Document:

Exhibit
10.5

EXECUTION COPY

REPLACEMENT CAPITAL COVENANT, dated as of November 22, 2006 (this “Replacement
Capital Covenant”), by FINANCIAL SECURITY ASSURANCE HOLDINGS LTD., a New
York corporation (together with its successors and assigns, the “Corporation”),
in favor of and for the benefit of each Covered Debtholder (as defined below).

WHEREAS, on the date hereof, the Corporation is
issuing $300,000,000 aggregate principal amount of its Junior Subordinated
Debentures, Series 2006-1 (the “Debentures”);

WHEREAS, this Replacement Capital Covenant is the “replacement
capital covenant” described in the Offering Memorandum, dated November 17,
2006, relating to the Debentures (the “Offering Memorandum”);

WHEREAS, the Corporation is entering into and
disclosing the content of this Replacement Capital Covenant in the manner
provided below with the intent that the covenants provided for in this
Replacement Capital Covenant be enforceable by each Covered Debtholder and that
the Corporation be estopped from disregarding the covenants in this Replacement
Capital Covenant, in each case to the fullest extent permitted by applicable
law; and

WHEREAS, the Corporation acknowledges that reliance by
each Covered Debtholder upon the covenants in this Replacement Capital Covenant
is reasonable and foreseeable by the Corporation and that, were the Corporation
to disregard its covenants in this Replacement Capital Covenant, each Covered
Debtholder would have sustained an injury as a result of its reliance on such
covenants;

NOW, THEREFORE, the Corporation hereby covenants and
agrees as follows in favor of and for the benefit of each Covered Debtholder.

SECTION 1.           Definitions.  Capitalized terms used in this Replacement
Capital Covenant but not defined herein shall have the meanings set forth in
Schedule I hereto.

SECTION 2.           Limitations on Repayment,
Redemption, Repurchase and Defeasance of Debentures.  The Corporation hereby promises and covenants
to and for the benefit of each Covered Debtholder that the Corporation shall
not, and shall cause its Subsidiaries not to, repay, redeem, repurchase or
defease all or any part of the Debentures on or before the date that is twenty
years prior to the Final Repayment Date, unless the principal amount repaid or
defeased or the applicable redemption or repurchase price does not exceed the
sum of:

 

(a) the Applicable Percentage of the aggregate amount of net cash
proceeds received by the Corporation and its Subsidiaries since the most recent
Measurement Date from the sale of Common Stock and rights to acquire Common
Stock to Persons other than the Corporation and its Subsidiaries; plus

(b) 100% of the aggregate amount of net cash proceeds received by the
Corporation and its Subsidiaries since the most recent Measurement Date from
the sale of securities convertible into Common Stock, such as Mandatorily
Convertible Preferred Stock and Debt Exchangeable for Equity to Persons other
than the Corporation and its Subsidiaries; plus

(c) 100% of the aggregate amount of net cash proceeds received by the
Corporation and its Subsidiaries since the most recent Measurement Date from
the sale of Qualifying Capital Securities to Persons other than the Corporation
and its Subsidiaries.

SECTION 3.           Covered Debt.  (a) 
The Corporation represents and warrants that the Initial Covered Debt is
Eligible Debt.

(b)  On or during the 30-day
period immediately preceding any Redesignation Date with respect to the Covered
Debt then in effect, the Corporation shall identify the series of Eligible Debt
that will become the Covered Debt on and after such Redesignation Date in
accordance with the following procedures:

(i) the Corporation shall identify each series of its then outstanding
long-term indebtedness for money borrowed that is Eligible Debt;

(ii) if only one series of the Corporation’s then outstanding long-term
indebtedness for money borrowed is Eligible Debt, such series shall become the
Covered Debt commencing on the related Redesignation Date;

(iii) if the Corporation has more than one outstanding series of
long-term indebtedness for money borrowed that is Eligible Debt, then the
Corporation shall identify the series that has the latest occurring final
maturity date as of the date the Corporation is applying the procedures in this
Section 3(b) and such series shall become the Covered Debt on the next
Redesignation Date;

(iv) the series of outstanding long-term indebtedness for money
borrowed that is determined to be Covered Debt pursuant to clause (ii) or
(iii) of this Section 3(b) shall be the Covered Debt for purposes of this
Replacement Capital Covenant for the period commencing on the related
Redesignation Date and continuing to but not including the Redesignation 

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Date as of
which a new series of outstanding long-term indebtedness for money borrowed is
next determined to be the Covered Debt pursuant to the procedures set forth in
this Section 3(b); and

(v) in connection with such identification of a new series of Covered
Debt, the Corporation shall give the notice provided for in Section 3(c)
within the time frame provided for in such Section.

(c)  Notice.  In order to give effect to the intent of the
Corporation described in the third recital, the Corporation covenants that:

(i) simultaneously with the execution of this Replacement Capital
Covenant or as soon as practicable after the date hereof, it shall
(A) give notice to the Holders of the Initial Covered Debt, in the manner
provided in the indenture relating to the Initial Covered Debt, of this
Replacement Capital Covenant and the rights granted to such Holders hereunder
and (B) file a copy of this Replacement Capital Covenant with the
Commission as an Exhibit to a Form 8-K under the Securities Exchange Act;

(ii) so long as the Corporation is a reporting company under the
Securities Exchange Act, the Corporation will include in each annual report
filed with the Commission on Form 10-K under the Securities Exchange Act a
description of the covenant set forth in Section 2 and identify the series
of long-term indebtedness for money borrowed that is Covered Debt as of the date
such Form 10-K is filed with the Commission;

(iii) if a series of the Corporation’s long-term indebtedness for money
borrowed (A) becomes Covered Debt or (B) ceases to be Covered Debt,
give notice of such occurrence within 30 days to the holders of such
long-term indebtedness for money borrowed in the manner provided for in the
indenture, fiscal agency agreement or other instrument under which such
long-term indebtedness for money borrowed was issued and report such change in
the Corporation’s next quarterly report on Form 10-Q or annual report on
Form 10-K, as applicable;

(iv) if, and only if, the Corporation ceases to be a reporting company
under the Securities Exchange Act, post on its website the information
otherwise required to be included in Securities Exchange Act filings pursuant
to clauses (ii) and (iii) of this Section 3(c); and

(v) promptly upon request by any Holder of Covered Debt, provide such
Holder with an executed copy of this Replacement Capital Covenant.

