Document:

Exhibit 10.25
 

 

CREDIT AGREEMENT

dated as of

November 20, 2006

among

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY,

THE LENDERS PARTY HERETO,

KEYBANK NATIONAL ASSOCIATION,

as Administrative Agent, Co-Lead Arranger,

Sole Book Runner and Swingline Lender

and

LASALLE BANK
NATIONAL ASSOCIATION, as Co-Lead Arranger

 

   
 

This
CREDIT AGREEMENT is made and entered into as of November 20, 2006 among
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY, the LENDERS party hereto,
KEYBANK NATIONAL ASSOCIATION, as Administrative Agent, Co-Lead Arranger, Sole
Book Runner and Swingline Lender, and LASALLE BANK NATIONAL ASSOCIATION, as
Co-Lead Arranger.

Recitals:

A.            The Borrower desires to borrow funds
under this Agreement for general corporate purposes, including liquidity and
working capital.

B.            The Lenders are willing to make
loans under the terms and conditions set forth in this Agreement.

Agreements:

NOW,
THEREFORE, the parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

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

“Adjusted Consolidated Debt”
means, as of any date, Consolidated Debt (of the type described in any or all
of clauses (a), (b), (c), (d), (e), (h) and (i) of the definition of “Debt”,
but, as to clause (i), only to the extent that it is an unpaid obligation in
respect of a letter of credit or letter of guaranty that is then due and
payable and not contingent) on such date, other than (i) Debt evidenced by
Trust Preferred Securities Notes, but only to the extent that the aggregate
unpaid principal balance of such Trust Preferred Securities Notes on such date
does not exceed an amount equal to fifteen percent (15%) of Total
Capitalization on such date (for the sake of clarity, with any portion of Debt
evidenced by Trust Preferred Securities Notes that exceeds an amount equal to
fifteen percent (15%) of Total Capitalization on such date being included in
Consolidated Debt for the purposes of this definition) and (ii) other
Subordinated Debt.

“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
Adjustment.

“Adjusted Total Capitalization” means, as of any date, an amount equal to
Total Capitalization, plus Accumulated Other Comprehensive Loss, or minus
Accumulated Other Comprehensive Income (as those terms are used under GAAP), as
applicable, to the extent, if any, reflected as a component of
Consolidated Net Worth as of such date.

“Administrative Agent” means KeyBank
National Association, in its capacity as administrative agent under the Loan
Documents, and its successors in such capacity.

“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 under common Control
with such specified Person.

“Agent” means the Administrative Agent.

“Alternate Base Rate” means, for any day, a
rate per annum equal to the greater of (a) the Prime Rate in effect on such day
and (b) the Federal Funds Effective Rate in effect on such day, plus one-half percent
(0.50%). Any change in the Alternate Base Rate due to a change in the Prime
Rate or the Federal Funds Effective Rate will be effective from and including
the effective date of such change in the Prime Rate or the Federal Funds
Effective Rate, respectively.

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

“Amounts Available for Dividends”
means, (a) as of the end of the first, second and third Fiscal Quarters of any
Fiscal Year, the maximum aggregate amount of dividends that American Equity
Life and each other Insurance Subsidiary is permitted to pay as of the first
day of such Fiscal Year and (b) as of the end of the last Fiscal Quarter of any
Fiscal Year, the maximum aggregate amount of dividends that American Equity
Life and each other Insurance Subsidiary is permitted to pay as of the first
day of the immediately succeeding Fiscal Year, in each case under the
Applicable Insurance Code of its state of domicile and without necessitating
approval of the Applicable Insurance Regulatory Authority.

“Anti-Terrorism Laws” means any
laws relating to terrorism or money laundering, including Executive Order No.
13224, the USA Patriot Act, the laws comprising or implementing the Bank
Secrecy Act, and the laws administered by the United States Treasury Department’s
Office of Foreign Asset Control (as any of the foregoing laws may from time to
time be amended, renewed, extended, or replaced).

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

“Applicable Insurance Regulatory
Authority” means, when
used with respect to any Insurance Subsidiary, the insurance department or
similar administrative authority or agency located in the state in which such
Insurance Subsidiary is domiciled.

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“Applicable Rate” means
for any day:

(a)           with respect to any Revolving Loan
that is a Eurodollar Loan, the applicable rate per annum set forth in the
Pricing Schedule in the row opposite the caption “Euro-Dollar Margin” and in
the column corresponding to the “Pricing Level” that applies for such day; and

(b)           with respect to the facility fees
payable hereunder, the applicable rate per annum set forth in the Pricing
Schedule in the row opposite the caption “Facility Fee Rate” and in the column
corresponding to the “Pricing Level” that applies for such day.

In each case, the “Applicable
Rate” will be based on the Borrower’s Pricing Rating (as defined in the Pricing
Schedule) as of the relevant determination date; provided that
at any time when an Event of Default has occurred and is continuing, such
Applicable Rates will be those set forth in the Pricing Schedule as “Pricing
Level V”.

On the Effective
Date and until adjusted pursuant to the provisions of this definition and the
Pricing Schedule, the Applicable Rate will be determined by reference to Level
III Pricing.

“Arrangers” means KeyBanc Capital Markets
and LaSalle Bank National Association, in their capacity as co-lead arrangers
of the credit facility provided under
this Agreement.

“Assignment” means an assignment and assumption
agreement 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.

“Assumed Reinsurance” means reinsurance assumed by any Insurance
Subsidiary from another Person (other than from another Insurance Subsidiary or
Affiliate of the Borrower).

“Authorized Control Level Risk-Based Capital”,
as of any date, has the meaning set forth on page 23, line 30, column 1 of the
annual Statutory Statement most recently filed by American Equity Life and each
other Insurance Subsidiary (or equivalent page, line, column or statement, to
the extent that any thereof is modified or replaced).

“Base Rate”, when used with respect 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.

“Best” means A.M. Best & Co. and its
successors and assigns or, if it shall be dissolved or shall no longer assign
ratings to insurance companies, then any other nationally recognized insurance
statistical rating agency designated by the Administrative Agent.

“Blocked Person” has the meaning
specified in Section 3.19.

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“Board of Directors” means, the
Board of Directors of the Borrower or any committee thereof duly authorized to
act on behalf of such Board of Directors.

“Borrower” means American Equity Investment Life
Holding Company, an Iowa corporation, and its successors.

“Borrower Cash Generated” means,
as of the end of any Fiscal Quarter, the sum of (a) Amounts Available for
Dividends as of such Fiscal Quarter-end and (b) Trailing Borrower-Only EBITDA
as of such Fiscal Quarter-end.

“Borrower Net Income” means, for
any period, the net income (or loss) of the Borrower only (that is, not on a
Consolidated basis) for such period, as determined in accordance with GAAP,
except that, notwithstanding GAAP, (a) the only revenues that shall be included
in such determination are (i) interest received in cash on the Surplus Notes;
(ii) revenues of the Borrower under the Investment Advisory Agreement; (iii)
income from investments of the Borrower, excluding the Borrower’s investments
in its Subsidiaries; (iv) cash flow from Subsidiaries that are not Insurance
Subsidiaries; and (v) income from interest rate Hedging Agreements to which the
Borrower is a party and that are entered into in connection with Subordinated
Debt under which the Borrower is the borrower or other primary obligor; and (b)
non-cash Interest Expense in connection with the Convertible 2004 Debt that
would otherwise be included in the computation of net income by reason of
Financial Accounting Standard 133 shall be excluded from such determination.

“Borrower-Only EBITDA” means,
for any period, Borrower Net Income for such period, plus, without duplication
and only to the extent reflected as a charge in the statement of such Borrower
Net Income for such period, (a) Interest Expense of the Borrower only for such
period, (b) depreciation of the Borrower only for such period, as determined in
accordance with GAAP, (c) amortization of the Borrower only for such period, as
determined in accordance with GAAP, and (d) all provisions for Income Taxes
(exclusive of Income Taxes attributable to the income or income or excess
profits of the Subsidiaries) during such period.

“Borrowing” means Loans of the same Interest Type made,
converted or continued on the same day and, in the case of Eurodollar
Loans, as to which the same Interest Period is in effect. The term “Borrowing”
does not apply to a Swingline Loan.

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

“Business Day” means any day that is not a
Saturday, Sunday or other day on which commercial banks in Cleveland, Ohio 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.

“Capital Lease Obligations” of
any Person means obligations of such Person to pay rent or other amounts under
any lease of (or other arrangement conveying the right to use) real or 

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personal property,
or a combination thereof, which obligations are required under GAAP to be
classified and accounted for as capital leases on a balance sheet of such
Person. The amount of such obligations will be the capitalized amount thereof
determined in accordance with GAAP.

“Cash Coverage Ratio” means, as
of the end of any Fiscal Quarter, the ratio of (a) Borrower Cash Generated as
of such Fiscal Quarter-end to (b) Trailing Fixed Charges as of such Fiscal
Quarter-end.

“Ceded Reinsurance” means risk that is ceded (whether by
co-insurance, reinsurance or equivalent
relationship otherwise named) by any Insurance Subsidiary to any other Person
(other than to another Insurance Subsidiary or Affiliate of the Borrower),
other than Surplus Relief Reinsurance.

“Change in Control” means the
occurrence of any of the following:

(a)           at any time that any “person” (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or
becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that for the purposes of this clause (a) such person shall
be deemed to have “beneficial ownership” of all shares that any such person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than any one or
more of the following: (i) 10% of the aggregate ordinary voting power
represented by the issued and outstanding Equity Interests in the Borrower and
(ii) 10% of the aggregate equity value represented by the issued and
outstanding Equity Interests in the Borrower;

(b)           during any period of eighteen (18)
consecutive calendar months, individuals who at the beginning of such period
constituted the Board of Directors (together with any new directors (i) whose
election by the Board of Directors was, or (ii) whose nomination for election
by the Borrower’s shareholders was, prior to the date of the proxy or consent
solicitation relating to such nomination, approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for election was
previously so approved), shall cease for any reason to constitute a majority of
the members of the Board of Directors then in office;

(c)           the adoption of a plan relating to
the liquidation or dissolution of the Borrower; or

(d)           the merger (other than a merger
permitted under the provisions of Section 6.03) or consolidation of the
Borrower with or into another Person or the merger of another Person with or
into the Borrower, or the sale of all or substantially all the assets of the
Borrower (determined on a Consolidated basis) to another Person, other than a
merger or consolidation transaction in which holders of Equity Interests
representing 100% of the ordinary voting power represented by the Equity
Interests in the Borrower immediately prior to such transaction (or other
securities into which such securities are converted as part of such merger or
consolidation transaction) own directly or indirectly at least a majority of 

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the ordinary voting power represented by the Equity
Interests in the surviving Person in such merger or consolidation transaction
issued and outstanding immediately after such transaction and in substantially
the same proportion as before the transaction.

“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 such date or (c)
compliance by any Lender (or, for purposes of Section 2.15(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 such date.

“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
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 2.05 or
Section 9.04. The initial amount of each Lender’s Commitment is set forth on
Schedule 2.01, or in the Assignment pursuant to which such Lender shall have
assumed its initial Commitment, as applicable. The initial aggregate amount of
the Commitments is $150,000,000.

“Consolidated”
means the Borrower and its Subsidiaries, taken as a whole in accordance with
GAAP.

“Consolidated Assets” means, as
at the date of any determination, the net book value of all assets of the
Borrower and its Subsidiaries as of such date classified as assets in
accordance with GAAP and determined on a Consolidated basis.

“Consolidated Interest Expense”
means Interest Expense of the Borrower and its Subsidiaries determined on a
Consolidated basis.

“Consolidated Liabilities”
means, as at any date of determination, all liabilities of the Borrower and its
Subsidiaries as of such date classified as liabilities in accordance with GAAP
and determined on a Consolidated basis.

“Consolidated Net Worth” means,
as at any date of determination, the remainder of (a) all Consolidated Assets
(after deducting all applicable reserves and excluding any re-appraisal or
write-up of assets after the date of this Agreement) as of such date, minus
(b) all Consolidated Liabilities as of such date, but computed without giving
effect to Accumulated Other
Comprehensive Income (Loss) under Financial Accounting Standards 115 and
123.

“Control” means possession, directly or
indirectly, of the power (a) to vote 10% or more of any class of voting
securities of a Person or (b) to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. “Controlling” and “Controlled” have
meanings correlative thereto.

“Convertible 2004 Debt” has the
meaning specified in Section 6.01.

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“Convertible
2004 Debt Documents” means the Indenture in respect of the
Convertible 2004 Debt dated December 6, 2004 by and between the Borrower and
U.S. Bank National Association, as Trustee, as supplemented by the First
Supplemental Indenture dated December 30, 2004, the Borrower’s 5.25% Contingent
Convertible Senior Notes Due 2024 issued thereunder, the Registration Rights
Agreement (as defined therein) and related agreements and other documents, as
amended and supplemented from time to time pursuant to this Agreement.

“Current Redeemable Equity” means any preferred
stock or other Equity Interests, which in either case, is subject to mandatory
redemption at any time prior to the first anniversary of the Maturity Date (as
it exists on any date of determination).

“Debt” 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 (other than
unspent cash deposits held in escrow by or in favor of such Person, or in a
segregated deposit account controlled by such Person, in each case in the
ordinary course of business to secure the performance obligations of, or
damages owing from, one or more third parties),

(b)           all obligations of such Person
evidenced by bonds, debentures, notes (including, without limitation, the Trust
Preferred Securities Notes) or similar instruments,

(c)           all obligations of such Person on
which interest charges are customarily paid (other than obligations where
interest is levied only on late or past due amounts).

(d)           all obligations of such Person under
conditional sale or other title retention agreements relating to property
acquired by such Person,

(e)           all obligations of such Person in
respect of the deferred purchase price of property or services (excluding
current accounts payable incurred in the ordinary course of business),

(f)            all Debt of others secured by (or
for which the holder of such Debt 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 Debt secured thereby has been assumed,

(g)           all Guarantees by such Person of Debt
of others,

(h)           all Capital Lease Obligations of such
Person,

(i)            all unpaid obligations, contingent
or otherwise, of such Person as an account party in respect of letters of
credit and letters of guaranty (other than cash collateralized letters of
credit to secure the performance of workers’ compensation, unemployment
insurance, other social security laws or regulations, bids, trade contracts,
leases, environmental and other statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case,
obtained in the ordinary course of business),

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(j)            all capital stock of such Person
which is required to be redeemed or is redeemable at the option of the holder if
certain events or conditions occur or exist or otherwise, and

(k)           all obligations, contingent or
otherwise, of such Person in respect of bankers’ acceptances.

The Debt of any
Person shall include the Debt of any other entity (including any partnership in
which such Person is a general partner) to the extent that such Person is
liable therefor pursuant to law or judicial holding as a result of such Person’s
ownership interest in or other relationship with such entity, except to the
extent that contractual provisions binding on the holder of such Debt provide
that such Person is not liable therefor; provided that Debt shall not include (i) obligations with
respect to insurance policies, annuities, guaranteed investment contracts and
similar products underwritten by, or Reinsurance Agreements or Retrocession
Agreements entered into by, an Insurance Subsidiary in the ordinary course of
its business, (ii) obligations with respect to Surplus Relief Reinsurance ceded
by an Insurance Subsidiary, or (iii) obligations in the ordinary course of
business of such Person to purchase securities that arise out of or in
connection with the sale of the same or substantially similar securities or to
return collateral consisting of securities arising out of or in connection with
the loan of the same or substantially similar securities.

“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.

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

“Domestic Subsidiary” means each
Subsidiary that is not a Foreign Subsidiary.

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

“Effective Date Trust Preferred Securities”
means mandatorily redeemable preferred securities issued by any of the
following Delaware business trusts that are Affiliates of the Borrower as of
the Effective Date: American Equity
Capital Trust I, American
Equity Capital Trust II,
American Equity Capital Trust III, American Equity Capital Trust IV, American Equity Capital Trust V, American Equity Capital Trust VI,
American Equity Capital Trust VII, American Equity Capital Trust VIII,
American Equity Capital Trust IX, American Equity Capital Trust X,
American Equity Capital Trust XI and American Equity Capital Trust XII.

“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 in any way to the environment, the
preservation or reclamation of natural resources, the management, release or
threatened release of any Hazardous Material or the effects of the environment
on health and safety.

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“Equity Interests” means (a)
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 or (b) any Equity Rights in such Person.

“Equity Rights” means, with
respect to any Person, any subscriptions, options, warrants, commitments,
preemptive rights or agreements of any kind (including, without limitation, any
stockholders’ or voting trust agreements) for the issuance, sale, registration
or voting of, or securities convertible into, any additional shares of capital
stock of any class, or partnership or other ownership interests of any type in,
such Person.

“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 or any Subsidiary,
is treated as a single employer under Section 4 14(b) or (c) of the Internal
Revenue Code or, solely for purposes of Section 302 of ERISA and Section 412 of
the Internal Revenue Code, is treated as a single employer under Section 414 of
the Internal Revenue 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 (except 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 Internal Revenue Code or
Section 302 of ERISA), whether or not waived; (c) the filing pursuant to
Section 4 12(d) of the Internal Revenue Code or Section 3 03(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 ERISA Affiliate 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; (f) the incurrence by the
Borrower or any ERISA Affiliate of any liability with respect to withdrawal or
partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by
the Borrower or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.

“Eurodollar”, when used with
respect 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.

“Events of Default” has
the meaning specified in Article 7.

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

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“Excluded Taxes” means, with
respect to any Lender Party or other recipient of a payment made by or on
account of any obligation of the Borrower hereunder:

(a)           income or franchise taxes imposed on
(or measured by) its net income, receipts, capital or net worth by the United
States (or any jurisdiction within the United States, except to the extent that
such jurisdiction within the United States imposes such taxes solely in
connection with such Lender Party’s enforcement of its rights or exercise of
its remedies under the Loan Documents), or by the jurisdiction under the laws
of which such recipient is organized or in which its principal office is
located or, in the case of any Lender, in which its applicable lending office
is located (collectively, “Income Taxes”);

(b)           any branch profits taxes imposed by
the United States or any similar tax imposed by any other jurisdiction
described in clause (a) above; and

(c)           in the case of a Foreign Lender, any
withholding tax that (i) is in effect and would apply to amounts payable to
such Foreign Lender at the time such Foreign Lender becomes a party to this
Agreement or designates a new lending office or (ii) is attributable to such
Foreign Lender’s failure to comply with Section 2.17(e).

Notwithstanding
the foregoing, a withholding tax will not be an “Excluded Tax” to the extent
that (A) it is imposed on amounts payable to a Foreign Lender by reason of an
assignment made to such Foreign Lender at the Borrower’s request pursuant to
Section 2.19(b), (B) it is imposed on amounts payable to a Foreign Lender by
reason of any other assignment and does not exceed the amount for which the
assignor would have been indemnified pursuant to Section 2.17(a) or (C) in the
case of designation of a new lending office, it does not exceed the amount for
which such Foreign Lender would have been indemnified if it had not designated
a new lending office.

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

“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 Cleveland,
or, if such rate is not so published on such 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.

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

“Financial Officer” means the
chief financial officer, vice chairman, or vice president of accounting of the
Borrower.

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“Financing Transactions” means any one or more of the execution,
delivery and performance by the Borrower of the Loan Documents to which it is
to be a party, and the borrowing of Loans.

“Fiscal Quarter” means a fiscal
quarter of the Borrower.

“Fiscal Quarter Increase” means,
as to any Fiscal Quarter, the sum of (a) the greater of (i) an amount equal to
50% of the Borrower’s Consolidated net, after tax earnings (determined in
accordance with GAAP) for such Fiscal Quarter and (ii) zero dollars ($0) and
(b) and an amount equal to 50% of Net Available Proceeds received by the
Borrower in such Fiscal Quarter.

“Fiscal Year” means a fiscal
year of the Borrower.

“Fitch” means Fitch Ratings, a subsidiary
of Fimilac, S.A.

“Fixed Charges” means, for any
period, the sum, without duplication, of (a) Consolidated Interest Expense for
such period, (b) Restricted Payments made or incurred by the Borrower during
such period, and (c) payments of Income Taxes made by the Borrower during such
period, except to the extent that such Income Taxes are paid with the proceeds
of payments made by a Subsidiary pursuant to a tax sharing agreement between
the Borrower and such Subsidiary.

“Foreign Lender” means any
Lender that is organized under the laws of a jurisdiction outside the United
States.

“Foreign Subsidiary” means a Subsidiary
(which may be a corporation, limited liability company, partnership or other
legal entity) organized under the laws of a jurisdiction outside the United
States, and conducting substantially all its operations outside the United
States.

“GAAP” means generally accepted accounting
principles as in effect from time to time in the United States, applied on a
basis consistent (except for changes concurred in by the Borrower’s independent
public accountants) with the most recent audited Consolidated financial
statements of the Borrower and its Consolidated Subsidiaries delivered to the
Lenders.

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

“Guarantee” by any Person (the “guarantor”)
means any obligation, contingent or otherwise, of the guarantor guaranteeing or
having the economic effect of guaranteeing any Debt or other debt-like
obligations 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 Debt or other obligation or to
purchase (or 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 

 11
 

assuring the owner
of such Debt 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 Debt or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Debt or other
obligation; provided that the term “Guarantee” shall
not include endorsements for collection or deposit in the ordinary course of
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.

“Hedging Agreement” means any interest rate
protection agreement, foreign currency exchange agreement, commodity price
protection agreement or other interest rate, currency exchange rate or
commodity price hedging arrangement.

“Income Taxes” has the meaning
specified in clause (a) of the definition of Excluded Taxes.

“Indemnified Taxes” means all Taxes except Excluded Taxes.

“Insurance Subsidiary” means a Subsidiary
that is a regulated insurance company. As of the date of this Agreement,
American Equity Investment Life Insurance Company and American Equity
Investment Life Insurance Company of New York constitute the Insurance
Subsidiaries.

“Interest Election” means an
election by the Borrower to change or continue the Interest Type of a Borrowing
in accordance with Section 2.07.

“Interest Expense” means, for
any fiscal period, all expense of the Borrower or any of its Subsidiaries for
such fiscal period classified as interest expense for such period, including
interest on capitalized interest and interest under “synthetic” leases, in
accordance with GAAP; provided that
Interest Expense shall not include (a) interest expense, if any, in respect of
Hedging Agreements that would otherwise be included pursuant to Financial
Accounting Standard 133; (b) interest expense in respect of obligations in the ordinary course of business of
the Borrower or any of its Subsidiaries to purchase securities that arise out
of or in connection with the sale of the same or substantially similar
securities or to return collateral consisting of securities arising out of or
in connection with the loan of the same or substantially similar securities; or
(c) non-cash interest expense accrued on the Convertible 2004 Debt.

“Interest Payment Date” means
(a) with respect to any Base Rate Loan, the last day of each calendar quarter,
(b) with respect to any Swingline Loan, the day on which such Loan is required
to be repaid and (c) 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,
if such Interest Period is longer than three months, each day during such
Interest Period that occurs at intervals of three months’ duration after the
first day of such Interest Period.

 12
 

“Interest Period” means, with respect to
any Eurodollar Borrowing, the period beginning on the date of such Borrowing
and ending on the numerically corresponding day in the calendar month that is
one, two, three or six months thereafter, as the Borrower may elect; provided that (a) if any Interest Period would end on a day
other than a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day and (b) any Interest Period that commences on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the last calendar month of such Interest
Period) shall end on the last Business Day of the last calendar month of such
Interest Period. For purposes hereof, the date of a Borrowing initially shall
be the date on which such Borrowing is made and thereafter shall be deemed to
be the effective date of the most recent conversion or continuation of such
Borrowing.

“Interest Type”, when used with respect 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 or the Alternate Base Rate.

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

“Investment” means, for any Person: (a) the acquisition
(whether for cash, Property, services or securities or otherwise) of capital
stock, bonds, notes, debentures, partnership or other ownership interests or
other securities of any other Person or any agreement to make any such
acquisition (including, without limitation, any “short sale” or any sale of any
securities at a time when such securities are not owned by the Person entering
into such sale); (b) the making of any deposit with, or advance, loan or other
extension of credit or capital contribution to, any other Person (including the
purchase of Property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such Property to such Person),
but excluding any such advance, loan or extension of credit having a term not
exceeding 90 days arising in connection with the sale of inventory or supplies
by such Person in the ordinary course of business; (c) the entering into of any
Guarantee of, or other contingent obligation with respect to, Debt or other
liability of any other Person and (without duplication) any amount committed to
be advanced, lent or extended to such Person; or (d) the entering into of any
Hedging Agreement.

“Lender Affiliate” means, (a)
with respect to any Lender, (i) an Affiliate of such Lender or (ii) any entity
(whether a corporation, partnership, trust or otherwise) that is engaged in
making, purchasing, holding or otherwise investing in bank loans and similar
extensions of credit in the ordinary course of its business and is administered
or managed by such Lender or an Affiliate of such Lender and (b) with respect
to any Lender that is a fund which invests in bank loans and similar extensions
of credit, any other fund that invests in bank loans and similar extensions of
credit and is managed by the same investment advisor as such Lender or by an
Affiliate of such investment advisor.

“Lender Parties” means the
Lenders and the Administrative Agent.

 13
 

“Lenders” means the Persons
listed on Schedule 2.01 and any other Person that shall have become a party
hereto pursuant to an Assignment or Section 2.05, other than any such Person
that ceases to be a party hereto pursuant to an Assignment. Unless the context
requires otherwise, the term “Lenders” includes the Swingline Lender.

“LIBO Rate” means, with respect
to any Eurodollar Borrowing for any Interest Period, the per annum rate of
interest, determined by the Administrative Agent in accordance with its usual
procedures (which determination shall be conclusive and binding absent manifest
error) as of approximately 11:00 A.M. (London time) two (2) Business Days prior
to the beginning of such Interest Period pertaining to such Eurodollar
Borrowing, appearing on page 3750 of the Dow Jones Telerate Service (or any
successor to 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) as
the rate in the London interbank market for dollar deposits in immediately
available funds with a maturity comparable to such Interest Period. In the
event that such a rate quotation is not available for any reason, then the rate
shall be the rate, determined by the Administrative Agent as of approximately
11:00 A.M. (London time) two (2) Business Days prior to the beginning of such
Interest Period pertaining to such Eurodollar Borrowing, to be the average
(rounded upwards, if necessary, to the nearest one sixteenth of one percent
(1/16th of 1%)) of the per annum rates of interest at which dollar deposits in
immediately available funds, approximately equal in principal amount to such
Eurodollar Borrowing and for a maturity comparable to the Interest Period, are
offered to KeyBank National Association by prime banks in the London interbank
market.

“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.

“Like-Kind Exchange” means the disposition of property in
exchange for similar property or for cash proceeds in a transaction qualifying
as a like-kind exchange pursuant to Section 1031 of the Internal Revenue Code
of 1986 (or any successor provision).

“Loan Documents” means this
Agreement, any promissory note issued by the Borrower pursuant to Section 2.09(e)
and any certificate required to be delivered by the Borrower pursuant to
Article 2 or Article 5.

“Loans” means loans made by the Lenders to
the Borrower pursuant to this Agreement. Unless the context requires otherwise,
the term “Loans” includes Swingline Loans.

“Long-Term Debt” means any Debt that, in accordance
with GAAP, constitutes (or, when incurred, constituted) a long-term liability.

 14
 

“Material Adverse Effect” means a material
adverse effect on (a) the business, operations, properties, assets, financial
condition, prospects, contingent liabilities or material agreements of the
Borrower and its Subsidiaries taken as a whole, (b) the ability of the Borrower
to perform any of its obligations under any Loan Document or (c) the rights of
or benefits available to any Lender Party under, or the validity or
enforceability of, any Loan Document.

