Document:

Commercial Note

  EXHIBIT 10 (rr)
 COMMERCIAL NOTE: DEMAND LINE OF
CREDIT/PRIME/LIBOR (Ohio)
  

	 Amount
 	  
 	 City, State
 	  
 	 Date
 	  
 	 FOR BANK USE ONLY
 	  
 
	 
 	  
 	 
 	  
 	 
 	  
 	 
 	  
 
	 $10,000,000.00
 	  
 	 Philadelphia, PA
 	  
 	 June 19, 2003
 	  
 	 Obligor #
 	  
 
	  
 	  
 	  
 	  
 	  
 	  
 	 Tax I. D. #
 	  
 
	  
 	  
 	  
 	  
 	  
 	  
 	 Obligation #
 	  
 
	  
 	  
 	  
 	  
 	  
 	  
 	 Office
 	  
 

 
 ON DEMAND, FOR VALUE RECEIVED, QUAKER CHEMICAL CORPORATION,
a Pennsylvania corporation (“Borrower”), whose mailing address is 901 East Hector Street, Conshohocken, Pennsylvania 19428-2307, hereby promises to pay to the
order of NATIONAL CITY BANK, a national banking association (“Bank”), having a banking office at 1 South Broad Street, 13th Floor,
Philadelphia, Pennsylvania 19107, Attention: Corporate Banking, at the address specified on the bills received by Borrower from Bank (or at such other place as Bank may from time to time designate by written notice) in lawful money of the United
States of America, the principal sum of
 TEN MILLION AND 00/100 DOLLARS
 or such lesser amount as may appear on this Note, or as may be entered in a loan account on Bank’s books and records, or both, together with interest, all as provided below. Notwithstanding any
provision or inference to the contrary, this Note may be enforced without presentment, protest, or notice of dishonor, all of which are waived by all makers and indorsers of this Note, now or hereafter existing. Any reference to any Contract Period
or to any rate of interest or late charge to be applicable after any notice of demand or the commencement of any Proceeding is made solely for the purpose of determining the rate of interest and late charges applicable under this Note, and shall not
diminish or impair Bank’s right to enforce this Note at any time.
 1.        No Commitment. This Note evidences an arrangement whereby, for Borrower’s convenience, Borrower may, without having to execute and deliver a separate note each time, obtain such loans (each a
“Subject Loan”) as Borrower may from time to time request and as Bank in its sole discretion may from time to time be willing to make, subject in any case to the condition
that (a) each Subject Loan shall be in an amount that is an integral multiple of five hundred thousand and 00/100 Dollars
($500,000.00) and (b) that the aggregate unpaid principal balance of the Subject Loans shall not at any time exceed the face amount of this Note. NOTWITHSTANDING ANY PROVISION OR INFERENCE TO
THE CONTRARY, BANK SHALL HAVE NO OBLIGATION TO EXTEND ANY CREDIT TO OR FOR THE ACCOUNT OF BORROWER BY REASON OF THIS NOTE.
 2.        Disbursement. Bank is hereby irrevocably authorized to make an appropriate entry on this Note, in a loan account on Bank’s books and
records, or both, whenever Borrower obtains a Subject Loan. Each such entry shall be prima facie evidence of the data entered, but the making of such an entry shall not be a condition to Borrower’s obligation to pay. Bank is hereby directed,
absent notice from Borrower to the contrary, to disburse the proceeds of each such Subject Loan to Borrower’s general checking account with Bank. Bank shall have no duty to follow, nor any liability for, the application of any proceeds of any
Subject Loan.
 