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SECTION 4.           Termination, Amendment and Waiver.  (a) 
The obligations of the Corporation pursuant to this Replacement Capital
Covenant shall remain in full force and effect until the earliest date (the “Termination
Date”) to occur of:

(i) the date that is twenty years prior to the Final Repayment Date;

(ii) the date, if any, on which the Holders of a majority by principal
amount of the then effective series of Covered Debt consent or agree in writing
to the termination of this Replacement Capital Covenant and the obligations of
the Corporation hereunder; and

(iii) the date on which the Corporation ceases to have any series of
outstanding Eligible Senior Debt or Eligible Subordinated Debt (in each case
without giving effect to the rating requirement in clause (b) of the
definition of each such term).

From
and after the Termination Date, the obligations of the Corporation pursuant to
this Replacement Capital Covenant shall be of no further force and effect.

(b)  This Replacement Capital
Covenant may be amended or supplemented from time to time by a written
instrument signed by the Corporation with the consent of the Holders of at
least a majority by principal amount of the then effective series of Covered
Debt, provided that this Replacement Capital Covenant may be amended or
supplemented from time to time by a written instrument signed only by the
Corporation (and without the consent of the Holders of the then effective
series of Covered Debt):

(i) where such amendment is not adverse to such Holders and an officer
of the Corporation has delivered to the trustee for such series of Covered Debt
a written certification stating that, in his or her determination, such
amendment is not adverse to such Holders;

(ii) to impose additional restrictions on the types of securities
qualifying as Qualifying Capital Securities, and an officer of the Corporation
has delivered to the trustee for such series of Covered Debt a written
certification to that effect; or

(iii) to eliminate Common Stock, Mandatorily Convertible Preferred
Stock of the Corporation and Debt Exchangeable for Equity (but only to the
extent exchangeable for Common Stock) as securities the proceeds of which may
be included for purposes of the Replacement Capital Covenant if, in the case of
this clause (iii), to the extent that the Corporation is a publicly traded
company, the Corporation has been advised in writing by a nationally recognized
independent accounting firm that there is more than an insubstantial risk that
the failure to do so would result in a reduction in 

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the
Corporation’s earnings per share as calculated for financial reporting
purposes.

(c)  For purposes of
Sections 4(a) and 4(b), the Holders whose consent or agreement is required
to amend, supplement, or terminate the obligations of the Corporation under
this Replacement Capital Covenant shall be the Holders of the then effective
series of Covered Debt as of a record date established by the Corporation that
is not more than 30 days prior to the date on which the Corporation
proposes that such termination, amendment or supplement becomes effective.

SECTION 5.           Miscellaneous.  (a) 
This Replacement Capital Covenant shall be governed by and construed in
accordance with the laws of the State of New York.

(b)  This Replacement Capital
Covenant shall be binding upon the Corporation and its successors and assigns
and shall inure to the benefit of the Covered Debtholders as they exist from
time to time (it being understood and agreed by the Corporation that any Person
who is a Covered Debtholder at the time such Person acquires, holds or sells
Covered Debt shall retain its status as a Covered Debtholder for so long as the
series of long-term indebtedness for money borrowed owned by such Person is
Covered Debt and, if such Person initiates a claim or proceeding to enforce its
rights under this Replacement Capital Covenant after the Corporation has
violated its covenants in Section 2 and before the series of long-term
indebtedness for money borrowed held by such Person is no longer Covered Debt,
such Person’s rights under this Replacement Capital Covenant shall not
terminate by reason of such series of long-term indebtedness for money borrowed
no longer being Covered Debt).

(c)  All notices or other
communications required or permitted to be given hereunder shall be in writing
and shall be delivered by hand or sent by facsimile or sent, postage prepaid,
by registered, certified or express mail or recognized overnight courier
service and shall be deemed given when so delivered by hand or facsimile, or if
mailed, three days after mailing (one Business Day in the case of express mail
or overnight courier service), as follows:

Financial Security Assurance Holdings Ltd.

31 West 52nd Street

New York, New York, 10019

Phone: 
(212) 826 0100

Fax: 
(212) 857-0541

Attention: General Counsel

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IN WITNESS WHEREOF, the Corporation has caused this
Replacement Capital Covenant to be executed by its duly authorized officer, as
of the day and year first above written.

	
   

  	
  FINANCIAL SECURITY HOLDINGS LTD.,

  
	
   

  	
   

  
	
   

  	
   

  	
  by

  	
  /s/ Joseph Simon

  
	
   

  	
   

  	
   

  	
  Name: Joseph Simon

  
	
   

  	
   

  	
   

  	
  Title:   Chief Financial Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
  /s/ Bruce E. Stern

  
	
   

  	
   

  	
   

  	
  Name: Bruce E. Stern

  
	
   

  	
   

  	
   

  	
  Title:   Secretary

  

 

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SCHEDULE 1

Definitions

“Alternative Payment Mechanism” means, with
respect to any securities or combination of securities, either:

(a) provisions
in the related transaction documents substantially similar to the “Alternate
Payment Mechanism” as defined in the Indenture or Debentures, or

(b) provisions in
the related transaction documents requiring the Corporation to issue (or use
commercially reasonable efforts to issue) one or more types of APM Qualifying
Securities raising eligible proceeds at least equal to the deferred
Distributions on such securities and apply the proceeds to pay unpaid
Distributions on such securities, commencing on the earlier of (x) the first
Distribution Date after commencement of a deferral period on which the
Corporation pays current Distributions on such securities and (y) the fifth
anniversary of the commencement of such deferral period, and that in the case
of this clause (b):

