Document:

Exhibit 10.01

 

 

 

AMENDED AND RESTATED

CREDIT AGREEMENT

DATED AS OF MAY 31, 2005

AMONG

RLI CORP.,

THE LENDERS, AND

JPMORGAN CHASE BANK, N.A.,

AS AGENT

 

 

 

J.P.
MORGAN SECURITIES INC.,

AS LEAD ARRANGER AND SOLE BOOKRUNNER

 

 

Table of Contents

 

	
  ARTICLE I

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  THE CREDITS

  	
   

  
	
  2.1

  	
  Commitment

  	
   

  
	
  2.2

  	
  Termination

  	
   

  
	
  2.3

  	
  Ratable
  Loans

  	
   

  
	
  2.4

  	
  Types
  of Advances

  	
   

  
	
  2.5

  	
  Commitment
  Fee; Reductions and Increases in Aggregate Commitment.

  	
   

  
	
  2.6

  	
  Minimum
  Amount of Each Advance

  	
   

  
	
  2.7

  	
  Optional
  Principal Payments

  	
   

  
	
  2.8

  	
  Method of Selecting Types and Interest Periods for New Advances

  	
   

  
	
  2.9

  	
  Conversion and Continuation of Outstanding Advances

  	
   

  
	
  2.10

  	
  Changes in Interest Rate, etc

  	
   

  
	
  2.11

  	
  Rates
  Applicable After Default

  	
   

  
	
  2.12

  	
  Method
  of Payment

  	
   

  
	
  2.13

  	
  Noteless Agreement; Evidence of Indebtedness

  	
   

  
	
  2.14

  	
  Telephonic Notices

  	
   

  
	
  2.15

  	
  Interest Payment Dates; Interest and Fee Basis

  	
   

  
	
  2.16

  	
  Notification of Advances, Interest Rates, Prepayments and Commitment
  Reductions

  	
   

  
	
  2.17

  	
  Lending
  Installations

  	
   

  
	
  2.18

  	
  Non-Receipt
  of Funds by the Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  YIELD PROTECTION; TAXES

  	
   

  
	
  3.1

  	
  Yield
  Protection

  	
   

  
	
  3.2

  	
  Changes in
  Capital Adequacy Regulations

  	
   

  
	
  3.3

  	
  Availability
  of Types of Advances

  	
   

  
	
  3.4

  	
  Funding
  Indemnification

  	
   

  
	
  3.5

  	
  Taxes

  	
   

  
	
  3.6

  	
  Lender
  Statements; Survival of Indemnity

  	
   

  
	
  3.7

  	
  Substitution
  of Lender

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  CONDITIONS PRECEDENT

  	
   

  
	
  4.1

  	
  Effectiveness

  	
   

  
	
  4.2

  	
  Each
  Advance

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
  5.1

  	
  Existence
  and Standing

  	
   

  
	
  5.2

  	
  Authorization
  and Validity

  	
   

  
	
  5.3

  	
  No
  Conflict; Consent

  	
   

  
	
  5.4

  	
  Financial
  Statements

  	
   

  
	
  5.5

  	
  Taxes

  	
   

  
	
  5.6

  	
  Material
  Adverse Change

  	
   

  

 

i

 

	
  5.7

  	
  Litigation
  and Contingent Obligations

  	
   

  
	
  5.8

  	
  Subsidiaries

  	
   

  
	
  5.9

  	
  ERISA

  	
   

  
	
  5.10

  	
  Accuracy
  of Information

  	
   

  
	
  5.11

  	
  Regulation
  U

  	
   

  
	
  5.12

  	
  Material
  Agreements

  	
   

  
	
  5.13

  	
  Compliance
  With Laws

  	
   

  
	
  5.14

  	
  Plan
  Assets; Prohibited Transactions

  	
   

  
	
  5.15

  	
  Investment
  Company Act

  	
   

  
	
  5.16

  	
  Public
  Utility Holding Company Act

  	
   

  
	
  5.17

  	
  Insurance
  Licenses

  	
   

  
	
  5.18

  	
  Reinsurance

  	
   

  
	
  5.19

  	
  Solvency

  	
   

  
	
  5.20

  	
  Labor
  Controversies; Union Contracts, Etc

  	
   

  
	
  5.21

  	
  Surety
  Obligations; Financial Assurances

  	
   

  
	
  5.22

  	
  Business
  Relations

  	
   

  
	
  5.23

  	
  Hazardous
  Materials

  	
   

  
	
  5.24

  	
  Ranking

  	
   

  
	
  5.25

  	
  Intellectual
  Property

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  COVENANTS

  	
   

  
	
  6.1

  	
  Financial
  Reporting

  	
   

  
	
  6.2

  	
  Other
  Reports

  	
   

  
	
  6.3

  	
  Use of
  Proceeds

  	
   

  
	
  6.4

  	
  Notice of
  Default

  	
   

  
	
  6.5

  	
  Taxes

  	
   

  
	
  6.6

  	
  Insurance

  	
   

  
	
  6.7

  	
  Compliance
  with Laws

  	
   

  
	
  6.8

  	
  Maintenance
  of Properties

  	
   

  
	
  6.9

  	
  Inspection

  	
   

  
	
  6.10

  	
  Conduct of
  Business

  	
   

  
	
  6.11

  	
  Dividends

  	
   

  
	
  6.12

  	
  Merger

  	
   

  
	
  6.13

  	
  Sale of
  Assets

  	
   

  
	
  6.14

  	
  Investments
  and Acquisitions

  	
   

  
	
  6.15

  	
  Liens

  	
   

  
	
  6.16

  	
  Reinsurance

  	
   

  
	
  6.17

  	
  Affiliates

  	
   

  
	
  6.18

  	
  Financial
  Covenants.

  	
   

  
	
  6.19

  	
  LaSalle
  Credit Facility Prepayments

  	
   

  

 

ii

 

	
  ARTICLE VII

  	
  DEFAULTS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  ACCELERATION, WAIVERS, AMENDMENTS AND
  REMEDIES

  	
   

  
	
  8.1

  	
  Acceleration

  	
   

  
	
  8.2

  	
  Amendments

  	
   

  
	
  8.3

  	
  Preservation
  of Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  GENERAL PROVISIONS

  	
   

  
	
  9.1

  	
  Survival of
  Representations

  	
   

  
	
  9.2

  	
  Governmental
  Regulation

  	
   

  
	
  9.3

  	
  Headings

  	
   

  
	
  9.4

  	
  Entire
  Agreement

  	
   

  
	
  9.5

  	
  Several
  Obligations; Benefits of this Agreement

  	
   

  
	
  9.6

  	
  Expenses;
  Indemnification

  	
   

  
	
  9.7

  	
  Numbers of
  Documents

  	
   

  
	
  9.8

  	
  Accounting

  	
   

  
	
  9.9

  	
  Severability
  of Provisions

  	
   

  
	
  9.10

  	
  Nonliability
  of Lenders

  	
   

  
	
  9.11

  	
  Confidentiality

  	
   

  
	
  9.12

  	
  Nonreliance

  	
   

  
	
  9.13

  	
  Disclosure

  	
   

  
	
  9.14

  	
  USA
  Patriot Act

  	
   

  
	
  9.15

  	
  Amendment
  and Restatement.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  THE AGENT

  	
   

  
	
  10.1

  	
  Appointment;
  Nature of Relationship

  	
   

  
	
  10.2

  	
  Powers

  	
   

  
	
  10.3

  	
  General
  Immunity

  	
   

  
	
  10.4

  	
  No
  Responsibility for Loans, Recitals, etc

  	
   

  
	
  10.5

  	
  Action on
  Instructions of Lenders

  	
   

  
	
  10.6

  	
  Employment
  of Agents and Counsel

  	
   

  
	
  10.7

  	
  Reliance
  on Documents; Counsel

  	
   

  
	
  10.8

  	
  Agent’s
  Reimbursement and Indemnification

  	
   

  
	
  10.9

  	
  Notice of
  Default

  	
   

  
	
  10.10

  	
  Rights as
  a Lender

  	
   

  
	
  10.11

  	
  Lender
  Credit Decision

  	
   

  
	
  10.12

  	
  Successor
  Agent

  	
   

  
	
  10.13

  	
  Delegation
  to Affiliates

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  SETOFF; RATABLE PAYMENTS

  	
   

  
	
  11.1

  	
  Setoff

  	
   

  
	
  11.2

  	
  Ratable
  Payments

  	
   

  

 

iii

 

	
  ARTICLE XII

  	
  BENEFIT OF AGREEMENT; ASSIGNMENTS;
  PARTICIPATIONS

  	
   

  
	
  12.1

  	
  Successors
  and Assigns

  	
   

  
	
  12.2

  	
  Participations.

  	
   

  
	
  12.3

  	
  Assignments.

  	
   

  
	
  12.4

  	
  Dissemination
  of Information

  	
   

  
	
  12.5

  	
  Tax
  Treatment

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
  NOTICES

  	
   

  
	
  13.1

  	
  Notices

  	
   

  
	
  13.2

  	
  Change of
  Address

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV

  	
  COUNTERPARTS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV

  	
  CHOICE OF LAW; CONSENT TO JURISDICTION;
  WAIVER OF JURY TRIAL

  	
   

  

 

iv

 

	
  EXHIBITS

  	
   

  
	
   

  	
   

  
	
  Exhibit A

  	
  Form of
  Compliance Certificate

  
	
  Exhibit B

  	
  Form of
  Assignment Agreement

  
	
  Exhibit C

  	
  Form of Note

  
	
   

  	
   

  
	
  SCHEDULES

  	
   

  
	
   

  	
   

  
	
  Schedule 5.8

  	
  Subsidiaries

  
	
  Schedule 5.9

  	
  Employee Plans

  
	
  Schedule 5.17

  	
  Insurance
  Licenses

  
	
  Schedule 5.18

  	
  Reinsurance

  
	
  Schedule 5.21

  	
  Financial
  Assurance

  

 

v

 

AMENDED
AND RESTATED CREDIT AGREEMENT

 

This Amended and Restated
Credit Agreement, dated as of May 31, 2005 is among RLI Corp., an Illinois
corporation, the Lenders and JPMorgan Chase Bank, N.A. (successor by merger to
Bank One, Illinois, NA), a national banking association, as Agent.  The parties hereto agree as follows:

 

RECITALS:

 

A.                                   The Borrower, the Lenders and the Agent
are parties to a Credit Agreement dated as of May 31, 2002, pursuant to
which the Lenders have made a $20,000,000 revolving credit facility available
to the Borrower (the “Existing Agreement”).

 

B.                                     The Existing Agreement terminates by its
terms as of May 31, 2005, and the Borrower wishes to reduce the aggregate
commitments with respect to the revolving credit facility from $20,000,000 to
$10,000,000 and to extend its maturity for an additional three years.

 

C.                                     LaSalle Bank National Association has
previously extended a $20,000,000 revolving credit facility to the Borrower,
which it intends to modify contemporaneously herewith on substantially the same
terms and conditions as those set forth herein.

 

D.                                    The Borrower, JPMCB and LaSalle are
simultaneously entering into an amendment to the existing intercreditor
agreement which confirms that the obligations under this Agreement and the
LaSalle Credit Agreement shall be pari passu and that the outstanding amounts
under this Agreement and the LaSalle Credit Agreement are intended to be equal
at all times.

 

ARTICLE I

 

DEFINITIONS

 

As used in this
Agreement:

 

“Acquisition” means any
transaction, or any series of related transactions, consummated on or after the
date of this Agreement, by which the Borrower or any of its Subsidiaries (a) acquires
any going business or all or substantially all of the assets of any firm,
corporation or limited liability company, or division thereof, whether through
purchase of assets, merger or otherwise or (b) directly or indirectly
acquires (in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors (other
than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the outstanding
ownership interests of a partnership or limited liability company.

 

“Act” means,
collectively, the Laws of any Governmental Authority which apply to the conduct
of business by the Borrower.

 

 

“Adjusted LIBO Rate”
means, with respect to any Eurodollar Advance for any Interest Period, an
interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%)
equal to the sum of (a)(i) the LIBO Rate for such Interest Period
multiplied by (ii) the Statutory Reserve Rate plus (b) 0.75% per
annum.

 

“Advance” means a
borrowing hereunder, (a) made by the Lenders on the same Borrowing Date,
or (b) converted or continued by the Lenders on the same date of
conversion or continuation, consisting, in either case, of the aggregate amount
of the several Loans of the same Type and, in the case of Eurodollar Loans, for
the same Interest Period.

 

“Affiliate” of any Person
means any other Person directly or indirectly controlling, controlled by or
under common control with such Person.  A
Person shall be deemed to control another Person if the controlling Person owns
10% or more of any class of voting securities (or other ownership interests) of
the controlled Person or possesses, directly or indirectly, the power to direct
or cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.

 

“Agent” means JPMorgan
Chase Bank, N.A., in its capacity as contractual representative of the Lenders
pursuant to Article X, and not in its individual capacity as a
Lender, and any successor Agent appointed pursuant to Article X.

 

“Aggregate Commitment”
means the aggregate of the Commitments of all the Lenders, as reduced from time
to time pursuant to the terms hereof.

 

“Agreement” means this
credit agreement, as it may be amended or modified and in effect from time to
time.

 

“Agreement Accounting
Principles” means generally accepted accounting principles as in effect from
time to time, applied in a manner consistent with those used in preparing the
financial statements referred to in Section 6.1.

 

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

 

“Annual Statement” means
the annual statutory financial statement of any Insurance Subsidiary required
to be filed with the insurance commissioner (or similar authority) of its
jurisdiction of incorporation, which statement shall be in the form required by
such Insurance Subsidiary’s jurisdiction of incorporation or, if no specific
form is so required, in the form of financial statements permitted by such
insurance commissioner (or such similar authority) to be used for filing annual
statutory financial statements and shall contain the type of information
permitted by such insurance commissioner (or such similar authority) to be disclosed
therein, together with all exhibits or schedules filed therewith.

 

2

 

“Approved Fund” means any
Fund that is administered or managed by (a) a Lender, (b) an
Affiliate of a Lender or (c) an entity or an Affiliate of an entity that
administers or manages a Lender.

 

“Arranger” means J.P.
Morgan Securities Inc., a Delaware corporation, and its successors, in its
capacity as Lead Arranger and Sole Bookrunner.

 

“Article” means an article of
this Agreement unless another document is specifically referenced.

 

“Authorized Officer”
means any of the CEO/President, Chief Operating Officer, Chief Financial
Officer or Treasurer of the Borrower, acting singly, or any other Person to
whom such authority may be delegated by such named officer from time to time
following prior notice to the Agent.

 

“Board” means the Board
of Governors of the Federal Reserve System of the United States (or any
successor).

 

“Borrower” means RLI
Corp., an Illinois corporation, and its successors and assigns.

 

“Borrowing Date” means a
date on which an Advance is made hereunder.

 

“Borrowing Notice” is
defined in Section 2.8.

 

“Business Day” means (a) with
respect to any borrowing, payment or rate selection of Eurodollar Advances, a
day (other than a Saturday or Sunday) on which banks generally are open in
Chicago and New York City for the conduct of substantially all of their
commercial lending activities, interbank wire transfers can be made on the
Fedwire system and dealings in United States dollars are carried on in the
London interbank market and (b) for all other purposes, a day (other than
a Saturday or Sunday) on which banks generally are open in Chicago for the
conduct of substantially all of their commercial lending activities and interbank
wire transfers can be made on the Fedwire system.

 

“Capitalized Lease” of a
Person means any lease of Property by such Person as lessee which would be
capitalized on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.

 

“Capitalized Lease
Obligations” of a Person means the amount of the obligations of such Person
under Capitalized Leases which would be shown as a liability on a balance sheet
of such Person prepared in accordance with Agreement Accounting Principles.

 

“Cash Equivalents” means (a) short-term
obligations of, or fully guaranteed by, the United States of America, (b) commercial
paper rated A-1 or better by S&P or P-1 or better by Moody’s, (c) demand
deposit accounts maintained in the ordinary course of business, and (d) certificates
of deposit issued by and time deposits with commercial banks (whether domestic
or foreign) having capital and surplus in excess of $100,000,000; provided in
each case that the same provides for payment of both principal and interest
(and not principal alone or interest alone) and is not subject to any
contingency regarding the payment of principal or interest.

 

3

 

“Change in Control” means
(a) a “change in control,” as defined in any applicable state law
Insurance Holding Company System Regulatory Act or similar legislation,
regulation, applicable insurance commission or department order, with respect
to RLIC or MHIC; (b) any “Person” or “group” (as such terms are used in
Sections 13d and 14d of the 1934 Act, is or shall become the “beneficial owner”
(as defined in Rules 13d-3 and 13d-5 under the 1934 Act)
directly or indirectly, of 25% or more on a fully diluted basis of the voting
capital stock interest of the Borrower; (c) during any period of 12
consecutive calendar months, commencing on the date hereof, the ceasing of
those individuals (the “Continuing Directors”) who (i) were directors of
the Borrower on the first day of each such period or (ii) subsequently
became directors of the Borrower and whose initial election or initial
nomination for election subsequent to that date was approved by a majority of
the Continuing Directors then on the board of directors of the Borrower, to
constitute a majority of the board of directors of the Borrower; (d) the
Borrower shall cease to own beneficially and of record, free and clear of all
Liens, other encumbrances or voting agreements, restrictions or trusts of any
kind, 100% of the outstanding shares of voting stock of RLIC on a fully diluted
basis; or (e) RLIC shall cease to own beneficially and of record, free and
clear of all Liens, other encumbrances or voting agreements, restrictions or
trusts of any kind, 100% of the outstanding shares of voting shock of MHIC on a
fully diluted basis.

 

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

 

“Commitment” means, for
each Lender, the obligation of such Lender to make Loans not exceeding the
amount set forth opposite its signature below, as it may be modified as a
result of any assignment that has become effective pursuant to Section 12.3.2
or as otherwise modified from time to time pursuant to the terms hereof.

 

“Consolidated
Indebtedness” means at any time the Indebtedness of the Borrower and its
Subsidiaries calculated on a consolidated basis as of such time.

 

“Consolidated Interest
Expense” means, with reference to any period, the interest expense of the
Borrower and its Subsidiaries calculated on a consolidated basis for such period.

 

“Consolidated Net Income”
means, with reference to any period, the net income (or loss) of the Borrower
and its Subsidiaries calculated on a consolidated basis for such period.

 

“Consolidated Net Worth”
means at any time the consolidated stockholders’ equity of the Borrower and its
Subsidiaries calculated on a consolidated basis as of such time.

 

“Consolidated Total
Capitalization” means at any time the sum of Consolidated Indebtedness and
Consolidated Net Worth, each calculated at such time.

 

“Contingent Obligation”
of a Person means any agreement, undertaking or arrangement by which such
Person assumes, guarantees, endorses, contingently agrees to purchase or
provide funds for the payment of, or otherwise becomes or is contingently
liable upon, the obligation or liability of any other Person, or agrees to
maintain the net worth or working capital or other financial condition of any
other Person, or otherwise assures any creditor of such other Person against
loss, including, without limitation, any comfort letter, operating agreement,
take-or-pay

 

4

 

contract or the
obligations of any such Person as general partner of a partnership with respect
to the liabilities of the partnership.

 

“Conversion/Continuation
Notice” is defined in Section 2.9.

 

“Controlled Group” means
all members of a controlled group of corporations or other business entities
and all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower or any of its Subsidiaries, are treated as a
single employer under Section 414 of the Code.

 

“Default” means an event
described in Article VII.

 

“Employee Plan” means any
pension, retirement, disability, medical, dental or other health plan, life
insurance or other death benefit plan, profit sharing, deferred compensation,
stock option, bonus or other incentive plan, vacation benefit plan, severance
plan, or other employee benefit plan or arrangement, including, without
limitation, those pension, profit-sharing and retirement plans of the Borrower
described from time to time in the Financial Statements, and any pension plan,
welfare plan, Defined Benefit Pension Plans (as defined in ERISA) or any
multi-employer plan, maintained or administered by the Borrower or any
Affiliate of the Borrower, to which the Borrower or any Affiliate of the
Borrower is a party or may have any liability or by which the Borrower or any
Affiliate is bound.

 

“Environmental Laws”
means any and all federal, state, local and foreign statutes, laws, judicial
decisions, regulations, ordinances, rules, judgments, orders, decrees, plans,
injunctions, permits, concessions, grants, franchises, licenses, agreements and
other governmental restrictions relating to (a) the protection of the
environment, (b) the effect of the environment on human health, (c) emissions,
discharges or releases of pollutants, contaminants, hazardous substances or
wastes into surface water, ground water or land, or (d) the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, hazardous substances or wastes or the
clean-up or other remediation thereof.

 

“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time,
and any rule or regulation issued thereunder.

 

“Eurodollar Advance”
means an Advance which, except as otherwise provided in Section 2.11,
bears interest at the applicable Adjusted LIBO Rate.

 

“Eurodollar Loan” means a
Loan which, except as otherwise provided in Section 2.11, bears
interest at the applicable Adjusted LIBO Rate.

 

“Excluded Taxes” means,
in the case of each Lender or applicable Lending Installation and the Agent,
taxes imposed on its overall net income, and franchise taxes imposed on it, by (i) the
jurisdiction under the laws of which such Lender or the Agent is incorporated
or organized or (ii) the jurisdiction in which the Agent’s or such Lender’s
principal executive office or such Lender’s applicable Lending Installation is
located.

 

“Exhibit” refers to an
exhibit to this Agreement, unless another document is specifically referenced.

 

5

 

“Facility Termination
Date” means May 31, 2008.

 

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

 

“Financial Assurance”
means any financial assurance (whether in the form of a bond, letter of credit,
cash or otherwise) required pursuant to any Act, other than insurance policies
and bonds issued by any Insurance Subsidiary in the ordinary course of
business.

 

“Financial Hedge” means a
swap, collar, floor, cap or other contract which is intended to reduce or
eliminate the risk of fluctuations in interest rates.

 

“Fixed Charge Coverage
Ratio” means, as of any date of determination, the ratio of (a) the
greater of (i) 10% of RLIC’s Statutory Surplus as Regards Policyholders as
of such date and (ii) RLIC’s aggregate Statutory Net Income for the period
of four fiscal quarters ending on such date without regard to unrealized
capital gains in such period (determined on a pre-tax basis) and determined
without double counting, plus the consolidated net income of the Borrower’s
Subsidiaries which are not Insurance Subsidiaries or Subsidiaries of Insurance
Subsidiaries, to (b) the sum of (i) the Borrower’s Consolidated
Interest Expense and dividends paid in the period of four fiscal quarters
ending on such date, and (ii) the current maturities of Indebtedness for
the Borrower and its Subsidiaries as of such date, other than (x) obligations
arising in respect of reverse repurchase transactions and (y) the Loans.

 

“Floating Rate” means,
for any day, a rate per annum equal to the Alternate Base Rate for such day,
changing when and as the Alternate Base Rate changes.

 

“Floating Rate Advance”
means an Advance which, except as otherwise provided in Section 2.11,
bears interest at the Floating Rate.

 

“Floating Rate Loan”
means a Loan which, except as otherwise provided in Section 2.11,
bears interest at the Floating Rate.

 

“Fund” means any Person
(other than a natural person) that is (or will be) engaged in making,
purchasing, holding or otherwise investing in commercial loans and similar
extensions of credit in the ordinary course of its business.

 

“Governmental Authority”
means any government (foreign or domestic) or any state or other political
subdivision thereof or any governmental body, agency, authority, department or
commission (including without limitation any board of insurance, insurance
department or insurance commissioner and any taxing authority or political
subdivision) or any instrumentality or officer thereof (including without
limitation any court or tribunal) exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government and

 

6

 

any corporation,
partnership or other entity directly or indirectly owned or controlled by or
subject to the control of any of the foregoing.

 

“Hazardous Materials”
means and includes (a) any friable asbestos (or asbestos which becomes
friable), PCBs or dioxins or insulation or other material composed of or
containing friable asbestos (or asbestos which becomes friable), PCBs or
dioxins and (b) any petroleum or any fraction thereof and any hazardous or
toxic waster, substance or material defined as such in (or for purposes of) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
any applicable so-called “superfund” or “superlien” law, or any other applicable
law regulating or pertaining to any such waste, substance or material, as now
or at any time hereafter in effect.

 

“Indebtedness” of a
Person means such Person’s (a) obligations for borrowed money, (b) obligations
representing the deferred purchase price of Property or services (other than
accounts payable arising in the ordinary course of such Person’s business
payable on terms customary in the trade), (c) obligations, whether or not
assumed, secured by Liens or payable out of the proceeds or production from
Property now or hereafter owned or acquired by such Person, (d) obligations
which are evidenced by notes, acceptances, or other instruments, (e) obligations
to purchase securities or other Property arising out of or in connection with
the sale of the same or substantially similar securities or Property, (f) Capitalized
Lease Obligations, (g) obligations arising in respect of reverse
repurchase transactions, (h) reimbursement obligations arising in respect
of drawn and undrawn Letters of Credit, (i) senior obligations with
respect to Financial Hedges, but only following the occurrence of a default
under the applicable Financial Hedge or a Default hereunder, (j) senior
obligations with respect to debt for which a Person is responsible or liable
solely as a guarantor, but only from and after the date demand for payment is
made under the applicable guaranty, and (k) any other obligation for borrowed
money or other financial accommodation which in accordance with Agreement
Accounting Principles would be shown as a liability on the consolidated balance
sheet of such Person.

 

“Insurance Subsidiary”
means any Subsidiary which is engaged in the insurance business.

 

“Interest Coverage Ratio”
means, as of any date of determination, the ratio of (a) the greater of (i) 10%
of RLIC’s Statutory Surplus as Regards Policyholders as of such date and (ii) RLIC’s
aggregate Statutory Net Income for the period of four fiscal quarters ending on
such date without regard to unrealized capital gains in such period (determined
on a pre-tax basis) and determined without double counting, plus the
consolidated net income of the Borrower’s Subsidiaries which are not Insurance
Subsidiaries or Subsidiaries of Insurance Subsidiaries, to (b) the
Borrower’s Consolidated Interest Expense paid in the period of four fiscal
quarters ending on such date.

 

“Interest Period” means,
with respect to a Eurodollar Advance, a period of one, two, three or six months
commencing on a Business Day selected by the Borrower pursuant to this
Agreement.  Such Interest Period shall
end on the day which corresponds numerically to such date one, two, three or
six months thereafter, provided, however, that if there is no
such numerically corresponding day in such next, second, third or sixth
succeeding month, such Interest Period shall end on the last Business Day of
such next, second, third or sixth succeeding month.  If an Interest Period would otherwise end on
a day which is not a Business Day, such

 

7

 

Interest Period
shall end on the next succeeding Business Day, provided, however,
that if said next succeeding Business Day falls in a new calendar month, such
Interest Period shall end on the immediately preceding Business Day.

 

“Investment” of a Person
means any loan, advance (other than commission, travel and similar advances to
officers and employees made in the ordinary course of business), extension of
credit (other than premiums or accounts receivable arising in the ordinary
course of business on terms customary in the trade) or contribution of capital
by such Person; stocks, bonds, mutual funds, partnership interests, notes,
debentures or other securities owned by such Person; any deposit accounts and
certificate of deposit owned by such Person; and structured notes, derivative
financial instruments and other similar instruments or contracts owned by  such Person.

 

“Investment Grade
Obligations” means, as of any date for each Insurance Subsidiary, investments
having an NAIC investment rating of 1 or 2, or a Standard & Poor’s
rating within the range of ratings from AAA to BBB-, or a Moody’s rating within
the range of ratings from Aaa to Baa3.

 

“JPMCB” means JPMorgan
Chase Bank, N.A. (successor by merger to Bank One, Illinois, NA), a national
banking association, in its individual capacity, and its successors.

 

“LaSalle Credit Agreement”
means that certain Amended and Restated Credit Agreement dated as of the date
hereof among the Borrower, the lenders party thereto and LaSalle Bank National
Association, as agent, as amended, supplemented, restated or modified from time
to time.

 

“LaSalle Credit Facility”
means the revolving credit facility created pursuant to the LaSalle Credit
Agreement.

 

“Laws” means all
ordinances, statutes, rules, regulations, codes, orders, injunctions, writs or
decrees of any Governmental Authority.

 

“Lenders” means the
lending institutions listed on the signature pages of this Agreement and
their respective successors and assigns.

 

“Lending Installation”
means, with respect to a Lender or the Agent, the office, branch, subsidiary or
affiliate of such Lender or the Agent listed on the signature pages hereof
or on a Schedule or otherwise selected by such Lender or the Agent
pursuant to Section 2.17.

 

“Letter of Credit” of a
Person means a letter of credit or similar instrument which is issued upon the
application of such Person or upon which such Person is an account party or for
which such Person is in any way liable.

 

“LIBO Rate” means, with
respect to any Eurodollar Advance for any Interest Period, the rate appearing
on Page 3750 of the Dow Jones Market Service (or on any successor or
substitute page of such Service, or any successor to or substitute for
such Service, providing rate quotations comparable to those currently provided
on such page of such Service, as determined by the Agent from time to time
for purposes of providing quotations of interest rates applicable to dollar

 

8

 

deposits in the
London interbank market) at approximately 11:00 a.m., London time, two
Business Days prior to the commencement of such Interest Period, as the rate
for dollar deposits with a maturity comparable to such Interest Period.  In the event that such rate is not available
at such time for any reason, then the “LIBO Rate” with respect to such
Eurodollar Advance for such Interest Period shall be the rate at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period
are offered by the principal London office of the 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.

 

“License”
means any license, certificate of authority, permit or other authorization
which is required to be obtained from any Governmental Authority in connection
with the operation, ownership or transaction of insurance business.

 

“Lien” means any lien
(statutory or other), mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, the interest of a vendor or lessor under any conditional sale,
Capitalized Lease or other title retention agreement).

 

“Loan” means, with
respect to a Lender, such Lender’s loan made pursuant to Article II
(or any conversion or continuation thereof).

 

“Loan Documents” means
this Agreement and any Notes issued pursuant to Section 2.13.

 

“Material Adverse Effect”
means a material adverse effect on (a) the business, Property, condition
(financial or otherwise) or results of operations of the Borrower and its
Subsidiaries taken as a whole, (b) the ability of the Borrower to perform
its obligations under the Loan Documents, or (c) the validity or
enforceability of any of the Loan Documents or the rights or remedies of the
Agent or the Lenders thereunder.

 

“Material Indebtedness”
means Indebtedness in an outstanding principal amount of $10,000,000 or more in
the aggregate (or the equivalent thereof in any currency other than U.S.
dollars).

 

“Material Indebtedness
Agreement” means any agreement under which any Material Indebtedness was
created or is governed or which provides for the incurrence of Indebtedness in
an amount which would constitute Material Indebtedness (whether or not an
amount of Indebtedness constituting Material Indebtedness is outstanding
thereunder), including the LaSalle Credit Facility.

 

“MHIC” means Mt. Hawley
Insurance Company, an Illinois insurance company.

 

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

 

“NAIC” means the National
Association of Insurance Commissioners or any successor thereto, or in lieu
thereof, any other association, agency or other organization performing
advisory, coordination or other like functions among insurance departments,
insurance

 

9

 

commissioners and
similar Governmental Authorities of the various states of the United States
toward the promotion of uniformity in the practices of such Governmental
Authorities.

 

“Non-U.S. Lender” is
defined in Section 3.5(d).

 

“Note” is defined in Section 2.13.

 

“Obligations” means all
unpaid principal of and accrued and unpaid interest on the Loans, all accrued
and unpaid fees and all expenses, reimbursements, indemnities and other
obligations of the Borrower to the Lenders or to any Lender, the Agent or any
indemnified party arising under the Loan Documents.

 

“Other Taxes” is defined
in Section 3.5(b).

 

“Participants” is defined
in Section 12.2.1.

 

“Payment Date” means the
first day of each January, April, July and October.

 

“PBGC” means the Pension
Benefit Guaranty Corporation, or any successor thereto.

 

“Person” means any
natural person, corporation, firm, joint venture, partnership, limited
liability company, association, enterprise, trust or other entity or
organization, or any government or political subdivision or any agency,
department or instrumentality thereof.

 

“Plan” means an employee
pension benefit plan which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code as to which the
Borrower or any member of the Controlled Group may have any liability.

 

“Prime Rate” means the
rate of interest per annum publicly announced from time to time by JPMCB as its
prime rate in effect at its principal office in New York City; each change in
the Prime Rate shall be effective from and including the date such change is
publicly announced as being effective.

 

“Property” of a Person
means any and all property, whether real, personal, tangible, intangible, or
mixed, of such Person, or other assets owned, leased or operated by such
Person.

 

“Purchasers” is defined
in Section 12.3.1.

 

“Quarterly Statement”
means the quarterly statutory financial statement of any Insurance Subsidiary
required to be filed with the insurance commissioner (or similar authority) of
its jurisdiction of incorporation or, if no specific form is so required, in
the form of financial statements permitted by such insurance commissioner (or
such similar authority) to be used for filing quarterly statutory financial
statements and shall contain the type of financial information permitted by
such insurance commissioner (or such similar authority) to be disclosed
therein, together with all exhibits or schedules filed therewith.

 

“Regulation D” means
Regulation D of the Board of Governors of the Federal Reserve System as from
time to time in effect and any successor thereto or other regulation or
official

 

10

 

interpretation of
said Board of Governors relating to reserve requirements applicable to member
banks of the Federal Reserve System.

 

“Regulation U” means
Regulation U of the Board of Governors of the Federal Reserve System as from
time to time in effect and any successor or other regulation or official
interpretation of said Board of Governors relating to the extension of credit
by banks for the purpose of purchasing or carrying margin stocks applicable to
member banks of the Federal Reserve System.

 

“Reportable Event” means
a reportable event as defined in Section 4043 of ERISA and the regulations
issued under such section, with respect to a Plan, excluding, however, such
events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of
ERISA that it be notified within 30 days of the occurrence of such event, provided,
however, that a failure to meet the minimum funding standard of Section 412
of the Code and of Section 302 of ERISA shall be a Reportable Event regardless
of the issuance of any such waiver of the notice requirement in accordance with
either Section 4043(a) of ERISA or Section 412(d) of the
Code.

 

“Reports” is defined in Section 9.6.

 

“Required Lenders” means
Lenders in the aggregate having at least a majority of the Aggregate Commitment
or, if the Aggregate Commitment has been terminated, Lenders in the aggregate
holding at least a majority of the aggregate unpaid principal amount of the
outstanding Advances.

 

“Reserve Requirement”
means, with respect to an Interest Period, the maximum aggregate reserve
requirement (including all basic, supplemental, marginal and other reserves)
which is imposed under Regulation D on Eurocurrency liabilities.

 

“Response Date” is
defined in Section 2.19.

 

“Restatement Date” means
the date on which each of the conditions set forth in Section 4.1
has been satisfied.

 

“Risk Based Capital Act”
means the Risk-Based Capital for Property and Casualty Insurers Model Act and
the rules, regulations and procedures prescribed from time to time by the NAIC
with respect thereto, in each case as amended, modified or supplemented from
time to time by the NAIC.

 

“Risk-Based Capital
Guidelines” is defined in Section 3.2.

 

“RLIC” means RLI
Insurance Company, an Illinois company.

 

“SAP” means, with respect
to any Insurance Subsidiary, the statutory accounting practices prescribed or
permitted by the insurance commissioner (or other similar authority) in the
jurisdiction of such Person for the preparation of annual statements and other
financial reports by insurance companies of the same type as such Person in
effect from time to time, applied in a manner consistent with those used in
preparing the financial statements referred to in Section 6.1.

 

11

 

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

 

“Schedule” refers to a
specific schedule to this Agreement, unless another document is
specifically referenced.

 

“Section” means a
numbered section of this Agreement, unless another document is
specifically referenced.

 

“Single Employer Plan”
means a Plan maintained by the Borrower or any member of the Controlled Group
for employees of the Borrower or any member of the Controlled Group.

 

“Statutory Net Income”
means, with respect to any Insurance Subsidiary at any time, the net income of
such Insurance Subsidiary at such time, as determined in accordance with SAP.

 

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

 

“Statutory Surplus as
Regards Policyholders” means, with respect to any Insurance Subsidiary at any
time, the capital and surplus of such Insurance Subsidiary at such time, as
determined in accordance with SAP.

 

“Subsidiary” of a Person
means (a) any corporation more than 50% of the outstanding securities
having ordinary voting power of which shall at the time be owned or controlled,
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries, or (b) any
partnership, limited liability company, association, joint venture or similar
business organization more than 50% of the ownership interests having ordinary
voting power of which shall at the time be so owned or controlled.  Unless otherwise expressly provided, all
references herein to a “Subsidiary” shall mean a Subsidiary of the Borrower.

 

“Substantial Portion”
means, with respect to the Property of the Borrower and its Subsidiaries,
Property which represents more than 10% of the consolidated assets of the
Borrower and its Subsidiaries or property which is responsible for more than
10% of the consolidated net revenue of the Borrower and its Subsidiaries, in
each case, as would be shown in the consolidated financial statements of the
Borrower and its Subsidiaries as at the beginning of the twelve-month period
ending with the month in which such determination is made (or if

 

12

 

financial
statements have not been delivered hereunder for that month which begins the
twelve-month period, then the financial statements delivered hereunder for the
quarter ending immediately prior to that month).

 

“Taxes” means any and all
present or future taxes, duties, levies, imposts, deductions, charges or
withholdings, and any and all liabilities with respect to the foregoing, but
excluding Excluded Taxes and Other Taxes.

 

“Total Invested Assets”
means, as of any date, as to each Insurance Subsidiary, the amount of such
Insurance Subsidiary’s cash and invested assets calculated in accordance with
SAP.

 

“Transferee” is defined
in Section 12.4.

 

“Type” means, with
respect to any Advance, its nature as a Floating Rate Advance or a Eurodollar
Advance and with respect to any Loan, its nature as a Floating Rate Loan or a
Eurodollar Loan.

 

“Unfunded Liabilities”
means the amount (if any) by which the present value of all vested and unvested
accrued benefits under all Single Employer Plans exceeds the fair market value
of all such Plan assets allocable to such benefits, all determined as of the
then most recent valuation date for such Plans using PBGC actuarial assumptions
for single employer plan terminations.

 

“Unmatured Default” means
an event which but for the lapse of time or the giving of notice, or both,
would constitute a Default.

 

“Wholly-Owned Subsidiary”
of a Person means (a) any Subsidiary all of the outstanding voting
securities of which shall at the time be owned or controlled, directly or
indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such
Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person,
or (b) any partnership, limited liability company, association, joint
venture or similar business organization 100% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.

 

The foregoing definitions
shall be equally applicable to both the singular and plural forms of the
defined terms.  References herein to
particular columns, lines or sections of any Person’s Annual Statement shall be
deemed, where appropriate, to be references to the corresponding column, line
or section of such Person’s Quarterly Statement, or if no such
corresponding column, line or section exists or if any report form
changes, then to the corresponding item referenced thereby.   In the event that the columns, lines or
sections of the Annual Statement referenced herein are changed or renumbered,
all such references shall be deemed references to such column, line or section as
so renumbered or changed.   References
herein to the Risk Based Capital Act shall be deemed to be references to such
act as in effect on the date of this Agreement; provided, that the Agent, the
Lenders and the Borrower agree to make mutually acceptable modifications to Section 6.18
hereof following the request by any thereof upon any modification to such act.  Each accounting term used herein which is not
otherwise defined herein shall be defined in accordance with Agreement
Accounting Principles or SAP, as applicable, unless otherwise specified.

 

13

 

ARTICLE II

 

THE CREDITS

 

2.1                                 Commitment. 
From and including the date of this Agreement and prior to the Facility
Termination Date, each Lender severally agrees, on the terms and conditions set
forth in this Agreement, to make Loans to the Borrower from time to time in
amounts not to exceed in the aggregate at any one time outstanding the amount
of its Commitment.  Subject to the terms
of this Agreement, the Borrower may borrow, repay and reborrow at any time
prior to the Facility Termination Date; provided, that the Borrower may
not make any borrowing hereunder if, after giving effect thereto, the aggregate
principal amount of the outstanding Loans hereunder would exceed or be less
than the principal amount outstanding of the LaSalle Credit Facility (after
giving effect to any concurrent borrowing thereunder).  The Commitments to lend hereunder shall
expire on the Facility Termination Date.

 

2.2                                 Termination.  Any outstanding Advances and all other unpaid
Obligations shall be paid in full by the Borrower on the Facility Termination
Date.