“Material Debt” means
Debt (other than obligations in respect of the Loans) or obligations in respect
of one or more Hedging Agreements, of any one or more of the Borrower and its
Subsidiaries in an aggregate principal amount exceeding $10,000,000. For
purposes of determining Material Debt, the “principal amount” of the
obligations of the Borrower or any Subsidiary in respect of any Hedging
Agreement at any time will be the maximum aggregate amount (after giving effect
to any netting agreements) that the Borrower or such Subsidiary would be
required to pay if such Hedging Agreement were terminated at such time.

“Material Insurance Subsidiary” means a
Material Subsidiary that is also an Insurance Subsidiary. As of the date of
this Agreement, American Equity Investment Life Insurance Company constitutes
the only Material Insurance Subsidiary.

“Material Subsidiary” means a Subsidiary that holds, directly or indirectly, more than 5%
of the Consolidated assets of the Borrower and its Subsidiaries at such time or
that accounts for more than 5% of the consolidated revenues of the Borrower and
its Subsidiaries at such time, in each instance determined in accordance
with GAAP.

“Maturity Date” means the Revolving Availability Termination
Date.

“Minimum Net Worth” means, for
any Fiscal Quarter, the minimum Consolidated Net Worth required to be
maintained by the Borrower as of the end of such Fiscal Quarter pursuant to
Section 6.13.

“Moody’s” means Moody’s Investors Service,
Inc. and its successors and assigns or, if it shall be dissolved or shall no
longer assign credit ratings to long term debt, then any other nationally
recognized statistical rating agency designated by the Administrative Agent.

“Multiemployer Plan” means
a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

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

“Net Available Proceeds” means, with respect to the sale or other
disposition of any Equity Interests of the Borrower or a Material Subsidiary,
the aggregate amount of all cash received by the Borrower and its Material
Subsidiaries in respect of such sale or other disposition, net of reasonable
expenses incurred by the Borrower and its Material Subsidiaries in connection
therewith.

 15
 

“Other Taxes” meansany
and all present or future recording, stamp, documentary, excise, transfer,
sales, property or similar taxes, charges or levies arising from any payment
made under any Loan Document or from the execution, delivery or enforcement of,
or otherwise with respect to, any Loan Document.

“Participants” has the meaning specified in
Section 9.04(e).

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

“Percentage” means, with respect to any
Lender, the percentage of the Total Commitment represented by such Lender’s
Commitment. If the Commitments have terminated or expired, the Percentages will
be determined based on the Commitments most recently in effect, adjusted to
give effect to any assignments.

“Permitted Investments”
means any of the following: (a) any investment in direct obligations
of the United States of America or any agency thereof; (b) investments in time
deposit accounts, certificates of deposit and money market deposits maturing
within 90 days of the date of acquisition thereof issued by any Lender or a
bank or trust company which is organized under the laws of the United States of
America, any State thereof or any foreign country recognized by the United
States of America, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $100,000,000 (or the foreign
currency equivalent thereof) and whose long-term debt is rated “A” (or such
similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the Exchange Act)
or any money market fund sponsored by a registered broker dealer or mutual fund
distributor; (c) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (a) above entered
into with a Lender or a bank meeting the qualifications described in clause (b)
above; (d) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an Affiliate
of the Borrower) organized and in existence under the laws of the United States
of America or any foreign country recognized by the United States of America
with a rating at the times as of which any investment therein is made of “P-l”
(or higher) by Moody’s or “A-1” (or higher) by S&P; (e) investments in
securities with maturities of six months or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the
United States of America, or by any political subdivision or taxing authority
thereof, and rated at least “A” by S&P or “A” by Moody’s; and (f) any other
investment permitted by the Applicable
Insurance Regulatory Authority.

“Permitted Liens” means:

(a)           Liens imposed by law for taxes that
are not yet due or are being contested in compliance with Section 5.05;

(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 5.05:

 16
 

(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
(including, without limitation, deposits made in the ordinary course of
business to cash collateralize letters of credit described in the parenthetical
in clause (i) of the definition of “Debt”);

(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, and Liens imposed by
statutory or common law relating to banker’s liens or rights of setoff or
similar rights relating to deposit accounts, in each case in the ordinary
course of business;

(e)           Liens arising under escrows, trusts,
custodianships, separate accounts, funds withheld procedures, and similar
deposits, arrangements, or agreements established with respect to insurance
policies, annuities, guaranteed investment contracts and similar products
underwritten by, or Reinsurance Agreements entered into by, any Insurance
Subsidiary in the ordinary course of business;

(f)            deposits with insurance regulatory
authorities in the ordinary course of business; and

(g)           easements, zoning restrictions,
rights-of-way, licenses, reservations, minor irregularities of title and
similar encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligation 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 Material Subsidiary;

provided that,
except as provided in clause (c), above, the term “Permitted Liens” shall not
include any Lien that secures Debt.

“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 (except a Multiemployer
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the
Internal Revenue 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) a “contributing sponsor” as
defined in Section 400 l(a)(13) of ERISA.

“Prevailing Eastern Time” means “eastern standard time” as defined in 15
USC §263 as modified by 15 USC §260a.

“Pricing Schedule” means the Pricing
Schedule attached hereto.

 17
 

“Prime Rate” means, for any day, the rate of interest per
annum then most recently publicly announced by KeyBank National
Association as its “prime” rate (or equivalent rate otherwise named) in effect
at its principal office in Cleveland, Ohio, which prime rate is not necessarily
the lowest rate of interest charged by KeyBank National Association to
commercial borrowers. Each change in the Prime Rate will be effective for
purposes hereof from and including the date such change is publicly announced
as being effective.

“Rating Agency” means each of S&P and
Best.

“Register” has the meaning
specified in Section 9.04(c).

“Reinsurance Agreement” means any agreement, contract, treaty or other
arrangement providing for Ceded Reinsurance by any Insurance Subsidiary or any
Subsidiary of such Insurance Subsidiary.

“Regulation U” means Regulation U of the
Board of Governors of the Federal Reserve System, as in effect from time to
time.

“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 its Affiliates.

“Required Lenders” means,
at any time, Lenders having aggregate Exposures and unused Commitments
representing more than 50% of
the sum of all Exposures and unused Commitments at such time.

“Restricted Payment” means, without duplication, (a) any dividend
or other distribution (whether in cash, securities or other property) with
respect to any Equity Interest in the Borrower or with respect to any Trust
Preferred Securities or (b) any payment (whether in cash, securities or other
property) or incurrence of an obligation by the Borrower or any of its
Subsidiaries, including any sinking fund or similar deposit, on account of the
purchase, redemption, retirement, acquisition, cancellation or termination of
any Equity Interest in the Borrower or any Trust Preferred Securities.

“Retrocession Agreement” means any agreement, contract, treaty or other
arrangement (other than Surplus Relief Reinsurance) whereby any Insurance
Subsidiary or any Subsidiary of such Insurance Subsidiary cedes reinsurance to
other insurers (other than to another Insurance Subsidiary or any of its
Subsidiaries).

“Revolving Availability” means on any date
an amount equal to the Total Commitment Amount on such date, minus the Total
Outstanding Amount on such date.

“Revolving Availability Period” means the
period from and including the Effective Date to but excluding the Revolving
Availability Termination Date (or, if earlier, the date on which all
outstanding Commitments terminate).

 18
 

“Revolving Availability Termination Date”
means November 18, 2011 (or if such date is not a Business Day with respect to
Eurodollar Loans, the next preceding day that is a Business Day with respect to
Eurodollar Loans).

“Revolving Loan” means a Loan made pursuant
to Section 2.02.

“Risk-Based Capital Ratio”
means, as of the end of any Fiscal Quarter, the ratio of (a) Total Adjusted
Capital as of such Fiscal Quarter-end to (b) an amount equal to (i) Authorized
Control Level Risk-Based Capital as of such Fiscal Quarter-end, times
(ii) two (2).

“Sale-Leaseback Transaction” has
the meaning specified in Section 6.07.

“SAP” means, with respect to any Insurance Subsidiary,
the accounting procedures and practices prescribed or permitted by the
Applicable Insurance Regulatory Authority, applied on a basis consistent with
those that, in accordance with the last sentence of Section 1.04 hereof, are to
be used in making the calculations for purposes of determining compliance with
this Agreement.

“S&P” means Standard & Poor’s Ratings Group,
a division of The McGraw-Hill Companies, Inc., and its successors and assigns
or, if it shall be dissolved or shall no longer assign credit ratings to long
term debt, then any other nationally recognized statistical rating agency
designated by the Administrative Agent.

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

“Senior Debt Rating” means a
rating of the Borrower’s senior long-term debt which is not secured or
supported by a guarantee, letter of credit or other form of credit enhancement;
provided that if a Senior Debt Rating by
a Rating Agency is required to be at or above a specified level and such Rating
Agency shall have changed its system of classifications after the date hereof,
the requirement will be met if the Senior Debt Rating by such Rating Agency is
at or above the new rating which most closely corresponds to the specified
level under the old rating system; and provided further that
the Senior Debt Rating in effect on any date is that in effect at the close of
business on such date.

“Statutory Reserve Adjustment” 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 Federal Reserve Board to
which the Administrative Agent is subject with respect to eurocurrency funding
(currently referred to as “Eurocurrency Liabilities” in Regulation D of the
Federal Reserve Board). Such reserve percentages will include those imposed
pursuant to such Regulation D. Eurodollar Loans will 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 Adjustment will be adjusted automatically on
and as of the effective date of any change in any applicable reserve
percentage.

 19

“Statutory Statement” means, as to any Insurance Subsidiary, a
statement of the condition and affairs of such Insurance Subsidiary, prepared
in accordance with statutory accounting practices required or permitted by the
Applicable Insurance Regulatory Authority, and filed with the Applicable
Insurance Regulatory Authority.

“Statutory Surplus” means, as at any date for any Insurance
Subsidiary, the aggregate amount of surplus as regards policyholders
(determined without duplication in accordance with SAP) of such Insurance
Subsidiary, as set forth on page 3, line 38, of the most recent Statutory
Statement of such Insurance Subsidiary (or equivalent page, line, or
statement, to the extent that any thereof is modified or replaced).

“Subordinated Debt” means the
Debt of the Borrower evidenced by the Trust Preferred Securities Notes and any
other Debt of the Borrower (a) no part of the principal of which is required to
be paid (whether by way of mandatory sinking fund, mandatory redemption,
mandatory prepayment or otherwise), prior to the date that is twelve months
after the Maturity Date and (b) that has been subordinated to the Loans and
other obligations of the Borrower under the Loan Documents in right and time of
payment upon terms that are satisfactory to the Required Lenders, which terms
may, in the Required Lenders’ determination, include (without limitation)
limitations or restrictions on the right of the holder of such Debt to receive
payments and exercise remedies.

“subsidiary” means, with respect
to any Person (the “parent”) at
any date, (a) any corporation, limited liability company, partnership 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 and (b) any other
corporation, limited liability company, partnership or other entity (i) of
which securities or other ownership interests (A) representing more than 50% of
the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership voting
interests or (B) otherwise having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions, are, as
of such date, owned, controlled or held, or (ii) that is otherwise Controlled
(pursuant to clause (b) of the definition of “Control”) as of such date, by the
parent and/or one or more of its subsidiaries, but excluding any such entity
that is required to be consolidated under GAAP solely by reason of FASB
Interpretation No. 46.

“Subsidiary” means any
subsidiary of the Borrower. As of the date of this Agreement, American Equity
Investment Life Insurance Company, American Equity Investment Life Insurance
Company of New York, American Equity Investment Capital, Inc., and American
Equity Investment Properties, L.C. are the Subsidiaries of the Borrower.

“Surplus Note” means any surplus
note or debenture issued at any time by American Equity Life or other Insurance
Subsidiary to the Borrower, as such surplus note or debenture may be amended or
modified in accordance with this Agreement and approved by the Applicable
Insurance Regulatory Authority.

“Surplus Relief Reinsurance” means any transaction in which any Insurance
Subsidiary or any Subsidiary of such Insurance Subsidiary cedes business under
a reinsurance agreement that 

 20
 

would be considered a “financing-type” reinsurance agreement as
determined by the independent certified public accountants of American Equity
Life or other Insurance Subsidiary in accordance with principles published by
the Financial Accounting Standards Board or the Second Edition of the AICPA
Audit Guide for Stock Life Insurance Companies (pp. 91-92 or equivalent
provisions), as the same may be revised from time to time.

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

“Swingline Lender” means KeyBank National Association, in
its capacity as the lender of Swingline Loans hereunder.

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

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

“Total Adjusted Capital”, as of
any date, has the meaning set forth on, whichever is most recently filed by
American Equity Life and each other Insurance Subsidiary, (a) page 23, line 29,
column 1 of its most recently filed annual Statutory Statement or (b) page 3,
line 38, column 1 of its most recently filed quarterly Statutory Statement (or,
in each case, equivalent page, line, column or statement, to the extent that
any thereof is modified or replaced).

“Total Capitalization” means, as of any
date, the aggregate of, without duplication, (a) Consolidated Debt of the
Borrower, of the type described in any or all of clauses (a), (b), (c), (d),
(e) and (h) of the definition of “Debt”, on such date and (b) Consolidated Net
Worth of the Borrower, on such date.

“Total Commitment” means, at any date, the aggregate of
the Commitments of all Lenders at such date.

“Total Outstanding Amount” means, at any date, the aggregate Exposures
of all Lenders at such date.

“Trailing Borrower-Only EBITDA”
means, as of the end of any Fiscal Quarter, Borrower-Only EBITDA for such
Fiscal Quarter, plus Borrower-Only EBITDA for the three (3) immediately
preceding Fiscal Quarters.

“Trailing Fixed Charges” means,
as of the end of any Fiscal Quarter, Fixed Charges for such Fiscal Quarter,
plus Fixed Charges for the three (3) immediately preceding Fiscal Quarters.

“Trust Preferred Securities”
means mandatorily redeemable preferred securities issued by one or more
Delaware business trusts that are Affiliates of the Borrower (including,
without limitation, Effective Date Trust Preferred Securities), to which trusts
the Borrower has issued 

 21
 

Trust Preferred
Securities Notes, provided that no such preferred
securities shall be mandatorily redeemable earlier than November 18, 2014.

“Trust Preferred Securities Notes”
means (a) the unsecured junior subordinated deferrable interest notes issued by
the Borrower to evidence loans made to the Borrower by the issuers of the Trust
Preferred Securities from the proceeds of the sale of such Trust Preferred
Securities under and pursuant to any of the Effective Date Trust Preferred
Securities and (b) any subsequent
unsecured junior subordinated deferrable interest notes issued by the Borrower
to evidence loans made to the Borrower by the issuers of the Trust Preferred
Securities from the proceeds of the sale of such Trust Preferred Securities,
which notes are governed by indentures in all material respects equivalent
(other than the face amount of such debentures) to that certain Junior
Subordinated Indenture dated June 15, 2005 between the Borrower and JPMorgan
Chase Bank, N.A., as trustee.

“United States” means the United States of America.

“USA Patriot Act” means the
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, as the same
has been, or shall hereafter be, renewed, extended, amended or replaced.

“Withdrawal Liability” means
liability to a Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan, as such terms are defined in Part I of
Subtitle E of Title IV of ERISA.

“Wholly Owned Subsidiary” means, with respect to any Person, any
corporation, partnership or other entity of which all of the equity securities
or other ownership interests (other than, in the case of a corporation,
directors’ qualifying shares) are directly or indirectly owned or controlled by
such Person or one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.

Section
1.02.          Classification
of Loans and Borrowings. For purposes of this Agreement, Loans and
Borrowings may be classified by Interest Type (e.g., a “Eurodollar Loan” or a “Eurodollar
Borrowing”).

Section
1.03.          Terms
Generally. The definitions of terms herein (including those
incorporated by reference to another document) apply equally to the singular
and plural forms of the terms defined. Whenever the context may require, any
pronoun includes the corresponding masculine, feminine and neuter forms. The
words “include”, “includes” and
“including” shall be deemed to be followed by the phrase “withoutlimitation”. 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 

 22
 

entirety and not
to any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the word “property”
shall be construed 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.

(a)           Except
as otherwise expressly provided herein, all accounting terms used herein shall
be interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Administrative Agent
hereunder shall (unless otherwise disclosed to the Administrative Agent in
writing at the time of delivery thereof in the manner described in subsection
(b) below) be prepared, in accordance with GAAP or with SAP applied on a basis
consistent with those used in the preparation of the latest financial
statements furnished to the Administrative Agent hereunder (which, prior to the
delivery of the first financial statements under Section 5.01 hereof, shall
mean the audited, or annual statutory, financial statements as at December 31,
2005 referred to in Section 3.04 hereof). All calculations made for the
purposes of determining compliance with this Agreement shall (except as
otherwise expressly provided herein) be made by application of GAAP or with
statutory accounting practices applied on a basis consistent with those used in
the preparation of the latest annual or quarterly financial statements
furnished to the Administrative Agent pursuant to Section 5.01 hereof (or,
prior to the delivery of the first financial statements under Section 5.01
hereof, used in the preparation of the audited, or annual statutory, financial
statements as at December 31, 2005 referred to in Section 3.04 hereof) unless
(i) the Borrower shall have objected to determining such compliance on such
basis at the time of delivery of such financial statements or (ii) the Required
Lenders (through the Administrative Agent) shall so object in writing within 30
days after delivery of such financial statements, in either of which events
such calculations shall be made on a basis consistent with those used in the
preparation of the latest financial statements as to which such objection shall
not have been made (which, if objection is made in respect of the first
financial statements delivered under Section 5.01 hereof, shall mean the
audited, or annual statutory, financial statements referred to in Section 3.04
hereof).

(b)           The
Borrower shall deliver to the Administrative Agent at the same time as the
delivery of any annual or quarterly financial statement under Section 5.01
hereof (i) a description in reasonable detail of any material variation between
the application of accounting principles, or statutory accounting practices,
employed in the preparation of such statement and the application of accounting
principles, or statutory accounting practices, employed in the preparation of
the next preceding annual or quarterly financial statements as to which no
objection has been made in accordance with the last sentence of subsection (a)
above and (ii) reasonable estimates of the difference between such statements
arising as a consequence thereof.

(c)           To enable the ready and consistent
determination of compliance with the covenants set forth in Article 6 hereof,
the Borrower shall not change the last day of its fiscal year from December 31,
or the last days of the first three fiscal quarters in each of its fiscal years
from March 31, June 30 and September 30 of each year, respectively.

 23
 

ARTICLE 2

THE CREDITS

Section
2.01.          Commitments.
(a) 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 Revolving Availability Period in an aggregate principal amount that will
not at any time result in (A) such Lender’s Exposure exceeding its Commitment
or (B) the Total Outstanding Amount exceeding the Total Commitment then in
effect. Within the foregoing limits and subject to the terms and conditions set
forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans.

(b)           The Commitments of the Lenders are
several, i.e., 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, and no
Lender shall be responsible for any other Lender’s failure to make Loans as and
when required hereunder.

Section
2.02.          Revolving
Loans. (a) Each Revolving Loan shall be made as part of a Borrowing
consisting of Loans of the same Interest Type made by the Lenders ratably in
accordance with their respective Commitments, as the Borrower may request
(subject to Section 2.14) in accordance herewith. 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. Any exercise of such option shall not affect
the Borrower’s obligation to repay such Loan as provided herein.

(b)           At the beginning of each Interest
Period for any Eurodollar Borrowing, the aggregate amount of such Borrowing
shall be an integral multiple of $5,000,000 and not less than $10,000,000. When
each Base Rate Borrowing is made, the aggregate amount of such Borrowing shall
be an integral multiple of $1,000,000 and not less than $5,000,000; provided that a Base Rate Borrowing may be in an aggregate
amount that is equal to the entire unused balance of the Commitments. Borrowings of more than one
Interest Type may be outstanding at the same time; provided that
there shall not at any time be more than a total of five (5) Eurodollar Borrowings
outstanding.

(c)           Notwithstanding any other provision
hereof, the Borrower will not be
entitled to request, or to elect to convert or continue, any Eurodollar
Borrowing if the Interest Period requested with respect thereto would end after
the Maturity Date.

Section
2.03.          Requests to
Borrow Revolving Loans. 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 11:00 a.m., Prevailing
Eastern Time, three Business Days before the date of the proposed Borrowing or
(b) in the case of a Base Rate Borrowing, not later than 11:00 a.m., Prevailing
Eastern Time, on the date of the proposed Borrowing. Each such telephonic
Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Borrowing Request
in a form approved by the Administrative Agent and signed by the Borrower. Each
such telephonic and 

 24
 

written Borrowing
Request shall specify the following information in compliance with Section
2.02:

(i)            the aggregate amount of such
Borrowing;

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

(iii)          whether such Borrowing is to be a Base
Rate 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 “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 Interest Type of a Borrowing is specified, the requested
Borrowing will be a Base Rate Borrowing. If no Interest Period with respect to
a requested Eurodollar Borrowing is specified, the Borrower will be deemed to
have selected an Interest Period of one month’s duration. Promptly after it
receives a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender as to the details of such
Borrowing Request and the amount of such Lender’s Loan to be made pursuant
thereto.

Section
2.04.          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 Revolving Availability Period, in each case in an amount that
(i) is an integral multiple of $500,000, (ii) will not result in the aggregate
outstanding principal amount of all Swingline Loans exceeding $15,000,000 and
(iii) will not result in the Total Outstanding Amount exceeding the Total
Commitment then in effect; provided that
the Swingline Lender will not be required to make a Swingline Loan to refinance
an outstanding 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 or email transmission), not later than 3:00 p.m.,
Prevailing Eastern Time, on the proposed date of borrowing. 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 shall 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 Borrower’s general deposit
account with the Swingline Lender by 5:00 p.m., Prevailing Eastern Time, on the
requested date of such Swingline Loan. Each Swingline Loan shall bear interest
at the rate specified in Section 2.13(c).

 25
 

(c)           The Borrower unconditionally promises
to pay to the Swingline Lender the then unpaid principal amount of each
Swingline Loan on the earlier of the Maturity Date and the thirtieth day after
such Swingline Loan is made; provided that, unless the Swingline
Lender otherwise expressly agrees in writing, on each day that a Borrowing of
Revolving Loans is made, the Borrower shall repay all Swingline Loans that were
outstanding when such Borrowing was requested.

(d)           The Borrower will have the right at
any time to prepay any Swingline Loan in full or in part in an amount that is
an integral multiple of $500,000. The Borrower shall notify the Swingline
Lender and the Administrative Agent, by telephone (confirmed by telecopy or
email transmission), of the date and amount of any such prepayment not later
than noon, Prevailing Eastern Time, on the date of prepayment. Each such
prepayment shall be made directly to the Swingline Lender and shall be
accompanied by accrued interest on the amount prepaid.

(e)           The Swingline Lender may, by written
notice given to the Administrative Agent not later than 3:00 p.m., Prevailing
Eastern Time, on any Business Day, require the Lenders to acquire
participations on such Business Day in all or a portion of the Swingline Loans
then outstanding. Such notice shall specify the aggregate amount of Swingline
Loans in which Lenders will participate. Promptly after it receives such
notice, the Administrative Agent shall notify each Lender as to the details
thereof and such Lender’s Percentage of such aggregate amount of Swingline
Loans. Each Lender agrees, upon receipt of such notification, to pay to the
Administrative Agent, for the account of the Swingline Lender, such Lender’s
Percentage of such aggregate amount of Swingline Loans. Each Lender’s
obligation to acquire participations in Swingline Loans pursuant to this
subsection is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including the occurrence and continuance of a Default
or any reduction or termination of the Commitments, and each payment by a Lender
to acquire such participations shall be made without any offset, abatement,
withholding or reduction whatsoever. Each Lender shall comply with its
obligation under this subsection 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(b)
shall apply, mutatis mutandis, to the payment
obligations of the Lenders under this subsection), 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
Swingline Loans acquired pursuant to this subsection, and thereafter payments
in respect of such Swingline Loans shall be made to the Administrative Agent
and not to the Swingline Lender. Any amounts received by the Swingline Lender
from the Borrower (or any other party on behalf of the Borrower) in respect of
a Swingline Loan after the Swingline Lender receives the proceeds of a sale of
participations therein shall be promptly remitted to the Administrative Agent,
which shall promptly remit any such amounts received by it to the Lenders that
shall have made payments pursuant to this subsection and to the Swingline
Lender, as their interests may appear. The purchase of participations in
Swingline Loans pursuant to this subsection will not relieve the Borrower of
any default in the payment thereof.

Section
2.05.          Optional Increase in Commitments. At any time prior to the
date that is thirty days prior to the Revolving Availability Termination Date,
if no Default shall have occurred and be continuing (or would result after
giving effect thereto), the Borrower, may, if it so elects, increase the
aggregate amount of the Commitments (each such increase to be in an aggregate 

 26
 

amount that is an
integral multiple of $5,000,000 and not less than $10,000,000), either by
designating a financial institution not theretofore a Lender to become a Lender
(such designation to be effective only with the prior written consent of the
Administrative Agent and the Swingline Lender, which consent will not be
unreasonably withheld or delayed, and only if such financial institution
accepts a Commitment in an aggregate amount that is an integral multiple of
$5,000,000 and not less than $10,000,000), or by agreeing with an existing
Lender that such Lender’s Commitment shall be increased. Upon execution and
delivery by the Borrower and such Lender or other financial institution of an
instrument (a “Commitment Acceptance”) in form
reasonably satisfactory to the Administrative Agent, such existing Lender shall
have a Commitment as therein set forth or such other financial institution
shall become a Lender with a Commitment as therein set forth and with all the
rights and obligations of a Lender with such a Commitment hereunder, and any
such other financial institution shall be deemed to be a Lender for all
purposes of this Agreement and the other Loan Documents without any amendment
hereto or thereto and without the consent of any other party (other than those
required above in this Section 2.05); provided:

(a)           that the Borrower shall provide
prompt notice of such increase to the Administrative Agent, who shall promptly
notify the Lenders;

(b)           that the Borrower shall have
delivered to the Administrative Agent a copy of the Commitment Acceptance;

(c)           that the amount of such increase,
together with all other increases in the aggregate amount of the Commitments
pursuant to this Section 2.05 since the date of this Agreement, does not exceed
$50,000,000;

(d)           that, before and after giving effect
to such increase, the representations and warranties of the Borrower contained
in Article 3 of this Agreement shall be true and correct; and

(e)           that the Administrative Agent shall
have received such evidence (including an opinion of Borrower’s counsel) as it
may reasonably request to confirm the Borrower’s due authorization of the
transactions contemplated by this Section 2.05 and the validity and
enforceability of the obligations of the Borrower resulting therefrom.

On
the date of any such increase, the Borrower shall be deemed to have represented
to the Administrative Agent and the Lenders that the conditions set forth in
clauses (a) through (e) above have been satisfied.

Upon
any increase in the aggregate amount of the Commitments pursuant to this
Section 2.05:

(x)            within five Domestic Business Days,
in the case of any Base Rate Borrowings then outstanding, and at the end of the
then current Interest Period with respect thereto, in the case of any
Eurodollar Borrowings then outstanding, the Borrower shall prepay such
Borrowing in its entirety and, to the extent the Borrower elects to do so and
subject to the conditions specified in Article 4, the Borrower shall reborrow
Loans from the 

 27
 

Lenders in proportion to their respective Commitments
after giving effect to such increase, until such time as all outstanding Loans
are held by the Lenders in such proportion; and

(y)           each existing Lender whose Commitment
has not increased pursuant to this Section 2.05 (each, a “Non-increasing Lender”) shall be deemed,
without further action by any party hereto, to have sold to each Lender whose
Commitment has been assumed or increased under this Section 2.05 (each, an “Increased Commitment Lender”), and each
Increased Commitment Lender shall be deemed, without further action by any
party hereto, to have purchased from each Non-Increasing Lender, a
participation (on the terms specified in Section 2.04(e) respectively) in each
Swingline Loan in which such Non-Increasing Lender has acquired a participation
in an amount equal to such Increased Commitment Lender’s Percentage thereof,
until such time as all Swingline Exposures are held by the Lenders in
proportion to their respective Commitments after giving effect to such
increase.