(i)  define “eligible proceeds” to mean, for
purposes of such Alternative Payment Mechanism, the net proceeds (after
underwriters’ or placement agents’ fees, commissions or discounts and other
expenses relating to the issuance or sale of the relevant securities, where
applicable, and including the fair market value of property received by the
Corporation or any of its Subsidiaries as consideration for such securities)
that the Corporation has received during the 180 days prior to the related
Distribution Date from the issuance of APM Qualifying Securities, up to the
Preferred Cap (as defined in paragraph (iv)(B) of this definition) in the case
of APM Qualifying Securities that are Qualifying Non-Cumulative Perpetual
Preferred Stock;

(ii)  permit the Corporation to pay current
Distributions on any Distribution Date out of any source of funds but (x)
require the Corporation to pay deferred Distributions only out of eligible
proceeds and (y) prohibit the Corporation from paying deferred
Distributions out of any source of funds other than eligible proceeds;

(iii)  if deferral of Distributions continues for
more than one year, require the Corporation not to redeem or repurchase any
securities of the Corporation that on a bankruptcy or liquidation of the
Corporation rank pari  passu with or junior to such securities
until at least one year after all deferred Distributions have been paid;

(iv)  limit the obligation of the Corporation to
issue (or use commercially reasonable efforts to issue) APM Qualifying
Securities up to:

(A)  in the case of APM Qualifying Securities that
are Common Stock or rights to purchase Common Stock, an amount 

 

from the issuance thereof pursuant to the
Alternative Payment Mechanism (including at any point in time from all prior
issuances thereof pursuant to the Alternative Payment Mechanism) with respect
to deferred Distributions attributable to the first five years of any deferral
period equal to 2% of the product of the average of the current stock market
prices of the Common Stock on the ten consecutive trading days ending on the
fourth trading day immediately preceding the date of issuance multiplied by the
total number of issued and outstanding shares of Common Stock as of the date of
the Corporation’s most recent publicly available consolidated financial
statements (the “Common Cap”),
provided that (x) once the Corporation reaches the Common Cap, until the
Common Cap ceases to apply the Corporation will not be required to issue more
Common Stock or rights to purchase Common Stock under the Alternative Payment
Mechanism with respect to deferred Distributions attributable to the first five
years of a deferral period even if the amount referred to in this sub
clause (A) subsequently increases because of a subsequent increase in the
current market price of Common Stock or the number of outstanding shares of
Common Stock, and (y) the Common Cap shall cease to apply to such deferral
period by a date (as specified in the related transaction documents) which
shall be not later than the ninth anniversary of the commencement of such
deferral period; and

(B) in the
case of APM Qualifying Securities that are Qualifying Non-Cumulative Perpetual
Preferred Stock, an amount from the issuance
thereof pursuant to the related Alternative Payment Mechanism (including at any
point in time from all prior issuances thereof pursuant to such Alternative
Payment Mechanism) equal to 25% of the initial principal or stated amount of
the securities that are the subject of the related Alternative Payment
Mechanism (the “Preferred Cap”);

(v) provide that
in certain events of the Corporation’s bankruptcy, insolvency or receivership
prior to the redemption or repayment of such securities the holder of such
securities will have no claim for optionally deferred and unpaid interest that
has not been settled through the application of the Alternative Payment
Mechanism, to the extent the amount of such interest exceeds (x) if the
APM Qualifying Securities include only Common Stock or rights to acquire Common
Stock and do not include Qualifying Non-Cumulative Perpetual Preferred
Stock, 25% of the principal or stated amount of such securities then
outstanding and (y) if the APM Qualifying Securities include Qualifying
Non-Cumulative Perpetual Preferred Stock, two years of accumulated and
unpaid interest on such securities; provided, however, that if
the APM Qualifying Securities include Qualifying Non-Cumulative Perpetual
Preferred Stock 

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and, accordingly,
clause (y) applies, holders of such securities may have an additional
preferred equity claim in respect of accumulated and unpaid interest which is
in excess of two years of accumulated and unpaid interest on such securities
that is senior to the Corporation’s Common Stock and is or would be pari
passu with any Qualifying Non-Cumulative Preferred Stock up to the
amount equal to their pro  rata shares of any unused portion of
the Preferred Cap (as defined above); and

(vi) provide that
if at any time (A) the Corporation is required to issue shares of its
Common Stock, rights to purchase Common Stock or Qualifying Non-Cumulative
Perpetual Preferred Stock pursuant to the Alternative Payment Mechanism,
(B) the Corporation has attempted to issue shares of its Qualifying
Non-Cumulative Perpetual Preferred Stock but it has not raised sufficient “eligible
proceeds” through the sale of its Common Stock, rights to purchase Common Stock
and Qualifying Non-Cumulative Perpetual Preferred Stock to pay all deferred
interest and (C) the Corporation is a party to a contribution agreement
substantially similar to the Contribution Agreement, which is in full force and
effect, then the Corporation is required to (1) make a request under such
contribution agreement and (2) enforce such contribution agreement after
making such a request;

provided that:

(x)  the Corporation shall not be obligated to
issue (or use commercially reasonable efforts to issue) APM Qualifying
Securities for so long as a Company Market Disruption Event has occurred and is
continuing;

(y)  if, due to a Company Market Disruption Event
or otherwise, the Corporation is able to raise and apply some, but not all, of
the eligible proceeds necessary to pay all deferred Distributions on any
Distribution Date, the Corporation will apply any available eligible proceeds
to pay accrued and unpaid Distributions on the applicable Distribution Date in
chronological order subject to the Common Cap and Preferred Cap, as applicable;
and

(z)  if the Corporation has outstanding more than
one class or series of securities under which it is obligated to sell a type of
APM Qualifying Securities and apply some part of the proceeds to the payment of
deferred Distributions, then on any date and for any period the amount of net
proceeds received by the Corporation from those sales and available for payment
of deferred Distributions on such securities shall be applied to such
securities on a pro  rata
basis in proportion to the total amounts that are due on such securities.

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“APM Qualifying Securities” means, with respect
to an Alternative Payment Mechanism, one or more of the following (as
designated in the transaction documents for the Qualifying Capital Securities
that include an Alternative Payment Mechanism or Debt Exchangeable for Equity):

(a)  Common Stock;

(b)  rights to purchase Common Stock; or

(c)  Qualifying Non-Cumulative Perpetual Preferred
Stock;

provided
that if the APM Qualifying Securities for any Alternative Payment Mechanism
include both Common Stock and rights to purchase Common Stock, such Alternative
Payment Mechanism may permit, but need not require, the Corporation to issue
rights to purchase Common Stock.