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  3.        Interest. The
unpaid principal balance of each Subject Loan shall at all times bear interest at the Contract Rate, provided, that so long as (a) any principal of any Subject Loan remains unpaid after Bank shall have given Borrower notice of demand for any such principal or after the commencement of any Proceeding with respect to Borrower,
or (b) any accrued interest on any Subject Loan remains unpaid after the due date of that interest, then, and in each such case, all unpaid principal of this Note and all overdue interest on
that principal shall bear interest at a fluctuating rate equal to two percent (2.0%) per annum above the rate that would otherwise be applicable, but in no case less than two percent (2.0%) per annum above the Prime Rate;
provided further, that in no event shall any principal of or interest on any Subject Loan bear interest at any time after the giving of any such notice or the commencement of any such Proceeding,
whichever shall first occur, at a lesser rate than the rate applicable thereto immediately after the giving of that notice or the commencement of that Proceeding, as the case may be. The “Contract
Rate” shall at all times be a fluctuating rate equal to the Prime Rate, provided, that Borrower shall have the right from time to time to irrevocably elect one percent
(1%) per annum plus LIBOR as the Contract Rate applicable during a Contract Period to a Unit in the amount of five hundred thousand and 00/100 Dollars ($500,000.00) (or any greater
amount that is an integral multiple of five hundred thousand and 00/100 Dollars ($500,000.00) by specifying the term and amount, respectively, of the Contract Period and Unit in a notice
given to Bank orally or in writing not later than 2:00 p. m., Banking-Office Time, of the third (3rd) Eurodollar Banking Day preceding the first day of that Contract Period.
 Interest on each Subject Loan shall be payable in arrears on June 1, 2003, and on the first day of each month thereafter and on demand, except that interest on each LIBOR Unit shall be payable in
arrears on the last day of the Contract Period for that Unit, on demand, and in the case of any Contract Period having a term longer than ninety (90) days, shall also be payable every three (3) months after the first day of the Contract Period. The
principal comprising each LIBOR Unit shall, at the end of the Contract Period for that Unit, become part of the Prime Rate Unit unless and to the extent that Borrower shall have elected otherwise as hereinbefore provided. Bank shall be entitled to
fund and maintain its funding of all or any part of any LIBOR Unit in any manner Bank may from time to time deem advisable, Borrower hereby acknowledging that all determinations relating to LIBOR Units shall be made as if Bank had actually funded
and maintained each such Unit by the purchase of deposits in an amount similar to the amount of that Unit, with a maturity similar to the Contract Period for that Unit, and bearing interest at LIBOR with respect to that Unit.
 4.        Ineffective Elections. Notwithstanding any provision or
inference to the contrary, Bank shall have the right in its discretion, without notice to Borrower, to deem ineffective Borrower’s election of a Contract Rate if (a) on or before the
first day of the Contract Period specified in Borrower’s notice of that election, Bank shall given Borrower any notice of demand for payment of this Note or any Proceeding shall have been commenced with respect to Borrower, (b) after giving effect to that election, more than one Contract Rate would be applicable to all or any part of any Unit, (c) after giving effect to that
election, the aggregate unpaid principal balance of all LIBOR Units would not, on the first day of the Contract Period specified in Borrower’s notice of that election, exceed the then aggregate amount ofthe Subject Loans,
or (d) Bank shall determine that any governmental authority has asserted that it is unlawful for Bank to fund, make, or maintain loans bearing interest based on LIBOR. Moreover, Borrower shall
not be entitled to elect a Contract Rate if Bank shall determine that (i) dollar deposits of the appropriate amount and maturity are not available in the market selected by Bank for
the
 
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  purpose of funding the relevant Unit at LIBOR, (ii) circumstances affecting the market selected by
Bank for the purpose of funding the relevant Unit make it impracticable for Bank to determine LIBOR, (iii) LIBOR is unlikely to adequately compensate Bank for the cost of making, funding or
maintaining the relevant Unit for the Contract Period specified in Borrower’s notice of that election, or (iv) any governmental authority has asserted that it is unlawful for Bank to
fund, make, or maintain loans bearing interest based on LIBOR. Bank’s books and records shall be conclusive (absent manifest error) as to whether Bank shall have deemed any election of a Contract Rate ineffective. Except as hereinbefore
provided, there is no limit to the number of Contract Rates that may be applicable to the unpaid principal balance of this Note at any one time.
 5.        Prepayment. (a) If any LIBOR Unit is paid in whole or in part before the last day of the Contract Period for that Unit,
then, and in each such case, Borrower shall, concurrently with the payment, pay to Bank (i) the accrued interest on the principal being so paid and (ii) a premium based on the principal amount paid and computed for the period from the date of payment to the last day of the Contract Period for that Unit at a rate per annum equal to the excess, if any, of LIBOR
used in determining the Contract Rate for such Contract Period theretofore applicable over the Reinvestment Rate, provided, that no such premium shall be payable under this
subsection (a) in respect of that Unit if Bank shall have given Borrower a written notice of demand for payment of this Note after the first day of that Contract Period for that Unit but
before the date of the payment.
 (b) If Bank shall deem ineffective Borrower’s election of any Contract Rate, then, and in each such case, that
election shall be ineffective and Borrower shall pay to Bank, on Bank’s demand, a premium to be calculated as set forth in (a) above as if Borrower had made a payment before the last day of the
Contract Period in the amount of the Unit in question on the date Bank deemed such election to be ineffective. 
 (c) If Bank shall determine that any
governmental authority has asserted that it is unlawful for Bank to fund, make, or maintain loans bearing interest based on LIBOR, then, and in each such case, notwithstanding any provision or inference to the contrary, the principal comprising each
then outstanding LIBOR Unit shall, upon Bank’s giving Borrower notice of that determination, be added to and become part of the Prime Rate Unit, and Borrower shall, concurrently with the addition of that principal to the Prime Rate Unit, pay to
Bank (i) the accrued interest on the principal so added and (ii) a premium to be calculated as set forth in (a) above as if Borrower had made a payment before the last day of the Contract Period in the amount of the principal so added on the date that the principal was added to the Prime Rate Unit.
 (d) Bank’s determination of any premium shall be conclusive absent manifest error. Borrower acknowledges and agrees that the premium (i) constitutes liquidated damages, (ii) is a reasonable method of determining Bank’s loss in the event all or any part of any principal of the Note is paid
in whole or in part or is accelerated before its original due date, and (iii) is not a penalty.
 6.        Definitions. As used in this Note, except where the context clearly requires otherwise, “Affiliate” means, when used with reference to any Person (the “subject”), a Person that is in control of, under the control of, or under common control
with, the subject, the term “control” meaning the possession, directly or indirectly, of the power to direct the management or policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise;
 
