Document:

Exhibit 10.11

 

TAX ALLOCATION AGREEMENT

 

 

This TAX ALLOCATION AGREEMENT (the “Agreement”), dated April 27, 2004,
is made by and among Assured Guaranty Ltd. (the “Buyer”), a Bermuda corporation
having its principal office at 30 Woodbourne Avenue, Hamilton, Bermuda,  ACE Financial Services Inc. (“AFS”), a
Delaware corporation having its principal office at 1325 Avenue of the
Americas, New York, New York 10019, ACE Prime Holdings, Inc. (“ACE Prime”), a
Delaware corporation having its principal office at 1209 Orange Street,
Wilmington, Delaware, 19801, Assured Guaranty US Holdings Inc. (“AG US
Holdings”), a Delaware corporation having its principal office at 1325 Avenue
of the Americas, New York, New York 10018, Assured Guaranty Corp. (“AGC”), a
Maryland corporation having its principal office at 1325 Avenue of the
Americas, New York, New York 10019, AGR Financial Products Inc. (“AGR FP”), a
Delaware corporation having its principal office at 1325 Avenue of the
Americas, New York, New York 10019, and ACE Risk Assurance Company (“ARA”), a
Maryland corporation having its principal office at 1325 Avenue of the
Americas, New York, New York 10019 .

 

WITNESSETH:

 

WHEREAS, AFS, AG US Holdings, AGC, AGR FP,
and ARA have been members of an affiliated group of corporations filing
consolidated federal income tax returns with ACE Prime (the common parent) (the
“ACE Prime Consolidated Tax Return Group”) within which AFS is the common
parent of a subgroup comprised of AFS, AG US Holdings, AGC, AGR FP and ARA (the
“AFS Subgroup”);

 

WHEREAS, Buyer is acquiring all of the
outstanding stock of AG US Holdings (the “Transfer”), which will be the direct
parent of AGC and AGR FP, pursuant to a Master Separation Agreement dated the
date hereof among AFS, Buyer, ACE Bermuda Insurance Ltd. and ACE Limited (the
“MSA”);

 

WHEREAS, upon consummation of the Closing
(defined below), (i) Buyer and AG US Holdings and Subsidiaries (defined below)
will become members of a worldwide affiliated group of corporations (the “Buyer
Group”), (ii) AG US Holdings will become the common parent of the affiliated US
group comprised of AG US Holdings, AGC, AGR FP and ARA within the Buyer
Group,  and (iii) AG US Holdings and
Subsidiaries will cease to be members of the ACE Prime Consolidated Tax Return
Group which includes the AFS Subgroup;

 

WHEREAS, AFS and AG US Holdings and Subsidiaries were a party to the
Amended and Restated Agreement Concerning Filing of Consolidated Federal Income
Tax Returns (“AFS Tax Sharing Agreement”) dated November 13, 1995 with respect
to the AFS Subgroup included within the ACE Prime Consolidated Tax Return
Group; and

 

WHEREAS, the parties hereto wish to assign responsibility for the
preparation and filing of tax returns; to set forth the methodology for
determining their respective liabilities for Taxes (defined below) and for
allocating such liabilities among themselves for all Taxes that may be owed to
or assessed by the Internal Revenue Service or any other comparable state or
local governmental authority attributable to the periods before, after and
including the Closing

 

 

Date (defined
below); to establish procedures for reimbursing one party for Taxes allocated
to the other under this Agreement; and to provide for certain tax elections and
for the division of any tax benefits which may arise as a result of such
elections;

 

NOW THEREFORE, in consideration of the mutual
covenants and agreements hereinafter set forth, the parties hereby agree as
follows:

 

1. Definitions. For purposes of this
Agreement, the following terms shall be defined as follows:

 

1.1                                           “ACE Prime Consolidated Tax Return”
means the U.S. consolidated income tax filing made by ACE Prime which includes
its U.S. subsidiaries and certain foreign corporations electing to be taxed as
U.S. corporations.

 

1.2                                           “AG US Holdings and Subsidiaries”
means AG US Holdings, its direct subsidiaries AGC and AGR FP, and its indirect
subsidiary ARA.

 

1.3                                           “Buyer” means Assured Guaranty Ltd.,
and any successors thereto.

 

1.4                                           “Closing” means the closing of the
Transfer and the sale by AFS of the stock of Buyer to underwriters for public
sale as described in Amendment No. 3 to the Registration Statement on Form S-1
filed April 19, 2004.

 

1.5                                           “Closing Date” means the date on
which the Closing occurs.

 

1.6                                           “Code” means the Internal Revenue
Code of 1986, as amended.

 

1.7                                           “Current
Amount” has the meaning specified in Section 8 hereof.

 

1.8                                           
“Election” has the meaning specified in Section 4 hereof.

 

1.9                                           
“Estimated Tax Payment Date” means any of the dates specified in Section 6655
of the Code for the payment of AG US Holdings and Subsidiaries’ estimated U.S.
federal income tax.

 

1.10                                       “Returns” means all returns, declarations,
reports, statements and other documents required to be filed with a Tax
Authority in respect of Taxes, and the term “Return” means any one of the
foregoing Returns.

 

1.11                                     “Tax
Allocation Schedule” has the meaning specified in Section 5 hereof.

 

1.12                                     
“Tax Authority” means the Internal Revenue Service or any other comparable
state, local or foreign governmental authority.

 

1.13                                     
“Tax Benefit Base Amount” for any Taxable Period means (i) any increase in an
amortization, depreciation or loss deduction in such Taxable Period or any
decrease in an item of income or gain in such Taxable Period arising as a
result of a basis increase occurring as a result of the Election, including any
basis increase arising from payments made pursuant to this Agreement, or (ii)
any increase in any net operating or

 

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capital loss carryover or carryback or tax credit which is carried to
such Taxable Period and which arose or arises in a prior or subsequent Taxable
Period as a result of any such increase in deduction or decrease in income or
gain in such prior or subsequent Taxable Period.

 

1.14                                     
“Tax Benefit Issue” has the meaning specified in Section 9.3.1 hereof.

 

1.15                                     
“Tax Benefits” means, for any Taxable Period, the excess, if any, of (a) the
total amount of federal, state, local and foreign income and franchise taxes,
respectively, that would be payable by AG US Holdings and Subsidiaries in
respect of such Taxable Period if the Tax Benefit Base Amount for such Taxable
Period were not taken into account (“Notional Tax Liability”), over (b) the
total amount of federal, state, local and foreign income and franchise taxes,
respectively, actually payable by AG US Holdings and Subsidiaries in respect of
such Taxable Period after taking into account the Tax Benefit Base Amount for
such Taxable Period (“Actual Tax Liability”). Any Tax Benefits hereunder shall
be determined using the method of reporting (i.e. consolidated, combined
or separate returns) actually utilized by AG US Holdings, AGC, AGR FP or ARA.
In any Taxable Period ending after the Closing, the Tax Benefits shall be no
less than the Tax Benefits calculated without giving effect to any items of
income, expense, loss, deduction or credit of, or attributable to, any
businesses, assets or liabilities other than (i) historic types of businesses
conducted by AG US Holdings and Subsidiaries as of the Closing, (ii) any assets
held by AG US Holdings and Subsidiaries prior to the Closing, (iii) any assets
acquired by AG US Holdings and Subsidiaries from the ACE Prime Consolidated Tax
Return Group subsequent to the Closing, and (iv) any liabilities of AG US Holdings
and Subsidiaries as of the Closing or incurred or assumed by AG US Holdings and
Subsidiaries with respect to
any asset described in (iii) above.

 

1.16                                     
“Taxable Period” means any
taxable year ending after the date of the Closing.

 

1.17                                     “Taxes” means any and all U.S.
federal, state, local and foreign taxes, assessments or similar charges,
including interest, additions to tax, and penalties, on, based on, measured by
or with respect to income, net worth or capital, and the term “Tax” means any
one of the foregoing Taxes.

 

1.18                                     
“Underpayment Rate” has the meaning specified in Section 9.3 hereof.

 

2. Tax Returns. AFS agrees to prepare and
file or cause to be prepared and filed timely any and all applicable Returns in
respect of AG US Holdings and Subsidiaries that (i) are required to be filed on
or before Closing; or (ii) are required to be filed after Closing that (A) are
required to include, on a consolidated or combined basis, the operations of AG
US Holdings and Subsidiaries for any tax period ending on or before Closing; or
(B) are required to be filed by AG US Holdings and Subsidiaries on a separate
return basis for any tax period ending on or before

 

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Closing.
To the extent requested by AFS in writing, AG US Holdings and Subsidiaries
shall participate in the filing of and, at the direction of AFS, shall file any
required separate basis Returns with respect to any period that ends on or
before Closing. The Buyer shall prepare or cause to be prepared the schedules
in respect of AG US Holdings and Subsidiaries containing the information
necessary for AFS to prepare any consolidated or combined returns. The Buyer
shall also prepare or cause to be prepared and shall file or cause to be filed
all other Returns required of AG US Holdings and Subsidiaries, or in respect of
its activities, for any Taxable Period ending after Closing that includes the
operations of AG US Holdings and Subsidiaries prior to Closing.

 

3. Obligation for Payment of Taxes.  AFS and AG US Holdings and Subsidiaries agree to the termination
of the AFS Tax Sharing Agreement as of the Closing date subject to the
following provisions.  The terms of the
AFS Tax Sharing Agreement, including paragraphs 4 and 5 thereof regarding
effects of termination, shall be adhered to for the timely payment of Taxes
covered thereunder subject to the following modifications:

 

(i)                         Each of
AFS,  Buyer and AG US Holdings and
Subsidiaries agrees that the Tax liability or benefit associated with any
deferred inter-company transactions under Section 267 or 1502 of the Code
triggered as a result of the Transfer will be the sole liability or benefit of
AFS.

 

(ii)                      Each of AFS,
Buyer and AG US Holdings and Subsidiaries agrees that the Tax liability
associated with the recapture of AGC’s contingency reserve deductions
previously taken for income tax purposes that will be triggered as a result of
the Election in Section 4 will be the sole liability of AFS.  Any proceeds associated with the sale of the
Tax and Loss bonds will be retained by AGC.

 

(iii)      All Taxes associated with the Election in
Section 4 will be the responsibility           of
AFS.

 

The terms of the AFS Tax Sharing Agreement
relating to the payment of the Tax liability associated with the Tax period
ending on the Closing Date (subject to the above modifications) will continue
until the final cash settlement for the period including the Closing Date is
completed based on a filed Tax Return for each of AG US Holdings and
Subsidiaries as included in the ACE Prime Consolidated Tax Return which
includes the period ending on the Closing Date.  All other Taxes of the Buyer Group post-Closing will be the
responsibility of Buyer and/or AG US Holdings and Subsidiaries, as appropriate.
The parties hereto will, to the extent permitted by applicable law, elect with
the relevant Tax Authority to treat for all purposes the Closing Date as the
last day of a taxable period of each of AG US Holdings and Subsidiaries, and
such period shall be treated as a “Short Period” for purposes of this
Agreement. In any case where applicable law does not permit AG US Holdings and
its subsidiaries to treat the Closing Date as the last day of a Short Period,
then for purposes of this Agreement, the portion of such Taxes that is
attributable to the operations of AG US Holdings and its subsidiaries for such
Interim Period (as defined below) shall be, the Taxes that would be due with
respect to the Interim Period, if such Interim Period were a Short Period.
“Interim Period” means with respect to any Taxes imposed on AG US Holdings and
Subsidiaries on a periodic basis for which the Closing Date is not the last day
of a Short Period, the period of time beginning on the first day of the actual
taxable period that includes (but does not end on) the Closing Date and ending
on and

 

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including the Closing Date.

 

4. Election Under Section 338 (h)(10). Buyer and AFS shall
timely make or cause to be made a valid joint election under Section 338(h)(10)
of the Code and under any comparable provisions of state law in respect of the
Transfer so as to have the transfer treated as a deemed sale of assets of AG US
Holdings and each of its subsidiaries and the deemed asset sale gain recognized
in the ACE Prime Consolidated Tax Return and any relevant state income or
franchise tax returns that include the Short Period for AG US Holdings and each
of its subsidiaries ending on the Closing Date (collectively, the “Election”).

 

5. Valuation and Allocation of Consideration. The parties agree
that the “aggregate deemed sale price” and “adjusted grossed-up basis” (as such
terms are defined in the regulations under Section 338 of the Code) with
respect to the Transfer and Election shall be determined by AFS, such
determination to be made, in part, based on allocable proceeds of the sales
price per share of the common stock of Buyer in the initial public offering of
such stock. The value of the consideration shall be allocated among the assets
of AG US Holdings and each of its subsidiaries as indicated on a schedule (the
“Tax Allocation Schedule”) to be prepared by AFS and delivered to AG US
Holdings and each of its subsidiaries no later than sixty days prior to the
date the Election must be filed, subject to adjustment by AFS to the extent
necessary to make such allocations consistent with any post-Closing
adjustments. The parties agree that any and all payments made pursuant to this
Agreement with respect to Tax Benefits shall be treated as an adjustment to the
“aggregate deemed sale price” and allocated in accordance with the terms of the
Tax Allocation Schedule. Absent a final and unappealable decision, judgment,
decree or other order by any court of competent jurisdiction or a closing
agreement under Section 7121 of the Code to the contrary, the parties (i) shall
be bound by such allocation for purposes of determining any Taxes and (ii)
shall prepare and file all Returns in a manner consistent with such allocation.
In the event that any Tax Authority disputes such allocation, the party receiving
notice of such dispute shall promptly notify and consult with the other party
hereto concerning resolution of such dispute.

 

6. Tax Reporting. AFS and Buyer shall file, or cause to be
filed, its respective U.S. federal income Tax Returns treating the Transfer as
a purchase of the assets of AG US Holdings and Subsidiaries pursuant to
Sections 338(a) and 338(h)(10) of the Code (including the post election Tax
Returns of AG US Holdings and Subsidiaries). AFS and Buyer shall file, or cause
to be filed, on a similar basis all state and local tax returns to the extent
that such treatment is consistent with such state and local tax law (including
the post election tax returns of AG US Holdings and Subsidiaries).

 

7. Liability for Assessments or Refunds.
AFS shall pay any assessments for U.S. federal income Taxes incurred
(subsequent to AG US Holdings and Subsidiaries satisfying its obligations under
Section 3) and be entitled to receive all refunds of U.S. federal income Taxes
(i) with respect to all periods ending on or prior to the Closing Date; and
(ii) with respect to any period beginning before the Closing Date and ending
after the Closing Date, but only with respect to the portion of such period up
to and including the Closing Date for which Taxes are allocated to AFS in
accordance with Section 3 above. AFS shall have sole and exclusive discretion
at its expense to contest or not to contest, negotiate and settle proposed
adjustments relating to the inclusion in any Return of the income, deductions,
credits, allowances or other tax items of AG US Holdings and Subsidiaries for
any period ending prior to or on the Closing Date.

 

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8. Tax Benefit Sharing Payment to AFS.

 

8.1       Estimated Tax
Payments.  AG US Holdings and
Subsidiaries shall pay to AFS, on each Estimated Tax Payment Date, an amount
equal to the estimated Tax Benefits for the applicable Taxable Period. For this
purpose, 25 percent (or, in the case of Taxable Periods of less than one year,
one divided by the number of Estimated Tax Payment Dates in such Period) of Tax
Benefits as then estimated for the applicable Taxable Period shall be deemed to
accrue and the applicable percentage thereof set forth in the preceding
sentence shall be paid at each Estimated Tax Payment Date. For the avoidance of
doubt, estimated Tax Benefits shall be calculated utilizing the notional/actual
method set forth in Section 1.15 above and using consistent methods and
assumptions between periods and notional/actual comparisons.

 

8.2       Current Amount
Adjustment. At the time AG US Holdings and Subsidiaries or successors files
its U.S. federal income tax return for each Taxable Period, to the extent that
the amounts paid to AFS pursuant to Section 8.1 hereof for such Taxable Period
exceeded the Tax Benefits for the applicable Taxable Period (the “Current
Amount”), such excess amounts paid shall be refunded together with interest at
the Underpayment Rate from the close of such Taxable Period by AFS to AG US
Holdings. To the extent that the amounts paid to AFS pursuant to Section 8.1
hereof for such Taxable Period were less than the Current Amount, such deficit
in amounts paid shall be paid to AFS by AG US Holdings together with interest
at the Underpayment Rate from the close of such Taxable Period.

 

8.3       Tax Computation
Assumptions. When allocation factors are required for any tax computation,
the factors used in AG US Holdings’ most recently filed consolidated Return or
the affected member of AG US Holdings and Subsidiaries most recently filed
Returns in the relevant jurisdictions shall be used.

 

8.4       Subsequent
Transactions by Buyer and AG US Holdings and Subsidiaries.

 

8.4.1.       Buyer
and AG US Holdings and Subsidiaries agree that they shall not enter into any
transaction, a significant effect of which is to reduce the amount of the Tax
Benefits otherwise payable to AFS under this Agreement unless they have (1)
obtained prior agreement by AFS (which agreement shall not be unreasonably
withheld) and (2) paid to AFS the amount set forth below in Section 8.4.2.

 

8.4.2.       AG
US Holdings and Subsidiaries shall pay to AFS the present value, as of the
closing date of any transaction described in Section 8.4.1, of any reduction in
the Tax Benefit that results from such transaction, such that the reduction in
the Tax Benefits that results from the proposed transaction as computed under
this Section 8.4 payable to AFS shall be considered liquidated and not factored
into the computation of future settlements under this Agreement.  AFS will compute the present value of any
reduction in the Tax Benefit that results from the proposed transaction under
this Section 8.4 utilizing the AA Composite Index in effect at the time of the
proposed transaction.  Any dispute
regarding the computation shall be settled under the provisions of Section
9.3.3.

 

8.5       Benefit Estimates.
AG US Holdings and Subsidiaries shall prepare and deliver to AFS no less than
60 days prior to the end of each calendar year, an estimate of the amount of
the Tax Benefits that will be payable to AFS during the immediately following
year, such

 

6

 

estimate to be
agreed upon by the parties in good faith and subject to the provisions of
Section 9.3.3. AG US Holdings and Subsidiaries shall revise and update each
such estimate on a quarterly basis to be delivered to AFS no less than 15 days
prior to the end of each quarter, such revision or update to be agreed upon by
the parties in good faith and subject to the provisions of Section 9.3.3.

 

8.6       Payments in General.
All payments to AFS pursuant to this Agreement shall be made directly by wire
transfer of immediately available funds prior to 10:30 A.M., New York time, on
the date of payment, to Fleet National Bank, N.A., transiting routing number
011900445, for the account of ACE Financial Services, Inc.  Account No. 
9429036170 (or such other account as directed by AFS).

 

8.7       Termination Payment.
As promptly as practicable following close of the fifteenth taxable year of
Buyer ending after the Closing Date, Buyer and AFS shall negotiate in good
faith to reach an agreement which requires Buyer to pay AFS an amount, if any,
equal to the then present value (determined by using the then current
Underpayment Rate) of the aggregate Tax Benefits which AG US Holdings and
Subsidiaries would
reasonably be expected to realize as a result of the Election in any taxable
year beginning after Buyer’s fifteenth taxable year ending after the Closing
Date, in consideration of Buyer and AG US Holdings and Subsidiaries being
relieved thereafter of its future obligations under this Section 8.

 

9.         Tax
Issues Arising After the Closing Date.

 

9.1       Mutual
Cooperation. The parties agree to consult in good faith and to provide each
other with such assistance as reasonably may be requested in writing by any of
them in connection with (i) the preparation and execution of any Return, (ii)
the negotiation and settlement of any audit or other examination of any Return
by any Tax Authority, or (iii) the handling of any judicial or administrative
proceeding relating to any Tax liability for periods of AG US Holdings and
Subsidiaries prior to the Closing Date. The parties’ general obligation to
cooperate shall require, but not be limited to requiring, each party (i) to
notify the other of any Tax Authority’s initiating an audit, requesting
information or proposing adjustment, or any extension of statutes of limitation
and of final determinations of adjustment, (ii) to preserve records, documents
and other information relevant to liabilities for Taxes until the expiration of
the applicable statute of limitations or extensions thereof and to provide,
upon written request, copies of such records and/or reasonable access thereto,
(iii) to make available without charge at a location determined by Buyer or AG
US Holdings and Subsidiaries during normal working hours, upon written request,
personnel responsible for preparing, maintaining, or explaining information,
records and documents in connection with matters relating to Taxes, and (iv) to
execute and deliver such powers of attorney, consents, and other documents as
are necessary to carry out the intent of this Agreement.

 

9.2       Buyer’s
and AG US Holdings and Subsidiaries’ Discretion to Contest, Negotiate and
Settle. Buyer and AG US Holdings and Subsidiaries’ shall have sole and
exclusive discretion to contest or not to contest, negotiate and settle
proposed adjustments relating to the inclusion in any Return of the income,
deductions, credits, allowances or other tax items of AG US Holdings and Subsidiaries
for any period after the Closing Date, subject to Sections 7 and 9.3 hereof.

 

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9.3       Contesting
Disputed Tax Benefits.

 

9.3.1              Control of Proceedings. In
the event that any Tax Authority disputes the existence or amount of the Tax
Benefit Base Amount or of any Tax Benefits, including any challenge to the Tax
Allocation Schedule (the “Tax Benefit Issue”), Buyer or AG US Holdings and
Subsidiaries shall contest the matter on audit, through Internal Revenue
Service or state appellate proceedings and through judicial proceedings.
Representatives of AFS shall be allowed to participate in such proceedings in
so far as they relate to the Tax Benefit Issue and such participation shall be
reflected by the grant of appropriate powers of attorney. Decisions regarding
the conduct of such contest shall be made by AFS or its representatives after
consultation with Buyer and its representatives, provided, however, that
ultimate control over contesting the Tax Benefit Issue, including control over
procedural matters that necessarily relate to all issues being contested
(including, without limitation, choice of forum), shall be exercised in good
faith by AFS and its representatives, and Buyer and AG US Holdings and Subsidiaries
shall take any action as is necessary to effectuate the decisions of AFS.
Decisions relating solely to tax issues unrelated to the Tax Benefit Issue
shall be made exclusively by Buyer and its representatives, provided, however,
that such decisions could not reasonably have an adverse tax consequence on the
Tax Benefits Issue. Decisions regarding the settlement of a contest of the Tax
Benefit Issue shall be made jointly by AFS and Buyer and their respective
representatives, provided, however, that if AFS or Buyer declines a settlement
proposal relating to the Tax Benefit Issue that the other wishes to accept, the
contest will continue and the declining party will (i) bear all further contest
costs, (ii) indemnify the party wishing to accept the settlement against any outcome more
adverse than that of the proposed settlement, and (iii) be entitled to all
benefits more advantageous than those of the proposed settlement.

 

9.3.2
Adverse Outcome and Repayment. If, as the result of a contest subject to
Section 9.3.1, Tax Benefits are less than those taken into account in computing
any payments made under Section 8 hereof, such payments will be recomputed on
the basis of such revised Tax Benefits, and any excess payments shall be
refunded by AFS to AG US Holdings and Subsidiaries together with any related
penalties imposed by a Tax Authority. Interest shall be payable at the rates
prescribed for underpayments in Section 6621(a) of the Code (the “Underpayment
Rate”) with respect to Tax Benefits or at the corresponding state underpayment
rate in connection with revisions relating to state tax revisions.

 

9.3.3
Resolution of Computational Disputes. If the parties hereto are unable
to agree on the amount of the Tax Benefit Base Amount or of any Tax Benefits
reflected in an estimate delivered pursuant to Section 8.5 (the “Disputed
Amount”), the determination of such Disputed Amount shall be made by an
independent firm of certified public accountants jointly selected by AFS and AG
US Holdings and Subsidiaries, whose cost shall be borne equally by AFS and AG
US Holdings and Subsidiaries. Each party shall bear their own amount of all
other costs arising in connection with a dispute under this Section 9.3.3. If
AFS and AG US Holdings and Subsidiaries cannot agree on the selection of an
independent firm of certified public accountants, such firm will be jointly
selected by the firms of certified public accountants that certify (or selected
by the firm of certified public accountants that certifies) the financial
statements of AFS and Buyer and that is other than the selecting firm(s). Such
accountants shall be given access by AFS, Buyer and their respective
subsidiaries to all information necessary to determine the Disputed Amount,
subject to the agreement of such accountants that such

 

8

 

information shall be kept confidential and
shall not be released without the written consent of AFS or Buyer, as
appropriate, except as compelled by legal process. Any amount otherwise due
under this Agreement that is a Disputed Amount shall be paid, together with
interest at the Underpayment Rate from the date on which such payment was
originally due, within 10 days of the determination of such Disputed Amount.

 

9.3.4 Expenses. Except as otherwise provided in this Agreement,
fees and expenses paid to third-party service providers and incurred after the
date hereof by AFS, Buyer or any of their subsidiaries for the purpose of
obtaining the Tax Benefits, including, without limitation, legal and accounting
expenses relating to the resolution of any dispute with any Tax Authority
regarding a Tax Benefit Issue or any related activity shall be borne by AFS in
the same percentage as the Tax Benefits in controversy bears to the Tax
Benefits paid to AFS pursuant to this Agreement for such Taxable Period. All
other such fees and expenses shall be borne by Buyer. Notwithstanding the
above, the obligation of any party to bear any portion of such fees or expenses
related to service providers not retained by it shall be contingent upon prior written
approval by such party of the retention of any such advisers.

 

9.4       Attorney’s
Fees. AFS on the one hand and AG US Holdings and Subsidiaries and Buyer on
the other hand shall, upon a breach of this Agreement, in addition to other
penalties, damages or liabilities, be responsible for and shall pay (or cause
to be paid) to the non-breaching party an amount equal to reasonable
out-of-pocket attorney’s fees actually incurred by such party in its efforts to
enforce its rights under this Agreement.

 

10.       Construction.
Each of the parties hereto agree that (i) the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation or construction of this Agreement,
and (ii) except as specifically provided in this Agreement, no usage of trade, course
of dealing, course of performance or enforcement or surrounding circumstance
shall be used in interpreting or construing this Agreement.

 

11.       Notices.
Any notice required under any provision of this Agreement shall be made in the
manner provided in the section entitled “Notices” in the MSA.

 

12.       Governing Law.
This Agreement shall be governed by and construed in accordance with the law of
the State of New York applicable to contracts made and to be performed therein,
without effect to its choice of law.

 

13.       Binding
Effect; Successors. This Agreement shall be effective as of the date of
this Agreement and shall be binding upon and inure to the benefit of any
successor, by merger, acquisition of assets or otherwise, to any of the parties
hereto (including but not limited to any successor of AFS, AG US Holdings and
Subsidiaries or Buyer succeeding to the tax attributes of AFS, AG US Holdings
and Subsidiaries or Buyer under Section 381 of the Code) , to the same extent as if such successor had been an original
party to the Agreement. In addition, in the event of any acquisition of the
assets of AGC US Holding and Subsidiaries in which gain or loss is not recognized,
in whole or in part, for U.S. federal income tax purposes, AG US Holdings and
Subsidiaries and Buyer shall ensure that any purchaser of such assets shall
assume the obligations set forth in this Agreement. Any other tax sharing
agreement other than as referenced in Section 3,

 

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or provision of such tax sharing agreement
other than as referenced in Section 3, among any parties to this Agreement or
their predecessors, shall have no force and effect for any taxable years, or
portions thereof, beginning on or after the Closing.

 

14.       Severability.
In the event that any term or provision of this Agreement shall for any reason
be held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other term or provision and
this Agreement shall be interpreted and construed as if such term or provision,
to the extent the same shall have been held to be invalid, illegal or
unenforceable, had never been contained herein.

 

15.       Headings.
The headings in the sections of this Agreement are inserted for convenience of
reference only and shall not constitute a part hereof.

 

16        Amendments.  This Agreement may not be modified or
amended except by agreement in writing signed by each of the parties hereto.

 

17.       Regulatory Approvals.  The parties hereto shall take such actions
as are reasonably necessary to obtain the approval or non-disapproval of this
Agreement by the Maryland Insurance Administration. Notwithstanding anything to
the contrary set forth herein, this Agreement will not be effective, and no
payments shall be made hereunder, until this Agreement is approved or
non-disapproved by the Maryland Insurance Administration.  The parties will not unreasonably refuse to
make any amendments hereto that are required to be made in order to obtain the
approval or non-disapproval of this Agreement by the Maryland Insurance
Administration.

 

10

 

IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed as of the date first above written.

 

 

	
  ACE Financial Services
  Inc.

  	
   

  
	
   

  	
   

  
	
  By

  	
  Peter Mear

  	
   

  
	
   

  	
   

  
	
   

  	
  Title: General Counsel
  and Secretary

  	
   

  
	
   

  	
   

  
	
  Assured Guaranty Ltd.

  	
   

  
	
   

  	
   

  
	
  By

  	
  Robert B. Mills

  	
   

  
	
   

  	
   

  
	
   

  	
  Title: Chief Financial
  Officer

  	
   

  
	
   

  	
   

  
	
  Assured Guaranty US
  Holdings, Inc.

  	
   

  
	
   

  	
   

  
	
  By

  	
  Robert B. Mills

  	
   

  
	
   

  	
   

  
	
   

  	
  Title: Chief Financial
  Officer

  	
   

  
	
   

  	
   

  
	
  Assured Guaranty Corp.

  	
   

  
	
   

  	
   

  
	
  By

  	
  Robert B. Mills

  	
   

  
	
   

  	
   

  
	
   

  	
  Title: Chief Financial
  Officer

  	
   

  
	
   

  	
   

  
	
  AGR Financial Products
  Inc.

  	
   

  
	
   

  	
   

  
	
  By

  	
  Howard Albert

  	
   

  
	
   

  	
   

  
	
   

  	
  Title: President

  	
   

  
	
   

  	
   

  
	
  ACE Risk Assurance
  Company

  	
   

  
	
   

  	
   

  
	
  By

  	
  Howard Albert

  	
   

  
	
   

  	
   

  
	
   

  	
  Title: President

  	
   

  
	
   

  	
   

  
	
  ACE Prime Holdings,
  Inc.

  	
   

  
	
   

  	
   

  
	
  By

  	
  Richard F. Betzler

  	
   

  
	
   

  	
   

  
	
   

  	
  Title Assistant
  Secretary

  	
   

  

 

11Exhibit 10.24

 

 

 

$250,000,000

 

364-DAY REVOLVING CREDIT FACILITY

 

 

CREDIT
AGREEMENT

 

 

Among

 

ASSURED GUARANTY LTD.,

 

ASSURED GUARANTY CORP.,

 

ASSURED GUARANTY (UK) LTD.

 

And

 

THE BANKS PARTY HERETO

 

And

 

ABN AMRO BANK N.V.,

As Administrative Agent

 

Dated as of April 29, 2004

 

 

 

 

ABN AMRO INCORPORATED

As Syndication Agent,

Lead Arranger, and Bookrunner

 

 

 

 

TABLE OF CONTENTS

 

 

	
  ARTICLE I

  	
  CERTAIN DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  1.01

  	
  Certain
  Definitions

  	
   

  
	
  Section
  1.02

  	
  Construction

  	
   

  
	
   

  	
  (a)

  	
  Number;
  Inclusion

  	
   

  
	
   

  	
  (b)

  	
  Determination

  	
   

  
	
   

  	
  (c)

  	
  Agent’s Discretion and Consent

  	
   

  
	
   

  	
  (d)

  	
  Documents Taken as a Whole

  	
   

  
	
   

  	
  (e)

  	
  Headings

  	
   

  
	
   

  	
  (f)

  	
  Implied References to this Agreement

  	
   

  
	
   

  	
  (g)

  	
  Persons

  	
   

  
	
   

  	
  (h)

  	
  Modifications to Documents

  	
   

  
	
   

  	
  (i)

  	
  From, To and Through

  	
   

  
	
   

  	
  (j)

  	
  Shall;
  Will

  	
   

  
	
  Section
  1.03

  	
  Accounting
  Principles; Computations

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  REVOLVING CREDIT AND TERM LOAN FACILITY

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  2.01

  	
  Revolving
  Credit Commitments; Term Loans

  	
   

  
	
  Section
  2.02

  	
  Nature
  of Banks’ Obligations with Respect to Revolving Credit Loans

  	
   

  
	
  Section
  2.03

  	
  Facility
  Fees; Term Loan Fee

  	
   

  
	
  Section
  2.04

  	
  Utilization
  Fee

  	
   

  
	
  Section
  2.05

  	
  Revolving
  Credit Loan Requests

  	
   

  
	
  Section
  2.06

  	
  Making
  Revolving Credit Loans

  	
   

  
	
  Section
  2.07

  	
  Use
  of Proceeds

  	
   

  
	
  Section
  2.08

  	
  Bid
  Loan Facility

  	
   

  
	
   

  	
  (b)

  	
  Bidding

  	
   

  
	
   

  	
  (c)

  	
  Accepting
  Bids

  	
   

  
	
   

  	
  (d)

  	
  Funding
  Bid Loans

  	
   

  
	
   

  	
  (e)

  	
  Several Obligations

  	
   

  
	
   

  	
  (f)

  	
  Bid Notes

  	
   

  
	
  Section
  2.09

  	
  Extension
  by Banks of the Expiration Date

  	
   

  
	
   

  	
  (b)

  	
  Approval by Required Banks

  	
   

  
	
  Section
  2.10

  	
  UK
  Borrower Loans

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  III

  	
  INTEREST
  RATES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  3.01

  	
  Interest
  Rate Options

  	
   

  
	
   

  	
  (a)

  	
  Revolving Credit Interest Rate Options

  	
   

  
	
   

  	
  (b)

  	
  Rate
  Quotations

  	
   

  
	
   

  	
  (c)

  	
  Change
  in Fees or Interest Rates

  	
   

  
	
  Section
  3.02

  	
  Committed
  Loans Interest Periods

  	
   

  
	
   

  	
  (a)

  	
  Amount of Borrowing Tranche

  	
   

  
						

 

ii

 

	
   

  	
  (b)

  	
  Renewals

  	
   

  
	
  Section
  3.03

  	
  Interest
  After Default

  	
   

  
	
   

  	
  (a)

  	
  Interest
  Rate

  	
   

  
	
   

  	
  (b)

  	
  Other
  Obligations

  	
   

  
	
   

  	
  (c)

  	
  Acknowledgment

  	
   

  
	
  Section
  3.04

  	
  LIBOR
  Unascertainable; Illegality; Increased Costs; Deposits Not Available

  	
   

  
	
   

  	
  (b)

  	
  Illegality;
  Increased Costs; Deposits Not Available

  	
   

  
	
   

  	
  (c)

  	
  Agent’s
  and Bank’s Rights

  	
   

  
	
  Section
  3.05

  	
  Selection
  of Interest Rate Options

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  PAYMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  4.01

  	
  Payments

  	
   

  
	
  Section
  4.02

  	
  Pro
  Rata Treatment of Banks

  	
   

  
	
  Section
  4.03

  	
  Interest
  Payment Dates

  	
   

  
	
  Section
  4.04

  	
  Voluntary
  Prepayments

  	
   

  
	
   

  	
  (b)

  	
  Replacement
  of a Bank

  	
   

  
	
   

  	
  (c)

  	
  Change of Lending Office

  	
   

  
	
  Section
  4.05

  	
  Reduction
  or Termination of Commitments

  	
   

  
	
  Section
  4.06

  	
  Additional
  Compensation in Certain Circumstances

  	
   

  
	
   

  	
  (b)

  	
  Indemnity

  	
   

  
	
  Section
  4.07

  	
  Taxes

  	
   

  
	
   

  	
  (b)

  	
  Stamp
  Taxes

  	
   

  
	
   

  	
  (c)

  	
  Indemnification for Taxes Paid by a Bank

  	
   

  
	
   

  	
  (d)

  	
  Certificate

  	
   

  
	
   

  	
  (e)

  	
  Survival

  	
   

  
	
  Section
  4.08

  	
  Judgment
  Currency

  	
   

  
	
   

  	
  (b)

  	
  Indemnity in Certain Events

  	
   

  
	
  Section
  4.09

  	
  Notes,
  Maturity

  	
   

  
	
  Section
  4.10

  	
  Mandatory
  Prepayments

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  5.01

  	
  Representations
  and Warranties

  	
   

  
	
   

  	
  (a)

  	
  Organization and Qualification

  	
   

  
	
   

  	
  (b)

  	
  Capitalization and Subsidiaries

  	
   

  
	
   

  	
  (c)

  	
  Power and Authority

  	
   

  
	
   

  	
  (d)

  	
  Validity and Binding Effect

  	
   

  
	
   

  	
  (e)

  	
  No Conflict

  	
   

  
	
   

  	
  (f)

  	
  Litigation

  	
   

  
	
   

  	
  (g)

  	
  Title to Properties

  	
   

  
	
   

  	
  (h)

  	
  Financial Statements, Reinsurance Coverage

  	
   

  
	
   

  	
  (i)

  	
  Use
  of Proceeds; Margin Stock

  	
   

  
	
   

  	
  (j)

  	
  Full
  Disclosure

  	
   

  
	
   

  	
  (k)

  	
  Taxes

  	
   

  
	
   

  	
  (l)

  	
  Consents
  and Approvals

  	
   

  
	
   

  	
  (m)

  	
  No
  Event of Default; Compliance With Instruments

  	
   

  
						

 

iii

 

	
   

  	
  (n)

  	
  Licenses, Etc.