“Applicable Percentage” means:

(a) 133.33% with respect to any repayment,
redemption, repurchase or defeasance on or prior to the date that is
50 years prior to the Final Repayment Date;

(b) 200.00% with respect to any repayment,
redemption, repurchase or defeasance after the date that is 50 years prior
to the Final Repayment Date and on or prior to the date that is 30 years
prior to the Final Repayment Date; and

(c) 400.00% with respect to any repayment,
redemption, repurchase or defeasance after the date that is 30 years prior
to the Final Repayment Date and prior to the date that is 20 years prior
to the Final Repayment Date.

“Business Day” means each day other than:

(a) a Saturday or Sunday; or

(b) a day on which banking institutions in The
City of New York are authorized or required by law or executive order to remain
closed or, on or after December 15, 2036, a day that is not a London
business day.  A “London business day” is
any day on which dealings in deposits in U.S. dollars are transacted in
the London interbank market.

“Commission” means the United States Securities
and Exchange Commission.

“Common Stock” means common stock of the
Corporation.

“Company Market Disruption Events” shall have
the meaning assigned to such term in the Indenture or the Debentures.

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“Contribution
Agreement” means the Contribution Agreement, dated as of November 22,
2006, between Dexia S.A. and the Corporation.

“Covered Debt” means:

(a) at the date of this Replacement Capital
Covenant and continuing to but not including the first Redesignation Date, the
Initial Covered Debt; and

(b) thereafter, commencing with each
Redesignation Date and continuing to but not including the next succeeding
Redesignation Date, the Eligible Debt identified pursuant to Section 3(b)
as the Covered Debt for such period.

“Covered Debtholder” means each Person (whether
a Holder or a beneficial owner holding through a participant in a clearing
agency) that buys, holds or sells long-term indebtedness for money borrowed of
the Corporation during the period that such long-term indebtedness for money borrowed
is Covered Debt.

“Debt Exchangeable for Equity” means a security
or combination of securities that:

(a)  gives the holder a
beneficial interest in (i) subordinated debt securities of the Corporation
that include a provision requiring the Corporation to issue (or use
commercially reasonable efforts to issue) one or more types of APM Qualifying
Securities raising proceeds at least equal to the deferred Distributions on
such subordinated debt securities commencing not later than two years after
initial issuance of such securities and that are the most junior subordinated
debt of the Corporation (or rank pari passu with the most junior subordinated debt of the
Corporation) and (ii) a fractional interest in a stock purchase contract
for a share of Qualifying Non-Cumulative Perpetual Preferred Stock of the
Corporation that ranks pari passu
with or junior to all other preferred stock of the Corporation;

(b)  provides that the investors directly or
indirectly grant to the Corporation a security interest in such subordinated
debt securities and their proceeds (including any substitute collateral
permitted under the transaction documents) to secure the investors’ direct or
indirect obligation to purchase such preferred stock of the Corporation
pursuant to such stock purchase contracts;

(c)  includes a remarketing feature pursuant to which the subordinated debt of the
Corporation is remarketed to new investors commencing not later than the first
Distribution Date that is at least five years after the date of issuance of the
security or earlier in the event of an early settlement event based on
(i) the capital ratios of the Corporation, or (ii) the dissolution of
the issuer of such Debt Exchangeable for Equity;

(d)  provides for the proceeds raised in the remarketing to be used
to purchase such preferred stock of the Corporation under the stock purchase
contracts and, if there has not been a successful remarketing by the first 

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Distribution Date
that is six years after the date of issuance of such securities, provides that
the stock purchase contracts will be settled by the Corporation foreclosing on
its subordinated debt securities or other collateral directly or indirectly
pledged by investors in the Debt Exchangeable for Equity;

(e)  includes a Replacement Capital Covenant that
will apply to such securities and to such preferred stock of the Corporation;
and

(f)  after the issuance of such preferred stock of
the Corporation, provides the holder of the security with a beneficial interest
in such preferred stock of the Corporation.

“Distribution Date” means, as to any securities
or combination of securities, the dates on which periodic Distributions on such
securities are scheduled to be made.

“Distribution Period” means, as to any
securities or combination of securities, each period from and including a
Distribution Date for such securities to but not including the next succeeding
Distribution Date for such securities.

“Distributions” means, as to a security or
combination of securities, dividends, interest payments or other income
distributions to the holders thereof that are not Subsidiaries of the
Corporation.

“Eligible Debt” means, at any time, Eligible
Subordinated Debt or, if no Eligible Subordinated Debt is then outstanding,
Eligible Senior Debt.

“Eligible Senior Debt” means, at any time in
respect of any issuer, each series of outstanding long-term indebtedness for
money borrowed of such issuer that:

(a) upon a bankruptcy, liquidation, dissolution
or winding up of the issuer, ranks most senior among the issuer’s then
outstanding classes of indebtedness for money borrowed;

(b) is then assigned a rating by at least one
NRSRO (provided that this clause (b) shall apply on a Redesignation
Date only if on such date the issuer has outstanding senior long-term indebtedness
for money borrowed that satisfies the requirements of clauses (a), (c) and
(d) that is then assigned a rating by at least one NRSRO);

(c) has an outstanding principal amount of not
less than $100,000,000, and;

(d) was issued through or with the assistance of
a commercial or investment banking firm or firms acting as underwriters,
initial purchasers or placement or distribution agents.

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For purposes of this
definition as applied to securities with a CUSIP number, each issuance of
long-term indebtedness for money borrowed that has (or, if such indebtedness is
held by a trust or other intermediate entity established directly or indirectly
by the issuer, the securities of such intermediate entity that have) a separate
CUSIP number shall be deemed to be a series of the issuer’s long-term
indebtedness for money borrowed that is separate from each other series of such
indebtedness.