 

2.3                                 Ratable Loans.  Each Advance hereunder shall consist of Loans
made from the several Lenders ratably in proportion to the ratio that their
respective Commitments bear to the Aggregate Commitment.

 

2.4                                 Types of Advances.  The Advances may be Floating Rate Advances or
Eurodollar Advances, or a combination thereof, selected by the Borrower in
accordance with Sections 2.8 and 2.9.

 

2.5                                 Commitment Fee; Reductions and
Increases in Aggregate Commitment.

 

(a)                                  The
Borrower agrees to pay to the Agent for the account of each Lender a commitment
fee at a per annum rate equal to .20% on the daily unused portion of such
Lender’s Commitment from the date hereof to and including the Facility
Termination Date, payable on each Payment Date hereafter and on the Facility
Termination Date.  All accrued commitment
fees shall be payable on the effective date of any termination of the
obligations of the Lenders to make Loans hereunder.

 

(b)                                 The
Borrower may permanently reduce the Aggregate Commitment in whole, or in part
ratably among the Lenders in integral multiples of $1,000,000, upon at least
five Business Days’ written notice to the Agent, which notice shall specify the
amount of any such reduction, provided, however, that the amount
of the Aggregate Commitment may not be reduced below the aggregate principal
amount of the outstanding Advances.

 

(c)                                  The
Borrower may, at its option, on up to two occasions, seek to increase the
Aggregate Commitment by up to an aggregate amount of $10,000,000 (resulting in
a maximum Aggregate Commitment of $20,000,000) upon at least three (3) Business
Days’ prior written notice to the Agent, which notice shall specify the amount
of any such increase and shall be delivered at a time when no Default or
Unmatured Default has occurred and is continuing; provided, that the
Borrower shall increase the aggregate commitment under the LaSalle Credit

 

14

 

Facility by the same amount at the time of any such
increase.  The Borrower shall, after
giving such notice, first offer the increase in the Aggregate Commitment on a
ratable basis to the Lenders (which may be declined by any Lender in its sole
discretion).  If any existing Lender does
not accept the offer to increase its Commitment, the Borrower may offer the
amount so declined to one or more Lenders and/or to other Lenders or entities
reasonably acceptable to the Agent.  No
increase in the Aggregate Commitment shall become effective until the existing or
new Lenders extending such incremental Commitment amount and the Borrower shall
have delivered to the Agent a document in form reasonably satisfactory to the
Agent pursuant to which any such existing Lender states the amount of its
Commitment increase,  any such new Lender
states its Commitment amount and agrees to assume and accept the obligations
and rights of a Lender hereunder and the Borrower accepts such incremental
Commitments.  The Lenders (new or
existing) shall accept an assignment from the existing Lenders, and the
existing Lenders shall make an assignment to the new or existing Lender
accepting a new or increased Commitment, of a direct or participation interest
in each then outstanding Advance such that, after giving effect thereto, all
credit exposure hereunder is held ratably by the Lenders in proportion to their
respective Commitments.  Assignments
pursuant to the preceding sentence shall be made in exchange for the principal
amount assigned plus accrued and unpaid interest and facility fees.  The Borrower shall make any payments under Section 3.4
resulting from such assignments.  Any
such increase of the Aggregate Commitment shall be subject to receipt by the
Agent from the Borrower of such supplemental opinions, resolutions,
certificates and other documents as the Agent may reasonably request.

 

2.6                                 Minimum Amount of Each Advance.  Each Eurodollar Advance shall be in an amount
of not less than $1,000,000 or any larger amount that is an integral multiple
of $500,000, and each Floating Rate Advance shall be in an amount of not less than
$500,000 or any larger amount that is an integral multiple of $500,000, provided,
however, that any Floating Rate Advance may be in the amount of the
unused Aggregate Commitment.

 

2.7                                 Optional Principal Payments.  The Borrower may from time to time pay,
without penalty or premium, all outstanding Floating Rate Advances, or, in a
minimum aggregate amount of $1,000,000 or any integral multiple of $100,000 in
excess thereof, any portion of the outstanding Floating Rate Advances upon two
Business Days’ prior notice to the Agent. 
The Borrower may from time to time pay, subject to the payment of any
funding indemnification amounts required by Section 3.4 but without
penalty or premium, all outstanding Eurodollar Advances, or, in a minimum
aggregate amount of $1,000,000 or any integral multiple of $100,000 in excess
thereof, any portion of the outstanding Eurodollar Advances upon three Business
Days’ prior notice to the Agent.

 

2.8                                 Method of Selecting Types and
Interest Periods for New Advances. 
The Borrower shall select the Type of Advance and, in the case of each
Eurodollar Advance, the Interest Period applicable thereto from time to
time.  The Borrower shall give the Agent
irrevocable notice (a “Borrowing Notice”) not later than 12:00 noon (Chicago
time) on the Borrowing Date of each Floating Rate Advance and two Business Days
before the Borrowing Date for each Eurodollar Advance, specifying:

 

(i)            the
Borrowing Date, which shall be a Business Day, of such Advance,

 

15

 

(ii)           the
aggregate amount of such Advance,

 

(iii)          the
Type of Advance selected, and

 

(iv)          in the case
of each Eurodollar Advance, the Interest Period applicable thereto (which may
not end after the Facility Termination Date).

 

Not later than 2:00 p.m.
(Chicago time) on each Borrowing Date, each Lender shall make available its
Loan or Loans in funds immediately available in Chicago to the Agent at its
address specified pursuant to Article XIII.  The Agent will make the funds so received
from the Lenders available to the Borrower at the Agent’s aforesaid address.

 

2.9                                 Conversion and Continuation
of Outstanding Advances.  Floating
Rate Advances shall continue as Floating Rate Advances unless and until such
Floating Rate Advances are converted into Eurodollar Advances pursuant to this Section 2.9
or are repaid in accordance with Section 2.7.  Each Eurodollar Advance shall continue as a
Eurodollar Advance until the end of the then applicable Interest Period
therefor, at which time such Eurodollar Advance shall be automatically
converted into a Floating Rate Advance unless (x) such Eurodollar Advance is or
was repaid in accordance with Section 2.7 or (y) the Borrower shall
have given the Agent a Conversion/Continuation Notice (as defined below)
requesting that, at the end of such Interest Period, such Eurodollar Advance
continue as a Eurodollar Advance for the same or another Interest Period.  Subject to the terms of Section 2.6,
the Borrower may elect from time to time to convert all or any part of a Floating
Rate Advance into a Eurodollar Advance. 
The Borrower shall give the Agent irrevocable notice (a “Conversion/Continuation
Notice”) of each conversion of a Floating Rate Advance into a Eurodollar
Advance or continuation of a Eurodollar Advance not later than 12:00 noon
(Chicago time) at least two Business Days prior to the date of the requested
conversion or continuation, specifying:

 

(i)            the
requested date, which shall be a Business Day, of such conversion or
continuation,

 

(ii)           the
aggregate amount and Type of the Advance which is to be converted or continued,
and

 

(iii)          the
amount of such Advance which is to be converted into or continued as a
Eurodollar Advance and the duration of the Interest Period applicable thereto
(which may not end after the Facility Termination Date).

 

2.10                           Changes in Interest Rate, etc.  Each Floating Rate Advance shall bear
interest on the outstanding principal amount thereof, for each day from and
including the date such Advance is made or is automatically converted from a
Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.9,
to but excluding the date it is paid or is converted into a Eurodollar Advance
pursuant to Section 2.9 hereof, at a rate per annum equal to the
Floating Rate for such day.  Changes in
the rate of interest on that portion of any Advance maintained as a Floating
Rate Advance will take effect simultaneously with each change in the Alternate
Base Rate.  Each Eurodollar Advance shall
bear interest on the outstanding principal amount thereof from and including
the first day of the Interest Period applicable thereto to (but not including)
the last day

 

16

 

of such Interest Period at the interest rate
determined by the Agent as applicable to such Eurodollar Advance based upon the
Borrower’s selections under Sections 2.8 and 2.9 and otherwise in accordance
with the terms hereof.  No Interest
Period may end after the Facility Termination Date.

 

2.11                           Rates Applicable After Default.  Notwithstanding anything to the contrary
contained in Section 2.8, 2.9 or 2.10, during the
continuance of a Default or Unmatured Default the Required Lenders may, at
their option, by notice to the Borrower (which notice may be revoked at the
option of the Required Lenders notwithstanding any provision of Section 8.2
requiring unanimous consent of the Lenders to changes in interest rates),
declare that no Advance may be made as, converted into or continued as a
Eurodollar Advance.  During the
continuance of a Default the Required Lenders may, at their option, by notice
to the Borrower (which notice may be revoked at the option of the Required
Lenders notwithstanding any provision of Section 8.2 requiring
unanimous consent of the Lenders to changes in interest rates), declare that (i) each
Eurodollar Advance shall bear interest for the remainder of the applicable
Interest Period at the rate otherwise applicable to such Interest Period plus
2% per annum and (ii) each Floating Rate Advance shall bear interest at a
rate per annum equal to the Floating Rate in effect from time to time plus 2%
per annum, provided that, during the continuance of a Default under Section 7.6
or 7.7, the interest rates set forth in clauses (i) and (ii) above
shall be applicable to all Advances without any election or action on the part
of the Agent or any Lender.

 

2.12                           Method of Payment.  All payments of the Obligations hereunder
shall be made, without setoff, deduction, or counterclaim, in immediately
available funds to the Agent at the Agent’s address specified pursuant to Article XIII,
or at any other Lending Installation of the Agent specified in writing by the
Agent to the Borrower, by noon (local time) on the date when due and shall be
applied ratably by the Agent among the Lenders. 
Each payment delivered to the Agent for the account of any Lender shall
be delivered promptly by the Agent to such Lender in the same type of funds
that the Agent received at its address specified pursuant to Article XIII
or at any Lending Installation specified in a notice received by the Agent from
such Lender.  The Agent is hereby
authorized at any time during the continuance of a Default to charge the
account of the Borrower maintained with Bank One for each payment of principal,
interest and fees as it becomes due and remains unpaid hereunder, other than
any part thereof which is reasonably being disputed by the Borrower.

 

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

 

(b)                                 The
Agent shall also maintain accounts in which it will record (i) the amount
of each Loan made hereunder, the Type thereof and the Interest Period with
respect thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder
and (iii) the amount of any sum received by the Agent hereunder from the
Borrower and each Lender’s share thereof.

 

17

 

(c)                                  The
entries maintained in the accounts maintained pursuant to paragraphs (a) and
(b) above shall be prima facie evidence of the existence and amounts of
the Obligations therein recorded; provided, however, that the
failure of the Agent or any Lender to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Obligations in accordance with their terms.

 

(d)                                 Any
Lender may request that its Loans be evidenced by a promissory note in
substantially the form of Exhibit C (a “Note”).  In such event, the Borrower shall prepare,
execute and deliver to such Lender such Note payable to the order of such
Lender.  Thereafter, the Loans evidenced
by such Note and interest thereon shall at all times (prior to any assignment
pursuant to Section 12.3) be represented by one or more Notes
payable to the order of the payee named therein, except to the extent that any
such Lender subsequently returns any such Note for cancellation and requests
that such Loans once again be evidenced as described in paragraphs (a) and
(b) above.

 

2.14                           Telephonic Notices.  The Borrower hereby authorizes the Lenders
and the Agent to extend, convert or continue Advances, effect selections of
Types of Advances and to transfer funds based on telephonic notices made by any
person or persons the Agent or any Lender in good faith believes to be acting
on behalf of the Borrower, it being understood that the foregoing authorization
is specifically intended to allow Borrowing Notices and Conversion/Continuation
Notices to be given telephonically.  The
Borrower agrees to deliver promptly to the Agent a written confirmation, if
such confirmation is requested by the Agent or any Lender, of each telephonic
notice signed by an Authorized Officer. 
If the written confirmation differs in any material respect from the action
taken by the Agent and the Lenders, the records of the Agent and the Lenders
shall govern absent manifest error.

 

2.15                           Interest Payment Dates;
Interest and Fee Basis.  Interest
accrued on each Floating Rate Advance shall be payable on each Payment Date,
commencing with the first such date to occur after the date hereof and at
maturity.  Interest accrued on each
Eurodollar Advance shall be payable on the last day of its applicable Interest
Period, on any date on which the Eurodollar Advance is prepaid, whether by
acceleration or otherwise, and at maturity. 
Interest accrued on each Eurodollar Advance having an Interest Period
longer than three months shall also be payable on the last day of each
three-month interval during such Interest Period.  Interest and commitment fees shall be
calculated for actual days elapsed on the basis of a 360-day year.  Interest shall be payable for the day an
Advance is made but not for the day of any payment on the amount paid if
payment is received prior to noon (local time) at the place of payment.  If any payment of principal of or interest on
an Advance shall become due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and, in the case of a
principal payment, such extension of time shall be included in computing
interest in connection with such payment.

 

2.16                           Notification of Advances,
Interest Rates, Prepayments and Commitment Reductions.  Promptly after receipt thereof, the Agent
will notify each Lender of the contents of each Aggregate Commitment reduction
notice, Borrowing Notice, Conversion/Continuation Notice, and repayment notice
received by it hereunder.  The Agent will
notify each Lender of the interest rate applicable to each Eurodollar Advance
promptly upon determination of such interest rate and will give each Lender
prompt notice of each change in the Alternate Base Rate.

 

18

 

2.17                           Lending
Installations.  Each Lender may book
its Loans at any Lending Installation selected by such Lender and may change
its Lending Installation from time to time. 
All terms of this Agreement shall apply to any such Lending Installation
and the Loans and any Notes issued hereunder shall be deemed held by each
Lender for the benefit of any such Lending Installation.  Each Lender may, by written notice to the
Agent and the Borrower in accordance with Article XIII, designate
replacement or additional Lending Installations through which Loans will be
made by it and for whose account Loan payments are to be made.

 

2.18                           Non-Receipt
of Funds by the Agent.  Unless the
Borrower or a Lender, as the case may be, notifies the Agent prior to the date
on which it is scheduled to make payment to the Agent of (i) in the case of a
Lender, the proceeds of a Loan or (ii) in the case of the Borrower, a payment
of principal, interest or fees to the Agent for the account of the Lenders,
that it does not intend to make such payment, the Agent may assume that such
payment has been made.  The Agent may,
but shall not be obligated to, make the amount of such payment available to the
intended recipient in reliance upon such assumption.  If such Lender or the Borrower, as the case
may be, has not in fact made such payment to the Agent, the recipient of such
payment shall, on demand by the Agent, repay to the Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the Agent
until the date the Agent recovers such amount at a rate per annum equal to (x)
in the case of payment by a Lender, the Federal Funds Effective Rate for such
day for the first three days and, thereafter, the interest rate applicable to
the relevant Loan or (y) in the case of payment by the Borrower, the interest
rate applicable to the relevant Loan.

 

ARTICLE
III

 

YIELD PROTECTION; TAXES

 

3.1                                 Yield
Protection.  If, on or after the date
of this Agreement, the adoption of any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or directive (whether or
not having the force of law), or any change in the interpretation or
administration thereof by any governmental or quasi-governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender or applicable Lending
Installation with any request or directive (whether or not having the force of
law) of any such authority, central bank or comparable agency:

 

(a)                                  subjects
any Lender or any applicable Lending Installation to any Taxes, or changes the
basis of taxation of payments (other than with respect to Excluded Taxes) to
any Lender in respect of its Eurodollar Loans, or

 

(b)                                 imposes
or increases or deems applicable any reserve, assessment, insurance charge,
special deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Lender or any applicable Lending
Installation (other than reserves and assessments taken into account in
determining the interest rate applicable to Eurodollar Advances), or

 

19

 

(c)                                  imposes
any other condition the result of which is to increase the cost to any Lender
or any applicable Lending Installation of making, funding or maintaining its
Eurodollar Loans or reduces any amount receivable by any Lender or any
applicable Lending Installation in connection with its Eurodollar Loans, or requires
any Lender or any applicable Lending Installation to make any payment
calculated by reference to the amount of Eurodollar Loans held or interest
received by it, by an amount deemed material by such Lender,

 

and the result of any of the foregoing is to increase
the cost to such Lender or applicable Lending Installation of making or
maintaining its Eurodollar Loans or Commitment or to reduce the return received
by such Lender or applicable Lending Installation in connection with such
Eurodollar Loans or Commitment, then, within 15 days of demand by such Lender,
the Borrower shall pay such Lender such additional amount or amounts as will
compensate such Lender for such increased cost or reduction in amount received.

 

3.2                                 Changes
in Capital Adequacy Regulations.  If
a Lender determines the amount of capital required or expected to be maintained
by such Lender, any Lending Installation of such Lender or any corporation
controlling such Lender is increased as a result of a Change, then, within 15
days of demand by such Lender, the Borrower shall pay such Lender the amount
necessary to compensate for any shortfall in the rate of return on the portion
of such increased capital which such Lender determines is attributable to this
Agreement, its Loans or its Commitment to make Loans hereunder (after taking
into account such Lender’s policies as to capital adequacy).  “Change” means (a) any change after the date
of this Agreement in the Risk-Based Capital Guidelines or (b) any adoption of
or change in any other law, governmental or quasi-governmental rule,
regulation, policy, guideline, interpretation, or directive (whether or not
having the force of law) after the date of this Agreement which affects the
amount of capital required or expected to be maintained by any Lender or any
Lending Installation or any corporation controlling any Lender.  “Risk-Based Capital Guidelines” means (a) the
risk-based capital guidelines in effect in the United States on the date of
this Agreement, including transition rules, and (b) the corresponding capital
regulations promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on Banking Regulation
and Supervisory Practices Entitled “International Convergence of Capital Measurements
and Capital Standards,” including transition rules, and any amendments to such
regulations adopted prior to the date of this Agreement.

 

3.3                                 Availability
of Types of Advances.  If any Lender
determines that maintenance of its Eurodollar Loans at a suitable Lending
Installation would violate any applicable law, rule, regulation, or directive,
whether or not having the force of law, or if the Required Lenders determine
that (a) deposits of a type and maturity appropriate to match fund Eurodollar
Advances are not available or (b) the interest rate applicable to Eurodollar
Advances does not accurately reflect the cost of making or maintaining
Eurodollar Advances, then the Agent shall suspend the availability of
Eurodollar Advances and require any affected Eurodollar Advances to be repaid
or converted to Floating Rate Advances, subject to the payment of any funding
indemnification amounts required by Section 3.4.

 

3.4                                 Funding
Indemnification.  If any payment of a
Eurodollar Advance occurs on a date which is not the last day of the applicable
Interest Period, whether because of acceleration, prepayment or otherwise, or a
Eurodollar Advance is not made on the date specified by the 

 

20

 

Borrower for any reason other than default by the
Lenders, the Borrower will indemnify each Lender for any loss or cost incurred by it resulting therefrom, including, without
limitation, any loss or cost in liquidating or employing deposits acquired to
fund or maintain such Eurodollar Advance.

 

3.5                                 Taxes.  (a) All payments by the Borrower to or for
the account of any Lender or the Agent hereunder or under any Note shall be
made free and clear of and without deduction for any and all Taxes.  If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to any Lender
or the Agent, (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 3.5) such Lender or the Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions, (iii)
the Borrower shall pay the full amount deducted to the relevant authority in
accordance with applicable law and (iv) the Borrower shall furnish to the Agent
the original copy of a receipt evidencing payment thereof within 30 days after
such payment is made.

 

(b)                                 In
addition, the Borrower hereby agrees to pay any present or future stamp or
documentary taxes and any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or under any Note or from
the execution or delivery of, or otherwise with respect to, this Agreement or
any Note (“Other Taxes”).

 

(c)                                  The
Borrower hereby agrees to indemnify the Agent and each Lender for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed on amounts payable under this Section 3.5) paid by
the Agent or such Lender as a result of its Commitment, any Loans made by it
hereunder, or otherwise in connection with its participation in this Agreement
and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto. 
Payments due under this indemnification shall be made within 30 days of
the date the Agent or such Lender makes demand therefor pursuant to Section
3.6.

 

(d)                                 Each
Lender that is not incorporated under the laws of the United States of America
or a state thereof (each a “Non-U.S. Lender”) agrees that it will, not more
than ten Business Days after the date of this Agreement, (i) deliver to the
Agent two duly completed copies of United States Internal Revenue Service Form
W-8BEN or W-8ECI, certifying in either case that such Lender is entitled to
receive payments under this Agreement without deduction or withholding of any
United States federal income taxes, and (ii) deliver to the Agent a United
States Internal Revenue Form W-8 or W-9, as the case may be, and certify that
it is entitled to an exemption from United States backup withholding tax.  Each Non-U.S. Lender further undertakes to
deliver to each of the Borrower and the Agent (x) renewals or additional copies
of such form (or any successor form) on or before the date that such form
expires or becomes obsolete, and (y) after the occurrence of any event
requiring a change in the most recent forms so delivered by it, such additional
forms or amendments thereto as may be reasonably requested by the Borrower or
the Agent.  All forms or amendments
described in the preceding sentence shall certify that such Lender is entitled
to receive payments under this Agreement without deduction or withholding of
any United States federal income taxes, unless
an event (including without limitation any change in treaty, law or regulation)
has occurred prior to the date on which any 

 

21

 

such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form or amendment with
respect to it and such Lender advises the Borrower and the Agent that it is not
capable of receiving payments without any deduction or withholding of United
States federal income tax.

 

(e)                                  For
any period during which a Non-U.S. Lender has failed to provide the Borrower
with an appropriate form pursuant to clause (d) above (unless such failure is
due to a change in treaty, law or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
occurring subsequent to the date on which a form originally was required to be
provided), such Non-U.S. Lender shall not be entitled to indemnification under
this Section 3.5 with respect to Taxes imposed by the United States;
provided that, should a Non-U.S. Lender which is otherwise exempt from or
subject to a reduced rate of withholding tax become subject to Taxes because of
its failure to deliver a form required under clause (d) above, the Borrower
shall take such steps as such Non-U.S. Lender shall reasonably request to
assist such Non-U.S. Lender to recover such Taxes.

 

(f)                                    Any
Lender that is entitled to an exemption from or reduction of withholding tax
with respect to payments under this Agreement or any Note pursuant to the law
of any relevant jurisdiction or any treaty shall deliver to the Borrower (with
a copy to the Agent), at the time or times prescribed by applicable law, such
properly completed and executed documentation prescribed by applicable law as
will permit such payments to be made without withholding or at a reduced rate.

 

(g)                                 If
the U.S. Internal Revenue Service or any other governmental authority of the
United States or any other country or any political subdivision thereof asserts
a claim that the Agent did not properly withhold tax from amounts paid to or
for the account of any Lender (because the appropriate form was not delivered
or properly completed, because such Lender failed to notify the Agent of a
change in circumstances which rendered its exemption from withholding
ineffective, or for any other reason), such Lender shall indemnify the Agent
fully for all amounts paid, directly or indirectly, by the Agent as tax,
withholding therefor, or otherwise, including penalties and interest, and
including taxes imposed by any jurisdiction on amounts payable to the Agent
under this subsection, together with all costs and expenses related thereto
(including attorneys fees and time charges of attorneys for the Agent, which
attorneys may be employees of the Agent). 
The obligations of the Lenders under this Section 3.5(g) shall
survive the payment of the Obligations and termination of this Agreement.

 

3.6                                 Lender
Statements; Survival of Indemnity. 
(a) To the extent reasonably possible, each Lender shall designate an
alternate Lending Installation with respect to its Eurodollar Loans to reduce
any liability of the Borrower to such Lender under Sections 3.1, 3.2
and 3.5 or to avoid the unavailability of Eurodollar Advances under Section
3.3, so long as such designation is not, in the judgment of such Lender,
disadvantageous to such Lender.  Each
Lender shall deliver a written statement of such Lender to the Borrower (with a
copy to the Agent) as to the amount due, if any, under Section 3.1, 3.2,
3.4 or 3.5.  Such written
statement shall set forth in reasonable detail the calculations upon which such
Lender determined such amount and shall be final, conclusive and binding on the
Borrower in the absence of manifest error. 
Determination of amounts payable under such Sections in connection with
a Eurodollar Loan shall be calculated as though each Lender funded its
Eurodollar Loan through the purchase of a deposit of the type and 

 

22

 

maturity corresponding to the deposit used as a
reference in determining the Adjusted LIBO Rate applicable to such Loan,
whether in fact that is the case or not. 
Unless otherwise provided herein, the amount specified
in the written statement of any Lender shall be payable on demand after receipt
by the Borrower of such written statement.  The obligations of the Borrower under Sections
3.1, 3.2, 3.4 and 3.5 shall survive payment of the
Obligations and termination of this Agreement.

 

(b)                                 Notwithstanding any other provision of
this Agreement, if any Lender fails to notify the Borrower of any event or
circumstance which would entitle such Lender to compensation pursuant to this Article
III within 180 days after such Lender obtains knowledge of such event or
circumstance, then such Lender shall not be entitled to compensation from the
Borrower for any amount arising prior to the date that is 180 days before the
date on which such Lender notifies the Borrower of such event or circumstance.

 

3.7                                 Substitution
of Lender.  Upon the receipt by the
Borrower from any Lender (an “Affected Lender”) of a claim for
compensation under Section 3.1,  3.2 or 3.5 or a notice in
accordance with Section 3.3 regarding the unavailability of a Type of
Advance, the Borrower may: (a) request the Affected Lender to use commercially
reasonable efforts to obtain a replacement bank or other entity satisfactory to
the Borrower to acquire and assume all or a ratable part of all of such
Affected Lender’s Loans and Commitment at the face amount thereof (a “Replacement
Lender”); (b) request one or more of the other Lenders to acquire and
assume all or part of such Affected Lender’s Loans and Commitment (which
request each such other Lender may decline or agree to in its sole discretion);
or (c) designate a Replacement Lender. 
Any such designation of a Replacement Lender under clause (a) or (c)
shall be subject to the prior written consent of the Agent (which consent shall
not unreasonably be withheld).  Any
transfer of Loans or Commitment pursuant to this Section shall be made in
accordance with Section 12.3 and Section 3.4, if applicable.

 

ARTICLE
IV

 

CONDITIONS PRECEDENT

 

4.1                                 Effectiveness.  This Agreement shall become effective when
the Borrower has furnished each of the following to the Agent with sufficient
copies for the Lenders:

 

(a)                                  Copies
of the articles of incorporation of the Borrower, together with all amendments,
and a certificate of good standing, each certified by the appropriate
governmental officer in its jurisdiction of incorporation.

 

(b)                                 Copies,
certified by the Secretary or Assistant Secretary of the Borrower, of its
by-laws and of its Board of Directors’ resolutions and of resolutions or
actions of any other body authorizing the execution of the Loan Documents to
which the Borrower is a party.

 

(c)                                  An
incumbency certificate, executed by the Secretary or Assistant Secretary of the
Borrower, which shall identify by name and title and bear the signatures of the
Authorized Officers and any other officers of the Borrower authorized to sign
the Loan 

 

23

 

Documents to which the Borrower is a party, upon which
certificate the Agent and the Lenders shall be entitled to rely until informed
of any change in writing by the Borrower.

 

(d)                                 A
certificate, signed by two Authorized Officers of the Borrower, stating that on
the Restatement Date no Default or Unmatured Default has occurred and is
continuing.

 

(e)                                  A
written opinion of Mary Beth Nebel, Esquire, counsel to Borrower, in form and
substance acceptable to the Agent and its counsel.

 

(f)                                    Executed
originals of this Agreement, the Note, and all other Loan Documents, together
with all schedules, exhibits, certificates, instruments, opinions, documents
and financial statements required to be delivered pursuant hereto and thereto.

 

(g)                                 Evidence
that the LaSalle Credit Agreement and the Reaffirmation and Amendment Agreement
(Intercreditor Agreement) dated as of the date hereof among JPMCB, LaSalle Bank
National Association and the Borrower have become effective.

 

(h)                                 Such
other documents as any Lender or its counsel may have reasonably requested.

 

4.2                                 Each
Advance.  The Lenders shall not be
required to make any Advance unless on the applicable Borrowing Date:

 

(a)                                  There
exists no Default or Unmatured Default.

 

(b)                                 The
representations and warranties contained in Article V are true and
correct as of such Borrowing Date except to the extent any such representation
or warranty is stated to relate solely to an earlier date, in which case such
representation or warranty shall have been true and correct on and as of such
earlier date.

 

(c)                                  The
aggregate principal amount of the outstanding Advances hereunder, after giving
effect to the proposed Advance, would not exceed the principal amount outstanding
under the LaSalle Credit Facility (after giving effect to any concurrent
borrowing proposed to be made thereunder).

 

(d)                                 All
legal matters incident to the making of such Advance shall be satisfactory to
the Lenders and their counsel.

 

Each Borrowing Notice
with respect to each such Advance shall constitute a representation and
warranty by the Borrower that the conditions contained in Sections 4.2(a),
(b) and (c) have been satisfied. 
Any Lender may require a duly completed compliance certificate in
substantially the form of Exhibit A as a condition to making an Advance.

 

24

 

ARTICLE
V

 

REPRESENTATIONS AND WARRANTIES

 

The Borrower represents
and warrants to the Lenders that:

 

5.1                                 Existence
and Standing.  Each of the Borrower
and its Subsidiaries is a corporation, partnership (in the case of Subsidiaries
only) or limited liability company duly and properly incorporated or organized,
as the case may be, validly existing and (to the extent such concept applies to
such entity) in good standing under the laws of its jurisdiction of
incorporation or organization and has all requisite authority to conduct its
business and (to the extent such concept applies to such entity) is in good
standing in each jurisdiction in which its business is conducted, the failure
of which could reasonably be expected to have a Material Adverse Effect.

 

5.2                                 Authorization
and Validity.  The Borrower has the
power and authority and legal right to execute and deliver the Loan Documents
to which it is a party and to perform its obligations thereunder.  The execution and delivery by the Borrower of
the Loan Documents to which it is a party and the performance of its
obligations thereunder have been duly authorized by proper corporate proceedings,
and the Loan Documents to which the Borrower is a party constitute legal, valid
and binding obligations of the Borrower enforceable against the Borrower in
accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors’
rights generally.

 

5.3                                 No
Conflict; Consent.  Neither the
execution and delivery by the Borrower of the Loan Documents to which it is a
party, nor the consummation of the transactions therein contemplated, nor
compliance with the provisions thereof will violate (a) any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding on the
Borrower or any of its Subsidiaries or (b) the Borrower’s or any Subsidiary’s
articles or certificate of incorporation, partnership agreement, certificate of
partnership, articles or certificate of organization, by-laws, or operating or
other management agreement, as the case may be, or (c) the provisions of any
indenture, instrument or agreement to which the Borrower or any of its
Subsidiaries is a party or is subject, or by which it, or its Property, is
bound, or conflict with or constitute a default thereunder, or result in, or
require, the creation or imposition of any Lien in, of or on the Property of
the Borrower or a Subsidiary pursuant to the terms of any such indenture,
instrument or agreement, which in any such case could reasonably be expected to
have a Material Adverse Effect.  No
order, consent, adjudication, approval, license, authorization, or validation
of, or filing, recording or registration with, or exemption by, or other action
in respect of any Person (including any governmental or public body or
authority, or any subdivision thereof), which has not been obtained by the
Borrower or any of its Subsidiaries, is required to be obtained by the Borrower
or any of its Subsidiaries in connection with the execution and delivery of the
Loan Documents, the borrowings under this Agreement, the payment and
performance by the Borrower of the Obligations or the legality, validity,
binding effect or enforceability of any of the Loan Documents.

 

5.4                                 Financial
Statements.  The Borrower has
heretofore furnished to each of the Lenders (a) the December 31, 2004 audited
consolidated financial statements of the Borrower and its Subsidiaries and (b)
the December 31, 2004 Annual Statement of each of RLIC and 

 

25

 

MHIC (collectively, the “Financial Statements”).  Each of the Financial Statements was prepared
in accordance with Agreement Accounting Principles or SAP, as applicable, and
such Financial Statements fairly present the consolidated (to the extent
applicable) financial condition and operations of the Borrower and its
Subsidiaries or such Insurance Subsidiary, as applicable, at such dates and the
consolidated results of their operations for the respective periods then ended
(except, in the case of such unaudited statements, for normal year-end audit
adjustments).

 

5.5                                 Taxes.  The Borrower and its Subsidiaries have filed
all United States federal tax returns and all other tax returns which are
required to be filed and have paid all taxes due pursuant to said returns or
pursuant to any assessment received by the Borrower or any of its Subsidiaries,
except such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided in accordance with Agreement Accounting
Principles and as to which no Lien exists. 
To the Borrower’s knowledge, no tax Liens have been filed and no claims
are being asserted with respect to any such taxes.

 

5.6                                 Material
Adverse Change.  Since December 31,
2004, there has been no change in the business, Property, condition (financial
or otherwise) or results of operations of the Borrower and its Subsidiaries
which could reasonably be expected to have a Material Adverse Effect.

 

5.7                                 Litigation
and Contingent Obligations.  There is
no litigation, arbitration, governmental investigation, proceeding or inquiry
pending or, to the knowledge of any of their officers, threatened against or
affecting the Borrower or any of its Subsidiaries which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect or
which seeks to prevent, enjoin or delay the making of any Loans.  The Borrower has no material contingent
obligations not provided for or disclosed in the financial statements referred
to in Section 5.4, other than any liabilities which could not reasonably
be expected to have a Material Adverse Effect.

 

5.8                                 Subsidiaries.  Schedule 5.8 contains an accurate list
of all Subsidiaries of the Borrower as of the date of this Agreement, setting
forth their respective jurisdictions of organization and the percentage of
their respective capital stock or other ownership interests owned by the
Borrower or other Subsidiaries.  All of
the issued and outstanding shares of capital stock or other ownership interests
of such Subsidiaries have been (to the extent such concepts are relevant with
respect to such ownership interests) duly authorized and issued and are fully
paid and non-assessable.

 

5.9                                 ERISA.  The Unfunded Liabilities of all Single
Employer Plans do not in the aggregate exceed $250,000.  Each Plan complies in all material respects
with all applicable requirements of law and regulations, no Reportable Event
has occurred with respect to any Plan, neither the Borrower nor any other
member of the Controlled Group has withdrawn from any Plan or initiated steps
to do so, and no steps have been taken to reorganize or terminate any Plan.  All of the Borrower’s Employee Plans as of
the date of this Agreement are listed on Schedule 5.9 hereto.  No proceedings have been instituted by any
Governmental Authority to terminate or appoint a trustee to administer any such
Employee Plans.

 

5.10                           Accuracy
of Information.  No information,
exhibit or report furnished by the Borrower or any of its Subsidiaries to the
Agent or to any Lender in connection with the 

 

26

 

negotiation of, or compliance with, the Loan Documents
contained any material misstatement of fact or omitted to state a material fact
or any fact necessary to make the statements contained therein not misleading.

 

5.11                           Regulation
U.  Margin stock (as defined in
Regulation U) constitutes less than 25% of the value of those assets of the
Borrower and its Subsidiaries which are subject to any limitation on sale,
pledge, or other restriction hereunder.

 

5.12                           Material
Agreements.  Neither the Borrower nor
any Subsidiary is a party to any agreement or instrument or subject to any
charter or other corporate restriction which could reasonably be expected to
have a Material Adverse Effect.  Neither
the Borrower nor any Subsidiary is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in (a)
any agreement to which it is a party, which default could reasonably be
expected to have a Material Adverse Effect or (b) any agreement or instrument
evidencing or governing Indebtedness.

 

5.13                           Compliance
With Laws. 
The Borrower and its Subsidiaries have complied with all applicable
statutes, rules, regulations, orders and restrictions of any domestic or
foreign government or any instrumentality or agency thereof having jurisdiction
over the conduct of their respective businesses or the ownership of their
respective Property except for any failure to comply with any of the foregoing
which could not reasonably be expected to have a Material Adverse Effect.

 

5.14                           Plan
Assets; Prohibited Transactions.  The
Borrower is not an entity deemed to hold “plan assets” within the meaning of 29
C.F.R. § 2510.3-101 of an employee benefit plan (as defined in Section 3(3) of
ERISA) which is subject to Title I of ERISA or any plan (within the meaning of
Section 4975 of the Code), and neither the execution of this Agreement nor the
making of Loans hereunder gives rise to a prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975 of the Code.

 

5.15                           Investment
Company Act.  Neither the Borrower
nor any Subsidiary is an “investment company” or a company “controlled” by an “investment
company”, within the meaning of the Investment Company Act of 1940, as amended.

 

5.16                           Public
Utility Holding Company Act.  Neither
the Borrower nor any Subsidiary is a “holding company” or a “subsidiary company”
of a “holding company”, or an “affiliate” of a “holding company” or of a “subsidiary
company” of a “holding company”, within the meaning of the Public Utility
Holding Company Act of 1935, as amended.

 

5.17                           Insurance
Licenses.  Schedule 5.17
hereto lists all of the jurisdictions in which any Insurance Subsidiary holds
active licenses (including, without limitation, licenses or certificates of
authority from applicable insurance departments), permits or authorizations to
transact insurance business (collectively, the “Licenses”) as of the date of
this Agreement.  No License, the loss of
which could reasonably be expected to have a Material Adverse Effect, is the
subject of a proceeding for suspension or revocation.  To the Borrower’s knowledge, there is no
sustainable basis for such suspension or revocation, and no such suspension or
revocation has been threatened by any Governmental Authority.  Schedule 5.17 also indicates the line
or lines of 

 

27

 

insurance in which each such
Insurance Subsidiary is authorized and the state or states in which such
Insurance Subsidiary is licensed to engage in any line of insurance, in each
case as of the date of this Agreement.

 

5.18                           Reinsurance.
 Schedule 5.18 sets forth a
summary of the reinsurance arrangements of the Insurance Subsidiaries in effect
as of the date of this Agreement.

 

5.19                           Solvency.  Immediately after the consummation of the
transactions to occur on the date hereof and immediately following the making
of each Loan, if any, made on the date hereof and after giving effect to the
application of the proceeds of such Loans, (a) the fair value of the assets of
the Borrower and its Subsidiaries on a consolidated basis, at a fair valuation,
will exceed the debts and liabilities, subordinated, contingent or otherwise,
of the Borrower and its Subsidiaries on a consolidated basis; (b) the present
fair saleable value of the Property of the Borrower and its Subsidiaries on a
consolidated basis will be greater than the amount that will be required to pay
the probable liability of the Borrower and its Subsidiaries on a consolidated
basis on their debts and other liabilities, subordinated, contingent or
otherwise, as such debts and other liabilities become absolute and matured; (c)
the Borrower and its Subsidiaries on a consolidated basis will be able to pay
their debts and liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured; and (d) the Borrower and its
Subsidiaries on a consolidated basis will not have unreasonably small capital
with which to conduct the businesses in which they are engaged as such
businesses are now conducted and are proposed to be conducted after the date
hereof.

 

5.20                           Labor
Controversies; Union Contracts, Etc. 
There are no labor controversies pending or, to the knowledge of the
Borrower, threatened against the Borrower, which if adversely determined could
have a Material Adverse Effect.  There
are no pending or, to the Borrower’s knowledge, threatened or anticipated (a)
employment discrimination charges or complaints against or involving the
Borrower before any governmental Person or(b) unfair labor practice charges or
complaints, disputes or grievances or arbitration proceedings or controversies
affecting the Borrower, which, in any such case, if adversely determined, could
have a Material Adverse Effect.  There
are no collective bargaining agreements covering any of the employees of the
Borrower.

 

5.21                           Surety
Obligations; Financial Assurances. 
The Borrower is not obligated as surety or indemnitor under any surety
or similar bond or other contract and has not issued or entered into any
agreement to assure payment, performance or completion of performance of any
undertaking or obligation of any Person, except, in any such case, in the
ordinary course of business.  As of the
date of this Agreement, the Borrower has not posted or placed any Financial
Assurance except as indicated in Schedule 5.21 hereto.

 

5.22                           Business
Relations.  There exists no actual or
threatened termination, cancellation, or adverse limitation of, or any adverse
modification or change in, the contractual and/or business relationship between
the Borrower and any owner/lessor of any facility utilized in the Borrower’s
business, municipality, customer and/or supplier, and there exists no present
condition or state of facts or circumstances in such relations, which in each
case would have a Material Adverse Effect.

