Document:

Exhibit
4.4.2

AMENDMENT
NO. 2

TO

STOCKHOLDERS
AGREEMENT

 

This AMENDMENT NO. 2, dated
as of June 16, 2006 (this “Amendment No. 2”), to the STOCKHOLDERS
AGREEMENT, dated as of September 30, 2004 (as amended, the “Stockholders
Agreement”), is among ACA Capital Holdings, Inc., a Delaware corporation
(the “Company”) and the stockholders of the Company listed on the
signature pages hereto.

 

WHEREAS, the Company has
determined that it is in the best interests of the Company and its stockholders
to register shares of its Common Stock with the Securities and Exchange
Commission pursuant to a registration statement on Form S-1 (File No.
333-133949) and list its shares of Common Stock for trading on the New York
Stock Exchange;

 

WHEREAS, the Company expects
to offer its Common Stock for sale to the public in an initial public offering
pursuant to a registration statement on Form S-1 filed with the Securities and
Exchange Commission (an “Initial Public Offering”);

 

WHEREAS, the Company and the
parties hereto wish to amend the Stockholders Agreement in compliance with the
Securities and Exchange Act of 1934 and the rules and regulations promulgated
thereunder (as amended, the “Exchange Act”) and the New York Stock
Exchange Listing Requirements (the “NYSE Rules”) in anticipation of such
registration;

 

WHEREAS, pursuant to Section
12 of the Stockholders Agreement, the Stockholders Agreement may be amended if
the amendment is approved in writing by the Company, the holders of at least a
majority of the Stockholder Shares (voting together as a single class, on an
as-converted basis) and the holders of a majority of the Series B Preferred
Stock;

 

NOW THEREFORE, in
consideration of the mutual covenants contained herein, and other good and
valuable consideration, the parties agree as follows:

 

1.             Amendment.

 

                (a)           The
Stockholders Agreement is hereby amended to add a new Section 25 to read as
follows:

 

“25. Compliance with
Listing Requirements. Nothing herein shall be construed so as to negate
compliance with the Act, the Securities and Exchange Act of 1934 and the rules
and regulations promulgated thereunder (as amended, the “Exchange Act”)
or the rules and regulations of any exchange on which the Common Stock is then
traded (the “Listing Requirements”). In the event of one or more conflicting
requirements between the Stockholders Agreement and one or more of the Act, the
Exchange Act or the Listing Requirements, the conflicting portion of the
Stockholders Agreement shall be superseded. All non-conflicting covenants,
agreements, representations, warranties, promises or other terms and conditions
of the Stockholders Agreement shall remain in full force and effect according
to 

 

 

 

their terms without any
change whatsoever.”

 

                2.             Governing Law.

 

                This Amendment No. 2 shall be
governed in all respects by the laws of the State of Delaware, without
reference to the conflict of laws principles thereof.

 

3.             Miscellaneous.

 

(a)           Defined Terms. 
Capitalized terms not defined in this Amendment No. 2 shall have the
meanings given to them in the Stockholders Agreement.

 

(b)           Survival of Other Provisions.  All of the other covenants, agreements,
representations, warranties, promises or other terms and conditions of the
Stockholders Agreement shall remain in full force and effect according to their
terms without any change whatsoever.

 

(c)           Entire Agreement. 
This Amendment No. 2 constitutes the full and entire understanding and
agreement of the parties with respect to the subject matter hereof, and there
are no further or other agreements or undertakings, written or oral, in effect
between the parties relating to the subject matter hereof unless expressly
referred to in this Amendment No. 2.

 

(d)           Execution in Counterparts. 
This Amendment No. 2 may be executed in any number of counterparts and
in separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument.

 

 

 

[Remainder of Page
Intentionally Left Blank; Signature Page Follows]

 

 

 

IN WITNESS WHEREOF, the
parties hereto have caused this Amendment No. 2 to be duly executed as of the
date first written above.

 

 

	
   

  	
  ACA CAPITAL HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: Nora J. Dahlman

  
	
   

  	
   

  	
  Title: General Counsel
  & Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
  Stockholder

  	
  Shares
  of Capital Stock of the Company Owned

  
	
   

  	
   

  
	
  BSMB/ACA LLC

  	
   

  
	
   

  	
   

  
	
   

  	
  Series B Senior Convertible Preferred—

  
	
  By:

  	
  Bear Stearns Merchant
  Manager II, LLC,

  	
  1,685,663.8305

  
	
  its Manager

  	
   

  
	
   

  	
  By:

  	
  JDH Management, LLC, its

  	
   

  
	
   

  	
  Manager

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name: David E. King

  	
   

  	
   

  
	
   

  	
  Title: Senior Managing Director

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  THE STEPHENS GROUP, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Common—237,623.8

  
	
   

  	
   

  	
   

  	
  Convertible Preference—273.4

  
	
  By: 

  	
   

  	
   

  	
  Senior Convertible Preferred—25.8 

  
	
   

  	
  Name: Warren A. Stephens

  	
   

  	
  Series B Senior Convertible Preferred—

  
	
   

  	
  Title: President and CEO

  	
   

  	
  267,565.6819

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  THIRD AVENUE TRUST ON
  BEHALF OF

  	
   

  
	
  THE THIRD AVENUE VALUE
  FUND 

  	
   

  
	
  SERIES

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Common—118,811.9

  
	
   

  	
   

  	
   

  	
  Convertible
  Preference—258.7

  
	
  By:

  	
   

  	
   

  	
  Senior Convertible
  Preferred—103.4

  
	
   

  	
  Name: David M. Barse 

  	
   

  	
  Series B Senior
  Convertible Preferred—

  
	
   

  	
  Title: Chief Executive Officer

  	
   

  	
  133,782.8436

  

 

 

 

 

	
  THIRD AVENUE TRUST ON
  BEHALF OF 

  	
   

  
	
  THE THIRD AVENUE SMALL-CAP  

  	
  Common—118,811.9

  
	
  VALUE FUND SERIES

  	
   

  	
  Convertible
  Preference—258.7

  
	
   

  	
   

  	
   

  	
  Senior Convertible
  Preferred—103.4

  
	
   

  	
   

  	
   

  	
  Series B Senior Convertible
  Preferred—

  
	
  By:

  	
   

  	
   

  	
  133,782.8436

  
	
   

  	
  Name: David M. Barse 

  	
   

  	
   

  
	
   

  	
  Title: Chief Executive Officer

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  CHESTNUT HILL ACA, LLC

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Common—237,623.8 

  
	
   

  	
   

  	
   

  	
  Convertible
  Preference—163.5

  
	
  By:

  	
   

  	
   

  	
  Senior Convertible
  Preferred—103.4

  
	
   

  	
  Name: John Berylson 

  	
   

  	
  Series B Senior
  Convertible Preferred—

  
	
   

  	
  Title: 

  	
   

  	
  267,565.6983Exhibit
10.1

 

EXECUTION
COPY

 

 

 

$75,000,000

 

CREDIT AGREEMENT

 

among

 

ACA CAPITAL HOLDINGS, INC.

 

as Borrower,

 

The Several Lenders from Time to Time Parties
Hereto,

 

J.P. MORGAN SECURITIES INC., as Arranger and

 

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

 

Dated as of May 1, 2006

 

 

 

 

Table of Contents

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I

  	
   

  
	
   

  	
   

  
	
  Definitions

  	
   

  
	
  SECTION 1.01.   Defined Terms

  	
  1

  
	
  SECTION 1.02.   Classification of Loans and Borrowings

  	
  16

  
	
  SECTION 1.03.   Terms Generally

  	
  16

  
	
  SECTION 1.04.   Accounting Terms; Changes in GAAP

  	
  17

  
	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
   

  	
   

  
	
  The Credits

  	
   

  
	
   

  	
   

  
	
  SECTION 2.01.   Commitments

  	
  17

  
	
  SECTION 2.02.   Loans and Borrowings

  	
  17

  
	
  SECTION 2.03.   Requests for Revolving Borrowings

  	
  19

  
	
  SECTION 2.04.   Competitive Bid Procedure

  	
  19

  
	
  SECTION 2.05.   Swingline Loans

  	
  21

  
	
  SECTION 2.06.   Funding of Borrowings

  	
  23

  
	
  SECTION 2.07.   Interest Elections

  	
  23

  
	
  SECTION 2.08.   Termination and Reduction of Commitments

  	
  24

  
	
  SECTION 2.09.   Repayment of Loans; Evidence of Debt

  	
  25

  
	
  SECTION 2.10.   Prepayment of Loans

  	
  26

  
	
  SECTION 2.11.   Fees

  	
  26

  
	
  SECTION 2.12.   Interest

  	
  27

  
	
  SECTION 2.13.   Alternate Rate of Interest

  	
  28

  
	
  SECTION 2.14.   Increased Costs

  	
  28

  
	
  SECTION 2.15.   Break Funding Payments

  	
  29

  
	
  SECTION 2.16.   Taxes

  	
  30

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

  	
  32

  
	
  SECTION 2.18.   Mitigation Obligations; Replacement of
  Lenders

  	
  33

  
	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
   

  	
   

  
	
  Representations and Warranties

  	
   

  
	
   

  	
   

  
	
  SECTION 3.01.   Organization; Powers

  	
  34

  
	
  SECTION 3.02.   Authorization; Enforceability

  	
  34

  
	
  SECTION 3.03.   Governmental Approvals; No Conflicts

  	
  34

  

 

i

 

	
  SECTION 3.04.   Federal Regulations

  	
  34

  
	
  SECTION 3.05.   Financial Condition; No Material Adverse
  Change

  	
  35

  
	
  SECTION 3.06.   Properties

  	
  35

  
	
  SECTION 3.07.   Litigation and Environmental Matters

  	
  35

  
	
  SECTION 3.08.   Compliance with Laws and Agreements

  	
  35

  
	
  SECTION 3.09.   Significant Subsidiaries

  	
  36

  
	
  SECTION 3.10.   Investment and Holding Company Status,
  Other Regulations

  	
  36

  
	
  SECTION 3.11.   Taxes

  	
  36

  
	
  SECTION 3.12.   ERISA

  	
  36

  
	
  SECTION 3.13.   Use of Proceeds

  	
  36

  
	
  SECTION 3.14.   No Default

  	
  36

  
	
  SECTION 3.15.   Disclosure

  	
  36

  
	
  SECTION 3.16.   Insurance Licenses

  	
  37

  
	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
   

  	
   

  
	
  Conditions

  	
   

  
	
   

  	
   

  
	
  SECTION 4.01.   Effective Date

  	
  37

  
	
  SECTION 4.02.   Each Credit Event

  	
  38

  
	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
   

  	
   

  
	
  Affirmative Covenants

  	
   

  
	
   

  	
   

  
	
  SECTION 5.01.   Financial Statements; Ratings Change and
  Other Information

  	
  39

  
	
  SECTION 5.02.   Notices of Material Events

  	
  40

  
	
  SECTION 5.03.   Existence; Conduct of Business

  	
  41

  
	
  SECTION 5.04.   Payment of Obligations

  	
  41

  
	
  SECTION 5.05.   Maintenance of Properties; Insurance

  	
  41

  
	
  SECTION 5.06.   Books and Records; Inspection Rights

  	
  42

  
	
  SECTION 5.07.   Compliance with Laws

  	
  42

  
	
  SECTION 5.08.   Compliance with Investment Guidelines

  	
  42

  
	
  SECTION 5.09.   Intentionally Omitted

  	
  42

  
	
  SECTION 5.10.   Financial Strength Rating

  	
  42

  
	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
   

  	
   

  
	
  Negative Covenants

  	
   

  
	
   

  	
   

  
	
  SECTION 6.01.   Indebtedness

  	
  43

  
	
  SECTION 6.02.   Liens

  	
  44

  

 

ii

 

	
  SECTION 6.03.   Fundamental Changes; Sales of Assets

  	
  45

  
	
  SECTION 6.04.   Restricted Payments

  	
  46

  
	
  SECTION 6.05.   Transactions with Affiliates

  	
  47

  
	
  SECTION 6.06.   Financial Covenants

  	
  47

  
	
  SECTION 6.07.   Fiscal Year

  	
  47

  
	
   

  	
   

  
	
  ARTICLE VII

  	
   

  
	
   

  	
   

  
	
  Events of Default

  	
   

  
	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  
	
   

  	
   

  
	
  The Administrative Agent

  	
   

  
	
   

  	
   

  
	
  ARTICLE IX

  	
   

  
	
   

  	
   

  
	
  Miscellaneous

  	
   

  
	
   

  	
   

  
	
  SECTION 9.01.   Notices

  	
  52

  
	
  SECTION 9.02.   Waivers; Amendments

  	
  53

  
	
  SECTION 9.03.   Expenses; Indemnity; Damage Waiver

  	
  54

  
	
  SECTION 9.04.   Successors and Assigns

  	
  55

  
	
  SECTION 9.05.   Survival

  	
  58

  
	
  SECTION 9.06.   Counterparts; Integration; Effectiveness

  	
  58

  
	
  SECTION 9.07.   Severability

  	
  58

  
	
  SECTION 9.08.   Right of Setoff

  	
  58

  
	
  SECTION 9.09.   Governing Law; Jurisdiction; Consent to
  Service of Process

  	
  59

  
	
  SECTION 9.10.   WAIVER OF JURY TRIAL

  	
  59

  
	
  SECTION 9.11.   Headings

  	
  59

  
	
  SECTION 9.12.   Confidentiality

  	
  60

  
	
  SECTION 9.13.   USA Patriot Act.

  	
  60

  

 

iii

 

	
  SCHEDULES:

  	
   

  
	
   

  	
   

  
	
  Schedule 2.01 — Commitments

  	
   

  
	
  Schedule 3.07 — Disclosed Matters

  	
   

  
	
  Schedule 3.09 — Significant Subsidiaries

  	
   

  
	
  Schedule 6.01 — Existing Indebtedness

  	
   

  
	
  Schedule 6.02 — Existing Liens

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  EXHIBITS:

  	
   

  
	
   

  	
   

  
	
  Exhibit A — Form of Assignment and Assumption

  	
   

  
	
  Exhibit B — Form of Opinion of Borrower’s Counsel

  	
   

  
	
  Exhibit C — New Lender Supplement

  	
   

  
	
  Exhibit D — Investment Guidelines

  	
   

  
	
  Exhibit E — Form of Section 2.16(e) Certificate

  	
   

  

 

iv

 

CREDIT AGREEMENT (this “Agreement”), dated as of May 1, 2006
among ACA CAPITAL HOLDINGS, INC., a Delaware corporation (the “Borrower”),
the several banks and other financial institutions or entities from time to
time parties to this Agreement (the “Lenders”), JPMORGAN SECURITIES
INC., (the “Arranger”), and JPMORGAN CHASE BANK, N.A. (“JPM”), as
administrative agent.

 

The parties hereto agree as follows:

 

ARTICLE
I

Definitions

 

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

 

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

 

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

 

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

 

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

 

“Affiliate” means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the Person
specified. For clarification purposes, any collateralized debt obligation
entity or any “bankruptcy-remote” entity whose assets are managed by the
Borrower or an Affiliate of Borrower shall not be deemed an Affiliate for
purposes of this Agreement, irrespective of whether or not Borrower owns any
equity in any such entity.

 

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

 

“Applicable Facility Fee” means, for any day, with respect to
the facility fees payable hereunder, the applicable facility fee rate per annum
set forth below under the caption “Facility Fee Rate” corresponding to the
Leverage Ratio as of the most recent Calculation Date:

 

 

	
  Leverage
  Ratio

  	
   

  	
  Facility
  Fee Rate

  	
   

  
	
  > 20%

  	
   

  	
  0.175

  	
  %

  
	
  > 15% to < 20%

  	
   

  	
  0.125

  	
  %

  
	
   < 15%

  	
   

  	
  0.100

  	
  %

  

 

The “Applicable Facility Fee Rate” shall be determined and adjusted
quarterly on the date (each a “Calculation Date”) by which the Borrower
is required to provide the consolidated financial information required by Section
5.01(a) or (b); provided, however, that the initial
Applicable Facility Fee Rate shall be based on the pricing level referred to in
the second row of the table above and shall remain at such pricing level until
the first Calculation Date occurring after the end of the first full fiscal
quarter of the Borrower subsequent to the Closing Date and, thereafter, the
Applicable Facility Fee Rate shall be based on the pricing level (as shown
above) corresponding to the Leverage Ratio as of the last day of the most
recently ended fiscal quarter or year of the Borrower preceding the applicable
Calculation Date; and provided, further, that if the Borrower does not provide
the consolidated financial information required by Section 5.01(a) or (b)
in a timely manner, the Applicable Facility Fee Rate shall be calculated based
on the highest Leverage Ratio in the table above until the provision thereof.

 

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

 

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

 

“Applicable Margin” means, for any day, with respect to any ABR
Loan or Eurodollar Loan, as the case may be, the applicable margin per annum
set forth below under the caption “Applicable Margin for Eurodollar Loans” or
“Applicable Margin for ABR Loans”, “ as the case may be, corresponding to the
Leverage Ratio as of the most recent Calculation Date:

 

	
  Leverage

  Ratio

  	
   

  	
  Applicable
  

  Margin for 

  Eurodollar 

  Loans

  	
   

  	
  Applicable
  

  Margin for 

  ABR Loans

  	
   

  
	
  > 20%

  	
   

  	
  0.700

  	
  %

  	
  0

  	
  %

  
	
  > 15% to < 20%

  	
   

  	
  0.500

  	
  %

  	
  0

  	
  %

  
	
   < 15%

  	
   

  	
  0.400

  	
  %

  	
  0

  	
  %

  

 

2

 

The Applicable Margin shall be determined and adjusted quarterly on the
Calculation Date; provided, however, that the initial
Applicable Margin shall be based on the pricing level referred to in the second
row of the table above and shall remain at such pricing level until the first
Calculation Date occurring after the end of the first full fiscal quarter of
the Borrower subsequent to the Closing Date and, thereafter, the Applicable
Margin shall be based on the pricing level (as shown above) corresponding to
the Leverage Ratio as of the last day of the most recently ended fiscal quarter
or year of the Borrower preceding the applicable Calculation Date and provided,
further, that if the Borrower does not provide the consolidated financial
information required by Section 5.01(a) or (b) in a timely
manner, the Applicable Margin shall be calculated based on the highest Leverage
Ratio in the table above until the provision thereof.

 

 “Approved Fund” has the
meaning assigned to such term in Section 9.04.

 

“Assessment Rate” means, for any day, the annual assessment rate
in effect on such day that is payable by a member of the Bank Insurance Fund
classified as “well-capitalized” and within supervisory subgroup “B” (or a
comparable successor risk classification) within the meaning of 12 C.F.R.
Part 327 (or any successor provision) to the Federal Deposit Insurance
Corporation for insurance by such Corporation of time deposits made in dollars
at the offices of such member in the United States; provided that if, as
a result of any change in any law, rule or regulation, it is no longer possible
to determine the Assessment Rate as aforesaid, then the Assessment Rate shall
be such annual rate as shall be determined by the Administrative Agent to be
representative of the cost of such insurance to the Lenders.

 

“Assignment and Assumption” means an assignment and assumption
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 9.04), and accepted by the Administrative
Agent, in the form of Exhibit A or any other form approved by the
Administrative Agent.

