Document:

exv10w1

 

Exhibit 10.1

LOAN AGREEMENT

($200,000,000 REVOLVING LOAN FACILITY)

dated as of November 24, 2004

AMONG

HCC INSURANCE HOLDINGS, INC.

as Borrower,

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Administrative Agent and Lead Arranger and as a Lender,

WACHOVIA BANK, NATIONAL ASSOCIATION,

as Syndications Agent and as a Lender,

AND

THE OTHER LENDERS NOW OR HEREAFTER

PARTIES HERETO

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page

	1. Definitions
	 	 	1	 
	1.1 Certain Defined Terms
	 	 	1	 
	1.2 Miscellaneous
	 	 	16	 
	2. Commitments and Loans
	 	 	16	 
	2.1 Loans
	 	 	16	 
	2.2 Terminations or Reductions of Commitments
	 	 	18	 
	2.3 Commitment Fees
	 	 	18	 
	2.4 Several Obligations
	 	 	18	 
	2.5 Notes
	 	 	19	 
	2.6 Use of Proceeds
	 	 	19	 
	2.7 Letters of Credit
	 	 	19	 
	3. Borrowings, Payments, Prepayments and Interest Options
	 	 	22	 
	3.1 Borrowings
	 	 	22	 
	3.2 Prepayments
	 	 	23	 
	3.3 Interest Options
	 	 	24	 
	3.4 Capital Adequacy
	 	 	27	 
	3.5 Limitation on Charges; Substitute Lenders; Non-Discrimination
	 	 	28	 
	4. Payments;
Pro Rata Treatment; Computations, Etc.
	 	 	29	 
	4.1 Payments
	 	 	29	 
	4.2 Pro Rata Treatment
	 	 	30	 
	4.3 Certain Actions, Notices, Etc
	 	 	30	 
	4.4 Non-Receipt of Funds by Agent
	 	 	31	 
	4.5 Sharing of Payments, Etc
	 	 	32	 
	5. Conditions Precedent
	 	 	32	 
	5.1 Initial Loans and Letters of Credit
	 	 	32	 
	5.2 All Loans
	 	 	34	 
	6. Representations and Warranties
	 	 	34	 
	6.1 Organization
	 	 	35	 
	6.2 Financial Statements
	 	 	35	 
	6.3 Enforceable Obligations; Authorization
	 	 	35	 
	6.4 Other Debt
	 	 	35	 
	6.5 Litigation
	 	 	35	 
	6.6 Title
	 	 	36	 
	6.7 Taxes
	 	 	36	 
	6.8 Regulations U and X
	 	 	36	 
	6.9 Subsidiaries
	 	 	36	 
	6.10 No Untrue or Misleading Statements
	 	 	36	 
	6.11 ERISA
	 	 	36	 
	6.12 Investment Company Act
	 	 	36	 
	6.13 Public Utility Holding Company Act
	 	 	37	 
	6.14 Solvency
	 	 	37	 
	6.15 Fiscal Year
	 	 	37	 

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	 	 	Page

	6.16 Compliance
	 	 	37	 
	6.17 Environmental Matters
	 	 	37	 
	6.18 Property and Earnings of Material Subsidiaries
	 	 	37	 
	7. Affirmative Covenants
	 	 	38	 
	7.1 Taxes, Existence, Regulations, Property, Etc
	 	 	38	 
	7.2 Financial Statements and Information
	 	 	38	 
	7.3 Financial Tests
	 	 	39	 
	7.4 Inspection
	 	 	39	 
	7.5 Further Assurances
	 	 	40	 
	7.6 Books and Records
	 	 	40	 
	7.7 Insurance
	 	 	40	 
	7.8 Notice of Certain Matters
	 	 	40	 
	7.9 ERISA Information and Compliance
	 	 	41	 
	8. Negative Covenants
	 	 	42	 
	8.1 Borrowed Money Indebtedness
	 	 	42	 
	8.2 Liens
	 	 	42	 
	8.3 Contingent Liabilities
	 	 	44	 
	8.4 Mergers and Consolidations
	 	 	44	 
	8.5 Redemption, Dividends and Distributions
	 	 	44	 
	8.6 Nature of Business
	 	 	45	 
	8.7 Transactions with Related Parties
	 	 	45	 
	8.8 Loans and Investments
	 	 	45	 
	8.9 Organizational Documents
	 	 	45	 
	8.10 Unfunded Liabilities
	 	 	45	 
	8.11 Intentionally Left Blank
	 	 	45	 
	8.12 Subsidiaries
	 	 	45	 
	8.13 Property and Earnings of Material Subsidiaries
	 	 	46	 
	9. Defaults
	 	 	46	 
	9.1 Events of Default
	 	 	46	 
	9.2 Right of Setoff
	 	 	48	 
	9.3 Collateral Account
	 	 	49	 
	9.4 Preservation of Security for Unmatured Reimbursement Obligations
	 	 	49	 
	9.5 Remedies Cumulative
	 	 	49	 
	10. Agent
	 	 	50	 
	10.1 Appointment, Powers and Immunities
	 	 	50	 
	10.2 Reliance
	 	 	51	 
	10.3 Defaults
	 	 	51	 
	10.4 Material Written Notices
	 	 	51	 
	10.5 Rights as a Lender
	 	 	51	 
	10.6 Indemnification
	 	 	52	 
	10.7 Non-Reliance on Agent and Other Lenders
	 	 	52	 
	10.8 Failure to Act
	 	 	52	 
	10.9 Resignation or Removal of Agent
	 	 	53	 
	10.10 No Partnership
	 	 	53	 
	10.11 No Waiver
	 	 	53	 

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	 	 	Page

	10.12 Syndications Agent
	 	 	53	 
	11. Miscellaneous
	 	 	54	 
	11.1 Waiver
	 	 	54	 
	11.2 Notices
	 	 	54	 
	11.3 Expenses, Etc
	 	 	55	 
	11.4 Indemnification
	 	 	56	 
	11.5 Amendments, Etc
	 	 	56	 
	11.6 Successors and Assigns
	 	 	57	 
	11.7 Limitation of Interest
	 	 	59	 
	11.8 Survival
	 	 	60	 
	11.9 Captions
	 	 	60	 
	11.10 Counterparts
	 	 	60	 
	11.11 Governing Law
	 	 	60	 
	11.12 Severability
	 	 	60	 
	11.13 Tax Forms
	 	 	60	 
	11.14 Venue
	 	 	61	 
	11.15 Jury Waiver
	 	 	61	 
	11.16 Conflicts Between This Agreement and the Other Loan Documents
	 	 	61	 
	11.17 Disclosure to Other Persons; Confidentiality
	 	 	61	 
	11.18 USA Patriot Act
	 	 	62	 
	11.19 Amendment and Restatement; Renewal Notes
	 	 	63	 

EXHIBITS

A — Request for Extension of Credit

B — Rate Designation Notice

C — Note

D — Assignment and Acceptance

E — Compliance Certificate

F — Subsidiaries as of the Effective Date

G — Existing Borrowed Money Indebtedness

H — Existing Liens

SCHEDULES

I – Commitments

II – Agency Subsidiaries

III – Insurance Company Subsidiaries

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LOAN AGREEMENT

     THIS LOAN AGREEMENT is made and entered into as of November 24, 2004, by
and among HCC INSURANCE HOLDINGS, INC., a Delaware corporation (together with
its permitted successors, herein called the “Borrower”); each of the lenders
which is or may from time to time become a party hereto (individually, a
“Lender” and, collectively, the “Lenders”), WELLS FARGO BANK, NATIONAL
ASSOCIATION (“Wells Fargo”), a national banking association, as Administrative
Agent for the Lenders and Lead Arranger (in such capacity, together with its
successors in such capacity, the “Agent”), and WACHOVIA BANK, NATIONAL
ASSOCIATION, as Syndications Agent.

     The parties hereto agree as follows:

1. Definitions.

     1.1 Certain Defined Terms.

     Unless a particular term, word or phrase is otherwise defined or the
context otherwise requires, capitalized terms, words and phrases used herein or
in the Loan Documents (as hereinafter defined) have the following meanings (all
definitions that are defined in this Agreement in the singular have the same
meanings when used in the plural and vice versa):

     Accounts, General Intangibles and Inventory shall have the respective
meanings assigned to them in the Uniform Commercial Code enacted in the State
of Texas in force on the Effective Date.

     Additional Interest means the aggregate of all amounts accrued or paid
pursuant to the Notes or any of the other Loan Documents (other than interest
on the Notes at the Stated Rate) which, under applicable laws, are or may be
deemed to constitute interest on the indebtedness evidenced by the Notes.

     Adjusted LIBOR means, with respect to each Interest Period applicable to a
LIBOR Borrowing, a rate per annum equal to the quotient, expressed as a
percentage, of (a) LIBOR with respect to such Interest Period divided by (b)
1.0000 minus the Eurodollar Reserve Requirement in effect on the first day of
such Interest Period.

     Affiliate means any Person controlling, controlled by or under common
control with any other Person. For purposes of this definition, “control”
(including “controlled by” and “under common control with”) means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or otherwise.

     Agency Subsidiaries means the Subsidiaries listed on Schedule II hereto
and such other Subsidiaries which are not direct or indirect Subsidiaries of
another Agency Subsidiary or an Insurance Company Subsidiary and which are
engaged primarily in the same businesses as the entities listed on Schedule II
hereto as Borrower may from time to time designate as an “Agency Subsidiary” by
giving Agent written notice thereof and by executing and delivering to Agent

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such Security Agreements, Guaranties, stock certificates, stock powers,
authorization documentation, legal opinions and other items as Agent may
reasonably request, each in Proper Form and duly executed and delivered, in
order to ensure that a Default shall not occur under the provisions of Sections
9.1(j) or (l) hereof. Borrower may at any time cause any of the above listed
entities to no longer be characterized as an “Agency Subsidiary” so long as no
Event of Default has occurred which is continuing and so long as such change in
characterization does not result in any Default or Event of Default (and in the
event any Person ceases to be an “Agency Subsidiary” as above provided, such
Person’s Guaranty (if any) shall be promptly released by Agent and the equity
interests in and to such Person shall be promptly released by Agent from the
Liens of each Security Document covering such equity interests and the
certificates evidencing such equity interests shall be promptly delivered to
Borrower by Agent).

     Agreement means this Loan Agreement, as it may from time to time be
amended, modified, restated or supplemented.

     Annual Financial Statements means the annual financial statements of a
Person, including all notes thereto, which statements shall include a balance
sheet as of the end of such fiscal year and an income statement and a statement
of cash flows for such fiscal year, all setting forth in comparative form the
corresponding figures from the previous fiscal year, all prepared in conformity
with GAAP in all material respects, and accompanied by the unqualified opinion
of independent certified public accountants of recognized national standing,
which shall state that such financial statements present fairly in all material
respects the financial position of such Person and, if such Person has any
Subsidiaries, its consolidated Subsidiaries as of the date thereof and the
results of its operations for the period covered thereby in conformity with
GAAP or, as applicable, statutory financial standards.

     Applications means all applications and agreements for Letters of Credit,
or similar instruments or agreements, in Proper Form, now or hereafter executed
by any Person in connection with any Letter of Credit now or hereafter issued
or to be issued under the terms hereof at the request of any Person. To the
extent that any Application contains provisions granting liens or security
interests not granted in the Loan Agreement or contains events of default
waivers, and cure periods (or fails to provide cure periods as provided in the
Loan Agreement) which are more restrictive than those contained in the Loan
Agreement, the provisions of the Loan Agreement shall control.

     Assignment and Acceptance shall have the meaning ascribed to such term in
Section 11.6 hereof.

     Bankruptcy Code means the United States Bankruptcy Code, as amended, and
any successor statute.

     Base Rate means for any day a rate per annum equal to the lesser of (a)
the greater of (1) the Prime Rate for that day or (2) the Federal Funds Rate
for that day plus 1/2 of 1% or (b) the Ceiling Rate. If for any reason Agent
shall have determined (which determination shall create a rebuttable
presumption as to the accuracy thereof) that it is unable to ascertain the
Federal Funds Rate for any reason, including, without limitation, the
inability or failure of Agent to obtain sufficient quotations in accordance
with the terms hereof (and in such event, Agent shall furnish written evidence
to Borrower showing how Agent made such determination), the Base Rate

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shall, until the circumstances giving rise to such inability no longer
exist, be the lesser of (a) the Prime Rate or (b) the Ceiling Rate.

     Base Rate Borrowing means that portion of the principal balance of the
Loans at any time bearing interest at the Base Rate.

     Borrowed Money Indebtedness means, with respect to any Person, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (iii) all obligations of such Person under conditional sale or
other title retention agreements relating to Property purchased by such Person,
(iv) all obligations of such Person issued or assumed as the deferred purchase
price of property or services (excluding obligations of such Person to
creditors for raw materials, inventory, services and supplies and deferred
payments for services to employees and former employees incurred in the
ordinary course of such Person’s business), (v) all capital lease obligations
of such Person, (vi) all obligations of others secured by any lien on property
or assets owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (vii) Interest Rate Risk Indebtedness of
such Person (to the extent treated as Indebtedness under GAAP), (viii) all
obligations of such Person in respect of outstanding letters of credit issued
for the account of such Person (whether or not drawn and in the stated amount
thereof), exclusive of letters of credit which are fully secured by cash or
marketable securities, (ix) that portion (if any) of any convertible preferred
or trust preferred securities issued by Borrower which is recognized by
Standard & Poor’s as indebtedness and (x) all guarantees of such Person of any
of the foregoing.

     Business Day means any day other than a day on which commercial banks are
authorized or required to close in Houston, Texas, New York City, New York or
Denver, Colorado. A separate definition of “LIBOR Business Day” applies to
LIBOR Borrowings under this Agreement.

     Capital Expenditures means, with respect to any Person for any period,
expenditures in respect of fixed or capital assets by such Person, including
capital lease obligations incurred during such period (to the extent not
already included), which would be reflected as additions to Property, plant or
equipment on a balance sheet of such Person and its consolidated Subsidiaries,
if any, prepared in accordance with GAAP; but excluding expenditures during
such period for the repair or replacement of any fixed or capital asset which
was destroyed or damaged, in whole or in part, to the extent financed by the
proceeds of an insurance policy maintained by such Person. Capital
Expenditures shall not include Permitted Investments or the assets owned by any
Person acquired by way of a Permitted Investment or assets comprising
substantially all of an entire business which is acquired by the applicable
Person.

     Cash Flow Coverage Ratio means, as of the end of any fiscal year, the
ratio of (a) the sum of the maximum aggregate dividends that the insurance
company Subsidiaries of Borrower are permitted by applicable regulatory
authorities to pay to Borrower in the applicable fiscal year plus all cash
dividends received by Borrower from agency operations of Subsidiaries of
Borrower in the applicable fiscal year plus Interest Expense paid by a
Subsidiary of Borrower to Borrower for the applicable fiscal year plus
principal payments made by a Subsidiary of Borrower to Borrower for the
applicable fiscal year to (b) the sum of Interest Expense of Borrower and its
Subsidiaries for the applicable fiscal year plus scheduled principal payments

3

 

paid or payable by Borrower and its Subsidiaries for the applicable fiscal
year plus dividends paid by Borrower to its shareholders for the applicable
fiscal year.