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  “Bank Debt” means, collectively, all Debt to Bank, whether incurred directly to Bank or
acquired by it by purchase, pledge, or otherwise, and whether participated to or from Bank in whole or in part; “Banking Day” means any day (other than any Saturday, Sunday or legal
holiday) on which Bank’s banking office is open to the public for carrying on substantially all of its banking functions; “Banking-Office Time” means, when used with reference to
any time, that time determined at the location of Bank’s banking office; “Contract Period” means, relative to a Unit, a period selected by Borrower, provided, that each Contract Period shall commence on a Eurodollar Banking Day and end one (1) month, two (2) months, or three (3) months thereafter, or, subject in each case to Bank’s assent thereto, four (4)
months or six (6) months thereafter, in each case on the first day of the respective month, provided, that (a) if any Contract Period otherwise would end
on a day that is not a Banking Day, it shall end instead on the next following Banking Day and (b) if any Contract Period commences on a day for which there is no numerical equivalent in the calendar
month in which that Contract Period is to end, it shall end on the last calendar day of that calendar month unless such day is not a Banking Day in which case it shall end on the next following Banking Day; “Debt” means, collectively, all obligations of the Person or Persons in question, including, without limitation, every such obligation whether owing by one such Person alone or with one or more other Persons in
a joint, several, or joint and several capacity, whether now owing or hereafter arising, whether owing absolutely or contingently, whether created by lease, loan, overdraft, guaranty of payment, or other contract, or by quasi-contract, tort,
statute, other operation of law, or otherwise; “Eurodollar Banking Day” means any Banking Day on which banks in the London Interbank Market deal in United States dollar deposits and on
which banking institutions are generally open for domestic and international business at the place where Bank’s banking office is located and in New York City; “LIBOR” means, with
respect to a Unit, the rate per annum (rounded upwards, if necessary, to the next higher 1/16 of 1.0%) determined by Bank by dividing (a) the
rate per annum determined by Bank to equal the average rate per annum at which deposits (denominated in United States dollars) in an amount similar to that Unit and with a maturity similar to the Contract Period for that Unit are offered to Bank at
11:00 A.M. London time (or as soon thereafter as practicable) two (2) Eurodollar Banking Days prior to the first day of that Contract Period by banking institutions in any Eurodollar market selected by Bank by (b) the difference of one (1) less the Reserve Percentage; “LIBOR Unit” means a Unit for which the Contract Rate is based on LIBOR;
“Note” means this promissory note (including, without limitation, each addendum, allonge, or amendment, if any, hereto); “Obligor” means any Person who, or any of whose property, shall at the time in question be obligated in respect of all or any part of the Bank Debt of Borrower and (in addition to Borrower) includes, without limitation, co-makers, indorsers,
guarantors, pledgors, hypothecators, mortgagors, and any other Person who agrees, conditionally or otherwise, to assure such other Obligor’s creditors or any of them against loss; “Person” means an individual or entity of any kind, including, without limitation, any association, company, cooperative, corporation, partnership, trust, governmental body, or any other form or kind of entity; “Prime Rate” means the fluctuating rate per annum which is publicly announced from time to time by Bank as being its “prime rate” or “base rate” thereafter in effect, with each change in the
Prime Rate automatically, immediately, and without notice changing the Prime Rate thereafter applicable hereunder, it being acknowledged that the Prime Rate is not necessarily the lowest rate of interest then available from Bank on fluctuating-rate
loans; “Prime Rate Unit” means, at any time, the then aggregate unpaid principal balance of the Subject Loans for which the Contract Rate is based on the Prime Rate;
“Proceeding” means any assignment for the benefit of creditors, any case in bankruptcy, any marshalling of any Obligor’s assets for the benefit of creditors, any moratorium on the
payment of debts, or any proceeding under any law relating to conservatorship, insolvency, liquidation, receivership,
 