Section
2.06.          Funding of
Revolving Loans. (a) Each Lender making a Revolving Loan hereunder
shall wire the principal amount thereof in immediately available funds, by 1:00
p.m., Prevailing Eastern Time, on the proposed date of such Loan, to the
account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders. The Administrative Agent shall make such
funds 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 Cleveland, Ohio and designated by the Borrower in the applicable
Borrowing Request.

(b)           Unless the Administrative Agent
receives notice from a Lender before the proposed date of any Borrowing that
such Lender will not make its share of such Borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender has
made such share available on such date in accordance with Section 2.06(a) and
may, in reliance on such assumption, make a corresponding amount available to
the Borrower. In such event, if a Lender has not in fact made its share of such Borrowing available to the
Administrative Agent, such 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 day 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 reasonably 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 Base Rate Loans. If such Lender pays such amount to the Administrative
Agent, such amount shall constitute such Lender’s Loan included in such
Borrowing.

Section
2.07.          Interest
Elections. (a) Each Borrowing of Revolving Loans initially shall be
of the Interest Type specified in the applicable Borrowing Request and, in the
case of a Eurodollar 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 Interest Type or, in the case of a
Eurodollar Borrowing, to continue such Borrowing for one or more additional
Interest Periods, 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 

 28
 

ratably among the
Lenders holding the Loans comprising such Borrowing, and the Loans comprising
each such portion shall be considered a separate Borrowing.

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

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

(i)            the Borrowing to which such Interest
Election 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, which shall be a Business Day;

(iii)          whether the resulting Borrowing is to
be a Base Rate Borrowing or a Eurodollar Borrowing; and

(iv)          if the resulting Borrowing is to be 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 “Interest Period”.

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

(d)           Promptly after it receives an
Interest Election, the Administrative Agent shall advise each Lender as to the
details thereof and such Lender’s portion of each resulting Borrowing.

(e)           if the Borrower fails to deliver a
timely Interest Election with respect to a Eurodollar Borrowing before the end
of an Interest Period applicable thereto, such Borrowing (unless repaid) will
be converted to a Base Rate Borrowing at the end of such Interest Period.
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 Borrowing may be converted to or
continued as a Eurodollar Borrowing and (ii) each Eurodollar Borrowing (unless
repaid) will be converted to a Base Rate Borrowing at the end of the Interest
Period applicable thereto on the date of such notice.

 29

Section
2.08.          Termination
or Reduction of Commitments. (a) Unless previously terminated, the
Commitments will terminate on the Revolving Availability Termination Date.

(b)           The Borrower may at any time
terminate, or from time to time reduce, the Commitments; provided that
(i) the amount of each reduction of the Commitments shall be an integral
multiple of $5,000,000 and not less than $10,000.000 and (ii) the Borrower
shall not terminate or reduce the Commitments if, after giving effect thereto
and to any concurrent prepayment of Revolving Loans pursuant to Section 2.10,
the total Exposures would exceed the total Commitments and (iii) the Borrower
shall not reduce the Commitments if, after giving effect thereto, the
outstanding Commitments would be less than $50,000,000.

(c)           The Borrower shall notify the
Administrative Agent of any election to terminate or reduce the Commitments
under Section 2.08(b), at least one Business Day before the effective date of
such termination or reduction, specifying such election and the effective date
thereof. Promptly after it receives any such notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section will be irrevocable; provided that
any such notice terminating the Commitments may state that it is conditioned on
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 before the
specified effective date) if such condition is not satisfied. Any termination
or reduction of the Commitments will be permanent and will be made ratably
among the Lenders in accordance with their respective Commitments.

Section
2.09.          Payment at
Maturity; Evidence of Debt. (a) The Borrower unconditionally
promises to pay to the Administrative Agent on the Maturity Date, for the
account of each Lender, the then unpaid principal amount of such Lender’s
Revolving Loans.

(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.

(c)           The Administrative Agent shall
maintain accounts in which it shall record (i) the amount of each Loan made
hereunder, the Interest Type thereof and each Interest Period (if any)
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 subsections (b) and (c) of this Section shall be prima facie evidence of the existence and amounts of the
obligations recorded therein; provided that
any failure by any Lender or the Administrative Agent to maintain such accounts
or any error therein shall not affect the Borrower’s obligation 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 

 30
 

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 (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.          Optional and
Mandatory Prepayments. (a) Optional Prepayments. The
Borrower will have the right at any time to prepay any Borrowing in whole or in
part, subject to the provisions of this Section and Section 2.16.

(b)           Mandatory Prepayments. If at any date the Total Outstanding
Amount exceeds the Total Commitment calculated as of such date, then not later
than the next succeeding Business Day, the Borrower shall be required to prepay
the Loans in an amount equal to such excess until the Total Outstanding Amount
does not exceed the Total Commitment.

(c)           Allocation of Prepayments.
Before any optional or mandatory prepayment of Borrowings hereunder, the
Borrower shall select the Borrowing or Borrowings to be prepaid and shall
specify such selection in the notice of such prepayment pursuant to Section
2.10(f).

(d)           Partial Prepayments. Each
partial prepayment of a Borrowing shall be in an amount that would be permitted
under Section 2.02(b) for a Borrowing of the same Interest Type, except as
needed to apply fully the required amount of a mandatory prepayment. Each
partial prepayment of a Borrowing shall be applied ratably to the Loans
included in such Borrowing.

(e)           Accrued Interest. Each
prepayment of a Borrowing shall be accompanied by accrued interest to the
extent required by Section 2.11 or Section 2.13.

(f)            Notice of Prepayments. The Borrower shall
notify the Administrative Agent by telephone (confirmed by telecopy or e-mail
transmission) of any prepayment of any Borrowing hereunder (i) in the case of a
Eurodollar Borrowing, not later than noon, Prevailing Eastern Time, three
Business Days before the date of prepayment and (ii) in the case of a Base Rate
Borrowing, not later than noon, Prevailing Eastern Time, on the date of
prepayment. Each such notice shall be irrevocable and shall specify the
prepayment date, the principal amount of each Borrowing or portion thereof to
be prepaid and, in the case of a mandatory prepayment, a reasonably detailed
calculation of the amount of such prepayment; provided that,
if a notice of optional prepayment is given in connection with a conditional
notice of termination of the Commitments as contemplated by Section 2.08(c),
then such notice of prepayment may be revoked if such notice of termination is
revoked in accordance with Section 2.08(c). Promptly after it receives any such
notice, the Administrative Agent shall advise the Lenders of the contents
thereof.

Section
2.11.          Change in
Control. (a) If a Change in Control of the Borrower shall occur, the
Borrower shall, within one Business Day after the occurrence thereof, give the
Administrative Agent notice thereof, and the Administrative Agent shall
promptly notify each Lender thereof. Such notice shall describe in reasonable
detail the facts and circumstances giving rise thereto and the date of such
Change in Control and each Lender may, by notice to the Borrower and the 

 31
 

Administrative
Agent (a “Termination Notice”) given not later than ten days after the date of such
Change of Control, terminate its Commitment, which shall be terminated, and
declare any Loans made by it (together with accrued interest thereon) and any
other amounts payable hereunder for its account to be, and such Loans and such
amounts shall become, due and
payable, in each case on the day following delivery of such Termination Notice
(or if such day is not a Business Day, the next succeeding Business Day),
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower.

(b)           If the Commitment of any Lender is
terminated pursuant to this Section at a time when any Swingline Loan is
outstanding, then (i) such Lender shall remain responsible to the Swingline
Lender with respect to such Swingline Loan to the same extent as if its
Commitment had not terminated and (ii) the Borrower shall pay to such Lender an amount in immediately available funds
(which funds shall be held as collateral pursuant to arrangements satisfactory
to such Lender) equal to such Lender’s Percentage of the aggregate outstanding
principal amount of such Swingline Loan at such time.

Section
2.12.          Fees. (a)
The Borrower shall pay to the Administrative Agent for the account of each
Lender a facility fee, which shall accrue during the Revolving Availability
Period at the Applicable Rate on the average daily amount of the Commitment of
such Lender, whether used or unused, during the period from and including the
Effective Date to the date on which such Commitment terminates. Such facility
fee shall be payable in arrears on the last day of each calendar quarter in
respect of the quarter then ending and on the earlier date on which the
Commitment of such Lender shall be terminated or assigned in whole.

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

(d)           All fees payable hereunder shall be
computed on the basis of a year of 360 days and will be payable for the actual
number of days elapsed and shall be paid on the dates due, in immediately
available funds, to the Administrative Agent for distribution, in the case of
facility fees and utilization fees, to the Lenders entitled thereto. Fees paid
shall not be refundable under any circumstances.

Section
2.13.          Interest. (a)The Loans comprising each Base Rate Borrowing shall bear
interest for each day at the Alternate Base Rate.

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

(c)           Each Swingline Loan shall bear
interest for each day at the rate per annum equal to (i) the rate determined by
the Swingline Lender to be its cost of funds in respect of such Swingline Loan,
plus (ii) the Applicable Rate for Eurodollar Borrowings then in effect.

 32
 

(d)           Notwithstanding the foregoing, (i) 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 (A) in the case of
overdue principal of any Loan, 2% plus the rate that otherwise would be
applicable to such Loan as provided
in the preceding subsections of this Section or (B) in the case of any other
amount, 2% plus the Alternate Base Rate; and (ii) upon notice to the Borrower
from the Administrative Agent upon and during the continuance of an Event of
Default, and continuing for so long as an Event of Default exists (but without
duplication of the interest accruing pursuant to clause (i), above), interest
on the Loans shall bear interest, after as well as before judgment, at a rate
per annum equal to 2% plus the rate that otherwise would be applicable to such
Loan as provided in the
preceding subsections of this Section.

(e)           Interest accrued on each Loan shall
be payable in arrears on each Interest Payment Date for such Loan and upon
termination of the Commitments; provided that
(i) interest accrued pursuant to Section 2.13(d) shall be payable on demand,
(ii) upon any repayment of any Loan (except a prepayment of a Base Rate
Revolving Loan before the end of the Revolving Availability Period), interest
accrued on the principal amount repaid shall be payable on the date of such
repayment and (iii) upon any conversion of a Eurodollar Loan before the end of
the current Interest Period there for, interest accrued on such Loan shall be
payable on the effective date of such conversion.

(f)            All interest hereunder will 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 will be computed on the basis of a year of 365 days (or
366 days in a leap year), and in each case will be payable for the actual
number of days elapsed (including the first day but excluding the last day).
Each applicable Alternate Base Rate or Adjusted LIBO Rate shall be determined
by the Administrative Agent, and its determination thereof will be conclusive
absent manifest error.

Section
2.14.          Alternate
Rate of Interest. If before the beginning of any Interest Period for
a Eurodollar Borrowing:

(i)            the Dow Jones Telerate Service is no
longer quoting rates for LIBO Rates and there is no substitute or successor
thereto as provided in Section 1.01, and if deposits in dollars in the
applicable amounts are not being offered by KeyBank National Association in the
London interbank market for such Interest Period; or

(ii)           Lenders having 50% or more of the
aggregate principal amount of the Loans to be included in such Borrowing advise
the Administrative Agent that the Adjusted LIBO Rate for such Interest Period,
after giving effect to Section 2.15, will not adequately and fairly reflect the
cost to such Lenders of making or maintaining such Loans for such Interest
Period;

 33
 

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 that requests the conversion of any Borrowing to, or continuation of
any Borrowing as, a Eurodollar Borrowing will be ineffective and (ii) if any
Borrowing Request requests a Eurodollar Borrowing, such Borrowing will be made
as a Base Rate Borrowing.

Section
2.15.          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 made by such Lender;

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

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

(c)           A certificate of a Lender setting
forth the amount or amounts necessary to compensate it or its holding company,
as the case may be, as specified in subsection (a) or (b) of this Section shall
be delivered to the Borrower and shall be rebuttably presumed to be correct.
Each such certificate shall contain a representation and warranty on the part
of the Lender to the effect that such Lender has complied with its obligations
pursuant to Section 2.19 hereof in an effort to eliminate or reduce such
amount. 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 by any Lender to
demand compensation pursuant to this Section will not constitute a waiver of
its right to demand such compensation; provided that the
Borrower will not be required to compensate a Lender pursuant to this Section
for any increased cost or reduction incurred more than 180 days before it
notifies the Borrower of the Change in Law giving rise to such increased cost
or reduction and of its intention to claim compensation therefor. However, if
the Change in Law giving 

 34
 

rise to such
increased cost or reduction is retroactive, then the 180-day period referred to
above will be extended to include the period of retroactive effect thereof.

Section
2.16.          Break
Funding Payments. If (a) any principal of any Eurodollar Loan is
repaid on a day other than the last day of an Interest Period applicable
thereto (including as a result of an Event of Default), (b) any Eurodollar Loan
is converted on a day other than the last day of an Interest Period applicable
thereto, (c) the Borrower fails to borrow, convert, continue or prepay any
Revolving Loan on the date specified in any notice delivered pursuant hereto
(regardless of whether such notice may be revoked under Section 2.10(f) and is
revoked in accordance therewith), or (d) any Eurodollar Loan is assigned on a
day other than the last day of an Interest Period applicable thereto as a
result of a request by the Borrower pursuant to Section 2.19, then the Borrower
shall compensate each Lender for its loss, cost and expense attributable to
such event. In the case of a Eurodollar Loan, such loss, cost and 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 that 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 end of the then current Interest Period therefor (or,
in the case of a failure to borrow, convert or continue, the Interest Period
that would have begun on the date of such failure), over (ii) the amount of
interest that would accrue on such principal amount for such period at the
interest rate which such Lender would bid were it to bid, at the beginning 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
2.17.          Taxes. (a)
All payments by the Borrower under the Loan Documents shall be made free and
clear of and without deduction or withholding for any Indemnified Taxes or
Other Taxes; provided that, if the Borrower
shall be required to deduct or withhold any Indemnified Taxes or Other Taxes
from such payments, then (i) the sum payable will be increased as necessary so
that, after all required deductions and withholdings (including deductions
applicable to additional sums payable under this Section) are made, each
relevant Lender Party receives an amount equal to the sum it would have
received had no such deductions or withholdings been made, (ii) the Borrower
shall make such deductions or withholdings and (iii) the Borrower shall pay the
full amount deducted or withheld 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 each
Lender Party, within 10 days after written demand therefor, for the full amount
of any Indemnified Taxes or Other Taxes paid by such Lender Party with respect
to any payment by or obligation of the Borrower under the Loan Documents
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to 

 35
 

amounts payable
under this Section) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto (unless such penalties, interest or expenses
arise by reason of the gross negligence or willful misconduct of such Lender),
whether or not such Indemnified Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority. A certificate as to
the amount of any such payment delivered to the Borrower by a Lender Party on
its own behalf, or by the Administrative Agent on behalf of a Lender Party,
shall be conclusive absent manifest error. If the Borrower has indemnified any
Lender Party pursuant to this Section 2.17(c), such Lender Party shall take
such steps as the Borrower shall reasonably request (at the Borrower’s expense)
to assist the Borrower in recovering the Indemnified Taxes or Other Taxes and
any penalties or interest attributable thereto; provided that
no Lender Party shall be required to take any action pursuant to this Section
2.17(c) unless, in the reasonable judgment of such Lender Party, such action
(i) would not subject such Lender Party to any unreimbursed cost or expense and
(ii) would not otherwise be disadvantageous to such Lender Party.

(d)           As soon as practicable after the
Borrower pays any Indemnified Taxes or Other Taxes 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)           Any Foreign Lender that is entitled
to an exemption from or reduction of withholding tax under the laws of the
United States, or any treaty to which the United States is a party, with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Administrative Agent), at the time or times prescribed by
applicable law, such properly completed and executed documentation prescribed
by applicable law or reasonably requested by the Borrower as will permit such
payments to be made without withholding or at a reduced rate. If any such
Foreign Lender becomes subject to any Tax because it fails to comply with this
subsection as and when prescribed by applicable law, the Borrower shall take
such steps (at such Foreign Lender’s expense) as such Foreign Lender shall
reasonably request to assist such Foreign Lender to recover such Tax.

(f)            The provisions of this Section 2.17
shall survive the termination of this Agreement and repayment of the Loans.

Section
2.18.          Payments Generally; Pro Rata
Treatment; Sharing of Set-Offs. (a) The Borrower shall make each
payment required to be made by it under the Loan Documents (whether of
principal, interest or fees, or amounts payable under Section 2.15, 2.16 or 2.17(c) or otherwise)
before the time expressly required under the relevant Loan Document for such
payment (or, if no such time is expressly required, before noon, Prevailing
Eastern Time), on the date when due, in immediately available funds, without
set-off or counterclaim. Any amount received after such time on any day 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
127 Public Square, 6th Floor, Cleveland, Ohio 44114 (or such other address as
may from time to time be designated by the Administrative Agent to the Borrower
in writing), except payments to be made directly to the Swingline Lender as
expressly provided herein and
except that payments pursuant to Sections 

 36
 

2.15,2.16, 2.17 and
9.03 shall be made directly to the Persons entitled thereto and payments
pursuant to other Loan Documents shall be made to the Persons specified
therein. The Administrative Agent shall distribute any such payment received by
it for the account of any other Person to the appropriate recipient promptly
alter receipt thereof. Unless otherwise specified herein, if any payment under
any Loan Document shall be due on a day that is not a Business Day, the date
for payment will be extended to the next succeeding Business Day and, if such
payment accrues interest, interest thereon will be payable for the period of
such extension. All payments under each Loan Document 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, to pay 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, to pay principal then due hereunder,
ratably among the Lenders in accordance with the amounts of principal then due.

(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 Loans or any of its participations
in Swingline Loans resulting in such Lender receiving payment of a greater
proportion of the aggregate amount of its Loans and participations in 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 Loans and participations in 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 Loans
and participations in 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 subsection shall not 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 subsection 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.

(d)           Unless, before the date on which any
payment is due to the Administrative Agent for the account of one or more
Lender Parties hereunder, the Administrative Agent receives from the Borrower
notice 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 on such assumption, distribute to each relevant
Lender Party the amount due to it. In such event, if the Borrower has not in
fact made such payment, each Lender Party severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Lender Party with interest thereon, for each day from and including the day
such amount is distributed to it 

 37
 

to but excluding
the day it repays 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 fails to make any
payment required to be made by it pursuant to Section 2.04(e), 2.06(b), 2.18(d)
or 9.03(c), 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
2.19.          Lender’s
Obligation to Mitigate; Replacement of Lenders. (a) If any Lender
requests compensation under Section 2.15, 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 2.17, then such Lender shall use all commercially
reasonable efforts to mitigate or eliminate the amount of such compensation or
additional amount, including without limitation, by designating a different
lending office for funding or booking its Loans hereunder or by assigning its
rights and obligations hereunder to another of its offices, branches or
affiliates; provided that no Lender shall be
required to take any action pursuant to this Section 2.19(a) unless, in the
reasonable judgment of such Lender, such designation or assignment or other
action (i) would eliminate or reduce amounts payable pursuant to Section 2.15
or 2.17, as the case may be, in the future, (ii) would not subject such Lender
to any unreimbursed cost or expense and (iii) would not otherwise be
disadvantageous to such Lender in any material respect. The Borrower shall pay
all reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.

(b)           If any Lender requests compensation
under Section 2.15, 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 2.17,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and
the Administrative Agent, require such Lender to assign, without recourse (in
accordance with and subject to the restrictions contained in Section 9.04), all
its interests, rights and obligations under this Agreement (including, without
limitation, participations in Swingline Loans) 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 (and,
if a Commitment is being assigned, the Swingline Lender), which consents shall
not unreasonably be withheld, (ii) such Lender shall have received payment of
an amount equal to the outstanding principal of its Loans and participations in
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 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 2.15 or payments required to be made
pursuant to Section 2.17, such assignment will result in a material reduction
in such compensation or payments. A Lender shall not be required to make any
such assignment if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment
cease to apply.

 38

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

The
Borrower represents and warrants to the Lender Parties that:

Section
3.01.          Organization;
Powers. The Borrower and each of its Material 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 failures to do so, 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 Financing Transactions to be entered into by the
Borrower are within its corporate, limited liability company or similar company
powers and have been duly authorized by all necessary corporate, limited
liability company (or similar) action and, if required, stockholder or equity
holder action. This Agreement has been duly executed and delivered by the
Borrower and constitutes, and each other Loan Document to which the Borrower is
to be a party, when executed and delivered by the Borrower, will constitute, a
legal, valid and binding obligation of the Borrower, as the case may be, in
each case enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and 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. The Financing Transactions and the use of
the proceeds thereof (a) do not require any consent or approval of,
registration or filing with, or other action by, any Governmental Authority,
except such as have been obtained or made and are in full force and effect, (b)
will not violate any applicable law or regulation or the charter, by-laws,
limited liability company agreement or other organizational documents of the
Borrower or any order of any Governmental Authority, (c) will not violate or
result in a default under any indenture, agreement or other instrument binding
upon the Borrower or any of its properties, or give rise to a right thereunder
to require the Borrower to make any payment, where such default or payment
reasonably can be expected to have a Material Adverse Effect and (d) will not
result in the creation or imposition of any Lien on any property of the
Borrower.

Section
3.04.          Financial
Statements; No Material Adverse Change. (a) The Borrower has
heretofore furnished to the Lenders (i) the audited Consolidated balance sheet
of the Borrower and its Subsidiaries as of December 31, 2005 and the related
Consolidated statements of income and cash flows for the Fiscal Year then
ended, reported on by KPMG LLP, independent public accountants, and (ii) the
unaudited Consolidated balance sheet of the Borrower and its Subsidiaries as of
September 30, 2006 and the related Consolidated statements of income and cash
flows for the Fiscal Quarter then ended and for the portion of the Fiscal Year
then ended, all certified by the Borrower’s chief financial officer. Such
financial statements present fairly, in all material respects, the Consolidated
financial position of the Borrower and its Subsidiaries as of such dates and
its Consolidated results of operations and cash flows for such periods in
accordance with 

 39
 

GAAP, subject to
normal year-end adjustments and the absence of footnotes in the case of the
statements referred to in clause (ii) above. None of the Borrower or any of its
Material Subsidiaries has on the date hereof any material contingent
liabilities, material liabilities for taxes, material unusual forward or
long-term commitments or material unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in
said balance sheets as at said dates.

(b)           Since December 31, 2005 (or, after
the Effective Date, since the last day of the Fiscal Year in respect of which
the Borrower has delivered audited financial statements pursuant to Section
5.01(i)) there has been no material adverse change in the business, operations,
properties, assets, financial condition, prospects, contingent liabilities or
material agreements of the Borrower and its Subsidiaries, taken as a whole.

(c)           The Borrower has heretofore furnished
to each of the Lenders the annual Statutory Statement of each Insurance
Subsidiary for the fiscal year thereof ended December 31, 2005, and the
quarterly Statutory Statement of each Insurance Subsidiary for the partial year
ended September 30, 2006, in each case as filed with the Applicable Insurance
Regulatory Authority. All such Statutory Statements present fairly in all
material respects the financial condition of each Insurance Subsidiary as at,
and the results of operations for, the fiscal year ended December 31, 2005, and
partial year ended September 30, 2006, in accordance with statutory accounting
practices prescribed or permitted by the Applicable Insurance Regulatory Authority.
Since September 30, 2006, there has been no material adverse change in the
financial condition of any Material Insurance Subsidiary from that set forth in
its respective Statutory Statement as at September 30, 2006.

Section
3.05.          Insurance Licenses. Schedule T to the most recent annual Statutory Statement of each
Insurance Subsidiary lists, as of the Effective Date, all of the jurisdictions
in which such Insurance Subsidiary holds active licenses (including, without
limitation, licenses or certificates of authority from Applicable Insurance
Regulatory Authorities), permits or authorizations to transact insurance and
reinsurance business or to act as an insurance agent or broker (collectively,
the “Licenses”). Each Insurance
Subsidiary is in compliance in all material respects with each License held by
it. No License (to the extent material) is the subject of a proceeding for
suspension or revocation or any similar proceedings, there is no sustainable
basis for such a suspension or revocation, and to the knowledge of the Borrower
no such suspension or revocation has been threatened by any Applicable
Insurance Regulatory Authority except in any such case where such proceedings
would not have a Material Adverse Effect.

Section
3.06.          Borrower’s
Subsidiaries.

(a)           As of the Effective Date, the
Borrower has no Subsidiaries, other than those set forth on Part A of Schedule
3.06. Part A of Schedule 3.06 accurately identifies the jurisdiction under the
laws of which each such Subsidiary is formed and whether such Subsidiary is or
is not, as the case may be, a Material Subsidiary as of the Effective Date.

(b)           Set forth on Part B of Schedule 3.06
is a complete and correct list of all Investments (other than (i) Investments
disclosed in Part A of said Schedule 3.06 and any other Investments 

 40
 

existing as of the
date hereof permitted under Section 6.04 and (ii) Guarantees of Debt the
aggregate principal or face amount of which Debt is less than $5,000,000) held
by the Borrower or any of its Subsidiaries in any Person on the date hereof
and, for each such Investment, (A) the identity of the Person or Persons
holding such Investment and (B) the nature of such Investment. Except as
disclosed in Part B of Schedule 3.06, each of the Borrower and its Subsidiaries
owns, free and clear of all Liens, all such Investments.

Section
3.07.          Litigation. There is no action, suit, arbitration
proceeding or other proceeding, inquiry or investigation, at law or in equity,
before or by any arbitrator or Governmental Authority pending against the
Borrower or any Material Subsidiary or of which the Borrower or any Material
Subsidiary has otherwise received notice or which, to the knowledge of the
Borrower, is threatened against the Borrower or any Material Subsidiary (i) as
to which, but after giving effect to any applicable insurance claim reserve,
there is a reasonable possibility of an unfavorable decision, ruling or finding
which would reasonably be expected to result in a Material Adverse Effect or
(ii) that involves any of the Loan Documents or the Financing Transactions or
the use of the proceeds thereof.

Section
3.08.          Compliance
with Laws and Agreements; Foreign Asset Control Regulations. (a) The
Borrower is in compliance with all laws, regulations and orders of any
Governmental Authority applicable to it or its property (including (i) all
Environmental Laws, (ii) ERISA, (iii) applicable laws, regulations and orders
dealing with intellectual property, and (iv) the Fair Labor Standards Act and
other applicable law dealing with such matters) and all indentures, agreements
and other instruments binding on it or its property, except where failures to
do so, in the aggregate, would not reasonably be expected to result in a
Material Adverse Effect. No Default has occurred and is continuing.

(b)           The Borrower is and will remain in
full compliance with all laws and regulations applicable to it ensuring that no
person who owns a controlling interest in or otherwise controls the Borrower is
or shall be (A) listed on the Specially Designated Nationals and Blocked Person
List maintained by the Office of Foreign Assets Control (“OFAC”).
Department of the Treasury, and/or any other similar lists maintained by OFAC
pursuant to any authorizing statute, Executive Order or regulation or (B) a
person designated under Section 1(b), (c) or (d) of Executive Order No. 13224
(September 23, 2001), any related enabling legislation or any other similar
Executive Orders.

