ground leases in respect of real property on which facilities
owned or leased by the Borrower or any of its Subsidiaries are located; (f)
easements, rights-of-way, restrictions, minor defects or irregularities in
title and other similar charges or encumbrances not interfering in any material
respect with the business of the Borrower and its Subsidiaries taken as a
whole; (g) any interest or title of a lessor or secured by a lessor’s interest
under any lease permitted by this Agreement; (h) Liens in favor of customs
and revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods; (i) Liens on goods the
purchase price of which is financed by a documentary letter of credit issued
for the account of the Borrower or any of its Subsidiaries, provided
that such Lien secures only the obligations of the Borrower or such
Subsidiaries in respect of such letter of credit to the extent permitted under
Section 10.1; (j) leases or subleases granted to others not
interfering in any material respect with the business of the Borrower and its
Subsidiaries, taken as a whole; and (k) any assignment or transfer permitted by
the other applicable terms of this Agreement.

 

“Permitted Preferred Stock” shall mean
any preferred stock of the Borrower which is not subject to any mandatory
redemption, put, repayment, sinking fund or similar requirement (other than
customary change of control put rights, provided that such requirement
states that payments in respect thereof may not be made to the extent that such
payments would constitute a Default or Event of Default) prior to the eighth
anniversary of the Closing Date.

 

“Person” shall mean any individual,
partnership, joint venture, firm, corporation, limited liability company,
association, trust or other enterprise or any Governmental Authority.

 

“Plan” shall mean any multiemployer or
single-employer plan, as defined in Section 4001 of ERISA and subject to Title
IV of ERISA, that is or was within any of the preceding five plan years
maintained or contributed to by (or to which there is or was an obligation to
contribute or to make payments of) the Borrower, a Subsidiary or an ERISA
Affiliate.

 

“Pledge Agreement” shall mean and
include the Pledge Agreement entered into by the Borrower, the other pledgors
party thereto and the Administrative Agent for the benefit of the Lenders,
substantially in the form of Exhibit B, as the same may be amended,
supplemented or otherwise modified from time to time.

 

23

 

“Prepayment Event” shall mean any
Asset Sale Prepayment Event or Debt Incurrence Prepayment Event.

 

“Prime Rate” shall mean the rate that
Credit Suisse First Boston announces from time to time as its prime lending
rate, as in effect from time to time. 
The Prime Rate is a reference rate and does not necessarily represent
the lowest or best rate actually charged to any customer.  Credit Suisse First Boston or any other
Lender may make commercial loans or other loans at rates of interest at, above
or below the Prime Rate.

 

“Pro Forma Adjustment” shall mean, for
any test period that includes any of the four fiscal quarters first following
any Permitted Acquisition, with respect to the Acquired Cash Flow of the
applicable Acquired Entity or Business, the pro forma increase or decrease in
such Acquired Cash Flow projected by the Borrower in good faith as a result of
reasonably identifiable and supportable net cost savings or additional net
costs, as the case may be, realizable during such period by combining the
operations of such Acquired Entity or Business with the operations of the
Borrower and its Subsidiaries, provided that so long as such net cost
savings or additional net costs will be realizable at any time during such
period, it may be assumed, for purposes of projecting such pro forma
increase or decrease to such Acquired Cash Flow, that such net cost savings or
additional net costs will be realizable during the entire such period, provided
further that any such pro forma increase or decrease to such Acquired
Cash Flow shall be without duplication for net cost savings or additional net
costs actually realized during such period and already included in such
Acquired Cash Flow.

 

“Pro Forma Adjustment Certificate”
shall mean any certificate of an Authorized Officer of the Borrower delivered
pursuant to Section 9.1(g) or setting forth the information described in
clause (iii) to Section 9.1(d).

 

“Reference Lender” shall mean CSFB.

 

“Refinancing” shall mean the payment
in full of all outstanding Indebtedness under the Existing Credit Agreement,
the termination of the “Commitments” (as defined in the Existing Credit
Agreement), the cancellation of all outstanding “Letters of Credit” (as defined
in the Existing Credit Agreement) and the termination of all Liens on the stock
or assets of the Borrower and its Subsidiaries that secure or purport to secure
the obligations under the Existing Credit Agreement or under of the “Credit
Documents” (as defined in the Existing Credit Agreement).

 

“Refinancing Expense” shall mean any
fees or expenses incurred or paid by the Borrower or any of its Subsidiaries in
connection with the Refinancing, the entering into of the Credit Documents and
the incurrence of Loans on the Closing Date.

 

“Register” shall have the meaning
provided in Section 13.6(d).

 

“Registration Statement” shall mean
the Registration Statement filed by the Borrower with the SEC on December 17,
2003, together with all amendments thereto, copies of which have been delivered
to the Administrative Agent on or prior to the Closing Date.

 

24

 

“Regulated Insurance Company” shall
mean any Subsidiary of the Borrower, whether now owned or hereafter acquired,
that is authorized or admitted to carry on or transact Insurance Business in
any jurisdiction and is regulated by the insurance department or similar
regulatory authority of such jurisdiction.

 

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

 

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

 

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

 

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

 

“Reinsurance Agreement” shall mean any
agreement, contract, treaty or other arrangement whereby one or more insurers,
as reinsurers, assume liabilities under insurance policies or agreements issued
by another insurance or reinsurance company or companies.

 

“Repayment Amounts” shall mean,
collectively, (a) the A Repayment Amounts and (b) the B Repayment
Amounts.

 

“Repayment Date” shall mean,
collectively, (a) each A Repayment Date and (b) each B Repayment
Date.

 

“Reportable Event” shall mean an event
described in Section 4043 of ERISA and the regulations thereunder.

 

“Required A Term Loan Lenders” shall
mean, at any date, Non-Defaulting Lenders having or holding a majority of the
outstanding principal amount of the A Term Loans (excluding the A Term Loans
held by Defaulting Lenders) in the aggregate at such date.

 

Required A Term/Revolving Credit Lenders”
shall mean, at any date, Non-Defaulting Lenders having or holding 66-2/3% or
more of the sum of (a) the outstanding principal amount of the A Terms Loans
(excluding the A Term Loans held by Defaulting Lenders) in the aggregate at
such date and (b)(i) the Adjusted Total Revolving Credit Commitment at such
date or (ii) if the Total Revolving Credit Commitment has been terminated, the
outstanding principal amount of the Revolving Credit Loans and Letter of Credit
Exposures (excluding the Loans and Letter of Credit Exposures of Defaulting
Lenders) in the aggregate on such date.

 

“Required B Term Loan Lenders” shall
mean, at any date, Non-Defaulting Lenders having or holding a majority of the
outstanding principal amount of the B Term

 

25

 

Loans (excluding the B Term Loans held by
Defaulting Lenders) in the aggregate at such date.

 

“Required B Term Loan Supermajority Lenders”
shall mean, at any date, Non-Defaulting Lenders having or holding 66-2/3% or
more of the sum of the outstanding principal amount of the B Term Loans
(excluding the B Term Loans held by Defaulting Lenders) in the aggregate at
such date.

 

“Required Lenders” shall mean, at any
date, (a) Non-Defaulting Lenders having or holding a majority of the sum
of (i) the Adjusted Total Revolving Credit Commitment at such date and
(ii) the outstanding principal amount of the Term Loans (excluding the Term
Loans held by Defaulting Lenders) at such date or (b) if the Total
Revolving Credit Commitment has been terminated or for the purposes of
acceleration pursuant to Section 11, the holders (excluding Defaulting
Lenders) of a majority of the outstanding principal amount of the Loans and
Letter of Credit Exposures (excluding the Loans and Letter of Credit Exposures
of Defaulting Lenders) in the aggregate at such date.

 

“Required Revolving Credit Lenders”
shall mean, at any date, (a) Non-Defaulting Lenders having or holding a
majority of the Adjusted Total Revolving Credit Commitment at such date or
(b) if the Total Revolving Credit Commitment has been terminated, the
holders (excluding Defaulting Lenders) of a majority of the outstanding
principal amount of the Revolving Credit Loans and Letter of Credit Exposures
(excluding the Loans and Letter of Credit Exposures of Defaulting Lenders) in
the aggregate at such date.

 

“Requirement of Law” shall mean, as to
any Person, the Certificate of Incorporation and By-Laws or other organizational
or governing documents of such Person, and any law, treaty, rule or regulation
or determination of an arbitrator or a court or other Governmental Authority,
in each case applicable to or binding upon such Person or any of its property
or assets or to which such Person or any of its property or assets is subject.

 

“Restricted Domestic Subsidiary” shall
mean each Restricted Subsidiary that is also a Domestic Subsidiary.

 

“Restricted Foreign Subsidiary” shall
mean each Foreign Subsidiary that is also a Restricted Subsidiary.

 

“Restricted Subsidiary” shall mean any
Subsidiary of the Borrower other than an Unrestricted Subsidiary.

 

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

 

“Revolving Credit Commitment” shall
mean, (a) with respect to each Lender that is a Lender on the date hereof,
the amount set forth opposite such Lender’s name on

 

26

 

Schedule 1.1 as such Lender’s “Revolving
Credit Commitment” and (b) in the case of any Lender that becomes a Lender
after the date hereof, the amount specified as such Lender’s “Revolving Credit
Commitment” in the Assignment and Assumption pursuant to which such Lender
assumed a portion of the Total Revolving Credit Commitment, in each case as the
same may be changed from time to time pursuant to the terms hereof.

 

“Revolving Credit Commitment Percentage”
shall mean at any time, for each Lender, the percentage obtained by dividing
such Lender’s Revolving Credit Commitment by the Total Revolving Credit
Commitment, provided that at any time when the Total Revolving Credit
Commitment shall have been terminated, each Lender’s Revolving Credit
Commitment Percentage shall be its Revolving Credit Commitment Percentage as in
effect immediately prior to such termination.

 

“Revolving Credit Loan” shall have the
meaning provided in Section 2.1(c).

 

“Revolving Credit Maturity Date” shall
mean the fifth anniversary of the Closing Date, or, if such date is not a
Business Day, the next preceding Business Day.

 

“Risk-Based Capital Ratio” shall mean,
for any Regulated Insurance Company, the ratio (expressed as a percentage), at
any time, of the Total Adjusted Capital of such Regulated Insurance Company to
the Authorized Control Level of such Regulated Insurance Company.

 

“SAP” shall mean, with respect to any
Regulated Insurance Company, the accounting procedures and practices prescribed
or permitted by the Applicable Insurance Regulatory Authority of the state in
which such Regulated Insurance Company is domiciled.

 

“S&P” shall mean Standard &
Poor’s, a division of The McGraw-Hill Companies, Inc., or any successor by
merger or consolidation to its business.

 

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

 

“Section 9.1 Financials” shall mean
the GAAP financial statements delivered, or required to be delivered, pursuant
to Section 9.1(a)(i) or (b)(i) together with the accompanying officer’s
certificate delivered, or required to be delivered, pursuant to
Section 9.1(d).

 

“Service Company” shall mean Bristol
West Insurance Services of California, Inc., a California corporation, and any
successor entity thereto.

 

“SNIC” shall mean Security National
Insurance Company.

 

“SPC” has the meaning specified in
Section 13.6.

 

“Specified Subsidiary” shall mean, at
any date of determination, (a) any Material Subsidiary; and (b) any
Unrestricted Subsidiary (i) whose total assets at the last day of

 

27

 

the Test Period ending on the last day of the
most recent fiscal period for which Section 9.1 Financials have been delivered
were equal to or greater than 15% of the consolidated total assets of the
Borrower and its Subsidiaries at such date or (ii) whose gross revenues
for such Test Period were equal to or greater than 15% of the consolidated
gross revenues of the Borrower and its Subsidiaries for such period, in each
case determined in accordance with GAAP.

 

“Stated Amount” of any Letter of
Credit shall mean the maximum amount from time to time available to be drawn
thereunder, determined without regard to whether any conditions to drawing
could then be met.

 

“Status” shall mean, as to the
Borrower as of any date, the existence of Level I Status, Level II
Status, Level III Status or Level IV Status, as the case may be, on
such date.  Changes in Status shall be
determined based on the Consolidated Total Debt to Consolidated Total
Capitalization Ratio as of the last day of each fiscal quarter and shall be
effective on the date on which (a) Section 9.1 Financials are delivered to
the Lenders under Section 9.1 in respect of such fiscal quarter and (b) an
officer’s certificate is delivered by the Borrower to the Lenders setting
forth, with respect to such Section 9.1 Financials, the then-applicable
Status, and shall remain in effect until the next change to be effected
pursuant to this definition, provided that (i) if the Borrower
fails to deliver Section 9.1 Financials when required under Section 9.1 or an
Event of Default exists, then until such Section 9.1 Financials are so
delivered and/or such Event of Default no longer exists, the Status of the
Borrower for the purposes of this Agreement shall be Level I Status and
(ii) notwithstanding the foregoing, for the period from and including the
Closing Date to but excluding the day that is 180 days following the
Closing Date, the Status of the Borrower for the purposes of this Agreement
shall be Level II Status.

 

“Statutory Pre-Tax Earnings” shall
mean, for any period, for any Regulated Insurance Company, net income
determined in accordance with SAP plus (a) to the extent deducted in
determining such net income and without duplication, the sum of the amounts for
such period of (i) provision for taxes (including, without limitation, payments
under tax sharing agreements), (ii) interest expense, (iii) depreciation
expense, (iv) amortization expense, including amortization of deferred
financing fees, (v) non-recurring charges, (vi) non-cash charges, (vii) losses
on asset sales, (viii) restructuring charges, (ix) Refinancing Expenses, (x)
any expenses or charges incurred in connection with any issuance of debt or
equity securities, (xi) any fees and expenses related to Permitted Acquisitions
and (xii) any deduction for minority interest expense, less (b) to the
extent included in determining such net income and without duplication, the sum
of the amounts for such period of (i) non-recurring gains, (ii) non-cash gains
and (iii) gains on asset sales, all as determined on a Combined basis for the
Regulated Insurance Companies in accordance with SAP, provided that (i)
except as provided in clause (ii) below, there shall be excluded from the
amounts determined above for any period the earnings or net income of all
Unrestricted Subsidiaries for such period to the extent otherwise included in
such amount, except to the extent actually received in cash by the Borrower or
its Restricted Subsidiaries during such period through dividends or other
distributions, and (ii) there shall be included in determining Statutory
Pre-Tax Earnings for any period (x) the Acquired Cash Flow of any Person,
property, business or asset 

 

28

 

(other than an Unrestricted Subsidiary)
acquired to the extent not subsequently sold, transferred or otherwise disposed
of (but not including the Acquired Cash Flow of any related Person, property,
business or assets to the extent not so acquired) by the Borrower or any
Restricted Subsidiary during such period (each such Person, property, business
or asset acquired and not subsequently so disposed of, an “Acquired Entity
or Business”), and the Acquired Cash Flow of an Unrestricted Subsidiary
that is converted into a Restricted Subsidiary during such period (each a “Converted
Restricted Subsidiary”), in each case based on the actual Acquired Cash
Flow of such Acquired Entity or Business or Converted Restricted Subsidiary for
such period (including the portion thereof occurring prior to such acquisition
or conversion) and (y) an adjustment with respect of each Acquired Entity or
Business equal to the amount of the Pro Forma Adjustment with respect to such
Acquired Entity or Business for such period (including the portion thereof
occurring prior to such acquisition or conversion) as specified in the Pro
Forma Adjustment Certificate delivered to the Lenders and the Administrative
Agent.

 

“Subsidiary” of any Person shall mean
and include (a) any corporation more than 50% of whose stock of any class or
classes having by the terms thereof ordinary voting power to elect a majority
of the directors of such corporation (irrespective of whether or not at the
time stock of any class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time
owned by such Person directly or indirectly through Subsidiaries and (b) any
partnership, association, joint venture or other entity in which such Person
directly or indirectly through Subsidiaries has more than a 50% equity interest
at the time.  Unless otherwise expressly
provided, all references herein to a “Subsidiary” shall mean a Subsidiary of
the Borrower.

 

“Surplus” shall mean, as of any date
of determination, the surplus of all Regulated Insurance Companies as of such
date determined on a Combined basis in accordance with SAP.

 

“Syndication Agent” shall mean ING
Capital LLC, together with its affiliates, as the syndication agent for the
Lenders under this Agreement and the other Credit Documents.

 

“Term Loans” shall mean, collectively,
(a) the A Term Loans and (b) the B Term Loans.

 

“Test Period” shall mean, for any date
of determination, the four consecutive fiscal quarters of the Borrower then
last ended.

 

“Texas Credit Parties” shall have the
meaning set forth in Section 9.17.

 

“Total A Term Loan Commitment” shall
mean the sum of the A Term Loan Commitments of all the Lenders.

 

“Total Adjusted Capital” shall mean
“Total Adjusted Capital” as defined by the NAIC as of December 31, 1994, as
such definition has been amended from time to time,

 

29

 

and as applied in the context of the
Risk-Based Capital Guidelines promulgated by the NAIC.

 

“Total B Term Loan Commitment” shall
mean the sum of the B Term Loan Commitments of all the Lenders.

 

“Total Commitment” shall mean the sum
of the Total Term Loan Commitment and the Total Revolving Credit Commitment.

 

“Total Credit Exposure” shall mean, at
any date, the sum of (a) the Total Revolving Credit Commitment at such date,
(b) the Total Term Loan Commitment at such date and (c) the
outstanding principal amount of all Term Loans at such date.

 

“Total Revolving Credit Commitment”
shall mean the sum of the Revolving Credit Commitments of all the Lenders.

 

“Total Term Loan Commitment” shall
mean the sum of the A Term Loan Commitments and the B Term Loan Commitments of
all Lenders.

 

“Transaction” shall mean,
collectively, (a) the Offering, (b) the Refinancing and (c) the
entering into of the Credit Documents and the incurrence of Loans on the
Closing Date.

 

“Transferee” shall have the meaning
provided in Section 13.6(f).

 

“Type” shall mean (a) as to any Term
Loan, its nature as an ABR Loan or a Eurodollar Term Loan and (b) as
to any Revolving Credit Loan, its nature as an ABR Loan or a Eurodollar
Revolving Credit Loan.

 

“Unfunded Current Liability” of any
Plan shall mean the amount, if any, by which the present value of the accrued
benefits under the Plan as of the close of its most recent plan year,
determined in accordance with Statement of Financial Accounting Standards No.
87 as in effect on the date hereof, based upon the actuarial assumptions that
would be used by the Plan’s actuary in a termination of the Plan, exceeds the
fair market value of the assets allocable thereto.

 

“Unpaid Drawing” shall have the
meaning provided in Section 3.4(a).

 

“Unregulated Restricted Subsidiary”
shall mean any Restricted Subsidiary that is also an Unregulated Subsidiary.

 

“Unregulated Subsidiary” shall mean
any Subsidiary of the Borrower, whether now owned or hereafter acquired, other
than a Regulated Insurance Company.

 

“Unrestricted Subsidiary” shall mean
(a) any Subsidiary of the Borrower that is formed or acquired after the
Closing Date, provided that at such time (or promptly thereafter) the
Borrower designates such Subsidiary an Unrestricted Subsidiary in a written
notice to the Administrative Agent, (b) any Restricted Subsidiary on the
Closing

 

30

 

Date subsequently re-designated as an
Unrestricted Subsidiary by the Borrower in a written notice to the
Administrative Agent, provided that such re-designation shall be deemed
to be an investment on the date of such re-designation in an Unrestricted
Subsidiary in an amount equal to the sum of (i) the greater of (A) the net
worth of such re-designated Restricted Subsidiary immediately prior to such re-designation
(such net worth to be calculated without regard to any Guaranty provided by
such re-designated Restricted Subsidiary) and (B) the amount actually invested
by the Borrower and its Restricted Subsidiaries in such re-designated
Restricted Subsidiary between the Closing Date and the date of such
re-designation and not returned to the Borrower or any Restricted Subsidiary
prior to the date of such re-designation and (ii) the aggregate principal
amount of any Indebtedness owed by such re-designated Restricted Subsidiary to
the Borrower or any other Restricted Subsidiary immediately prior to such
re-designation, all calculated, except as set forth in the parenthetical to
clause (i), on a consolidated basis in accordance with GAAP, and (c) each
Subsidiary of an Unrestricted Subsidiary; provided, however, that
(i) at the time of any written re-designation by the Borrower to the
Administrative Agent of any Unrestricted Subsidiary as a Restricted Subsidiary,
the Unrestricted Subsidiary so re-designated shall no longer constitute an
Unrestricted Subsidiary, (ii) no Unrestricted Subsidiary may be
re-designated as a Restricted Subsidiary if a Default or Event of Default would
result from such re-designation and (iii) no Restricted Subsidiary may be
re-designated as an Unrestricted Subsidiary if a Default or Event of Default
would result from such re-designation. 
On or promptly after the date of its formation, acquisition or
re-designation, as applicable, each Unrestricted Subsidiary shall have entered
into a tax sharing agreement containing terms that, in the reasonable judgment
of the Administrative Agent, provide for an appropriate allocation of tax
liabilities and benefits.

 

“Voting Stock” shall mean, with
respect to any Person, shares of such Person’s capital stock having the right
to vote for the election of directors of such Person under ordinary
circumstances.

 

SECTION
2.           Amount
and Terms of Credit.

 

2.1           Commitments. 
(a)   Subject to and upon the terms and conditions herein set
forth, each Lender having an A Term Loan Commitment severally agrees to make a
loan or loans (each an “A Term Loan” and, collectively, the “A Term
Loans”) to the Borrower, which A Term Loans (i) shall be made on the
Closing Date, (ii) may, at the option of the Borrower, be incurred and
maintained as, and/or converted into, ABR Loans or Eurodollar Term Loans, provided
that all A Term Loans made by each of the Lenders pursuant to the same
Borrowing shall, unless otherwise specifically provided herein, consist
entirely of A Term Loans of the same Type, (iii) may be repaid in
accordance with the provisions hereof, but once repaid, may not be reborrowed,
(iv) shall not exceed for any such Lender the A Term Loan Commitment of such
Lender and (v) shall not exceed in the aggregate the Total A Term Loan
Commitment.  On the A Term Loan Maturity
Date, all A Term Loans shall be repaid in full.

 

(b)           Subject
to and upon the terms and conditions herein set forth, each Lender having a B
Term Loan Commitment severally agrees to make a loan or loans (each a “B Term
Loan” and, collectively, the “B Term Loans”) to the Borrower, which
B Term Loans (i) shall be

 

31

 

made on the
Closing Date, (ii) may, at the option of the Borrower, be incurred and
maintained as, and/or converted into, ABR Loans or Eurodollar Term Loans, provided
that all B Term Loans made by each of the Lenders pursuant to the same
Borrowing shall, unless otherwise specifically provided herein, consist
entirely of B Term Loans of the same Type, (iii) may be repaid in
accordance with the provisions hereof, but once repaid, may not be reborrowed,
(iv) shall not exceed for any such Lender the B Term Loan Commitment of such
Lender and (v) shall not exceed in the aggregate the Total B Term Loan
Commitment.  On the B Term Loan Maturity
Date, all B Term Loans shall be repaid in full.

 

(c)           Subject
to and upon the terms and conditions herein set forth, each Lender having a
Revolving Credit Commitment severally agrees to make a loan or loans (each a “Revolving
Credit Loan” and, collectively, the “Revolving Credit Loans”) to the
Borrower, which Revolving Credit Loans (i) shall be made at any time and
from time to time after the Closing Date and prior to the Revolving Credit
Maturity Date, provided that no Revolving Credit Loans may be incurred
on the Closing Date, (ii) may, at the option of the Borrower, be incurred
and maintained as, and/or converted into, ABR Loans or Eurodollar Revolving
Credit Loans, provided that all Revolving Credit Loans made by each of
the Lenders pursuant to the same Borrowing shall, unless otherwise specifically
provided herein, consist entirely of Revolving Credit Loans of the same Type,
(iii) may be repaid and reborrowed in accordance with the provisions hereof,
(iv) shall not exceed for any such Lender at any time outstanding that
aggregate principal amount which, when added to the product of (x) such
Lender’s Revolving Credit Commitment Percentage and (y) the aggregate
Letter of Credit Outstandings at such time, equals the Revolving Credit
Commitment of such Lender at such time and (v) shall not, after giving effect
thereto and to the application of the proceeds thereof, exceed for all Lenders
at any time outstanding the aggregate principal amount that, when added to the
aggregate Letter of Credit Outstandings at such time, equals the Total
Revolving Credit Commitment then in effect. 
On the Revolving Credit Maturity Date, all Revolving Credit Loans shall
be repaid in full.

 

2.2           Minimum Amount of Each Borrowing;
Maximum Number of Borrowings.  The
aggregate principal amount of each Borrowing of Term Loans or Revolving Credit
Loans shall be in a multiple of $100,000 and shall not be less than the Minimum
Borrowing Amount with respect thereto. 
More than one Borrowing may be incurred on any date, provided
that at no time shall there be outstanding more than 12 Borrowings of
Eurodollar Loans under this Agreement.

 

2.3           Notice of Borrowing.  (a)  The Borrower shall give the
Administrative Agent at the Administrative Agent’s Office (i) prior to
12:00 Noon (New York time) at least three Business Days’ prior written notice
(or telephonic notice promptly confirmed in writing) of the Borrowing of Term
Loans if all or any of such Term Loans are to be Eurodollar Loans and
(ii) prior written notice (or telephonic notice promptly confirmed in
writing) prior to 12:00 Noon. (New York time) on the date of the Borrowing
of Term Loans if all such Term Loans are to be ABR Loans.  Such notice (together with each notice of a
Borrowing of Revolving Credit Loans pursuant to Section 2.3(b), a “Notice
of Borrowing”) shall be in substantially the form attached hereto as
Exhibit C, shall be irrevocable and shall specify (i) the aggregate
principal amount of the Term Loans to be made and the Facilities pursuant to
which such Term Loans are to be made, (ii) the date of the borrowing
(which shall be a Business Day and, in the case of the initial borrowing, shall
be the Closing Date), (iii) whether the Term Loans of each Facility shall
consist

 

32

 

of ABR Loans and/or Eurodollar
Term Loans and, if the Term Loans of any Facility are to include Eurodollar
Term Loans, the Interest Period to be initially applicable thereto and (iv) any
instructions for the remittance of funds. 
The Administrative Agent shall promptly give each Lender written notice
(or telephonic notice promptly confirmed in writing) of each proposed Borrowing
of Term Loans, of such Lender’s proportionate share thereof and of the other
matters covered by the related Notice of Borrowing.

 

(b)           Whenever
the Borrower desires to incur Revolving Credit Loans hereunder (other than
borrowings to repay Unpaid Drawings), it shall give the Administrative Agent at
the Administrative Agent’s Office (i) prior to 12:00 Noon (New York time) at
least three Business Days’ prior written notice (or telephonic notice promptly
confirmed in writing) of each Borrowing of Eurodollar Revolving Credit Loans
and (ii) prior to 12:00 Noon (New York time) at least one Business Day’s
prior written notice (or telephonic notice promptly confirmed in writing) of
each Borrowing of ABR Loans.  Each such
Notice of Borrowing, except as otherwise expressly provided in Section 2.10,
shall be irrevocable and shall specify (i) the aggregate principal amount of
the Revolving Credit Loans to be made pursuant to such Borrowing, (ii) the date
of Borrowing (which shall be a Business Day), (iii) whether the respective
Borrowing shall consist of ABR Loans or Eurodollar Revolving Credit Loans and,
if Eurodollar Revolving Credit Loans, the Interest Period to be initially
applicable thereto and (iv) any instructions for the remittance of funds.  The Administrative Agent shall promptly give
each Lender written notice (or telephonic notice promptly confirmed in writing)
of each proposed Borrowing of Revolving Credit Loans, of such Lender’s
proportionate share thereof and of the other matters covered by the related
Notice of Borrowing.

 

(c)           Borrowings
to reimburse Unpaid Drawings shall be made upon the notice specified in
Section 3.4(c).

 

(d)           Without
in any way limiting the obligation of the Borrower to confirm in writing any
notice it may give hereunder by telephone, the Administrative Agent may act
prior to receipt of written confirmation without liability upon the basis of
such telephonic notice believed by the Administrative Agent in good faith to be
from an Authorized Officer of the Borrower. 
In each such case the Borrower hereby waives the right to dispute the
Administrative Agent’s record of the terms of any such telephonic notice.

 

2.4           Disbursement of Funds.  (a) 
No later than 12:00 Noon (New York time) on the date specified in each
Notice of Borrowing, each Lender will make available its pro  rata
portion, if any, of each Borrowing requested to be made on such date in the manner
provided below.