 

28

 

5.23                           Hazardous
Materials.  Borrower has not caused
or permitted any Hazardous Material to be disposed of or incorporated into,
either on or under real property legally or beneficially owned or operated by
Borrower, and no such real property has ever been used as a dump site or
long-term storage site for any Hazardous Materials which would be reasonably
likely to (a) give rise to present or future legal liability, and (b) have a
material adverse effect on the business or financial condition of Borrower.  The failure, if any, of Borrower in
connection with the operation of their business, to obtain or be in compliance
with any permit, certificate, license, approval and other authorization, or to
file any notification or report relating to chemical substances, air emissions,
effluent discharges and Hazardous Material storage, treatment, transport and
disposal has not had, nor will it have, a Material Adverse Effect, and no facts
or circumstances exist which could give rise to liabilities with respect to Hazardous
Materials on the business or financial condition of Borrower which would be
reasonably likely to have a Material Adverse Effect.

 

5.24                           Ranking.  The Obligations will rank at least pari passu
with all Indebtedness of the Borrower, except Indebtedness secured by Liens
permitted under Section 6.15.

 

5.25                           Intellectual
Property.  The Borrower owns or has
sufficient and legally enforceable rights to use all material licenses,
patents, patent applications, copyrights, service marks, trademarks, trademark applications,
and trade names necessary to continue to conduct its businesses as heretofore
conducted by it, now conducted by it, and now proposed to be conducted by it,
the lack of which could reasonably be expected to have a  Material Adverse Effect.  The Borrower is conducting its business
without infringement or claim of infringement of any license, patent,
copyright, service mark, trademark, trade name, trade secret, or other
intellectual property right of others, other
than any such infringements or claims which, if successfully
asserted against or determined adversely to the Borrower, could not,
individually or collectively reasonably be expected to have a Material Adverse
Effect.

 

ARTICLE
VI

 

COVENANTS

 

During the term of this
Agreement, unless the Required Lenders shall otherwise consent in writing:

 

6.1                                 Financial
Reporting.  The Borrower will
maintain, for itself and each Subsidiary, a system of accounting established
and administered in accordance with generally accepted accounting principles,
and furnish to the Lenders:

 

(a)                                  Within
120 days after the close of each of its fiscal years, an unqualified audit
report certified by independent certified public accountants acceptable to the
Lenders, prepared in accordance with Agreement Accounting Principles on a
consolidated and consolidating basis (consolidating statements need not be
certified by such accountants) for itself and its Subsidiaries, including
balance sheets as of the end of such period, related profit and loss, retained
earnings and reconciliation of surplus statements, and a statement of cash
flows, accompanied by (i) any management letter prepared by said accountants,
and (ii) a certificate of 

 

29

 

said accountants that, in the
course of their examination necessary for their certification of the foregoing,
they have obtained no knowledge of any Default or Unmatured Default, or if, in
the opinion of such accountants, any Default or Unmatured Default shall exist,
stating the nature and status thereof.

 

(b)                                 Within
60 days after the close of the first three quarterly periods of each of its
fiscal years, for itself and its Subsidiaries, consolidated and consolidating
unaudited balance sheets as at the close of each such period and consolidated
and consolidating profit and loss, retained earnings and reconciliation of
surplus statements and a statement of cash flows for the period from the
beginning of such fiscal year to the end of such quarter, all certified by its
chief financial officer.

 

(c)                                  Together
with the financial statements required under Sections 6.1(a) and (b),
a compliance certificate in substantially the form of Exhibit A signed
by its chief financial officer or treasurer showing the calculations necessary
to determine compliance with this Agreement and stating that no Default or
Unmatured Default exists, or if any Default or Unmatured Default exists,
stating the nature and status thereof.

 

6.2                                 Other
Reports.  The Borrower will and will
cause each Subsidiary to deliver to furnish to the Lenders the following:

 

(a)                                  Within
270 days after the close of each fiscal year, a statement of the Unfunded
Liabilities of each Single Employer Plan, certified as correct by an actuary
enrolled under ERISA.

 

(b)                                 As
soon as possible and in any event within 10 days after the Borrower knows that
any Reportable Event has occurred with respect to any Plan, a statement, signed
by the chief financial officer or treasurer of the Borrower, describing said
Reportable Event and the action which the Borrower proposes to take with
respect thereto.

 

(c)                                  Promptly
upon the furnishing thereof to the shareholders of the Borrower, copies of all
financial statements, reports and proxy statements so furnished.

 

(d)                                 Promptly
upon the filing thereof, copies of all registration statements and annual,
quarterly, monthly or other regular reports which the Borrower or any of its
Subsidiaries files with the Securities and Exchange Commission.

 

(e)                                  Upon
the earlier of (i) (A) fifteen (15) days after the regulatory filing date or
(B) sixty (60) days after the close of each fiscal year of each of RLIC and
MHIC, copies of the unaudited Annual Statement of such Insurance Subsidiary,
certified by the chief financial officer or the treasurer of such Insurance
Subsidiary, all such statements to be prepared in accordance with SAP
consistently applied throughout the periods reflected therein and (ii) no later
than each June 15, copies of such Annual Statements audited and certified by
independent certified public accountants of recognized national standing.

 

(f)                                    Upon
the earlier of (i) ten (10) days after the regulatory filing date or (ii) sixty
(60) days after the close of each of the first three (3) fiscal quarters of
each fiscal year of each of RLIC and MHIC, copies of the unaudited Quarterly Statement
of each of the Insurance 

 

30

 

Subsidiaries, certified by the chief financial officer
or the treasurer of RLIC or MHIC, as applicable, all such statements to be
prepared in accordance with SAP consistently applied through the period
reflected therein.

 

(g)                                 Promptly
and in any event within ten (10) days after (i) learning thereof, notification
of any changes after the date of this Agreement in the rating given by A.M.
Best & Co. in respect of any Insurance Subsidiary and (ii) receipt thereof,
copies of any ratings analysis by A.M. Best & Co. relating to any Insurance
Subsidiary.

 

(h)                                 Copies
of any outside actuarial reports prepared with respect to the adequacy of
reserves analysis and evaluation of RLIC or MHIC, promptly after the receipt
thereof, and no later than March 31 of each year, an annual actuarial opinion
with respect to RLIC and MHIC in form and substance satisfactory to the
Required Lenders from an actuarial firm reasonably satisfactory to the Required
Lenders.

 

(i)                                     Promptly
upon the filing thereof, copies of all registration statements and annual,
quarterly, monthly or other reports which the Borrower or any of its
Subsidiaries files with the Securities and Exchange Commission, the National Association
of Securities Dealers, any securities exchange, the NAIC or any insurance
commission or department or analogous Governmental Authority (including any
filing made by the Borrower or any Subsidiary pursuant to any insurance holding
company act or related rules or regulations), but excluding routine or
non-material filings with the NAIC, any insurance commissioner or department or
analogous Governmental Authority.

 

(j)                                     Within
90 days after the close of each fiscal year, a copy of the annual Risk Based
Capital reports regarding each of RLIC and MHIC.

 

(k)                                  Within
120 days after the close of each fiscal year, a copy of the IRIS Ratios
relating to each of RLIC and MHIC.

 

(l)                                     Within
90 days after the close of each fiscal year, a copy of the annual projections
and budget for the next fiscal year for the Borrower and its Subsidiaries.

 

(m)                               Such
other information (including, without limitation, the annual Best’s Advance
Report Service report prepared with respect to each Insurance Subsidiary rated
by A.M. Best & Co. and non-financial information) as the Agent or any
Lender may from time to time reasonably request.

 

6.3                                 Use
of Proceeds.  The Borrower will, and
will cause each Subsidiary to, use the proceeds of the Advances for working
capital and general corporate purposes. 
The Borrower will not, nor will it permit any Subsidiary to, use any of
the proceeds of the Advances to purchase or carry any “margin stock” (as
defined in Regulation U).

 

6.4                                 Notice
of Default.  The Borrower will, and
will cause each Subsidiary to, give prompt notice in writing to the Lenders of
the occurrence of (a) any Default or Unmatured Default, (b) of any other event
or development, financial or other, relating specifically to the Borrower or
any of its Subsidiaries (and not of a general economic or political nature)
which could reasonably be expected to have a Material Adverse Effect, (c) their
receipt of any notice 

 

31

 

from any Governmental Authority of the expiration
without renewal, revocation or suspension of, or the institution of any
proceedings to revoke or suspend, any License now or hereafter held by any
Insurance Subsidiary which is required to conduct insurance business in
compliance with all applicable laws and regulations and the expiration,
revocation or suspension of which could reasonably be expected to have a
Material Adverse Effect, (d) their receipt of any notice from any Governmental
Authority of the institution of any disciplinary proceedings against or in
respect of any Insurance Subsidiary, or the issuance of any order, the taking
of any action or any request for an extraordinary audit for cause by any
Governmental Authority which, if adversely determined, could reasonably be
expected to have a Material Adverse Effect, (e) any material judicial or
administrative order of which they are aware limiting or controlling the
insurance business of any Insurance Subsidiary (and not the insurance industry
generally) which has been issued or adopted or (f) the commencement of any
litigation of which they are aware which could reasonably be expected to create
a Material Adverse Effect.

 

6.5                                 Taxes.  The Borrower will, and will cause each
Subsidiary to, timely file complete and correct United States federal and other
material foreign, state and local tax returns required by law and pay when due
all taxes, assessments and governmental charges and levies upon it or its
income, profits or Property, except those which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves
have been set aside in accordance with Agreement Accounting Principles.

 

6.6                                 Insurance.  The Borrower will, and will cause each
Subsidiary to, maintain with financially sound and reputable insurance
companies insurance on all their Property in such amounts and covering such
risks as is consistent with sound business practice, and the Borrower will
furnish to any Lender upon request full information as to the insurance
carried.  The Borrower shall retain all
incidents of ownership of the insurance maintained pursuant hereto and shall
not borrow upon or otherwise impair its rights to receive the proceeds of such
insurance.  In the event the Borrower
either fails to provide the Agent with evidence of the insurance coverage required
by this Section 6.6 or at any time hereafter shall fail to obtain or
maintain any of the policies of insurance required above, or to pay any premium
in whole or in part relating thereto, then the Agent, without waiving or
releasing any obligation or default by the Borrower hereunder, may at any time
(but shall be under no obligation to act), obtain and maintain such policies of
insurance and pay such premium and take any other action with respect thereto,
which the Agent deems advisable.  The
Borrower may later cancel any such insurance purchased by the Agent, but only
after providing the Agent with evidence that the Borrower has obtained the
insurance coverage required by this Section. 
The costs of such insurance obtained by the Agent, through and including
the effective date such insurance coverage is canceled or expires, shall be
payable on demand by the Borrower to the Agent, together with interest at the
default rate provided for in Section 2.11 on such amounts until repaid
and any other charges by the Agent in connection with the placement of such
insurance.  The costs of such insurance,
which may be greater than the cost of insurance which the Borrower may be able
to obtain on its own, together with interest thereon at the default rate
provided for in Section 2.11 and any other charges by the Agent in
connection with the placement of such insurance may be added to the total
Obligations due and owing.

 

6.7                                 Compliance
with Laws.  The Borrower will, and
will cause each Subsidiary to, comply with all laws, rules, regulations,
orders, writs, judgments, injunctions, decrees or awards 

 

32

 

to which it may be subject
including, without limitation, all Environmental Laws, the failure to comply
with which could reasonably be expected to have a Material Adverse Effect.

 

6.8                                 Maintenance
of Properties.  The Borrower will,
and will cause each Subsidiary to, do all things necessary to maintain,
preserve, protect and keep its Property in good repair, working order and
condition, and make all necessary and proper repairs, renewals and replacements
so that its business carried on in connection therewith may be properly
conducted at all times.

 

6.9                                 Inspection.  The Borrower will, and will cause each
Subsidiary to, upon reasonable notice permit the Agent and the Lenders, by
their respective representatives and agents, to inspect any of the Property,
corporate books and financial records of the Borrower and each Subsidiary, to
examine and make copies of the books of accounts and other financial records of
the Borrower and each Subsidiary, and to discuss the affairs, finances and
accounts of the Borrower and each Subsidiary with, and to be advised as to the
same by, their respective officers at such reasonable times and intervals as
the Lenders may designate.  The Borrower
will keep or cause to be kept, and cause each Subsidiary to keep or cause to be
kept, appropriate records and books of account in which complete entries are to
be made reflecting its and their business and financial transactions, such
entries to be made in accordance with Agreement Accounting Principles or SAP,
as applicable, consistently applied.

 

6.10                           Conduct
of Business.  The Borrower will, and
will cause each Subsidiary to, (a) carry on and conduct its business in
substantially the same manner and in substantially the same fields of
enterprise as it is presently conducted, (b) do all things necessary to remain
duly incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and maintain all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted except where the failure to maintain such authority could not
reasonably be expected to have a Material Adverse Effect and (c) do all things
necessary to renew, extend and continue in effect all Licenses which may at any
time and from time to time be necessary for any Insurance Subsidiary to operate
its insurance business in compliance with all applicable laws and regulations
except for any License the loss of which could not reasonably be expected to
have a Material Adverse Effect; provided, that any Insurance Subsidiary may
withdraw from one or more states (other than its state of domicile) as an
admitted insurer if such withdrawal is determined by the such Insurance
Subsidiary’s Board of Directors to be in the best interest of such Insurance
Subsidiary and could not reasonably be expected to have a Material Adverse
Effect.  No Insurance Subsidiary shall
change its state of domicile or incorporation without the prior written consent
of the Required Lenders.  Each
Wholly-Owned Subsidiary in existence as of the date of this Agreement shall
continue to be a Wholly-Owned Subsidiary; provided, that the Borrower
may sell all of the capital stock of any Subsidiary, subject to Section 6.14
hereof.

 

6.11                           Dividends.  The Borrower will not, nor will it permit any
Subsidiary to, declare or pay any dividends or make any distributions on its
capital stock (other than dividends payable in its own capital stock) or
redeem, repurchase or otherwise acquire or retire any of its capital stock at
any time outstanding, except that (a) any Subsidiary may declare and pay
dividends or make distributions to the Borrower or to a Wholly-Owned Subsidiary,
and (b) the Borrower may declare and pay dividends on its capital stock or
redeem, repurchase or otherwise acquire or 

 

33

 

retire any of its capital stock at any time
outstanding; provided, that no Default or Unmatured Default shall exist
before or after giving effect to such dividends, redemptions, repurchases or
other acquisitions or be created as a result thereof.

 

6.12                           Merger.  The Borrower will not, nor will it permit any
Subsidiary to, merge or consolidate with or into any other Person; provided,
that, (x) any Person may merge with or into the Borrower so long as (i) no
Event of Default will result therefrom, (ii) the Borrower has permitted written
notice at least twenty days prior to the proposed effective date, (iii) the
aggregate consideration paid in such transaction does not exceed $50,000,000
and (iv) the Borrower is the surviving entity, and (y) subject to Section
6.14, a Subsidiary may merge into the Borrower or a Wholly-Owned
Subsidiary.

 

6.13                           Sale
of Assets.  The Borrower will not,
nor will it permit any Subsidiary to, lease, sell, transfer or otherwise
dispose of its Property to any other Person except for (a) sales of Investments
in the ordinary course of business, (b) the sale by the Borrower on
commercially reasonable terms of its Investment in Maui Jim, Inc., (c) the sale
by RLIC on commercially reasonable terms of its Investment in Taylor, Bean and
Whittaker, and (d) leases, sales, transfers or other dispositions of its
Property that, together with all other Property of the Borrower and its
Subsidiaries leased, sold or disposed of (other than sales permitted pursuant
to clauses (a), (b), (c) and (d) of this Section 6.13) as permitted by
this Section 6.13 since the date hereof do not constitute a Substantial
Portion.

 

6.14                           Investments
and Acquisitions.  The Borrower and
its Subsidiaries may make Investments (including, without limitation, loans and
advances to, and other Investments in, its Subsidiaries) and commitments
therefor, create Subsidiaries, become a partner in any partnership or joint
venture and make Acquisitions, subject to the following:

 

(a)                                  The
Borrower and its Subsidiaries may make Acquisitions so long as (i) such
transactions (A) consist exclusively of Acquisitions of businesses or entities
engaged in the specialty property and casualty business, (B) do not constitute
hostile takeovers and (C) do not require the payment of an aggregate
consideration in excess of $50,000,000 after the date of this Agreement, (ii)
the Borrower provides the Agent and each Lender with written notice of such
transactions at least 20 days prior to the effective date thereof, and (iii) no
Default or Unmatured Default has occurred and is continuing or would occur
after giving effect thereto.

 

(b)                                 The
Borrower and its Subsidiaries may make Investments in debt securities so long
as at least 90% of the principal amount outstanding of all such Investments  constitutes
an Investment in Investment Grade Obligations.

 

(c)                                  Any
Investments made by any Insurance Subsidiary must be of a quality acceptable to
the insurance commissioner in the respective domiciliary state of such
Insurance Subsidiary.

 

(d)                                 The
Borrower and its Subsidiaries may make loans to and extend guarantees of loans
made to employees of the Borrower and its Subsidiaries to purchase stock of the
Borrower pursuant to an employee stock purchase plan, so long as the aggregate
principal 

 

34

 

amount outstanding of all such
loans and guaranteed loans shall not exceed $20,000,000 in the aggregate.

 

(e)                                  The
Borrower and its Subsidiaries may purchase equity securities issued by other
Persons which are not Affiliates thereof and become a partner in a partnership
or joint venture or similar Person, in each case in transactions which do not
constitute Acquisitions; provided, that after giving effect to such
transactions, the aggregate fair market value of all equity securities so
purchased and the partnership, joint venture and other interests so obtained
shall not exceed at any time 20% of the aggregate statutory surplus of the
Insurance Subsidiaries at such time; provided, further, that
neither (i) interests in joint ventures which are limited liability companies
engaging in the same lines of business as the Insurance Subsidiaries nor (ii)
purchases of publicly traded equity securities which aggregate less than 5% of
the outstanding equity securities of a Person shall count toward such
limitation.

 

6.15                           Liens.  The Borrower will not, nor will it permit any
Subsidiary to, create, incur, or suffer to exist any
Lien in, of or on the Property of the Borrower or any of its Subsidiaries,
except:

 

(a)                                  Liens
for taxes, assessments or governmental charges or levies on its Property if the
same shall not at the time be delinquent or thereafter can be paid without
penalty, or are being contested in good faith and by appropriate proceedings
and for which adequate reserves in accordance with Agreement Accounting
Principles shall have been set aside on its books.

 

(b)                                 Liens
imposed by law, such as carriers’, warehousemen’s and mechanics’ liens and
other similar liens arising in the ordinary course of business which secure
payment of obligations not more than 60 days past due or which are being
contested in good faith by appropriate proceedings and for which adequate
reserves shall have been set aside on its books.

 

(c)                                  Liens
arising out of pledges or deposits under worker’s compensation laws,
unemployment insurance, pension plans, or other social security or retirement
benefits, or similar legislation.

 

(d)                                 Utility
easements, building restrictions and such other encumbrances or charges against
real property as are of a nature generally existing
with respect to properties of a similar character and which do not in any
material way affect the marketability of the same or interfere with the use
thereof in the business of the Borrower or its Subsidiaries.

 

(e)                                  [reserved].

 

(f)                                    purchase
money Liens upon or in real property or equipment acquired or held by the
Borrower or any Subsidiary in the ordinary course of business to secure the
purchase price of such property or equipment or to secure Indebtedness incurred
solely for the purpose of financing the acquisition, construction or
improvement of any such property or equipment to be subject to such Liens, or
Liens existing on any such property or equipment at the time of acquisition or
within 180 days following such acquisition (other than any such Liens created
in contemplation of such acquisition that do not secure the purchase price), or
extensions, renewals 

 

35

 

or replacements of any of the foregoing for the same
or a lesser amount; provided that no such Lien shall extend to or cover any
property other than the property or equipment being acquired, constructed or
improved, and no such extension, renewal or replacement shall extend to or
cover any property not theretofore subject to the Lien being extended, renewed
or replaced.

 

(g)                                 Liens
arising in connection with Capitalized Leases; provided that no such Lien shall
extend to or cover any assets other than the assets subject to such Capitalized
Leases.

 

(h)                                 Liens
securing Financial Hedges arising in the ordinary course of business.

 

(i)                                     Liens
on securities arising out of repurchase agreements permitted by the terms of
this Agreement.

 

(j)                                     Liens
consisting of deposits made by an Insurance Subsidiary with any Governmental
Authority or Liens or claims imposed or required by applicable insurance law or
regulation against the Property of any Insurance Subsidiary, in each case in
favor of policyholders of such Insurance Subsidiary or any Governmental
Authority and in the ordinary course of such Insurance Subsidiary’s business.

 

(k)                                  Liens
on Investments and cash balances of any Insurance Subsidiary (other than
capital stock or any Subsidiary) securing Obligations of the Borrower or any
Insurance Subsidiary in respect of (i) letters of credit obtained in the
ordinary course of business and/or (ii) trust arrangements formed in the
ordinary course of business for the benefit of cedents to secure reinsurance
recoverables owed to them by any Insurance Subsidiary.

 

(l)                                     The
replacement, extension or renewal of any Lien permitted by clause (e) or (g)
above upon or in the same property theretofore subject thereto or the
replacement, extension or renewal (without increase in the amount (other than
in respect of fees, expenses and premiums, if any) or change in any direct or
contingent obligor) of the Indebtedness secured thereby.

 

(m)                               Liens
securing obligations owed by any Subsidiary to the Borrower or any other
Subsidiary.

 

(n)                                 Liens
incurred in the ordinary course of business in favor of financial
intermediaries and clearing agents pending clearance of payments for
Investments or in the nature of set-off, banker’s lien or similar rights as to
deposit accounts or other funds.

 

(o)                                 Judgment
or judicial attachment Liens; provided, that the enforcement of such
Liens is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings.

 

(p)                                 Liens
securing up to an aggregate amount of $50,000,000 of obligations of the
Borrower or any Insurance Subsidiary arising out of catastrophe bond financing.

 

36

 

(q)                                 Liens
securing Indebtedness or obligations (in addition to that described in clauses
(a) through (p) above), in an aggregate amount not to exceed $30,000,000 at any
one time outstanding.

 

6.16                           Reinsurance.  After the date of this Agreement, the
Borrower will not permit RLIC or MHIC to modify its reinsurance arrangements in
a manner that could reasonably be expected to have a Material Adverse Effect.

 

6.17                           Affiliates.  The Borrower will not, and will not permit
any Subsidiary to, enter into any transaction (including, without limitation,
the purchase, exchange or sale of any Property or service) with, or make any
payment or transfer to, any Affiliate except (a) transactions between
Subsidiaries and/or payments by or transfers from one Subsidiary to another or
(b) in the ordinary course of business and pursuant to the reasonable
requirements of the Borrower’s or such Subsidiary’s business and upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary than the
Borrower or such Subsidiary would obtain in a comparable arms-length
transaction.

 

6.18                           Financial
Covenants.

 

6.18.1                  Interest
Coverage Ratio.  The Borrower will
not permit the Interest Coverage Ratio, determined as of the end of each of its
fiscal quarters for the then most-recently ended four fiscal quarters to be
less than 4.0 to 1.0.

 

6.18.2                  Leverage
Ratio.  The Borrower will not permit
the ratio, determined as of the end of each of its fiscal quarters, of (a)
Consolidated Indebtedness to (b) Consolidated Total Capitalization to be
greater than .30 to 1.0.

 

6.18.3                  Fixed
Charge Coverage Ratio.  The Borrower
will not permit the Fixed Charge Coverage Ratio, determined as of the end of
each of its fiscal quarters for the then most-recently ended four fiscal
quarters, to be less than 1.5 to 1.0.

 

6.18.4                  Risk-Based
Capital.  At all times after March
31, 2005, cause each of RLIC and MHIC to maintain a ratio of (a) Total Adjusted
Capital (as defined in the Risk-Based Capital Act or in the rules and
procedures prescribed from time to time by the NAIC with respect thereto) to
(b) the Company Action Level RBC (as defined in the Risk-Based Capital Act or
in the rules and procedures prescribed from time to time by the NAIC with
respect thereto) of at least one hundred seventy five percent (175%).

 

6.19                           LaSalle
Credit Facility Prepayments. 
The Borrower shall not (a) pay any amount under the LaSalle Credit
Facility if, after giving effect thereto, and to any commitment payment made
hereunder, the principal amount outstanding under the LaSalle Credit Facility
would be less than the aggregate principal amount of the outstanding Advances
hereunder or (b) enter into any transaction that has a substantially similar
effect.

 

37

 

ARTICLE
VII

 

DEFAULTS

 

The occurrence of any one or more of the following
events shall constitute a Default:

 

7.1                                 Any
representation or warranty made or deemed made by or on behalf of the Borrower
or any of its Subsidiaries to the Lenders or the Agent under or in connection
with this Agreement, any Loan, or any certificate or information delivered in
connection with this Agreement or any other Loan Document shall be materially
false on the date as of which made.

 

7.2                                 Nonpayment
of principal of any Loan when due, or nonpayment of interest upon any Loan or
of any commitment fee or other obligations under any of the Loan Documents
within five days after the same becomes due.

 

7.3                                 The
breach by the Borrower of any of the terms or provisions of Sections 6.3,
6.4(a), or 6.10 through 6.19.

 

7.4                                 The
breach by the Borrower (other than a breach which constitutes a Default under
another Section of this Article VII) of any of the terms or provisions
of this Agreement which is not remedied within twenty (20) Business Days after
written notice from the Agent or any Lender.

 

7.5                                 Failure
of the Borrower or any of its Subsidiaries to pay when due any Material
Indebtedness; or the default by the Borrower or any of its Subsidiaries in the
performance (beyond the applicable grace period with respect thereto, if any) of
any term, provision or condition contained in any Material Indebtedness
Agreement, or any other event shall occur or condition exist, the effect of
which default, event or condition is to cause, or to permit the holder(s) of
such Material Indebtedness or the lender(s) under any Material Indebtedness
Agreement to cause, such Material Indebtedness to become due prior to its
stated maturity or any commitment to lend under any Material Indebtedness
Agreement to be terminated prior to its stated expiration date; or any Material
Indebtedness of the Borrower or any of its Subsidiaries shall be declared to be
due and payable or required to be prepaid or repurchased (other than by a
regularly scheduled payment) prior to the stated maturity thereof; or the
Borrower or any of its Subsidiaries shall not pay, or admit in writing its
inability to pay, its debts generally as they become due.

 

7.6                                 The
Borrower or any of its Subsidiaries shall (a) have an order for relief entered
with respect to it under the Federal bankruptcy laws as now or hereafter in
effect, (b) make an assignment for the benefit of creditors, (c) apply for,
seek, consent to, or acquiesce in, the appointment of a receiver, custodian,
trustee, examiner, liquidator or similar official for it or any Substantial
Portion of its Property, (d) institute any proceeding seeking an order for
relief under the Federal bankruptcy laws as now or hereafter in effect or
seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
winding up, liquidation, reorganization, arrangement, adjustment,
rehabilitation or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or fail to file
an answer or other pleading denying the material allegations of any such
proceeding filed against it, (e) take any corporate or 

 

38

 

partnership action to authorize
or effect any of the foregoing actions set forth in this Section 7.6 or
(f) fail to contest in good faith any appointment or proceeding described in Section
7.7.

 

7.7                                 Without
the application, approval or consent of the Borrower or any of its
Subsidiaries, a receiver, trustee, examiner, liquidator or similar official
shall be appointed for the Borrower or any of its Subsidiaries or any
Substantial Portion of its Property, or a proceeding described in Section
7.6(d) shall be instituted against the Borrower or any of its Subsidiaries
and such appointment continues undischarged or such proceeding continues
undismissed or unstayed for a period of 60 consecutive days.

 

7.8                                 Any
court, government or governmental agency shall condemn, seize or otherwise
appropriate, or take custody or control of, all or any portion of the Property
of the Borrower and its Subsidiaries which, when taken together with all other
Property of the Borrower and its Subsidiaries so condemned, seized,
appropriated, or taken custody or control of, during the twelve-month period
ending with the month in which any such action occurs, constitutes a Substantial
Portion.

 

7.9                                 The
Borrower or any of its Subsidiaries shall fail within 30 days to pay (or make
arrangements to pay), bond or otherwise discharge one or more judgments which
are not stayed on appeal or otherwise being appropriately contested in good
faith and which are (a) judgments or orders for the payment of money in excess
of $10,000,000 (or the equivalent thereof in currencies other than U.S.
Dollars) in the aggregate, or (b) nonmonetary judgments or orders which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.

 

7.10                           The
Unfunded Liabilities of all Single Employer Plans shall exceed in the aggregate
$1,000,000 or any Reportable Event shall occur in connection with any Plan.

 

7.11                           Any
Change in Control shall occur.

 

7.12                           Any
material License of RLIC or MHIC (a) shall be revoked by the Governmental
Authority which issued a material License, or any action (administrative or
judicial) to revoke a material License shall have been commenced against RLIC
or MHIC and shall not have been dismissed within 180 days after the
commencement thereof, (b) shall be suspended by such Governmental Authority for
a period in excess of thirty (30) days or (c) shall not be reissued or renewed
by such Governmental Authority upon the expiration thereof following
application for such reissuance or renewal by RLIC or MHIC, as applicable.

 

7.13                           The
Insurance Subsidiaries shall be the subject of one or more final non-appealable
orders imposing a fine in an amount in excess of $10,000,000 in any single
instance or other such orders imposing fines in excess of $35,000,000 in the
aggregate after the date of this Agreement by or at the request of one or more
state insurance regulatory agencies as a result of the violation by such Insurance
Subsidiaries of such states’ applicable insurance laws or the regulations
promulgated in connection therewith.

 

7.14                           Any
Insurance Subsidiary shall become subject to any conservation, rehabilitation
or liquidation order, directive or mandate issued by any Governmental Authority
or any 

 

39

 

Insurance Subsidiary shall become subject to any other
directive or mandate issued by any Governmental Authority which could
reasonably be expected to have a Material Adverse Effect and which is not
stayed within ten (10) days.

 

ARTICLE
VIII

 

ACCELERATION, WAIVERS, AMENDMENTS
AND REMEDIES

 

8.1                                 Acceleration.  If any Default described in Section 7.6
or 7.7 occurs with respect to the Borrower, the obligations of the Lenders
to make Loans hereunder shall automatically terminate and the Obligations shall
immediately become due and payable without any election or action on the part
of the Agent or any Lender.  If any other
Default occurs, the Required Lenders (or the Agent with the consent of the
Required Lenders) may terminate or suspend the obligations of the Lenders to
make Loans hereunder, or declare the Obligations to be due and payable, or
both, whereupon the Obligations shall become immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which the Borrower
hereby expressly waives.

 

If, within 30 days after
acceleration of the maturity of the Obligations or termination of the
obligations of the Lenders to make Loans hereunder as a result of any Default
(other than any Default as described in Section 7.6 or 7.7 with
respect to the Borrower) and before any judgment or decree for the payment of
the Obligations due shall have been obtained or entered, the Required Lenders
(in their sole discretion) shall so direct, the Agent shall, by notice to the
Borrower, rescind and annul such acceleration and/or termination.

 

8.2                                 Amendments.  Subject to the provisions of this Section
8.2, the Required Lenders (or the Agent with the consent in writing of the
Required Lenders) and the Borrower may enter into agreements supplemental
hereto for the purpose of adding or modifying any provisions to the Loan
Documents or changing in any manner the rights of the Lenders or the Borrower
hereunder or waiving any Default hereunder; provided, however,
that no such supplemental agreement shall, without the consent of all of the
Lenders adversely affected thereby (or in the case of Section 8.2(b), (d)
and (e), all of the Lenders):

 

(a)                                  Extend
the final maturity of any Loan or forgive all or any portion of the principal
amount thereof, or reduce the rate or extend the time of payment of interest or
fees thereon.

 

(b)                                 Reduce
the percentage specified in the definition of Required Lenders.

 

(c)                                  Extend
the Facility Termination Date, or reduce the amount or extend the payment date
for, the mandatory payments required under Section 2.2, or increase the
amount of the Aggregate Commitment or of the Commitment of any Lender
hereunder.

 

(d)                                 Permit
the Borrower to assign its rights under this Agreement.

 

(e)                                  Amend
this Section 8.2 or Section 10.1 or 10.2.

 

40

 

No amendment of any
provision of this Agreement relating to the Agent shall be effective without
the written consent of the Agent.  The
Agent may waive payment of the fee required under Section 12.3.2
without obtaining the consent of any other party to this Agreement.

 

8.3                                 Preservation
of Rights.  No delay or omission of
the Lenders or the Agent to exercise any right under the Loan Documents shall
impair such right or be construed to be a waiver of any Default or an
acquiescence therein, and the making of a Loan notwithstanding the existence of
a Default or the inability of the Borrower to satisfy the conditions precedent
to such Loan shall not constitute any waiver or acquiescence.  Any single or partial exercise of any such
right shall not preclude other or further exercise thereof or the exercise of
any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to Section 8.2,
and then only to the extent in such writing specifically set forth.  All remedies contained in the Loan Documents
or by law afforded shall be cumulative and all shall be available to the Agent
and the Lenders until the Obligations have been paid in full.

 

ARTICLE IX

GENERAL PROVISIONS

 

9.1                                 Survival
of Representations.  All
representations and warranties of the Borrower contained in this Agreement
shall survive the making of the Loans herein contemplated.

 

9.2                                 Governmental
Regulation.  Anything contained in
this Agreement to the contrary notwithstanding, no Lender shall be obligated to
extend credit to the Borrower in violation of any limitation or prohibition
provided by any applicable statute or regulation.

 

9.3                                 Headings.  Section headings in the Loan Documents
are for convenience of reference only, and shall not govern the interpretation
of any of the provisions of the Loan Documents.

 

9.4                                 Entire
Agreement.  The Loan Documents embody
the entire agreement and understanding among the Borrower, the Agent and the
Lenders and supersede all prior agreements and understandings among the
Borrower, the Agent and the Lenders relating to the subject matter thereof
other than those contained in the fee letter described in Section 10.13
which shall survive and remain in full force and effect during the term of this
Agreement.

 

9.5                                 Several
Obligations; Benefits of this Agreement. 
The respective obligations of the Lenders hereunder are several and not
joint and no Lender shall be the partner or agent of any other (except to the
extent to which the Agent is authorized to act as such).  The failure of any Lender to perform any of
its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder.  This Agreement
shall not be construed so as to confer any right or benefit upon any Person
other than the parties to this Agreement and their respective successors and
assigns, provided, however, that the parties hereto expressly
agree that the Arranger shall enjoy the benefits of the provisions of Sections
9.6, 9.10 and 10.11 to the extent specifically set 

 

41

 

forth
therein and shall have the right to enforce such provisions on its own behalf
and in its own name to the same extent as if it were a party to this Agreement.

 

9.6                                 Expenses;
Indemnification.  (a) The
Borrower shall reimburse the Agent and the Arranger for any costs, internal
charges and out-of-pocket expenses (including attorneys’ fees and time charges
of attorneys for the Agent, which attorneys may be employees of the Agent) paid
or incurred by the Agent or the Arranger in connection with the preparation,
negotiation, execution, delivery, review, amendment, modification, and
administration of the Loan Documents. 
The Borrower also agrees to reimburse the Agent, the Arranger and the
Lenders for any costs, internal charges and out-of-pocket expenses (including
attorneys’ fees and time charges of attorneys for the Agent, the Arranger and
the Lenders, which attorneys may be employees of the Agent, the Arranger or the
Lenders) paid or incurred by the Agent, the Arranger or any Lender in
connection with the collection and enforcement of the Loan Documents.

 

(b)                                 The
Borrower hereby further agrees to indemnify the Agent, the Arranger, each
Lender, their respective affiliates, and each of their directors, officers and
employees against all losses, claims, damages, penalties, judgments,
liabilities and expenses (including, without limitation, all expenses of
litigation or preparation therefor whether or not the Agent, the Arranger, any
Lender or any affiliate is a party thereto) which any of them may pay or incur
arising out of or relating to this Agreement, the other Loan Documents, the
transactions contemplated hereby or the direct or indirect application or
proposed application of the proceeds of any Loan hereunder except to the extent
that they are determined by a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of the party seeking indemnification.   The obligations of the Borrower under this Section 9.6
shall survive the termination of this Agreement.

 

9.7                                 Numbers
of Documents.  All statements,
notices, closing documents, and requests hereunder shall be furnished to the
Agent with sufficient counterparts so that the Agent may furnish one to each of
the Lenders.

 

9.8                                 Accounting.  Except as provided to the contrary herein,
all accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles or SAP, as applicable except that any calculation or determination
which is to be made on a consolidated basis shall be made for the Borrower and
all its Subsidiaries, including those Subsidiaries, if any, which are
unconsolidated on the Borrower’s audited financial statements, and provided
that, if the Borrower notifies the Agent that the Borrower wishes to amend any
provision hereof to eliminate the effect of any change in GAAP or SAP (or if
the Agent notifies the Borrower that the Required Lenders wish to amend any
provision hereof for such purpose), then such provision shall be applied on the
basis of GAAP or SAP in effect immediately before the relevant change in GAAP
or SAP became effective, until either such notice is withdrawn or such
provision is amended in a manner satisfactory to the Borrower and the Required
Lenders.

 

9.9                                 Severability
of Provisions.  Any provision in any
Loan Document that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or
invalid without affecting the remaining provisions in that 

 

42

 

jurisdiction
or the operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.

 

9.10                           Nonliability
of Lenders.  The relationship between
the Borrower on the one hand and the Lenders and the Agent on the other hand
shall be solely that of borrower and lender. 
Neither the Agent, the Arranger nor any Lender
shall have any fiduciary responsibilities to the Borrower.  Neither the Agent, the
Arranger nor any Lender undertakes any responsibility to the Borrower to
review or inform the Borrower of any matter in connection with any phase of the
Borrower’s business or operations.  The
Borrower agrees that neither the Agent, the Arranger nor any Lender shall have
liability to the Borrower (whether sounding in tort, contract or otherwise) for
losses suffered by the Borrower in connection with, arising out of, or in any
way related to, the transactions contemplated and the relationship established
by the Loan Documents, or any act, omission or event occurring in connection
therewith, unless it is determined in a final non-appealable judgment by a
court of competent jurisdiction that such losses resulted from the gross
negligence or willful misconduct of the party from which recovery is
sought.  Neither the Agent, the Arranger
nor any Lender shall have any liability with respect to, and the Borrower
hereby waives, releases and agrees not to sue for, any
special, indirect, consequential or punitive damages suffered by the Borrower
in connection with, arising out of, or in any way related to the Loan Documents
or the transactions contemplated thereby.

 

9.11                           Confidentiality.  Each Lender agrees to hold any confidential
information which it may receive from the Borrower pursuant to this Agreement
in confidence, except for disclosure (i) to its Affiliates and to other
Lenders and their respective Affiliates, (ii) to legal counsel,
accountants, and other professional advisors to such Lender or to a Transferee,
(iii) to regulatory officials, (iv) to any Person as requested
pursuant to or as required by law, regulation, or legal process, (v) to
any Person in connection with any legal proceeding to which such Lender is a
party, (vi) to such Lender’s direct or indirect contractual counterparties
in swap agreements or to legal counsel, accountants and other professional
advisors to such counterparties, (vii) permitted by Section 12.4
and (viii) to rating agencies if requested or required by such agencies in
connection with a rating relating to the Advances hereunder.

 

9.12                           Nonreliance.  Each Lender hereby represents that it is not
relying on or looking to any margin stock (as defined in Regulation U of the
Board of Governors of the Federal Reserve System) for the repayment of the
Loans provided for herein.

 

9.13                           Disclosure.  The Borrower and each Lender hereby
acknowledge and agree that JPMCB and/or its Affiliates from time to time may
hold investments in, make other loans to or have other relationships with the
Borrower and its Affiliates.

 

9.14                           USA
Patriot Act.  Each
Lender that is subject to the requirements of the USA Patriot Act (Title III of
Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”)
hereby notifies the Borrower that pursuant to the requirements of the Act, it
is required to obtain, verify and record certain information and documentation
that identifies the Borrower, which information includes the name and address
of the Borrower and such other information that will allow such Lender to
identify the Borrower in accordance with the Act.

 

43

 

9.15                           Amendment
and Restatement.

 

(a)                                  On
the Restatement Date, the Existing Agreement shall be amended, restated and
superseded in its entirety.  The parties
hereto acknowledge and agree that (a) this Agreement, the Notes delivered
pursuant to Section 2.13 (the “Restated Notes”) and the
other Loan Documents executed and delivered in connection herewith do not
constitute a novation, payment and reborrowing, or termination of the “Obligations”
(as defined in the Existing Agreement) under the Existing Agreement as in
effect prior to the Restatement Date; (b) such “Obligations” are in all
respects continuing with only the terms thereof being modified as provided in
this Agreement; and (c) upon the effectiveness of this Agreement all loans
outstanding under the Existing Agreement immediately before the effectiveness
of this Agreement will be part of the Loans hereunder on the terms and
conditions set forth in this Agreement.