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  trusteeship, or any similar event, condition, or other thing; “Reinvestment Rate” means, at
the time of calculation, the “bond equivalent yield” interpolated from the most actively traded U.S. Treasury Bills, U.S. Treasury Notes and/or U.S. Treasury Bonds to a term equal to the principal weighted average time (as
measured in years from the date of calculation and rounded to the nearest 1/10th of a year) that all principal payments subject to early repayment are scheduled to be outstanding
and bear interest at a fixed rate under this Note; “Related Writing” means this Note and any indenture, note, guaranty, assignment,
mortgage, security agreement, subordination agreement, notice, financial statement, legal opinion, certificate, or other writing of any kind pursuant to which all or any part of the Bank Debt of Borrower is issued, which evidences or secures all or
any part of the Bank Debt of Borrower, which governs the relative rights and priorities of Bank and one or more other Persons to payments made by, or the property of, any Obligor, which is delivered to Bank pursuant to another such writing, or which
is otherwise delivered to Bank by or on behalf of any Person (or any employee, officer, auditor, counsel, or agent of any Person) in respect of or in connection with all or any part of the Bank Debt of Borrower; “Reserve Percentage” means the percentage (expressed as a decimal) which Bank determines to be the maximum (but in any case less than 1.00) reserve requirement (including, without limitation, any emergency,
marginal, special, or supplemental reserve requirement) prescribed for so-called “Eurocurrency liabilities” (or any other category of liabilities that includes deposits by reference to which the interest rate applicable to LIBOR Units is
determined) under Regulation D (as amended from time to time) of the Board of Governors of the Federal Reserve System or under any successor regulation which Bank determines to be applicable, with each change in such maximum reserve requirement
automatically, immediately, and without notice changing the interest rate thereafter applicable to each LIBOR Unit, it being agreed that LIBOR Units shall be deemed Eurocurrency liabilities subject to such reserve requirements without the benefit of
any credit for proration, exceptions, or offsets; “Unit” means an amount of unpaid principal under this Note which (a) Borrower
elects under section 3 to bear interest at a Contract Rate based on LIBOR, or (b) which bears interest at a Contract Rate equal to the Prime Rate; and the foregoing definitions shall be applicable to the respective plurals of the foregoing defined
terms.
 7.        Late Charges. If any principal of
any Subject Loan is not paid within ten (10) days after Bank shall have given Borrower notice of demand therefor or within ten (10) days after the commencement of any Proceeding with respect to Borrower, or if any interest on
this Note is not paid within (10) days after the due date of that interest, then, and in each such case, Bank shall have the right to assess a late charge, payable by Borrower on demand, in an amount equal to the greater of Twenty and
00/100 Dollars ($20.00) or five percent (5.0%) of the amount not timely paid.
 8.        No Setoff. Borrower hereby waives any and all now existing or hereafter arising rights to recoup or offset any obligation of Borrower under
or in connection with this Note or any Related Writing against any claim or right of Borrower against Bank.
 9.        Indemnity: Governmental Costs. If (a) there shall be enacted any law (including,
without limitation, any change in any law or in its interpretation or administration and any request by any governmental authority) relating to any interest rate or any assessment, reserve, or special deposit requirement (except if and to the extent
utilized in computation of the Reserve Percentage) against assets held by, deposits in, or loans by Bank or to any tax (other than any tax on Bank’s overall net income) and (b) in
Bank’s sole opinion any such event increases the cost of funding or maintaining any LIBOR Unit or reduces the amount of any payment to be 
 