 

(b)           Each
Lender shall make available all amounts it is to fund under any Borrowing in
Dollars and immediately available funds to the Administrative Agent at the
Administrative Agent’s Office and the Administrative Agent will (except in the
case of Borrowings to repay Unpaid Drawings) make available to the Borrower by
depositing to the Borrower’s account as specified in the Notice of Borrowing
the aggregate of the amounts so made available in Dollars and the type of funds
received.  Unless the Administrative
Agent shall have been notified by any Lender prior to the date of any such
Borrowing that such Lender does not intend to make available to the
Administrative Agent its portion of the Borrowing or

 

33

 

Borrowings to be made on such
date, the Administrative Agent may assume that such Lender has made such amount
available to the Administrative Agent on such date of Borrowing, and the
Administrative Agent, in reliance upon such assumption, may (in its sole
discretion and without any obligation to do so) make available to the Borrower
a corresponding amount.  If such
corresponding amount is not in fact made available to the Administrative Agent
by such Lender and the Administrative Agent has made available same to the
Borrower, the Administrative Agent shall be entitled to recover such
corresponding amount from such Lender. 
If such Lender does not pay such corresponding amount forthwith upon the
Administrative Agent’s demand therefor, the Administrative Agent shall promptly
notify the Borrower, and the Borrower shall immediately pay such corresponding
amount to the Administrative Agent.  The
Administrative Agent shall also be entitled to recover from such Lender or the
Borrower, as the case may be, interest on such corresponding amount in respect
of each day from the date such corresponding amount was made available by the
Administrative Agent to the Borrower to the date such corresponding amount is
recovered by the Administrative Agent, at a rate per annum equal to (i) if paid
by such Lender, the Federal Funds Effective Rate or (ii) if paid by the
Borrower, the then-applicable rate of interest, calculated in accordance with
Section 2.8, for the respective Loans.

 

(c)           Nothing
in this Section 2.4 shall be deemed to relieve any Lender from its obligation
to fulfill its commitments hereunder or to prejudice any rights that the
Borrower may have against any Lender as a result of any default by such Lender
hereunder (it being understood, however, that no Lender shall be responsible
for the failure of any other Lender to fulfill its commitments hereunder).

 

2.5           Repayment of Loans; Evidence of Debt.  (a)   The Borrower shall repay to
the Administrative Agent, for the benefit of the Lenders, (i) on the A
Term Loan Maturity Date, the then-unpaid A Term Loans, (ii) on the B Term Loan
Maturity Date, the then-unpaid B Term Loans, and (iii) on the Revolving
Credit Maturity Date, the then-unpaid Revolving Credit Loans.

 

(b)           The
Borrower shall repay to the Administrative Agent, for the benefit of the
Lenders of A Term Loans, on each date set forth below (each an “A Repayment
Date”), the principal amount of the A Term Loans set forth below opposite
such A Repayment Date (each an “A Repayment Amount”):

 

	
  A Repayment Date

  	
   

  	
  A
  Repayment Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  June 30,
  2004

  	
   

  	
  $

  	
  437,500

  	
   

  
	
  September
  30, 2004

  	
   

  	
  $

  	
  437,500

  	
   

  
	
  December 31, 2004

  	
   

  	
  $

  	
  437,500

  	
   

  
	
  March 31,
  2005

  	
   

  	
  $

  	
  437,500

  	
   

  
	
  June 30,
  2005

  	
   

  	
  $

  	
  875,000

  	
   

  
	
  September
  30, 2005

  	
   

  	
  $

  	
  875,000

  	
   

  
	
  December 31,
  2005

  	
   

  	
  $

  	
  875,000

  	
   

  
	
  March 31,
  2006

  	
   

  	
  $

  	
  875,000

  	
   

  
	
  June 30,
  2006

  	
   

  	
  $

  	
  875,000

  	
   

  
	
  September
  30, 2006

  	
   

  	
  $

  	
  875,000

  	
   

  
	
  December 31,
  2006

  	
   

  	
  $

  	
  875,000

  	
   

  
	
  March 31,
  2007

  	
   

  	
  $

  	
  875,000

  	
   

  

 

34

 

	
  A Repayment Date

  	
   

  	
  A
  Repayment Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  June 30,
  2007

  	
   

  	
  $

  	
  875,000

  	
   

  
	
  September
  30, 2007

  	
   

  	
  $

  	
  875,000

  	
   

  
	
  December 31,
  2007

  	
   

  	
  $

  	
  875,000

  	
   

  
	
  March 31,
  2008

  	
   

  	
  $

  	
  875,000

  	
   

  
	
  June 30,
  2008

  	
   

  	
  $

  	
  1,312,500

  	
   

  
	
  September
  30, 2008

  	
   

  	
  $

  	
  1,312,500

  	
   

  
	
  December 31,
  2008

  	
   

  	
  $

  	
  1,312,500

  	
   

  
	
  March 31,
  2009

  	
   

  	
  $

  	
  1,312,500

  	
   

  
	
  June 30,
  2009

  	
   

  	
  $

  	
  4,375,000

  	
   

  
	
  September
  30, 2009

  	
   

  	
  $

  	
  4,375,000

  	
   

  
	
  December 31,
  2009

  	
   

  	
  $

  	
  4,375,000

  	
   

  
	
  A Term Loan
  Maturity Date

  	
   

  	
  $

  	
  4,375,000

  	
   

  

 

(c)           The
Borrower shall repay to the Administrative Agent, for the benefit of the
Lenders of B Term Loans, on each date set forth below (each a “B Repayment
Date”), the principal amount of the B Term Loans set forth below opposite
such B Repayment Date (each a “B Repayment Amount”):

 

	
  B Repayment Date

  	
   

  	
  B
  Repayment Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  June 30,
  2004

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  September
  30, 2004

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  December 31,
  2004

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  March 31,
  2005

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  June 30,
  2005

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  September
  30, 2005

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  December 31,
  2005

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  March 31,
  2006

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  June 30,
  2006

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  September
  30, 2006

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  December 31,
  2006

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  March 31,
  2007

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  June 30,
  2007

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  September
  30, 2007

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  December 31,
  2007

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  March 31,
  2008

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  June 30,
  2008

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  September
  30, 2008

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  December 31,
  2008

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  March 31,
  2009

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  June 30,
  2009

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  September
  30, 2009

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  December 31,
  2009

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  March 31,
  2010

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  June 30,
  2010

  	
   

  	
  $

  	
  9,400,000

  	
   

  

 

35

 

	
   

  	
   

  	
   

  	
   

  
	
  September
  30, 2010

  	
   

  	
  $

  	
  9,400,000

  	
   

  
	
  December 31,
  2010

  	
   

  	
  $

  	
  9,400,000

  	
   

  
	
  B Term Loan
  Maturity Date

  	
   

  	
  $

  	
  9,400,000

  	
   

  

 

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

 

(e)           The
Administrative Agent shall maintain the Register pursuant to Section 13.6,
and a subaccount for each Lender, in which Register and subaccounts (taken
together) shall be recorded (i) the amount of each Loan made hereunder, whether
such Loan is an A Term Loan, a B Term Loan or a Revolving Credit Loan, the Type
of each Loan made and the Interest Period applicable thereto, (ii) the amount
of any principal or interest due and payable or to become due and payable from
the Borrower to each Lender hereunder and (iii) the amount of any sum received
by the Agent hereunder from the Borrower and each Lender’s share thereof.

 

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

 

2.6           Conversions and Continuations.  (a)   The Borrower shall have the
option on any Business Day to convert all or a portion equal to at least the
Minimum Borrowing Amount of the outstanding principal amount of Loans pursuant
to a single Facility of one Type into a Borrowing or Borrowings of another Type
under such Facility or to continue the outstanding principal amount of any
Eurodollar Term Loans or Eurodollar Revolving Credit Loans as Eurodollar Term
Loans or Eurodollar Revolving Credit Loans, as the case may be, for an
additional Interest Period, provided that (i) no partial conversion of
Eurodollar Term Loans or Eurodollar Revolving Credit Loans shall reduce the
outstanding principal amount of Eurodollar Term Loans or Eurodollar Revolving Credit
Loans made pursuant to a single Borrowing to less than the Minimum Borrowing
Amount, (ii) ABR Loans may not be converted into Eurodollar Term Loans or
Eurodollar Revolving Credit Loans if a Default or Event of Default is in
existence on the date of the conversion and the Administrative Agent has or the
Required Lenders have determined in its or their sole discretion not to permit
such conversion, (iii) Eurodollar Loans may not be continued as Eurodollar
Term Loans or Eurodollar Revolving Credit Loans for an additional Interest
Period if a Default or Event of Default is in existence on the date of the
proposed continuation and the Administrative Agent has or the Required Lenders
have determined in its or their sole discretion not to permit such continuation
and (iv) Borrowings resulting from conversions pursuant to this Section
2.6 shall be limited in number as provided in Section 2.2.  Each such conversion or continuation shall
be effected by

 

36

 

the Borrower by giving the
Administrative Agent at the Administrative Agent’s Office prior to 12:00 Noon
(New York time) at least three Business Days’ (or one Business Day’s notice in
the case of a conversion into ABR Loans) prior written notice (or telephonic notice
promptly confirmed in writing) (each a “Notice of Conversion or Continuation”)
specifying the A Term Loans, B Term Loans or Revolving Credit Loans to be so
converted or continued, the Type of Term Loans or Revolving Credit Loans to be
converted or continued into and, if such Term Loans or Revolving Credit Loans
are to be converted into or continued as Eurodollar Term Loans or Eurodollar
Revolving Credit Loans, the Interest Period to be initially applicable
thereto.  The Administrative Agent shall
give each Lender notice as promptly as practicable of any such proposed
conversion or continuation affecting any of its Term Loans or Revolving Credit
Loans.

 

(b)           If
any Default or Event of Default is in existence at the time of any proposed
continuation of any Eurodollar Term Loans or Eurodollar Revolving Credit Loans
and the Administrative Agent has or the Required Lenders have determined in its
or their sole discretion not to permit such continuation, such Eurodollar Term
Loans or Eurodollar Revolving Credit Loans shall be automatically converted on
the last day of the current Interest Period into ABR Loans.  If upon the expiration of any Interest
Period in respect of Eurodollar Term Loans or Eurodollar Revolving Credit
Loans, the Borrower has failed to elect a new Interest Period to be applicable
thereto as provided in paragraph (a) above, the Borrower shall be deemed
to have elected to convert such Borrowing of Eurodollar Term Loans or
Eurodollar Revolving Credit Loans, as the case may be, into a Borrowing of ABR
Loans effective as of the expiration date of such current Interest Period.

 

2.7           Pro Rata Borrowings.  Each Borrowing of A Term Loans, B Term Loans
or Revolving Credit Loans under this Agreement shall be granted by the Lenders pro
rata on the basis of their then-applicable Commitments.  It is understood that no Lender shall be
responsible for any default by any other Lender in its obligation to make Loans
hereunder and that each Lender shall be obligated to make the Loans provided to
be made by it hereunder, regardless of the failure of any other Lender to
fulfill its commitments hereunder.

 

2.8           Interest. 
(a)  The unpaid principal amount
of each ABR Loan shall bear interest from the date of the Borrowing thereof
until maturity (whether by acceleration or otherwise) at a rate per annum that
shall at all times be the Applicable ABR Margin plus the ABR in effect from
time to time.

 

(b)           The
unpaid principal amount of each Eurodollar Term Loan or Eurodollar Revolving
Credit Loan shall bear interest from the date of the Borrowing thereof until
maturity thereof (whether by acceleration or otherwise) at a rate per annum
that shall at all times be the Applicable Eurodollar Margin in effect from time
to time plus the relevant Eurodollar Rate.

 

(c)           If
all or a portion of (i) the principal amount of any Loan or (ii) any
interest payable thereon shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue amount shall bear
interest at a rate per annum that is (x) in the case of overdue principal, the
rate that would otherwise be applicable thereto plus 2% or (y) in
the case of any overdue interest, to the extent permitted by applicable law,
the rate described in Section 2.8(a) plus 2% from and including the
date of such non-payment to but excluding the date on which such amount is paid
in full (after as well as before judgment).

 

37

 

(d)           Interest
on each Loan shall accrue from and including the date of any Borrowing to but
excluding the date of any repayment thereof and shall be payable (i) in respect
of each ABR Loan, quarterly in arrears on the last Business day of each March,
June, September and December, (ii) in respect of each Eurodollar Term Loan or
Eurodollar Revolving Credit Loan, on the last day of each Interest Period
applicable thereto and, in the case of an Interest Period in excess of three
months, on each date occurring at three-month intervals after the first day of
such Interest Period, (iii) in respect of each Loan (except, in the case
of prepayments, any ABR Loan), on any prepayment (on the amount prepaid), at
maturity (whether by acceleration or otherwise) and, after such maturity, on
demand.

 

(e)           All
computations of interest hereunder shall be made in accordance with
Section 5.5.

 

(f)            The
Administrative Agent, upon determining the interest rate for any Borrowing of
Eurodollar Loans, shall promptly notify the Borrower and the relevant Lenders
thereof.  Each such determination shall,
absent clearly demonstrable error, be final and conclusive and binding on all
parties hereto.

 

2.9           Interest Periods.  At the time the Borrower gives a Notice of Borrowing or Notice of
Conversion or Continuation in respect of the making of, or conversion into or
continuation as, a Borrowing of Eurodollar Term Loans or Eurodollar Revolving
Credit Loans (in the case of the initial Interest Period applicable thereto) or
prior to 12:00 Noon. (New York time) on the third Business Day prior to the
expiration of an Interest Period applicable to a Borrowing of Eurodollar Term
Loans or Eurodollar Revolving Credit Loans, the Borrower shall have the right
to elect by giving the Administrative Agent written notice (or telephonic
notice promptly confirmed in writing) the Interest Period applicable to such
Borrowing, which Interest Period shall, at the option of the Borrower, be a
one, two, three, six or (if available to all the Lenders making such loans as
determined by such Lenders in good faith based on prevailing market conditions)
a nine or twelve month period. 
Notwithstanding anything to the contrary contained above:

 

(a)           the
initial Interest Period for any Borrowing of Eurodollar Term Loans or
Eurodollar Revolving Credit Loans shall commence on the date of such Borrowing
(including the date of any conversion from a Borrowing of ABR Loans) and each
Interest Period occurring thereafter in respect of such Borrowing shall
commence on the day on which the next preceding Interest Period expires;

 

(b)           if
any Interest Period relating to a Borrowing of Eurodollar Term Loans or
Eurodollar Revolving Credit Loans begins on the last Business Day of a calendar
month or begins on a day for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period, such Interest Period shall
end on the last Business Day of the calendar month at the end of such Interest
Period;

 

(c)           if
any Interest Period would otherwise expire on a day that is not a Business Day,
such Interest Period shall expire on the next succeeding Business Day, provided
that if any Interest Period in respect of a Eurodollar Term Loan or Eurodollar
Revolving Credit Loan would otherwise expire on a day that is not a Business
Day but is a day of the month after

 

38

 

which no further Business Day
occurs in such month, such Interest Period shall expire on the next preceding
Business Day; and

 

(d)           the
Borrower shall not be entitled to elect any Interest Period in respect of any
Eurodollar Term Loan or Eurodollar Revolving Credit Loan if such Interest
Period would extend beyond the applicable Maturity Date of such Loan;

 

2.10         Increased Costs, Illegality, etc.  (a)   In the event that
(x) in the case of clause (i) below, the Administrative Agent or
(y) in the case of clauses (ii) and (iii) below, any Lender shall
have reasonably determined (which determination shall, absent clearly
demonstrable error, be final and conclusive and binding upon all parties
hereto):

 

(i)            on any date for determining the
Eurodollar Rate for any Interest Period that, by reason of any changes arising
on or after the Closing Date affecting the interbank Eurodollar market,
adequate and fair means do not exist for ascertaining the applicable interest
rate on the basis provided for in the definition of Eurodollar Rate; or

 

(ii)           at any time, that such Lender shall
incur increased costs or reductions in the amounts received or receivable
hereunder with respect to any Eurodollar Loans (other than any such increase or
reduction attributable to taxes) because of (x) any change since the date
hereof in any applicable law, governmental rule, regulation, guideline or order
(or in the interpretation or administration thereof and including the
introduction of any new law or governmental rule, regulation, guideline or order),
such as, for example, but not limited to, a change in official reserve
requirements, and/or (y) other circumstances affecting the interbank Eurodollar
market or the position of such Lender in such market; or

 

(iii)          at any time, that the making or continuance
of any Eurodollar Loan has become unlawful by compliance by such Lender in good
faith with any law, governmental rule, regulation, guideline or order (or would
conflict with any such governmental rule, regulation, guideline or order not
having the force of law even though the failure to comply therewith would not
be unlawful), or has become impracticable as a result of a contingency
occurring after the date hereof that materially and adversely affects the
interbank Eurodollar market;

 

then, and in any such event,
such Lender (or the Administrative Agent, in the case of clause (i) above)
shall within a reasonable time thereafter give notice (if by telephone
confirmed in writing) to the Borrower and to the Administrative Agent of such
determination (which notice the Administrative Agent shall promptly transmit to
each of the other Lenders).  Thereafter
(x) in the case of clause (i) above, Eurodollar Term Loans and
Eurodollar Revolving Credit Loans shall no longer be available until such time
as the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice by the Administrative Agent no longer
exist (which notice the Administrative Agent agrees to give at such time when
such circumstances no longer exist), and any Notice of Borrowing or Notice of
Conversion given by the Borrower with respect to Eurodollar Term Loans or
Eurodollar Revolving Credit Loans that have not yet been incurred shall be
deemed rescinded by the Borrower, (y) in the case of clause (ii)
above, the Borrower shall pay to such Lender, promptly after receipt of written

 

39

 

demand therefor, such
additional amounts (in the form of an increased rate of, or a different method
of calculating, interest or otherwise as such Lender in its reasonable
discretion shall determine) as shall be required to compensate such Lender for
such increased costs or reductions in amounts receivable hereunder (it being
agreed that a written notice as to the additional amounts owed to such Lender,
showing in reasonable detail the basis for the calculation thereof, submitted
to the Borrower by such Lender shall, absent clearly demonstrable error, be
final and conclusive and binding upon all parties hereto) and (z) in the
case of clause (iii) above, the Borrower shall take one of the actions
specified in Section 2.10(b) as promptly as possible and, in any event,
within the time period required by law.

 

(b)           At
any time that any Eurodollar Loan is affected by the circumstances described in
Section 2.10(a)(ii) or (iii), the Borrower may (and in the case of a Eurodollar
Loan affected pursuant to Section 2.10(a)(iii) shall) either (i) if the
affected Eurodollar Loan is then being made pursuant to a Borrowing, cancel
said Borrowing by giving the Administrative Agent telephonic notice (confirmed
promptly in writing) thereof on the same date that the Borrower was notified by
a Lender pursuant to Section 2.10(a)(ii) or (iii) or (ii) if the affected
Eurodollar Loan is then outstanding, upon at least three Business Days’ notice
to the Administrative Agent, require the affected Lender to convert each such
Eurodollar Revolving Credit Loan and Eurodollar Term Loan into an ABR Loan, provided
that if more than one Lender is affected at any time, then all affected Lenders
must be treated in the same manner pursuant to this Section 2.10(b).

 

(c)           If,
after the date hereof, the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, the
NAIC, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by a Lender or its parent with any
request or directive made or adopted after the date hereof regarding capital
adequacy (whether or not having the force of law) of any such authority,
association, central bank or comparable agency, has or would have the effect of
reducing the rate of return on such Lender’s or its parent’s capital or assets
as a consequence of such Lender’s commitments or obligations hereunder to a
level below that which such Lender or its parent could have achieved but for
such adoption, effectiveness, change or compliance (taking into consideration such
Lender’s or its parent’s policies with respect to capital adequacy), then from
time to time, promptly after demand by such Lender (with a copy to the
Administrative Agent), the Borrower shall pay to such Lender such additional
amount or amounts as will compensate such Lender or its parent for such
reduction, it being understood and agreed, however, that a Lender shall not be
entitled to such compensation as a result of such Lender’s compliance with, or
pursuant to any request or directive to comply with, any such law, rule or
regulation as in effect on the date hereof. 
Each Lender, upon determining in good faith that any additional amounts
will be payable pursuant to this Section 2.10(c), will give prompt written
notice thereof to the Borrower, which notice shall set forth in reasonable
detail the basis of the calculation of such additional amounts, although the
failure to give any such notice shall not, subject to Section 2.13,
release or diminish any of the Borrower’s obligations to pay additional amounts
pursuant to this Section 2.10(c) upon receipt of such notice.

 

2.11         Compensation. 
If (a) any payment of principal of any Eurodollar Term Loan or
Eurodollar Revolving Credit Loan is made by the Borrower to or for the account
of a

 

40

 

Lender other than on the last
day of the Interest Period for such Eurodollar Loan as a result of a payment or
conversion pursuant to Section 2.5, 2.6, 2.10, 5.1, 5.2 or 13.7, as a result of
acceleration of the maturity of the Loans pursuant to Section 11 or for any
other reason, (b)  any Borrowing of Eurodollar Term Loans or Eurodollar
Revolving Credit Loans is not made as a result of a withdrawn Notice of
Borrowing, (c)  any ABR Loan is not converted into a Eurodollar Term Loan
or Eurodollar Revolving Credit Loan as a result of a withdrawn Notice of
Conversion or Continuation, (d)  any Eurodollar Loan is not continued as a
Eurodollar Term Loan or Eurodollar Revolving Credit Loan as a result of a
withdrawn Notice of Conversion or Continuation or (e) any prepayment of
principal of any Eurodollar Term Loan or Eurodollar Revolving Credit Loan is
not made as a result of a withdrawn notice of prepayment pursuant to
Section 5.1 or 5.2, the Borrower shall, after receipt of a written request
by such Lender (which request shall set forth in reasonable detail the basis
for requesting such amount), pay to the Administrative Agent for the account of
such Lender any amounts required to compensate such Lender for any additional
losses, costs or expenses that such Lender may reasonably incur as a result of
such payment, failure to convert, failure to continue or failure to prepay,
including, without limitation, any loss, cost or expense (excluding loss of
anticipated profits) actually incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Lender to fund or
maintain such Eurodollar Loan.

 

2.12         Change of Lending Office.  Each Lender agrees that, upon the occurrence
of any event giving rise to the operation of Section 2.10(a)(ii), 2.10(a)(iii),
2.10(b), 3.5 or 5.4 with respect to such Lender, it will, if requested by the
Borrower, use reasonable efforts (subject to overall policy considerations of
such Lender) to designate another lending office for any Loans affected by such
event, provided that such designation is made on such terms that such
Lender and its lending office suffer no economic, legal or regulatory
disadvantage, with the object of avoiding the consequence of the event giving
rise to the operation of any such Section. Nothing in this Section 2.12 shall
affect or postpone any of the obligations of the Borrower or the right of any
Lender provided in Section 2.10, 3.5 or 5.4.

 

2.13         Notice of Certain Costs.  Notwithstanding anything in this Agreement
to the contrary, to the extent any notice required by Section 2.10, 2.11,
3.5 or 5.4 is given by any Lender more than 180 days after such Lender has
knowledge (or should have had knowledge) of the occurrence of the event giving
rise to the additional cost, reduction in amounts, loss, tax or other
additional amounts described in such Sections, such Lender shall not be
entitled to compensation under Section 2.10, 2.11, 3.5 or 5.4, as the case
may be, for any such amounts incurred or accruing prior to the giving of such
notice to the Borrower.

 

SECTION
3.           Letters
of Credit.

 

3.1           Letters of Credit.  (a)  Subject to and upon
the terms and conditions herein set forth, the Borrower, at any time and from
time to time on or after the Closing Date and on or prior to the date that is
thirty (30) days prior to the Revolving Credit Maturity Date, may request that
the Letter of Credit Issuer issue, for the account of the Borrower, a standby
letter of credit or letters of credit in such form as may be approved by the
Letter of Credit Issuer in its reasonable discretion.

 

41

 

(b)           Notwithstanding
the foregoing, (i) no Letter of Credit shall be issued the Stated Amount
of which, when added to the Letter of Credit Outstandings at such time, would
exceed the Letter of Credit Commitment then in effect; (ii) no Letter of
Credit shall be issued the Stated Amount of which, when added to the sum of
(x) the Letter of Credit Outstandings at such time and (y) the
aggregate principal of all Revolving Credit Loans then outstanding, would
exceed the Total Revolving Credit Commitment then in effect; (iii) each Letter
of Credit shall have an expiration date occurring no later than one year after
the date of issuance thereof unless otherwise agreed upon by the Administrative
Agent and the Letter of Credit Issuer and, if renewable, may be renewed for
successive periods not to exceed one year, unless otherwise agreed upon by the
Administrative Agent and the Letter of Credit Issuer, provided that in no
event shall such expiration date (after giving effect to all renewals) occur
later than the L/C Maturity Date; (iv) each Letter of Credit shall be
denominated in Dollars; and (v) no Letter of Credit shall be issued by the
Letter of Credit Issuer after it has received a written notice from the
Borrower or any Lender stating that a Default or Event of Default has occurred
and is continuing until such time as the Letter of Credit Issuer shall have
received a written notice of (x) rescission of such notice from the party or
parties originally delivering such notice or (y) the waiver of such Default or
Event of Default in accordance with the provisions of Section 13.1.

 

(c)           Upon
at least one Business Day’s prior written notice (or telephonic notice promptly
confirmed in writing) to the Administrative Agent and the Letter of Credit
Issuer (which notice the Administrative Agent shall promptly transmit to each
of the Lenders), the Borrower shall have the right, on any day, permanently to
terminate or reduce the Letter of Credit Commitment in whole or in part, provided
that, after giving effect to such termination or reduction, the Letter of
Credit Outstandings shall not exceed the Letter of Credit Commitment.

 

3.2           Letter of Credit Requests.  (a) 
Whenever the Borrower desires that a Letter of Credit be issued for its
account, it shall give the Administrative Agent and the Letter of Credit Issuer
at least five (or such lesser number as may be agreed upon by the
Administrative Agent and the Letter of Credit Issuer) Business Days’ written
notice thereof.  Each notice shall be
executed by the Borrower and shall be in the form of Exhibit E (each a “Letter
of Credit Request”).  Upon notice by
the Letter of Credit Issuer, the Administrative Agent shall promptly notify
each Lender of each Letter of Credit issued.

 

(b)           The
making of each Letter of Credit Request shall be deemed to be a representation
and warranty by the Borrower that the Letter of Credit may be issued in
accordance with, and will not violate the requirements of, Section 3.1(b).

 

3.3           Letter of Credit Participations.  (a) 
Immediately upon the issuance by the Letter of Credit Issuer of any
Letter of Credit, the Letter of Credit Issuer shall be deemed to have sold and
transferred to each other Lender that has a Revolving Credit Commitment (each
such other Lender, in its capacity under this Section 3.3, an “L/C
Participant”), and each such L/C Participant shall be deemed irrevocably
and unconditionally to have purchased and received from the Letter of Credit
Issuer, without recourse or warranty, an undivided interest and participation
(each an “L/C Participation”), to the extent of such L/C Participant’s
Revolving Credit Commitment Percentage, in such Letter of Credit, each
substitute letter of credit, each drawing made thereunder and the obligations
of the Borrower under this Agreement with respect thereto, and any security
therefor or guaranty pertaining thereto (although Letter of Credit Fees

 

42

 

will be paid directly to the
Administrative Agent for the ratable account of the L/C Participants as
provided in Section 4.1(b) and the L/C Participants shall have no right to
receive any portion of any Fronting Fees).

 

(b)           In
determining whether to pay under any Letter of Credit, the Letter of Credit
Issuer shall have no obligation relative to the L/C Participants other than to
confirm that any documents required to be delivered under such Letter of Credit
have been delivered and that they appear to comply on their face with the
requirements of such Letter of Credit. 
Any action taken or omitted to be taken by the Letter of Credit Issuer
under or in connection with any Letter of Credit issued by it, if taken or
omitted in the absence of gross negligence or willful misconduct, shall not
create for the Letter of Credit Issuer any resulting liability.

 

(c)           In
the event that the Letter of Credit Issuer makes any payment under any Letter
of Credit issued by it and the Borrower shall not have repaid such amount in
full to the Letter of Credit Issuer pursuant to Section 3.4(a), the Letter of
Credit Issuer shall promptly notify the Administrative Agent and each L/C
Participant of such failure, and each L/C Participant shall promptly and
unconditionally pay to the Administrative Agent, for the account of the Letter
of Credit Issuer, the amount of such L/C Participant’s Revolving Credit
Commitment Percentage of such unreimbursed payment in Dollars and in same day
funds; provided, however, that no L/C Participant shall be
obligated to pay to the Administrative Agent for the account of the Letter of
Credit Issuer its Revolving Credit Commitment Percentage of such unreimbursed
amount arising from any wrongful payment made by the Letter of Credit Issuer
under a Letter of Credit as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of the Letter of Credit Issuer.  If the Letter of Credit Issuer so notifies,
prior to 11:00 A.M. (New York time) on any Business Day, any L/C Participant
required to fund a payment under a Letter of Credit, such L/C Participant shall
make available to the Administrative Agent for the account of the Letter of
Credit Issuer such L/C Participant’s Revolving Credit Commitment Percentage of
the amount of such payment on such Business Day in same day funds.  If and to the extent such L/C Participant
shall not have so made its Revolving Credit Commitment Percentage of the amount
of such payment available to the Administrative Agent for the account of the
Letter of Credit Issuer, such L/C Participant agrees to pay to the
Administrative Agent for the account of the Letter of Credit Issuer, forthwith
on demand, such amount, together with interest thereon for each day from such
date until the date such amount is paid to the Administrative Agent for the
account of the Letter of Credit Issuer at the Federal Funds Effective
Rate.  The failure of any L/C
Participant to make available to the Administrative Agent for the account of
the Letter of Credit Issuer its Revolving Credit Commitment Percentage of any
payment under any Letter of Credit shall not relieve any other L/C Participant
of its obligation hereunder to make available to the Administrative Agent for
the account of the Letter of Credit Issuer its Revolving Credit Commitment
Percentage of any payment under such Letter of Credit on the date required, as
specified above, but no L/C Participant shall be responsible for the failure of
any other L/C Participant to make available to the Administrative Agent such
other L/C Participant’s Revolving Credit Commitment Percentage of any such
payment.