“Eligible Subordinated Debt” means, at any time
in respect of any issuer, each series of the issuer’s then outstanding
long-term indebtedness for money borrowed that:

(a) upon a bankruptcy, liquidation, dissolution
or winding up of the issuer, ranks subordinate to the issuer’s then outstanding
series of indebtedness for money borrowed that ranks most senior;

(b) is then assigned a rating by at least one
NRSRO (provided that this clause (b) shall apply on a Redesignation Date
only if on such date the issuer has outstanding subordinated long-term
indebtedness for money borrowed that satisfies the requirements in
clauses (a), (c) and (d) that is then assigned a rating by at least one
NRSRO);

(c) has an outstanding principal amount of not
less than $100,000,000; and

(d) was issued through or with the assistance of
a commercial or investment banking firm or firms acting as underwriters,
initial purchasers or placement or distribution agents.

For purposes of this
definition as applied to securities with a CUSIP number, each issuance of
long-term indebtedness for money borrowed that has (or, if such indebtedness is
held by a trust or other intermediate entity established directly or indirectly
by the issuer, the securities of such intermediate entity that have) a separate
CUSIP number shall be deemed to be a series of the issuer’s long-term
indebtedness for money borrowed that is separate from each other series of such
indebtedness.

“Final Repayment Date” shall have the meaning
assigned to such term in the Indenture or the Debentures.

“Holder” means, as to the Covered Debt then in
effect, each holder of such Covered Debt as reflected on the securities
register maintained by or on behalf of the Corporation with respect to such
Covered Debt.

“Indenture” means the Indenture, dated as of
November 22, 2006, between the Corporation and the Indenture Trustee.

“Indenture Trustee” means The Bank of New York,
a New York corporation.

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“Initial Covered Debt” means the Corporation’s
5.60% Notes due July 15, 2103.

“Intent-Based Replacement Disclosure” means, as
to any security or combination of securities, that the issuer thereof has
publicly stated its intention, either in the prospectus or other offering
document under which such securities were initially offered for sale or in
filings with the Commission made by such issuer under the Securities Exchange
Act prior to or contemporaneously with the issuance of such securities, that
such issuer will repay, redeem or repurchase such securities only with the
proceeds of specified replacement capital securities that have terms and
provisions at the time of repayment, redemption or repurchase that are as or
more equity-like than the securities then being repaid, redeemed or
repurchased, raised within 180 days prior to the delivery of notice of such
repayment or redemption or the date of such repurchase.

“Mandatorily
Convertible Preferred Stock” means cumulative preferred stock with:

(a) no prepayment obligation on the part of the
issuer thereof, whether at the election of the holders or otherwise; and

(b) a requirement that such preferred stock
convert into common stock within three years from the date of its issuance at a
conversion ratio within a range established at the time of issuance of such
preferred stock.

“Mandatory Trigger Provision” means as to any
security or combination of securities, provisions in the terms thereof or of
the related transaction agreements that:

(a) require, or at its option in the case of
non-cumulative perpetual preferred stock permit, the issuer of such security or
combination of securities to make payment of Distributions on such securities
only pursuant to the issuance and sale of common stock or rights to purchase
common stock or Qualifying Non-Cumulative Perpetual Preferred Stock, within
either (i) one year of the failure of the issuer thereof to satisfy one or
more financial tests set forth in the terms of such securities or related
transaction agreements or (ii) two years of the failure of the issuer
thereof to satisfy one or more financial tests set forth in the terms of such
securities or related transaction agreements if the terms thereof or of the
related transaction agreements prohibit the issuer of such security or
combination of securities from repurchasing any of its common stock prior to
the date one year after the issuer applies the net proceeds of the sales of
common stock described in this clause (a) to pay such unpaid Distributions
in full, in the case of clause (i) or (ii) in an amount such that the
net proceeds of such sale are at least equal to the amount of unpaid
Distributions on such securities (including without limitation all deferred and
accumulated amounts), and in either case require the application of the net
proceeds of such sale to pay such unpaid Distributions; provided that:

(i) the amount of
Qualifying Non-Cumulative Perpetual Preferred Stock the net proceeds of which
the issuer may apply to pay such 

 8
 

 

Distributions pursuant to such provision may not exceed 25% of the
liquidation or principal amount of such securities; and

(ii) if the
Mandatory Trigger Provision requires such issuance and sale within one year of
such failure and the securities include an Optional Deferral Provision, such
Mandatory Trigger Provision need not limit the issuance of common stock or
rights to purchase common stock to a maximum of 2% of the issuer’s Market
Capitalization;

 (b) upon
any liquidation, dissolution, winding up, reorganization or in connection with
any insolvency, receivership or proceeding under any bankruptcy law with
respect to the issuer of such security or combination of securities, limit the
claim of the holders of such securities (other than non-cumulative perpetual
preferred stock) for Distributions that accumulate during a period in which the
issuer of such security or combination of securities fails to satisfy one or
more financial tests set forth in the terms of such securities or related
transaction agreements to (x) 25% of the principal amount of such
securities then outstanding in the case of securities not permitting the
issuance and sale pursuant to the provisions described in clause (a) above
of securities other than common stock or rights to acquire common stock or
(y) two years of accumulated and unpaid Distributions (including
compounded amounts thereon) in all other cases. 
No remedy other than Permitted Remedies will arise by the terms of such
securities or related transaction agreements in favor of the holders of such
securities as a result of the issuer’s failure to pay Distributions because of
the Mandatory Trigger Provision or as a result of the issuer’s exercise of its
right under an Optional Deferral Provision until Distributions have been
deferred for one or more Distribution Periods that total together at least ten
years; and

(c) require that if at any time (i) the
Corporation is required to issue shares of its Common Stock, rights to purchase
Common Stock or Qualifying Non-Cumulative Perpetual Preferred Stock pursuant to
the Mandatory Trigger Provision, (ii) the Corporation has attempted to
issue shares of its Qualifying Non-Cumulative Perpetual Preferred Stock but it
has not raised sufficient net proceeds through the sale of its Common Stock,
rights to purchase Common Stock and Qualifying Non-Cumulative Perpetual
Preferred Stock to pay all unpaid Distributions and (iii) the Corporation
is a party to a contribution agreement substantially similar to the
Contribution Agreement, which is in full force and effect, then the Corporation
is required to (a) make a request under such contribution agreement and
(b) enforce such contribution agreement after making such a request.