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  made to Bank in respect thereof, then, and in each such case, upon Bank’s demand, Borrower shall pay Bank an amount equal to each such cost increase or
reduced payment, as the case may be. In determining any such amount, Bank may use reasonable averaging and attribution methods. Each determination by Bank shall be conclusive absent manifest error.
 10.      Indemnity: Administration and Enforcement. Borrower will reimburse Bank, on Bank’s
demand from time to time, for any and all reasonable fees, costs, and expenses (including, without limitation, the reasonable fees and disbursements of legal counsel) incurred by Bank in administering this Note or in protecting, enforcing, or
attempting to protect or enforce its rights under this Note. If any amount (other than any principal of any Subject Loan and any interest and late charges) owing under this Note is not paid when due, then, and in each such case, Borrower shall pay,
on Bank’s demand, interest on that amount from the due date thereof until paid in full at a fluctuating rate equal to two percent (2.0%) per annum plus the Prime Rate.
 11.      Waivers; Remedies; Application of Payments. Bank may from time to time in its discretion
grant waivers and consents in respect of this Note or any other Related Writing or assent to amendments thereof, but no such waiver, consent, or amendment shall be binding upon Bank unless set forth in a writing (which writing shall be narrowly
construed) signed by Bank. No course of dealing in respect of, nor any omission or delay in the exercise of, any right, power, or privilege by Bank shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any
further or other exercise thereof or of any other, as each such right, power, or privilege may be exercised either independently or concurrently with others and as often and in such order as Bank may deem expedient. Without limiting the generality
of the foregoing, neither Bank’s acceptance of one or more late payments or charges nor Bank’s acceptance of interest on overdue amounts at the respective rates applicable thereto shall constitute a waiver of any right of Bank. Each right,
power, or privilege specified or referred to in this Note is in addition to and not in limitation of any other rights, powers, and privileges that Bank may otherwise have or acquire by operation of law, by other contract, or otherwise. Bank shall be
entitled to equitable remedies with respect to each breach or anticipatory repudiation of any provision of this Note, and Borrower hereby waives any defense which might be asserted to bar any such equitable remedy. Bank shall have the right to apply
payments in respect of the indebtedness evidenced by this Note with such allocation to the respective parts thereof and the respective due dates thereof as Bank in its sole discretion may from time to time deem advisable. If any payment is required
to be made on a day which is not a Banking Day, such payment shall be due on the next immediately following Banking Day and interest shall continue to accrue at the applicable rate.
 12.      Other Provisions. The provisions of this Note shall bind Borrower and Borrower’s
successors and assigns and benefit Bank and its successors and assigns, including each subsequent holder, if any, of this Note. Except for Borrower and Bank and their respective successors and assigns, there are no intended beneficiaries of this
Note, any Subject Loan, or the arrangement evidenced by this Note. The provisions of sections 7 through 16, both inclusive, shall survive the payment in full of the principal of and interest on this Note. The captions to the sections
and subsections of this Note are inserted for convenience only and shall be ignored in interpreting the provisions thereof. If any provision in this Note shall be or become illegal or unenforceable in any case, then that provision shall be deemed
modified in that case so as to be legal and enforceable to the maximum extent permitted by law while most nearly preserving its original intent, and in any case the illegality or unenforceability of that provision shall affect neither that provision
in any other case nor any other provision. All fees,
 