     Ceiling Rate means, on any day, the maximum nonusurious rate of interest
permitted for that day by whichever of applicable federal or Texas (or any
jurisdiction whose usury laws are deemed to apply to the Notes or any other
Loan Documents despite the intention and desire of the parties to apply the
usury laws of the State of Texas) laws permits the higher interest rate, stated
as a rate per annum. On each day, if any, that the Texas Finance Code
establishes the Ceiling Rate, the Ceiling Rate shall be the “weekly ceiling”
(as defined in §303 of the Texas Finance Code) for that day. Agent may from
time to time, as to current and future balances, implement any other ceiling
under the Texas Finance Code by notice to Borrower, if and to the extent
permitted by the Texas Finance Code. Without notice to Borrower or any other
person or entity, the Ceiling Rate shall automatically fluctuate upward and
downward as and in the amount by which such maximum nonusurious rate of
interest permitted by applicable law fluctuates.

     Change of Control means a change resulting when any Unrelated Person or
any Unrelated Persons acting together which would constitute a Group together
with any Affiliates or Related Persons thereof (in each case also constituting
Unrelated Persons) shall at any time either (i) Beneficially Own more than 50%
of the aggregate voting power of all classes of Voting Stock of Borrower or
(ii) succeed in having sufficient of its or their nominees elected to the Board
of Directors of Borrower such that such nominees, when added to any existing
directors remaining on the Board of Directors of Borrower after such election
who is an Affiliate or Related Person of such Person or Group, shall constitute
a majority of the Board of Directors of Borrower. As used herein (a)
“Beneficially Own” means “beneficially own” as defined in Rule 13d-3 of the
Securities Exchange Act of 1934, as amended, or any successor provision
thereto; provided, however, that, for purposes of this definition, a Person
shall not be deemed to Beneficially Own securities tendered pursuant to a
tender or exchange offer made by or on behalf of such Person or any of such
Person’s Affiliates until such tendered securities are accepted for purchase or
exchange; (b) “Group” means a “group” for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended; (c) “Unrelated Person” means at
any time any Person other than Borrower or any Subsidiary of Borrower and other
than any trust for any employee benefit plan of Borrower or any Subsidiary of
Borrower; (d) “Related Person” of any Person shall mean any other Person owning
(1) 5% or more of the outstanding common stock of such Person or (2) 5% or more
of the Voting Stock of such Person; and (e) “Voting Stock” of any Person shall
mean capital stock of such Person which ordinarily has voting power for the
election of directors (or persons performing similar functions) of such Person,
whether at all times or only so long as no senior class of securities has such
voting power by reason of any contingency.

     Code means the Internal Revenue Code of 1986, as amended, as now or
hereafter in effect, together with all regulations, rulings and interpretations
thereof or thereunder by the Internal Revenue Service.

     Collateral means all Property, tangible or intangible, real, personal or
mixed, now or hereafter subject to the Security Documents.

     Combined Ratio means, for any period, the sum of the Loss Ratio for such
period plus the Expense Ratio for such period, determined on a statutory
accounting basis.

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     Commitment means, as to any Lender, the obligation, if any, of such Lender
to make Loans and incur or participate in Letter of Credit Liabilities in an
aggregate principal amount at any one time outstanding up to (but not
exceeding) the amount, if any, set forth on Schedule I hereto, or otherwise
provided for in an Assignment and Acceptance Agreement (as the same may be
reduced from time to time pursuant to Section 2.2 hereof).

     Compliance Certificate shall have the meaning given to it in Section 7.2
hereof.

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

     Corporation means any corporation, limited liability company, partnership,
joint venture, joint stock association, business trust and other business
entity.

     Cover for Letter of Credit Liabilities shall be effected by paying to
Agent immediately available funds, to be held by Agent in a collateral account
maintained by Agent at its Principal Office and collaterally assigned as
security for the financial accommodations extended pursuant to this Agreement
using documentation reasonably satisfactory to Agent, in the amount required by
any applicable provision hereof. Such amount shall be retained by Agent in
such collateral account until such time as the applicable Letter of Credit
shall have expired and the Reimbursement Obligations, if any, with respect
thereto shall have been fully satisfied or such Cover is no longer required by
the terms of this Agreement; provided, however, that at such time if a Default
or Event of Default has occurred and is continuing, Agent shall not be required
to release such amount in such collateral account until such Default or Event
of Default shall have been cured or waived.

     Debt to Capitalization Ratio means, as of the end of any fiscal quarter,
the ratio of (a) Indebtedness as of such date to (b) the sum of Indebtedness as
of such date plus Shareholder’s Equity as of such date.

     Default means an Event of Default or an event which with notice or lapse
of time or both would, unless cured or waived, become an Event of Default.

     Dollars and $ means lawful money of the United States of America.

     Effective Date means November 24, 2004.

     Environmental Claim means any third party (including Governmental
Authorities and employees) action, lawsuit, claim or proceeding (including
claims or proceedings at common law or under the Occupational Safety and Health
Act or similar laws relating to safety of employees) which seeks to impose
liability for (i) noise; (ii) pollution or contamination of the air, surface
water, ground water or land or the clean-up of such pollution or contamination;
(iii) solid, gaseous or liquid waste generation, handling, treatment, storage,
disposal or transportation; (iv) exposure to Hazardous Substances; (v) the
safety or health of employees or (vi) the manufacture, processing, distribution
in commerce or use of Hazardous Substances. An “Environmental Claim” includes,
but is not limited to, a common law action, as well as a proceeding to issue,
modify or terminate an Environmental Permit, or to adopt or amend a regulation
to the extent

5

 

that such a proceeding attempts to redress violations of an applicable
permit, license, or regulation as alleged by any Governmental Authority.

     Environmental Liabilities includes all liabilities arising from any
Environmental Claim, Environmental Permit or Requirement of Environmental Law
under any theory of recovery, at law or in equity, and whether based on
negligence, strict liability or otherwise, including but not limited to:
remedial, removal, response, abatement, investigative, monitoring, personal
injury and damage to property or injuries to persons, and any other related
costs, expenses, losses, damages, penalties, fines, liabilities and
obligations, and all costs and expenses necessary to cause the issuance,
reissuance or renewal of any Environmental Permit including reasonable
attorneys’ fees and court costs.

     Environmental Permit means any permit, license, approval or other
authorization under any applicable Legal Requirement relating to pollution or
protection of health or the environment, including laws, regulations or other
requirements relating to emissions, discharges, releases or threatened releases
of pollutants, contaminants or hazardous substances or toxic materials or
wastes into ambient air, surface water, ground water or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants or Hazardous
Substances.

     ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all rules, regulations, rulings and
interpretations adopted by the Internal Revenue Service or the U.S. Department
of Labor thereunder.

     Eurodollar Rate means for any day during an Interest Period for a LIBOR
Borrowing a rate per annum equal to the lesser of (a) the sum of (1) the
Adjusted LIBOR in effect on the first day of such Interest Period plus (2) the
Margin Percentage from time to time in effect or (b) the Ceiling Rate. Each
Eurodollar Rate is subject to adjustments for reserves, insurance assessments
and other matters as provided for in Section 3.3 hereof.

     Eurodollar Reserve Requirement means, on any day, that percentage
(expressed as a decimal fraction and rounded, if necessary, to the next highest
one ten thousandth [.0001]) which is in effect on such day for determining all
reserve requirements (including, without limitation, basic, supplemental,
marginal and emergency reserves) applicable to “Eurocurrency liabilities,” as
currently defined in Regulation D. Each determination of the Eurodollar
Reserve Requirement by Agent shall create a rebuttable presumption as to the
accuracy thereof, and may be computed using any reasonable averaging and
attribution method.

     Event of Default shall have the meaning assigned to it in Section 9
hereof.

     Expense Ratio means, for any period, the ratio of (a) Statutory Net
Operating Expenses for the 12 months ending on the last day of the immediately
preceding calendar quarter to (b) Statutory Net Written Premiums for the 12
months ending on the last day of the immediately preceding calendar quarter,
tested at the end of each calendar quarter.

     Federal Funds Rate means, for any day, a fluctuating interest rate per
annum equal for such day to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for

6

 

such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is not
so published for any such day which is a Business Day, the average of the
quotations for such day on such transactions received by Agent from three
Federal funds brokers of recognized standing selected by Agent in its sole and
absolute discretion.

     Financing Statements means all such Uniform Commercial Code financing
statements as Agent shall reasonably require, in Proper Form, duly executed by
Borrower (or any other applicable Obligor) to give notice of and to perfect or
continue perfection of Agent’s Liens in any applicable Collateral, as any of
the foregoing may from time to time be amended, modified, supplemented or
restated.

     Foreign Subsidiaries means Subsidiaries which are organized under the laws
of a jurisdiction other than the United States of America, any State of the
United States or any political subdivision thereof.

     Funding Loss means, with respect to (a) Borrower’s payment of principal of
a LIBOR Borrowing on a day other than the last day of the applicable Interest
Period; (b) Borrower’s failure to borrow a LIBOR Borrowing on the date
specified by Borrower; (c) Borrower’s failure to make any prepayment of the
Loans (other than Base Rate Borrowings) on the date specified by Borrower, or
(d) any cessation of a Eurodollar Rate to apply to the Loans or any part
thereof pursuant to Section 3.3, in each case whether voluntary or involuntary,
any loss, expense, penalty, premium or liability actually incurred by any
Lender (including but not limited to any actual loss or reasonable expense
incurred by reason of the liquidation or reemployment of deposits or other
funds acquired by any Lender to fund or maintain a Loan), but excluding loss of
margin or profit for the period after such payment or failure to borrow or
prepay and excluding losses resulting from the gross negligence or willful
misconduct of the applicable Lender.

     GAAP means, as to a particular Person, such accounting practice as, in the
opinion of independent certified public accountants of recognized national
standing regularly retained by such Person, conforms at the time to generally
accepted accounting principles, consistently applied for all periods after the
Effective Date so as to present fairly the financial condition, and results of
operations and cash flows, of such Person. If any change in any accounting
principle or practice is required by the Financial Accounting Standards Board,
all reports and financial statements required hereunder may be prepared in
accordance with such change so long as Borrower provides to Agent such
disclosures of the impact of such change as Agent may reasonably require. No
such change in any accounting principle or practice shall, in itself, cause a
Default or Event of Default hereunder (but Borrower, Agent and Lenders shall
negotiate in good faith to replace any financial covenants hereunder to the
extent such financial covenants are affected by such change in accounting
principle or practice).

     Governmental Authority means any foreign governmental authority, the
United States of America, any State of the United States, and any political
subdivision of any of the foregoing, and any central bank, agency, department,
commission, board, bureau, court or other tribunal having jurisdiction over
Agent, any Lender, any Obligor or their respective Property.

     Guaranties means, collectively, (i) the Guaranties dated on or prior to
the date of hereof executed by each of the current Agency Subsidiaries of
Borrower which is not a Foreign

7

 

Subsidiary in favor of Agent, for the benefit of Lenders, and (ii) any and
all other guaranties hereafter executed in favor of Agent, for the benefit of
Lenders, relating to the Obligations, as any of them may from time to time be
amended, modified, restated or supplemented.

     Hazardous Substance means petroleum products, and any hazardous or toxic
waste or substance defined or regulated as such from time to time by any law,
rule, regulation or order described in the definition of “Requirements of
Environmental Law”.

     Indebtedness means, for any Person, (i) all obligations of such Person for
Borrowed Money Indebtedness (or which has been incurred in connection with the
acquisition of property) and (ii) preferred stock having a mandatory redemption
prior to the maturity of the Revolving Loan Obligations.

     Index Debt means senior, unsecured, long-term indebtedness for borrowed
money of the Borrower that is not guaranteed by any other Person or subject to
any other credit enhancement.

     Insurance Company Subsidiaries means the Subsidiaries listed on Schedule
III hereto and such other Subsidiaries which are not direct or indirect
Subsidiaries of another Insurance Company Subsidiary or an Agency Subsidiary
and which are engaged primarily in the same businesses as the entities listed
on Schedule III hereto as Borrower may from time to time designate as an
“Insurance Company Subsidiary” by giving Agent written notice thereof and by
executing and delivering to Agent such Security Agreements, stock certificates,
stock powers, authorization documentation, legal opinions and other items as
Agent may reasonably request, each in Proper Form and duly executed and
delivered, in order to ensure that a Default shall not occur under the
provisions of Sections 9.1(j) or (l) hereof. Borrower may at any time cause
any of the above listed entities to no longer be characterized as an “Insurance
Company Subsidiary” so long as no Event of Default has occurred which is
continuing and so long as such change in characterization does not result in
any Default or Event of Default (and in the event any Person ceases to be an
“Insurance Company Subsidiary” as above provided, the equity interests in and
to such Person shall be promptly released by Agent from the Liens of each
Security Document covering such equity interests and the certificates
evidencing such equity interests shall be promptly delivered to Borrower by
Agent).

     Interest Expense means, for any Person, the sum of (i) all interest on
Indebtedness paid or due and payable (including the portion of rents payable
under capital leases allocable to interest) plus (ii) all debt discount and
expense amortized or required to be amortized during such period.

     Interest Options means the Base Rate and each Eurodollar Rate, and
“Interest Option” means any of them.

     Interest Payment Dates means (a) for Base Rate Borrowings, December 31,
2004 and the last Business Day of each March, June, September and December
thereafter prior to the Revolving Loan Maturity Date, and the Revolving Loan
Maturity Date and (b) for LIBOR Borrowings, the end of the applicable Interest
Period (and if such Interest Period exceeds three months’ duration, quarterly,
commencing on the first quarterly anniversary of the first day of such Interest
Period), and the Revolving Loan Maturity Date.

8

 

     Interest Period means, for each LIBOR Borrowing, a period commencing on
the date such LIBOR Borrowing began and ending on the numerically corresponding
day which is, subject to availability as set forth in Section 3.3(c)(iii), 1,
2, 3, 6 or 12 months thereafter, as Borrower shall elect in accordance
herewith; provided, (1) unless Agent shall otherwise consent, no Interest
Period with respect to a LIBOR Borrowing shall commence on a date earlier than
three (3) Business Days after this Agreement shall have been fully executed;
(2) any Interest Period with respect to a LIBOR Borrowing which would otherwise
end on a day which is not a LIBOR Business Day shall be extended to the next
succeeding LIBOR Business Day, unless such LIBOR Business Day falls in another
calendar month, in which case such Interest Period shall end on the next
preceding LIBOR Business Day; (3) any Interest Period with respect to a LIBOR
Borrowing which begins on the last LIBOR Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last LIBOR Business
Day of the appropriate calendar month; (4) no Interest Period for a Loan shall
ever extend beyond the Revolving Loan Maturity Date, and (5) Interest Periods
shall be selected by Borrower in such a manner that the Interest Period with
respect to any portion of the Loans which shall become due shall not extend
beyond such due date.