  	
   

  
	
   

  	
  (o)

  	
  Insurance

  	
   

  
	
   

  	
  (p)

  	
  Compliance With Laws

  	
   

  
	
   

  	
  (q)

  	
  Material Contracts; Burdensome Restrictions

  	
   

  
	
   

  	
  (r)

  	
  Investment
  Companies; Regulated Entities

  	
   

  
	
   

  	
  (s)

  	
  Plans and Benefit Arrangements

  	
   

  
	
   

  	
  (t)

  	
  Senior
  Debt Status

  	
   

  
	
   

  	
  (u)

  	
  Holdings

  	
   

  
	
  Section
  5.02

  	
  Continuation
  of Representations

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  CONDITIONS OF LENDING

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  6.01

  	
  Closing
  Date

  	
   

  
	
   

  	
  (a)

  	
  Representations and Warranties True and Complete, No Defaults

  	
   

  
	
   

  	
  (b)

  	
  Secretary’s Certificate

  	
   

  
	
   

  	
  (c)

  	
  Delivery
  of Notes, Guaranty Agreements, and Loan Request

  	
   

  
	
   

  	
  (d)

  	
  Opinion
  of Counsel

  	
   

  
	
   

  	
  (e)

  	
  Legal Details

  	
   

  
	
   

  	
  (f)

  	
  Payment
  of Fees

  	
   

  
	
   

  	
  (g)

  	
  No Material Adverse Change

  	
   

  
	
  Section
  6.02

  	
  Effective
  Date

  	
   

  
	
   

  	
  (a)

  	
  Existing Credit Agreement

  	
   

  
	
   

  	
  (b)

  	
  Initial
  Public Offering

  	
   

  
	
   

  	
  (c)

  	
  Corporate
  Structure

  	
   

  
	
  Section
  6.03

  	
  Each
  Loan

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VII

  	
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  7.01

  	
  Affirmative
  Covenants

  	
   

  
	
   

  	
  (a)

  	
  Preservation of Existence, Etc.

  	
   

  
	
   

  	
  (b)

  	
  Payment of Liabilities, Including Taxes, Etc.

  	
   

  
	
   

  	
  (c)

  	
  Maintenance of Insurance

  	
   

  
	
   

  	
  (d)

  	
  Maintenance of Properties and Leases

  	
   

  
	
   

  	
  (e)

  	
  Maintenance of Licenses, Etc.

  	
   

  
	
   

  	
  (f)

  	
  Visitation
  Rights

  	
   

  
	
   

  	
  (g)

  	
  Keeping
  of Records and Books of Account

  	
   

  
	
   

  	
  (h)

  	
  Plans
  and Benefit Arrangements

  	
   

  
	
   

  	
  (i)

  	
  Compliance
  With Laws

  	
   

  
	
   

  	
  (j)

  	
  Use
  of Proceeds

  	
   

  
	
   

  	
  (k)

  	
  Senior
  Debt Status

  	
   

  
	
  Section
  7.02

  	
  Negative
  Covenants

  	
   

  
	
   

  	
  (a)

  	
  Indebtedness

  	
   

  
	
   

  	
  (b)

  	
  Liens

  	
   

  
	
   

  	
  (c)

  	
  Guaranties

  	
   

  
	
   

  	
  (d)

  	
  Loans and Investments

  	
   

  
	
   

  	
  (e)

  	
  Dividends and Related Distributions

  	
   

  
							

 

iv

 

	
   

  	
  (f)

  	
  Liquidations, Mergers, Consolidations,
  Acquisitions

  	
   

  
	
   

  	
  (g)

  	
  Dispositions of Assets or Subsidiaries

  	
   

  
	
   

  	
  (h)

  	
  Affiliate
  Transactions

  	
   

  
	
   

  	
  (i)

  	
  Subsidiaries, Partnerships and Joint
  Ventures

  	
   

  
	
   

  	
  (j)

  	
  Continuation of or Change in Business

  	
   

  
	
   

  	
  (k)

  	
  Plans and Benefit Arrangements

  	
   

  
	
   

  	
  (l)

  	
  Fiscal Year

  	
   

  
	
   

  	
  (m)

  	
  Minimum
  Statutory Capital

  	
   

  
	
   

  	
  (n)

  	
  Maximum
  Exposure Ratio (Company)

  	
   

  
	
   

  	
  (o)

  	
  Maximum Debt to Total Capitalization Ratio

  	
   

  
	
   

  	
  (p)

  	
  Maximum Debt to Total Capitalization Ratio (Holdings)

  	
   

  
	
   

  	
  (q)

  	
  Minimum
  Net Worth

  	
   

  
	
   

  	
  (r)

  	
  Interest
  Coverage Ratio

  	
   

  
	
  Section
  7.03

  	
  Reporting
  Requirements

  	
   

  
	
   

  	
  (a)

  	
  Quarterly
  Financial Statements

  	
   

  
	
   

  	
  (b)

  	
  Annual
  Financial Statements

  	
   

  
	
   

  	
  (c)

  	
  Certificate
  of the Company

  	
   

  
	
   

  	
  (d)

  	
  Notice of Default

  	
   

  
	
   

  	
  (e)

  	
  Off-Balance
  Sheet Financing

  	
   

  
	
   

  	
  (f)

  	
  Notice
  of Litigation

  	
   

  
	
   

  	
  (g)

  	
  Notice of Change in Insurer Financial Strength Rating

  	
   

  
	
   

  	
  (h)

  	
  Sale of Assets

  	
   

  
	
   

  	
  (i)

  	
  Budgets, Other Reports and Information

  	
   

  
	
  Section
  7.04

  	
  Bermuda
  Law Event

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII

  	
  DEFAULT

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  8.01

  	
  Events
  of Default

  	
   

  
	
   

  	
  (a)

  	
  Payments
  Under Loan Documents

  	
   

  
	
   

  	
  (b)

  	
  Breach
  of Warranty

  	
   

  
	
   

  	
  (c)

  	
  Breach
  of Negative Covenants or Visitation Rights

  	
   

  
	
   

  	
  (d)

  	
  Breach
  of Other Covenants

  	
   

  
	
   

  	
  (e)

  	
  Defaults in Other Agreements or Indebtedness

  	
   

  
	
   

  	
  (f)

  	
  Final
  Judgments or Orders

  	
   

  
	
   

  	
  (g)

  	
  Loan
  Document Unenforceable

  	
   

  
	
   

  	
  (h)

  	
  Losses;
  Proceedings Against Assets

  	
   

  
	
   

  	
  (i)

  	
  Notice
  of Lien or Assessment

  	
   

  
	
   

  	
  (j)

  	
  Insolvency

  	
   

  
	
   

  	
  (k)

  	
  Events
  Relating to Plans and Benefit Arrangements

  	
   

  
	
   

  	
  (l)

  	
  Change
  of Control

  	
   

  
	
   

  	
  (m)

  	
  Involuntary
  Proceedings

  	
   

  
	
   

  	
  (n)

  	
  Voluntary
  Proceedings

  	
   

  
	
   

  	
  (o)

  	
  Bermuda
  Law Event

  	
   

  
	
  Section
  8.02

  	
  Consequences
  of Event of Default

  	
   

  
	
   

  	
  (b)

  	
  Bankruptcy, Insolvency or Reorganization
  Proceedings

  	
   

  
	
   

  	
  (c)

  	
  Set-off

  	
   

  
	
   

  	
  (d)

  	
  Suits, Actions, Proceedings

  	
   

  

 

v

 

	
   

  	
  (e)

  	
  Application of Proceeds

  	
   

  
	
   

  	
  (f)

  	
  Other
  Rights and Remedies

  	
   

  
	
  Section
  8.03

  	
  Right
  of Competitive Bid Loan Banks

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  THE AGENT

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  9.01

  	
  Appointment

  	
   

  
	
  Section
  9.02

  	
  Delegation
  of Duties

  	
   

  
	
  Section
  9.03

  	
  Nature
  of Duties; Independent Credit Investigation

  	
   

  
	
  Section
  9.04

  	
  Actions
  in Discretion of Agent; Instructions From the Banks

  	
   

  
	
  Section
  9.05

  	
  Reimbursement
  and Indemnification of Agent by the Borrowers

  	
   

  
	
  Section
  9.06

  	
  Exculpatory
  Provisions; Limitation of Liability

  	
   

  
	
  Section
  9.07

  	
  Reimbursement
  and Indemnification of Agent by Banks

  	
   

  
	
  Section
  9.08

  	
  Reliance
  by Agent

  	
   

  
	
  Section
  9.09

  	
  Notice
  of Default

  	
   

  
	
  Section
  9.10

  	
  Notices

  	
   

  
	
  Section
  9.11

  	
  Banks
  in Their Individual Capacities; Agents in Its Individual Capacity

  	
   

  
	
  Section
  9.12

  	
  Holders
  of Notes

  	
   

  
	
  Section
  9.13

  	
  Equalization
  of Banks

  	
   

  
	
  Section
  9.14

  	
  Successor
  Agent

  	
   

  
	
  Section
  9.15

  	
  Agent’s
  Fee

  	
   

  
	
  Section
  9.16

  	
  Availability
  of Funds

  	
   

  
	
  Section
  9.17

  	
  Calculations

  	
   

  
	
  Section
  9.18

  	
  Beneficiaries

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  10.01

  	
  Modifications,
  Amendments, or Waivers

  	
   

  
	
   

  	
  (a)

  	
  Increase
  of Commitment; Extension of Expiration Date

  	
   

  
	
   

  	
  (b)

  	
  Extension
  of Payment; Reduction of Principal Interest or Fees; Modification of Terms of
  Payment

  	
   

  
	
   

  	
  (c)

  	
  Release
  of Collateral or Guarantor

  	
   

  
	
   

  	
  (d)

  	
  Miscellaneous

  	
   

  
	
  Section
  10.02

  	
  No
  Implied Waivers; Cumulative Remedies; Writing Required

  	
   

  
	
  Section
  10.03

  	
  Reimbursement
  and Indemnification of Banks by the Borrowers; Taxes

  	
   

  
	
  Section
  10.04

  	
  Holidays

  	
   

  
	
  Section
  10.05

  	
  Funding
  by Branch, Subsidiary, or Affiliate

  	
   

  
	
   

  	
  (b)

  	
  Actual
  Funding

  	
   

  
	
  Section
  10.06

  	
  Notices

  	
   

  
	
  Section
  10.07

  	
  Severability

  	
   

  
	
  Section
  10.08

  	
  Governing
  Law

  	
   

  
	
  Section
  10.09

  	
  Prior
  Understanding

  	
   

  
	
  Section
  10.10

  	
  Duration;
  Survival

  	
   

  
	
  Section
  10.11

  	
  Successors
  and Assigns

  	
   

  
	
  Section
  10.12

  	
  Confidentiality

  	
   

  
	
   

  	
  (b)

  	
  Sharing Information With Affiliates of the Banks

  	
   

  
					

 

vi

 

	
  Section
  10.13

  	
  Counterparts

  	
   

  
	
  Section
  10.14

  	
  Agent’s
  or Bank’s Consent

  	
   

  
	
  Section
  10.15

  	
  Exceptions

  	
   

  
	
  Section
  10.16

  	
  CONSENT TO FORUM; WAIVER OF JURY TRIAL

  	
   

  
	
  Section
  10.17

  	
  Tax
  Withholding Clause

  	
   

  
	
  Section
  10.18

  	
  Joinder
  of Guarantors

  	
   

  
	
  Section
  10.19

  	
  Limited
  Recourse

  	
   

  
	
  Section
  10.20

  	
  Change
  of Lending Office

  	
   

  
	
  Section
  10.21

  	
  USA
  Patriot Act

  	
   

  

 

 

LIST OF SCHEDULES AND EXHIBITS

SCHEDULES

 

	
  SCHEDULE
  1.01(A)

  	
   

  	
  -

  	
   

  	
  PRICING
  GRID

  
	
  SCHEDULE
  1.01(B)

  	
   

  	
  -

  	
   

  	
  COMMITMENTS
  OF BANKS AND ADDRESSES FOR NOTICES

  
	
  SCHEDULE
  1.01(P)

  	
   

  	
  -

  	
   

  	
  EXISTING
  LIENS

  
	
  SCHEDULE
  5.01(b)

  	
   

  	
  -

  	
   

  	
  SUBSIDIARIES

  
	
  SCHEDULE
  5.01(h)

  	
   

  	
  -

  	
   

  	
  REINSURANCE
  COVERAGE

  
	
  SCHEDULE
  7.02(a)

  	
   

  	
  -

  	
   

  	
  EXISTING
  INDEBTEDNESS

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT 1.01(A)

  	
   

  	
  -

  	
   

  	
  ASSIGNMENT AND ASSUMPTION AGREEMENT

  
	
  EXHIBIT 1.01(B)

  	
   

  	
  -

  	
   

  	
  BID NOTE

  
	
  EXHIBIT 1.01(G)(1)

  	
   

  	
  -

  	
   

  	
  GUARANTOR JOINDER

  
	
  EXHIBIT 1.01(G)(2)-1

  	
   

  	
  -

  	
   

  	
  GUARANTY AGREEMENT OF MATERIAL NON-AGC SUBSIDIARIES

  
	
  EXHIBIT 1.01(G)(2)-2

  	
   

  	
  -

  	
   

  	
  GUARANTY AGREEMENT OF ASSURED GUARANTY CORP.

  
	
  EXHIBIT 1.01(R)

  	
   

  	
  -

  	
   

  	
  REVOLVING CREDIT/TERM LOAN NOTE

  
	
  EXHIBIT 2.05

  	
   

  	
  -

  	
   

  	
  COMMITTED LOAN REQUEST

  
	
  EXHIBIT 2.08(a)

  	
   

  	
  -

  	
   

  	
  BID LOAN REQUEST

  
	
  EXHIBIT 6.01(d)

  	
   

  	
  -

  	
   

  	
  OPINION(S) OF COUNSEL

  
	
  EXHIBIT 7.03(c)

  	
   

  	
  -

  	
   

  	
  QUARTERLY COMPLIANCE CERTIFICATE

  

 

vii

 

CREDIT AGREEMENT

 

THIS
CREDIT AGREEMENT is dated as of April 29, 2004, and is made by and among
ASSURED GUARANTY LTD., a company organized under the laws of Bermuda, ASSURED
GUARANTY CORP., a Maryland corporation, ASSURED GUARANTY (UK) LTD., a company
organized under the laws of England and Wales, the BANKS (as hereinafter
defined), and ABN AMRO BANK N.V., in its capacity as administrative agent for
the Banks under this Agreement and sole bookrunner.

 

W I T N E S S E T H
:

 

WHEREAS, the Borrowers have requested the Banks to
provide a 364-day revolving credit facility to the Borrowers in an aggregate
principal amount not to exceed the Commitments of the Banks; and

 

WHEREAS, such revolving credit facility shall be used
for the general corporate purposes of the Borrowers; and

 

WHEREAS, the Banks are willing to provide such credit
upon the terms and conditions hereinafter set forth;

 

NOW,
THEREFORE, the parties hereto, in consideration of their mutual covenants and
agreements hereinafter set forth, hereby covenant and agree as follows:

 

ARTICLE I

CERTAIN DEFINITIONS

 

Section 1.01  Certain Definitions.  In addition to words and terms defined
elsewhere in this Agreement, the following words and terms shall have the
following meanings, respectively, unless the context hereof clearly requires
otherwise:

 

ABN AMRO Bank or ABN AMRO shall mean ABN AMRO Bank N.V., its
successors and assigns.

 

ACE shall mean ACE Limited, a Cayman Islands company.

 

Affiliate as to any Person shall mean any other Person
(i) which directly or indirectly controls, is controlled by, or is under
common control with, such Person, (ii) which beneficially owns or holds 5%
or more of any class of the voting or other equity interests of such Person, or
(iii) 5% or more of any class of voting interests or other equity
interests of which is beneficially owned or held, directly or indirectly, by
such Person.  Control, as used in this
definition, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person,
whether through the ownership of voting

 

 

securities, by contract or otherwise, including the
power to elect a majority of the directors or trustees of a corporation or
trust, as the case may be.

 

Agent shall mean ABN AMRO Bank N.V., and its successors and
permitted assigns, in their respective capacities as administrative agent for
the Banks under this Agreement.

 

Agent’s Fee shall have the meaning assigned to that term in
Section 9.15.

 

Agent’s Letter shall have the meaning assigned to that term in
Section 9.15.

 

Aggregate Loan Outstandings shall have the meaning assigned to that
term in Section 4.10(a).

 

Agreement shall mean this Credit Agreement, as the same may be
supplemented or amended from time to time, including all schedules and
exhibits.

 

AGRI shall mean Assured Guaranty Re International Ltd., a
Bermuda company.

 

AGRO shall mean Assured Guaranty Re Overseas Ltd.

 

Alternate Currency shall mean each of Euros and Pounds Sterling.

 

Alternate Currency Loan shall mean any Loan denominated in an Alternate
Currency.

 

Applicable Facility Fee Rate shall mean the percentage rate per annum
corresponding to the indicated level of Insurer Financial Strength Rating in
the pricing grid on Schedule 1.01(A) below the heading “Facility
Fee.”  The Applicable Facility Fee Rate
shall be computed in accordance with the parameters set forth on Schedule 1.01(A).

 

Applicable Margin shall mean, as applicable:

 

(A)          the
percentage spread to be added to Base Rate under the Revolving Credit Base Rate
Option or the Term Loan Base Rate Option corresponding to the indicated level
of Insurer Financial Strength Rating or Holdings Debt Rating, as the case may
be, in the pricing grid on Schedule 1.01(A) below the heading
“Applicable Margin for Base Rate Loans,” or

 

(B)           the
percentage spread to be added to LIBOR under the Revolving Credit LIBOR Option
or the Term Loan LIBOR Option corresponding to the indicated level of Insurer
Financial Strength Rating or Holdings Debt Rating, as the case may be, in the
pricing grid on Schedule 1.01(A) below the heading “Applicable
Margin for LIBOR Loans.”

 

The Applicable Margin shall be computed in accordance
with the parameters set forth on Schedule 1.01(A).

 

2

 

Applicable Usage Premium shall mean the percentage rate per annum
corresponding to the indicated level of Insurer Financial Strength Rating or
Holdings Debt Rating, as the case may be, in the pricing grid on Schedule 1.01(A)
below the heading “Usage Premium.”  The
Applicable Usage Premium shall be computed in accordance with the parameters
set forth on Schedule 1.01(A).

 

Approved Currency shall mean each of Dollars and each Alternate
Currency.

 

Assignee Bank shall have the meaning assigned to such term in Section
2.09(b).

 

Assignment and Assumption Agreement shall mean an Assignment and Assumption
Agreement by and among a Purchasing Bank, a Transferor Bank and the Agent, as
Agent and on behalf of the remaining Banks, substantially in the form of Exhibit 1.01(A).

 

Associated Cost Rateshall mean, with respect to any
Interest Period for Pounds Sterling denominated Loans, the amount
(expressed as a percentage rate per annum, rounded up to the nearest four
decimal places, as determined by the Agent on the first day of such Interest
Period) required to compensate the Banks lending from facility offices in the
United Kingdom for the portion of the cost of each such Bank of complying with
the cash ratio and special deposit requirements of the Bank of England and/or capital
adequacy requirements and banking supervision or other fees imposed by the
United Kingdom Financial Services Authority, which, in the reasonable
determination of such Bank, is attributable to the Loans made by such Bank from
its facility office in the United Kingdom and outstanding during such Interest
Period.

 

Authorized Officer shall mean those individuals, designated by written
notice to the Agent from each Borrower, authorized to execute notices, reports
and other documents required hereunder on behalf of such Borrower.  Each Borrower may amend such list of
individuals from time to time by giving written notice of such amendment to the
Agent.

 

Banks shall mean the financial institutions named on Schedule 1.01(B)
and their respective successors and assigns as permitted hereunder, each of
which is referred to herein as a “Bank”.

 

Bank to be Terminated shall have the meaning assigned to such term in
Section 2.09(b).

 

Base Rate shall mean the greater of (i) the interest rate
per annum announced from time to time by the Agent at its Principal Office as
its then prime rate, which rate may not be the lowest rate then being charged
commercial borrowers by the Agent, or (ii) the Federal Funds Effective
Rate plus 0.5% per annum.

 

Base Rate Loan shall mean each Loan designated or deemed designated
as such by any Borrower at the time of incurrence thereof or conversion
thereto.

 

Base Rate Option shall mean the Revolving Credit Base Rate Option or
the Term Loan Base Rate Option, as the case may be.

 

3

 

Benefit Arrangement shall mean at any time an “employee benefit plan,”
within the meaning of Section 3(3) of ERISA, which is neither a Plan nor a
Multiemployer Plan and which is maintained, sponsored or otherwise contributed
to by any member of the ERISA Group.

 

Bermuda Law Event shall have the meaning assigned to that term in
Section 7.04.

 

Bid shall have the meaning assigned to such term in
Section 2.08(b).

 

Bid Deadline shall have the meaning assigned to such term in Section
2.08(b).

 

Bid Loan Borrowing Date shall mean, with respect to any Bid Loan, the date
for the making thereof, which date shall be a Business Day.

 

Bid Loan Fixed Rate Option shall mean the option of each Borrower
to request that the Banks submit Bids to make Bid Loans bearing interest at a
fixed rate per annum quoted by such Banks as a numerical percentage (and not as
a spread over another rate such as the LIBOR).

 

Bid Loan Interest Period shall have the meaning assigned to such
term in Section 2.08(a).

 

Bid Loan LIBOR Rate Option shall mean the option of each Borrower
to request that the Banks submit Bids to make Bid Loans bearing interest at a
rate per annum quoted by such Banks at the LIBOR in effect two Business Days
before the Borrowing Date of such Bid Loan plus a LIBOR Bid Loan Spread.

 

Bid Loan Request shall have the meaning assigned to such term in
Section 2.08(b).

 

Bid Loans shall mean collectively all of the Bid Loans and Bid
Loan shall mean separately any Bid Loan, made by any of the Banks to either
Borrower pursuant to Section 2.08.

 

Bid Notes shall mean collectively all of the Bid Notes and Bid
Note shall mean separately any Bid Note, of each Borrower in the form of Exhibit 1.01(B)
evidencing the Bid Loans made to such Borrower together with all amendments,
extensions, renewals, replacements, refinancings or refunds thereof in whole or
in part.

 

Borrower shall mean Holdings, the Company and, at all times
after the conditions precedent set forth in Section 6.03(b) have been
satisfied, the UK Borrower.

 

Borrowing Date shall mean, with respect to any Loan, the date for
the making thereof or the renewal or conversion thereof at or to the same or a
different Interest Rate Option, which date shall be a Business Day.

 

Borrowing Tranche shall mean specified portions of Loans outstanding as
follows:  (i) any Loans to which a
LIBOR Option or a Bid Loan Fixed Rate Option applies which become subject to
the same Interest Rate Option under the same Loan Request by a Borrower

 

4

 

and which have the same Interest Period shall
constitute one Borrowing Tranche, and (ii) all Loans to which a Base Rate
Option applies shall constitute one Borrowing Tranche.

 

Business Day shall mean any day other than a Saturday or Sunday or
a legal holiday on which commercial banks are authorized or required to be
closed for business in New York, New York and, if the applicable
Business Day relates to any Loan to which the LIBOR Option applies, such day
must also be a day on which dealings are carried on in the London interbank
market and, with respect to any payments due by Holdings, such day must also be
a day which is not a national or public holiday in Bermuda.

 

Closing Date shall mean the date on which the conditions precedent
set forth in Section 6.01 have been satisfied.

 

Commitment shall mean as to any Bank its Revolving Credit
Commitment, and Commitments shall mean the aggregate of the Revolving
Credit Commitments of all of the Banks.

 

Committed Loan shall mean a Revolving Credit Loan or a Term Loan, as
the case may be.  

 

Committed Loan Interest Period shall mean the period of time selected
by a Borrower in connection with (and to apply to) any election permitted
hereunder by such Borrower to have Revolving Credit Loans or Term Loans bear
interest under the LIBOR Option. 
Subject to the last sentence of this definition, such period shall be
one, two, three or six Months.  Such
Interest Period shall commence on the effective date of borrowing of any Loan
bearing interest at a rate determined with reference to such Interest Rate
Option, which shall be (i) the Borrowing Date if the respective Borrower is
requesting new Loans, or (ii) the date of renewal of or conversion to the LIBOR
Option if the respective Borrower is renewing or converting to the LIBOR Option
applicable to outstanding Loans. 
Notwithstanding the second sentence hereof:  (A) any Interest Period which would otherwise end on a date which
is not a Business Day shall be extended to the next succeeding Business Day unless
such Business Day falls in the next calendar month, in which case such Interest
Period shall end on the directly preceding Business Day, and (B) such Borrower
shall not select, convert to or renew an Interest Period for any portion of the
Loans that would end after the Term Loan Maturity Date.

 

Committed Loan LIBOR Option shall mean a Revolving Credit Loan LIBOR
Option and a Term Loan LIBOR Option.

 

Committed Loan Request shall mean a request for a Revolving Credit Loan or a
request to select, convert to or renew a Base Rate Option or LIBOR Option with
respect to an outstanding Revolving Credit Loan or Term Loan in accordance with
Section 2.05, Section 3.01 and Section 3.02.

 

Company shall mean Assured Guaranty Corp., a Maryland
corporation.

 

Compliance Certificate shall have the meaning assigned to such term in
Section 7.03(c).

 

5

 

Consideration shall mean a greater than de minimis monetary return
for the sale or provision of a service or product or for the undertaking of an
obligation or liability, except that with respect to a Permitted Acquisition,
Consideration shall mean the aggregate of (i) the cash paid by any of the
Company or any Material Subsidiary, as buyer, directly or indirectly, to the seller
in connection with such Permitted Acquisition, (ii) the Indebtedness
incurred or assumed by the Company or any of the Material Subsidiaries, as
buyer, with respect to such Permitted Acquisition, whether in favor of the
seller or otherwise and whether fixed or contingent, (iii) any Guaranty
given or incurred by the Company or any Material Subsidiary in connection
therewith, and (iv) any other consideration given or obligation incurred
by the Company or any of the Material Subsidiaries in connection with such
Permitted Acquisition.

 

Consolidated Debt shall mean, at any time, an amount equal to the sum
(without duplication) of the then outstanding Indebtedness of Holdings or the
Company, as the case may be, and of each Subsidiary of Holdings or the Company,
as the case may be, (excluding, however, (i) the amount of all
Insurance-Related Guaranties, (ii) the amount of any Soft Capital,
(iii) the obligations of Holdings with respect to any preferred stock of
Holdings, and (iv) the obligations of any of Holdings or its Subsidiaries under
Guaranteed Investment Contracts), determined and consolidated in accordance
with GAAP.

 

Consolidated Interest Coverage Ratio for any period shall mean the ratio of
Consolidated Net Income to Consolidated Interest Expense for such period.

 

Consolidated Interest Expense shall mean, for any period, the total
consolidated interest expense of Holdings and its Subsidiaries for such period.

 

Consolidated Net Income shall mean, for any period, the net income for such
period for Holdings and its Subsidiaries, determined on a consolidated basis in
accordance with GAAP.

 

Consolidated Net Worth shall mean, at any time, the net worth of Holdings
and its Subsidiaries at such time, determined on a consolidated basis in
accordance with GAAP.

 

Credit Derivative Guaranties shall have the meaning assigned to such
term in Section 7.02(c).

 

Dollar, Dollars, U.S. Dollars and the symbol $
shall mean lawful money of the United States of America.

 

Dollar Equivalent shall mean, at any time for the determination
thereof, the amount of Dollars which could be purchased with the amount of the
relevant Alternate Currency involved in such computation at the spot exchange
rate therefor as quoted by the Administrative Agent as of 11:00 A.M., London
time, on the date two Business Days prior to the date of any determination
thereof for purchase on such date.

 

Effective Date shall mean the date on which the conditions precedent
set forth in Section 6.02 have been satisfied.

 

6

 

ERISA shall mean the Employee Retirement Income Security
Act of 1974, as the same may be amended or supplemented from time to time, and
any successor statute of similar import, and the rules and regulations
thereunder, as from time to time in effect.

 

ERISA Group shall mean, at any time, Holdings and all members of
a controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control and all other entities which, together with
Holdings, are treated as a single employer under Section 414 of the
Internal Revenue Code.

 

Euro shall mean the single currency of participating
member states of the European Union.

 

Eurodollar Rate shall mean, with respect to the Loans comprising any
Borrowing Tranche denominated in Dollars to which the LIBOR Option applies for
any Interest Period, an interest rate per annum determined on the basis of the
rate for deposits in Dollars for a period comparable to such Interest Period
commencing on the first day of such Interest Period appearing on Page 3750 of
the Telerate screen as of 11:00 A.M., London time, two Business Days prior to
the beginning of such Interest Period. 
In the event that such rate does not appear on Page 3750 of the Telerate
screen (or otherwise on such screen), the Eurodollar Rate shall be determined
by reference to such other publicly available service for displaying eurodollar
rates as may be agreed upon by the Agent and the Borrowers or, in the absence
of such agreement, the Eurodollar Rate shall be the rate of interest per annum
determined by the Agent in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) equal to the rate per
annum at which Dollar deposits approximately equal in principal amount to such
Borrowing Tranche for a period and with a maturity comparable to such Interest
Period are offered to the principal London office of Agent in immediately
available funds in the London interbank market at approximately 11:00 A.M.,
London time, two Business Days prior to the commencement of such Interest
Period.  The Agent shall give prompt
notice to the Borrowers of the Eurodollar Rate as determined or adjusted in
accordance herewith, which determination shall be conclusive absent manifest
error.

 

Eurodollar Reserve Percentage shall mean as of any day and with
respect to any Bank or the Agent, the maximum percentage in effect on such day
for such Bank or the Agent, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for determining the reserve
requirements as it affects such Bank or the Agent (including supplemental,
marginal and emergency reserve requirements) with respect to eurocurrency
funding (currently referred to as “Eurocurrency Liabilities”).

 

Euro-LIBOR  shall mean, with respect to the Loans
comprising any Borrowing Tranche denominated in Euros to which the LIBOR Option
applies for any Interest Period, an interest rate per annum determined on the
basis of the rate for deposits in Euros for a period comparable to such
Interest Period commencing on the first day of such Interest Period appearing
on Page 3750 of the Telerate screen as of 11:00 A.M., London time, two Business
Days prior to the beginning of such Interest Period.  In the event that such rate does not appear on Page 3750 of the
Telerate screen (or otherwise on such screen), Euro LIBOR shall be determined by reference to such other
publicly available service for displaying Euro-denominated rates as may be
agreed upon by the Agent and the Borrowers or, in the absence of such
agreement, the Euro

 

7

 

LIBOR shall be the rate of interest per annum
determined by the Agent in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) equal to the rate per
annum at which Euro deposits approximately equal in principal amount to such
Borrowing Tranche for a period and with a maturity comparable to such Interest
Period are offered to the principal London office of Agent in immediately
available funds in the London interbank market at approximately 11:00 A.M.,
London time, two Business Days prior to the commencement of such Interest
Period.  The Agent shall give prompt
notice to the Borrowers of the Euro LIBOR as determined or adjusted in
accordance herewith, which determination shall be conclusive absent manifest
error.

 

Event of Default shall mean any of the events described in Section
8.01 and referred to therein as an “Event of Default.”

 

Existing Credit Agreement shall mean the Credit Agreement, dated
as of May 22, 2003, among the Company (formerly known as ACE Guaranty Corp.),
the UK Borrower, the banks party thereto, ABN AMRO Bank N.V., as administrative
agent, and ABN AMRO Incorporated, as syndication agent, lead arranger and
bookrunner.

 

Existing Reinsurance Coverage shall have the meaning assigned to such
term in Section 5.01(h)(C).

 

Expiration Date shall mean, with respect to the Revolving Credit
Commitments, the date occurring 364 days after the Closing Date, or such later
date as determined pursuant to Section 2.09.

 

Extending Bank shall have the meaning assigned to such term in
Section 2.09(b).

 

Facility Fee shall have the meaning assigned to that term in
Section 2.03.

 

Facility Usage shall mean at any time the sum of the principal
amount of the Revolving Credit Loans or Term Loans, as the case may be,
outstanding and, solely for purposes of Section 2.04, the principal amount of
the Bid Loans outstanding.

 

Federal Funds Effective Rate for any day shall mean the rate per
annum (based on a year of 360 days and actual days elapsed and rounded upward
to the nearest 1/100 of 1%) announced by the Federal Reserve Bank of
New York (or any successor) on such day as being the weighted average of
the rates on overnight federal funds transactions arranged by federal funds
brokers on the previous trading day, as computed and announced by such Federal
Reserve Bank (or any successor) in substantially the same manner as such
Federal Reserve Bank computes and announces the weighted average it refers to
as the “Federal Funds Effective Rate” as of the date of this Agreement; provided,
if such Federal Reserve Bank (or its successor) does not announce such rate on
any day, the “Federal Funds Effective Rate” for such day shall be the Federal
Funds Effective Rate for the last day on which such rate was announced.

 

Fixed Rate shall mean a fixed interest rate quoted by a Bank in
its Bid to apply to such Bank’s Bid Loan over the term of such Bid Loan if such
Bank’s Bid is accepted.

 

8

 

Fixed Rate Bid Loan shall mean a Bid Loan that bears interest under the
Bid Loan Fixed Rate Option.