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  interest, and premiums for any given period shall accrue on the first day thereof but not on the last day thereof (unless the last day is the first day) and
in each case shall be computed on the basis of a 360-day year and the actual number of days in the period. In no event shall interest accrue at a higher rate than the maximum rate, if any, permitted by law. Bank shall have the right to furnish to
its Affiliates, and to such other Persons as Bank shall deem advisable for the conduct of its business, information concerning the business, financial condition, and property of Borrower, the amount of the Bank Debt of Borrower, and the terms,
conditions, and other provisions applicable to the respective parts thereof. This Note shall be governed by the law (excluding conflict of laws rules) of the jurisdiction in which Bank’s banking office is located.
 13.      Integration. This Note and, to the extent consistent with this Note, the
other Related Writings, set forth the entire agreement of Borrower and Bank as to the subject matter of this Note, and may not be contradicted by evidence of any agreement or statement unless made in a writing (which writing shall be narrowly
construed) signed by Bank contemporaneously with or after the execution and delivery of this Note. Without limiting the generality of the foregoing, Borrower hereby acknowledges that Bank has not based, conditioned, or offered to base or condition
the credit hereby evidenced or any charges, fees, interest rates, or premiums applicable thereto upon Borrower’s agreement to obtain any other credit, property, or service other than any loan, discount, deposit, or trust service from Bank. In
the event and to the extent of any conflict between the terms hereof and the terms of any exhibit, schedule, addendum, allonge, modification or amendment hereto, the terms of such exhibit, schedule, addendum, allonge, modification or amendment shall
control.
 14.      Notices and Other Communications. Each
notice, demand, or other communication, whether or not received, shall be deemed to have been given to Borrower whenever Bank shall have mailed a writing to that effect by certified or registered mail to Borrower at Borrower’s mailing address
(or any other address of which Borrower shall have given Bank notice after the execution and delivery of this Note); however, no other method of giving actual notice to Borrower is hereby precluded. Borrower hereby irrevocably accepts
Borrower’s appointment as each Obligor’s agent for the purpose of receiving any notice, demand, or other communication to be given by Bank to each such Obligor pursuant to any Related Writing. Bank shall be entitled to assume that any
knowledge possessed by any Obligor other than Borrower is possessed by Borrower. Each communication to be given to Bank shall be in writing unless this Note expressly permits that communication to be made orally, and in any case shall be given to
Bank at Bank’s banking office (or any other address of which Bank shall have given notice to Borrower after the execution and delivery this Note). Borrower hereby assumes all risk arising out of or in connection with each oral communication
given by Borrower and each communication given or attempted by Borrower in contravention of this section. Bank shall be entitled to rely on each communication believed in good faith by Bank to be genuine.
 15.      Jurisdiction and Venue; Waiver of Jury Trial. Any action, claim, counterclaim, crossclaim,
proceeding, or suit, whether at law or in equity, whether sounding in tort, contract, or otherwise at any time arising under or in connection with this Note or any other Related Writing, the administration, enforcement, or negotiation of this Note
or any other Related Writing, or the performance of any obligation in respect of this Note or any other Related Writing (each such action, claim, counterclaim, crossclaim, proceeding, or suit, an ”Action”) may be brought in any federal or state court located in the city in which Bank’s banking office is located. Borrower hereby unconditionally submits to the jurisdiction of any such court with
respect to each such Action and hereby waives any objection Borrower may now or hereafter
 
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  have to the venue of any such Action brought in any such court. BORROWER HEREBY, AND EACH HOLDER OF THIS NOTE, BY TAKING POSSESSION THEREOF, KNOWINGLY AND
VOLUNTARILY WAIVES JURY TRIAL IN RESPECT OF ANY ACTION.
  

	  
 	  
 	  
 	 BORROWER:
 
 QUAKER CHEMICAL CORPORATION
 
	  
 	  
 	  
 	  
 	 By: 
 	 
 /s/ MICHAEL F. BARRY
 
	  
 	  
 	  
 	  
 	  
 	 
 
	  
 	  
 	  
 	  
 	 Printed Name: 
 	 Michael F. Barry
 
	  
 	  
 	  
 	  
 	 Title: 
 	 Vice President and Chief Financial Officer
 
	  
 	  
 	  
 	  
 	 
 And By:
 	 
 /s/ D. JEFFRY BENOLIEL
 
	  
 	  
 	  
 	  
 	  
 	 
 
	  
 	  
 	  
 	  
 	 Printed Name:
 	 D. Jeffry Benoliel
 
	  
 	  
 	  
 	  
 	 Title:
 	 Vice President and General Counsel
 

 
- 8 -Amendment No. 1 to Revolving Credit Agreement.