“Market Capitalization” means, with respect to
any Person, as of any date, an amount equal to the number of shares of common
stock of such Person outstanding on such date multiplied by the current market
price of one share of common stock of such Person on such date.

 9
 

 

“Measurement Date” means, with respect to any
repayment, redemption, repurchase or defeasance of Debentures, the later of:

(a) the date 180 days prior to delivery of
notice of such repayment, redemption or defeasance or the date of such
repurchase; and

(b) to the extent the Debentures remain
outstanding after December 15, 2036, the most recent date, if any, on
which a notice of repayment, redemption or defeasance was delivered in respect
of, or on which the Corporation repurchased, any Debentures.

“Non-Cumulative” means, with respect to any
securities, that the issuer thereof may elect not to make any number of
periodic Distributions without any remedy arising under the terms of the
securities or related agreements in favor of the holders, other than one or
more Permitted Remedies.  Securities that
include either:

(a) provisions requiring the issuer to issue
Non-Cumulative perpetual preferred stock and common stock or rights to purchase
common stock and apply the proceeds to pay unpaid Distributions pursuant to an
Alternative Payment Mechanism; or

(b) a Mandatory Trigger Provision

shall also be deemed to
be “Non-Cumulative” for all purposes of this Replacement Capital Covenant other
than the definition of “Qualifying Non-Cumulative Perpetual Preferred Stock”.

“NRSRO” means a nationally recognized
statistical rating organization within the meaning of
Rule 15c3-1(c)(2)(vi)(F) under the Securities Exchange Act.

“Optional Deferral Provision” means, as to any
securities, a provision in the terms thereof or of the related transaction
agreements to the following effect:

(a) the issuer of such securities may, in its sole
discretion, defer in whole or in part payment of Distributions on such
securities for one or more consecutive Distribution Periods of up to
five years or, if an event substantially similar to a Company Market
Disruption Event is continuing, ten years, without any remedy other than
Permitted Remedies and the obligation described in clause (b) below; and

(b) if the issuer of such securities has exhausted its
right to defer Distributions and no event substantially similar to a Company
Market Disruption Event is continuing, the issuer will be obligated to issue
common stock, rights to purchase common stock and/or Non-Cumulative perpetual
preferred stock in an amount such that the net proceeds of such sale equal or
exceed the amount of unpaid Distributions on such securities (including without
limitation all deferred

 10
 

 

and accumulated amounts)
and to apply the net proceeds of such sale to pay such unpaid Distributions in
full.

“Permitted Remedies” means, with respect to any
securities, one or more of the following remedies:

(a) rights in favor of the holders of such securities
permitting such holders to elect one or more directors of the issuer (including
any such rights required by the listing requirements of any stock or securities
exchange on which such securities may be listed or traded); and

(b) complete or partial prohibitions on the issuer
paying Distributions on or repurchasing common stock or other securities that
rank pari  passu with or junior as to Distributions to such
securities for so long as Distributions on such securities, including unpaid
Distributions, remain unpaid.

“Person” means any individual, corporation,
partnership, joint venture, trust, limited liability company or corporation,
unincorporated organization or government or any agency or political
subdivision thereof.

“Qualifying Capital Securities” means
securities (other than Common Stock, rights to acquire Common Stock and
securities convertible into Common Stock, such as Mandatorily Convertible
Preferred Stock and Debt Exchangeable for Equity) that, in the determination of
the Corporation’s board of directors, reasonably construing the definitions and
other terms of this Replacement Capital Covenant, meet one of the following
criteria:

(a) in connection with any repayment, redemption,
repurchase or defeasance of Debentures on or prior to the date that is 50 years
prior to the Final Repayment Date:

(i) securities
issued by the Corporation or its Subsidiaries that (A) rank pari  passu
with or junior to the Debentures upon the liquidation, dissolution or winding
up of the Corporation, (B) have terms that are substantially similar to
the terms of the Debentures and (C) are subject to a replacement capital
covenant substantially similar to this Replacement Capital Covenant or have a
Mandatory Trigger Provision and an Optional Deferral Provision and are subject
to Intent-Based Replacement Disclosure;

(ii) securities
issued by the Corporation or its Subsidiaries that (A) rank pari  passu
with or junior to the Debentures upon the liquidation, dissolution or winding
up of the Corporation, (B) are Non-Cumulative, (C) have no maturity
or a maturity of at least 60 years and (D) are subject to a
replacement capital covenant substantially similar to this Replacement Capital
Covenant or have a Mandatory Trigger Provision and are subject to Intent-Based
Replacement Disclosure; or

 11
 

 

(iii) securities
issued by the Corporation or its Subsidiaries that (A) rank pari  passu
or junior to other preferred stock of the issuer, (B) have no maturity or
a maturity of at least 40 years, (C) are subject to a replacement
capital covenant substantially similar to this Replacement Capital Covenant and
(D) have a Mandatory Trigger Provision and an Optional Deferral Provision;
or

(b) in connection with any repayment, redemption,
repurchase or defeasance of Debentures after the date that is 50 years
prior to the Final Repayment Date and on or prior to the date that is
30 years prior to the Final Repayment Date:

(i) all
securities described under clause (a) of this definition;

(ii) securities
issued by the Corporation or its Subsidiaries that (A) rank pari  passu
with or junior to the Debentures upon a liquidation, dissolution or winding up
of the Corporation, (B) have an Optional Deferral Provision or a Ten-Year
Optional Deferral Provision, (C) have no maturity or a maturity of at
least 60 years and (D) are subject to a replacement capital covenant
substantially similar to this Replacement Capital Covenant;

(iii) securities
issued by the Corporation or its Subsidiaries that (A) rank pari  passu
with or junior to the Debentures upon a liquidation, dissolution or winding up
of the Corporation, (B) are Non-Cumulative and (C) have no maturity
or a maturity of at least 60 years and are subject to Intent-Based Replacement
Disclosure;