     Interest Rate Risk Agreement means an interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or similar
arrangement entered into by Borrower for the purpose of reducing Borrower’s
exposure to interest rate fluctuations and not for speculative purposes,
approved in writing by Agent (such approval not to be unreasonably withheld),
as it may from time to time be amended, modified, restated or supplemented.

     Interest Rate Risk Indebtedness means all obligations and Indebtedness of
Borrower with respect to the program for the hedging of interest rate risk
provided for in any Interest Rate Risk Agreement.

     Investment means the purchase or other acquisition of any securities or
Indebtedness of, or the making of any loan, advance, transfer of Property
(other than transfers in the ordinary course of business) or capital
contribution to, or the incurring of any liability (other than trade accounts
payable arising in the ordinary course of business), contingently or otherwise,
in respect of the Indebtedness of, any Person; provided, however, that the
purchase by Borrower or any of its Subsidiaries of any Indebtedness of Borrower
or any of its Subsidiaries for the purpose of retiring such Indebtedness shall
not be deemed to be an Investment.

     Issuer means the issuer (or, where applicable, each issuer) of a Letter of
Credit under this Agreement.

     Legal Requirement means any law, statute, ordinance, decree, requirement,
order, judgment, rule, or regulation (or interpretation of any of the
foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority, whether presently existing or arising in the future.

     Letter of Credit shall have the meaning assigned to such term in Section
2.7 hereof.

     Letter of Credit Liabilities means, at any time and in respect of any
Letter of Credit, the sum of (i) the amount available for drawings under such
Letter of Credit plus (ii) the aggregate

9

 

unpaid amount of all Reimbursement Obligations at the time due and payable in
respect of previous drawings made under such Letter of Credit.

     LIBOR means, for each Interest Period for any LIBOR Borrowing, the rate
per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%)
appearing on Telerate Page 3750 (or if such Telerate Page shall not be
available, any successor or similar service as may be selected by Agent and
Borrower as the London interbank rate for deposits in United States dollars) as
of 11:00 London time (or as soon thereafter as practicable) on the day two
LIBOR Business Days prior to the first day of such Interest Period for deposits
in United States dollars having a term comparable to such Interest Period and
in an amount comparable to the principal amount of the LIBOR Borrowing to which
such Interest Period relates. If none of such Telerate Page 3750 nor any
successor or similar service is available, then “LIBOR” shall mean, with
respect to any Interest Period for any applicable LIBOR Borrowing, the rate of
interest per annum, rounded upwards, if necessary, to the nearest 1/100th of
1%, quoted by Agent at or before 11:00 London time (or as soon thereafter as
practicable), on the date two LIBOR Business Days before the first day of such
Interest Period, to be the arithmetic average of the prevailing rates per annum
at the time of determination and in accordance with the then existing practice
in the applicable market, for the offering to Agent by one or more prime banks
selected by Agent in its sole discretion, in the London interbank market, of
deposits in United States dollars for delivery on the first day of such
Interest Period and having a maturity equal to the length of such Interest
Period and in an amount equal (or as nearly equal as may be) to the LIBOR
Borrowing to which such Interest Period relates. Each determination by Agent
of LIBOR shall create a rebuttable presumption as to the accuracy thereof, and
may be computed using any reasonable averaging and attribution method.

     LIBOR Borrowing means each portion of the principal balance of the Loans
at any time bearing interest at a Eurodollar Rate.

     LIBOR Business Day means a Business Day on which transactions in United
States dollar deposits between lenders may be carried on in the London
interbank market.

     Lien means any mortgage, pledge, charge, encumbrance, security interest,
collateral assignment or other lien or restriction of any kind, whether based
on common law, constitutional provision, statute or contract, and shall include
reservations, exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions and other title exceptions.

     Loans means the loans provided for by Section 2.1 hereof.

     Loan Documents means, collectively, this Agreement, the Guaranties, the
Security Documents, the Notes, all Applications, the Notice of Entire
Agreement, all instruments, certificates and agreements now or hereafter
executed or delivered by any Obligor to Agent or any Lender pursuant to any of
the foregoing or in connection with the Obligations or any commitment regarding
the Obligations, and all amendments, modifications, renewals, extensions,
increases and rearrangements of, and substitutions for, any of the foregoing.

     Loss and Loss Adjustment Expenses means the total of all claims incurred
by an insurance or reinsurance company under a policy or policies, whether paid
or unpaid (including a provision for claims that have occurred but have not yet
been reported to the insurer or reinsurer)

10

 

and the total expense of settling claims, including legal and other fees
and the portion of general expense allocated to claim settlement costs, as
determined in accordance with statutory accounting standards.

     Loss Ratio means, for any period, the ratio of (a) the sum of Loss and
Loss Adjustment Expenses for the 12 months ending on the last day of the
immediately preceding calendar quarter to (b) Net Earned Premiums for the 12
months ending on the last day of the immediately preceding calendar quarter,
tested at the end of each calendar quarter.

     Majority Lenders means two or more Lenders having greater than 51% of the
Commitments or, if the Commitments are terminated, two or more Lenders having
greater than 51% of the outstanding Loans.

     Margin Percentage means, on any day, the applicable per annum percentage
set forth at the appropriate intersection in the table shown below, based upon
the ratings by S&P applicable on such date to the Index Debt:

	 	 	 	 	 
	Index Debt	 	 
	Rating
	 	Margin Percentage

	A or higher
	 	 	0.75	 
	A- or lower
	 	 	1.00	 

For purposes of the foregoing, (i) if S&P shall not have in effect a rating for
the Index Debt (other than by reason of the circumstances referred to in the
last sentence of this definition), then S&P shall be deemed to have established
a rating of A- or lower and (ii) if the ratings established or deemed to have
been established by S&P for the Index Debt shall be changed (other than as a
result of a change in the rating system of S&P), such change shall be effective
as of the date on which it is first announced by S&P, irrespective of when
notice of such change shall have been furnished by the Borrower to the Agent
and the Lenders pursuant to this Agreement or otherwise. Each change in the
Margin Percentage shall apply during the period commencing on the effective
date of such change and ending on the date immediately preceding the effective
date of the next such change. If the rating system of S&P shall change, or if
S&P shall cease to be in the business of rating corporate debt obligations, the
Borrower and the Lenders shall negotiate in good faith to amend this definition
to reflect such changed rating system or the unavailability of ratings from S&P
and, pending the effectiveness of any such amendment, the Margin Percentage
shall be determined by reference to the rating most recently in effect prior to
such change or cessation.

     Material Adverse Effect means relative to any occurrence of whatever
nature (including any adverse determination in any litigation, arbitration or
governmental investigation or proceeding), resulting in (i) a material adverse
effect on the financial condition, business, operations, or assets of Borrower
and its Subsidiaries, on a consolidated basis, from those reflected in the
financial statements furnished to Agent referred to in Section 6.2 hereof or
from the facts represented or warranted in this Agreement or any other Loan
Document, (ii) a material impairment of the ability of Borrower and its
Subsidiaries, on a consolidated basis, to perform their obligations under the
Loan Documents or (iii) a material impairment of the validity or

11

 

enforceability of the Loan Documents the result of which is a material
adverse effect on the ability of Lenders to collect the Obligations when due.

     Material Subsidiaries means the Insurance Company Subsidiaries and the
Agency Subsidiaries.

     Net Earned Premiums means the portion of Net Written Premiums during or
prior to a given period which is actually earned during such period.

     Net Written Premiums means the total of all premiums received or to be
received for insurance underwritten and reinsurance assumed during a given
period less the total premium paid or to be paid for reinsurance ceded to
others during such period, as determined in accordance with statutory
accounting standards.

     Newly Acquired Subsidiaries means, as of any date, any Subsidiary formed,
created or acquired within forty-five (45) days prior to such date.

     Notes means the promissory notes of Borrower evidencing the Loans, in the
form of Exhibit C hereto, together with all renewals, extensions,
modifications, amendments, increases and/or and replacements thereof and
substitutions therefor.

     Notice of Entire Agreement means a notice of entire agreement, in Proper
Form, executed by Borrower and Agent, as the same may from time to time be
amended, modified, supplemented or restated.

     Obligations means, as at any date of determination thereof, the sum of the
following: (i) the aggregate principal amount of Loans outstanding hereunder
on such date, plus (ii) the aggregate amount of the outstanding Letter of
Credit Liabilities hereunder on such date, plus (iii) all other outstanding
liabilities, obligations and indebtedness of any Obligor under any Loan
Document on such date.

     Obligors means Borrower, the Insurance Company Subsidiaries and each other
Subsidiary of Borrower which is a party to any Guaranty or Security Agreement.

     Organizational Documents means, with respect to a corporation, the
certificate of incorporation, articles of incorporation and bylaws of such
corporation; with respect to a partnership, the partnership agreement
establishing such partnership and with respect to a trust, the instrument
establishing such trust; in each case including any and all modifications
thereof as of the date of the Loan Document referring to such Organizational
Document and any and all future modifications thereof.

     Past Due Rate means, on any day, a rate per annum equal to the lesser of
(i) the Ceiling Rate for that day or (ii) the Base Rate plus three percent
(3%).

     PBGC means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

12

 

     Permitted Dividends means (i) dividends or distributions by a Subsidiary
of Borrower to Borrower (or to another Subsidiary of Borrower) or redemption by
a Subsidiary of any of its stock held by Borrower (or by another Subsidiary of
Borrower), (ii) dividends paid in stock and stock splits and (iii) so long as
no Default or Event of Default shall have occurred and be continuing (or would
result therefrom), dividends or distributions by Borrower not exceeding, in the
aggregate in any applicable fiscal year, the greater of (x) $50,000,000 or (y)
33% of the net income of Borrower for the immediately preceding fiscal year.
The dividends and distributions otherwise permitted under this definition shall
be subject to the provisions of Section 8.13 hereof.

     Permitted Investment means Investments permitted under the terms of
Section 8.8 hereof.

     Permitted Liens means Liens permitted under the provisions of Section 8.2
hereof.

     Person means any individual, Corporation, trust, unincorporated
organization, Governmental Authority or any other form of entity.

     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 and is either (a) maintained by Borrower or any member of the Controlled
Group for employees of Borrower or any member of the Controlled Group or (b)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
Borrower or any member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding five plan years
made contributions.

     Prime Rate means, on any day, the prime rate for that day as determined
from time to time by Wells Fargo at its principal office in Denver, Colorado.
The Prime Rate is a reference rate and does not necessarily represent the
lowest or best rate or a favored rate, and Wells Fargo, Agent and each Lender
disclaims any statement, representation or warranty to the contrary. Wells
Fargo, Agent or any Lender may make commercial loans or other loans at rates of
interest at, above or below the Prime Rate.

     Principal Office means 1700 Lincoln Ave., MAC C7300-034, Denver, Colorado
80203.

     Proper Form means in form reasonably satisfactory to Agent.

     Property means any interest in any kind of property or asset, whether
real, personal or mixed, tangible or intangible.

     Quarterly Dates means the last Business Day of each March, June, September
and December.

     Quarterly Financial Statements means the quarterly financial statements of
a Person, which statements shall include a balance sheet as of the end of such
fiscal quarter, an income statement for the period ended on such fiscal quarter
and for the fiscal year to date and a statement of cash flows for the fiscal
year to date, subject to normal year-end adjustments, prepared in accordance
with GAAP in all material respects except that such statements are condensed
and exclude detailed footnote disclosures and certified by the chief financial
officer or

13

 

other authorized officer of such Person as fairly presenting, in all
material respects, the financial position of such person as of such date.

     Rate Designation Date means that Business Day which is (a) in the case of
Base Rate Borrowings, 11:00 a.m., Houston, Texas time, on the date of such
borrowing and (b) in the case of LIBOR Borrowings, 11:00 a.m., Houston, Texas
time, on the date three LIBOR Business Days preceding the first day of any
proposed Interest Period.

     Rate Designation Notice means a written notice substantially in the form
of Exhibit B.

     Regulation D means Regulation D of the Board of Governors of the Federal
Reserve System from time to time in effect and includes any successor or other
regulation relating to reserve requirements applicable to member banks of the
Federal Reserve System.

     Regulatory Change means with respect to any Lender, any change on or after
the date of this Agreement in any Legal Requirement (including, without
limitation, Regulation D) or the adoption or making on or after such date of
any interpretation, directive or request applying to a class of lenders
including such Lender under any Legal Requirements (whether or not having the
force of law) by any Governmental Authority.

     Reimbursement Obligations means, as at any date, the obligations of
Borrower then outstanding, or which may thereafter arise, in respect of Letters
of Credit under this Agreement, to reimburse the applicable Issuers for the
amount paid by such Issuers in respect of any drawing under such Letters of
Credit, which obligations shall at all times be payable in Dollars
notwithstanding any such Letter of Credit being payable in a currency other
than Dollars.

     Request for Extension of Credit means a request for extension of credit
duly executed by the chief executive officer, president, chief financial
officer, any vice president or treasurer of Borrower or any other officer of
Borrower duly authorized in writing by Borrower, appropriately completed and
substantially in the form of Exhibit A attached hereto.

     Requirements of Environmental Law means all requirements imposed by any
law (including for example and without limitation The Resource Conservation and
Recovery Act and The Comprehensive Environmental Response, Compensation, and
Liability Act), rule, regulation, or order of any federal, state or local
executive, legislative, judicial, regulatory or administrative agency, board or
authority in effect at the applicable time which relate to (i) noise; (ii)
pollution, protection or clean-up of the air, surface water, ground water or
land; (iii) solid, gaseous or liquid waste generation, treatment, storage,
disposal or transportation; (iv) exposure to Hazardous Substances; (v) the
safety or health of employees or (vi) regulation of the manufacture,
processing, distribution in commerce, use, discharge or storage of Hazardous
Substances.

     Revolving Loan shall mean a Loan made pursuant to Section 2.1(a) hereof.

     Revolving Loan Availability Period means, for each Revolving Loan Lender,
the period from and including the Effective Date to (but not including) the
Revolving Loan Termination Date.

14

 

     Revolving Loan Commitment Percentage means, as to any Revolving Loan
Lender, the percentage equivalent of a fraction the numerator of which is the
amount of such Lender’s Commitment (or if the Commitments have terminated, such
Lender’s outstanding Loans) and the denominator of which is the aggregate
amount of the Commitments of all Lenders (or if the Commitments have
terminated, the aggregate amount of all Loans).

     Revolving Loan Lender means each Lender with (i) prior to the Revolving
Loan Termination Date, a Commitment and (ii) on and after the Revolving Loan
Termination Date, any outstanding Revolving Loan Obligations.

     Revolving Loan Maturity Date means the maturity of the Notes, November 30,
2009.

     Revolving Loan Obligations means, as at any date of determination thereof,
the sum of the following (determined without duplication): (i) the aggregate
principal amount of Loans outstanding hereunder plus (ii) the aggregate amount
of the Letter of Credit Liabilities hereunder.

     Revolving Loan Termination Date means the earlier of (a) the Revolving
Loan Maturity Date or (b) the date specified by Agent in accordance with
Section 9.1 hereof.

     S&P means Standard & Poor’s.