 

(d)           Whenever
the Letter of Credit Issuer receives a payment in respect of an unpaid
reimbursement obligation as to which the Administrative Agent has received for
the account of the Letter of Credit Issuer any payments from the L/C
Participants pursuant to paragraph (c) above, the Letter of Credit Issuer shall
pay to the Administrative Agent and the

 

43

 

Administrative Agent shall
promptly pay to each L/C Participant that has paid its Revolving Credit
Commitment Percentage of such reimbursement obligation, in Dollars and in same
day funds, an amount equal to such L/C Participant’s share (based upon the
proportionate aggregate amount originally funded by such L/C Participant to the
aggregate amount funded by all L/C Participants) of the principal amount of
such reimbursement obligation and interest thereon accruing after the purchase
of the respective L/C Participations.

 

(e)           The
obligations of the L/C Participants to make payments to the Administrative
Agent for the account of the Letter of Credit Issuer with respect to Letters of
Credit shall be irrevocable and not subject to counterclaim, set-off or other
defense or any other qualification or exception whatsoever and shall be made in
accordance with the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:

 

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

 

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

 

(iii)          any draft, certificate or any other
document presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;

 

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

 

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

 

provided,
however, that no L/C Participant shall be obligated to pay to the
Administrative Agent for the account of the Letter of Credit Issuer its
Revolving Credit Commitment Percentage of any unreimbursed amount arising from
any wrongful payment made by the Letter of Credit Issuer under a Letter of
Credit as a result of acts or omissions constituting willful misconduct or
gross negligence on the part of the Letter of Credit Issuer.

 

3.4           Agreement to Repay Letter of Credit
Drawings.  (a)  The Borrower
hereby agrees to reimburse the Letter of Credit Issuer, by making payment to
the Administrative Agent in Dollars in immediately available funds at the
Administrative Agent’s Office, for any payment or disbursement made by the
Letter of Credit Issuer under any Letter of Credit (each such amount so paid
until reimbursed, an “Unpaid Drawing”) immediately after, and in any
event on the date of, such payment, with interest on the amount so paid or
disbursed by the Letter of Credit Issuer, to the extent not reimbursed prior to
5:00 P.M. (New York time) on the date of such payment or disbursement,
from and including the date paid or disbursed to but excluding

 

44

 

the date the Letter of Credit
Issuer is reimbursed therefor, at a rate per annum that shall at all times be
the Applicable ABR Margin plus the ABR as in effect from time to time, provided
that, notwithstanding anything contained in this Agreement to the contrary,
(i) unless the Borrower shall have notified the Administrative Agent and
the Letter of Credit Issuer prior to 10:00 A.M. on the date of such
drawing that the Borrower intends to reimburse the Letter of Credit Issuer for
the amount of such drawing with funds other than the proceeds of Loans, the
Borrower shall be deemed to have given a Notice of Borrowing to the
Administrative Agent requesting that the Lenders make Revolving Credit Loans
(which shall initially be ABR Loans) on the date on which such drawing is
honored in an amount equal to the amount of such drawing and (ii) each
Lender shall, on such date, make Revolving Credit Loans in an amount equal to
such Lender’s pro rata portion of such Borrowing in accordance with the
provisions of Section 2.4.

 

(b)           The
Borrower’s obligations under this Section 3.4 to reimburse the Letter of Credit
Issuer with respect to Unpaid Drawings (including, in each case, interest
thereon) shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff, counterclaim or defense to payment that the
Borrower or any other Person may have or have had against the Letter of Credit
Issuer, the Administrative Agent or any Lender (including in its capacity as an
L/C Participant), including, without limitation, any defense based upon the failure
of any drawing under a Letter of Credit (each a “Drawing”) to conform to
the terms of the Letter of Credit or any non-application or misapplication by
the beneficiary of the proceeds of such Drawing, provided that the
Borrower shall not be obligated to reimburse the Letter of Credit Issuer for
any wrongful payment made by the Letter of Credit Issuer under the Letter of
Credit issued by it as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of the Letter of Credit Issuer.

 

(c)           Each
payment by the Letter of Credit Issuer under any Letter of Credit shall
constitute a request by the Borrower for an ABR Revolving Credit Loan in the
amount of the Unpaid Drawing in respect of such Letter of Credit.  The Letter of Credit Issuer shall notify the
Borrower and the Administrative Agent, by 10:00 A.M. (New York time) on
any Business Day on which the Letter of Credit Issuer intends to honor a
drawing under a Letter of Credit, of (i) the Letter of Credit Issuer’s intention
to honor such drawing and (ii) the amount of such drawing.  Unless otherwise instructed by the Borrower
by 10:30 A.M. (New York time) on such Business Day, the Administrative
Agent shall promptly notify each Lender of such drawing and the amount of its
Revolving Credit Loan to be made in respect thereof, and each Lender shall be
irrevocably obligated to make an ABR Revolving Credit Loan to the Borrower in
the amount of its Revolving Credit Commitment Percentage of the applicable
Unpaid Drawing by 12:00 noon (New York time) on such Business Day by making the
amount of such Revolving Credit Loan available to the Administrative Agent at
the Administrative Agent’s Office.  Such
Revolving Credit Loans shall be made without regard to the Minimum Borrowing
Amount.  The Administrative Agent shall
use the proceeds of such Revolving Credit Loans solely for purpose of
reimbursing the Letter of Credit Issuer for the related Unpaid Drawing.

 

3.5           Increased Costs.  If after the date hereof, the adoption of any applicable law,
rule or regulation, or any change therein, or any change in the interpretation
or administration thereof by any Governmental Authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
actual compliance by the Letter of Credit Issuer or any L/C Participant with
any request or directive made or adopted after the date

 

45

 

hereof (whether or not having
the force of law), by any such authority, central bank or comparable agency
shall either (a) impose, modify or make applicable any reserve, deposit,
capital adequacy or similar requirement against letters of credit issued by the
Letter of Credit Issuer, or any L/C Participant’s L/C Participation therein, or
(b) impose on the Letter of Credit Issuer or any L/C Participant any other
conditions affecting its obligations under this Agreement in respect of Letters
of Credit or L/C Participations therein or any Letter of Credit or such L/C
Participant’s L/C Participation therein; and the result of any of the foregoing
is to increase the cost to the Letter of Credit Issuer or such L/C Participant
of issuing, maintaining or participating in any Letter of Credit, or to reduce
the amount of any sum received or receivable by the Letter of Credit Issuer or
such L/C Participant hereunder (other than any such increase or reduction
attributable to taxes) in respect of Letters of Credit or L/C Participations
therein, then, promptly after receipt of written demand to the Borrower by the
Letter of Credit Issuer or such L/C Participant, as the case may be (a copy of
which notice shall be sent by the Letter of Credit Issuer or such L/C
Participant to the Administrative Agent), the Borrower shall pay to the Letter
of Credit Issuer or such L/C Participant such additional amount or amounts as
will compensate the Letter of Credit Issuer or such L/C Participant for such
increased cost or reduction, it being understood and agreed, however, that the
Letter of Credit Issuer or a L/C Participant shall not be entitled to such
compensation as a result of such Person’s compliance with, or pursuant to any
request or directive to comply with, any such law, rule or regulation as in
effect on the date hereof.  A certificate
submitted to the Borrower by the Letter of Credit Issuer or a
L/C Participant, as the case may be (a copy of which certificate shall be
sent by the Letter of Credit Issuer or such L/C Participant to the
Administrative Agent), setting forth in reasonable detail the basis for the
determination of such additional amount or amounts necessary to compensate the
Letter of Credit Issuer or such L/C Participant as aforesaid shall be
conclusive and binding on the Borrower absent clearly demonstrable error.

 

3.6           Successor Letter of Credit Issuer.  The Letter of Credit Issuer may resign as
Letter of Credit Issuer upon 60 days’ prior written notice to the
Administrative Agent, the Lenders and the Borrower.  If the Letter of Credit Issuer shall resign as Letter of Credit
Issuer under this Agreement, then the Borrower shall appoint from among the
Lenders with Revolving Credit Commitments a successor issuer of Letters of
Credit, whereupon such successor issuer shall succeed to the rights, powers and
duties of the Letter of Credit Issuer, and the term “Letter of Credit Issuer”
shall mean such successor issuer effective upon such appointment.  At the time such resignation shall become
effective, the Borrower shall pay to the resigning Letter of Credit Issuer all
accrued and unpaid fees pursuant to Sections 4.1(c) and (d).  The acceptance of any appointment as the
Letter of Credit Issuer hereunder by a successor Lender shall be evidenced by
an agreement entered into by such successor, in a form satisfactory to the
Borrower and the Administrative Agent and, from and after the effective date of
such agreement, such successor Lender shall have all the rights and obligations
of the previous Letter of Credit Issuer under this Agreement and the other
Credit Documents.  After the resignation
of the Letter of Credit Issuer hereunder, the resigning Letter of Credit Issuer
shall remain a party hereto and shall continue to have all the rights and
obligations of a Letter of Credit Issuer under this Agreement and the other
Loan Documents with respect to Letters of Credit issued by it prior to such
resignation, but shall not be required to issue additional Letters of
Credit.  After any retiring Letter of
Credit Issuer’s resignation as Letter of Credit Issuer, the provisions of this
Agreement relating to the Letter of Credit Issuer shall inure to its benefit as
to any actions taken or omitted to be taken by it (a)

 

46

 

while it was Letter of Credit
Issuer under this Agreement or (b) at any time with respect to Letters of
Credit issued by such Letter of Credit Issuer.

 

SECTION 4.           Fees;
Commitments.

 

4.1           Fees.  (a)  The Borrower agrees to pay to the
Administrative Agent, for the account of each Lender having a Revolving Credit
Commitment (pro rata according to the respective Revolving Credit Commitments
of all such Lenders), a commitment fee for each day from and including the
Closing Date to but excluding the Final Date. 
Such commitment fee shall be payable in arrears (i) on
March 31, 2004 (for the period ended on such day), (ii) on the last
Business day of each March, June, September and December (for the three-month
period (or portion thereof) ended on the such day for which no payment has been
received pursuant to clause (i) above) and (iii) on the Final Date (for
the period ended on such date for which no payment has been received pursuant
to clause (ii) above), and shall be computed for each day during such
period at a rate per annum equal to the Commitment Fee Rate in effect on such
day on the Available Commitments in effect on such day. Notwithstanding the
foregoing, the Borrower shall not be obligated to pay any amounts to any
Defaulting Lender pursuant to this Section 4.1.

 

(b)           The
Borrower agrees to pay to the Administrative Agent for the account of the
Lenders pro  rata on the basis of their respective Letter of
Credit Exposure, a fee in respect of each Letter of Credit (the “Letter of
Credit Fee”), for the period from and including the date of issuance of
such Letter of Credit to but not including the termination date of such Letter
of Credit computed at the per annum rate for each day equal to the Applicable
Eurodollar Margin for Revolving Credit Loans on the average daily Stated Amount
of such Letter of Credit.  Such Letter
of Credit Fees shall be due and payable quarterly in arrears on the last
Business day of each March, June, September and December and on the date upon
which the Total Revolving Credit Commitment terminates and the Letter of Credit
Outstandings shall have been reduced to zero.

 

(c)           The
Borrower agrees to pay to the Letter of Credit Issuer a fee in respect of each
Letter of Credit issued by it (the “Fronting Fee”), for the period from
and including the date of issuance of such Letter of Credit to but not
including the termination date of such Letter of Credit, computed at the rate
for each day equal to 0.125% per annum on the average daily Stated Amount of
such Letter of Credit.  Such Fronting
Fees shall be due and payable quarterly in arrears on the last Business day of
each March, June, September and December and on the date upon which the Total
Revolving Credit Commitment terminates and the Letter of Credit Outstandings
shall have been reduced to zero.

 

(d)           The
Borrower agrees to pay directly to the Letter of Credit Issuer upon each
issuance of, drawing under, and/or amendment of, a Letter of Credit issued by
it such amount as the Letter of Credit Issuer and the Borrower shall have
agreed upon for issuances of, drawings under or amendments of, letters of
credit issued by it.

 

(e)           The
Borrower agrees to pay to the Administrative Agent, on the Closing Date, the
fees in the amounts and on the dates previously agreed to in writing by the
Borrower and the Administrative Agent. 
The Administrative Agent agrees to pay to each Lender, for its

 

47

 

own account on the Closing
Date, the fees in the amounts and on the dates previously agreed to in writing
by the Administrative Agent and such Lender.

 

4.2           Voluntary Reduction of Revolving
Credit Commitments.  Upon at
least one Business Day’s prior written notice (or telephonic notice promptly
confirmed in writing) to the Administrative Agent at the Administrative Agent’s
Office (following the receipt of such notice the Administrative Agent shall
promptly notify each Lender of such receipt), the Borrower shall have the
right, without premium or penalty, on any day, permanently to terminate or
reduce the Revolving Credit Commitments in whole or in part, provided
that (a) any such reduction shall apply proportionately and permanently to
reduce the Revolving Credit Commitment of each of the Lenders, (b) any
partial reduction pursuant to this Section 4.2 shall be in the amount of at
least $5,000,000 and (c) after giving effect to such termination or
reduction and to any prepayments of the Loans made on the date thereof in
accordance with this Agreement, the sum of (i) the aggregate outstanding
principal amount of the Revolving Credit Loans and (ii) the Letter of
Credit Outstandings shall not exceed the Total Revolving Credit Commitment.

 

4.3           Mandatory Termination of Commitments.  (a)  The Total Term Loan
Commitment shall terminate at 5:00 P.M. (New York time) on the
Closing Date.

 

(b)           The
Total Revolving Credit Commitment shall terminate at 5:00 P.M.
(New York time) on the Revolving Credit Maturity Date.

 

SECTION
5.           Payments.

 

5.1           Voluntary Prepayments.  The Borrower shall have the right to prepay
Term Loans and Revolving Credit Loans, without premium or penalty, in whole or
in part from time to time on the following terms and conditions: (a) the
Borrower shall give the Administrative Agent at the Administrative Agent’s
Office written notice (or telephonic notice promptly confirmed in writing) of
its intent to make such prepayment, the amount of such prepayment, whether such
prepayment shall be applied to A Term Loans, B Term Loans or Revolving Credit
Loans, and (in the case of Eurodollar Term Loans and Eurodollar Revolving
Credit Loans) the specific Borrowing(s) pursuant to which made, which notice
shall be given by the Borrower no later than 12:00 Noon (New York time)
(i) at least one Business Day prior to the date of such prepayment in the case
of Term Loans and Revolving Credit Loans maintained as ABR Loans and (ii) at
least three Business Days prior to the date of such prepayment in the case of
Term Loans and Revolving Loans maintained as Eurodollar Loans, and shall
promptly be transmitted by the Administrative Agent to each of the Lenders; (b)
each partial prepayment of any Borrowing of Term Loans or Revolving Credit
Loans shall be in a multiple of $100,000 and in an aggregate principal amount
of at least $1,000,000, provided that no partial prepayment of
Eurodollar Term Loans or Eurodollar Revolving Credit Loans made pursuant to a
single Borrowing shall reduce the outstanding Eurodollar Term Loans or
Eurodollar Revolving Credit Loans made pursuant to such Borrowing to an amount
less than the Minimum Borrowing Amount for Eurodollar Term Loans or Eurodollar
Revolving Credit Loans; and (c) any prepayment of Eurodollar Term Loans or
Eurodollar Revolving Credit Loans pursuant to this Section 5.1 on any day other
than the last day of an Interest Period applicable thereto shall be subject to
compliance by the Borrower with the applicable provisions of Section 2.11.  Each prepayment of Term Loans of a Facility
pursuant to this Section 5.1 shall be applied to reduce

 

48

 

the Repayment Amounts of such
Facility in such order as the Borrower may determine.  At the Borrower’s election in connection with any prepayment
pursuant to this Section 5.1, such prepayment shall not be applied to any
Term Loan or Revolving Credit Loan of a Defaulting Lender.

 

5.2           Mandatory Prepayments.  (a)  Term Loan Prepayments.  On
each occasion that a Prepayment Event occurs, the Borrower shall, within five
Business Days after the occurrence of such Prepayment Event, offer to prepay,
in accordance with paragraph (c) below, the principal amount of Term Loans
in an amount equal to 100% of the Net Cash Proceeds from such Prepayment Event.

 

(b)           Aggregate
Revolving Credit Outstandings.  If
on any date the sum of the outstanding principal amount of the Revolving Credit
Loans and the aggregate amount of Letter of Credit Outstandings (all the
foregoing, collectively, the “Aggregate Revolving Credit Outstandings”)
exceeds the Total Revolving Credit Commitment as then in effect, the Borrower
shall forthwith repay on such date the principal amount of Revolving Credit
Loans in an amount equal to such excess. 
If, after giving effect to the prepayment of all outstanding Revolving
Credit Loans, the Aggregate Revolving Credit Outstandings exceed the Total
Revolving Credit Commitment then in effect, the Borrower shall pay to the
Administrative Agent an amount in cash equal to such excess and the Administrative
Agent shall hold such payment for the benefit of the Lenders as security for
the obligations of the Borrower hereunder (including, without limitation,
obligations in respect of Letter of Credit Outstandings) pursuant to a cash
collateral agreement to be entered into in form and substance satisfactory to
the Administrative Agent (which shall permit certain investments in Permitted
Investments satisfactory to the Administrative Agent, until the proceeds are
applied to the secured obligations).

 

(c)           Application
to Term Loan Facilities and Repayment Amounts.  Each prepayment of Term Loans required by Section 5.2(a) shall be
applied pro rata to the then unpaid A Term Loans and B Term Loans (based on the
then outstanding principal amount of the Term Loans pursuant to each such
Facility), and shall be applied to reduce the future Repayment Amounts of each
such Facility on a pro rata basis (based on the remaining amount of each such
Repayment Amount at such time).  With
respect to each such prepayment, (i) the Borrower will, not later than the
date specified in Section 5.2(a) for offering to make such prepayment,
give the Administrative Agent telephonic notice (promptly confirmed in writing)
requesting that the Administrative Agent provide notice of such prepayment to
each Term Loan Lender which is to receive a portion of such prepayment, (ii)
each holder of B Term Loans will have the right to refuse any such prepayment
of such Term Loans by giving written notice of such refusal to the
Administrative Agent within 5 Business Days after such Lender’s receipt of
notice from the Administrative Agent of such prepayment (and the Borrower shall
not prepay any such Term Loans until the date that is specified in the
immediately following clause), (iii) the Borrower will make all such
prepayments not so refused upon the earlier of (x) the sixth Business Day
following Lenders’ receipt of notice from the Administrative Agent described in
clause (ii) above and (y) such time as the Administrative Agent has
received notice from each B Term Loan Lender that it consents to or refuses
such prepayment and (iv) 50% of any prepayment so refused shall be applied to
the repayment of outstanding A Term Loans, if any, (and to reduce the future A
Repayment Amounts on a pro rata basis), and the Borrower may retain the amount
of such refused prepayments not so applied.

 

49

 

(d)           Application
to Term Loans.  With respect to each prepayment of A Term
Loans required by Section 5.2(a), the Borrower may designate the Types of
Loans that are to be prepaid and the specific Borrowing(s) pursuant to which
made, provided that (i) Eurodollar Term Loans of A Term Loans may
be designated for prepayment pursuant to this Section 5.2 only on the last
day of an Interest Period applicable thereto unless all Eurodollar Term Loans
of such Facility with Interest Periods ending on such date of required
prepayment and all ABR Term Loans of such Facility have been paid in full; and
(ii) if any prepayment of Eurodollar Term Loans made pursuant to a single
Borrowing shall reduce the outstanding Term Loans made pursuant to such
Borrowing to an amount less than the Minimum Borrowing Amount for Eurodollar
Term Loans, such Borrowing shall immediately be converted into ABR Loans.  In the absence of a designation by the
Borrower as described in the preceding sentence or in the case of each
prepayment of B Term Loans required under Section 5.2(a), the
Administrative Agent shall, subject to the above, make such designation in its
reasonable discretion with a view, but no obligation, to minimize breakage
costs owing under Section 2.11.

 

(e)           Application
to Revolving Credit Loans.  With
respect to each prepayment of Revolving Credit Loans required by Section
5.2(b), the Borrower may designate the Types of Loans that are to be prepaid
and the specific Borrowing(s) pursuant to which made, provided that (i)
Eurodollar Revolving Credit Loans may be designated for prepayment pursuant to
this Section 5.2 only on the last day of an Interest Period applicable thereto
unless all Eurodollar Revolving Credit Loans with Interest Periods ending on
such date of required prepayment and all ABR Loans have been paid in full; (ii)
if any prepayment of Eurodollar Revolving Credit Loans made pursuant to a
single Borrowing shall reduce the outstanding Revolving Credit Loans made
pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount
for Eurodollar Revolving Credit Loans, such Borrowing shall immediately be
converted into ABR Loans; (iii) each prepayment of any Loans made pursuant to a
Borrowing shall be applied pro  rata among such Loans; and
(iv) notwithstanding the provisions of the preceding clause (iii), no
prepayment made pursuant to Section 5.2(b) of Revolving Credit Loans shall be
applied to the Revolving Credit Loans of any Defaulting Lender.  In the absence of a designation by the
Borrower as described in the preceding sentence, the Administrative Agent
shall, subject to the above, make such designation in its reasonable discretion
with a view, but no obligation, to minimize breakage costs owing under
Section 2.11.

 

(f)            Eurodollar
Interest Periods.  In lieu of making
any payment pursuant to this Section 5.2 in respect of any A Term
Loan that is a Eurodollar Loan other than on the last day of the Interest
Period therefor, so long as no Default or Event of Default shall have occurred
and be continuing, the Borrower at its option may deposit with the
Administrative Agent an amount equal to the amount of the Eurodollar Loan to be
prepaid and such Eurodollar Loan shall be repaid on the last day of the
Interest Period therefor in the required amount.  Such deposit shall be held by the Administrative Agent in a
corporate time deposit account established on terms reasonably satisfactory to
the Administrative Agent, earning interest at the then-customary rate for
accounts of such type.  Such deposit
shall constitute cash collateral for the Obligations, provided that the
Borrower may at any time direct that such deposit be applied to make the
applicable payment on such A Term Loan required pursuant to this
Section 5.2.

 

(g)           Minimum
Amount. No prepayment shall be required pursuant to Section 5.2(a)
unless and until the amount at any time of Net Cash Proceeds from Prepayment

 

50

 

Events required to be applied
at or prior to such time pursuant to such Section and not yet applied at or
prior to such time to prepay Term Loans pursuant to such Section exceeds
$5,000,000 in the aggregate.

 

(h)           Regulatory
Approval.  Notwithstanding anything
to the contrary contained above in this Section 5.2, to the extent that (i)
funds for any prepayment otherwise required to be made pursuant to the terms of
Section 5.2(a) (as a result of an Asset Sale Prepayment Event) are only
available to the Borrower through dividend payments to the Borrower from one or
more Regulated Insurance Companies, (ii) such dividend payments cannot be made
at such time within the ordinary dividend-paying capacity of such Regulated
Insurance Company or Companies and, accordingly, require specific affirmative
regulatory approval for the payment of extraordinary dividends and (iii) after
due written application or request, such approval for the payment of
extraordinary dividends is not obtained by such Regulated Insurance Company,
upon certification by the Borrower to the Administrative Agent (which shall
promptly deliver a copy of such certification to the Lenders) to such effect
(together with, in the case of an application or request for regulatory
approval, copies of all documents submitted, and all written responses
received, in connection therewith), the Borrower shall not, to such extent, be
required to make such prepayment for so long as such dividend payments may not,
for such reasons, be made.

 

5.3           Method and Place of Payment.  (a) 
Except as otherwise specifically provided herein, all payments under
this Agreement shall be made, without set-off, counterclaim or deduction of any
kind, to the Administrative Agent for the ratable account of the Lenders
entitled thereto or the Letter of Credit Issuer, as the case may be, not later
than 12:00 Noon (New York time) on the date when due and shall be made in
immediately available funds and in lawful money of the United States of America
at the Administrative Agent’s Office, it being understood that written or
facsimile notice by the Borrower to the Administrative Agent to make a payment
from the funds in the Borrower’s account at the Administrative Agent’s Office
shall constitute the making of such payment to the extent of such funds held in
such account.  The Administrative Agent
will thereafter cause to be distributed on the same day (if payment was
actually received by the Administrative Agent prior to 2:00 P.M. (New York
time) on such day) like funds relating to the payment of principal or interest
or Fees ratably to the Lenders entitled thereto.

 

(b)           Any
payments under this Agreement that are made later than 2:00 P.M.
(New York time) shall be deemed, unless the Administrative Agent otherwise
elects, to have been made on the next succeeding Business Day.  Whenever any payment to be made hereunder
shall be stated to be due on a day that is not a Business Day, the due date
thereof shall be moved to the immediately preceding Business Day.

 

5.4           Net Payments. 
(a)  All payments made by the
Borrower under this Agreement shall be made free and clear of, and without
deduction or withholding for or on account of, any current or future income,
stamp or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or assessed
by any Governmental Authority, excluding (i) net income taxes and
franchise taxes (imposed in lieu of net income taxes) imposed on the
Administrative Agent or any Lender and (ii) any taxes imposed on the
Administrative Agent or any Lender as a result of a current or former
connection between the Administrative Agent or such Lender and the jurisdiction
of the

 

51

 

Governmental Authority imposing
such tax or any political subdivision or taxing authority thereof or therein
(other than any such connection arising solely from the Administrative Agent or
such Lender having executed, delivered or performed its obligations or received
payment under, or enforced, this Agreement). 
If any such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions or withholdings (“Non-Excluded Taxes”) are required to be
withheld from any amounts payable to the Administrative Agent or any Lender
hereunder, the amounts so payable to the Administrative Agent or such Lender
shall be increased to the extent necessary to yield to the Administrative Agent
or such Lender (after payment of all Non-Excluded Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts specified in
this Agreement; provided, however, that the Borrower shall not be
required to increase any such amounts payable to any Lender that is not
organized under the laws of the United States of America or a state thereof or
the District of Columbia if such Lender fails to comply with the requirements
of paragraph (b) of this Section 5.4. 
Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly
as possible thereafter the Borrower shall send to the Administrative Agent for
its own account or for the account of such Lender, as the case may be, a
certified copy of an original official receipt received by the Borrower showing
payment thereof.  If the Borrower fails
to pay any Non-Excluded Taxes when due to the appropriate taxing authority or
fails to remit to the Administrative Agent the required receipts or other
required documentary evidence, the Borrower shall indemnify, and within ten
(10) days of demand thereof, pay, the Administrative Agent and the Lenders the
full amount of any taxes, interest, costs or penalties that may become payable
by the Administrative Agent or any Lender as a result of any such failure.  The agreements in this Section 5.4(a) shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.

 

(b)           Each
Lender that is not incorporated or organized under the laws of the United
States of America or a state thereof or the District of Columbia shall:

 

(i)            deliver to the Borrower and the
Administrative Agent two copies of either United States Internal Revenue
Service Form W-8BEN or Form W-8ECI or, in the case of Non-U.S. Lender
claiming exemption from U.S. Federal withholding tax under Section 871(h)
or 881(c) of the Code with respect to payments of “portfolio interest”, a
Form W-8BEN, or any subsequent versions thereof or successors thereto
(and, if such Non-U.S. Lender delivers a Form W-8BEN, a certificate
representing that such Non-U.S. Lender is not a bank for purposes of
Section 881(c) of the Code, is not a 10-percent shareholder (within the
meaning of Section 871(h)(3)(B) of the Code) of the Borrower and is not a
controlled foreign corporation related to the Borrower (within the meaning of
Section 864(d)(4) of the Code)), properly completed and duly executed by
such Non-U.S. Lender claiming complete exemption from, or reduced rate of, U.S.
Federal withholding tax on payments by the Borrower under this Agreement;

 

(ii)           deliver to the Borrower and the
Administrative Agent two further copies of any such form or certification on or
before the date that any such form or certification expires or becomes obsolete
and after the occurrence of any event requiring a change in the most recent
form previously delivered by it to the Borrower; and

 

52

 

(iii)          obtain such extensions of time for
filing and complete such forms or certifications as may reasonably be requested
by the Borrower or the Administrative Agent;

 

unless in any such case
any change in treaty, law or regulation has occurred prior to the date on which
any such delivery would otherwise be required that renders any such form
inapplicable or would prevent such Lender from duly completing and delivering
any such form with respect to it and such Lender so advises the Borrower and
the Administrative Agent.  Each Person
that shall become a Participant pursuant to Section 13.6 or a Lender pursuant
to Section 13.6 shall, upon the effectiveness of the related transfer, be required
to provide all the forms and statements required pursuant to this Section
5.4(b), provided that in the case of a Participant such Participant shall
furnish all such required forms and statements to the Lender from which the
related participation shall have been purchased.