 

(b)                                 Notwithstanding
the modifications effected by this Agreement of the representations, warranties
and covenants of Borrower contained in the Existing Agreement, the Borrower
acknowledges and agrees that any choses
in action or other rights created in favor of any Lender and its
respective successors arising out of the representations and warranties of the
Borrower contained in or delivered (including representations and warranties
delivered in connection with the making of the Loans or other extensions of
credit thereunder) in connection with the Existing Agreement, shall survive the
execution and delivery of this Agreement; provided, however, that it is
understood and agreed that the Borrower’s monetary obligations under the
Existing Agreement in respect of the loans thereunder  (including all “Obligations”, as defined
thereunder) are evidenced by this Agreement as provided in Article I
hereof.

 

(c)                                  All
indemnification obligations of the Borrower pursuant to the Existing Agreement
shall survive the amendment and restatement of the Existing Agreement pursuant
to this Agreement.

 

(d)                                 On
and after the Restatement Date, (i) each reference in the Loan Documents
to the “Credit Agreement”, “thereunder”, “thereof” or similar words referring
to the Credit Agreement shall mean and be a reference to this Agreement and (ii) each
reference in the Loan Documents to a “Note” shall mean and be a Note as defined
in this Agreement.

 

ARTICLE X

THE AGENT

 

10.1                           Appointment;
Nature of Relationship.  JPMCB is
hereby appointed by each of the Lenders as its contractual representative
(herein referred to as the “Agent”) hereunder and under each other Loan
Document, and each of the Lenders irrevocably authorizes the Agent to act as
the contractual representative of such Lender with the rights and duties
expressly set forth herein and in the other Loan Documents.  The Agent agrees to act as such contractual
representative upon the express conditions contained in this Article X.  Notwithstanding the use of the defined term “Agent,”
it is expressly understood and agreed that the Agent shall not have any
fiduciary responsibilities to any Lender by reason of this Agreement or any
other Loan Document and that 

 

44

 

the
Agent is merely acting as the contractual representative of the Lenders with
only those duties as are expressly set forth in this Agreement and the other
Loan Documents.  In its capacity as the
Lenders’ contractual representative, the Agent (i) does not hereby assume
any fiduciary duties to any of the Lenders, (ii) is a “representative” of
the Lenders within the meaning of the term “secured party” as defined in the
Illinois Uniform Commercial Code and (iii) is acting as an independent
contractor, the rights and duties of which are limited to those expressly set
forth in this Agreement and the other Loan Documents.  Each of the Lenders hereby agrees to assert
no claim against the Agent on any agency theory or any other theory of
liability for breach of fiduciary duty, all of which claims each Lender hereby
waives.

 

10.2                           Powers.  The Agent shall have and may exercise such
powers under the Loan Documents as are specifically delegated to the Agent by
the terms of each thereof, together with such powers as are reasonably
incidental thereto.  The Agent shall have
no implied duties to the Lenders, or any obligation to the Lenders to take any
action thereunder except any action specifically provided by the Loan Documents
to be taken by the Agent.

 

10.3                           General
Immunity.  Neither the Agent nor any
of its directors, officers, agents or employees shall be liable to the Borrower,
the Lenders or any Lender for any action taken or omitted to be taken by it or
them hereunder or under any other Loan Document or in connection herewith or
therewith except to the extent such action or inaction is determined in a final
non-appealable judgment by a court of competent jurisdiction to have arisen
from the gross negligence or willful misconduct of such Person.

 

10.4                           No
Responsibility for Loans, Recitals, etc. 
Neither the Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into,
or verify (a) any statement, warranty or representation made in connection
with any Loan Document or any borrowing hereunder; (b) the performance or
observance of any of the covenants or agreements of any obligor under any Loan
Document, including, without limitation, any agreement by an obligor to furnish
information directly to each Lender; (c) the satisfaction of any condition
specified in Article IV, except receipt of items required to be delivered
solely to the Agent; (d) the existence or possible existence of any
Default or Unmatured Default; (e) the validity, enforceability,
effectiveness, sufficiency or genuineness of any Loan Document or any other
instrument or writing furnished in connection therewith; (f) the value,
sufficiency, creation, perfection or priority of any Lien in any collateral
security; or (g) the financial condition of the Borrower or any guarantor
of any of the Obligations or of any of the Borrower’s or any such guarantor’s
respective Subsidiaries.  Except as
expressly set forth herein, the Agent shall not have any duty to disclose, and
shall not be liable for the failure to disclose, any information relating to
the Borrower or any of its Subsidiaries that is communicated to or obtained by
the bank serving as Agent or any of its Affiliates in any capacity.

 

10.5                           Action
on Instructions of Lenders.  The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder and under any other Loan Document in accordance with written
instructions signed by the Required Lenders, and such instructions and any
action taken or failure to act pursuant thereto shall be binding on all of the
Lenders.  The Lenders hereby acknowledge
that the Agent shall be under no duty to take any discretionary action
permitted to be taken by it pursuant to the provisions of this Agreement or any
other Loan Document unless it shall be requested in writing to do so by the
Required Lenders.  The Agent 

 

45

 

shall be fully justified in failing or refusing to
take any action hereunder and under any other Loan Document unless it shall
first be indemnified to its satisfaction by the Lenders pro rata against any
and all liability, cost and expense that it may incur by reason of taking or
continuing to take any such action.

 

10.6                           Employment
of Agents and Counsel.  The Agent may
execute any of its duties as Agent hereunder and under any other Loan Document
by or through employees, agents, and attorneys-in-fact and shall not be
answerable to the Lenders, except as to money or securities received by it or
its authorized agents, for the default or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.  The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and the
Lenders and all matters pertaining to the Agent’s duties hereunder and under
any other Loan Document.

 

10.7                           Reliance
on Documents; Counsel.  The Agent shall
be entitled to rely upon any Note, notice, consent, certificate, affidavit,
letter, telegram, statement, paper or document believed by it to be genuine and
correct and to have been signed or sent by the proper person or persons, and,
in respect to legal matters, upon the opinion of counsel selected by the Agent,
which counsel may be employees of the Agent.

 

10.8                           Agent’s
Reimbursement and Indemnification. 
The Lenders agree to reimburse and indemnify the Agent ratably in
proportion to their respective Commitments (or, if the Commitments have been
terminated, in proportion to their Commitments immediately prior to such
termination) (i) for any amounts not reimbursed by the Borrower for which
the Agent is entitled to reimbursement by the Borrower under the Loan
Documents, (ii) for any other expenses incurred by the Agent on behalf of
the Lenders, in connection with the preparation, execution, delivery,
administration and enforcement of the Loan Documents (including, without
limitation, for any expenses incurred by the Agent in connection with any
dispute between the Agent and any Lender or between two or more of the Lenders)
and (iii) for any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind and
nature whatsoever which may be imposed on, incurred by or asserted against the
Agent in any way relating to or arising out of the Loan Documents or any other
document delivered in connection therewith or the transactions contemplated
thereby (including, without limitation, for any such amounts incurred by or
asserted against the Agent in connection with any dispute between the Agent and
any Lender or between two or more of the Lenders), or the enforcement of any of
the terms of the Loan Documents or of any such other documents, provided that (i) no Lender shall be
liable for any of the foregoing to the extent any of the foregoing is found in
a final non-appealable judgment by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of the Agent and (ii) any
indemnification required pursuant to Section 3.5(vii) shall,
notwithstanding the provisions of this Section 10.8, be paid by the
relevant Lender in accordance with the provisions thereof.  The obligations of the Lenders under this Section 10.8
shall survive payment of the Obligations and termination of this Agreement.

 

10.9                           Notice
of Default.  The Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or
Unmatured Default hereunder unless the Agent has received written notice from a
Lender or the Borrower referring to this Agreement describing such 

 

46

 

Default or Unmatured
Default and stating that such notice is a “notice of default”.  In the event that the Agent receives such a
notice, the Agent shall give prompt notice thereof to the Lenders.

 

10.10                     Rights
as a Lender.  In the event the Agent
is a Lender, the Agent shall have the same rights and powers hereunder and
under any other Loan Document with respect to its Commitment and its Loans as
any Lender and may exercise the same as though it were not the Agent, and the
term “Lender” or “Lenders” shall, at any time when the Agent is a Lender,
unless the context otherwise indicates, include the Agent in its individual
capacity.  The Agent and its Affiliates
may accept deposits from, lend money to, and generally engage in any kind of
trust, debt, equity or other transaction, in addition to those contemplated by
this Agreement or any other Loan Document, with the Borrower or any of its
Subsidiaries in which the Borrower or such Subsidiary is not restricted hereby
from engaging with any other Person.

 

10.11                     Lender
Credit Decision.  Each Lender
acknowledges that it has, independently and without reliance upon the Agent,
the Arranger or any other Lender and based on the financial statements prepared
by the Borrower and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement and the other Loan Documents. 
Each Lender also acknowledges that it will, independently and without
reliance upon the Agent, the Arranger or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents.

 

10.12                     Successor
Agent.  The Agent may resign at any
time by giving written notice thereof to the Lenders and the Borrower, such
resignation to be effective upon the appointment of a successor Agent or, if no
successor Agent has been appointed, forty-five days after the retiring Agent
gives notice of its intention to resign. 
Upon any such resignation, the Required Lenders shall have the right to
appoint, on behalf of the Borrower and the Lenders, a successor Agent.  If no successor Agent shall have been so
appointed by the Required Lenders within thirty days after the resigning Agent’s
giving notice of its intention to resign, then the resigning Agent may appoint,
on behalf of the Borrower and the Lenders, a successor Agent.  Notwithstanding the previous sentence, the
Agent may at any time without the consent of the Borrower or any Lender,
appoint any of its Affiliates which is a commercial
bank as a successor Agent hereunder.  If
the Agent has resigned and no successor Agent has been appointed, the Lenders
may perform all the duties of the Agent hereunder and the Borrower shall make
all payments in respect of the Obligations to the applicable Lender and for all
other purposes shall deal directly with the Lenders.  No successor Agent shall be deemed to be
appointed hereunder until such successor Agent has accepted the appointment.  Any such successor Agent shall be a
commercial bank having capital and retained earnings of at least
$100,000,000.  Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the resigning Agent.  Upon
the effectiveness of the resignation of the Agent, the resigning Agent shall be
discharged from its duties and obligations hereunder and under the Loan
Documents.  After the effectiveness of
the resignation or removal of an Agent, the provisions of this Article X
shall continue in effect for the benefit of such Agent in respect of any
actions taken or omitted to be taken by it while it was acting as the Agent
hereunder and under the other Loan Documents. 
In the event that there is a successor to the Agent by merger, or the
Agent assigns its duties and 

 

47

 

obligations
to an Affiliate pursuant to this Section 10.12, then the term “Prime
Rate” as used in this Agreement shall mean the prime rate, base rate or other
analogous rate of the new Agent.

 

10.13                     Delegation
to Affiliates.  The Borrower and the
Lenders agree that the Agent may delegate any of its duties under this
Agreement to any of its Affiliates.  Any
such Affiliate (and such Affiliate’s directors, officers, agents and employees)
which performs duties in connection with this Agreement shall be entitled to
the same benefits of the indemnification, waiver and other protective
provisions to which the Agent is entitled under Articles IX and X.

 

ARTICLE XI

SETOFF; RATABLE PAYMENTS

 

11.1                           Setoff.  In addition to, and without limitation of,
any rights of the Lenders under applicable law, if the Borrower becomes
insolvent, however evidenced, or any Default occurs, any and all deposits
(including all account balances, whether provisional or final and whether or
not collected or available) and any other Indebtedness at any time held or
owing by any Lender or any Affiliate of any Lender to or for the credit or
account of the Borrower may be offset and applied toward the payment of the
Obligations owing to such Lender, whether or not the Obligations, or any part
thereof, shall then be due.

 

11.2                           Ratable
Payments.  If any Lender, whether by
setoff or otherwise, has payment made to it upon its Loans (other than payments
received pursuant to Section 3.1, 3.2, 3.4 or 3.5)
in a greater proportion than that received by any other Lender, such Lender
agrees, promptly upon demand, to purchase a portion of the Loans held by the
other Lenders so that after such purchase each Lender will hold its ratable
proportion of Loans.  If any Lender,
whether in connection with setoff or amounts which might be subject to setoff
or otherwise, receives collateral or other protection for its Obligations or such
amounts which may be subject to setoff, such Lender agrees, promptly upon
demand, to take such action necessary such that all Lenders share in the
benefits of such collateral ratably in proportion to their Loans.  In case any such payment is disturbed by
legal process, or otherwise, appropriate further adjustments shall be made.

 

ARTICLE XII

BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

 

12.1                           Successors
and Assigns.  The terms and
provisions of the Loan Documents shall be binding upon and inure to the benefit
of the Borrower and the Lenders and their respective successors and assigns
permitted hereby, except that (i) the Borrower shall not have the right to
assign its rights or obligations under the Loan Documents without the prior
written consent of each Lender, (ii) any assignment by any Lender must be
made in compliance with Section 12.3, and (iii) any transfer
by Participation must be made in compliance with Section 12.2.  Any attempted assignment or transfer by any
party not made in compliance with this Section 12.1 shall be null
and void, unless such attempted assignment or transfer is treated as a
participation 

 

48

 

in
accordance with Section 12.3.2. 
The parties to this Agreement acknowledge that clause (ii) of this Section 12.1
relates only to absolute assignments and this Section 12.1 does not
prohibit assignments creating security interests, including, without
limitation, (x) any pledge or assignment by any Lender of all or any portion of
its rights under this Agreement and any Note to a Federal Reserve Bank or (y)
in the case of a Lender which is a fund, any pledge or assignment of all or any
portion of its rights under this Agreement and any Note to its trustee in
support of its obligations to its trustee; provided, however,
that no such pledge or assignment creating a security interest shall release
the transferor Lender from its obligations hereunder unless and until the
parties thereto have complied with the provisions of Section 12.3.  The Agent may treat the Person which made any
Loan or which holds any Note as the owner thereof for all purposes hereof
unless and until such Person complies with Section 12.3; provided,
however, that the Agent may in its discretion (but shall not be required
to) follow instructions from the Person which made any Loan or which holds any
Note to direct payments relating to such Loan or Note to another Person.  Any assignee of the rights to any Loan or any
Note agrees by acceptance of such assignment to be bound by all the terms and
provisions of the Loan Documents.  Any
request, authority or consent of any Person, who at the time of making such
request or giving such authority or consent is the owner of the rights to any Loan
(whether or not a Note has been issued in evidence thereof), shall be
conclusive and binding on any subsequent holder or assignee of the rights to
such Loan.

 

12.2                           Participations.

 

12.2.1                  Permitted Participants; Effect.  Any Lender may at any time sell to one or
more banks or other entities (“Participants”) participating interests in any
Loan owing to such Lender, any Note held by such Lender, any Commitment of such
Lender or any other interest of such Lender under the Loan Documents.  In the event of any such sale by a Lender of
participating interests to a Participant, such Lender’s obligations under the
Loan Documents shall remain unchanged, such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, such Lender shall remain the owner of its Loans and the holder of
any Note issued to it in evidence thereof for all purposes under the Loan
Documents, all amounts payable by the Borrower under this Agreement shall be
determined as if such Lender had not sold such participating interests, and the
Borrower and the Agent shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under the Loan
Documents.

 

12.2.2                  Voting Rights.  Each Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment, modification or
waiver of any provision of the Loan Documents other than any amendment,
modification or waiver with respect to any Loan or Commitment in which such
Participant has an interest which would require consent of all of the Lenders
pursuant to the terms of Section 8.2 or of any other Loan Document.

 

12.2.3                  Benefit of Certain Provisions.  The Borrower agrees that each Participant
shall be deemed to have the right of setoff provided in Section 11.1
in respect of its participating interest in amounts owing under the Loan
Documents to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under the 

 

49

 

Loan Documents, provided that each Lender shall retain the right
of setoff provided in Section 11.1 with respect to the amount of
participating interests sold to each Participant.  The Lenders agree to share with each
Participant, and each Participant, by exercising the right of setoff provided
in Section 11.1, agrees to share with each Lender, any amount
received pursuant to the exercise of its right of setoff, such amounts to be
shared in accordance with Section 11.2 as if each Participant were
a Lender.  The Borrower further agrees
that each Participant shall be entitled to the benefits of Sections 3.1,
3.2, 3.4 and 3.5 to the same extent as if it were a Lender
and had acquired its interest by assignment pursuant to Section 12.3,
provided that (i) a Participant shall not be entitled to receive
any greater payment under Section 3.1, 3.2 or 3.5
than the Lender who sold the participating interest to such Participant would
have received had it retained such interest for its own account, unless the
sale of such interest to such Participant is made with the prior written
consent of the Borrower, and (ii) any Participant not incorporated under
the laws of the United States of America or any State thereof agrees to comply
with the provisions of Section 3.5 to the same extent as if it were
a Lender.

 

12.3                           Assignments.

 

12.3.1                  Permitted Assignments.  Any Lender may at any time assign to one or
more banks or other entities (“Purchasers”) all or any part of its rights and
obligations under the Loan Documents. 
Such assignment shall be substantially in the form of Exhibit B
or in such other form as may be agreed to by the parties thereto.  Each such assignment with respect to a
Purchaser which is not a Lender or an Affiliate of a Lender or an Approved Fund
shall either be in an amount equal to the entire applicable Commitment and
Loans of the assigning Lender  (unless
each of the Borrower and the Agent otherwise consents) be in an aggregate
amount not less than $5,000,000.  The
amount of the assignment shall be based on the Commitment or outstanding Loans
(if the Commitment has been terminated) subject to the assignment, determined
as of the date of such assignment or as of the “Trade Date,” if the “Trade Date”
is specified in the assignment.

 

12.3.2                  Consents.  The consent of the Borrower shall be required
prior to an assignment becoming effective unless the Purchaser is a Lender, an
Affiliate of a Lender or an Approved Fund, provided
that the consent of the Borrower shall not be required if a Default has
occurred and is continuing.  The consent
of the Agent shall be required prior to an assignment becoming effective unless
the Purchaser is a Lender.  The consent
of the Issuing Bank shall be required prior to an assignment of a Commitment
becoming effective.  Any consent required
under this Section 12.3.2 shall not be unreasonably withheld or
delayed.

 

12.3.3                  Effect; Effective Date.  Upon (i) delivery to the Agent of an
assignment, together with any consents required by Sections 12.3.1 and 12.3.2,
and (ii) payment of a $4,000 fee to the Agent for processing such
assignment (unless such fee is waived by the Agent), such assignment shall
become effective on the effective date specified in such assignment.  The assignment shall contain a representation
by the Purchaser to the effect that none of the consideration used to make the
purchase of the Commitment and Loans under the applicable assignment agreement
constitutes “plan assets” as defined under ERISA and that the rights and
interests of the Purchaser in and under the Loan 

 

50

 

Documents will not be “plan assets” under ERISA.  On and after the effective date of such
assignment, such Purchaser shall for all purposes be a Lender party to this
Agreement and any other Loan Document executed by or on behalf of the Lenders
and shall have all the rights and obligations of a Lender under the Loan
Documents, to the same extent as if it were an original party thereto, and the
transferor Lender shall be released with respect to the Commitment and Loans assigned
to such Purchaser without any further consent or action by the Borrower, the
Lenders or the Agent.  In the case of an
assignment covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a Lender hereunder but shall
continue to be entitled to the benefits of, and subject to, those provisions of
this Agreement and the other Loan Documents which survive payment of the
Obligations and termination of the applicable agreement.  Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this Section 12.3
shall be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with Section 12.2.  Upon the consummation of any assignment to a
Purchaser pursuant to this Section 12.3.3, the transferor Lender,
the Agent and the Borrower shall, if the transferor Lender or the Purchaser
desires that its Loans be evidenced by Notes, make appropriate arrangements so
that new Notes or, as appropriate, replacement Notes are issued to such
transferor Lender and new Notes or, as appropriate, replacement Notes, are
issued to such Purchaser, in each case in principal amounts reflecting their
respective Commitments, as adjusted pursuant to such assignment.

 

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

 

12.4                           Dissemination
of Information.  The Borrower
authorizes each Lender to disclose to any Participant or Purchaser or any other
Person acquiring an interest in the Loan Documents by operation of law (each a “Transferee”)
and any prospective Transferee any and all information in such Lender’s
possession concerning the creditworthiness of the Borrower and its Subsidiaries,
including without limitation any information contained in any Reports; provided
that each Transferee and prospective Transferee agrees to be bound by Section 9.11
of this Agreement.

 

12.5                           Tax
Treatment.  If any interest in any
Loan Document is transferred to any Transferee which is not incorporated under
the laws of the United States or any State thereof, the transferor Lender shall
cause such Transferee, concurrently with the effectiveness of such transfer, to
comply with the provisions of Section 3.5(d).

 

51

 

ARTICLE XIII

NOTICES

 

13.1                           Notices.  Except as otherwise permitted by Section 2.14
with respect to borrowing notices, all notices, requests and other
communications to any party hereunder shall be in writing (including electronic
transmission, facsimile transmission or similar writing) and shall be given to
such party: (x) in the case of the Borrower or the Agent, at its address or
facsimile number set forth on the signature pages hereof, (y) in the case
of any Lender, at its address or facsimile number set forth below its signature
hereto or (z) in the case of any party, at such other address or facsimile
number as such party may hereafter specify for the purpose by notice to the
Agent and the Borrower in accordance with the provisions of this Section 13.1.  Each such notice, request or other
communication shall be effective (i) if given by facsimile transmission,
when transmitted to the facsimile number specified in this Section and
confirmation of receipt is received, (ii) if given by mail, 72 hours after
such communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid, or (iii) if given by any other means, when
delivered (or, in the case of electronic transmission, received) at the address
specified in this Section; provided that notices to the Agent under Article II
shall not be effective until received.

 

13.2                           Change
of Address.  The Borrower, the Agent
and any Lender may each change the address for service of notice upon it by a
notice in writing to the other parties hereto.

 

ARTICLE XIV

COUNTERPARTS

 

This Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one agreement, and any of the parties hereto may execute this
Agreement by signing any such counterpart. 
This Agreement shall be effective when it has been executed by the
Borrower, the Agent and the Lenders and each party has notified the Agent by
facsimile transmission or telephone that it has taken such action.

 

ARTICLE XV

CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

 

15.1                        CHOICE OF LAW.  THE LOAN DOCUMENTS (OTHER THAN THOSE
CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, 735 ILCS SECTION 105/5-1
ET SEQ, BUT OTHERWISE WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE
STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
BANKS.

 

15.2                        CONSENT TO JURISDICTION.  THE BORROWER HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF ANY 

 

52

 

UNITED
STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE
BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY
WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS
AN INCONVENIENT FORUM.  NOTHING HEREIN
SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST
THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.  ANY JUDICIAL PROCEEDING BY THE BORROWER
AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A
COURT IN CHICAGO, ILLINOIS.

 

15.3                        WAIVER OF JURY TRIAL.  THE BORROWER, THE AGENT AND EACH LENDER
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.

 

53

 

IN WITNESS WHEREOF, the
Borrower, the Lenders and the Agent have executed this Agreement as of the date
first above written.

 

	
   

  	
  RLI CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title: 

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title: 

  	
   

  	
   

  
	
   

  	
   

  	
  9025 North Lindbergh Drive

  
	
   

  	
   

  	
  Peoria, Illinois 61615-1431

  
	
   

  	
   

  
	
   

  	
  Attention:

  	
  John E. Robison

  
	
   

  	
   

  	
  Telephone:

  	
  (309) 693-5846

  
	
   

  	
   

  	
  FAX:

  	
  (309) 689-2229

  
							

 

	
  Commitments

  	
   

  
	
   

  	
   

  
	
  $10,000,000

  	
  JPMORGAN CHASE
  BANK, N.A.

  
	
   

  	
  (successor by
  merger to Bank One,
 Illinois, NA),

  
	
   

  	
  Individually and
  as Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title: 

  	
   

  	
   

  
	
   

  	
   

  	
  124 SW Adams Street

  
	
   

  	
   

  	
  Peoria, Illinois 61602

  
	
   

  	
   

  
	
   

  	
  Attention:

  	
  Erik J. Pettit

  
	
   

  	
   

  	
  Telephone:

  	
  (309) 672-6274

  
	
   

  	
   

  	
  FAX:

  	
  (309) 672-7930

  
	
   

  	
   

  
	
  Aggregate
  Commitment

  	
   

  
	
   

  	
   

  
	
  $10,000,000

  	
   

  
								

 

 

EXHIBIT A

COMPLIANCE CERTIFICATE

 

To:                              The
Lenders parties to the

Credit Agreement Described Below

 

This Compliance
Certificate is furnished pursuant to that certain Credit Agreement dated as of May 31,
2005 (as amended, modified, renewed or extended from time to time, the “Agreement”)
among RLI Corp. (the “Borrower”), the lenders party thereto and JPMorgan Chase
Bank, N.A., (successor by merger to Bank One, Illinois, NA), as Agent for the
Lenders.  Unless otherwise defined
herein, capitalized terms used in this Compliance Certificate have the meanings
ascribed thereto in the Agreement.

 

THE UNDERSIGNED HEREBY
CERTIFIES THAT:

 

1.                                       I am the duly elected                    of
the Borrower;

 

2.                                       I have reviewed the terms of the
Agreement and I have made, or have caused to be made under my supervision, a
detailed review of the transactions and conditions of the Borrower and its
Subsidiaries during the accounting period covered by the attached financial
statements;

 

3.                                       The examinations described in paragraph 2
did not disclose, and I have no knowledge of, the existence of any condition or
event which constitutes a Default or Unmatured Default during or at the end of
the accounting period covered by the attached financial statements or as of the
date of this Certificate, except as set forth below; and

 

4.                                       Schedule I attached hereto sets
forth financial data and computations evidencing the Borrower’s compliance with
certain covenants of the Agreement, all of which data and computations are
true, complete and correct.

 

Described below are the
exceptions, if any, to paragraph 3 by listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
the Borrower has taken, is taking, or proposes to take with respect to each
such condition or event:

 

 

 

 

 

The foregoing
certifications, together with the computations set forth in Schedule I
hereto and the financial statements delivered with this Certificate in support
hereof, are made and delivered this         day
of                  ,
       .

 

	
   

  	
  RLI CORP.,

  
	
   

  	
  as Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

A-2

 

SCHEDULE I
TO COMPLIANCE CERTIFICATE

 

Compliance as of               ,
         with

Provisions of Section 6.18 of

the Agreement

 

	
  (a)                                  Section 6.18.1
  – Interest Coverage Ratio

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (i)                                     Actual Interest
  Coverage Ratio:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (A)                           RLIC’s
  Statutory Surplus as of date of determination

  	
   

  	
  $

  
	
   

  	
  (B)                             10%
  of (A)

  	
   

  	
  $

  
	
   

  	
  (C)                             RLIC’s
  statutory net income for four fiscal quarters ended on date of determination

  	
   

  	
  $

  
	
   

  	
  (D)                            Greater
  of (B) and (C)

  	
   

  	
  $

  
	
   

  	
  (E)                              Consolidated
  net income of other Subsidiaries which are not Insurance Subsidiaries or
  Subsidiaries of Insurance Subsidiaries

  	
   

  	
  $

  
	
   

  	
  (F)                              Sum
  of (D) and (E)

  	
   

  	
  $

  
	
   

  	
  (G)                             Consolidated
  Interest Expense for four quarters ended on date of determination

  	
   

  	
  $

  
	
   

  	
  (H)                            Ratio
  of (F) to (G)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (ii)                                  Minimum Interest
  Coverage Ratio

  	
   

  	
  4.0 to 1.0

  
	
   

  	
   

  	
   

  
	
  (b)                                 Section 6.18.2
  – Leverage Ratio

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (i)                                     Actual Leverage
  Ratio:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (A)                           Consolidated
  Indebtedness

  	
   

  	
  $

  
	
   

  	
  (B)                             Consolidated
  Net Worth as of the date of determination

  	
   

  	
  $

  
	
   

  	
  (C)                             Sum
  of (A) and (B)

  	
   

  	
  $

  
	
   

  	
  (D)                            Ratio
  of (A) to (C)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  (ii)                                  Maximum Leverage
  Ratio

  	
   

  	
   

  	
  .30 to 1.0

  
	
   

  	
   

  	
   

  
	
  (c)                                  Section 6.18.4
  – Fixed Charge Coverage Ratio

  	
                                                  

  	
   

  
	
   

  	
   

  	
   

  
	
  (i)                                     Actual Fixed
  Charge Coverage Ratio:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (A)                           RLIC’s
  Statutory Surplus as of the date of determination

  	
   

  	
  $

  
	
   

  	
  (B)                             10%
  of (A)

  	
   

  	
  $

  
					

 

1

 

	
   

  	
  (C)                             RLIC’s
  statutory net income for four fiscal quarters ended on date of determination

  	
   

  	
  $

  
	
   

  	
  (D)                            Greater
  of (B) and (C)

  	
   

  	
  $

  
	
   

  	
  (E)                              Consolidated
  net income of other Subsidiaries which are not Insurance Subsidiaries or
  Subsidiaries of Insurance Subsidiaries

  	
   

  	
  $

  
	
   

  	
  (F)                              Sum
  of (D) and (E)

  	
   

  	
  $

  
	
   

  	
  (G)                             Consolidated
  Interest Expense for four fiscal quarters ending on date of determination

  	
   

  	
  $

  
	
   

  	
  (H)                            Aggregate
  dividends paid for four quarters ending on date of determination

  	
   

  	
  $

  
	
   

  	
  (I)                                 Current
  Maturities of Indebtedness for the Borrower and its Subsidiaries as of the
  date of determination (other than reverse repos and the Loans)

  	
   

  	
  $

  
	
   

  	
  (J)                                Sum
  of (G), (H) and (I)

  	
   

  	
  $

  
	
   

  	
  (K)                            Ratio
  of (F) to (J)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (ii)                                  Minimum Fixed
  Charge Coverage Ratio

  	
   

  	
  1.5 to 1.0

  
	
   

  	
   

  	
   

  
	
  (d)                                 Section 6.18.5
  – MHIC’s Risk Based Capital Ratio

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (i)                                     Actual Risk
  Based Capital Ratio for MHIC:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (A)                           MHIC’s
  Total Adjusted Capital

  	
   

  	
  $

  
	
   

  	
  (B)                             MHIC’s
  Company Action Level PBC

  	
   

  	
  $

  
	
   

  	
  (C)                             Ratio
  of (A) to (B)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  (ii)                                  Minimum Required
  Risk Based Capital Ratio for MHIC

  	
   

  	
  175%

  
	
   

  	
   

  	
   

  
	
  (e)                                  Section 6.18.6
  – RLIC’s Risk Based Capital Ratio

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (i)                                     Actual Risk
  Based Capital Ratio for RLIC:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (A)                           RLIC’s
  Total Adjusted Capital

  	
   

  	
  $

  
	
   

  	
  (B)                             RLIC’s
  Company Action Level RBC

  	
   

  	
  $

  
	
   

  	
  (C)                             Ratio
  of (A) to (B)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  (ii)                                  Minimum Required
  Risk Based Capital Ratio for RLIC

  	
   

  	
  175%

  

 

2

 

EXHIBIT B

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

This Assignment and
Assumption (the “Assignment and Assumption”) is dated as of the
Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”)
and [Insert name of Assignee]
(the “Assignee”).  Capitalized
terms used but not defined herein shall have the meanings given to them in the
Credit Agreement identified below (as amended, the “Credit Agreement”),
receipt of a copy of which is hereby acknowledged by the Assignee.  The Standard Terms and Conditions set forth
in Annex 1 attached hereto are hereby agreed to and incorporated herein by
reference and made a part of this Assignment and Assumption as if set forth
herein in full.

 

For an agreed
consideration, the Assignor hereby irrevocably sells and assigns to the
Assignee, and the Assignee hereby irrevocably purchases and assumes from the
Assignor, subject to and in accordance with the Standard Terms and Conditions
and the Credit Agreement, as of the Effective Date inserted by the Agent as
contemplated below, the interest in and to all of the Assignor’s rights and
obligations in its capacity as a Lender under the Credit Agreement and any
other documents or instruments delivered pursuant thereto that represents the
amount and percentage interest identified below of all of the Assignor’s
outstanding rights and obligations under the respective facilities identified
below (including without limitation any letters of credit, guaranties and
swingline loans, included in such facilities and, to the extent permitted to be
assigned under applicable law, all claims (including without limitation
contract claims, tort claims, malpractice claims, statutory claims and all
other claims at law or in equity), suits, causes of action and any other right
of the Assignor against any Person whether known or unknown arising under or in
connection with the Credit Agreement, any other documents or instruments
delivered pursuant thereto or the loan transactions governed thereby) (the “Assigned
Interest”).  Such sale and assignment
is without recourse to the Assignor and, except as expressly provided in this
Assignment and Assumption, without representation or warranty by the Assignor.

 

	
  1.

  	
  Assignor:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Assignee:

  	
   

  	
   

  	
   

  	
  [and is an Affiliate/Approved Fund of 

  
	
   

  	
   

  	
   

  	
  [identify Lender(1)]]

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Borrower:

  	
   

  	
  RLI Corp.

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Agent:

  	
   

  	
  JPMorgan Chase Bank, N.A. (successor by merger to Bank One, Illinois,
  NA), as the agent under the Credit Agreement.

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Credit Agreement:

  	
   

  	
  Amended and Restated Credit Agreement dated as of May 31, 2005
  among RLI Corp., the Lenders parties thereto and JPMorgan Chase Bank, N.A.
  (successor by merger to Bank One, Illinois, NA), as Agent.

  

 

(1) Select as applicable.

 

B-1

 

	
  6.

  	
  Assigned Interest:

  

 

	
  Aggregate Amount of

  Commitment/Loans for all

  Lenders*

  	
   

  	
  Amount of

  Commitment/Loans

  Assigned*

  	
   

  	
  Percentage Assigned of

  Commitment/Loans(2)

  
	
  $

  	
   

  	
  $            

  	
   

  	
          %

  

 

	
  7.

  	
  Trade Date:

  	
   

  	
   

  

 

Effective Date:                                    ,
20    [TO BE INSERTED BY AGENT AND WHICH SHALL BE THE EFFECTIVE
DATE OF RECORDATION OF TRANSFER BY THE AGENT.]

 

The terms set forth in
this Assignment and Assumption are hereby agreed to:

 

	
   

  	
  ASSIGNOR

  
	
   

  	
  [NAME OF ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ASSIGNEE

  
	
   

  	
  [NAME OF ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  
				

 

[Consented to and](3) Accepted:

 

JPMORGAN CHASE BANK,
N.A., as Agent

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  

 

* 
Amount to be adjusted by the counterparties to take into account any
payments or prepayments made between the Trade Date and the Effective Date.

 

(2) 
Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of
all Lenders thereunder.

 

(3) 
To be added only if the consent of the Agent is required by the terms of the
Credit Agreement.

 

B-2

 

[Consented to:](4)

 

RLI CORP.

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  

 

(4) 
To be added only if the consent of the Borrower is required by the terms of the
Credit Agreement.

 

B-3

 

ANNEX
1

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

 

1.                                       Representations and Warranties.

 

1.1                                 Assignor.  The Assignor
represents and warrants that (a) it is the legal and beneficial owner of
the Assigned Interest, (b) the Assigned Interest is free and clear of any
lien, encumbrance or other adverse claim and (c) it has full power and
authority, and has taken all action necessary, to execute and deliver this
Assignment and Assumption and to consummate the transactions contemplated
hereby.  Neither the Assignor nor any of
its officers, directors, employees, agents or attorneys shall be responsible
for (a) any statements, warranties or representations made in or in
connection with the Credit Agreement or any other Loan Document, (b) the
execution, legality, validity, enforceability, genuineness, sufficiency,
perfection, priority, collectibility, or value of the Loan Documents or any
collateral thereunder, (c) the financial condition of the Borrower, any of
its Subsidiaries or Affiliates or any other Person obligated in respect of any
Loan Document, (d) the performance or observance by the Borrower, any of
its Subsidiaries or Affiliates or any other Person of any of their respective
obligations under any Loan Document, (e) inspecting any of the property,
books or records of the Borrower, or any guarantor, or (f) any mistake,
error of judgment, or action taken or omitted to be taken in connection with
the Loans or the Loan Documents.

 

1.2.                              Assignee.  The Assignee (a) represents
and warrants that (i) it has full power and authority, and has taken all
action necessary, to execute and deliver this Assignment and Assumption and to
consummate the transactions contemplated hereby and to become a Lender under
the Credit Agreement, (ii) from and after the Effective Date, it shall be
bound by the provisions of the Credit Agreement as a Lender thereunder and, to
the extent of the Assigned Interest, shall have the obligations of a Lender
thereunder, (iii) agrees that its payment instructions and notice
instructions are as set forth in Schedule 1 to this Assignment and
Assumption, (iv) confirms that none of the funds, monies, assets or other
consideration being used to make the purchase and assumption hereunder are “plan
assets” as defined under ERISA and that its rights, benefits and interests in
and under the Loan Documents will not be “plan assets” under ERISA, (v) agrees
to indemnify and hold the Assignor harmless against all losses, costs and
expenses (including, without limitation, reasonable attorneys’ fees) and
liabilities incurred by the Assignor in connection with or arising in any
manner from the Assignee’s non-performance of the obligations assumed under
this Assignment and Assumption, (vi) it has received a copy of  the Credit Agreement, together with copies of
financial statements and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Assumption and to purchase the Assigned Interest on the basis of
which it has made such analysis and decision independently and without reliance
on the Agent or any other Lender, and (vii) attached as Schedule 1 to
this Assignment and Assumption is any documentation required to be delivered by
the Assignee with respect to its tax status pursuant to the terms of the Credit
Agreement, duly completed and executed by the Assignee and (b) agrees that
(i) it will, independently and without reliance on the Agent, the Assignor
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Loan Documents, and (ii) it will
perform in accordance with their terms all of the 

 

 

obligations which by the terms of the Loan Documents
are required to be performed by it as a Lender.

 

2.                                       Payments.  The Assignee
shall pay the Assignor, on the Effective Date, the amount agreed to by the
Assignor and the Assignee.  From and
after the Effective Date, the Administrative Agent shall make all payments in
respect of the Assigned Interest (including payments of principal, interest,
fees and other amounts) to the Assignor for amounts which have accrued to but
excluding the Effective Date and to the Assignee for amounts which have accrued
from and after the Effective Date.

 

3.                                       General Provisions. This Assignment and Assumption shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns.  This
Assignment and Assumption may be executed in any number of counterparts, which
together shall constitute one instrument. 
Delivery of an executed counterpart of a signature page of this
Assignment and Assumption by telecopy shall be effective as delivery of a
manually executed counterpart of this Assignment and Assumption.  This Assignment and Assumption shall be
governed by, and construed in accordance with, the internal laws of the State
of Illinois (without regard to conflict of laws provisions thereof) but giving
effect to federal laws applicable to national banks.

 

 

ADMINISTRATIVE
QUESTIONNAIRE

 

(Schedule to be supplied by Closing Unit or Trading Documentation
Unit)

 

 

US
AND NON-US TAX INFORMATION REPORTING REQUIREMENTS

 

(Schedule to be supplied by Closing Unit or Trading Documentation
Unit)

 

 

EXHIBIT C

REVOLVING NOTE

 

May 31, 2005

 

RLI
Corp., an Illinois corporation (the “Borrower”), promises to pay to the order
of                                                             (the
“Lender”) the aggregate unpaid principal amount of all Loans made by the Lender
to the Borrower pursuant to Section 2.1 of the Agreement (as
hereinafter defined), in immediately available funds at JPMorgan Chase Bank,
N.A. in Peoria, Illinois, as Agent, together with interest on the unpaid
principal amount hereof at the rates and on the dates set forth in the
Agreement.  The Borrower shall pay the
principal of and accrued and unpaid interest on the Loans in full on the
Facility Termination Date.

 

The
Lender shall, and is hereby authorized to, record on the schedule attached
hereto, or to otherwise record in accordance with its usual practice, the date
and amount of each Loan and the date and amount of each principal payment
hereunder.