 

“Availability Period” means the period from and including the
Effective Date to but excluding the earlier of the Termination Date and the
date of termination of the Commitments.

 

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

 

“Borrower” means ACA Capital Holdings, Inc., a Delaware
corporation.

 

“Borrowing” means (a) Revolving Loans of the same Type, made,
converted or continued on the same date and, in the case of Eurodollar Loans,
as to which a single Interest Period is in effect, (b) a Competitive Loan or
group of Competitive Loans of the same Type made on the same date and as to
which a single Interest Period is in effect or (c) a Swingline Loan.

 

“Borrowing Request” means a request by the Borrower for a
Revolving Borrowing in accordance with Section 2.03.

 

3

 

“Business Day” means any day that is not a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to remain closed; provided that, when used in connection with a
Eurodollar Loan, the term “Business Day” shall also exclude any day on
which banks are not open for dealings in dollar deposits in the London
interbank market.

 

“Calculation Date” is defined in the definition of “Applicable
Facility Fee”.

 

“Capital” means, as of any date of determination, the sum of
Debt and Net Worth on such date.

 

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

 

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

 

“Change in Control” means (a) occupation of a majority of the
seats (other than vacant seats) on the board of directors of the Borrower by
Persons who were neither (i) nominated by the board of directors of the
Borrower or the Permitted Holders nor (ii) appointed by directors so nominated
or the Permitted Holders or (b) if (i) at any time prior to a Qualified IPO,
any combination of Permitted Holders shall fail to own beneficially (within the
meaning of Rule 13d-5 of the Securities Exchange Act of 1934 as in effect on
the Effective Date), directly or indirectly, in the aggregate Equity Interests
representing at least 51% of the aggregate ordinary voting power represented by
the issued and outstanding Equity Interests of the Borrower or (ii) at any time
after a Qualified IPO, any Person or “group” (within the meaning of Rules 13d-3
and 13d-5 under the Securities Exchange Act of 1934, as in effect on the
Effective Date), other than any combination of the Permitted Holders, shall
have acquired beneficial ownership of 35% or more on a fully diluted basis of
the voting or economic interest in the Borrower’s capital stock and the
Permitted Holders shall own, directly or indirectly, less than such Person or
“group” on a fully diluted basis of the economic and voting interest in
Borrower’s capital stock.

 

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

 

4

 

“Change in Tax Law” means the enactment, promulgation, execution
or ratification of, or any change in or amendment to, any law (including the
Code), treaty, regulation or rule (or in the official application or
interpretation of any law, treaty, regulation or rule, including a holding,
judgment or order by a court of competent jurisdiction) relating to United
States income taxation by a Governmental Authority.

 

“Class”, when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are Revolving
Loans, Competitive Loans or Swingline Loans.

 

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

 

“Commitment” means, with respect to each Lender, the commitment
of such Lender to make Revolving Loans and to acquire participations in Swingline
Loans hereunder, expressed as an amount representing the maximum aggregate
amount of such Lender’s Revolving Credit Exposure hereunder, as such commitment
may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced
or increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 2.02(g) and Section 9.04. 
The initial amount of each Lender’s Commitment is set forth on Schedule
2.01, or in the Assignment and Assumption pursuant to which such Lender shall
have assumed its Commitment, as applicable. 
The initial aggregate amount of the Lenders’ Commitments is $75,000,000.

 

“Competitive Bid” means an offer by a Lender to make a
Competitive Loan in accordance with Section 2.04.

 

“Competitive Bid Rate” means, with respect to any Competitive
Bid, the Margin or the Fixed Rate, as applicable, offered by the Lender making
such Competitive Bid.

 

“Competitive Bid Request” means a request by the Borrower for
Competitive Bids in accordance with Section 2.04.

 

“Competitive Loan” means a Loan made pursuant to Section 2.04.

 

“Consolidated Net Income” 
for any period, the consolidated net income (or loss) of the Borrower
and its Subsidiaries, determined on a consolidated basis in accordance with
GAAP; provided that there shall be excluded (a) the income (or deficit) of any
Person accrued prior to the date it becomes a Subsidiary of the Borrower or is
merged into or consolidated with the Borrower or any of its Subsidiaries, (b)
the income (or deficit) of any Person (other than a Subsidiary of the Borrower)
in which the Borrower or any of its Subsidiaries has an ownership interest,
except to the extent that any such income is actually received by the Borrower
or such Subsidiary in the form of dividends or similar distributions, (c) the
undistributed earnings of any Subsidiary of the Borrower to the extent that the
declaration or payment of dividends or similar distributions by such Subsidiary
is not at the time permitted by the terms of any Contractual Obligation (other
than under any Loan Document) or Requirement of Law applicable to such
Subsidiary, (d) non-recurring extraordinary items, (e) the cumulative effect of
a change in accounting principles and (f) unrealized gains or losses on
derivative instruments.

 

5

 

“Consolidated Net Worth” at any date, all amounts that would, in
conformity with GAAP, be included on a consolidated GAAP financial statements
of the Borrower and its Subsidiaries under stockholders’ equity at such date.

 

“Contractual Obligation” means, as to any Person, any provision
of any security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.

 

“Control” means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise.  “Controlling” and “Controlled”
have meanings correlative thereto.

 

“Debt” means at any date, the aggregate principal amount,
without duplication, of all Indebtedness of the Borrower and its Subsidiaries
at such date, determined on a consolidated basis in accordance with GAAP,
excluding (i) obligations of a Regulated Insurance Company under insurance
policies in the nature of financial guarantees and financial guarantees, in
each case from time to time issued in the ordinary course of such Regulated
Insurance Company’s business (ii) Indebtedness of any Subsidiary issued in
connection with, or Indebtedness of any Subsidiary issued to refinance
Indebtedness issued in connection with, the purchases of equity in connection
with, and the warehousing of assets for, collateralized debt obligation
transactions structured by and managed by any Subsidiary in the ordinary course
of such entity’s business, provided that any such Indebtedness is not
the subject of a Guarantee by the Borrower or any Subsidiary directly or
indirectly owning Capital Stock of any Regulated Insurance Company and (iii)
any Indebtedness of any special purpose vehicle created for the purpose of
issuing a collateralized debt obligation or entering into credit default swaps
which is consolidated with the Borrower or any of its subsidiaries.

 

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

 

“Disclosed Matters” means the matters that are disclosed on
Schedule 3.07.

 

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

 

“Effective Date” means the date on which the conditions
specified in Section 4.01 are satisfied (or waived in accordance with
Section 9.02).

 

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

 

“Environmental Liability” means any liability (including any
liability for damages, costs of environmental remediation, fines, penalties or
indemnities), of the Borrower or any Subsidiary resulting from or based upon
(a) violation of any Environmental Law, (b) the 

 

6

 

generation, use, handling,
transportation, storage, treatment or disposal of any Hazardous Materials,
(c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any
contract or agreement pursuant to which liability is assumed or imposed with
respect to any of the foregoing.

 

“Equity Interests “ means shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a Person, and any
warrants, options or other rights entitling the holder thereof to purchase or
acquire any such equity interest.

 

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

 

“ERISA Affiliate” means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under 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.

 

“ERISA Event” means (a) any “reportable event”, as defined
in Section 4043 of ERISA or the regulations issued thereunder with respect
to a Plan (other than an event for which the 30-day notice period is waived);
(b) the existence with respect to any Plan of an “accumulated funding
deficiency” (as defined in Section 412 of the Code or Section 302 of
ERISA), whether or not waived; (c) the filing pursuant to
Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of
any liability under Title IV of ERISA with respect to the termination of
any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the
PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; or
(f) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability with respect to the withdrawal or partial withdrawal from any Plan.

 

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

 

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

 

“Excluded Taxes” means, with respect to the Administrative
Agent, any Lender or any other recipient of any payment to be made by or on
account of any obligation of the Borrower hereunder, (a) any Taxes (other than
Other Taxes) imposed, deducted or withheld by reason of any present or former
connection between the Administrative Agent or such Lender or other recipient
(as the case may be) and the jurisdiction imposing such Taxes (other than
solely on account of the execution and performance of, the enforcement of any
right under or the receipt of any payment under, this Agreement or any of the
other Loan Documents), (b) any branch profits taxes imposed by the United
States of America or any similar tax imposed by any other jurisdiction under
the laws of which the Administrative Agent or such Lender or other recipient
(as the case may be) is organized or resident, in which the Administrative
Agent or 

 

7

 

such Lender or other recipient
(as the case may be) has an office or with which the Administrative Agent or
such Lender or other recipient (as the case may be) has any other connection
(other than solely on account of the execution and performance of, the
enforcement of any right under or the receipt of any payment under, this
Agreement or any of the other Loan Documents) and (c) in the case of a Foreign
Lender (other than an assignee pursuant to a request by the Borrower under
Section 2.18(b)), any Tax imposed, deducted or withheld on or from amounts
payable to such Foreign Lender (i) as of the time such Foreign Lender becomes a
party to this Agreement or designates a new lending office (including, for the
avoidance of doubt, the designation of a new lending office by a Lender that
was an assignee pursuant to a request by Borrower under Section 2.18) except to
the extent that such Foreign Lender (or its assignor, if any) was entitled, at
the time of designation of a new lending office (or assignment, if any), to
receive additional amounts from the Borrower with respect to such Tax pursuant
to Section 2.16(a) or (ii) that is attributable to such Foreign Lender’s
failure, inability or ineligibility at any time during which such Foreign
Lender is a party to this Agreement to deliver the Internal Revenue Service
forms and the Section 2.16(e) Certificate (as applicable) described in
Section 2.16(e) certifying that such Foreign Lender is entitled to a
reduced rate or complete exemption from United States withholding taxation with
respect to all payments to be made to it under the Loans Documents, except to
the extent such Foreign Lender’s failure is due to a Change in Tax Law
occurring after the date on which such Foreign Lender became a party to this
Agreement or the date (if any) on which such Foreign Lender designated a new
lending office .

 

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

 

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

 

“Fixed Rate” means, with respect to any Competitive Loan (other
than a Eurodollar Competitive Loan), the fixed rate of interest per annum
specified by the Lender making such Competitive Loan in its related Competitive
Bid.

 

“Fixed Rate Loan” means a Competitive Loan bearing interest at a
Fixed Rate.

 

“Foreign Lender” means any Lender that is not a “United States
person” as defined in Section 7701(a)(30) of the Code.

 

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

 

“Governmental Authority” means the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any 

 

8

 

agency, authority,
instrumentality, regulatory body, court, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government, including
any Applicable Insurance Regulatory Authority.

 

“Guarantee” of or by any Person (the “guarantor”) means
any obligation, contingent or otherwise, of the guarantor guaranteeing or
having the economic effect of guaranteeing any Indebtedness or other obligation
of any other Person (the “primary obligor”) in any manner, whether
directly or indirectly, and including any obligation of the guarantor, direct
or indirect, (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation or to purchase
(or to advance or supply funds for the purchase of) any security for the
payment thereof, (b) to purchase or lease property, securities or services
for the purpose of assuring the owner of such Indebtedness or other obligation
of the payment thereof, (c) to maintain working capital, equity capital or
any other financial statement condition or liquidity of the primary obligor so
as to enable the primary obligor to pay such Indebtedness or other obligation
or (d) as an account party in respect of any letter of credit or letter of
guaranty issued to support such Indebtedness or obligation; provided,
that the term Guarantee shall not include (i) endorsements for collection or
deposit in the ordinary course of business or (ii) financial guarantees made as
an incident to the conduct by any Regulated Insurance Subsidiary of its
Insurance Business and in the ordinary course of such business.

 

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

 

“Indebtedness” of any Person means, without duplication,
(a) all obligations of such Person for borrowed money or with respect to
deposits or advances of any kind, (b) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person under conditional sale or other title retention
agreements relating to property acquired by such Person or in respect of the
deferred purchase price of property or services (excluding current accounts
payable incurred in the ordinary course of business, including payables under
insurance contracts and reinsurance payables, and, in the case of the Borrower
and its Subsidiaries, obligations under forward purchase agreements entered
into in the ordinary course of business of the Borrower and its Subsidiaries
for the purpose of accumulating asset-backed securities for potential collateralized
debt obligation transactions), (d) all Indebtedness of others secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed,
(e) all Guarantees by such Person of Indebtedness of others, (f) all
Capital Lease Obligations of such Person, (g) all obligations, contingent
or otherwise, of such Person as an account party in respect of letters of
credit and letters of guaranty and (h) all obligations, contingent or
otherwise, of such Person in respect of bankers’ acceptances.  The Indebtedness of any Person shall include
the Indebtedness of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefor as a
result of such Person’s ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide that such Person
is not liable therefor.

 

9

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Information Memorandum” means the Confidential Information
Memorandum dated February 2006 relating to the Borrower and the Transactions.

 

“Insurance Business” means one or more aspects of the business
of selling, issuing or underwriting insurance or reinsurance and any activities
(including investment activities) reasonably related or ancillary thereto or
representing a reasonable extension thereof.

 

“Insurance Licenses” means, with respect to each Regulated
Insurance Company, licenses (including, without limitation, licenses or
certificates of authority from Applicable Insurance Regulatory Authorities),
permits or authorizations to transact insurance and reinsurance business held
by such Regulated Insurance Company.

 

“Interest Election Request” means a request by the Borrower to
convert or continue a Revolving Borrowing in accordance with Section 2.07.

 

“Interest Payment Date” means (a) with respect to any ABR
Loan (other than a Swingline Loan), the last day of each March, June, September
and December, (b) with respect to any Eurodollar Loan, the last day of the
Interest Period applicable to the Borrowing of which such Loan is a part and,
in the case of a Eurodollar Borrowing with an Interest Period of more than
three months’ duration, each day prior to the last day of such Interest Period
that occurs at intervals of three months’ duration after the first day of such
Interest Period, (c) with respect to any Fixed Rate Loan, the last day of the
Interest Period applicable to the Borrowing of which such Loan is a part and,
in the case of a Fixed Rate Borrowing with an Interest Period of more than 90
days’ duration (unless otherwise specified in the applicable Competitive Bid
Request), each day prior to the last day of such Interest Period that occurs at
intervals of 90 days’ duration after the first day of such Interest Period, and
any other dates that are specified in the applicable Competitive Bid Request as
Interest Payment Dates with respect to such Borrowing and (d) with respect
to any Swingline Loan, the day that such Loan is required to be repaid.

 

“Interest Period” means (a) with respect to any Eurodollar
Borrowing, the period commencing on the date of such Borrowing and ending on
the numerically corresponding day in the calendar month that is one, two,
three, six or, if available to the Lenders, nine or twelve, months
thereafter, as the Borrower may elect, and (b) with respect to any Fixed Rate
Borrowing, the period (which shall not be less than 3 days or more than 270
days) commencing on the date of such Borrowing and ending on the date specified
in the applicable Competitive Bid Request; provided, that (i) if any Interest
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless, in the case of a
Eurodollar Borrowing only, such next succeeding Business Day would fall in the
next calendar month, in which case such Interest Period shall end on the next
preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar
Borrowing that commences on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the last calendar
month of such Interest Period) shall end on the last Business Day of the last
calendar month of such Interest Period. 
For purposes hereof, the date of a Borrowing initially shall be the date
on which such Borrowing is made and, in the case of a Revolving Borrowing, 

 

10

 

thereafter shall be the
effective date of the most recent conversion or continuation of such Borrowing.

 

“Lenders” means the Persons listed on Schedule 2.01 and any
other Person that shall have become a party hereto pursuant to an Assignment
and Assumption or in accordance with 2.02(g), other than any such Person that
ceases to be a party hereto pursuant to an Assignment and Assumption.  Unless the context otherwise requires, the
term “Lenders” includes the Swingline Lender.

 

“Leverage Ratio” means, at any date of determination, the ratio
of Debt of any type described in clause (a), (b), (c), (f) or (h) of the
definition of “Indebtedness” to Capital at such date.

 

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

 

“Lien” means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a lessor
under any conditional sale agreement, capital lease or title retention agreement
(or any financing lease having substantially the same economic effect as any of
the foregoing) relating to such asset and (c) in the case of securities,
any purchase option, call or similar right of a third party with respect to
such securities.

 

“Loan Documents”  means
this Agreement and any amendment, waiver, supplement or other modification this
Agreement.

 

“Loans” means the loans made by the Lenders to the Borrower
pursuant to this Agreement.

 

“Margin” means, with respect to any Competitive Loan bearing
interest at a rate based on the LIBO Rate, the marginal rate of interest, if
any, to be added to or subtracted from the LIBO Rate to determine the rate of
interest applicable to such Loan, as specified by the Lender making such Loan
in its related Competitive Bid.

 

“Material Adverse Effect” means a material adverse effect on
(a) the business, assets, operations, or condition (financial or
otherwise) of the Borrower and the Subsidiaries 

 

11

 

taken as a whole, (b) the
ability of the Borrower to perform any of its obligations under this Agreement
or (c) the rights of or benefits available to the Lenders under this
Agreement.

 

“Material Obligations” means Debt (other than the Loans), or
obligations in respect of one or more Swap Agreements, of any one or more of
the Borrower and its Subsidiaries (other than Subsidiaries that are
collateralized debt obligation entities, credit default swap entities or
“bankruptcy-remote” entities whose assets are managed by the Borrower or one of
its Subsidiaries) in an aggregate principal amount exceeding the Threshold
Amount.  For purposes of determining
Material Obligations, the “principal amount” of the obligations of the Borrower
or any Subsidiary in respect of any Swap Agreement at any time shall be the
maximum aggregate amount (giving effect to any netting agreements) that the
Borrower or such Subsidiary would be required to pay if such Swap Agreement
were terminated at such time.

 

“Maturity Date” means, the Termination Date, as such date may be
extended for any Lender as provided in Section 2.02(e), provided that if
the Borrower elects to extend the Maturity Date pursuant to Section 2.02(f),
the Maturity Date shall be the first anniversary of the then Termination Date.

 

“Net Cash Proceeds” means in connection with any issuance or
sale of Capital Stock or any incurrence of Indebtedness, the gross cash
proceeds received from such issuance or incurrence, net of attorneys’ fees,
investment banking fees, accountants’ fees, underwriting discounts and
commissions and other customary fees and expenses actually incurred in
connection therewith.

 

“Net Worth” means, at any date of determination, total
shareholders’ equity of the Borrower and its Subsidiaries at such date,
determined on a consolidated basis in accordance with GAAP, on such date,
excluding all accumulated “other comprehensive income” in total shareholders’
equity.

 

“Other Taxes” means any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement but excluding
property or similar Taxes other than any such Taxes imposed in such
circumstances solely as a result of the Borrower being organized or resident
in, maintaining an office in, conducting business in or maintaining property
located in, the taxing jurisdiction imposing such Taxes.

 

“Participant” has the meaning set forth in Section 9.04(c).