  Exhibit 10.31
  EXECUTION COPY
  AMENDMENT NO. 1 TO CREDIT AGREEMENT
            THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT, dated as of July 30, 2003 (this
“Amendment”), to the Credit Agreement (as defined below) is made by Ambac Financial Group, Inc., a Delaware corporation (“Ambac Financial”), Ambac Assurance Corporation, a Wisconsin stock insurance corporation
(“Ambac Assurance”; and, together with Ambac Financial, the “Borrowers”) and the banks, financial institutions and other institutional lenders parties thereto (the “Lenders”).
  W I T N E S S E T H:
            WHEREAS, the Borrowers, the Lenders, The Bank of New
York, as syndication agent and The Bank of Nova Scotia, as administrative agent (the “Administrative Agent”), are all parties to the Credit Agreement, dated as of August 1, 2002 (as amended or otherwise modified prior to the date
hereof, the “Credit Agreement”); and
            WHEREAS, the Lenders hereby agree that, on the terms and subject to the conditions
hereinafter set forth, on the Amendment Effective Date, the Credit Agreement shall be amended as set forth below.
            NOW, THEREFORE, the
parties hereto hereby covenant and agree as follows:
  ARTICLE I
  DEFINITIONS
            Terms for which meanings are provided in the Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used in this Amendment with such
meanings.
 ARTICLE II
  AMENDMENTS TO CREDIT AGREEMENT
            Effective on (and subject to the occurrence of) the Amendment Effective Date, the provisions of the Credit Agreement referred to below are hereby amended in
accordance with this Article II.
            SECTION 2.1. Amendment to Section 1.01.  The following definitions are hereby
inserted in the appropriate alphabetical order:

             “Additional Lender” has the meaning specified in Section 2.16(c).
            “Assigned Portion” has the meaning specified in Section 2.16(c).
             SECTION 2.2. Amendment to Section 2.16.  Section 2.16 of the Credit Agreement is hereby amended by adding the following new clause (c) and restating
the existing clause (c) thereof in its entirety to read as clause (d) below:

	   
 	            “(c)     If the Commitments of Extending Lenders together with the aggregate additional
Commitments of Increasing Extending Lenders, if any, and the aggregate amount of commitments to lend under this Agreement received by the Administrative Agent in writing from one or more Eligible Transferees (each such Eligible Transferee being an
“Additional Lender”) on or prior to the date occurring 20 days after the Administrative Agent’s receipt of such Extension Request exceed the aggregate Commitments of the Lenders immediately prior to the Commitment Termination
Date then in effect, the Administrative Agent may, in connection with the extension of the Commitment Termination Date pursuant to this Section 2.16, allocate to the Extending Lenders and such Additional Lenders a Commitment under this Agreement in
an amount determined by the Administrative Agent and the Borrowers; provided that (i) the Commitment of any Additional Lender shall not be less than $15,000,000; (ii) any Extending Lender that, immediately prior to such allocation, had a Commitment
in excess of it’s Commitment immediately after such allocation (A) shall assign such excess portion of its rights and obligations under its Note and this Agreement (such excess portion being an “Assigned Portion”) to such
Additional Lender or Additional Lenders (as directed by the Administrative Agent) so as to give effect to the Commitments as allocated, (B) shall have received payment of all amounts owing under its Note and this Agreement on the effective date of
such assignment(s) relating to such Assigned Portion, (C) such assignment(s) shall otherwise have occurred in compliance with Section 8.07 and (D) the effective date of such assignment(s) shall be the date specified by the Borrowers and agreed
to by the relevant Additional Lender, as the case may be, which date shall be on the applicable Commitment Termination Date; and (iii) no Extending Lender’s Commitment immediately after such allocation shall be greater than such Extending
Lender’s Commitment immediately prior to such allocation without the consent of such Extending Lender.
 
	  
 	   
 
	   
 	            (d)     If (and only if) the sum of (i) the Commitments of the Extending Lenders and the Replacement
Lenders plus (ii) the additional Commitments of the Increasing Extending Lenders and the Additional Lenders shall be greater than 50% of the aggregate amount of the Commitments in effect on the then scheduled Commitment Termination Date, then,
effective as of the then scheduled Commitment Termination Date, the “Commitment Termination Date” shall be extended to the date occurring 364 days after the Commitment Termination Date then in effect (except that, if such date is not a
Business Day, such Commitment Termination Date as so extended shall be the next preceding Business Day).  Upon any extension of the Commitment Termination Date pursuant to this
 

 2

	  
 	  Section 2.16, each Replacement Lender or Additional Lender, as the case may be, shall thereupon become a “Lender” for all purposes of this Agreement.”