     Secretary’s Certificate means a certificate, in Proper Form, of the
Secretary or an Assistant Secretary of a corporation as to (a) the resolutions
of the Board of Directors of such corporation authorizing the execution,
delivery and performance of the documents to be executed by such corporation;
(b) the incumbency and signature of the officer of such corporation executing
such documents on behalf of such corporation, and (c) the Organizational
Documents of such corporation.

     Security Agreements means security agreements, each in Proper Form,
executed or to be executed in favor of Agent, securing the Obligations,
covering all of the issued and outstanding equity interests in each Material
Subsidiary of Borrower (other than Foreign Subsidiaries, with respect to which
only 65% of its issued and outstanding equity interests shall be covered), as
the same may from time to time be amended, modified, restated or supplemented.

     Security Documents means, collectively, the Security Agreements and any
and all security documents now or hereafter executed and delivered by any
Obligor to secure all or any part of the Obligations, as any of them may from
time to time be amended, modified, restated or supplemented.

     Shareholders’ Equity means the consolidated shareholders’ equity of
Borrower and its Subsidiaries determined in accordance with GAAP.

     Stated Rate means the effective weighted per annum rate of interest
applicable to the Loans; provided, that if on any day such rate shall exceed
the Ceiling Rate for that day, the Stated Rate shall be fixed at the Ceiling
Rate on that day and on each day thereafter until the total amount of interest
accrued at the Stated Rate on the unpaid principal balances of the Notes plus
the Additional Interest equals the total amount of interest which would have
accrued if there had been no Ceiling Rate. Without notice to Borrower or any
other Person, the Stated Rate shall

15

 

automatically fluctuate upward and downward in accordance with the
provisions of this definition.

     Statutory Net Operating Expenses means statutory policy acquisition costs
and other underwriting expense, net of miscellaneous income or loss, including
equity in earnings (loss) of Subsidiaries for the period of time in question,
as determined in accordance with statutory accounting standards.

     Statutory Net Written Premiums means the total of all premiums received or
to be received for insurance underwritten and reinsurance assumed during a
given period less the total premium paid or to be paid for reinsurance ceded to
others during such period, as determined in accordance with statutory
accounting standards.

     Subsidiary means, as to a particular parent Corporation, any Corporation
of which more than 50% of the indicia of equity rights (whether outstanding
capital stock or otherwise) is at the time directly or indirectly owned by,
such parent Corporation.

     Swing Loan shall mean a Loan made pursuant to Section 2.1(b) hereof.

     Swing Loan Availability Period shall mean the period from and including
the Effective Date to (but not including) the Revolving Loan Termination Date.

     Swing Note shall mean that certain promissory note dated as of the
Effective Date herewith in the original principal amount of $20,000,000
executed by Borrower payable to the order of Wells Fargo.

     Taxes shall have the meaning ascribed to it in Section 4.1(d).

     Unfunded Liabilities means, with respect to any Plan, at any time, the
amount (if any) by which (a) the present value of all benefits under such Plan
exceeds (b) the fair market value of all Plan assets allocable to such
benefits, all determined as of the then most recent actuarial valuation report
for such Plan, but only to the extent that such excess represents a potential
liability of any member of the Controlled Group to the PBGC or a Plan under
Title IV of ERISA. With respect to multi-employer Plans, the term “Unfunded
Liabilities” shall also include asserted withdrawal liability under Section
4201 of ERISA to all multi-employer Plans to which Borrower or any member of a
Controlled Group for employees of Borrower contributes.

     1.2 Miscellaneous. The words “hereof,” “herein,” and “hereunder” and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement. The
term “annualized” as used herein shall mean the multiplication of the
applicable amount for any given period by a fraction, the numerator of which is
365 and the denominator of which is the number of days elapsed in such period.

2. Commitments and Loans.

     2.1 Loans. Each Revolving Loan Lender severally agrees, subject to all of
the terms and conditions of this Agreement (including, without limitation,
Sections 5.1 and 5.2 hereof), to make Loans as follows:

16

 

     (a) Revolving Loans. From time to time on or after the Effective Date and
during the Revolving Loan Availability Period, each Revolving Loan Lender shall
make loans under this Section 2.1(a) to Borrower in an aggregate principal
amount at any one time outstanding (including its Revolving Loan Commitment
Percentage of all Letter of Credit Liabilities at such time) up to but not
exceeding such Revolving Loan Lender’s Commitment. Subject to the conditions
in this Agreement, any such Loan repaid prior to the Revolving Loan Termination
Date may be reborrowed pursuant to the terms of this Agreement; provided, that
any and all such Loans shall be due and payable in full at the end of the
Revolving Loan Availability Period. Borrower, Agent and the Revolving Loan
Lenders agree pursuant to Chapter 346 (“Chapter 346”) of the Texas Finance
Code, that Chapter 346 (which relates to open-end line of credit revolving loan
accounts) shall not apply to this Agreement, the Notes or any Revolving Loan
Obligation and that neither the Notes nor any Revolving Loan Obligation shall
be governed by Chapter 346 or subject to its provisions in any manner
whatsoever. The aggregate of all Loans to be made by the Revolving Loan Lenders
in connection with a particular borrowing shall be equal to $500,000 or an
integral multiple of $100,000 in excess thereof.

     (b) Swing Loans. Subject to all of the terms and conditions of this
Agreement (including, without limitation, Section 5.1 and 5.2 hereof), from
time to time on or after the Effective Date and during the Swing Loan
Availability Period, Wells Fargo shall make loans under this Section 2.1(b) to
Borrower in an aggregate principal amount at any one time outstanding up to but
not exceeding $20,000,000. Swing Loans shall constitute “Loans” for all
purposes hereunder, except that such Swing Loans shall not be considered a
utilization of the Commitment of Wells Fargo or any other Revolving Loan Lender
for purposes of calculating commitment fees hereunder. Notwithstanding the
foregoing sentence, the aggregate amount of all Loans (including, without
limitation, all Swing Loans) plus all Letter of Credit Liabilities shall not at
any time exceed $200,000,000. Subject to the conditions in this Agreement, any
Swing Loan repaid prior to the Revolving Loan Termination Date may be
reborrowed pursuant to the terms of this Agreement; provided, that any and all
such Swing Loans shall be due and payable in full at the end of the Swing Loan
Availability Period. At any time, upon the request of Wells Fargo, each
Revolving Loan Lender (other than Wells Fargo) shall, on the first Business Day
after such request is made, purchase a participating interest in any one or
more Swing Loans made in accordance with the first sentence of this Section
2.1(b) in an amount equal to its Revolving Loan Commitment Percentage of such
Swing Loans. Each Revolving Loan Lender will immediately transfer to Wells
Fargo, in immediately available funds, the amount of its participation.
Whenever, at any time after Wells Fargo has received from any Revolving Loan
Lender such Revolving Loan Lender’s participation in a Swing Loan, Wells Fargo
receives payment on account thereof, Wells Fargo will distribute to such
Revolving Loan Lender its participating interest in such amount (appropriately
adjusted, in the case of interest payments, to reflect the period of time
during which such Revolving Loan Lender’s participating interest was
outstanding and funded); provided, however, that in the event that such payment
received by Wells Fargo is required to be returned, such Revolving Loan Lender
will return to Wells Fargo any portion thereof previously distributed by Wells
Fargo to it. Each Revolving Loan Lender’s obligation to purchase such
participating interests shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (i) any set-off,
counterclaim, recoupment, defense of other right which such Revolving Loan
Lender or any other Person may have against Wells Fargo or any other Person for
any reason whatsoever; (ii) the occurrence or continuance of a Default or Event
of Default or the

17

 

termination of any Commitment; (iii) any adverse change in the condition
(financial or otherwise) of any Obligor or any other Revolving Loan Lender;
(iv) any breach of this Agreement or any other Loan Document by any Obligor or
any other Revolving Loan Lender, or (v) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing. Each Swing
Loan, once so participated, shall cease to be a Swing Loan for the purposes of
this Agreement, but shall be a Revolving Loan. Borrower, Agent and the
Revolving Loan Lenders agree pursuant to Chapter 346, that Chapter 346 shall
not apply to the Swing Note or any Swing Loan and that neither the Swing Note
nor any Swing Loan shall be governed by Chapter 346 or subject to its
provisions in any manner whatsoever. Each Swing Loan shall be in an amount
equal to $100,000 or a multiple thereof.

     2.2 Terminations or Reductions of Commitments.

     (a) Optional. Borrower shall have the right to terminate or reduce the
unused portion of the Commitments at any time or from time to time, provided
that (i) Borrower shall give notice of each such termination or reduction to
Agent as provided in Section 4.3 hereof and (ii) each such partial reduction as
to any Commitment shall be in an integral multiple of $5,000,000.

     (b) No Reinstatement. No termination or reduction of the Commitments may
be reinstated without the written approval of Agent and the Lenders.

     2.3 Commitment Fees.

     (a) Borrower shall pay to Agent for the account of each Revolving Loan
Lender revolving loan commitment fees for the period from the Effective Date to
and including the Revolving Loan Termination Date at 0.15% per annum. Such
revolving loan commitment fees shall be computed (on the basis of the actual
number of days elapsed in a year composed of 365 or 366 days, as the case may
be) on each day and shall be based on the excess of (x) the aggregate amount of
each Revolving Loan Lender’s Commitment for such day over (y) the sum of (i)
the aggregate unpaid principal balance of such Lender’s Note (excluding any
Swing Loans) on such day plus (ii) the aggregate Letter of Credit Liabilities
as to such Lender for such day. Accrued revolving loan commitment fees under
this provision shall be payable in arrears on the Quarterly Dates prior to the
Revolving Loan Termination Date and on the Revolving Loan Termination Date.

     (b) All past due fees payable under this Section shall bear interest at
the Past Due Rate.

     2.4 Several Obligations. The failure of any Lender to make any Loan to be
made by it on the date specified therefor shall not relieve any other Lender of
its obligation to make its Loan on such date, but neither Agent nor any Lender
shall be responsible or liable for the failure of any other Lender to make a
Loan to be made by such other Lender or to participate in, or co-issue, any
Letter of Credit. Notwithstanding anything contained herein to the contrary,
(a) no Lender shall be required to make or maintain Loans at any time
outstanding if, as a result, the total Revolving Loan Obligations held by such
Lender shall exceed the lesser of (1) such Lender’s Revolving Loan Commitment
Percentage of all Revolving Loan Obligations and (2) such Lender’s Revolving
Loan Commitment Percentage of the aggregate of the Commitments and (b) if a
Lender fails to make a Loan as and when required hereunder, then upon each

18

 

subsequent event which would otherwise result in funds being paid to the
defaulting Lender, the amount which would have been paid to the defaulting
Lender shall be divided among the non-defaulting Lenders ratably according to
their respective shares of the outstanding Revolving Loan Commitment
Percentages until the Revolving Loan Obligations of each Revolving Loan Lender
(including the defaulting Lender) are equal to such Lender’s Revolving Loan
Commitment Percentage of the total Revolving Loan Obligations.

     2.5 Notes. The Loans (other than the Swing Loans) made by each Lender
shall be evidenced by a single Note of Borrower in substantially the form of
Exhibit C hereto payable to the order of such Lender in a principal amount
equal to the Commitment of such Lender, and otherwise duly completed. Each
Lender is hereby authorized by Borrower to endorse on the schedule (or a
continuation thereof) that may be attached to each Note of such Lender, to the
extent applicable, the date, amount, type of and the applicable period of
interest for each Loan made by such Lender to Borrower hereunder, and the
amount of each payment or prepayment of principal of such Loan received by such
Lender, provided, that any failure by such Lender to make any such endorsement
shall not affect the obligations of Borrower under such Note or hereunder in
respect of such Loan. Swing Loans shall be evidenced by the Swing Note. The
Swing Note, and all renewals, extensions, modifications and replacements
thereof and substitutions therefor, shall constitute one of the “Notes”
hereunder.

     2.6 Use of Proceeds. The proceeds of the Loans shall be used to refinance
existing Borrowed Money Indebtedness of Borrower, to finance acquisitions and
for other working capital and general corporate purposes. Neither Agent nor
any Lender shall have any responsibility as to the use of any proceeds of the
Loans.

     2.7 Letters of Credit.

     (a) Letters of Credit. Subject to all of the terms and conditions of this
Agreement (including, without limitation, Section 5.1 and 5.2 hereof), (i)
Borrower shall have the right to, in addition to Loans provided for in Section
2.1 hereof, utilize the Revolving Loan Commitments from time to time during the
Revolving Loan Availability Period by obtaining the issuance of standby letters
of credit for the account of Borrower (in support of the obligations of
Borrower or the obligations of its Affiliates) if Borrower shall so request in
the notice referred to in Section 2.7(b)(i) hereof (such standby letters of
credit as any of them may be amended, supplemented, extended or confirmed from
time to time, being herein collectively called the “Letters of Credit”) and
(ii) Wells Fargo agrees to issue such Letters of Credit. Upon the date of the
issuance of a Letter of Credit, the applicable Issuer shall be deemed, without
further action by any party hereto, to have sold to each Revolving Loan Lender,
and each such Lender shall be deemed, without further action by any party
hereto, to have purchased from the applicable Issuer, a participation, to the
extent of such Lender’s Revolving Loan Commitment Percentage, in such Letter of
Credit and the related Letter of Credit Liabilities, which participation shall
terminate on the earlier of the expiration date of such Letter of Credit or the
Revolving Loan Termination Date. Unless the Majority Lenders shall have
otherwise agreed in writing, no Letter of Credit shall have an expiration date
later than the earlier of (x) one year from date of issuance or (y) the date
ten (10) Business Days prior to the end of the Revolving Loan Availability
Period. Any Letter of Credit that shall have an expiration date after the end
of the Revolving Loan Availability Period shall be subject to Cover or backed
by a standby letter of credit in form and substance, and issued by a Person,
acceptable to Agent in its sole discretion. Wells Fargo or,

19

 

with the prior approval of Borrower, Agent and the applicable Lender,
another Lender shall be the Issuer of each Letter of Credit.

     (b) Additional Provisions. The following additional provisions shall
apply to each Letter of Credit:

          (i) Borrower shall give Agent notice requesting each issuance of a Letter
of Credit hereunder as provided in Section 4.3 hereof and shall furnish such
additional information regarding such transaction as Agent may reasonably
request. Upon receipt of such notice, Agent shall promptly notify each
Revolving Loan Lender of the contents thereof and of such Lender’s Revolving
Loan Commitment Percentage of the amount of such proposed Letter of Credit.

          (ii) No Letter of Credit may be issued if after giving effect thereto the
sum of (A) the aggregate outstanding principal amount of Loans plus (B) the
aggregate Letter of Credit Liabilities would exceed the aggregate of the
Commitments. On each day during the period commencing with the issuance of any
Letter of Credit and until such Letter of Credit shall have expired or been
terminated, the Commitment of each Revolving Loan Lender shall be deemed to be
utilized for all purposes hereof in an amount equal to such Lender’s Revolving
Loan Commitment Percentage of the amount then available for drawings under such
Letter of Credit (or any unreimbursed Reimbursement Obligations).