 

(c)           The
Borrower shall not be required to indemnify any Non-U.S. Lender, or to pay any
additional amounts to any Non-U.S. Lender, in respect of U.S. Federal
withholding tax pursuant to paragraph (a) above to the extent that
(i) the obligation to withhold amounts with respect to U.S. Federal
withholding tax existed on the date such Non-U.S. Lender became a party to this
Agreement (or, in the case of a Non-U.S. Participant, on the date such
Participant became a Participant hereunder); provided, however,
that this clause (i) shall not apply to the extent that (x) the
indemnity payments or additional amounts any Lender (or Participant) would be
entitled to receive (without regard to this clause (i)) do not exceed the
indemnity payment or additional amounts that the person making the assignment,
participation or transfer to such Lender (or Participant) would have been
entitled to receive in the absence of such assignment, participation or
transfer, or (y) such assignment, participation or transfer had been
requested by the Borrower, (ii) the obligation to pay such additional
amounts would not have arisen but for a failure by such Non-U.S. Lender or
Non-U.S. Participant to comply with the provisions of paragraph (b) above
or (iii) any of the representations or certifications made by a Non-U.S.
Lender or Non-U.S. Participant pursuant to paragraph (b) above are incorrect at
the time a payment hereunder is made, other than by reason of any change in
treaty, law or regulation having effect after the date such representations or
certifications were made.

 

(d)           If
the Borrower determines in good faith that a reasonable basis exists for
contesting any taxes for which indemnification has been demanded hereunder, the
relevant Lender or the Administrative Agent, as applicable, shall cooperate
with the Borrower in challenging such taxes at the Borrower’s expense if so
requested by the Borrower.  If any
Lender or the Administrative Agent, as applicable, receives a refund of a tax
for which a payment has been made by the Borrower pursuant to this Agreement,
which refund in the good faith judgment of such Lender or Administrative Agent,
as the case may be, is attributable to such payment made by the Borrower, then
the Lender or the Administrative Agent, as the case may be, shall reimburse the
Borrower for such amount as the Lender or Administrative Agent, as the case may
be, determines to be the proportion of the refund as will leave it, after such
reimbursement, in no better or worse position than it would have been in if the
payment had not been required.  A Lender
or Administrative Agent shall claim any refund that it determines is available
to it, unless it concludes in its reasonable discretion that it would be
adversely affected by making such a claim. 
Neither the Lender nor the Administrative Agent shall be obliged to
disclose any

 

53

 

information regarding its tax
affairs or computations to the Borrower in connection with this
paragraph (d) or any other provision of this Section 5.4.

 

(e)           Each
Lender represents and agrees that, on the date hereof and at all times during
the term of this Agreement, it is not and will not be a conduit entity
participating in a conduit financing arrangement (as defined in Section 7701(1)
of the Code and the regulations thereunder) with respect to the Borrowings
hereunder unless the Borrower has consented to such arrangement prior thereto.

 

5.5           Computations of Interest and Fees.  (a)  Interest on Eurodollar Loans
and, except as provided in the next succeeding sentence, ABR Loans shall be
calculated on the basis of a 360-day year for the actual days elapsed.  Interest on ABR Loans in respect of which
the rate of interest is calculated on the basis of the Prime Rate and interest
on overdue interest shall be calculated on the basis of a 365- (or 366-, as the
case may be) day year for the actual days elapsed.

 

(b)           Fees
and Letter of Credit Outstandings shall be calculated on the basis of a 360-day
year for the actual days elapsed.

 

SECTION 6.           Conditions
Precedent to Initial Borrowing.

 

The initial Borrowing under this Agreement is subject to the
satisfaction of the following conditions precedent on or prior to the Closing
Date:

 

6.1           Credit Documents.  The Administrative Agent shall have received (a) this
Agreement, executed and delivered by a duly authorized officer of the Borrower
and each Lender, (b) the Guaranty, executed and delivered by a duly authorized
officer of each Guarantor, (c) the Pledge Agreement, executed and delivered by
each pledgor party thereto and (d) all certificates, notes and instruments
representing securities pledged under the Pledge Agreement, accompanied by
instruments of transfer and undated stock powers, as applicable, endorsed in
blank.

 

6.2           Closing Certificate.  The Administrative Agent shall have received
a certificate of each Credit Party, dated the Closing Date, substantially in
the form of Exhibit H, with appropriate insertions, executed by the
President or any Vice President and the Secretary or any Assistant Secretary of
such Credit Party, and attaching the documents referred to in Sections 6.3 and
6.4.

 

6.3           Corporate Proceedings of Each
Credit Party.  The
Administrative Agent shall have received a copy of the resolutions, in form and
substance satisfactory to the Administrative Agent, of the Board of Directors
of each Credit Party (or a duly authorized committee thereof) authorizing (a)
the execution, delivery and performance of the Credit Documents to which it is
a party and (b) in the case of the Borrower, the extensions of credit
contemplated hereunder.

 

6.4           Corporate Documents.  The Administrative Agent shall
have received true and complete copies of the certificate of incorporation
and by-laws of each Credit Party.

 

54

 

6.5           No Material Adverse Change.  There shall have been no material adverse
change in the business, assets, operations, properties, financial condition or
prospects of the Borrower and its Subsidiaries (taken as a whole) since
December 31, 2002.

 

6.6           Fees.  The
Administrative Agent and Joint Bookrunners and Joint Lead Arrangers shall have
received the fees referred to in Section 4.1(e) to be received on the
Closing Date.

 

6.7           Offering. 
The Borrower shall have received at least $95,000,000 in Net Cash
Proceeds from the Offering.  The
Offering shall have been consummated, or shall be consummated simultaneously
with the making of the initial Loans, in accordance with applicable law and the
Registration Statement.  The
Registration Statement shall not have been amended since February 12,
2004, in any material respect that is, in the reasonable judgment of the
Administrative Agent, adverse to the interests of the Lenders.

 

6.8           Refinancing. 
The Administrative Agent shall have received evidence and documentation
(including payoff letters) satisfactory to the Administrative Agent that the
Refinancing will occur simultaneously with the funding of the Term Loans on the
Closing Date, in a manner and pursuant to documentation satisfactory to the
Administrative Agent in its reasonable discretion.

 

6.9           Other Indebtedness.  After giving effect to the Transaction and
the other transactions contemplated hereby, the Borrower and its Subsidiaries
shall have outstanding no Indebtedness other than (a) the extensions of
credit under this Agreement and (b) Indebtedness permitted under
Section 10.1, other than under clauses (i), (j), (k) and (l) thereof.

 

6.10         Closing Date Balance Sheet.  The Lenders shall have received a pro
forma consolidated closing balance sheet of the Borrower giving effect
to the Transaction, the financing therefor and the other transactions
contemplated hereby and thereby, dated as of September 30, 2003.

 

6.11         Solvency Certificate.  The Lenders shall have received a
certificate from the Chief Financial Officer of the Borrower or other executive
officer of the Borrower with the responsibility for financial matters, in the
form of Exhibit I, as to the solvency of the Borrower and of the Borrower and
its Subsidiaries on a consolidated basis after giving effect to the
Transaction, the making of the initial Loans and the consummation of the other
transactions contemplated hereby.

 

6.12         Required Approvals.  All requisite material Governmental Authorities and third parties
shall have approved or consented to the Transaction and the other transactions
contemplated hereby to the extent required, all applicable appeal periods shall
have expired and there shall be no governmental or judicial action, actual or
threatened, that has or could have a reasonable likelihood of restraining,
preventing or imposing materially burdensome conditions on the Transaction, the
financing therefor or the other transactions contemplated hereby or thereby.

 

6.13         Legal Opinions.  The Administrative Agent shall have received, with a counterpart
for each Lender, the executed legal opinions of (a) Simpson Thacher &
Bartlett,

 

55

 

special New York counsel to the
Borrower, substantially in the form of Exhibit F-1, (b) Sonnenschein,
Nath and Rosenthal LLP, California counsel to the Borrower, substantially in
the form of Exhibit F-2, (c) Sonnenschein, Nath and Rosenthal LLP, Florida
counsel to the Borrower, substantially in the form of Exhibit F-3, (d)
Alexis Oster, Esq., General Counsel to the Borrower substantially in the form
of Exhibit F-4 and (e) George O’Brien, Esq. counsel to the Borrower,
substantially in the form of Exhibit F-5, and the Borrower hereby
instructs such counsel to deliver such legal opinions.

 

SECTION 7.           Conditions
Precedent to All Credit Events.  The
agreement of each Lender to make any Loan requested to be made by it on any
date (including, without limitation, its initial Loan) and the obligation of
the Letter of Credit Issuer to issue Letters of Credit on any date is subject
to the satisfaction of the following conditions precedent:

 

7.1           No Default; Representations and
Warranties.  At the time of each
Credit Event and also after giving effect thereto (a) there shall exist no
Default or Event of Default and (b) all representations and warranties made by
any Credit Party contained herein or in the other Credit Documents shall be
true and correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
Credit Event (except where such representations and warranties expressly relate
to an earlier date, in which case such representations and warranties shall
have been true and correct in all material respects as of such earlier date).

 

7.2           Notice of Borrowing; Letter of Credit
Request.  (a)  Prior to the making of each Term Loan and
each Revolving Credit Loan (other than any Revolving Credit Loan made pursuant
to Section 3.4(a)), the Administrative Agent shall have received a Notice
of Borrowing (whether in writing or by telephone) meeting the requirements of
Section 2.3.

 

(b)           Prior
to the issuance of each Letter of Credit, the Administrative Agent and the
Letter of Credit Issuer shall have received a Letter of Credit Request meeting
the requirements of Section 3.2(a).

 

The acceptance of the benefits
of each Credit Event shall constitute a representation and warranty by each
Credit Party to each of the Lenders that all the applicable conditions
specified above (including, with respect to the initial Borrowing, those under
Section 6) exist as of that time.

 

SECTION
8.           Representations,
Warranties and Agreements.  In order
to induce the Lenders to enter into this Agreement, to make the Loans and issue
or participate in Letters of Credit as provided for herein, the Borrower makes
the following representations and warranties to, and agreements with, the
Lenders, all of which shall survive the execution and delivery of this
Agreement and the making of the Loans and the issuance of the Letters of
Credit:

 

8.1           Corporate Status.  The Borrower and each Material Subsidiary (a) is a duly organized
and validly existing corporation or other entity in good standing under the
laws of the jurisdiction of its organization and has the corporate or other
organizational power and authority to own its property and assets and to
transact the business in which it is engaged and (b) has duly qualified and is
authorized to do business and is in good standing in all jurisdictions

 

56

 

where it is required to be so
qualified, except where the failure to be so qualified could not reasonably be
expected to result in a Material Adverse Effect.

 

8.2           Corporate Power and Authority.  Each Credit Party has the corporate power
and authority to execute, deliver and carry out the terms and provisions of the
Credit Documents to which it is a party and has taken all necessary corporate
action to authorize the execution, delivery and performance of the Credit
Documents to which it is a party.  Each
Credit Party has duly executed and delivered each Credit Document to which it
is a party and each such Credit Document constitutes the legal, valid and
binding obligation of such Credit Party enforceable in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors’ rights generally and subject to
general principles of equity.

 

8.3           No Violation. 
Neither the execution, delivery and performance by any Credit Party of
the Credit Documents to which it is a party nor compliance with the terms and
provisions thereof nor the consummation of the Transaction and the other
transactions contemplated therein will (a) contravene any applicable
provision of any law, statute, rule, regulation, order, writ, injunction or
decree of any court or governmental instrumentality, (b)  result in any breach of any of the terms,
covenants, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of (or the obligation to create or impose)
any Lien upon any of the property or assets of the Borrower or any of the
Restricted Subsidiaries pursuant to, the terms of any material indenture, loan
agreement, lease agreement, mortgage, deed of trust or other material agreement
or instrument to which the Borrower or any of the Restricted Subsidiaries is a
party or by which it or any of its property or assets is bound or (c) violate
any provision of the certificate of incorporation or By-Laws of the Borrower or
any of the Restricted Subsidiaries.

 

8.4           Litigation. 
There are no actions, suits or proceedings (including, without
limitation, Environmental Claims) pending or, to the knowledge of the Borrower,
threatened with respect to the Borrower or any of its Subsidiaries that could
reasonably be expected to result in a Material Adverse Effect.

 

8.5           Margin Regulations.  Neither the making of any Loan hereunder nor
the use of the proceeds thereof will violate the provisions of Regulation T, U
or X of the Board.

 

8.6           Governmental Approvals.  No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any Governmental Authority is required to authorize or is
required in connection with (a) the execution, delivery and performance of any
Credit Document or (b) the legality, validity, binding effect or enforceability
of any Credit Document, except any of the foregoing the failure to obtain or
make could not reasonably be expected to have a Material Adverse Effect.

 

8.7           Investment Company Act.  The Borrower is not an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.

 

8.8           True and Complete Disclosure.  (a) 
All factual information and data (taken as a whole) heretofore or
contemporaneously furnished by the Borrower, any of its

 

57

 

Subsidiaries or any of their
respective authorized representatives in writing to the Administrative Agent
and/or any Lender on or before the Closing Date (including, without limitation,
all information contained in the Credit Documents) for purposes of or in
connection with this Agreement or any transaction contemplated herein was true
and complete in all material respects on the date as of which such information
or data is dated or certified and was not incomplete by omitting to state any
material fact necessary to make such information and data (taken as a whole)
not misleading at such time in light of the circumstances under which such
information or data was furnished, it being understood and agreed that for
purposes of this Section 8.8(a), such factual information and data shall not
include projections and pro forma financial information.

 

(b)           The
projections and pro forma financial information contained in the information
and data referred to in paragraph (a) above were based on good faith
estimates and assumptions believed by such Persons to be reasonable at the time
made, it being recognized by the Lenders that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such projections may differ from the projected
results.

 

8.9           Financial Condition; Financial
Statements.  (a)  (i) The Combined balance sheet of the
Borrower and its Subsidiaries at December 31, 2002, and the related
Combined statements of operations, stockholders’ equity and cash flows for the
fiscal year ended as of such date, which statements have been audited by
Deloitte & Touche LLP, independent certified public accountants, who
delivered an unqualified opinion with respect thereto, and (ii) the
unaudited Combined balance sheet of the Borrower and its Subsidiaries at
December 31, 2003, and the related Combined statements of operations,
stockholders’ equity and cash flows for the fiscal quarter ended as of such
date, in each case present fairly in all material respects the Combined
financial position of the Borrower and its Subsidiaries at the respective dates
of said statements and the results of operations for the respective periods
covered thereby.  All such financial
statements have been prepared in accordance with GAAP consistently applied
except to the extent provided in the notes to said financial statements and, in
the case of said financial statements referred to in clause (ii), subject
to normal year-end audit adjustments.

 

(b)           The
Annual Statement of Coast and its Subsidiaries (including, without limitation,
BWCIC and BWIC) at December 31, 2002, which Annual Statement has been
audited by Deloitte & Touche LLP, independent certified public
accountants, who delivered an unqualified opinion with respect thereto,
presents fairly the financial position of Coast and its Subsidiaries
(including, without limitation, BWCIC and BWIC) at the date of said statement
and the results for the fiscal year covered thereby.  Such financial statement has been prepared in accordance with SAP
consistently applied except to the extent provided in the notes to said
financial statement.

 

(c)           The
Annual Statement of SNIC and its Subsidiaries at December 31, 2002, which
Annual Statement has been audited by Deloitte & Touche LLP,
independent certified public accountants, who delivered an unqualified opinion
with respect thereto, presents fairly the financial position of SNIC and its
Subsidiaries at the date of said statement and the results for the fiscal year
covered thereby.  Such financial
statement has been prepared in accordance with SAP consistently applied except
to the extent provided in the notes to said financial statement.

 

58

 

(d)           There
has been no Material Adverse Change since December 31, 2002, other than
solely as a result of changes in general economic conditions.

 

8.10         Tax Returns and Payments.  Each of the Borrower and its Subsidiaries
has filed all federal income tax returns and all other material tax returns,
domestic and foreign, required to be filed by it and has paid all material
taxes and assessments payable by it that have become due, other than those not
yet delinquent or contested in good faith. 
The Borrower and each of its Subsidiaries have paid, or have provided
adequate reserves (in the good faith judgment of the management of the
Borrower) in accordance with GAAP for the payment of, all material federal,
state and foreign income taxes applicable for all prior fiscal years and for
the current fiscal year to the Closing Date.

 

8.11         Compliance with ERISA.  Each Plan is in compliance with ERISA, the
Code and any applicable Requirement of Law; no Reportable Event has occurred
(or is reasonably likely to occur) with respect to any Plan; no Plan is
insolvent or in reorganization (or is reasonably likely to be insolvent or in
reorganization), and no written notice of any such insolvency or reorganization
has been given to the Borrower, any Subsidiary or any ERISA Affiliate; no Plan
(other than a multiemployer plan) has an accumulated or waived funding
deficiency (or is reasonably likely to have such a deficiency); neither the
Borrower nor any Subsidiary nor any ERISA Affiliate has incurred (or is
reasonably likely to incur) any liability to or on account of a Plan pursuant
to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201 or 4204 of
ERISA or Section 4971 or 4975 of the Code or has been notified in writing that
it will incur any liability under any of the foregoing Sections with respect to
any Plan; no proceedings have been instituted (or are reasonably likely to be
instituted) to terminate or to reorganize any Plan or to appoint a trustee to
administer any Plan, and no written notice of any such proceedings has been
given to the Borrower, any Subsidiary or any ERISA Affiliate; and no lien
imposed under the Code or ERISA on the assets of the Borrower or any Subsidiary
or any ERISA Affiliate exists (or is reasonably likely to exist) nor has the
Borrower, any Subsidiary or any ERISA Affiliate been notified in writing that
such a lien will be imposed on the assets of the Borrower, any Subsidiary or
any ERISA Affiliate on account of any Plan, except to the extent that a
breach of any of the foregoing representations, warranties or agreements in
this Section 8.11 would not result, individually or in the aggregate, in an
amount of liability that would be reasonably likely to have a Material Adverse
Effect.  No Plan (other than a
multiemployer plan) has an Unfunded Current Liability that would, individually
or when taken together with any other liabilities referenced in this
Section 8.11, be reasonably likely to have a Material Adverse Effect.  With respect to Plans that are multiemployer
plans (as defined in Section 3(37) of ERISA), the representations and
warranties in this Section 8.11, other than any made with respect to (a)
liability under Section 4201 or 4204 of ERISA or (b) liability for termination
or reorganization of such Plans under ERISA, are made to the best knowledge of
the Borrower.

 

8.12         Subsidiaries. 
(a)  Schedule 8.12 lists each Subsidiary of the Borrower (and
the direct and indirect ownership interest of the Borrower therein), in each
case existing on the Closing Date.  Each
Material Subsidiary as of the Closing Date has been so designated on Schedule
8.12.

 

(b)           As
of the Closing Date, there are no restrictions on any Regulated Insurance
Company which prohibit or otherwise restrict the ability of any Regulated
Insurance 

 

59

 

Company to (i) pay dividends or
make other distributions or pay any Indebtedness owed to the Borrower or any
Subsidiary, (ii) make loans or advances to the Borrower or any Subsidiary, (iii)
transfer any of its properties or assets to the Borrower or any Subsidiary or
(iv) guarantee the Obligations, other than prohibitions or restrictions
existing under or by reason of (A) this Agreement or the other Credit
Documents, (B) Requirements of Law, (C) customary non-assignment
provisions entered into in the ordinary course of business and consistent with
past practices and (D) purchase money obligations for property acquired in the
ordinary course of business, so long as such obligations are permitted under
this Agreement.

 

8.13         Intellectual Property, etc.  The Borrower and each of the Restricted
Subsidiaries have obtained all patents, trademarks, servicemarks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are necessary for the operation of their respective businesses as currently
conducted and as proposed to be conducted, except where the failure to obtain
any such rights could not reasonably be expected to have a Material Adverse
Effect.

 

8.14         Environmental Laws.  (a)  Other than instances of noncompliance that could
not reasonably be expected to have a Material Adverse Effect: (i) the Borrower
and each of its Subsidiaries are in compliance with all Environmental Laws in
all jurisdictions in which the Borrower and each of its Subsidiaries are
currently doing business (including, without limitation, having obtained all
material permits required under Environmental Laws) and (ii) the Borrower will
comply and cause each of its Subsidiaries to comply with all such Environmental
Laws (including, without limitation, all permits required under Environmental
Laws).

 

(b)           Neither
the Borrower nor any of its Subsidiaries has treated, stored, transported or
disposed of Hazardous Materials at or from any currently or formerly owned Real
Estate (as defined in Section 9.1(f)) or facility relating to its business
in a manner that could reasonably be expected to have a Material Adverse
Effect.

 

8.15         Properties. 
The Borrower and each of the Restricted Subsidiaries have good title to
or leasehold interest in all properties that are necessary for the operation of
their respective businesses as currently conducted and as proposed to be
conducted, free and clear of all Liens (other than any Liens permitted by this
Agreement) and except where the failure to have such good title could not
reasonably be expected to have a Material Adverse Effect.

 

SECTION 9.           Affirmative
Covenants.  The Borrower hereby
covenants and agrees that on the Closing Date and thereafter, for so long as this
Agreement is in effect and until the Commitments and each Letter of Credit have
terminated and the Loans and Unpaid Drawings, together with interest, Fees and
all other Obligations incurred hereunder, are paid in full:

 

9.1           Information Covenants.  The Borrower will furnish to the
Administrative Agent for distribution to the Lenders:

 

(a)           Annual
Financial Statements.  (i) As
soon as available and in any event within 90 days (or, if the Borrower obtains
an extension from the SEC to any 90-day filing requirement for filing its Form
10-K with the SEC by filing a Form 12b-25, 120 days) after the

 

60

 

close of each fiscal year of
the Borrower, (1) the consolidated (and consolidating in the case of the
Borrower, Coast and SNIC at a minimum) balance sheet of (x) the Borrower and
the Restricted Subsidiaries and (y) the Borrower and its Subsidiaries, in each
case as at the end of such fiscal year and the related consolidated (and
consolidating in the case of the Borrower, Coast and SNIC at a minimum)
statement of operations, stockholders’ equity and cash flows for such fiscal
year, setting forth comparative consolidated (and consolidating in the case of
the Borrower, Coast and SNIC at a minimum) figures for the preceding fiscal
year, and certified (in the case of the foregoing consolidated statements) by
independent certified public accountants of recognized national standing whose
opinion shall not be qualified as to the scope of audit or as to the status of
the Borrower or any of the Material Subsidiaries as a going concern, together
in any event with a certificate of such accounting firm stating that in the
course of its regular audit of the business of the Borrower and the Material
Subsidiaries, which audit was conducted in accordance with generally accepted
auditing standards, such accounting firm has obtained no knowledge of any
Default or Event of Default relating to Sections 10.8, 10.9, 10.10 and
10.11 that has occurred and is continuing or, if in the opinion of such
accounting firm such a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof and (2) management’s
discussion and analysis of the most important operational and financial
developments during such fiscal year.  To the extent that the financial statements required to be
delivered to the Lenders pursuant to this Section 9.1(a) are filed
electronically with the SEC through its Electronic Data Gathering, Analysis and
Retrieval System (“EDGAR”), such financial statements shall be deemed to
be delivered to the Lenders for purposes of this Section 9.1(a).

 

(ii)           As soon as
available and in any event within 60 days (or, in the case of any audited
statements and risk-based capital reports required to be delivered pursuant to
this clause (ii), 180 days) after the close of each fiscal year of each
Regulated Insurance Company, the Annual Statement of such Regulated Insurance
Company (prepared in accordance with SAP) for such fiscal year and as filed
with the Insurance Department of the state in which such Regulated Insurance
Company is domiciled (together with any certifications or statements of such
Regulated Insurance Company relating to such Annual Statement and any audited
statements and risk-based capital reports, in each case which are required by
such Insurance Department).

 

(b)           Quarterly
Financial Statements.  (i)  As soon as available and in any event within
60 days after the close of each of the first three quarterly accounting periods
in each fiscal year of the Borrower, the consolidated (and consolidating in the
case of the Borrower, Coast and SNIC at a minimum) balance sheet of (x) the
Borrower and the Restricted Subsidiaries and (y) the Borrower and its
Subsidiaries, in each case as at the end of such quarterly period and the
related consolidated (and consolidating in the case of the Borrower, Coast and
SNIC at a minimum) statement of operations and stockholders’ equity for such
quarterly accounting period and for the elapsed portion of the fiscal year
ended with the last day of such quarterly period, and the related consolidated
(and consolidating in the case of the Borrower, Coast and SNIC at a minimum)
statement of cash flows for the elapsed portion of the fiscal year ended with
the last day of such quarterly period, and setting forth comparative
consolidated (and consolidating in the case of the Borrower, Coast and SNIC at
a minimum) figures for the related periods in the prior fiscal year or, in the
case of such consolidated (and consolidating in the case of the Borrower, Coast
and SNIC at a minimum) balance sheet, for the last day of the prior fiscal
year, all of

 

61

 

which shall be certified by an
Authorized Officer of the Borrower, subject to changes resulting from audit and
normal year-end audit adjustments.  To
the extent that the financial statements required to be delivered to the
Lenders pursuant to this Section 9.1(b) are filed electronically with the SEC
through EDGAR, such financial statements shall be deemed to be delivered to the
Lenders for purposes of this Section 9.1(b)

 

(ii)           As soon as
available and in any event within 60 days after the close of each of the first
three quarterly accounting periods in each fiscal year of each Regulated
Insurance Company, quarterly financial statements of such Regulated Insurance
Company (prepared in accordance with SAP) for such quarterly accounting period
as filed with the Insurance Department of the state in which such Regulated
Insurance Company is domiciled (together with any certifications or statements
of such Regulated Insurance Company relating to such quarterly financial
statements which are required by such Insurance Department).

 

(c)           Budgets.  Within 60 days after the commencement
of each fiscal year of the Borrower, budgets of the Borrower in reasonable
detail (including a customary balance sheet, income statement and cash flow
statement) for the fiscal year as customarily prepared by management of the
Borrower for its internal use, setting forth the principal assumptions upon
which such budgets are based.

 

(d)           Officer’s
Certificates.  At the time of the
delivery of the financial statements provided for in Sections 9.1(a) and (b), a
certificate of an Authorized Officer of the Borrower to the effect that no
Default or Event of Default exists or, if any Default or Event of Default does
exist, specifying the nature and extent thereof, which certificate shall set
forth (i) the calculations, in reasonable detail, required to establish whether
the Borrower and its Subsidiaries were in compliance with the provisions of
Sections 10.8, 10.9, 10.10, 10.11 and 10.12 as at the end of such fiscal
year or period, as the case may be, (ii) a specification of any change in
the identity of the Restricted Subsidiaries or Unrestricted Subsidiaries as at
the end of such fiscal year or period, as the case may be, from the Restricted
Subsidiaries or Unrestricted Subsidiaries, respectively, provided to the
Lenders on the Closing Date or the most recent fiscal year or period, as the
case may be, (iii) the then applicable Status and (iv) the amount of any
Pro Forma Adjustment not previously set forth in a Pro  Forma
Adjustment Certificate or any change in the amount of a Pro Forma Adjustment
set forth in any Pro  Forma Adjustment Certificate previously
provided and, in either case, in reasonable detail, the calculations and basis
therefor; and at the time of the delivery of the financial statements provided
for in Section 9.1(a), a certificate of an Authorized Officer of the
Borrower setting forth in reasonable detail the Available Amount as at the end
of the fiscal year to which such financial statements relate.

 

(e)           Notice
of Default or Litigation.  Promptly
after an Authorized Officer of the Borrower or any of its Subsidiaries obtains
knowledge thereof, notice of (i) the occurrence of any event that constitutes a
Default or Event of Default, which notice shall specify the nature thereof, the
period of existence thereof and what action the Borrower proposes to take with
respect thereto, and (ii) any litigation or governmental proceeding pending
against the Borrower or any of its Subsidiaries that could reasonably be
expected to result in a Material Adverse Effect.

 

62

 

(f)            Environmental
Matters.  The Borrower will promptly
advise the Lenders in writing after obtaining knowledge of any one or more of
the following environmental matters, unless such environmental matters would
not, individually or when aggregated with all other such matters, be reasonably
expected to result in a Material Adverse Effect:

 

(i)            Any pending or
threatened Environmental Claim against the Borrower or any of its Subsidiaries
or any Real Estate (as defined below);

 

(ii)           Any condition or occurrence on any Real Estate that (x) results
in noncompliance by the Borrower or any of its Subsidiaries with any applicable
Environmental Law or (y) could reasonably be anticipated to form the basis of
an Environmental Claim against the Borrower or any of its Subsidiaries or any
Real Estate;

 

(iii)          Any condition or occurrence on any Real Estate that could
reasonably be anticipated to cause such Real Estate to be subject to any
restrictions on the ownership, occupancy, use or transferability of such Real
Estate under any Environmental Law; and

 

(iv)          The taking of any removal or remedial action in response to
the actual or alleged presence of any Hazardous Material on any Real Estate.

 

All such notices shall
describe in reasonable detail the nature of the claim, investigation,
condition, occurrence or removal or remedial action and the Borrower’s response
thereto.  The term “Real Estate”
shall mean land, buildings and improvements owned or leased by the Borrower or
any of its Subsidiaries, but excluding all operating fixtures and equipment,
whether or not incorporated into improvements.

 

(g)           Pro
Forma Adjustment Certificate.  Not
later than the consummation of the acquisition of any Acquired Entity or
Business by the Borrower or any Restricted Subsidiary for which there shall be
a Pro Forma Adjustment, a certificate of an Authorized Officer of the Borrower
setting forth the amount of such Pro Forma Adjustment and, in reasonable
detail, the calculations and basis therefor.