 

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

 

“Permitted Encumbrances” means:

 

(a)           Liens
imposed by law for taxes that are not yet due or are being contested in
compliance with Section 5.04;

 

12

 

(b)           carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens
imposed by law, arising in the ordinary course of business and securing
obligations that are not overdue by more than 30 days or are being contested in
compliance with Section 5.04;

 

(c)           pledges
and deposits made in the ordinary course of business in compliance with
workers’ compensation, unemployment insurance and other social security laws or
regulations;

 

(d)           deposits
to secure the performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations
of a like nature, in each case in the ordinary course of business;

 

(e)           judgment
liens in respect of judgments that do not constitute an Event of Default under
clause (i) of Article VII;

 

(f)            easements,
zoning restrictions, rights-of-way and similar encumbrances on real property
imposed by law or arising in the ordinary course of business that do not secure
any monetary obligations and do not materially detract from the value of the
affected property or interfere with the ordinary conduct of business of the
Borrower or any Subsidiary;

 

(g)           contractual
set-off rights, rights of lessees and licensees arising in the ordinary course
of business; and

 

(h)           any
extensions, replacements, renewals or refinancings of the foregoing;

 

provided that the term “Permitted
Encumbrances” shall not include any Lien securing Indebtedness.

 

“Permitted Holders” means BSMB/ACA LLC, Stephens Group, Inc.,
Third Avenue Trust, on behalf of Third Avenue Value Fund, Third Avenue Trust,
on behalf of Third Avenue Small-Cap Value Fund Series, Chestnut Hill ACA, LLC,
Transamerica Life Insurance Company, Life Investors Insurance Company of
America, Insurance Partners, L.P., Insurance Partners Offshore (Bermuda) L.P.,
IP/MCLP, L.L.C., Drawbridge Special Opportunities Fund L.P., FW ACA Investors,
L.P., Banc of America Strategic Investments Corporation and present and former
members of the Borrower’s management and their respective Affiliates.

 

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

 

“Plan” means any employee pension benefit plan subject to the
provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069
of ERISA be deemed to be) an “employer” as defined in Section 3(5) of
ERISA.

 

“Prime Rate” means the rate of interest per annum publicly
announced from time to time by JPMorgan Chase Bank, N.A., as its prime rate in
effect at its principal office in New

 

13

 

York City; each change in the
Prime Rate shall be effective from and including the date such change is
publicly announced as being effective.

 

“Qualified IPO” means an underwritten public offering of the
Equity Interests of Borrower which generates cash proceeds to Borrower of at
least $100,000,000.

 

“Register” has the meaning set forth in Section 9.04(b).

 

“Regulated Insurance Company” means 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 any Applicable Insurance Regulatory Authority.

 

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

 

“Required Lenders” means, at any time, Lenders having Revolving
Credit Exposures and unused Commitments representing more than 50% of the sum
of the total Revolving Credit Exposures and unused Commitments at such time; provided
that, for purposes of declaring the Loans to be due and payable pursuant to
Article VII, and for all purposes after the Loans become due and payable
pursuant to Article VII or the Commitments expire or terminate, the
outstanding Competitive Loans of the Lenders shall be included in their
respective Revolving Credit Exposures in determining the Required Lenders.

 

“Restricted Payment” means any dividend or other distribution
(whether in cash, securities or other property) with respect to any Equity
Interests in the Borrower, or any payment (whether in cash, securities or other
property), including any sinking fund or similar deposit, on account of the
purchase, redemption, retirement, acquisition, cancellation or termination of
any such Equity Interests in the Borrower or any option, warrant or other right
to acquire any such Equity Interests in the Borrower.

 

“Revolving Credit Exposure” means, with respect to any Lender at
any time, the sum of the outstanding principal amount of such Lender’s
Revolving Loans and Swingline Exposure at such time.

 

“Revolving Loan” means a Loan made pursuant to Section 2.03.

 

“S&P” means Standard & Poor’s.

 

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

 

“Significant Subsidiary” means (i) any Subsidiary that would be
a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation
S-X, promulgated pursuant to the Securities Act of 1933, as amended, as such
Regulation is in effect on the date hereof or (ii) any group of Subsidiaries
that are not individually Significant Subsidiaries but when taken together meet
the criteria of a Significant Subsidiary.

 

14

 

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

 

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

 

“subsidiary” means, with respect to any Person (the “parent”)
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent’s consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity (a) of which securities or other ownership
interests representing more than 50% of the equity or more than 50% of the
ordinary voting power or, in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, controlled or held,
or (b) that is, as of such date, otherwise Controlled, by the parent or
one or more subsidiaries of the parent or by the parent and one or more subsidiaries
of the parent.

 

“Subsidiary” means any subsidiary of the Borrower.

 

“Swap Agreement” means any agreement with respect to any swap,
forward, future or derivative transaction or option or similar agreement
involving, or settled by reference to, one or more rates, currencies,
commodities, equity or debt instruments or securities, or economic, financial
or pricing indices or measures of economic, financial or pricing risk or value
or any similar transaction or any combination of these transactions; provided
that no phantom stock or similar plan providing for payments only on account of
services provided by current or former directors, officers, employees or
consultants of the Borrower or the Subsidiaries shall be a Swap Agreement.

 

“Swingline Exposure” means, at any time, the aggregate principal
amount of all Swingline Loans outstanding at such time.  The Swingline Exposure of any Lender at any
time shall be its Applicable Percentage of the total Swingline Exposure at such
time.

 

“Swingline Lender” means JPMorgan Chase Bank, N.A., in its
capacity as lender of Swingline Loans hereunder.

 

15

 

“Swingline Loan” means a Loan made pursuant to Section 2.05.

 

“Tangible Net Worth” means, at any date of determination,
Consolidated Net Worth minus the aggregate book value of all intangible assets
(including deferred debt issuance costs and deferred policy acquisition costs)
of the Borrower and its Subsidiaries as of such date in accordance with GAAP.

 

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

 

“Termination Date” means that date that is 364 days after the
Effective Date, as such date may be extended for any Lender as provided in
Section 2.02(e).

 

“Threshold Amount” means $10,000,000.

 

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

 

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

 

“Variable Interest Entities” means the following Subsidiaries of
the Borrower:  (a) ACA Service L.L.C.;
(b) ACA Risk Solutions, L.L.C. (c) ACA Management, L.L.C. (d) any other
newly-created Subsidiary of the Borrower which is engaged solely in the
business of structuring and management of collateralized debt obligations and
the entering into of any credit default swaps and (e) all of the subsidiaries
of any of the foregoing..

 

SECTION 1.02.  Classification of Loans and Borrowings.  For purposes of this Agreement, Loans may be
classified and referred to by Class (e.g., a “Revolving Loan”) or by
Type (e.g., a “Eurodollar Loan”) or by Class and Type (e.g., a
“Eurodollar Revolving Loan”).  Borrowings
also may be classified and referred to by Class (e.g., a “Revolving
Borrowing”) or by Type (e.g., a “Eurodollar Borrowing”) or by Class and
Type (e.g., a “Eurodollar Revolving Borrowing”).

 

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

 

16

 

to any particular provision
hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules
shall be construed to refer to Articles and Sections of, and Exhibits and
Schedules to, this Agreement and (e) the words “asset” and “property” shall be
construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.

 

SECTION 1.04.  Accounting Terms; Changes in GAAP.  Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP as in effect from time to time; provided that, if
the Borrower notifies the Administrative Agent that the Borrower requests an
amendment to any provision hereof to eliminate the effect of any change
occurring after the date hereof in GAAP, or in the application thereof on the
operation of such provision, regardless of whether any such notice is given
before or after such change in GAAP, or in the application thereof, then such
provision shall be interpreted on the basis of GAAP as in effect and applied
immediately before such change shall have become effective until such notice
shall have been withdrawn or such provision amended in accordance
herewith.  Notwithstanding the foregoing,
it is acknowledged and agreed that the financial statements provided pursuant
to Section 5.01(a) and (b) shall be prepared in accordance with GAAP and the
financial covenants herein shall be calculated on the basis of such financial
statements.

 

ARTICLE
II

The Credits

 

SECTION 2.01.  Commitments.  Subject to the terms and conditions set forth
herein, each Lender agrees to make Revolving Loans to the Borrower from time to
time during the Availability Period in an aggregate principal amount that will
not result in (a) such Lender’s Revolving Credit Exposure exceeding such
Lender’s Commitment or (b) the sum of the total Revolving Credit Exposures
plus the aggregate principal amount of outstanding Competitive Loans exceeding
the total Commitments.  Within the
foregoing limits and subject to the terms and conditions set forth herein, the
Borrower may borrow, prepay and reborrow Revolving Loans.

 

SECTION 2.02.  Loans and Borrowings.

 

(a)           Each Revolving
Loan shall be made as part of a Borrowing consisting of Revolving Loans made by
the Lenders ratably in accordance with their respective Commitments.  Each Competitive Loan shall be made in
accordance with the procedures set forth in Section 2.04.  The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations
hereunder; provided that the Commitments and Competitive Bids of the
Lenders are several and no Lender shall be responsible for any other Lender’s
failure to make Loans as required.

 

(b)           Subject to
Section 2.13, (i) each Revolving Borrowing shall be comprised entirely of
ABR Loans or Eurodollar Loans as the Borrower may request in accordance
herewith, and (ii) each Competitive Borrowing shall be comprised entirely
of Eurodollar Loans or Fixed Rate Loans as the Borrower may request in
accordance herewith.  Each Swingline Loan
shall be 

 

17

 

an ABR Loan.  Each Lender at its option may make any
Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such
Lender to make such Loan; provided that any exercise of such option
shall not affect the obligation of the Borrower to repay such Loan in
accordance with the terms of this Agreement, nor shall it increase the
Borrower’s obligations under Section 2.16.

 

(c)           At the
commencement of each Interest Period for any Eurodollar Revolving Borrowing,
such Borrowing shall be in an aggregate amount that is an integral multiple of
$1,000,000 and not less than $10,000,000. 
At the time that each ABR Revolving Borrowing is made, such Borrowing
shall be in an aggregate amount that is an integral multiple of $1,000,000 and
not less than $10,000,000; provided that an ABR Revolving Borrowing may
be in an aggregate amount that is equal to the entire unused balance of the
total Commitments.  Each Competitive
Borrowing shall be in an aggregate amount that is an integral multiple of
$1,000,000 and not less than $10,000,000. 
Each Swingline Loan shall be in an amount that is an integral multiple
of $1,000,000 and not less than $10,000,000. 
Borrowings of more than one Type and Class may be outstanding at the
same time; provided that there shall not at any time be more than a
total of 5 Eurodollar Revolving Borrowings outstanding.

 

(d)           Notwithstanding
any other provision of this Agreement, the Borrower shall not be entitled to
request, or to elect to convert or continue, any Borrowing if the Interest
Period requested with respect thereto would end after the then scheduled
Maturity Date.

 

(e)           Provided that
no Default or Event of Default has occurred and is continuing, the Borrower may
request an extension of the Termination Date for an additional period of one
year with notice to the Administrative Agent, to be given no more than 45 days
before the Effective Date.  The
Administrative Agent shall notify the Lenders of such request promptly upon
receipt of such request from the Borrower. 
If, within 30 days of being notified of such request by the Administrative
Agent, Lenders holding a majority of the Commitments consent to such extension,
the Commitment of each consenting Lender shall be extended by one year, which
shall become the new Termination Date with respect to such Commitment and the
Loans made thereunder.  The
Administrative Agent shall offer to the consenting Lenders the opportunity to
increase their respective Commitments on a pro rata basis by acquiring all or
part of the Commitments of the non-extending Lenders through an Assignment and
Assumption. Any Commitment of a non-extending Lender not assumed by a
consenting Lender shall terminate on the scheduled Termination Date.

 

(f)            Provided that
no Default or Event of Default has occurred and is continuing, the Borrower
shall have the right to elect that the Maturity Date of all or any ratable
portion of the Loans (other than any Loans under Commitments then being
extended pursuant to 2.02(d) above) be extended to be due and payable on the
date one year after the then scheduled Termination Date, by giving notice to
the Administrative Agent, which shall promptly notify the Lender thereof, not
later than five Business Days prior to such Termination Date.

 

(g)           Provided that
all conditions set forth in Section 4.02 are then satisfied, the Borrower may request
that the Lenders and/or other entities provide additional Commitments. If such
additional Commitments are provided, the amount of the aggregate Commitments
shall be increased by the amount of such Commitments; provided that (i) the
aggregate amount of any 

 

18

 

such increase shall not
exceed $50,000,000, (ii) the aggregate amount of all Commitments, including all
such increases, shall not exceed $125,000,000 and (iii) no Lender shall have
any obligation to participate in any additional Commitment or other increase
described in this paragraph unless it agrees to do so in its sole discretion.
 Any additional bank, financial institution or other entity which, with
the consent of the Administrative Agent (which consent shall not be
unreasonably withheld), elects to become a “Lender” under this Agreement in
connection with the making of any Loan or the making of any additional
Commitment shall execute a New Lender Supplement substantially in the form of
Exhibit C, whereupon such bank, financial institution or other entity shall
become a Lender for all purposes and to the same extent as if originally a
party hereto and shall be bound by and entitled to the benefits of this
Agreement.

 

SECTION 2.03.  Requests for Revolving Borrowings.   To request a Revolving Borrowing, the
Borrower shall notify the Administrative Agent of such request by telephone (a)
in the case of a Eurodollar Borrowing, not later than 12:00 noon, New
York City time, three Business Days before the date of the proposed
Borrowing or (b) in the case of an ABR Borrowing, not later than 3:00
p.m., New York City time, one Business Day before the date of the proposed
Borrowing.  Each such telephonic Borrowing
Request shall be irrevocable and shall be confirmed promptly by hand delivery
or telecopy to the Administrative Agent of a written Borrowing Request in a
form approved by the Administrative Agent and signed by the Borrower.  Each such telephonic and written Borrowing
Request shall specify the following information in compliance with
Section 2.02:

 

(i)            the aggregate
amount of the requested Borrowing;

 

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

 

(iii)          whether such
Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

 

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

 

(v)           the location
and number of the Borrower’s account to which funds are to be disbursed, which
shall comply with the requirements of Section 2.06.

 

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

 

SECTION 2.04.  Competitive Bid Procedure.  (a)  Subject to the terms and
conditions set forth herein, from time to time during the Availability Period
the Borrower may request Competitive Bids and may (but shall not have any
obligation to) accept Competitive Bids and borrow Competitive Loans; provided
that the sum of the total Revolving Credit Exposures 

 

19

 

plus the aggregate principal
amount of outstanding Competitive Loans at any time shall not exceed the total
Commitments.  To request Competitive
Bids, the Borrower shall notify the Administrative Agent of such request by
telephone, in the case of a Eurodollar Borrowing, not later than 12:00 noon,
New York City time, four Business Days before the date of the proposed
Borrowing and, in the case of a Fixed Rate Borrowing, not later than 10:00
a.m., New York City time, one Business Day before the date of the proposed
Borrowing; provided that the Borrower may submit up to (but not more
than) 2 Competitive Bid Requests on the same day, but a Competitive Bid Request
shall not be made within five Business Days after the date of any previous
Competitive Bid Request, unless any and all such previous Competitive Bid
Requests shall have been withdrawn or all Competitive Bids received in response
thereto rejected.  Each such telephonic
Competitive Bid Request shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Competitive Bid Request in a
form approved by the Administrative Agent and signed by the Borrower.  Each such telephonic and written Competitive Bid
Request shall specify the following information in compliance with Section
2.02:

 

(i)            the aggregate
amount of the requested Borrowing;

 

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

 

(iii)          whether such
Borrowing is to be a Eurodollar Borrowing or a Fixed Rate Borrowing;

 

(iv)          the Interest
Period to be applicable to such Borrowing, which shall be a period contemplated
by the definition of the term “Interest Period”; and

 

(v)           the location
and number of the Borrower’s account to which funds are to be disbursed, which
shall comply with the requirements of Section 2.06.

 

Promptly following receipt of a Competitive Bid Request in accordance
with this Section, the Administrative Agent shall notify the Lenders of the
details thereof by telecopy, inviting the Lenders to submit Competitive Bids.

 

(b)           Each Lender may
(but shall not have any obligation to) make one or more Competitive Bids to the
Borrower in response to a Competitive Bid Request.  Each Competitive Bid by a Lender must be in a
form approved by the Administrative Agent and must be received by the
Administrative Agent by telecopy, in the case of a Eurodollar Competitive
Borrowing, not later than 9:30 a.m., New York City time, three Business
Days before the proposed date of such Competitive Borrowing, and in the case of
a Fixed Rate Borrowing, one Business Day before the proposed date of such
Competitive Borrowing.  Competitive Bids
that do not conform substantially to the form approved by the Administrative
Agent may be rejected by the Administrative Agent, and the Administrative Agent
shall notify the applicable Lender as promptly as practicable.  Each Competitive Bid shall specify
(i) the principal amount (which shall be a minimum of $1,000,000 and an
integral multiple of $1,000,000 and which may equal the entire principal amount
of the Competitive Borrowing requested by the Borrower) of the Competitive Loan
or Loans that the Lender is willing to make, (ii) the Competitive Bid Rate
or Rates at which the Lender is prepared to make such Loan or Loans (expressed
as a percentage 

 

20

 

rate per annum in the form
of a decimal to no more than four decimal places) and (iii) the Interest
Period applicable to each such Loan and the last day thereof.

 

(c)           The
Administrative Agent shall promptly notify the Borrower by telecopy of the
Competitive Bid Rate and the principal amount specified in each Competitive Bid
and the identity of the Lender that shall have made such Competitive Bid.

 

(d)           Subject only to
the provisions of this paragraph, the Borrower may accept or reject any
Competitive Bid.  The Borrower shall
notify the Administrative Agent by telephone, confirmed by telecopy in a form
approved by the Administrative Agent, whether and to what extent it has decided
to accept or reject each Competitive Bid, in the case of a Eurodollar
Competitive Borrowing, not later than 12:00 noon, New York City time, three
Business Days before the date of the proposed Competitive Borrowing, and in the
case of a Fixed Rate Borrowing, not later than 12:00 noon, New York City time,
on the proposed date of the Competitive Borrowing; provided that
(i) the failure of the Borrower to give such notice shall be deemed to be
a rejection of each Competitive Bid, (ii) the Borrower shall not accept a
Competitive Bid made at a particular Competitive Bid Rate if the Borrower
rejects a Competitive Bid made at a lower Competitive Bid Rate, (iii) the
aggregate amount of the Competitive Bids accepted by the Borrower shall not
exceed the aggregate amount of the requested Competitive Borrowing specified in
the related Competitive Bid Request, (iv) to the extent necessary to
comply with clause (iii) above, the Borrower may accept Competitive Bids at the
same Competitive Bid Rate in part, which acceptance, in the case of multiple
Competitive Bids at such Competitive Bid Rate, shall be made pro rata in
accordance with the amount of each such Competitive Bid, and (v) except
pursuant to clause (iv) above, no Competitive Bid shall be accepted for a
Competitive Loan unless such Competitive Loan is in a minimum principal amount
of $1,000,000 and an integral multiple of $1,000,000; provided  further
that if a Competitive Loan must be in an amount less than $1,000,000 because of
the provisions of clause (iv) above, such Competitive Loan may be for a minimum
of $1,000,000 or any integral multiple thereof, and in calculating the pro rata
allocation of acceptances of portions of multiple Competitive Bids at a
particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be
rounded to integral multiples of $1,000,000 in a manner determined by the
Borrower.  A notice given by the Borrower
pursuant to this paragraph shall be irrevocable.