 

This
Note is one of the Notes issued pursuant to, and is entitled to the benefits
of, the Amended and Restated Credit Agreement dated as of May 31, 2005
(which, as it may be amended or modified and in effect from time to time, is
herein called the “Agreement”), among the Borrower, the lenders party thereto,
including the Lender, and JPMorgan Chase Bank, N.A. (successor by merger to
Bank One, Illinois, NA), as Agent, to which Agreement reference is hereby made
for a statement of the terms and conditions governing this Note, including the
terms and conditions under which this Note may be prepaid or its maturity date
accelerated.  Capitalized terms used
herein and not otherwise defined herein are used with the meanings attributed
to them in the Agreement.

 

 

	
   

  	
  RLI CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
						

 

 

SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL

TO

NOTE OF                     ,

DATED              ,

 

	
  Date

  	
   

  	
  Principal

  Amount of

  Loan

  	
   

  	
  Maturity

  of Interest

  Period

  	
   

  	
  Principal

  Amount

  Paid

  	
   

  	
  Unpaid

  BalanceExhibit 10.02

 

 

 

 

AMENDED AND RESTATED

CREDIT AGREEMENT

DATED AS OF MAY 31, 2005

AMONG

RLI CORP.,

THE LENDERS, AND

LASALLE BANK NATIONAL ASSOCIATION

AS AGENT

 

 

 

Table of Contents

 

	
  ARTICLE I

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  THE CREDITS

  	
   

  
	
  2.1

  	
  Commitment

  	
   

  
	
  2.2

  	
  Termination

  	
   

  
	
  2.3

  	
  Ratable Loans

  	
   

  
	
  2.4

  	
  Types of Advances

  	
   

  
	
  2.5

  	
  Commitment Fee; Reductions in Aggregate
  Commitment.

  	
   

  
	
  2.6

  	
  Minimum Amount of Each Advance

  	
   

  
	
  2.7

  	
  Optional Principal Payments

  	
   

  
	
  2.8

  	
  Method of Selecting Types and Interest
  Periods for New Advances

  	
   

  
	
  2.9

  	
  Conversion and Continuation of Outstanding
  Advances

  	
   

  
	
  2.10

  	
  Changes in Interest Rate, etc

  	
   

  
	
  2.11

  	
  Rates Applicable After Default

  	
   

  
	
  2.12

  	
  Method of Payment

  	
   

  
	
  2.13

  	
  Noteless Agreement; Evidence of
  Indebtedness

  	
   

  
	
  2.14

  	
  Telephonic Notices

  	
   

  
	
  2.15

  	
  Interest Payment Dates; Interest and Fee
  Basis

  	
   

  
	
  2.16

  	
  Notification of Advances, Interest Rates,
  Prepayments and Commitment Reductions

  	
   

  
	
  2.17

  	
  Lending Installations

  	
   

  
	
  2.18

  	
  Non-Receipt of Funds by the Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  YIELD PROTECTION; TAXES

  	
   

  
	
  3.1

  	
  Yield Protection

  	
   

  
	
  3.2

  	
  Changes in Capital Adequacy Regulations

  	
   

  
	
  3.3

  	
  Availability of Types of Advances

  	
   

  
	
  3.4

  	
  Funding Indemnification

  	
   

  
	
  3.5

  	
  Taxes

  	
   

  
	
  3.6

  	
  Lender Statements; Survival of Indemnity

  	
   

  
	
  3.7

  	
  Substitution of Lender

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  CONDITIONS PRECEDENT

  	
   

  
	
  4.1

  	
  Effectiveness

  	
   

  
	
  4.2

  	
  Each
  Advance

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
  5.1

  	
  Existence and Standing

  	
   

  
	
  5.2

  	
  Authorization and Validity

  	
   

  
	
  5.3

  	
  No Conflict; Consent

  	
   

  
	
  5.4

  	
  Financial Statements

  	
   

  
	
  5.5

  	
  Taxes

  	
   

  
	
  5.6

  	
  Material Adverse Change

  	
   

  

 

i

 

	
  5.7

  	
  Litigation and Contingent Obligations

  	
   

  
	
  5.8

  	
  Subsidiaries

  	
   

  
	
  5.9

  	
  ERISA

  	
   

  
	
  5.10

  	
  Accuracy of Information

  	
   

  
	
  5.11

  	
  Regulation
  U

  	
   

  
	
  5.12

  	
  Material Agreements

  	
   

  
	
  5.13

  	
  Compliance With Laws

  	
   

  
	
  5.14

  	
  Plan Assets; Prohibited Transactions

  	
   

  
	
  5.15

  	
  Investment Company Act

  	
   

  
	
  5.16

  	
  Public Utility Holding Company Act

  	
   

  
	
  5.17

  	
  Insurance Licenses

  	
   

  
	
  5.18

  	
  Reinsurance

  	
   

  
	
  5.19

  	
  Solvency

  	
   

  
	
  5.20

  	
  Labor Controversies; Union Contracts, Etc

  	
   

  
	
  5.21

  	
  Surety Obligations; Financial Assurances

  	
   

  
	
  5.22

  	
  Business Relations

  	
   

  
	
  5.23

  	
  Hazardous Materials

  	
   

  
	
  5.24

  	
  Ranking

  	
   

  
	
  5.25

  	
  Intellectual Property

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  COVENANTS

  	
   

  
	
  6.1

  	
  Financial Reporting

  	
   

  
	
  6.2

  	
  Other
  Reports

  	
   

  
	
  6.3

  	
  Use of Proceeds

  	
   

  
	
  6.4

  	
  Notice of Default

  	
   

  
	
  6.5

  	
  Taxes

  	
   

  
	
  6.6

  	
  Insurance

  	
   

  
	
  6.7

  	
  Compliance with Laws

  	
   

  
	
  6.8

  	
  Maintenance of Properties

  	
   

  
	
  6.9

  	
  Inspection

  	
   

  
	
  6.10

  	
  Conduct of Business

  	
   

  
	
  6.11

  	
  Dividends

  	
   

  
	
  6.12

  	
  Merger

  	
   

  
	
  6.13

  	
  Sale of Assets

  	
   

  
	
  6.14

  	
  Investments and Acquisitions

  	
   

  
	
  6.15

  	
  Liens

  	
   

  
	
  6.16

  	
  Reinsurance

  	
   

  
	
  6.17

  	
  Affiliates

  	
   

  
	
  6.18

  	
  Financial Covenants.

  	
   

  
	
  6.19

  	
  JPMCB Credit Facility Prepayments

  	
   

  

 

ii

 

	
  ARTICLE VII

  	
  DEFAULTS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  ACCELERATION, WAIVERS, AMENDMENTS AND
  REMEDIES

  	
   

  
	
  8.1

  	
  Acceleration

  	
   

  
	
  8.2

  	
  Amendments

  	
   

  
	
  8.3

  	
  Preservation
  of Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  GENERAL PROVISIONS

  	
   

  
	
  9.1

  	
  Survival of
  Representations

  	
   

  
	
  9.2

  	
  Governmental
  Regulation

  	
   

  
	
  9.3

  	
  Headings

  	
   

  
	
  9.4

  	
  Entire
  Agreement

  	
   

  
	
  9.5

  	
  Several
  Obligations; Benefits of this Agreement

  	
   

  
	
  9.6

  	
  Expenses;
  Indemnification

  	
   

  
	
  9.7

  	
  Numbers of
  Documents

  	
   

  
	
  9.8

  	
  Accounting

  	
   

  
	
  9.9

  	
  Severability
  of Provisions

  	
   

  
	
  9.10

  	
  Nonliability
  of Lenders

  	
   

  
	
  9.11

  	
  Confidentiality

  	
   

  
	
  9.12

  	
  Nonreliance

  	
   

  
	
  9.13

  	
  Disclosure

  	
   

  
	
  9.14

  	
  USA
  Patriot Act

  	
   

  
	
  9.15

  	
  Amendment
  and Restatement.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  THE AGENT

  	
   

  
	
  10.1

  	
  Appointment;
  Nature of Relationship

  	
   

  
	
  10.2

  	
  Powers

  	
   

  
	
  10.3

  	
  General
  Immunity

  	
   

  
	
  10.4

  	
  No
  Responsibility for Loans, Recitals, etc

  	
   

  
	
  10.5

  	
  Action on
  Instructions of Lenders

  	
   

  
	
  10.6

  	
  Employment
  of Agents and Counsel

  	
   

  
	
  10.7

  	
  Reliance
  on Documents; Counsel

  	
   

  
	
  10.8

  	
  Agent’s
  Reimbursement and Indemnification

  	
   

  
	
  10.9

  	
  Notice of
  Default

  	
   

  
	
  10.10

  	
  Rights as
  a Lender

  	
   

  
	
  10.11

  	
  Lender
  Credit Decision

  	
   

  
	
  10.12

  	
  Successor
  Agent

  	
   

  
	
  10.13

  	
  Delegation
  to Affiliates

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  SETOFF; RATABLE PAYMENTS

  	
   

  
	
  11.1

  	
  Setoff

  	
   

  
	
  11.2

  	
  Ratable
  Payments

  	
   

  

 

iii

 

	
  ARTICLE XII

  	
  BENEFIT OF AGREEMENT; ASSIGNMENTS;
  PARTICIPATIONS

  	
   

  
	
  12.1

  	
  Successors
  and Assigns

  	
   

  
	
  12.2

  	
  Participations.

  	
   

  
	
  12.3

  	
  Assignments.

  	
   

  
	
  12.4

  	
  Dissemination
  of Information

  	
   

  
	
  12.5

  	
  Tax
  Treatment

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
  NOTICES

  	
   

  
	
  13.1

  	
  Notices

  	
   

  
	
  13.2

  	
  Change of
  Address

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV

  	
  COUNTERPARTS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV

  	
  CHOICE OF LAW; CONSENT TO JURISDICTION;
  WAIVER OF JURY TRIAL

  	
   

  
	
  15.1

  	
  CHOICE OF LAW

  	
   

  
	
  15.2

  	
  CONSENT TO JURISDICTION

  	
   

  
	
  15.3

  	
  WAIVER OF JURY TRIAL

  	
   

  

 

iv

 

	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Form of
  Compliance Certificate

  	
   

  
	
  Exhibit B

  	
  Form of
  Assignment Agreement

  	
   

  
	
  Exhibit C

  	
  Form of
  Note

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 5.8

  	
  Subsidiaries

  	
   

  
	
  Schedule 5.9

  	
  Employee Plans

  	
   

  
	
  Schedule 5.17

  	
  Insurance
  Licenses

  	
   

  
	
  Schedule 5.18

  	
  Reinsurance

  	
   

  
	
  Schedule 5.21

  	
  Financial
  Assurance

  	
   

  

 

v

 

AMENDED
AND RESTATED CREDIT AGREEMENT

 

This Amended and Restated
Credit Agreement, dated as of May 31, 2005 is among RLI Corp., an Illinois
corporation, the Lenders and LaSalle Bank National Association, a national
banking association, as Agent.  The
parties hereto agree as follows:

 

RECITALS:

 

A.                                   The Borrower, the Lenders and the Agent
are parties to a Credit Agreement dated as of May 31, 2002, pursuant to
which the Lenders have made a $20,000,000 revolving credit facility available
to the Borrower (the “Existing Agreement”).

 

B.                                     The Existing Agreement terminates by its
terms as of May 31, 2005, and the Borrower wishes to reduce the aggregate
commitments with respect to the revolving credit facility from $20,000,000 to
$10,000,000 and to extend its maturity for an additional three years.

 

C.                                     JPMorgan Chase Bank, N.A. (“JPMCB”) has
previously extended a $20,000,000 revolving credit facility to the Borrower,
which it intends to modify contemporaneously herewith on substantially the same
terms and conditions as those set forth herein.

 

D.                                    The Borrower, JPMCB and LaSalle are
simultaneously entering into an amendment to the existing intercreditor
agreement which confirms that the obligations under this Agreement and the
JPMCB Credit Agreement shall be pari passu and that the outstanding amounts
under this Agreement and the JPMCB Credit Agreement are intended to be equal at
all times.

 

ARTICLE I

 

DEFINITIONS

 

As used in this
Agreement:

 

“Acquisition” means any
transaction, or any series of related transactions, consummated on or after the
date of this Agreement, by which the Borrower or any of its Subsidiaries (a) acquires
any going business or all or substantially all of the assets of any firm,
corporation or limited liability company, or division thereof, whether through
purchase of assets, merger or otherwise or (b) directly or indirectly
acquires (in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the outstanding
ownership interests of a partnership or limited liability company.

 

“Act” means,
collectively, the Laws of any Governmental Authority which apply to the conduct
of business by the Borrower.

 

 

“Adjusted LIBO Rate”
means, with respect to any Eurodollar Advance for any Interest Period, an
interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%)
equal to the sum of (a)(i) the LIBO Rate for such Interest Period
multiplied by (ii) the Statutory Reserve Rate plus (b) 0.75% per
annum.

 

“Advance” means a
borrowing hereunder, (a) made by the Lenders on the same Borrowing Date,
or (b) converted or continued by the Lenders on the same date of
conversion or continuation, consisting, in either case, of the aggregate amount
of the several Loans of the same Type and, in the case of Eurodollar Loans, for
the same Interest Period.

 

“Affiliate” of any Person
means any other Person directly or indirectly controlling, controlled by or
under common control with such Person.  A
Person shall be deemed to control another Person if the controlling Person owns
10% or more of any class of voting securities (or other ownership interests) of
the controlled Person or possesses, directly or indirectly, the power to direct
or cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.

 

“Agent” means LaSalle
Bank National Association, in its capacity as contractual representative of the
Lenders pursuant to Article X, and not in its individual capacity
as a Lender, and any successor Agent appointed pursuant to Article X.

 

“Aggregate Commitment”
means the aggregate of the Commitments of all the Lenders, as reduced from time
to time pursuant to the terms hereof.

 

“Agreement” means this
credit agreement, as it may be amended or modified and in effect from time to
time.

 

“Agreement Accounting
Principles” means generally accepted accounting principles as in effect from
time to time, applied in a manner consistent with those used in preparing the
financial statements referred to in Section 6.1.

 

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

 

“Annual Statement” means
the annual statutory financial statement of any Insurance Subsidiary required
to be filed with the insurance commissioner (or similar authority) of its
jurisdiction of incorporation, which statement shall be in the form required by
such Insurance Subsidiary’s jurisdiction of incorporation or, if no specific
form is so required, in the form of financial statements permitted by such
insurance commissioner (or such similar authority) to be used for filing annual
statutory financial statements and shall contain the type of information
permitted by such insurance commissioner (or such similar authority) to be
disclosed therein, together with all exhibits or schedules filed therewith.

 

2

 

“Approved Fund” means any
Fund that is administered or managed by (a) a Lender, (b) an
Affiliate of a Lender or (c) an entity or an Affiliate of an entity that
administers or manages a Lender.

 

“Article” means an article of
this Agreement unless another document is specifically referenced.

 

“Authorized Officer”
means any of the CEO/President, Chief Operating Officer, Chief Financial
Officer or Treasurer of the Borrower, acting singly, or any other Person to
whom such authority may be delegated by such named officer from time to time
following prior notice to the Agent.

 

“Board” means the Board
of Governors of the Federal Reserve System of the United States (or any
successor).

 

“Borrower” means RLI
Corp., an Illinois corporation, and its successors and assigns.

 

“Borrowing Date” means a
date on which an Advance is made hereunder.

 

“Borrowing Notice” is
defined in Section 2.8.

 

“Business Day” means (a) with
respect to any borrowing, payment or rate selection of Eurodollar Advances, a
day (other than a Saturday or Sunday) on which banks generally are open in
Chicago and New York City for the conduct of substantially all of their
commercial lending activities, interbank wire transfers can be made on the
Fedwire system and dealings in United States dollars are carried on in the
London interbank market and (b) for all other purposes, a day (other than
a Saturday or Sunday) on which banks generally are open in Chicago for the
conduct of substantially all of their commercial lending activities and interbank
wire transfers can be made on the Fedwire system.

 

“Capitalized Lease” of a
Person means any lease of Property by such Person as lessee which would be
capitalized on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.

 

“Capitalized Lease
Obligations” of a Person means the amount of the obligations of such Person
under Capitalized Leases which would be shown as a liability on a balance sheet
of such Person prepared in accordance with Agreement Accounting Principles.

 

“Cash Equivalents” means (a) short-term
obligations of, or fully guaranteed by, the United States of America, (b) commercial
paper rated A-1 or better by S&P or P-1 or better by Moody’s, (c) demand
deposit accounts maintained in the ordinary course of business, and (d) certificates
of deposit issued by and time deposits with commercial banks (whether domestic
or foreign) having capital and surplus in excess of $100,000,000; provided in
each case that the same provides for payment of both principal and interest
(and not principal alone or interest alone) and is not subject to any
contingency regarding the payment of principal or interest.

 

“Change in Control” means
(a) a “change in control,” as defined in any applicable state law
Insurance Holding Company System Regulatory Act or similar legislation,
regulation,

 

3

 

applicable
insurance commission or department order, with respect to RLIC or MHIC; (b) any
“Person” or “group” (as such terms are used in Sections 13d and 14d of the 1934
Act, is or shall become the “beneficial owner” (as defined in Rules 13d-3
and 13d-5 under the 1934 Act) directly or indirectly, of 25% or more on a fully
diluted basis of the voting capital stock interest of the Borrower; (c) during
any period of 12 consecutive calendar months, commencing on the date hereof,
the ceasing of those individuals (the “Continuing Directors”) who (i) were
directors of the Borrower on the first day of each such period or (ii) subsequently
became directors of the Borrower and whose initial election or initial
nomination for election subsequent to that date was approved by a majority of
the Continuing Directors then on the board of directors of the Borrower, to
constitute a majority of the board of directors of the Borrower; (d) the
Borrower shall cease to own beneficially and of record, free and clear of all
Liens, other encumbrances or voting agreements, restrictions or trusts of any
kind, 100% of the outstanding shares of voting stock of RLIC on a fully diluted
basis; or (e) RLIC shall cease to own beneficially and of record, free and
clear of all Liens, other encumbrances or voting agreements, restrictions or
trusts of any kind, 100% of the outstanding shares of voting shock of MHIC on a
fully diluted basis.

 

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

 

“Commitment” means, for
each Lender, the obligation of such Lender to make Loans not exceeding the
amount set forth opposite its signature below, as it may be modified as a
result of any assignment that has become effective pursuant to Section 12.3.2
or as otherwise modified from time to time pursuant to the terms hereof.

 

“Consolidated
Indebtedness” means at any time the Indebtedness of the Borrower and its
Subsidiaries calculated on a consolidated basis as of such time.

 

“Consolidated Interest
Expense” means, with reference to any period, the interest expense of the
Borrower and its Subsidiaries calculated on a consolidated basis for such
period.

 

“Consolidated Net Income”
means, with reference to any period, the net income (or loss) of the Borrower
and its Subsidiaries calculated on a consolidated basis for such period.

 

“Consolidated Net Worth”
means at any time the consolidated stockholders’ equity of the Borrower and its
Subsidiaries calculated on a consolidated basis as of such time.

 

“Consolidated Total
Capitalization” means at any time the sum of Consolidated Indebtedness and
Consolidated Net Worth, each calculated at such time.

 

“Contingent Obligation”
of a Person means any agreement, undertaking or arrangement by which such
Person assumes, guarantees, endorses, contingently agrees to purchase or
provide funds for the payment of, or otherwise becomes or is contingently
liable upon, the obligation or liability of any other Person, or agrees to
maintain the net worth or working capital or other financial condition of any
other Person, or otherwise assures any creditor of such other Person against
loss, including, without limitation, any comfort letter, operating agreement,
take-or-pay contract or the obligations of any such Person as general partner
of a partnership with respect to the liabilities of the partnership.

 

4

 

“Conversion/Continuation
Notice” is defined in Section 2.9.

 

“Controlled Group” means
all members of a controlled group of corporations or other business entities
and all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower or any of its Subsidiaries, are treated as a
single employer under Section 414 of the Code.

 

“Default” means an event
described in Article VII.

 

“Employee Plan” means any
pension, retirement, disability, medical, dental or other health plan, life
insurance or other death benefit plan, profit sharing, deferred compensation,
stock option, bonus or other incentive plan, vacation benefit plan, severance
plan, or other employee benefit plan or arrangement, including, without
limitation, those pension, profit-sharing and retirement plans of the Borrower
described from time to time in the Financial Statements, and any pension plan,
welfare plan, Defined Benefit Pension Plans (as defined in ERISA) or any
multi-employer plan, maintained or administered by the Borrower or any
Affiliate of the Borrower, to which the Borrower or any Affiliate of the
Borrower is a party or may have any liability or by which the Borrower or any
Affiliate is bound.

 

“Environmental Laws”
means any and all federal, state, local and foreign statutes, laws, judicial
decisions, regulations, ordinances, rules, judgments, orders, decrees, plans,
injunctions, permits, concessions, grants, franchises, licenses, agreements and
other governmental restrictions relating to (a) the protection of the
environment, (b) the effect of the environment on human health, (c) emissions,
discharges or releases of pollutants, contaminants, hazardous substances or
wastes into surface water, ground water or land, or (d) the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, hazardous substances or wastes or the
clean-up or other remediation thereof.

 

“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time,
and any rule or regulation issued thereunder.

 

“Eurodollar Advance”
means an Advance which, except as otherwise provided in Section 2.11,
bears interest at the applicable Adjusted LIBO Rate.

 

“Eurodollar Loan” means a
Loan which, except as otherwise provided in Section 2.11, bears
interest at the applicable Adjusted LIBO Rate.

 

“Excluded Taxes” means,
in the case of each Lender or applicable Lending Installation and the Agent,
taxes imposed on its overall net income, and franchise taxes imposed on it, by (i) the
jurisdiction under the laws of which such Lender or the Agent is incorporated
or organized or (ii) the jurisdiction in which the Agent’s or such Lender’s
principal executive office or such Lender’s applicable Lending Installation is
located.

 

“Exhibit” refers to an
exhibit to this Agreement, unless another document is specifically referenced.

 

“Facility Termination
Date” means May 31, 2008.

 

5

 

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

 

“Financial Assurance”
means any financial assurance (whether in the form of a bond, letter of credit,
cash or otherwise) required pursuant to any Act, other than insurance policies
and bonds issued by any Insurance Subsidiary in the ordinary course of
business.

 

“Financial Hedge” means a
swap, collar, floor, cap or other contract which is intended to reduce or
eliminate the risk of fluctuations in interest rates.

 

“Fixed Charge Coverage
Ratio” means, as of any date of determination, the ratio of (a) the
greater of (i) 10% of RLIC’s Statutory Surplus as Regards Policyholders as
of such date and (ii) RLIC’s aggregate Statutory Net Income for the period
of four fiscal quarters ending on such date without regard to unrealized
capital gains in such period (determined on a pre-tax basis) and determined
without double counting, plus the consolidated net income of the Borrower’s
Subsidiaries which are not Insurance Subsidiaries or Subsidiaries of Insurance
Subsidiaries, to (b) the sum of (i) the Borrower’s Consolidated
Interest Expense and dividends paid in the period of four fiscal quarters
ending on such date, and (ii) the current maturities of Indebtedness for
the Borrower and its Subsidiaries as of such date, other than (x) obligations
arising in respect of reverse repurchase transactions and (y) the Loans.

 

“Floating Rate” means,
for any day, a rate per annum equal to the Alternate Base Rate for such day,
changing when and as the Alternate Base Rate changes.

 

“Floating Rate Advance”
means an Advance which, except as otherwise provided in Section 2.11,
bears interest at the Floating Rate.

 

“Floating Rate Loan”
means a Loan which, except as otherwise provided in Section 2.11,
bears interest at the Floating Rate.

 

“Fund” means any Person
(other than a natural person) that is (or will be) engaged in making,
purchasing, holding or otherwise investing in commercial loans and similar
extensions of credit in the ordinary course of its business.

 

“Governmental Authority”
means any government (foreign or domestic) or any state or other political
subdivision thereof or any governmental body, agency, authority, department or
commission (including without limitation any board of insurance, insurance
department or insurance commissioner and any taxing authority or political
subdivision) or any instrumentality or officer thereof (including without
limitation any court or tribunal) exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government and any
corporation, partnership or other entity directly or indirectly owned or
controlled by or subject to the control of any of the foregoing.

 

6

 

“Hazardous Materials”
means and includes (a) any friable asbestos (or asbestos which becomes
friable), PCBs or dioxins or insulation or other material composed of or
containing friable asbestos (or asbestos which becomes friable), PCBs or
dioxins and (b) any petroleum or any fraction thereof and any hazardous or
toxic waster, substance or material defined as such in (or for purposes of) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
any applicable so-called “superfund” or “superlien” law, or any other
applicable law regulating or pertaining to any such waste, substance or
material, as now or at any time hereafter in effect.

 

“Indebtedness” of a
Person means such Person’s (a) obligations for borrowed money, (b) obligations
representing the deferred purchase price of Property or services (other than
accounts payable arising in the ordinary course of such Person’s business
payable on terms customary in the trade), (c) obligations, whether or not
assumed, secured by Liens or payable out of the proceeds or production from
Property now or hereafter owned or acquired by such Person, (d) obligations
which are evidenced by notes, acceptances, or other instruments, (e) obligations
to purchase securities or other Property arising out of or in connection with
the sale of the same or substantially similar securities or Property, (f) Capitalized
Lease Obligations, (g) obligations arising in respect of reverse
repurchase transactions, (h) reimbursement obligations arising in respect
of drawn and undrawn Letters of Credit, (i) senior obligations with
respect to Financial Hedges, but only following the occurrence of a default
under the applicable Financial Hedge or a Default hereunder, (j) senior
obligations with respect to debt for which a Person is responsible or liable
solely as a guarantor, but only from and after the date demand for payment is
made under the applicable guaranty, and (k) any other obligation for borrowed
money or other financial accommodation which in accordance with Agreement
Accounting Principles would be shown as a liability on the consolidated balance
sheet of such Person.

 

“Insurance Subsidiary”
means any Subsidiary which is engaged in the insurance business.

 

“Interest Coverage Ratio”
means, as of any date of determination, the ratio of (a) the greater of (i) 10%
of RLIC’s Statutory Surplus as Regards Policyholders as of such date and (ii) RLIC’s
aggregate Statutory Net Income for the period of four fiscal quarters ending on
such date without regard to unrealized capital gains in such period (determined
on a pre-tax basis) and determined without double counting, plus the
consolidated net income of the Borrower’s Subsidiaries which are not Insurance
Subsidiaries or Subsidiaries of Insurance Subsidiaries, to (b) the
Borrower’s Consolidated Interest Expense paid in the period of four fiscal
quarters ending on such date.

 

“Interest Period” means,
with respect to a Eurodollar Advance, a period of one, two, three or six months
commencing on a Business Day selected by the Borrower pursuant to this
Agreement.  Such Interest Period shall
end on the day which corresponds numerically to such date one, two, three or
six months thereafter, provided, however, that if there is no
such numerically corresponding day in such next, second, third or sixth
succeeding month, such Interest Period shall end on the last Business Day of
such next, second, third or sixth succeeding month.  If an Interest Period would otherwise end on
a day which is not a Business Day, such Interest Period shall end on the next
succeeding Business Day, provided, however, that if said next
succeeding Business Day falls in a new calendar month, such Interest Period
shall end on the immediately preceding Business Day.

 

7

 

“Investment” of a Person
means any loan, advance (other than commission, travel and similar advances to
officers and employees made in the ordinary course of business), extension of
credit (other than premiums or accounts receivable arising in the ordinary
course of business on terms customary in the trade) or contribution of capital
by such Person; stocks, bonds, mutual funds, partnership interests, notes,
debentures or other securities owned by such Person; any deposit accounts and
certificate of deposit owned by such Person; and structured notes, derivative
financial instruments and other similar instruments or contracts owned by  such Person.

 

“Investment Grade
Obligations” means, as of any date for each Insurance Subsidiary, investments
having an NAIC investment rating of 1 or 2, or a Standard & Poor’s
rating within the range of ratings from AAA to BBB-, or a Moody’s rating within
the range of ratings from Aaa to Baa3.

 

“JPMCB” means JPMorgan
Chase Bank, N.A. (successor by merger to Bank One, Illinois, NA), a national
banking association, in its individual capacity, and its successors.

 

“JPMCB Credit Agreement”
means that certain Amended and Restated Credit Agreement dated as of the date
hereof among the Borrower, the lenders party thereto and JPMCB, as agent, as
amended, supplemented, restated or modified from time to time.

 

“JPMCB Credit Facility”
means the revolving credit facility created pursuant to the JPMCB Credit
Agreement.

 

“LaSalle” means LaSalle
Bank National Association, a national banking association in its individual
capacity and its successors.

 

“Laws” means all
ordinances, statutes, rules, regulations, codes, orders, injunctions, writs or
decrees of any Governmental Authority.

 

“Lenders” means the
lending institutions listed on the signature pages of this Agreement and
their respective successors and assigns.

 

“Lending Installation”
means, with respect to a Lender or the Agent, the office, branch, subsidiary or
affiliate of such Lender or the Agent listed on the signature pages hereof
or on a Schedule or otherwise selected by such Lender or the Agent
pursuant to Section 2.17.

 

“Letter of Credit” of a
Person means a letter of credit or similar instrument which is issued upon the
application of such Person or upon which such Person is an account party or for
which such Person is in any way liable.

 

“LIBO Rate” means, with
respect to any Eurodollar Advance for any Interest Period, the rate appearing
on Page 3750 of the Dow Jones Market Service (or on any successor or
substitute page of such Service, or any successor to or substitute for
such Service, providing rate quotations comparable to those currently provided
on such page of such Service, as determined by the Agent from time to time
for purposes of providing quotations of interest rates applicable to dollar
deposits in the London interbank market) at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period, as the rate for dollar deposits

 

8

 

with a maturity
comparable to such Interest Period.  In
the event that such rate is not available at such time for any reason, then the
“LIBO Rate” with respect to such Eurodollar Advance for such Interest
Period shall be the rate at which dollar deposits of $5,000,000 and for a
maturity comparable to such Interest Period are offered by the principal London
office of the 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.

 

“License”
means any license, certificate of authority, permit or other authorization
which is required to be obtained from any Governmental Authority in connection
with the operation, ownership or transaction of insurance business.

 

“Lien” means any lien
(statutory or other), mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, the interest of a vendor or lessor under any conditional sale,
Capitalized Lease or other title retention agreement).

 

“Loan” means, with
respect to a Lender, such Lender’s loan made pursuant to Article II
(or any conversion or continuation thereof).

 

“Loan Documents” means this
Agreement and any Notes issued pursuant to Section 2.13.

 

“Material Adverse Effect”
means a material adverse effect on (a) the business, Property, condition
(financial or otherwise) or results of operations of the Borrower and its
Subsidiaries taken as a whole, (b) the ability of the Borrower to perform
its obligations under the Loan Documents, or (c) the validity or
enforceability of any of the Loan Documents or the rights or remedies of the
Agent or the Lenders thereunder.

 

“Material Indebtedness”
means Indebtedness in an outstanding principal amount of $10,000,000 or more in
the aggregate (or the equivalent thereof in any currency other than U.S.
dollars).

 

“Material Indebtedness
Agreement” means any agreement under which any Material Indebtedness was
created or is governed or which provides for the incurrence of Indebtedness in
an amount which would constitute Material Indebtedness (whether or not an
amount of Indebtedness constituting Material Indebtedness is outstanding
thereunder), including the JPMCB Credit Facility.

 

“MHIC” means Mt. Hawley
Insurance Company, an Illinois insurance company.

 

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

 

“NAIC” means the National
Association of Insurance Commissioners or any successor thereto, or in lieu
thereof, any other association, agency or other organization performing
advisory, coordination or other like functions among insurance departments,
insurance commissioners and similar Governmental Authorities of the various
states of the United States toward the promotion of uniformity in the practices
of such Governmental Authorities.

 

9

 

“Non-U.S. Lender” is
defined in Section 3.5(d).

 

“Note” is defined in Section 2.13.

 

“Obligations” means all
unpaid principal of and accrued and unpaid interest on the Loans, all accrued
and unpaid fees and all expenses, reimbursements, indemnities and other
obligations of the Borrower to the Lenders or to any Lender, the Agent or any
indemnified party arising under the Loan Documents.

 

“Other Taxes” is defined
in Section 3.5(b).

 

“Participants” is defined
in Section 12.2.1.

 

“Payment Date” means the
first day of each January, April, July and October.

 

“PBGC” means the Pension
Benefit Guaranty Corporation, or any successor thereto.

 

“Person” means any
natural person, corporation, firm, joint venture, partnership, limited
liability company, association, enterprise, trust or other entity or
organization, or any government or political subdivision or any agency,
department or instrumentality thereof.

 

“Plan” means an employee
pension benefit plan which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code as to which the
Borrower or any member of the Controlled Group may have any liability.

 

“Prime Rate” means the
rate of interest per annum publicly announced from time to time by LaSalle as
its prime rate in effect at its principal office in Chicago; each change in the
Prime Rate shall be effective from and including the date such change is
publicly announced as being effective.

 

“Property” of a Person
means any and all property, whether real, personal, tangible, intangible, or
mixed, of such Person, or other assets owned, leased or operated by such
Person.

 

“Purchasers” is defined
in Section 12.3.1.

 

“Quarterly Statement”
means the quarterly statutory financial statement of any Insurance Subsidiary
required to be filed with the insurance commissioner (or similar authority) of
its jurisdiction of incorporation or, if no specific form is so required, in
the form of financial statements permitted by such insurance commissioner (or
such similar authority) to be used for filing quarterly statutory financial
statements and shall contain the type of financial information permitted by
such insurance commissioner (or such similar authority) to be disclosed
therein, together with all exhibits or schedules filed therewith.

 

“Regulation D” means
Regulation D of the Board of Governors of the Federal Reserve System as from
time to time in effect and any successor thereto or other regulation or
official interpretation of said Board of Governors relating to reserve
requirements applicable to member banks of the Federal Reserve System.

 

10

 

“Regulation U” means Regulation
U of the Board of Governors of the Federal Reserve System as from time to time
in effect and any successor or other regulation or official interpretation of
said Board of Governors relating to the extension of credit by banks for the
purpose of purchasing or carrying margin stocks applicable to member banks of
the Federal Reserve System.

 

“Reportable Event” means
a reportable event as defined in Section 4043 of ERISA and the regulations
issued under such section, with respect to a Plan, excluding, however, such
events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of
ERISA that it be notified within 30 days of the occurrence of such event, provided,
however, that a failure to meet the minimum funding standard of Section 412
of the Code and of Section 302 of ERISA shall be a Reportable Event
regardless of the issuance of any such waiver of the notice requirement in
accordance with either Section 4043(a) of ERISA or Section 412(d) of
the Code.

 

“Reports” is defined in Section 9.6.

 

“Required Lenders” means
Lenders in the aggregate having at least a majority of the Aggregate Commitment
or, if the Aggregate Commitment has been terminated, Lenders in the aggregate
holding at least a majority of the aggregate unpaid principal amount of the
outstanding Advances.

 

“Reserve Requirement”
means, with respect to an Interest Period, the maximum aggregate reserve
requirement (including all basic, supplemental, marginal and other reserves)
which is imposed under Regulation D on Eurocurrency liabilities.

 

“Response Date” is
defined in Section 2.19.

 

“Restatement Date” means
the date on which each of the conditions set forth in Section 4.1
has been satisfied.

 

“Risk Based Capital Act”
means the Risk-Based Capital for Property and Casualty Insurers Model Act and
the rules, regulations and procedures prescribed from time to time by the NAIC
with respect thereto, in each case as amended, modified or supplemented from
time to time by the NAIC.

 

“Risk-Based Capital
Guidelines” is defined in Section 3.2.

 

“RLIC” means RLI
Insurance Company, an Illinois company.

 

“SAP” means, with respect
to any Insurance Subsidiary, the statutory accounting practices prescribed or
permitted by the insurance commissioner (or other similar authority) in the
jurisdiction of such Person for the preparation of annual statements and other
financial reports by insurance companies of the same type as such Person in
effect from time to time, applied in a manner consistent with those used in
preparing the financial statements referred to in Section 6.1.

 

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

 

11

 

“Schedule” refers to a
specific schedule to this Agreement, unless another document is
specifically referenced.

 

“Section” means a
numbered section of this Agreement, unless another document is
specifically referenced.

 

“Single Employer Plan”
means a Plan maintained by the Borrower or any member of the Controlled Group
for employees of the Borrower or any member of the Controlled Group.

 

“Statutory Net Income”
means, with respect to any Insurance Subsidiary at any time, the net income of
such Insurance Subsidiary at such time, as determined in accordance with SAP.

 

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

 

“Statutory Surplus as
Regards Policyholders” means, with respect to any Insurance Subsidiary at any
time, the capital and surplus of such Insurance Subsidiary at such time, as
determined in accordance with SAP.

 

“Subsidiary” of a Person
means (a) any corporation more than 50% of the outstanding securities
having ordinary voting power of which shall at the time be owned or controlled,
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries, or (b) any
partnership, limited liability company, association, joint venture or similar
business organization more than 50% of the ownership interests having ordinary
voting power of which shall at the time be so owned or controlled.  Unless otherwise expressly provided, all
references herein to a “Subsidiary” shall mean a Subsidiary of the Borrower.

 

“Substantial Portion”
means, with respect to the Property of the Borrower and its Subsidiaries,
Property which represents more than 10% of the consolidated assets of the
Borrower and its Subsidiaries or property which is responsible for more than
10% of the consolidated net revenue of the Borrower and its Subsidiaries, in
each case, as would be shown in the consolidated financial statements of the
Borrower and its Subsidiaries as at the beginning of the twelve-month period
ending with the month in which such determination is made (or if financial
statements have not been delivered hereunder for that month which begins the
twelve-month period, then the financial statements delivered hereunder for the
quarter ending immediately prior to that month).

 

12

 

“Taxes” means any and all
present or future taxes, duties, levies, imposts, deductions, charges or
withholdings, and any and all liabilities with respect to the foregoing, but
excluding Excluded Taxes and Other Taxes.

 

“Total Invested Assets”
means, as of any date, as to each Insurance Subsidiary, the amount of such
Insurance Subsidiary’s cash and invested assets calculated in accordance with
SAP.

 

“Transferee” is defined
in Section 12.4.

 

“Type” means, with
respect to any Advance, its nature as a Floating Rate Advance or a Eurodollar
Advance and with respect to any Loan, its nature as a Floating Rate Loan or a
Eurodollar Loan.

 

“Unfunded Liabilities”
means the amount (if any) by which the present value of all vested and unvested
accrued benefits under all Single Employer Plans exceeds the fair market value
of all such Plan assets allocable to such benefits, all determined as of the
then most recent valuation date for such Plans using PBGC actuarial assumptions
for single employer plan terminations.

 

“Unmatured Default” means
an event which but for the lapse of time or the giving of notice, or both,
would constitute a Default.

 

“Wholly-Owned Subsidiary”
of a Person means (a) any Subsidiary all of the outstanding voting
securities of which shall at the time be owned or controlled, directly or
indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person,
or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (b) any
partnership, limited liability company, association, joint venture or similar
business organization 100% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled.

 

The foregoing definitions
shall be equally applicable to both the singular and plural forms of the
defined terms.  References herein to
particular columns, lines or sections of any Person’s Annual Statement shall be
deemed, where appropriate, to be references to the corresponding column, line
or section of such Person’s Quarterly Statement, or if no such
corresponding column, line or section exists or if any report form
changes, then to the corresponding item referenced thereby.   In the event that the columns, lines or
sections of the Annual Statement referenced herein are changed or renumbered,
all such references shall be deemed references to such column, line or section as
so renumbered or changed.   References herein to the Risk Based Capital
Act shall be deemed to be references to such act as in effect on the date of
this Agreement; provided, that the Agent, the Lenders and the Borrower agree to
make mutually acceptable modifications to Section 6.18 hereof
following the request by any thereof upon any modification to such act.  Each accounting term used herein which is not
otherwise defined herein shall be defined in accordance with Agreement
Accounting Principles or SAP, as applicable, unless otherwise specified.

 

13

 

ARTICLE II

 

THE CREDITS

 

2.1                                 Commitment.  From and including the date of this Agreement
and prior to the Facility Termination Date, each Lender severally agrees, on
the terms and conditions set forth in this Agreement, to make Loans to the
Borrower from time to time in amounts not to exceed in the aggregate at any one
time outstanding the amount of its Commitment. 
Subject to the terms of this Agreement, the Borrower may borrow, repay
and reborrow at any time prior to the Facility Termination Date; provided,
that the Borrower may not make any borrowing hereunder if, after giving effect
thereto, the aggregate principal amount of the outstanding Loans hereunder
would exceed or be less than the principal amount outstanding of the JPMCB
Credit Facility (after giving effect to any concurrent borrowing
thereunder).  The Commitments to lend
hereunder shall expire on the Facility Termination Date.