Section
3.09.          Investment
Company Status. 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.

Section
3.10.          Taxes.
The Borrower and its Subsidiaries are
members of an affiliated group of corporations filing consolidated returns for
Federal income tax purposes, of which the Borrower is the “common parent”
(within the meaning of Section 1504 of the Code) of such group. The Borrower
and its Material Subsidiaries have filed all Federal income tax returns and all
other material tax returns that are required to be filed by them and have paid
all taxes due pursuant to such returns or pursuant to any assessment received
by the Borrower or any of its Material Subsidiaries. The charges, accruals and
reserves on the books of the Borrower and its Material 

 41
 

Subsidiaries in respect of taxes and other governmental charges are, in
the opinion of the Borrower, adequate. The Borrower has not given or been
requested to give a waiver of the statute of limitations relating to the
payment of any Federal, state, local and foreign taxes or other impositions.

Section
3.11.          Material
Agreements and Liens.

(a)           Part A of Schedule 3.11 is a complete
and correct list of each credit agreement, loan agreement, indenture, purchase
agreement, guarantee, letter of credit or other arrangement providing for or
otherwise relating to any Debt or any extension of credit (or commitment for
any extension of credit) to, or Guarantee by, the Borrower or any of its
Subsidiaries, outstanding on the date hereof the aggregate principal or face
amount of which equals or exceeds (or may equal or exceed) $5,000,000, and the
aggregate principal or face amount outstanding or that may become outstanding
under each such arrangement is correctly described in Part A of said Schedule
3.11.

(b)           Part B of Schedule 3.11 is a complete
and correct list of each Lien securing Debt of any Person outstanding on the
date hereof the aggregate principal or face amount of which equals or exceeds
(or may equal or exceed) $5,000,000 and covering any Property of the Borrower
or any of its Subsidiaries, and the aggregate Debt secured (or that may be
secured) by each such Lien and the Property covered by each such Lien is
correctly described in Part B of said Schedule 3.11.

Section
3.12.          Environmental Matters.
Each of the Borrower and its Subsidiaries has obtained all environmental,
health and safety permits, licenses and other authorizations required under all
Environmental Laws to carry on its business as now being or as proposed to be
conducted, except to the extent failure to have any such permit, license or
authorization would not (either individually or in the aggregate) have a
Material Adverse Effect. Each of such permits, licenses and authorizations is
in full force and effect and each of the Borrower and its Subsidiaries is in
compliance with the terms and conditions thereof, and is also in compliance
with all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any applicable
Environmental Law or in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except to the extent failure to comply therewith would not (either
individually or in the aggregate) have a Material Adverse Effect.

Section
3.13.          Capitalization. The
authorized capital stock of the Borrower consists, on the date hereof, of an
aggregate of 127,000,000 shares consisting of (a) 125,000,000 shares of common
stock, $1 par value, of which (as of September 30, 2006) 55,839,818 shares were duly and validly issued and
outstanding, each of which shares is fully paid and non-assessable, and (b)
2,000,000 shares of preferred stock, $1 par value, of which (as of September
30, 2006) no shares were issued and
outstanding, each of which shares is fully paid and non-assessable. As of the
date hereof, (i) except as set forth in Part A of Schedule 3.13, there are no
outstanding Equity Rights with respect to the Borrower and (ii) except as set
forth in Part B of Schedule 3.13, there are no outstanding obligations of the
Borrower or any of its Subsidiaries to repurchase, redeem, or otherwise acquire
any shares of capital stock of the Borrower nor are there any outstanding
obligations of the Borrower or any of its Subsidiaries to make payments to any
Person, such as 

 42
 

“phantom stock” payments, where the amount thereof is calculated with
reference to the fair market value or equity value of the Borrower or any of
its Subsidiaries.

Section
3.14.          No Reliance. The Borrower
has made, independently and without reliance upon the Administrative Agent or
any Lender, and based on such documents and information as it has deemed
appropriate, its own decision to enter into this Agreement and has made (and
will continue to make), independently and without reliance upon the
Administrative Agent or any Lender, and based on such documents and information
as it has deemed appropriate (or shall deem appropriate at the time), its own
legal, credit and tax analysis of the transactions contemplated hereby.

Section
3.15.          ERISA. No
ERISA Event has occurred or is reasonably expected to occur that, when taken
together with all other ERISA Events for which liability is reasonably expected
to occur, would reasonably be expected to result in a Material Adverse Effect.

Section
3.16.          Regulation
U. Neither the Borrower nor any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U).

Section
3.17.          Disclosure. The
Borrower has disclosed to the Lenders all agreements, instruments and corporate
or other restrictions to which it is subject, and all other matters known to
it, that, individually or in the aggregate, would reasonably be expected to
result in a Material Adverse Effect. All of the reports, financial statements,
certificates and other written information (other than projected financial
information) that have been made available by or on behalf of the Borrower to
the Arrangers, the Administrative Agent or any Lender in connection with the
negotiation of this Agreement or any other Loan Document or delivered hereunder
or thereunder, are complete and correct in all material respects and do not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not materially
misleading in light of the circumstances under which such statements are made; provided that, with respect to projected financial
information, the Borrower represents only that such information was prepared in
good faith based on assumptions believed to be reasonable at the time.

Section
3.18.          Solvency. Immediately
after the Financing Transactions to occur on the Effective Date are consummated
and after giving effect to the application of the proceeds of each Loan made on
the Effective Date and after giving effect to the application of the proceeds
of each Loan made on any other date, (a) the fair value of the assets of the
Borrower, at a fair valuation, will exceed its debts and liabilities,
subordinated, contingent or otherwise; (b) the Borrower will be able to pay its
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (c) the Borrower will not have
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and proposed to be conducted after
the Effective Date.

Section 3.19.          Anti-Terrorism Requirements.

(a)           Neither
any Borrower nor any Affiliate of any Borrower, is in violation in any material
respect of any Anti-Terrorism Law or engages in or conspires to engage in any
transaction 

 43
 

that evades or
avoids, or has the purpose of evading or avoiding, or attempts to violate, any
of the prohibitions set forth in any Anti-Terrorism Law.

(b)           Neither
any Borrower, nor any Affiliate of any Borrower or their respective agents
acting or benefiting in any capacity in connection with the Loans or other
transactions hereunder, is any of the following (each a “Blocked Person”):

(i)            a Person that is
listed in the annex to, or is otherwise subject to the provisions of, the
Executive Order No. 13224;

(ii)           a Person owned or
controlled by, or acting for or on behalf of, any Person that is listed in the
annex to, or is otherwise subject to the provisions of, the Executive Order No.
13224;

(iii)          a Person with which
any Lender is prohibited from dealing or otherwise engaging in any transaction
by any Anti-Terrorism Law;

(iv)          a Person that
commits, threatens or conspires to commit or supports “terrorism” as defined in
the Executive Order No. 13224;

(v)           a Person that is
named as a “specially designated national” on the most current list published
by the U.S. Treasury Department Office of Foreign Asset Control at its official
website or any replacement website or other replacement official publication of
such list, or

(vi)          a Person who is
affiliated or associated with a Person listed above.

(c)           Neither the Borrower or, to the
knowledge of the Borrower, any of its agents acting or benefiting in any
capacity in connection with the Loans or other transactions hereunder, (i)
conducts any business or engages in making or receiving any contribution of
funds, goods or services to or for the benefit of any Blocked Person, or (ii)
deals in, or otherwise engages in any transaction relating to, any property or
interests in property blocked pursuant to the Executive Order No. 13224.

ARTICLE 4

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 shall have
received counterparts hereof signed by the Borrower and each of the Lenders
listed on the signature pages hereof (or, in the case of any party as to which
an executed counterpart shall not have been received, receipt by the
Administrative Agent in form satisfactory to it of facsimile or other written
confirmation from such party that it has executed a counterpart hereof).

 44
 

(b)           The Administrative Agent shall have
received favorable written opinions addressed to the Administrative Agent and
the Lenders and dated the Effective Date of Wendy Carlson, General Counsel of
the Borrower, and Skadden, Arps, Slate, Meagher & Flom, LLP, special
counsel for the Borrower, which opinions shall cover such matters relating to
the Borrower, the Loan Documents and the Financing Transactions, and otherwise
shall be in such form and substance, as the Administrative Agent shall request.
The Borrower requests such counsel to deliver such opinions.

(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 and its Material Subsidiaries, the authorization for
and validity of the Financing Transactions and any other legal matters relating
to the Borrower, its Material Subsidiaries, the Loan Documents or the Financing
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, a
Vice President or a Financial Officer of the Borrower, confirming compliance
with the conditions set forth in clauses (b), (c) and (d) of Section 4.02.

(e)           That the Required Lenders shall not
have notified the Administrative Agent of their determination that, since
December 31, 2005, any event, development or circumstance has occurred that has
had or would reasonably be expected to have a Material Adverse Effect.

(f)            That neither of the Arrangers nor
the Administrative Agent shall have become aware of any information or other
matter affecting the Borrower or the Financing Transactions which was in
existence prior to the date of this Agreement and is inconsistent in a material
and adverse manner with any such information or other matter disclosed to them
prior to the date of this Agreement.

(g)           The Borrower shall have paid all fees
and other amounts due and payable to the Lender Parties on or before the
Effective Date, including an up-front fee to each Lender as specified in a
separate letter between the Arranger and the Borrower and further including, to
the extent invoiced, all out-of-pocket expenses (including fees, charges and
disbursements of counsel) required to be reimbursed or paid by the Borrower under
the Loan Documents.

(h)           All consents and approvals required
to be obtained from any Governmental Authority or other Person in connection
with the Financing Transactions shall have been obtained and be in full force
and effect, except where failure to obtain such approval or consent would not
have a Material Adverse Effect.

(i)            The Borrower shall have delivered to
the Administrative Agent evidence reasonably satisfactory to the Administrative
Agent that the Credit Agreement among the Borrower, various lender parties
thereto, and U.S. Bank National Association, as agent dated September 22, 2004,
as thereafter amended or supplemented, shall have expired or been 

 45
 

terminated and
that all of the respective Debt and other obligations of the Borrower and its
Subsidiaries thereunder shall have been paid and satisfied in full.

(j)            The Administrative Agent shall have
received from the trustee under each indenture governing the Trust Preferred
Securities Notes a confirmation of the subordination of the Borrower’s Debt and
obligations thereunder to its Debt and obligations hereunder, all in form and
substance satisfactory to the Administrative Agent; provided
that, at the option of the Borrower, the requirements of this paragraph (j) may
be satisfied (i) by causing the opinion of counsel delivered by Skadden, Arps,
Slate, Meagher & Flom, LLP pursuant to paragraph (b), above, to contain an
opinion in respect of such subordination reasonably satisfactory to the
Administrative Agent in form and substance or (ii) pursuant to the provisions
of this paragraph (j), other than the provisions of clause (i) of this proviso,
no later than 60 days after the Effective Date.

(k)           The Administrative Agent and the
Lenders shall have received from the Borrower such other certificates and other
documents as the Administrative Agent or any Lender may reasonably have
requested, including the promissory note complying with Section 2.09(e) of any
Lender requesting such promissory note.

If, pursuant to
the option provided in clause (ii) of the proviso in paragraph (j) of this
Section 4.01, the Borrower defers satisfaction of the condition precedent
therein set forth, the Borrower’s failure to satisfy such condition on or
before 60 days after the Effective Date shall constitute an Event of Default.

Section
4.02.          Conditions
to Initial Utilization and Each Subsequent Utilization. The
obligation of each Lender to make a Loan on the occasion of any Borrowing
(including the initial Borrowing), the obligation of the Swingline Lender to
make any Swingline Loan (including the initial Swingline Loan, if such initial
Swingline Loan is made prior to the occasion of the initial Borrowing), are
each subject to receipt of the Borrower’s request therefor in accordance
herewith and to the satisfaction of the following conditions:

(a)           The Effective Date shall have
occurred.

(b)           Immediately before and immediately
after giving effect to such Borrowing or Swingline Loan, as applicable, no
Default shall have occurred and be continuing.

(c)           The representations and warranties of
the Borrower set forth in the Loan Documents shall be true on and as of the
date of such Borrowing or Swingline Loan, as applicable.

(d)           Immediately before and after such
Borrowing or Swingline Loan is made, the Total Outstanding Amount will not exceed
the Total Commitment.

Each
Borrowing and each Swingline Loan shall be deemed to constitute a
representation and warranty by the Borrower on the date thereof as to the
matters specified in clauses (b), (c) and (d) of this Section.

 46

ARTICLE 5

AFFIRMATIVE COVENANTS

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

Section
5.01.          Financial
Statements and Other Information. The Borrower shall furnish to the
Administrative Agent (for delivery to each Lender):

(i)            as soon as available and in any
event within 90 days after the end of each Fiscal Year, its audited Consolidated
balance sheet as of the end of such Fiscal Year and the related statements of
income and cash flows for such Fiscal Year, setting forth in each case in
comparative form the figures for the previous Fiscal Year, all reported on by
KPMG LLP or other independent public accountants of recognized national
standing (without qualification or exception and without any qualification or
exception as to the scope of such audit) as presenting fairly in all material
respects the financial position, results of operations and cash flows of the
Borrower and its Subsidiaries on a Consolidated basis in accordance with
generally accepted auditing standards;

(ii)           as soon as available and in any event
within 45 days after the end of each of the first three Fiscal Quarters of each
Fiscal Year, its Consolidated balance sheet as of the end of such Fiscal
Quarter and the related statements of income and cash flows for such Fiscal
Quarter and for the then elapsed portion of such 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 a Financial Officer as (A) reflecting
all adjustments (which adjustments are normal and recurring unless otherwise
disclosed) necessary for a fair presentation of the results for the period
covered and (B) having been prepared in accordance with the applicable rules of
the SEC;

(iii)          concurrently with each delivery of
financial statements under clause (i) or (ii) above, a certificate of a
Financial Officer (A) certifying as to whether a Default has occurred and is
continuing and, if a Default has occurred and is continuing, specifying the
details thereof and any action taken or proposed to be taken with respect
thereto, (B) setting forth reasonably detailed calculations demonstrating
compliance with Sections 6.11 through Section 6.14, inclusive, and (C)
identifying any change(s) in GAAP or in the application thereof that have
become effective since the date of, and have had an effect on, the Borrower’s
most recent audited financial statements referred to in Section 3.04 or
delivered pursuant to this Section (and, if any such change has become
effective, specifying the effect of such change on the financial statements
accompanying such certificate);

(iv)          concurrently with each delivery of
financial statements under clause (i) above, (A) a certificate of the
accounting firm that reported on such financial statements 

 47
 

stating whether during the course of their examination
of such financial statements they obtained knowledge of any Default (which
certificate may be limited to the extent required by accounting rules or
guidelines) and (B) a certificate of a Financial Officer identifying any Subsidiary
that has been formed or acquired during the Fiscal Year covered by such
financial statements;

(v)           promptly after the same become
publicly available, copies of all periodic and other material reports and proxy
statements filed by the Borrower or any Material Subsidiary with the SEC, or
any Governmental Authority succeeding to any or all of the functions of the
SEC;

(vi)          promptly upon the effectiveness of any
material amendment or modification of, or any waiver of the rights of the
Borrower or any Material Subsidiary under, the certificate of formation,
limited liability company agreement, certificate of incorporation, by-laws or
other organizational documents of the Borrower or any Material Subsidiary, and

(vii)         promptly following any request
therefor, such other information regarding the operations, business affairs and
financial condition of the Borrower and its Material Subsidiaries, or
compliance with the terms of any Loan Document, as the Administrative Agent or
any Lender may reasonably request.

provided
that any information or document that is required to be furnished by any of
clauses (i), (ii), (v), (vi) and (vii) of this Section 5.01 and that is filed
with the SEC via the EDGAR filing system shall be deemed to be furnished so
long as the Borrower provides to the Administrative Agent and the Lenders
electronic or written notice of the posting of such information or document.

Section
5.02.          Notice of Material Events. The
Borrower shall 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 or Applicable Insurance Regulatory Authority against or affecting the
Borrower or any Material Subsidiary that, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect or the filing any other legal or arbitral proceedings, and any
material development in respect of such legal or other proceedings, affecting
the Borrower or any of its Subsidiaries, except proceedings that, if adversely
determined, would not (either individually or in the aggregate) have 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 liabilities
of the Borrower and its Material Subsidiaries in an aggregate amount exceeding
$5,000,000;

(d)           (i) the occurrence of any change in
the Borrower’s Senior Debt Rating by any of Best, Fitch and S&P and (ii)
the establishment of a Senior Debt Rating of the Borrower by 

 48
 

Moody’s and, after
such establishment, any change in the Borrower’s Senior Debt Rating by Moody’s;

(e)           at least five Business Days prior to
the effectiveness of any amendment to the terms of the Convertible 2004 Debt,
or the effectiveness of any agreement governing any Debt in replacement or
exchange thereof, a copy of such amendment or agreement;

(f)            any actual or proposed change in any
Applicable Insurance Code that could reasonably be expected to have a Material
Adverse Effect, promptly upon the Borrower’s or any Insurance Subsidiary’s
becoming aware of such actual or proposed change;

(g)           any change in the published rating by
Best of any Person to which any Insurance Subsidiary has ceded risk pursuant to
a Reinsurance Agreement if such change causes such published rating to be “B+”
or lower; and

(h)           any other development that results
in, or would 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.          Material
Insurance Subsidiary Reporting. The Borrower shall furnish to the Administrative Agent and each Lender copies of the
following:

(i)            promptly
after filing with the Applicable Insurance Regulatory Authority and in any
event within 45 days after the end of each for the first three quarterly fiscal
periods of each fiscal year of each Material Insurance Subsidiary, its
quarterly Statutory Statement for such quarterly fiscal period, together with
the opinion thereon of a senior financial officer of such Material Insurance
Subsidiary stating that such Statutory Statement presents the financial
condition of such Material Insurance Subsidiary for such quarterly fiscal
period in accordance with statutory accounting practices required or permitted
by the Applicable Insurance Regulatory Authority;

(ii)           promptly after filing with the Applicable Insurance
Regulatory Authority and in any event within 90 days after the end of each
fiscal year of each Material Insurance Subsidiary, the annual Statutory Statement of such
Material Insurance Subsidiary for such year, together with (i) the
opinion thereon of a senior financial officer of such Material Insurance Subsidiary stating that said annual Statutory
Statement presents the financial condition of such Material Insurance Subsidiary for such fiscal year in accordance with
statutory accounting practices required or permitted by the Applicable
Insurance Regulatory Authority and (ii) a certificate of a valuation actuary
affirming the adequacy of reserves taken by such Material Insurance Subsidiary in respect of future policyholder benefits
as at the end of such fiscal year (as shown on such Statutory Statement);

 49
 

(iii)          within ninety (90) days after the
close of each fiscal year of each Insurance Subsidiary, a copy of the “Statement
of Actuarial Opinion” for such Insurance Subsidiary which is provided to the
Applicable Insurance Regulatory Authority (or equivalent information should
such Applicable Insurance Regulatory Authority no longer require such a
statement), which statement shall be in the format prescribed by the Applicable
Insurance Code of such Insurance Subsidiary;

(iv)          within 180 days after the end of each
fiscal year of each Material Insurance
Subsidiary, the report of KPMG
LLP (or other independent certified public accountants of recognized national
standing) on the annual Statutory Statements delivered pursuant to clause (ii),
above;

(v)           promptly after any Material Insurance
Subsidiary receives the results of a triennial examination by the NAIC of the
financial condition and operations of such Insurance Subsidiary or any of its
Material Subsidiaries, a copy thereof;

(vi)          promptly following the delivery or
receipt by the Borrower or any of its Material Insurance Subsidiaries of any
correspondence, notice or report to or from any Applicable Insurance Regulatory
Authority that relates, to any material extent, to the financial viability of
any of its Material Subsidiaries, a copy thereof;

(vii)         within five Business Days after
receipt, notice from any Applicable Insurance Regulatory Authority of any
threatened or actual proceeding for suspension or revocation of any License or
any similar proceeding with respect to any such License; and

(viii)        promptly, notice of any denial of
coverage, litigation, or arbitration arising out of any Reinsurance Agreements
to which any Insurance Subsidiary is a party which denial, litigation or
arbitration involves $10,000,000 or more.

Section
5.04.          Existence; Conduct of Business. Except
as otherwise permitted under Section 6.03, the Borrower shall, and shall cause
each of its Material 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, franchises, patents,
copyrights, trademarks and trade names material to the conduct of its business.

Section
5.05.          Payment of Obligations. The Borrower shall, and shall cause
each of its Material Subsidiaries to, pay all of its Material Debt and other
material obligations, including Tax liabilities, 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, (c) such contest effectively suspends collection of the
contested obligation and the enforcement of any Lien securing such obligation
and (d) the failure to make payment pending such contest would not reasonably
be expected to result in a Material Adverse Effect.

Section
5.06.          [Reserved].

 50
 

Section
5.07.          Insurance. The Borrower shall keep itself and all of its
insurable properties, and shall cause each Material Subsidiary to keep itself
and all of its insurable properties, insured at all times to such extent, by
such insurers, and against such hazards and liabilities as is customarily
carried by prudent businesses of like size and enterprise; and promptly upon
the Administrative Agent’s written request upon and during the continuance of
an Event of Default, the Borrower shall furnish to the Administrative Agent
such information about any such insurance as the Administrative Agent may from
time to time reasonably request; provided that, nothing in this Section 5.07 shall be
deemed to require any of the Borrower’s Material Subsidiaries to enter into any
Reinsurance Agreement and provided, further, that The Borrower and its Material Subsidiaries may
self-insure against such hazards and risks, and in such amounts as is customary
for corporations of a similar size and in similar lines of business.

Section
5.08.          NAIC Ratio. In the event that the NAIC or any Applicable Insurance Regulatory
Authority shall at any time promulgate any risk-based capital ratio
requirements or guidelines, the Borrower shall cause each Material Insurance
Subsidiary to comply with the minimum requirements or guidelines applicable to
it as established by the NAIC or such Applicable Insurance Regulatory
Authority.

Section
5.09.          Proper Records; Rights to Inspect and Appraise. The Borrower
shall, and shall cause each of its Material Subsidiaries to, keep proper books
of record and account in which complete and correct entries are made of all transactions
relating to its business and activities. The Borrower shall, and shall cause
each of its Material Subsidiaries to, permit any representatives designated by
the Administrative Agent or any Lender, upon reasonable prior notice, 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,
directors and employees, all at such reasonable times and as often as
reasonably requested, but, other than in exigent circumstances, taking into
account periodic accounting and regulatory compliance demands on the Borrower
and its Subsidiaries.

Section
5.10.          Compliance with Laws.

(a)           The Borrower shall, and shall cause
each of its Material Subsidiaries to, comply with all laws, rules, regulations
and orders of any Governmental Authority (including all Environmental Laws and
ERISA and the respective rules and regulations thereunder) applicable to it or
its property, other than such laws, rules or regulations (a) the validity or
applicability of which the Borrower or any Subsidiary is contesting in good
faith by appropriate proceedings or (b) the failure to comply with which cannot
reasonably be expected to result in a Material Adverse Effect.

(b)           Without limiting the generality of
the foregoing, the Borrower and its Affiliates and agents shall not (i) conduct
any business or engage in any transaction or dealing with any Blocked Person,
including the making or receiving of any contribution of funds, goods or
services to or for the benefit of any Blocked Person, (ii) deal in, or
otherwise engage in any transaction relating to, any property or interests in
property blocked pursuant to the Executive Order No. 13224; or (iii) engage in
or conspire to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of the prohibitions
set forth in the Executive Order No. 13224, the USA Patriot Act or any other
Anti-Terrorism Law. The Borrower shall deliver to 

 51
 

the Lenders any
certification or other evidence reasonably requested from time to time by any
Lender in its reasonable discretion, confirming the Borrower’s compliance with
this Section 5.10.

Section
5.11.          Use of Proceeds. The
proceeds of the Revolving Loans and Swingline Loans will be used only to
finance the general corporate purposes of the Borrower (including, without
limitation, liquidity and working capital needs of the Borrower and its
Subsidiaries). No part of the proceeds of any Loan will be used, directly or
indirectly, for any purpose that entails a violation of any of the Regulations
of the Federal Reserve Board, including Regulations U and X.

ARTICLE 6

NEGATIVE COVENANTS

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

Section
6.01.          Debt;
Certain Equity Securities. (a) The Borrower shall not, and shall not
permit any of its Material Subsidiaries to, create, incur, assume or permit to
exist any Debt, except:

(i)            Debt
created under the Loan Documents;

(ii)           Debt
existing on the date hereof (other than Debts that, individually, do not exceed
$1,000,000 and, in the aggregate, do not exceed $5,000,000 in principal amount)
and listed in Schedule 6.01;

(iii)                               Debt
of Material Subsidiaries to the Borrower or to other Material Subsidiaries;

(iv)          Debt of $260,000,000 in aggregate
principal amount incurred on, respectively, December 6, 2004 and December 30,
2004 by the Borrower pursuant to a note offering exempt from the registration
requirements of the Securities Act of 1933, as amended (the “Convertible 2004
Debt”), which Convertible 2004 Debt at all times shall be on terms consistent
in all material respects with those contained in the Convertible 2004 Debt
Documents (the “Existing Terms”), and any Debt, not greater than $260,000,000
in principal amount and otherwise on terms not more restrictive on or otherwise
less favorable to the Borrower in any material respect than the Existing Terms,
in exchange therefor, whether or not the notes, debentures or other instruments
evidencing such exchange Debt are exempt from such registration requirements
(without limiting the generality of the foregoing, it is the intention hereby
that the terms of the Convertible 2004 Debt, including the effect of any
modification thereof, and the terms of any Debt in exchange or replacement
thereof, (i) provide for a final scheduled maturity not earlier than December 6,
2024 and (ii) otherwise shall not be more restrictive on, or otherwise less
favorable to, the Borrower in any material respect than the Existing Terms);

 52
 

(v)           additional Debt of
the Borrower and its Material Subsidiaries (including, without limitation, Capital
Lease Obligations and other Debt secured by Liens permitted under Section 6.02
hereof) up to but not exceeding $10,000,000 in the aggregate at any one time
outstanding as to all such Debt described in this clause (v);

(vi)          Subordinated Debt;
and

(vii)         additional unsecured
Debt not to exceed $10,000,000 in aggregate principal amount at any time
outstanding as to the Borrower and its Subsidiaries on a Consolidated basis.

(b)           The Borrower shall not issue Current
Redeemable Equity.