 

(h)           Reserve
Adequacy Report.  As promptly as
reasonably practicable following the request of the Administrative Agent or the
Required Lenders, a report prepared by an independent actuarial consulting firm
of recognized professional standing reasonably satisfactory to the
Administrative Agent and the Required Lenders reviewing the adequacy of
reserves of each Regulated Insurance Company determined in accordance with SAP,
which firm shall be provided access to or copies of all reserve analyses and
valuations relating to the insurance business of each Regulated Insurance
Company in the possession of or available to the Borrower or its Subsidiaries; provided
that no request may be made pursuant to this clause (h) unless there shall have
occurred and be continuing an Event of Default under Section 11.1 or an Event
of Default under Section 11.3(a) (to the extent resulting from a breach of the
requirements of Section 10.8, 10.9, 10.10 or 10.11).

 

(i)            Other
Regulatory Statements and Reports. 
Promptly (i) after receipt thereof, copies of all regular and periodic
reports of examinations  (including,
without limitation, triennial examinations and annual risk adjusted capital
reports) of any Regulated Insurance Company, delivered to such Person by any
Applicable Insurance Regulatory Authority,

 

63

 

insurance commission or similar
regulatory authority, (ii) after receipt thereof, written notice of any
assertion by any Applicable Insurance Regulatory Authority or any governmental
agency or agencies substituted therefor, as to a violation of any Requirement
of Law by any Regulated Insurance Company which is likely to have a Material
Adverse Effect, (iii) after receipt thereof, a copy of any notice of
termination, cancellation or recapture of any Reinsurance Agreement or
Retrocession Agreement to which a Regulated Insurance Company is a party to the
extent such termination or cancellation is likely to have a Material Adverse
Effect and (iv) after receipt thereof, copies of any notice of actual
suspension, termination or revocation of any material license of any Regulated
Insurance Company by any Applicable Insurance Regulatory Authority, including
any request by an Applicable Insurance Regulatory Authority which commits a
Regulated Insurance Company to take or refrain from taking any action or which
otherwise affects the authority of such Regulated Insurance Company to conduct
its business.

 

(j)            Other
Information.  Promptly upon filing
thereof, copies of any filings on Form 10-K, 10-Q or 8-K or registration
statements with, and reports to, the SEC by the Borrower or any of its
Subsidiaries (other than amendments to any registration statement (to the
extent such registration statement, in the form it becomes effective, is
delivered to the Lenders), exhibits to any registration statement and any
registration statements on Form S-8) and copies of all financial statements,
proxy statements, notices and reports that the Borrower or any of its
Subsidiaries shall send to the holders of any publicly issued debt or equity of
the Borrower and/or any of its Subsidiaries in their capacity as such holders
(in each case to the extent not theretofore delivered to the Lenders pursuant
to this Agreement) and, with reasonable promptness, such other information
(financial or otherwise) as the Administrative Agent on its own behalf or on
behalf of any Lender may reasonably request in writing from time to time.

 

9.2           Books, Records and Inspections.  The Borrower will, and will cause each of
the Specified Subsidiaries to, permit officers and designated representatives
of the Administrative Agent or the Required Lenders to visit and inspect any of
the properties or assets of the Borrower and any such Specified Subsidiary in
whomsoever’s possession to the extent that it is within the Borrower’s or such
Specified Subsidiary’s control to permit such inspection, and to examine the
books of account of the Borrower and any such Specified Subsidiary and discuss
the affairs, finances and accounts of the Borrower and of any such Specified
Subsidiary with, and be advised as to the same by, its and their officers and
independent accountants, all at such reasonable times and intervals and to such
reasonable extent as the Administrative Agent or the Required Lenders may
desire.

 

9.3           Maintenance of Insurance.  The Borrower will, and will cause each of
the Material Subsidiaries to, at all times maintain in full force and effect,
with insurance companies that the Borrower believes (in the good faith judgment
of the management of the Borrower) are financially sound and responsible at the
time the relevant coverage is placed or renewed, insurance in at least such
amounts and against at least such risks (and with such risk retentions) as are
usually insured against in the same general area by companies engaged in the
same or a similar business; and will furnish to the Lenders, upon written
request from the Administrative Agent, information presented in reasonable
detail as to the insurance so carried.

 

9.4           Payment of Taxes.  The Borrower will pay and discharge, and will cause each of its
Subsidiaries to pay and discharge, all material taxes, assessments and
governmental

 

64

 

charges or levies imposed upon
it or upon its income or profits, or upon any properties belonging to it, prior
to the date on which material penalties attach thereto, and all lawful material
claims that, if unpaid, could reasonably be expected to become a material Lien
upon any properties of the Borrower or any of the Restricted Subsidiaries, provided
that neither the Borrower nor any of its Subsidiaries shall be required to pay
any such tax, assessment, charge, levy or claim that is being contested in good
faith and by proper proceedings if it has maintained adequate reserves (in the
good faith judgment of the management of the Borrower) with respect thereto in
accordance with GAAP.

 

9.5           Consolidated Corporate Franchises.  The Borrower will do, and will cause each
Material Subsidiary to do, or cause to be done, all things necessary to
preserve and keep in full force and effect its existence, corporate rights and
authority, except to the extent that the failure to do so could not reasonably
be expected to have a Material Adverse Effect; provided, however,
that the Borrower and its Subsidiaries may consummate any transaction permitted
under Section 10.3 or 10.4.

 

9.6           Compliance with Statutes, etc.  The Borrower will, and will cause each
Subsidiary to, comply with all applicable laws, rules, regulations and orders,
except to the extent the failure to do so could not reasonably be expected to
have a Material Adverse Effect.

 

9.7           ERISA. 
Promptly after the Borrower or any Subsidiary or any ERISA Affiliate
knows or has reason to know of the occurrence of any of the following events
that, individually or in the aggregate (including in the aggregate such events
previously disclosed or exempt from disclosure hereunder, to the extent the
liability therefor remains outstanding), would be reasonably likely to have a
Material Adverse Effect, the Borrower will deliver to each of the Lenders a
certificate of an Authorized Officer or any other senior officer of the
Borrower setting forth details as to such occurrence and the action, if any,
that the Borrower, such Subsidiary or such ERISA Affiliate is required or
proposes to take, together with any notices (required, proposed or otherwise)
given to or filed with or by the Borrower, such Subsidiary, such ERISA
Affiliate, the PBGC, a Plan participant (other than notices relating to an
individual participant’s benefits) or the Plan administrator with respect
thereto: that a Reportable Event has occurred; that an accumulated funding
deficiency has been incurred or an application is to be made to the Secretary
of the Treasury for a waiver or modification of the minimum funding standard
(including any required installment payments) or an extension of any
amortization period under Section 412 of the Code with respect to a Plan; that
a Plan having an Unfunded Current Liability has been or is to be terminated,
reorganized, partitioned or declared insolvent under Title IV of ERISA
(including the giving of written notice thereof); that a Plan has an Unfunded
Current Liability that has or will result in a lien under ERISA or the Code;
that proceedings will be or have been instituted to terminate a Plan having an
Unfunded Current Liability (including the giving of written notice thereof);
that a proceeding has been instituted against the Borrower, a Subsidiary or an
ERISA Affiliate pursuant to Section 515 of ERISA to collect a delinquent
contribution to a Plan; that the PBGC has notified the Borrower, any Subsidiary
or any ERISA Affiliate of its intention to appoint a trustee to administer any
Plan; that the Borrower, any Subsidiary or any ERISA Affiliate has failed to
make a required installment or other payment pursuant to Section 412 of the
Code with respect to a Plan; or that the Borrower, any Subsidiary or any ERISA
Affiliate has incurred or will incur (or has been notified in writing that it
will incur) any liability (including any contingent or secondary liability)

 

65

 

to or on account of a Plan
pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201 or
4204 of ERISA or Section 4971 or 4975 of the Code.

 

9.8           Good Repair. 
The Borrower will, and will cause each of the Restricted Subsidiaries
to, ensure that its properties and equipment used or useful in its business in
whomsoever’s possession they may be to the extent that it is within the
Borrower’s or such Restricted Subsidiary’s control to cause same, are kept in
good repair, working order and condition, normal wear and tear excepted, and
that from time to time there are made in such properties and equipment all
needful and proper repairs, renewals, replacements, extensions, additions,
betterments and improvements thereto, to the extent and in the manner customary
for companies in similar businesses and consistent with third party leases,
except in each case to the extent the failure to do so could not be reasonably
expected to have a Material Adverse Effect.

 

9.9           Transactions with Affiliates.  The Borrower will conduct, and cause each of
the Restricted Subsidiaries to conduct, all transactions with any of its
Affiliates (other than the Borrower or any Restricted Subsidiary) on terms that
are substantially as favorable to the Borrower or such Restricted Subsidiary as
it would obtain in a comparable arm’s-length transaction with a Person that is
not an Affiliate, provided that the foregoing restrictions shall not
apply to (a) the payment of customary annual fees to KKR and its
Affiliates for management, consulting and financial services rendered to the
Borrower and its Subsidiaries, and investment banking fees paid to KKR and its
Affiliates for services rendered to the Borrower and its Subsidiaries in
connection with divestitures, acquisitions, financings and other transactions,
(b) customary fees paid to members of the Board of Directors of the
Borrower and its Subsidiaries, (c) transactions permitted by
Section 10.6 and (d) transactions described on Schedule 9.9.

 

9.10         End of Fiscal Years; Fiscal Quarters.  The Borrower will, for financial reporting
purposes, cause (a) each of its, and each of its Subsidiaries’, fiscal years to
end on December 31 of each year and (b) each of its, and each of its
Subsidiaries’, fiscal quarters to end on dates consistent with such fiscal
year-end; provided, however, that the Borrower may, upon written
notice to the Administrative Agent, change the financial reporting convention
specified above to any other financial reporting convention reasonably
acceptable to the Administrative Agent, in which case the Borrower and the
Administrative Agent will, and are hereby authorized by the Lenders to, make
any adjustments to this Agreement that are necessary in order to reflect such
change in financial reporting.

 

9.11         Additional Guarantors.  The Borrower will cause (a) any direct or
indirect Domestic Subsidiary (other than any Unrestricted Subsidiary or any
Regulated Insurance Company) formed or otherwise purchased or acquired after
the date hereof and (b) any Subsidiary that is not a Domestic Subsidiary
on the date hereof but subsequently becomes a Domestic Subsidiary (other than
any Unrestricted Subsidiary or any Regulated Insurance Company), in each case
to execute a supplement to the Guaranty, in form and substance reasonably
satisfactory to the Administrative Agent, in order to become a Guarantor.

 

9.12         Pledges of Additional Stock and
Evidence of Indebtedness. 
The Borrower will pledge, and, in the case of clause (c), will cause
each direct Domestic Subsidiary to pledge, to the Administrative Agent, for the
benefit of the Lenders, (a) all the capital stock of each direct

 

66

 

Domestic Subsidiary (other than
any Unrestricted Subsidiary), all of the non-Voting Stock (if any) of each
direct Foreign Subsidiary (other than any Unrestricted Subsidiary), and 65% of
all the Voting Stock of each direct Foreign Subsidiary (other than any
Unrestricted Subsidiary), in each case, formed or otherwise purchased or
acquired after the date hereof, in each case pursuant to a supplement to the
Pledge Agreement in form and substance reasonably satisfactory to the
Administrative Agent, (b) all the capital stock of any direct Domestic
Subsidiary (other than any Unrestricted Subsidiary), all of the non-Voting
Stock (if any) of each direct Foreign Subsidiary (other than any Unrestricted
Subsidiary), and 65% of all the Voting Stock of each direct Foreign Subsidiary
(other than any Unrestricted Subsidiary), in each case that is not a direct
Subsidiary on the date hereof but subsequently becomes a direct Subsidiary, in
each case pursuant to a supplement to the Pledge Agreement in form and
substance reasonably satisfactory to the Administrative Agent, and (c) all
evidences of Indebtedness in excess of $5,000,000, in the aggregate, received
by the Borrower or any of the direct Domestic Subsidiaries (other than any
Unrestricted Subsidiary) in connection with any disposition of assets pursuant
to Section 10.4(b), in each case pursuant to a supplement to the Pledge
Agreement in form and substance reasonably satisfactory to the Administrative
Agent.

 

9.13         Use of Proceeds. 
The proceeds of the Term Loans will be used by the Borrower solely
(a) to consummate the Refinancing, (b) to pay the Refinancing
Expenses and (c) following the completion of (a) and (b) above, for
general corporate purposes.  Proceeds of
Revolving Credit Loans may be used by the Borrower solely for working capital
requirements and other general corporate purposes (including Permitted
Acquisitions), and Letters of Credit will be used by the Borrower for general
corporate purposes.

 

9.14         Changes in Business.  The Borrower will, and will cause its
Material Subsidiaries to, taken as a whole, engage primarily in (a) the lines
of business carried on by the Borrower and its Restricted Subsidiaries on the
Closing Date, (b) any other insurance or insurance related business and/or (c)
businesses or activities incidental or related thereto.

 

9.15         Maintenance of License and Permits.  The Borrower will, and will cause each of
its Subsidiaries to, maintain all permits, licenses and consents as may be
required for the conduct of its business by any state, federal or local
government agency or instrumentality except where failure to maintain the same
could not reasonably be expected to have a Material Adverse Effect.

 

9.16         Rating of Facilities.  Within 45 days after the Closing Date, the
Borrower will obtain a senior secured credit rating with respect to the
Facilities from each of S&P and Moody’s, and will cause such a senior
secured credit rating with respect to the Facilities from each of S&P and
Moody’s to be available at all times thereafter until the last Maturity Date
under this Agreement.

 

9.17         Legal Opinions. 
Within 45 days after the Closing Date (or such later date as the
Administrative Agent shall agree in its sole discretion), the Borrower shall
deliver to the Administrative Agent, addressed to the Administrative Agent and
the Lenders, executed legal opinions, dated as of the Closing Date, of Texas
counsel to Bristol West Insurance Services of Texas, Inc. and Coast National
General Agency, Inc. (each a “Texas Credit Party”, and collectively, the
“Texas Credit Parties”) to the effect that (a) each Texas Credit Party
is duly

 

67

 

incorporated, validly existing
and in good standing under its jurisdiction of incorporation, with corporate
power and authority to execute and deliver each of the Credit Documents to
which it is a party and to perform its obligations thereunder, (b) each Texas
Credit Party has duly authorized, executed and delivered each of the Credit
Documents to which it is a party and (c) the execution and delivery by each
Texas Credit Party of the Credit Documents to which it is a party, and its
performance thereunder, does not conflict with such Texas Credit Party’s
organizational documents.

 

SECTION 10.         Negative
Covenants.  The Borrower hereby
covenants and agrees that on the Closing Date and thereafter, for so long as
this Agreement is in effect and until the Commitments and each Letter of Credit
have terminated and the Loans and Unpaid Drawings, together with interest, Fees
and all other Obligations incurred hereunder, are paid in full:

 

10.1         Limitation on Indebtedness.  The Borrower will not, and will not permit
any of the Restricted Subsidiaries to create, incur, assume or suffer to exist
any Indebtedness, except:

 

(a)           Indebtedness
arising under the Credit Documents;

 

(b)           Indebtedness
of (i) the Borrower to any Restricted Subsidiary of the Borrower and
(ii) any Restricted Subsidiary to the Borrower or any other Restricted
Subsidiary of the Borrower;

 

(c)           Indebtedness
in respect of any bankers’ acceptance, letter of credit, warehouse receipt or
similar facilities entered into in the ordinary course of business;

 

(d)           except
as provided in clauses (i) and (j) below, Guaranty Obligations incurred by
(i) Restricted Subsidiaries in respect of Indebtedness of the Borrower or
other Restricted Subsidiaries that is permitted to be incurred under this
Agreement and (ii) the Borrower in respect of Indebtedness of the
Restricted Subsidiaries that is permitted to be incurred under this Agreement;

 

(e)           Guaranty
Obligations incurred in the ordinary course of business in respect of obligations
of suppliers, customers, lessors and licensees;

 

(f)            (i)
Indebtedness (including Indebtedness arising under Capital Leases) incurred
within 270 days of the acquisition, construction or improvement of fixed
or capital assets to finance the acquisition, construction or improvement of
such fixed or capital assets or otherwise incurred in respect of Capital
Expenditures permitted by Section 10.12, (ii) Indebtedness arising under
Capital Leases, other than Capital Leases in effect on the date hereof and
Capital Leases entered into pursuant to subclauses (i) above, provided
that the aggregate amount of Indebtedness incurred pursuant to this
subclause (ii) shall not exceed $5,000,000 at any time outstanding, and
(iii) any refinancing, refunding, renewal or extension of any Indebtedness
specified in subclause (i) or (ii) above, provided that
the principal amount thereof is not increased above the principal amount
thereof outstanding immediately prior to such refinancing, refunding, renewal
or extension;

 

68

 

(g)           Indebtedness
outstanding on the date hereof and listed on Schedule 10.1 and any
refinancing, refunding, renewal or extension thereof, provided that
(i) the principal amount thereof is not increased above the principal
amount thereof outstanding immediately prior to such refinancing, refunding,
renewal or extension, except to the extent otherwise permitted hereunder, and
(ii) the direct and contingent obligors with respect to such Indebtedness
are not changed;

 

(h)           Indebtedness
in respect of Hedge Agreements;

 

(i)            (i) Indebtedness
of a Person or Indebtedness attaching to assets of a Person that, in either
case, becomes a Restricted Subsidiary or Indebtedness attaching to assets that
are acquired by the Borrower or any Restricted Subsidiary, in each case after
the Closing Date as the result of a Permitted Acquisition, provided that
(w) such Indebtedness existed at the time such Person became a Restricted
Subsidiary or at the time such assets were acquired and, in each case, was not
created in anticipation thereof, (x) such Indebtedness is not guaranteed
in any respect by the Borrower or any Restricted Subsidiary (other than any
such Person that so becomes a Restricted Subsidiary), (y)(A) the Borrower
pledges the capital stock of such Person to the Administrative Agent to the
extent required under Section 9.12, (B) such Person executes a supplement
to the Guaranty to the extent required under Section 9.11 and (C) if
any such Indebtedness is secured, (1) the Guaranty referred to in the
preceding subclause (B) is equally and ratably secured or (2) in the
case of assets acquired by the Borrower or any Restricted Subsidiary, the
Borrower’s obligations hereunder or such Restricted Subsidiary’s Guaranty, as
the case may be, are equally and ratably secured and (z) the aggregate
amount of such Indebtedness and all Indebtedness incurred under clause (j)
below, when taken together, does not exceed $40,000,000 in the aggregate at any
time outstanding, (ii) any refinancing, refunding, renewal or extension of
any Indebtedness specified in subclause (i) above, provided that,
except to the extent otherwise permitted hereunder, (x) the principal
amount of any such Indebtedness is not increased above the principal amount
thereof outstanding immediately prior to such refinancing, refunding, renewal
or extension and (y) the direct and contingent obligors with respect to
such Indebtedness are not changed;

 

(j)            (i) Indebtedness
of the Borrower or any Restricted Subsidiary incurred to finance a Permitted
Acquisition, provided that (x) such Indebtedness is not guaranteed
in any respect by any Restricted Subsidiary (other than any Person acquired
(the “acquired Person”) as a result of such Permitted Acquisition or the
Restricted Subsidiary so incurring such Indebtedness) or, in the case of
Indebtedness of any Restricted Subsidiary, by the Borrower, (y)(A) the
Borrower pledges the capital stock of such acquired Person to the
Administrative Agent to the extent required under Section 9.12, (B) such
acquired Person executes a supplement to the Guaranty to the extent required
under Section 9.11 and (C) if a guaranty by such acquired Person of
any such Indebtedness is secured by assets of such acquired Person, the
Guaranty referred to in the preceding subclause (B) is equally and ratably
secured and (z) (A) the aggregate amount of such Indebtedness and all
Indebtedness assumed or permitted to exist under clause (i) above, when
taken together, does not exceed $40,000,000 in the aggregate at any time
outstanding, and (B) the aggregate amount of such Indebtedness incurred by any
Restricted Subsidiary and all Indebtedness incurred under clause (k) below,
when taken together, does not exceed $15,000,000 in the aggregate at any time
outstanding, and (ii) any refinancing, refunding, renewal or extension of
any Indebtedness specified in subclause (i) above, provided that
(x) the

 

69

 

principal amount of any such
Indebtedness is not increased above the principal amount thereof outstanding
immediately prior to such refinancing, refunding, renewal or extension and
(y) the direct and contingent obligors with respect to such Indebtedness
are not changed, except to the extent otherwise permitted hereunder;

 

(k)           (i)
additional Indebtedness of Borrower’s Restricted Subsidiaries; provided that
the aggregate amount of Indebtedness incurred pursuant to this clause (k) and
all Indebtedness incurred by any Restricted Subsidiary under clause (j) above,
when taken together, shall not exceed $15,000,000 in the aggregate at any time
outstanding and (ii) any refinancing, refunding, renewal or extension of any
Indebtedness specified in subclause (k)(i) above; and

 

(l)            additional
Indebtedness of the Borrower that is (i) not otherwise permitted to be incurred
by clauses (a)-(k) above and (ii) not guaranteed by any of the Borrower’s
Restricted Subsidiaries; provided, that the amount of payments scheduled
to be made on or prior to the B Term Loan Maturity Date in connection with such
Indebtedness, together with the amount of optional or voluntary prepayments,
redemptions, repurchases, retirements or defeasances of Indebtedness made in
compliance with Section 10.7, shall not exceed $25,000,000 in the aggregate.

 

10.2         Limitation on Liens.  The Borrower will not, and will not permit
any of the Restricted Subsidiaries to, create, incur, assume or suffer to exist
any Lien upon any property or assets of any kind (real or personal, tangible or
intangible) of the Borrower or any Restricted Subsidiary, whether now owned or
hereafter acquired, except:

 

(a)           Liens
arising under the Credit Documents;

 

(b)           Permitted
Liens;

 

(c)           Liens
securing Indebtedness permitted pursuant to Section 10.1(f), provided
that such Liens attach at all times only to the assets so financed;

 

(d)           Liens
existing on the date hereof and listed on Schedule 10.2;

 

(e)           Liens
existing on the assets of any Person that becomes a Restricted Subsidiary, or
existing on assets acquired, pursuant to a Permitted Acquisition to the extent
the Liens on such assets secure Indebtedness permitted by Section 10.1(i),
provided that such Liens attach at all times only to the same assets
that such Liens attached to, and secure only the same Indebtedness that such
Liens secured, immediately prior to such Permitted Acquisition;

 

(f)            the
replacement, extension or renewal of any Lien permitted by clauses (a) through
(e) above upon or in the same assets theretofore subject to such Lien or the
replacement, extension or renewal (without increase in the amount or change in
any direct or contingent obligor) of the Indebtedness secured thereby; and

 

(g)           additional
Liens so long as the aggregate principal amount of the obligations so secured
does not exceed $10,000,000 at any time outstanding.

 

70

 

10.3         Limitation on Fundamental Changes.  Except as expressly permitted by
Section 10.4 or 10.5, the Borrower will not, and will not permit any of
the Restricted Subsidiaries to, enter into any merger, consolidation or amalgamation,
or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of,
all or substantially all its business units, assets or other properties, except
that:

 

(a)           any
Subsidiary of the Borrower (other than any Restricted Insurance Subsidiary, the
Service Company, or any Material Subsidiary) or any other Person may be merged
or consolidated with or into the Borrower, provided that (i) the
Borrower shall be the continuing or surviving corporation or the Person formed
by or surviving any such merger or consolidation (if other than the Borrower)
shall be a corporation organized or existing under the laws of the United
States, any state thereof, the District of Columbia or any territory thereof
(the Borrower or such Person, as the case may be, being herein referred to as
the “Successor Borrower”), (ii) the Successor Borrower (if other
than the Borrower) shall expressly assume all the obligations of the Borrower
under this Agreement and the other Credit Documents pursuant to a supplement
hereto or thereto in form reasonably satisfactory to the Administrative Agent,
(iii) no Default or Event of Default would result from the consummation of
such merger or consolidation, (iv) the Successor Borrower shall be in
compliance, on a pro forma basis after giving effect to such merger or
consolidation, with the covenants set forth in Sections 10.8, 10.9, 10.10
and 10.11, as such covenants are recomputed as at the last day of the most
recently ended Test Period under such Section as if such merger or
consolidation had occurred on the first day of such Test Period, (v) each
Guarantor, unless it is the other party to such merger or consolidation, shall
have by a supplement to the Guaranty confirmed that its Guaranty shall apply to
the Successor Borrower’s obligations under this Agreement and (vi) the Borrower
shall have delivered to the Administrative Agent an officer’s certificate and
an opinion of counsel, each stating that such merger or consolidation and such
supplement to this Agreement or any Guaranty comply with this Agreement, provided
further that if the foregoing are satisfied, the Successor Borrower (if
other than the Borrower) will succeed to, and be substituted for, the Borrower
under this Agreement;

 

(b)           any
Subsidiary of the Borrower or any other Person may be merged or consolidated
with or into any one or more Subsidiaries of the Borrower so long as the stock
of the surviving Subsidiary is pledged to the extent required under Section
9.12, provided that (i) in the case of any merger or consolidation
involving one or more Restricted Subsidiaries, (A) a Restricted Subsidiary
shall be the continuing or surviving corporation or (B) the Borrower shall take
all steps necessary to cause the Person formed by or surviving any such merger
or consolidation (if other than a Restricted Subsidiary) to become a Restricted
Subsidiary, (ii) in the case of any merger or consolidation involving one or
more Guarantors, a Guarantor shall be the continuing or surviving corporation
or the Person formed by or surviving any such merger or consolidation (if other
than a Guarantor) shall execute a supplement to the Guaranty in form and
substance reasonably satisfactory to the Administrative Agent in order to become
a Guarantor, (iii) no Default or Event of Default would result from the
consummation of such merger or consolidation, (iv) the Borrower shall be
in compliance, on a pro forma basis after giving effect to such merger or
consolidation, with the covenants set forth in Sections 10.8, 10.9, 10.10
and 10.11, as such covenants are recomputed as at the last day of the most
recently ended Test Period under such Section as if such merger or
consolidation had occurred on the first day of such Test

 

71

 

Period, and (v) the
Borrower shall have delivered to the Administrative Agent an Officers’
Certificate stating that such merger or consolidation and such supplement to
any Guaranty comply with this Agreement;

 

(c)           any
Restricted Subsidiary that is not a Guarantor may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to the Borrower, a Guarantor or any other Restricted Subsidiary of
the Borrower; and

 

(d)           any
Guarantor may sell, lease, transfer or otherwise dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to the Borrower, any
Guarantor, any wholly-owned Regulated Insurance Company or any other Regulated
Insurance Company (to the extent that the equity interests of such Regulated
Insurance Company which are owned directly or indirectly by the Borrower are
pledged to the Administrative Agent for the benefit of the Lenders).

 

10.4         Limitation on Sale of Assets.  The Borrower will not, and will not permit
any of the Restricted Subsidiaries to, (i) convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired (other than any such sale, transfer, assignment
or other disposition resulting from any casualty or condemnation, of any assets
of the Borrower or the Restricted Subsidiaries) or (ii) sell any shares
owned by it of any Restricted Subsidiary’s capital stock to any Person other
than the Borrower or a Guarantor, except that:

 

(a)           the
Borrower and the Restricted Subsidiaries may sell, transfer or otherwise
dispose of used or surplus equipment, vehicles and other assets in the ordinary
course of business;

 

(b)           the
Borrower and the Restricted Subsidiaries may sell, transfer or otherwise
dispose of other assets for fair value, provided that (i) the
aggregate amount of such sales, transfers and disposals by the Borrower and the
Restricted Subsidiaries taken as a whole pursuant to this clause (b) shall
not exceed in the aggregate $50,000,000 during the term of this Agreement,
(ii) any consideration received by the Borrower or any Guarantor in
connection with such sales, transfers and other dispositions of assets pursuant
to this clause (b) that is in the form of Indebtedness shall be pledged to
the Administrative Agent pursuant to Section 9.12, (iii) with respect
to any such sale, transfer or disposition (or series of related sales, transfers
or dispositions) in an aggregate amount in excess of $5,000,000, the Borrower
shall be in compliance, on a pro forma basis after giving effect to such sale,
transfer or disposition, with the covenants set forth in Sections 10.8,
10.9, 10.10 and 10.11, as such covenants are recomputed as at the last day of
the most recently ended Test Period under such Sections as if such sale,
transfer or disposition had occurred on the first day of such Test Period, and
(iv) after giving effect to any such sale, transfer or disposition, no
Default or Event of Default shall have occurred and be continuing;

 

(c)           the
Borrower and the Restricted Subsidiaries may make sales of assets to the
Borrower or to any Restricted Subsidiary, provided that any such sales
to Foreign Subsidiaries must be for fair value;

 

72

 

(d)           any
Restricted Subsidiary may effect any transaction permitted by
Section 10.3, 10.5 or 10.6;

 

(e)           in
addition to selling or transferring accounts receivable pursuant to the other
provisions hereof, the Borrower and the Restricted Subsidiaries may sell or
discount without recourse accounts receivable arising in the ordinary course of
business in connection with the compromise or collection thereof; and

 

(f)            any
Regulated Insurance Company may (x) enter into any Insurance Contract,
Reinsurance Agreement or Retrocession Agreement in the ordinary course of
business in accordance with its normal underwriting, indemnity and retention
policies, provided that any counterparty to any such Reinsurance
Agreement or Retrocession Agreement shall have an A.M. Best financial strength
rating of A- (or equivalent rating level if A.M. Best changes its ratings
methodology or designations) or better, unless such counterparty’s obligations
under such Reinsurance Agreement or Retrocession Agreement are collateralized
by irrevocable letters of credit and/or a trust or similar arrangement
containing cash and/or marketable securities with an average quality rating of
A (or its equivalent) or better of which the applicable Regulated Insurance
Company is the beneficiary, and (y) dispose of any assets in its investment
portfolio.