 

2.2                                 Termination.  Any outstanding Advances and all other unpaid
Obligations shall be paid in full by the Borrower on the Facility Termination
Date.

 

2.3                                 Ratable
Loans.  Each Advance hereunder
shall consist of Loans made from the several Lenders ratably in proportion to
the ratio that their respective Commitments bear to the Aggregate Commitment.

 

2.4                                 Types
of Advances.  The Advances may
be Floating Rate Advances or Eurodollar Advances, or a combination thereof,
selected by the Borrower in accordance with Sections 2.8 and 2.9.

 

2.5                                 Commitment Fee;
Reductions and Increases in Aggregate Commitment.

 

(a)                                  The
Borrower agrees to pay to the Agent for the account of each Lender a commitment
fee at a per annum rate equal to .20% on the daily unused portion of such
Lender’s Commitment from the date hereof to and including the Facility
Termination Date, payable on each Payment Date hereafter and on the Facility
Termination Date.  All accrued commitment
fees shall be payable on the effective date of any termination of the
obligations of the Lenders to make Loans hereunder.

 

(b)                                 The
Borrower may permanently reduce the Aggregate Commitment in whole, or in part
ratably among the Lenders in integral multiples of $1,000,000, upon at least
five Business Days’ written notice to the Agent, which notice shall specify the
amount of any such reduction, provided, however, that the amount
of the Aggregate Commitment may not be reduced below the aggregate principal
amount of the outstanding Advances.

 

(c)                                  The
Borrower may, at its option, on up to two occasions, seek to increase the Aggregate
Commitment by up to an aggregate amount of $10,000,000 (resulting in a maximum
Aggregate Commitment of $20,000,000) upon at least three (3) Business Days’
prior written notice to the Agent, which notice shall specify the amount of any
such increase and shall be delivered at a time when no Default or Unmatured
Default has occurred and is continuing; provided, that the Borrower shall
increase the aggregate commitment under the JPMCB Credit

 

14

 

Facility by the same amount at the time of any such
increase.  The Borrower shall, after
giving such notice, first offer the increase in the Aggregate Commitment on a
ratable basis to the Lenders (which may be declined by any Lender in its sole
discretion).  If any existing Lender does
not accept the offer to increase its Commitment, the Borrower may offer the
amount so declined to one or more Lenders and/or to other Lenders or entities
reasonably acceptable to the Agent.  No
increase in the Aggregate Commitment shall become effective until the existing
or new Lenders extending such incremental Commitment amount and the Borrower
shall have delivered to the Agent a document in form reasonably satisfactory to
the Agent pursuant to which any such existing Lender states the amount of its
Commitment increase,  any such new Lender
states its Commitment amount and agrees to assume and accept the obligations
and rights of a Lender hereunder and the Borrower accepts such incremental
Commitments.  The Lenders (new or
existing) shall accept an assignment from the existing Lenders, and the
existing Lenders shall make an assignment to the new or existing Lender
accepting a new or increased Commitment, of a direct or participation interest
in each then outstanding Advance such that, after giving effect thereto, all
credit exposure hereunder is held ratably by the Lenders in proportion to their
respective Commitments.  Assignments
pursuant to the preceding sentence shall be made in exchange for the principal
amount assigned plus accrued and unpaid interest and facility fees.  The Borrower shall make any payments under Section 3.4
resulting from such assignments.  Any
such increase of the Aggregate Commitment shall be subject to receipt by the
Agent from the Borrower of such supplemental opinions, resolutions,
certificates and other documents as the Agent may reasonably request.

 

2.6                                 Minimum Amount of
Each Advance.  Each Eurodollar
Advance shall be in an amount of not less than $1,000,000 or any larger amount
that is an integral multiple of $500,000, and each Floating Rate Advance shall
be in an amount of not less than $500,000 or any larger amount that is an
integral multiple of $500,000, provided, however, that any
Floating Rate Advance may be in the amount of the unused Aggregate Commitment.

 

2.7                                 Optional
Principal Payments.  The
Borrower may from time to time pay, without penalty or premium, all outstanding
Floating Rate Advances, or, in a minimum aggregate amount of $1,000,000 or any
integral multiple of $100,000 in excess thereof, any portion of the outstanding
Floating Rate Advances upon two Business Days’ prior notice to the Agent.  The Borrower may from time to time pay,
subject to the payment of any funding indemnification amounts required by Section 3.4
but without penalty or premium, all outstanding Eurodollar Advances, or, in a
minimum aggregate amount of $1,000,000 or any integral multiple of $100,000 in
excess thereof, any portion of the outstanding Eurodollar Advances upon three
Business Days’ prior notice to the Agent.

 

2.8                                 Method of Selecting
Types and Interest Periods for New Advances.  The Borrower shall select the Type of Advance
and, in the case of each Eurodollar Advance, the Interest Period applicable
thereto from time to time.  The Borrower
shall give the Agent irrevocable notice (a “Borrowing Notice”) not later than
12:00 noon (Chicago time) on the Borrowing Date of each Floating Rate Advance
and two Business Days before the Borrowing Date for each Eurodollar Advance,
specifying:

 

(i)                                     the
Borrowing Date, which shall be a Business Day, of such Advance,

 

15

 

(ii)                                  the
aggregate amount of such Advance,

 

(iii)                               the Type of Advance
selected, and

 

(iv)                              in
the case of each Eurodollar Advance, the Interest Period applicable thereto (which
may not end after the Facility Termination Date).

 

Not later than 2:00 p.m.
(Chicago time) on each Borrowing Date, each Lender shall make available its
Loan or Loans in funds immediately available in Chicago to the Agent at its
address specified pursuant to Article XIII.  The Agent will make the funds so received
from the Lenders available to the Borrower at the Agent’s aforesaid address.

 

2.9                                 Conversion and
Continuation of Outstanding Advances.  Floating Rate Advances shall continue as
Floating Rate Advances unless and until such Floating Rate Advances are
converted into Eurodollar Advances pursuant to this Section 2.9 or
are repaid in accordance with Section 2.7.  Each Eurodollar Advance shall continue as a
Eurodollar Advance until the end of the then applicable Interest Period
therefor, at which time such Eurodollar Advance shall be automatically
converted into a Floating Rate Advance unless (x) such Eurodollar Advance is or
was repaid in accordance with Section 2.7 or (y) the Borrower shall
have given the Agent a Conversion/Continuation Notice (as defined below)
requesting that, at the end of such Interest Period, such Eurodollar Advance
continue as a Eurodollar Advance for the same or another Interest Period.  Subject to the terms of Section 2.6,
the Borrower may elect from time to time to convert all or any part of a
Floating Rate Advance into a Eurodollar Advance.  The Borrower shall give the Agent irrevocable
notice (a “Conversion/Continuation Notice”) of each conversion of a Floating
Rate Advance into a Eurodollar Advance or continuation of a Eurodollar Advance
not later than 12:00 noon (Chicago time) at least two Business Days prior to
the date of the requested conversion or continuation, specifying:

 

(i)                                     the
requested date, which shall be a Business Day, of such conversion or
continuation,

 

(ii)                                  the
aggregate amount and Type of the Advance which is to be converted or continued,
and

 

(iii)                               the amount of such
Advance which is to be converted into or continued as a Eurodollar Advance and
the duration of the Interest Period applicable thereto (which may not end after
the Facility Termination Date).

 

2.10                           Changes
in Interest Rate, etc.  Each
Floating Rate Advance shall bear interest on the outstanding principal amount
thereof, for each day from and including the date such Advance is made or is
automatically converted from a Eurodollar Advance into a Floating Rate Advance
pursuant to Section 2.9, to but excluding the date it is paid or is
converted into a Eurodollar Advance pursuant to Section 2.9 hereof,
at a rate per annum equal to the Floating Rate for such day.  Changes in the rate of interest on that
portion of any Advance maintained as a Floating Rate Advance will take effect
simultaneously with each change in the Alternate Base Rate.  Each Eurodollar Advance shall bear interest
on the outstanding principal amount thereof from and including the first day of
the Interest Period applicable thereto to (but not including) the last day

 

16

 

of such Interest Period at the interest rate
determined by the Agent as applicable to such Eurodollar Advance based upon the
Borrower’s selections under Sections 2.8 and 2.9 and otherwise in accordance
with the terms hereof.  No Interest
Period may end after the Facility Termination Date.

 

2.11                           Rates Applicable After
Default.  Notwithstanding
anything to the contrary contained in Section 2.8, 2.9 or 2.10,
during the continuance of a Default or Unmatured Default the Required Lenders
may, at their option, by notice to the Borrower (which notice may be revoked at
the option of the Required Lenders notwithstanding any provision of Section 8.2
requiring unanimous consent of the Lenders to changes in interest rates),
declare that no Advance may be made as, converted into or continued as a
Eurodollar Advance.  During the
continuance of a Default the Required Lenders may, at their option, by notice
to the Borrower (which notice may be revoked at the option of the Required
Lenders notwithstanding any provision of Section 8.2 requiring unanimous
consent of the Lenders to changes in interest rates), declare that (i) each
Eurodollar Advance shall bear interest for the remainder of the applicable
Interest Period at the rate otherwise applicable to such Interest Period plus
2% per annum and (ii) each Floating Rate Advance shall bear interest at a
rate per annum equal to the Floating Rate in effect from time to time plus 2%
per annum, provided that, during the continuance of a Default under Section 7.6
or 7.7, the interest rates set forth in clauses (i) and (ii) above
shall be applicable to all Advances without any election or action on the part
of the Agent or any Lender.

 

2.12                           Method
of Payment.  All payments of
the Obligations hereunder shall be made, without setoff, deduction, or
counterclaim, in immediately available funds to the Agent at the Agent’s
address specified pursuant to Article XIII, or at any other Lending
Installation of the Agent specified in writing by the Agent to the Borrower, by
noon (local time) on the date when due and shall be applied ratably by the
Agent among the Lenders.  Each payment
delivered to the Agent for the account of any Lender shall be delivered
promptly by the Agent to such Lender in the same type of funds that the Agent
received at its address specified pursuant to Article XIII or at
any Lending Installation specified in a notice received by the Agent from such
Lender.  The Agent is hereby authorized
at any time during the continuance of a Default to charge the account of the
Borrower maintained with LaSalle for each payment of principal, interest and
fees as it becomes due and remains unpaid hereunder, other than any part
thereof which is reasonably being disputed by the Borrower.

 

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

 

(b)                                 The
Agent shall also maintain accounts in which it will record (i) the amount
of each Loan made hereunder, the Type thereof and the Interest Period with
respect thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder
and (iii) the amount of any sum received by the Agent hereunder from the
Borrower and each Lender’s share thereof.

 

17

(c)                                  The
entries maintained in the accounts maintained pursuant to paragraphs (a) and
(b) above shall be prima facie evidence of the existence and amounts of
the Obligations therein recorded; provided, however, that the
failure of the Agent or any Lender to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Obligations in accordance with their terms.

 

(d)                                 Any
Lender may request that its Loans be evidenced by a promissory note in
substantially the form of Exhibit C (a “Note”).  In such event, the Borrower shall prepare,
execute and deliver to such Lender such Note payable to the order of such
Lender.  Thereafter, the Loans evidenced
by such Note and interest thereon shall at all times (prior to any assignment
pursuant to Section 12.3) be represented by one or more Notes
payable to the order of the payee named therein, except to the extent that any
such Lender subsequently returns any such Note for cancellation and requests
that such Loans once again be evidenced as described in paragraphs (a) and
(b) above.

 

2.14                           Telephonic
Notices.  The Borrower hereby
authorizes the Lenders and the Agent to extend, convert or continue Advances,
effect selections of Types of Advances and to transfer funds based on
telephonic notices made by any person or persons the Agent or any Lender in
good faith believes to be acting on behalf of the Borrower, it being understood
that the foregoing authorization is specifically intended to allow Borrowing
Notices and Conversion/Continuation Notices to be given telephonically.  The Borrower agrees to deliver promptly to
the Agent a written confirmation, if such confirmation is requested by the
Agent or any Lender, of each telephonic notice signed by an Authorized
Officer.  If the written confirmation
differs in any material respect from the action taken by the Agent and the
Lenders, the records of the Agent and the Lenders shall govern absent manifest
error.

 

2.15                           Interest Payment Dates;
Interest and Fee Basis. 
Interest accrued on each Floating Rate Advance shall be payable on each
Payment Date, commencing with the first such date to occur after the date
hereof and at maturity.  Interest accrued
on each Eurodollar Advance shall be payable on the last day of its applicable
Interest Period, on any date on which the Eurodollar Advance is prepaid,
whether by acceleration or otherwise, and at maturity.  Interest accrued on each Eurodollar Advance
having an Interest Period longer than three months shall also be payable on the
last day of each three-month interval during such Interest Period.  Interest and commitment fees shall be
calculated for actual days elapsed on the basis of a 360-day year.  Interest shall be payable for the day an
Advance is made but not for the day of any payment on the amount paid if
payment is received prior to noon (local time) at the place of payment.  If any payment of principal of or interest on
an Advance shall become due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and, in the case of a
principal payment, such extension of time shall be included in computing
interest in connection with such payment.

 

2.16                           Notification of Advances,
Interest Rates, Prepayments and Commitment Reductions.  Promptly after receipt thereof, the Agent
will notify each Lender of the contents of each Aggregate Commitment reduction
notice, Borrowing Notice, Conversion/Continuation Notice, and repayment notice
received by it hereunder.  The Agent will
notify each Lender of the interest rate applicable to each Eurodollar Advance
promptly upon determination of such interest rate and will give each Lender
prompt notice of each change in the Alternate Base Rate.

 

18

 

2.17                           Lending
Installations.  Each Lender
may book its Loans at any Lending Installation selected by such Lender and may
change its Lending Installation from time to time.  All terms of this Agreement shall apply to
any such Lending Installation and the Loans and any Notes issued hereunder
shall be deemed held by each Lender for the benefit of any such Lending
Installation.  Each Lender may, by
written notice to the Agent and the Borrower in accordance with Article XIII,
designate replacement or additional Lending Installations through which Loans
will be made by it and for whose account Loan payments are to be made.

 

2.18                           Non-Receipt of Funds by
the Agent.  Unless the
Borrower or a Lender, as the case may be, notifies the Agent prior to the date
on which it is scheduled to make payment to the Agent of (i) in the case
of a Lender, the proceeds of a Loan or (ii) in the case of the Borrower, a
payment of principal, interest or fees to the Agent for the account of the
Lenders, that it does not intend to make such payment, the Agent may assume
that such payment has been made.  The
Agent may, but shall not be obligated to, make the amount of such payment
available to the intended recipient in reliance upon such assumption.  If such Lender or the Borrower, as the case
may be, has not in fact made such payment to the Agent, the recipient of such
payment shall, on demand by the Agent, repay to the Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the Agent
until the date the Agent recovers such amount at a rate per annum equal to (x)
in the case of payment by a Lender, the Federal Funds Effective Rate for such
day for the first three days and, thereafter, the interest rate applicable to
the relevant Loan or (y) in the case of payment by the Borrower, the interest
rate applicable to the relevant Loan.

 

ARTICLE III

 

YIELD PROTECTION; TAXES

 

3.1                                 Yield
Protection.  If, on or after
the date of this Agreement, the adoption of any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or directive (whether or
not having the force of law), or any change in the interpretation or
administration thereof by any governmental or quasi-governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender or applicable Lending Installation with
any request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency:

 

(a)                                  subjects
any Lender or any applicable Lending Installation to any Taxes, or changes the
basis of taxation of payments (other than with respect to Excluded Taxes) to
any Lender in respect of its Eurodollar Loans, or

 

(b)                                 imposes
or increases or deems applicable any reserve, assessment, insurance charge,
special deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Lender or any applicable Lending
Installation (other than reserves and assessments taken into account in
determining the interest rate applicable to Eurodollar Advances), or

 

19

 

(c)                                  imposes
any other condition the result of which is to increase the cost to any Lender
or any applicable Lending Installation of making, funding or maintaining its
Eurodollar Loans or reduces any amount receivable by any Lender or any
applicable Lending Installation in connection with its Eurodollar Loans, or
requires any Lender or any applicable Lending Installation to make any payment
calculated by reference to the amount of Eurodollar Loans held or interest
received by it, by an amount deemed material by such Lender,

 

and the result of any of
the foregoing is to increase the cost to such Lender or applicable Lending
Installation of making or maintaining its Eurodollar Loans or Commitment or to
reduce the return received by such Lender or applicable Lending Installation in
connection with such Eurodollar Loans or Commitment, then, within 15 days of
demand by such Lender, the Borrower shall pay such Lender such additional
amount or amounts as will compensate such Lender for such increased cost or
reduction in amount received.

 

3.2                                 Changes in Capital
Adequacy Regulations.  If a
Lender determines the amount of capital required or expected to be maintained
by such Lender, any Lending Installation of such Lender or any corporation
controlling such Lender is increased as a result of a Change, then, within 15
days of demand by such Lender, the Borrower shall pay such Lender the amount
necessary to compensate for any shortfall in the rate of return on the portion
of such increased capital which such Lender determines is attributable to this
Agreement, its Loans or its Commitment to make Loans hereunder (after taking
into account such Lender’s policies as to capital adequacy).  “Change” means (a) any change after the
date of this Agreement in the Risk-Based Capital Guidelines or (b) any
adoption of or change in any other law, governmental or quasi-governmental
rule, regulation, policy, guideline, interpretation, or directive (whether or
not having the force of law) after the date of this Agreement which affects the
amount of capital required or expected to be maintained by any Lender or any
Lending Installation or any corporation controlling any Lender.  “Risk-Based Capital Guidelines” means (a) the
risk-based capital guidelines in effect in the United States on the date of
this Agreement, including transition rules, and (b) the corresponding
capital regulations promulgated by regulatory authorities outside the United
States implementing the July 1988 report of the Basle Committee on Banking
Regulation and Supervisory Practices Entitled “International Convergence of
Capital Measurements and Capital Standards,” including transition rules, and
any amendments to such regulations adopted prior to the date of this Agreement.

 

3.3                                 Availability of
Types of Advances.  If any
Lender determines that maintenance of its Eurodollar Loans at a suitable
Lending Installation would violate any applicable law, rule, regulation, or
directive, whether or not having the force of law, or if the Required Lenders
determine that (a) deposits of a type and maturity appropriate to match
fund Eurodollar Advances are not available or (b) the interest rate
applicable to Eurodollar Advances does not accurately reflect the cost of
making or maintaining Eurodollar Advances, then the Agent shall suspend the
availability of Eurodollar Advances and require any affected Eurodollar
Advances to be repaid or converted to Floating Rate Advances, subject to the
payment of any funding indemnification amounts required by Section 3.4.

 

3.4                                 Funding
Indemnification.  If any
payment of a Eurodollar Advance occurs on a date which is not the last day of the
applicable Interest Period, whether because of acceleration, prepayment or
otherwise, or a Eurodollar Advance is not made on the date specified by the

 

20

 

Borrower for any reason other than default by the
Lenders, the Borrower will indemnify each Lender for any loss or cost incurred
by it resulting therefrom, including, without limitation, any loss or cost in
liquidating or employing deposits acquired to fund or maintain such Eurodollar
Advance.

 

3.5                                 Taxes.  (a) All payments by the Borrower to or
for the account of any Lender or the Agent hereunder or under any Note shall be
made free and clear of and without deduction for any and all Taxes.  If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to any Lender
or the Agent, (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 3.5) such Lender or the
Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make
such deductions, (iii) the Borrower shall pay the full amount deducted to
the relevant authority in accordance with applicable law and (iv) the
Borrower shall furnish to the Agent the original copy of a receipt evidencing
payment thereof within 30 days after such payment is made.

 

(b)                                 In
addition, the Borrower hereby agrees to pay any present or future stamp or
documentary taxes and any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or under any Note or from
the execution or delivery of, or otherwise with respect to, this Agreement or
any Note (“Other Taxes”).

 

(c)                                  The
Borrower hereby agrees to indemnify the Agent and each Lender for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed on amounts payable under this Section 3.5) paid
by the Agent or such Lender as a result of its Commitment, any Loans made by it
hereunder, or otherwise in connection with its participation in this Agreement
and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto. 
Payments due under this indemnification shall be made within 30 days of
the date the Agent or such Lender makes demand therefor pursuant to Section 3.6.

 

(d)                                 Each
Lender that is not incorporated under the laws of the United States of America
or a state thereof (each a “Non-U.S. Lender”) agrees that it will, not more
than ten Business Days after the date of this Agreement, (i) deliver to
the Agent two duly completed copies of United States Internal Revenue Service Form W-8BEN
or W-8ECI, certifying in either case that such Lender is entitled to receive
payments under this Agreement without deduction or withholding of any United
States federal income taxes, and (ii) deliver to the Agent a United States
Internal Revenue Form W-8 or W-9, as the case may be, and certify that it
is entitled to an exemption from United States backup withholding tax.  Each Non-U.S. Lender further undertakes to
deliver to each of the Borrower and the Agent (x) renewals or additional copies
of such form (or any successor form) on or before the date that such form
expires or becomes obsolete, and (y) after the occurrence of any event
requiring a change in the most recent forms so delivered by it, such additional
forms or amendments thereto as may be reasonably requested by the Borrower or
the Agent.  All forms or amendments
described in the preceding sentence shall certify that such Lender is entitled
to receive payments under this Agreement without deduction or withholding of
any United States federal income taxes, unless
an event (including without limitation any change in treaty, law or regulation)
has occurred prior to the date on which any

 

21

 

such delivery would otherwise be required which
renders all such forms inapplicable or which would prevent such Lender from
duly completing and delivering any such form or amendment with respect to it
and such Lender advises the Borrower and the Agent that it is not capable of
receiving payments without any deduction or withholding of United States
federal income tax.

 

(e)                                  For
any period during which a Non-U.S. Lender has failed to provide the Borrower
with an appropriate form pursuant to clause (d) above (unless such failure
is due to a change in treaty, law or regulation, or any change in the interpretation
or administration thereof by any governmental authority, occurring subsequent
to the date on which a form originally was required to be provided), such
Non-U.S. Lender shall not be entitled to indemnification under this Section 3.5
with respect to Taxes imposed by the United States; provided that, should a
Non-U.S. Lender which is otherwise exempt from or subject to a reduced rate of
withholding tax become subject to Taxes because of its failure to deliver a
form required under clause (d) above, the Borrower shall take such steps
as such Non-U.S. Lender shall reasonably request to assist such Non-U.S. Lender
to recover such Taxes.

 

(f)                                    Any
Lender that is entitled to an exemption from or reduction of withholding tax
with respect to payments under this Agreement or any Note pursuant to the law
of any relevant jurisdiction or any treaty shall deliver to the Borrower (with
a copy to the Agent), at the time or times prescribed by applicable law, such
properly completed and executed documentation prescribed by applicable law as
will permit such payments to be made without withholding or at a reduced rate.

 

(g)                                 If
the U.S. Internal Revenue Service or any other governmental authority of the
United States or any other country or any political subdivision thereof asserts
a claim that the Agent did not properly withhold tax from amounts paid to or
for the account of any Lender (because the appropriate form was not delivered
or properly completed, because such Lender failed to notify the Agent of a
change in circumstances which rendered its exemption from withholding
ineffective, or for any other reason), such Lender shall indemnify the Agent
fully for all amounts paid, directly or indirectly, by the Agent as tax,
withholding therefor, or otherwise, including penalties and interest, and
including taxes imposed by any jurisdiction on amounts payable to the Agent
under this subsection, together with all costs and expenses related thereto
(including attorneys fees and time charges of attorneys for the Agent, which attorneys
may be employees of the Agent).  The
obligations of the Lenders under this Section 3.5(g) shall
survive the payment of the Obligations and termination of this Agreement.

 

3.6                                 Lender Statements;
Survival of Indemnity.  (a) To
the extent reasonably possible, each Lender shall designate an alternate
Lending Installation with respect to its Eurodollar Loans to reduce any
liability of the Borrower to such Lender under Sections 3.1, 3.2
and 3.5 or to avoid the unavailability of Eurodollar Advances under Section 3.3,
so long as such designation is not, in the judgment of such Lender,
disadvantageous to such Lender.  Each
Lender shall deliver a written statement of such Lender to the Borrower (with a
copy to the Agent) as to the amount due, if any, under Section 3.1,
3.2, 3.4 or 3.5. 
Such written statement shall set forth in reasonable detail the
calculations upon which such Lender determined such amount and shall be final,
conclusive and binding on the Borrower in the absence of manifest error.  Determination of amounts payable under such
Sections in connection with a Eurodollar Loan shall be calculated as though
each Lender funded its Eurodollar Loan through the purchase of a deposit of the
type and

 

22

 

maturity corresponding to the deposit used as a
reference in determining the Adjusted LIBO Rate applicable to such Loan,
whether in fact that is the case or not. 
Unless otherwise provided herein, the amount specified in the written
statement of any Lender shall be payable on demand after receipt by the
Borrower of such written statement.  The
obligations of the Borrower under Sections 3.1, 3.2, 3.4
and 3.5 shall survive payment of the Obligations and termination of this
Agreement.

 

(b)                                 Notwithstanding any other provision of
this Agreement, if any Lender fails to notify the Borrower of any event or
circumstance which would entitle such Lender to compensation pursuant to this Article III
within 180 days after such Lender obtains knowledge of such event or circumstance,
then such Lender shall not be entitled to compensation from the Borrower for
any amount arising prior to the date that is 180 days before the date on which
such Lender notifies the Borrower of such event or circumstance.

 

3.7                                 Substitution
of Lender.  Upon the receipt
by the Borrower from any Lender (an “Affected Lender”) of a claim for
compensation under Section 3.1,  3.2 or 3.5 or a
notice in accordance with Section 3.3 regarding the unavailability
of a Type of Advance, the Borrower may: (a) request the Affected Lender to
use commercially reasonable efforts to obtain a replacement bank or other
entity satisfactory to the Borrower to acquire and assume all or a ratable part
of all of such Affected Lender’s Loans and Commitment at the face amount thereof
(a “Replacement Lender”); (b) request one or more of the other
Lenders to acquire and assume all or part of such Affected Lender’s Loans and
Commitment (which request each such other Lender may decline or agree to in its
sole discretion); or (c) designate a Replacement Lender.  Any such designation of a Replacement Lender
under clause (a) or (c) shall be subject to the prior written consent
of the Agent (which consent shall not unreasonably be withheld).  Any transfer of Loans or Commitment pursuant
to this Section shall be made in accordance with Section 12.3
and Section 3.4, if applicable.

 

ARTICLE IV

 

CONDITIONS PRECEDENT

 

4.1                                 Effectiveness.  This Agreement shall become effective when
the Borrower has furnished each of the following to the Agent with sufficient
copies for the Lenders:

 

(a)                                  Copies
of the articles of incorporation of the Borrower, together with all amendments,
and a certificate of good standing, each certified by the appropriate
governmental officer in its jurisdiction of incorporation.

 

(b)                                 Copies,
certified by the Secretary or Assistant Secretary of the Borrower, of its
by-laws and of its Board of Directors’ resolutions and of resolutions or
actions of any other body authorizing the execution of the Loan Documents to
which the Borrower is a party.

 

(c)                                  An
incumbency certificate, executed by the Secretary or Assistant Secretary of the
Borrower, which shall identify by name and title and bear the signatures of the
Authorized Officers and any other officers of the Borrower authorized to sign the
Loan

 

23

 

Documents to which the Borrower is a party, upon which
certificate the Agent and the Lenders shall be entitled to rely until informed
of any change in writing by the Borrower.

 

(d)                                 A
certificate, signed by the two Authorized Officers of the Borrower, stating
that on the Restatement Date no Default or Unmatured Default has occurred and
is continuing.

 

(e)                                  A
written opinion of Mary Beth Nebel, Esquire, counsel to Borrower, in form and
substance acceptable to the Agent and its counsel.

 

(f)                                    Executed
originals of this Agreement, the Note, and all other Loan Documents, together
with all schedules, exhibits, certificates, instruments, opinions, documents
and financial statements required to be delivered pursuant hereto and thereto.

 

(g)                                 Evidence
that the JPMCB Credit Agreement and the Reaffirmation and Amendment Agreement
(Intercreditor Agreement) dated as of the date hereof among JPMCB, LaSalle and
the Borrower have become effective.

 

(h)                                 Such
other documents as any Lender or its counsel may have reasonably requested.

 

4.2                                 Each
Advance.  The Lenders shall
not be required to make any Advance unless on the applicable Borrowing Date:

 

(a)                                  There
exists no Default or Unmatured Default.

 

(b)                                 The
representations and warranties contained in Article V are true and
correct as of such Borrowing Date except to the extent any such representation
or warranty is stated to relate solely to an earlier date, in which case such
representation or warranty shall have been true and correct on and as of such
earlier date.

 

(c)                                  The
aggregate principal amount of the outstanding Advances hereunder, after giving
effect to the proposed Advance, would not exceed the principal amount
outstanding under the JPMCB Credit Facility (after giving effect to any
concurrent borrowing proposed to be made thereunder).

 

(d)                                 All
legal matters incident to the making of such Advance shall be satisfactory to
the Lenders and their counsel.

 

Each Borrowing Notice
with respect to each such Advance shall constitute a representation and
warranty by the Borrower that the conditions contained in Sections 4.2(a),
(b) and (c) have been satisfied.  Any Lender may require a duly completed
compliance certificate in substantially the form of Exhibit A as a
condition to making an Advance.

 

24

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES

 

The Borrower represents
and warrants to the Lenders that:

 

5.1                                 Existence
and Standing.  Each of the
Borrower and its Subsidiaries is a corporation, partnership (in the case of
Subsidiaries only) or limited liability company duly and properly incorporated
or organized, as the case may be, validly existing and (to the extent such
concept applies to such entity) in good standing under the laws of its
jurisdiction of incorporation or organization and has all requisite authority
to conduct its business and (to the extent such concept applies to such entity)
is in good standing in each jurisdiction in which its business is conducted,
the failure of which could reasonably be expected to have a Material Adverse
Effect.

 

5.2                                 Authorization
and Validity.  The Borrower
has the power and authority and legal right to execute and deliver the Loan
Documents to which it is a party and to perform its obligations
thereunder.  The execution and delivery
by the Borrower of the Loan Documents to which it is a party and the
performance of its obligations thereunder have been duly authorized by proper
corporate proceedings, and the Loan Documents to which the Borrower is a party
constitute legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their terms, except as enforceability
may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors’ rights generally.

 

5.3                                 No
Conflict; Consent.  Neither
the execution and delivery by the Borrower of the Loan Documents to which it is
a party, nor the consummation of the transactions therein contemplated, nor
compliance with the provisions thereof will violate (a) any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding on the
Borrower or any of its Subsidiaries or (b) the Borrower’s or any
Subsidiary’s articles or certificate of incorporation, partnership agreement,
certificate of partnership, articles or certificate of organization, by-laws,
or operating or other management agreement, as the case may be, or (c) the
provisions of any indenture, instrument or agreement to which the Borrower or
any of its Subsidiaries is a party or is subject, or by which it, or its
Property, is bound, or conflict with or constitute a default thereunder, or
result in, or require, the creation or imposition of any Lien in, of or on the
Property of the Borrower or a Subsidiary pursuant to the terms of any such
indenture, instrument or agreement, which in any such case could reasonably be
expected to have a Material Adverse Effect. 
No order, consent, adjudication, approval, license, authorization, or validation
of, or filing, recording or registration with, or exemption by, or other action
in respect of any Person (including any governmental or public body or
authority, or any subdivision thereof), which has not been obtained by the
Borrower or any of its Subsidiaries, is required to be obtained by the Borrower
or any of its Subsidiaries in connection with the execution and delivery of the
Loan Documents, the borrowings under this Agreement, the payment and
performance by the Borrower of the Obligations or the legality, validity,
binding effect or enforceability of any of the Loan Documents.

 

5.4                                 Financial
Statements.  The Borrower has
heretofore furnished to each of the Lenders (a) the December 31, 2004
audited consolidated financial statements of the Borrower and its Subsidiaries
and (b) the December 31, 2004 Annual Statement of each of RLIC and

 

25

 

MHIC (collectively, the “Financial Statements”).  Each of the Financial Statements was prepared
in accordance with Agreement Accounting Principles or SAP, as applicable, and
such Financial Statements fairly present the consolidated (to the extent
applicable) financial condition and operations of the Borrower and its
Subsidiaries or such Insurance Subsidiary, as applicable, at such dates and the
consolidated results of their operations for the respective periods then ended
(except, in the case of such unaudited statements, for normal year-end audit
adjustments).

 

5.5                                 Taxes.  The Borrower and its Subsidiaries have filed
all United States federal tax returns and all other tax returns which are
required to be filed and have paid all taxes due pursuant to said returns or
pursuant to any assessment received by the Borrower or any of its Subsidiaries,
except such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided in accordance with Agreement Accounting
Principles and as to which no Lien exists. 
To the Borrower’s knowledge, no tax Liens have been filed and no claims
are being asserted with respect to any such taxes.

 

5.6                                 Material
Adverse Change.  Since December 31,
2004, there has been no change in the business, Property, condition (financial
or otherwise) or results of operations of the Borrower and its Subsidiaries
which could reasonably be expected to have a Material Adverse Effect.

 

5.7                                 Litigation and
Contingent Obligations.  There
is no litigation, arbitration, governmental investigation, proceeding or
inquiry pending or, to the knowledge of any of their officers, threatened
against or affecting the Borrower or any of its Subsidiaries which, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect or which seeks to prevent, enjoin or delay the making of any Loans.  The Borrower has no material contingent
obligations not provided for or disclosed in the financial statements referred
to in Section 5.4, other than any liabilities which could not
reasonably be expected to have a Material Adverse Effect.

 

5.8                                 Subsidiaries.  Schedule 5.8 contains an accurate
list of all Subsidiaries of the Borrower as of the date of this Agreement,
setting forth their respective jurisdictions of organization and the percentage
of their respective capital stock or other ownership interests owned by the
Borrower or other Subsidiaries.  All of
the issued and outstanding shares of capital stock or other ownership interests
of such Subsidiaries have been (to the extent such concepts are relevant with
respect to such ownership interests) duly authorized and issued and are fully
paid and non-assessable.

 

5.9                                 ERISA.  The Unfunded Liabilities of all Single
Employer Plans do not in the aggregate exceed $250,000.  Each Plan complies in all material respects
with all applicable requirements of law and regulations, no Reportable Event
has occurred with respect to any Plan, neither the Borrower nor any other
member of the Controlled Group has withdrawn from any Plan or initiated steps
to do so, and no steps have been taken to reorganize or terminate any
Plan.  All of the Borrower’s Employee
Plans as of the date of this Agreement are listed on Schedule 5.9
hereto.  No proceedings have been
instituted by any Governmental Authority to terminate or appoint a trustee to
administer any such Employee Plans.

 

5.10                           Accuracy
of Information.  No
information, exhibit or report furnished by the Borrower or any of its
Subsidiaries to the Agent or to any Lender in connection with the

 

26

 

negotiation of, or compliance with, the Loan Documents
contained any material misstatement of fact or omitted to state a material fact
or any fact necessary to make the statements contained therein not misleading.

 

5.11                           Regulation
U.  Margin stock (as defined
in Regulation U) constitutes less than 25% of the value of those assets of the
Borrower and its Subsidiaries which are subject to any limitation on sale,
pledge, or other restriction hereunder.

 

5.12                           Material
Agreements.  Neither the
Borrower nor any Subsidiary is a party to any agreement or instrument or
subject to any charter or other corporate restriction which could reasonably be
expected to have a Material Adverse Effect. 
Neither the Borrower nor any Subsidiary is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in (a) any agreement to which it is a party, which
default could reasonably be expected to have a Material Adverse Effect or (b) any
agreement or instrument evidencing or governing Indebtedness.

 

5.13                           Compliance
With Laws.  The Borrower and
its Subsidiaries have complied with all applicable statutes, rules,
regulations, orders and restrictions of any domestic or foreign government or
any instrumentality or agency thereof having jurisdiction over the conduct of
their respective businesses or the ownership of their respective Property
except for any failure to comply with any of the foregoing which could not
reasonably be expected to have a Material Adverse Effect.

 

5.14                           Plan Assets; Prohibited
Transactions.  The Borrower is
not an entity deemed to hold “plan assets” within the meaning of 29 C.F.R. § 2510.3-101
of an employee benefit plan (as defined in Section 3(3) of ERISA)
which is subject to Title I of ERISA or any plan (within the meaning of Section 4975
of the Code), and neither the execution of this Agreement nor the making of
Loans hereunder gives rise to a prohibited transaction within the meaning of Section 406
of ERISA or Section 4975 of the Code.

 

5.15                           Investment
Company Act.  Neither the
Borrower nor any Subsidiary is an “investment company” or a company “controlled”
by an “investment company”, within the meaning of the Investment Company Act of
1940, as amended.

 

5.16                           Public Utility Holding
Company Act.  Neither the
Borrower nor any Subsidiary is a “holding company” or a “subsidiary company” of
a “holding company”, or an “affiliate” of a “holding company” or of a “subsidiary
company” of a “holding company”, within the meaning of the Public Utility
Holding Company Act of 1935, as amended.

 

5.17                           Insurance Licenses.  Schedule 5.17 hereto lists
all of the jurisdictions in which any Insurance Subsidiary holds active
licenses (including, without limitation, licenses or certificates of authority
from applicable insurance departments), permits or authorizations to transact
insurance business (collectively, the “Licenses”) as of the date of this
Agreement.  No License, the loss of which
could reasonably be expected to have a Material Adverse Effect, is the subject
of a proceeding for suspension or revocation. 
To the Borrower’s knowledge, there is no sustainable basis for such
suspension or revocation, and no such suspension or revocation has been
threatened by any Governmental Authority. 
Schedule 5.17 also indicates the line or lines of

 

27

 

insurance in which each such Insurance Subsidiary is
authorized and the state or states in which such Insurance Subsidiary is
licensed to engage in any line of insurance, in each case as of the date of
this Agreement.

 

5.18                           Reinsurance.  Schedule 5.18 sets forth a
summary of the reinsurance arrangements of the Insurance Subsidiaries in effect
as of the date of this Agreement.

 

5.19                           Solvency.  Immediately after the consummation of the
transactions to occur on the date hereof and immediately following the making
of each Loan, if any, made on the date hereof and after giving effect to the
application of the proceeds of such Loans, (a) the fair value of the
assets of the Borrower and its Subsidiaries on a consolidated basis, at a fair
valuation, will exceed the debts and liabilities, subordinated, contingent or
otherwise, of the Borrower and its Subsidiaries on a consolidated basis; (b) the
present fair saleable value of the Property of the Borrower and its
Subsidiaries on a consolidated basis will be greater than the amount that will
be required to pay the probable liability of the Borrower and its Subsidiaries
on a consolidated basis on their debts and other liabilities, subordinated,
contingent or otherwise, as such debts and other liabilities become absolute
and matured; (c) the Borrower and its Subsidiaries on a consolidated basis
will be able to pay their debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured; and (d) the
Borrower and its Subsidiaries on a consolidated basis will not have
unreasonably small capital with which to conduct the businesses in which they
are engaged as such businesses are now conducted and are proposed to be
conducted after the date hereof.

 

5.20                           Labor Controversies;
Union Contracts, Etc.  There
are no labor controversies pending or, to the knowledge of the Borrower,
threatened against the Borrower, which if adversely determined could have a
Material Adverse Effect.  There are no
pending or, to the Borrower’s knowledge, threatened or anticipated (a) employment
discrimination charges or complaints against or involving the Borrower before
any governmental Person or(b) unfair labor practice charges or complaints,
disputes or grievances or arbitration proceedings or controversies affecting
the Borrower, which, in any such case, if adversely determined, could have a
Material Adverse Effect.  There are no
collective bargaining agreements covering any of the employees of the Borrower.

 

5.21                           Surety Obligations;
Financial Assurances.  The
Borrower is not obligated as surety or indemnitor under any surety or similar
bond or other contract and has not issued or entered into any agreement to
assure payment, performance or completion of performance of any undertaking or
obligation of any Person, except, in any such case, in the ordinary course of
business.  As of the date of this
Agreement, the Borrower has not posted or placed any Financial Assurance except
as indicated in Schedule 5.21 hereto.

 

5.22                           Business
Relations.  There exists no
actual or threatened termination, cancellation, or adverse limitation of, or
any adverse modification or change in, the contractual and/or business
relationship between the Borrower and any owner/lessor of any facility utilized
in the Borrower’s business, municipality, customer and/or supplier, and there
exists no present condition or state of facts or circumstances in such
relations, which in each case would have a Material Adverse Effect.