 

GAAP shall mean generally accepted accounting principles
as in effect from time to time in the United States, subject to the provisions
of Section 1.03, applied on a consistent basis both as to classification of
items and amounts.

 

Guaranteed Investment Contract shall mean, with respect to any Person,
a guaranteed investment contract, funding agreement or similar agreement issued
or entered into by such Person wherein such Person guarantees a rate of return
on invested capital over the term of such contract or agreement.

 

Guarantor shall mean the Company and each Material Subsidiary
which hereafter joins this Agreement as a Guarantor after the date hereof
pursuant to Section 10.18.

 

Guarantor Joinder shall mean a joinder by a Person as a Guarantor under
this Agreement, the Guaranty Agreement and the other Loan Documents in the form
of Exhibit 1.01(G)(1).

 

Guaranty of any Person shall mean any obligation of such
Person guarantying or in effect guarantying any liability or obligation of any
other Person in any manner, whether directly or indirectly, including any
agreement to indemnify or hold harmless any other Person (other than as an
incidental part of another transaction), any performance bond or other
suretyship arrangement and any other form of assurance against loss, except
endorsement of negotiable or other instruments for deposit or collection in the
ordinary course of business.

 

Guaranty Agreement shall mean one or more Guaranty Agreements in
substantially the form of Exhibit 1.01(G)(2)-1 or Exhibit 1.01(G)(2)-2
executed and delivered by each of the Guarantors to the Agent for the benefit
of the Banks.

 

Historical Statements shall have the meaning assigned to that term in
Section 5.01(h)(A).

 

Holdings shall mean Assured Guaranty Ltd., a company organized
under the laws of Bermuda.

 

Holdings Debt Rating shall mean the senior unsecured debt rating of
Holdings as determined by either of Standard & Poor’s or Moody’s.

 

Indebtedness shall mean, as to any Person at any time, any and all
indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or
joint or several) of such Person for or in respect of:  (i) borrowed money, (ii) amounts
raised under or liabilities in respect of any note purchase or acceptance
credit facility, (iii) payment obligations (contingent or otherwise) under
any letter of credit, currency swap agreement, interest rate swap, cap, collar
or floor agreement or other interest rate management device, (iv) any
other transaction (including forward sale or purchase agreements, capitalized
leases and conditional sales agreements) having the commercial effect of a
borrowing of money entered into by such Person to finance its operations or
capital

 

9

 

requirements (but not including trade payables and
accrued expenses incurred in the ordinary course of business which are not
represented by a promissory note or other evidence of indebtedness and which
are not more than ninety (90) days past due), (v) any Guaranteed Investment
Contract, or (vi) any Guaranty of Indebtedness.

 

Insolvency Proceeding shall mean, with respect to any Person, (a) a
case, action or proceeding with respect to such Person (i) before any
court or any other Official Body under any bankruptcy, insolvency,
reorganization or other similar Law now or hereafter in effect, or (ii) for
the appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator (or similar official) of Holdings or any Material
Subsidiary, or otherwise relating to the liquidation, dissolution, winding-up
or relief of such Person, or (b) any general assignment for the benefit of
creditors, composition, marshaling of assets for creditors, or other similar
arrangement in respect of such Person’s creditors generally or any substantial
portion of its creditors, undertaken under any Law.

 

Insurance-Related Guaranties shall have the meaning assigned to that
term in Section 7.02(c).

 

Insurer Financial Strength Rating shall mean the insurer financial strength rating of the Company as determined by
either of Standard & Poor’s and Moody’s.

 

Interest Period shall mean either a Committed Loan Interest Period or
a Bid Loan Interest Period.

 

Interest Rate Hedge shall mean an interest rate exchange, collar, cap,
swap, adjustable strike cap, adjustable strike corridor, or similar agreement
entered into by Holdings or any Material Subsidiary in order to provide
protection to, or minimize the impact upon, Holdings or any Material Subsidiary
of increasing floating rates of interest applicable to Indebtedness.

 

Interest Rate Option shall mean any Committed Loan LIBOR Option, Bid Loan
LIBOR Option, Bid Loan Fixed Rate Option, or Base Rate Option.

 

Internal Revenue Code shall mean the Internal Revenue Code of 1986, as the
same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.

 

Law shall mean any law (including common law),
constitution, statute, treaty, regulation, rule, ordinance, opinion, release,
ruling, order, injunction, writ, decree, bond, judgment, authorization, or
approval, lien or award of or settlement agreement with any Official Body.

 

LIBOR shall mean, with respect to any Borrowing Tranche of
Loans, the relevant interest rate, i.e., Eurodollar Rate, Euro LIBOR or
Sterling LIBOR.

 

LIBOR Bid Loan shall mean any Bid Loan that bears interest under the
Bid Loan LIBOR Option.

 

10

 

LIBOR Bid Loan Spread shall mean the spread quoted by a Bank in its Bid to
apply to such Bank’s Bid Loan if such Bank’s Bid is accepted.  The LIBOR Bid Loan Spread shall be quoted as
a percentage rate per annum and expressed in multiples of 1/1000th of one
percentage point to be either added to (if it is positive) or subtracted from
(if it is negative) the LIBOR in effect two (2) Business Days before the
Borrowing Date with respect to such Bid Loan. 
Interest on LIBOR Bid Loans shall be computed based on a year of 360
days for the actual days elapsed.

 

LIBOR Interest Period shall mean the Interest Period applicable to a LIBOR
Bid Loan, a Revolving Credit Loan that is subject to the Revolving Credit LIBOR
Option or a Term Loan that is subject to the Term Loan LIBOR Option.

 

LIBOR Loan shall mean each Loan designated or deemed designated
as such by any Borrower at the time of incurrence thereof or conversion
thereto.

 

LIBOR Option shall mean either the Revolving Credit LIBOR Option,
the Term Loan LIBOR Option or the Bid Loan LIBOR-Rate Option.

 

Lien shall mean any mortgage, deed of trust, pledge, lien,
security interest, charge, or other encumbrance or security arrangement of any
nature whatsoever, whether voluntarily or involuntarily given, including any
conditional sale or title retention arrangement, and any assignment, deposit
arrangement, or lease intended as, or having the effect of, security and any
filed financing statement or other notice of any of the foregoing (whether or
not a lien or other encumbrance is created or exists at the time of the
filing).

 

Loan Documents shall mean this Agreement, the Agent’s Letter, the
Guaranty Agreement, and any other instruments, certificates, or documents
delivered or contemplated to be delivered hereunder or thereunder or in
connection herewith or therewith, as the same may be supplemented or amended
from time to time in accordance herewith or therewith, and “Loan Document”
shall mean any of the Loan Documents.

 

Loan Request shall mean either a Bid Loan Request or a Committed
Loan Request.

 

Loans shall mean collectively all Revolving Credit Loans,
Term Loans and Bid Loans and Loan shall mean separately any Revolving Credit
Loan, Term Loan or Bid Loan.

 

Material Adverse Change shall mean any set of circumstances or events which
(a) has or could reasonably be expected to have any material adverse
effect whatsoever upon the validity or enforceability of this Agreement or any
other Loan Document, (b) is or could reasonably be expected to be material
and adverse to the business, properties, assets, financial condition, results
of operations or prospects of Holdings and its Material Subsidiaries taken as a
whole or the Company and its Material Subsidiaries taken as a whole,
(c) impairs materially or could reasonably be expected to impair
materially the ability of Holdings and the Material Subsidiaries taken as a
whole duly and punctually to pay or to perform their respective obligations
under the Loan Documents, or (d) impairs materially or could reasonably be
expected to impair materially the ability of the Agent or any of the Banks, to
the extent permitted, to enforce their legal remedies pursuant to this
Agreement or any other Loan Document.

 

11

 

Material Non-AGC Subsidiary shall mean any Material Subsidiary of
Holdings other than (a) Assured Guaranty US Holdings Inc., Assured Guaranty
Finance Overseas Ltd.,  their respective
Subsidiaries (including the Company and its Subsidiaries), (b) any Material
Subsidiary of Holdings which is regulated by a state insurance regulatory
authority in the U.S. and (c) Assured Guaranty Barbados Holdings Ltd.

 

Material Subsidiary shall mean (i) any Subsidiary of Holdings which has
at any time, or which will have after giving effect to any contemplated
transaction, acquisition, loan or investment, a net worth equal to or greater
than an amount which is the greater of five percent (5%) of the consolidated
tangible net worth of Holdings and its Subsidiaries or $25,000,000,
(ii) any Subsidiary of Holdings as to which Holdings requests in writing
that it be a Material Subsidiary, and (iii) any Subsidiary or Subsidiaries of
Holdings which own(s) in the aggregate 30% or more of any Material Subsidiary;
and Material Subsidiaries shall mean all such Subsidiaries.  Notwithstanding the foregoing, each of the
Company and the UK Borrower shall be deemed to be a Material Subsidiary for all
purposes of this Agreement and the other Loan Documents; provided, however,
that neither the Company nor the UK Borrower shall be required to be a
Guarantor (except for the requirement that the Company guaranty all obligations
of the UK Borrower).

 

Month, with respect to an Interest Period under the LIBOR
Option, shall mean the interval between the days in consecutive calendar months
numerically corresponding to the first day of such Interest Period.  If any LIBOR Interest Period begins on a day
of a calendar month for which there is no numerically corresponding day in the
month in which such Interest Period is to end, the final month of such Interest
Period shall be deemed to end on the last Business Day of such final month.

 

Moody’s shall mean Moody’s Investors Service, Inc. and its
successors.

 

Multiemployer Plan shall mean any employee benefit plan which is a
“multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA and
to which Holdings or any member of the ERISA Group is then making or accruing
an obligation to make contributions or, within the preceding five Plan years,
has made or had an obligation to make such contributions.

 

Multiple Employer Plan shall mean a Plan which has two or more contributing
sponsors (including Holdings or any member of the ERISA Group) at least two of
whom are not under common control, as such a plan is described in
Sections 4063 and 4064 of ERISA.

 

Net Par shall mean the aggregate maximum par amount of
insurance and reinsurance coverage under all obligations of insurance or
reinsurance (or similar arrangements) provided by a Person less the aggregate
maximum par amount of reinsurance (or similar arrangements including hedging
arrangements) coverage in favor of such Person with respect to its insurance or
reinsurance obligations.

 

Notes shall mean the Revolving Credit/Term Loan Notes and
Bid Notes.

 

Notices shall have the meaning assigned to that term in
Section 10.06.

 

12

 

Obligation shall mean any obligation or liability of any
Borrower or any Material Subsidiary to the Agent or any of the Banks, howsoever
created, arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing, or due or to become due, under or in
connection with this Agreement, any Notes,  the Agent’s Letter or any other Loan
Document.

 

Off-Balance Sheet Transactions shall have the meaning assigned to that
term in Section 7.03(e).

 

Offered Amount shall have the meaning assigned to such term in
Section 2.08(b).

 

Official Body shall mean any national, federal, state, local, or
other government or political subdivision or any agency, authority, board,
bureau, central bank, commission, department, or instrumentality of either, or
any court, tribunal, grand jury, or arbitrator, in each case whether foreign or
domestic.

 

PBGC shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA or any successor.

 

Permitted Acquisitions shall have the meaning assigned to such term in
Section 7.02(f).

 

Permitted Investments shall mean:

 

(i)            direct
obligations of the United States of America or the United Kingdom or any agency
or instrumentality thereof or obligations backed by the full faith and credit
of the United States of America or the United Kingdom maturing in twelve (12)
months or less from the date of acquisition;

 

(ii)           commercial
paper maturing in 180 days or less rated not lower than A-1, by Standard &
Poor’s or P-1 by Moody’s on the date of acquisition;

 

(iii)          demand
deposits, time deposits or certificates of deposit maturing within one year in
commercial banks whose obligations are rated A-1, A or the equivalent or better
by Standard & Poor’s on the date of acquisition;

 

(iv)          fixed
income securities with a weighted average credit quality of A by Standard &
Poor’s or A2 by Moody’s on the date of acquisition; and

 

(v)           investments
of the types specified in Sections 1402(b) and 1404(a)(1), (2), (3), (8), and
(10) of the New York Insurance Law.

 

Permitted Liens shall mean:

 

(i)            Liens
for taxes, assessments, or similar charges, incurred in the ordinary course of
business and which are not yet due and payable;

 

13

 

(ii)           Liens
and pledges or deposits made in the ordinary course of business of Holdings or
any Material Subsidiary with respect to employee’s salaries and benefits, to
secure payment of workmen’s compensation, or to participate in any fund in
connection with workmen’s compensation, unemployment insurance, old-age
pensions or other social security programs with respect to such Person’s
officers or employees;

 

(iii)          Liens
of mechanics, materialmen, warehousemen, carriers, or other like Liens,
securing obligations incurred in the ordinary course of business that are not
yet due and payable and Liens of landlords securing obligations to pay lease
payments that are not yet due and payable or in default;

 

(iv)          Good-faith
pledges or deposits made in the ordinary course of business of Holdings or any
Material Subsidiary to secure statutory or regulatory obligations of Holdings
or any Material Subsidiary;

 

(v)           Encumbrances
consisting of zoning restrictions, easements or other restrictions on the use
of real property, none of which materially impairs the use of such property or
the value thereof, and none of which is violated in any material respect by
existing or proposed structures or land use;

 

(vi)          Liens,
security interests and mortgages in favor of the Agent for the benefit of the
Banks securing the Obligations;

 

(vii)         Liens
on property leased by Holdings or any Material Subsidiary under capital and
operating leases;

 

(viii)        Any
Lien described on Schedule 1.01(P), provided that the
principal amount secured thereby is not hereafter increased;

 

(ix)           Purchase
Money Security Interests;

 

(x)            Liens
on assets received by any Borrower from a third Person and held in trust by any
Borrower in respect of liabilities assumed by any Borrower in the course of the
reinsurance business of such Borrower;

 

(xi)           Liens
securing Credit Derivative Guaranties;

 

(xii)          To
the extent that they would constitute “Liens”, Insurance-Related Guaranties;
and

 

(xiii)         The
following, (A) if the validity or amount thereof is being contested in
good faith by appropriate and lawful proceedings diligently conducted so long as
levy and execution thereon have been stayed and continue to be stayed or
(B) if a final judgment is entered and such judgment is discharged within
thirty (30) days of entry, and they do not in the aggregate materially impair
the ability of any Borrower or any Material Subsidiary to perform its
Obligations hereunder or under the other Loan Documents:

 

14

 

(1)           Claims
or Liens for taxes, assessments or charges due and payable and subject to
interest or penalty, provided that the applicable Borrower or applicable
Material Subsidiary maintains such reserves or other appropriate provisions as
shall be required by GAAP and pays all such taxes, assessments or charges
forthwith upon the commencement of proceedings to foreclose any such Lien;

 

(2)           Claims,
Liens, or encumbrances upon, and defects of title to, real or personal
property, including any attachment of personal or real property or other legal
process prior to adjudication of a dispute on the merits;

 

(3)           Claims
or Liens of mechanics, materialmen, warehousemen, carriers, or other statutory
nonconsensual Liens; or

 

(4)           Liens
resulting from final judgments or orders described in Section 8.01(f).

 

Person shall mean any individual, company, corporation,
partnership, limited liability company, association, joint-stock company,
trust, unincorporated organization, joint venture, government or political
subdivision or agency thereof, or any other entity.

 

Plan shall mean at any time an employee pension benefit
plan (including a Multiple Employer Plan, but not a Multiemployer Plan) which
is covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Internal Revenue Code and either (i) is
maintained by any member of the ERISA Group for employees of any member of the
ERISA Group or (ii) has at any time within the preceding five years been
maintained by any entity which was at such time a member of the ERISA Group for
employees of any entity which was at such time a member of the ERISA Group.

 

Potential Default shall mean any event or condition which with notice,
passage of time or a determination by the Agent or the Required Banks, or any
combination of the foregoing, would constitute an Event of Default.

 

Pounds Sterling shall mean freely transferable lawful money of the
United Kingdom.

 

Principal Amount shall mean (i) the stated principal amount of each
Loan denominated in Dollars, and/or (ii) the Dollar Equivalent of the stated
principal amount of each Alternate Currency Loan, as the context may require.

 

Principal Office shall mean the main banking office of the Agent in
New York, New York.

 

Prohibited Transaction shall mean any “prohibited transaction” as defined in
Section 4975 of the Internal Revenue Code or Section 406 of ERISA for
which neither an individual nor a class exemption has been issued by the United
States Department of Labor.

 

Property shall mean all real property, both owned and leased,
of Holdings or any Material Subsidiary.

 

15

 

Purchase Money Security Interest shall mean Liens upon tangible personal
property securing loans to the Company or any Material Subsidiary, or deferred
payments by such Person, in either case for the purchase of such tangible
personal property.

 

Purchasing Bank shall mean a Bank which becomes a party to this
Agreement by executing an Assignment and Assumption Agreement.

 

Ratable Share shall mean the proportion that a Bank’s Commitment
bears to the Commitments.

 

Regulation U shall mean any of Regulations T, U, or X as
promulgated by the Board of Governors of the Federal Reserve System, as amended
from time to time.

 

Reportable Event shall mean a reportable event described in
Section 4043 of ERISA and regulations thereunder with respect to a Plan or
Multiemployer Plan.

 

Requested Amount shall have the meaning assigned to such term in
Section 2.08(a).

 

Required Banks shall mean

 

(A)          if
there are no Loans, Required Banks shall mean Banks whose Commitments aggregate
greater than 50% of the Commitments of all of the Banks, or

 

(B)           if
there are Loans, Required Banks shall mean:

 

(i)            prior
to a termination of the Commitments hereunder pursuant to Section 8.02(a) or
Section 8.02(b), any Bank or group of Banks if the sum of the Principal Amount
of the Committed Loans of such Banks then outstanding aggregates greater than
50% of the total Principal Amount of all of the Committed Loans then
outstanding; and

 

(ii)           after
a termination of the Commitments hereunder pursuant to Section 8.02(a) or
Section 8.02(b), any Bank or group of Banks if the sum of the Principal Amount
of the Loans of such Banks then outstanding aggregates greater than 50% of the
total principal amount of all of the Loans then outstanding.

 

Revolving Credit Base Rate Option shall mean the option of the Borrowers
to have Revolving Credit Loans bear interest at the rate and under the terms
and conditions set forth in Section 3.01(a)(i).

 

Revolving Credit Commitment shall mean, as to any Bank at any time,
the amount initially set forth opposite its name on Schedule 1.01(B)
in the column labeled “Amount of Commitment for Revolving Credit Loans,” and
thereafter on Schedule I to the most recent Assignment and Assumption
Agreement, and Revolving Credit Commitments shall mean the aggregate Revolving
Credit Commitments of all of the Banks.

 

16

 

Revolving Credit LIBOR Option shall mean the option of the Borrowers
to have Revolving Credit Loans bear interest at the rate and under the terms
and conditions set forth in Section 3.01(a)(ii).

 

Revolving Credit Loans shall mean collectively all Revolving Credit Loans
made by the Banks to the Borrowers and Revolving Credit Loan shall mean
separately any Revolving Credit Loan, made by one of the Banks to a Borrower, pursuant
to Section 2.01(a).  A Bid Loan is not a
Revolving Credit Loan, except that it will be treated as a Revolving Credit
Loan following a termination of the Commitments hereunder pursuant to Section
8.02(a) or Section 8.02(b) as provided in Section 8.03.

 

Revolving Credit/Term Loan Note shall mean any Revolving Credit/Term
Loan Note of a Borrower in the form of Exhibit 1.01(R) issued by
such Borrower to a Bank evidencing the Revolving Credit Loans or Term Loans, as
the case may be, of such Bank to such Borrower, together with all amendments,
extensions, renewals, replacements, refinancings or refundings thereof in whole
or in part.

 

SEC shall mean the Securities and Exchange Commission or
any governmental agencies substituted therefor.

 

Soft Capital shall have the meaning assigned to that term in
Section 7.02(a).

 

Standard & Poor’s shall mean Standard & Poor’s Ratings Services, a
division of The McGraw-Hill Companies, Inc., and its successors.

 

Statutory Capital shall mean the aggregate of policyholders’ surplus of
the Company and the contingency reserve of the Company, each determined in a
manner consistent with that used in preparing the Historical Statements
referred to in Section 5.01(h)(A) [Historical Statements].

 

Sterling LIBOR shall mean,
with respect to the Loans comprising any Borrowing Tranche denominated in
Pounds Sterling to which the LIBOR Option applies for any Interest Period, (A)
an interest rate per annum determined on the basis of the rate for deposits in
Pounds Sterling for a period comparable to such Interest Period commencing on
the first day of such Interest Period appearing on Page 3750 of the Telerate
screen as of 11:00 A.M., London time, two Business Days prior to the beginning
of such Interest Period plus (B) the Associated Cost Rate for such Loans for
such Interest Period.  In the event that
such rate does not appear on Page 3750 of the Telerate screen (or otherwise on
such screen), Sterling LIBOR shall be determined by reference to such other
publicly available service for displaying Pounds Sterling-denominated rates as
may be agreed upon by the Agent and the Borrowers or, in the absence of such
agreement, Sterling LIBOR shall
be the rate of interest per annum determined by the Agent in accordance with
its usual procedures (which determination shall be conclusive absent manifest
error) equal to the rate per annum at which Pounds Sterling deposits
approximately equal in principal amount to such Borrowing Tranche for a period
and with a maturity comparable to such Interest Period are offered to the
principal London office of Agent in immediately available funds in the London
interbank market at approximately 11:00 A.M., London time, two Business Days
prior to the commencement of such Interest Period.  The Agent shall give prompt notice to

 

17

 

the Borrowers of the
Sterling LIBOR as determined or adjusted in accordance herewith, which
determination shall be conclusive absent manifest error.

 

Subsidiary of any Person at any time shall mean (i) any
corporation, company or trust of which 50% or more (by number of shares or
number of votes) of the outstanding capital stock or shares of beneficial
interest normally entitled to vote for the election of one or more directors or
trustees (regardless of any contingency which does or may suspend or dilute the
voting rights) is at such time owned directly or indirectly by such Person or
one or more of such Person’s Subsidiaries, (ii) any partnership of which
such Person is a general partner or of which 50% or more of the partnership
interests is at the time directly or indirectly owned by such Person or one or
more of such Person’s Subsidiaries, (iii) any limited liability company of
which such Person is a member or of which 50% or more of the limited liability
company interests is at the time directly or indirectly owned by such Person or
one or more of such Person’s Subsidiaries or (iv) any corporation, trust,
partnership, limited liability company or other entity which is controlled or
capable of being controlled by such Person or one or more of such Person’s
Subsidiaries.  Notwithstanding the
foregoing, the Company and the UK Borrower shall be deemed to be a “Subsidiary”
of Holdings and, with respect to the UK Borrower, of the Company, for all
purposes in this Agreement and the other Loan Documents; provided, however,
that neither the Company nor the UK Borrower shall be required to be a
Guarantor (except for the requirement that the Company guaranty all obligations
of the UK Borrower).

 

Term Loan Base Rate Option shall mean the option of the Borrowers
to have Term Loans bear interest at the rate and under the terms and conditions
set forth in Section 3.01(a)(i).

 

Term Loan Fee shall have the meaning assigned to that term in
Section 2.03(b).

 

Term Loan LIBOR Option shall mean the option of the Borrowers to have Term
Loans bear interest at the rate and under the terms and conditions set forth in
Section 3.01(a)(ii).

 

Term Loan Maturity Date shall mean the first anniversary of the Expiration
Date or, if such day is not a Business Day, the next preceding Business Day.

 

Term Loans shall mean each Revolving Credit Loan that is
converted into a term loan on the Expiration Date pursuant to Section 2.01(b).

 

Test Period shall mean each period of four consecutive fiscal
quarters of Holdings (taken as one accounting period) ending after the date
hereof; provided that for each fiscal quarter ending prior to June 20,
2005, Test Period shall mean the period from July 1, 2004 through the end of
such fiscal quarter.

 

Total Capitalization shall mean, at any time, an amount (without
duplication) equal to (i) the then outstanding Consolidated Debt of Holdings or
the Company, as the case may be, and its Subsidiaries, plus (ii) consolidated
stockholders equity of Holdings or of the Company, as the case may be, and its
Subsidiaries.

 

Transferor Bank shall mean the selling Bank pursuant to an Assignment
and Assumption Agreement.

 

18

 

UK Borrower shall mean Assured Guaranty (UK) Ltd., a company
organized under the laws of England and Wales.

 

US Holdco shall mean Assured Guaranty US Holdings Inc., a
Delaware corporation which is a direct wholly-owned Subsidiary of Holdings and
which owns, inter  alia, 100% of the capital stock of the Company.

 

Section 1.02  Construction.  Unless the context of this Agreement
otherwise clearly requires, the following rules of construction shall apply to
this Agreement and each of the other Loan Documents:

 

(a)           Number;
Inclusion.  References to the
plural include the singular, the plural, the part and the whole; “or” has the
inclusive meaning represented by the phrase “and/or,” and “including” is not a
term of limitation and has the meaning represented by the phrase “including
without limitation”;

 

(b)           Determination.  References to “determination” of or by the
Agent or the Banks shall be deemed to include good-faith estimates by the Agent
or the Banks (in the case of quantitative determinations) and good-faith
beliefs by the Agent or the Banks (in the case of qualitative determinations)
and such determination shall be conclusive absent manifest error;

 

(c)           Agent’s
Discretion and Consent. 
Whenever the Agent or the Banks are granted the right herein to act in
its or their sole discretion or to grant or withhold consent such right shall
be exercised in good faith;

 

(d)           Documents
Taken as a Whole.  The
words “hereof,” “herein,” “hereunder,” “hereto” and similar terms in this
Agreement or any other Loan Document refer to this Agreement or such other Loan
Document as a whole and not to any particular provision of this Agreement or
such other Loan Document;

 

(e)           Headings.  The section and other headings contained in
this Agreement or such other Loan Document and the Table of Contents (if any),
preceding this Agreement or such other Loan Document are for reference purposes
only and shall not control or affect the construction of this Agreement or such
other Loan Document or the interpretation thereof in any respect;

 

(f)            Implied
References to this Agreement. 
Article, section, subsection, clause, schedule and exhibit references
are to this Agreement or other Loan Document, as the case may be, unless
otherwise specified;

 

(g)           Persons.  Reference to any Person includes such
Person’s successors and assigns but, if applicable, only if such successors and
assigns are permitted by this Agreement or such other Loan Document, as the
case may be, and reference to a Person in a particular capacity excludes such
Person in any other capacity;

 

(h)           Modifications
to Documents.  Reference to any
agreement (including this Agreement and any other Loan Document together with
the schedules and exhibits hereto

 

19

 

or thereto), document or
instrument means such agreement, document or instrument as amended, modified,
replaced, substituted for, superseded or restated;

 

(i)            From, To
and Through.  Relative to the
determination of any period of time, “from” means “from and including,” “to”
means “to but excluding,” and “through” means “through and including”; and

 

(j)            Shall; Will.  References to “shall” and “will” are
intended to have the same meaning.

 

Section 1.03  Accounting Principles; Computations.  (a) 
Except as otherwise provided in this Agreement (as, for example, where
reference is made to statutory or regulatory financial matters), all
computations and determinations as to accounting or financial matters and all
financial statements to be delivered pursuant to this Agreement shall be made
and prepared in accordance with GAAP (including principles of consolidation
where appropriate), and all accounting or financial terms shall have the
meanings ascribed to such terms by GAAP as in effect on the date hereof applied
on a basis consistent with that used in preparing the Historical Statements referred
to in Section 5.01(h)(A) [Historical Statements].  In the event of any change after the date hereof in GAAP, and if
such change would result in the inability to determine compliance with the
financial covenants set forth in Section 7.02 based upon Holdings’ regularly
prepared financial statements by reason of the preceding sentence, then the
parties hereto agree to endeavor, in good faith, to agree upon an amendment to
this Agreement that would adjust such financial covenants in a manner that
would not affect the substance thereof, but would allow compliance therewith to
be determined in accordance with Holdings’ financial statements at that time.

 

(b)           For
purposes of this Agreement, the Dollar Equivalent of each Loan that is an
Alternate Currency Loan shall be calculated on the date when any such Loan is
made, on the second Business Day of each month, or such date as a Borrower may
request and at such other times as designated by the Agent at any time when a
Potential Default or an Event of Default exists.  Such Dollar Equivalent shall remain in effect until the same is
recalculated by the Agent as provided above and notice of such recalculation is
received by the Borrowers, it being understood that until such notice is
received, the Dollar Equivalent shall be that Dollar Equivalent as last
reported to the Borrowers by the Agent. 
The Agent shall promptly notify the Borrowers and the Banks of each such
determination of the Dollar Equivalent.

 

ARTICLE II

REVOLVING CREDIT AND TERM LOAN FACILITY

 

Section 2.01  Revolving Credit Commitments; Term Loans.  (A)  Subject to the terms and conditions hereof and relying
upon the representations and warranties herein set forth, each Bank severally
agrees to make Revolving Credit Loans to any Borrower (on a several basis) at
any time or from time to time on or after the date hereof to the Expiration
Date, which Revolving Credit Loans (i) may be made and maintained in such
Approved Currency as is requested by the applicable Borrower, (ii) shall not,
in the case of Revolving Credit Loans

 

20

 

incurred by Holdings, when added to the outstanding
Principal Amount of all Bid Loans incurred by Holdings, exceed $50,000,000 in
aggregate Principal Amount outstanding at any time for all such Revolving
Credit Loans and Bid Loans, and (iii) shall not, in the case of Revolving
Credit Loans incurred by the UK Borrower, when added to the outstanding
Principal Amount of all Bid Loans incurred by the UK Borrower, exceed
$12,500,000 in aggregate Principal Amount outstanding at any time for all such
Revolving Credit Loans and Bid Loans; provided that, after giving effect
to each such Loan, the aggregate amount of Loans from such Bank shall not
exceed such Bank’s Revolving Credit Commitment.  Within such limits of time and amount and subject to the other
provisions of this Agreement, the Borrowers may borrow, repay, and reborrow
Revolving Credit Loans pursuant to this Section 2.01(a).

 

(b)           Subject
to and upon the terms and conditions set forth herein, each Borrower and each
Bank which has Dollar-denominated Revolving Credit Loans outstanding at such
time agree that at 9:00 A.M., New York time, on the Expiration Date, the
aggregate principal amount of Dollar-denominated Revolving Credit Loans owing
to such Bank and outstanding at such time shall (unless such Revolving Credit
Loans have been declared (or have become) due and payable pursuant to this
Agreement), upon written notice (or telephonic notice promptly confirmed in
writing) by the respective Borrower to the Agent requesting such conversion,
automatically convert to and thereafter constitute Term Loans owing to such
Bank hereunder.  The Term Loans of each
Bank (i) shall be made and thereafter maintained in Dollars; (ii) shall, at the
option of the applicable Borrower, be Base Rate Loans or LIBOR Loans, provided
that all Term Loans comprising the same Borrowing Tranche shall, unless
otherwise specifically provided herein, consist of Term Loans of the same type;
and (iii) shall not exceed in initial Principal Amount for such Bank an amount
which equals the total principal amount of Dollar-denominated Revolving Credit
Loans owed to such Bank and outstanding at 9:00 A.M., New York time, on
the Expiration Date.  Once repaid, Term
Loans may not be reborrowed.

 

Section 2.02  Nature of Banks’ Obligations with Respect
to Revolving Credit Loans.  Each
Bank shall be obligated to participate in each request for Revolving Credit
Loans pursuant to Section 2.05 [Revolving Credit Loan Requests] in accordance with
its Ratable Share.  The aggregate
Principal Amount of each Bank’s Revolving Credit Loans outstanding hereunder to
the Borrowers at any time shall never exceed its Revolving Credit Commitment.  The obligations of each Bank hereunder are
several and not joint.  The failure of
any Bank to perform its obligations hereunder shall not affect the Obligations
of the Borrowers to any other party nor shall any other party be liable for the
failure of such Bank to perform its obligations hereunder.  The Banks shall have no obligation to make
Revolving Credit Loans hereunder on or after the Expiration Date.

 

Section 2.03  Facility Fees; Term Loan Fee.  (a) 
Accruing from the date hereof until but not including the Expiration
Date, Holdings and the Company agree to pay, on a joint and several basis, to
the Agent for the account of each Bank, as consideration for such Bank’s
Revolving Credit Commitment hereunder, a non-refundable facility fee (the
“Facility Fee”) equal to the product of the Applicable Facility Fee Rate
(computed on the basis of a year of 360  days for the actual days elapsed) and the
average daily amount of such Bank’s Revolving Credit Commitment as the same may
be constituted from time to time, regardless of usage.  All Facility Fees shall be payable in
arrears on the first Business Day of each June, September, December, and March
after the date hereof and on the Expiration Date or upon acceleration of the
Loans.

 

21

 

(b)           Accruing
on the Expiration Date to but not including the Term Loan Maturity Date,
Holdings and the Company agree to pay, on a joint and several basis, to the
Agent for the pro  rata account of each Bank, a non-refundable fee
(the “Term Loan Fee”), equal to 0.125% of the average daily aggregate
outstanding Principal Amount of the Term Loans.  The Term Loan Fee shall be payable in arrears on the first
Business Day of each March, June, September, and December after the Expiration
Date and on the date the Term Loans are repaid in their entirety.

 

Section 2.04  Utilization Fee.  On each day on which the Facility Usage
exceeds 33.3% of the amount of the Commitments (or, after the Expiration Date,
the Commitments as in effect immediately prior to the Expiration Date), the
Applicable Margin shall be increased for such day by the Applicable Usage
Premium.

 

Section 2.05  Revolving Credit Loan Requests.  Except as otherwise provided herein, a
Borrower may from time to time prior to the Expiration Date request the Banks
to make Revolving Credit Loans in Dollars, or renew or convert the Interest
Rate Option applicable to existing Revolving Credit Loans or Term Loans
pursuant to Section 3.01(c) [Interest Periods], by delivering to the Agent, not
later than 10:00 a.m., New York time, (i) three (3) Business Days
prior to the proposed Borrowing Date with respect to the making of Revolving
Credit Loans to which the LIBOR Option applies, or with respect to the
conversion to or the renewal of the LIBOR Option for any Loans, provided
that at any time when an Event of Default shall have occurred and be
continuing, a LIBOR Option shall not be available to a Borrower if the Required
Lenders have so notified the Borrower; and (ii) one (1) Business Day prior
to either the proposed Borrowing Date with respect to the making of a Revolving
Credit Loan to which the Base Rate Option applies or the last day of the
preceding Committed Loan Interest Period with respect to the conversion to the
Base Rate Option for any Loan, of a duly completed Committed Loan Request
therefor substantially in the form of Exhibit 2.05 or a Committed Loan
Request by telephone immediately confirmed in writing by letter, facsimile,
email, or telex in the form of such Exhibit. 
In addition, a Borrower may from time to time prior to the Expiration
Date request to make Revolving Credit Loans in Alternate Currencies by
delivering to the Agent, not later than 1:00 P.M., New York time, at least
four Business Days prior to the Borrowing Date a duly completed Committed Loan
Request substantially in the form of Exhibit 2.05 or a Committed Loan Request
by telephone immediately confirmed in writing by letter, facsimile, email or
telex in the form of such Exhibit.  Each
Committed Loan Request shall be irrevocable and shall specify (i) the
identity of the applicable Borrower; (ii) the respective Approved Currency
for such Loan; (iii) the proposed Borrowing Date; (iv) the aggregate
amount of the proposed Loans comprising each Borrowing Tranche (stated in the
applicable Approved Currency), which shall be (A) for all Loans made to
Holdings and the Company, in integral multiples of $1,000,000 and not less than
$10,000,000 for each Borrowing Tranche to which the LIBOR Option applies and
not less than the lesser of $500,000 or the maximum amount available for
Borrowing Tranches to which the Base Rate Option applies and (B) for all Loans
made to the UK Borrower, in integral multiples of $1,000,000 for each Borrowing
Tranche to which the LIBOR Option applies and not less than $500,000 or the
maximum amount available for Borrowing Tranches to which the Base Rate Option
applies; (v) whether Committed Loan LIBOR Option or Base Rate Option shall
apply to the proposed Loans comprising the applicable Borrowing Tranche; and
(vi) in the case of a Borrowing Tranche to which the Committed Loan LIBOR
Option applies, an appropriate Committed Loan Interest Period for the Loans
comprising such Borrowing Tranche.