 

(e)           The
Administrative Agent shall promptly notify each bidding Lender by telecopy
whether or not its Competitive Bid has been accepted (and, if so, the amount
and Competitive Bid Rate so accepted), and each successful bidder will
thereupon become bound, subject to the terms and conditions hereof, to make the
Competitive Loan in respect of which its Competitive Bid has been accepted.

 

(f)            If the
Administrative Agent shall elect to submit a Competitive Bid in its capacity as
a Lender, it shall submit such Competitive Bid directly to the Borrower at
least one quarter of an hour earlier than the time by which the other Lenders
are required to submit their Competitive Bids to the Administrative Agent
pursuant to paragraph (b) of this Section.

 

SECTION 2.05.  Swingline Loans.  (a)  Subject to the terms and
conditions set forth herein, the Swingline Lender agrees to make Swingline
Loans to the Borrower from time to time during the Availability Period, in an
aggregate principal amount at any time outstanding 

 

21

 

that will not result in
(i) the aggregate principal amount of outstanding Swingline Loans
exceeding $15,000,000 or (ii) the sum of the total Revolving Credit Exposures
plus the aggregate principal amount of outstanding Competitive Loans exceeding
the total Commitments; provided that the Swingline Lender shall not be
required to make a Swingline Loan to refinance an outstanding Swingline
Loan.  Any Swingline Loan will reduce the
availability of Loan amounts by the amount of such Swingline Loan.  Within the foregoing limits and subject to
the terms and conditions set forth herein, the Borrower may borrow, prepay and
reborrow Swingline Loans.

 

(b)           To request a
Swingline Loan, the Borrower shall notify the Administrative Agent of such
request by telephone (confirmed by telecopy), not later than 12:00 noon, New
York City time on the day of a proposed Swingline Loan.  Each such notice shall be irrevocable and
shall specify the requested date (which shall be a Business Day) and amount of
the requested Swingline Loan.  The
Administrative Agent will promptly advise the Swingline Lender of any such
notice received from the Borrower.  The
Swingline Lender shall make each Swingline Loan available to the Borrower by
means of a credit to the general deposit account of the Borrower with the
Swingline Lender by 3:00 p.m., New York City time, on the requested date
of such Swingline Loan.

 

(c)           The Swingline
Lender may by written notice given to the Administrative Agent not later than
10:00 a.m., New York City time, on any Business Day require the Lenders to
acquire participations on such Business Day in all or a portion of the
Swingline Loans outstanding.  Such notice
shall specify the aggregate amount of Swingline Loans in which Lenders will
participate.  Promptly upon receipt of
such notice, the Administrative Agent will give notice thereof to each Lender,
specifying in such notice such Lender’s Applicable Percentage of such Swingline
Loan or Loans.  Each Lender hereby
absolutely and unconditionally agrees, upon receipt of notice as provided above,
to pay to the Administrative Agent, for the account of the Swingline Lender,
such Lender’s Applicable Percentage of such Swingline Loan or Loans.  Each Lender acknowledges and agrees that its
obligation to acquire participations in Swingline Loans pursuant to this
paragraph is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including the occurrence and continuance of a Default
or reduction or termination of the Commitments, and that each such payment
shall be made without any offset, abatement, withholding or reduction
whatsoever.  Each Lender shall comply
with its obligation under this paragraph by wire transfer of immediately
available funds, in the same manner as provided in Section 2.06 with
respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis
mutandis, to the payment obligations of the Lenders), and the
Administrative Agent shall promptly pay to the Swingline Lender the amounts so
received by it from the Lenders.  The
Administrative Agent shall notify the Borrower of any participations in any
Swingline Loan acquired pursuant to this paragraph, and thereafter payments in
respect of such Swingline Loan shall be made to the Administrative Agent and
not to the Swingline Lender.  Any amounts
received by the Swingline Lender from the Borrower (or other party on behalf of
the Borrower) in respect of a Swingline Loan after receipt by the Swingline
Lender of the proceeds of a sale of participations therein shall be promptly
remitted to the Administrative Agent; any such amounts received by the
Administrative Agent shall be promptly remitted by the Administrative Agent to
the Lenders that shall have made their payments pursuant to this paragraph and
to the Swingline Lender, as their interests may appear; provided that any such
payment so remitted shall be repaid to the Swingline Lender or to the
Administrative Agent, as applicable, if and to the extent such payment is
required to be refunded to the Borrower for any 

 

22

 

reason.  The purchase of participations in a Swingline
Loan pursuant to this paragraph shall not relieve the Borrower of any default
in the payment thereof.

 

SECTION 2.06.  Funding of Borrowings.  (a)  Each Lender shall make each
Loan to be made by it hereunder on the proposed date thereof by wire transfer
of immediately available funds by 12:00 noon, New York City time, to the
account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders; provided that Swingline Loans shall be
made as provided in Section 2.05. 
The Administrative Agent will make such Loans available to the Borrower
by promptly crediting the amounts so received, in like funds, to an account of
the Borrower maintained with the Administrative Agent in New York City and designated
by the Borrower in the applicable Borrowing Request or Competitive Bid Request.

 

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

 

SECTION 2.07.  Interest Elections.  (a)  Each Revolving Borrowing
initially shall be of the Type specified in the applicable Borrowing Request
and, in the case of a Eurodollar Revolving Borrowing, shall have an initial
Interest Period as specified in such Borrowing Request.  Thereafter, the Borrower may elect to convert
such Borrowing to a different Type or to continue such Borrowing and, in the
case of a Eurodollar Revolving Borrowing, may elect Interest Periods therefor,
all as provided in this Section.  The
Borrower may elect different options with respect to different portions of the
affected Borrowing, in which case each such portion shall be allocated ratably
among the Lenders holding the Loans comprising such Borrowing, and the Loans
comprising each such portion shall be considered a separate Borrowing.  This Section shall not apply to Competitive
Borrowings or Swingline Borrowings, which may not be converted or continued.

 

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

 

23

 

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

 

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

 

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

 

(iii)          whether the
resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

 

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

 

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

 

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

 

(e)           If the Borrower
fails to deliver a timely Interest Election Request with respect to a
Eurodollar Revolving Borrowing prior to the end of the Interest Period
applicable thereto, then, unless such Borrowing is repaid as provided herein,
at the end of such Interest Period such Borrowing shall be converted to an ABR
Borrowing.  Notwithstanding any contrary
provision hereof, if an Event of Default has occurred and is continuing and the
Administrative Agent, at the request of the Required Lenders, so notifies the
Borrower, then, so long as an Event of Default is continuing (i) no outstanding
Revolving Borrowing may be converted to or continued as a Eurodollar Borrowing
and (ii) unless repaid, each Eurodollar Revolving Borrowing shall be converted
to an ABR Borrowing at the end of the Interest Period applicable thereto.

 

SECTION 2.08.  Termination and Reduction of Commitments.  (a)  Unless previously terminated,
the Commitments shall terminate on the Maturity Date.

 

(b)           The Borrower
may at any time terminate, or from time to time reduce, the Commitments; provided
that (i) each reduction of the Commitments shall be in an amount that is an
integral multiple of $1,000,000 and not less than $5,000,000 (unless all
Commitments are terminated in their entirety) and (ii) the Borrower shall not
terminate or reduce the Commitments if, after giving effect to any concurrent
prepayment of the Loans in accordance with Section 2.10, the sum of the
Revolving Credit Exposures plus the aggregate principal amount of outstanding
Competitive Loans would exceed the total Commitments.

 

24

 

(c)           The Borrower
shall notify the Administrative Agent of any election to terminate or reduce
the Commitments under paragraph (b) of this Section at least one Business
Day prior to the effective date of such termination or reduction, specifying
such election and the effective date thereof. 
Promptly following receipt of any notice, the Administrative Agent shall
advise the Lenders of the contents thereof. 
Each notice delivered by the Borrower pursuant to this Section shall be
irrevocable; provided that a notice of termination of the Commitments
delivered by the Borrower may state that such notice is conditioned upon the
effectiveness of other credit facilities, in which case such notice may be
revoked by the Borrower (by notice to the Administrative Agent on or prior to
the specified effective date) if such condition is not satisfied.  Any termination or reduction of the
Commitments shall be permanent.  Each
reduction of the Commitments shall be made ratably among the Lenders in
accordance with their respective Commitments.

 

SECTION 2.09.  Repayment of Loans; Evidence of Debt.  (a)  The Borrower hereby
unconditionally promises to pay (i) to the Administrative Agent for the account
of each Lender the then unpaid principal amount of each Revolving Loan on the Maturity
Date, (ii) to the Administrative Agent for the account of each Lender the then
unpaid principal amount of each Competitive Loan on the last day of the
Interest Period applicable to such Loan and (iii) to the Swingline Lender the
then unpaid principal amount of each Swingline Loan on the earlier of the
Termination Date and the first date after such Swingline Loan is made that is
the 15th or last day of a calendar month and is at least seven days after such Swingline Loan is made; provided
that on each date that a Revolving Borrowing or Competitive Borrowing is made,
the Borrower shall repay all Swingline Loans then outstanding.

 

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

 

(c)           The
Administrative Agent shall maintain accounts in which it shall record
(i) the amount of each Loan made hereunder, the Class and Type thereof and
the Interest Period applicable thereto, (ii) the amount of any principal
or interest due and payable or to become due and payable from the Borrower to
each Lender hereunder and (iii) the amount of any sum received by the
Administrative Agent hereunder for the account of the Lenders and each Lender’s
share thereof.

 

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

 

(e)           Any Lender may
request that Loans made by it be evidenced by a promissory note.  In such event, the Borrower shall prepare,
execute and deliver to such Lender a promissory note payable to the order of
such Lender (or, if requested by such Lender, to such Lender and its registered
assigns) and in a form approved by the Administrative Agent.  Thereafter, the Loans evidenced by such
promissory note and interest thereon shall at all times 

 

25

 

(including after assignment
pursuant to Section 9.04) be represented by one or more promissory notes in
such form payable to the order of the payee named therein (or, if such
promissory note is a registered note, to such payee and its registered
assigns).

 

SECTION 2.10.  Prepayment of Loans.  (a)  The Borrower shall have the
right at any time and from time to time to prepay any Borrowing in whole or in
part, subject to prior notice in accordance with paragraph (b) of this Section;
provided that the Borrower shall not have the right to prepay any
Competitive Loan without the prior consent of the Lender thereof and provided
that any such prepayment shall not be less than $1,000,000.

 

(b)           The Borrower
shall notify the Administrative Agent (and, in the case of prepayment of a
Swingline Loan, the Swingline Lender) by telephone (confirmed by telecopy) of
any prepayment hereunder (i) in the case of prepayment of a Eurodollar
Revolving Borrowing, not later than 3:00 p.m., New York City time, three
Business Days before the date of prepayment, (ii) in the case of prepayment of
an ABR Revolving Borrowing, not later than 3:00 p.m., New York City time, one
Business Day before the date of prepayment or (iii) in the case of
prepayment of a Swingline Loan, not later than 12:00 noon, New York City time,
on the date of prepayment.  Each such
notice shall be irrevocable and shall specify the prepayment date and the
principal amount of each Borrowing or portion thereof to be prepaid; provided
that, if a notice of prepayment is given in connection with a conditional
notice of termination of the Commitments as contemplated by Section 2.08,
then such notice of prepayment may be revoked if such notice of termination is
revoked in accordance with Section 2.08. 
Promptly following receipt of any such notice relating to a Revolving
Borrowing, the Administrative Agent shall advise the Lenders of the contents
thereof.  Each partial prepayment of any
Revolving Borrowing shall be in an amount that would be permitted in the case
of an advance of a Revolving Borrowing of the same Type as provided in Section
2.02.  Each prepayment of a Revolving
Borrowing shall be applied ratably to the Loans included in the prepaid
Borrowing.  Prepayments shall be
accompanied by accrued interest to the extent required by Section 2.12.

 

SECTION 2.11.  Fees. 
(a)  The Borrower agrees to pay to the Administrative Agent
for the account of each Lender a facility fee, which shall accrue at the
Applicable Facility Fee Rate on the daily amount of the Commitment of such
Lender (whether used or unused) during the period from and including the date
hereof to but excluding the date
on which such Commitment terminates; provided that, if such Lender
continues to have any Revolving Credit Exposure after its Commitment
terminates, then such facility fee shall continue to accrue on the daily amount
of such Lender’s Revolving Credit Exposure from and including the date on which
its Commitment terminates to but excluding the date on which such Lender ceases
to have any Revolving Credit Exposure. 
Facility fees accrued through and including the last day of March, June,
September and December of each year shall be payable on the third Business Day
following such last day, commencing on the first such date to occur three full
months after the date hereof; provided that all such fees shall be
payable on the date on which the Commitments terminate and any such fees
accruing after the date on which the Commitments terminate shall be payable on
demand.  All facility fees shall be
computed on the basis of a year of 360 days and shall be payable for the actual
number of days elapsed (including the first day but excluding the last day).

 

26

 

(b)           The Borrower
agrees to pay to the Administrative Agent, for its own account, fees payable in
the amounts and at the times separately agreed upon between the Borrower and
the Administrative Agent.

 

(c)           All fees
payable hereunder shall be paid on the dates due, in immediately available
funds, to the Administrative Agent for distribution, in the case of facility
fees and participation fees, to the Lenders. 
Fees paid shall not be refundable under any circumstances.

 

(d)           The Borrower
agrees to pay to the Administrative Agent for the account of each Lender a
utilization fee (the “Utilization Fee”), calculated at a rate of .0125%
per annum on the average daily amount of the total Revolving Credit Exposure
whenever such total Revolving Credit Exposure exceeds 50% of the
Commitments.  Utilization fees accrued
through and including the last day of March, June, September and December of
each year shall be payable on the third Business Day following such last day,
commencing on the first such date to occur after the Effective Date; provided
that all such fees shall be payable on the date on which the Commitments
terminate and any such fees accruing after the date on which the Commitments
terminate shall be payable on demand. 
All utilization fees shall be computed on the basis of a year of 360
days and shall be payable for the actual number of days elapsed (including the
first day but excluding the last day).

 

SECTION 2.12.  Interest.  (a)  The Loans comprising each
ABR Borrowing (including each Swingline Loan) shall bear interest at the
Alternate Base Rate plus the Applicable Margin.

 

(b)           The Loans
comprising each Eurodollar Borrowing shall bear interest (i) in the case of a
Eurodollar Revolving Loan, at the Adjusted LIBO Rate for the Interest Period in
effect for such Borrowing plus the Applicable Margin, or (ii) in the case of a
Eurodollar Competitive Loan, at the LIBO Rate for the Interest Period in effect
for such Borrowing plus (or minus, as applicable) the Margin applicable to such
Loan.

 

(c)           Each Fixed Rate
Loan shall bear interest at the Fixed Rate applicable to such Loan.

 

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

 

(e)           Accrued
interest on each Loan shall be payable in arrears on each Interest Payment Date
for such Loan and, in the case of Revolving Loans, upon termination of the
Commitments; provided that (i) interest accrued pursuant to paragraph
(d) of this Section shall be payable on demand, (ii) in the event of any
repayment or prepayment of any Loan (other than a prepayment of an ABR
Revolving Loan prior to the end of the Availability Period), accrued interest
on the principal amount repaid or prepaid shall be payable on the date of such
repayment 

 

27

 

or prepayment and (iii) in
the event of any conversion of any Eurodollar Revolving Loan prior to the end
of the current Interest Period therefor, accrued interest on such Loan shall be
payable on the effective date of such conversion.

 

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

 

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

 

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

 

(b)           the
Administrative Agent is advised by the Required Lenders (or, in the case of a
Eurodollar Competitive Loan, the Lender that is required to make such Loan)
that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest
Period will not adequately and fairly reflect the cost to such Lenders (or
Lender) of making or maintaining their Loans (or its Loan) included in such
Borrowing for such Interest Period;

 

then the Administrative Agent shall give notice thereof to the Borrower
and the Lenders by telephone or telecopy as promptly as practicable thereafter
and, until the Administrative Agent notifies the Borrower and the Lenders that
the circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Revolving Borrowing to, or
continuation of any Revolving Borrowing as, a Eurodollar Borrowing shall be
ineffective, (ii) if any Borrowing Request requests a Eurodollar Revolving
Borrowing, such Borrowing shall be made as an ABR Borrowing and (iii) any
request by the Borrower for a Eurodollar Competitive Borrowing shall be
ineffective; provided that (A) if the circumstances giving rise to such
notice do not affect all the Lenders, then requests by the Borrower for
Eurodollar Competitive Borrowings may be made to Lenders that are not affected
thereby and (B) if the circumstances giving rise to such notice affect only one
Type of Borrowings, then the other Type of Borrowings shall be permitted.

 

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

 

(i)            impose, modify
or deem applicable any reserve, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, any
Lender (except any such reserve requirement reflected in the Adjusted LIBO
Rate); or

 

(ii)           impose on any
Lender or the London interbank market any other condition affecting this
Agreement or Eurodollar Loans or Fixed Rate Loans made by such Lender or
participation therein;

 

28

 

and the result of any of the foregoing shall be to increase the cost to
such Lender of making or maintaining any Eurodollar Loan or Fixed Rate Loan (or
of maintaining its obligation to make any such Loan) or to reduce the amount of
any sum received or receivable by such Lender hereunder (whether of principal,
interest or otherwise), then the Borrower will pay to such Lender such
additional amount or amounts as will compensate such Lender for such additional
costs incurred or reduction suffered.

 

(b)           If any Lender
determines that any Change in Law regarding capital requirements has or would
have the effect of reducing the rate of return on such Lender’s capital or on
the capital of such Lender’s holding company, if any, as a consequence of this
Agreement or the Loans made hereby to a level below that which such Lender or
such Lender’s holding company could have achieved but for such Change in Law
(taking into consideration such Lender’s policies and the policies of such
Lender’s holding company with respect to capital adequacy), then from time to
time the Borrower will pay to such Lender such additional amount or amounts as
will compensate such Lender or such Lender’s holding company for any such
reduction suffered.

 

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

 

(d)           Failure or
delay on the part of any Lender to demand compensation pursuant to this Section
shall not constitute a waiver of such Lender’s right to demand such
compensation; provided that the Borrower shall not be required to
compensate a Lender pursuant to this Section for any increased costs or
reductions incurred more than 270 days prior to the date that such Lender
notifies the Borrower of the Change in Law giving rise to such increased costs
or reductions and of such Lender’s intention to claim compensation therefor; provided
further that, if the Change in Law giving rise to such increased costs
or reductions is retroactive, then the 270-day period referred to above shall
be extended to include the period of retroactive effect thereof.

 

(e)           Notwithstanding
the foregoing provisions of this Section, a Lender shall not be entitled to
compensation pursuant to this Section in respect of any Competitive Loan if the
Change in Law that would otherwise entitle it to such compensation shall have
been publicly announced prior to submission of the Competitive Bid pursuant to
which such Loan was made.

 

(f)            Notwithstanding
anything in this Section to the contrary, this Section shall not apply to
Taxes, which shall be governed solely by Section 2.16.