            SECTION 2.3. Amendment to Section 5.03.  Section 5.03(b) of the Credit Agreement is hereby amended by replacing
the reference to “$1,750,000,000” therein with “$2,000,000,000”.
           SECTION 2.4. Amendment to Section 8.08. 
Section 8.08 of the Credit Agreement is hereby amended by adding the following new paragraph to the end thereof:

	   
 	            “Notwithstanding anything contained in this Agreement to the contrary, and notwithstanding any other express or
implied agreement or understanding to the contrary, each of the parties hereto (and each employee, representative or other agent of any such party) may disclose to any and all persons without limitation of any kind, the “tax treatment” and
“tax structure” (in each case, within the meaning of Treasury Regulation Section 1.6011-4) of this Agreement and the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are
provided to any such party relating to such tax treatment and tax structure; provided, that with respect to any document or similar item that in either case contains information concerning such tax treatment or tax structure of this Agreement and
the transactions contemplated hereby as well as other information, this sentence shall only apply to such portions of the document or similar item that relate to such tax treatment or tax structure of this Agreement and the transactions contemplated
hereby.”
 

  ARTICLE III
  CONDITIONS TO EFFECTIVENESS
            This Amendment and the amendments contained herein shall become effective on the date (the “Amendment Effective Date”) when each of the conditions
set forth in this Article III shall have been fulfilled to the satisfaction of the Administrative Agent.
           SECTION
3.1.  Counterparts.  The Administrative Agent shall have received counterparts hereof executed on behalf of the Borrowers and the Required Lenders. 
            SECTION 3.2.  Costs and Expenses, etc.  The Administrative Agent shall have received evidence of payment of all fees, costs and expenses
(including the reasonable fees and out-of-pocket expenses of Mayer, Brown, Rowe & Maw LLP) due and payable pursuant to Section 11.3 of the Credit Agreement, if then invoiced.
  ARTICLE IV
  MISCELLANEOUS
            SECTION
4.1.  Cross-References.  References in this Amendment to any Article or Section are, unless otherwise specified, to such Article or Section of this Amendment.
  3

             SECTION 4.2.  Loan Document Pursuant to Credit Agreement.  This Amendment is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated therein) be construed, administered and applied in accordance with all of the terms and provisions of the Credit Agreement, as amended hereby, including
Article VIII thereof.
            SECTION 4.3.  Successors and Assigns.  This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and assigns.
            SECTION
4.4.  Counterparts.  This Amendment may be executed by the parties hereto in several counterparts, each of which when executed and delivered shall be an original and all of which shall constitute together but one and the same
agreement.  Delivery of an executed counterpart of a signature page to this Amendment by facsimile shall be effective as delivery of a manually executed counterpart of this Amendment.
           SECTION 4.5.  Governing Law.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
            SECTION 4.6.  Full Force and Effect; Limited Amendment.  Except as expressly amended
hereby, all of the representations, warranties, terms, covenants, conditions and other provisions of the Credit Agreement and the Loan Documents shall remain unchanged and shall continue to be, and shall remain, in full force and effect in
accordance with their respective terms.  The amendments set forth herein shall be limited precisely as provided for herein to the provisions expressly amended herein and shall not be deemed to be an amendment to, waiver of, consent to or
modification of any other term or provision of the Credit Agreement or any other Loan Document or of any transaction or further or future action on the part of either Borrower which would require the consent of the Lenders under the Credit Agreement
or any of the Loan Documents.
  4

             IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment as of the date first above
written.

	   
 	  AMBAC FINANCIAL GROUP, INC.
 	   
 
	  
 	   
 	   
 
	   
 	   
 	   
 
	   
 	  By  
 	  /s/ ROBERT W. STARR
 	   
 
	   
 	   
 	 
 	   
 
	   
 	  Name:
 	  Robert W. Starr
 	   
 
	   
 	  Title:
 	  MANAGING DIRECTOR AND TREASURER
 	   
 
	  
 	   
 	   
 
	   
 	   
 	   
 
	   
 	  AMBAC ASSURANCE CORPORATION
 	   
 
	   
 	   
 	   
 
	   
 	   
 	   
 
	   
 	  By 
 	  /s/ ROBERT W. STARR
 	   
 
	   
 	   
 	 
 	   
 
	  
 	  Name:
 	  Robert W. Starr
 	   
 
	   
 	  Title:
 	  MANAGING DIRECTOR AND TREASURER
 	   
 

  5

	  
 	 THE BANK OF NOVA SCOTIA
 	  
 
	  
 	  
 	  
 
	  
 	  
 	  
 
	  
 	 By
 	 /s/ JOHN W. CAMPBELL
 	  
 
	  
 	  
 	 
 	  
 
	  
 	 Name:
 	 John W. Campbell
 	  
 
	  
 	 Title:
 	 Managing Director
 	  
 

  
 6

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