Section
6.02.          Liens. The
Borrower shall not, and shall not permit any of its Material Subsidiaries to,
create or permit to exist any Lien on any property 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:

(i)            Permitted Liens;

(ii)           any Lien on any property of the
Borrower or any Material Subsidiary existing on the date hereof and listed in
Schedule 6.02; provided that (A)
such Lien shall not apply to any other property of the Borrower or any Material
Subsidiary and (B) such Lien shall secure only those obligations which it
secures on the date hereof and extensions, renewals and replacements thereof
that do not increase the outstanding principal amount thereof;

(iii)          any Lien existing on any property or
asset before the acquisition thereof by the Borrower or any Material Subsidiary
or existing on any property or asset of any Person that first becomes a
Material Subsidiary after the date hereof before the time such Person becomes a
Material Subsidiary; provided that
(A) such Lien is not created in contemplation of or in connection with such
acquisition or such Person becoming a Material Subsidiary, (B) such Lien will
not apply to any other property or asset of the Borrower or any Material
Subsidiary, (C) such Lien will secure only those obligations which it secures
on the date of such acquisition or the date such Person first becomes a
Material Subsidiary, as the case may be, and extensions, renewals and
replacements thereof that do not increase the outstanding principal amount
thereof, and (D) the principal amount of Debt secured by any such Lien shall at
no time exceed 80% of the fair market value (as determined in good faith by a
senior financial officer of the Borrower) of such property at the time it was
acquired (by purchase, construction or otherwise);

(iv)          Liens on fixed or capital assets
acquired, constructed or improved by the Borrower or any Material Subsidiary; provided that (A) the Debt secured by such
Liens is permitted by, as applicable, Section 6.01, (B) such Liens and the Debt
secured thereby are incurred before or within 90 days after such acquisition or
the completion of such construction or improvement, (C) the Debt secured
thereby does not exceed the cost of 

 53
 

acquiring, constructing or improving such fixed or
capital assets, and (D) such Liens will not apply to any other property of the
Borrower or any Material Subsidiary;

(v)           Liens to secure a Debt owing to the
Borrower; and

(vi)          any Lien arising out of the refinancing,
extension, renewal or refunding of any Debt secured by a Lien permitted by any
of clauses (iii), (iv), (v) or (vi) of this Section; provided that such Debt is not increased (except by the
amount of fees, expenses and premiums required to be paid in connection with
such refinancing, extension, renewal or refunding) and is not secured by any
additional assets.

Section
6.03.          Fundamental
Changes.

(a)           The
Borrower shall not, nor shall it permit any of its Material Subsidiaries to,
enter into any transaction of merger or consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution).

(b)           The
Borrower shall not, nor shall it permit any of its Material Subsidiaries to,
acquire any business or property from, or capital stock of, or be a party to
any acquisition of, any Person except for purchases of inventory and other
property to be sold or used in the ordinary course of business, Assumed
Reinsurance in the ordinary course of business, Investments permitted under
Section 6.04, and capital expenditures in the ordinary course of business.

(c)           the
Borrower shall not, nor shall it permit any of its Material Subsidiaries to,
convey, sell, lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or a substantial part of its business or Property,
whether now owned or hereafter acquired.

(d)           Neither the Borrower nor any
Subsidiary will engage in any business if, after giving effect to such
business, less than one-half of the Borrower’s Consolidated revenues,
determined in accordance with GAAP, would be derived from the providing of
insurance (including insurance agency) and other financial services.

Notwithstanding the foregoing provisions of this Section 6.03:

(i)            any Subsidiary of the
Borrower may be merged or consolidated with or into: (A) the Borrower if the
Borrower shall be the continuing or surviving corporation or (B) any other such
Subsidiary; provided that if any such transaction
shall be between a Subsidiary and a Wholly Owned Subsidiary, the Wholly Owned
Subsidiary shall be the continuing or surviving corporation;

(ii)           any Material
Subsidiary of the Borrower may sell, lease, transfer or otherwise dispose of
any or all of its property (upon voluntary liquidation or otherwise) to the
Borrower or a Wholly Owned Subsidiary of the Borrower;

(iii)          any
Material Subsidiary of the Borrower may merge or consolidate with or acquire
any other Person if, in the case of a merger or consolidation, the surviving
corporation is a Wholly Owned Subsidiary of the Borrower; and

 54

(iv)          the Borrower may merge with another
Person, but only so long (A) as the surviving corporation is the Borrower, (B)
after giving effect thereto, no Default would exist hereunder, (C) the business
activity engaged in by such other Person would be permitted under Section
6.03(d) hereof if such other Person were a Subsidiary of the Borrower prior to
such merger or consolidation and (D) the aggregate amount of the Statutory
Surplus (determined as at the date of the relevant merger, consolidation or
acquisition) of all such other Persons that have been the subject of any
merger, consolidation or acquisition pursuant to this clause (iv) during any
calendar year (other than any such merger, consolidation or acquisition
financed solely with Net Available Proceeds) shall be less than $25,000,000.

Section
6.04.          Investments, Loans, Advances,
Guarantees and Acquisitions. The Borrower shall not, nor shall it
permit any of its Material Subsidiaries to, make or permit to remain
outstanding any Investments except (i) Investments outstanding on the date
hereof and identified in Part B of Schedule 3.06, (ii) operating deposit
accounts with banks, (iii) Permitted Investments, (iv) Investments by the
Borrower and its Material Subsidiaries in their respective Subsidiaries, (v)
Hedging Agreements in the ordinary course of the Borrower’s or such Subsidiary’s
business, (vi) as to each Insurance Subsidiary, investments that would be
permitted under the investment provisions of its Applicable Insurance Code
administered and enforced by its Applicable Insurance Regulatory Authority, and
(vii) as to the Borrower, any investment that, pursuant to clause (vi), above,
would be permitted to be made by any of its Insurance Subsidiaries.

Section 6.05.          Asset Sales. The Borrower shall not, and shall not permit
any of its Material Subsidiaries to, sell, transfer, lease or otherwise dispose
of any property, including any Equity Interest owned by it, nor will any
Material Subsidiary issue any additional Equity Interest in such Subsidiary,
except:

(a)           sales of used or surplus equipment
and Permitted Investments in the ordinary course of business;

(b)           Sale-Leaseback Transactions permitted
pursuant to Section 6.07; and

(c)           other sales of assets so long as (i)
immediately before and after giving effect thereto, no Default shall have
occurred and be continuing, and (ii) the Senior Debt Rating by each Rating
Agency immediately following the sale’s becoming known publicly is not more
than one level or category lower than the Senior Debt Rating by such Rating
Agency immediately prior to the sale’s becoming known publicly.

Section
6.06.          Ceded Reinsurance. The
Borrower shall not, nor shall it permit any other Insurance Subsidiary to:

(a)           enter into any
Reinsurance Agreement in respect of ceded risk in excess of $10,000,000 with
any Person other than (i) another Insurance Subsidiary, (ii) any Person for
which the most recently published rating by Best is “B++” or higher or, if such
Person is not rated by Best, which has a Statutory Surplus (or the equivalent
thereof) of not less than $500,000,000, (iii) any Person that posts security
under such Reinsurance Agreement in an amount equal to the total liabilities
assumed by such Person, through a letter of credit 

 55
 

issued by an “authorized
bank” (as such term is defined by the Applicable Insurance Regulatory
Authority) or cash collateral deposit or (iv) any other reinsurers acceptable
to the Administrative Agent, provided
however, that for purposes of the foregoing clause (ii), any “NA” designation
shall not be considered a rating of Best;

(b)           enter into any
Reinsurance Agreement or Reinsurance Agreements with Lloyd’s of London if the
aggregate amount of reinsurance ceded thereby would exceed 15% of the aggregate
premium volume of reinsurance ceded by the Insurance Subsidiaries.

(c)           enter into any
Surplus Relief Reinsurance except with another Insurance Subsidiary; provided that the Insurance Subsidiaries identified on
Schedule 6.06 may continue to maintain (and from time to time replace so long
as the amount thereof does not increase) the Surplus Relief Reinsurance in
effect on the date hereof and described on Schedule 6.06; or

(d)           enter into any Reinsurance Agreement
or Reinsurance Agreements if such Reinsurance Agreements will result in a 20%
or more reduction of net premium volume for the Insurance Subsidiaries in any
12-month period.

Section
6.07.          Sale and
Leaseback Transactions. The
Borrower shall not, nor shall it permit any of its Material Subsidiaries to,
enter into any an arrangement with any Person (other than the Borrower or any
of its Material Subsidiaries) providing for the leasing to the Borrower or any
of its Material Subsidiaries for a period of more than five years of any
property which has been or is to be sold or transferred by the Borrower or such
Material Subsidiary to such Person or to any other Person (other than the
Borrower or any of its Material Subsidiaries), to which funds have been or are
to be advanced by such Person on the security of the property subject to such
lease (a “Sale-Leaseback Transaction”) if, after
giving effect thereto, the Value (as defined below) of all Sale/Leaseback
Transactions at such time would exceed 10% of the Consolidated Net Worth of the
Borrower at such time. For purposes of this Section 6.07, “Value”
shall mean, with respect to any Sale-Leaseback Transaction as at any time, the
amount equal to the greater of (a) the net proceeds of the sale or transfer of
the property subject to such Sale-Leaseback Transaction and (b) the fair value,
in the opinion of the board of directors of the Borrower of such property at
the time of entering into such Sale-Leaseback Transaction, in either case
divided first by the number of full years of the term of the lease and then
multiplied by the number of full years of such term remaining at the time of
determination, without regard to any renewal or extension options contained in
such lease; provided that
all obligations under such sale-leaseback agreements shall constitute Debt for
purposes of calculating compliance with the covenants set forth in this Article
6.

Section
6.08.          Restricted
Payments. The Borrower shall not declare or make, or agree to pay or
make, directly or indirectly, any Restricted Payment, or incur any obligation
(contingent or otherwise) to do so unless, both immediately before and after
giving effect to such Restricted Payment, no Default exists.

Section
6.09.          Transactions
with Affiliates. Except as
expressly permitted by this Agreement, the Borrower shall not, nor shall it
permit any of its Material Subsidiaries to, directly or indirectly: (a) make
any Investment in an Affiliate; (b) transfer, sell, lease, assign or otherwise 

 56
 

dispose of any property to an Affiliate; (c) merge into or consolidate
with or purchase or acquire property from an Affiliate; or (d) enter into any
other transaction directly or indirectly with or for the benefit of an
Affiliate (including, without limitation, Guarantees and assumptions of
obligations of an Affiliate); provided that
(i) any Affiliate who is an individual may serve as a director, officer or
employee of the Borrower or any of its Material Subsidiaries and receive
reasonable compensation for his or her services in such capacity and (ii) the
Borrower and its Material Subsidiaries may enter into transactions (other than
extensions of credit by the Borrower or any of its Material Subsidiaries to an
Affiliate) providing for the leasing of property, the rendering or receipt of
services or the purchase or sale of inventory and other property in the
ordinary course of business if the monetary or business consideration arising
therefrom would be substantially as advantageous to the Borrower and its
Material Subsidiaries as the monetary or business consideration that would
obtain in a comparable transaction with a Person not an Affiliate (or in the
case of any management agreement or investment advisory agreement among or
between the Borrower and its Insurance Subsidiaries, that is approved by the Applicable Insurance Regulatory Authorities).

Section
6.10.          Restrictive
Agreements. The Borrower shall not and shall not permit any of its
Material Subsidiaries to, directly or indirectly, enter into or permit to exist
any agreement or other arrangement that prohibits, restricts or imposes any
condition on (a) the ability of the Borrower or any Material Subsidiary to
create or permit to exist any Lien on any of its property or (b) the ability of
any Material Subsidiary to pay dividends or other distributions with respect to
any shares of its capital stock or to make or repay loans or advances to the
Borrower or any other Material Subsidiary or to Guarantee Debt of the Borrower
or any other Material Subsidiary; provided that
(i) the foregoing shall not apply to restrictions and conditions imposed by law
or by any Loan Document, (ii) the foregoing shall not apply to restrictions and
conditions existing on the date hereof and identified on Schedule 6.10 (but
shall apply to any amendment or modification expanding the scope of, or any
extension or renewal of, any such restriction or condition), (iii) the foregoing
shall not apply to customary restrictions and conditions contained in
agreements relating to the sale of a Subsidiary pending such sale, provided that such restrictions and conditions apply only to
the Subsidiary that is to be sold and such sale is permitted hereunder, (iv)
clause (a) of this Section shall not apply to restrictions or conditions
imposed by any agreement relating to secured Debt permitted by this Agreement
if such restrictions or conditions apply only to the property securing such
Debt and (v) clause (a) of this Section shall not apply to customary provisions
in leases and other contracts restricting the assignment thereof.

Section
6.11.          Ratio of
Debt to Capital. The Borrower shall not, as of the end of any Fiscal
Quarter, permit the ratio of (a) its Adjusted Consolidated Debt as of such
Fiscal Quarter-end to (b) its Adjusted Total Capitalization as of such Fiscal
Quarter-end to be greater than 0.425 to 1.

Section
6.12.          Risk-Based
Capital Ratio. The
Borrower shall not permit the Risk-Based Capital Ratio of any Material
Insurance Subsidiary as of the end of any Fiscal Quarter to be less than 2.00
to 1.

Section
6.13.          Consolidated
Net Worth. The Borrower shall not permit its Consolidated Net Worth
(a) as of the end of the Fiscal Quarter ending September 30, 2006, to be less
than $484,278,000 and (b) as of the end of any Fiscal Quarter thereafter, to be
less than an amount equal 

 57
 

to (i) the Fiscal
Quarter Increase for the immediately preceding Fiscal Quarter, plus (ii)
the Minimum Net Worth for such immediately preceding Fiscal Quarter.

Section
6.14.          Cash
Coverage Ratio. The Borrower shall not permit the Cash Coverage
Ratio as of the end of any Fiscal Quarter to be less than 1.25 to 1.00.

Section 6.15.          Amendment of Material
Documents; Prepayments. (a) The Borrower shall not, and shall not
permit any of its Material Subsidiaries to, without the prior written consent
of the Required Lenders, amend, modify, supplement or waive any of its rights
under its certificate of formation, limited liability company agreement,
certificate of incorporation, by-laws or other organizational documents, in
each case in any manner that would reasonably be expected to have a Material
Adverse Effect.

(b)           The Borrower shall not, and shall not
permit any Subsidiary to, enter into any amendment, waiver or other
modification of any of the Convertible 2004 Debt Documents, any of the Trust
Preferred Securities Notes or any indenture or other agreement governing the
Trust Preferred Securities Notes, or of any document evidencing or otherwise
governing any Material Debt (i) if the effect of such amendment, waiver or
other modification is to increase the interest rate on such Debt, increase the
amount of principal due on any date, change (to earlier dates) any dates upon
which payments of principal or interest are due thereon, change any event of
default or condition to an event of default with respect thereto (other than to
eliminate or make less onerous any such event or default or increase any grace
period related thereto), change the redemption, prepayment or defeasance
provisions thereof, or change any collateral therefor (other than to release
such collateral), or (ii) if the effect of such amendment or change, together
with all other amendments or changes made, is to increase in any material
respect the obligations of the obligor thereunder or to confer any additional
rights on the holders of such Debt (or a trustee or other representative on
their behalf).

(c)           The
Borrower shall not, and shall not permit any Subsidiary to, make or agree to
pay or make, directly or indirectly, any payment or other distribution (whether
in cash, securities or other property) of or in respect of principal of or
interest on any Subordinated Debt, or any payment or other distribution
(whether in cash, securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation, defeasance or termination of any Subordinated Debt,
except:

(i)            payments (other
than optional or voluntary prepayments) as and when due in respect of such
Subordinated Debt but only to the extent, if any, permitted by the
subordination terms, subordination agreement or intercreditor agreement (or
equivalent agreement otherwise named) applicable to such Subordinated Debt; and

(ii)           refinancings of
such Subordinated Debt with the proceeds of other Subordinated Debt.

Section
6.16.          Lines of
Business. The Borrower shall
not, nor shall it permit any of its Subsidiaries to, engage to any substantial
extent in any line or lines of business activity other than the business of
owning and operating life insurance companies as conducted on the date hereof
and 

 58
 

businesses related or incidental thereto (it being understood that the
businesses of American Equity Investment Capital, Inc. and American
Equity Investment Properties, L.C., to the
extent conducted as of the date hereof, are related to the business of owning
and operating life insurance companies).

ARTICLE 7

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 the same shall become due, whether at the due date
thereof or at a date fixed for prepayment thereof or otherwise;

(b)           the Borrower shall fail to pay when
due any interest on any Loan or any fee or other amount (except an amount
referred to in clause (a) above) payable under any Loan Document, and such
failure shall continue unremedied for a period of five (5) Business Days;

(c)           any representation, warranty or
certification made or deemed made by or on behalf of the Borrower or any
Material Subsidiary in or in connection with any Loan Document or any amendment
or modification thereof or waiver thereunder, or in any report, certificate,
financial statement or other document furnished pursuant to or in connection
with any Loan Document or any amendment or modification thereof or waiver
thereunder, shall prove to have been incorrect in any material respect when
made or deemed made;

(d)           the Borrower shall fail to observe or
perform any covenant or agreement contained in Section 5.0l(i), Section 5.0l(ii), Section 5.0l (iii), Section 5.0l
(iv), Section 5.02, Section
5.03, Section 5.04, Section 5.08, Section 5.10 or Section 5.11 or in
Article 6;

(e)           the Borrower shall fail to observe or
perform any provision of any Loan Document (other than those failures covered
by clauses (a), (b), (c) and (d) of this Article 7) and such failure shall
continue for 15 days after the earlier of notice of such failure to the
Borrower from the Administrative Agent or knowledge of such failure by an
officer of the Borrower;

(f)            the Borrower or any of its Material
Subsidiaries shall fail to make a payment or payments (whether of principal or
interest and regardless of amount) in respect of any Material Debt when the
same shall become due, whether at the due date thereof or at a date fixed for
prepayment thereof or otherwise;

(g)           any event or condition occurs that
(i) results in any Material Debt becoming due before its scheduled maturity or
(ii) enables or permits (with or without the giving of notice, the lapse of
time or both) the holder or holders of Material Debt or any trustee or agent on
its or their behalf to cause any Material Debt to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, before its scheduled
maturity or (iii) results in the termination of or enables one or more banks or
financial institutions to terminate commitments to provide in 

 59
 

excess of
$10,000,000 aggregate principal amount of credit to the Borrower or its
Material Subsidiaries; provided that,
in the case of any event described in clauses (ii) or (iii) that would permit
Material Debt to be accelerated or would permit termination of such
commitments, as applicable, only after the lapse of a cure period, so long as
the Borrower has notified the Administrative Agent immediately upon occurrence
of such event, such event shall give rise to an Event of Default hereunder upon
expiration of such cure period; and provided, further,
that neither (A) a mandatory payment of cash required by Section 10.01 of the
Indenture described in the definition of Convertible 2004 Debt Documents (as it
provides on the date hereof) nor (B) a mandatory prepayment of Material Debt
required to be made by reason of the sale or other disposition (including,
without limitation, condemnation or insured casualty) of assets securing such
Material Debt shall be deemed to be an event or condition described in any of
clauses (i), (ii) and (iii). above;

(h)           an involuntary proceeding shall be
commenced or an involuntary petition shall be filed seeking (i) liquidation,
reorganization or other relief in respect of the Borrower or any of its
Material Subsidiaries or its debts, or of a substantial part of its assets,
under any Federal, state or foreign bankruptcy, insolvency, receivership or
similar law now or hereafter in effect or (ii) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for the
Borrower or any of its Material Subsidiaries or for a substantial part of its
assets, and, in any such case, such proceeding or petition shall continue
undismissed for 30 days or an order or decree approving or ordering any of the
foregoing shall be entered;

(i)            the Borrower or any of its Material
Subsidiaries shall (i) voluntarily commence any proceeding or file any petition
seeking liquidation, reorganization or other relief under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or petition described in clause (h) above,
(iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for any the Borrower
or any of its Material Subsidiaries or for a substantial part of’ its assets,
(iv) file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (v) make a general assignment for the
benefit of creditors or (vi) take any action for the purpose of effecting any
of the foregoing;

(j)            the Borrower or any of its Material
Subsidiaries shall become unable, admit in writing its inability or fail
generally to pay its debts as they become due;

(k)           one or more judgments for the payment
of money, not covered by insurance, in an aggregate amount exceeding, after
giving effect to any insurance, an amount equal to 3% of the Borrower’s
shareholders’ equity, as reflected on the balance sheet of the Borrower as of
the most recent Fiscal Quarter end, shall be rendered against the Borrower or
any of its Material Subsidiaries and shall remain undischarged for a period of
30 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 asset of the Borrower or any of its Material Subsidiaries to enforce any
such judgment;

 60
 

(l)            an ERISA Event shall have occurred
that, in the opinion of the Required Lenders, when taken together with all
other ERISA Events that have occurred, would reasonably be expected to result
in a Material Adverse Effect; or

(m)          any provision of any Loan Document
after delivery thereof shall for any reason cease to be valid and binding on or
enforceable against the Borrower, or the Borrower shall so state in writing;

then, and in every
such event (except an event with respect to the Borrower described in clause
(h) or (i) above), 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 Borrower accrued hereunder, shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are waived by the Borrower; and in the case of any event with
respect to the Borrower described in clause (h) or (i) above, 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 waived by the Borrower.

ARTICLE 8

THE ADMINISTRATIVE AGENT

Section
8.01.          Appointment
and Authorization. Each Lender Party irrevocably appoints the
Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions as agent on its behalf and to exercise such powers as are
delegated to the Administrative Agent by the terms of the Loan Documents,
together with such actions and powers as are reasonably incidental thereto.

Section
8.02.          Rights and
Powers as a Lender. The Administrative Agent shall, in its capacity
as a Lender, have the same rights and powers as any other Lender and may
exercise or refrain from exercising the same as though it were not the
Administrative Agent. The Administrative Agent 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 Affiliate of the Borrower as if it were not
the Administrative Agent hereunder.

Section
8.03.          Limited
Duties and Responsibilities. The Administrative Agent shall not have
any duties or obligations except those expressly set forth in the Loan
Documents. Without limiting the generality of the foregoing, (a) the
Administrative Agent shall not be subject to any 

 61
 

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 by the Loan Documents that the Administrative
Agent is required in writing to exercise 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 in the Loan Documents, the
Administrative Agent shall not have any duty to disclose, or be liable for any
failure to disclose, any information relating to the Borrower or any of its
Subsidiaries that is communicated to or obtained by the 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 any Loan Document, (ii) the contents of any
certificate, report or other document delivered thereunder or in connection
therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth in any Loan Document, (iv)
the validity, enforceability, effectiveness or genuineness of any Loan Document
or any other agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article 4 or elsewhere in any Loan Document, other than
to confirm receipt of items expressly required to be delivered to the
Administrative Agent.

Section
8.04.          Authority to
Rely on Certain Writings, Statements and Advice. The Administrative
Agent shall be entitled to rely on, and shall not incur any liability for
relying on, 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 on 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.

Section
8.05.          Sub-Agents and Related Parties. The
Administrative Agent may perform any and all its duties and exercise its rights
and powers by or through one or more sub-agents appointed by it. 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 Sections of this Article 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 activities in connection with
the syndication of the credit facilities provided
for herein as well as activities as the Administrative Agent hereunder.

Section
8.06.          Resignation; Successor Agent. Subject to the appointment and
acceptance of a successor Administrative Agent as provided in this Section, the Administrative Agent may resign at
any time by notifying the Lenders and the Borrower. Upon any such resignation,
the 

 62
 

Required Lenders
shall have the right, in consultation with the Borrower, to appoint a successor
Agent; provided that consultation with the
Borrower shall not be required if an Event of Default shall have occurred and
be continuing. If no successor Administrative Agent 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 Agent which shall be a bank or financial
institution. Upon acceptance of its appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent 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
by the Borrower and such successor Administrative Agent. After any retiring
Administrative Agent’s resignation hereunder as Administrative Agent, 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 the retiring Agent was acting as an Administrative
Agent hereunder.

Section
8.07.          Credit
Decisions by Lenders. Each Lender acknowledges that it has,
independently and without reliance on the Administrative Agent or any other
Lender Party 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 on the Administrative Agent or any other Lender Party and
based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based on this Agreement, any other Loan Document or related agreement
or any document furnished hereunder or thereunder.

Section
8.08.          Agent’s
Fees. The Borrower shall pay to the Administrative Agent for its own
account fees in the amounts and at the times previously agreed upon by the
Borrower and such Agent.

Section
8.09           Syndication Agent, Documentation Agent, Etc.. Neither of the Lead Arrangers
nor the Sole Book Runner, in their capacities as such, shall have any duties or
responsibilities or incur any liability under this Agreement or any of the Loan
Documents.

Section
8.10           No Reliance
on Administrative Agent’s Customer Identification Program . Each of
the Lenders acknowledges and agrees that neither such Lender nor any of its
Affiliates, participants or assignees, may rely on the Administrative Agent to
carry out such Lender’s, Affiliate’s, participant’s or assignee’s customer
identification program, or other obligations required or imposed under or
pursuant to the USA Patriot Act or the regulations thereunder, including the
regulations contained in 31 CFR 103.121 (as hereafter amended or replaced, the “CIP
Regulations”), or any other anti-terrorism law, including any programs
involving any of the following items relating to or in connection with any of
the Borrower, its Affiliates or its agents, this Agreement, the other Loan
Documents or the transactions hereunder or contemplated hereby: (1) any
identity verification procedures, (2) any record keeping, (3) comparisons with
government 

 63
 

lists, (4)
customer notices or (5) other procedures required under the CIP Regulations or
such other laws.

ARTICLE 9

MISCELLANEOUS

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

(a)           if to the Borrower, to it at 5000 Westown Parkway, Suite 200, West Des Moines,
Iowa 50266, Attention of David J. Noble, President (Facsimile No. (515) 221-9947);

(b)           if to the Administrative Agent or to
the Swingline Lender, to KeyBank National Association, 127 Public Square,
Cleveland, Ohio 44114, Attention of Mary K. Young (Facsimile No. (216)
689-4981); and

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

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

Section
9.02.          Waivers;
Amendments. (a) No failure or delay by any Lender Party in
exercising any right or power hereunder or under any other Loan Document 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 Lender
Parties under the Loan Documents are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver of any provision
of any Loan Document or consent to any departure by the Borrower therefrom
shall in any event be effective unless the same shall be permitted by
subsection (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 any Lender
Party had notice or knowledge of such Default at the time.

(b)           No Loan Document or provision thereof
may be waived, amended or modified except, in the case of this Agreement, by an
agreement or agreements in writing entered into by the Borrower and the
Required Lenders or, in the case of any other Loan Document, by an agreement or
agreements in writing entered into by the parties thereto with the consent of
the Required Lenders; provided that
no such agreement shall:

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(i)            increase the Commitment of any
Lender without its written consent;

(ii)           reduce the principal amount of any
Loan or reduce the rate of interest thereon, or reduce any fee payable
hereunder, without the written consent of each Lender Party affected thereby;

(iii)          postpone the maturity of any Loan, or
the required date of any mandatory payment of principal (including without
limitation pursuant to Section 2.10(b), or any date for the payment of any
interest or fee 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 Party affected thereby;

(iv)          change the definition of “Percentage”
or change Section 2.18(b) or 2.18(c) in a manner that would alter the pro rata
sharing of payments required thereby, without the written consent of each
Lender affected thereby;

(v)           change any provision of this Section
or the percentage set forth in the definition of “Required Lenders” or any
other provision of any Loan Document specifying the number or percentage of
Lenders required to take any action thereunder, without the written consent of
each Lender; or

(vi)          increase the aggregate amount of the
Commitments (without giving effect to any increases permitted or theretofore made
pursuant to Section 2.05) under this Agreement to be in excess of $200,000,000,
or amend Section 2.05 to permit increases in the aggregate Commitments
permitted thereunder to be in excess of the $50,000,000 set forth therein on
the date hereof, without the written consent of the Administrative Agent and
Lenders having aggregate Exposures and unused Commitments representing more
than two-thirds (2/3) of the
sum of all Exposures and unused Commitments at such time (it being understood
that an increase in the Commitment of any Lender is subject to clause (i)
above); and

provided
further that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Administrative Agent or the
Swingline Lender without its prior written consent; and provided
further that neither a reduction or termination of Commitments
pursuant to Section 2.08 or 2.11, nor an increase in Commitments pursuant to
Section 2.05, constitutes an amendment, waiver or modification for purposes of
this Section 9.02.