 

28

 

5.23                           Hazardous
Materials.  Borrower has not
caused or permitted any Hazardous Material to be disposed of or incorporated
into, either on or under real property legally or beneficially owned or
operated by Borrower, and no such real property has ever been used as a dump
site or long-term storage site for any Hazardous Materials which would be
reasonably likely to (a) give rise to present or future legal liability,
and (b) have a material adverse effect on the business or financial
condition of Borrower.  The failure, if
any, of Borrower in connection with the operation of their business, to obtain
or be in compliance with any permit, certificate, license, approval and other
authorization, or to file any notification or report relating to chemical
substances, air emissions, effluent discharges and Hazardous Material storage,
treatment, transport and disposal has not had, nor will it have, a Material
Adverse Effect, and no facts or circumstances exist which could give rise to
liabilities with respect to Hazardous Materials on the business or financial
condition of Borrower which would be reasonably likely to have a Material
Adverse Effect.

 

5.24                           Ranking.  The Obligations will rank at least pari passu
with all Indebtedness of the Borrower, except Indebtedness secured by Liens
permitted under Section 6.15.

 

5.25                           Intellectual
Property.  The Borrower owns
or has sufficient and legally enforceable rights to use all material licenses,
patents, patent applications, copyrights, service marks, trademarks, trademark
applications, and trade names necessary to continue to conduct its businesses
as heretofore conducted by it, now conducted by it, and now proposed to be
conducted by it, the lack of which could reasonably be expected to have a  Material Adverse Effect.  The Borrower is conducting its business
without infringement or claim of infringement of any license, patent,
copyright, service mark, trademark, trade name, trade secret, or other
intellectual property right of others, other
than any such infringements or claims which, if successfully
asserted against or determined adversely to the Borrower, could not,
individually or collectively reasonably be expected to have a Material Adverse
Effect.

 

ARTICLE VI

 

COVENANTS

 

During the term of this
Agreement, unless the Required Lenders shall otherwise consent in writing:

 

6.1                                 Financial
Reporting.  The Borrower will
maintain, for itself and each Subsidiary, a system of accounting established
and administered in accordance with generally accepted accounting principles,
and furnish to the Lenders:

 

(a)                                  Within
120 days after the close of each of its fiscal years, an unqualified audit
report certified by independent certified public accountants acceptable to the
Lenders, prepared in accordance with Agreement Accounting Principles on a
consolidated and consolidating basis (consolidating statements need not be
certified by such accountants) for itself and its Subsidiaries, including
balance sheets as of the end of such period, related profit and loss, retained
earnings and reconciliation of surplus statements, and a statement of cash flows,
accompanied by (i) any management letter prepared by said accountants, and
(ii) a certificate of

 

29

 

said accountants that, in the course of their
examination necessary for their certification of the foregoing, they have
obtained no knowledge of any Default or Unmatured Default, or if, in the
opinion of such accountants, any Default or Unmatured Default shall exist,
stating the nature and status thereof.

 

(b)                                 Within
60 days after the close of the first three quarterly periods of each of its
fiscal years, for itself and its Subsidiaries, consolidated and consolidating
unaudited balance sheets as at the close of each such period and consolidated
and consolidating profit and loss, retained earnings and reconciliation of
surplus statements and a statement of cash flows for the period from the
beginning of such fiscal year to the end of such quarter, all certified by its
chief financial officer.

 

(c)                                  Together
with the financial statements required under Sections 6.1(a) and (b),
a compliance certificate in substantially the form of Exhibit A
signed by its chief financial officer or treasurer showing the calculations
necessary to determine compliance with this Agreement and stating that no
Default or Unmatured Default exists, or if any Default or Unmatured Default
exists, stating the nature and status thereof.

 

6.2                                 Other
Reports.  The Borrower will
and will cause each Subsidiary to deliver to furnish to the Lenders the
following:

 

(a)                                  Within
270 days after the close of each fiscal year, a statement of the Unfunded
Liabilities of each Single Employer Plan, certified as correct by an actuary
enrolled under ERISA.

 

(b)                                 As
soon as possible and in any event within 10 days after the Borrower knows that
any Reportable Event has occurred with respect to any Plan, a statement, signed
by the chief financial officer or treasurer of the Borrower, describing said
Reportable Event and the action which the Borrower proposes to take with
respect thereto.

 

(c)                                  Promptly
upon the furnishing thereof to the shareholders of the Borrower, copies of all
financial statements, reports and proxy statements so furnished.

 

(d)                                 Promptly
upon the filing thereof, copies of all registration statements and annual,
quarterly, monthly or other regular reports which the Borrower or any of its
Subsidiaries files with the Securities and Exchange Commission.

 

(e)                                  Upon
the earlier of (i) (A) fifteen (15) days after the regulatory filing
date or (B) sixty (60) days after the close of each fiscal year of each of
RLIC and MHIC, copies of the unaudited Annual Statement of such Insurance
Subsidiary, certified by the chief financial officer or the treasurer of such
Insurance Subsidiary, all such statements to be prepared in accordance with SAP
consistently applied throughout the periods reflected therein and (ii) no
later than each June 15, copies of such Annual Statements audited and
certified by independent certified public accountants of recognized national
standing.

 

(f)                                    Upon
the earlier of (i) ten (10) days after the regulatory filing date or (ii) sixty
(60) days after the close of each of the first three (3) fiscal quarters
of each fiscal year of

 

30

 

each of RLIC and MHIC, copies of the unaudited
Quarterly Statement of each of the Insurance Subsidiaries, certified by the
chief financial officer or the treasurer of RLIC or MHIC, as applicable, all
such statements to be prepared in accordance with SAP consistently applied
through the period reflected therein.

 

(g)                                 Promptly
and in any event within ten (10) days after (i) learning thereof,
notification of any changes after the date of this Agreement in the rating
given by A.M. Best & Co. in respect of any Insurance Subsidiary
and (ii) receipt thereof, copies of any ratings analysis by A.M. Best &
Co. relating to any Insurance Subsidiary.

 

(h)                                 Copies
of any outside actuarial reports prepared with respect to the adequacy of
reserves analysis and evaluation of RLIC or MHIC, promptly after the receipt
thereof, and no later than March 31 of each year, an annual actuarial
opinion with respect to RLIC and MHIC in form and substance satisfactory to the
Required Lenders from an actuarial firm reasonably satisfactory to the Required
Lenders.

 

(i)                                     Promptly
upon the filing thereof, copies of all registration statements and annual,
quarterly, monthly or other reports which the Borrower or any of its
Subsidiaries files with the Securities and Exchange Commission, the National
Association of Securities Dealers, any securities exchange, the NAIC or any
insurance commission or department or analogous Governmental Authority
(including any filing made by the Borrower or any Subsidiary pursuant to any
insurance holding company act or related rules or regulations), but
excluding routine or non-material filings with the NAIC, any insurance
commissioner or department or analogous Governmental Authority.

 

(j)                                     Within
90 days after the close of each fiscal year, a copy of the annual Risk Based
Capital reports regarding each of RLIC and MHIC.

 

(k)                                  Within
120 days after the close of each fiscal year, a copy of the IRIS Ratios
relating to each of RLIC and MHIC.

 

(l)                                     Within
90 days after the close of each fiscal year, a copy of the annual projections
and budget for the next fiscal year for the Borrower and its Subsidiaries.

 

(m)                               Such
other information (including, without limitation, the annual Best’s Advance
Report Service report prepared with respect to each Insurance Subsidiary rated
by A.M. Best & Co. and non-financial information) as the Agent or
any Lender may from time to time reasonably request.

 

6.3                                 Use
of Proceeds.  The Borrower
will, and will cause each Subsidiary to, use the proceeds of the Advances for
working capital and general corporate purposes. 
The Borrower will not, nor will it permit any Subsidiary to, use any of
the proceeds of the Advances to purchase or carry any “margin stock” (as
defined in Regulation U).

 

6.4                                 Notice
of Default.  The Borrower
will, and will cause each Subsidiary to, give prompt notice in writing to the
Lenders of the occurrence of (a) any Default or Unmatured Default, (b) of
any other event or development, financial or other, relating specifically to
the

 

31

 

Borrower or any of its Subsidiaries (and not of a
general economic or political nature) which could reasonably be expected to
have a Material Adverse Effect, (c) their receipt of any notice from any
Governmental Authority of the expiration without renewal, revocation or
suspension of, or the institution of any proceedings to revoke or suspend, any
License now or hereafter held by any Insurance Subsidiary which is required to
conduct insurance business in compliance with all applicable laws and
regulations and the expiration, revocation or suspension of which could reasonably
be expected to have a Material Adverse Effect, (d) their receipt of any
notice from any Governmental Authority of the institution of any disciplinary
proceedings against or in respect of any Insurance Subsidiary, or the issuance
of any order, the taking of any action or any request for an extraordinary
audit for cause by any Governmental Authority which, if adversely determined,
could reasonably be expected to have a Material Adverse Effect, (e) any
material judicial or administrative order of which they are aware limiting or
controlling the insurance business of any Insurance Subsidiary (and not the
insurance industry generally) which has been issued or adopted or (f) the
commencement of any litigation of which they are aware which could reasonably
be expected to create a Material Adverse Effect.

 

6.5                                 Taxes.  The Borrower will, and will cause each
Subsidiary to, timely file complete and correct United States federal and other
material foreign, state and local tax returns required by law and pay when due
all taxes, assessments and governmental charges and levies upon it or its
income, profits or Property, except those which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves
have been set aside in accordance with Agreement Accounting Principles.

 

6.6                                 Insurance.  The Borrower will, and will cause each
Subsidiary to, maintain with financially sound and reputable insurance
companies insurance on all their Property in such amounts and covering such
risks as is consistent with sound business practice, and the Borrower will
furnish to any Lender upon request full information as to the insurance
carried.  The Borrower shall retain all
incidents of ownership of the insurance maintained pursuant hereto and shall
not borrow upon or otherwise impair its rights to receive the proceeds of such
insurance.  In the event the Borrower
either fails to provide the Agent with evidence of the insurance coverage
required by this Section 6.6 or at any time hereafter shall fail to
obtain or maintain any of the policies of insurance required above, or to pay
any premium in whole or in part relating thereto, then the Agent, without
waiving or releasing any obligation or default by the Borrower hereunder, may
at any time (but shall be under no obligation to act), obtain and maintain such
policies of insurance and pay such premium and take any other action with
respect thereto, which the Agent deems advisable.  The Borrower may later cancel any such
insurance purchased by the Agent, but only after providing the Agent with
evidence that the Borrower has obtained the insurance coverage required by this
Section.  The costs of such insurance
obtained by the Agent, through and including the effective date such insurance
coverage is canceled or expires, shall be payable on demand by the Borrower to
the Agent, together with interest at the default rate provided for in Section 2.11
on such amounts until repaid and any other charges by the Agent in connection
with the placement of such insurance. 
The costs of such insurance, which may be greater than the cost of
insurance which the Borrower may be able to obtain on its own, together with
interest thereon at the default rate provided for in Section 2.11
and any other charges by the Agent in connection with the placement of such
insurance may be added to the total Obligations due and owing.

 

32

 

6.7                                 Compliance
with Laws.  The Borrower will,
and will cause each Subsidiary to, comply with all laws, rules, regulations,
orders, writs, judgments, injunctions, decrees or awards to which it may be
subject including, without limitation, all Environmental Laws, the failure to
comply with which could reasonably be expected to have a Material Adverse
Effect.

 

6.8                                 Maintenance
of Properties.  The Borrower
will, and will cause each Subsidiary to, do all things necessary to maintain,
preserve, protect and keep its Property in good repair, working order and
condition, and make all necessary and proper repairs, renewals and replacements
so that its business carried on in connection therewith may be properly
conducted at all times.

 

6.9                                 Inspection.  The Borrower will, and will cause each
Subsidiary to, upon reasonable notice permit the Agent and the Lenders, by
their respective representatives and agents, to inspect any of the Property,
corporate books and financial records of the Borrower and each Subsidiary, to
examine and make copies of the books of accounts and other financial records of
the Borrower and each Subsidiary, and to discuss the affairs, finances and
accounts of the Borrower and each Subsidiary with, and to be advised as to the
same by, their respective officers at such reasonable times and intervals as
the Lenders may designate.  The Borrower
will keep or cause to be kept, and cause each Subsidiary to keep or cause to be
kept, appropriate records and books of account in which complete entries are to
be made reflecting its and their business and financial transactions, such
entries to be made in accordance with Agreement Accounting Principles or SAP,
as applicable, consistently applied.

 

6.10                           Conduct
of Business.  The Borrower
will, and will cause each Subsidiary to, (a) carry on and conduct its
business in substantially the same manner and in substantially the same fields
of enterprise as it is presently conducted, (b) do all things necessary to
remain duly incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and maintain all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted except where the failure to maintain such authority could not
reasonably be expected to have a Material Adverse Effect and (c) do all
things necessary to renew, extend and continue in effect all Licenses which may
at any time and from time to time be necessary for any Insurance Subsidiary to
operate its insurance business in compliance with all applicable laws and
regulations except for any License the loss of which could not reasonably be
expected to have a Material Adverse Effect; provided, that any Insurance
Subsidiary may withdraw from one or more states (other than its state of
domicile) as an admitted insurer if such withdrawal is determined by the such
Insurance Subsidiary’s Board of Directors to be in the best interest of such
Insurance Subsidiary and could not reasonably be expected to have a Material
Adverse Effect.  No Insurance Subsidiary
shall change its state of domicile or incorporation without the prior written
consent of the Required Lenders.  Each
Wholly-Owned Subsidiary in existence as of the date of this Agreement shall
continue to be a Wholly-Owned Subsidiary; provided, that the Borrower
may sell all of the capital stock of any Subsidiary, subject to Section 6.14
hereof.

 

6.11                           Dividends.  The Borrower will not, nor will it permit any
Subsidiary to, declare or pay any dividends or make any distributions on its
capital stock (other than dividends payable in its own capital stock) or
redeem, repurchase or otherwise acquire or retire any of its capital stock at
any time outstanding, except that (a) any Subsidiary may declare and pay
dividends or make

 

33

 

distributions to the Borrower or to a Wholly-Owned
Subsidiary, and (b) the Borrower may declare and pay dividends on its
capital stock or redeem, repurchase or otherwise acquire or retire any of its
capital stock at any time outstanding; provided, that no Default or
Unmatured Default shall exist before or after giving effect to such dividends,
redemptions, repurchases or other acquisitions or be created as a result
thereof.

 

6.12                           Merger.  The Borrower will not, nor will it permit any
Subsidiary to, merge or consolidate with or into any other Person; provided,
that, (x) any Person may merge with or into the Borrower so long as (i) no
Event of Default will result therefrom, (ii) the Borrower has permitted
written notice at least twenty days prior to the proposed effective date, (iii) the
aggregate consideration paid in such transaction does not exceed $50,000,000
and (iv) the Borrower is the surviving entity, and (y) subject to Section 6.14,
a Subsidiary may merge into the Borrower or a Wholly-Owned Subsidiary.

 

6.13                           Sale
of Assets.  The Borrower will
not, nor will it permit any Subsidiary to, lease, sell, transfer or otherwise
dispose of its Property to any other Person except for (a) sales of
Investments in the ordinary course of business, (b) the sale by the
Borrower on commercially reasonable terms of its Investment in Maui Jim, Inc.,
(c) the sale by RLIC on commercially reasonable terms of its Investment in
Taylor, Bean and Whittaker, and (d) leases, sales, transfers or other
dispositions of its Property that, together with all other Property of the
Borrower and its Subsidiaries leased, sold or disposed of (other than sales
permitted pursuant to clauses (a), (b), (c) and (d) of this Section 6.13)
as permitted by this Section 6.13 since the date hereof do not
constitute a Substantial Portion.

 

6.14                           Investments and Acquisitions.  The Borrower and its Subsidiaries may make
Investments (including, without limitation, loans and advances to, and other
Investments in, its Subsidiaries) and commitments therefor, create
Subsidiaries, become a partner in any partnership or joint venture and make
Acquisitions, subject to the following:

 

(a)                                  The
Borrower and its Subsidiaries may make Acquisitions so long as (i) such
transactions (A) consist exclusively of Acquisitions of businesses or
entities engaged in the specialty property and casualty business, (B) do
not constitute hostile takeovers and (C) do not require the payment of an
aggregate consideration in excess of $50,000,000 after the date of this
Agreement, (ii) the Borrower provides the Agent and each Lender with
written notice of such transactions at least 20 days prior to the effective
date thereof, and (iii) no Default or Unmatured Default has occurred and
is continuing or would occur after giving effect thereto.

 

(b)                                 The
Borrower and its Subsidiaries may make Investments in debt securities so long
as at least 90% of the principal amount outstanding of all such
Investments  constitutes an Investment in
Investment Grade Obligations.

 

(c)                                  Any
Investments made by any Insurance Subsidiary must be of a quality acceptable to
the insurance commissioner in the respective domiciliary state of such
Insurance Subsidiary.

 

(d)                                 The
Borrower and its Subsidiaries may make loans to and extend guarantees of loans
made to employees of the Borrower and its Subsidiaries to purchase stock of

 

34

 

the Borrower pursuant to an employee stock purchase
plan, so long as the aggregate principal amount outstanding of all such loans
and guaranteed loans shall not exceed $20,000,000 in the aggregate.

 

(e)                                  The
Borrower and its Subsidiaries may purchase equity securities issued by other
Persons which are not Affiliates thereof and become a partner in a partnership
or joint venture or similar Person, in each case in transactions which do not
constitute Acquisitions; provided, that after giving effect to such
transactions, the aggregate fair market value of all equity securities so
purchased and the partnership, joint venture and other interests so obtained
shall not exceed at any time 20% of the aggregate statutory surplus of the
Insurance Subsidiaries at such time; provided, further, that
neither (i) interests in joint ventures which are limited liability
companies engaging in the same lines of business as the Insurance Subsidiaries
nor (ii) purchases of publicly traded equity securities which aggregate
less than 5% of the outstanding equity securities of a Person shall count
toward such limitation.

 

6.15                           Liens.  The Borrower will not, nor will it permit any
Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the
Property of the Borrower or any of its Subsidiaries, except:

 

(a)                                  Liens
for taxes, assessments or governmental charges or levies on its Property if the
same shall not at the time be delinquent or thereafter can be paid without
penalty, or are being contested in good faith and by appropriate proceedings
and for which adequate reserves in accordance with Agreement Accounting
Principles shall have been set aside on its books.

 

(b)                                 Liens
imposed by law, such as carriers’, warehousemen’s and mechanics’ liens and
other similar liens arising in the ordinary course of business which secure
payment of obligations not more than 60 days past due or which are being
contested in good faith by appropriate proceedings and for which adequate
reserves shall have been set aside on its books.

 

(c)                                  Liens
arising out of pledges or deposits under worker’s compensation laws,
unemployment insurance, pension plans, or other social security or retirement
benefits, or similar legislation.

 

(d)                                 Utility
easements, building restrictions and such other encumbrances or charges against
real property as are of a nature generally existing with respect to properties
of a similar character and which do not in any material way affect the
marketability of the same or interfere with the use thereof in the business of
the Borrower or its Subsidiaries.

 

(e)                                  RESERVED

 

(f)                                    purchase
money Liens upon or in real property or equipment acquired or held by the
Borrower or any Subsidiary in the ordinary course of business to secure the
purchase price of such property or equipment or to secure Indebtedness incurred
solely for the purpose of financing the acquisition, construction or
improvement of any such property or equipment to be subject to such Liens, or
Liens existing on any such property or equipment at the time of acquisition or
within 180 days following such acquisition (other than any such Liens created
in

 

35

 

contemplation of such acquisition that do not secure
the purchase price), or extensions, renewals or replacements of any of the
foregoing for the same or a lesser amount; provided that no such Lien shall
extend to or cover any property other than the property or equipment being
acquired, constructed or improved, and no such extension, renewal or
replacement shall extend to or cover any property not theretofore subject to
the Lien being extended, renewed or replaced.

 

(g)                                 Liens
arising in connection with Capitalized Leases; provided that no such Lien shall
extend to or cover any assets other than the assets subject to such Capitalized
Leases.

 

(h)                                 Liens
securing Financial Hedges arising in the ordinary course of business.

 

(i)                                     Liens
on securities arising out of repurchase agreements permitted by the terms of
this Agreement.

 

(j)                                     Liens
consisting of deposits made by an Insurance Subsidiary with any Governmental
Authority or Liens or claims imposed or required by applicable insurance law or
regulation against the Property of any Insurance Subsidiary, in each case in
favor of policyholders of such Insurance Subsidiary or any Governmental
Authority and in the ordinary course of such Insurance Subsidiary’s business.

 

(k)                                  Liens
on Investments and cash balances of any Insurance Subsidiary (other than
capital stock or any Subsidiary) securing Obligations of the Borrower or any
Insurance Subsidiary in respect of (i) letters of credit obtained in the
ordinary course of business and/or (ii) trust arrangements formed in the
ordinary course of business for the benefit of cedents to secure reinsurance
recoverables owed to them by any Insurance Subsidiary.

 

(l)                                     The
replacement, extension or renewal of any Lien permitted by clause (e) or (g) above
upon or in the same property theretofore subject thereto or the replacement,
extension or renewal (without increase in the amount (other than in respect of
fees, expenses and premiums, if any) or change in any direct or contingent
obligor) of the Indebtedness secured thereby.

 

(m)                               Liens
securing obligations owed by any Subsidiary to the Borrower or any other
Subsidiary.

 

(n)                                 Liens
incurred in the ordinary course of business in favor of financial
intermediaries and clearing agents pending clearance of payments for
Investments or in the nature of set-off, banker’s lien or similar rights as to
deposit accounts or other funds.

 

(o)                                 Judgment
or judicial attachment Liens; provided, that the enforcement of such
Liens is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings.

 

(p)                                 Liens
securing up to an aggregate amount of $50,000,000 of obligations of the
Borrower or any Insurance Subsidiary arising out of catastrophe bond financing.

 

36

 

(q)                                 Liens
securing Indebtedness or obligations (in addition to that described in clauses (a) through
(p) above), in an aggregate amount not to exceed $30,000,000 at any one time
outstanding.

 

6.16                           Reinsurance.  After the date of this Agreement, the
Borrower will not permit RLIC or MHIC to modify its reinsurance arrangements in
a manner that could reasonably be expected to have a Material Adverse Effect.

 

6.17                           Affiliates.  The Borrower will not, and will not permit
any Subsidiary to, enter into any transaction (including, without limitation,
the purchase, exchange or sale of any Property or service) with, or make any
payment or transfer to, any Affiliate except (a) transactions between
Subsidiaries and/or payments by or transfers from one Subsidiary to another or (b) in
the ordinary course of business and pursuant to the reasonable requirements of
the Borrower’s or such Subsidiary’s business and upon fair and reasonable terms
no less favorable to the Borrower or such Subsidiary than the Borrower or such
Subsidiary would obtain in a comparable arms-length transaction.

 

6.18                           Financial
Covenants.

 

6.18.1                  Interest Coverage Ratio.  The Borrower will not permit the Interest
Coverage Ratio, determined as of the end of each of its fiscal quarters for the
then most-recently ended four fiscal quarters to be less than 4.0 to 1.0.

 

6.18.2                  Leverage Ratio.  The Borrower will not permit the ratio,
determined as of the end of each of its fiscal quarters, of (a) Consolidated
Indebtedness to (b) Consolidated Total Capitalization to be greater than
..30 to 1.0.

 

6.18.3                  Fixed Charge Coverage Ratio.  The Borrower will not permit the Fixed Charge
Coverage Ratio, determined as of the end of each of its fiscal quarters for the
then most-recently ended four fiscal quarters, to be less than 1.5 to 1.0.

 

6.18.4                  Risk-Based Capital.  At all times after March 31, 2005, cause
each of RLIC and MHIC to maintain a ratio of (a) Total Adjusted Capital
(as defined in the Risk-Based Capital Act or in the rules and procedures
prescribed from time to time by the NAIC with respect thereto) to (b) the
Company Action Level RBC (as defined in the Risk-Based Capital Act or in the rules and
procedures prescribed from time to time by the NAIC with respect thereto) of at
least one hundred seventy five percent (175%).

 

6.19                           JPMCB Credit Facility
Prepayments.  The Borrower
shall not (a) pay any amount under the JPMCB Credit Facility if, after
giving effect thereto, and to any commitment payment made hereunder, the
principal amount outstanding under the JPMCB Credit Facility would be less than
the aggregate principal amount of the outstanding Advances hereunder or (b) enter
into any transaction that has a substantially similar effect.

 

37

ARTICLE VII

 

DEFAULTS

 

The occurrence of any one
or more of the following events shall constitute a Default:

 

7.1           Any representation or warranty made or
deemed made by or on behalf of the Borrower or any of its Subsidiaries to the
Lenders or the Agent under or in connection with this Agreement, any Loan, or
any certificate or information delivered in connection with this Agreement or
any other Loan Document shall be materially false on the date as of which made.

 

7.2           Nonpayment of principal of any Loan when
due, or nonpayment of interest upon any Loan or of any commitment fee or other
obligations under any of the Loan Documents within five days after the same
becomes due.

 

7.3           The breach by the Borrower of any of the
terms or provisions of Sections 6.3, 6.4(a), or 6.10
through 6.19.

 

7.4           The breach by the Borrower (other than a
breach which constitutes a Default under another Section of this Article VII)
of any of the terms or provisions of this Agreement which is not remedied
within twenty (20) Business Days after written notice from the Agent or any
Lender.

 

7.5           Failure of the Borrower or any of its
Subsidiaries to pay when due any Material Indebtedness; or the default by the
Borrower or any of its Subsidiaries in the performance (beyond the applicable
grace period with respect thereto, if any) of any term, provision or condition
contained in any Material Indebtedness Agreement, or any other event shall
occur or condition exist, the effect of which default, event or condition is to
cause, or to permit the holder(s) of such Material Indebtedness or the
lender(s) under any Material Indebtedness Agreement to cause, such Material
Indebtedness to become due prior to its stated maturity or any commitment to
lend under any Material Indebtedness Agreement to be terminated prior to its
stated expiration date; or any Material Indebtedness of the Borrower or any of
its Subsidiaries shall be declared to be due and payable or required to be
prepaid or repurchased (other than by a regularly scheduled payment) prior to
the stated maturity thereof; or the Borrower or any of its Subsidiaries shall
not pay, or admit in writing its inability to pay, its debts generally as they
become due.

 

7.6           The Borrower or any of its Subsidiaries
shall (a) have an order for relief entered with respect to it under the
Federal bankruptcy laws as now or hereafter in effect, (b) make an
assignment for the benefit of creditors, (c) apply for, seek, consent to,
or acquiesce in, the appointment of a receiver, custodian, trustee, examiner,
liquidator or similar official for it or any Substantial Portion of its
Property, (d) institute any proceeding seeking an order for relief under
the Federal bankruptcy laws as now or hereafter in effect or seeking to
adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment, rehabilitation or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed against it, (e) take
any corporate or

 

38

 

partnership action
to authorize or effect any of the foregoing actions set forth in this Section 7.6
or (f) fail to contest in good faith any appointment or proceeding
described in Section 7.7.

 

7.7           Without the application, approval or
consent of the Borrower or any of its Subsidiaries, a receiver, trustee,
examiner, liquidator or similar official shall be appointed for the Borrower or
any of its Subsidiaries or any Substantial Portion of its Property, or a
proceeding described in Section 7.6(d) shall be instituted
against the Borrower or any of its Subsidiaries and such appointment continues
undischarged or such proceeding continues undismissed or unstayed for a period
of 60 consecutive days.

 

7.8           Any court, government or governmental
agency shall condemn, seize or otherwise appropriate, or take custody or
control of, all or any portion of the Property of the Borrower and its
Subsidiaries which, when taken together with all other Property of the Borrower
and its Subsidiaries so condemned, seized, appropriated, or taken custody or
control of, during the twelve-month period ending with the month in which any
such action occurs, constitutes a Substantial Portion.

 

7.9           The Borrower or any of its Subsidiaries
shall fail within 30 days to pay (or make arrangements to pay), bond or
otherwise discharge one or more judgments which are not stayed on appeal or
otherwise being appropriately contested in good faith and which are (a) judgments
or orders for the payment of money in excess of $10,000,000 (or the equivalent
thereof in currencies other than U.S. Dollars) in the aggregate, or (b) nonmonetary
judgments or orders which, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.

 

7.10         The Unfunded Liabilities of all Single
Employer Plans shall exceed in the aggregate $1,000,000 or any Reportable Event
shall occur in connection with any Plan.

 

7.11         Any Change in Control shall occur.

 

7.12         Any material License of RLIC or MHIC (a) shall
be revoked by the Governmental Authority which issued a material License, or
any action (administrative or judicial) to revoke a material License shall have
been commenced against RLIC or MHIC and shall not have been dismissed within
180 days after the commencement thereof, (b) shall be suspended by such
Governmental Authority for a period in excess of thirty (30) days or (c) shall
not be reissued or renewed by such Governmental Authority upon the expiration
thereof following application for such reissuance or renewal by RLIC or MHIC,
as applicable.

 

7.13         The Insurance Subsidiaries shall be the
subject of one or more final non-appealable orders imposing a fine in an amount
in excess of $10,000,000 in any single instance or other such orders imposing
fines in excess of $35,000,000 in the aggregate after the date of this
Agreement by or at the request of one or more state insurance regulatory agencies
as a result of the violation by such Insurance Subsidiaries of such states’
applicable insurance laws or the regulations promulgated in connection
therewith.

 

7.14         Any Insurance Subsidiary shall become
subject to any conservation, rehabilitation or liquidation order, directive or
mandate issued by any Governmental Authority or any

 

39

 

Insurance
Subsidiary shall become subject to any other directive or mandate issued by any
Governmental Authority which could reasonably be expected to have a Material
Adverse Effect and which is not stayed within ten (10) days.

 

ARTICLE VIII

 

ACCELERATION, WAIVERS, AMENDMENTS
AND REMEDIES

 

8.1           Acceleration.  If any Default described in Section 7.6
or 7.7 occurs with respect to the Borrower, the obligations of the
Lenders to make Loans hereunder shall automatically terminate and the
Obligations shall immediately become due and payable without any election or
action on the part of the Agent or any Lender. 
If any other Default occurs, the Required Lenders (or the Agent with the
consent of the Required Lenders) may terminate or suspend the obligations of
the Lenders to make Loans hereunder, or declare the Obligations to be due and
payable, or both, whereupon the Obligations shall become immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which the Borrower hereby expressly waives.

 

If, within 30 days after
acceleration of the maturity of the Obligations or termination of the
obligations of the Lenders to make Loans hereunder as a result of any Default
(other than any Default as described in Section 7.6 or 7.7
with respect to the Borrower) and before any judgment or decree for the payment
of the Obligations due shall have been obtained or entered, the Required
Lenders (in their sole discretion) shall so direct, the Agent shall, by notice
to the Borrower, rescind and annul such acceleration and/or termination.

 

8.2           Amendments.  Subject to the provisions of this Section 8.2,
the Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of the Lenders or the Borrower hereunder or waiving
any Default hereunder; provided, however, that no such
supplemental agreement shall, without the consent of all of the Lenders
adversely affected thereby (or in the case of Section 8.2(b), (d) and
(e), all of the Lenders):

 

(a)           Extend
the final maturity of any Loan or forgive all or any portion of the principal
amount thereof, or reduce the rate or extend the time of payment of interest or
fees thereon.

 

(b)           Reduce
the percentage specified in the definition of Required Lenders.

 

(c)           Extend
the Facility Termination Date, or reduce the amount or extend the payment date
for, the mandatory payments required under Section 2.2, or increase
the amount of the Aggregate Commitment or of the Commitment of any Lender
hereunder.

 

(d)           Permit
the Borrower to assign its rights under this Agreement.

 

(e)           Amend
this Section 8.2 or Section 10.1 or 10.2.

 

40

 

No amendment of any
provision of this Agreement relating to the Agent shall be effective without
the written consent of the Agent.  The
Agent may waive payment of the fee required under Section 12.3.2
without obtaining the consent of any other party to this Agreement.

 

8.3           Preservation
of Rights.  No delay or omission of
the Lenders or the Agent to exercise any right under the Loan Documents shall
impair such right or be construed to be a waiver of any Default or an
acquiescence therein, and the making of a Loan notwithstanding the existence of
a Default or the inability of the Borrower to satisfy the conditions precedent
to such Loan shall not constitute any waiver or acquiescence.  Any single or partial exercise of any such
right shall not preclude other or further exercise thereof or the exercise of
any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to Section 8.2,
and then only to the extent in such writing specifically set forth.  All remedies contained in the Loan Documents
or by law afforded shall be cumulative and all shall be available to the Agent
and the Lenders until the Obligations have been paid in full.

 

ARTICLE IX

 

GENERAL PROVISIONS

 

9.1           Survival
of Representations.  All representations
and warranties of the Borrower contained in this Agreement shall survive the
making of the Loans herein contemplated.

 

9.2           Governmental
Regulation.  Anything contained in
this Agreement to the contrary notwithstanding, no Lender shall be obligated to
extend credit to the Borrower in violation of any limitation or prohibition
provided by any applicable statute or regulation.

 

9.3           Headings.  Section headings in the Loan Documents
are for convenience of reference only, and shall not govern the interpretation
of any of the provisions of the Loan Documents.

 

9.4           Entire
Agreement.  The Loan Documents embody
the entire agreement and understanding among the Borrower, the Agent and the
Lenders and supersede all prior agreements and understandings among the
Borrower, the Agent and the Lenders relating to the subject matter thereof
other than those contained in the fee letter described in Section 10.13
which shall survive and remain in full force and effect during the term of this
Agreement.

 

9.5           Several
Obligations; Benefits of this Agreement. 
The respective obligations of the Lenders hereunder are several and not
joint and no Lender shall be the partner or agent of any other (except to the
extent to which the Agent is authorized to act as such).  The failure of any Lender to perform any of
its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder.  This Agreement
shall not be construed so as to confer any right or benefit upon any Person
other than the parties to this Agreement and their respective successors and
assigns, provided, however, that the parties hereto expressly
agree that the Arranger shall enjoy the benefits of the provisions of Sections
9.6, 9.10 and 10.11 to the extent specifically set

 

41

 

forth therein and shall
have the right to enforce such provisions on its own behalf and in its own name
to the same extent as if it were a party to this Agreement.

 

9.6           Expenses;
Indemnification.  (a) The
Borrower shall reimburse the Agent and the Arranger for any costs, internal
charges and out-of-pocket expenses (including attorneys’ fees and time charges
of attorneys for the Agent, which attorneys may be employees of the Agent) paid
or incurred by the Agent or the Arranger in connection with the preparation,
negotiation, execution, delivery, review, amendment, modification, and
administration of the Loan Documents. 
The Borrower also agrees to reimburse the Agent, the Arranger and the
Lenders for any costs, internal charges and out-of-pocket expenses (including
attorneys’ fees and time charges of attorneys for the Agent, the Arranger and
the Lenders, which attorneys may be employees of the Agent, the Arranger or the
Lenders) paid or incurred by the Agent, the Arranger or any Lender in
connection with the collection and enforcement of the Loan Documents.

 

(b)           The
Borrower hereby further agrees to indemnify the Agent, the Arranger, each
Lender, their respective affiliates, and each of their directors, officers and
employees against all losses, claims, damages, penalties, judgments,
liabilities and expenses (including, without limitation, all expenses of
litigation or preparation therefor whether or not the Agent, the Arranger, any
Lender or any affiliate is a party thereto) which any of them may pay or incur
arising out of or relating to this Agreement, the other Loan Documents, the
transactions contemplated hereby or the direct or indirect application or
proposed application of the proceeds of any Loan hereunder except to the extent
that they are determined by a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of the party seeking
indemnification.  The obligations of the
Borrower under this Section 9.6 shall survive the termination of
this Agreement.

 

9.7           Numbers
of Documents.  All statements,
notices, closing documents, and requests hereunder shall be furnished to the
Agent with sufficient counterparts so that the Agent may furnish one to each of
the Lenders.

 

9.8           Accounting.  Except as provided to the contrary herein,
all accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles or SAP, as applicable except that any calculation or determination
which is to be made on a consolidated basis shall be made for the Borrower and
all its Subsidiaries, including those Subsidiaries, if any, which are
unconsolidated on the Borrower’s audited financial statements, and provided
that, if the Borrower notifies the Agent that the Borrower wishes to amend any
provision hereof to eliminate the effect of any change in GAAP or SAP (or if
the Agent notifies the Borrower that the Required Lenders wish to amend any
provision hereof for such purpose), then such provision shall be applied on the
basis of GAAP or SAP in effect immediately before the relevant change in GAAP
or SAP became effective, until either such notice is withdrawn or such
provision is amended in a manner satisfactory to the Borrower and the Required
Lenders.

 

9.9           Severability
of Provisions.  Any provision in any
Loan Document that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or
invalid without affecting the remaining provisions in that

 

42

 

jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.

 

9.10         Nonliability
of Lenders.  The relationship between
the Borrower on the one hand and the Lenders and the Agent on the other hand
shall be solely that of borrower and lender. 
Neither the Agent, the Arranger nor any Lender shall have any fiduciary
responsibilities to the Borrower. 
Neither the Agent, the Arranger nor any Lender undertakes any
responsibility to the Borrower to review or inform the Borrower of any matter
in connection with any phase of the Borrower’s business or operations.  The Borrower agrees that neither the Agent,
the Arranger nor any Lender shall have liability to the Borrower (whether
sounding in tort, contract or otherwise) for losses suffered by the Borrower in
connection with, arising out of, or in any way related to, the transactions
contemplated and the relationship established by the Loan Documents, or any
act, omission or event occurring in connection therewith, unless it is
determined in a final non-appealable judgment by a court of competent jurisdiction
that such losses resulted from the gross negligence or willful misconduct of
the party from which recovery is sought. 
Neither the Agent, the Arranger nor any Lender shall have any liability
with respect to, and the Borrower hereby waives, releases and agrees not to sue
for, any special, indirect, consequential or punitive damages suffered by the
Borrower in connection with, arising out of, or in any way related to the Loan
Documents or the transactions contemplated thereby.

 

9.11         Confidentiality.  Each Lender agrees to hold any confidential
information which it may receive from the Borrower pursuant to this Agreement
in confidence, except for disclosure (i) to its Affiliates and to other
Lenders and their respective Affiliates, (ii) to legal counsel, accountants,
and other professional advisors to such Lender or to a Transferee, (iii) to
regulatory officials, (iv) to any Person as requested pursuant to or as
required by law, regulation, or legal process, (v) to any Person in
connection with any legal proceeding to which such Lender is a party, (vi) to
such Lender’s direct or indirect contractual counterparties in swap agreements
or to legal counsel, accountants and other professional advisors to such
counterparties, (vii) permitted by Section 12.4 and (viii) to
rating agencies if requested or required by such agencies in connection with a
rating relating to the Advances hereunder.

 

9.12         Nonreliance.  Each Lender hereby represents that it is not
relying on or looking to any margin stock (as defined in Regulation U of the
Board of Governors of the Federal Reserve System) for the repayment of the
Loans provided for herein.

 

9.13         Disclosure.  The Borrower and each Lender hereby
acknowledge and agree that JPMCB and/or its Affiliates from time to time may
hold investments in, make other loans to or have other relationships with the
Borrower and its Affiliates.

 

9.14         USA
Patriot Act.  Each Lender that is
subject to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56
(signed into law October 26, 2001)) (the “Act”) hereby notifies the
Borrower that pursuant to the requirements of the Act, it is required to
obtain, verify and record certain information and documentation that identifies
the Borrower, which information includes the name and address of the Borrower
and such other information that will allow such Lender to identify the Borrower
in accordance with the Act.

 

43

 

9.15         Amendment
and Restatement.

 

(a)           On
the Restatement Date, the Existing Agreement shall be amended, restated and
superseded in its entirety.  The parties
hereto acknowledge and agree that (a) this Agreement, the Notes delivered
pursuant to Section 2.13 (the “Restated Notes”) and the
other Loan Documents executed and delivered in connection herewith do not
constitute a novation, payment and reborrowing, or termination of the “Obligations”
(as defined in the Existing Agreement) under the Existing Agreement as in
effect prior to the Restatement Date; (b) such “Obligations” are in all
respects continuing with only the terms thereof being modified as provided in
this Agreement; and (c) upon the effectiveness of this Agreement all loans
outstanding under the Existing Agreement immediately before the effectiveness
of this Agreement will be part of the Loans hereunder on the terms and
conditions set forth in this Agreement.