 

10.5         Limitation on Investments.  The Borrower will not, and will not permit
any of the Restricted Subsidiaries to, make any advance, loan, extensions of
credit or capital contribution to, or purchase any stock, bonds, notes,
debentures or other securities of or any assets of, or make any other
investment in, any Person, except:

 

(a)           extensions
of trade credit and asset purchases in the ordinary course of business;

 

(b)           (i)
Permitted Investments by the Borrower and Restricted Subsidiaries (other than
Regulated Insurance Companies) and (ii) investments by Regulated Insurance
Companies to the extent permitted under applicable Requirements of Law;

 

(c)           loans
and advances to officers, directors and employees of the Borrower or any of its
Restricted Subsidiaries (i) to finance the purchase of capital stock of
the Borrower from the Borrower and (ii) for additional purposes not
contemplated by subclause (i) above in an aggregate principal amount at
any time outstanding with respect to this clause (ii) not exceeding
$3,000,000;

 

(d)           investments
existing on the date hereof and any extensions, renewals or reinvestments
thereof, so long as the aggregate amount of all investments pursuant to this
clause (d) is not increased at any time above the amount of such
investments existing on the date hereof;

 

(e)           investments
in Hedge Agreements permitted by Section 10.1(h);

 

(f)            investments
received in connection with the bankruptcy or reorganization of suppliers or
customers and in settlement of delinquent obligations of, and other disputes
with, customers arising in the ordinary course of business;

 

73

 

(g)           investments
to the extent that payment for such investments is made with capital stock of
the Borrower;

 

(h)           investments
constituting non-cash proceeds of sales, transfers and other dispositions of
assets to the extent permitted by Section 10.4;

 

(i)            investments
in any Guarantor, in any wholly-owned Regulated Insurance Company or in any
other Regulated Insurance Company (to the extent that the equity interests of
such Regulated Insurance Company which are owned directly or indirectly by the
Borrower are pledged to the Administrative Agent for the benefit of the
Lenders);

 

(j)            investments
constituting Permitted Acquisitions;

 

(k)           loans
and advances permitted under Section 10.1(b); and

 

(l)            additional
investments (including investments in Minority Investments and Unrestricted
Subsidiaries) in an aggregate amount at the time of such investment not in
excess of the sum of (i) $25,000,000 (minus the portion, if any, of such
$25,000,000 previously applied to make investments pursuant to this clause (l)
and not returned by means of redemption, capital distribution or other return
of capital to the Borrower at or prior to such time) and (ii) the Available
Amount at such time; provided, that (i) the aggregate amount invested in
Unrestricted Subsidiaries pursuant to this clause (l) with the portion (if any)
of the Available Amount added thereto pursuant to clause (a)(iii) and/or
(a)(iv) of the definition thereof as a result of a preferred capital
contribution or a preferred equity issuance shall not exceed $20,000,000 and
(ii) the aggregate amount invested pursuant to this clause (l) with the
Available Amount (when added to the amount of the Available Amount used to make
Capital Expenditures pursuant to Section 10.12) shall not exceed $50,000,000.

 

10.6         Limitation on Dividends.  The Borrower will not declare or pay any
dividends (other than dividends payable solely in its capital stock or rights,
warrants or options to purchase its capital stock) or return any capital to its
stockholders or make any other distribution, payment or delivery of property or
cash to its stockholders as such, or redeem, retire, purchase or otherwise
acquire, directly or indirectly, for consideration, any shares of any class of
its capital stock or the capital stock of any direct or indirect parent of the
Borrower now or hereafter outstanding (or any warrants for or options or stock
appreciation rights in respect of any of such shares), or set aside any funds
for any of the foregoing purposes, or permit any of the Restricted Subsidiaries
to purchase or otherwise acquire for consideration (other than in connection
with an investment permitted by Section 10.5) any shares of any class of
the capital stock of the Borrower, now or hereafter outstanding (or any options
or warrants or stock appreciation rights issued by such Person with respect to
its capital stock) (all of the foregoing “Dividends”), provided
that, so long as no Default or Event of Default exists or would exist after
giving effect thereto, (a) the Borrower may pay regularly scheduled dividends
on Permitted Preferred Stock, (b) the Borrower may redeem in whole or in
part any capital stock of the Borrower for another class of capital stock or
rights to acquire capital stock of the Borrower or with proceeds from
substantially concurrent equity contributions or issuances of new shares of
capital stock, provided that such other class of capital stock contains
terms and provisions at least as advantageous to the Lenders as those contained
in the capital stock redeemed thereby, (c) the

 

74

 

Borrower may repurchase shares
of its capital stock (and/or options or warrants in respect thereof) held by
its officers, directors and employees so long as such repurchase is pursuant
to, and in accordance with the terms of, management and/or employee stock
plans, stock subscription agreements or shareholder agreements, (d) the
Borrower may make investments permitted by Section 10.5 and (e) the
Borrower may repurchase or redeem shares of its capital stock, or declare and
pay dividends on its capital stock, to the extent not otherwise permitted by
clauses (a)-(d) of this proviso so long as the Available Commitment is greater
than or equal to $10,000,000.

 

10.7         Limitations on Debt Payments and
Amendments.  The Borrower will
not, and will not permit its Restricted Subsidiaries to, make or cause or
permit to be made any optional or voluntary prepayment, redemption, repurchase,
retirement or defeasance (legal or economic) of, or take any action having a
similar effect to any of the foregoing with respect to, (in each case in full
or in part) any Indebtedness permitted to be incurred pursuant to
Section 10.1(l) that would otherwise become due and payable after the B
Term Loan Maturity Date, provided that any optional or voluntary prepayments,
redemptions, repurchases, retirements or defeasances otherwise prohibited by
this Section 10.7 may be made in an amount, together with the amount of
scheduled payments to be made pursuant to the proviso in Section 10.1(l), not
to exceed $25,000,000 in the aggregate.

 

10.8         Consolidated Total Debt to
Consolidated Total Capitalization Ratio.  The Borrower will not permit the Consolidated Total Debt to
Consolidated Total Capitalization Ratio as of the last day of any fiscal
quarter to be greater than 0.35:1.00 at any time prior to the last Maturity
Date under this Agreement.

 

10.9         Cash Flow to Consolidated Interest
Expense Ratio.  The Borrower
will not permit the Cash Flow to Consolidated Interest Expense Ratio for
any Test Period ending on the last day of a calendar quarter ending prior to
the last Maturity Date under this Agreement to be less than 3.00:1.00.

 

10.10       Cash Flow to Consolidated Fixed
Charges Ratio.  The Borrower
will not permit the Cash Flow to Consolidated Fixed Charges Ratio for any
Test Period ending on the last day of a calendar quarter ending prior to the
last Maturity Date under this Agreement to be less than 1.25:1.00.

 

10.11       Minimum Risk-Based Capital Ratio.  The Borrower will not permit the Risk-Based
Capital Ratio for any Regulated Insurance Company determined on an individual
basis calculated as of the last day of any fiscal year to be less than 250%, provided
that if any such Person fails to maintain such Risk-Based Capital Ratio as of
the last day of any fiscal year the Borrower shall nevertheless be deemed to be
in compliance with this Section 10.11, and no Default or Event of Default shall
exist, so long as (i) the Combined Risk-Based Capital Ratio for all
Regulated Insurance Companies as of the last day of such fiscal year is at
least 275% and (ii) the Risk-Based Capital Ratio of each Regulated
Insurance Company determined on an individual basis as of the last day of such
fiscal year is at least 210%.

 

10.12       Capital Expenditures.  The Borrower will not, and will not permit
any of its Restricted Subsidiaries to, make any Capital Expenditures (other
than Permitted Acquisitions

 

75

 

that constitute Capital
Expenditures) in any fiscal year, in excess of an amount equal to $10,000,000
plus the Available Amount at the time of the making of any such Capital
Expenditures, provided that, for each fiscal year after 2004, an amount
equal to the excess of $10,000,000 over the amount of Capital Expenditures made
in the immediately preceding fiscal year may be carried forward and utilized in
such fiscal year.  In no event shall the
aggregate amount used to make Capital Expenditures with the Available Amount
pursuant to this Section 10.12 (when added to the amount of the Available Amount
used to make investments pursuant to Section 10.5(l)) exceed $50,000,000.

 

SECTION
11.         Events of
Default.  Upon the occurrence of any
of the following specified events (each an “Event of Default”):

 

11.1         Payments.  The
Borrower shall (a) default in the payment when due of any principal of the
Loans or (b) default, and such default shall continue for five or more days, in
the payment when due of any interest on the Loans or any Fees or any Unpaid
Drawings or of any other amounts owing hereunder or under any other Credit
Document; or

 

11.2         Representations, etc.  Any representation, warranty or statement
made or deemed made by any Credit Party herein or in the Guaranty, the Pledge
Agreement or any certificate delivered or required to be delivered pursuant hereto
or thereto shall prove to be untrue in any material respect on the date as of
which made or deemed made; or

 

11.3         Covenants. 
Any Credit Party shall (a) default in the due performance or observance
by it of any term, covenant or agreement contained in Section 9.1(e) or
Section 10 or (b) default in the due performance or observance by it of
any term, covenant or agreement (other than those referred to in Section 11.1
or 11.2 or clause (a) of this Section 11.3) contained in this Agreement,
the Guaranty or the Pledge Agreement and such default shall continue unremedied
for a period of at least 30 days after receipt of written notice by the
Borrower from the Administrative Agent or the Required Lenders; or

 

11.4         Default Under Other Agreements.  (a) The Borrower or any of its Restricted
Subsidiaries shall (i) default in any payment with respect to any Indebtedness
(other than the Obligations) in excess of $7,000,000 in the aggregate, for the
Borrower and such Subsidiaries, beyond the period of grace, if any, provided in
the instrument or agreement under which such Indebtedness was created or
(ii) default in the observance or performance of any agreement or
condition relating to any such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or (except in the case of
Indebtedness consisting of any Hedge Agreement) any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause, any such Indebtedness to
become due prior to its stated maturity; or (b) without limiting the
provisions of clause (a) above, any such Indebtedness (other than
Indebtedness consisting of any Hedge Agreement) shall be declared to be due and
payable, or required to be prepaid other than by a regularly scheduled required
prepayment or as a mandatory prepayment, prior to the stated maturity thereof;
or

 

76

 

11.5         Bankruptcy, etc.  The Borrower or any Specified Subsidiary shall commence a
voluntary case concerning itself under Title 11 of the United States Code
entitled “Bankruptcy,” as now or hereafter in effect, or any successor thereto
(the “Bankruptcy Code”); or an involuntary case is commenced against the
Borrower or any Specified Subsidiary and the petition is not controverted
within 10 days after commencement of the case; or an involuntary case is
commenced against the Borrower or any Specified Subsidiary and the petition is
not dismissed within 60 days after commencement of the case; or a custodian (as
defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of the Borrower or any Specified Subsidiary;
or the Borrower or any Specified Subsidiary commences (including by way of
applying for or consenting to the appointment of, or taking of possession by, a
rehabilitation, receiver, custodian, trustee, conservator or liquidation
(collectively, a “conservator”) of itself or all or any substantial portion of
its property) any other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency, liquidation,
rehabilitation, conservatorship or similar law of any jurisdiction whether now
or hereafter in effect relating to the Borrower or any Specified Subsidiary; or
there is commenced against the Borrower or any Specified Subsidiary any such
proceeding that remains undismissed for a period of 60 days; or the Borrower or
any Specified Subsidiary is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered; or the
Borrower or any Specified Subsidiary suffers any appointment of any conservator
or the like for it or any substantial part of its property, which appointment
shall continue undischarged or unstayed for a period of 60 days; or the
Borrower or any Specified Subsidiary makes a general assignment for the benefit
of creditors; or any corporate action is taken by the Borrower or any Specified
Subsidiary for the purpose of effecting any of the foregoing; or

 

11.6         ERISA.  (a) Any
Plan shall fail to satisfy the minimum funding standard required for any plan
year or part thereof or a waiver of such standard or extension of any
amortization period is sought or granted under Section 412 of the Code; any
Plan is or shall have been terminated or is the subject of termination
proceedings under ERISA (including the giving of written notice thereof); an
event shall have occurred or a condition shall exist in either case entitling
the PBGC to terminate any Plan or to appoint a trustee to administer any Plan
(including the giving of written notice thereof); any Plan shall have an accumulated
funding deficiency (whether or not waived); the Borrower or any Subsidiary or
any ERISA Affiliate has incurred or is likely to incur a liability to or on
account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064,
4069, 4201 or 4204 of ERISA or Section 4971 or 4975 of the Code (including the
giving of written notice thereof); (b) there could result from any event or
events set forth in clause (a) of this Section 11.6 the imposition of a lien,
the granting of a security interest, or a liability, or the reasonable
likelihood of incurring a lien, security interest or liability; and (c) such
lien, security interest or liability will or would be reasonably likely to have
a Material Adverse Effect; or

 

11.7         Guaranty.  The
Guaranty or any material provision thereof shall cease to be in full force or
effect or any Guarantor thereunder or any Credit Party shall deny or disaffirm
in writing such Guarantor’s obligations under the Guaranty; or

 

11.8         Pledge Agreement.  The Pledge Agreement or any material provision thereof shall
cease to be in full force or effect (other than pursuant to the terms hereof or
thereof

 

77

 

or as a result of acts or
omissions of the Administrative Agent or any Lender) or any Pledgor thereunder
or any Credit Party shall deny or disaffirm in writing such Pledgor’s
obligations under the Pledge Agreement; or

 

11.9         Judgments. 
One or more judgments or decrees shall be entered against the Borrower
or any of the Restricted Subsidiaries involving a liability of $7,000,000 or
more in the aggregate for all such judgments and decrees for the Borrower and
the Restricted Subsidiaries (to the extent not paid or fully covered by
insurance or reinsurance provided by a carrier not disputing coverage) and any
such judgments or decrees shall not have been satisfied, vacated, discharged or
stayed or bonded pending appeal within 60 days from the entry thereof; or

 

11.10       Change of Control.  A Change of Control shall occur;

 

then, and in any such
event, and at any time thereafter, if any Event of Default shall then be
continuing, the Administrative Agent shall, upon the written request of the
Required Lenders, by written notice to the Borrower, take any or all of the
following actions, without prejudice to the rights of the Administrative Agent
or any Lender to enforce its claims against the Borrower, except as otherwise
specifically provided for in this Agreement (provided that, if an Event
of Default specified in Section 11.5 shall occur with respect to the Borrower,
the result that would occur upon the giving of written notice by the
Administrative Agent as specified in clauses (i), (ii) and (iv) below shall
occur automatically without the giving of any such notice):  (i) declare the Total Revolving Credit
Commitment terminated, whereupon the Revolving Credit Commitments, if any, of
each Lender shall forthwith terminate immediately and any Fees theretofore
accrued shall forthwith become due and payable without any other notice of any
kind; (ii) declare the principal of and any accrued interest in respect of
all Loans and all Obligations owing hereunder and thereunder to be, whereupon
the same shall become, forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower; (iii) terminate any Letter of Credit that may be terminated in
accordance with its terms; and/or (iv) direct the Borrower to pay (and the
Borrower agrees that upon receipt of such notice, or upon the occurrence of an
Event of Default specified in Section 11.5 with respect to the Borrower, it
will pay) to the Administrative Agent at the Administrative Agent’s Office such
additional amounts of cash, to be held as security for the Borrower’s
reimbursement obligations for Drawings that may subsequently occur thereunder,
equal to the aggregate Stated Amount of all Letters of Credit issued and then
outstanding.

 

SECTION
12.         The
Administrative Agent.

 

12.1         Appointment. 
Each Lender hereby irrevocably designates and appoints the
Administrative Agent as the agent of such Lender under this Agreement and the
other Credit Documents, and each such Lender irrevocably authorizes the
Administrative Agent, in such capacity, to take such action on its behalf under
the provisions of this Agreement and the other Credit Documents and to exercise
such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and the other Credit
Documents, together with such other powers as are reasonably incidental
thereto.  Notwithstanding any provision
to the contrary elsewhere in this Agreement, the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein,
or any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, 

 

78

 

duties, obligations or
liabilities shall be read into this Agreement or any other Credit Document or
otherwise exist against the Administrative Agent.  The Syndication Agent and the Documentation Agent shall not have
any obligations, duties or responsibilities under this Agreement.

 

12.2         Delegation of Duties.  The Administrative Agent may execute any of
its duties under this Agreement and the other Credit Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties.  The Administrative Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys in-fact selected by it with
reasonable care.

 

12.3         Exculpatory Provisions.  Neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (a) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or any other Credit
Document (except for its or such Person’s own gross negligence or willful
misconduct) or (b) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by the Borrower or any
Guarantor or any officer thereof contained in this Agreement or any other
Credit Document or in any certificate, report, statement or other document
referred to or provided for in, or received by the Administrative Agent under
or in connection with, this Agreement or any other Credit Document or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other Credit Document or for any failure of the Borrower
or any Guarantor to perform its obligations hereunder or thereunder.  The Administrative Agent shall not be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Credit Document, or to inspect the properties, books or
records of the Borrower.

 

12.4         Reliance by Administrative Agent.  The Administrative Agent shall be entitled
to rely, and shall be fully protected in relying, upon any writing, resolution,
notice, consent, certificate, affidavit, letter, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Borrower), independent accountants and other
experts selected by the Administrative Agent. 
The Administrative Agent may deem and treat the Lender specified in the
Register with respect to any amount owing hereunder as the owner thereof for
all purposes unless a written notice of assignment, negotiation or transfer
thereof shall have been filed with the Administrative Agent. The Administrative
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Credit Document unless it shall first receive such
advice or concurrence of the Required Lenders as it deems appropriate or it
shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.  The
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the other Credit Documents in
accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the Lenders
and all future holders of the Loans.

 

79

 

12.5         Notice of Default.  The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder unless
the Administrative Agent has received notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a “notice of default”.  In the event that the Administrative Agent receives such a
notice, the Administrative Agent shall give notice thereof to the Lenders.  The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders, provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders (except to the extent that
this Agreement requires that such action be taken only with the approval of the
Required Lenders or each of the Lenders, as applicable).

 

12.6         Non-Reliance on Administrative
Agent and Other Lenders.  Each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of
the Borrower or any Guarantor, shall be deemed to constitute any representation
or warranty by the Administrative Agent to any Lender.  Each Lender represents to the Administrative
Agent that it has, independently and without reliance upon the Administrative
Agent or any other Lender, and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Borrower and any Guarantor and made its own decision to
make its Loans hereunder and enter into this Agreement.  Each Lender also represents that it will,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Credit Documents, and to make such investigation as it deems necessary to
inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Borrower and any Guarantor.  Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, assets, operations, properties, financial
condition, prospects or creditworthiness of the Borrower or any Guarantor that
may come into the possession of the Administrative Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.

 

12.7         Indemnification.  The Lenders agree to indemnify the Administrative Agent in its
capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to their
respective portions of the Total Credit Exposure in effect on the date on which
indemnification is sought (or, if indemnification is sought after the date upon
which the Commitments shall have terminated and the Loans shall have been paid
in full, ratably in accordance with their respective portions of the Total
Credit Exposure in effect immediately prior to such date), from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever that
may at any time (including, without limitation, at any

 

80

 

time following the payment of
the Loans) be imposed on, incurred by or asserted against the Administrative Agent
in any way relating to or arising out of, the Commitments, this Agreement, any
of the other Credit Documents or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or any
action taken or omitted by the Administrative Agent under or in connection with
any of the foregoing, provided that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Administrative Agent’s gross negligence or willful
misconduct.  The agreements in this
Section 12.7 shall survive the payment of the Loans and all other amounts
payable hereunder.

 

12.8         Administrative Agent in Its Individual
Capacity.  The Administrative
Agent and its Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with the Borrower and any Guarantor as though
the Administrative Agent were not the Administrative Agent hereunder and under
the other Credit Documents.  With
respect to the Loans made by it, the Administrative Agent shall have the same
rights and powers under this Agreement and the other Credit Documents as any
Lender and may exercise the same as though it were not the Administrative
Agent, and the terms “Lender” and “Lenders” shall include the Administrative
Agent in its individual capacity.

 

12.9         Successor Agent.  The Administrative Agent may resign as Administrative Agent upon
20 days’ prior written notice to the Lenders and the Borrower.  If the Administrative Agent shall resign as
Administrative Agent under this Agreement and the other Credit Documents, then
the Required Lenders shall appoint from among the Lenders a successor agent for
the Lenders, which successor agent shall be approved by the Borrower (which
approval shall not be unreasonably withheld), whereupon such successor agent
shall succeed to the rights, powers and duties of the Administrative Agent, and
the term “Administrative Agent” shall mean such successor agent effective upon
such appointment and approval, and the former Administrative Agent’s rights,
powers and duties as Administrative Agent shall be terminated, without any
other or further act or deed on the part of such former Administrative Agent or
any of the parties to this Agreement or any holders of the Loans.  After any retiring Administrative Agent’s
resignation as Administrative Agent, the provisions of this Section 12 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Agreement and the other Credit
Documents.

 

SECTION
13.         Miscellaneous.

 

13.1         Amendments and Waivers.  Neither this Agreement nor any other Credit
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 13.1. The
Required Lenders may, or, with the written consent of the Required Lenders, the
Administrative Agent may, from time to time, (a) enter into with the relevant
Credit Party or Credit Parties written amendments, supplements or modifications
hereto and to the other Credit Documents for the purpose of adding any
provisions to this Agreement or the other Credit Documents or changing in any
manner the rights of the Lenders or of the Borrower hereunder or thereunder or
(b) waive, on such terms and conditions as the Required Lenders or the
Administrative Agent, as the case may be, may specify in such instrument, any
of the requirements of this Agreement or the other Credit Documents or any
Default or Event of Default and its consequences; provided, however,
that no such waiver and no

 

81

 

such amendment, supplement or
modification shall directly (i) forgive any portion of any Loan or extend the
final scheduled maturity date of any Loan (including, without limitation, the
Revolving Credit Maturity Date, the A Term Loan Maturity Date and the B Term
Loan Maturity Date notwithstanding anything contained in clauses (vi) and (vii)
below) or reduce the stated rate, or forgive any portion, or extend the date
for the payment, of any interest or fee payable hereunder (other than as a
result of waiving the applicability of any post-default increase in interest
rates) or extend the final expiration date of any Lender’s Commitment or extend
the final expiration date of any Letter of Credit beyond the L/C Maturity Date
or increase the aggregate amount of the Commitments of any Lender, in each case
without the written consent of each Lender directly and adversely affected
thereby, or (ii) amend, modify or waive any provision of this Section 13.1
or reduce the percentages specified in the definitions of the terms “Required
Lenders”, “Required Revolving Credit Lenders”, “Required A Term Loan Lenders”,
“Required B Term Loan Lenders”, “Required B Term Loan Supermajority Lenders”,
and “Required A Term/Revolving Credit Lenders”, or consent to the assignment or
transfer by the Borrower of its rights and obligations under any Credit
Document to which it is a party (except as permitted pursuant to
Section 10.3), in each case without the written consent of each Lender
directly and adversely affected thereby, or (iii) amend, modify or waive any
provision of Section 12 without the written consent of the then-current
Administrative Agent, or (iv) amend, modify or waive any provision of Section 3
without the written consent of the Letter of Credit Issuer, or (v) change
any Revolving Credit Commitment to any Term Loan Commitment without the prior
written consent of each Lender directly and adversely affected thereby, or
(vi) decrease any A Repayment Amount or extend any scheduled A Repayment
Date, in each case without the written consent of the Required A Term Loan
Lenders, or (vii) decrease any B Repayment Amount or extend any scheduled
B Repayment Date, in each case without the written consent of the Required B
Term Loan Lenders, or (viii) except to the extent permitted under the
applicable Credit Document, release all or substantially all the Collateral under
the Pledge Agreement or release all or substantially all of the Guarantors
under the Guaranty, in each case without the written consent of (I) the
Required A Term/Revolving Credit Lenders and (II) the Required B Term Loan
Supermajority Lenders and provided further, that at any time that no
Default or Event of Default has occurred and is continuing, the Revolving
Credit Commitment of any Lender may be increased to finance a Permitted
Acquisition, with the consent of such Lender, the Borrower and the Administrative
Agent (which consent, in the case of the Administrative Agent, shall not be
unreasonably withheld) and without the consent of the Required Lenders, so long
as (i) the Increased Commitment Amount (as defined below) at such time,
when added to the amount of Indebtedness incurred pursuant to
Sections 10.1(i) and (j) and outstanding at such time, does not exceed the
limits set forth therein, (ii) the Borrower shall pledge the Capital Stock
of any person acquired pursuant thereto to the Administrative Agent for the
benefit of the Lenders to the extent required under Section 9.12 and
(iii) to the extent determined by the Administrative Agent to be necessary
to ensure pro rata borrowings commencing with the initial borrowing after
giving effect to such increase, the Borrower shall prepay any Eurodollar Loans
outstanding immediately prior to such initial borrowing; as used herein, the
“Increased Commitment Amount” means, at any time, aggregate amount of all
increases pursuant to this proviso made at or prior to such time less the
aggregate amount of all voluntary reductions of the Revolving Credit
Commitments made prior to such time. 
Any such waiver and any such amendment, supplement or modification shall
apply equally to each of the affected Lenders and shall be binding upon the
Borrower, such Lenders, the Administrative Agent and all future holders of the
affected Loans.  In the case of

 

82

 

any waiver, the Borrower, the
Lenders and the Administrative Agent shall be restored to their former
positions and rights hereunder and under the other Credit Documents, and any
Default or Event of Default waived shall be deemed to be cured and not
continuing, it being understood that no such waiver shall extend to any subsequent
or other Default or Event of Default or impair any right consequent thereon.

 

13.2         Notices.  All
notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing (including by facsimile transmission), and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered, or three days after being deposited in the mail,
postage prepaid, or, in the case of telecopy notice, when received; provided
that any notice, request or demand to or upon the Administrative Agent or the
Lenders pursuant to Sections 2.3, 2.6, 2.9, 4.2 and 5.1 shall not be effective
until received.  For the purposes
hereof, the address of each party hereto shall be as set forth under such
party’s name on Schedule 13.2 or (i) as to the Company and the Administrative
Agent, such other address as shall be designated by such Person in a written
notice delivered to the other parties hereto and (ii) as to each other party,
such other address as shall be designated by such party in a written notice
delivered to the Administrative Agent. 
Electronic mail may be used to distribute routine communications, such
as financial statements and other information; provided, however,
that no signature with respect to any notice, request, agreement, waiver,
amendment or other document or any notice that is intended to have binding
effect may be sent by electronic mail.

 

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

 

13.4         Survival of Representations and
Warranties.  All representations
and warranties made hereunder, in the other Credit Documents and in any
document, certificate or statement delivered pursuant hereto or in connection
herewith shall survive the execution and delivery of this Agreement and the
making of the Loans hereunder.

 

13.5         Payment of Expenses and Taxes.  The Borrower agrees (a) to pay or reimburse
the Administrative Agent for all its reasonable out-of-pocket costs and
expenses incurred in connection with the development, preparation and execution
of, and any amendment, supplement or modification to, this Agreement and the
other Credit Documents and any other documents prepared in connection herewith
or therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees, disbursements and other charges of counsel to the Administrative Agent,
(b) to pay or reimburse each Lender and the Administrative Agent for all its
reasonable and documented costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Agreement, the other
Credit Documents and any such other documents, including, without limitation,
the reasonable fees, disbursements and other charges of counsel to each Lender
and of counsel to the Administrative Agent, (c) to pay, indemnify, and hold

 

83

 

harmless each Lender and the
Administrative Agent from, any and all recording and filing fees and any and
all liabilities with respect to, or resulting from any delay in paying, stamp,
excise and other similar taxes, if any, that may be payable or determined to be
payable in connection with the execution and delivery of, or consummation or
administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the other Credit Documents and any such other documents, and (d)
to pay, indemnify, and hold harmless each Lender and the Administrative Agent
and their respective directors, officers, employees, trustees and agents from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever, including, without limitation, reasonable and
documented fees, disbursements and other charges of counsel, with respect to
the execution, delivery, enforcement, performance and administration of this
Agreement, the other Credit Documents and any such other documents, including,
without limitation, any of the foregoing relating to the violation of,
noncompliance with or liability under, any Environmental Law applicable to the
operations of the Borrower, any of its Subsidiaries or any of the Properties
(all the foregoing in this clause (d), collectively, the “indemnified
liabilities”), provided that the Borrower shall have no obligation
hereunder to the Administrative Agent or any Lender nor any of their respective
directors, officers, employees, trustees and agents with respect to indemnified
liabilities arising from (i) the gross negligence or willful misconduct of
the party to be indemnified or (ii) disputes among the Administrative
Agent, the Lenders and/or their transferees. 
The agreements in this Section 13.5 shall survive repayment of the Loans
and all other amounts payable hereunder.