 

SECTION 2.15.  Break Funding Payments.  In the event of (a) the payment of any
principal of any Eurodollar Loan or Fixed Rate Loan other than on the last day
of an Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Eurodollar Loan or Fixed Rate Loan on the date specified
in any notice delivered pursuant hereto (regardless of whether such notice may
be 

 

29

 

revoked under Section 2.10(b)
and is revoked in accordance therewith), (d) the failure to borrow any
Competitive Loan after accepting the Competitive Bid to make such Loan, or
(e) the assignment of any Eurodollar Loan or Fixed Rate Loan other than on
the last day of the Interest Period applicable thereto as a result of a request
by the Borrower pursuant to Section 2.18, then, in any such event, the
Borrower shall compensate each Lender for the loss, cost and expense
attributable to such event.  In the case
of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed
to include an amount determined by such Lender to be the excess, if any, of (i)
the amount of interest which would have accrued on the principal amount of such
Loan had such event not occurred, at the Adjusted LIBO Rate that would have
been applicable to such Loan, for the period from the date of such event to the
last day of the then current Interest Period therefor (or, in the case of a
failure to borrow, convert or continue, for the period that would have been the
Interest Period for such Loan), over (ii) the amount of interest which would
accrue on such principal amount for such period at the interest rate which such
Lender would bid were it to bid, at the commencement of such period, for dollar
deposits of a comparable amount and period from other banks in the eurodollar
market.  A certificate of any Lender
setting forth any amount or amounts that such Lender is entitled to receive
pursuant to this Section shall be delivered to the Borrower and shall be
conclusive absent manifest error.  The
Borrower shall pay such Lender the amount shown as due on any such certificate
within 10 days after receipt thereof.

 

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

 

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

 

(c)           The Borrower
shall indemnify the Administrative Agent and each Lender promptly after written
demand therefor, which written demand shall be made promptly after the
Administrative Agent or such Lender receives written demand for payment of any
Indemnified Taxes or Other Taxes from the relevant Governmental Authority, for
the full amount of such Indemnified Taxes or Other Taxes paid by the
Administrative Agent or such Lender, as the case may be, on or with respect to
any payment by or on account of any obligation of the Borrower hereunder
(including Indemnified Taxes or Other Taxes properly imposed or asserted on or
attributable to amounts payable under this Section 2.16(b)) and any penalties,
interest and reasonable expenses arising therefrom or with respect thereto, whether
or not such Indemnified Taxes or Other Taxes were correctly or legally imposed
or asserted by the relevant Government Authority.  A certificate as to the amount of such
payment or liability and, in reasonable detail, the manner in which such amount
shall have been determined, delivered to the Borrower by a 

 

30

 

Lender or by the
Administrative Agent on its own behalf or on behalf of a Lender, shall be
conclusive absent manifest error.

 

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

 

(e)           Each Foreign
Lender shall deliver to the Borrower and the Administrative Agent on or before
the date such Foreign Lender becomes a party to this Agreement and on or before
the date, if any, such Foreign Lender changes its lending office (i) two
duly executed and properly completed Internal Revenue Service
Forms W-8ECI, W-8IMY, W-8EXP, or W-8BEN (with respect to the benefit of an
income tax treaty), or other applicable forms, certifying to such Foreign
Lender’s entitlement to a complete exemption from or reduced rate of United
States withholding tax with respect to all payments to be made to it under the
Loan Documents, or (ii) if such Foreign Lender is not a “bank” within the
meaning of Section 881(c)(3)(A) of the Code, either (x) the forms referred
to in clause (i) above certifying to such Foreign Lender’s entitlement to
a complete exemption from United States withholding tax with respect to all
payments to be made to it under the Loan Documents, or (y) two duly executed
and properly completed Internal Revenue Service Forms W-8BEN (or successor
forms) and a duly executed certificate substantially in the form of Exhibit E
(any such certificate, a “Section 2.16(e) Certificate”).  In addition, each Foreign Lender shall
deliver such Internal Revenue Service forms and the Section 2.16(e) Certificate
(as applicable) to the Borrower and the Administrative Agent promptly upon the
obsolescence, inaccuracy or invalidity of any such Internal Revenue Service
forms or Section 2.16(e) Certificate previously delivered by such Foreign
Lender pursuant to this Section 2.16(e). 
Notwithstanding any other provision of this paragraph, a Foreign Lender
shall not be required to deliver any form pursuant to this paragraph that such
Foreign Lender is not legally able to deliver.

 

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

 

31

 

SECTION 2.17.  Payments Generally; Pro Rata Treatment;
Sharing of Set-offs. 
(a)  The Borrower shall make each payment required to be made
by it hereunder (whether of principal, interest, fees, or of amounts payable
under Section 2.14, 2.15 or 2.16, or otherwise) prior to 12:00 noon, New York
City time, on the date when due, in immediately available funds, without set-off
or counterclaim.  Any amounts received
after such time on any date may, in the discretion of the Administrative Agent,
be deemed to have been received on the next succeeding Business Day for
purposes of calculating interest thereon. 
All such payments shall be made to the Administrative Agent at its
offices at 270 Park Avenue, New York, New York and except that payments
pursuant to Sections 2.14, 2.15, 2.16 and 9.03 shall be made directly to the
Persons entitled thereto.  The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof.  If any payment
hereunder shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day, and, in the case
of any payment accruing interest, interest thereon shall be payable for the
period of such extension.  All payments
hereunder shall be made in dollars.

 

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

 

(c)           If any Lender
shall, by exercising any right of set-off or counterclaim or otherwise, obtain
payment in respect of any principal of or interest on any of its Revolving
Loans or Swingline Loans resulting in such Lender receiving payment of a
greater proportion of the aggregate amount of its Revolving Loans and Swingline
Loans and accrued interest thereon than the proportion received by any other
Lender, then the Lender receiving such greater proportion shall purchase (for
cash at face value) participations in the Revolving Loans and Swingline Loans
of other Lenders to the extent necessary so that the benefit of all such
payments shall be shared by the Lenders ratably in accordance with the
aggregate amount of principal of and accrued interest on their respective
Revolving Loans and Swingline Loans; provided that (i) if any such
participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment
made by the Borrower pursuant to and in accordance with the express terms of
this Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans to any assignee or
participant, other than to the Borrower or any Subsidiary or Affiliate thereof
(as to which the provisions of this paragraph shall apply).  The Borrower consents to the foregoing and
agrees, to the extent it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against the Borrower rights of set-off and counterclaim with respect
to such participation as fully as if such Lender were a direct creditor of the
Borrower in the amount of such participation.

 

32

 

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

 

(e)           If any Lender
shall fail to make any payment required to be made by it pursuant to Section
2.05(c), 2.06(b) or 2.17(d), then the Administrative Agent may, in its
discretion (notwithstanding any contrary provision hereof), apply any amounts
thereafter received by the Administrative Agent for the account of such Lender
to satisfy such Lender’s obligations under such Sections until all such
unsatisfied obligations are fully paid.

 

SECTION 2.18.  Mitigation Obligations; Replacement of
Lenders.  (a)  If any
Lender requests compensation under Section 2.14, or if the Borrower
is required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.16, then
such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would eliminate
or reduce amounts payable pursuant to Section 2.14 or 2.16, as the case may be,
in the future and (ii) would not, in the reasonable judgment of such Lender,
require such Lender to incur an unreimbursed out-of-pocket cost or expense, or
a legal or regulatory disadvantage, determined by such Lender to be
material.  The Borrower hereby agrees to
pay all reasonable out-of-pocket costs and expenses incurred by any Lender in
connection with any such designation or assignment.

 

(b)           If any Lender
requests compensation under Section 2.14, or if the Borrower is required
to pay any additional amount or indemnity payment to any Lender or any
Governmental Authority for the account of any Lender pursuant to
Section 2.16, or if any Lender defaults in its obligation to fund Loans
hereunder, or if any Lender fails to consent to a proposed amendment or waiver
which is consented to by the Required Holders but which requires a unanimous
approval of all Lenders then the Borrower may, at its sole expense and effort,
upon notice to such Lender and the Administrative Agent, require such Lender to
assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in Section 9.04), all its interests, rights and
obligations under this Agreement (other than any outstanding Competitive Loans
held by it) to an assignee that shall assume such obligations (which assignee
may be another Lender, if a Lender accepts such assignment); provided
that (i) the Borrower shall have received the prior written consent of the
Administrative Agent, which consent shall not unreasonably be withheld, (ii)
such Lender shall have received payment of an amount equal to the outstanding
principal of its Loans (other than Competitive Loans) and Swingline Loans,
accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the 

 

33

 

Borrower (in the case of all
other amounts) and (iii) in the case of any such assignment resulting from
a claim for compensation under Section 2.14 or payments required to be made
pursuant to Section 2.16, such assignment will result in a reduction in
such compensation or payments.  A Lender
shall not be required to make any such assignment and delegation if, prior
thereto, as a result of a waiver by such Lender or otherwise, the circumstances
entitling the Borrower to require such assignment and delegation cease to
apply.

 

ARTICLE
III

Representations and Warranties

 

The Borrower represents and warrants to the Lenders that:

 

SECTION 3.01.  Organization; Powers.  Each of the Borrower and its Subsidiaries is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, has all requisite power and authority to
carry on its business as now conducted and, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, is qualified to do business in, and is in good
standing in, every jurisdiction where such qualification is required.

 

SECTION 3.02.  Authorization; Enforceability.  The Transactions are within the Borrower’s
corporate powers and have been duly authorized by all necessary corporate and,
if required, stockholder action.  This
Agreement has been duly executed and delivered by the Borrower and constitutes
a legal, valid and binding obligation of the Borrower, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors’ rights generally
and subject to general principles of equity, regardless of whether considered
in a proceeding in equity or at law.

 

SECTION 3.03.  Governmental Approvals; No Conflicts.  Except as could not reasonably be expected to
result in a Material Adverse Effect, the Transactions (a) do not require any
consent or approval of, registration or filing with, or any other action by,
any Governmental Authority, except such as have been obtained or made and are
in full force and effect, (b) do not violate any applicable law or regulation
or any order of any Governmental Authority in each case applicable to the
Borrower or any of its Subsidiaries, (c) do not violate or result in a default
under any indenture, agreement or other instrument binding upon the Borrower or
any of its Subsidiaries or its assets, or give rise to a right thereunder to
require any payment to be made by the Borrower or any of its Subsidiaries, and
(d) do not result in the creation or imposition of any Lien on any asset of the
Borrower or any of its Subsidiaries.  The
Transactions do not violate the charter, by-laws or other organizational
documents of the Borrower or any of its Subsidiaries.

 

SECTION 3.04.  Federal Regulations.  No part of the proceeds of any Loans, and no
other extensions of credit hereunder, will be used for “buying” or “carrying”
any “margin stock” within the respective meanings of each of the quoted terms
under Regulation U as now and from time to time hereafter in effect in any
manner that violates the provisions of the Regulations of the Board.  If requested by any Lender or the
Administrative Agent, the Borrower will furnish to the Administrative Agent and
each Lender a statement to the foregoing effect in 

 

34

 

conformity with the
requirements of FR Form G-3 or FR Form U-1, as applicable, referred to in
Regulation U.

 

SECTION 3.05.  Financial Condition; No Material Adverse
Change.  (a)  The Borrower
has heretofore furnished to the Lenders its consolidated balance sheet and
statements of income, stockholders equity and cash flows as of and for the
fiscal year ended December 31, 2005, reported on by Deloitte & Touche LLP,
independent public accountants. Such financial statements present fairly, in
all material respects, the financial position and results of operations and cash
flows of the Borrower and each of its Subsidiaries as of such dates and for
such periods in accordance with GAAP.

 

(b)           Since December
31, 2005, there has been no material adverse change in the business, assets,
operations, prospects or condition, financial or otherwise, of the Borrower and
its Subsidiaries, taken as a whole.

 

SECTION 3.06.  Properties.  (a)  Each of the Borrower and its
Subsidiaries has good title to, or valid leasehold interests in, all its real
and personal property material to its business, except for such defects in
title that could not reasonably be expected to have a Material Adverse Effect,
and none of such property is subject to any Lien except as permitted by Section
6.02.

 

(b)           Each of the
Borrower and its Subsidiaries owns, or is licensed to use, all trademarks,
tradenames, copyrights, patents and other intellectual property material to its
business, and the use thereof by the Borrower and its Subsidiaries does not
infringe upon the rights of any other Person, except for any such infringements
that, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.

 

SECTION 3.07.  Litigation and Environmental Matters.  (a)  There are no actions, suits or
proceedings by or before any arbitrator or Governmental Authority pending
against or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or any of its Subsidiaries (i) as to which there is a
reasonable possibility of an adverse determination and that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect (other than the Disclosed Matters) or
(ii) that involve this Agreement or the Transactions.

 

(b)           Except for the
Disclosed Matters and except with respect to any other matters that,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, neither the Borrower nor any of its Subsidiaries
(i) has failed to comply with any Environmental Law or to obtain, maintain
or comply with any permit, license or other approval required under any
Environmental Law, (ii) has become subject to any Environmental Liability
or (iii) has received notice of any claim with respect to any
Environmental Liability.

 

(c)           Since the
Effective Date, there has been no change in the status of the Disclosed Matters
that, individually or in the aggregate, has resulted in, or materially
increased the likelihood of, a Material Adverse Effect.

 

SECTION 3.08.  Compliance with Laws and Agreements.  Each of the Borrower and its Subsidiaries is
in compliance with all laws, regulations and orders of any Governmental 

 

35

 

Authority applicable to it or
its property and all indentures, agreements and other instruments binding upon
it or its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.  No Default has occurred and is
continuing.

 

SECTION 3.09.  Significant Subsidiaries.  Except as disclosed to the Administrative
Agent (which shall be furnished by the Administrative Agent to each Lender) by
the Borrower in writing from time to time after the Effective Date, Schedule
3.09 sets forth the name and jurisdiction of incorporation of each Significant
Subsidiary and, as to each such Significant Subsidiary, the percentage of each
class of stock owned by any party hereto.

 

SECTION 3.10.  Investment and Holding Company Status,
Other Regulations.  The Borrower is
not an “investment company”, or a company “controlled” by an “investment
company”, within the meaning of the Investment Company Act of 1940, as
amended.  The Borrower is not subject to
regulation under any Requirement of Law (other than Regulation X of the Board)
that limits its ability to incur Indebtedness.

 

SECTION 3.11.  Taxes. 
Each of the Borrower and its Subsidiaries has timely filed or caused to
be filed all Tax returns and reports required to have been filed and has paid
or caused to be paid all Taxes required to have been paid by it, except
(a) Taxes that are being contested in good faith by appropriate
proceedings and for which the Borrower or such Subsidiary, as applicable, has
set aside on its books adequate reserves or (b) to the extent that the
failure to do so could not reasonably be expected to result in a Material
Adverse Effect.

 

SECTION 3.12.  ERISA. 
No ERISA Event has occurred or is reasonably expected to occur that,
when taken together with all other such ERISA Events for which liability is
reasonably expected to occur, could reasonably be expected to result in a
Material Adverse Effect.  The present
value of all accumulated benefit obligations under each Plan (based on the
assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed the fair market value of the assets of such
Plan, and the present value of all accumulated benefit obligations of all
underfunded Plans (based on the assumptions used for purposes of Statement of
Financial Accounting Standards No. 87) did not, as of the date of the most
recent financial statements reflecting such amounts, exceed the fair market
value of the assets of all such underfunded Plans, in each case by an amount
that could reasonably be expected to result in a Material Adverse Effect.

 

SECTION 3.13.  Use of Proceeds.  The proceeds of the Revolving Loans and the
Competitive Loans shall be used to finance the working capital needs and
general corporate purposes of the Borrower and its Subsidiaries.

 

SECTION 3.14.  No Default.  None of the Borrower or its Subsidiaries is
in default under or with respect to any of its material Contractual Obligations
in any respect that could reasonably be expected to have a Material Adverse
Effect.

 

SECTION 3.15.  Disclosure.  Neither the Information Memorandum nor any of
the other reports, financial statements, certificates or other information
(other than projected 

 

36

 

financial information)
furnished by or on behalf of the Borrower to the Lenders in connection with the
negotiation of this Agreement or delivered hereunder (as modified or
supplemented by other information so furnished) contains, when taken as a whole
as of each date on which the representation and warranty is made or deemed
made, any material misstatement of fact or omits to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided that, with respect
to projected financial information, the Borrower represents only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time.

 

SECTION 3.16.  Insurance Licenses.  (a)          Each
Regulated Insurance Company has obtained and maintains in full force and effect
all licenses and permits from all regulatory authorities necessary to operate
in the jurisdictions in which such Regulated Insurance Company operates, in
each case other than such licenses and permits the failure of which to obtain
or maintain, individually or in the aggregate, would not reasonably to expected
to have a Material Adverse Effect.

 

(b)           There is (i) no
Insurance License that is the subject of a proceeding for suspension,
revocation or limitation or any similar proceedings, (ii) no sustainable basis
for such a suspension, revocation or limitation, and (iii) to the knowledge of
Borrower, no such suspension, revocation or limitation threatened by any
Applicable Insurance Regulatory Authority, that, in the each instance under
(i), (ii) and (iii) above, has had, or would reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.  No Regulated Insurance Company transacts any
insurance business, directly or indirectly, in any jurisdiction where such
business requires any Insurance License of an Applicable Insurance Regulatory
Authority or such jurisdiction not validly maintained by such Regulated
Insurance Company, except to the extent that the failure to so maintain has not
had, or would not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.

 

ARTICLE
IV

Conditions

 

SECTION 4.01.  Effective Date.  The obligations of the Lenders to make Loans
hereunder shall not become effective until the date on which each of the
following conditions is satisfied (or waived in accordance with Section 9.02):

 

(a)           The
Administrative Agent (or its counsel) shall have received from each party
hereto either (i) a counterpart of this Agreement signed on behalf of such
party or (ii) written evidence satisfactory to the Administrative Agent (which
may include telecopy transmission of a signed signature page of this Agreement)
that such party has signed a counterpart of this Agreement.

 

(b)           The
Administrative Agent shall have received a favorable written opinion (addressed
to the Administrative Agent and the Lenders and dated the Effective Date) of
Fried Frank Harris Shriver & Jacobson, LLP, counsel for the Borrower,
substantially in the form of Exhibit B, and covering such other matters
relating to the Borrower, this 

 

37

 

Agreement or the
Transactions as the Required Lenders shall reasonably request.  The Borrower hereby requests such counsel to
deliver such opinion.

 

(c)           The
Administrative Agent shall have received such documents and certificates as the
Administrative Agent or its counsel may reasonably request relating to the
organization, existence and good standing of the Borrower, the authorization of
the Transactions and any other legal matters relating to the Borrower, this
Agreement or the Transactions, all in form and substance satisfactory to the
Administrative Agent and its counsel.

 

(d)           The
Administrative Agent shall have received a certificate, dated the Effective
Date and signed by the President, the General Counsel or a Financial Officer of
the Borrower, confirming compliance with the conditions set forth in
paragraphs (a) and (b) of Section 4.02.

 

(e)           The
Administrative Agent shall have received all fees and other amounts due and
payable on or prior to the Effective Date, including, to the extent invoiced,
reimbursement or payment of all out-of-pocket expenses required to be reimbursed
or paid by the Borrower hereunder.