 

22

 

Section 2.06  Making Revolving Credit Loans.  The Agent shall, promptly after receipt by
it of a Committed Loan Request pursuant to Section 2.05 [Revolving Credit Loan
Requests], notify the Banks of its receipt of such Loan Request
specifying:  (i) the applicable
Borrower making the Loan Request; (ii) the proposed Borrowing Date and the
time and method of disbursement of the Revolving Credit Loans requested
thereby; (iii) the amount and type of each such Revolving Credit Loan
(stated in the applicable Approved Currency) and the applicable Interest Period
(if any); and (iv) the apportionment among the Banks of such Revolving
Credit Loans as determined by the Agent in accordance with Section 2.02 [Nature
of Banks’ Obligations].  Each Bank shall
remit the principal amount of each Revolving Credit Loan to the Agent such that
the Agent is able to, and the Agent shall, to the extent the Banks have made
funds available to it for such purpose and subject to Section 6.03 [Each
Additional Loan], fund such Revolving Credit Loans to the applicable Borrower
in the applicable Approved Currency and immediately available funds at the
Principal Office prior to 2:00 p.m., New York time, on the applicable
Borrowing Date, provided that if any Bank fails to remit such funds to
the Agent in a timely manner, the Agent may elect in its sole discretion to
fund with its own funds the Revolving Credit Loans of such Bank on such
Borrowing Date, and such Bank shall be subject to the repayment obligation in
Section 9.16 [Availability of Funds].

 

Section 2.07  Use of Proceeds.  The proceeds of the Revolving Credit Loans
shall be used for the working capital and other general corporate purposes of
the Borrowers and in accordance with Section 7.01(j) [Use of Proceeds].

 

Section 2.08  Bid Loan Facility.  (a)  Bid
Loan Requests.  Except as otherwise
provided herein, any Borrower may from time to time prior to the Expiration
Date request that the Banks make Bid Loans by delivery to the Agent not later
than 10:00 A.M. New York time of a duly completed request therefor
substantially in the form of Exhibit 2.08(a) hereto or a request by
telephone immediately confirmed in writing by letter, facsimile, email, or
telex (each, a “Bid Loan Request”) at least three (3) Business Days prior to
the proposed Bid Loan Borrowing Date if the applicable Borrower is requesting
Fixed Rate Bid Loans and four (4) Business Days prior to the proposed Bid Loan
Borrowing Date if the applicable Borrower is requesting Bid Loans with the Bid
Loan LIBOR Rate Option of one, two, three, or six months’ duration.  Each Bid Loan Request shall be irrevocable
and shall specify (i) the identity of the applicable Borrower; (ii) the
respective Approved Currency for such Loan; (iii) the proposed Bid Loan
Borrowing Date; (iv) whether the applicable Borrower is electing the Bid Loan
Fixed Rate Option or the Bid Loan LIBOR Option; (v) the term of the proposed
Bid Loan (the “Bid Loan Interest Period”), which may be no less than seven (7)
day(s) and no longer than one hundred eighty (180) days if the applicable
Borrower is requesting a Fixed Rate Bid Loan and one, two, three, or six months
if the applicable Borrower is requesting a LIBOR Bid Loan; and (vi) the maximum
principal amount (the “Requested Amount”) of such Bid Loan, which (x) in the
case of Bid Loans to Holdings and the Company, shall be not less than
$10,000,000 and shall be an integral multiple of $1,000,000 and (y) in the case
of Bid Loans to the UK Borrower, shall be not less than $1,000,000 and shall be
an integral multiple of $1,000,000. 
After giving effect to such Bid Loan and any other Loan made on or before
the Bid Loan Borrowing Date, the aggregate Principal Amount of all Revolving
Credit Loans and Bid Loans outstanding shall not exceed the aggregate amount of
the Revolving Credit Commitments of the Banks. 
In addition, after giving effect to any such Bid Loan incurred by (i)
Holdings and any other Loan made on or before the Bid Loan Borrowing Date, the
aggregate Principal Amount of all Bid Loans and Revolving Credit Loans

 

23

 

incurred by Holdings shall not exceed $50,000,000 in
Principal Amount outstanding and (ii) the UK Borrower and any other Loan made
on or before the Bid Loan Borrowing Date, the aggregate Principal Amount of all
Bid Loans and Revolving Credit Loans incurred by the UK Borrower shall not exceed
$12,500,000 in Principal Amount outstanding. 
Notwithstanding any provision hereof to the contrary, no Bid Loan may be
requested for a period that would end beyond the Expiration Date.

 

(b)           Bidding.  The Agent shall promptly after receipt by it
of a Bid Loan Request pursuant to Section 2.08(a) notify the Banks of its
receipt of such Bid Loan Request specifying (i) the identity of the applicable
Borrower, (ii) the proposed Bid Loan Borrowing Date, (iii) whether the
proposed Bid Loan shall be a Fixed Rate Bid Loan or a LIBOR Bid Loan, (iv) the
Bid Loan Interest Period, (v) the principal amount of the proposed Bid Loan and
(vi) the Approved Currency for such Bid Loan.  Each Bank may submit a bid (a “Bid”) to the Agent by telephone
(immediately confirmed in writing by letter, facsimile, email, or telex) not
later than the following (each, as applicable, a “Bid Deadline”): 10:00 A.M.
New York time two (2) Business Day before the proposed Bid Loan Borrowing
Date if the applicable Borrower is requesting a Fixed Rate Bid Loan or 10:00
A.M. New York time three (3) Business Days before the proposed Bid Loan
Borrowing Date if the applicable Borrower is requesting a LIBOR Bid Loan of
one, two, three, or six months’ duration. 
Each Bid shall specify: (A) the principal amount of proposed Bid
Loans offered by such Bank (the “Offered Amount”) which (i) may be less
than, but shall not exceed, the Requested Amount, (ii) shall be at least
$1,000,000 and shall be an integral multiple of $1,000,000 and (iii) may
exceed such Bank’s Revolving Credit Commitment; and (B) the Fixed Rate
which shall apply to such proposed Bid Loan if the applicable Borrower has
requested a Fixed Rate Bid Loan or the LIBOR Bid Loan Spread which shall apply
to such proposed Bid Loan if the applicable Borrower has requested a LIBOR Bid
Loan and which may be a positive or negative number.  If any Bid omits information required hereunder, the Agent may in
its sole discretion attempt to notify the Bank submitting such Bid.  If the Agent so notifies a Bank, such Bank
may resubmit its Bid, provided that it does so prior to the applicable
Bid Deadline.  The Agent shall promptly
notify the applicable Borrower of the Bids which it timely received from the
Banks.  If the Agent in its capacity as
a Bank shall, in its sole discretion, make a Bid, it shall notify the Borrower
of such Bid at least one-half hour before the applicable Bid Deadline.

 

(c)           Accepting
Bids.  The applicable Borrower,
at its option, shall irrevocably accept or reject Bids by notifying the Agent
of such acceptance or rejection by telephone (immediately confirmed in writing
by letter, facsimile, email, or telex) not later than one hour after the
applicable Bid Deadline.  If the
applicable Borrower elects to accept any Bids, its acceptance must meet the
following conditions: (1) the total amount which (A) Holdings or the Company
accepts from all Banks must not be less than $10,000,000 and shall be in
integral multiples of $1,000,000 and (B) the UK Borrower accepts from all Banks
shall be in integral multiples of $1,000,000, and may not exceed the Requested
Amount; (2) the applicable Borrower must accept Bids based solely on the amount
of the Fixed Rates or LIBOR Bid Loan Spreads, as the case may be, which each of
the Banks quoted in their Bids in ascending order of the amount of Fixed Rates
or LIBOR Bid Loan Spreads; (3) the applicable Borrower may not borrow Bid Loans
from any Bank on the Bid Loan Borrowing Date in an amount exceeding such Bank’s
Offered Amount; (4) if two or more Banks make Bids at the same Fixed Rate (if
the applicable Borrower Requested a Fixed Rate Bid Loan) or LIBOR Bid Loan
Spread (if the

 

24

 

applicable Borrower Requested a LIBOR Bid Loan) and
the applicable Borrower desires to accept a portion but not all of the Bids at
such Fixed Rate or LIBOR Bid Loan Spread, as the case may be, the applicable
Borrower shall accept a portion of each Bid equal to the product of the Offered
Amount of such Bid times the fraction obtained by dividing the total amount of
Bids which the applicable Borrower desires to accept at such Fixed Rate or
LIBOR Bid Loan Spread, as the case may be, by the sum of the Offered Amounts of
the Bids at such Fixed Rate or LIBOR Bid Loan Spread, provided that the
applicable Borrower shall round the Bid Loans allocated to each such Bank
upward or downward as the applicable Borrower may select to integral multiples
of $1,000,000.  The Agent shall (i)
promptly notify a Bank that has made a Bid of the amount of its Bid that was
accepted or rejected by the applicable Borrower and (ii) as promptly as
practical notify all of the Banks of all Bids submitted and those which have
been accepted.

 

(d)           Funding
Bid Loans.  Each Bank whose Bid
or portion thereof is accepted shall remit the principal amount of its Bid Loan
to the Agent by 12:00 Noon on the Bid Loan Borrowing Date.  The Agent shall make such funds available to
the applicable Borrower on or before 1:00 P.M. on the Borrowing Date, provided
that the conditions precedent to the making of such Bid Loan set forth in
Section 6.03 have been satisfied not later than 10:00 A.M. New York time
on the proposed Bid Loan Borrowing Date. 
If such conditions precedent have not been satisfied prior to such time,
then (i) the Agent shall not make such funds available to the applicable
Borrower, (ii) the Bid Loan Request shall be deemed to be canceled, (iii) the
Agent shall return the amount previously funded to the Agent by each applicable
Bank no later than the next following Business Day, and (iv) the applicable
Borrower shall be obligated to each such Bank for any loss, costs, and expenses
applicable pursuant to Section 4.06(b) [Indemnity].  The applicable Borrower shall immediately notify the Agent of any
failure to satisfy the conditions precedent to the making of Bid Loans under
Section 6.03.  The Agent may assume that
the applicable Borrower has satisfied such conditions precedent if the
applicable Borrower (i) has delivered to the Agent any documents required
to be delivered under Section 6.03, (ii) the applicable Borrower has not
notified the Agent that any other conditions precedent have not been satisfied,
and (iii) the Agent has no actual notice of such a failure.

 

(e)           Several
Obligations.  The obligations of
the Banks to make Bid Loans after their Bids have been accepted are
several.  No Bank shall be responsible
for the failure of any other Bank to make any Bid Loan which another Bank has
agreed to make.

 

(f)            Bid Notes.  The obligation of the applicable Borrower to
repay the aggregate unpaid principal amount of the Bid Loans made to it by each
Bank, together with interest thereon, shall be evidenced by a Bid Note dated as
of the Closing Date payable to the order of such Bank in a face amount equal to
the aggregate Revolving Credit Commitments of all of the Banks.

 

Section 2.09  Extension by Banks of the Expiration Date.  (a)  Requests;
Approval by All Banks.  No earlier
than ninety (90) days and no later than sixty (60) days prior to the Expiration
Date, Holdings or the Company may request an extension of the Expiration Date
for another 364 days by written notice to the Banks, and the Banks agree to
respond to the Company’s request for an extension no earlier than thirty (30)
and no later than twenty (20) days prior to the then applicable Expiration
Date; provided, however, that the failure of any Bank to respond
within such time period shall not in any manner constitute an agreement by such
Bank to

 

25

 

extend the Expiration Date.  If all Banks elect to extend, the Expiration Date shall be
extended for a period of 364 days.  If
one or more Banks decline to extend or do not respond to the Company’s request,
the provisions of Section 2.09(b) shall apply.

 

(b)           Approval
by Required Banks.  In the event
that one or more Banks do not agree to extend the Expiration Date or do not
respond to Holdings’ or the Company’s request for an extension within the time
required under Section 2.09(a) (each a “Bank to be Terminated”), but the
Required Banks agree to such extension within such time:  then, on or before the then applicable
Expiration Date, either of Holdings or the Company may, with the prior written
approval of the Agent (which approval shall not be unreasonably withheld),
arrange to have one or more other banks reasonably acceptable to the Agent
(each an “Assignee Bank”) purchase all of the outstanding Loans, if any, of the
Bank to be Terminated and succeed to and assume all of the Commitments and all
other rights, interests, and obligations of the Bank to be Terminated under
this Agreement and the other Loan Documents. 
Any such purchase and assumption shall be (1) pursuant to an
Assignment and Assumption Agreement, (2) subject to and in accordance with
Section 10.11 [Successors and Assigns], and (3) if any Committed Loans are
outstanding under the Committed Loan LIBOR Option or if any Bid Loans are
outstanding to such Bank to be Terminated, the Borrowers shall pay all such
outstanding amounts, together with all interest, fees and all other amounts of
any nature owing to the Bank to be Terminated on the effective date of such
Assignment and Assumption Agreement (including any amounts owing under Section
4.06(b) [Indemnity].  In the event that
the Agent shall become a Bank to be Terminated, the provisions of this Section
2.09 shall be subject to Section 9.14 [Successor Agent].  In the event that the Loans and Commitments
of a Bank to be Terminated are not fully assigned and assumed pursuant to this
Section 2.09(b) on or before the then applicable Expiration Date, then the
Expiration Date shall not be extended for any Bank.

 

Section 2.10  UK Borrower Loans.  Notwithstanding anything to the contrary in
this Agreement, the UK Borrower will not be permitted to borrow or incur any
new Loans hereunder at any time after the UK Borrower ceases to be a
wholly-owned Subsidiary of Holdings.

 

ARTICLE III

INTEREST RATES

 

Section 3.01  Interest Rate Options.  Each Borrower shall pay interest in respect
of the outstanding unpaid principal amount of the Committed Loans as selected
by it from the Base Rate Option or Revolving Credit LIBOR Option set forth
below applicable to the Committed Loans, it being understood that, subject to
the provisions of this Agreement, the Borrowers may select different Interest
Rate Options and different Interest Periods to apply to different Borrowing
Tranches of the Committed Loans, and may convert to or renew one or more
Interest Rate Options with respect to all or any portion of the Committed Loans
comprising any Borrowing Tranche, provided that there shall not be at
any one time outstanding more than eight (8) Borrowing Tranches in the
aggregate among all of the Committed Loans. 
If at any time the designated rate applicable to any Committed Loan made
by any Bank exceeds such Bank’s

 

26

 

highest lawful rate, the rate of interest on such
Bank’s Committed Loan shall be limited to such Bank’s highest lawful rate.

 

(a)           Revolving
Credit Interest Rate Options. 
Each Borrower shall have the right to select from the following Interest
Rate Options applicable to the Revolving Credit Loans and Term Loans incurred
by it:

 

(i)            Revolving
Credit Base Rate Option:  A
fluctuating rate per annum (computed on the basis of a year of 365 or 366  days,
as the case may be, for the actual days elapsed) equal to the Base Rate plus
the Applicable Margin, such interest rate to change automatically from time to
time effective as of the effective date of each change in the Base Rate; or

 

(ii)           Revolving
Credit LIBOR Option:  A rate per
annum (computed on the basis of a year of 360 days for the actual days elapsed)
equal to the applicable LIBOR plus the Applicable Margin.

 

(b)           Rate
Quotations.  The Borrowers may
call the Agent on or before the date on which a Committed Loan Request is to be
delivered to receive an indication of the rates then in effect, but it is
acknowledged that such projection shall not be binding on the Agent or the
Banks nor affect the rate of interest which thereafter is actually in effect
when the election is otherwise made in accordance with the terms of this
Agreement.

 

(c)           Change in
Fees or Interest Rates. 
If the Applicable Margin or Applicable Facility Fee Rate is increased or
reduced with respect to any period for which any Borrower has already paid
interest or Facility Fees, the Agent shall recalculate the additional interest
or Facility Fees due from, or the amount of the refund of interest or Facility
Fees due to, such Borrower and shall, within fifteen (15) Business Days after
the Agent received the information which gave rise to such increase or
decrease, give the applicable Borrower and the Banks notice of such
recalculation.

 

(i)            Any
additional interest or Facility Fee due from any Borrower shall be paid to the
Agent for the account of the Banks on the next date on which an interest or fee
payment is due; provided, however, that if there are no Loans
outstanding or if the Loans are due and payable, such additional interest or
Facility Fee shall be paid promptly after receipt of written request for
payment from the Agent.

 

(ii)           Any
interest or Facility Fee refund due to any Borrower shall be credited against
payments otherwise due from such Borrower on the next interest or fee payment
date or, if the Loans have been repaid and the Banks are no longer committed to
lend under this Agreement, the Banks shall pay the Agent for the account of
such Borrower such interest or Facility Fee refund not later than five Business
Days after written notice from the Agent to the Banks.

 

Section 3.02  Committed Loans Interest Periods.  At any time when any Borrower shall select,
convert to, or renew a Committed Loan LIBOR Option, the applicable Borrower
shall notify the Agent thereof at least three (3) Business Days prior to the
effective date of such

 

27

 

LIBOR Option by delivering a Loan Request.  The notice shall specify a  Committed
Loan Interest Period during which such Interest Rate Option shall apply.  Notwithstanding the preceding sentence, the
following provisions shall apply to any selection of, renewal of, or conversion
to a Committed Loan LIBOR Option:

 

(a)           Amount
of Borrowing Tranche.  Each
Borrowing Tranche of Committed Loans shall be in integral multiples of
$1,000,000 and not less than $5,000,000 (or, in the case of Borrowing Tranches
of Committed Loans to the UK Borrower, not less than $1,000,000); and

 

(b)           Renewals.  In the case of the renewal of a Committed
Loan LIBOR Option at the end of an Interest Period, the first day of the new
Interest Period shall be the last day of the preceding Interest Period, without
duplication in payment of interest for such day.

 

Section 3.03  Interest After Default.  To the extent permitted by Law, upon the
occurrence of an Event of Default and until such time such Event of Default
shall have been cured or waived:

 

(a)           Interest Rate.  The rate of interest otherwise applicable
for each Loan pursuant to Section 3.01 [Interest Rate Options] shall be
increased by 2.0% per annum; and

 

(b)           Other
Obligations.  Each other Obligation
hereunder if not paid when due shall bear interest at a rate per annum equal to
the sum of the rate of interest applicable under the Revolving Credit Base Rate
Option plus an additional 2.0% per annum from the time such Obligation becomes
due and payable and until it is paid in full.

 

(c)           Acknowledgment.  The Borrowers acknowledge that the increase
in rates referred to in this Section 3.03 reflects, among other things,
the fact that such Loans or other amounts have become a substantially greater
risk given their default status and that the Banks are entitled to additional
compensation for such risk; and all such interest referred to in this Section
3.03 shall be payable by the Borrowers upon demand by the Agent.

 

Section 3.04  LIBOR Unascertainable; Illegality;
Increased Costs; Deposits Not Available. 
(a)  Unascertainable.  If on any date on which LIBOR would
otherwise be determined with respect to Committed Loans or Bid Loans, the Agent
shall have determined that:

 

(i)               adequate and fair means do not
exist for ascertaining such LIBOR, or

 

(ii)              a contingency has occurred which
materially and adversely affects the respective London interbank market
relating to LIBOR, the Agent shall have the rights specified in Section 3.04.

 

(b)           Illegality;
Increased Costs; Deposits Not Available. 
If at any time any Bank shall have determined that:

 

28

 

(i)            the making, maintenance or funding
of any Loan to which a LIBOR Option applies has been made unlawful by
compliance by such Bank in good faith with any Law or any interpretation or
application thereof by any Official Body or with any request or directive of
any such Official Body (whether or not having the force of Law), or

 

(ii)           such LIBOR Option will not adequately
and fairly reflect the cost to such Bank of the establishment or maintenance of
any such Loan, or

 

(iii)          after making all reasonable efforts,
deposits of the relevant amount in the relevant Approved Currency for the
relevant Interest Period for a Loan to which a LIBOR Option applies are not
available to such Bank with respect to such Loan in the respective London
interbank market,

 

then the Agent shall have
the rights specified in Section 3.04(c).

 

(c)           Agent’s and Bank’s
Rights.  In the case of any event
specified in Section 3.04(a) above, the Agent shall promptly so notify the
Banks and the Borrowers thereof, and in the case of an event specified in
Section 3.04(b) above, such Bank shall promptly so notify the Agent and endorse
a certificate to such notice as to the specific circumstances of such notice,
and the Agent shall promptly send copies of such notice and certificate to the
other Banks and the Borrowers.  Upon
such date as shall be specified in such notice (which shall not be earlier than
the date such notice is given), the obligation of (A) the Banks, in the
case of such notice given by the Agent, or (B) such Bank, in the case of
such notice given by such Bank, to allow the Borrowers to select, convert to or
renew a LIBOR Option shall be suspended until the Agent shall have later
notified the Borrowers, or such Bank shall have later notified the Agent, of
the Agent’s or such Bank’s, as the case may be, determination that the
circumstances giving rise to such previous determination no longer exist.  If at any time the Agent makes a
determination under Section 3.04(a) and any Borrower has previously notified
the Agent of its selection of, conversion to or renewal of a LIBOR Option and
such Interest Rate Option has not yet gone into effect, such notification shall
be deemed to provide for the termination of the applicable Borrower’s Bid Loan
request (without penalty) for such Loans if the applicable Borrower has
requested Bid Loans under the Bid Loan LIBOR Option and for the selection of,
conversion to or renewal of the Base Rate Option otherwise available with
respect to such Loans if the applicable Borrower has requested the Committed
Loan LIBOR Option.  If any Bank notifies
the Agent of a determination under Section 3.04(b), the Borrowers shall,
subject to the Borrowers’ indemnification Obligations under Section 4.06(b)
[Indemnity], as to any Loan of the Bank to which a LIBOR Option applies, on the
date specified in such notice either convert such Loan to the Base Rate Option
otherwise available with respect to such Loan (in the case of
Dollar-denominated Loans) or prepay such Loan in accordance with Section 4.04
[Voluntary Prepayments].  Absent due
notice from the Borrowers of conversion or prepayment, such Loan shall
automatically be converted to the Base Rate Option otherwise available with
respect to such Loan upon such specified date in the case of Dollar-denominated
Loans, or prepaid on such date in the case of all other Loans.

 

Section 3.05  Selection
of Interest Rate Options.  If any
Borrower fails to select a new Interest Period to apply to any Borrowing
Tranche of Committed Loans under the

 

29

 

Committed
Loan LIBOR Option at the expiration of an existing Interest Period applicable
to such Borrowing Tranche in accordance with the provisions of Section 3.01(c)
[Interest Periods], the applicable Borrower shall be deemed to have (i) in the
case of Dollar-denominated Loans, converted such Borrowing Tranche to the
Revolving Credit Base Rate Option commencing upon the last day of the existing
Interest Period and (ii) in the case of Alternate Currency Loans, selected a
one-month Interest Period commencing upon the last day of the existing Interest
Period.

 

ARTICLE IV

PAYMENTS

 

Section 4.01  Payments.  All payments and prepayments to be made in respect of principal,
interest, Facility Fees, Term Loan Fees, Agent’s Fee, or other fees or amounts
due from the Borrowers hereunder shall be payable prior to 11:00 A.M.,
New York time, on the date when due without presentment, demand, protest,
or notice of any kind, all of which are hereby expressly waived by the
Borrowers, and without set-off, counterclaim, or other deduction of any nature,
and an action therefor shall immediately accrue.  Such payments shall be made to the Agent at the Principal Office
for the ratable accounts of the Banks with respect to the Loans and for the
account of the lending Bank with respect to the Bid Loans, in the applicable
Approved Currency and in immediately available funds, and the Agent shall
promptly distribute such amounts to the Banks in immediately available funds, provided
that in the event payments are received by 11:00 A.M., New York time, by
the Agent with respect to the Loans and such payments are not distributed to
the Banks on the same day received by the Agent, the Agent shall pay the Banks
the Federal Funds Effective Rate with respect to the amount of such payments
for each day held by the Agent and not distributed to the Banks.  The Agent’s and each Bank’s statement of
account, ledger, or other relevant record shall, in the absence of manifest
error, be conclusive as the statement of the amount of principal of and
interest on the Loans and other amounts owing under this Agreement.

 

Section 4.02  Pro Rata Treatment of Banks.  (a) 
Each borrowing of Revolving Credit Loans shall be allocated to each Bank
according to its Ratable Share (irrespective of the amount of Bid Loans
outstanding), and each selection of, conversion to or renewal of any Interest
Rate Option applicable to Revolving Credit Loans and each payment or prepayment
by the Borrowers with respect to principal or interest on the Revolving Credit
Loans, Term Loans, Facility Fees or Term Loan Fees or other fees (except for
the Agent’s Fee and the Bid Loan Processing Fee) or amounts due from the
Borrowers hereunder to the Banks with respect to the Revolving Credit Loans or
Term Loans, shall (except as provided in Section 3.04(c) [Agent’s and Bank’s
Rights] in the case of an event specified in Section 3.04 [Euro-Rate Unascertainable;
Etc.], Section 4.04 [Replacement of a Bank] or Section 4.06 [Additional
Compensation in Certain Circumstances]) be made in proportion to the applicable
Revolving Credit Loans or Term Loans, as the case may be, outstanding from each
Bank and, if no such Loans are then outstanding, in proportion to the Ratable
Share of each Bank.  Each borrowing of a
Bid Loan shall be made according to the provisions in Section 2.08 hereof and
each payment or prepayment by the Borrowers of principal, interest, fees, or
other amounts from the Borrowers

 

30

 

with respect to Bid Loans shall be made to the Banks
in proportion to the amounts due to such Banks with respect to Bid Loans then
outstanding.

 

(b)           All
Borrowings of Term Loans under this Agreement shall be incurred by the
Borrowers from the Banks pro  rata on the basis of such Banks’
Commitments as in effect immediately prior to the Expiration Date.

 

Section 4.03  Interest Payment Dates.  Interest on Committed Loans to which the
Base Rate Option applies shall be due and payable in arrears on the first
Business Day of each June, September, December, and March after the date hereof
and on the Expiration Date, the Term Loan Maturity Date or upon acceleration of
the Loan.  Interest on Committed Loans
and Bid Loans to which the LIBOR Option applies and Bid Loans to which the Bid
Loan Fixed Rate Option applies shall be due and payable on the last day of each
Interest Period for those Loans and, if such Interest Period is longer than
three (3) Months, also at the end of the third Month of such Interest
Period.  Interest on payments of
principal and other monetary Obligations shall be due on the date such payment
is due (whether on the stated maturity date, upon acceleration, or otherwise)
or if principal or such other Obligation is paid earlier than the date when
due, then on the date when paid.

 

Section 4.04  Voluntary Prepayments.  (a)  Right
to Prepay.  Each Borrower shall have
the right at its option from time to time to prepay the Committed Loans
incurred by it in whole or in part without premium or penalty (except as
provided in Section 4.04(b) below or in Section 4.06 [Additional Compensation
in Certain Circumstances]):

 

(i)          at any time with respect to any
Committed Loan to which the Base Rate Option applies,

 

(ii)         on the last day of the applicable
Interest Period with respect to Committed Loans to which a LIBOR Option
applies,

 

(iii)        on the date specified in a notice by any
Bank pursuant to Section 3.04 [LIBOR Unascertainable, Etc.] with respect to any
Committed Loan to which a LIBOR Option applies.

 

Whenever any Borrower desires to prepay any part of
the Committed Loans, it shall provide a prepayment notice to the Agent by 12:00
Noon, New York time, at least one (1) Business Day prior to the date of
prepayment of Revolving Credit Loans or Term Loans to which a Base Rate Option
applies and at least three (3) Business Days prior to the date of prepayment of
Revolving Credit Loans or Term Loans to which a LIBOR Option applies setting
forth the following information:

 

(x)         the date, which shall be a Business
Day, on which the proposed prepayment is to be made;

 

(y)        a statement indicating the application
of the prepayment among the Borrowing Tranches of such Loans; and

 

31

 

(z)         the total principal amount of such
prepayment, which shall not be less than $1,000,000 or such lesser amount as
may be outstanding under the Borrowing Tranche to be prepaid.

 

The principal amount of the Committed Loans for which
a prepayment notice is given, together with such interest and fees as have
accrued on such principal amount, shall be due and payable on the date
specified in such prepayment notice as the date on which the proposed
prepayment is to be made; provided, however, that failure of any
Borrower to make payment in accordance with a prepayment notice given by it
shall not be an Event of Default in and of itself.  Except as provided in Section 3.04(c) [Agent’s and Bank’s rights],
if any Borrower prepays a Committed Loan, but fails to specify the applicable
Borrowing Tranche which the applicable Borrower is prepaying, the prepayment
shall be applied first to Committed Loans to which the Base Rate Option
applies, then to Loans to which the Committed Loan LIBOR Option applies.  Any prepayment hereunder and any failure of
the applicable Borrower to make payment in accordance with a prepayment notice
provided by it shall be subject to the applicable Borrower’s Obligation to
indemnify the Banks under Section 4.06(b) [Indemnity].

 

(b)           Replacement
of a Bank.  In the event
any Bank (i) gives notice under Section 3.04 [LIBOR Unascertainable, Etc.]
or Section 4.06 [Additional Compensation in Certain Circumstances],
(ii) does not fund Revolving Credit Loans or Bid Loans because the making
of such Loans would contravene any Law applicable to such Bank, or
(iii) becomes subject to the control of an Official Body (other than
normal and customary supervision), then Holdings or the Company shall have the
right at its option, with the consent of the Agent, which shall not be
unreasonably withheld, to prepay the Loans of such Bank in whole, together with
all interest accrued thereon, and terminate such Bank’s Commitment at any time
after (x) receipt of such Bank’s notice under Section 3.04 [LIBOR
Unascertainable, Etc.] or Section 4.06(a) [Increased Costs, Etc.], (y) the
date such Bank has failed to fund Revolving Credit Loans or Bid Loans because
the making of such Loans would contravene Law applicable to such Bank, or (z) the
date such Bank became subject to the control of an Official Body, as
applicable; provided that the applicable Borrower shall also pay to such Bank
at the time of such prepayment any amounts required under Section 4.06
[Additional Compensation in Certain Circumstances] and any accrued interest due
on such amount and any related fees; provided, however, that the
Commitment and any Bid Loan of such Bank shall be provided by one or more of
the remaining Banks or a replacement bank acceptable to the Agent; provided,
further, the remaining Banks shall have no obligation hereunder to
increase their Commitments or provide the Bid Loan of such Bank.  Notwithstanding the foregoing, the Agent may
only be replaced subject to the requirements of Section 9.14 [Successor Agent].

 

(c)           Change of Lending Office.  Each Bank agrees that, upon the occurrence
of any event giving rise to increased costs or other special payments under
Section 3.04(b) [Illegality, Etc.] or Section 4.06(a) [Increased Costs, Etc.]
with respect to such Bank, it will, if requested by Holdings or the Company,
use reasonable efforts (subject to overall policy considerations of such Bank)
to designate another lending office for any Loans affected by such event,
provided that such designation is made on terms that such Bank and its lending
office suffer no economic, legal or regulatory disadvantage, with the object of
avoiding the consequence of the event giving rise to the operation of such
Section.  Nothing in this Section
4.04(c)

 

32

 

shall affect or postpone any of the Obligations or the
rights of the Agent or any Bank provided in this Agreement.

 

Section 4.05  Reduction or Termination of Commitments.  The aggregate amount of the Commitments
shall be automatically reduced to zero on the Expiration Date.  The aggregate amount of Commitments shall be
automatically reduced to zero on the 90th day following the Closing
Date unless the Effective Date has occurred by such time.  In addition, the Borrower shall have the
right to terminate or reduce the then unused portion of Commitments at any time
or from time to time; provided that (a) each partial reduction shall be
in an aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in
excess thereof; (b) at no time shall the total amount of the Commitments be
less than current Loans outstanding; and (c) any Borrower shall provide at
least five (5) Business Days’ prior written notice of each such termination or
reduction to the Agent specifying the amount of the Commitments to be reduced
or terminated.  Each such notice shall
be irrevocable, and Commitments once terminated or reduced may not be
reinstated.  Any partial reduction of
Commitments pursuant to this Section 4.05 will apply ratably to all Banks based
upon each such Bank’s Commitment.

 

Section 4.06  Additional Compensation in Certain
Circumstances.  (a)  Increased Costs or Reduced Return
Resulting From Taxes, Reserves, Capital Adequacy Requirements, Expenses, Etc.  If any Law, guideline or interpretation or
any change in any Law, guideline or interpretation or application thereof by
any Official Body charged with the interpretation or administration thereof or
compliance with any request or directive (whether or not having the force of
Law) of any central bank or other Official Body:

 

(i)            subjects
any Bank to any tax or changes the basis of taxation with respect to this
Agreement, the Committed Loans or the Bid Loans or payments by any Borrower of
principal, interest, Facility Fees, Term Loan Fees or other amounts due from
the Borrowers hereunder (except for taxes on the overall net income of such
Bank),

 

(ii)           imposes,
modifies or deems applicable any reserve (including the Eurodollar Reserve
Percentage), special deposit or similar requirement against credits or
commitments to extend credit extended by, or assets (funded or contingent) of,
deposits with or for the account of, or other acquisitions of funds by, any
Bank, or

 

(iii)          imposes,
modifies or deems applicable any capital adequacy or similar requirement
(A) against assets (funded or contingent) of, or letters of credit, other
credits or commitments to extend credit extended by, any Bank, or
(B) otherwise applicable to the obligations of any Bank under this
Agreement,

 

and the result of any of the foregoing is to increase the cost to,
reduce the income receivable by, or impose any expense (including loss of
margin) upon any Bank with respect to this Agreement, or the making,
maintenance or funding of any part of the Committed Loans or the Bid Loans (or,
in the case of any capital adequacy or similar requirement, to have the effect
of reducing the rate of return on any Bank’s capital, taking into consideration
such Bank’s customary policies with respect to capital adequacy) by an amount
which such Bank in its sole discretion deems to be material, such Bank shall
from time to time notify the Borrowers and the Agent of the amount determined
in good faith (using any averaging and attribution methods

 

33

 

employed in good faith) by such Bank to be necessary to compensate such
Bank for such increase in cost, reduction of income, additional expense or
reduced rate of return.  Such notice
shall set forth in reasonable detail the basis for such determination.  Such amount shall be due and payable by the
applicable Borrower to such Bank ten (10) Business Days after such notice is
given.