 

13.6         Successors and Assigns; Participations
and Assignments. 
(a)  (i) This Agreement shall be binding upon and inure
to the benefit of the Borrower, the Lenders, the Administrative Agent and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of each Lender. 
No sale, assignment or transfer or participation of any Letter of Credit
or any participation therein may be made separately from a sale, assignment,
transfer or participation of a corresponding interest in the Revolving Loan
Commitment and the Revolving Loans of the Lender effecting such sale,
assignment, transfer or participation.

 

(ii)           Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any time sell
to one or more Persons (other than a natural Person) (“Participants”)
participating interests in any Loan owing to such Lender, any Commitment of
such Lender or any other interest of such Lender hereunder and under the other
Credit Documents (including to loan derivative counterparties in respect of
swaps or similar arrangements having the practical or economic effect
thereof).  In the event of any such sale
by a Lender of a participating interest to a Participant, such Lender’s obligations
under this Agreement to the other parties to this Agreement shall remain
unchanged, such Lender shall remain solely responsible to the other parties
hereto for the performance thereof, such Lender shall remain the holder of any
such Loan for all purposes under this Agreement and the other Credit Documents,
and the Borrower and the Administrative Agent shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement and the other Credit Documents.  In no event shall any Participant under any
such participation have any right to approve any amendment, modification or
waiver of any provision of any

 

84

 

Credit Document, or any consent to any departure by
any Credit Party therefrom, except to the extent that such amendment, waiver or
consent would directly forgive any principal of any Loan or reduce the stated
rate, or forgive any portion, or postpone the date for the payment, of any
interest or fee payable hereunder (other than as a result of waiving the
applicability of any post-default increase in interest rates), or increase the
aggregate amount of the Commitments of any Lender or postpone the date of the
final scheduled maturity of any Loan, in each case to the extent subject to
such participation, and any agreement or instrument pursuant to which such
participation is sold or transferred shall expressly provide for the provisions
of this sentence.  The Borrower agrees
that if amounts outstanding under this Agreement are due or unpaid, or shall
have been declared or shall have become due and payable upon the occurrence of
an Event of Default, each Participant shall, to the maximum extent permitted by
applicable law, be deemed to have the right of setoff in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Lender
under this Agreement, provided that, in purchasing such participating
interest, such Participant shall be deemed to have agreed to share with the
Lenders the proceeds thereof as provided in Section 13.8 as fully as if it were
a Lender hereunder.  The Borrower also
agrees that each Participant shall be entitled to the benefits of
Sections 2.10 and 2.11 with respect to its participation in the
Commitments and the Loans outstanding from time to time as if it were a Lender,
provided that no Participant shall be entitled to receive any greater
amount pursuant to any such Section than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred
by such transferor Lender to such Participant had no such transfer occurred.

 

(iii)          Any Lender may, in the ordinary course
of its business and in accordance with applicable law, at any time and from
time to time assign to any Eligible Assignee that is a Lender or any Affiliate
or any Approved Fund thereof (with the consent of the Borrower if any increased
costs would result therefrom) or, with the consent of the Borrower and the
Administrative Agent (which in each case shall not be unreasonably withheld, it
being understood that, without limitation, the Borrower shall have the right to
withhold its consent to any assignment if, in order for such assignment to comply
with applicable law, the Borrower would be required to obtain the consent of,
or make any filing or registration with, any Governmental Authority), to an
Eligible Assignee (other than any Lender or Affiliate or Approved Fund thereof)
that is regularly engaged in making, purchasing or investing in loans or
securities or financial institution (an “Assignee”) all or any part of
its rights and obligations under this Agreement and the other Credit Documents
pursuant to an Assignment and Assumption Agreement, substantially in the form
of Exhibit G (the “Assignment and Assumption”), executed (either
manually in the case of delivery per clause (x) below, or electronically in the
case of delivery per clause (y) below) by such Assignee, such assigning Lender
(and, in the case of an Assignee that is not then a Lender, an Affiliate or an
Approved Fund thereof, by the Borrower and the Administrative Agent) and either
(x) manually delivered to the Administrative Agent for its acceptance and
recording in the Register or (y) electronically delivered to the Administrative
Agent via an electronic settlement system acceptable to the Administrative
Agent (which initially shall be Clear Par, LLC) (the “Electronic Settlement
System”), provided that, (i) except in the case of an assignment of
all of a

 

85

 

Lender’s interests under this Agreement and except for
assignments to any Lender or any Affiliate or Approved Fund thereof, unless
otherwise agreed to by the Borrower and the Administrative Agent, no such
assignment to an Assignee (other than any Lender, any Affiliate or any Approved
Fund thereof) shall be in an aggregate principal amount of less than
$1,000,000, (ii) each partial assignment shall be made as an assignment of a proportionate
part of all the assigning Lender’s rights and obligations under this Agreement
with respect to the Loan or Commitment so assigned and (iii) any assignment of
Revolving Credit Loans or a Revolving Credit Commitment hereunder shall require
the prior written consent of the Administrative Agent and the Letter of Credit
Issuer.  Upon such execution, delivery,
acceptance and recording, from and after the effective date determined pursuant
to such Assignment and Assumption (and upon delivery of such other information
reasonably requested by the Administrative Agent including, without limitation,
such forms, certificates or other evidence, if any, with respect to United
States federal income tax withholding matters and with respect to such
information requested under the Patriot Act as such assignee may otherwise be
required to deliver pursuant to Section 5.4(b)) (x) the Assignee thereunder
shall be a party hereto and, to the extent provided in such Assignment and
Assumption, have the rights and obligations of a Lender hereunder with a
Commitment as set forth therein and (y) the assigning Lender thereunder shall,
to the extent provided in such Assignment and Assumption, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all or the remaining portion of an assigning Lender’s
rights and obligations under this Agreement, such assigning Lender shall cease
to be a party hereto); provided that notwithstanding anything contained in any
of the Credit Documents to the contrary, if such Lender is a Letter of Credit
Issuer such Lender shall continue to have all rights and obligations of a
Letter of Credit Issuer until the cancellation or expiration of any Letters of
Credit issued by it and the reimbursement of any amounts drawn thereunder.  The assigning Lender shall, upon the
effectiveness of such assignment or as promptly thereafter as practicable,
surrender any promissory notes it holds that represent Loans to the Administrative
Agent for cancellation, and thereupon new promissory notes, if so requested by
the Assignee, substantially in the form of Exhibit D-1, D-2 or D-3, as the case
may be, evidencing the A Term Loans, B Term Loans and Revolving Credit Loans,
respectively, owing to such Assignee.  
Notwithstanding any provision of this Agreement to the contrary, the
consent of the Borrower shall not be required for any assignment that occurs at
any time when any of the events described in Section 11.5 shall have occurred
and be continuing with respect to the Borrower.

 

(b)           Nothing
herein shall prohibit any Lender from pledging or assigning all or any portion
of its Loans to any Federal Reserve Bank in accordance with applicable law
provided, that (i) no Lender shall be relieved of any of its obligations hereunder
as a result of any such assignment or pledge and (ii) in no event shall any
assignee or pledge be considered to be a “Lender” or entitled to require the
assigning Lender to take or omit to take any action hereunder.  In order to facilitate such pledge or
assignment, the Borrower hereby agrees that, upon request of any Lender at any
time and from time to time after the Borrower has made its initial borrowing
hereunder, the Borrower shall provide to such Lender, at the Borrower’s own
expense, a promissory note, substantially in the form of Exhibit D-1, D-2 or
D-3, as the case may be, evidencing the A Term Loans, B Term Loans and
Revolving Credit Loans, respectively, owing to such Lender.

 

86

 

(c)           Notwithstanding
anything to the contrary contained herein, any Lender (a “Granting Lender”)
may grant to a special purpose funding vehicle (a “SPC”), identified as
such in writing from time to time by the Granting Lender to the Administrative
Agent and the Borrower, the option to provide to the Borrower all or any part
of any Loan that such Granting Lender would otherwise be obligated to make to
the Borrower pursuant to this Agreement; provided that (i) nothing
herein shall constitute a commitment by any SPC to make any Loan and (ii) if an
SPC elects not to exercise such option or otherwise fails to provide all or any
part of such Loan, the Granting Lender shall be obligated to make such Loan
pursuant to the terms hereof.  The
making of a Loan by an SPC hereunder shall utilize the Commitment of the
Granting Lender to the same extent, and as if, such Loan were made by such
Granting Lender.  Each party hereto
hereby agrees that no SPC shall be liable for any indemnity or similar payment
obligation under this Agreement (all liability for which shall remain with the
Granting Lender).  In furtherance of the
foregoing, each party hereto hereby agrees (which agreement shall survive the
termination of this Agreement) that, prior to the date that is one year and one
day after the payment in full of all outstanding commercial paper or other
senior indebtedness of any SPC, it will not institute against, or join any
other person in instituting against, such SPC any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under the laws of the United
States or any State thereof or the District of Columbia.  In addition, notwithstanding anything to the
contrary contained in this 13.6 any SPC may (i) with notice to, but without the
prior written consent of, the Borrower and the Administrative Agent and without
paying any processing fee therefor, assign all or a portion of its interests in
any Loans to the Granting Lender or to any Eligible Assignees (consented to by
the Borrower and Administrative Agent) providing liquidity and/or credit
support to or for the account of such SPC to support the funding or maintenance
of Loans and (ii) disclose on a confidential basis any non-public information
relating to its Loans to any rating agency, commercial paper dealer or provider
of any surety, guarantee or credit or liquidity enhancement to such SPC.  This section may not be amended without the
written consent of the SPC.

 

(d)           The
Administrative Agent, on behalf of the Borrower, shall maintain at the address
of the Administrative Agent referred to in Section 13.2 a copy of each
Assignment and Assumption delivered to it and a register (the “Register”)
for the recordation of the names and addresses of the Lenders and the
Commitment of, and principal amount of the Loans owing to, each Lender from
time to time.  The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrower, the Administrative Agent and the Lenders shall treat each Person
whose name is recorded in the Register as the owner of a Loan or other
obligation hereunder as the owner thereof for all purposes of this Agreement
and the other Credit Documents, notwithstanding any notice to the
contrary.  Any assignment of any Loan or
other obligation hereunder shall be effective only upon appropriate entries
with respect thereto being made in the Register.  The Register shall be available for inspection by the Borrower or
any Lender at any reasonable time and from time to time upon reasonable prior
notice.

 

(e)           Upon
its receipt of an Assignment and Assumption executed by an assigning Lender and
an Assignee (and, in the case of an Assignee that is not then a Lender, an
Affiliate or an Approved Fund thereof, by the Borrower and the Administrative
Agent) together with payment to the Administrative Agent of a registration and
processing fee of $3,500, the Administrative Agent shall (i) promptly
accept such Assignment and Assumption and (ii) on the effective date
determined pursuant thereto record the information contained therein in the

 

87

 

Register and give notice of
such acceptance and recordation to the Lenders and the Borrower; provided
however, that no such fee shall be payable if the Assignment and
Assumption is delivered via the Electronic Settlement System; and provided
further that, in the case of contemporaneous assignments by a Lender to
more than one fund managed by the same investment advisor (and, to the extent
such Lender is a fund, which funds are not managed by the same investment advisor
as such Lender or by an Affiliate of such investment advisor), only a single
$3,500 such fee shall be payable for all such contemporaneous assignments.

 

(f)            Subject
to Section 13.16, the Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a “Transferee”) and any prospective
Transferee any and all financial information in such Lender’s possession
concerning the Borrower and its Affiliates that has been delivered to such
Lender by or on behalf of the Borrower pursuant to this Agreement or which has
been delivered to such Lender by or on behalf of the Borrower in connection
with such Lender’s credit evaluation of the Borrower and its Affiliates prior
to becoming a party to this Agreement, provided that neither the
Administrative Agent nor any Lender shall provide to any Transferee or
prospective Transferee any of the Confidential Information unless such person
shall have previously executed a Confidentiality Agreement in the form of
Exhibit J.

 

13.7         Replacements of Lenders under
Certain Circumstances.  The
Borrower shall be permitted to replace any Lender that (a) requests
reimbursement for amounts owing pursuant to Section 2.10, 2.12, 3.5 or
5.4, (b) is affected in the manner described in Section 2.10(a)(iii) and as a
result thereof any of the actions described in such Section is required to be
taken or (c) becomes a Defaulting Lender, with a replacement bank or other
financial institution, provided that (i) such replacement does not
conflict with any Requirement of Law, (ii) no Event of Default shall have
occurred and be continuing at the time of such replacement, (iii) the Borrower
shall repay (or the replacement bank or institution shall purchase, at par) all
Loans and other amounts (other than any disputed amounts), pursuant to
Section 2.10, 2.11, 2.12, 3.5 or 5.4, as the case may be) owing to such
replaced Lender prior to the date of replacement, (iv) the replacement bank or
institution, if not already a Lender, and the terms and conditions of such
replacement, shall be reasonably satisfactory to the Administrative Agent, (v)
the replaced Lender shall be obligated to make such replacement in accordance
with the provisions of Section 13.6 (provided that the Borrower shall be
obligated to pay the registration and processing fee referred to therein) and
(vi) any such replacement shall not be deemed to be a waiver of any rights
that the Borrower, the Administrative Agent or any other Lender shall have
against the replaced Lender.

 

13.8         Adjustments; Set-off.  (a) 
If any Lender (a “Benefited Lender”) shall at any time receive
any payment of all or part of its Loans, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, pursuant to events or proceedings of the nature referred to in Section
11.5, or otherwise), in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such other
Lender’s Loans, or interest thereon, such Benefited Lender shall purchase for
cash from the other Lenders a participating interest in such portion of each
such other Lender’s Loans, or shall provide such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as shall be necessary
to cause such Benefited Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; provided, however,
that if all or any portion of such excess payment or benefits is thereafter
recovered from such Benefited Lender, 

 

88

 

such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.

 

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

 

13.9         Counterparts. 
This Agreement may be executed by one or more of the parties to this
Agreement on any number of separate counterparts (including by facsimile
transmission), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. 
A set of the copies of this Agreement signed by all the parties shall be
lodged with the Borrower and the Administrative Agent.

 

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

 

13.11       Integration. 
This Agreement and the other Credit Documents represent the agreement of
the Borrower, the Administrative Agent and the Lenders with respect to the
subject matter hereof, and there are no promises, undertakings, representations
or warranties by the Administrative Agent or any Lender relative to subject
matter hereof not expressly set forth or referred to herein or in the other
Credit Documents.

 

13.12       GOVERNING LAW. 
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF NEW YORK.

 

13.13       Submission to Jurisdiction; Waivers.  The Borrower hereby irrevocably and
unconditionally:

 

(a)           submits
for itself and its property in any legal action or proceeding relating to this
Agreement and the other Credit Documents to which it is a party, or for
recognition and enforcement of any judgment in respect thereof, to the non-exclusive
general jurisdiction of the

 

89

 

courts of the State of New
York, the courts of the United States of America for the Southern District
of New York and appellate courts from any thereof;

 

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

 

(c)           agrees
that service of process in any such action or proceeding may be effected by
mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to the Borrower at its address set
forth on Schedule 13.2 or at such other address of which the Administrative
Agent shall have been notified pursuant thereto;

 

(d)           agrees
that nothing herein shall affect the right to effect service of process in any
other manner permitted by law or shall limit the right to sue in any other
jurisdiction; and

 

(e)           waives,
to the maximum extent not prohibited by law, any right it may have to claim or
recover in any legal action or proceeding referred to in this Section 13.13
any special, exemplary, punitive or consequential damages.

 

13.14       Acknowledgments.  The Borrower hereby acknowledges that:

 

(a)           it
has been advised by counsel in the negotiation, execution and delivery of this
Agreement and the other Credit Documents;

 

(b)           neither
the Administrative Agent nor any Lender has any fiduciary relationship with or
duty to the Borrower arising out of or in connection with this Agreement or any
of the other Credit Documents, and the relationship between Administrative
Agent and Lenders, on one hand, and the Borrower, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor; and

 

(c)           no
joint venture is created hereby or by the other Credit Documents or otherwise
exists by virtue of the transactions contemplated hereby among the Lenders or
among the Borrower and the Lenders.

 

13.15       WAIVERS OF JURY TRIAL.  THE BORROWER, THE ADMINISTRATIVE AGENT AND
THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

 

13.16       Confidentiality.  The Administrative Agent and each Lender shall hold all
non-public information furnished by or on behalf of the Borrower in connection
with such Lender’s evaluation of whether to become a Lender hereunder or
obtained by such Lender or the Administrative Agent pursuant to the
requirements of this Agreement (“Confidential Information”), in
accordance with its customary procedure for handling confidential information
of this nature and (in the case of a Lender that is a bank) in accordance with
safe and sound banking practices and in any event may make disclosure as
required or requested by any 

 

90

 

governmental agency or
representative thereof or pursuant to legal process or to such Lender’s or the
Administrative Agent’s attorneys, professional advisors or independent auditors
or Affiliates or Approved Funds, provided that unless specifically prohibited
by applicable law or court order, each Lender and the Administrative Agent
shall notify the Borrower of any request by any governmental agency or
representative thereof (other than any such request in connection with an
examination of the financial condition of such Lender by such governmental
agency) for disclosure of any such non-public information prior to disclosure
of such information, and provided further that in no event shall any
Lender or the Administrative Agent be obligated or required to return any
materials furnished by the Borrower or any Subsidiary of the Borrower.  Each Lender and the Administrative Agent
agrees that it will not provide to prospective Transferees or to prospective
direct or indirect contractual counterparties in swap agreements to be entered
into in connection with Loans made hereunder any of the Confidential
Information unless such Person shall have previously executed a Confidentiality
Agreement in the form of Exhibit J.    Notwithstanding
anything else contained herein, each party hereto authorizes each other party
hereto to disclose all information and materials regarding the structure and
tax aspects of the transactions contemplated herein to the extent required by
Internal Revenue Code Section 6011 and the Treasury Regulations thereunder
in order to avoid the transactions contemplated herein being treated as a
“Confidential Transaction” as defined by such Treasury Regulations.

 

*     *     *    
*     *

 

91

 

IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Agreement to be duly executed and delivered as of the date first above
written.

 

	
   

  	
  BRISTOL WEST HOLDINGS, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ JEFFREY J. DAILEY

  	
   

  
	
   

  	
   

  	
  Name:

  	
  JEFFREY J. DAILEY

  	
   

  
	
   

  	
   

  	
  Title:

  	
  PRESIDENT

  	
   

  

 

 

	
   

  	
  CREDIT SUISSE FIRST BOSTON,

  	
   

  
	
   

  	
  acting through its Cayman
  Islands branch,

  as Administrative Agent, Joint Lead Arranger and Lender

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ JAY CHALL

  	
   

  
	
   

  	
   

  	
  Name:

  	
  JAY CHALL

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Director

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  and

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ JENNIFER A. PIEZA

  	
   

  
	
   

  	
   

  	
  Name:

  	
  JENNIFER A. PIEZA

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Associate

  	
   

  

 

 

	
   

  	
  ING CAPITAL
  LLC, as Syndication Agent,

  Joint Lead Arranger and Lender

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Mark R. Newsome

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Mark R. Newsome

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  and

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  

 

 

	
   

  	
  UBS SECURITIES LLC,
as Co-Documentation Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ David A. Judge

  	
   

  
	
   

  	
   

  	
  Name:

  	
  David A. Judge

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  and

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Oliver O. Trumbo II

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Oliver O. Trumbo II

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Director

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  UBS LOAN FINANCE LLC,
as Lender

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Wilfred V. Saint

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Wilfred V. Saint

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Associate Director

  Banking Products Services US

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  and

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Thomas R. Salzano

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Thomas R. Salzano

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Director

  Banking Products Services, US

  	
   

  

 

 

	
   

  	
  BEAR STEARNS CORPORATE LENDING

  INC., as Co-Documentation Agent and Lender

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Keith C. Barnish

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Keith C. Barnish

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice PresidentQuickLinks
 -- Click here to rapidly navigate through this document
  

Exhibit 4.5  

 
 

UNDERWRITER'S WARRANT AGREEMENT    
    

        Underwriter's Warrant Agreement (the "Agreement"), dated as
of                        , 2004, between JED Oil Inc.
(the "Company") and Gilford Securities Incorporated (the "Underwriter"). 

 
 

WITNESSETH:    
    

        WHEREAS, the Underwriter has agreed, pursuant to the underwriting agreement
dated                        , 2004 (the "Underwriting
Agreement") between the Company and the Underwriter, to act as the underwriter in connection with the Company's proposed public offering of up to  1,675,000 shares of the
Company's common stock, no par value (the "Common Stock") at $5.50 per share
(the "Public Offering"); and 

        WHEREAS,
the Company proposes to issue to the Underwriter and/or member firms of the National Association of Securities Dealers, Inc.
("NASD") participating in the Public Offering and the bona fide officers and partners thereof as permitted by Rule 2710(c)(7)(A) and
(B) (the "Rule") of the NASD Conduct Rules (each, a "Holder," and collectively, the
"Holders"), warrants ("Warrants") to purchase up to  167,500 shares of Common Stock (the "Shares"); and 

        WHEREAS,
the Warrants to be issued pursuant to this Agreement will be issued on the Closing Date (as such term is defined in the Underwriting Agreement) by the Company to the Holders in
consideration for, and as part of the compensation in connection with, the Underwriter acting as underwriter pursuant to the Underwriting Agreement. 

        NOW,
THEREFORE, in consideration of the premises, the payment to the Company of $.0001 per Warrant, the agreements set forth herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 

        1.    Grant and Period.    

        (a)   The
above recitals are true and correct. The Public Offering has been registered under a Registration Statement on Form S-1 (File
No. 333-111435) and declared effective by the Securities and Exchange Commission (the "Commission")
on                        , 2004 (the
"Effective Date"). This Agreement, relating to the purchase of the Warrants, is entered into pursuant to the Underwriting Agreement between the Company
and the Underwriter in connection with the Public Offering. 

        (b)   Pursuant
to the Warrants, the Holders are hereby granted the right to purchase from the Company, at any time during the period commencing after the one year anniversary
of the Closing Date of the Offering and expiring five years after the Closing Date (the "Expiration Time"), up to a number of shares of Common Stock of
the Company equal to 10% of the number of shares sold in the Public Offering at an initial exercise price (subject to adjustment as provided in Section 7 hereof) of $6.60 per share (120% of the
per share price of the Common Stock in the Public Offering) (the "Exercise Price" or "Purchase Price"),
subject to the terms and conditions of this Agreement. 

        (c)   Except
as specifically otherwise provided herein, the Shares shall bear the same terms and conditions as such securities described under the caption
"Description of Securities" in the Registration Statement, and as designated in the Company's Articles of Incorporation and any amendments thereto, and
the Holders shall have registration rights under the Securities Act of 1933, as amended (the "Act"), for the Warrants and the Shares, as more fully
described in Section 7 of this Agreement. 

        2.    Warrant Certificates.    The warrant certificates ("Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall be in the form set forth in the form of Warrant Certificate, 

16

 

attached
hereto and made a part hereof, with such appropriate insertions, omissions, substitutions, and other variations as required or permitted by this Agreement. 

        3.    Exercise of Warrant.    

        3.1    Full Exercise.    

        (a)   The
Holder may effect a cash exercise of the Warrants by surrendering to the Company the Warrant Certificate, together with a Subscription in the form of  Exhibit A attached thereto, duly executed by
such Holder, at any time prior to the Expiration Time, at the Company's principal office,
accompanied by payment in cash or by certified or official bank check payable to the order of the Company in the amount of the aggregate purchase price (the "Aggregate
Price"), subject to any adjustments provided for in this Agreement. The aggregate price hereunder for each Holder shall be equal to the Exercise Price multiplied by the number
of Shares that are the subject of each Holder's Warrant (as adjusted as hereinafter provided). 

        (b)   The
Holder may effect a cashless exercise of the Warrants by delivering the Warrant Certificate to the Company together with a Subscription in the form of  Exhibit B attached thereto, duly executed by
such Holder, in which case no payment of cash will be required. Upon such cashless exercise, the
number of Shares to be purchased by each Holder shall be determined by dividing: (i) the number obtained by multiplying the number of Shares that are the subject of each Holder's Warrant
Certificate by the amount, if any, by which the then Market Value (as hereinafter defined) exceeds the Purchase Price; by (ii) the then per share Market Value. In no event shall the Company be
obligated to issue any fractional securities and, at the time it causes a certificate or certificates to be issued, it shall pay the Holder in lieu of any fractional securities or shares to which such
Holder would otherwise be entitled, by the Company check, in an amount equal to such fraction multiplied by the Market Value. The "Market Value" shall
be determined on a per Share basis as of the close of the business day preceding the date of exercise, which determination shall be made as follows: (a) if the Common Stock is listed for
trading on a national or regional stock exchange or is included on the NASDAQ National Market or SmallCap Market, the average closing sale price quoted on such exchange or the NASDAQ National Market
or SmallCap Market which is published in The Wall Street Journal for the 10 trading days immediately preceding the date of exercise, or if no trade of the Common Stock shall have been reported during
such period, the last sale price so quoted for the next day prior thereto on which a trade in the Common Stock was so reported; or (b) if the Common Stock is not so listed, admitted to trading
or included, the average of the closing highest reported bid and lowest reported ask price as quoted on the National Association of Securities Dealer's OTC Bulletin Board or in the "Pink Sheets"
published by the National Daily Quotation Bureau for the first day immediately preceding the date of exercise on which the Common Stock is traded. 

        3.2    Partial Exercise.    The Warrants may also be exercised from time to time in part by surrendering the Warrant
Certificate in the manner specified in Section 3.1 hereof, except that with respect to a cash exercise, the Purchase Price payable shall be equal to the number of Shares being purchased
hereunder multiplied by the per Share Purchase Price, subject to any adjustments provided for in this Agreement. Upon any such partial exercise, the Company, at its expense, will forthwith issue to
the Holder a new Warrant Certificate or Warrants of like tenor calling in the aggregate for the number of securities (as constituted as of the date hereof) for which the Warrant Certificate shall not
have been exercised, issued in the name of the Holder or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct. 

        4.    Issuance of Certificates.    

        (a)   Upon
the exercise of the Warrants, the issuance of certificates for shares of Common Stock shall be made forthwith (and, in any event within three business days
thereafter) without charge to the Holder thereof including, without limitation, any tax which may be payable in respect of the issuance 

17

 

thereof,
and such certificates shall (subject to the provisions of Section 5 and Section 6 hereof) be issued in the name of, or in such names as may be directed by, the Holder thereof;
provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any such certificates in a name other
than that of the Holder and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. 

        (b)   The
Warrant Certificates and the certificates representing the shares of Common Stock shall be executed on behalf of the Company by manual or facsimile signature of the
then present Chairman or Vice Chairman of the Board of Directors or President or Vice President of the Company. Warrant Certificates shall be dated the date of execution by the Company upon initial
issuance, division, exchange, substitution or transfer. 

        5.    Restriction on Transfer of Warrants.    The Holder of a Warrant Certificate, by acceptance thereof, covenants
and agrees that the Warrants may not be sold, transferred, assigned, hypothecated or otherwise disposed of, in whole or in part, for a period of one year from the Date of the Public Offering, except
(a) to a NASD member firm that participated in the Public Offering and the bona fide officers or partners thereof; (b) by operation of law or (c) by reason of reorganization of
the Company. 

        6.    Registration Rights.    

        6.1    Registration Under the Securities Act of 1933.    The Warrants and the Shares (collectively the
"Registrable Securities") have not been registered under the Securities Act of 1933, as amended (the
"Act"). Upon exercise, in part or in whole, of the Warrants, certificates representing the Shares shall bear the following legend in the event there is
no current registration statement effective with the Commission at such time as to such securities: 

        The
securities represented by this certificate may not be offered or sold except pursuant to (i) an effective registration statement under the Securities Act of 1933, as amended,
(ii) to the extent applicable, Rule 144 under the Securities Act (or any similar rule under the Securities Act relating to the disposition of securities), or (iii) an opinion of
counsel, if such opinion shall be reasonably satisfactory to counsel to the issuer, that an exemption from registration under the Securities Act and applicable state securities laws is available. 

        6.2    Piggyback Registration.    

        (a)   If,
at any time commencing on the first anniversary of the Closing Date and expiring seven years after the Closing Date, the Company prepares and files a
post-effective amendment to the Registration Statement, or a new Registration Statement under the Act, or files a Notification on Form 1-A or otherwise registers
securities under the Act, or files a similar disclosure document with the Commission (each such filing, a "Registration Document") as to any of its
securities under the Act (other than under a Registration Statement pursuant to Form S-8 or Form S-4), it will give written notice by registered mail, at least
20 days prior to the filing of such Registration Document to the Underwriter and to all other Holders of the Registrable Securities of its intention to do so. The Company shall include all
Registrable Securities in such Registration Documents with respect to which the Company has received written requests for inclusion therein within 15 days of actual receipt of the Company's
notice. 

        (b)   No
Holder of Registrable Securities may participate in any registration hereunder which is underwritten unless such holder completes and executes all documents as are
reasonable and customary in such offerings. 