          (iii) Upon receipt from the beneficiary of any Letter of Credit of any
demand for payment thereunder, Agent shall promptly notify Borrower and each
Lender as to the amount to be paid as a result of such demand and the payment
date therefor. If at any time prior to the earlier of the expiration date of a
Letter of Credit or the Revolving Loan Termination Date any Issuer shall have
made a payment to a beneficiary of a Letter of Credit in respect of a drawing
under such Letter of Credit, each Revolving Loan Lender will pay to Agent
immediately upon demand by such Issuer at any time during the period commencing
after such payment until reimbursement thereof in full by Borrower, an amount
equal to such Lender’s Revolving Loan Commitment Percentage of such payment,
together with interest on such amount for each day from the date of demand for
such payment (or, if such demand is made after 12:00 noon Houston, Texas time
on such date, from the next succeeding Business Day) to the date of payment by
such Lender of such amount at a rate of interest per annum equal to the Federal
Funds Rate for such period. To the extent that it is ultimately determined
that the Borrower is relieved of its obligation to reimburse the applicable
Issuer because of such Issuer’s gross negligence or willful misconduct in
determining that documents received under any applicable Letter of Credit
comply with the terms thereof, the applicable Issuer shall be obligated to
refund to the paying Lenders all amounts paid to such Issuer to reimburse
Issuer for the applicable drawing under such Letter of Credit.

          (iv) Borrower shall be irrevocably and unconditionally obligated forthwith
to reimburse Agent, on the date on which the Agent notifies Borrower of the
date and amount of any payment by the Issuer of any drawing under a Letter of
Credit, for the amount paid by any Issuer upon such drawing, without
presentment, demand, protest or other formalities of any kind, all of which are
hereby waived. Such reimbursement may, subject to satisfaction of the
conditions in Sections 5.1 and 5.2 hereof and to the aggregate of the
Commitments (after adjustment in the same to reflect the elimination of the
corresponding Letter of Credit Liability), be made by the borrowing of Loans.
Agent will pay to each Revolving Loan Lender such

20

 

Lender’s Revolving Loan Commitment Percentage of all amounts received from
Borrower for application in payment, in whole or in part, of the Reimbursement
Obligation in respect of any Letter of Credit, but only to the extent such
Lender has made payment to Agent in respect of such Letter of Credit pursuant
to clause (iii) above.

          (v) Borrower will pay to Agent at the Principal Office for the account of
each Revolving Loan Lender a letter of credit fee with respect to each Letter
of Credit equal to the greater of (x) $500 or (y) the then current Margin
Percentage multiplied by the face amount of such Letter of Credit (and computed
on the basis of the actual number of days elapsed in a year composed of 360
days), in each case for the period from and including the date of issuance of
such Letter of Credit to and including the date of expiration or termination
thereof, such fee to be due and payable in advance. Agent will pay to each
Revolving Loan Lender, promptly after receiving any payment in respect of
letter of credit fees referred to in this clause (v), an amount equal to the
product of such Lender’s Revolving Loan Commitment Percentage times the amount
of such fees. In addition to and cumulative of the above described fees,
Borrower shall pay to Agent, for the account of the applicable Issuer, in
advance on the date of the issuance of the applicable Letter of Credit, a
fronting fee in an amount equal to 0.10% of the face amount of the applicable
Letter of Credit (such fronting fee to be retained by the applicable Issuer for
its own account). The Borrower shall also pay each Issuer’s standard fees with
respect to the amendment, renewal or extension of any Letter of Credit or
processing of drawings thereunder.

          (vi) The issuance by the applicable Issuer of each Letter of Credit shall,
in addition to the conditions precedent set forth in Section 5 hereof, be
subject to the conditions precedent (A) that such Letter of Credit shall be in
such form and contain such terms as shall be reasonably satisfactory to Agent,
and (B) that Borrower shall have executed and delivered such Applications and
other instruments and agreements relating to such Letter of Credit as Agent
shall have reasonably requested and are not inconsistent with the terms of this
Agreement. In the event of a conflict between the terms of this Agreement and
the terms of any Application, the terms hereof shall control.

          (vii) Issuer will send to the Borrower and each Lender, immediately upon
issuance of any Letter of Credit issued by Issuer or any amendment thereto, a
true and correct copy of such Letter of Credit or amendment.

     (c) Indemnification; Release. Borrower hereby indemnifies and holds
harmless Agent, each Revolving Loan Lender and each Issuer from and against any
and all claims and damages, losses, liabilities, costs or expenses which Agent,
such Lender or such Issuer may incur (or which may be claimed against Agent,
such Lender or such Issuer by any Person whatsoever), REGARDLESS OF WHETHER
CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES,
in connection with the execution and delivery of any Letter of Credit or
transfer of or payment or failure to pay under any Letter of Credit; provided
that Borrower shall not be required to indemnify any party seeking
indemnification for any claims, damages, losses, liabilities, costs or expenses
to the extent, but only to the extent, caused by (i) the willful misconduct or
gross negligence of the party seeking indemnification, or (ii) the failure by
the party seeking indemnification to pay under any Letter of Credit after the
presentation to it of a request required to be paid under applicable law.
Borrower hereby releases, waives and discharges Agent, each Revolving Loan
Lender and each Issuer from any claims, causes of action, damages, losses,
liabilities, reasonable costs or

21

 

expenses which may now exist or may hereafter arise, REGARDLESS OF WHETHER
CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES,
by reason of or in connection with the failure of any other Revolving Loan
Lender to fulfill or comply with its obligations to Agent, such Lender or such
Issuer, as the case may be, hereunder (but nothing herein contained shall
affect any rights Borrower may have against such defaulting Lender); provided
that Borrower shall not be required to indemnify any party seeking
indemnification for any claims, damages, losses, liabilities, costs or expenses
to the extent, but only to the extent, caused by (i) the willful misconduct or
gross negligence of the party seeking indemnification, or (ii) the failure by
the party seeking indemnification to pay under any Letter of Credit after the
presentation to it of a request required to be paid under applicable law or
(iii) disputes between or among any and all of Agent, Lenders and Issuers.
Nothing in this Section 2.7(c) is intended to limit the obligations of Borrower
under any other provision of this Agreement.

     (d) Additional Costs in Respect of Letters of Credit. If as a result of
any Regulatory Change there shall be imposed, modified or deemed applicable any
tax (other than any tax based on or measured by net income), reserve, special
deposit or similar requirement against or with respect to or measured by
reference to Letters of Credit issued or to be issued hereunder or
participations in such Letters of Credit, and the result shall be to increase
the cost to any Revolving Loan Lender of issuing or maintaining any Letter of
Credit or any participation therein, or materially reduce any amount receivable
by any Revolving Loan Lender hereunder in respect of any Letter of Credit or
any participation therein (which increase in cost, or reduction in amount
receivable, shall be the result of such Lender’s reasonable allocation of the
aggregate of such increases or reductions resulting from such event), then such
Lender shall notify Borrower through Agent (which notice shall be accompanied
by a statement setting forth in reasonable detail the basis for the
determination of the amount due), and within 15 Business Days after demand
therefor by such Lender through Agent, Borrower shall pay to such Lender, from
time to time as specified by such Lender, such additional amounts as shall be
sufficient to compensate such Lender for such increased costs or reductions in
amount. Such statement as to such increased costs or reductions in amount
incurred by such Lender, submitted by such Lender to Borrower, shall create a
rebuttable presumption as to the accuracy thereof, and may be computed using
any reasonable averaging and attribution method. Each Lender will notify
Borrower through Agent of any event occurring after the date of this Agreement
which will entitle such Lender to compensation pursuant to this Section as
promptly as practicable after any executive officer of such Lender obtains
knowledge thereof and determines to request such compensation, and (if so
requested by Borrower through Agent) will designate a different lending office
of such Lender for the issuance or maintenance of Letters of Credit by such
Lender or will take such other action as Borrower may reasonably request if
such designation or action is consistent with the internal policy of such
Lender and legal and regulatory restrictions, can be undertaken at no
additional cost, will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender (provided that such Lender shall have no
obligation so to designate a different lending office which is not located in
the United States of America).

3. Borrowings, Payments, Prepayments and Interest Options.

     3.1 Borrowings. Borrower shall give Agent notice of each borrowing (other
than a borrowing of Swing Loans as to which the last sentence of this Section
3.1 shall apply) to be

22

 

made hereunder as provided in Section 4.3 hereof and Agent shall promptly
notify each Lender of such request. Not later than 1:00 p.m., Houston, Texas
time on the date specified for each such borrowing hereunder, each Lender shall
make available the amount of the Loan, if any, to be made by it on such date to
Agent at its Principal Office, in immediately available funds, for the account
of Borrower. Such amounts received by Agent will be held in an account
maintained by Borrower with Agent. The amounts so received by Agent shall,
subject to the terms and conditions of this Agreement, be made available to
Borrower by wiring or otherwise transferring, in immediately available funds,
such amount to an account designated by Borrower. Borrower shall give Agent
notice of each borrowing of a Swing Loan to be made hereunder as provided in
Section 4.3 hereof and, no later than 1:00 p.m., Houston, Texas time on the
date specified for such borrowing hereunder, Wells Fargo shall make available
the amount of such Swing Loan to Borrower by depositing the same, in
immediately available funds, in an account designated by Borrower and approved
by Agent

     3.2 Prepayments.

     (a) Optional Prepayments. Except as provided in Section 3.3 hereof,
Borrower shall have the right to prepay, on any Business Day, in whole or in
part, without the payment of any penalty or fee, any Loans at any time or from
time to time, provided that Borrower shall give Agent notice of each such
prepayment as provided in Section 4.3 hereof. Each optional prepayment on a
Loan shall be in an amount equal to an integral multiple of (x) in the case of
LIBOR Borrowings, $2,000,000 or an integral multiple of $100,000 in excess
thereof and (y) in the case of Base Rate Borrowings, $500,000 or an integral
multiple of $100,000 in excess thereof.

     (b) Interest Payments. Accrued and unpaid interest on the unpaid
principal balance of the Loans shall be due and payable (i) on the date of any
prepayment permitted hereunder and (ii) on the Interest Payment Dates.

     (c) Mandatory Prepayments. If the Commitments shall at any time be less
than the unpaid principal balance of the Loans, Borrower shall make an
immediate prepayment on the Loans equal to the difference.

     (d) Payments and Interest on Reimbursement Obligations. Borrower will pay
to Agent for the account of each Lender the amount of each Reimbursement
Obligation on the date on which the Agent notifies Borrower of the date and
amount of the applicable payment by the Issuer of any drawing under a Letter of
Credit. The amount of any Reimbursement Obligation may, if the applicable
conditions precedent specified in Sections 5.1 and 5.2 hereof have been
satisfied, be paid with the proceeds of Loans. Subject to Section 11.7 hereof,
Borrower will pay to Agent for the account of each Lender interest on any
Reimbursement Obligation (i) at the Base Rate from the date such Reimbursement
Obligation arises until the date five (5) Business Days thereafter and (ii) at
the Past Due Rate thereafter until the same is paid in full.

     (e) Mandatory Payment of Swing Loans. The principal of, and all accrued
and unpaid interest on the unpaid principal balance of, each Swing Loan shall
be due and payable within ten (10) Business Days after the date such Swing Loan
was made.

23

 

     3.3 Interest Options.

     (a) Options Available. The outstanding principal balance of the Notes
(including, without limitation, the Swing Note) shall bear interest at the Base
Rate; provided, that (1) all past due amounts, both principal and accrued
interest, shall bear interest at the Past Due Rate, and (2) subject to the
provisions hereof, Borrower shall have the option of having all or any portion
of the principal balances of the Notes (other than the Swing Note) from time to
time outstanding bear interest at a Eurodollar Rate. The records of Agent and
each of the Lenders with respect to Interest Options, Interest Periods and the
amounts of Loans to which they are applicable shall create a rebuttable
presumption as to the accuracy thereof, and Agent and Lenders agree to furnish
written evidence to Borrower upon request of Borrower with respect to such
matters. Interest on the Loans shall be calculated at the Base Rate except
where it is expressly provided pursuant to this Agreement that a Eurodollar
Rate is to apply. Interest on the amount of each advance against the Notes
shall be computed on the amount of that advance and from the date it is made.
Notwithstanding anything in this Agreement to the contrary, for the full term
of the Notes the interest rate produced by the aggregate of all sums paid or
agreed to be paid to the holders of the Notes for the use, forbearance or
detention of the debt evidenced thereby (including all interest on the Notes at
the Stated Rate plus the Additional Interest) shall not exceed the Ceiling
Rate.

     (b) Designation and Conversion. Borrower shall have the right to
designate or convert its Interest Options in accordance with the provisions
hereof. Provided no Event of Default has occurred and is continuing and
subject to the last sentence of Section 3.3(a) and the provisions of Section
3.3(c), Borrower may elect to have a Eurodollar Rate apply or continue to apply
to all or any portion of the principal balance of the Notes (other than the
Swing Note). Each change in Interest Options shall be a conversion of the rate
of interest applicable to the specified portion of the Loans, but such
conversion shall not change the respective outstanding principal balances of
the Notes. The Interest Options shall be designated or converted in the manner
provided below:

     (i) Borrower shall give Agent telephonic notice, promptly confirmed by a
Rate Designation Notice (and Agent shall promptly inform each Lender thereof).
Each such telephonic and written notice shall specify the amount of the Loan
which is the subject of the designation, if any; the amount of borrowings into
which such borrowings are to be converted or for which an Interest Option is
designated; the proposed date for the designation or conversion and the
Interest Period or Periods, if any, selected by Borrower. Such telephonic
notice shall be irrevocable and shall be given to Agent no later than the
applicable Rate Designation Date.

     (ii) No more than ten (10) LIBOR Borrowings shall be in effect with
respect to the Loans at any time.

     (iii) Each designation or conversion of a LIBOR Borrowing shall occur on a
LIBOR Business Day.

     (iv) Each request for a LIBOR Borrowing shall be in the amount equal to an
integral multiple of $2,000,000 or an integral multiple of $100,000 in excess
thereof.

     (v) Each designation of an Interest Option with respect to the Notes shall
apply to all

24

 

of the Notes ratably in accordance with their respective outstanding
principal balances. If any Lender assigns an interest in any of its Notes when
any LIBOR Borrowing is outstanding with respect thereto, then such assignee
shall have its ratable interest in such LIBOR Borrowing.

     (c) Special Provisions Applicable to LIBOR Borrowings.

     (i) Options Unlawful. If the adoption of any applicable Legal Requirement
after the Effective Date or any change after the Effective Date in any
applicable Legal Requirement or in the interpretation or administration thereof
by any Governmental Authority or compliance by any Lender with any request or
directive (whether or not having the force of law) issued after the Effective
Date by any central bank or other Governmental Authority shall at any time make
it unlawful or impossible for any Lender to permit the establishment of or to
maintain any LIBOR Borrowing, the commitment of such Lender to establish or
maintain such LIBOR Borrowing shall forthwith be canceled and Borrower shall
forthwith, upon demand by Agent to Borrower, (1) convert the LIBOR Borrowing of
such Lender with respect to which such demand was made to a Base Rate
Borrowing; (2) pay all accrued and unpaid interest to date on the amount so
converted; and (3) pay any amounts required to compensate each Lender for any
additional cost or expense which any Lender may incur as a result of such
adoption of or change in such Legal Requirement or in the interpretation or
administration thereof and any Funding Loss which any Lender may incur as a
result of such conversion. If, when Agent so notifies Borrower, Borrower has
given a Rate Designation Notice specifying a LIBOR Borrowing but the selected
Interest Period has not yet begun, as to the applicable Lender such Rate
Designation Notice shall be deemed to be of no force and effect, as if never
made, and the balance of the Loans made by such Lender specified in such Rate
Designation Notice shall bear interest at the Base Rate until a different
available Interest Option shall be designated in accordance herewith.