 

(b)           Indemnity.  In addition to the compensation required by
Section 4.06 [Increased Costs, Etc.], each Borrower, with respect to Loans
incurred or requests therefor made by such Borrower, shall indemnify each Bank
against all liabilities, losses, or expenses (including loss of margin, any
loss or expense incurred in liquidating or employing deposits from third
parties and any loss or expense incurred in connection with funds acquired by a
Bank to fund or maintain Loans subject to a LIBOR Option or the Bid Loan Fixed
Rate Option) which such Bank sustains or incurs as a consequence of any

 

(i)            payment,
prepayment, conversion, or renewal of any Loan to which a LIBOR Option or the
Bid Loan Fixed Rate Option applies on a day other than the last day of the
corresponding Interest Period (whether or not such payment or prepayment is
mandatory, voluntary, or automatic and whether or not such payment or
prepayment is then due),

 

(ii)           attempt
by such Borrower to revoke (expressly, by later inconsistent notices or
otherwise) in whole or part any Loan Requests under Section 2.05 [Revolving
Credit Loan Requests], Section 2.08 [Bid Loan Facility] or Section 3.02
[Interest Periods] or notice relating to prepayments under Section 4.04
[Voluntary Prepayments],

 

(iii)          default
by such Borrower in the performance or observance of any covenant or condition
contained in this Agreement or any other Loan Document, including any failure
of such Borrower to pay when due (by acceleration or otherwise) any principal
of or interest on the Committed Loans or the Bid Loans, Facility Fee, Term Loan
Fee or any other amount due hereunder, or

 

(iv)          payment
or prepayment of any Bid Loan on a day other than the maturity date thereof
(whether or not such payment or prepayment is mandatory or voluntary).

 

If any Bank sustains or incurs any such loss or
expense, it shall from time to time notify the applicable Borrower of the
amount determined in good faith by such Bank (which determination may include
such assumptions, allocations of costs and expenses, and averaging or
attribution methods as such Bank shall deem reasonable) to be necessary to
indemnify such Bank for such loss or expense. 
Such notice shall set forth in reasonable detail the basis for such
determination.  Such amount shall be due
and payable by such Borrower to such Bank ten (10) Business Days after such
notice is given.

 

Section 4.07  Taxes.  (a)  No Deductions.  All payments made by each Borrower hereunder
and under each Note shall be made free and clear of and without deduction for
any present or future taxes, levies, imposts, deductions, charges, or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on the net income of any Bank and all income and franchise taxes applicable to
any Bank of the United States (all such non-excluded taxes, levies,

 

34

 

imposts, deductions, charges, withholdings, and
liabilities being hereinafter referred to as “Taxes”).  If any Borrower shall be required by Law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
Note, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 4.07(a)) each Bank receives an
amount equal to the sum it would have received had no such deductions been
made, (ii) the applicable Borrower shall make such deductions, and
(iii) the applicable Borrower shall timely pay the full amount deducted to
the relevant tax authority or other authority in accordance with applicable
Law.

 

(b)           Stamp Taxes.  In addition, each Borrower agrees to pay any
present or future stamp or documentary taxes or any other excise or property
taxes, charges, or similar levies which arise from any payment made by such
Borrower hereunder or from the execution, delivery, or registration of, or
otherwise with respect to, this Agreement or any Note executed and delivered by
such Borrower (hereinafter referred to as “Other Taxes”).

 

(c)           Indemnification
for Taxes Paid by a Bank. 
Each Borrower, with respect to Loans incurred or requests therefor made
by such Borrower, shall indemnify each Bank for the full amount of Taxes or
Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by
any jurisdiction on amounts payable under this Section 4.07(c)) paid by any
Bank and any liability (including penalties, interest, and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes
were correctly or legally asserted. 
This indemnification shall be made within 30 days from the date a Bank
makes written demand therefor.

 

(d)           Certificate.  Within 30 days after the date of any payment
of any Taxes by any Borrower, the applicable Borrower shall furnish to each
Bank, at its address referred to herein, the original or a certified copy of a
receipt evidencing payment thereof.

 

(e)           Survival.  Without prejudice to the survival of any
other agreement of the Borrowers hereunder, the agreements and obligations of
the Borrowers contained in this Section 4.07 shall survive the payment in full
of principal and interest hereunder and under any instrument delivered
hereunder.

 

Section 4.08  Judgment Currency.  (a)  Currency
Conversion Procedures for Judgments. 
If for the purposes of obtaining judgment in any court it is necessary
to convert a sum due hereunder or under a Note in any currency (the “Original
Currency”) into another currency (the “Other Currency”), the parties hereby
agree, to the fullest extent permitted by Law, that the rate of exchange used
shall be that at which in accordance with normal banking procedures each Bank
could purchase the Original Currency with the Other Currency after any premium
and costs of exchange on the Business Day preceding that on which final
judgment is given.

 

(b)           Indemnity
in Certain Events.  The
obligation of each Borrower in respect of any sum due from such Borrower to any
Bank hereunder shall, notwithstanding any judgment in an Other Currency,
whether pursuant to a judgment or otherwise, be discharged only to the extent
that, on the Business Day following receipt by any Bank of any sum adjudged to
be so due in such Other Currency, such Bank may in accordance with normal
banking procedures purchase

 

35

 

the Original Currency with such Other Currency.  If the amount of the Original Currency so
purchased is less than the sum originally due to such Bank in the Original
Currency, each Borrower agrees, with respect to Loans incurred and requests
therefor made by such Borrower, as a separate obligation and notwithstanding
any such judgment or payment, to indemnify such Bank against such loss.

 

Section 4.09  Notes, Maturity.  The Revolving Credit Loans and Term Loans
made by each Bank shall be evidenced by a Revolving Credit/Term Loan Note in
the form of Exhibit 1.01(R). 
Notwithstanding anything to the contrary contained elsewhere in this
Agreement, (x) all outstanding Revolving Credit Loans not converted to Term
Loans pursuant to Section 2.01(b) shall be repaid in full on the Expiration
Date and (y) all outstanding Term Loans shall be repaid on the Term Loan
Maturity Date.

 

Section 4.10  Mandatory Prepayments.  (a) 
If on any date (including, without limitation, any date on which Dollar
Equivalents are determined) the sum of the aggregate outstanding Principal
Amount of Revolving Credit Loans and Bid Loans (all the foregoing,
collectively, the “Aggregate Loan Outstandings”) exceeds the Commitments as
then in effect, Holdings, the Company and/or the UK Borrower (as they shall
determine) shall repay no later than the next following Business Day the
principal amount of Revolving Credit Loans in an aggregate Principal Amount
equal to such excess.  If, after giving
effect to the prepayment of all outstanding Revolving Credit Loans as set forth
above, the remaining Aggregate Loan Outstandings exceed the Commitments, Holdings,
the Company and/or the UK Borrower (as they shall determine) shall repay on
such date the principal of Bid Loans in an aggregate amount equal to such
excess.

 

(b)           If
on any date (including, without limitation, any date on which Dollar
Equivalents are determined) the aggregate Principal Amount of Revolving Credit
Loans and Bid Loans incurred by the UK Borrower exceeds $12,500,000, the UK
Borrower shall repay no later than the next following Business Day the
principal amount of Revolving Credit loans in an aggregate Principal Amount
equal to such excess.  If, after giving
effect to the repayment of all outstanding Revolving Credit Loans incurred by
the UK Borrower as set forth above, the outstanding Bid Loans incurred by the
UK Borrower exceeds $12,500,000, the UK Borrower shall repay on such date the
principal of Bid Loans in an aggregate amount equal to such excess.

 

(c)           If
on any date (including, without limitation, any date on which Dollar
Equivalents are determined) the aggregate Principal Amount of Revolving Credit
Loans and Bid Loans incurred by Holdings exceeds $50,000,000, Holdings shall
repay no later than the next following Business Day the principal amount of
Revolving Credit loans in an aggregate Principal Amount equal to such excess.  If, after giving effect to the repayment of
all outstanding Revolving Credit Loans incurred by Holdings as set forth above,
the outstanding Bid Loans incurred by Holdings exceeds $50,000,000, Holdings
shall repay on such date the principal of Bid Loans in an aggregate amount
equal to such excess.

 

36

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES

 

Section 5.01  Representations and Warranties.  Each Borrower represents and warrants (in
each case solely as to itself and its Subsidiaries) to the Agent and each of
the Banks as follows:

 

(a)           Organization
and Qualification.  Such
Borrower is a corporation duly organized, validly existing, and in good
standing under the laws of its jurisdiction of organization.  Such Borrower has the lawful power to own or
lease its properties and to engage in the business it presently conducts.  Such Borrower is duly licensed or qualified
and in good standing in each jurisdiction where the property owned or leased by
it or the nature of the business transacted by it or both makes such licensing
or qualification necessary; provided, however, that the UK Borrower as
of the date of this Agreement is not so licensed, and no contrary
representation hereby is made.  The
Company covenants on behalf of itself to notify the Agent of the receipt by the
UK Borrower of such license or other authority (which, in any event, shall
occur on or prior to the date on which the UK Borrower becomes a Borrower
hereunder), as of which time (and thereafter as required during the term of
this Agreement) the Company shall be deemed to have made the foregoing
representation and warranty with respect to the UK Borrower, and the UK
Borrower shall be deemed to have made the foregoing representation and warranty
with respect to itself.

 

(b)           Capitalization and Subsidiaries.  As of the Closing Date, Holdings has no
Subsidiaries other than those Subsidiaries listed on Schedule 5.01(b).  ACE Risk Assurance Company is an inactive
corporation having no material liabilities or Indebtedness.  All of the issued and outstanding share
capital of Holdings has been validly issued and is fully paid and
nonassessable.

 

(c)           Power
and Authority.  Such Borrower
has full power to enter into, execute, deliver, and carry out this Agreement
and the other Loan Documents to which it is a party, to incur the Indebtedness
contemplated by the Loan Documents, and to perform its Obligations under the
Loan Documents to which it is a party, and all such actions have been duly
authorized by all necessary proceedings on its part.

 

(d)           Validity
and Binding Effect.  This
Agreement has been duly and validly executed and delivered by such Borrower,
and each other Loan Document which such Borrower is required to execute and
deliver as of the date hereof has been duly executed and delivered by such
Borrower.  Assuming the due execution
and delivery by Agent and the Banks of those Loan Documents to which they are a
party, this Agreement and each other Loan Document to which such Borrower is a
party constitute the legal, valid and binding obligations of such Borrower on
and after its date of delivery thereof, enforceable against such Borrower in
accordance with its terms, except to the extent that enforceability of any of
such Loan Document may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other similar laws affecting the enforceability of creditors’
rights generally or limiting the right of specific performance.

 

(e)           No Conflict.  Neither the execution and delivery of this
Agreement or the other Loan Documents by such Borrower nor the consummation of
the transactions herein or therein contemplated or compliance with the terms
and provisions hereof or

 

37

 

thereof will conflict
with, constitute a default under or result in any breach of (i) the terms
and conditions of the certificate or articles of incorporation, bylaws,
memorandum of association or other organizational or constitutional documents
of such Borrower, or (ii) any Law or any material agreement or instrument
or order, writ, judgment, injunction, or decree to which such Borrower is a
party or by which it is bound or to which it is subject, or result in the
creation or enforcement of any Lien, charge or encumbrance whatsoever upon any
property (now or hereafter acquired) of such Borrower (other than Permitted
Liens).

 

(f)            Litigation.  Except as disclosed under the Legal
Proceedings heading of the Amendment No. 2 Form S-1 draft filed by Holdings
with the SEC on April 1, 2004, there are no actions, suits, proceedings, or
investigations pending or, to the knowledge of such Borrower, threatened
against such Borrower at law or in equity before any Official Body which
individually or in the aggregate may result in any Material Adverse Change.  Such Borrower is not in violation of any
order, writ, injunction, or any decree of any Official Body which may result in
any Material Adverse Change.

 

(g)           Title to
Properties.  Such Borrower has
good and marketable title to or valid leasehold interests in all properties,
assets, and other rights which it purports to own or lease or which are
reflected as owned or leased on its books and records, free and clear of all
Liens and encumbrances except Permitted Liens. 
All leases of property are in full force and effect and are subject only
to the terms and conditions of the applicable leases.

 

(h)           Financial
Statements, Reinsurance Coverage.

 

(A)          Historical Statements.  The Company has delivered to the Agent
copies of its audited consolidated year-end financial statements for and as of
the end of the three (3) fiscal years ended December 31, 2001, 2002 and 2003
(the “Historical Statements”).  The
Historical Statements were compiled from the books and records maintained by
the Company’s management, are correct and complete and fairly represent the
consolidated financial condition of the Company and its Subsidiaries as of
their dates and the results of operations for the fiscal periods then ended and
have been prepared in accordance with GAAP and statutory requirements consistently
applied.

 

(B)           Accuracy of Financial Statements.  As of the Closing Date, neither the Company
nor any Subsidiary of the Company has any liabilities, contingent or otherwise,
or forward or long-term commitments or Off-Balance Sheet Transactions that are
not disclosed in the Historical Statements or in the notes thereto, and except
as disclosed therein there are no unrealized or anticipated losses from any
commitments of the Company or any Subsidiary of the Company which may cause a
Material Adverse Change.  Since
December 31, 2003, no Material Adverse Change has occurred.

 

(C)           Reinsurance Coverage.  The Company has delivered Schedule 5.01(h)
to the Agent setting forth the amount, terms, and provider(s) to the Company of
reinsurance and the extent of the Company’s insurance or

 

38

 

reinsurance
exposure covered thereby; as of December 31, 2003, Schedule 5.01(h)
is correct and complete and fairly represents the reinsurance coverage
pertaining to the business of the Company and its Subsidiaries (“Existing
Reinsurance Coverage”).

 

(i)            Use of
Proceeds; Margin Stock. 
Such Borrower intends to use the proceeds of the Loans in accordance
with Section 2.07 and Section 7.01(j). 
Such Borrower does not engage or intend to engage principally, or as one
of its important activities, in the business of extending credit for the
purpose, immediately, incidentally or ultimately, of purchasing or carrying
margin stock (such term used herein within the meaning of Regulation U).  No part of the proceeds of any Loan has been
or will be used, immediately, incidentally or ultimately, to purchase or carry
any margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock or to refund Indebtedness originally incurred for
such purpose, or for any purpose which entails a violation of or which is
inconsistent with the provisions of the regulations of the Board of Governors
of the Federal Reserve System.  Such Borrower
does not hold or intend to hold margin stock in such amounts that more than 25%
of the reasonable value of its assets are or will be represented by margin
stock.

 

(j)            Full
Disclosure.  Neither this
Agreement nor any other Loan Document, nor any certificate, statement,
agreement, or other document furnished to the Agent or any Bank by either of
Holdings or the Company in connection herewith or therewith, contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein and therein, in light of the
circumstances under which they were made, not misleading.  There is no fact known to either of Holdings
or the Company which materially adversely affects the business, property, assets,
financial condition, results of operations, or prospects of Holdings and its
Subsidiaries taken as a whole or the Company and its Subsidiaries taken as a
whole which has not been set forth in this Agreement or in the certificates,
statements, agreements, or other documents furnished in writing to the Agent
and the Banks by either Holdings or the Company prior to or at the date hereof
in connection with the transactions contemplated hereby.

 

(k)           Taxes.  All federal, state, local, and other tax
returns required to have been filed with respect to such Borrower have been
filed, and payment or adequate provision has been made for the payment of all
taxes, fees, assessments, and other governmental charges which have or may
become due pursuant to said returns or to assessments received, except to the extent
that such taxes, fees, assessments, and other charges are being contested in
good faith by appropriate proceedings diligently conducted and for which such
reserves or other appropriate provisions, if any, as shall be required by GAAP
shall have been made.  There are no
agreements or waivers extending the statutory period of limitations applicable
to any federal income tax return of such Borrower for any period.

 

(l)            Consents and Approvals.  No consent, approval, exemption, order, or
authorization of, or a registration or filing with, any Official Body or any
other Person is required by any Law or any agreement in connection with the
execution, delivery, or

 

39

 

carrying out of this
Agreement or any of the other Loan Documents by such Borrower, except such as
have been obtained or made on or prior to the Closing Date.

 

(m)          No Event of Default;
Compliance With Instruments.  No
event has occurred and is continuing and no condition exists or will exist
after giving effect to the borrowings or other extensions of credit to be made
under or pursuant to the Loan Documents which constitutes an Event of Default
or Potential Default.  Such Borrower is
not in violation of (i) any term of its certificate or articles of
incorporation, bylaws, memorandum of association or other organizational or
constitutional documents or (ii) any material agreement or instrument to
which it is a party or by which it or any of its properties may be subject or
bound, in each such case where such violation would constitute a Material
Adverse Change.

 

(n)           Licenses,
Etc.  Such Borrower owns or
possesses all the material licenses, registrations, franchises, permits, and
rights necessary to own and operate its properties and to carry on its business
as presently conducted by such Borrower, without conflict with the rights of
others; provided, however, that the UK Borrower as of the date of this
Agreement is not so licensed, and no contrary representation hereby is
made.  The Company covenants on behalf
of itself to notify the Agent of the receipt by the UK Borrower of such license
or other authority (which, in any event, shall occur on or prior to the date on
which the UK Borrower becomes a Borrower hereunder), as of which time (and
thereafter as required during the term of this Agreement) the Company shall be
deemed to have made the foregoing representation and warranty with respect to
the UK Borrower, and the UK Borrower shall be deemed to have made the foregoing
representation and warranty with respect to itself.

 

(o)           Insurance.  No notice has been given or claim made and
no grounds exist to cancel or avoid any insurance policy or bond in favor of
such Borrower or any of its property, or to reduce the coverage provided
thereby.  Such policies and bonds
provide adequate coverage from reputable and financially sound insurers in
amounts sufficient to insure the assets and risks of such Borrower in
accordance with prudent business practice in the industry of such Borrower.

 

(p)           Compliance
With Laws.  Such Borrower is in
compliance in all material respects with all applicable Laws in all
jurisdictions in which such Borrower is doing business, except where the
failure to do so would not constitute a Material Adverse Change.

 

(q)           Material
Contracts; Burdensome Restrictions.  All material contracts relating to the business operations of
such Borrower are valid, binding, and enforceable upon such Borrower and, to
the knowledge of such Borrower, each of the other parties thereto in accordance
with their respective terms, and there is no default thereunder, to such
Borrower’s knowledge, with respect to parties other than such Borrower.  Such Borrower is not bound by any
contractual obligation, or subject to any restriction in any organizational
document or any requirement of Law, which in and of itself is material and
adverse to such Borrower.

 

40

 

(r)            Investment
Companies; Regulated Entities. 
Such Borrower is not an “investment company” registered or required to
be registered under the Investment Company Act of 1940 or under the “control”
of an “investment company” as such terms are defined in the Investment Company
Act of 1940 and shall not become such an “investment company” or under such
“control.”  Such Borrower is not subject
to any other Federal or state statute or regulation limiting its ability to
incur Indebtedness for borrowed money.

 

(s)           Plans
and Benefit Arrangements. 
To the extent of any Benefit Arrangement, Plan or Multiemployer Plan in
place during the term of this Agreement, Holdings and each other member of the
ERISA Group are in compliance in all material respects with any applicable
provisions of ERISA with respect to all Benefit Arrangements, Plans, and
Multiemployer Plans.  There has been no
Prohibited Transaction with respect to any Benefit Arrangement or any Plan or,
to the best knowledge of the Borrowers, with respect to any Multiemployer Plan
or Multiple Employer Plan, which could result in any material liability of
Holdings or any other member of the ERISA Group.  To the extent of any Benefit Arrangement, Plan or Multiemployer
Plan in place during the term of this Agreement, Holdings and all other members
of the ERISA Group have made when due any and all payments required to be made
under any agreement relating to a Multiemployer Plan or a Multiple Employer
Plan or any Law pertaining thereto. 
With respect to each Plan and Multiemployer Plan, if any, Holdings and
each other member of the ERISA Group (i) have fulfilled in all material
respects their obligations under the minimum funding standards of ERISA,
(ii) have not incurred any liability to the PBGC other than PBGC premiums
due but not delinquent under Section 4007 of ERISA, and (iii) have not had
asserted against them any penalty for failure to fulfill the minimum funding
requirements of ERISA.  All Plans,
Benefit Arrangements and Multiemployer Plans, if any, have been administered in
accordance with their terms and applicable Law.

 

Holdings and each
other member of the ERISA Group are in compliance in all material respects with
any applicable provisions of ERISA with respect to all Benefit Arrangements,
Plans, and Multiemployer Plans, if any. 
There has been no Prohibited Transaction with respect to any Benefit
Arrangement or any Plan or, to the best knowledge of Holdings, with respect to
any Multiemployer Plan or Multiple Employer Plan, which could result in any
material liability of Holdings or any other member of the ERISA Group.  To the extent of any Benefit Arrangement,
Plan or Multiemployer Plan in place during the term of this Agreement, Holdings
and all other members of the ERISA Group have made when due any and all
payments required to be made under any agreement relating to a Multiemployer
Plan or a Multiple Employer Plan or any Law pertaining thereto.  With respect to each Plan and Multiemployer
Plan, if any, Holdings and each other member of the ERISA Group (i) have
fulfilled in all material respects their obligations under the minimum funding
standards of ERISA, (ii) have not incurred any liability to the PBGC other
than PBGC premiums due but not delinquent under Section 4007 of ERISA, and
(iii) have not had asserted against them any penalty for failure to
fulfill the minimum funding requirements of ERISA.  All Plans, Benefit Arrangements and Multiemployer Plans have been
administered in accordance with their terms and applicable Law.

 

41

 

(A)             No event requiring notice to the
PBGC under Section 302(f)(4)(A) of ERISA has occurred or is reasonably
expected to occur with respect to any Plan, and no amendment with respect to
which security is required under Section 307 of ERISA has been made or is
reasonably expected to be made to any Plan.

 

(B)             Neither Holdings nor any other
member of the ERISA Group has incurred or reasonably expects to incur any
material withdrawal liability under ERISA to any Multiemployer Plan or Multiple
Employer Plan.  Neither Holdings nor any
other member of the ERISA Group has been notified by any Multiemployer Plan or
Multiple Employer Plan that such Multiemployer Plan or Multiple Employer Plan
has been terminated within the meaning of Title IV of ERISA and, to the
best knowledge of Holdings, no Multiemployer Plan or Multiple Employer Plan is
reasonably expected to be reorganized or terminated, within the meaning of
Title IV of ERISA.

 

(t)            Senior Debt
Status.  The Obligations
of such Borrower under this Agreement and each of the other Loan Documents to
which it is a party do rank and will rank at least pari  passu in
priority of payment with all other Indebtedness of the such Borrower except (i)
Indebtedness of such Borrower to the extent secured by Permitted Liens, and
(ii) Indebtedness which constitutes a “preferred claim” under Section 9-227 of
the Maryland Insurance Law (or any analogous provision of United Kingdom or
Bermuda law) in the event of the liquidation, rehabilitation, reorganization,
or conservation of the such Borrower. 
There is no Lien upon or with respect to any of the properties or income
of such Borrower which secures indebtedness or other obligations of any Person
except for Permitted Liens.

 

(u)           Holdings.  Holdings was created on August 21, 2003 for
the purpose of holding the capital stock of the Company and its other
subsidiaries (but it is recognized that Holdings has the corporate capacity to
carry on other business under the objects expressed in its Memorandum of
Association).

 

Section 5.02  Continuation
of Representations.  Each Borrower
makes the representations and warranties in this ARTICLE V on the date hereof
and on the Closing Date and each date thereafter on which a Loan is made to
such Borrower as provided in and subject to Section 6.01, Section 6.02 and
Section 6.03.

 

ARTICLE VI

CONDITIONS OF LENDING

 

The obligation of each Bank to make Loans hereunder is
subject to the performance by the Borrowers of their Obligations to be
performed hereunder at or prior to the making of any such Loans, and to the
satisfaction of the following further conditions:

 

Section 6.01  Closing Date.  The Closing Date shall occur when the
following conditions have been satisfied:

 

42

 

(a)           Representations
and Warranties True and Complete, No Defaults.  The representations and warranties of the
Borrowers contained in Article V shall be true, complete, and accurate on and
as of the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date (except representations and
warranties which relate solely to an earlier date or time, which
representations and warranties shall be true and correct on and as of the
specific dates or times referred to therein), and the Borrowers shall have
performed and complied with all covenants and conditions hereof and thereof, no
Event of Default or Potential Default shall have occurred and be continuing.

 

(b)           Secretary’s
Certificate.  There shall
be delivered to the Agent for the benefit of each Bank certificates dated the
Closing Date and signed by the Secretary or an Assistant Secretary of Holdings
and the Company, certifying as appropriate as to:

 

(i)            resolutions
approving all actions taken by Holdings and the Company in connection with this
Agreement and the other Loan Documents;

 

(ii)           the
names of the officer or officers authorized to sign this Agreement and the
other Loan Documents and the true signatures of such officer or officers and
specifying the Authorized Officers permitted to act on behalf of Holdings and
the Company for purposes of this Agreement and the true signatures of such
officers, on which the Agent and each Bank may conclusively rely; and

 

(iii)          copies
of its organizational or constitutional documents, including its certificate or
articles of incorporation and bylaws as in effect on the Closing Date certified
by the appropriate state or governmental official where such documents are
filed in a state office and capable of being certified by the appropriate state
or governmental official, together with certificates from the appropriate state
officials as to the continued existence and good standing of Holdings and the
Company in each jurisdiction where organized.

 

(c)           Delivery
of Notes, Guaranty Agreements, and Loan Request.  The Notes and the Guaranty Agreement to be entered into by the Material Non-AGC
Subsidiaries shall have been duly executed and delivered to the Agent for the
benefit of the Banks.

 

(d)           Opinion of Counsel.  There shall be delivered to the Agent for
the benefit of each Bank party hereto on the Closing Date one or more written
opinions of counsel for Holdings and the Company dated the Closing Date and in
form and substance satisfactory to the Agent and its counsel:

 

(i)            as
to the matters set forth in Exhibit 6.01(d); and

 

(ii)           as
to such other matters incident to the transactions contemplated herein as the
Agent may reasonably request.

 

(e)           Legal Details.  All legal details and proceedings in
connection with the transactions contemplated by this Agreement and the other
Loan Documents shall be in form and substance satisfactory to the Agent and
counsel for the Agent, and the Agent

 

43

 

shall have received all such other counterpart
originals or certified or other copies of such documents and proceedings in
connection with such transactions, in form and substance satisfactory to the
Agent and said counsel, as the Agent or said counsel may reasonably request.

 

(f)            Payment of Fees.  The Borrowers shall have paid or caused to
be paid to the Agent for itself and for the account of the Banks to the extent
not previously paid the Facility Fees, all other fees accrued through the
Closing Date and the costs and expenses for which the Agent and the Banks are
entitled to be reimbursed.

 

(g)           No
Material Adverse Change. 
There has not occurred a Material Adverse Change since the date of the
Historical Statements.

 

Section 6.02  Effective Date.  The Effective Date Shall occur when the
following conditions have been satisfied:

 

(a)           Existing Credit Agreement.  The commitments under the Existing Credit
Agreement shall have been terminated, all loans thereunder shall have been
repaid in full, together with all accrued and unpaid interest thereon, all
accrued and unpaid fees thereon shall have been paid in full, and all other
amounts then owing pursuant to the Existing Credit Agreement shall have been
repaid in full, and the Agent shall have received evidence in form, scope and
substance reasonably satisfactory to it that the matters set forth in this
Section 6.02(a) have been satisfied at such time.

 

(b)           Initial Public Offering.  The initial public offering of equity stock
of Holdings shall have been consummated and after giving effect thereto ACE
shall own less than 50% of the equity of Holdings.

 

(c)           Corporate
Structure.  The corporate
and capital structure of Holdings and its Subsidiaries shall be satisfactory to
the Agent (it being understood and agreed that the corporate and capital
structure described under the Corporate Structure heading of the Amendment No.
2 Form S-1 draft filed by Holdings with the SEC on April 1, 2004 shall be
deemed satisfactory).

 

Section 6.03  Each
Loan.  (a) At the time of making any
Loans, and after giving effect to the proposed extensions of credit:  the Closing Date and the Effective Date
shall have occurred; the representations and warranties of the Borrowers
contained in ARTICLE V and in the other Loan Documents and the representations
and warranties of each Material Non-AGC Subsidiary contained or incorporated in
the Guarantor Joinder given by such Material Non-AGC Subsidiary pursuant to Section
10.18 shall be true on and as of the date of such additional Loan with the same
effect as though such representations and warranties had been made on and as of
such date (except representations and warranties which expressly relate solely
to an earlier date or time, which representations and warranties shall be true
and correct on and as of the specific dates or times referred to therein) and
the Borrowers shall have performed and complied with all covenants and
conditions hereof that are required to be performed or complied with as of

 

44

 

the
date of such Loan and each Material Non-AGC Subsidiary shall have complied with
Section 10.18 and all other covenants and conditions that are required to be
performed or complied with as of the date of such Loan and which are set forth
in or incorporated into the Guarantor Joinder given by such Material Non-AGC
Subsidiary pursuant to Section 10.18; no Event of Default or Potential Default
shall have occurred and be continuing or shall exist; and the applicable
Borrower shall have delivered to the Agent a duly executed and completed Loan
Request.

 

(b)           Notwithstanding anything to the
contrary in this Agreement, the UK Borrower shall not be permitted to incur any
Loans hereunder unless and until the following additional conditions precedent
have been satisfied:

 

(i)            Secretary’s
Certificate.  There shall be
delivered to the Agent for the benefit of each Bank a certificate signed by the
Secretary or an Assistant Secretary of the UK Borrower, certifying as
appropriate as to:

 

(A)          all action taken by
the UK Borrower in connection with this Agreement and the other Loan Documents;

 

(B)           the names of the
officer or officers authorized to sign this Agreement and the other Loan Documents
and the true signatures of such officer or officers and specifying the
Authorized Officers permitted to act on behalf of the UK Borrower for purposes
of this Agreement and the true signatures of such officers, on which the Agent
and each Bank may conclusively rely; and

 

(C)           copies of its
organizational documents, including its certificate or articles of
incorporation and bylaws as in effect on the date such Secretary’s Certificate
is executed and if applicable, certified by the appropriate official where such
documents are filed in an office.

 

(ii)           Opinion
of Counsel.  There shall be
delivered to the Agent for the benefit of each Bank one or more written
opinions of counsel for the UK Borrower in form and substance satisfactory to
the Agent and its counsel:

 

(A)          as to the matters set
forth in Exhibit 6.01(d); and

 

(B)           as to such other
matters incident to the transactions contemplated herein as the Agent may
reasonably request.

 

(iii)          The UK Borrower shall have received
permission from the United Kingdom Financial Services Authority under Part IV
of the Financial Services and Markets Act 2000 to effect and carry out
contracts of insurance.

 

(iv)          The Guaranty Agreement to be delivered
by the Company with respect to the obligations of the UK Borrower shall have
been duly executed and delivered to the Agent for the benefit of the Banks.

 

45

 

ARTICLE VII

COVENANTS

 

Section 7.01  Affirmative Covenants.  Subject to Section 7.04, each Borrower
covenants and agrees (in each case solely on behalf of itself and its
Subsidiaries) that, until payment in full of the Loans, and interest thereon,
satisfaction of all of the other Obligations under the Loan Documents and
termination of the Commitments, each Borrower shall comply at all times with
the following affirmative covenants:

 

(a)           Preservation
of Existence, Etc. 
Holdings shall, and shall cause each of its Material Subsidiaries to,
maintain its legal existence as a corporation, limited partnership, or limited
liability company and its license or qualification and good standing in each
jurisdiction in which its ownership or lease of property or the nature of its
business makes such license or qualification necessary, except as otherwise
expressly permitted in Section 7.02(f) [Liquidations, Mergers, Etc.].

 

(b)           Payment
of Liabilities, Including Taxes, Etc.  Holdings shall, and shall cause each of its Material Subsidiaries
to, duly pay and discharge all liabilities to which it is subject or which are
asserted against it, promptly as and when the same shall become due and
payable, including all taxes,  assessments, and governmental charges upon
it or any of its properties, assets, income or profits, prior to the date on
which penalties attach thereto, except to the extent that such liabilities,
including taxes, assessments or charges, are being contested in good faith and
by appropriate and lawful proceedings diligently conducted and for which such
reserve or other appropriate provisions, if any, as shall be required by GAAP shall
have been made, provided that Holdings will pay, and cause its Material
Subsidiaries to pay, all such liabilities forthwith upon the commencement of
proceedings to foreclose any Lien which may have attached as security therefor.

 

(c)           Maintenance
of Insurance.  Holdings
shall, and shall cause each of its Material Subsidiaries to, insure its
properties and assets against loss or damage by insurable hazards as such
assets are commonly insured (including, to the extent applicable to the
respective industry of Holdings or any Subsidiary thereof, fire, extended
coverage, property damage, workers’ compensation, public liability, and
business interruption insurance) and against other risks (including errors and
omissions) in such amounts as similar properties and assets are insured by
prudent companies in similar circumstances carrying on similar businesses, and
with reputable and financially sound insurers, including self-insurance to the
extent customary.

 

(d)           Maintenance
of Properties and Leases. 
Holdings shall, and shall cause each of its Material Subsidiaries to,
maintain in good repair, working order, and condition (ordinary wear and tear
excepted) in accordance with the general practice of other businesses of
similar character and size, all of those properties useful or necessary to its
business, and from time to time Holdings will make or cause to be made all
appropriate repairs, renewals, or replacements thereof.

 

46

 

(e)           Maintenance
of Licenses, Etc.  Holdings
shall, and shall cause each of its Material Subsidiaries to, maintain in full
force and effect all licenses, franchises, permits, rights, and other
authorizations necessary for the ownership and operation of its properties and
business if the failure so to maintain the same would constitute a Material
Adverse Change; provided, however, that the parties hereto acknowledge
that, as of the date of this Agreement, the UK Borrower is not so licensed or
authorized and provided further, however, that once so licensed and authorized
(which, in any event, shall occur on or prior to the date on which the UK
Borrower becomes a Borrower hereunder), as of which time (and thereafter as
required during the term of this Agreement), the Company covenants on behalf of
itself to notify the Agent of the receipt by the UK Borrower of such license or
other authority.

 

(f)            Visitation
Rights.  Holdings shall,
and shall cause each of its Material Subsidiaries to, permit any of the
officers or authorized employees or representatives of the Agent or any Bank to
visit and inspect any of its properties and to examine and make excerpts from
its books and records and discuss its business affairs, finances and accounts
with its officers, all in such detail and at such times and as often as the
Agent or any such Bank may reasonably request and at the pro  rata
expense of the Banks (if requested by the Required Banks), the requesting Bank
or, if the request has not come from any Bank, the Agent, provided that
the Agent or such Bank shall provide the Company with reasonable notice prior
to any visit or inspection, provided further no Bank shall be permitted
more than one visit per one year period and provided further that during
the continuation of any Event of Default, (i) the limitation on visits in the
immediately preceding proviso shall not apply and (ii) all such visits and
inspections by Agent and or Bank shall be at the expense of the Borrowers.  In the event any Bank desires to conduct a
visitation or inspection as contemplated hereby of Holdings or any Subsidiary,
such Bank shall make a reasonable effort to conduct such visitation and
inspection contemporaneously with any visitation or inspection to be performed
by the Agent.

 

(g)             Keeping of
Recordsand Books of Account. 
Holdings shall, and shall cause each Subsidiary of Holdings to, maintain
and keep proper books of record and account which enable Holdings and its
Material Subsidiaries to issue financial statements in accordance with GAAP and
as otherwise required by applicable Laws of any Official Body having
jurisdiction over Holdings or any Subsidiary of Holdings, and in which full,
true and correct entries shall be made in all material respects of all its
dealings and business and financial affairs.