        (c)   The
Company shall have the right at any time after it shall have given written notice pursuant to this Section 6.2 (irrespective of whether a written request for
inclusion of any Registration Securities 

18

 

shall
have been made) to elect not to file any such Registration Document, or to withdraw the same after the filing but prior to the effective date thereof. 

        6.3    Demand Registrations.    

        (a)    Expenses to be Paid by the Company.    At any time commencing one year after the Closing Date until the
Expiration Time, Holders of Registrable Securities representing more than 50% of such securities at that time outstanding (a "Majority of Holders")
shall have the right (which right is in addition to the registration rights under Section 6.2 and Section 6.3(b) hereof), exercisable by written notice to the Company, to have the
Company prepare and file with the Commission, on one occasion, a registration statement and/or such other documents, including a prospectus, and/or any other appropriate disclosure document as may be
reasonably necessary in the opinion of both counsel for the Company and counsel for the Majority of Holders, in order to comply with the provisions of the Act, so as to permit a public offering and
sale of their respective Registrable Securities for 12 consecutive months (or such longer period of time as permitted by the Act) by such Majority of Holders and any other Holders of any of the
Registrable Securities who notify the Company within 20 days after receipt of notice by registered or certified mail from the Company of such request ("Demand
Registration"). A Demand Registration shall not be counted as a Demand Registration hereunder until such Demand Registration has been
declared effective by the Commission and maintained continuously effective for a period of at least 12 months or such shorter period when all Registrable Securities included therein have been
sold in accordance with such Demand Registration. The Company shall pay all costs (excluding transfer taxes, if any, and the Holders' pro-rata portions of the selling discount or
commissions), fees and expenses in connection with all registration statements filed pursuant to Section 6.2 and this Section 6.3(a) including, without limitation, the Company's legal
and accounting fees, printing expenses, blue sky fees and expenses and the fees and expenses of one legal counsel to the Holders, so chosen by the Holders. 

        (b)    Expenses to be Paid by the Holder(s).    At any time commencing one year after the Closing Date until the
Expiration Time, a Majority of Holders shall have the right (which right is in addition to the registration rights under Sections 6.2 and Section 6.3(a) hereof), exercisable by written notice
to the Company, to one Demand Registration. A Demand Registration shall not be counted as a Demand Registration hereunder until such Demand Registration has been declared effective by the Commission
and maintained continuously effective for a period of at least nine months or such shorter period when all Registrable Securities included therein have been sold in accordance with such Demand
Registration. The Holder(s) will pay all costs, fees and expenses in connection with any registration statement filed pursuant to Section this 6.3(b). 

        (c)   The
Company covenants and agrees to give written notice by registered or certified mail of any registration request under this Section 6.3 by the Majority of
Holders to all other registered Holders of any of the Registrable Securities within 10 days from the date of the receipt of any such registration request. 

        (d)   Any
written request by the Holders made pursuant to this Section 6.3 shall: 

          (i)  specify
the number of Registrable Securities which the Holders intend to offer and sell and the minimum price at which the Holders intend to offer and sell such
securities; 

         (ii)  state
the intention of the Holders to offer such securities for sale; 

        (iii)  describe
the intended method of distribution of such securities; and 

        (iv)  contain
an undertaking on the part of the Holders to provide all such information and materials concerning the Holders and take all such action as may be reasonably
required to permit the Company to comply with all applicable requirements of the Commission and to obtain acceleration of the effective date of the registration statement. 

19

 

        6.4    Covenants of The Company With Respect to Registration.    In connection with the filing of any Registration
Document by the Company, the Company covenants and agrees as follows: 

        (a)   The
Company shall use its best efforts to file a registration statement within 45 days of receipt of any Demand Registration pursuant to
Section 6.3, and shall use its best efforts to have any such registration statement declared effective at the earliest practicable time. The Company will promptly notify each Holder of such
Registrable Securities and confirm such advice in writing, (i) when such registration statement becomes effective, (ii) when any post-effective amendment to such registration
statement becomes effective and (iii) of any request by the Commission for any amendment or supplement to such registration statement or any prospectus relating thereto or for additional
information. 

        (b)   The
Company shall furnish to each Holder of such Registrable Securities such number of copies of such registration statement and of each such amendment and supplement
thereto (in each case including each preliminary prospectus and summary prospectus) in conformity with the requirements of the Act, and such other documents as the Holders may reasonably request in
order to facilitate the disposition of the Registrable Securities by such Holders. 

        (c)   If
the Company shall fail to comply with the provisions of Section 6.3(a), the Company shall, in addition to any other equitable or other relief available to the
Holder(s), be liable for any or all special and consequential damages sustained by the Holder(s) requesting registration of their Registrable Securities. 

        (d)   The
Company shall prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as
may be reasonably necessary to keep such registration statement effective for at least 12 months (or such longer period as permitted by the Act), and to comply with the provisions of the Act
with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the Holder or Holders of
Registrable Securities set forth in such registration statement. If at any time the Commission should institute or threaten to institute any proceedings for the purpose of issuing a stop order
suspending the effectiveness of any such registration statement, the Company will promptly notify each Holder of Registrable Securities and will use all reasonable efforts to prevent the issuance of
any such stop order or to obtain the withdrawal thereof as soon as possible. The Company will use its good faith reasonable efforts and take all reasonably necessary action which may be required in
qualifying or registering the Registrable Securities included in a registration statement for offering and sale under the securities or blue sky laws of such states as reasonably are required by the
Holder(s), provided that the Company shall not be obligated to execute or file any general consent to service of process or to qualify as a foreign corporation to do business under the laws of any
such jurisdiction. The Company shall use its good faith reasonable efforts to cause such Registrable Securities covered by such registration statement to be registered with or approved by such other
governmental agencies or authorities of the United States or any State thereof as may be reasonably necessary to enable the Holder(s) thereof to consummate the disposition of such Registrable
Securities. 

        (e)   The
Company shall indemnify the Holder(s) of the Registrable Securities to be sold pursuant to any registration statement and each person, if any, who controls such
Holders within the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against all loss, claim, damage, expense or liability (including all expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever)
to which any of them may become subject under the Act, the Exchange Act or otherwise, arising from such registration statement but only to the same extent and with the same effect as the provisions
pursuant to which the Company has agreed to indemnify the Underwriter as contained in the Underwriting Agreement. 

20

 

        (f)    If
requested by the Company prior to the filing of any registration statement covering the Registrable Securities, each of the Holder(s) of the Registrable Securities to
be sold pursuant to a registration statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company, its officers and directors and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against all loss, claim, damage or expense or liability (including all expenses
reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they may become subject under the Act, the Exchange Act or otherwise, arising from written
information furnished by such Holder, or their successors or assigns, for specific inclusion in such registration statement to the same extent and with the same effect as the provisions contained in
the Underwriting Agreement pursuant to which the Underwriters have agreed to indemnify the Company, except that the maximum amount which may be recovered from each Holder pursuant to this paragraph or
otherwise shall be limited to the amount of net proceeds received by the Holder from the sale of the Registrable Securities. 

        (g)   Nothing
contained in this Agreement shall be construed as requiring the Holder(s) to exercise their Warrants prior to the filing of any registration statement or the
effectiveness thereof. 

        (h)   The
Company shall not permit the inclusion of any securities other than the Registrable Securities to be included in any registration statement filed pursuant to
Section 6.3 hereof without the prior written consent of the Majority of Holders which consent will not be unreasonably withheld or delayed. 

        (i)    The
Company shall furnish to each Holder participating in an offering and to the managing underwriter, if any, a signed counterpart, addressed to such Holder or
underwriter, of (i) an opinion of counsel to the Company, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, an opinion
dated the date of the closing under the underwriting agreement), and (ii) a "Cold Comfort" letter dated the effective date of such registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing under the underwriting agreement) signed by the independent public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the
case of such accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters
delivered to underwriters in underwritten public offerings of securities. 

        (j)    The
Company shall deliver promptly to each Holder participating in an offering and to the managing underwriter, if any, copies of all correspondence between the
Commission and the Company, its counsel or auditors and all non-privileged memoranda relating to discussions with the Commission or its staff with respect to the registration statement and
permit each Holder and underwriter to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the NASD. Such investigation shall include access to books, records and properties and opportunities to discuss the business of the
Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times and as often as any such Holder shall reasonably request. 

        (k)   With
respect to a registration statement filed pursuant to Section 6.3, the Company, if requested, shall enter into an underwriting agreement with the managing
underwriter, reasonably satisfactory to the Company, selected for such underwriting by a Majority of Holders requested to be included in such underwriting. Such agreement shall be satisfactory in form
and substance to the Company, each Holder and such managing underwriter, and shall contain such representations, warranties and covenants by the Company and such other terms as are customarily
contained in 

21

 

agreements
of that type used by the managing underwriter. The Holders, if required by the underwriter to be parties to any underwriting agreement relating to an underwritten sale of their Registrable
Securities, may, at their option, require that any or all the representations, warranties and covenants of the Company to or for the benefit of such underwriters shall also be made to and for the
benefit of such Holders. Such Holders shall not be required to make any representations or warranties to or agreements with the Company or the underwriters except as they may relate to such Holders
and their intended methods of distribution. 

        (l)    Notwithstanding
the provisions of Section 6.2 or Section 6.3 of this Agreement, the Company shall not be required to effect or cause the registration of
Registrable Securities pursuant to Section 6.2 or Section 6.3 hereof if, within 30 days after its receipt of a request to register such Registrable Securities (i) counsel
for the Company delivers an opinion to the Holders and to the Company's transfer agent requesting registration of such Registrable Securities, in form and substance satisfactory to counsel to such
Holder(s), to the effect that the entire number of Registrable Securities proposed to be sold by such Holder(s) may otherwise be sold, in the manner proposed by such Holder(s), without registration
under the Securities Act, or (ii) the Commission shall have issued a no-action position, in form and substance satisfactory to counsel for the Holder(s) requesting registration of
such Registrable Securities, to the effect that the entire number of Registrable Securities proposed to be sold by such Holder(s) may be sold by it, in the manner proposed by such Holder(s), without
registration under the Securities Act; provided, however, if the Company's transfer agent does not permit the sale of the Registrable Securities upon request or for any other reason such sale is
delayed, the Company shall thereafter immediately register the Registrable Securities for sale under the Act. 

        (m)  After
completion of the Public Offering, the Company shall not, directly or indirectly, enter into any merger, business combination or consolidation in which
(i) the Company shall not be the surviving corporation and (ii) the shareholders of the Company are to receive, in whole or in part, capital stock or other securities of the surviving
corporation, unless the surviving corporation shall, prior to such merger, business combination or consolidation, agree in writing to assume the obligations of the Company under this Agreement, and
for that purpose references hereunder to "Registrable Securities" shall be deemed to include the securities which the Holders would be entitled to
receive in exchange for Registrable Securities under any such merger, business combination or consolidation, provided that to the extent such securities to be received are convertible into shares of
Common Stock of the issuer thereof, then any such shares of Common Stock as are issued or issuable upon conversion of said convertible securities shall also be included within the definition of
"Registrable Securities." 

        7.    Adjustments to Exercise Price and Number of Securities.    

        7.1    Adjustment for Dividends, Subdivisions, Combinations or Reclassifications.    

        (a)   In
case the Company shall (i) pay a dividend or make a distribution in shares of its capital stock (whether shares of Common Stock or of capital stock of any
other class), (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares,
or (iv) issue by reclassification of its shares of Common Stock any shares of capital stock of the Company; then, and in each such case, the per Share Exercise Price and the number of Shares in
effect immediately prior to such action shall be adjusted so that the Holder of this Warrant thereafter upon the exercise hereof shall be entitled to receive the number and kind of shares of the
Company which such Holder would have owned immediately following such action had this Warrant been exercised immediately prior thereto. An adjustment made pursuant to this Section 7.1 shall
become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination
or reclassification. If, as a result of an adjustment made pursuant to this section, the Holder of this Warrant shall become entitled to receive shares of two or more classes of capital stock of the
Company, the Board of Directors of the Company (whose 

22

 

determination
shall be conclusive) shall determine the allocation of the adjusted Exercise Price between or among shares of such class of capital stock. 

        (b)   Immediately
upon any adjustment of the Exercise Price pursuant to this section, the Company shall send written notice thereof to the Holder of Warrant Certificates (by
first class mail, postage prepaid), which notice shall state the Exercise Price resulting from such adjustment, and any increase or decrease in the number of Shares to be acquired upon exercise of the
Warrants, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. 

        7.2    Adjustment for Reorganization, Merger or Consolidation.    In case of any reorganization of the Company or
consolidation of the Company with, or merger of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger which does not result in any reclassification
or change of the outstanding Common Stock), the corporation formed by such consolidation or merger shall execute and deliver to the Holder a supplemental Warrant Agreement providing that the Holder of
each Warrant then outstanding or to be outstanding shall have the right thereafter (until the expiration of such Warrant) to receive, upon exercise of such warrant, the kind and amount of shares of
stock and other securities and property receivable upon such consolidation or merger, by a holder of the number of shares of Common Stock of the Company for which such warrant might have been
exercised immediately prior to such reorganization, consolidation, merger, conveyance, sale or transfer. Such supplemental Warrant Agreement shall provide for adjustments which shall be identical to
the adjustments provided in this Section 7 and such registration rights and other rights as provided in this Agreement. The Company shall not effect any such consolidation, merger, or similar
transaction as contemplated by this paragraph, unless prior to or simultaneously with the consummation thereof, the successor corporation (if other than the Company) resulting from such consolidation
or merger or the corporation purchasing, receiving, or leasing such assets or other appropriate corporation or entity shall assume, by written instrument executed and delivered to the Holders, the
obligation to
deliver to the Holders, such shares of stock, securities, or assets as, in accordance with the foregoing provisions, such holders may be entitled to purchase, and to perform the other obligations of
the Company under this Agreement. The above provision of this Section 7.2 shall similarly apply to successive consolidations or successively whenever any event listed above shall occur. 

        7.3    Dividends and Other Distributions.    In the event that the Company shall at any time prior to the exercise of
all of the Warrants distribute to its shareholders any assets, property, rights, evidences of indebtedness, securities (other than a distribution made as a cash dividend payable out of earnings or out
of any earned surplus legally available for dividends under the laws of the jurisdictions of incorporation of the Company), whether issued by the Company or by another, the Holders of the unexercised
Warrants shall thereafter be entitled, in addition to the shares of Common Stock or other securities and property receivable upon the exercise thereof, to receive, upon the exercise of such Warrants,
the same property, assets, rights, evidences of indebtedness, securities or any other thing of value that they would have been entitled to receive at the time of such distribution as if the Warrants
had been exercised immediately prior to such distribution. At the time of any such distribution, the Company shall make appropriate reserves to ensure the timely performance of the provisions of this
subsection or an adjustment to the Exercise Price, which shall be effective as of the day following the record date for such distribution. 

        7.4    Adjustment in Number of Securities.    Upon each adjustment of the Exercise Price pursuant to the provisions of
this Section 7, the number of securities issuable upon the exercise of each Warrant shall be adjusted to the nearest full amount by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of securities issuable upon exercise of the Warrants immediately prior to such adjustment and dividing the product so obtained by the adjusted
Exercise Price. 

23

 

        7.5    No Adjustment of Exercise Price in Certain Cases.    No adjustment of the Exercise Price shall be made if the
amount of said adjustment shall be less than $.01 per Share; provided, however, that in such case any adjustment that would otherwise be required then to be made shall be carried forward and shall be
made at the time of and together with the next subsequent adjustment which, together with any adjustment so carried forward, shall amount to at least $.01 per Share. 

        7.6    Accountant's Certificate of Adjustment.    In each case of an adjustment or readjustment of the Exercise Price
or the number of any securities issuable upon exercise of the Warrants, the Company, at its expense, shall cause independent certified public accountants of recognized standing selected by the Company
(who may be the independent certified public accountants then auditing the books of the Company) to compute such adjustment or readjustment in accordance herewith and prepare a certificate showing
such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to any Holder of the Warrants at the Holders' address as shown on the Company's books. The
certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based including, but not limited to, a statement of
(i) the
Exercise Price at the time in effect, and (ii) the number of additional or fewer securities and the type and amount, if any, of other property which at the time would be receivable upon
exercise of the Warrants. 

        8.    Exchange and Replacement of Warrant Certificates.    

        (a)   Each
Warrant Certificate is exchangeable without expense, upon the surrender thereof by the registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the right to purchase the same number of securities in such denominations as shall be designated by the Holder thereof at the
time of such surrender. 

        (b)   Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Warrant Certificate, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it, and reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of the
Warrants, if mutilated, the Company will make and deliver a new Warrant Certificate of like tenor, in lieu thereof. 

        9.    Elimination of Fractional Interest.    The Company shall not be required to issue certificates representing
fractions of shares of Common Stock upon the exercise of the Warrants, nor shall it be required to issue script or pay cash in lieu of fractional interests, it being the intent of the parties that all
fractional interests may be eliminated, at the Company's option, by rounding any fraction up to the nearest whole number of shares of Common Stock or other securities, properties or rights, or in lieu
thereof paying cash equal to such fractional interest multiplied by the Market Value of a share of Common Stock. 

        10.    Reservation, Validity and Listing.    The Company covenants and agrees that during the exercise period, the
Company shall at all times reserve and keep available out of its authorized shares of Common Stock, solely for the purpose of issuance upon the exercise of the Warrants, such number of shares of
Common Stock or other securities, properties or rights as shall be issuable upon the exercise under this Warrant Certificate. The Company covenants and agrees that, upon exercise of the Warrants, and
payment of the Exercise Price therefor, all shares of Common Stock and other securities issuable upon such exercise shall be duly authorized, validly issued, fully paid, non-assessable and
not subject to the preemptive rights of any shareholder. As long as the Warrants shall be outstanding, the Company shall use its best efforts to cause all shares of Common Stock issuable upon the
exercise of the Warrants to be listed and quoted (subject to official notice of issuance) on all securities exchanges and systems on which the Common Stock are then listed and/or quoted, including
Nasdaq and the American Stock Exchange. 

24

 

        11.    Notices to Warrant Holders.    Nothing contained in this Agreement shall be construed as conferring upon the
Holders of the Warrants the right to vote or to consent or to receive notice as a shareholder in respect of any meetings of shareholders for the election of directors or any other matter, or as having
any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of the Warrants and their exercise, any of the following events shall occur: 

        (a)   the
Company shall take a record of the holders of its shares of Common Stock for the purpose of entitling them to receive a dividend or distribution payable otherwise
than in cash, or a cash dividend or distribution payable otherwise than out of current or retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of
the Company; or 

        (b)   the
Company shall offer to all the holders of its Common Stock any additional shares of capital stock of the Company or securities convertible into or exchangeable for
shares of capital stock of the Company, or any option, right or warrant to subscribe therefor; or 

        (c)   a
dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or merger) or a sale of all or substantially all of its property,
assets and business as an entirety shall be proposed; 

        then,
in any one or more of said events, the Company shall give written notice of such event at least 15 days prior to the date fixed as a record date of the date of closing the
transfer books for the determination of the shareholders entitled to such dividend, distribution, convertible or exchangeable securities or subscription rights, or entitled to vote on such proposed
dissolution, liquidation, winding up or sale. Such notices shall specify such record date or the date of closing the transfer books, as the case may be. 

        12.    Notices.    All notices, requests, consents and other communications hereunder shall be in writing and shall be
deemed to have been duly given when sent by (i) facsimile; or (ii) delivered personally or by overnight courier or mailed by registered or certified mail, return receipt requested: 

        (a)   If
to the registered Holder of any of the Registrable Securities, to the address of such Holder as shown on the books of the Company. 

With
a copy to: 

Jeffrey
M. Knetsch, Esq.

Brownstein Hyatt & Farber, P.C.

410 Seventeenth Street, 22nd Floor

Denver, CO 80202-4437

Fax: (303) 223-1111 

        (b)   If
to the Company, to the address set forth below or to such other address as the Company may designate by notice to the Holders. 

Bruce
A. Stewart

Chief Financial Officer

JED Oil Inc.

2600, 500 – 4th Avenue S.W.

Calgary, Alberta, Canada

T2P 2V6

Fax: (403) 294-1197 

With
a copy to: 

Gary
A. Agron, Esq.

5445 DTC Parkway, Suite 520

Englewood, CO 80111

Fax: (303) 770-7257 

25

 

        13.    Entire Agreement: Modification.    This Agreement (and the Underwriting Agreement to the extent applicable)
contains the entire understanding between the parties hereto with respect to the subject matter hereof, and the terms and provisions of this Agreement may not be modified, waived or amended except in
a writing executed by the Company and a Majority of Holders. Notice of any modification, waiver or amendment shall be promptly provided to any Holder not consenting to such modification, waiver or
amendment. 

        14.    Successors.    All the covenants and provisions of this Agreement shall be binding upon and inure to the
benefit of the Company, the Holders and their respective successors and assigns hereunder. 

        15.    Termination.    This Agreement shall terminate at the earlier of (i) the public sale of all of the
Registrable Securities, or (ii) at the close of business on                        , 20    .
Notwithstanding the foregoing, the indemnification provisions of Section 6 shall survive
such termination. 

        16.    Governing Law; Submission to Jurisdiction.    This Agreement shall be governed by and construed in accordance
with the internal laws of the State of New York without regard to the conflicts of laws principles thereof. The parties hereto hereby irrevocably agree that any suit or proceeding arising directly
and/or indirectly pursuant to or under this Agreement, shall be brought solely in a federal or state court located in the City, County and State of New York. By its execution hereof, the parties
hereby covenant and irrevocably submit to the in personam jurisdiction of the federal and state courts located in the City, County and State of New York and agree that any process in any such action
may be served upon any of them personally, or by certified mail or registered mail upon them or their agent, return receipt requested, with the same full force and effect as if personally served upon
them in New York City. The parties hereto waive any claim that any such jurisdiction is not a convenient forum for any such suit or proceeding and any defense or lack of in personam jurisdiction with
respect thereto. In the event of any such action or proceeding, the party prevailing therein shall be entitled to payment from the other party hereto of its reasonable counsel fees and disbursements
in an amount judicially determined. 

        17.    Severability.    If any provision of this Agreement shall be held to be invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provision of this Agreement. 

        18.    Captions.    The caption headings of the sections of this Agreement are for convenience of reference only and
are not intended, nor should they be construed as, a part of this Agreement and shall be given no substantive effect. 

        19.    Benefits of This Agreement.    Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and the Underwriter and any other registered Holder(s) of the Warrant Certificates or Registrable Securities any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for the sole and exclusive benefit of the Company and the Underwriters and any other Holder(s) of the Warrant Certificates or Registrable Securities. 

        20.    Counterparts.    This Agreement may be executed in any number of counterparts and each of such counterparts
shall for all purposes be deemed to be an original, and such counterparts shall together constitute but one and the same instrument. 

26

 

        IN
WITNESS HEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. 

	 	 	JED OIL INC.
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	Name:	 	 
	 	 	 	 	

	 	 	Title:	 	 
	 	 	 	 	

	

 	
 	

GILFORD SECURITIES INCORPORATED
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	Name:	 	 
	 	 	 	 	

	 	 	Title:	 	 
	 	 	 	 	

27

 
 
 

JED OIL INC.    
    
    WARRANT CERTIFICATE    
    

        THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE
REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE. 

        THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO
HEREIN.

EXERCISABLE ON OR BEFORE  

5:30 P.M. EASTERN TIME ON                        , 200    

NO.
W-                                         
       Warrants 

        This
Warrant Certificate certifies that, or registered assigns, is the registered holder of Warrants of JED Oil Inc. (the
"Company"). Each Warrant permits the Holder hereof to purchase initially, at any time
from                        , 2004 ("Purchase
Date") until 5:30 p.m. Eastern Time on                        , 2009 ("Expiration Time"), one (1) share of the Company's
Common Stock at the initial exercise price, subject to adjustment in certain events (the "Exercise Price"), of $6.60 per share (120% of the public
offering price). 

        Any
exercise of Warrants shall be effected by surrender of this Warrant Certificate and payment of the Exercise Price at an office or agency of the Company, but subject to the conditions
set forth herein and in the Underwriter's Warrant Agreement dated as of                        , 2004, between the Company and
Gilford Securities Incorporated, as the same may be amended or modified from time
to time (the "Underwriter's Warrant Agreement"). Payment of the Exercise Price shall be made by certified check or official bank check in New York
Clearing House funds payable to the order of the Company in the event there is no cashless exercise pursuant to Section 3.1(b) of the Underwriter's Warrant Agreement. 

        No
Warrant may be exercised after the Expiration Time, at which time all Warrants evidenced hereby, unless exercised prior thereto, hereby shall thereafter be void. 

        The
Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants issued pursuant to the Underwriter's Warrant Agreement, which Underwriter's Warrant
Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation or rights, obligations, duties and immunities
thereunder of the
Company and the holders (the words "Holders" or "Holder" meaning the registered holders or registered
holder) of the Warrants. 

        The
Underwriter's Warrant Agreement provides that upon the occurrence of certain events, the Exercise Price and the type and/or number of the Company's securities issuable thereupon may,
subject to certain conditions, be adjusted. In such event, the Company will, at the request of the holder, issue a new Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants; provided, however, that the failure of the Company to issue such new Warrant Certificates shall not in any way change,
alter, or otherwise impair, the rights of the holder as set forth in the Underwriter's Warrant Agreement. 

28

 

        Upon
due presentment for registration or transfer of this Warrant Certificate at an office or agency of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and
evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided herein and in the Underwriter's
Warrant Agreement, without any charge except for any tax or other governmental charge imposed in connection with such transfer. 

        Upon
the exercise of less than all of the Warrants evidenced by this Certificate, the Company shall forthwith issue to the holder hereof a new Warrant Certificate representing such
number of unexercised Warrants. 

        The
Company may deem and treat the registered holder(s) hereof as the absolute owner(s) of this Warrant certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone), for the purpose of any exercise hereof, and of any distribution to the holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the
contrary. 

        All
terms used in this Warrant Certificate which are defined in the Underwriter's Warrant Agreement shall have the meanings assigned to them in the Underwriter's Warrant Agreement. 

        IN
WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed. 

	Dated as of                        , 2004	 	 	 	 
	

 	
 	

JED OIL INC.
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	Name:	 	 
	 	 	 	 	

	 	 	Title:	 	 
	 	 	 	 	

29

 
 
 

EXHIBIT A    
    
    FORM OF SUBSCRIPTION (CASH EXERCISE)    
    

(To
be signed only upon exercise of Warrant) 

TO:
JED Oil Inc.

2600, 500 – 4th Avenue S.W.

Calgary, Alberta, Canada

T2P 2V6 

        The
undersigned, the Holder of Warrant Certificate number                        (the "Warrant"), representing

                        Warrants of JED Oil Inc. (the "Company"), which
Warrant Certificate is being delivered herewith, hereby irrevocably elects to
exercise the purchase right provided by the Warrant Certificate for, and to purchase thereunder,                        Shares of
the Company, and herewith makes payment of $                        therefore, and
requests that the certificates for such securities be issued in the name of, and delivered to,                        , whose
address is                        , all in accordance with the Underwriter's Warrant
Agreement and the Warrant Certificate. 

Dated:

(Signature
must conform in all respects to name of Holder as specified on the face of the Warrant Certificate) 

Address  

Social Security Number or

Tax Identification Number 

30

 
 
 

EXHIBIT B    
    
    FORM OF SUBSCRIPTION (CASHLESS EXERCISE)    
    

TO:
JED Oil Inc.

2600, 500 – 4th Avenue S.W.

Calgary, Alberta, Canada

T2P 2V6 

        The
undersigned, the Holder of Warrant Certificate number                        (the "Warrant"), representing

                        Warrants of JED Oil Inc (the "Company"), which Warrant is
being delivered herewith, hereby irrevocably elects the cashless exercise of
the purchase right provided by the Underwriter's Warrant Agreement and the Warrant Certificate for, and to purchase thereunder, Shares of the Company in accordance with the formula provided at
Section 3.1(b) of the Underwriter's Warrant Agreement. The undersigned requests that the certificates for such Shares be issued in the name of, and delivered to,
                        , whose address
is                        , all in accordance with the Warrant Certificate. 

Dated: 

(Signature
must conform in all respects to name of Holder as specified on the face of the Warrant Certificate) 

Address  

Social Security Number or

Tax Identification Number 

 
 

FORM OF ASSIGNMENT    
    

(To
be exercised by the registered holder if such Holder desires to transfer the Warrant Certificate) 

        FOR
VALUE RECEIVED                        hereby sells, assigns and transfers unto: 

Print Name of Transferee  

Address  

City State Zip Code  

this Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and
appoint                        Attorney, to transfer the
within Warrant Certificate on the books of the within-named Company, with full power of substitution. 

	Dated: Signature:	 	 
	 	 	(Signature must conform in all respects to name of Holder as specified on the face of the Warrant Certificate)

Social
Security Number or Other Identifying Number of Assignee 

31

QuickLinks

UNDERWRITER'S WARRANT AGREEMENT

WITNESSETH

JED OIL INC. WARRANT CERTIFICATE

EXHIBIT A FORM OF SUBSCRIPTION (CASH EXERCISE)

EXHIBIT B FORM OF SUBSCRIPTION (CASHLESS EXERCISE)

FORM OF ASSIGNMENT

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