 

The Administrative Agent shall notify the Borrower and the Lenders of
the Effective Date, and such notice shall be conclusive and binding.  Notwithstanding the foregoing, the
obligations of the Lenders to make Loans hereunder shall not become effective
unless each of the foregoing conditions is satisfied (or waived pursuant to
Section 9.02) at or prior to 3:00 p.m., New York City time, on May 1, 2006
(and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate at such time).

 

SECTION 4.02.  Each Credit Event.  The obligation of each Lender to make a Loan
on the occasion of any Borrowing is subject to the satisfaction of the
following conditions:

 

(a)           The
representations and warranties of the Borrower set forth in this Agreement
shall be true and correct in all material respects on and as of the date of
such Borrowing.

 

(b)           At the time of
and immediately after giving effect to such Borrowing, no Default or Event of
Default shall have occurred and be continuing.

 

Each Borrowing shall be deemed to constitute a representation and
warranty by the Borrower on the date thereof as to the matters specified in
paragraphs (a) and (b) of this Section.

 

ARTICLE
V

Affirmative Covenants

 

Until the Commitments have expired or been terminated and the principal
of and interest on each Loan and all fees payable hereunder shall have been
paid in full, the Borrower covenants and agrees with the Lenders that:

 

38

 

SECTION 5.01.  Financial Statements; Ratings Change and
Other Information.  The Borrower will
furnish to the Administrative Agent and each Lender:

 

(a)           as soon as
available but in any event within 105 days after the end of each fiscal year of the Borrower, its
audited consolidated balance sheet and related statements of operations,
stockholders’ equity and cash flows as of the end of and for such year, setting
forth in each case in comparative form the figures for the previous fiscal
year, all reported on by Deloitte & Touche LLP or other independent public
accountants of recognized national standing (without a “going concern” or like
qualification or exception and without any qualification or exception as to the
scope of such audit) to the effect that such consolidated financial statements
present fairly in all material respects the financial condition and results of
operations of the Borrower and its consolidated Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied;

 

(b)           as soon as
available but in any event within 50 days after the end of each of the
first three fiscal quarters of each fiscal year of the Borrower, its
consolidated balance sheet and related statements of operations, stockholders’
equity and cash flows as of the end of and for such fiscal quarter and the then
elapsed portion of the fiscal year, setting forth in each case in comparative
form the figures for the corresponding period or periods of (or, in the case of
the balance sheet, as of the end of) the previous fiscal year, all certified by
one of its Financial Officers as presenting fairly in all material respects the
financial condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes;

 

(c)           concurrently
with any delivery of financial statements under clause (a) or
(b) above, a certificate of a Financial Officer of the Borrower
(i) certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed to be
taken with respect thereto, (ii) setting forth reasonably detailed
calculations demonstrating compliance with Sections 6.06 and
(iii) stating whether any change in GAAP or in the application thereof has
occurred since the date of the audited financial statements referred to in
Section 3.05 and, if any such change has occurred, specifying the effect
of such change on the financial statements accompanying such certificate;

 

(d)           to the extent
permitted by the rules of the American Institute of Certified Public
Accountants, the Public Company Accounting Oversight Board or any other
accounting governing body, concurrently with any delivery of financial
statements under clause (a) above, a certificate of the accounting firm
that reported on such financial statements stating whether they obtained
knowledge during the course of their examination of such financial statements
of any Default under Section 6.06 (which certificate may be limited to the
extent required by accounting rules or guidelines);

 

(e)           promptly after
the same become publicly available, copies of all periodic and other reports,
proxy statements and other materials filed by the Borrower or any Subsidiary
with the Securities and Exchange Commission, or any Governmental Authority
succeeding to any or all of the functions of said Commission, or with any 

 

39

 

national securities
exchange, or distributed by the Borrower to its shareholders generally, as the
case may be;

 

(f)            promptly after
S&P shall have announced a change in the financial strength rating of ACA
Financial Guaranty Corporation, written notice of such rating change;

 

(g)           promptly after
the filing thereof, a copy of each Statutory Statement filed by ACA Financial
Guaranty Corporation and any other material Regulated Insurance Company with
the Applicable Insurance Regulatory Authority in the jurisdiction in which it
is domiciled;

 

(h)           promptly
following the delivery or receipt, as the case may be, by any Regulated
Insurance Company or any of their respective Subsidiaries, copies of (a) each
material examination and/or audit report or other submitted to any Regulated
Insurance Company by any Applicable Insurance Regulatory Authority, (b) all
material information which the Lenders may from time to time reasonably request
with respect to the nature or status of any material deficiencies or violations
reflected in any examination report or other similar report, and (c) each
registration, filing, submission, report, order, direction, instruction,
approval, authorization, license or other notice which any Borrower or any
Regulated Insurance Company may at any time make with, or receive from, any
Applicable Insurance Regulatory Authority that could reasonably be expected to
have a Material Adverse Effect; and

 

(i)            promptly
following any request therefor, such other information regarding the
operations, business affairs and financial condition of the Borrower or any
Subsidiary, or compliance with the terms of this Agreement, as the
Administrative Agent or any Lender may reasonably request.

 

Reports and financial statements required to be delivered by the
Borrower pursuant to paragraphs (a), (b), (e) and (g) of this Section 5.01
shall be deemed to have been delivered on the date on which the Borrower posts
such reports, or reports containing such financial statements, on its website
on the Internet at www.aca.com or when such reports, or reports containing such
financial statements are posted on the SEC’s website at www.sec.gov; provided
that the Borrower shall deliver paper copies of the reports and financial
statements referred to in paragraphs (a), (b), (e) and (g) of this Section 5.01
to the Administrative Agent or any Lender who requests it to deliver such paper
copies until written notice to cease delivering paper copies is given by the
Administrative Agent or such Lender.

 

SECTION 5.02.  Notices of Material Events.  The Borrower will furnish to the
Administrative Agent and each Lender prompt written notice of the following:

 

(a)           the occurrence
of any Default;

 

(b)           the filing or
commencement of any action, suit or proceeding by or before any arbitrator or
Governmental Authority against or affecting the Borrower or any Affiliate
thereof that could reasonably be expected to be adversely determined and, if so

 

40

 

adversely determined, could
reasonably be expected to result in a Material Adverse Effect;

 

(c)           the occurrence
of any ERISA Event that, alone or together with any other ERISA Events that
have occurred, could reasonably be expected to result in liability of the
Borrower and its Subsidiaries in an aggregate amount not to exceed the
Threshold Amount;

 

(d)           promptly
following notification thereof from a Governmental Authority, notification of
the suspension, limitation, termination or non-renewal of any material
Insurance License, or the taking of any other action in respect of, any
Insurance License that could reasonably be expected to result in a Material
Adverse Effect; and

 

(e)           any other
development that results in, or could reasonably be expected to result in, a
Material Adverse Effect.

 

Each notice delivered under
this Section shall be accompanied by a statement of a Financial Officer or
other executive officer of the Borrower setting forth the details of the event
or development requiring such notice and any action taken or proposed to be
taken with respect thereto.

 

SECTION 5.03.  Existence; Conduct of Business.  The Borrower will, and will cause each of its
Subsidiaries to, do or cause to be done all things necessary to preserve, renew
and keep in full force and effect its legal existence and the rights, licenses,
permits, privileges and franchises material to the conduct of its business,
including the maintenance of 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; provided that the foregoing shall
not prohibit any merger, consolidation, liquidation or dissolution permitted
under Section 6.03; and provided, further, that the Borrower shall not be required to preserve
any such right, license, permit, privilege or franchise, if its board of
directors shall determine in good faith that the preservation thereof is no
longer desirable in the conduct of the business of the Borrower and its
Subsidiaries, taken as a whole, and that the loss thereof is not materially disadvantageous
to the Lenders.

 

SECTION 5.04.  Payment of Obligations.  The Borrower will, and will cause each of its
Subsidiaries to, pay its obligations, including Tax liabilities, that, if not
paid, could result in a Material Adverse Effect before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (b) the Borrower or
such Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP or SAP or both, as the case may be, and (c) the
failure to make payment pending such contest could not reasonably be expected
to result in a Material Adverse Effect.

 

SECTION 5.05.  Maintenance of Properties; Insurance.  The Borrower will, and will cause each of its
Subsidiaries to, (a) keep and maintain all property material to the
conduct of its business in good working order and condition, ordinary wear and
tear excepted (provided that nothing herein shall prevent the Borrower or any
of its Subsidiaries to dispose of any of their respective properties so long as
such disposition is not prohibited by Section 6.03), and 

 

41

 

(b) maintain, with
financially sound and reputable insurance companies, insurance in such amounts
and against such risks as are prudent for the business operated by the
Borrower.

 

SECTION 5.06.  Books and Records; Inspection Rights.  The Borrower will, and will cause each of its
Subsidiaries to, keep proper books of record and account in which full, true
and correct entries are made of all dealings and transactions in relation to
its business and activities.  The
Borrower will, and will cause each of its Subsidiaries to, permit any representatives
designated by the Administrative Agent, upon reasonable prior notice and under
guidance of officers of either Borrower or such Subsidiary, without
interruption of business and, unless an Event of Default shall then exist, at
the sole cost and expense of the Administrative Agent, to visit and inspect its
properties, to examine and make extracts from its books and records, and to
discuss its affairs, finances and condition with its officers and independent
accountants, all at such reasonable times and as often as reasonably requested
(but, in the absence of an Event of Default, no more often than twice each
year).

 

SECTION 5.07.  Compliance with Laws.  The Borrower will, and will cause each of its
Subsidiaries to, comply with all laws, rules, regulations and orders of any
Governmental Authority applicable to it or its property, as well as all of its
material Contractual Obligations, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.

 

SECTION 5.08.  Compliance with Investment Guidelines.
The Borrower will, and will cause each of its Subsidiaries that is a Regulated
Insurance Company to comply with the investment guidelines established from
time to time by the Board of Directors of the Borrower.

 

SECTION 5.09.  Intentionally Omitted.

 

SECTION 5.10.  Financial Strength Rating.   The Borrower will cause ACA Financial
Guaranty Corporation to maintain a minimum financial strength rating from
S&P of A- or better.  If the rating
system of S&P (or its successor) shall change or if it (or its successors)
shall cease to be in the business of rating the financial strength of insurance
companies like the Regulated Insurance Companies, the Borrower and the Lenders
shall negotiate in good faith to amend the references to the specific S&P
rating in this Agreement to reflect such changed rating system or the
non-availability of ratings from such agency (it being understood that any such
amendment to such specific ratings shall in no event be effective without the
approval of the Required Lenders).

 

ARTICLE
VI

Negative Covenants

 

Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder have been paid in
full, the Borrower covenants and agrees with the Lenders that:

 

42

 

SECTION 6.01.  Indebtedness.  The Borrower will not permit any Subsidiary
to create, incur, assume or permit to exist any Indebtedness, except:

 

(a)           Indebtedness
existing on the date hereof and set forth in Schedule 6.01, but not any
extensions, renewals or replacements of any such Indebtedness, unless such
extension, renewal or replacement does not increase the outstanding principal
amount thereof;

 

(b)           Indebtedness of
any Subsidiary to the Borrower or any other Subsidiary;

 

(c)           Indebtedness of
any Subsidiary incurred to finance the acquisition, construction or improvement
of any fixed or capital assets, including Capital Lease Obligations and any
Indebtedness assumed in connection with the acquisition of any such assets or
secured by a Lien on any such assets prior to the acquisition thereof, and
extensions, renewals and replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof;

 

(d)           Indebtedness of
any Person that becomes a Subsidiary after the date hereof; provided
that such Indebtedness exists at the time such Person becomes a Subsidiary and
is not created in contemplation of or in connection with such Person becoming a
Subsidiary;

 

(e)           Indebtedness of
any Subsidiary that is excluded from “Debt”, as defined in this Agreement;

 

(f)            (A) contingent
liabilities in respect of any indemnification, adjustment of purchase price,
earn-out, non-compete, consulting, deferred compensation and similar obligations
of the Borrower and its Subsidiaries incurred in connection with acquisitions
and dispositions of assets and (B) Indebtedness incurred by the Borrower or its
Subsidiaries in connection with an acquisition or disposition of assets in the
nature of earn-outs or the adjustment of the purchase price or similar
adjustments;

 

(g)           Indebtedness
owed to any Person providing property, casualty or liability insurance to the
Borrower or any Subsidiary of the Borrower, so long as such Indebtedness shall
not be in excess of the amount of the unpaid cost of, and shall be incurred
only to defer the cost of, such insurance for the year in which such
Indebtedness is incurred and such Indebtedness shall be outstanding only during
such year;

 

(h)           Indebtedness
arising from the honoring by a bank or other financial institution of a check,
draft or similar instrument drawn against insufficient funds in the ordinary
course of business; provided that (A) such Indebtedness (other than
credit or purchase cards) is extinguished within five Business Days of its
incurrence and (B) such Indebtedness in respect of credit or purchase cards is
extinguished within 60 days from its incurrence;

 

(i)            Indebtedness
representing deferred compensation to employees of any Subsidiary;

 

43

 

(j)            Indebtedness of
any Subsidiary as an account party in respect of letters of credit opened in
the ordinary course of such Subsidiary’s business and other Indebtedness of any
Subsidiary incurred in the ordinary course of its business, provided that any
such Indebtedness under this clause (j) is not the subject of any Guarantee by
the Borrower or any other Subsidiary and is otherwise non-recourse to it;

 

(k)           Guarantee by
any Subsidiary of Indebtedness of any other Subsidiary permitted under this
Section 6.01 (other than under clause(e) above);

 

(l)            Indebtedness of
ACA Financial Guaranty Corporation in the form of a guarantee of third-party
Indebtedness provided in the ordinary course of its business; and

 

(m)          Indebtedness of
any Subsidiary in an aggregate principal amount at any time outstanding for all
Subsidiaries of $1,000,000.

 

SECTION 6.02.  Liens. 
The Borrower will not, and will not permit any Subsidiary to, create,
incur, assume or permit to exist any Lien on any property or asset now owned or
hereafter acquired by it, or assign or sell any income or revenues (including
accounts receivable) or rights in respect of any thereof, except:

 

(a)           Permitted
Encumbrances;

 

(b)           any Lien on any
property or asset of the Borrower or any Subsidiary existing on the date hereof
and set forth in Schedule 6.02; provided that (i) such Lien shall
not apply to any other property or asset of the Borrower or any Subsidiary and
(ii) such Lien shall secure only those obligations which it secures on the date
hereof;

 

(c)           any Lien
existing on any property or asset prior to the acquisition thereof by the
Borrower or any Subsidiary or existing on any property or asset of any Person
that becomes a Subsidiary after the date hereof prior to the time such Person
becomes a Subsidiary; provided that (i) such Lien is not created in
contemplation of or in connection with such acquisition or such Person becoming
a Subsidiary, as the case may be, (ii) such Lien shall not apply to any
other property or assets of the Borrower or any Subsidiary and (iii) such Lien
shall secure only those obligations which it secures on the date of such
acquisition or the date such Person becomes a Subsidiary, as the case may be
and extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof;

 

(d)           any Lien on any
property securing Indebtedness incurred to finance the acquisition,
construction or improvement of any fixed or capital assets, including Capital
Lease Obligations and any Indebtedness assumed in connection with the
acquisition of any such assets; provided that such Lien (i) applies only to
such acquired property and (ii) attaches to such property concurrently with or
within 180 days after the acquisition thereof;

 

(e)           Liens securing
obligations owed by the Borrower to any of its Subsidiaries or owed by any
Subsidiary of the Borrower to the Borrower or any Subsidiary of the 

 

44

 

Borrower, in each case
solely to the extent that such Liens are required by an Applicable Insurance
Regulatory Authority for such Person to maintain such obligations;

 

(f)            Liens
consisting of deposits made by any Regulated Insurance Company with an
Applicable Insurance Regulatory Authority or other statutory Liens or Liens or
claims imposed or required by applicable insurance laws or regulations against
the assets of any Regulated Insurance Company, in each case in favor of
policyholders of such Regulated Insurance Company or an Applicable Insurance Regulatory
Authority and in the ordinary course of such Regulated Insurance Company’s
business; and

 

(g)           Liens (A) on
assets of Variable Interest Entities granted in connection with the purchases
of equity issued in connection with, and the warehousing of assets for,
collateralized debt obligation transactions structured and managed by a
Variable Interest Entity in the ordinary course of business of such Variable
Interest Entities and (B) on cash and cash equivalents securing Swap Agreements
entered into for bona fide risk management purposes and not for speculation;

 

(h)           Liens on
investments and cash balances of any Regulated Insurance Company securing
obligations of such Regulated Insurance Company in respect of trust
arrangements formed in the ordinary course of business for the benefit of
cedents to secure reinsurance recoverables owed to them by such Regulated
Insurance Company;

 

(i)            Liens on
investments and cash balances of any credit default swap entity or Regulated
Insurance Company to secure obligations under or in respect of credit default
swaps, provided that in the case of any such credit default swap entity,
such investments and cash balances have been provided by a Regulated Insurance
Company supporting its obligations under such credit default swaps;

 

(j)            Liens at the
Borrower on investments and cash balances, in an aggregate value at any time of
not more than $50,000,000, securing credit default swaps; and

 

(k)           Liens not
otherwise permitted by the foregoing clauses of this Section 6.02 securing Indebtedness
in an aggregate principal or face amount at any date not to exceed 5% of
Tangible Net Worth.

 

SECTION 6.03.  Fundamental Changes; Sales of Assets.
(a)  The Borrower will not, and will not permit any Subsidiary to,
merge into or consolidate with any other Person, or permit any other Person to
merge into or consolidate with it, or sell, transfer, lease or otherwise
dispose of (in one transaction or in a series of transactions) all or
substantially all of its assets, or liquidate or dissolve, except that, if at
the time thereof and immediately after giving effect thereto no Default shall
have occurred and be continuing,

 

(i)            the Borrower
may merge into or consolidate with any other Person and any other Person may
merge into or consolidate with the Borrower and the Borrower may sell,
transfer, lease or otherwise dispose of (in one transaction or in a series of
transactions) all or substantially all of its assets to any Person, so long as
(A) the surviving entity of such transaction is the Borrower and (B)
immediately after giving effect thereto no Default shall have occurred and be
continuing,

 

45

 

(ii)           any Subsidiary
may merge into the Borrower in a transaction in which the Borrower is the
surviving corporation,

 

(iii)          any Subsidiary
may merge into the Borrower in a transaction in which the Borrower is the
surviving corporation and may sell, transfer, lease or otherwise dispose of its
assets to the Borrower,

 

(iv)          any Subsidiary
(other than a Regulated Insurance Company) may merge into, consolidate with,
sell, transfer, lease or otherwise dispose of its assets to any other
Subsidiary or, so long as immediately after giving effect thereto no Default
shall have occurred and be continuing, any other Person, and any other Person
may, so long as immediately after giving effect thereto no Default shall have
occurred and be continuing, merge into, consolidate with, sell, transfer, lease
or otherwise dispose of its assets to any Subsidiary, in each case, in a transaction
in which the surviving entity is a Subsidiary (and if a Regulated Insurance
Company is a party to such a merger, the survivor entity is a Regulated
Insurance Company),

 

(v)           any Subsidiary
that is a Regulated Insurance Company may merge into, consolidate with, sell,
transfer, lease or otherwise dispose of its assets to another Subsidiary that
is a Regulated Insurance Company or, so long as immediately after giving effect
thereto no Default shall have occurred and be continuing, to any other Person that
would have been a Regulated Insurance Company had it been a Subsidiary of the
Borrower, and, so long as immediately after giving effect thereto no Default
shall have occurred and be continuing, any such Person may merge into,
consolidate with, sell, transfer, lease or otherwise dispose of its assets to
any Subsidiary that is a Regulated Insurance Company, and

 

(vi)          any Subsidiary
may liquidate or dissolve if the Borrower determines in good faith that such
liquidation or dissolution is in the best interests of the Borrower and is not
materially disadvantageous to the Lenders.