(iv) securities
issued by the Corporation or its Subsidiaries that (A) rank pari  passu
with or junior to the Debentures upon a liquidation, dissolution or winding up
of the Corporation, (B) are Non-Cumulative, (C) have no maturity or a
maturity of at least 40 years and (D) are subject to a replacement
capital covenant substantially similar to this Replacement Capital Covenant or
have a Mandatory Trigger Provision and an Optional Deferral Provision and are
subject to Intent-Based Replacement Disclosure;

(v) securities
issued by the Corporation or its Subsidiaries that (A) would rank junior
to all of the senior and subordinated debt of the Corporation other than the
Debentures, (B) have a Mandatory Trigger Provision and an Optional
Deferral Provision and (C) have no maturity or a maturity of at least
60 years and are subject to Intent-Based Replacement Disclosure;

(vi) cumulative
preferred stock issued by the Corporation or its Subsidiaries that (A) has
no prepayment obligation on the part of the issuer thereof, whether at the
election of the holders or otherwise, and 

 12
 

 

(B) (1) has no maturity or a maturity of at least 60 years
and (2) is subject to a replacement capital covenant substantially similar
to this Replacement Capital Covenant; or

(vii) other
securities issued by the Corporation or its Subsidiaries that (A) rank
upon a liquidation, dissolution or winding up of the Corporation either
(1) pari  passu with or junior to the Debentures or (2) pari
passu with the claims of the Corporation’s trade creditors and junior to
all of the Corporation’s long-term indebtedness for money borrowed (other than
the Corporation’s long-term indebtedness for money borrowed from time to time
outstanding that by its terms ranks pari  passu with such
securities on a liquidation, dissolution or winding up of the Corporation); and
(B) either (1) have no maturity or a maturity of at least
40 years, are subject to Intent-Based Replacement Disclosure and have a
Mandatory Trigger Provision and an Optional Deferral Provision or (2) have
no maturity or a maturity of at least 25 years and are subject to a
replacement capital covenant substantially similar to this Replacement Capital
Covenant and have a Mandatory Trigger Provision and an Optional Deferral
Provision; or

(c) in connection with any repayment, redemption,
repurchase or defeasance of Debentures at any time after the date that is
30 years prior to the Final Repayment Date and prior to the date that is
20 years prior to the Final Repayment Date:

(i) all
securities described under clauses (a) or (b) of this definition;

(ii) preferred
stock issued by the Corporation that (A) has no maturity or a maturity of
at least 60 years and is subject to Intent-Based Replacement Disclosure
and (B) has an Optional Deferral Provision or a Ten-Year Optional Deferral
Provision;

(iii)  securities
issued by the Corporation or its Subsidiaries that (A) rank pari  passu
with or junior to the Debentures upon a liquidation, dissolution or winding up
of the Corporation, (B) either (1) have no maturity or a maturity of
at least 60 years and are subject to Intent-Based Replacement Disclosure
or (2) have no maturity or a maturity of at least 30 years and are
subject to a replacement capital covenant substantially similar to this
Replacement Capital Covenant and (C) have an Optional Deferral Provision
or a Ten-Year Optional Deferral Provision;

(iv) securities
issued by the Corporation or its Subsidiaries that (A) would rank junior
to all of the senior and subordinated debt of the Corporation other than the
Debentures, (B) have a Mandatory Trigger Provision and an Optional
Deferral Provision and (C) have no maturity or 

 13
 

 

a maturity of at least 30 years and are subject to Intent-Based
Replacement Disclosure; or

(v) cumulative
preferred stock issued by the Corporation or its Subsidiaries that either
(A) has no maturity or a maturity of at least 60 years and is subject
to Intent-Based Replacement Disclosure or (B) has a maturity of at least
40 years and is subject to a replacement capital covenant substantially
similar to this Replacement Capital Covenant.

“Qualifying Non-Cumulative Perpetual Preferred
Stock” means non-cumulative perpetual preferred stock of the Corporation or
its Subsidiaries that:

(a) has no
maturity date;

(b) contains no
remedies other than Permitted Remedies;

(c) (i) is subject
to Intent-Based Replacement Disclosure and has a provision providing for
mandatory deferral of interest if there is a breach of financial triggers or
(ii) is subject to a replacement capital covenant substantially similar to
this Replacement Capital Covenant; and

(d) ranks pari
passu with or junior to the Debentures upon a liquidation, dissolution
or winding up of the Corporation.

“Redesignation Date” means, as to the Covered
Debt in effect at any time, the earliest of:

(a) the date that is two years prior to the final
maturity date of such Covered Debt;

(b) if the Corporation elects to repay or redeem,
or the Corporation or a Subsidiary of the Corporation elects to repurchase,
such Covered Debt either in whole or in part with the consequence that after
giving effect to such repayment or redemption or repurchase the outstanding
principal amount of such Covered Debt is less than $100,000,000, the applicable
redemption or repurchase date; and

(c) if such Covered Debt is not Eligible
Subordinated Debt, the date on which the Corporation issues long-term
indebtedness for money borrowed that is Eligible Subordinated Debt.

“Securities Exchange Act” means the Securities
Exchange Act of 1934, as amended.

“Subsidiary” means, at any time, any Person the
shares of stock or other ownership interests of which having ordinary voting
power to elect a majority of the board of directors or other managers of such
Person are at the time owned, or the management or policies of which are
otherwise at the time controlled, directly or

 14
 

 

indirectly through one or
more intermediaries (including other Subsidiaries) or both, by another Person.

“Ten-Year Optional Deferral Provision” means,
as to any securities, a provision in the terms thereof or of the related
transaction agreements to the effect that the issuer of such securities may, in
its sole discretion, defer in whole or in part payment of Distributions on such
securities for one or more consecutive Distribution Periods of up to ten years
without any remedy other than Permitted Remedies.

 15Exhibit 10.1

 

AMENDMENT
NO. 1 TO AMENDED AND RESTATED

REVOLVING CREDIT AGREEMENT

Dated as of November 21,
2006

THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED REVOLVING
CREDIT AGREEMENT (“Amendment No. 1”) is by and among FIRST COMMUNITY BANCORP, a corporation
formed under the laws of the State of California (“Borrower”), and U.S. BANK NATIONAL ASSOCIATION, a national
banking association (“Lender”), with a banking office at 777 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202, and it amends and supplements that
certain Amended and Restated Revolving Credit Agreement, dated as of August 3,
2006 (as amended to date, and as it may be further amended, restated or  otherwise modified from time to time, the “Credit
Agreement”), by and between Borrower and Lender.