 

(h)           Plans and Benefit
Arrangements.  Holdings shall, and
shall cause each other member of the ERISA Group to, comply with ERISA, the
Internal Revenue Code and other Laws applicable to any Plans and Benefit
Arrangements except where such failure, alone or in conjunction with any other
failure, would not result in a Material Adverse Change.  Without limiting the generality of the
foregoing, Holdings shall cause all of its Plans and all Plans maintained by
any member of the ERISA Group, if any, to be funded in accordance with the
minimum funding requirements of ERISA and, to the extent applicable shall make,
and cause each member of the ERISA Group to make, in a timely manner, all
contributions due to Plans, Benefit Arrangements and Multiemployer Plans.

 

47

 

(i)            Compliance With
Laws.  Holdings shall, and shall
cause each of its Material Subsidiaries to, comply with all applicable Laws in
all respects, provided that it shall not be deemed to be a violation of this
Section 7.01(i) if any failure to comply with any Law would not result in
fines, penalties, remediation costs, other similar liabilities or injunctive
relief which in the aggregate would constitute a Material Adverse Change.

 

(j)            Use of Proceeds.  Each Borrower will use the proceeds of the
Loans only for the general corporate purposes and working capital needs of the
such Borrower.  No Borrower shall use
the proceeds of the Loans for any purposes which contravenes any applicable Law
or any provision hereof.

 

(k)           Senior Debt Status.  Holdings shall ensure that the Obligations
of Holdings and any Material Subsidiary under this Agreement, a Guarantor
Joinder, any Guaranty Agreement, and each of the other Loan Documents to which
it is a party shall at all times rank at least pari  passu in priority
of payment with all other senior unsecured Indebtedness of Holdings or such
Material Subsidiary (except to the extent of any Indebtedness which has a
“preferred” status under any Law governing the bankruptcy, liquidation,
insolvency, rehabilitation, reorganization, conservation, or like circumstance
of Holdings or such Material Subsidiary) and no such other senior unsecured
Indebtedness of Holdings or such Material Subsidiary shall at any time be
governed by or subject to covenants, defaults, or other provisions that are
more restrictive on Holdings or such Material Subsidiary than those set forth
herein; and provided that if payment of any present or future Indebtedness of
Holdings or any Material Subsidiary, except Indebtedness of Holdings or any Material
Subsidiary to the extent secured by Permitted Liens, shall at any time
hereafter become secured by any Lien on any property, Holdings or such Material
Subsidiary shall secure payment of the Obligations with a Lien of like priority
on the same or substantially similar property of the same or greater value
(but, in any event, such Lien shall secure an amount of Obligations not to
exceed the amount secured by the Lien given to secure payment of such other
Indebtedness).

 

Section 7.02  Negative Covenants.  Subject to Section 7.04, each Borrower
covenants and agrees (in each case on behalf of itself and its Subsidiaries)
that until payment in full of the Loans and interest thereon, satisfaction of
all of the other Obligations hereunder and termination of the Commitments, such
Borrower shall comply with the following negative covenants:

 

(a)           Indebtedness.  Holdings shall not, and shall not permit any
of its Material Subsidiaries to, at any time create, incur, assume, or suffer
to exist any Indebtedness, except:

 

(i)            Indebtedness
under the Loan Documents;

 

(ii)           Existing
Indebtedness as set forth on Schedule 7.02(a) (including any
extensions or renewals thereof, provided there is no increase in the
amount thereof or other significant change in the terms thereof unless
otherwise specified on Schedule 7.02(a);

 

48

 

(iii)          Capitalized
and operating leases;

 

(iv)          Indebtedness
secured by Purchase Money Security Interests;

 

(v)           Indebtedness
of Holdings or any Material Subsidiary to the Company or any other Material
Subsidiary, or any of their respective Affiliates;

 

(vi)          Any
Interest Rate Hedge;

 

(vii)         Any
Guaranties permitted pursuant to Section 7.02(c);

 

(viii)        Other
Indebtedness of the Company which is non-recourse to the Company and in the
nature (as to its purpose and non-recourse structure) of that existing
Indebtedness in favor of Deutsche Bank shown on Exhibit 7.02(a) (“Soft
Capital”);

 

(ix)           Other
Indebtedness of Material Subsidiaries which are regulated insurance companies
consisting of letters of credit, trust accounts and similar collateral support
required in the ordinary course of business either by statute or by rating
agencies to support the insurance and/or reinsurance businesses of such
Material Subsidiaries;

 

(x)            All
obligations of any Affiliate of Holdings under Guaranteed Investment Contracts
issued by such Person in an aggregate amount of up to $1,000,000,000; and

 

(xi)           Other
Indebtedness of Holdings or US Holdco from time to time so long as such
Indebtedness is permitted at such time by the other provisions of this
Agreement.

 

(b)           Liens.  Holdings shall not, and shall not permit any
of its Material Subsidiaries to, at any time create, incur, assume, or suffer
to exist any Lien on any of its property or assets, tangible or intangible, now
owned or hereafter acquired, or agree or become liable to do so,  except
Permitted Liens.

 

(c)           Guaranties.  Holdings shall not, and shall not permit any
of its Material Subsidiaries to, at any time, directly or indirectly, become or
be liable in respect of any Guaranty, or assume, guaranty, become surety for,
endorse or otherwise agree, become or remain directly or contingently liable
upon or with respect to any obligation or liability of any other Person, except
for Guaranties of that Indebtedness of Holdings and the Material Subsidiaries
permitted hereunder and (the following, collectively, “Insurance-Related
Guaranties”): (i) reinsurance and insurance agreements and policies and
Guaranties which Holdings or any Material Subsidiary is authorized or licensed
to provide in the ordinary course of its reinsurance or insurance business,
(ii) Guaranties given by the Company to support credit derivative transactions
entered into by AGR Financial Products Inc., a Delaware corporation and
Affiliate of the Company (“Credit Derivative Guaranties”), (iii) Guaranties
given by the Company to support the obligations of any Subsidiary of Holdings
pursuant to Guaranteed Investment Contracts issued by such

 

49

 

Subsidiary; (iv) keepwell
and similar agreements between and among various Subsidiaries of Holdings, the
purpose and effect of which is to transfer the financial strength ratings of
either of the Company or Assured Guaranty Re International Ltd. to its
Subsidiaries, and (v) letters of credit, trust accounts or similar collateral
support procured by Subsidiaries of Holdings which are required in the ordinary
course of business either by statute or by rating agencies in order to support
the respective reinsurance or insurance business of such Subsidiaries.

 

(d)           Loans and
Investments.  Holdings
shall not, and shall not permit any of its Material Subsidiaries to, at any
time make or suffer to remain outstanding any loan or advance to, or purchase,
acquire or own any stock, bonds, notes or securities of, or any partnership
interest (whether general or limited) or limited liability company interest in,
or any other investment or interest in,  or make any capital contribution to, any
other Person, or agree, become, or remain liable to do any of the foregoing,
except:

 

(i)            trade
credit extended on usual and customary terms in the ordinary course of
business;

 

(ii)           advances
to employees to meet expenses incurred by such employees in the ordinary course
of business;

 

(iii)          Permitted
Investments and Permitted Acquisitions; and

 

(iv)          loans,
advances and investments in Holdings and any Subsidiary of Holdings; provided
that the Company may not make any loans, advances and investments in
Holdings or any Subsidiary of Holdings which is not a Subsidiary of the Company
(other than any such Subsidiary of Holdings which issues or proposes to issue
Guaranteed Investment Contracts).

 

(e)           Dividends
and Related Distributions. 
Holdings shall not, and shall not permit any of its Material
Subsidiaries to, make or pay, or agree to become or remain liable to make or
pay, any dividend or other distribution of any nature (whether in cash,
property, securities or otherwise) on account of or in respect of its shares of
capital stock, partnership interests, or limited liability company interests or
on account of the purchase, redemption, retirement, or acquisition of its
shares of capital stock (or warrants, options or rights therefor), partnership
interests or limited liability company interests, except dividends or other
distributions payable to Holdings or any Material Subsidiary and except for
dividends payable by Holdings not in excess of $15,000,000 in any fiscal year
of Holdings.

 

(f)            Liquidations,
Mergers, Consolidations, Acquisitions. 
Holdings shall not, and shall not permit any of its Material
Subsidiaries to, dissolve, liquidate, or wind-up its affairs, or become a party
to any amalgamation, merger or consolidation, or acquire by purchase, lease, or
otherwise all or substantially all of the assets or capital stock of or other
ownership interest in any other Person, provided that

 

(1)           any
Material Subsidiary may consolidate, amalgamate or merge into Holdings or any
other Material Subsidiary provided that the Company may

 

50

 

not merge, amalgamate or
consolidate with Holdings, and the Company may only merge, amalgamate or
consolidate with another Material Subsidiary if the Company is the surviving
entity of such merger, amalgamation or consolidation; and

 

(2)           Holdings
or any Material Subsidiary may acquire, whether by purchase, by amalgamation or
by merger, (A) all of the ownership interests of another Person or
(B) substantially all of the assets of another Person or of a business or
division of another Person (each a “Permitted Acquisition”), provided
that each of the following requirements is met:

 

(i)            if
Holdings or any Material Subsidiary is acquiring the ownership interests in
such Person and such Person meets the criteria for a Material Subsidiary set
forth in the definition of such term at Section 1.01, such Person shall execute
a Guarantor Joinder and join this Agreement as a Guarantor pursuant to Section
10.18 [Joinder of Guarantors] on or before the date of such Permitted
Acquisition;

 

(ii)           the
board of directors or other equivalent governing body of such Person shall have
approved such Permitted Acquisition and Holdings or the relevant Material
Subsidiary shall have delivered to the Banks written evidence of such approval
of the board of directors (or equivalent body) of such Person for such
Permitted Acquisition;

 

(iii)          the
business acquired, or the business conducted by the Person whose ownership
interests are being acquired, as applicable, shall be substantially the same
as, or otherwise complementary or related to, one or more lines of business
conducted by Holdings or any Material Subsidiary, or otherwise incidental to
the business of a financial services company, and shall comply with Section
7.02(j) [Continuation of or Change in Business];

 

(iv)          no
Potential Default or Event of Default shall exist immediately prior to and
after giving effect to such Permitted Acquisition; and

 

(v)           upon
the reasonable request of Agent, Holdings or the relevant Material Subsidiary
shall deliver to the Agent at least five (5) Business Days before such
Permitted Acquisition such information about such Person or its assets as Agent
may reasonably require.

 

(g)           Dispositions
of Assets or Subsidiaries. 
Holdings shall not, and shall not permit any of its Material ubsidiaries
to, sell, convey, assign, lease, abandon, or otherwise transfer or dispose of,
voluntarily or involuntarily, any of its properties or assets, tangible or
intangible (including by sale, assignment, discount, or other disposition of
accounts, contract rights, chattel paper, equipment, or general intangibles
with or

 

51

 

without recourse or of
capital stock, shares of beneficial interest, partnership interests or limited
liability company interests of a Subsidiary of Holdings), except:

 

(i)            transactions
involving the sale of inventory, if any, in the ordinary course of business;

 

(ii)           any
sale, transfer, or lease of assets, including any sale of investment assets, in
the ordinary course of business which are no longer necessary or required in
the conduct of Holdings’ or such Subsidiary’s business or which are incidental
to the management of Holdings’ or its Subsidiary’s investment portfolio in a
manner consistent with past practices;

 

(iii)          any
sale, transfer or lease of assets by any wholly owned Subsidiary of Holdings to
Holdings or any Material Subsidiary;

 

(iv)          any
sale, transfer or lease of assets in the ordinary course of business which are
replaced by reasonably equivalent substitute assets; or

 

(v)           any
sale, transfer or lease of assets, other than those specifically excepted
pursuant to clauses (i) through (iv) above, provided that (A) at
the time of any disposition, no Event of Default shall exist or shall result
from such disposition, and (B) the aggregate value of all assets so sold
by (x) Holdings shall not exceed in any fiscal year fifteen percent (15%) of
the consolidated tangible net worth of Holdings and its Subsidiaries or (y) any
Material Subsidiary in any fiscal year shall not exceed a material portion of
such Material Subsidiary’s tangible net worth.

 

(h)           Affiliate Transactions.  Holdings shall not, and shall not permit any
of its Material Subsidiaries to, enter into or carry out any transaction
(including purchasing property or services from or selling property or services
to any Affiliate of Holdings or any Material Subsidiary or other Person) unless
such transaction is not otherwise prohibited by this Agreement, is entered into
upon fair and reasonable arm’s-length terms and conditions which are fully
disclosed to the Agent, and is in accordance with all applicable Law and
accounting standards.

 

(i)            Subsidiaries,
Partnerships and Joint Ventures. 
Holdings shall not, and shall not permit any of its Material Subsidiaries
to, own, acquire, or create directly or indirectly any Material Non-AGC
Subsidiary other than Material Non-AGC Subsidiaries each of which has joined
this Agreement as a Guarantor at any time after the Closing Date in accordance
with Section 10.18 [Joinder of Guarantors]; provided, however, that the
parties hereto acknowledge and agree that AGRI and AGRO shall not be required
to become Guarantors and deliver all required documents pursuant to Section
10.18 until sixty (60) days after the Effective Date.  Each of Holdings and its Material Subsidiaries shall not become
or agree to become (1) a general or limited partner in any general or limited
partnership, except that Holdings or any of its Material Subsidiaries may be
general or limited partners in any other Material Subsidiary, (2) a member or
manager of,

 

52

 

or hold a limited
liability company interest in, a limited liability company, except that
Holdings or any of its Material Subsidiaries may be members or managers of, or
hold limited liability company interests in, other Material Subsidiaries, or
(3) a joint venturer or hold a joint venture interest in any joint venture
except that Holdings or any of its Material Subsidiaries may be a party to a joint
venture (A) that would not otherwise be a Material Subsidiary were it a
Subsidiary of Holdings, and (B) as to which neither Holdings nor any Material
Subsidiary is directly or indirectly jointly or severally liable for any act or
omission of the joint venture beyond the amount of its investment therein.

 

(j)            Continuation
of or Change in Business. 
Holdings shall not, and shall not permit any of its Material
Subsidiaries to, make a material change in the nature of its business as
substantially conducted and operated by Holdings or such Subsidiary as of the
Closing Date; provided, however, that (A) it shall not be a
material change hereunder for Holdings or any of its Material Subsidiaries to
alter the concentration percentages of products offered or business conducted
as of the Closing Date, nor to enter into any business incidental to the
offering of such products or the conduct of such business and it shall not be a
material change hereunder for a Material Subsidiary to engage in any business
incidental to the conduct of a financial services company and (B) the parties
hereto hereby acknowledge and agree that the issuance of Guaranteed Investment
Contracts is a business incidental to the conduct of a financial services
company.

 

(k)           Plans and
Benefit Arrangements.  Holdings
shall not, and shall not permit any of its Material Subsidiaries to, engage in
a Prohibited Transaction with any Plan, Benefit Arrangement, or Multiemployer
Plan which, alone or in conjunction with any other circumstance or set of circumstances,
would result in a material liability under ERISA or otherwise violate ERISA in
a material respect.

 

(l)            Fiscal
Year.  Holdings shall not, and shall
not permit any Subsidiary of Holdings to, change its fiscal year from the
twelve-month period beginning January 1 and ending December 31 unless Holdings
has (i) provided thirty (30) days’ prior written notice to the Agent and the
Banks of the proposed change accompanied by an explanation in reasonable detail
of the effect thereof on Holdings and its Subsidiaries in general and on
Holdings’ or its Material Subsidiary’s financial reporting and covenant
compliance hereunder, and (ii) agreed to amend the covenants contained herein
(including the financial covenants set forth below) if reasonably requested by
the Agent and the Required Banks to maintain the continuity of the such
covenants.

 

(m)          Minimum
Statutory Capital.  The
Company shall not at any time permit the Statutory Capital of the Company to be
less than eighty percent (80%) of the Statutory Capital of the Company as of
the most recent fiscal quarter of the Company prior to the Closing Date.

 

(n)           Maximum Exposure
Ratio (Company).  The Company shall
not at any time permit the ratio of the Net Par of the Company to the Statutory
Capital of the Company to exceed 150 to 1.0.

 

53

 

(o)           Maximum Debt
to Total Capitalization Ratio.  The
Company shall maintain at all times a ratio of Consolidated Debt to Total
Capitalization of not more than 0.35 to 1.0.

 

(p)           Maximum
Debt to Total Capitalization Ratio (Holdings).  Holdings shall maintain at all times a ratio
of Consolidated Debt to Total Capitalization of not more than 0.30 to 1.0.

 

(q)           Minimum Net Worth.  Holdings shall not permit at any time its
Consolidated Net Worth to be less than seventy-five percent (75%) of the
Consolidated Net Worth of Holdings as of March 31, 2004.

 

(r)            Interest
Coverage Ratio.  Holdings
will not permit the Consolidated Interest Coverage Ratio for any Test Period
ending on the last day of a fiscal quarter of Holdings to be less than 2.5:1.0.

 

Section 7.03  Reporting Requirements.  Subject to Section 7.04, each Borrower
covenants and agrees (in each case solely on behalf of itself and its
Subsidiaries) that until payment in full of the Loans and interest thereon,
satisfaction of all other Obligations hereunder and under the other Loan
Documents and termination of the Commitments, Holdings will furnish or cause to
be furnished to the Agent (which shall promptly furnish the same to each of the
Banks):

 

(a)           Quarterly
Financial Statements.  As
soon as available and in any event within forty-five (45) calendar days after
the end of each of the first three fiscal quarters in each fiscal year, the
Form 10-Q of Holdings as filed with the SEC and two sets of financial
statements of Holdings and the Company, each consisting of a consolidated
balance sheet as of the end of such fiscal quarter and related consolidated
statements of income, stockholders’ equity, and cash flows for the fiscal
quarter then ended and the fiscal year through that date, all in reasonable
detail and certified (subject to normal year-end audit adjustments) by the
Chief Executive Officer, President, Chief Financial Officer, Treasurer, or
Assistant Treasurer of Holdings or the Company, as the case may be, as having
been prepared as the set of financial statements of Holdings in accordance with
GAAP, consistently applied, and as to the set of financial statements of the
Company as having been prepared in accordance with statutory accounting
principles required by the State of Maryland.

 

(b)           Annual Financial
Statements.  As soon as available
and in any event within ninety (90) days after the end of each fiscal year of
Holdings, the Form 10-K of Holdings as filed with the SEC and two sets of
financial statements of Holdings and the Company, each consisting of a
consolidated balance sheet as of the end of such fiscal year, and related
consolidated statements of income, stockholders’ equity, and cash flows for the
fiscal year then ended, all in reasonable detail with the set relating to
Holdings being prepared in accordance with GAAP, consistently applied, and the
set relating to the Company being prepared in accordance with statutory
accounting principles required by the State of Maryland, and, in each case,
certified by independent certified public accountants of nationally recognized
standing satisfactory to the Agent.  The
certificate

 

54

 

or report of accountants
shall be free of qualifications (other than any consistency qualification that
may result from a change in the method used to prepare the financial statements
as to which such accountants concur) and shall not indicate the occurrence or
existence of any event, condition, or contingency which would materially impair
the prospect of payment or performance of any covenant, agreement, or duty of
Holdings and/or any Material Subsidiary under any of the Loan Documents.

 

(c)           Certificate
of the Company. 
Concurrently with the financial statements of Holdings and the Company
furnished to the Agent and to the Banks pursuant to Section 7.03(a) [Quarterly
Financial Statements] and Section 7.03(b) [Annual Financial Statements], a
certificate (each a “Compliance Certificate”) of each of Holdings and the
Company signed by the Chief Executive Officer, President, Chief Financial
Officer, Treasurer, or Assistant Treasurer of Holdings or the Company, in the
form of Exhibit 7.03, to the effect that, except as described pursuant to
Section 7.03(d) [Notice of Default], (i) the representations and
warranties of the Borrowers contained in ARTICLE V and in the other Loan
Documents and the representations and warranties of each Material Non-AGC
Subsidiary, if any, contained or incorporated in the Guarantor Joinder given by
such Non-AGC Material Subsidiary pursuant to Section 10.18 are true on and as
of the date of such certificate with the same effect as though such
representations and warranties had been made on and as of such date (except
representations and warranties which expressly relate solely to an earlier date
or time) and each Borrower has performed and complied with all covenants and
conditions hereof and each Material Subsidiary, if any, shall have complied
with all covenants and conditions of or incorporated into the Guarantor Joinder
given by such Non-AGC Material Subsidiary pursuant to Section 10.18,
(ii) no Event of Default or Potential Default exists and is continuing on
the date of such certificate, and (iii) containing calculations in
sufficient detail to (A) demonstrate compliance as of the date of such
financial statements with all applicable financial covenants contained in
Section 7.02 [Negative Covenants] and (B) determine the Net Par of the
Company and any material changes or loss experience in connection with Existing
Reinsurance Coverage from the components thereof set forth on Schedule
5.01(h).

 

(d)           Notice of
Default.  Promptly after any officer
of a Borrower has learned of: (i) the occurrence of an Event of Default or
Potential Default, a certificate signed by the Chief Executive Officer,
President, Chief Financial Officer, Treasurer, or Assistant Treasurer of such
Borrower setting forth the details of such Event of Default or Potential
Default and the action which such Borrower proposes to take with respect
thereto, or (ii) the creation or acquisition of a Material Subsidiary (or the
existence of a Material Non-AGC Subsidiary other than the Company, the UK
Borrower and AGRI which has not executed and delivered a Guaranty Agreement to
Agent for the benefit of the Banks), a certificate signed by the Chief
Executive Officer, President, Chief Financial Officer, Treasurer, or Assistant
Treasurer of Holdings setting forth the legal name, jurisdiction of
organization, and such other relevant information reasonably requested by
Agent.

 

(e)           Off-Balance
Sheet Financing.  None of
Holdings or any of its Material Subsidiaries shall engage in any off-balance
sheet transaction (i.e., the liabilities in respect of which do not
appear on the liability side of the balance sheet) providing the functional
equivalent of material Indebtedness or otherwise providing for a material

 

55

 

liability of Holdings or
any of its Material Subsidiaries (collectively, “Off-Balance Sheet
Transactions”), except such Off-Balance Sheet Transactions as re fully
disclosed to the Banks and Agent prior to their creation.

 

(f)            Notice of Litigation.  Promptly after the commencement thereof,
notice of all actions, suits, proceedings or investigations before or by any
Official Body or any other Person against Holdings or any Material Subsidiary
of Holdings, which involve a claim or series of claims in excess of $20,000,000
or which, if adversely determined, would constitute a Material Adverse Change.

 

(g)           Notice
of Change in Insurer Financial Strength Rating.  Within two (2) Business Days after Standard
& Poor’s or Moody’s announces a change in the Company’s Insurer Financial
Strength Rating, notice of such change. 
Holdings will deliver together with such notice a copy of any written
notification which the Company received from the applicable rating agency
regarding such change of its Insurer Financial Strength Rating.

 

(h)           Sale of Assets.  At least fifteen (15) calendar days prior
thereto, notice with respect to any proposed sale or transfer of material
assets pursuant to Section 7.02(g)(v).

 

(i)            Budgets, Other Reports and Information.  Promptly upon their becoming available to
Holdings or the Company, such reports and information as any of the Banks may
from time to time reasonably request. 
Each Borrower shall also notify the Banks and Agent promptly of the
enactment, enforcement, or adoption of any Law which may result in a Material
Adverse Change with respect to such Borrower.

 

Section 7.04  Bermuda Law Event.  To the extent that the making by Holdings,
the Company or any Guarantor of any covenant set forth in Sections 7.01, 7.02
or 7.03 or in any of the Loan Documents is for such Person not permitted by, or
is unlawful under or is in violation of, any Bermuda Law pertaining to fetters
on statutory powers, then such covenant shall be deemed not made by nor
applicable to such Person, but if such Person shall take or fail to take any
action which would have breached such covenant had the same been applicable to
such Person, the action or failure to take action shall constitute a “Bermuda
Law Event”.

 

ARTICLE VIII

DEFAULT

 

Section 8.01  Events of Default.  An Event of Default shall mean the
occurrence or existence of any one or more of the following events or
conditions (whatever the reason therefor and whether voluntary, involuntary, or
effected by operation of Law):

 

(a)           Payments Under
Loan Documents.  Any Borrower shall
fail to pay (i) any principal of any Loan (including scheduled installments
or mandatory prepayments, if any, or the payment due at maturity) when such
principal is due hereunder or (ii) any interest on any Loan or any other
amount owing hereunder or under the other Loan

 

56

 

Documents within five (5)
Business Days after such interest or other amount becomes due in accordance
with the terms hereof or thereof;

 

(b)           Breach of Warranty.  Any representation or warranty made at any
time by any of Holdings and the Material Subsidiaries herein or by any of
Holdings and the Material Subsidiaries in any other Loan Document, or in any
certificate, other instrument, or statement furnished by Holdings or a Material
Subsidiary pursuant to the provisions hereof or thereof, shall prove to have been
false or misleading in any material respect as of the time it was made or
furnished;

 

(c)           Breach of Negative
Covenants or Visitation Rights. 
Holdings or any Material Subsidiary shall default in the observance or
performance of any covenant contained in Section 7.02 [Negative Covenants] or
shall default for a period of ten (10) days or more in the observance or
performance of any covenant contained in Section 7.01(f);

 

(d)           Breach of Other
Covenants.  Holdings or any Material
Subsidiary shall default in the observance or performance of any other
covenant, condition, or provision hereof or of any other Loan Document and such
default shall continue unremedied for a period of thirty (30) days (such grace
period to be applicable only in the event such default can be remedied by
corrective action);

 

(e)           Defaults
in Other Agreements or Indebtedness.  A default or event of default shall occur at any time under the
terms of any other agreement involving borrowed money or the extension of
credit or any other Indebtedness under which Holdings or any Material
Subsidiary of Holdings may be obligated as a borrower or guarantor in excess of
$20,000,000 in the aggregate, and either (1) such breach, default or event of
default consists of the failure to pay (beyond any period of grace permitted
with respect thereto, whether waived or not) any Indebtedness when due (whether
at stated maturity, by acceleration or otherwise) or (2) such breach or default
causes (or permits the holder or holders of such Indebtedness to cause) the
acceleration of any Indebtedness (whether or not such right shall have been
waived) or the termination of any commitment to lend;

 

(f)            Final Judgments
or Orders.  Any final judgments or
orders for the payment of money which results in an uninsured liability to pay
in excess of $20,000,000 in the aggregate shall be entered against Holdings or
any Material Subsidiary by a court having jurisdiction in the premises, which
judgment is not discharged, vacated, bonded, or stayed pending appeal within a
period of forty-five (45) days from the date of entry;

 

(g)           Loan Document
Unenforceable.  Any of the Loan
Documents shall cease to be legal, valid, and binding agreements enforceable
against the party executing the same or such party’s successors and assigns (as
permitted under the Loan Documents) in accordance with the respective terms
thereof or shall in any way be terminated (except in accordance with its terms)
or become or be declared stayed, ineffective, or inoperative or shall cease to
give or provide the respective Liens or security interests intended to be
created thereby; provided, however, if any of the foregoing is a
result of an involuntary

 

57

 

proceeding of the type
described in Section 8.01(m), such proceeding has not been contested by the
affected party or has not been dismissed after the passage of more than sixty
(60) days;

 

(h)           Losses;
Proceedings Against Assets. 
Any of Holdings’ or the Company’s assets having an aggregate value
(reasonably determined) in excess of five (5%) of the tangible net worth of
Holdings and its Subsidiaries or the Company and the Subsidiaries, as the case
may be, or any of its Material Subsidiaries’ assets having an aggregate value
(reasonably etermined) in excess of a material amount of such Material
Subsidiary’s tangible net worth, are attached, seized, levied upon or subjected
to a writ or distress warrant; or such come within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors and the
same is not cured within sixty (60) days thereafter;

 

(i)            Notice of Lien
or Assessment.  A notice of Lien or
assessment in excess of $20,000,000 which is not a Permitted Lien is filed of
record with respect to all or any part of the Holdings’ or any of its Material
Subsidiaries’ assets by the United States, or any department, agency, or
instrumentality thereof, or by any state, county, municipal, or other
governmental agency, including the PBGC, or any taxes or debts owing at any
time or times hereafter to any one of these becomes payable and the same is not
paid within thirty (30) days after the same becomes payable;

 

(j)            Insolvency.  Holdings or any Material Subsidiary of
Holdings ceases to be solvent or admits in writing its inability to pay its
debts as they mature;

 

(k)           Events
Relating to Plans and Benefit Arrangements.  Any of the following occurs:  (i) any Reportable Event, which the
Agent determines in good faith constitutes grounds for the termination of any
Plan by the PBGC or the appointment of a trustee to administer or liquidate any
Plan, shall have occurred and be continuing; (ii) proceedings shall have
been instituted or other action taken to terminate any Plan, or a termination
notice shall have been filed with respect to any Plan; (iii) a trustee
shall be appointed to administer or liquidate any Plan; (iv) the PBGC
shall give notice of its intent to institute proceedings to terminate any Plan
or Plans or to appoint a trustee to administer or liquidate any Plan; and, in
the case of the occurrence of (i), (ii), (iii) or (iv) above, the Agent
determines in good faith that the amount of Holdings’ liability is likely to
exceed 10% of its Consolidated Tangible Net Worth; (v) Holdings or any
member of the ERISA Group shall fail to make any contributions when due to a
Plan or a Multiemployer Plan; (vi) Holdings or any other member of the
ERISA Group shall make any amendment to a Plan with respect to which security
is required under Section 307 of ERISA; (vii) Holdings or any other member
of the ERISA Group shall withdraw completely or partially from a Multiemployer
Plan; (viii) Holdings or any other member of the ERISA Group shall
withdraw (or shall be deemed under Section 4062(e) of ERISA to withdraw)
from a Multiple Employer Plan; or (ix) any applicable Law is adopted,
changed or interpreted by any Official Body with respect to or otherwise
affecting one or more Plans, Multiemployer Plans or Benefit Arrangements and,
with respect to any of the events specified in (v), (vi), (vii), (viii) or
(ix), the Agent determines in good faith that any such

 

58

 

occurrence would be
reasonably likely to materially and adversely affect the total enterprise
represented by Holdings and the other members of the ERISA Group;

 

(l)            Change of Control.  (i) Any person or group of persons (within
the meaning of Sections 13(d) or 14(a) of the Securities Exchange Act of
1934, as amended), other than ACE or an Affiliate of ACE, shall have acquired
beneficial ownership of (within the meaning of Rule 13d-3 promulgated by the
SEC under said Act) 30% or more of the voting capital stock of Holdings; or
(ii) within a period of twelve (12) consecutive calendar months,
individuals who were directors of Holdings on the first day of such period and
individuals approved by the existing board of directors of Holdings shall cease
to constitute a majority of the board of directors of Holdings; or (iii) the
Company shall cease to be a wholly-owned Subsidiary of Holdings; or (iv) the UK
Borrower shall cease to be a subsidiary of the Company at any time when any
Loans are outstanding to the UK Borrower;

 

(m)          Involuntary
Proceedings.  A
proceeding shall have been instituted in a court having jurisdiction in the
premises seeking a decree or order for relief in respect of Holdings or any
Material Subsidiary of Holdings in an involuntary case under any applicable
bankruptcy, insolvency, reorganization, or other similar law now or hereafter
in effect, or for the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator, or conservator (or similar official) of
Holdings or any Material Subsidiary of Holdings or for any substantial part of
its property, or for the winding-up or liquidation of its affairs, and such
proceeding shall remain undismissed or unstayed and in effect for a period of
sixty (60) consecutive days or such court shall enter a decree or order
granting any of the relief sought in such proceeding;

 

(n)           Voluntary
Proceedings.  Holdings or
any Material Subsidiary of Holdings shall commence a voluntary case under any
applicable bankruptcy, insolvency, reorganization, or other similar law now or
hereafter in effect, shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the appointment or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator, or conservator (or other similar official) of itself or for any
substantial part of its property or shall make a general assignment for the benefit
of creditors, or shall fail generally to pay its debts as they become due, or
shall take any action in furtherance of any of the foregoing; or

 

(o)           Bermuda Law Event.  A Bermuda Law Event shall occur and be
continuing, provided that any grace period provided under the provisions of
this Section 8 or otherwise under this Agreement or under the other Loan
Documents applicable to an equivalent breach of covenant under Section 7 shall
apply to this Section 8.01(o).

 

Section 8.02  Consequences of Event of Default.  (a)  Events
of Default Other Than Bankruptcy, Insolvency or Reorganization Proceedings.  If an Event of Default or Potential Default
specified under Section 8.01(a) through Section 8.01(l) or Section 8.01(o)
shall occur and be continuing, the Banks and the Agent shall be under no
further obligation to make Revolving Credit Loans, Term Loans or Bid Loans, as
the case may be, and if any such Event of Default shall occur and be
continuing, the Agent may, and upon the request of the Required

 

59

 

Banks, shall by written notice to the Borrowers, take
any of the following actions: (i) terminate the Commitments and thereupon
the Commitments shall be terminated and of no further force or effect, or
(ii) declare the unpaid principal amount of the Revolving Credit Notes,
Term Loans and Bid Notes then outstanding and all interest accrued thereon, any
unpaid fees, and all other Indebtedness of the Borrowers to the Banks hereunder
and thereunder to be forthwith due and payable, and the same shall thereupon
become and be immediately due and payable to the Agent for the benefit of each
Bank without presentment, demand, protest or any other notice of any kind, all
of which are hereby expressly waived; and

 

(b)           Bankruptcy, Insolvency or Reorganization Proceedings.  If an Event of Default specified under
Section .01(m) [Involuntary Proceedings] or Section 8.01(n) [Voluntary
Proceedings] shall occur, the Commitments shall automatically terminate and be
of no further force and effect, the Banks shall be under no further obligations
to make Revolving Credit Loans, Term Loans or Bid Loans hereunder and the
unpaid principal amount of the Loans then outstanding and all interest accrued
thereon, any unpaid fees and all other Indebtedness of the Borrowers to the
Banks hereunder and thereunder shall be immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived; and

 

(c)           Set-off.  If an Event of Default shall occur and be
continuing, any Bank to whom any Obligation is owed by any Borrower or any
Material Subsidiary hereunder or under any other Loan Document or any
participant of such Bank which has agreed in writing to be bound by the
provisions of Section 9.13 [Equalization of Banks] and any branch, Subsidiary,
or Affiliate of such Bank or participant anywhere shall have the right, in
addition to all other rights and remedies available to it, without notice to
any Borrower or any Material Subsidiary, to set-off against and apply to the
then unpaid balance of all the Loans and all other Obligations hereunder or
under any other Loan Document any debt owing to, and any other funds held in
any manner for the account of, such Borrower or such Material Subsidiary by
such Bank or participant or by such branch, Subsidiary or Affiliate, including
all funds in all deposit accounts (whether time or demand, general or special,
provisionally credited or finally credited, or otherwise) now or hereafter
maintained by such Borrower or such Material Subsidiary for its own account
(but not including funds of others held in custodian or trust accounts
maintained by any Borrower or any of its Material Subsidiaries) with such Bank
or participant or such branch, Subsidiary, or Affiliate.  Such right shall exist whether or not any
Bank or the Agent shall have made any demand under this Agreement or any other
Loan Document, whether or not such debt owing to or funds held for the account
of such Borrower or such Material Subsidiary is or are matured or unmatured and
regardless of the existence or adequacy of any Guaranty or any other security,
right, or remedy available to any Bank or the Agent; and

 

(d)           Suits,
Actions, Proceedings.  If an Event
of Default shall occur and be continuing, and whether or not the Agent shall
have accelerated the maturity of Committed Loans pursuant to any of the
foregoing provisions of this Section 8.02, the Agent or any Bank, upon the
request or consent of the Required Banks, may proceed to protect and enforce
the Agent’s or any one or more Banks’ rights by suit in equity, action at law
and/or other appropriate proceeding, whether for the specific performance of
any covenant or agreement contained in this Agreement or the other Loan
Documents, including as permitted by applicable Law the obtaining of the ex
parte appointment of a receiver, and, if such amount shall have become due, by

 

60

 

declaration or otherwise, proceed to enforce the
payment thereof or any other legal or equitable right of the Agent or such
Bank; and

 

(e)           Application
of Proceeds.  From and after the
date on which the Agent has taken any action pursuant to this Section 8.02 and
until all Obligations have been paid in full, any and all proceeds received by
the Agent from the exercise of any remedy by the Agent, shall be applied as
follows:

 

(A)       first, to reimburse the Agent and the
Banks for out-of-pocket costs, expenses and disbursements, including reasonable
attorneys’ fees and legal expenses, incurred by the Agent or the Banks in
connection with collection of any Obligations under any of the Loan Documents;

 

(B)        second, to the repayment of all
Indebtedness then due and unpaid of any Borrower or any Material Subsidiary to
the Banks incurred under this Agreement or any of the other Loan Documents,
with such repayments to be applied in the following order: (i) interest, (ii)
principal, (iii) fees and (iv)expenses and other amounts owing to the Banks;
and

 

(C)        the balance, if any, as required by Law;
and

 

(f)            Other Rights and Remedies.  In addition to all of the rights and
remedies contained in this Agreement or in any of the other Loan Documents, the
Agent shall have all of the rights and remedies under applicable Law, all of
which rights and remedies shall be cumulative and non-exclusive, to the extent
permitted by Law.  The Agent may, and
upon the request of the Required Banks shall, exercise all post-default rights
granted to the Agent and the Banks under the Loan Documents or applicable Law.