 

(b)           The Borrower
will not, and will not permit any of its Subsidiaries to, engage to any
material extent in any business other than businesses of the type conducted by
the Borrower and its Subsidiaries on the date of execution of this Agreement
and businesses reasonably related on ancillary thereto or representing a
reasonable extension thereof.

 

SECTION 6.04.  Restricted Payments.  The Borrower will not, and will not permit
any of its Subsidiaries to, declare or make, or agree to pay or make, directly
or indirectly, any Restricted Payment, except (a) the Borrower may declare and
pay dividends with respect to its Equity Interests payable solely in additional
shares of its common stock, (b) Subsidiaries may declare and pay dividends
ratably with respect to their Equity Interests, (c) the Borrower may make
Restricted Payments pursuant to and in accordance with stock option plans or
other benefit plans for management or employees of the Borrower and its
Subsidiaries, including (whether or not otherwise included therein) repurchases
or other acquisitions for value of Equity Interests of the Borrower held by a
former officer of the Borrower resulting in a net payment to such officer of up
to $2,000,000, (d) the Borrower may make any Restricted Payment in exchange
for, or out of the Net Cash Proceeds of the sale within 90 days of such payment
(other than to a Subsidiary of the Borrower) of, Equity Interests of the
Borrower (other than out of Net Cash Proceeds from an initial public offering
by the Borrower) or from the substantially concurrent cash contribution 

 

46

 

to the common equity capital to
the Borrower; provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance or other
acquisition will be excluded from clause (e) below and (e) so long as no
Default or Event of Default shall have occurred and be continuing, the Borrower
may make a Restricted Payment at any time so long as the aggregate Restricted
Payments made by the Borrower under this clause (e) shall not exceed the sum of
(A) 25% of the Consolidated Net Income of the Borrower and its Subsidiaries for
the period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the Effective Date to the end of the Borrower’s
most recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if Consolidated Net
Income for such period is a deficit, less 100% of such deficit), plus (B)
$10,000,000 in respect of such fiscal year.

 

SECTION 6.05.  Transactions with Affiliates.  The Borrower will not, and will not permit
any of its Subsidiaries to, sell, lease or otherwise transfer any property or
assets to, or purchase, lease or otherwise acquire any property or assets from,
or otherwise engage in any other transactions with, any of its Affiliates,
except (a) transactions on terms and conditions not less favorable taken as a
whole to the Borrower or such Subsidiary than could be obtained on an
arm’s-length basis from unrelated third parties, (b) transactions between or
among the Borrower and its Subsidiaries not involving any other Affiliate, (c)
any Restricted Payment permitted by Section 6.04 and (d) any collateralized
debt obligation transaction.

 

SECTION 6.06.  Financial Covenants.

 

(a)           The Borrower
will not permit its Consolidated Net Worth at any time to be less than the sum
of (i) $298,500,000, (ii) 60% of cumulative Consolidated Net Income for each
fiscal quarter of the Borrower (beginning with the fiscal quarter ending March
31, 2006) for which Consolidated Net Income is positive, and (iii) 60% of the
Net Cash Proceeds of any offering by the Borrower of common equity consummated
after the Closing Date.

 

(b)           The Borrower
will not permit its Leverage Ratio to be greater than 35% at any time.

 

SECTION 6.07.  Fiscal Year.   Without the prior written consent of the
Administrative Agent, the Borrower will not permit the fiscal year of the
Borrower to end on a day other than December 31 or change the Borrower’s method
of determining fiscal quarters.

 

ARTICLE
VII

Events of Default

 

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

 

(a)           the Borrower
shall fail to pay any principal of any Loan when and as the same shall become
due and payable, whether at the due date thereof or at a date fixed for
prepayment thereof or otherwise;

 

(b)           the Borrower
shall fail to pay any interest on any Loan or any fee or any other amount
(other than an amount referred to in clause (a) of this Article) payable
under 

 

47

 

this Agreement, when and as
the same shall become due and payable, and such failure shall continue
unremedied for a period of three Business Days;

 

(c)           any
representation or warranty made or deemed made by or on behalf of the Borrower
in or in connection with this Agreement or any amendment or modification hereof
or waiver hereunder, or in any report, certificate, or financial statement
furnished pursuant to or in connection with this Agreement or any amendment or
modification hereof or waiver hereunder, shall prove to have been incorrect in
any material respect when made or deemed made and, if the circumstances giving
rise to such false or misleading representation or warranty are susceptible to
being cured in all material respects, such false or misleading representation
or warranty shall not be cured in all material respects for five days after the
earlier to occur of (i) the date on which an officer of the Borrower shall
obtain knowledge thereof, or (ii) the date on which written notice thereof
shall have been given to the Borrower by the Administrative Agent;

 

(d)           the Borrower
shall fail to observe or perform any covenant, condition or agreement contained
in Section 5.02, 5.03 (with respect to the Borrower’s existence) or 5.10
or in Article VI;

 

(e)           the Borrower
shall fail to observe or perform any covenant, condition or agreement contained
in this Agreement (other than those specified in clause (a), (b) or (d) of this
Article), and such failure shall continue unremedied for a period of
30 days after notice thereof from the Administrative Agent to the Borrower
(which notice will be given at the request of any Lender);

 

(f)            the Borrower or
any Subsidiary shall fail to make any payment of principal or interest
(regardless of amount) in respect of any Material Obligations, when and as the
same shall become due and payable (after giving effect to any applicable period
of grace);

 

(g)           any event or
condition occurs and continues beyond any applicable period of grace that
results in any Material Obligations becoming due prior to its scheduled
maturity or that enables or permits (with or without the giving of notice, to
the extent required by the documents governing such Material Obligations) the
holder or holders of any Material Obligations or any trustee or agent on its or
their behalf to cause any Material Obligations to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its
scheduled maturity; provided that this clause (g) shall not apply
to secured Indebtedness that becomes due as a result of the voluntary sale or
transfer of the property or assets securing such Indebtedness;

 

(h)           the Borrower or
any of its Significant Subsidiaries shall commence a voluntary case concerning
itself under Title 11 of the United States Code entitled “Bankruptcy,” as now
or hereafter in effect, or any successor thereto (the “Bankruptcy Code”); or an
involuntary case is commenced against the Borrower or any of its Subsidiaries
and the petition is not controverted within 10 days, or is not dismissed within
60 days, after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or substantially all
of the 

 

48

 

property of the Borrower or
any of its Significant Subsidiaries; or the Borrower or any of its Significant
Subsidiaries commences (including by way of applying for or consenting to the
appointment of, or the taking of possession by, a rehabilitator, receiver,
custodian, trustee, conservator or liquidator (collectively, a “conservator”)
of itself or all or any substantial portion of its property) any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency, liquidation, rehabilitation, supervision,
conservatorship or similar law of any jurisdiction whether now or hereafter in
effect relating to the Borrower or any of its Significant Subsidiaries; or any
such proceeding is commenced against (a) any Regulated Insurance Company that
is a Significant Subsidiary which is engaged in the business of underwriting
insurance and/or reinsurance, or (b) the Borrower or any of its Significant
Subsidiaries (other than (x) any Regulated Insurance Company described in the
immediately preceding clause (a)) to the extent such proceeding is consented to
by such Person, and in the case of either clause (a) or (b) remains undismissed
for a period of 60 days; or the Borrower or any of its Significant Subsidiaries
is adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or (a) any Regulated
Insurance Company that is a Significant Subsidiary which is engaged in the
business of underwriting insurance and/or reinsurance in the United States
suffers any appointment of any conservator or the like for it or any
substantial part of its property, or (b) the Borrower or any of its Significant
Subsidiaries (other than any Regulated Insurance Company described in the
immediately preceding clause (a)) suffers any appointment of any conservator or
the like for it or any substantial part of its property which continues
undischarged or unstayed for a period of 60 days; or the Borrower or any of its
Significant Subsidiaries makes a general assignment for the benefit of
creditors; or any corporate action is taken by the Borrower or any of its
Significant Subsidiaries for the purpose of effecting any of the foregoing;

 

(i)            one or more
final judgments for the payment of money in an aggregate amount (not paid or
fully covered by insurance as to which the relevant insurance company has not
denied coverage) in excess of the Threshold Amount shall be rendered against
the Borrower, any Significant Subsidiary or any combination thereof and the
same shall remain undischarged for a period of 60 consecutive days during
which execution shall not be effectively stayed, or any action shall be legally
taken by a judgment creditor to attach or levy upon any assets of the Borrower
or any Significant Subsidiary to enforce any such judgment; or

 

(j)            a Change in
Control shall occur;

 

then, and in every such event (other than an event with respect to the
Borrower described in clause (h) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take either
or both of the following actions, at the same or different
times:  (i) terminate the Commitments, and thereupon the
Commitments shall terminate immediately, and (ii) declare the Loans then
outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to
be due and payable), and thereupon the principal of the Loans so declared to be
due and payable, together with accrued interest thereon and all fees and other
obligations of the 

 

49

 

Borrower accrued hereunder, shall become due and payable immediately,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower; and in case of any event with respect to the
Borrower described in clause (h) of this Article, the Commitments shall
automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and all fees and other obligations of
the Borrower accrued hereunder, shall automatically become due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower.

 

ARTICLE
VIII

The Administrative Agent

 

Each of the Lenders hereby irrevocably appoints the Administrative
Agent as its agent and authorizes the Administrative Agent to take such actions
on its behalf and to exercise such powers as are delegated to the
Administrative Agent by the terms hereof, together with such actions and powers
as are reasonably incidental thereto.

 

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

 

The Administrative Agent shall not have any duties or obligations
except those expressly set forth herein. 
Without limiting the generality of the foregoing, (a) the
Administrative Agent shall not be subject to any fiduciary or other implied
duties, regardless of whether a Default has occurred and is continuing,
(b) the Administrative Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby that the Administrative Agent
is required to exercise in writing as directed by the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 9.02), and (c) except as expressly set
forth herein, the Administrative Agent shall not have any duty to disclose, and
shall not be liable for the failure to disclose, any information relating to
the Borrower or any of its Subsidiaries that is communicated to or obtained by
the bank serving as Administrative Agent or any of its Affiliates in any
capacity.  The Administrative Agent shall
not be liable for any action taken or not taken by it with the consent or at
the request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in
Section 9.02) or in the absence of its own gross negligence or willful
misconduct.  The Administrative Agent
shall be deemed not to have knowledge of any Default unless and until written
notice thereof is given to the Administrative Agent by the Borrower or a
Lender, and the Administrative Agent shall not be responsible for or have any
duty to ascertain or inquire into (i) any statement, warranty or representation
made in or in connection with this Agreement, (ii) the contents of any
certificate, report or other document delivered hereunder or in connection
herewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein, (iv) the
validity, enforceability, effectiveness or genuineness of this Agreement or any
other agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article IV or 

 

50

 

elsewhere herein, other than to
confirm receipt of items expressly required to be delivered to the
Administrative Agent.

 

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

 

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

 

Subject to the appointment and acceptance of a successor Administrative
Agent as provided in this paragraph, the Administrative Agent may resign at any
time by notifying the Lenders and the Borrower. 
Upon any such resignation, the Required Lenders shall have the right, in
consultation with the Borrower, to appoint a successor.  If no successor shall have been so appointed by
the Required Lenders and shall have accepted such appointment within
30 days after the retiring Administrative Agent gives notice of its
resignation, then the retiring Administrative Agent may, on behalf of the
Lenders, appoint a successor Administrative Agent which shall be a bank with an
office in New York, New York, or an Affiliate of any such bank.  Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder.  The fees payable by the Borrower to a
successor Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrower and such successor.  After the Administrative Agent’s resignation
hereunder, the provisions of this Article and Section 9.03 shall continue
in effect for the benefit of such retiring Administrative Agent, its sub-agents
and their respective Related Parties in respect of any actions taken or omitted
to be taken by any of them while it was acting as Administrative Agent.

 

Each Lender acknowledges 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 credit
analysis and decision to enter into this Agreement.  Each Lender also acknowledges 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 from time to
time deem appropriate, continue to make its own decisions in 

 

51

 

taking or not taking action
under or based upon this Agreement, any related agreement or any document
furnished hereunder or thereunder.

 

ARTICLE
IX

Miscellaneous

 

SECTION 9.01.  Notices.  (a)  All notices, requests and
demands to or upon the respective parties hereto to be effective shall be in
writing (including by telecopy), and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when delivered, or
three Business Days after being deposited in the mail, postage prepaid, or, in
the case of telecopy notice, when received, addressed as follows in the case of
the Borrower and the Administrative Agent, and as set forth in an
Administrative Questionnaire delivered to the Administrative Agent in the case
of the Lenders, or to such other address as may be hereafter notified by the
respective parties hereto:

 

	
   

  	
  Borrower:

  	
   

  	
  ACA Capital Holdings, Inc.

  
	
   

  	
   

  	
   

  	
  140 Broadway

  
	
   

  	
   

  	
   

  	
  47th Floor

  
	
   

  	
   

  	
   

  	
  New York, NY

  
	
   

  	
   

  	
   

  	
  Attention: Treasurer

  
	
   

  	
   

  	
   

  	
  Telecopy: (212) 375-2100

  
	
   

  	
   

  	
   

  	
  Telephone: (212) 375-2000

  
	
   

  	
  with a copy to:

  	
   

  	
  General Counsel at the same address

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Administrative Agent:

  	
   

  	
  JP Morgan Chase Bank, N.A.

  
	
   

  	
   

  	
   

  	
  1111 Fannin Street, Floor 10

  
	
   

  	
   

  	
   

  	
  Houston, Texas 77002

  
	
   

  	
   

  	
   

  	
  Attention: Loan and Agency Services

  
	
   

  	
   

  	
   

  	
  Telecopy: (713) 427-6307

  
	
   

  	
   

  	
   

  	
  Telephone: (713) 750-2377

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Attention:

  
	
   

  	
   

  	
   

  	
  Telecopy:

  
	
   

  	
   

  	
   

  	
  Telephone:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Swingline Lender

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Attention:

  
	
   

  	
   

  	
   

  	
  Telecopy:

  
	
   

  	
   

  	
   

  	
  Telephone:

  

 

provided that any notice, request or demand to
or upon the Administrative Agent or the Lenders shall not be effective until
received.

 

(b)           Notices and
other communications to the Lenders hereunder may be delivered or furnished by
electronic communications pursuant to procedures approved by the 

 

52

 

Administrative Agent;
provided that the foregoing shall not apply to notices pursuant to Article II
unless otherwise agreed by the Administrative Agent and the applicable
Lender.  The Administrative Agent or the
Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications.

 

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

 

SECTION 9.02.  Waivers; Amendments.  (a)  No failure or delay by the
Administrative Agent or any Lender in exercising any right or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof
or the exercise of any other right or power. 
The rights and remedies of the Administrative Agent and the Lenders
hereunder are cumulative and are not exclusive of any rights or remedies that
they would otherwise have.  No waiver of
any provision of this Agreement or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which
given.  Without limiting the generality
of the foregoing, the making of a Loan shall not be construed as a waiver of
any Default, regardless of whether the Administrative Agent or any Lender may
have had notice or knowledge of such Default at the time.

 

(b)           Neither this
Agreement nor any provision hereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Borrower
and the Required Lenders or by the Borrower and the Administrative Agent with
the consent of the Required Lenders; provided that no such agreement
shall (i) increase the Commitment of any Lender without the written consent of
such Lender, (ii) reduce the principal amount of any Loan or reduce the rate of
interest thereon, or reduce any fees payable hereunder, without the written
consent of each Lender affected thereby, (iii) postpone the scheduled date of
payment of the principal amount of any Loan, or any interest thereon, or any
fees payable hereunder, or reduce the amount of, waive or excuse any such
payment, or postpone the scheduled date of expiration of any Commitment,
without the written consent of each Lender affected thereby, (iv) change
Section 2.17(b) or (c) in a manner that would alter the pro rata sharing of
payments required thereby, without the written consent of each Lender, or (v)
change any of the provisions of this Section or the definition of “Required
Lenders” or any other provision hereof specifying the number or percentage of
Lenders required to waive, amend or modify any rights hereunder or make any
determination or grant any consent hereunder, without the written consent of
each Lender; provided  further that no such agreement shall amend,
modify or otherwise affect the rights or duties of the Administrative Agent or
the Swingline Lender hereunder without the prior written consent of the
Administrative Agent or the Swingline Lender, as the case may be.

 

53

 

SECTION 9.03.  Expenses; Indemnity; Damage Waiver.  (a)  The Borrower shall pay (i) all
reasonable out-of-pocket expenses incurred by the Administrative Agent and its
Affiliates, including the reasonable fees, charges and disbursements of
Simpson, Thacher & Bartlett LLP for the Administrative Agent, in connection
with the syndication of the credit facilities provided for herein, the
preparation and administration of this Agreement or any amendments, modifications
or waivers of the provisions hereof (whether or not the transactions
contemplated hereby or thereby shall be consummated) and (ii) all reasonable
out-of-pocket expenses incurred by the Administrative Agent or any Lender,
including the reasonable fees, charges and disbursements of any one counsel for
the Administrative Agent or any Lender, in connection with the enforcement or
protection of its rights in connection with this Agreement, including its
rights under this Section, or in connection with the Loans made hereunder,
including all such reasonable out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans.

 

(b)           The Borrower
shall indemnify the Administrative Agent, each Lender and each Related Party of
any of the foregoing Persons (each such Person being called an “Indemnitee”)
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including the reasonable fees,
charges and disbursements of one counsel for any Indemnitee, incurred by or
asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of this Agreement or any agreement
or instrument contemplated hereby, the performance by the parties hereto of
their respective obligations hereunder or the consummation of the Transactions
or any other transactions contemplated hereby, (ii) any Loan or the use of
the proceeds therefrom, (iii) any actual or alleged presence or release of
Hazardous Materials on or from any property owned or operated by the Borrower
or any of its Subsidiaries, or any Environmental Liability of the Borrower or
any of its Subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is
a party thereto; provided that (i) such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the
gross negligence or willful misconduct of such Indemnitee, (ii) each Indemnitee
shall give the Borrower (x) prompt notice of any such action brought against
such Indemnitee in connection with a claim for which it is entitled to
indemnity under this Section and (y) an opportunity to consult from time to
time with such Indemnitee regarding defensive measures and potential settlement
and (iii) the Borrower shall not be obligated to pay the amount of any
settlement entered into without its written consent (which consent shall not be
unreasonably withheld).