RECITAL

The parties
desire to amend and supplement the Credit Agreement as provided below.

AGREEMENTS

In consideration of the Recital, the promises and
agreements set forth in the Credit Agreement, as amended hereby, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:

1.             Definitions
and References.  Capitalized terms
not otherwise defined herein have the meanings assigned in the Credit
Agreement.  All references to the Credit
Agreement contained in the Note, the Pledge Agreement and the other agreements,
documents and instruments referred to in the Credit Agreement shall, upon
fulfillment of the conditions specified in section 3 below, mean the
Credit Agreement as amended by this Amendment No. 1.

2.             Amendments.  The Credit Agreement is amended as follows:

(a)           Section
2.1(a)(ii)(B) of the Credit Agreement is amended by deleting the percent “one
and one-half percent (+1.50%)” therein and inserting the amount “nine
hundredths of a percent (+0.90%)” in its place.

(b)           Section
2.1(a)(iii)(B) of the Credit Agreement is amended by deleting the percent “one
and one-half percent (+1.50%)” therein and inserting the amount “one and
one-quarter percent (+1.25%)” in its place.

(c)           Section 4.15 of the Credit Agreement
is amended by deleting “Pacific Western National Bank” therein and inserting “Pacific
Western Bank” in its place.

 

 

(d)           Section
5.11 of the Credit Agreement is amended by deleting “Pacific Western National
Bank” therein and inserting “Pacific Western Bank” in its place.

(e)           Section
7.1(e) of the Credit Agreement is amended by deleting “Pacific Western National
Bank” therein and inserting “Pacific Western Bank” in its place.

3.             Effectiveness
of the Amendment.  This Amendment No.
1 shall become effective upon execution and delivery hereof by the parties and
receipt by the Lender of:

(a)           an
amendment to the Pledge Agreement, duly executed by Borrower and Lender;

(b)           the
original stock certificates evidencing the Pledged Shares; and

(c)           stock
power, duly executed in the blank.

4.             Limited
Waiver.  Notwithstanding anything
contained in the Credit Agreement to the contrary, Lender consents to (a) the
conversion of Pacific Western Bank from a nationally chartered bank to a
California state chartered bank under the name of “Pacific Western Bank”, (b)
the withdrawal (and filing of notice with the Federal Reserve Bank of San
Francisco) by Pacific Western Bank from the Federal Reserve System and becoming
a “nonmember” bank, (c) the acquisition by Borrower of Community Bancorp, (d)
the merger of Community National Bank into First National Bank, and (e) the
merger of First National Bank into Pacific Western Bank.  Borrower agrees that except as set forth in
the previous sentence, nothing contained herein shall be construed by Borrower
as a waiver by Lender of Borrower’s compliance with each representation,
warranty or covenant contained in the Credit Agreement and that no waiver of
any provision of the Credit Agreement by Lender has occurred.  Borrower further agrees that, except as set
forth in the first sentence of this Section 4, nothing contained herein shall
impair the right of Lender to require strict performance by Borrower of the
Credit Agreement.

5.             Representations
and Warranties.  Borrower represents
and warrants to Lender that:

(a)           The execution and
delivery of this Amendment No. 1 (a) is within its corporate powers, (b) has
been duly authorized by all proper corporate action, (c) has received any and
all necessary governmental approvals; and (d) does not and will not contravene
or conflict with any provision of law or charter or by-laws of Borrower or any
agreement affecting Borrower or its property. 
This Amendment No. 1 when executed and delivered will be, legal, valid
and binding obligations of Borrower, enforceable against Borrower in accordance
with its terms.

(b)           The
representations and warranties contained in the Credit Agreement are correct
and complete as of the date of this Amendment No. 1, and no condition or event
exists or act has occurred that, with or without the giving of notice or the
passage of time, would constitute an Unmatured Event of Default or Event of
Default under the Credit Agreement.

 2
 

 

 

6.             Miscellaneous.

(a)           Expenses
and Fees. Borrower agrees to pay on demand all out-of-pocket costs and
expenses paid or incurred by Lender in connection with the negotiation,
preparation, execution and delivery of this Amendment No. 1, and all amendments,
forms, certificates agreements, documents and instruments related hereto and
thereto, including the reasonable fees and expenses of Lender’s counsel.

(b)           Amendments
and Waivers.  This Amendment No. 1
may not be changed or amended orally, and no waiver hereunder may be oral, but
any change or amendment hereto or any waiver hereunder must be in writing and
signed by the party or parties against whom such change, amendment or waiver is
sought to be enforced.

(c)           Headings. 
The headings in this Amendment No. 1 are intended solely for convenience
of reference and shall be given no effect in the construction or interpretation
of this Amendment No. 1.

(d)           Affirmation. 
Each party hereto affirms and acknowledges that the Credit Agreement
as amended by this Amendment No. 1 remains in full force and effect in
accordance with its terms.

(e)           Counterparts.  This Amendment No. 1 may be executed in one
or more counterparts, each of which shall constitute an original, but all of
which when taken together shall constitute but one and the same instrument.

[remainder of page intentionally left blank; signature page follows]

 

 3

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to Amended and Restated Revolving Credit Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.

	
  

  	
  FIRST COMMUNITY BANCORP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Victor R.
  Santoro

  	
   

  
	
   

  	
   

  	
  Victor R.
  Santoro, Executive Vice President

  
	
   

  	
   

  	
  and Chief
  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  Address for notices:

  
	
   

  	
   

  
	
   

  	
  10250 Constellation Blvd., Suite 1640

  
	
   

  	
  Los Angeles, CA 90067

  
	
   

  	
  Attention:  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  U.S. BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jon B. Beggs

  	
   

  
	
   

  	
   

  	
  Jon B. Beggs, Vice President

  

 

 

Signature Page to Amendment
No. 1 to Amended and Restated Revolving Credit Agreement

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