 

(b)           Notwithstanding
the modifications effected by this Agreement of the representations, warranties
and covenants of Borrower contained in the Existing Agreement, the Borrower
acknowledges and agrees that any choses
in action or other rights created in favor of any Lender and its
respective successors arising out of the representations and warranties of the
Borrower contained in or delivered (including representations and warranties
delivered in connection with the making of the Loans or other extensions of
credit thereunder) in connection with the Existing Agreement, shall survive the
execution and delivery of this Agreement; provided, however, that it is
understood and agreed that the Borrower’s monetary obligations under the
Existing Agreement in respect of the loans thereunder, (including all “Obligations,”
as defined thereunder) are evidenced by this Agreement as provided in Article I
hereof.

 

(c)           All
indemnification obligations of the Borrower pursuant to the Existing Agreement
shall survive the amendment and restatement of the Existing Agreement pursuant
to this Agreement.

 

(d)           On
and after the Restatement Date, (i) each reference in the Loan Documents
to the “Credit Agreement”, “thereunder”, “thereof” or similar words referring
to the Credit Agreement shall mean and be a reference to this Agreement and (ii) each
reference in the Loan Documents to a “Note” shall mean and be a Note as defined
in this Agreement.

 

ARTICLE X

 

THE AGENT

 

10.1         Appointment;
Nature of Relationship.  LaSalle is
hereby appointed by each of the Lenders as its contractual representative
(herein referred to as the “Agent”) hereunder and under each other Loan
Document, and each of the Lenders irrevocably authorizes the Agent to act as
the contractual representative of such Lender with the rights and duties
expressly set forth herein and in the other Loan Documents.  The Agent agrees to act as such contractual
representative upon the express conditions contained in this Article X.  Notwithstanding the use of the defined term “Agent,”
it is expressly understood and agreed that the Agent shall not have any
fiduciary responsibilities to any Lender by reason of this Agreement or any
other Loan Document and that

 

44

 

the Agent is merely
acting as the contractual representative of the Lenders with only those duties
as are expressly set forth in this Agreement and the other Loan Documents.  In its capacity as the Lenders’ contractual
representative, the Agent (i) does not hereby assume any fiduciary duties
to any of the Lenders, (ii) is a “representative” of the Lenders within
the meaning of the term “secured party” as defined in the Illinois Uniform
Commercial Code and (iii) is acting as an independent contractor, the
rights and duties of which are limited to those expressly set forth in this
Agreement and the other Loan Documents. 
Each of the Lenders hereby agrees to assert no claim against the Agent
on any agency theory or any other theory of liability for breach of fiduciary
duty, all of which claims each Lender hereby waives.

 

10.2         Powers.  The Agent shall have and may exercise such
powers under the Loan Documents as are specifically delegated to the Agent by
the terms of each thereof, together with such powers as are reasonably
incidental thereto.  The Agent shall have
no implied duties to the Lenders, or any obligation to the Lenders to take any
action thereunder except any action specifically provided by the Loan Documents
to be taken by the Agent.

 

10.3         General
Immunity.  Neither the Agent nor any
of its directors, officers, agents or employees shall be liable to the
Borrower, the Lenders or any Lender for any action taken or omitted to be taken
by it or them hereunder or under any other Loan Document or in connection
herewith or therewith except to the extent such action or inaction is
determined in a final non-appealable judgment by a court of competent
jurisdiction to have arisen from the gross negligence or willful misconduct of
such Person.

 

10.4         No
Responsibility for Loans, Recitals, etc. 
Neither the Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into,
or verify (a) any statement, warranty or representation made in connection
with any Loan Document or any borrowing hereunder; (b) the performance or
observance of any of the covenants or agreements of any obligor under any Loan
Document, including, without limitation, any agreement by an obligor to furnish
information directly to each Lender; (c) the satisfaction of any condition
specified in Article IV, except receipt of items required to be
delivered solely to the Agent; (d) the existence or possible existence of
any Default or Unmatured Default; (e) the validity, enforceability,
effectiveness, sufficiency or genuineness of any Loan Document or any other
instrument or writing furnished in connection therewith; (f) the value,
sufficiency, creation, perfection or priority of any Lien in any collateral
security; or (g) the financial condition of the Borrower or any guarantor
of any of the Obligations or of any of the Borrower’s or any such guarantor’s
respective Subsidiaries.  Except as
expressly set forth herein, the Agent shall not have any duty to disclose, and
shall not be liable for the failure to disclose, any information relating to
the Borrower or any of its Subsidiaries that is communicated to or obtained by
the bank serving as Agent or any of its Affiliates in any capacity.

 

10.5         Action
on Instructions of Lenders.  The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder and under any other Loan Document in accordance with written
instructions signed by the Required Lenders, and such instructions and any
action taken or failure to act pursuant thereto shall be binding on all of the
Lenders.  The Lenders hereby acknowledge
that the Agent shall be under no duty to take any discretionary action permitted
to be taken by it pursuant to the provisions of this Agreement or any other
Loan Document unless it shall be requested in writing to do so by the Required
Lenders.  The Agent

 

45

 

shall be fully justified
in failing or refusing to take any action hereunder and under any other Loan
Document unless it shall first be indemnified to its satisfaction by the
Lenders pro rata against any and all liability, cost and expense that it may
incur by reason of taking or continuing to take any such action.

 

10.6         Employment
of Agents and Counsel.  The Agent may
execute any of its duties as Agent hereunder and under any other Loan Document
by or through employees, agents, and attorneys-in-fact and shall not be
answerable to the Lenders, except as to money or securities received by it or
its authorized agents, for the default or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.  The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and the
Lenders and all matters pertaining to the Agent’s duties hereunder and under
any other Loan Document.

 

10.7         Reliance
on Documents; Counsel.  The Agent
shall be entitled to rely upon any Note, notice, consent, certificate,
affidavit, letter, telegram, statement, paper or document believed by it to be
genuine and correct and to have been signed or sent by the proper person or
persons, and, in respect to legal matters, upon the opinion of counsel selected
by the Agent, which counsel may be employees of the Agent.

 

10.8         Agent’s
Reimbursement and Indemnification. 
The Lenders agree to reimburse and indemnify the Agent ratably in
proportion to their respective Commitments (or, if the Commitments have been
terminated, in proportion to their Commitments immediately prior to such
termination) (i) for any amounts not reimbursed by the Borrower for which
the Agent is entitled to reimbursement by the Borrower under the Loan
Documents, (ii) for any other expenses incurred by the Agent on behalf of
the Lenders, in connection with the preparation, execution, delivery,
administration and enforcement of the Loan Documents (including, without
limitation, for any expenses incurred by the Agent in connection with any
dispute between the Agent and any Lender or between two or more of the Lenders)
and (iii) for any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind and
nature whatsoever which may be imposed on, incurred by or asserted against the
Agent in any way relating to or arising out of the Loan Documents or any other
document delivered in connection therewith or the transactions contemplated
thereby (including, without limitation, for any such amounts incurred by or
asserted against the Agent in connection with any dispute between the Agent and
any Lender or between two or more of the Lenders), or the enforcement of any of
the terms of the Loan Documents or of any such other documents, provided that (i) no Lender shall be
liable for any of the foregoing to the extent any of the foregoing is found in
a final non-appealable judgment by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of the Agent and (ii) any
indemnification required pursuant to Section 3.5(vii) shall,
notwithstanding the provisions of this Section 10.8, be paid by the
relevant Lender in accordance with the provisions thereof.  The obligations of the Lenders under this Section 10.8
shall survive payment of the Obligations and termination of this Agreement.

 

10.9         Notice
of Default.  The Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or
Unmatured Default hereunder unless the Agent has received written notice from a
Lender or the Borrower referring to this Agreement describing such

 

46

 

Default or Unmatured
Default and stating that such notice is a “notice of default”.  In the event that the Agent receives such a
notice, the Agent shall give prompt notice thereof to the Lenders.

 

10.10       Rights
as a Lender.  In the event the Agent
is a Lender, the Agent shall have the same rights and powers hereunder and
under any other Loan Document with respect to its Commitment and its Loans as
any Lender and may exercise the same as though it were not the Agent, and the
term “Lender” or “Lenders” shall, at any time when the Agent is a Lender,
unless the context otherwise indicates, include the Agent in its individual
capacity.  The Agent and its Affiliates
may accept deposits from, lend money to, and generally engage in any kind of
trust, debt, equity or other transaction, in addition to those contemplated by
this Agreement or any other Loan Document, with the Borrower or any of its
Subsidiaries in which the Borrower or such Subsidiary is not restricted hereby
from engaging with any other Person.

 

10.11       Lender
Credit Decision.  Each Lender
acknowledges that it has, independently and without reliance upon the Agent,
the Arranger or any other Lender and based on the financial statements prepared
by the Borrower and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement and the other Loan Documents. 
Each Lender also acknowledges that it will, independently and without
reliance upon the Agent, the Arranger or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents.

 

10.12       Successor
Agent.  The Agent may resign at any
time by giving written notice thereof to the Lenders and the Borrower, such
resignation to be effective upon the appointment of a successor Agent or, if no
successor Agent has been appointed, forty-five days after the retiring Agent
gives notice of its intention to resign. 
Upon any such resignation, the Required Lenders shall have the right to
appoint, on behalf of the Borrower and the Lenders, a successor Agent.  If no successor Agent shall have been so
appointed by the Required Lenders within thirty days after the resigning Agent’s
giving notice of its intention to resign, then the resigning Agent may appoint,
on behalf of the Borrower and the Lenders, a successor Agent.  Notwithstanding the previous sentence, the
Agent may at any time without the consent of the Borrower or any Lender,
appoint any of its Affiliates which is a commercial bank as a successor Agent
hereunder.  If the Agent has resigned and
no successor Agent has been appointed, the Lenders may perform all the duties
of the Agent hereunder and the Borrower shall make all payments in respect of
the Obligations to the applicable Lender and for all other purposes shall deal
directly with the Lenders.  No successor
Agent shall be deemed to be appointed hereunder until such successor Agent has
accepted the appointment.  Any such
successor Agent shall be a commercial bank having capital and retained earnings
of at least $100,000,000.  Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the resigning Agent.  Upon the effectiveness of the resignation of
the Agent, the resigning Agent shall be discharged from its duties and
obligations hereunder and under the Loan Documents.  After the effectiveness of the resignation or
removal of an Agent, the provisions of this Article X shall
continue in effect for the benefit of such Agent in respect of any actions
taken or omitted to be taken by it while it was acting as the Agent hereunder
and under the other Loan Documents.  In
the event that there is a successor to the Agent by merger, or the Agent
assigns its duties and

 

47

 

obligations to an
Affiliate pursuant to this Section 10.12, then the term “Prime Rate”
as used in this Agreement shall mean the prime rate, base rate or other
analogous rate of the new Agent.

 

10.13       Delegation
to Affiliates.  The Borrower and the
Lenders agree that the Agent may delegate any of its duties under this
Agreement to any of its Affiliates.  Any
such Affiliate (and such Affiliate’s directors, officers, agents and employees)
which performs duties in connection with this Agreement shall be entitled to
the same benefits of the indemnification, waiver and other protective
provisions to which the Agent is entitled under Articles IX and X.

 

ARTICLE XI

 

SETOFF; RATABLE PAYMENTS

 

11.1         Setoff.  In addition to, and without limitation of,
any rights of the Lenders under applicable law, if the Borrower becomes
insolvent, however evidenced, or any Default occurs, any and all deposits
(including all account balances, whether provisional or final and whether or not
collected or available) and any other Indebtedness at any time held or owing by
any Lender or any Affiliate of any Lender to or for the credit or account of
the Borrower may be offset and applied toward the payment of the Obligations
owing to such Lender, whether or not the Obligations, or any part thereof,
shall then be due.

 

11.2         Ratable
Payments.  If any Lender, whether by
setoff or otherwise, has payment made to it upon its Loans (other than payments
received pursuant to Section 3.1, 3.2, 3.4 or 3.5)
in a greater proportion than that received by any other Lender, such Lender
agrees, promptly upon demand, to purchase a portion of the Loans held by the
other Lenders so that after such purchase each Lender will hold its ratable
proportion of Loans.  If any Lender,
whether in connection with setoff or amounts which might be subject to setoff
or otherwise, receives collateral or other protection for its Obligations or
such amounts which may be subject to setoff, such Lender agrees, promptly upon
demand, to take such action necessary such that all Lenders share in the
benefits of such collateral ratably in proportion to their Loans.  In case any such payment is disturbed by
legal process, or otherwise, appropriate further adjustments shall be made.

 

ARTICLE XII

 

BENEFIT OF AGREEMENT;
ASSIGNMENTS; PARTICIPATIONS

 

12.1         Successors
and Assigns.  The terms and
provisions of the Loan Documents shall be binding upon and inure to the benefit
of the Borrower and the Lenders and their respective successors and assigns permitted
hereby, except that (i) the Borrower shall not have the right to assign
its rights or obligations under the Loan Documents without the prior written
consent of each Lender, (ii) any assignment by any Lender must be made in
compliance with Section 12.3, and (iii) any transfer by
Participation must be made in compliance with Section 12.2.  Any attempted assignment or transfer by any
party not made in compliance with this Section 12.1 shall be null
and void, unless such attempted assignment or transfer is treated as a
participation

 

48

 

in accordance with Section 12.3.2.  The parties to this Agreement acknowledge
that clause (ii) of this Section 12.1 relates only to absolute
assignments and this Section 12.1 does not prohibit assignments
creating security interests, including, without limitation, (x) any pledge or
assignment by any Lender of all or any portion of its rights under this
Agreement and any Note to a Federal Reserve Bank or (y) in the case of a Lender
which is a fund, any pledge or assignment of all or any portion of its rights
under this Agreement and any Note to its trustee in support of its obligations
to its trustee; provided, however, that no such pledge or
assignment creating a security interest shall release the transferor Lender
from its obligations hereunder unless and until the parties thereto have
complied with the provisions of Section 12.3.  The Agent may treat the Person which made any
Loan or which holds any Note as the owner thereof for all purposes hereof
unless and until such Person complies with Section 12.3; provided,
however, that the Agent may in its discretion (but shall not be required
to) follow instructions from the Person which made any Loan or which holds any
Note to direct payments relating to such Loan or Note to another Person.  Any assignee of the rights to any Loan or any
Note agrees by acceptance of such assignment to be bound by all the terms and
provisions of the Loan Documents.  Any
request, authority or consent of any Person, who at the time of making such
request or giving such authority or consent is the owner of the rights to any
Loan (whether or not a Note has been issued in evidence thereof), shall be
conclusive and binding on any subsequent holder or assignee of the rights to
such Loan.

 

12.2         Participations.

 

12.2.1      Permitted
Participants; Effect.  Any Lender may
at any time sell to one or more banks or other entities (“Participants”)
participating interests in any Loan owing to such Lender, any Note held by such
Lender, any Commitment of such Lender or any other interest of such Lender
under the Loan Documents.  In the event
of any such sale by a Lender of participating interests to a Participant, such
Lender’s obligations under the Loan Documents shall remain unchanged, such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, such Lender shall remain the owner of its
Loans and the holder of any Note issued to it in evidence thereof for all
purposes under the Loan Documents, all amounts payable by the Borrower under
this Agreement shall be determined as if such Lender had not sold such
participating interests, and the Borrower and the Agent shall continue to deal
solely and directly with such Lender in connection with such Lender’s rights
and obligations under the Loan Documents.

 

12.2.2      Voting
Rights.  Each Lender shall retain the
sole right to approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other than any
amendment, modification or waiver with respect to any Loan or Commitment in
which such Participant has an interest which would require consent of all of
the Lenders pursuant to the terms of Section 8.2 or of any other
Loan Document.

 

12.2.3      Benefit
of Certain Provisions.  The Borrower
agrees that each Participant shall be deemed to have the right of setoff
provided in Section 11.1 in respect of its participating interest
in amounts owing under the Loan Documents to the same extent as if the amount
of its participating interest were owing directly to it as a Lender under the

 

49

 

Loan Documents, provided that each Lender shall retain the right
of setoff provided in Section 11.1 with respect to the amount of
participating interests sold to each Participant.  The Lenders agree to share with each
Participant, and each Participant, by exercising the right of setoff provided
in Section 11.1, agrees to share with each Lender, any amount received
pursuant to the exercise of its right of setoff, such amounts to be shared in
accordance with Section 11.2 as if each Participant were a
Lender.  The Borrower further agrees that
each Participant shall be entitled to the benefits of Sections 3.1, 3.2,
3.4 and 3.5 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to Section 12.3, provided
that (i) a Participant shall not be entitled to receive any greater
payment under Section 3.1, 3.2 or 3.5 than the Lender
who sold the participating interest to such Participant would have received had
it retained such interest for its own account, unless the sale of such interest
to such Participant is made with the prior written consent of the Borrower, and
(ii) any Participant not incorporated under the laws of the United States
of America or any State thereof agrees to comply with the provisions of Section 3.5
to the same extent as if it were a Lender.

 

12.3         Assignments.

 

12.3.1      Permitted
Assignments.  Any Lender may at any
time assign to one or more banks or other entities (“Purchasers”) all or any
part of its rights and obligations under the Loan Documents.  Such assignment shall be substantially in the
form of Exhibit B or in such other form as may be agreed to by the
parties thereto.  Each such assignment
with respect to a Purchaser which is not a Lender or an Affiliate of a Lender
or an Approved Fund shall either be in an amount equal to the entire applicable
Commitment and Loans of the assigning Lender (unless each of the Borrower and
the Agent otherwise consents) be in an aggregate amount not less than
$5,000,000.  The amount of the assignment
shall be based on the Commitment or outstanding Loans (if the Commitment has
been terminated) subject to the assignment, determined as of the date of such
assignment or as of the “Trade Date,” if the “Trade Date” is specified in the
assignment.

 

12.3.2      Consents.  The consent of the Borrower shall be required
prior to an assignment becoming effective unless the Purchaser is a Lender, an
Affiliate of a Lender or an Approved Fund, provided that the consent of the
Borrower shall not be required if a Default has occurred and is
continuing.  The consent of the Agent
shall be required prior to an assignment becoming effective unless the Purchaser
is a Lender.  The consent of the Issuing
Bank shall be required prior to an assignment of a Commitment becoming
effective.  Any consent required under
this Section 12.3.2 shall not be unreasonably withheld or delayed.

 

12.3.3      Effect;
Effective Date.  Upon (i) delivery
to the Agent of an assignment, together with any consents required by Sections
12.3.1 and 12.3.2, and (ii) payment of a $4,000 fee to the
Agent for processing such assignment (unless such fee is waived by the Agent),
such assignment shall become effective on the effective date specified in such
assignment.  The assignment shall contain
a representation by the Purchaser to the effect that none of the consideration
used to make the purchase of the Commitment and Loans under the applicable
assignment agreement constitutes “plan assets” as defined under ERISA and that
the rights and interests of the Purchaser in and under the Loan

 

50

 

Documents will not be “plan assets” under ERISA.  On and after the effective date of such
assignment, such Purchaser shall for all purposes be a Lender party to this
Agreement and any other Loan Document executed by or on behalf of the Lenders
and shall have all the rights and obligations of a Lender under the Loan
Documents, to the same extent as if it were an original party thereto, and the
transferor Lender shall be released with respect to the Commitment and Loans
assigned to such Purchaser without any further consent or action by the
Borrower, the Lenders or the Agent.  In
the case of an assignment covering all of the assigning Lender’s rights and
obligations under this Agreement, such Lender shall cease to be a Lender
hereunder but shall continue to be entitled to the benefits of, and subject to,
those provisions of this Agreement and the other Loan Documents which survive
payment of the Obligations and termination of the applicable agreement.  Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this Section 12.3
shall be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with Section 12.2.  Upon the consummation of any assignment to a
Purchaser pursuant to this Section 12.3.3, the transferor Lender,
the Agent and the Borrower shall, if the transferor Lender or the Purchaser
desires that its Loans be evidenced by Notes, make appropriate arrangements so
that new Notes or, as appropriate, replacement Notes are issued to such transferor
Lender and new Notes or, as appropriate, replacement Notes, are issued to such
Purchaser, in each case in principal amounts reflecting their respective
Commitments, as adjusted pursuant to such assignment.

 

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

 

12.4         Dissemination
of Information.  The Borrower
authorizes each Lender to disclose to any Participant or Purchaser or any other
Person acquiring an interest in the Loan Documents by operation of law (each a “Transferee”)
and any prospective Transferee any and all information in such Lender’s
possession concerning the creditworthiness of the Borrower and its
Subsidiaries, including without limitation any information contained in any
Reports; provided that each Transferee and prospective Transferee agrees
to be bound by Section 9.11 of this Agreement.

 

12.5         Tax
Treatment.  If any interest in any
Loan Document is transferred to any Transferee which is not incorporated under
the laws of the United States or any State thereof, the transferor Lender shall
cause such Transferee, concurrently with the effectiveness of such transfer, to
comply with the provisions of Section 3.5(d).

 

51

 

ARTICLE XIII

 

NOTICES

 

13.1         Notices.  Except as otherwise permitted by Section 2.14
with respect to borrowing notices, all notices, requests and other
communications to any party hereunder shall be in writing (including electronic
transmission, facsimile transmission or similar writing) and shall be given to
such party: (x) in the case of the Borrower or the Agent, at its address or
facsimile number set forth on the signature pages hereof, (y) in the case
of any Lender, at its address or facsimile number set forth below its signature
hereto or (z) in the case of any party, at such other address or facsimile
number as such party may hereafter specify for the purpose by notice to the
Agent and the Borrower in accordance with the provisions of this Section 13.1.  Each such notice, request or other
communication shall be effective (i) if given by facsimile transmission,
when transmitted to the facsimile number specified in this Section and
confirmation of receipt is received, (ii) if given by mail, 72 hours after
such communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid, or (iii) if given by any other means, when
delivered (or, in the case of electronic transmission, received) at the address
specified in this Section; provided that notices to the Agent under Article II
shall not be effective until received.

 

13.2         Change
of Address.  The Borrower, the Agent
and any Lender may each change the address for service of notice upon it by a
notice in writing to the other parties hereto.

 

ARTICLE XIV

 

COUNTERPARTS

 

This Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one agreement, and any of the parties hereto may execute this
Agreement by signing any such counterpart. 
This Agreement shall be effective when it has been executed by the
Borrower, the Agent and the Lenders and each party has notified the Agent by
facsimile transmission or telephone that it has taken such action.

 

ARTICLE XV

 

CHOICE OF LAW; CONSENT TO
JURISDICTION; WAIVER OF JURY TRIAL

 

15.1         CHOICE OF LAW.  THE LOAN DOCUMENTS (OTHER THAN
THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, 735 ILCS SECTION 105/5-1
ET SEQ, BUT OTHERWISE WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE
STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
BANKS.

 

52

 

15.2         CONSENT TO JURISDICTION.  THE BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER
HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY
WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS
AN INCONVENIENT FORUM.  NOTHING HEREIN
SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST
THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.  ANY JUDICIAL PROCEEDING BY THE BORROWER
AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A
COURT IN CHICAGO, ILLINOIS.

 

15.3         WAIVER OF JURY TRIAL.  THE BORROWER, THE AGENT AND
EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN
DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

 

53

 

IN WITNESS WHEREOF, the
Borrower, the Lenders and the Agent have executed this Agreement as of the date
first above written.

 

	
   

  	
  RLI CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
  9025 North Lindbergh Drive

  
	
   

  	
   

  	
  Peoria, Illinois 61615-1431

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  John E. Robison

  
	
   

  	
   

  	
  Telephone:

  	
  (309) 693-5846

  
	
   

  	
   

  	
  FAX:

  	
  (309) 689-2229

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attention:

  	
   

  
	
   

  	
   

  	
  Telephone:

  
	
   

  	
   

  	
  FAX:

  
	
   

  	
   

  
	
   

  	
   

  
	
  Commitments

  	
   

  
	
   

  	
   

  
	
   

  	
  $10,000,000

  	
  LASALLE BANK
  NATIONAL ASSOCIATION

  
	
   

  	
  Individually and
  as Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attention:

  	
  Brandon S. Allison

  
	
   

  	
   

  	
  Telephone:

  	
  (312) 904-6324

  
	
   

  	
   

  	
  FAX:

  	
  (312) 904-6189

  
	
   

  	
   

  
	
  Aggregate
  Commitment

  	
   

  
	
   

  	
   

  
	
   

  	
  $10,000,000

  	
   

  
								

 

54

 

EXHIBIT A

COMPLIANCE CERTIFICATE

 

To:          The
Lenders parties to the

Credit Agreement Described Below

 

This Compliance
Certificate is furnished pursuant to that certain Amended and Restated Credit
Agreement dated as of May 31, 2005 (as amended, modified, renewed or extended
from time to time, the “Agreement”) among RLI Corp. (the “Borrower”), the
lenders party thereto and LaSalle Bank National Association, as Agent for the
Lenders.  Unless otherwise defined
herein, capitalized terms used in this Compliance Certificate have the meanings
ascribed thereto in the Agreement.

 

THE UNDERSIGNED HEREBY
CERTIFIES THAT:

 

1.             I
am the duly elected                      
of the Borrower;

 

2.             I
have reviewed the terms of the Agreement and I have made, or have caused to be
made under my supervision, a detailed review of the transactions and conditions
of the Borrower and its Subsidiaries during the accounting period covered by
the attached financial statements;

 

3.             The
examinations described in paragraph 2 did not disclose, and I have no knowledge
of, the existence of any condition or event which constitutes a Default or
Unmatured Default during or at the end of the accounting period covered by the
attached financial statements or as of the date of this Certificate, except as
set forth below; and

 

4.             Schedule I
attached hereto sets forth financial data and computations evidencing the
Borrower’s compliance with certain covenants of the Agreement, all of which
data and computations are true, complete and correct.

 

Described below are the exceptions,
if any, to paragraph 3 by listing, in detail, the nature of the condition or
event, the period during which it has existed and the action which the Borrower
has taken, is taking, or proposes to take with respect to each such condition
or event:

 

 

 

 

The foregoing
certifications, together with the computations set forth in Schedule I
hereto and the financial statements delivered with this Certificate in support
hereof, are made and delivered this          
day of                      ,
           .

 

	
   

  	
  RLI CORP.,

  
	
   

  	
  as Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

A-2

 

SCHEDULE I
TO COMPLIANCE CERTIFICATE

 

Compliance as of              ,
        with

Provisions of Section 6.18 of

the Agreement

 

	
  (a)           Section 6.18.1 – Interest
  Coverage Ratio

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (i)     Actual
  Interest Coverage Ratio:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (A)     RLIC’s
  Statutory Surplus as of date of determination

  	
   

  	
  $

  	
   

  
	
  (B)     10%
  of (A)

  	
   

  	
  $

  	
   

  
	
  (C)     RLIC’s
  statutory net income for four fiscal quarters ended on date of determination

  	
   

  	
  $

  	
   

  
	
  (D)     Greater
  of (B) and (C)

  	
   

  	
  $

  	
   

  
	
  (E)     Consolidated
  net income of other Subsidiaries which are not Insurance Subsidiaries or
  Subsidiaries of Insurance Subsidiaries

  	
   

  	
  $

  	
   

  
	
  (F)     Sum
  of (D) and (E)

  	
   

  	
  $

  	
   

  
	
  (G)     Consolidated
  Interest Expense for four quarters ended on date of determination

  	
   

  	
  $

  	
   

  
	
  (H)     Ratio
  of (F) to (G)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (ii)     Minimum
  Interest Coverage Ratio

  	
   

  	
  4.0 to 1.0

  
	
   

  	
   

  	
   

  
	
  (b)     Section 6.18.2
  – Leverage Ratio

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (i)     Actual
  Leverage Ratio:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (A)     Consolidated
  Indebtedness

  	
   

  	
  $

  	
   

  
	
  (B)     Consolidated
  Net Worth as of the date of determination

  	
   

  	
  $

  	
   

  
	
  (C)     Sum
  of (A) and (B)

  	
   

  	
  $

  	
   

  
	
  (D)     Ratio
  of (A) to (C)

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  (ii)     Maximum
  Leverage Ratio

  	
   

  	
  .30 to 1.0

  
	
   

  	
   

  	
   

  
	
  (c)     Section 6.18.4
  – Fixed Charge Coverage Ratio

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (i)     Actual
  Fixed Charge Coverage Ratio:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (A)     RLIC’s
  Statutory Surplus as of the date of determination

  	
   

  	
  $

  	
   

  
	
  (B)     10%
  of (A)

  	
   

  	
  $

  	
   

  

 

1

 

	
  (C)     RLIC’s
  statutory net income for four fiscal quarters ended on date of determination

  	
   

  	
  $

  	
   

  
	
  (D)     Greater
  of (B) and (C)

  	
   

  	
  $

  	
   

  
	
  (E)     Consolidated
  net income of other Subsidiaries which are not Insurance Subsidiaries or
  Subsidiaries of Insurance Subsidiaries

  	
   

  	
  $

  	
   

  
	
  (F)     Sum
  of (D) and (E)

  	
   

  	
  $

  	
   

  
	
  (G)     Consolidated
  Interest Expense for four fiscal quarters ending on date of determination

  	
   

  	
  $

  	
   

  
	
  (H)     Aggregate
  dividends paid for four quarters ending on date of determination

  	
   

  	
  $

  	
   

  
	
  (I)     Current
  Maturities of Indebtedness for the Borrower and its Subsidiaries as of the
  date of determination (other than reverse repos and the Loans)

  	
   

  	
  $

  	
   

  
	
  (J)     Sum
  of (G), (H) and (I)

  	
   

  	
  $

  	
   

  
	
  (K)     Ratio
  of (F) to (J)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (ii)     Minimum
  Fixed Charge Coverage Ratio

  	
   

  	
  1.5 to 1.0

  
	
   

  	
   

  	
   

  
	
  (d)     Section 6.18.5
  – MHIC’s Risk Based Capital Ratio

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (i)     Actual
  Risk Based Capital Ratio for MHIC:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (A)     MHIC’s
  Total Adjusted Capital

  	
   

  	
  $

  	
   

  
	
  (B)     MHIC’s
  Company Action Level PBC

  	
   

  	
  $

  	
   

  
	
  (C)     Ratio
  of (A) to (B)

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  (ii)     Minimum
  Required Risk Based Capital Ratio for MHIC

  	
   

  	
  175%

  
	
   

  	
   

  	
   

  
	
  (e)     Section 6.18.6
  – RLIC’s Risk Based Capital Ratio

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (i)     Actual
  Risk Based Capital Ratio for RLIC:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (A)     RLIC’s
  Total Adjusted Capital

  	
   

  	
  $

  	
   

  
	
  (B)     RLIC’s
  Company Action Level RBC

  	
   

  	
  $

  	
   

  
	
  (C)     Ratio
  of (A) to (B)

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  (ii)     inimum
  Required Risk Based Capital Ratio for RLIC

  	
   

  	
  175%

  

 

2

 

EXHIBIT B

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

This Assignment and
Assumption (the “Assignment and Assumption”) is dated as of the
Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”)
and [Insert name of Assignee]
(the “Assignee”).  Capitalized
terms used but not defined herein shall have the meanings given to them in the
Credit Agreement identified below (as amended, the “Credit Agreement”),
receipt of a copy of which is hereby acknowledged by the Assignee.  The Standard Terms and Conditions set forth
in Annex 1 attached hereto are hereby agreed to and incorporated herein by
reference and made a part of this Assignment and Assumption as if set forth
herein in full.

 

For an agreed
consideration, the Assignor hereby irrevocably sells and assigns to the
Assignee, and the Assignee hereby irrevocably purchases and assumes from the
Assignor, subject to and in accordance with the Standard Terms and Conditions
and the Credit Agreement, as of the Effective Date inserted by the Agent as
contemplated below, the interest in and to all of the Assignor’s rights and
obligations in its capacity as a Lender under the Credit Agreement and any
other documents or instruments delivered pursuant thereto that represents the
amount and percentage interest identified below of all of the Assignor’s
outstanding rights and obligations under the respective facilities identified
below (including without limitation any letters of credit, guaranties and
swingline loans, included in such facilities and, to the extent permitted to be
assigned under applicable law, all claims (including without limitation
contract claims, tort claims, malpractice claims, statutory claims and all
other claims at law or in equity), suits, causes of action and any other right
of the Assignor against any Person whether known or unknown arising under or in
connection with the Credit Agreement, any other documents or instruments
delivered pursuant thereto or the loan transactions governed thereby) (the “Assigned
Interest”).  Such sale and assignment
is without recourse to the Assignor and, except as expressly provided in this
Assignment and Assumption, without representation or warranty by the Assignor.

 

	
  1.   Assignor:

  	
   

  
	
   

  
	
  2.   Assignee:

  	
                                                                        [and
  is an Affiliate/Approved Fund of [identify
  Lender(1)]]

  
	
   

  
	
  3.   Borrower:

  	
  RLI Corp.

  
	
   

  
	
  4.   Agent:

  	
  LaSalle Bank National
  Association, as the agent under the Credit Agreement.

  
	
   

  
	
  5.   Credit
  Agreement:

  	
  Amended and Restated
  Credit Agreement dated as of May 31, 2005 among RLI Corp., the Lenders
  parties thereto and LaSalle Bank National Association, as Agent.

  

 

(1)  Select as applicable.

 

B-1

 

	
  6.   Assigned
  Interest:

  	
   

  

 

	
  Aggregate Amount of

  Commitment/Loans for all

  Lenders*

  	
   

  	
  Amount of

  Commitment/Loans

  Assigned*

  	
   

  	
  Percentage Assigned of

  Commitment/Loans(2)

  	
   

  
	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
  %

  
								

 

	
  7.   Trade
  Date:

  	
   

  

 

Effective Date:                                    ,
20      [TO BE INSERTED BY AGENT AND WHICH SHALL BE
THE EFFECTIVE DATE OF RECORDATION OF TRANSFER BY THE AGENT.]

 

The terms set forth in
this Assignment and Assumption are hereby agreed to:

 

	
   

  	
  ASSIGNOR

  
	
   

  	
  [NAME OF ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ASSIGNEE

  
	
   

  	
  [NAME OF ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  

 

[Consented to and](3)
Accepted:

 

	
  LASALLE BANK NATIONAL
  ASSOCIATION., as Agent

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  

 

*  Amount to be adjusted by the counterparties
to take into account any payments or prepayments made between the Trade Date
and the Effective Date.

(2)  Set forth, to at least 9 decimals, as a
percentage of the Commitment/Loans of all Lenders thereunder.

(3)  To be added only if the consent of the Agent
is required by the terms of the Credit Agreement.

 

B-2

 

	
  [Consented to:](4)

  
	
   

  
	
  RLI CORP.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  

 

(4)  To be added only if the consent of the
Borrower is required by the terms of the Credit Agreement.

 

B-3

 

ANNEX
1

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

 

1.             Representations
and Warranties.

 

1.1.          Assignor.  The Assignor represents and warrants that
(a) it is the legal and beneficial owner of the Assigned Interest,
(b) the Assigned Interest is free and clear of any lien, encumbrance or
other adverse claim and (c) it has full power and authority, and has taken
all action necessary, to execute and deliver this Assignment and Assumption and
to consummate the transactions contemplated hereby.  Neither the Assignor nor any of its officers,
directors, employees, agents or attorneys shall be responsible for (a) any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Loan Document, (b) the execution, legality,
validity, enforceability, genuineness, sufficiency, perfection, priority, collectibility,
or value of the Loan Documents or any collateral thereunder, (c) the
financial condition of the Borrower, any of its Subsidiaries or Affiliates or
any other Person obligated in respect of any Loan Document, (d) the
performance or observance by the Borrower, any of its Subsidiaries or
Affiliates or any other Person of any of their respective obligations under any
Loan Document, (e) inspecting any of the property, books or records of the
Borrower, or any guarantor, or (f) any mistake, error of judgment, or
action taken or omitted to be taken in connection with the Loans or the Loan
Documents.

 

1.2.          Assignee.  The Assignee (a) represents and warrants
that (i) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and Assumption and to
consummate the transactions contemplated hereby and to become a Lender under
the Credit Agreement, (ii) from and after the Effective Date, it shall be
bound by the provisions of the Credit Agreement as a Lender thereunder and, to
the extent of the Assigned Interest, shall have the obligations of a Lender
thereunder, (iii) agrees that its payment instructions and notice
instructions are as set forth in Schedule 1 to this Assignment and
Assumption, (iv) confirms that none of the funds, monies, assets or other
consideration being used to make the purchase and assumption hereunder are
“plan assets” as defined under ERISA and that its rights, benefits and
interests in and under the Loan Documents will not be “plan assets” under
ERISA, (v) agrees to indemnify and hold the Assignor harmless against all
losses, costs and expenses (including, without limitation, reasonable
attorneys’ fees) and liabilities incurred by the Assignor in connection with or
arising in any manner from the Assignee’s non-performance of the obligations
assumed under this Assignment and Assumption, (vi) it has received a copy
of the Credit Agreement, together with copies of financial statements and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Assumption and
to purchase the Assigned Interest on the basis of which it has made such
analysis and decision independently and without reliance on the Agent or any other
Lender, and (vii) attached as Schedule 1 to this Assignment and
Assumption is any documentation required to be delivered by the Assignee with
respect to its tax status pursuant to the terms of the Credit Agreement, duly
completed and executed by the Assignee and (b) agrees that (i) it
will, independently and without reliance on the Agent, the Assignor or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action

 

 

under
the Loan Documents, and (ii) it will perform in accordance with their
terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Lender.

 

2.             Payments.  The Assignee shall pay the Assignor, on the
Effective Date, the amount agreed to by the Assignor and the Assignee.  From and after the Effective Date, the
Administrative Agent shall make all payments in respect of the Assigned Interest
(including payments of principal, interest, fees and other amounts) to the
Assignor for amounts which have accrued to but excluding the Effective Date and
to the Assignee for amounts which have accrued from and after the Effective
Date.

 

3.             General
Provisions. This Assignment and Assumption shall be binding upon, and inure
to the benefit of, the parties hereto and their respective successors and
assigns.  This Assignment and Assumption
may be executed in any number of counterparts, which together shall constitute
one instrument.  Delivery of an executed
counterpart of a signature page of this Assignment and Assumption by
telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and Assumption.  This
Assignment and Assumption shall be governed by, and construed in accordance
with, the internal laws of the State of Illinois (without regard to conflict of
laws provisions thereof) but giving effect to federal laws applicable to
national banks.

 

 

US
AND NON-US TAX INFORMATION REPORTING REQUIREMENTS

 

(Schedule to
be supplied by Closing Unit or Trading Documentation Unit)

 

 

EXHIBIT C

REVOLVING NOTE

 

May 31, 2005

 

RLI Corp., an Illinois
corporation (the “Borrower”), promises to pay to the order of                                                                   
(the “Lender”) the aggregate unpaid principal amount of all Loans made by the
Lender to the Borrower pursuant to Section 2.1 of the Agreement (as
hereinafter defined), in immediately available funds at LaSalle Bank National
Association in Peoria, Illinois, as Agent, together with interest on the unpaid
principal amount hereof at the rates and on the dates set forth in the
Agreement.  The Borrower shall pay the
principal of and accrued and unpaid interest on the Loans in full on the
Facility Termination Date.

 

The Lender shall, and is
hereby authorized to, record on the schedule attached hereto, or to
otherwise record in accordance with its usual practice, the date and amount of
each Loan and the date and amount of each principal payment hereunder.

 

This Note is one of the
Notes issued pursuant to, and is entitled to the benefits of, the Amended and
Restated Credit Agreement dated as of May 31, 2005 (which, as it may be
amended or modified and in effect from time to time, is herein called the
“Agreement”), among the Borrower, the lenders party thereto, including the
Lender, and LaSalle Bank National Association, as Agent, to which Agreement
reference is hereby made for a statement of the terms and conditions governing
this Note, including the terms and conditions under which this Note may be
prepaid or its maturity date accelerated. 
Capitalized terms used herein and not otherwise defined herein are used
with the meanings attributed to them in the Agreement.

 

 

	
   

  	
  RLI CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
							

 

 

SCHEDULE OF
LOANS AND PAYMENTS OF PRINCIPAL

TO

NOTE OF                      ,

DATED             ,

 

	
  Date

  	
   

  	
  Principal

  Amount of

  Loan

  	
   

  	
  Maturity

  of Interest

  Period

  	
   

  	
  Principal

  Amount

  Paid

  	
   

  	
  Unpaid

  Balance

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