 

(c)           To the extent
that the Borrower fails to pay any amount required to be paid by it to the
Administrative Agent or the Swingline Lender under paragraph (a) or (b) of this
Section, each Lender severally agrees to pay to the Administrative Agent or the
Swingline Lender, as the case may be, such Lender’s Applicable Percentage
(determined as of the time that the applicable unreimbursed expense or
indemnity payment is sought) of such unpaid amount; provided that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against the
Administrative Agent or the Swingline Lender in its capacity as such.

 

54

 

(d)           To the extent
permitted by applicable law, the Borrower shall not assert, and hereby waives,
any claim against any Indemnitee, on any theory of liability, for special,
indirect, consequential or punitive damages (as opposed to direct or actual
damages) arising out of, in connection with, or as a result of, this Agreement
or any agreement or instrument contemplated hereby, the Transactions, any Loan
or the use of the proceeds thereof.

 

(e)           All amounts due
under this Section shall be payable not later than ten Business Days after
written demand therefor.

 

SECTION 9.04.  Successors and Assigns.  (a)  The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby, except that (i)
the Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any
attempted assignment or transfer by the Borrower without such consent shall be
null and void) and (ii) no Lender may assign or otherwise transfer its rights
or obligations hereunder except in accordance with this Section.  Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby, Participants
(to the extent provided in paragraph (c) of this Section) and, to the extent
expressly contemplated hereby, the Related Parties of each of the
Administrative Agent and the Lenders) any legal or equitable right, remedy or
claim under or by reason of this Agreement.

 

(b)           (i)  Subject
to the conditions set forth in paragraph (b)(ii) below, any Lender may assign
to one or more assignees all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Commitment and the Loans at
the time owing to it) with the prior written consent (such consent not to be
unreasonably withheld) of:

 

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

 

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

 

(C)           the Swingline
Lender.

 

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

 

(A)          except in the
case of an assignment to a Lender or an Affiliate of a Lender or an assignment
of the entire remaining amount of the assigning Lender’s Commitment or Loans of
any Class, the amount of the Commitment or Loans of the assigning Lender
subject to each such assignment (determined as of the date the Assignment and
Assumption with respect to such assignment is delivered to the Administrative
Agent) shall not be less than $5,000,000 unless each of the Borrower and the
Administrative Agent otherwise consent, provided that no such consent of
the 

 

55

 

Borrower
shall be required if an Event of Default under clause (a), (b), or (h) of
Article VII has occurred and is continuing;

 

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

 

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

 

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

 

For the purposes of this Section 9.04(b), the term “Approved Fund”
has the following meaning:

 

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

 

(iii)          Subject to
acceptance and recording thereof pursuant to paragraph (b)(iv) of this
Section, from and after the effective date specified in each Assignment and
Assumption the assignee thereunder shall be a party hereto and, to the extent
of the interest assigned by such Assignment and Assumption, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of
Sections 2.16 and 9.03).  Any
assignment or transfer by a Lender of rights or obligations under this
Agreement that does not comply with this Section 9.04 shall be treated for
purposes of this Agreement as a sale by such Lender of a participation in such
rights and obligations in accordance with paragraph (c) of this Section.

 

(iv)          The
Administrative Agent, acting for this purpose as an agent of the Borrower,
shall maintain at one of its offices a copy of each Assignment and Assumption
delivered to it and a register for the recordation of the names and addresses
of the Lenders, and the Commitment of, and principal amount of the Loans owing
to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be
conclusive, and the Borrower, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the Register pursuant to the terms
hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. 
The Register shall be available for 

 

56

 

inspection by the Borrower
and any Lender, at any reasonable time and from time to time upon reasonable
prior notice.

 

(v)           Upon its
receipt of a duly completed Assignment and Assumption executed by an assigning
Lender and an assignee, the assignee’s completed Administrative Questionnaire
(unless the assignee shall already be a Lender hereunder), the processing and
recordation fee referred to in paragraph (b) of this Section and any
written consent to such assignment required by paragraph (b) of this Section,
the Administrative Agent shall accept such Assignment and Assumption and record
the information contained therein in the Register.  No assignment shall be effective for purposes
of this Agreement unless it has been recorded in the Register as provided in
this paragraph.

 

(c)           (i)  Any
Lender may, without the consent of the Borrower, the Administrative Agent or
the Swingline Lender, sell participations to one or more banks or other
entities (a “Participant”) in all or a portion of such Lender’s rights
and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided that (A) such
Lender’s obligations under this Agreement shall remain unchanged, (B) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (C) the Borrower, the Administrative
Agent and the other Lenders shall continue to deal solely and directly with
such Lender in connection with such Lender’s rights and obligations under this
Agreement.  Any agreement or instrument pursuant
to which a Lender sells such a participation shall provide that such Lender
shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that such agreement or instrument may provide that such Lender will not,
without the consent of the Participant, agree to any amendment, modification or
waiver described in the first proviso to Section 9.02(b) that affects such
Participant.  Subject to paragraph
(c)(ii) of this Section, the Borrower agrees that each Participant shall be
entitled to the benefits of Sections 2.14, 2.15 and 2.16 to the same extent as
if it were a Lender and had acquired its interest by assignment pursuant to
paragraph (b) of this Section.  To the
extent permitted by law, each Participant also shall be entitled to the
benefits of Section 9.08 as though it were a Lender, provided such
Participant agrees to be subject to Section 2.17(c) as though it were a Lender.

 

(ii)           A Participant
shall not be entitled to receive any greater payment under Section 2.14 or 2.16
than the applicable Lender would have been entitled to receive with respect to
the participation sold to such Participant, unless the sale of the
participation to such Participant is made with the Borrower’s prior written
consent.  Subject to the foregoing
sentence, a Participant that would be a Foreign Lender if it were a Lender
shall not be entitled to the benefits of Section 2.16 unless the Borrower
is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 2.16(e) as
though it were a Lender.

 

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

 

57

 

obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.

 

SECTION 9.05.  Survival.  All covenants, agreements, representations
and warranties made by the Borrower herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any
Loans, regardless of any investigation made by any such other party or on its
behalf and notwithstanding that the Administrative Agent or any Lender may have
had notice or knowledge of any Default or incorrect representation or warranty
at the time any credit is extended hereunder, and shall continue in full force
and effect as long as the principal of or any accrued interest on any Loan or
any fee or any other amount payable under this Agreement is outstanding and
unpaid and so long as the Commitments have not expired or terminated.  The provisions of Sections 2.14, 2.15, 2.16
and 9.03 and Article VIII shall survive and remain in full force and effect regardless
of the consummation of the transactions contemplated hereby, the repayment of
the Loans, the expiration or termination of the Commitments or the termination
of this Agreement or any provision hereof.

 

SECTION 9.06.  Counterparts; Integration; Effectiveness.  This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract.  This
Agreement and any separate letter agreements with respect to fees payable to
the Administrative Agent constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof.  Except as provided in Section
4.01, this Agreement shall become effective when it shall have been executed by
the Administrative Agent and when the Administrative Agent shall have received
counterparts hereof which, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.  Delivery of an executed counterpart of a signature
page of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.

 

SECTION 9.07.  Severability.  Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.

 

SECTION 9.08.  Right of Setoff.  If an Event of Default shall have occurred
and be continuing, each Lender and each of its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations at any time owing
by such Lender or Affiliate to or for the credit or the account of the Borrower
against any of and all the obligations of the Borrower now or hereafter
existing under this Agreement held by such Lender, irrespective of whether or
not such Lender shall have made any demand under this Agreement and although
such obligations may be unmatured.  Each
Lender exercising its rights of setoff hereunder shall promptly notify the
Borrower of such exercise The 

 

58

 

rights of each Lender under
this Section are in addition to other rights and remedies (including other
rights of setoff) which such Lender may have.

 

SECTION 9.09.  Governing Law; Jurisdiction; Consent to
Service of Process. 
(a)  This Agreement shall be construed in accordance with and
governed by the law of the State of New York.

 

(b)           Each party to
this Agreement hereby irrevocably and unconditionally submits, for itself and
its property, to the nonexclusive jurisdiction of the Supreme Court of the
State of New York sitting in New York County and of the United States District
Court of the Southern District of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such
New York State or, to the extent permitted by law, in such Federal
court.  Each of the parties hereto agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.

 

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

 

(d)           Each party to
this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 9.01. 
Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.

 

SECTION 9.10.  WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). 
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.

 

SECTION 9.11.  Headings.  Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of
this Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

 

59

 

SECTION 9.12.  Confidentiality.

 

(a)           Each of the
Administrative Agent and the Lenders agrees to maintain the confidentiality of
the Information (as defined below), except that Information may be disclosed
(i) to its and its Affiliates’ directors, officers, employees and agents,
including accountants, legal counsel and other advisors (it being understood
that the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such Information
confidential), (ii) to the extent requested by any regulatory authority,
(iii) to the extent required by applicable laws or regulations or by any
subpoena or similar legal process, (iv) to any other party to this Agreement,
(v) in connection with the exercise of any remedies hereunder or any suit,
action or proceeding relating to this Agreement or the enforcement of rights
hereunder, (vi) subject to an agreement containing provisions substantially the
same as those of this Section, to (A) any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations
under this Agreement or (B) any actual or prospective counterparty (or its
advisors) to any swap or derivative transaction relating to the Borrower and
its obligations, (vii) with the consent of the Borrower or (viii) to the
extent such Information (A) becomes publicly available other than as a
result of a breach of this Section or (B) becomes available to the
Administrative Agent or any Lender on a nonconfidential basis from a source
other than the Borrower.  For the
purposes of this Section, “Information” means all information received from the
Borrower relating to the Borrower or its business, other than any such
information that is available to the Administrative Agent or any Lender on a
nonconfidential basis prior to disclosure by the Borrower; provided that, in
the case of information received from the Borrower after the date hereof, such
information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.

 

(b)           Each Lender
acknowledges that information furnished to it pursuant to this Agreement may in
the future include material non-public information concerning the Borrower and
its Affiliates and their related parties or their respective securities, and
confirms that it has developed compliance procedures regarding the use of
material non-public information and that it will handle such material
non-public information in accordance with those procedures and applicable law,
including Federal and state securities laws.

 

(c)           All
information, including requests for waivers and amendments, furnished by the
Borrower or the Administrative Agent pursuant to, or in the course of
administering, this Agreement will be syndicate-level information, which may
contain material non-public information about the Borrower and its Affiliates
and their related parties or their respective securities.  Accordingly, each Lender represents to the
Borrower and the Administrative Agent that it has identified in its
administrative questionnaire a credit contact who may receive information that
may contain material non-public information in accordance with its compliance
procedures and applicable law.

 

SECTION 9.13.  USA Patriot Act.  The Administrative Agent and each Lender
hereby notifies the Borrower that pursuant to the requirements of the USA
Patriot Act (Title III 

 

60

 

of Pub. L. 107-56 (signed into
law October 26, 2001)) (the “Act”), it is required to obtain, verify and record
information that identifies the Borrower, which information includes the name
and address of the Borrower and other information that will allow such Lender
to identify the Borrower in accordance with the Act.  The Borrower shall promptly provide such
information upon request by any Lender. 
In connection therewith, each Lender hereby agrees that the
confidentiality provisions set forth in Section 9.12 shall apply to any non-public
information provided to it by the Borrower and its Subsidiaries pursuant to
this Section 9.13.

 

61

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.

 

	
   

  	
  ACA CAPITAL HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE BANK, N.A., individually

  
	
   

  	
  and as Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

Schedule 2.01

 

Commitments

 

	
  Institution

  	
   

  	
  Amount

  	
   

  
	
  JPMorgan
  Chase Bank, N.A.

  	
   

  	
  $

  	
  10,000,000

  	
   

  
	
  Credit
  Suisse

  	
   

  	
  $

  	
  10,000,000

  	
   

  
	
  National
  Australia Bank Limited

  	
   

  	
  $

  	
  10,000,000

  	
   

  
	
  ABN AMRO
  Bank N.V.

  	
   

  	
  $

  	
  9,000,000

  	
   

  
	
  Bear Sterns
  Corporate Lending Inc.

  	
   

  	
  $

  	
  9,000,000

  	
   

  
	
  Malayan
  Banking Berhad, New York Branch

  	
   

  	
  $

  	
  9,000,000

  	
   

  
	
  PNC Bank,
  National Association

  	
   

  	
  $

  	
  9,000,000

  	
   

  
	
  Greenwich
  Capital Markets, Inc., as agent for The Royal Bank of Scotland plc

  	
   

  	
  $

  	
  9,000,000

  	
   

  

 

 

Schedule 3.07

 

Disclosed Matters

 

None.

 

 

Schedule 3.09

 

Significant Subsidiaries

 

 

ACA Financial Guaranty Corporation (Maryland)*

ACA Service L.L.C. (Delaware)*

ACA Management, L.L.C. (Delaware)*

 

* Borrower indirectly owns 100% of each of the Significant
Subsidiaries’ equity

 

 

Schedule 6.01

 

Existing Indebtedness

 

 

1.             On
December 4, 2002, ACA Statutory Trust I (“Trust I”) issued and sold $17,500,000
of its Floating Rate Capital Securities to I-Preferred Term Securities I, Ltd.
The proceeds from these sales combined with the proceeds from the sale by Trust
I to American Capital Access Holdings, Limited of its common securities were
used by Trust I to purchase $18,042,000 in principal amount of Floating Rate
Junior Subordinated Deferrable Interest Debentures of American Capital Access
Holdings, Limited. As an incentive for the holders to purchase the Floating
Rate Capital Securities, American Capital Access Holdings, Limited entered into
a Guarantee Agreement pursuant to which it guaranteed certain payments or
distributions in respect of such capital securities.

 

2.             On
May 15, 2003, ACA Statutory Trust II (“Trust II”) issued and sold $20,000,000
of its Floating Rate Capital Securities to I-Preferred Term Securities II, Ltd.
The proceeds from these sales combined with the proceeds from the sale by Trust
II to American Capital Access Holdings, Limited of its common securities were
used by Trust II to purchase $20,619,000 in principal amount of Floating Rate
Junior Subordinated Deferrable Interest Debentures of American Capital Access
Holdings, Limited. As an incentive for the holders to purchase the Floating
Rate Capital Securities, American Capital Access Holdings, Limited entered into
a Guarantee Agreement pursuant to which it guaranteed certain payments or
distributions in respect of such capital securities.

 

3.             On
October 29, 2003, ACA Statutory Trust III (“Trust III”) issued and sold
$20,000,000 of its Floating Rate Capital Securities to I-Preferred Term
Securities III, Ltd. The proceeds from these sales combined with the proceeds
from the sale by Trust III to American Capital Access Holdings, Limited of its
common securities were used by Trust III to purchase $20,619,000 in principal
amount of Floating Rate Junior Subordinated Deferrable Interest Debentures of
American Capital Access Holdings, Limited. As an incentive for the holders to
purchase the Floating Rate Capital Securities, American Capital Access
Holdings, Limited entered into a Guarantee Agreement pursuant to which it
guaranteed certain payments or distributions in respect of such capital
securities.

 

4.             On
December 29, 2004, ACA Statutory Trust IV (“Trust IV”) issued and sold
$20,000,000 of its Floating Rate Capital Securities to Keefe, Bruyette &
Woods, Inc. The proceeds from these sales combined with the proceeds from the
sale by Trust IV to ACA Capital Holdings, Inc. of its common securities were
used by Trust IV to purchase $20,619,000 in principal amount of Floating Rate
Junior Subordinated Deferrable Interest Debentures of ACA Capital Holdings,
Inc. As an incentive for the holders to purchase the Floating Rate Capital
Securities, ACA Capital Holdings, Inc. entered into a Guarantee Agreement
pursuant to which it guaranteed certain payments or distributions in respect of
such capital securities.

 

 

5.             In
March 2005, ACA Parliament, L.L.C. (“ACA Parliament”), entered into an
investment agreement with Premium Asset Trust, with respect to Premium Asset
Trust, ACA Trust Series 1 (“Investor”),
pursuant to which the Investor deposited $100 million in a fund that is
maintained and invested by ACA Parliament. The obligations of ACA Parliament to
make quarterly interest payments and to repay the deposit amount are guaranteed
by a financial guaranty insurance policy issued by ACA Financial Guaranty
Corporation.

 

6.             On
November 26, 2003, ACA ABS 2003-3 Funding, Limited issued notes in the amount
of $10,000,000 in connection with its purchase of certain preferred shares of
ACA ABS 2004-1, Limited. As of May 1, 2006, the outstanding principal amount on
the notes is $8,962,313.32. The obligations of ACA ABS 2003-3 Funding, Limited
to make such interest payments and to repay the outstanding principal amount of
the notes are guaranteed by a bond insurance policy issued by ACA Financial
Guaranty Corporation.

 

7.             On
March 2, 2005, ACA ABS 2005-1 Funding, Limited issued note in the amount of
$3,820,875 in connection with its purchase of certain preferred shares of ACA
ABS 2005-1, Limited. As of May 1, 2006, the outstanding principal amount on the
notes is $1,719,996.47. The obligations of ACA ABS 2005-1 Funding, Limited to
make such interest payments and to repay the outstanding principal amount of
the notes are guaranteed by a bond insurance policy issued by ACA Financial
Guaranty Corporation.

 

8.             On
September 22, 2005, ACA Service Corporation issued a promissory note in the
amount of $4,500,000 in connection with its purchase of certain preferred
shares of Khaleej II CDO, Ltd. As of May 1, 2006, the outstanding principal
amount on the promissory note is $ 3,813,684.02. The obligations of ACA ABS
2005-1 Funding, Limited to make such interest payments and to repay the
outstanding principal amount of the promissory note are guaranteed by a bond
insurance policy issued by ACA Financial Guaranty Corporation.

 

9.             ACA
Capital Holdings, Inc. expects to enter into a certain guarantee agreement with
the distributor for ACA Capital Partners I Master Fund, Ltd., pursuant to which
it will guarantee the timely payment of the placement fees that the distributor
will be entitled to receive for soliciting investors in the fund.

 

 

Schedule 6.02

 

Existing Liens

 

 

	
  Property/Asset

  	
   

  	
  ACA Entity

  	
   

  	
  Amounts

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash
  Collateral

  	
   

  	
  ACA
  Financial Guaranty Corporation

  	
   

  	
  $

  	
  7,797,859.37

  	
  *

  	
  8,289,484.08

  	
  **

  
	
  Cash
  Collateral

  	
   

  	
  ACA
  Financial Guaranty Corporation

  	
   

  	
  $

  	
  19,156,210.66

  	
  *

  	
  19,231,929.97

  	
  **

  
	
  Short-Term
  Investments

  	
   

  	
  ACA
  Financial Guaranty Corporation

  	
   

  	
  $

  	
  217,923.70

  	
  *

  	
  217,923.70

  	
  **

  
	
  Cash
  Collateral

  	
   

  	
  ACA Service
  L.L.C.

  	
   

  	
  $

  	
  300,000.00

  	
  *

  	
  300,000.00

  	
  **

  
	
  Cash
  Collateral

  	
   

  	
  ACA CDS
  2001-1

  	
   

  	
  $

  	
  10,450,267.89

  	
  *

  	
  11,379,279.58

  	
  **

  
	
  Cash
  Collateral

  	
   

  	
  ACA CDS
  2002-2

  	
   

  	
  $

  	
  11,067,439.31

  	
  *

  	
  12,422,905.86

  	
  **

  

 

*              as of March 31, 2006

**           as of April 30, 2006 (estimated)

 

62

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