(c)           The Administrative Agent may, but
shall have no obligation to, from time to time promulgate revised, replacement
Schedules 2.01 (which, upon such promulgation, absent manifest error, shall
become Schedule 2.01 hereto) and revisions or supplements to other Loan
Documents to reflect changes in the parties constituting the Lenders and their
respective Commitments pursuant to Assignments and Section 2.05, in each
instance without the necessity of the agreement of the Borrower and the
Required Lenders.

 65

Section
9.03.          Expenses;
Indemnity; Damage Waiver. (a) The Borrower shall pay (i) all
reasonable and documented out-of-pocket expenses incurred by the Arranger, the
Administrative Agent and their respective Affiliates, including, without
limitation, the reasonable fees, charges and disbursements of Squire, Sanders
& Dempsey L.L.P., special counsel for the Administrative Agent, in
connection with the syndication of the credit facilities provided for herein, the preparation
and administration of the Loan Documents and any amendments, modifications or
waivers of the provisions thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated) and (ii) all reasonable out-of-pocket
expenses incurred by any Lender Party, including the fees, charges and
disbursements of any counsel for any Lender Party, in connection with the
replacement of any Lender pursuant to Section 2.19(b), the enforcement or
protection of its rights in connection with the Loan Documents (including its
rights under this Section) or the Loans, including all such reasonable
out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of the Loans.

(b)           The Borrower shall indemnify each of
the Lender Parties and their respective Related Parties (each such Person being
called an “Indemnitee”) against, and hold each Indemnitee
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including the fees, charges and disbursements of 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 any Loan
Document or any other agreement or instrument contemplated hereby, the
performance by the parties to the Loan Documents of their respective
obligations thereunder or the consummation of the Financing 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 currently or formerly owned or
operated by the Borrower or any Subsidiary, 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 be available to any Indemnitee 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 such Indemnitee’s gross negligence or willful misconduct; (ii)
such indemnity shall not be available to any Indemnitee for losses, claims,
damages, liabilities or related expenses arising out of a proceeding in which
such indemnitee and the Borrower are adverse parties to the extent that the
Borrower prevails on the merits, as determined by a court of competent
jurisdiction (it being understood that nothing in this Agreement shall preclude
a claim or suit by the Borrower against any Indemnitee for such Indemnitee’s
failure to perform any of its obligations to the Borrower under the Loan
Documents); (iii) the Borrower shall not, in connection with any such
proceeding or related proceedings in the same jurisdiction and in the absence
of conflicts of interest, be liable for the fees and expenses of more than one
law firm at any one time for the Indemnitees (which law firm shall be selected
(x) by mutual agreement of the Administrative Agent and the Borrower or (y) if
no such agreement has been reached following the Administrative Agent’s good
faith consultation with the Borrower with respect thereto, by the
Administrative Agent in its sole discretion); (iv) 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 (v)
the 

 66
 

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 subsection (a) or (b) of this Section, each Lender
severally agrees to pay to such Agent or the Swingline Lender, as the case may
be, such Lender’s pro rata share (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 such Agent or the Swingline Lender in its capacity as
such. For purposes hereof, a Lender’s “pro rata share” shall
be determined based on its share of the sum of the total Exposures and unused
Commitments at the time.

(d)           To the extent permitted by applicable
law, the Borrower shall not assert, and it 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 Financing Transactions, any Loan or the use
of the proceeds thereof.

(e)           All amounts due under this Section
shall be payable within five Business Days after written demand therefor.

Section
9.04.          Successors
and Assigns. (a) The provisions of this Agreement shall be binding
on and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that 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). Nothing
in this Agreement, expressed or implied, shall be construed to confer upon any
Person (except the parties hereto, their respective successors and assigns
permitted hereby and, to the extent expressly provided herein, the Related Parties of the Lender Parties) any
legal or equitable right, remedy or claim under or by reason of this Agreement.

(b)           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 any Commitment it has at the time and any Loans
at the time owing to it); provided that:

(i)            except in the case of an assignment
to a Lender or a Lender Affiliate, each of the Borrower and the Administrative
Agent (and, in the case of an assignment of all or a portion of a Commitment or
any Lender’s obligations in respect of its Swingline Exposure, and the
Swingline Lender) must give their prior written consent to such assignment
(which consents shall not be unreasonably withheld);

(ii)           each partial assignment shall be made
as an assignment of a proportionate part of all the assigning Lender’s rights
and obligations under this Agreement;

 67
 

(iii)          unless each of the Borrower and the
Administrative Agent otherwise consent, the amount of the Commitment or Loans of
the assigning Lender subject to each such assignment (determined as of the date
on which the relevant Assignment is delivered to the Administrative Agent)
shall not be less than $5,000,000; provided that
this clause (iii) shall not apply to an assignment to a Lender or a Lender
Affiliate or an assignment of the entire remaining amount of the assigning
Lender’s Commitment or Loans;

(iv)          the parties to each assignment shall
execute and deliver to the Administrative Agent an Assignment, together with a
processing and recordation fee of $3,500; provided
that only one such fee shall be due in respect of a simultaneous
assignment to more than one Lender Affiliate; and

(v)           the assignee, if it shall not be a
Lender, shall deliver to the Administrative Agent a completed Administrative
Questionnaire;

and provided
further that any consent of the Borrower otherwise required under
this subsection shall not be required if an Event of Default has occurred and
is continuing. Subject to acceptance and recording thereof pursuant to
subsection (d) of this Section, from and after the effective date specified in
each Assignment the assignee thereunder shall be a party hereto and, to the
extent of the interest assigned by such Assignment, 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, be
released from its obligations under this Agreement (and, in the case of an
Assignment 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 2.15, 2.16, 2.17 and 9.03). Any
assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this subsection 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 subsection (e) of this Section.

(c)           The Administrative Agent, acting for
this purpose as an agent of the Borrower, shall maintain at one of its offices
in Cleveland, Ohio a copy of each Assignment delivered to it and a register for
the recordation of the names and addresses of the Lenders, their respective
Commitments and the principal amounts 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
(absent manifest error), and the parties hereto may treat each Person whose
name is recorded in the Register pursuant to the terms hereof as a Lender for
all purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by any party hereto at any
reasonable time and from time to time upon reasonable prior notice.

(d)           Upon its receipt of a duly completed
Assignment executed by an assigning Lender and an assignee, the assignee’s
completed Administrative Questionnaire (unless the assignee shall already be a
Lender hereunder), any processing and recordation fee referred to in, and
payable pursuant to, subsection (b) of this Section and any written consent to
such assignment required by subsection (b) of this Section, the Administrative
Agent shall accept such Assignment and record 

 68
 

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 subsection.

(e)           Any Lender may, without the consent
of the Borrower or any other Lender Party, sell participations to one or more
banks or other entities (“Participants”) in
all or a portion of such Lender’s rights and obligations under this Agreement
(including all or a portion of its Commitments and the Loans owing to it); provided that (i) such Lender’s obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Borrower and the other Lender Parties 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 the Loan Documents and to approve any
amendment, modification or waiver of any provision of the Loan Documents; 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 clause (i), (ii), (iii) or (iv)
of the first proviso to Section 9.02(b) that affects such Participant. Subject
to subsection (f) of this Section, each Participant shall be entitled to the
benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to subsection (b)
of this Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 9.09 as though it were a Lender, provided that such Participant agrees to be subject to
Section 2.18(c) as though it were a Lender.

(f)            A Participant shall not be entitled
to receive any greater payment under Section 2.15 or 2.17 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. A Participant
that would be a Foreign Lender if it were a Lender shall not be entitled to the
benefits of Section 2.17 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 2.17(e) as though it were a Lender.

(g)           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 any pledge or
assignment to secure obligations to a Federal Reserve Bank, and this Section
shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security
interest shall release a Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.

Section
9.05.          USA Patriot
Act. Each Lender or assignee or participant of a Lender that is not
incorporated under the laws of the United States of America or a state thereof
(and is not excepted from the certification requirement contained in Section
313 of the USA Patriot Act and the applicable regulations because it is both
(i) an affiliate of a depository institution or foreign bank that maintains a
physical presence in the United States or foreign country, and (ii) subject to
supervision by a banking authority regulating such affiliated depository
institution or foreign bank) shall deliver to the Administrative Agent the
certification, or, if applicable, recertification, certifying that such Lender
is not a “shell” and certifying to other matters as required by Section 

 69
 

313 of the USA
Patriot Act and the applicable regulations: (1) within ten (10) days after the
Effective Date, and (2) as such other times as are required under the USA
Patriot Act.

Section
9.06.          Survival. All
covenants, agreements, representations and warranties made by the Borrower in
the Loan Documents and in certificates or other instruments delivered in
connection with or pursuant to the Loan Documents shall be considered to have
been relied upon by the other parties hereto and shall survive the execution
and delivery of the Loan Documents and the making of any Loans, regardless of
any investigation made by any such other party or on its behalf and
notwithstanding that any Lender Party may have had notice or knowledge of any
Default or incorrect representation or warranty at the time any credit is
extended hereunder, and shall continue in full force and effect as long as any
principal of or accrued interest on any Loan or any fee or other amount payable
hereunder is outstanding and unpaid or any Commitment has not expired or
terminated. The provisions of Sections 2.15,2.16, 2.17 and 9.03 and Article 8 shall survive and remain
in full force and effect regardless of the consummation of the Financing
Transactions, the repayment of the Loans, the expiration or termination of the
Commitments or the termination of this Agreement or any provision hereof.

Section
9.07.          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, the other Loan Documents 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 (i) will become effective when the Administrative Agent shall have
signed this Agreement and received counterparts hereof that, when taken
together, bear the signatures of each of the other parties hereto and (ii)
thereafter will 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 will be effective
as delivery of a manually executed counterpart of this Agreement.

Section
9.08.          Severability.
If any provision of any Loan Document is invalid, illegal or
unenforceable in any jurisdiction then, to the fullest extent permitted by law,
(i) such provision shall, as to such jurisdiction, be ineffective to the extent
(but only to the extent) of such invalidity, illegality or unenforceability,
(ii) the other provisions of the Loan Documents shall remain in full force and
effect in such jurisdiction and shall be liberally construed in favor of the
Lender Parties in order to carry out the intentions of the parties thereto as
nearly as may be possible and (iii) the invalidity, illegality or
unenforceability of any such provision in any jurisdiction shall not affect the
validity, legality or enforceability of such provision in any other
jurisdiction.

Section
9.09.          Right of
Setoff. If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is 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
obligations of the Borrower now or hereafter existing hereunder and held by
such Lender, irrespective of 

 70
 

whether or not
such Lender shall have made any demand hereunder and although such obligations
may be unmatured. The rights of each Lender under this Section are in addition
to other rights and remedies (including other rights of setoff) that such
Lender may have.

Section
9.10.          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)           The Borrower irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the courts of the State of Ohio sitting in Cuyahoga County and
of the courts of the State of New York sitting in New York County and of the
United States District Court of the Northern District of Ohio and of the United
States District Court of the Southern District of New York, and any relevant
appellate court, in any action or proceeding arising out of or relating to any
Loan Document, or for recognition or enforcement of any judgment, and each
party hereto irrevocably and unconditionally agrees that all claims in respect
of any such action or proceeding may be heard and determined in any such Ohio
or New York state court or, to the extent permitted by law, in any such Federal
court. Each party hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in any Loan Document shall affect any
right that any Lender Party may otherwise have to bring any action or
proceeding relating to any Loan Document against the Borrower or its properties
in the courts of any jurisdiction.

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

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

Section
9.11.          WAIVER OF
JURY TRIAL. EACH PARTY HERETO 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 ANY LOAN
DOCUMENT OR ANY TRANSACTION CONTEMPLATED THEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED. EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 71
 

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

Section
9.13.          Confidentiality.
Each Lender Party agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates’ directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that 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), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations of any Governmental
Authority or any stock exchange or similar self-regulated entity or by any
subpoena or similar legal process, (d) to any other party to this Agreement,
(e) in connection with the exercise of any remedy hereunder or any suit, action
or proceeding relating to any Loan Document or the enforcement of any right
thereunder, (f) subject to an agreement containing provisions substantially the
same as those of this Section, to (i) any actual or prospective assignee of or
Participant in any of its rights or obligations under this Agreement or (ii)
any actual or prospective counterparty (or its advisors) to any swap or
derivative transaction relating to the Borrower and its obligations, (g) with
the consent of the Borrower or (h) to the extent such Information either (i)
becomes publicly available other than as a result of a breach of this Section
or (ii) becomes available to any Lender Party 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 any Lender Party on a nonconfidential basis
before 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.

Notwithstanding
the foregoing, effective from the date of commencement of discussions
concerning the transactions contemplated hereby, the parties hereto and each of
their employees, representatives or other agents may disclose to any and all
Persons, without limitation of any kind, the tax treatment and tax structure of
the transactions contemplated hereby and all materials of any kind (including
opinions or other tax analyses) that have been provided to them relating to such tax treatment and tax
structure.

Section
9.14.          Interest
Rate Limitation. Notwithstanding anything herein to the contrary, if
at any time the interest rate applicable to any Loan, together with all fees,
charges and other amounts that are treated as interest on such Loan under
applicable law (collectively the “Charges”),
shall exceed the maximum lawful rate (the “Maximum
Rate”) that may be contracted for, charged or otherwise received by
the Lender holding such Loan in accordance with applicable law, the rate of
interest payable in respect of such Loan hereunder, together with all Charges
payable in respect thereof, shall be limited to the Maximum Rate and, to the
extent lawful, the interest and Charges that would have been payable in respect
of such Loan but were not payable as a result of the operation of this Section
shall be cumulated and the interest and Charges payable to such Lender in
respect of other Loans or periods shall be increased (but not above the Maximum
Rate therefor) until such Lender shall have received such cumulated amount,
together with interest thereon at the Federal Funds Effective Rate to the date
of payment.

 72
 

[No additional provisions are on this page; the page
next following is the signature page.]

 73

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.

	
  

  	
  AMERICAN EQUITY INVESTMENT LIFE

  
	
   

  	
  HOLDING COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Debra J. Richardson

  
	
   

  	
   

  	
  Debra J. Richardson,

  
	
   

  	
   

  	
  Senior Vice President

  
	
   

  	
   

  
	
   

  	
  KEYBANK NATIONAL ASSOCIATION, as

  
	
   

  	
  Administrative Agent, Co-Lead Arranger, Sole Book
  Runner and Swingline Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mary K. Young

  
	
   

  	
   

  	
  Mary K. Young

  
	
   

  	
   

  	
  Senior Vice President

  
	
   

  	
   

  
	
   

  	
  LASALLE BANK NATIONAL ASSOCIATION, as Co-Lead
  Arranger

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brandon S. Allison

  
	
   

  	
   

  	
  Brandon S. Allison

  
	
   

  	
   

  	
  Vice President

  

 

 74
 

 

	
  

  	
  LENDERS

  
	
   

  	
   

  
	
   

  	
  KEYBANK NATIONAL ASSOCIATION,

  
	
   

  	
  as Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mary K. Young

  
	
   

  	
   

  	
  Mary K. Young

  
	
   

  	
   

  	
  Senior Vice President

  

 

 75
 

 

	
  [Lender Signatures
  Continued]

  
	
   

  	
   

  
	
   

  	
  LASALLE BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brandon S. Allison

  
	
   

  	
   

  
	
   

  	
  Name/Title:

  	
  Brandon S. Allison, Vice President

  
				

 

 76
 

 

	
  

  	
  CITIBANK, N.A.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Drew Desky

  
	
   

  	
   

  
	
   

  	
  Name/Title:

  	
  Drew Desky, Director

  
				

 

 77
 

 

	
  

  	
  BANKERS TRUST COMPANY, N.A.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jon M. Doll

  
	
   

  	
   

  
	
   

  	
  Name/Title:

  	
  Jon M. Doll, Vice President

  
				

 

 78
 

 

	
  

  	
  DEUTSCHE BANK AG, NEW YORK BRANCH

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John S. McGill

  
	
   

  	
   

  
	
   

  	
  Name/Title:

  	
  John S. McGill, Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael Campites

  
	
   

  	
   

  	
   

  
	
   

  	
  Name/Title:

  	
  Michael Campites, Vice President

  
				

 

 

 79
 

 

	
  

  	
  JPMORGAN CHASE BANK, N.A.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas A. Kiepura

  
	
   

  	
   

  
	
   

  	
  Name/Title:

  	
  Thomas A. Kiepura, Vice President

  
				

 

 80
 

 

	
  

  	
  SUNTRUST BANK

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy M. O’Leary

  
	
   

  	
   

  
	
   

  	
  Name/Title:

  	
  Timothy M. O’Leary, Director

  
				

 

 81
 

 

	
  

  	
  WEST BANK

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Donald R. Stone,

  
	
   

  	
   

  
	
   

  	
  Name/Title:

  	
  Donald R. Stone, Vice President

  
				

 

 82

PRICING SCHEDULE

	
  Borrower’s Pricing Rating*

  	
   

  	
  Pricing Level

  	
   

  	
  Euro-Dollar Margin

  	
   

  	
  Facility Fee Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  bbb+/BBB+ or any higher
  Borrower’s Pricing Rating

  	
   

  	
   

  	
  Level I

  	
   

  	
   

  	
  0.500

  	
  %

  	
  0.125

  	
  %

  
	
  bbb/BBB

  	
   

  	
   

  	
  Level II

  	
   

  	
   

  	
  0.600

  	
  %

  	
  0.150

  	
  %

  
	
  bbb-/BBB-

  	
   

  	
   

  	
  Level III

  	
   

  	
   

  	
  0.800

  	
  %

  	
  0.200

  	
  %

  
	
  bb+/BB+

  	
   

  	
   

  	
  Level IV

  	
   

  	
   

  	
  1.000

  	
  %

  	
  0.250

  	
  %

  
	
  bb/BB or any lower Borrower’s Pricing Rating

  	
   

  	
   

  	
  Level V

  	
   

  	
   

  	
  1.250

  	
  %

  	
  0.375

  	
  %

  

* If another statistical rating agency is substituted
for Best or S&P pursuant to the definition of “Best” or “S&P”, the
equivalent ratings category designations of such substitute Rating Agency shall
be substituted for the ratings category designations of, as the case may be,
Best or S&P set forth in this table.

For
purposes of this Schedule, the following terms have the following meanings:

“Borrower’s
Pricing Rating” means, as of any day, the Senior Debt Rating on such day of
each of Best and S&P; provided
that (i) in the event that on any day the Rating Agencies’ respective Senior
Debt Ratings do not both fall into the same one of the Pricing Levels set forth
above, the Borrower’s Pricing Rating shall the higher of the two Senior Debt
Ratings on such day; except that if the lower of such two Senior Debt Ratings
on such day is more than one Pricing Level lower than the higher of such two
Senior Debt Ratings, then the Borrower’s Pricing Rating shall be deemed to be
that of the Pricing Level that is immediately above such lower Senior Debt
Rating; and (ii) in the event that, on any day, less than both of the Rating
Agencies shall not then have in effect a Senior Debt Rating, the Pricing Level
shall be Pricing Level V. The Pricing Levels shall be re-determined on each day
on which occurs an announcement of a change in the Senior Debt Rating issued by
either Rating Agency.

“Pricing
Level” means for any day, the Pricing Level (I, II, II, IV or V) indicated on
the table above that corresponds to the Borrower’s Pricing Rating on such day.
Pricing Levels are referred to in ascending order, that is, Pricing Level I is
the lowest Pricing Level and Pricing Level V is the highest Pricing Level.

EXHIBIT A

ASSIGNMENT AND ACCEPTANCE

AGREEMENT
dated as of ___________________, ___________ among [NAME OF ASSIGNOR] (the “Assignor” and [NAME OF ASSIGNEE] (the “Assignee”).

WHEREAS, this
Assignment and Acceptance (the “Agreement”)
relates to the Credit Agreement dated as of November 20, 2006 among American
Equity Investment Life Holding Company (the “Borrower”), the Assignor and the other Lenders party thereto, KeyBank
National Association, as Administrative Agent (the “Administrative Agent”),
Co-Lead Arranger, Sole Book Runner and Swingline Lender and LaSalle Bank
National Association, Co-Lead Arranger (as amended from time to time, the “Credit Agreement”).

WHEREAS,
as provided under the Credit
Agreement, the Assignor has a Commitment to make Loans to the Borrower and
participate in Swingline Loans in an aggregate principal amount at any time
outstanding not to exceed $____________

WHEREAS,
Loans made to the Borrower by the Assignor under the Credit Agreement in the
aggregate principal amount of $______________ are outstanding at the date
hereof;

WHEREAS,
Swingline Loans in the aggregate principal amount of $______________ are
outstanding at the date hereof; and

WHEREAS,
the Assignor proposes to assign to the Assignee all of the rights of the
Assignor under the Credit Agreement in respect of a portion of its Commitment
thereunder in an amount equal to $_____________ (the “Assigned Amount”), together with a corresponding
portion of each of its outstanding Loans and its Swingline Exposure, and the
Assignee proposes to accept such assignment and assume the corresponding
obligations of the Assignor under the Credit Agreement;

NOW,
THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:

SECTION
1.           Definitions.
All capitalized terms not otherwise defined herein have the
respective meanings set forth in the Credit Agreement.

SECTION
2.           Assignment. The
Assignor hereby assigns and sells to the Assignee all of the rights of the
Assignor under the Credit Agreement to the extent of the Assigned Amount and a
corresponding portion of each of its outstanding Loans and its Swingline
Exposure, and the Assignee hereby accepts such assignment from the Assignor and
assumes all of the obligations of the Assignor under the Credit Agreement to
the extent of the Assigned Amount and the corresponding portion of each of its
outstanding Loans and its Swingline Exposure. Upon the execution and delivery
hereof by the Assignor and the Assignee [and by the Borrower, the Administrative
Agent and the Swingline Lender](1) and the payment of the amounts specified in 

(1) Delete if consent is not required.

 A-1
 

Section 3 required
to be paid on the date hereof (i) the Assignee shall, as of the date hereof,
succeed to the rights and be obligated to perform the obligations of a Lender
under the Credit Agreement with a Commitment in an amount equal to the Assigned
Amount and shall acquire the rights of the Assignor with respect to a
corresponding portion of each of its outstanding Loans and its Swingline
Exposure and (ii) the Commitment of the Assignor shall, as of the date hereof,
be reduced by the Assigned Amount, and the Assignor shall be released from its
obligations under the Credit Agreement to the extent such obligations have been
assumed by the Assignee. The assignment provided
for herein shall be without recourse to the Assignor.

SECTION
3.           Payments. As
consideration for the assignment and sale contemplated in Section 2 hereof, the
Assignee shall pay to the Assignor on the date hereof in Federal funds the
amount heretofore agreed between them.(2) Facility fees accrued before the date
hereof are for the account of the Assignor and such fees accruing on and after
the date hereof with respect to the Assigned Amount are for the account of the
Assignee. Each of the Assignor and the Assignee agrees that if it receives any
amount under the Credit Agreement which is for the account of the other party
hereto, it shall receive the same for the account of such other party to the
extent of such other party’s interest therein and promptly pay the same to such
other party.

(2) Amount
should combine principal together with accrued interest and breakage
compensation, if any, to be paid by the Assignee, net of any portion of any
upfront fee to be paid by the Assignor to the Assignee. It may be preferable in
an appropriate case to specify these amounts generically or by formula rather
than as a fixed sum.

[SECTION
4.         Consent of the Borrower, the Administrative Agent, and the Swingline
Lender. This Agreement is conditioned upon the consent of the
Borrower, the Administrative Agent and the Swingline Lender pursuant to Section
9.04(b) of the Credit Agreement. The execution of the Agreement by the
Borrower, the Administrative Agent and the Swingline Lender is evidence of this
consent.](3)

(3) Delete
if consent is not required.

SECTION
5.           Non-Reliance on Assignor. The
Assignor makes no representation or warranty in connection with, and shall have
no responsibility with respect to, the solvency, financial condition, or
statements of the Borrower. or the validity and enforceability of the Borrower’s
obligations under the Credit Agreement, any note issued thereunder or any Loan
Document. The Assignee acknowledges that it has, independently and without
reliance on the Assignor, and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter its own
independent appraisal of the business, affairs and financial condition of the
Borrower.

SECTION
6.           Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.

SECTION
7.           Counterparts.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.

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

 A-2
 

 

	
  

  	
  [NAME OF ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  [NAME OF ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

The undersigned
consent to the foregoing assignment.

	
  

  	
  [AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:](4)

  
	
   

  	
   

  
	
   

  	
  [KEYBANK NATIONAL ASSOCIATION, as Administrative
  Agent and Swingline Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:](5)

  

(4) Delete
if Borrower’s consent is not required.

(5) Delete
(or modify as appropriate) if consent of Administrative Agent, and/or Swingline
Lender is not required.

 A-3

Schedule 2.01

Commitment Schedule

	
  Name of Lender

  	
   

  	
  Commitment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  KeyBank National
  Association

  	
   

  	
  $

  	
  30,000,000

  	
   

  
	
  LaSalle Bank National
  Association

  	
   

  	
  $

  	
  30,000,000

  	
   

  
	
  CitiBank, N.A.

  	
   

  	
  $

  	
  20,000,000

  	
   

  
	
  Bankers Trust Company,
  N.A.

  	
   

  	
  $

  	
  15,000,000

  	
   

  
	
  Deutsche Bank AG, New
  York Branch

  	
   

  	
  $

  	
  15,000,000

  	
   

  
	
  JPMorgan Chase Bank,
  N.A.

  	
   

  	
  $

  	
  15,000,000

  	
   

  
	
  SunTrust Bank

  	
   

  	
  $

  	
  15,000,000

  	
   

  
	
  West Bank

  	
   

  	
  $

  	
  10,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  150,000,000Exhibit
10.2

METABASIS THERAPEUTICS, INC.

AMENDED AND RESTATED 2001 EQUITY INCENTIVE PLAN

Amendment and Restatement Adopted
by Board on June 6, 2001

Amendment and Restatement
Approved by Stockholders on July 23, 2001

Amendment Adopted by Board on
November 29, 2001

Amendment Adopted by Board on
August 21, 2002

Amendments Approved by
Stockholders on October 30, 2002

Amendment and Restatement Adopted
by Board on May 6, 2004

Amendment and Restatement
Approved by Stockholders on May 10, 2004

Amendment Adopted by Board on
January 17, 2007

Termination
Date:  May 10, 2014

1.             PURPOSES.

(a)           Amendment and Restatement.  The Plan amends and restates the Company’s
Amended and Restated 2001 Equity Incentive Plan adopted by the Board on June 6,
2001, as amended on November 29, 2001 and August 21, 2002 (the “Prior Plan”).  All outstanding options granted under the
Prior Plan shall remain subject to the terms of the Prior Plan.  All options granted subsequent to the
adoption of this Plan by the Board shall be subject to the terms of the Plan.

(b)           Eligible Stock Award Recipients.  The persons eligible to receive Stock Awards
are Employees, Directors and Consultants.

(c)           Available Stock Awards.  The purpose of the Plan is to provide a means
by which eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of the
following Stock Awards:  (i) Incentive
Stock Options, (ii) Nonstatutory Stock Options, (iii) Restricted Stock Awards,
(iv) Stock Appreciation Rights, (v) Phantom Stock Awards and (vi) Other Stock
Awards.

(d)           General Purpose.  The Company, by means of the Plan, seeks to
retain the services of the group of persons eligible to receive Stock Awards,
to secure and retain the services of new members of this group and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.

2.             DEFINITIONS.

(a)           “Affiliate”
means any parent corporation or subsidiary corporation of the Company, whether
now or hereafter existing, as those terms are defined in Sections 424(e) and
(f), respectively, of the Code.