 

Section 8.03  Right
of Competitive Bid Loan Banks.  If
any Event of Default shall occur and be continuing, the Banks which have any
Bid Loans then outstanding to the Borrowers (the “Bid Loan Banks”) shall not be
entitled to accelerate payment of the Bid Loans or to exercise any right or
remedy related to the collection of the Bid Loans until the Commitments shall
be terminated hereunder pursuant to Section 8.02.  Upon such a termination of the Commitments:  (i) references to Revolving Credit
Loans in Section 8.02 shall be deemed to apply also to the Bid Loans and the
Bid Loan Banks shall be entitled to all enforcement rights given to a holder of
a Revolving Credit Loan in Section 8.02, and (ii) the definition of
Required Banks shall be changed as provided in Section 1.01 so that each Bank
shall have voting rights hereunder in proportion to its share of the total
Loans outstanding.

 

ARTICLE IX

THE AGENT

 

Section 9.01  Appointment.  Each Bank hereby irrevocably designates,
appoints and authorizes ABN AMRO Bank N.V. to act as Agent for such Bank under
this Agreement and to execute and deliver or accept on behalf of each of the
Banks the other Loan Documents.  Each
Bank hereby irrevocably authorizes the Agent to take such action on its behalf
under the

 

61

 

provisions of this Agreement and the other Loan
Documents and any other instruments and agreements referred to herein, and to
exercise such powers and to perform such duties hereunder as are specifically
delegated to or required of the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. 
ABN AMRO Bank N.V. agrees to act as the Agent on behalf of the Banks to
the extent provided in this Agreement.

 

Section 9.02  Delegation of Duties.  The Agent may perform any of its duties
hereunder by or through agents or employees (provided such delegation does not
constitute a relinquishment of its duties as Agent) and, subject to Section
9.05 [Reimbursement of Agent by Borrower, Etc.] and Section 9.06, shall be
entitled to engage and pay for the advice or services of any ttorneys,
accountants or other experts concerning all matters pertaining to its duties
hereunder and to rely upon any advice so obtained.

 

Section 9.03  Nature of Duties; Independent Credit
Investigation.  The Agent shall have
no duties or responsibilities except those expressly set forth in this
Agreement and no implied covenants, functions, responsibilities, duties,
obligations, or liabilities shall be read into this Agreement or otherwise
exist.  The duties of the Agent shall be
mechanical and administrative in nature; the Agent shall not have by reason of
this Agreement a fiduciary or trust relationship in respect of any Bank; and
nothing in this Agreement, expressed or implied, is intended to or shall be
construed as to impose upon the Agent any obligations in respect of this
Agreement except as expressly set forth herein.  Without limiting the generality of the foregoing, the use of the
term “agent” in this Agreement with reference to the Agent is not intended to
connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable Law. 
Instead, such term is used merely as a matter of market custom, and is
intended to create or reflect only an administrative relationship between
independent contracting parties.  Each
Bank expressly acknowledges (i) that the Agent has not made any
representations or warranties to it and that no act by the Agent hereafter
taken, including any review of the affairs of any of Holdings or any of its
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Agent to any Bank; (ii) that it has made and will continue to make,
without reliance upon the Agent, its own independent investigation of the
financial condition and affairs and its own appraisal of the creditworthiness
of each of Holdings and its Subsidiaries in connection with this Agreement and
the making and continuance of the Loans hereunder; and (iii) except as
expressly provided herein, that the Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Bank with any credit
or other information with respect thereto, whether coming into its possession
before the making of any Loan or at any time or times thereafter.

 

Section 9.04  Actions in Discretion of Agent;
Instructions From the Banks.  The
Agent agrees, upon the written request of the Required Banks, to take or
refrain from taking any action of the type specified as being within the Agent’s
rights, powers or discretion herein, provided that the Agent shall not be
required to take any action which exposes the Agent to personal liability or
which is contrary to this Agreement or any other Loan Document or applicable
Law.  In the absence of a request by the
Required Banks, the Agent shall have authority, in its sole discretion, to take
or not to take any such action, unless this Agreement specifically requires the
consent of the Required Banks or all of the Banks.  Any action taken or failure to act pursuant to such instructions
or discretion shall be binding on the Banks, subject to Section 9.06
[Exculpatory Provisions, Etc.].  Subject
to the provisions of Section 9.06, no Bank

 

62

 

shall have any right of action whatsoever against the
Agent as a result of the Agent acting or refraining from acting hereunder in
accordance with the instructions of the Required Banks, or in the absence of
such instructions, in the absolute discretion of the Agent.

 

Section 9.05  Reimbursement and Indemnification of
Agent by the Borrowers.  Each
Borrower unconditionally, jointly and severally, agrees to pay or reimburse the
Agent and hold the Agent harmless against (a) liability for the payment of
all reasonable out-of-pocket costs, expenses, and disbursements (including fees
and expenses of counsel) incurred by the Agent (i) in connection with the
development, negotiation, preparation, printing, execution, administration,
syndication, interpretation and performance of this Agreement and the other
Loan Documents, (ii) relating to any requested amendments, waivers or
consents pursuant to the provisions hereof, (iii) in connection with the
enforcement of this Agreement or any other Loan Document or collection of
amounts due hereunder or thereunder or the proof and allowability of any claim
arising under this Agreement or any other Loan Document, whether in bankruptcy
or receivership proceedings or otherwise, and (iv) in any workout or
restructuring or in connection with the protection, preservation, exercise or
enforcement of any of the terms hereof or of any rights hereunder or under any
other Loan Document or in connection with any foreclosure, collection or
bankruptcy proceedings, and (b) all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Agent, in its capacity as such, in any way relating to or
arising out of this Agreement or any other Loan Documents or any action taken
or omitted by the Agent hereunder or thereunder, provided that the Borrowers
shall not be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
if the same results from the Agent’s gross negligence or willful misconduct, or
if the Borrowers were not given notice of the subject claim and the opportunity
to participate in the defense thereof, at their expense (except that the
Borrowers shall remain liable to the extent such failure to give notice does
not result in a loss to the Borrowers), or if the same results from a
compromise or settlement agreement entered into without the consent of the
Borrowers, which shall not be unreasonably withheld.

 

Section 9.06  Exculpatory Provisions; Limitation of
Liability.  Neither the Agent nor
any of its directors, officers, employees, agents, attorneys or Affiliates
shall (a) be liable to any Bank for any action taken or omitted to be
taken by it or them hereunder, or in connection herewith including pursuant to
any Loan Document, unless caused by its or their own gross negligence or
willful misconduct, (b) be responsible in any manner to any of the Banks
for the effectiveness, enforceability, genuineness, validity or the due
execution of this Agreement or any other Loan Documents or for any recital,
representation, warranty, document, certificate, report or statement herein or
made or furnished under or in connection with this Agreement or any other Loan
Documents, or (c) be under any obligation to any of the Banks to ascertain
or to inquire as to the performance or observance of any of the terms,
covenants or conditions hereof or thereof on the part of the Borrowers or any of
their Subsidiaries, or the financial condition of the Borrowers or any of their
Subsidiaries, or the existence or possible existence of any Event of Default or
Potential Default.  No claim may be made
by the Borrowers or any of their Subsidiaries, any Bank, the Agent or any of
their respective Subsidiaries against the Agent, any Bank or any of their
respective directors, officers, employees, agents, attorneys or Affiliates, or
any of them, for any special, indirect or consequential damages or, to the fullest
extent permitted by Law, for any punitive damages in respect of any claim or
cause of action (whether based on

 

63

 

contract, tort, statutory liability, or any other
ground) based on, arising out of or related to any Loan Document or the
transactions contemplated hereby or any act, omission or event occurring in
connection therewith, including the negotiation, documentation, administration
or collection of the Loans, and the Borrowers (for themselves and on behalf of
each of their ubsidiaries), the Agent and each Bank hereby waive, release and
agree never to sue upon any claim for any such damages, whether such claim now
exists or hereafter arises and whether or not it is now known or suspected to
exist in their favor.  Each Bank agrees
that, except for notices, reports and other documents expressly required to be
furnished to the Banks by the Agent hereunder or given to the Agent for the
account of or with copies for the Banks, the Agent and each of its directors,
officers, employees, agents, attorneys or Affiliates shall not have any duty or
responsibility to provide any Bank with an credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Borrowers or any of their
Subsidiaries which may come into the possession of the Agent or any of its
directors, officers, employees, agents, attorneys or Affiliates.

 

Section 9.07  Reimbursement and Indemnification of
Agent by Banks.  Each Bank agrees to
reimburse and indemnify the Agent (to the extent not reimbursed by the
Borrowers and without limiting the Obligation of the Borrowers to do so) in
proportion to its Ratable Share from and against all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements, including attorneys’ fees and disbursements (including the
allocated costs of staff counsel), and costs of appraisers and environmental
consultants, of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against the Agent, in its capacity as such, in any way relating
to or arising out of this Agreement or any other Loan Documents or any action
taken or omitted by the Agent hereunder or thereunder, provided that no Bank
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
(a) if the same results from the Agent’s gross negligence or willful misconduct,
or (b) if such Bank was not given notice of the subject claim and the
opportunity to participate in the defense thereof, at its expense (except that
such Bank shall remain liable to the extent such failure to give notice does
not result in a loss to the Bank), or (c) if the same results from a
compromise and settlement agreement entered into without the consent of such
Bank, which shall not be unreasonably withheld.  In addition, each Bank agrees promptly upon demand to reimburse
the Agent (to the extent not reimbursed by the Borrowers and without limiting
the Obligation of the Borrowers to do so) in proportion to its Ratable Share
for all amounts due and payable by the Borrowers to the Agent in connection
with the Agent’s periodic audit of the Company’s or any of its respective
Material Subsidiaries’ books, records and business properties.

 

Section 9.08  Reliance by Agent.  The Agent shall be entitled to rely upon any
writing, telegram, telex or teletype message, resolution, notice, consent,
certificate, letter, cablegram, statement, order or other document or
conversation by telephone or otherwise believed by it to be genuine and correct
and to have been signed, sent or made by the proper Person or Persons, and upon
the advice and opinions of counsel and other professional advisers selected by
the Agent.  The Agent shall be fully
justified in failing or refusing to take any action hereunder unless it shall
first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action.

 

64

 

Section 9.09  Notice of Default.  The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Potential Default or Event of
Default unless the Agent has received written notice from a Bank or a Borrower
referring to this Agreement, describing such Potential Default or Event of
Default and stating that such notice is a “notice of default.”

 

Section 9.10  Notices.  The Agent shall promptly send to each Bank a copy of all notices
received from any Borrower pursuant to the provisions of this Agreement or the
other Loan Documents promptly upon receipt thereof.  The Agent shall promptly notify the Borrowers and the other Banks
of each change in the Base Rate and the effective date thereof.

 

Section 9.11  Banks in Their Individual Capacities;
Agents in Its Individual Capacity. 
With respect to its Revolving Credit Commitment, the Revolving Credit
Loans and any Bid Loans made by it and any other rights and powers given to it
as a Bank hereunder or under any of the other Loan Documents, the Agent shall
have the same rights and powers hereunder as any other Bank and may exercise
the same as though it were not the Agent, and the term “Bank” and “Banks”
shall, unless the context otherwise indicates, include the Agent in its
individual capacity.  ABN AMRO Bank and
its Affiliates and each of the Banks and their respective Affiliates may,
without liability to account, except as prohibited herein, make loans to, issue
letters of credit for the account of, acquire equity interests in, accept
deposits from, discount drafts for, act as trustee under indentures of, and
generally engage in any kind of banking, trust, financial advisory,
underwriting or other business with, Holdings and its Subsidiaries and their
Affiliates, in the case of the Agent, as though it were not acting as Agent
hereunder and in the case of each Bank, as though such Bank were not a Bank
hereunder, in each case without notice to or consent of the other Banks.  The Banks acknowledge that, pursuant to such
activities, the Agent or its Affiliates may (i) receive information
regarding Holdings and any of its Subsidiaries or Affiliates (including
information that may be subject to confidentiality obligations in favor of
Holdings or any of its Subsidiaries or Affiliates) and acknowledge that the
Agent shall be under no obligation to provide such information to them, and
(ii) accept fees and other consideration from Holdings and any of its
Subsidiaries for services in connection with this Agreement and otherwise
without having to account for the same to the Banks.

 

Section 9.12  Holders of Notes.  The Agent may deem and treat any payee of
any Note as the owner thereof for all purposes hereof unless and until written
notice of the assignment or transfer thereof shall have been filed with the
Agent.  Any request, authority or
consent of any Person who at the time of making such request or giving such
authority or consent is the holder of any Note shall be conclusive and binding
on any subsequent holder, transferee or assignee of such Note or of any Note or
Notes issued in exchange therefor.

 

Section 9.13  Equalization of Banks.  The Banks and the holders of any participations
in any Commitments or Loans or other rights or obligations of a Bank hereunder
agree among themselves that,  with respect to all amounts received by
any Bank or any such holder for application on any Obligation hereunder or
under any such participation, whether received by voluntary payment, by
realization upon security, by the exercise of the right of set-off or banker’s
lien, by counterclaim, or by any other non-pro  rata source,
equitable adjustment will be made in the manner stated in the following sentence
so that, in effect, all such excess amounts will be shared ratably among the
Banks and such holders in proportion to their interests

 

65

 

in payments on the Loans, except as otherwise provided
in Section 3.04(c) [Agent’s and Bank’s Rights], Section 4.04(b) [Replacement of
a Bank] or Section 4.06 [Additional Compensation in Certain
Circumstances].  The Banks or any such
holder receiving any such amount shall purchase for cash from each f the other
Banks an interest in such Bank’s Loans in such amount as shall result in a
ratable participation by the Banks and each such holder in the aggregate unpaid
amount of the Loans, provided that if all or any portion of such excess amount
is thereafter recovered from the Bank or the holder making such purchase, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, together with interest or other amounts, if any, required by law
(including court order) to be paid by the Bank or the holder making such
purchase.

 

Section 9.14  Successor Agent.  The Agent (i) may resign as Agent or
(ii) shall resign if such resignation is required by Section 4.04(b)
[Replacement of a Bank], in either case of (i) or (ii) by giving not less than thirty
(30) days’ prior written notice to the Borrowers.  If the Agent shall resign under this Agreement, then either
(a) the Required Banks shall appoint from among the Banks a successor
agent for the Banks, subject to the consent of the Borrowers, such consent not
to be unreasonably withheld, or (b) if a successor agent shall not be so
appointed and approved within the thirty (30) day period following the Agent’s
notice to the Banks of its resignation, then the Agent shall appoint, with the
consent of the Borrowers, such consent not to be unreasonably withheld, a
successor agent who shall serve as Agent until such time as the Required Banks
appoint and the Borrowers consent to the appointment of a successor agent.  Upon its appointment pursuant to either clause
(a) or (b) above, such successor agent shall succeed to the rights, powers and
duties of the Agent, and the term “Agent” shall mean such successor agent,  effective
upon its appointment, and the former Agent’s rights, powers and duties as Agent
shall be terminated without any other or further act or deed on the part of
such former Agent or any of the parties to this Agreement.  After the resignation of any Agent
hereunder, the provisions of this ARTICLE IX shall inure to the benefit of such
former Agent and such former Agent shall not by reason of such resignation be
deemed to be released from liability for any actions taken or not taken by it
while it was an Agent under this Agreement.

 

Section 9.15  Agent’s Fee.  The Borrowers shall pay to the Agent a
nonrefundable fee (the “Agent’s Fee”) for Agent’s services hereunder under the
terms of a letter (the “Agent’s Letter”) between the Borrowers and Agent, as
amended from time to time.

 

Section 9.16  Availability of Funds.  The Agent may assume that each Bank has made
or will make the proceeds of a Loan available to the Agent unless the Agent
shall have been notified by such Bank on or before the later of (1) the
close of Business on the Business Day preceding the Borrowing Date with respect
to such Loan or (2) two hours before the time on which the Agent actually funds
the proceeds of such Loan to the respective Borrower (whether using its own
funds pursuant to this Section 9.16 or using proceeds deposited with the Agent
by the Banks and whether such funding occurs before or after the time on which
Banks are required to deposit the proceeds of such Loan with the Agent).  The Agent may, in reliance upon such
assumption (but shall not be required to), make available to the respective
Borrower a corresponding amount.  If
such corresponding amount is not in fact made available to the Agent by such
Bank, the Agent shall be entitled to recover such amount on demand from such
Bank (or, if such Bank fails to pay such amount forthwith upon such demand from
the Borrowers) together with interest thereon, in respect of each day during
the period commencing on the date

 

66

 

such amount was made available to the Borrowers and
ending on the date the Agent recovers such amount, at a rate per annum equal to
(i) the Federal Funds Effective Rate during the first three (3) days after such
interest shall begin to accrue and (ii) the applicable interest rate in respect
of such Loan after the end of such three-day period.

 

Section 9.17 Calculations.  In the absence of gross negligence or
willful misconduct, the Agent shall not be liable for any error in computing
the amount payable to any Bank whether in respect of the Loans, fees or any
other amounts due to the Banks under this Agreement.  In the event an error in computing any amount payable to any Bank
is made, the Agent, the Borrowers and each affected Bank shall, forthwith upon
discovery of such error, make such adjustments as shall be required to correct
such error, and any compensation therefor will be calculated at the Federal
Funds Effective Rate.

 

Section 9.18  Beneficiaries.  Except as expressly provided herein, the
provisions of this ARTICLE IX are solely for the benefit of the Agent and the
Banks, and Holdings and its Subsidiaries shall not have any rights to rely on
or enforce any of the provisions hereof. 
In performing its functions and duties under this Agreement, the Agent
shall act solely as agent of the Banks and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or trust
with or for the Company or any of its Subsidiaries.

 

ARTICLE X

 

MISCELLANEOUS

 

Section 10.01  Modifications, Amendments,
or Waivers.  With the written
consent of the Required Banks, the Agent, acting on behalf of all the Banks,
and the Borrowers may from time to time enter into written agreements amending
or changing any provision of this Agreement or any other Loan Document or the
rights of the Banks or the Borrowers hereunder or thereunder, or may grant
written waivers or consents to a departure from the due performance of the
Obligations hereunder or thereunder. 
Any such agreement, waiver or consent made with such written consent
shall be effective to bind all the Banks and the Borrowers; provided that,
without the written consent of all the Banks, no such agreement, waiver, or
consent may be made which will:

 

(a)           Increase
of Commitment; Extension of Expiration Date.  Increase the amount of the Revolving Credit
Commitment of any Bank hereunder or extend the Expiration Date or the Term Loan
Maturity Date;

 

(b)           Extension
of Payment; Reduction of Principal Interest or Fees; Modification of
Terms of Payment.  Whether or not
any Loans are outstanding, extend the time for payment of principal or interest
of any Loan (excluding the due date of any mandatory prepayment of a Loan or
any mandatory Commitment reduction in connection with such a mandatory
prepayment hereunder except for mandatory reductions of the Commitments on the
Expiration Date), the Facility Fee, the Term Loan Fee or any other fee payable
to any Bank, or reduce the principal amount of or the rate of interest borne by
any Loan or reduce the Facility Fee or any other fee payable to any Bank, or
otherwise

 

67

 

affect the terms of
payment of the principal of or interest of any Loan, the Facility Fee or any
other fee payable to any Bank;

 

(c)           Release of
Collateral or Guarantor. 
Release any Guarantor from its Obligations under the Guaranty Agreement
or any other security for any of the Obligations except as otherwise may be
permitted by the terms hereof or of the instrument establishing the Lien; or

 

(d)           Miscellaneous.  Amend Section 4.02 [Pro Rata Treatment of
Banks], Section 9.06 [Exculpatory Provisions, Etc.] or Section 9.13
[Equalization of Banks] or this Section 10.01, alter any provision regarding
the pro  rata treatment of the Banks, change the definition of
Required Banks, or change any requirement providing for the Banks or the
Required Banks to authorize the taking of any action hereunder;

 

provided, further, that no agreement,
waiver or consent which would modify the interests, rights or obligations of
the Agent in its capacity as Agent shall be effective without the written
consent of the Agent.

 

Section 10.02  No Implied Waivers;
Cumulative Remedies; Writing Required. 
No course of dealing and no delay or failure of the Agent or any Bank in
exercising any right, power, remedy or privilege under this Agreement or any
other Loan Document shall affect any other or future exercise thereof or
operate as a waiver thereof, nor shall any single or partial exercise thereof
or any abandonment or discontinuance of steps to enforce such a right, power,
remedy or privilege preclude any further exercise thereof or of any other
right, power, remedy or privilege.  The
rights and remedies of the Agent and the Banks under this Agreement and any
other Loan Documents are cumulative and not exclusive of any rights or remedies
which they would otherwise have.  Any waiver,
permit, consent or approval of any kind or character on the part of any Bank of
any breach or default under this Agreement or any such waiver of any provision
or condition of this Agreement must be in writing and shall be effective only
to the extent specifically set forth in such writing.

 

Section 10.03  Reimbursement and
Indemnification of Banks by the Borrowers; Taxes.  Each Borrower jointly and severally agrees unconditionally upon
demand to pay or reimburse to each Bank (other than the Agent, as to which the
Borrowers’ Obligations are set forth in Section 9.05 [Reimbursement of Agent By
Borrower, Etc.]) and to save such Bank harmless against (i) liability for
the payment of all reasonable out-of-pocket costs, expenses and disbursements
(including fees and expenses of counsel for each Bank except with respect to
(a) and (b) below), incurred by such Bank (a) in connection with the
review, execution, delivery, administration, or interpretation of this
Agreement, and other instruments and documents to be delivered hereunder,
(b) relating to any amendments, waivers, or consents pursuant to the
provisions hereof, (c) in connection with the enforcement of this
Agreement or any other Loan Document, or collection of amounts due hereunder or
thereunder or the proof and allowability of any claim arising under this
Agreement or any other Loan Document, whether in bankruptcy or receivership
proceedings or otherwise, and (d) in any workout or restructuring or in
connection with the protection, preservation, exercise, or enforcement of any
of the terms hereof or of any rights hereunder or under any other Loan Document
or in connection with any foreclosure, collection, or bankruptcy proceedings,
or (ii) all liabilities, obligations, losses, damages,

 

68

 

penalties, actions, judgments, suits, costs, expenses,
or disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against such Bank (including such Bank’s officers,
directors and employees), in its capacity as such, in any way relating to or
arising out of this Agreement or any other Loan Documents, use of proceeds of
the Loans or the transactions contemplated by the Loan Documents or any action
taken or omitted by such Bank (including such Bank’s officers, directors and
employees) hereunder or thereunder, provided that the Borrowers shall not be
liable to a Bank (including such Bank’s officers, directors and employees) for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, or disbursements (A) if the
same results from such Bank’s or its officer’s, director’s or employee’s gross
negligence or willful misconduct, or (B) if the Borrowers were not given
notice of the subject claim and the opportunity to participate in the defense
thereof, at their expense (except that the Borrowers shall remain liable to the
extent such failure to give notice does not result in a loss to the Borrowers),
or (C) if the same results from a compromise or settlement agreement
entered into without the consent of the Borrowers, which shall not be
unreasonably withheld.  The Banks will
attempt to minimize the fees and expenses of legal counsel for the Banks which
are subject to reimbursement by the Borrowers on a joint and several basis
hereunder by considering the usage of one law firm to represent the Banks and
the Agent if appropriate under the circumstances.  The Borrowers, jointly and severally, agree unconditionally to
pay all stamp, document, transfer, recording or filing taxes or fees and
similar impositions now or hereafter determined by the Agent or any Bank to be
payable in connection with this Agreement or any other Loan Document, and the
Borrowers, jointly and severally, agree unconditionally to save the Agent and
the Banks harmless from and against any and all present or future claims,
liabilities or losses with respect to or resulting from any omission to pay or
delay in paying any such taxes, fees or impositions.

 

Section 10.04  Holidays.  Whenever payment of a Loan to be made or
taken hereunder shall be due on a day which is not a Business Day such payment
shall be due on the next Business Day (except as provided in the definition of
Committed Loan Interest Period with respect to Interest Periods under the LIBOR
Option) and such extension of time shall be included in computing interest and
fees, except that the Loans shall be due on the Business Day preceding the
Expiration Date or the Term Loan Maturity Date if the Expiration Date or the
Term Loan Maturity Date is not a Business Day. 
Whenever any payment or action to be made or taken hereunder (other than
payment of the Loans) shall be stated to be due on a day which is not a
Business Day, such payment or action shall be made or taken on the next
following Business Day, and such extension of time shall not be included in
computing interest or fees, if any, in connection with such payment or action.

 

Section 10.05  Funding by Branch,
Subsidiary, or Affiliate.  (a)  Notional Funding.  Each Bank shall have the right from time to
time, without notice to the Borrowers, to deem any branch, Subsidiary, or
Affiliate (which for the purposes of this Section 10.05 shall mean any
corporation or association which is directly or indirectly controlled by or is
under direct or indirect common control with any corporation or association
which directly or indirectly controls such Bank) of such Bank to have made,
maintained, or funded any Loan to which the LIBOR Option applies at any time, provided
that immediately following (on the assumption that a payment was then due from
the Borrowers to such other office), and as a result of such change, the
Borrowers will not be under any greater financial obligation pursuant to
Section 4.06 [Additional Compensation in Certain Circumstances] than they ould
have been in

 

69

 

the absence of such change.  Notional funding offices may be selected by each Bank without
regard to such Bank’s actual methods of making, maintaining or funding the
Loans or any sources of funding actually used by or available to such Bank.

 

(b)           Actual Funding.  Each Bank shall have the right from time to time to make or
maintain any Loan by arranging for a branch, Subsidiary or Affiliate of such
Bank to make or maintain such Loan subject to the last sentence of this Section
10.05(b).  If any Bank causes a branch,
Subsidiary or Affiliate to make or maintain any part of the Loans hereunder,
all terms and conditions of this Agreement shall, except where the context
clearly requires otherwise, be applicable to such part of the Loans to the same
extent as if such Loans were made or maintained by such Bank, but in no event
shall any Bank’s use of such a branch, Subsidiary or Affiliate to make or
maintain any part of the Loans hereunder cause such Bank or such branch,
Subsidiary or Affiliate to incur any cost or expenses payable by any Borrower
hereunder or require any Borrower to pay any other compensation to any Bank
(including any expenses incurred or payable pursuant to Section 4.06
[Additional Compensation in Certain Circumstances]) which would otherwise not
be incurred.

 

Section 10.06  Notices.  Any notice, request, demand, direction, or
other communication (for purposes of this Section 10.06 only, a “Notice”) to be
given to or made upon any party hereto under any provision of this Agreement
shall be given or made by telephone or in writing (which includes means of
electronic transmission (i.e., “e-mail”) or facsimile transmission in
accordance with this Section 10.06.  Any
such Notice must be delivered to the applicable parties hereto at the addresses
and numbers set forth under their respective names on Schedule 1.01(B)
hereof or in accordance with any subsequent unrevoked Notice from any such
party that is given in accordance with this Section 10.06.  Any Notice shall be effective:

 

(A)          In
the case of hand-delivery, when delivered;

 

(B)           If
given by mail, four days after such Notice is deposited with the United States
Postal Service, with first-class postage prepaid, return receipt requested;

 

(C)           In
the case of a telephonic Notice, when a party is contacted by telephone, if
delivery of such telephonic Notice is confirmed no later than the next Business
Day by hand delivery, a facsimile or electronic transmission, a Website Posting
or overnight courier delivery of a confirmatory notice (received at or before
noon on such next Business Day);

 

(D)          In
the case of a facsimile transmission, when sent to the applicable party’s
facsimile machine’s telephone number if the party sending such Notice receives
confirmation of the delivery thereof from its own facsimile machine;

 

(E)           In
the case of electronic transmission, when actually received;

 

(F)           In
the case of a Website Posting, upon delivery of a Notice of such posting
(including the information necessary to access such web site) by another means
set forth in this Section 10.06; and

 

70

 

(G)           If
given by any other means (including by overnight courier), when actually received.

 

Any Bank giving a Notice to any Borrower or any
Material Subsidiary shall concurrently send a copy thereof to the Agent, and
the Agent shall promptly notify the other Banks of its receipt of such Notice.

 

Section 10.07  Severability.  The provisions of this Agreement are
intended to be severable.  If any
provision of this Agreement shall be held invalid or unenforceable in whole or
in part in any jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without in any
manner affecting the validity or enforceability thereof in any other
jurisdiction or the remaining provisions hereof in any jurisdiction.

 

Section 10.08  Governing Law.  This Agreement and any other documents delivered
herewith and the rights and obligations of the parties hereto and thereto shall
be for all purposes governed by, and construed and enforced in accordance with
the internal Laws of the State of New York, without giving effect to its
conflicts of law principles.

 

Section 10.09  Prior Understanding.  This Agreement and the other Loan Documents
supersede all prior understandings and agreements, whether written or oral,
between the parties hereto and thereto relating to the transactions provided
for herein and therein, including any prior confidentiality agreements and
commitments.

 

Section 10.10  Duration; Survival.  All representations and warranties of the
Borrowers and the Material Subsidiaries contained herein or made in connection
herewith shall survive the making of Loans and shall not be waived by the
execution and delivery of this Agreement, any investigation by the Agent or the
Banks, the making of Loans, or payment in full of the Loans.  All covenants and agreements of the
Borrowers contained in Section 7.01 [Affirmative Covenants], Section 7.02
[Negative Covenants] and Section 7.03 [Reporting Requirements], and all
comparable covenants and agreements contained in or incorporated into the
Guarantor Joinder given by each Material Non-AGC Subsidiary pursuant to Section
10.18, shall continue in full force and effect from and after the date hereof
so long as the Borrowers may borrow hereunder and until termination of the
Commitments and payment in full of the Loans. 
All covenants and agreements of the Borrowers contained herein relating
to the payment of principal, interest, premiums, additional compensation or
expenses and indemnification, including those set forth in ARTICLE IV
[Payments] and Section 9.05 [Reimbursement of Agent by Borrowers, Etc.], Section
9.07 [Reimbursement of Agent by Banks, Etc.] and Section 10.03 [Reimbursement
of Banks by Borrowers; Etc.], and all comparable covenants and agreements
contained in or incorporated into the Guarantor Joinder given by each Material
Non-AGC Subsidiary pursuant to Section 10.18, shall survive payment in full of
the Loans and termination of the Commitments.

 

Section 10.11  Successors and Assigns.  (a)  This Agreement shall be
binding upon and shall inure to the benefit of the Banks, the Agent, the Borrowers
and, when party to this Agreement, each of the Material Subsidiaries, and their
respective successors and assigns, except that no Borrowers or any Material
Subsidiary may assign or transfer any of its rights or

 

71

 

Obligations or any interest herein or in any other
Loan Document, except as may be permitted by the terms hereof or otherwise
approved by each Bank.  Each Bank may,
at its own cost, make assignments of or sell participations in all or any part
of its Revolving Credit Commitments and the Loans made by it to one or more
banks or other entities, subject to the consent of the Borrowers and the Agent
with respect to any assignee, such consent not to be unreasonably withheld, provided
that (1) no consent of the Borrowers shall be required (A) if an Event of
Default exists and is continuing, or (B) in the case of an assignment by a Bank
to an Affiliate of such Bank, (2) any assignment by a Bank to a Person
other than an Affiliate of such Bank may not be made in amounts less than the
lesser of $5,000,000 or the amount of the assigning Bank’s Commitment, (3) a
Bank may assign an interest or sell a participation in less than 100% of its
Commitments, Committed Loans, or Bid Loans, provided that such Bank sells
an equal percentage interest or participation in each of its Revolving Credit
Commitment and Revolving Credit Loans and Term Loans, (4) a Bank may assign a
Bid Loan to another Person without assigning any portion of its Commitment to
such Person, and (5) no consent of the Agent shall be required in the case of
an assignment by a Bank to an Affiliate of such Bank.  In the case of an assignment, upon receipt by the Agent of the
Assignment and Assumption Agreement, the assignee shall have, to the extent of
such assignment (unless otherwise provided therein), the same rights, benefits
and obligations as it would have if it had been a signatory Bank hereunder, the
Commitments shall be adjusted accordingly, and upon surrender of any Revolving
Credit/Term Loan Note subject to such assignment, the applicable Borrower shall
execute and deliver a new Revolving Credit/Term Loan Note to the assignee, if
such assignee requests such a Note in an amount equal to the amount of the
Revolving Credit Commitment assumed by it and a new Revolving Credit/Term Loan
Note to the assigning Bank, if the assigning Bank requests such a Note with
respect to the Commitment it has retained. 
The assigning Bank shall surrender its Bid Note and the respective
Borrower shall execute and deliver to the assignee (and to the assignor if the
assignor is assigning less than all of its Revolving Credit Commitments and Bid
Loans) a new Bid Note in the form of Exhibit 1.01(B) as
appropriate.  Any Bank which assigns any
or all of its Commitment or Loans to a Person other than an Affiliate of such
Bank shall pay to the Agent a service fee in the amount of $3,500 for each
assignment.  In the case of a
participation, the participant shall only have the rights specified in Section
8.02 [Set-off] (the participant’s rights against such Bank in respect of such
participation to be those set forth in the agreement executed by such Bank in
favor of the participant relating thereto and not to include any voting rights
except with respect to changes of the type referenced in Section 10.01(a)
[Increase of Commitment, Etc.], Section 10.01(b) [Extension of Payment, Etc.],
or Section 10.01(c) [Release of Collateral or Guarantor]), all of such Bank’s
obligations under this Agreement or any other Loan Document shall remain
unchanged, and all amounts payable by any Borrower or any Material Subsidiary
hereunder or thereunder shall be determined as if such Bank had not sold such
participation.