     (ii) Increased Cost of Borrowings. If the adoption after the Effective
Date of any applicable Legal Requirement or any change after the Effective Date
in any applicable Legal Requirement or in the interpretation or administration
thereof by any Governmental Authority or compliance by any Lender with any
request or directive (whether or not having the force of law) issued after the
Effective Date by any central bank or Governmental Authority shall at any time
as a result of any portion of the principal balances of the Notes being
maintained on the basis of a Eurodollar Rate:

	(1)	 	subject any Lender to any Taxes, or
any deduction or withholding for any Taxes, on or from
any payment due under any LIBOR Borrowing or other
amount due hereunder, other than income and franchise
taxes of the United States or its political subdivisions
or such other jurisdiction in which the applicable
Lender has its principal office or applicable lending
office; or
	 
	(2)	 	change the basis of taxation of
payments due from Borrower to any Lender under any LIBOR
Borrowing (other than by a change in the rate of
taxation of the overall net income of such Lender); or
	 
	(3)	 	impose, modify, increase or deem
applicable any reserve requirement (excluding that
portion of any reserve requirement included in the
calculation of the applicable Eurodollar Rate),

25

 

	 	 	special deposit requirement or similar requirement
(including, but not limited to, state law requirements
and Regulation D) against assets of any Lender, or
against deposits with any Lender, or against loans made
by any Lender, or against any other funds, obligations
or other property owned or held by any Lender; or
	 
	(4)	 	Impose on any Lender any other
condition regarding any LIBOR Borrowing;

and the result of any of the foregoing is to materially increase the cost to
any Lender of agreeing to make or of making, renewing or maintaining such LIBOR
Borrowing, or reduce the amount of principal or interest received by any
Lender, then, within 15 Business Days after demand by the applicable Lender
(accompanied by a statement setting forth in reasonable detail the applicable
Lender’s basis therefor), Borrower shall pay to Agent additional amounts which
shall compensate each Lender for such increased cost or reduced amount. The
determination by any Lender of the amount of any such increased cost, increased
reserve requirement or reduced amount shall create a rebuttable presumption as
to the accuracy thereof. Borrower shall have the right, if it receives from
Agent any notice referred to in this paragraph, upon three Business Days’
notice to Agent (which shall notify each affected Lender), either (i) to repay
in full (but not in part) any borrowing with respect to which such notice was
given, together with any accrued interest thereon, or (ii) to convert the LIBOR
Borrowing which is the subject of the notice to a Base Rate Borrowing;
provided, that any such repayment or conversion shall be accompanied by payment
of (x) the amount required to compensate each Lender for the increased cost or
reduced amount referred to in the preceding paragraph; (y) all accrued and
unpaid interest to date on the amount so repaid or converted, and (z) any
Funding Loss which any Lender may incur as a result of such repayment or
conversion. Each Lender will notify Borrower through Agent of any event
occurring after the date of this Agreement which will entitle such Lender to
compensation pursuant to this Section as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation, and (if
so requested by Borrower through Agent) will designate a different lending
office of such Lender for the applicable LIBOR Borrowing or will take such
other action as Borrower may reasonably request if such designation or action
is consistent with the internal policy of such Lender and legal and regulatory
restrictions, will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be materially
disadvantageous to such Lender (provided that such Lender shall have no
obligation so to designate a different lending office which is located in the
United States of America).

     (iii) Inadequacy of Pricing and Rate Determination. If, for any reason
with respect to any Interest Period, Agent shall have determined (which
determination shall create a rebuttable presumption as to the accuracy thereof)
that:

	(1)	 	Agent is unable through its customary general
practices to determine any applicable Eurodollar Rate, or
	 
	(2)	 	by reason of circumstances affecting the
applicable market, generally, Agent is not being offered
deposits in United States dollars in such market, for the
applicable Interest Period and in an amount equal to the
amount of any applicable LIBOR Borrowing requested by
Borrower,

26

 

then Agent shall give Borrower written notice thereof (accompanied by a
statement setting forth in reasonable detail the applicable Lender’s basis
therefor) and thereupon, (A) any Rate Designation Notice previously given by
Borrower designating the applicable LIBOR Borrowing which has not commenced as
of the date of such notice from Agent shall be deemed for all purposes hereof
to be of no force and effect, as if never given, and (B) until Agent shall
notify Borrower that the circumstances giving rise to such notice from Agent no
longer exist, each Rate Designation Notice requesting the applicable Eurodollar
Rate shall be deemed a request for a Base Rate Borrowing, and any applicable
LIBOR Borrowing then outstanding shall be converted, without any notice to or
from Borrower, upon the termination of the Interest Period then in effect with
respect to it, to a Base Rate Borrowing.

     (iv) Funding Losses. Borrower shall indemnify each Lender against and
hold each Lender harmless from any Funding Loss. This indemnity shall, subject
to the provisions of Section 3.5 hereof, survive the payment of the Notes. A
certificate of such Lender (explaining in reasonable detail the amount and
calculation of the amount claimed) as to any additional amounts payable
pursuant to this paragraph submitted to Borrower shall create a rebuttable
presumption as to the accuracy thereof.

     (d) Funding Offices; Adjustments Automatic; Calculation Year. Any Lender
may, if it so elects, fulfill its obligation as to any LIBOR Borrowing by
causing a branch or affiliate of such Lender to make such Loan and may transfer
and carry such Loan at, to or for the account of any branch office or affiliate
of such Lender; provided, that in such event for the purposes of this Agreement
such Loan shall be deemed to have been made by such Lender and the obligation
of Borrower to repay such Loan shall nevertheless be to such Lender and shall
be deemed held by it for the account of such branch or affiliate. Without
notice to Borrower or any other Person, each rate required to be calculated or
determined under this Agreement shall automatically fluctuate upward and
downward in accordance with the provisions of this Agreement. Interest at the
Prime Rate shall be computed on the basis of the actual number of days elapsed
in a year consisting of 365 or 366 days, as the case may be. All other
interest required to be calculated or determined under this Agreement shall be
computed on the basis of the actual number of days elapsed in a year consisting
of 360 days, unless the Ceiling Rate would thereby be exceeded, in which event,
to the extent necessary to avoid exceeding the Ceiling Rate, the applicable
interest shall be computed on the basis of the actual number of days elapsed in
the applicable calendar year in which accrued.

     (e) Funding Sources. Notwithstanding any provision of this Agreement to
the contrary, each Lender shall be entitled to fund and maintain its funding of
all or any part of the Loans in any manner it sees fit, it being understood,
however, that for the purposes of this Agreement all determinations hereunder
shall be made as if each Lender had actually funded and maintained each LIBOR
Borrowing during each Interest Period through the purchase of deposits having a
maturity corresponding to such Interest Period and bearing an interest rate
equal to the Eurodollar Rate for such Interest Period.

     3.4 Capital Adequacy. If any Lender shall have determined that the
adoption after the Effective Date of any applicable law, rule, regulation or
treaty regarding capital adequacy, or any change therein after the Effective
Date, or any change in the interpretation or administration thereof after the
Effective Date by any Governmental Authority, central bank or comparable

27

 

agency charged with the interpretation or administration thereof, or
compliance by any Lender with any request or directive after the Effective Date
regarding capital adequacy (whether or not having the force of law) of any such
Governmental Authority, central bank or comparable agency has or would have the
effect of reducing the rate of return on such Lender’s capital as a consequence
of its obligations hereunder, under the Letters of Credit, the Notes or other
Obligations held by it to a level below that which such Lender could have
achieved but for such adoption, change or compliance by an amount deemed by
such Lender to be material, then from time to time, upon satisfaction of the
conditions precedent set forth in this Section, after demand by such Lender
(with a copy to Agent) as provided below, Borrower shall pay (subject to
Section 11.7 hereof) to such Lender such additional amount or amounts as will
compensate such Lender for such reduction. The certificate of any Lender
setting forth such amount or amounts as shall be necessary to compensate it and
the basis thereof and reasons therefor shall be delivered as soon as
practicable to Borrower and shall create a rebuttable presumption as to the
accuracy thereof. Borrower shall pay the amount shown as due on any such
certificate within five (5) Business Days after the delivery of such
certificate. In preparing such certificate, a Lender may employ such
assumptions and allocations of costs and expenses as it shall in good faith
deem reasonable and may use any reasonable averaging and attribution method.

     3.5 Limitation on Charges; Substitute Lenders; Non-Discrimination.
Anything in Sections 2.7(d), 3.3 or 3.4 notwithstanding:

	(1)	 	Borrower shall not be required to pay to any
Lender reimbursement with regard to any costs or expenses
described in such Sections, unless such Lender notifies
Borrower of such costs or expenses within 90 days after the
date paid or incurred but in no event more than 90 days after
the repayment of the Loans and the termination of the
Commitments;
	 
	(2)	 	none of the Lenders shall be permitted to pass
through to Borrower charges and costs under such Sections
(other than Funding Losses) on a discriminatory basis (i.e.,
which are not also passed through by such Lender to all other
customers of such Lender similarly situated where such
customer is subject to documents providing for such pass
through); and
	 
	(3)	 	if any Lender (including, without limitation, the
Agent) elects to pass through to Borrower any material charge
or cost under such Sections (other than Funding Losses) or
elects to terminate the availability of LIBOR Borrowings for
any material period of time, Borrower may, within 60 days
after the date of such event and so long as no Default shall
have occurred and be continuing, elect to terminate such
Lender as a party to this Agreement; provided that,
concurrently with such termination Borrower shall (i) if Agent
and each of the other Lenders shall consent, pay that Lender
all principal, interest and fees and other amounts owed to
such Lender through such date of termination or (ii) have
arranged for another financial institution approved by Agent
(such approval not to be unreasonably withheld) as of such
date, to become a substitute Lender for all purposes under
this Agreement in the manner provided in Section 11.6;
provided further that, prior to substitution for any Lender,
Borrower shall have given written notice to Agent of such
intention and the Lenders shall

28

 

	 	 	have the option, but no obligation, for a period of 60 days
after receipt of such notice, to increase their Commitments
in order to replace the affected Lender in lieu of such
substitution.

4. Payments; Pro Rata Treatment; Computations, Etc.

     4.1 Payments.

     (a) Except to the extent otherwise provided herein, all payments of
principal, interest Reimbursement Obligations and other amounts to be made by
Borrower hereunder, under the Notes and under the other Loan Documents shall be
made in Dollars, in immediately available funds, without set-off, deduction or
counterclaim, to Agent at the Principal Office (or in the case of a successor
Agent, at the principal office of such successor Agent in the United States),
not later than 1:00 p.m., Houston, Texas time on the date on which such payment
shall become due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day).

     (b) Borrower shall, at the time of making each payment hereunder, under
any Note or under any other Loan Document, specify to Agent the Loans or other
amounts payable by Borrower hereunder or thereunder to which such payment is to
be applied. Each payment received by Agent hereunder, under any Note or under
any other Loan Document for the account of a Lender shall be paid promptly to
such Lender, in immediately available funds. If Agent fails to send to any
Lender the applicable amount by the close of business on the date any such
payment is received by Agent if such payment is received prior to 1:00 p.m.,
Houston, Texas time (or on the next succeeding Business Day with respect to
payments which are received after 1:00 p.m., Houston, Texas time), Agent shall
pay to the applicable Lender interest on such amount from such date at the
Federal Funds Rate.

     (c) If the due date of any payment hereunder or under any Note falls on a
day which is not a Business Day, the due date for such payments (except as
otherwise provided in Section 3.3 hereof) shall be extended to the next
succeeding Business Day and interest shall be payable for any principal so
extended for the period of such extension.

     (d) All payments by the Borrower hereunder or under any other Loan
Document shall be made free and clear of and without deduction for or on
account of any present or future income, stamp, or other taxes, fees, duties,
withholding or other charges of any nature whatsoever imposed by any taxing
authority excluding in the case of each Lender taxes imposed on or measured by
its net income or franchise taxes imposed by the jurisdiction in which it is
organized or through which it acts for purposes of this Agreement (such
non-excluded items being hereinafter referred to as “Taxes”). If as a result
of any change in law (or the interpretation thereof) after the date that the
applicable Lender became a “Lender” under this Agreement any withholding or
deduction from any payment to be made to, or for the account of, a Lender by
the Borrower hereunder or under any other Loan Document is required in respect
of any Taxes pursuant to any applicable law, rule, or regulation, then the
Borrower will (i) pay to the relevant authority the full amount required to be
so withheld or deducted; (ii) to the extent available, promptly forward to the
Agent an official receipt or other documentation reasonably satisfactory to the
Agent evidencing such payment to such authority; and (iii) pay to the Agent,
for the account of each affected Lender, such additional amount or amounts as
are necessary to ensure

29

 

that the net amount actually received by such Lender will equal the full
amount such Lender would have received had no such withholding or deduction
been required. Each Lender shall determine such additional amount or amounts
payable to it (which determination shall create a rebuttable presumption as to
the accuracy thereof), and in such event, Agent shall furnish written evidence
to Borrower showing how Agent made such determination. If a Lender becomes
aware that any such withholding or deduction from any payment to be made by the
Borrower hereunder or under any other Loan Document is required, then such
Lender shall promptly notify the Agent and the Borrower thereof stating the
reasons therefor and the additional amount required to be paid under this
Section. Each Lender shall execute and deliver to the Agent and Borrower such
forms as it may be required to execute and deliver pursuant to Section 11.13
hereof. To the extent that any such withholding or deduction results from the
failure of a Lender to provide a form required by Section 11.13 hereof (unless
such failure is due to some prohibition under applicable Legal Requirements),
the Borrower shall have no obligation to pay the additional amount required by
clause (iii) above. Anything in this Section notwithstanding, if any Lender
elects to require payment by the Borrower of any material amount under this
Section, the Borrower may, within 60 days after the date of receiving notice
thereof and so long as no Default shall have occurred and be continuing, elect
to terminate such Lender as a party to this Agreement; provided that,
concurrently with such termination the Borrower shall (i) if the Agent and each
of the other Lenders shall consent, pay that Lender all principal, interest and
fees and other amounts owed to such Lender through such date of termination or
(ii) have arranged for another financial institution approved by the Agent
(such approval not to be unreasonably withheld) as of such date, to become a
substitute Lender for all purposes under this Agreement in the manner provided
in Section 11.6; provided further that, prior to substitution for any Lender,
the Borrower shall have given written notice to the Agent of such intention and
the Lenders shall have the option, but no obligation, for a period of 60 days
after receipt of such notice, to increase their Commitments in order to replace
the affected Lender in lieu of such substitution.