(b)           “Board”
means the Board of Directors of the Company.

 1
 

(c)            “Capitalization
Adjustment” has the meaning ascribed to that term
in Section 11(a).

(d)           “Cause”
means, with respect to a Participant, the
occurrence of any of the following:  (i)
such Participant’s conviction of any felony or any crime involving fraud or
dishonesty which, in the Board’s sole discretion, materially affects the
business of the Company; (ii) such Participant’s participation (whether by
affirmative act or omission) in a fraud, act of dishonesty or other act of
misconduct against the Company and/or its Affiliates which, in the Board’s sole
discretion, materially affects the business of the Company; (iii) conduct by
such Participant which, based upon a good faith and reasonable factual
investigation by the Company (or, if such Participant is an Officer, by the
Board), demonstrates such Participant’s gross unfitness to serve; (iv) such
Participant’s violation of any statutory or fiduciary duty, or duty of loyalty,
owed to the Company and/or its Affiliates; (v) such Participant’s breach of any
material term of any material contract between such Participant and the Company
and/or its Affiliates; and (vi) such Participant’s repeated violation of any
material Company policy.  Notwithstanding
the foregoing, such Participant’s Disability shall not constitute Cause as set
forth herein.  The determination that a
termination is for Cause shall be by the Committee in its sole and exclusive
judgment and discretion.

(e)           “Change in Control”
means the occurrence, in a single transaction or in a series of related
transactions, of any one or more of the following events:

(i)            any Exchange Act
Person becomes the Owner, directly or indirectly, of securities of the Company
representing more than 50% of
the combined voting power of the Company’s then outstanding securities other
than by virtue of a merger, consolidation or similar transaction.  Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur (A) on account
of the acquisition of securities of the Company by an investor, any affiliate
thereof or any other Exchange Act Person from the Company in a transaction or
series of related transactions the primary purpose of which is to obtain
financing for the company through the issuance of equity securities or (B)  solely because the
level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold
of the outstanding voting securities as a result of a repurchase or other
acquisition of voting securities by the Company reducing the number of shares
outstanding, provided that if a Change in Control would occur (but for the
operation of this sentence) as a result of the acquisition of voting securities
by the Company, and after such share acquisition, the Subject Person becomes
the Owner of any additional voting securities that, assuming the repurchase or
other acquisition had not occurred, increases the percentage of the then
outstanding voting securities Owned by the Subject Person over the designated
percentage threshold, then a Change in Control shall be deemed to occur;

(ii)           there is
consummated a merger, consolidation or similar transaction involving (directly
or indirectly) the Company and, immediately after the consummation of such
merger, consolidation or similar transaction, the stockholders of the Company
immediately prior thereto do not Own, directly or indirectly, either (A)
outstanding voting securities representing more than 50% of the combined outstanding voting power of the surviving
Entity in such merger, consolidation or similar transaction or (B) more than 50% of the combined outstanding voting
power of the parent of the surviving Entity in such merger, consolidation or
similar

 2
 

transaction, in each case
in substantially the same proportions as their Ownership of the outstanding
voting securities of the Company immediately prior to such transaction;

(iii)         there is consummated
a sale, lease, license or other disposition of all or substantially all of the
consolidated assets of the Company and its Subsidiaries, other than a sale,
lease, license or other disposition of all or substantially all of the
consolidated assets of the Company and its Subsidiaries to an Entity, more than
50% of the combined voting power
of the voting securities of which are Owned by stockholders of the Company in
substantially the same proportions as their Ownership of the outstanding voting
securities of the Company immediately prior to such sale, lease, license or
other disposition; or

(iv)          individuals who, on
the date this Plan is adopted by the Board, are members of the Board (the “Incumbent Board”)
cease for any reason to constitute at least a majority of the members of the
Board; provided, however, that if the
appointment or election (or nomination for election) of any new Board member
was approved or recommended by a majority vote of the members of the Incumbent
Board then still in office, such new member shall, for purposes of this Plan,
be considered as a member of the Incumbent Board.

Notwithstanding the foregoing or any other provision
of this Plan, the definition of Change in Control (or any analogous term) in an
individual written agreement between the Company or any Affiliate and the
Participant shall supersede the foregoing definition with respect to Stock
Awards subject to such agreement (it being understood, however, that if no
definition of Change in Control or any analogous term is set forth in such an
individual written agreement, the foregoing definition shall apply).

(f)            “Code”
means the Internal Revenue Code of 1986, as amended.

(g)           “Committee”
means a committee of one or more members of the Board appointed by the Board in
accordance with Section 3(c).

(h)           “Common Stock”
means the common stock of the Company.

(i)            “Company”
means Metabasis Therapeutics, Inc., a Delaware corporation.

(j)            “Consultant”
means any person, including an advisor, (i) engaged by the Company or an
Affiliate to render consulting or advisory services and who is compensated for
such services or (ii) serving as a member of the Board of Directors of an
Affiliate and who is compensated for such services.  However, the term “Consultant” shall not
include Directors who are not compensated by the Company for their services as
Directors, and the payment of a director’s fee by the Company for services as a
Director shall not cause a Director to be considered a “Consultant” for
purposes of the Plan.

(k)           “Continuous Service”
means that the Participant’s service with the Company or an Affiliate, whether
as an Employee, Director or Consultant, is not interrupted or terminated.  A change in the capacity in which the
Participant renders service to the Company or an Affiliate as an Employee, Consultant
or Director or a change in the entity for which the Participant renders such
service, provided that there is no interruption or termination of the
Participant’s service with the Company or an Affiliate, shall not terminate a
Participant’s Continuous Service.  For

 3
 

example, a change in status from an Employee of the
Company to a Consultant of an Affiliate or to a Director shall not constitute
an interruption of Continuous Service. 
The Board or the chief executive officer of the Company, in that party’s
sole discretion, may determine whether Continuous Service shall be considered
interrupted in the case of any leave of absence approved by that party,
including sick leave, military leave or any other personal leave.  Notwithstanding the foregoing, a leave of
absence shall be treated as Continuous Service for purposes of vesting in a
Stock Award only to such extent as may be provided in the Company’s leave of
absence policy or in the written terms of the Participant’s leave of absence.

(l)            “Corporate Transaction”
means the occurrence, in a single transaction or in a series of related
transactions, of any one or more of the following events:

(i)            a sale  or other disposition of all or substantially all, as
determined by the Board in its discretion, of the consolidated assets of the
Company and its Subsidiaries;

(ii)           a sale or other
disposition of at least 90%  of the outstanding securities of the Company;

(iii)         a merger,
consolidation or similar transaction following which the Company is not the
surviving corporation; or

(iv)          a merger,
consolidation or similar transaction following which the Company is the
surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger, consolidation or similar transaction are converted or
exchanged by virtue of the merger, consolidation or similar transaction into
other property, whether in the form of securities, cash or otherwise.

(m)          “Covered Employee”
means the chief executive officer and the four other highest compensated
officers of the Company for whom total compensation is required to be reported
to stockholders under the Exchange Act, as determined for purposes of Section
162(m) of the Code.

(n)           “Director”
means a member of the Board.

(o)           “Disability”
means the permanent and total disability of a person within the meaning of
Section 22(e)(3) of the Code.

(p)           “Employee”
means any person employed by the Company or an Affiliate.  Service as a Director or payment of a
director’s fee by the Company or an Affiliate shall not be sufficient to constitute
“employment” by the Company or an Affiliate.

(q)           “Entity”
means a corporation, partnership or other entity.

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

(s)           “Exchange Act Person” means
any natural person, Entity or “group” (within the meaning of Section 13(d) or
14(d) of the Exchange Act), except that “Exchange Act Person” shall not include
(A) the Company or any Subsidiary of the Company, (B) any employee benefit plan
of the Company or any Subsidiary of the Company or any trustee or other
fiduciary holding

 4
 

securities under an employee benefit plan of the
Company or any Subsidiary of the Company, (C) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (D) an Entity
Owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their Ownership of stock of the Company.

(t)            “Fair Market Value”
means, as of any date, the value of the Common Stock determined as follows:

(i)            If the Common Stock
is listed on any established stock exchange, the Fair Market Value of a share
of Common Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported, and in each case rounded up where necessary to
the nearest whole cent) as quoted on such exchange (or the exchange with the
greatest volume of trading in the Common Stock) on the day of determination, as
reported in The Wall Street Journal
or such other source as the Board deems reliable.  Unless otherwise provided by the Board, if
there is no closing sales price (or closing bid, if no sales were reported) for
the Common Stock on the day of determination, then the Fair Market Value shall
be the closing sales price (or the closing bid, if no sales were reported, and
in each case rounded up where necessary to the nearest whole cent) on the last
preceding date for which such quotation exists.

(ii)           In the absence of
such market for the Common Stock, the Fair Market Value shall be determined in
good faith by the Board.

(u)            “Incentive Stock Option”
means an Option intended to qualify as an incentive stock option within the
meaning of Section 422 of the Code and the regulations promulgated
thereunder.

(v)            “IPO Date” means the effective
date of the initial public offering of the Common Stock.

(w)           “Non-Employee Director”
means a Director who either (i) is not a current Employee or
Officer of the Company or its parent or a subsidiary, does not receive
compensation, either directly or indirectly, from the Company or its parent or
a subsidiary, for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act (“Regulation
S-K”)), does not possess an interest in any other transaction
for which disclosure would be required under Item 404(a) of Regulation S-K, and
is not engaged in a business relationship for which disclosure would be
required pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise
considered a “non-employee director” for purposes of Rule 16b-3.

(x)           “Nonstatutory Stock Option”
means an Option not intended to qualify as an Incentive Stock Option.

(y)           “Officer”
means a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.

(z)           “Option”
means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant
to the Plan.

 5
 

(aa)         “Option Agreement”
means a written agreement between the Company and an Optionholder evidencing
the terms and conditions of an individual Option grant.  Each Option Agreement shall be subject to the
terms and conditions of the Plan.

(bb)         “Optionholder”
means a person to whom an Option is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Option.

(cc)         “Other Stock Award” means an
award based in whole or in part by reference to the Common Stock which is
granted pursuant to the terms and conditions of Section 7(d).

(dd)         “Other Stock Award
Agreement” means a written agreement between the
Company and a holder of an Other Stock Award evidencing the terms and
conditions of an individual Other Stock Award grant.  Each Other Stock Award Agreement shall be
subject to the terms and conditions of the Plan.

(ee)         “Outside Director”
means a Director who either (i) is not a current employee of the Company or an “affiliated
corporation” (within the meaning of Treasury Regulations promulgated under
Section 162(m) of the Code), is not a former employee of the Company or an “affiliated
corporation” who receives compensation for prior services (other than benefits
under a tax-qualified retirement plan) during the taxable year, has not been an
officer of the Company or an “affiliated corporation”, and does not receive
remuneration from the Company or an “affiliated corporation,” either directly
or indirectly, in any capacity other than as a Director or (ii) is otherwise
considered an “outside director” for purposes of Section 162(m) of the Code.

(ff)           “Own,” “Owned,” “Owner,” “Ownership”  A person or Entity shall be
deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership”
of securities if such person or Entity, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares voting
power, which includes the power to vote or to direct the voting, with respect
to such securities.

(gg)         “Participant”
means a person to whom a Stock Award is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Stock Award.

(hh)         “Phantom Stock Award” means
a right to receive shares of Common Stock which is granted pursuant to the
terms and conditions of Section 7(b).

(ii)           “Phantom Stock Award
Agreement” means a written agreement between the
Company and a holder of a Phantom Stock Award evidencing the terms and
conditions of an individual Phantom Stock Award grant.  Each Phantom Stock Award Agreement shall be
subject to the terms and conditions of the Plan.

(jj)           “Plan”
means this Metabasis Therapeutics, Inc. Amended and Restated 2001 Equity
Incentive Plan.

(kk)        “Restricted Stock Award” means an
award of shares of Common Stock which is granted pursuant to the terms and
conditions of Section 7(a).

 6
 

(ll)           “Restricted Stock Award Agreement”
means an agreement between the Company and a holder of a Restricted Stock Award
evidencing the terms and conditions of an individual Restricted Stock Award
grant.  Each Restricted Stock Award
Agreement shall be subject to the terms and conditions of the Plan.

(mm)       “Rule 16b-3”
means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule
16b-3, as in effect from time to time.

(nn)         “Securities Act”
means the Securities Act of 1933, as amended.

(oo)         “Stock Appreciation Right” means
a right to receive the appreciation of Common Stock that is granted pursuant to
the terms and conditions of Section 7(c).

(pp)         “Stock Appreciation Right
Agreement” means a written agreement between the
Company and a holder of a Stock Appreciation Right evidencing the terms and
conditions of an individual Stock Appreciation Right grant.  Each Stock Appreciation Right Agreement shall
be subject to the terms and conditions of the Plan.

(qq)         “Stock Award”
means any right granted under the Plan, including an Option, a Restricted Stock
Award, a Stock Appreciation Right, a Phantom Stock Award or any Other Stock
Award.

(rr)         “Stock Award Agreement”
means a written agreement between the Company and a holder of a Stock Award
evidencing the terms and conditions of an individual Stock Award grant.  Each Stock Award Agreement shall be subject
to the terms and conditions of the Plan.

(ss)          “Subsidiary”
means, with respect to the Company, (i) any corporation of which more than 50%
of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of
whether, at the time, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, Owned by the Company, and
(ii) any partnership in which the Company has a direct or indirect interest
(whether in the form of voting or participation in profits or capital contribution)
of more than 50%.

(tt)           “Ten Percent Stockholder”
means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the
Code) stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of any of its Affiliates.

3.             ADMINISTRATION.

(a)           Administration by Board.  The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
Section 3(c).

(b)           Powers of Board.  The Board shall have the power, subject to,
and within the limitations of, the express provisions of the Plan:

(i)            To determine from
time to time which of the persons eligible under the Plan shall be granted
Stock Awards; when and how each Stock Award shall be granted; what

 7
 

type or combination of
types of Stock Award shall be granted; the provisions of each Stock Award
granted (which need not be identical), including the time or times when a
person shall be permitted to receive Common Stock pursuant to a Stock Award;
and the number of shares of Common Stock with respect to which a Stock Award
shall be granted to each such person.

(ii)           To construe and
interpret the Plan and Stock Awards granted under it, and to establish, amend
and revoke rules and regulations for its administration.  The Board, in the exercise of this power, may
correct any defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or expedient
to make the Plan fully effective.

(iii)         To effect, at any
time and from time to time, with the consent of any adversely affected
Optionholder, (1) the reduction of the exercise price of any outstanding Option
under the Plan, (2) the cancellation of any outstanding Option under the Plan
and the grant in substitution therefor of (A) a new Option under the Plan or
another equity plan of the Company covering the same or a different number of
shares of Common Stock, (B) a Restricted Stock Award (including a stock bonus),
(C) a Stock Appreciation Right, (D) a Phantom Stock Award (E) an Other Stock
Award, (F) cash and/or (G) other valuable consideration (as determined by the
Board, in its sole discretion), or (3) any other action that is treated as a
repricing under generally accepted accounting principles.

(iv)          To amend the Plan or
a Stock Award as provided in Section 12.

(v)            To terminate or
suspend the Plan as provided in Section 13.

(vi)          Generally, to
exercise such powers and to perform such acts as the Board deems necessary or
expedient to promote the best interests of the Company and that are not in
conflict with the provisions of the Plan.

(c)           Delegation
to Committee.

(i)            General.  The Board may delegate administration of the
Plan to a Committee or Committees of one or more members of the Board, and the
term “Committee”
shall apply to any person or persons to whom such authority has been
delegated.  If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
including the power to delegate to a subcommittee any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board.  The Board may abolish the Committee at any
time and revest in the Board the administration of the Plan.

(ii)           Section 162(m) and Rule 16b-3
Compliance.  In the
discretion of the Board, the Committee may consist solely of two or more
Outside Directors, in accordance with Section 162(m) of the Code, and/or solely
of two or more Non-Employee Directors, in accordance with Rule 16b-3.  In addition, the Board or the Committee, in
their discretion, may (1) delegate to a committee of one or more members of the
Board who need not be Outside Directors the authority to grant Stock Awards to
eligible persons who are either (a) not then

 8
 

Covered Employees and are
not expected to be Covered Employees at the time of recognition of income
resulting from such Stock Award, or (b) not persons with respect to whom the
Company wishes to comply with Section 162(m) of the Code, and/or (2) delegate
to a committee of one or more members of the Board who need not be Non-Employee
Directors the authority to grant Stock Awards to eligible persons who are not
then subject to Section 16 of the Exchange Act.

(d)           Delegation to
an Officer.  The Board may
delegate to one or more Officers of the Company the authority to do one or both
of the following (i) designate Officers and Employees of the Company or any of
its Subsidiaries to be recipients of Stock Awards and (ii) determine the number
of shares of Common Stock to be subject to such Stock Awards granted to such
Officers and Employees of the Company; provided,
however, that the Board resolutions regarding such delegation shall
specify the total number of shares of Common Stock that may be subject to the
Stock Awards granted by such Officer and that such Officer may not grant a
Stock Award to himself or herself. 
Notwithstanding the foregoing, the Board may not delegate authority to
an Officer to determine the Fair Market Value of the Common Stock.

(e)           Effect of Board’s
Decision. All determinations,
interpretations and constructions made by the Board in good faith shall not be
subject to review by any person and shall be final, binding and conclusive on
all persons.

4.             SHARES
SUBJECT TO THE PLAN.

(a)           Share Reserve.  Subject to the provisions of Section 11(a)
relating to Capitalization Adjustments, the shares of Common Stock that may be
issued pursuant to Stock Awards shall not exceed in the aggregate 2,213,995
shares of Common Stock, plus an annual increase to be added on the first day of
the fiscal year of the Company for a period commencing on the first day of the
fiscal year that begins on January 1, 2005 and ending on (and including) the
first day of the fiscal year that begins on January 1, 2014 (each such day, a “Calculation
Date”), equal to the lesser of (i) 3% of the fully diluted (i.e. assuming
exercise for or conversion into Common Stock of all then outstanding options,
warrants and convertible securities of the Company) shares of Common Stock
outstanding on each such Calculation Date (rounded down to the nearest whole
share); or (ii) 1,000,000 shares of Common Stock.  Notwithstanding the foregoing, the Board may
act, prior to the first day of any fiscal year of the Company, to increase the
share reserve by such number of shares of Common Stock as the Board shall
determine, which number shall be less than each of (i) and (ii).

(b)           Reversion of Shares to the Share
Reserve.  If any Stock
Award shall for any reason expire or otherwise terminate, in whole or in part,
without having been exercised in full, or if any shares of Common Stock issued
to a Participant pursuant to a Stock Award are forfeited back to or repurchased
by the Company, including, but not limited to, any repurchase or forfeiture
caused by the failure to meet a contingency or condition required for the
vesting of such shares, then the shares of Common Stock not acquired under such
Stock Award, or forfeited back to or repurchased by the Company, shall revert
to and again become available for issuance under the Plan.  If any shares subject to a Stock Award are
not delivered to a Participant because such shares are withheld for the payment
of taxes or the Stock Award is exercised through a reduction of shares subject
to the Stock Award (i.e., “net
exercised”), the number of shares that are not delivered to the Participant as
a result thereof shall revert to and again become available

 9
 

for issuance under the Plan.  If the exercise price of any Stock Award is
satisfied by tendering shares of Common Stock held by the Participant (either
by actual delivery or attestation), then the number of such tendered shares
shall revert to and again become available for issuance under the Plan.  Notwithstanding anything to the contrary in
this Section 4(b), subject to the provisions of Section 11(a) relating to
Capitalization Adjustments the aggregate maximum number of shares of Common
Stock that may be issued as Incentive Stock Options shall be 11,000,000 shares
of Common Stock.

(c)           Source of Shares.  The shares of Common Stock subject to the Plan
may be unissued shares or reacquired shares, bought on the market or otherwise.

5.             ELIGIBILITY.

(a)           Eligibility for Specific Stock Awards.  Incentive Stock Options may be granted only
to Employees.  Stock Awards other than
Incentive Stock Options may be granted to Employees, Directors and Consultants.

(b)           Ten Percent Stockholders.  A Ten Percent Stockholder shall not be
granted an Incentive Stock Option unless the exercise price of such Option is
at least 110% of the Fair Market Value of the Common Stock on the date of grant
and the Option is not exercisable after the expiration of five years from the
date of grant.

(c)           Section 162(m) Limitation on Annual
Grants.  Subject to the
provisions of Section 11(a) relating to Capitalization Adjustments, no Employee
shall be eligible to be granted Options covering more than 1,000,000 shares of Common Stock during any
calendar year, and no Employee shall be eligible to be granted Stock
Appreciation Rights covering more than 1,000,000 shares of Common Stock during
any calendar year.

(d)           Consultants.  A Consultant shall not be eligible for the
grant of a Stock Award if, at the time of grant, a Form S-8 Registration
Statement under the Securities Act (“Form S-8”) is not available to register
either the offer or the sale of the Company’s securities to such Consultant
because of the nature of the services that the Consultant is providing to the
Company, because the Consultant is not a natural person, or because of any
other rule governing the use of Form S-8, unless the Company determines both
(i) that such grant (A) shall be registered in another manner under the
Securities Act (e.g., on a Form S-3 Registration
Statement) or (B) does not require registration under the Securities Act in
order to comply with the requirements of the Securities Act, if applicable, and
(ii) that such grant complies with the securities laws of all other relevant
jurisdictions.

6.             OPTION
PROVISIONS.

Each Option shall be in such form and shall contain
such terms and conditions as the Board shall deem appropriate.  All Options shall be separately designated
Incentive Stock Options or Nonstatutory Stock Options at the time of grant,
and, if certificates are issued, a separate certificate or certificates shall
be issued for shares of Common Stock purchased on exercise of each type of
Option.  The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

 10

(a)           Term.  The Board shall determine the term of an
Option; provided that, subject to
the provisions of Section 5(b) regarding Ten Percent Stockholders, no Incentive
Stock Option shall be exercisable after the expiration of ten years from the
date on which it was granted.

(b)           Exercise Price of an Incentive Stock
Option.  Subject to the
provisions of Section 5(b) regarding Ten Percent Stockholders, the exercise
price of each Incentive Stock Option shall be not less than 100% of the Fair
Market Value of the Common Stock subject to the Option on the date the Option
is granted.  Notwithstanding the
foregoing, an Incentive Stock Option may be granted with an exercise price
lower than that set forth in the preceding sentence if such Option is granted
pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.

(c)           Exercise Price of a Nonstatutory
Stock Option.  The
Board, in its discretion, shall determine the exercise price of each
Nonstatutory Stock Option.

(d)           Consideration.  The purchase price of Common Stock acquired
pursuant to an Option shall be paid, to the extent permitted by applicable law,
either (i) in cash at the time the Option is exercised or (ii) at the
discretion of the Board at the time of the grant of the Option (or subsequently
in the case of a Nonstatutory Stock Option) (1) by delivery to the Company of
other Common Stock, (2) according to a deferred payment or other similar
arrangement with the Optionholder, (3) by a “net exercise” of the Option (as
further described below), (4) pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve
Board that, prior to the issuance of Common Stock, results in either the
receipt of cash (or check) by the Company or the receipt of irrevocable
instructions to pay the aggregate exercise price to the Company from the sales
proceeds or (5) in any other form of legal consideration that may be
acceptable to the Board.  Unless
otherwise specifically provided in the Option, the purchase price of Common
Stock acquired pursuant to an Option that is paid by delivery to the Company of
other Common Stock acquired, directly or indirectly from the Company, shall be
paid only by shares of the Common Stock of the Company that have been held for
more than six months (or such longer or shorter period of time required to
avoid a charge to earnings for financial accounting purposes).  At any time that the Company is incorporated
in Delaware, payment of the Common Stock’s “par value,” as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.

In the case of any deferred payment arrangement,
interest shall be compounded at least annually and shall be charged at the
minimum rate of interest necessary to avoid (1) the treatment as interest,
under any applicable provisions of the Code, of any amounts other than amounts
stated to be interest under the deferred payment arrangement and (2) the
treatment of the Option as a variable award for financial accounting purposes.

In the case of a “net exercise” of an Option, the
Company will not require a payment of the exercise price of the Option from the
Participant but will reduce the number of shares of Common Stock issued upon
the exercise by the largest number of whole shares that has a Fair Market Value
that does not exceed the aggregate exercise price.  With respect to any remaining balance of the
aggregate exercise price, the Company shall accept a cash payment from the
Participant.  The shares of Common Stock
so used to pay the exercise price of an Option under a “net exercise” will be
considered to have resulted from the exercise of the Option, and

 11
 

accordingly,
the Option will not again be exercisable with respect to such shares, the
shares actually delivered to the Participant, and any shares withheld for
purposes of tax withholding.

(e)           Transferability of an Incentive Stock
Option.  An Incentive
Stock Option shall not be transferable except by will or by the laws of descent
and distribution and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. 
Notwithstanding the foregoing, the Optionholder may, by delivering
written notice to the Company, in a form provided by or otherwise satisfactory to
the Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.

(f)            Transferability of a Nonstatutory
Stock Option.  A
Nonstatutory Stock Option shall be transferable to the extent provided in the
Option Agreement.  If the Nonstatutory
Stock Option does not provide for transferability, then the Nonstatutory Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder only
by the Optionholder.  Notwithstanding the
foregoing, the Optionholder may, by delivering written notice to the Company,
in a form provided by or otherwise satisfactory to the Company, designate a
third party who, in the event of the death of the Optionholder, shall
thereafter be entitled to exercise the Option.

(g)           Vesting Generally.  The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore become exercisable
in periodic installments that may, but need not, be equal.  The Option may be subject to such other terms
and conditions on the time or times when it may be exercised (which may be
based on performance or other criteria) as the Board may deem appropriate.  The vesting provisions of individual Options
may vary.  The provisions of this Section
6(g) are subject to any Option provisions governing the minimum number of
shares of Common Stock as to which an Option may be exercised.

(h)           Termination of Continuous Service.  In the event that an Optionholder’s Continuous
Service terminates (for reasons other than Cause or upon the Optionholder’s
death or Disability), the Optionholder may exercise his or her Option (to the
extent that the Optionholder was entitled to exercise such Option as of the
date of termination) but only within such period of time ending on the earlier
of (i) the date three months following the termination of the Optionholder’s
Continuous Service (or such longer or shorter period specified in the Option
Agreement or (ii) the expiration of the term of the Option as set forth in the
Option Agreement.  If, after termination,
the Optionholder does not exercise his or her Option within the time specified
in the Option Agreement, the Option shall terminate.

(i)            Extension of Termination Date.  An Optionholder’s Option Agreement may also
provide that if the exercise of the Option following the termination of the
Optionholder’s Continuous Service (for reasons other than Cause or upon the
Optionholder’s death or Disability) would be prohibited at any time solely
because the issuance of shares of Common Stock would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in the Option
Agreement or (ii) the expiration of a period of three months after the
termination of the Optionholder’s Continuous Service during which the exercise
of the Option would not be in violation of such registration requirements.

 12
 

(j)            Disability of Optionholder.  In the event that an Optionholder’s
Continuous Service terminates as a result of the Optionholder’s Disability, the
Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise such Option as of the date of
termination), but only within such period of time ending on the earlier of (i)
the date 12 months following such termination (or such longer or shorter period
specified in the Option Agreement or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. 
If, after termination, the Optionholder does not exercise his or her
Option within the time specified herein, the Option shall terminate.