 

(b)           Any
assignee or participant which is not incorporated under the Laws of the United
States of America or a state thereof shall deliver to the Borrowers and the
Agent the form of certificate described in Section 10.17 [Tax Withholding
Clause] relating to federal income tax withholding.  Each Bank may furnish any publicly available information
concerning the Borrowers or its Subsidiaries and any other information
concerning the Borrowers or its Subsidiaries in the possession of such Bank
from time to time to assignees and participants (including prospective
assignees or participants), provided that such assignees and
participants agree to be bound by the provisions of Section 10.12
[Confidentiality].

 

72

 

(c)           Notwithstanding
any other provision in this Agreement, any Bank may at any time pledge or grant
a security interest in all or any portion of its rights under this Agreement,
its Note (if any) and the other Loan Documents to any Federal Reserve Bank
without notice to or consent of the Borrowers or the Agent.  No such pledge or grant of a security
interest shall release the transferor Bank of its obligations hereunder or
under any other Loan Document.

 

Section 10.12  Confidentiality.  (a)  General.  The Agent and the Banks each agree to keep
confidential all information obtained from the Borrowers or their Subsidiaries
which is nonpublic and confidential or proprietary in nature (including any
information the Borrowers specifically designate as confidential), except as
provided below, and to use such information only in connection with their
respective capacities under this Agreement and for the purposes contemplated
hereby.  The Agent and the Banks shall
be permitted to disclose such information (i) to outside legal counsel,
accountants and other professional advisors who need to know such information
in connection with the administration and enforcement of this Agreement,
subject to agreement of such Persons to maintain the confidentiality of such
information as provided herein, (ii) to assignees and participants as
contemplated by Section 10.11, and prospective assignees and participants,
provided that Agent or such Bank, as the case may be, exercises its best
efforts to obtain the agreement of such prospective assignees and participants
to be bound by the confidentiality provisions hereof, (iii) to the extent
requested by any bank regulatory authority or, with notice to the Borrowers, as
otherwise required by applicable Law or by any subpoena or similar legal
process, or in connection with any investigation or proceeding arising out of
the transactions contemplated by this Agreement, (iv) if it becomes
publicly available other than as a result of a breach of this Agreement or
becomes available from a source not known to be subject to confidentiality
restrictions, or (v) if the Borrowers shall have consented to such
disclosure.

 

(b)           Sharing Information With Affiliates
of the Banks.  The Borrowers
acknowledge that from time to time financial advisory, investment banking, and
other services may be offered or provided to the Borrowers or one or more of
their Affiliates (in connection with this Agreement or otherwise) by any Bank
or by one or more Subsidiaries or Affiliates of such Bank and the Borrowers
hereby authorize each Bank to share any information delivered to such Bank by
the Borrowers or any of their Subsidiaries pursuant to this Agreement, or in
connection with the decision of such Bank to enter into this Agreement, to any
such Subsidiary or Affiliate of such Bank, it being understood that any such
Subsidiary or Affiliate of any Bank receiving such information shall be bound
by the provisions of Section 10.12 as if it were a Bank hereunder.  Such authorization shall survive the
repayment of the Loans and other Obligations and the termination of the
Commitments.

 

Section 10.13  Counterparts.  This Agreement may be executed by different
parties hereto on any number of separate counterparts, each of which, when so
executed and delivered, shall be an original, and all such counterparts shall
together constitute one and the same instrument.

 

Section 10.14  Agent’s or Bank’s Consent.  Whenever the Agent’s or any Bank’s consent
is required to be obtained under this Agreement or any of the other Loan
Documents as a condition to any action, inaction, condition or event, the Agent
and each Bank shall be

 

73

 

authorized to give or withhold such consent in its
sole and absolute discretion and to condition its consent upon the giving of
additional collateral, the payment of money or any other matter.

 

Section 10.15  Exceptions.  The representations, warranties and
covenants contained herein shall be independent of each other, and no exception
to any representation, warranty or covenant shall be deemed to be an exception
to any other representation, warranty or covenant contained herein unless
expressly provided, nor shall any such exceptions be deemed to permit any
action or omission that would be in contravention of applicable Law.

 

Section 10.16  CONSENT TO FORUM; WAIVER OF JURY
TRIAL.  EACH OF THE
BORROWERS HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF ANY
NEW YORK STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA
SITTING IN NEW YORK CITY, AND WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT.  THE COMPANY CONSENTS
THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY CERTIFIED OR REGISTERED MAIL
DIRECTED TO THE COMPANY AT THE ADDRESS PROVIDED FOR IN SECTION 10.06 AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF.  HOLDINGS AND THE UK BORROWER CONSENTS THAT
ALL SERVICE OF PROCESS MAY BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO
THE COMPANY AT THE ADDRESS PROVIDED IN SECTION 10.06 (AND HOLDINGS AND THE UK
BORROWER HEREBY IRREVOCABLY APPOINTS THE COMPANY AS ITS AGENT TO RECEIVE SUCH
SERVICE OF PROCESS), AND SERVICE SO MADE SHALL BE COMPLETED UPON ACTUAL RECEIPT
THEREOF.  EACH OF THE BORROWERS WAIVES
ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS
PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION
OR VENUE.

 

EACH BORROWER, THE AGENT, AND EACH OF
THE BANKS HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY OTHER
LOAN DOCUMENT, OR ANY COLLATERAL TO THE FULL EXTENT PERMITTED BY LAW.

 

Section 10.17  Tax Withholding Clause.  Each Bank or assignee or participant of a
Bank that is not incorporated under the Laws of the United States of America or
a state thereof (and, upon the written request of the Agent, each other Bank or
assignee or participant of a Bank) agrees that it will deliver to each of the
Borrowers and the Agent two (2) duly completed appropriate valid Withholding
Certificates (as defined under § 1.1441-1(c)(16) of the Income Tax Regulations
(the “Regulations”)) certifying its status (i.e., U.S. or foreign
person) and, if appropriate, making a claim of reduced, or exemption from, U.S.
withholding tax on the basis of an income tax treaty or an exemption provided
by the Internal Revenue Code.  The term
“Withholding Certificate” means a Form W-9; a Form W-8BEN; a Form W-8ECI; a
Form W-8IMY and the related statements and certifications as required under §
1.1441-1(e)(2) and/or (3) of the Regulations; a statement described in §
1.871-14(c)(2)(v) of the Regulations; or any other certificates under the
Internal Revenue Code or Regulations that certify or establish the status of a
payee or beneficial owner as a U.S. or foreign person.  Each Bank, assignee or participant

 

74

 

required to deliver to the Borrowers and the Agent a
Withholding Certificate pursuant to the preceding sentence shall deliver such
valid Withholding Certificate as follows: 
(A) each Bank which is a party hereto on the Closing Date shall deliver
such valid Withholding Certificate at least five (5) Business Days prior to the
first date on which any interest or fees are payable by the Borrowers hereunder
for the account of such Bank; (B) each assignee or participant shall
deliver such valid Withholding Certificate at least five (5) Business Days
before the effective date of such assignment or participation (unless the Agent
in its sole discretion shall permit such assignee or participant to deliver
such valid Withholding Certificate less than five (5) Business Days before such
date in which case it shall be due on the date specified by the Agent).  Each Bank, assignee or participant which so
delivers a valid Withholding Certificate further undertakes to deliver to each
of the Borrowers and the Agent two (2) additional copies of such Withholding
Certificate (or a successor form) on or before the date that such Withholding
Certificate expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent Withholding Certificate so delivered by
it, and such amendments thereto or extensions or renewals thereof as may be
reasonably requested by the Borrowers or the Agent.  Notwithstanding the submission of a Withholding Certificate
claiming a reduced rate of or exemption from U.S. withholding tax, the Agent
shall be entitled to withhold United States federal income taxes at the full
30% withholding rate if in its reasonable judgment it is required to do so
under the due diligence requirements imposed upon a withholding agent under §
1.1441-7(b) of the Regulations. 
Further, the Agent is indemnified under § 1.1461-1(e) of the Regulations
against any claims and demands of any Bank or assignee or participant of a Bank
for the amount of any tax it deducts and withholds in accordance with
regulations under § 1441 of the Internal Revenue Code.

 

Section 10.18  Joinder of Guarantors.  Any Material Non-AGC Subsidiary of Holdings
which is required to be a Guarantor pursuant to Section 7.02(i) [Subsidiaries,
Partnerships and Joint Ventures] shall execute and deliver to the Agent
(i) a Guarantor Joinder in substantially the form attached hereto as Exhibit 1.01(G)(1)
pursuant to which it shall join as a Guarantor each of the documents to which
the Guarantors are parties; and (ii) documents in the forms described in
Section 6.01 [First Loans] modified as appropriate to relate to such
Subsidiary.  Holdings shall deliver such
Guarantor Joinder and related documents to the Agent within five (5) Business
Days after, as the case may be, the date of the acquisition of such Subsidiary,
the date upon which a Subsidiary meets the criteria for a Material Non-AGC
Subsidiary as set forth in the definition thereof in Section 1.01, or the date
the filing of such Subsidiary’s certificate or articles of incorporation if the
Subsidiary is a corporation, the date of the filing of its certificate of
limited partnership if it is a limited partnership or the date of its
organization if it is an entity other than a limited partnership or
corporation.

 

Section 10.19  Limited Recourse.  Notwithstanding anything to the contrary in
this Agreement or any other Loan Document, except as expressly provided herein
and therein the obligations of the Borrowers hereunder and thereunder are
several and not joint, and in no event shall the Banks or the Agent have legal
recourse to (i) Holdings with respect to Loans incurred by the Company or the
UK Borrower and (ii) the Company or the UK Borrower with respect to Loans
incurred by Holdings (it being understood and agreed that the Banks and the
Agent shall have legal recourse to the Company with respect to Loans incurred
by the UK Borrower in accordance with the terms of the Guaranty Agreement
entered into by the Company).

 

75

 

Section 10.20  Change of Lending Office.  Each Bank may transfer and carry its Loans
and/or Commitments at, to or for the account of any branch office, subsidiary
or affiliate of such Bank; provided that no Borrower shall be
responsible for costs arising under Sections 3.04, 4.06 or 4.07 resulting from
any such transfer to the extent such costs would not otherwise be applicable to
such Bank in the absence of such transfer.

 

Section 10.21  USA Patriot Act.  Each Bank
hereby notifies the Borrowers and Guarantors that pursuant to the requirements
of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October
26, 2001)) (the “Act”), it is required to obtain, verify and record information
that identifies the Borrowers and Guarantors, which information includes the
name and address of each Borrower and Guarantor and other information that will
allow such Bank to identify such Borrower and Guarantor in accordance with the
Act, and each Borrower and each Guarantor agrees to provide such information
from time to time to each Bank.

 

 

[SIGNATURE PAGES FOLLOW]

 

76

 

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

 

	
   

  	
  ASSURED GUARANTY LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
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  ASSURED GUARANTY CORP.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
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  ASSURED GUARANTY (UK) LTD.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
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  ABN AMRO BANK N.V., Individually and as

  Administrative Agent

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
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  BANK OF AMERICA N.A.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
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  KEYBANK NATIONAL ASSOCIATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
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  CITIBANK N.A.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
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  DEUTSCHE BANK AG NEW YORK BRANCH

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
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  WACHOVIA BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
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  ROYAL BANK OF SCOTLAND

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
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  THE BANK OF NEW YORK

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
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  JPMORGAN CHASE BANK

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
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  NORDDEUTSCHE LANDESBANK

  GIROZENTRALE NEW YORK BRANCH

  and/or CAYMAN ISLANDS BRANCH

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
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  STATE STREET BANK AND TRUST COMPANY

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
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SCHEDULE
1.01(A)

 

PRICING GRID

 

	
  Pricing

  Level

  	
   

  	
  Facility

  Fee

  	
   

  	
  Applicable

  Margin for

  Base Rate

  Loans to

  the

  Company

  and UK

  Borrower

  	
   

  	
  Applicable

  Margin for

  LIBOR

  Loans to

  the

  Company

  and UK

  Borrower

  	
   

  	
  All-in

  Drawn

  (LIBOR)

  when

  usage is £

  33%

  	
   

  	
  Usage

  Premium

  	
   

  	
  All-in

  Drawn

  (LIBOR)

  when

  usage is >

  33%

  	
   

  
	
   

  	
   

  	
  (Basis

  Points

  per Annum)

  	
   

  	
  (Basis

  Points

  per Annum)

  	
   

  	
  (Basis

  Points

  per Annum)

  	
   

  	
  (Basis

  Points

  per Annum)

  	
   

  	
  (Basis

  Points

  per Annum)

  	
   

  	
  (Basis

  Points

  per Annum)

  	
   

  
	
  Level I

  	
   

  	
  8.0

  	
   

  	
  0.0

  	
   

  	
  22.0

  	
   

  	
  30.0

  	
   

  	
  5.0

  	
   

  	
  35.0

  	
   

  
	
  Level II

  	
   

  	
  10.0

  	
   

  	
  0.0

  	
   

  	
  33.5

  	
   

  	
  43.5

  	
   

  	
  10.0

  	
   

  	
  53.5

  	
   

  
	
  Level III

  	
   

  	
  14.0

  	
   

  	
  0.0

  	
   

  	
  48.5

  	
   

  	
  62.5

  	
   

  	
  15.0

  	
   

  	
  77.5

  	
   

  
	
  Level IV

  	
   

  	
  16.5

  	
   

  	
  0.0

  	
   

  	
  73.5

  	
   

  	
  90.0

  	
   

  	
  15.0

  	
   

  	
  105.0

  	
   

  
	
  Level V

  	
   

  	
  21.5

  	
   

  	
  0.0

  	
   

  	
  93.5

  	
   

  	
  115.0

  	
   

  	
  25.0

  	
   

  	
  140.0

  	
   

  

 

For purposes of this Pricing Grid,
capitalized terms not otherwise defined in this Pricing Grid shall have the
respective meanings ascribed to them in the Credit Agreement and the following
terms have the meanings set forth below, subject to the concluding paragraph of
this Pricing Grid:

 

“Level
I Pricing” applies
on any day on which the Company’s Insurer Financial Strength Rating is AAA by
S&P or
the Company’s Insurer Financial Strength Rating is rated insurance financial
strength rating is Aaa by Moody’s.

 

“Level
II Pricing”
applies on any day on which (i) the Company’s Insurer Financial Strength Rating
is rated AA+ or higher by S&P or the Company’s Insurer Financial
Strength Rating is rated Aa1 or higher by Moody’s and (ii) Level I Pricing does
not apply.

 

“Level
III Pricing”
applies on any day on which (i) the Company’s Insurer Financial Strength Rating
is rated AA or higher by S&P or the Company’s Insurer Financial
Strength Rating is Aa2 or higher by Moody’s and (ii) neither Level I Pricing
nor Level II Pricing applies.

 

“Level
IV Pricing”
applies on any day on which (i) the Company’s Insurer Financial Strength Rating
is AA- or higher by S&P or the Company’s Insurer Financial
Strength Rating is rated Aa3 or higher by Moody’s and (ii) none of Level I
Pricing, Level II Pricing or Level III Pricing applies.

 

“Level
V Pricing” applies
on any day if no other Pricing Level applies on such day.

 

“Moody’s” means Moody’s Investors Service, Inc.

 

“Pricing
Level” refers to
the determination of which of Level I, Level II, Level III, Level IV, or Level
V Pricing applies on any day.

 

“S&P” means Standard & Poor’s Ratings Services, a
division of The McGraw-Hill Companies, Inc.

 

 

The “Usage”
applicable to any date is the percentage equivalent of a fraction the numerator
of which is the sum of the aggregate outstanding principal amount of all Loans
outstanding under the Credit Agreement at such date and the denominator of
which is the total amount of Commitments at such date.

 

The ratings in effect for any day are those
in effect at the close of business on such day.

 

In the case of split ratings from S&P and
Moody’s, the rating to be used to determine the applicable Pricing Level is the
higher of the two (e.g., AAA/Aaa results in Level I Pricing); provided that
if the split is more than one full rating, the intermediate (or higher of the
two intermediate ratings) will be used (e.g., AAA/Aa2 results in Level
II Pricing; or AAA/Aa3 results in Level II).

 

 

The following grid
shall apply to Loans incurred by Holdings:

 

	
  Pricing

  Level

  	
   

  	
  Applicable

  Margin for

  Base Rate

  Loans to

  Holdings

  	
   

  	
  Applicable

  Margin for

  LIBOR

  Loans to

  Holdings

  	
   

  	
  All-in

  Drawn

  (LIBOR)

  when usage

  is £ 33%

  	
   

  	
  Usage

  Premium

  	
   

  	
  All-in

  Drawn

  (LIBOR)

  when usage

  is > 33%

  	
   

  
	
   

  	
   

  	
  (Basis

  Points per

  Annum)

  	
   

  	
  (Basis

  Points per

  Annum)

  	
   

  	
  (Basis

  Points per

  Annum)

  	
   

  	
  (Basis

  Points per

  Annum)

  	
   

  	
  (Basis

  Points per

  Annum)

  	
   

  
	
  Level I

  	
   

  	
  0.0

  	
   

  	
  30.0

  	
  *

  	
  30.0

  	
   

  	
  5.0

  	
   

  	
  35.0

  	
   

  
	
  Level II

  	
   

  	
  0.0

  	
   

  	
  45.0

  	
  *

  	
  45.0

  	
   

  	
  10.0

  	
   

  	
  55.0

  	
   

  
	
  Level III

  	
   

  	
  0.0

  	
   

  	
  55.0

  	
  *

  	
  55.0

  	
   

  	
  10.0

  	
   

  	
  65.0

  	
   

  
	
  Level IV

  	
   

  	
  0.0

  	
   

  	
  75.0

  	
  *

  	
  75.0

  	
   

  	
  12.5

  	
   

  	
  87.5

  	
   

  
	
  Level V

  	
   

  	
  0.0

  	
   

  	
  100.0

  	
  *

  	
  100.0

  	
   

  	
  12.5

  	
   

  	
  112.5

  	
   

  
	
  Level VI

  	
   

  	
  25.0

  	
   

  	
  125.0

  	
  *

  	
  125.0

  	
   

  	
  25.0

  	
   

  	
  150.0

  	
   

  

 

For purposes of this Pricing Grid,
capitalized terms not otherwise defined in this Pricing Grid shall have the
respective meanings ascribed to them in the Credit Agreement and the following
terms have the meanings set forth below, subject to the concluding paragraph of
this Pricing Grid:

 

“Level
I Pricing” applies
on any day on which Holdings’ senior unsecured debt is rated A+ or higher by
S&P or
Holdings’ senior unsecured debt is rated A1 or higher by Moody’s.

 

“Level
II Pricing”
applies on any day on which (i) Holdings’ senior unsecured debt is rated A or
higher by S&P or Holdings’ senior unsecured debt is rated A2 or higher by
Moody’s and (ii) Level I Pricing does not apply.

 

“Level
III Pricing”
applies on any day on which (i) Holdings’ senior unsecured debt is rated A- or
higher by S&P or Holdings’ senior unsecured debt is rated A3 or higher by
Moody’s and (ii) neither Level I Pricing nor Level II Pricing applies.

 

*  In each case, the Applicable
Margin for LIBOR Loan to Holdings at any time will be the percentage specified
above minus the then applicable Facility Fee at such time.

 

2

 

“Level
IV Pricing”
applies on any day on which (i) Holdings’ senior unsecured debt is rated BBB+
or higher by S&P or Holdings’ senior unsecured debt is
rated Baa1 or higher by Moody’s and (ii) none of Level I Pricing, Level II
Pricing or Level III Pricing applies.

 

“Level
V Pricing” applies
on any day on which (i) Holdings’ senior unsecured debt is rated BBB or higher
by S&P or
Holdings’ senior unsecured debt is rated Baa2 or higher by Moody’s and (ii)
none of Level I Pricing, Level II Pricing, Level III or Level IV Pricing
applies.

 

“Level
VI Pricing”
applies on any day (i) if no other Pricing Level applies on such day or (ii) on
which S&P and Moody’s have not rated Holdings’ senior unsecured debt.

 

“Moody’s” means Moody’s Investors Service, Inc.

 

“Pricing
Level” refers to
the determination of which of Level I, Level II, Level III, Level IV, Level V
or Level VI Pricing applies on any day.

 

“S&P” means Standard & Poor’s Ratings Services, a
division of The McGraw-Hill Companies, Inc.

 

The “Usage”
applicable to any date is the percentage equivalent of a fraction the numerator
of which is the sum of the aggregate outstanding principal amount of all Loans
outstanding under the Credit Agreement at such date and the denominator of
which is the total amount of the Commitments at such date.

 

The ratings in effect for any day are those
in effect at the close of business on such day.

 

In the case of split ratings from S&P and
Moody’s, the rating to be used to determine the applicable Pricing Level is the
higher of the two (e.g., A+/A1 results in Level I Pricing); provided that
if the split is more than one full rating, the intermediate (or higher of the
two intermediate ratings) will be used (e.g., A+/A3 results in Level II
Pricing; or A+/Baa1 results in Level II).

 

3

 

SCHEDULE
1.01(B)

 

 

COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES

 

 

Part 1 - Commitments of Banks and Addresses for Notices
to Banks

 

	
  Bank

  	
   

  	
  Amount of
  Commitment

  for Revolving

  Credit Loans

  	
   

  	
  Ratable
  Share

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  Address:

   

   

  Attention:

  Telephone:

  Telecopy:

  	
  ABN AMRO Bank N.V.

  Park Avenue Plaza

  55 East 52nd Street

  New York, NY  10055

  Neil Stein

  212-409-1489

  212-409-1718

  	
   

  	
  $

  	
  27,500,000

  	
   

  	
  11.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  Address:

   

  Attention:

  Telephone:

  Telecopy:

  	
  Bank of America N.A.

  231 S. LaSalle Street

  Chicago, IL 60697

  Debra Basler

  312-828-3734

  312-987-0889

  	
   

  	
  $

  	
  27,500,000

  	
   

  	
  11.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  Address:

   

  Attention: 

  Telephone:

  Facsimile:

  	
  Keybank National Association

  127 Public Square

  Cleveland, OH 44114

  Mary K. Young

  216-689-4443

  216-689-4981

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  10.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  Address:

   

  Attention:

  Telephone:

  Telecopy:

  	
  Citibank N.A.

  388 Greenwich Street, 23rd Floor

  New York, NY 10013

  Michael Taylor

  212-816-4033

  212-816-4144

  	
   

  	
  $

  	
  22,500,000

  	
   

  	
  9.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

   

  Address:

   

   

  Attention:

  Telephone:

  Facsimile:

  	
  Deutsche Bank AG

     New York Branch

  60 Wall Street,

  Mail Stop NYC60-2509

  New York,NY 10005

  Ruth Leung

  212-250-8650

  212-797-0270

  	
   

  	
  $

  	
  22,500,000

  	
   

  	
  9.00

  	
  %

  

 

 

	
  Bank

  	
   

  	
  Amount of
  Commitment

  for Revolving

  Credit Loans

  	
   

  	
  Ratable
  Share

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

   

  Address:

   

  Attention:

  Telephone:

  Telecopy:

  	
  Wachovia Bank, National

     Association

  1339 Chestnut Street, 3rd Floor

  Philadelphia, PA  19107

  John L. Thomas

  267-321-6710 

  267-321-7102

  	
   

  	
  $

  	
  22,500,000

  	
   

  	
  9.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  Address:

   

  Attention:

  Telephone:

  Telecopy:

  	
  Royal Bank of Scotland

  280 Bishopsgate, 9th Floor

  London, UK EC2M 4RB

  Rob Kershaw

  (44) 207-672-1054

  (44) 207-672-1073

  	
   

  	
  $

  	
  22,500,000

  	
   

  	
  9.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  Address:

   

  Attention:

  Telephone:

  Telecopy:

  	
  The Bank of New York

  One Wall Street, 17th Floor

  New York, NY 10286

  Evan Glass

  212-635-6466

  212-809-9520

  	
   

  	
  $

  	
  20,000,000

  	
   

  	
  8.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  Address:

   

  Attention:

  Telephone:

  Telecopy:

  	
  JPMorgan Chase Bank

  270 Park Avenue, 4th Floor

  New York, NY 10017

  Helen Newcomb

  212-270-6260

  212-270-1511

  	
   

  	
  $

  	
  20,000,000

  	
   

  	
  8.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

   

   

  Address:

   

   

  Attention:

  Telephone:

  Telecopy:

  	
  Norddeutsche Landesbank

     Girozentrale New York
  Branch

     and/or Cayman Islands
  Branch

  1114 Avenue of the Americas,

  37th Floor

  New York, NY 10036

  Rebecca Rahe

  212-812-6871 

  212-812-6860

  	
   

  	
  $

  	
  20,000,000

  	
   

  	
  8.00

  	
  %

  

 

2

 

	
  Bank

  	
   

  	
  Amount of
  Commitment

  for Revolving

  Credit Loans

  	
   

  	
  Ratable Share

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

   

  Address:

   

  Attention:

  Telephone:

  Telecopy:

  	
  State Street Bank and Trust

     Company

  225 Franklin Street

  Boston, MA 02110

  Anna Muita

  617-662-4053

  617-662-2323

  	
   

  	
  $

  	
  20,000,000

  	
   

  	
  8.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  250,000,000

  	
   

  	
  $

  	
  250,000,000

  	
   

  
									

 

3

 

Part
2 - Addresses for Notices to Borrower and Guarantors:

 

AGENT

 

Notices related to
commitments, covenants or extensions of expiry/termination dates:

 

ABN AMRO Bank N.V.

208 South LaSalle Street, Suite 1500

Chicago, IL  60604-1003

Attn:  Agency Services

E-Mail:  josephine.o’brien@abnamro.com

FAX:  312-601-3610

 

ABN AMRO Bank N.V.

208 South LaSalle Street, Suite 1500

Chicago, IL  60604-1003

Attn:  Credit Administration

E-Mail:  teresa.weirath@abnamro.com

FAX:  312-992-5111

 

ABN AMRO Bank N.V.

55 East 52nd Street

New York, NY 10055

Attn:  Neil Stein

E-Mail:  neil.stein@abnamro.com

FAX:  (212) 409-1718

 

Notices related to Loans,
Interest and Fees and all required Financial Information:

 

ABN AMRO Bank N.V.

208 South LaSalle Street, Suite 1500

Chicago, IL  60604-1003

Attn: Agency Services

E-Mail:  josephine.o’brien@abnamro.com

FAX:  312-601-3610

 

BORROWERS

 

Name:  Assured Guaranty Ltd.

Address:  c/o 1325 Avenue of the
Americas

New York, NY  10019

Attention:  Donald H. Paston

Telephone:  212-974-0100

Telecopy:  212-581-3268

 

4

 

Name:  Assured Guaranty Corp.

Address:  1325 Avenue of the Americas

New York, NY  10019

Attention:  Donald H. Paston

Telephone:  212-974-0100

Telecopy:  212-581-3268

 

Name:  Assured Guaranty (UK) Ltd.

Address:  c/o 1325 Avenue of the
Americas

New York, NY  10019

Attention:  Geraldine Alfino Egler, Esq.

Telephone:  212-261-5597

Telecopy:  212-581-3268

 

With a mandatory copy to:

 

Name:  Assured Guaranty Corp.

Address:  1325 Avenue of the Americas

New York, NY  10019

Attention:  Geraldine Alfino Egler, Esq.

Telephone:  212-261-5597

Telecopy:  212-581-3268

 

5

 

SCHEDULE
1.01(P)

 

EXISTING LIENS

 

 

1.             Assured Guaranty
Corp.:  Amended and Restated Pledge and
Security Agreement, as amended as of December 16, 2003, between Assured
Guaranty Corp. (formerly ACE Guaranty Corp.) and Deutsche Bank AG, New York
Branch, as Collateral Agent.

 

2.             Each of the Assured
Guaranty Re Overseas Ltd. (“AGRO”) and Assured Guaranty Re International Ltd.
(“AGRI”) credit support agreements (the “Credit Support Agreements) listed
below and entered into by either of AGRO or AGRI as in effect on the date
hereof, provided that the notional amount subject to such Credit Support
Agreements may not increase from and after April 29, 2004:

 

AGRI Credit Support Agreements

 

(a)                                  with Swiss Re Financial
Products Corporation, dated as of July 30, 2003

Notional in force:  $82,500,000;

 

(b)                                 with UBS AG, dated as of March
31, 2000

Notional in force:  $467,500,000;

 

(c)                                  with Merrill Lynch
International, dated as of April 27, 2001

Notional in force:  $80,500,000;

 

(d)                                 with Morgan Stanley Credit
Products Ltd., dated as of August 29, 2002

Notional in force:  $173,000,000;

 

(e)                                  with Goldman Sachs
International, dated as of June 12, 2002

Notional in force:  $25,000,000;

 

(f)                                    with GenRe Securities Limited,
dated as of July 27, 2001

Notional in force:  $36,000,000;

 

(g)                                 with Fleet National Bank,
dated as of March 3, 2003

Notional in force:  $40,000,000;

 

(h)                                 with Citibank, N.A., dated as
of November 15, 2000

Notional in force:  $275,800,000;

 

(i)                                     with CDC IXIS Capital Markets,
London Branch, dated as of March 26, 2003

Notional in force:  $63,150,000; and

 

(j)                                     with Bear Stearns
International Limited, dated as of February 28, 2001

Notional in force:  $155,000,000.

 

 

AGRO Credit Support Agreements 

 

(a)                                  with Citibank, N.A., dated as
of January 16, 2002

Notional in force:  $40,000,000;

 

(b)                                 with Lehman Brothers International
(Europe), dated as of May 18, 2001

Notional in force:  $16,000,000;

 

(c)                                  with Morgan Stanley Capital
Services Inc., dated as of March 24, 2003

Notional in force:  $37,000,000;

 

(d)                                 with Morgan Guaranty Trust
Company of New York, dated as of January 1, 2001

Notional in force:  $112,000,000; and

 

(e)                                  with Citibank, N.A and Bank of
America, N.A., dated as of May 31, 2002

Notional in force:  $50,000,000.

 

2

 

SCHEDULE
5.01(b)

 

 

SUBSIDIARIES

 

Direct Subsidiaries

 

	
  Assured Guaranty Re International Ltd. (“AGRI”)

  	
   

  	
   

  	
   

  	
  Bermuda

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Assured Guaranty US Holdings Inc.

  	
   

  	
  (“US Holdings”)

  	
   

  	
  Delaware

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Assured Guaranty Finance Overseas Ltd.

  	
   

  	
   

  	
   

  	
  England

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Direct Subsidiaries of AGRI

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Assured Guaranty Barbados Holdings Ltd.

  	
   

  	
   

  	
   

  	
  Barbados

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  which in turn holds

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Assured Guaranty Overseas US Holdings Inc.

  	
   

  	
   

  	
   

  	
  Delaware

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  which in turn holds

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Assured Guaranty Re Overseas Ltd.

  	
   

  	
   

  	
   

  	
  Bermuda

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  which in turn holds

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Assured Guaranty Mortgage Insurance Company

  	
   

  	
   

  	
   

  	
  New York

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  and

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AG Intermediary Inc.

  	
   

  	
   

  	
   

  	
  New York

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Direct Subsidiaries of US Holdings

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Assured Guaranty Financial Products Inc.

  	
   

  	
   

  	
   

  	
  Delaware

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Assured Guaranty Corp. 

  	
   

  	
   

  	
   

  	
  Maryland 

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  which in turn holds

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Assured Guaranty Risk Assurance Company

  	
   

  	
   

  	
   

  	
  Maryland

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  and

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Assured Guaranty (UK) Ltd.

  	
   

  	
   

  	
   

  	
  England

  

 

Each of the foregoing operating companies conducted business under
names including “ACE”, “AGR” and/or “Capital Re”.  In connection with the
public offering of certain common stock of Assured Guaranty Ltd., the names
will be changed to those listed above. 
Not all of the names may have been changed as of April 28, 2004.

 

 

SCHEDULE
5.01(h)

 

 

REINSURANCE COVERAGE

 

 

	
  Description

  	
   

  	
  Reinsurer

  	
   

  	
  Limit

  	
   

  	
  Attachment

  Point (losses)

  	
   

  	
  Term

  
	
  (f) CDO Excess of Loss

   

  Covers senior tranches of 23CDOs in AGR FP’s swap book of business

  	
   

  	
  Bridge Re – security from Dresdner Bank by way of assignment

  	
   

  	
  $1.97 billion

  	
   

  	
  $1.97 billion

  	
   

  	
  12/31/2001-Term of Risk

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (g) CDO Excess of Loss

   

  Covers senior tranches of a group of CDOs in AGR FP’s swap book of
  business

  	
   

  	
  ACRI

  	
   

  	
  $1.0 billion

  	
   

  	
  $1.0 billion

  	
   

  	
  12/31/2002-Term of Risk

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (h) Banco de Brasil Single Risk Reinsurance

   

  Covers assumed exposure related to credit card receivables of Banco
  de Brasil:  Quota Share Reinsurance
  Excess of Loss Reinsurance

  	
   

  	
  Radian Reinsurance Co RAM Reinsurance Co Ltd

  	
   

  	
  $40 million  $20 million

  	
   

  	
  $0.0 million  $57.5 million

  	
   

  	
  Life of Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (i) Regulatory Covers

   

  From time to time ACE Guaranty cedes business on a credit by credit
  basis to comply with statutory or rating agency requirements. These cessions
  are made on an excess of loss basis and do not provide significant risk
  transfer.

  	
   

  	
  Assured Guaranty Re Overseas Ltd.

  	
   

  	
  Varies by credit

  	
   

  	
  Varies by credit

  	
   

  	
  12/31/2003-12/31/2004

  

 

 

SCHEDULE 7.02(a)

 

 

EXISTING INDEBTEDNESS

 

 

1.             Assured Guaranty Corp.: 
Amended and Restated Credit Agreement, dated as of November 15, 2001 and
as amended through and including December 16, 2003, among Assured Guaranty
Corp., the Banks party thereto from time to time, and Deutsche Bank AG, New
York Branch, as Agent.

 

a.             Amended and Restated Pledge and
Security Agreement, dated as of November 15, 2001 and as amended through and
including December 16, 2003, between Assured Guaranty Corp and Deutsche Bank
AG, New York Branch, as Collateral Agent.

 

Available to Assured Guaranty
Corp.:  $175 million, presently undrawn.

 

2.             The following letters of credit are outstanding,
pursuant to which the named companies have reimbursement obligations:

 

Assured Guaranty Re Overseas
Ltd.:

 

$3,888,728, for the benefit of Continental Casualty Co.

$2,199,452 for the benefit of Hartford Steam Boiler

$19,700,000 for the benefit of Assured Guaranty Corp.

 

Assured Guaranty Corp.:

 

$1,430,200 for the benefit of AIG Global Trade & Political Risk
Insurance Co.

 

None of the foregoing letters
of credit have been drawn.

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