     4.2 Pro Rata Treatment. Except to the extent otherwise provided herein:
(a) each Loan borrowing shall be made ratably from the Revolving Loan Lenders
in accordance with their respective Commitments, provided that borrowings of
Swing Loans shall be for Wells Fargo’s own account; (b) each payment of
commitment fees with respect to the Commitments shall be made for the account
of the Revolving Loan Lenders and each termination or reduction of the
Commitments under Section 2.2 hereof shall be applied, pro rata, according to
the applicable Lenders’ respective Commitments, (c) each payment by Borrower of
principal or interest on the Loans shall be made to Agent for the account of
the Lenders pro rata in accordance with the respective unpaid principal amounts
of such Loans held by the Lenders, provided that payments of Swing Loans shall
be for Wells Fargo’s own account, (d) upon request by Wells Fargo, the
Revolving Loan Lenders (other than the Wells Fargo) shall purchase from Wells
Fargo participations in each Swing Loan to the extent of their respective
Revolving Loan Commitment Percentages, and (e) the Revolving Loan Lenders
(other than the applicable Issuer) shall purchase from the applicable Issuer
participations in each Letter of Credit to the extent of their respective
Revolving Loan Commitment Percentages.

     4.3 Certain Actions, Notices, Etc. Notices to Agent of any termination or
reduction of Commitments and of borrowings and optional prepayments of Loans
and requests for issuances of Letters of Credit shall be irrevocable and shall
be effective only if received by Agent not later than 11:00 a.m., Houston,
Texas time on the number of Business Days prior to the date of the relevant
termination, reduction, borrowing and/or prepayment specified below:

30

 

	 	 	 
	

	 	Number of Business
	

	 	Days Prior Notice
	 
	 	 
	Borrowing at the Base Rate

	 	1 Business Day
	 
	 	 
	Borrowings or prepayments of

	 	same day
	Swing Loans
	 	 
	 
	 	 
	Repayment of Base Rate Borrowing

	 	1 Business Day
	 
	 	 
	Borrowing at Eurodollar Rate

	 	3 LIBOR Business Days
	 
	 	 
	Repayment of LIBOR Borrowing
	 	 
	prior to last day of the applicable

	 	3 LIBOR Business Days
	Interest Period
	 	 
	 
	 	 
	Letter of Credit issuance

	 	5 Business Days
	 
	 	 
	Termination or Reduction of
	 	 
	Commitments

	 	2 Business Days (subject to any
	

	 	Funding Losses with respect to
LIBOR Borrowings)

Each such notice of termination or reduction shall specify the amount of the
applicable Commitment to be terminated or reduced. Each such notice of
borrowing or prepayment shall specify the amount of the Loans to be borrowed or
prepaid and the date of borrowing or prepayment (which shall be a Business
Day). Agent shall promptly notify the affected Lenders of the contents of each
such notice. Any selection of a Eurodollar Rate with respect to a Loan shall
be subject to the advance notice requirements set forth in Section 3.3 hereof.

     4.4 Non-Receipt of Funds by Agent. Unless Agent shall have been notified
by a Lender or Borrower (the “Payor”) prior to the day on which such Lender is
to make payment to Agent of the proceeds of a Loan (or funding of a drawing
under a Letter of Credit or reimbursement with respect to any drawing under a
Letter of Credit) to be made by it hereunder or Borrower is to make a payment
to Agent for the account of one or more of the Lenders, as the case may be
(such payment being herein called the “Required Payment”), which notice shall
be effective upon receipt, that the Payor does not intend to make the Required
Payment to Agent, Agent may assume that the Required Payment has been made and
may, in reliance upon such assumption (but shall not be required to), make the
amount thereof available to the intended recipient on such date and, if the
Payor has not in fact made the Required Payment to Agent, the recipient of such
payment (or, if such recipient is the beneficiary of a Letter of Credit,
Borrower and, if Borrower fails to pay the amount thereof to Agent forthwith
upon demand, the Lenders ratably in proportion to their respective Revolving
Loan Commitment Percentages) shall, on demand, pay to Agent the amount made
available by Agent, together with interest thereon in respect of the period
commencing on the date such amount was so made available by Agent until the
date Agent recovers such amount at a rate per annum equal to the Federal Funds
Rate for such period.

31

 

     4.5 Sharing of Payments, Etc. If a Lender shall obtain payment of any
principal of or interest on any Loan made by it under this Agreement, on any
Reimbursement Obligation or on any other Obligation then due to such Lender
hereunder, through the exercise of any right of set-off (including, without
limitation, any right of setoff or lien granted under Section 9.2 hereof),
banker’s lien, counterclaim or similar right, or otherwise, it shall promptly
purchase from the other Lenders participations in the Loans made, or
Reimbursement Obligations or other Obligations held, by the other Lenders in
such amounts, and make such other adjustments from time to time as shall be
equitable to the end that all the Lenders shall share the benefit of such
payment (net of any expenses which may be incurred by such Lender in obtaining
or preserving such benefit) pro rata in accordance with the unpaid Obligations
then due to each of them (after giving due consideration to any similar
payments obtained by the other Lenders). To such end all the Lenders shall
make appropriate adjustments among themselves (by the resale of participations
sold or otherwise) if such payment is rescinded or must otherwise be restored.
Borrower agrees, to the fullest extent it may effectively do so under
applicable law, that any Lender so purchasing a participation in the Loans
made, or Reimbursement Obligations or other Obligations held, by other Lenders
may exercise all rights of set-off, bankers’ lien, counterclaim or similar
rights with respect to such participation as fully as if such Lender were a
direct holder of Loans, or Reimbursement Obligations or other Obligations in
the amount of such participation. Nothing contained herein shall require any
Lender to exercise any such right or shall affect the right of any Lender to
exercise, and retain the benefits of exercising, any such right with respect to
any other indebtedness or obligation of Borrower.

5. Conditions Precedent.

     5.1 Initial Loans and Letters of Credit. The obligation of each Lender or
each Issuer to make its initial Loans or issue or participate in a Letter of
Credit (if such Letter of Credit is issued prior to the funding of the initial
Loans) hereunder is subject to the following conditions precedent, each of
which shall have been fulfilled or waived to the satisfaction of Agent:

     (a) Authorization and Status. Agent shall have received from the
appropriate Governmental Authorities certified copies of the Organizational
Documents (other than by-laws) of each Obligor, and evidence satisfactory to
Agent of all action taken by each Obligor authorizing the execution, delivery
and performance of the Loan Documents and all other documents related to this
Agreement to which it is a party (including, without limitation, a certificate
of the secretary of each such party which is a corporation setting forth the
resolutions of its Board of Directors authorizing the transactions contemplated
thereby and attaching a copy of its bylaws), together with such certificates as
may be appropriate to demonstrate the qualification and good standing of and
payment of taxes by each Obligor in the jurisdiction of its organization and in
each other jurisdiction where the failure in which to qualify would have a
Material Adverse Effect.

     (b) Incumbency. Each Obligor shall have delivered to Agent a certificate
in respect of the name and signature of each of the officers (i) who is
authorized to sign on its behalf the applicable Loan Documents related to any
Loan or the issuance of any Letter of Credit and (ii) who will, until replaced
by another officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving notices and
other communications in connection with any Loan or the issuance of any Letter
of Credit. Agent and

32

 

each Lender may conclusively rely on such certificates until they receive
notice in writing from the applicable Obligor to the contrary.

     (c) Notes. Agent shall have received the appropriate Notes of Borrower
for each Lender, duly completed and executed.

     (d) Loan Documents. Each Obligor shall have duly executed and delivered
the Loan Documents to which it is a party (in such number of copies as Agent
shall have requested). Each such Loan Document shall be in substantially the
form furnished to the Lenders prior to their execution of this Agreement,
together with such changes therein as Lenders may approve.

     (e) Security Matters. All such action as Agent shall have requested to
perfect the Liens created pursuant to the Security Documents shall have been
taken, including, without limitation, where applicable, the filing and
recording of the Security Documents with the appropriate Governmental
Authorities. Agent shall also have received evidence satisfactory to it that
the Liens created by the Security Documents constitute first priority Liens,
except for the exceptions expressly provided for herein, including, without
limitation, delivery of all applicable stock certificates (with stock powers
executed in blank), Uniform Commercial Code search reports and executed
releases of any prior Liens (except as permitted by Section 8.2).

     (f) Fees and Expenses. Borrower shall have paid to Agent all unpaid fees
in the amounts previously agreed upon in writing among Borrower and Agent; and
shall have in addition paid to Agent all amounts payable under Section 11.3
hereof, on or before the date of this Agreement, except for amounts which
Agent, in its sole discretion, agrees may be paid at a later date.

     (g) Insurance. Borrower shall have delivered to Agent certificates of
insurance satisfactory to Agent evidencing the existence of all insurance
required to be maintained by each Obligor by this Agreement and the Security
Documents.

     (h) Opinions of Counsel. Agent shall have received such opinions of
counsel to Obligors as Agent shall reasonably request with respect to Obligors
and the Loan Documents.

     (i) Consents. Agent shall have received evidence satisfactory to Agent
that all material consents of each Governmental Authority and of each other
Person, if any, reasonably required in connection with (a) the Loans and the
Letters of Credit and (b) the execution, delivery and performance of this
Agreement and the other Loan Documents have been satisfactorily obtained.

     (j) Payment of Certain Outstanding Indebtedness. Agent shall have
received evidence satisfactory to Agent that all existing Borrowed Money
Indebtedness owing by any Obligors (other than Indebtedness permitted under
Section 8.1 hereof) shall have been paid in full (or will be paid in full out
of the initial advance hereunder) and that any credit availability under any
facility for Borrowed Money Indebtedness to which any Obligor is a party as the
borrower (other than Indebtedness permitted under Section 8.1 hereof) shall
have been terminated.

33

 

     (k) Ratings Confirmation. Agent shall have received reaffirmation of
current ratings with respect to Borrower issued by Standard & Poor’s.

     (l) Projections. Agent shall have received projections of consolidated
financial statements of Borrower and its Subsidiaries, on a consolidated basis,
for the balance of the current fiscal year and for the following fiscal year.

     (m) Other Documents. Agent shall have received such other documents
consistent with the terms of this Agreement and relating to the transactions
contemplated hereby as Agent may reasonably request.

     5.2 All Loans. The obligation of each Lender to make any Loan (including
the initial Loan) to be made by it hereunder and the obligation of the Issuer
to issue any Letter of Credit is subject to (a) the accuracy, in all material
respects, on the date of such Loan of all representations and warranties of
each Obligor contained in this Agreement and the other Loan Documents (except
for such representations and warranties which expressly refer to a prior date
in which case they shall be true and correct as of such earlier date);
provided, however, that for purposes of this Section, in each representation
and warranty in Article 6 hereof that makes reference to a Schedule, the
representation under this Section that such representation and warranty in
Article 6 hereof is true on and as of the date of making of such Loan shall
take into account subsequent amendments to any Schedule referred to therein and
matters arising after the date hereof which do not otherwise give rise to or
constitute a Default hereunder; (b) Agent shall have received the following,
all of which shall be duly executed and in Proper Form: (1) a Request for
Extension of Credit as to the Loan or the Letter of Credit, as the case may be,
no later than 11:00 a.m., Houston, Texas time on the Business Day on which such
Request for Extension of Credit must be given under Section 4.3 hereof, and (2)
in the case of a Letter of Credit, an Application, and (3) such other documents
as Agent may reasonably require; (c) prior to the making of such Loan or the
issuance of such Letter of Credit and after giving effect thereto, there shall
have occurred no event having a Material Adverse Effect; (d) no Default or
Event of Default shall have occurred and be continuing; (e) the making of such
Loan or the issuance of such Letter of Credit shall not be illegal or
prohibited by any Legal Requirement, (f) all Swing Loans then outstanding shall
have been paid or shall be paid with the proceeds of such Revolving Loan, and
(g) Borrower shall have paid all fees and expenses of the type described in
Section 11.3 hereof and all other fees owed to Agent or any Lender under the
Loan Documents which are due and payable, in each case, prior to or on the date
of such Loan or such issuance (except for amounts which Agent or the applicable
Lender, as the case may be, in their sole discretion, agree may be paid at a
later date). The submission by the Borrower of a Request for Extension of
Credit shall be deemed to be a representation and warranty that the conditions
precedent to the applicable Loan have been satisfied. Selection of a new
interest rate at the expiration of an Interest Period shall not constitute a
new Loan hereunder.

6. Representations and Warranties.

     To induce the Lenders to enter into this Agreement and to make the Loans
and issue or participate in the Letters of Credit, Borrower represents and
warrants (such representations and warranties to survive any investigation and
the making of the Loans and the issuance of any Letters of Credit) to the
Lenders and Agent as follows:

34

 

     6.1 Organization. Each Obligor (a) is duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its organization;
(b) has all necessary power and authority to conduct its business as presently
conducted, and (c) is duly qualified to do business and in good standing in the
jurisdiction of its organization and in all jurisdictions in which the failure
to so qualify would reasonably be expected to have a Material Adverse Effect.

     6.2 Financial Statements. Borrower has furnished to Agent (i) audited
financial statements (including a balance sheet) as to Borrower which fairly
present in all material respects, in accordance with GAAP, the consolidated
financial condition and the results of operations of Borrower as at the end of
Borrower’s fiscal year ending in 2003 and (ii) unaudited financial statements
(including a balance sheet) as to Borrower which fairly present in all material
respects, in accordance with GAAP (subject to year-end adjustments and the
absence of notes), the consolidated financial condition and the results of
operations of Borrower as at the end of the fiscal quarter ended September 30,
2004. No events, conditions or circumstances have occurred from the date that
the financial statements were delivered to Agent through the Effective Date
which would cause said financial statements to be misleading in any material
respect. There are no material instruments or liabilities which should, in
accordance with GAAP, be reflected in such financial statements provided to
Agent which are not so reflected.

     6.3 Enforceable Obligations; Authorization. The Loan Documents have been
duly executed and delivered by each applicable Obligor and are legal, valid and
binding obligations of each applicable Obligor, enforceable in accordance with
their respective terms, except as may be limited by bankruptcy, insolvency and
other similar laws and judicial decisions affecting creditors’ rights generally
and by general equitable principles. The execution, delivery and performance
of the Loan Documents (a) have all been duly authorized by all necessary
action; (b) are within the power and authority of each applicable Obligor; (c)
to the best of Borrower’s knowledge, do not and will not contravene or violate
any Legal Requirement applicable to any applicable Obligor or the
Organizational Documents of any applicable Obligor, the contravention or
violation of which would reasonably be expected to have a Material Adverse
Effect; (d) do not and will not result in the breach of, or constitute a
default under, any material agreement or instrument by which any Obligor or any
of its Property may be bound the contravention or violation of which would
reasonably be expected to have a Material Adverse Effect, and (e) do not and
will not result in the creation of any Lien upon any material Property of any
Obligor except for Permitted Liens. All necessary permits, registrations and
consents for such making and performance have been obtained, except where the
failure to obtain the same would not have a Material Adverse Effect. Except as
otherwise expressly stated in the Security Documents, the Liens of the Security
Documents will constitute valid and perfected first and prior Liens on the
Property described therein, subject to no other Liens whatsoever except
Permitted Liens covering Collateral other than equity interests in the
Subsidiaries of Borrower.