(k)           Death of Optionholder.  In the event that (i) an Optionholder’s
Continuous Service terminates as a result of the Optionholder’s death or (ii)
the Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder’s Continuous Service for a
reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder’s estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
option upon the Optionholder’s death pursuant to Section 6(e) or 6(f), but only
within the period ending on the earlier of (1) the date 18 months following the
date of death (or such longer or shorter period specified in the Option
Agreement or (2) the expiration of the term of such Option as set forth in the
Option Agreement.  If, after death, the
Option is not exercised within the time specified herein, the Option shall
terminate.

(l)            Termination for Cause.  In the event an Optionholder’s Continuous
Service is terminated for Cause, the Option shall terminate upon the
termination date of such Optionholder’s Continuous Service and the Optionholder
is prohibited from exercising his or her Option as of the time of such
termination.

(m)          Early Exercise.  The Option may, but need not, include a
provision whereby the Optionholder may elect at any time before the
Optionholder’s Continuous Service terminates to exercise the Option as to any
part or all of the shares of Common Stock subject to the Option prior to the
full vesting of the Option.  Any unvested
shares of Common Stock so purchased may be subject to a repurchase option in
favor of the Company or to any other restriction the Board determines to be
appropriate.  The Company will not
exercise its repurchase option until at least six months (or such longer or
shorter period of time required to avoid a charge to earnings for financial
accounting purposes) have elapsed following exercise of the Option unless the
Board otherwise specifically provides in the Option.

7.             PROVISIONS
OF STOCK AWARDS OTHER THAN OPTIONS.

(a)           Restricted Stock Awards.  Each Restricted Stock Award Agreement shall
be in such form and shall contain such terms and conditions as the Board shall
deem appropriate.  At the Board’s
election, shares of Common Stock may be (i) held in book entry form subject to
the Company’s instructions until any restrictions relating to the Restricted
Stock Award lapse; or (ii) evidenced by a certificate, which certificate shall
be held in such form and manner as determined by the Board.  The terms and conditions of Restricted Stock
Award Agreements may change from time to time, and the terms and conditions of
separate Restricted Stock Award Agreements need not be identical, provided, however, that each Restricted
Stock Award Agreement shall

 13
 

include (through incorporation of the provisions
hereof by reference in the agreement or otherwise) the substance of each of the
following provisions:

(i)            Purchase Price.  At the time of the grant of a Restricted
Stock Award, the Board will determine the price to be paid by the Participant
for each share subject to the Restricted Stock Award.  To the extent required by law, the price to
be paid by the Participant for each share of the Restricted Stock Award will
not be less than the par value of a share of Common Stock.  A Restricted Stock Award may be awarded as a
stock bonus (i.e., with no cash
purchase price to be paid) to the extent permissible under applicable law.

(ii)           Consideration.  At the time of the grant of a Restricted
Stock Award, the Board will determine the consideration permissible for the
payment of the purchase price of the Restricted Stock Award.  The purchase price of Common Stock acquired
pursuant to the Restricted Stock Award shall be paid in one of the following
ways: (i) in cash at the time of purchase; (ii) at the discretion of the Board,
according to a deferred payment or other similar arrangement with the
Participant; (iii) by services rendered or to be rendered to the Company; or
(iv) in any other form of legal consideration that may be acceptable to the
Board; provided, however, that at
any time that the Company is incorporated in Delaware, the Common Stock’s “par
value,” as defined in the Delaware General Corporation Law, shall not be paid
by deferred payment and must be paid in a form of consideration that is
permissible under the Delaware Corporation Law.

(iii)         Vesting. Shares of
Common Stock acquired under a Restricted Stock Award may, but need not, be
subject to a share repurchase option in favor of the Company in accordance with
a vesting schedule to be determined by the Board.

(iv)          Termination of Participant’s
Continuous Service. In the event that a Participant’s
Continuous Service terminates, the Company shall have the right, but not the
obligation, to repurchase or otherwise reacquire any or all of the shares of
Common Stock held by the Participant that have not vested as of the date of
termination under the terms of the Restricted Stock Award Agreement.  At the Board’s election, the repurchase right
may be at the least of: (i) the Fair Market Value on the relevant date; (ii)
the Participant’s original cost; or (iii) if the Participant paid the purchase
price for the shares of Common Stock with services rendered, then for no
consideration.  The Company will not
exercise its repurchase option until at least six months (or such longer or
shorter period of time required to avoid a charge to earnings for financial
accounting purposes) have elapsed following the purchase of the restricted
stock unless otherwise determined by the Board or provided in the Restricted
Stock Award Agreement.

(v)            Transferability.
Rights to purchase or receive shares of Common Stock granted under a Restricted
Stock Award shall be transferable by the Participant only upon such terms and
conditions as are set forth in the Restricted Stock Award Agreement, as the
Board shall determine in its discretion, and so long as Common Stock awarded
under the Restricted Stock Award remains subject to the terms of the Restricted
Stock Award Agreement.

(b)           Phantom Stock.  Each Phantom Stock Award
Agreement shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate.  The
terms and conditions of Phantom Stock Award Agreements may change from time to
time, and the terms

 14
 

and conditions of separate Phantom Stock Award
Agreements need not be identical, provided,
however, that each Phantom Stock Award Agreement shall include
(through incorporation of the provisions hereof by reference in the agreement
or otherwise) the substance of each of the following provisions:

(i)            Consideration.  At the time of grant of a Phantom Stock
Award, the Board will determine the consideration, if any, to be paid by the
Participant upon delivery of each share of Common Stock subject to the Phantom
Stock Award. To the extent required by applicable law, the consideration to be
paid by the Participant for each share of Common Stock subject to a Phantom
Stock Award will not be less than the par value of a share of Common Stock.  Such consideration may be paid in any form
permitted under applicable law.

(ii)           Vesting.  At the time of the grant of
a Phantom Stock Award, the Board may impose such restrictions or conditions to
the vesting of the Phantom Stock Award as it, in its absolute discretion, deems
appropriate.

(iii)         Payment.  A
Phantom Stock Award may be settled by the delivery of shares of Common Stock,
their cash equivalent, or any combination of the two, as the Board deems
appropriate.

(iv)          Additional Restrictions.  At the time of the grant of
a Phantom Stock Award, the Board, as it deems appropriate, may impose such
restrictions or conditions that delay the delivery of the shares of Common
Stock (or their cash equivalent) subject to a Phantom Stock Award after the
vesting of such Award.

(v)            Dividend Equivalents.  Dividend equivalents may be
credited in respect of shares of Common Stock covered by a Phantom Stock Award,
as determined by the Board and contained in the Phantom Stock Award
Agreement.  At the discretion of the Board,
such dividend equivalents may be converted into additional shares of Common
Stock covered by the Phantom Stock Award by dividing (1) the aggregate amount
or value of the dividends paid with respect to that number of shares of Common
Stock covered by the Phantom Stock Award then credited by (2) the Fair Market
Value per share of Common Stock on the payment date for such dividend, or in
such other manner as determined by the Board. 
Any additional shares covered by the Phantom Stock Award credited by
reason of such dividend equivalents will be subject to all the terms and
conditions of the underlying Phantom Stock Award Agreement to which they
relate.

(vi)          Termination
of Participant’s Continuous Service.  Except
as otherwise provided in the applicable Phantom Stock Award Agreement, such
portion of the Phantom Stock Award that has not vested will be forfeited upon
the Participant’s termination of Continuous Service for any reason.

(c)           Stock Appreciation Rights.  Each Stock Appreciation
Right Agreement shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. 
The terms and conditions of Stock Appreciation Right Agreements may
change from time to time, and the terms and conditions of separate Stock Appreciation
Right Agreements need not be identical, but each Stock Appreciation Right
Agreement shall include (through incorporation of

 15
 

the provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions:

(i)            Strike Price and Calculation of Appreciation.  Each Stock Appreciation Right will be
denominated in share of Common Stock equivalents.  The appreciation distribution payable on the
exercise of a Stock Appreciation Right will be not greater than an amount equal
to the excess of (A) the aggregate Fair Market Value (on the date of the
exercise of the Stock Appreciation Right) of a number of shares of Common Stock
equal to the number of share of Common Stock equivalents in which the
Participant is vested under such Stock Appreciation Right, and with respect to
which the Participant is exercising the Stock Appreciation Right on such date,
over (B) an amount that will be determined by the Committee at the time of
grant of the Stock Appreciation Right.

(ii)           Vesting.  At the time of the grant of
a Stock Appreciation Right, the Board may impose such restrictions or
conditions to the vesting of such Stock Appreciate Right as it, in its absolute
discretion, deems appropriate.

(iii)         Exercise.  To
exercise any outstanding Stock Appreciation Right, the Participant must provide
written notice of exercise to the Company in compliance with the provisions of
the Stock Appreciation Right Agreement evidencing such Stock Appreciation
Right.

(iv)          Payment.  The
appreciation distribution in respect of a Stock Appreciation Right may be paid
in Common Stock, in cash, or any combination of the two, or in any other form
of consideration as determined by the Board and contained in the Stock
Appreciation Right Agreement evidencing such Stock Appreciation Right.

(v)            Termination of Continuous Service.  In the event that a Participant’s Continuous
Service terminates, the Participant may exercise his or her Stock Appreciation
Right (to the extent that the Participant was entitled to exercise such Stock
Appreciation Right as of the date of termination) but only within such period
of time ending on the earlier of (i) the date three months following the
termination of the Participant’s Continuous Service (or such longer or shorter
period specified in the Stock Appreciation Right Agreement) or (ii) the
expiration of the term of the Stock Appreciation Right as set forth in the
Stock Appreciation Right Agreement.  If,
after termination, the Participant does not exercise his or her Stock
Appreciation Right within the time specified in the Stock Appreciation Right
Agreement, the Stock Appreciation Right shall terminate.

(d)           Other Stock Awards. 
Other forms of Stock Awards valued in whole or in part by reference to,
or otherwise based on, Common Stock may be granted either alone or in addition
to Stock Awards provided for under Section 6 and the preceding provisions of
this Section 7.  Subject to the
provisions of the Plan, the Board shall have sole and complete authority to
determine the persons to whom and the time or times at which such Other Stock
Awards will be granted, the number of shares of Common Stock (or the cash
equivalent thereof) to be granted pursuant to such Awards and all other terms
and conditions of such Awards.

 16

8.             COVENANTS
OF THE COMPANY.

(a)           Availability of Shares.  During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.

(b)           Securities Law Compliance.  The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided,
however, that this undertaking shall not require the Company to
register under the Securities Act the Plan, any Stock Award or any Common Stock
issued or issuable pursuant to any such Stock Award.  If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of Common Stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell Common Stock upon exercise of such
Stock Awards unless and until such authority is obtained.

9.             USE
OF PROCEEDS FROM STOCK.

Proceeds from the sale of Common Stock pursuant to
Stock Awards shall constitute general funds of the Company.

10.          MISCELLANEOUS.

(a)           Acceleration of Exercisability and
Vesting.  The Board
shall have the power to accelerate the time at which a Stock Award may first be
exercised or the time during which a Stock Award or any part thereof will vest
in accordance with the Plan, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.

(b)           Stockholder Rights.  No Participant shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
of Common Stock subject to such Stock Award unless and until such Participant
has satisfied all requirements for exercise of the Stock Award pursuant to its
terms.

(c)           No Employment or other Service
Rights.  Nothing in the
Plan or any instrument executed or Stock Award granted pursuant thereto shall
confer upon any Participant any right to continue to serve the Company or an
Affiliate in the capacity in effect at the time the Stock Award was granted or
shall affect the right of the Company or an Affiliate to terminate (i) the
employment of an Employee with or without notice and with or without cause,
(ii) the service of a Consultant pursuant to the terms of such Consultant’s
agreement with the Company or an Affiliate or (iii) the service of a Director
pursuant to the Bylaws of the Company or an Affiliate, and any applicable
provisions of the corporate law of the state in which the Company or the
Affiliate is incorporated, as the case may be.

(d)           Incentive Stock Option $100,000
Limitation.  To the extent
that the aggregate Fair Market Value (determined at the time of grant) of
Common Stock with respect to which Incentive Stock Options are exercisable for
the first time by any Optionholder during any

 17
 

calendar year (under all plans of the Company and its
Affiliates) exceeds $100,000, the Options or portions thereof that exceed such
limit (according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options, notwithstanding any contrary provision of a Stock
Award Agreement.

(e)           Investment Assurances.  The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant’s
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the
Participant is acquiring Common Stock subject to the Stock Award for the
Participant’s own account and not with any present intention of selling or
otherwise distributing the Common Stock. 
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (1) the issuance of the shares of Common
Stock upon the exercise or acquisition of Common Stock under the Stock Award
has been registered under a then currently effective registration statement
under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws.  The Company may, upon advice of counsel to
the Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the
transfer of the Common Stock.

(f)            Withholding Obligations.  To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of Common
Stock under a Stock Award by any of the following means (in addition to the
Company’s right to withhold from any compensation paid to the Participant by
the Company) or by a combination of such means: 
(i) tendering a cash payment; (ii) authorizing the Company to withhold
shares of Common Stock from the shares of Common Stock otherwise issuable to
the Participant as a result of the exercise or acquisition of Common Stock
under the Stock Award; provided, however,
that no shares of Common Stock are withheld with a value exceeding the minimum
amount of tax required to be withheld by law (or such lesser amount as may be
necessary to avoid variable award accounting); or (iii) delivering to the
Company owned and unencumbered shares of Common Stock.

11.          ADJUSTMENTS
UPON CHANGES IN STOCK.

(a)           Capitalization Adjustments.  If any change is made in, or other event
occurs with respect to, the Common Stock subject to the Plan or subject to any
Stock Award without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by
the Company (each a “Capitalization
Adjustment”), the Plan will be appropriately adjusted in the class(es)
and maximum number of securities subject to the Plan pursuant to Sections 4(a)
and 4(b) and the

 18
 

maximum number of securities subject to award to any
person pursuant to Section 5(c), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of securities and price per
share of Common Stock subject to such outstanding Stock Awards.  The Board shall make such adjustments, and
its determination shall be final, binding and conclusive.  (The conversion of any convertible securities
of the Company shall not be treated as a transaction “without receipt of
consideration” by the Company.)

(b)           Dissolution or Liquidation.  In the event of a dissolution or liquidation
of the Company, then all outstanding Stock Awards shall terminate immediately
prior to the completion of such dissolution or liquidation.

(c)           Corporate Transaction.  In the event of a Corporate Transaction, any
surviving corporation or acquiring corporation may assume or continue any or
all Stock Awards outstanding under the Plan or may substitute similar stock
awards for Stock Awards outstanding under the Plan (it being understood that
similar stock awards include, but are not limited to, awards to acquire the
same consideration paid to the stockholders or the Company, as the case may be,
pursuant to the Corporate Transaction), and any reacquisition or repurchase
rights held by the Company in respect of Common Stock issued pursuant to Stock
Awards may be assigned by the Company to the successor of the Company (or the
successor’s parent company), if any, in connection with such Corporate
Transaction.  In the event that any
surviving corporation or acquiring corporation does not assume or continue all
such outstanding Stock Awards or substitute similar stock awards for all such
outstanding Stock Awards, then with respect to Stock Awards that have not been
assumed, continued or substituted and that are held by Participants whose
Continuous Service has not terminated prior to the effective time of the
Corporate Transaction, the vesting of such Stock Awards (and, if applicable,
the time at which such Stock Awards may be exercised) shall (contingent upon
the effectiveness of the Corporate Transaction) be accelerated in full to a
date prior to the effective time of such Corporate Transaction as the Board
shall determine (or, if the Board shall not determine such a date, to the date
that is five days prior to the effective time of the Corporate Transaction),
such Stock Awards shall terminate if not exercised (if applicable) at or prior
to such effective time, and any reacquisition or repurchase rights held by the
Company with respect to such Stock Awards shall (contingent upon the
effectiveness of the Corporate Transaction) lapse.  With respect to any other Stock Awards
outstanding under the Plan that have not been assumed, continued or
substituted, the vesting of such Stock Awards (and, if applicable, the time at
which such Stock Award may be exercised) shall not be accelerated, unless
otherwise provided in a written agreement between the Company or any Affiliate
and the holder of such Stock Award, and such Stock Awards shall terminate if
not exercised (if applicable) prior to the effective time of the Corporate
Transaction.

(d)           Change in Control.  A Stock Award held by any Participant whose
Continuous Service has not terminated prior to the effective time of a Change
in Control may be subject to additional acceleration of vesting and
exercisability upon or after such event as may be provided in the Stock Award
Agreement for such Stock Award or as may be provided in any other written
agreement between the Company or any Affiliate and the Participant, but in the
absence of such provision, no such acceleration shall occur.

 19
 

12.          AMENDMENT
OF THE PLAN AND STOCK AWARDS.

(a)           Amendment of Plan.  The Board at any time, and from time to time,
may amend the Plan.  However, except as
provided in Section 11(a) relating to Capitalization Adjustments, no amendment
shall be effective unless approved by the stockholders of the Company to the
extent stockholder approval is necessary to satisfy applicable law.

(b)           Stockholder Approval.  The Board, in its sole discretion, may submit
any other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to Covered Employees.

(c)           Contemplated Amendments.  It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.

(d)           No Impairment of Rights.  Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the
Participant consents in writing.

(e)           Amendment of Stock Awards.  The Board at any time, and from time to time,
may amend the terms of any one or more Stock Awards; provided,
however, that the rights under any Stock Award shall not be impaired
by any such amendment unless (i) the Company requests the consent of the
Participant and (ii) the Participant consents in writing.

13.          TERMINATION
OR SUSPENSION OF THE PLAN.

(a)           Plan Term.  The Board may suspend or terminate the Plan
at any time.  Unless sooner terminated,
the Plan shall terminate on May    , 2014.  No Stock Awards may be granted under the Plan
while the Plan is suspended or after it is terminated.

(b)           No Impairment of Rights.  Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.

14.          EFFECTIVE
DATE OF PLAN.

The Plan shall become effective on the IPO Date, but
no Stock Award shall be exercised (or, in the case of a stock bonus, shall be
granted) unless and until the Plan has been approved by the stockholders of the
Company, which approval shall be within 12 months before or after the date the
Plan is adopted by the Board.

 20
 

15.          CHOICE
OF LAW.

The laws of the State of California shall govern all questions concerning the construction,
validity and interpretation of this Plan, without regard to such state’s
conflict of laws rules.

 21

METABASIS
THERAPEUTICS, INC.

AMENDED AND
RESTATED 2001 EQUITY INCENTIVE PLAN

STOCK OPTION
AGREEMENT

(INCENTIVE STOCK OPTION OR NONSTATUTORY STOCK OPTION)

Pursuant to your Stock Option
Grant Notice (“Grant
Notice”) and this Stock Option Agreement, Metabasis Therapeutics, Inc. (the “Company”) has granted
you an option under its Amended and
Restated 2001 Equity Incentive Plan (the “Plan”) to purchase the number of shares
of the Company’s Common Stock indicated in your Grant Notice at the exercise
price indicated in your Grant Notice. 
Defined terms not explicitly defined in this Stock Option Agreement but
defined in the Plan shall have the same definitions as in the Plan.

The details of your option are
as follows:

1.             VESTING.  Subject to the limitations contained herein,
your option will vest as provided in your Grant Notice, provided that vesting
will cease upon the termination of your Continuous Service.

2.             NUMBER
OF SHARES AND EXERCISE PRICE.  The number of shares of Common Stock subject
to your option and your exercise price per share referenced in your Grant
Notice may be adjusted from time to time for Capitalization Adjustments.

3.             METHOD
OF PAYMENT. 
Payment of the exercise price is due in full upon exercise of all or any
part of your option.  You may elect to
make payment of the exercise price in cash or by check or in any other manner permitted by your Grant Notice,
which may include one or more of the following:

(a)           In the Company’s
sole discretion at the time your option is exercised and provided that at the
time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, pursuant to a program developed
under Regulation T as promulgated by the Federal Reserve Board that, prior to
the issuance of Common Stock, results in either the receipt of cash (or check)
by the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds.

(b)           Provided that at
the time of exercise the Common Stock is publicly traded and quoted regularly
in The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company’s reported earnings (generally six
months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of
exercise.  “Delivery” for these purposes,
in the sole discretion of the Company at the time you exercise your option,
shall include delivery to the Company of your attestation of ownership of such
shares of Common Stock in a form approved by the Company.  Notwithstanding the foregoing, you may not
exercise your option by tender to the Company of Common Stock to the extent
such tender

 1
 

would violate the provisions of any law, regulation or
agreement restricting the redemption of the Company’s stock.

4.             WHOLE
SHARES.  You may
exercise your option only for whole shares of Common Stock.

5.             SECURITIES
LAW COMPLIANCE. 
Notwithstanding anything to the contrary contained herein, you may not
exercise your option unless the shares of Common Stock issuable upon such
exercise are then registered under the Securities Act or, if such shares of Common
Stock are not then so registered, the Company has determined that such exercise
and issuance would be exempt from the registration requirements of the
Securities Act.  The exercise of your
option also must comply with other applicable laws and regulations governing
your option, and you may not exercise your option if the Company determines
that such exercise would not be in material compliance with such laws and
regulations.

6.             TERM.  You may not exercise your option before the
commencement or after the expiration of its term.  The term of your option commences on the date
of grant and expires upon the earliest of the following:

(a)           immediately upon
the termination of your Continuous Service for Cause;

(b)           three months after
the termination of your Continuous Service for any reason other than your
Disability or death, provided that if during any part of such three-month
period your option is not exercisable solely because of the condition set forth
in Section 5, your option shall not expire until the earlier of the Expiration
Date or until it shall have been exercisable for an aggregate period of three
months after the termination of your Continuous Service;

(c)           12 months after the
termination of your Continuous Service due to your Disability;

(d)           18 months after
your death if you die either during your Continuous Service or within three
months after your Continuous Service terminates;

(e)           the Expiration Date
indicated in your Grant Notice; or

(f)            the day before the
tenth anniversary of the date of grant.

If your option is an Incentive
Stock Option, note that to obtain the federal income tax advantages associated
with an Incentive Stock Option, the Code requires that at all times beginning
on the date of grant of your option and ending on the day three months before
the date of your option’s exercise, you must be an employee of the Company or
an Affiliate, except in the event of your death or your permanent and total
disability, as defined in Section 22(e) of the Code.  (The definition of disability in Section
22(e) of the Code is different from the definition of the Disability under the
Plan).  The Company has provided for
extended exercisability of your option under certain circumstances for your
benefit but cannot guarantee that your option will necessarily be treated as an
Incentive Stock Option if you continue to provide services to the

 2
 

Company or an Affiliate as a
Consultant or Director after your employment terminates or if you otherwise
exercise your option more than three months after the date your employment with
the Company or an Affiliate terminates.

7.             EXERCISE.

(a)           You may exercise
the vested portion of your option during its term by delivering a Notice of
Exercise (in a form designated by the Company) together with the exercise price
to the Secretary of the Company, or to such other person as the Company may
designate, during regular business hours, together with such additional
documents as the Company may then require.

(b)           By exercising your
option you agree that, as a condition to any exercise of your option, the
Company may require you to enter into an arrangement providing for the payment
by you to the Company of any tax withholding obligation of the Company arising
by reason of (1) the exercise of your option, (2) the lapse of any substantial
risk of forfeiture to which the shares of Common Stock are subject at the time
of exercise, or (3) the disposition of shares of Common Stock acquired upon
such exercise.

(c)           If your option is
an Incentive Stock Option, by exercising your option you agree that you will
notify the Company in writing within 15 days after the date of any disposition
of any of the shares of the Common Stock issued upon exercise of your option
that occurs within two years after the date of your option grant or within one
year after such shares of Common Stock are transferred upon exercise of your
option.

8.             TRANSFERABILITY.

(a)           If your option is
an Incentive Stock Option, your option is not transferable, except by will or
by the laws of descent and distribution, and is exercisable during your life
only by you.  Notwithstanding the
foregoing, by delivering written notice to the Company, in a form satisfactory
to the Company, you may designate a third party who, in the event of your
death, shall thereafter be entitled to exercise your option.

(b)           If your option is a
Nonstatutory Stock Option, your option is not transferable, except (i) by will
or by the laws of descent and distribution, (ii) with the prior written
approval of the Company, by instrument to an inter vivos or testamentary trust,
in a form accepted by the Company, in which the option is to be passed to
beneficiaries upon the death of the trustor (settlor) and (iii) with the prior
written approval of the Company, by gift, in a form accepted by the Company, to
a permitted transferee under Rule 701 of the Securities Act. Notwithstanding
the foregoing, by delivering written notice to the Company, in a form
satisfactory to the Company, you may designate a third party who, in the event
of your death, shall thereafter be entitled to exercise your option.

9.             OPTION
NOT A SERVICE CONTRACT.  Your option is not an employment or service
contract, and nothing in your option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company
or an Affiliate, or of the Company or an Affiliate to continue your
employment.  In addition, nothing in your
option shall

 3
 

obligate the Company or an Affiliate, their respective
stockholders, Boards of Directors, Officers or Employees to continue any
relationship that you might have as a Director or Consultant for the Company or
an Affiliate.

10.          WITHHOLDING OBLIGATIONS.

(a)           At the time you
exercise your option, in whole or in part, or at any time thereafter as
requested by the Company, you hereby authorize withholding from payroll and any
other amounts payable to you, and otherwise agree to make adequate provision
for (including by means of a “cashless exercise” pursuant to a program
developed under Regulation T as promulgated by the Federal Reserve Board to the
extent permitted by the Company), any sums required to satisfy the federal,
state, local and foreign tax withholding obligations of the Company or an
Affiliate, if any, which arise in connection with the exercise of your option.

(b)           Upon your request
and subject to approval by the Company, in its sole discretion, and compliance
with any applicable legal conditions or restrictions, the Company may withhold
from fully vested shares of Common Stock otherwise issuable to you upon the
exercise of your option a number of whole shares of Common Stock having a Fair
Market Value, determined by the Company as of the date of exercise, not in
excess of the minimum amount of tax required to be withheld by law (or such
lower amount as may be necessary to avoid variable award accounting).  If the date of determination of any tax
withholding obligation is deferred to a date later than the date of exercise of
your option, share withholding pursuant to the preceding sentence shall not be
permitted unless you make a proper and timely election under Section 83(b) of
the Code, covering the aggregate number of shares of Common Stock acquired upon
such exercise with respect to which such determination is otherwise deferred,
to accelerate the determination of such tax withholding obligation to the date
of exercise of your option. 
Notwithstanding the filing of such election, shares of Common Stock
shall be withheld solely from fully vested shares of Common Stock determined as
of the date of exercise of your option that are otherwise issuable to you upon
such exercise.  Any adverse consequences
to you arising in connection with such share withholding procedure shall be
your sole responsibility.

(c)           You may not
exercise your option unless the tax withholding obligations of the Company
and/or any Affiliate are satisfied. 
Accordingly, you may not be able to exercise your option when desired
even though your option is vested, and the Company shall have no obligation to
issue a certificate for such shares of Common Stock or release such shares of
Common Stock from any escrow provided for herein unless such obligations are
satisfied.

11.          NOTICES.  Any notices provided for in your option or
the Plan shall be given in writing and shall be deemed effectively given upon
receipt or, in the case of notices delivered by mail by the Company to you,
five days after deposit in the United States mail, postage prepaid, addressed
to you at the last address you provided to the Company.

12.          GOVERNING
PLAN DOCUMENT. 
Your option is subject to all the provisions of the Plan, the provisions
of which are hereby made a part of your option, and is further subject to all
interpretations, amendments, rules and regulations, which may from time to time
be promulgated and adopted pursuant to the Plan.  In the event of any conflict between the
provisions of your option and those of the Plan, the provisions of the Plan
shall control.

 4

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