     6.4 Other Debt. After giving effect to the initial advance hereunder (and
the payment of certain existing Indebtedness of Obligors thereby), no Obligor
is in default in the payment of any other Indebtedness or under any agreement,
mortgage, deed of trust, security agreement or lease to which it is a party and
which would constitute an Event of Default under Section 9.1(b).

     6.5 Litigation. There is no litigation or administrative proceeding, to
the knowledge of any executive officer of Borrower, pending or threatened
against, nor any outstanding judgment, order or decree against, Borrower or any
of its Subsidiaries before or by any

35

 

Governmental Authority which does or would reasonably be expected to have
a Material Adverse Effect. No Obligor is in default with respect to any
judgment, order or decree of any Governmental Authority where such default
would have a Material Adverse Effect.

     6.6 Title. Each Obligor has indefeasible title to all of its material
Property necessary in the ordinary course of its business, free and clear of
all Liens except Permitted Liens.

     6.7 Taxes. Each Obligor has filed all federal and other material tax
returns required to have been filed and paid all federal taxes and all other
material taxes due and payable, except (i) those for which extensions have been
obtained and those which are being contested in good faith and adequate
reserves computed in accordance with GAAP have been set aside therefor and (ii)
taxes, assessments, levies or other charges imposed by any Governmental
Authority (other than federal income taxes) with respect to which the failure
to make payments could not, by reason of the amount thereof or of remedies
available to such Governmental Authorities, reasonably be expected to have a
Material Adverse Effect.

     6.8 Regulations U and X. None of the proceeds of any Loan will be used
for the purpose of purchasing or carrying directly or indirectly any margin
stock or for any other purpose which would constitute this transaction a
“purpose credit” within the meaning of Regulations U and X of the Board of
Governors of the Federal Reserve System, as any of them may be amended from
time to time.

     6.9 Subsidiaries. As of the Effective Date, Borrower has no Subsidiaries
other than those set forth on Exhibit F hereto.

     6.10 No Untrue or Misleading Statements. No representation or warranty
made by Borrower in any Loan Document or in any document, instrument or other
writing furnished to the Lenders by or on behalf of any Obligor in connection
with the transactions contemplated in any Loan Document contains any untrue
material statement of material fact or omits to state any such material fact
(of which any executive officer of Borrower has knowledge) necessary to make
the representations, warranties and other statements contained herein or in
such other document, instrument or writing not misleading in any material
respect on the date when made or deemed made.

     6.11 ERISA. With respect to each Plan, Borrower and each member of the
Controlled Group have fulfilled their obligations, including obligations under
the minimum funding standards of ERISA and the Code and are in compliance in
all material respects with the provisions of ERISA and the Code. No event has
occurred which could result in a liability of Borrower or any member of the
Controlled Group to the PBGC or a Plan (other than to make contributions in the
ordinary course) that would reasonably be expected to have a Material Adverse
Effect. There have not been any nor are there now existing any events or
conditions that would cause the Lien provided under Section 4068 of ERISA to
attach to any Property of Borrower or any member of the Controlled Group.
Unfunded Liabilities as of the date hereof do not exceed $500,000. No
“prohibited transaction” (for which there is not an exemption) has occurred
with respect to any Plan.

     6.12 Investment Company Act. No Obligor is an investment company within
the meaning of the Investment Company Act of 1940, as amended, or, directly or
indirectly,

36

 

controlled by or acting on behalf of any Person which is an investment
company, within the meaning of said Act.

     6.13 Public Utility Holding Company Act. No Obligor is an “affiliate” or
a “subsidiary company” of a “public utility company,” or a “holding company,”
or an “affiliate” or a “subsidiary company” of a “holding company,” as such
terms are defined in the Public Utility Holding Company Act of 1935, as
amended.

     6.14 Solvency. None of Borrower, any other Obligor, or Borrower and its
Subsidiaries on a consolidated basis, is “insolvent,” as such term is used and
defined in (i) the Bankruptcy Code and (ii) the fraudulent conveyance statutes
of the State of Texas or of any other applicable jurisdiction.

     6.15 Fiscal Year. The fiscal year of each Obligor ends on December 31.

     6.16 Compliance. To the best knowledge of any executive officer of
Borrower, Borrower and each of its Subsidiaries is in compliance with all Legal
Requirements applicable to it, except to the extent that the failure to comply
therewith would not reasonably be expected to have a Material Adverse Effect.

     6.17 Environmental Matters. Each Obligor has, to the best knowledge of
Borrower’s executive officers, obtained and maintained in effect all
Environmental Permits (or the applicable Person has initiated the necessary
steps to transfer the Environmental Permits into its name or obtain such
permits), the failure to obtain which would reasonably be expected to have a
Material Adverse Effect. Each Obligor and its Properties, business and
operations have been and are, to the best knowledge of Borrower’s executive
officers, in compliance with all applicable Requirements of Environmental Law
and Environmental Permits, the failure to comply with which would reasonably be
expected to have a Material Adverse Effect. Each Obligor and its Properties,
business and operations are not, to the best knowledge of Borrower’s executive
officers (after making reasonable inquiry of the personnel and records of their
respective Corporations), subject to any (a) Environmental Claims or (b)
Environmental Liabilities, in either case direct or contingent, arising from or
based upon any act, omission, event, condition or circumstance occurring or
existing on or prior to the date hereof which would reasonably be expected to
have a Material Adverse Effect. None of the officers of Borrower have received
nor is aware of any Obligor receiving any notice of any violation or alleged
violation of any Requirements of Environmental Law or Environmental Permit or
any Environmental Claim in connection with its Properties, liabilities,
condition (financial or otherwise), business or operations which would
reasonably be expected to have a Material Adverse Effect. Borrower does not
know of any event or condition with respect to currently enacted Requirements
of Environmental Laws presently scheduled to become effective in the future
with respect to any of the Properties of any Obligor which would reasonably be
expected to have a Material Adverse Effect, for which the applicable Person has
not made good faith provisions in its business plan and projections of
financial performance.

     6.18 Property and Earnings of Material Subsidiaries. The aggregate book
value, on a consolidated basis, of the Property owned by the Material
Subsidiaries and Newly Acquired Subsidiaries is equal to or greater than ninety
percent (90%) of the aggregate consolidated book value of the Property owned by
Borrower and its Subsidiaries on the Effective Date and the

37

 

aggregate earnings, on a consolidated basis, of the Material Subsidiaries
and Newly Acquired Subsidiaries for the twelve month period ending on the
Effective Date is equal to or greater than ninety percent (90%) of the
aggregate consolidated earnings of Borrower and its Subsidiaries for such
period.

7. Affirmative Covenants.

     Borrower covenants and agrees with Agent and the Lenders that prior to the
termination of this Agreement it will do or cause to be done, and cause each of
its Subsidiaries to do or cause to be done, each and all of the following:

     7.1 Taxes, Existence, Regulations, Property, Etc. At all times (a) pay
when due all taxes and governmental charges of every kind upon it or against
its income, profits or Property, unless and only to the extent that the same
shall be contested diligently in good faith and adequate reserves in accordance
with GAAP have been established therefor and, in the case of Subsidiaries which
are not Obligors, the failure to pay would reasonably be expected to have a
Material Adverse Effect; (b) do all things necessary to preserve its existence,
qualifications, rights and franchises in all jurisdictions where such failure
to qualify would reasonably be expected to have a Material Adverse Effect; (c)
comply with all applicable Legal Requirements (including without limitation
Requirements of Environmental Law) in respect of the conduct of its business
and the ownership of its Property, the noncompliance with which would
reasonably be expected to have a Material Adverse Effect; and (d) cause its
Property to be protected, maintained and kept in good repair (ordinary wear and
tear excepted) and make all replacements and additions to such Property as may
be reasonably necessary to conduct its business properly and efficiently except
where the failure to do so would not reasonably be expected to have a Material
Adverse Effect.

     7.2 Financial Statements and Information. Furnish to Agent fifteen (15)
copies of each of the following: (a) as soon as available and in any event
within 100 days after the end of each applicable fiscal year, beginning with
the fiscal year ending on December 31, 2004, Annual Financial Statements of
Borrower; (b) as soon as available and in any event within 60 days after the
end of each fiscal quarter, Quarterly Financial Statements of Borrower; (c)
concurrently with the financial statements provided for in Subsections 7.2(a)
and (b) hereof, such schedules, computations and other information, in
reasonable detail, as may be reasonably required by Agent to demonstrate
compliance with the covenants set forth herein or reflecting any non-compliance
therewith as of the applicable date, all certified and signed by the president,
chief financial officer or treasurer of Borrower (or other authorized officer
approved by Agent) as true and correct in all material respects to the best
knowledge of such officer and, concurrently with the financial statements
provided for in Subsections 7.2(a) and (b) hereof commencing with the Annual
Financial Statement prepared as of December 31, 2004, a compliance certificate
(“Compliance Certificate”) in the form of Exhibit E hereto, duly executed by
such authorized officer; (d) as soon as available and in any event within 90
days after the end of each applicable fiscal year, beginning with the fiscal
year ending on December 31, 2004, annual financial statements prepared on a
statutory basis for the Insurance Company Subsidiaries which are not Foreign
Subsidiaries (as filed with the appropriate regulatory authorities); (e) as
soon as available and in any event within 60 days after the end of each
applicable fiscal quarter (other than the last fiscal quarter of a fiscal
year), beginning with the fiscal quarter ending on March 31, 2005, quarterly
financial statements prepared on a statutory basis for the Insurance Company

38

 

Subsidiaries which are not Foreign Subsidiaries (as filed with the
appropriate regulatory authorities); (f) as soon as available and in any event
within 180 days after the end of each applicable fiscal year, beginning with
the fiscal year ending on December 31, 2004, annual financial statements
prepared on a statutory basis for each Insurance Company Subsidiary which is a
Foreign Subsidiary (as filed with the applicable regulatory authorities); (g)
promptly upon their becoming publicly available, each financial statement,
report, notice or definitive proxy statements sent by Borrower or any of its
Subsidiaries to shareholders generally and each regular or periodic report and
each registration statement or prospectus filed by Borrower or any of its
Subsidiaries with any securities exchange or the Securities and Exchange
Commission or any successor agency; (h) within sixty (60) days after the end of
each fiscal year, projections of the consolidated financial statements of
Borrower and its Subsidiaries for the following fiscal year; (i) at the request
of Agent or the Majority Lenders, independent actuarial reserve adequacy
summary reports for the Insurance Company Subsidiaries, in such form and
substance as is utilized by the applicable Insurance Company Subsidiary in the
ordinary course of its business and which conforms to normal and customary
industry practice, issued by the actuarial consultant utilized by the Insurance
Company Subsidiaries, such consultant to be reasonably satisfactory to Agent
and the Majority Lenders; (j) within thirty (30) days after the provision
thereof, all significant reports by the National Association of Insurance
Commissioners or any insurance regulatory authority or other Governmental
Authority with respect to any Insurance Company Subsidiary’s insurance
business, and (k) such other financial projections and other information
(including without limitation significant filings under state insurance holding
company acts) relating to the condition (financial or otherwise), operations or
business of any Obligor as from time to time may be reasonably requested by
Agent (or any Lender through Agent). Each delivery of a financial statement
pursuant to this Section 7.2 shall constitute a restatement of the
representations contained in the last two sentences of Section 6.2 with respect
to the period of time from the date of such most recently delivered financial
statements.

     7.3 Financial Tests. Borrower will have and maintain (in each case, on a
consolidated basis for Borrower and its Subsidiaries):

     (a) S&P Rating — a rating by S&P applicable to the Index Debt of A- or
better.

     (b) A.M. Best Rating — an A.M. Best rating for each of the Insurance
Company Subsidiaries of at least “A”.

     (c) Debt to Capitalization Ratio — a Debt to Capitalization Ratio of not
greater than 35% at all times.

     (d) Cash Flow Coverage Ratio — a Cash Flow Coverage Ratio at the end of
each fiscal year of not less than 2.00 to 1.00.

     (e) Combined Ratio — a Combined Ratio at the end of each fiscal quarter of
not greater than 105%.

     7.4 Inspection. Permit Agent and each Lender upon five (5) Business Days’
prior notice from Agent or such Lender through Agent (unless a Default or an
Event of Default has occurred which is continuing, in which case no prior
notice is required) to inspect its Property, to examine its files, books and
records, except privileged communication with legal counsel (both

39

 

inside and outside), confidential information regarding insured parties
(provided that Borrower shall, if requested by Agent, use good faith efforts to
obtain consent, or take such other actions, to permit the disclosure thereof)
and classified governmental material, and make and take away copies thereof,
and to discuss its affairs with its officers and accountants, all during normal
business hours and at such intervals and to such extent as Agent or such Lender
may reasonably desire. Unless an Event of Default has occurred which is
continuing, Agent and Lenders shall not exercise their rights hereunder more
than once each calendar year and Agent or the applicable Lender, as the case
may be, shall pay its own costs and expenses relating to the exercise of the
rights under this Section.

     7.5 Further Assurances. Promptly execute and deliver, at Borrower’s
expense, any and all other and further instruments which may be reasonably
requested by Agent to cure any defect in the execution and delivery of any Loan
Document in order to effectuate the transactions expressly contemplated by the
Loan Documents, and in order to grant, preserve, protect and perfect the
validity and priority of the security interests created by the Security
Documents.

     7.6 Books and Records. Maintain accounting records which permit financial
statements to be prepared in accordance with GAAP and statutory accounting
principles, as applicable.

     7.7 Insurance. Borrower will (and will cause each of its Subsidiaries to)
maintain insurance with such insurers, on such of its Property, with
responsible companies in such amounts, with such deductibles and against such
risks as are usually carried by owners of similar businesses and properties in
the same general areas in which the applicable Person operates, and furnish
Agent satisfactory evidence thereof promptly upon request.

     7.8 Notice of Certain Matters. Give Agent written notice of the following
within five Business Days after any executive officer of Borrower shall become
aware of the same:

     (a) the issuance by any court or governmental agency or authority of any
injunction, order or other restraint prohibiting, or having the effect of
prohibiting, the performance of this Agreement, any other Loan Document, or the
making of the Loans or the initiation of any litigation, or any claim or
controversy which would reasonably be expected to result in the initiation of
any litigation, seeking any such injunction, order or other restraint;

     (b) the filing or commencement of any action, suit or proceeding, whether
at law or in equity or by or before any court or any Governmental Authority
involving claims in excess of $15,000,000 (exclusive of claims covered by
insurance and exclusive of claims made in the ordinary course of the insurance
business of such Person) or which would reasonably be expected to result in a
Default hereunder;

     (c) any Event of Default or Default, specifying the nature and extent
thereof and the action (if any) which is proposed to be taken with respect
thereto;

     (d) the incurrence of material burdensome restrictions under contracts or
applicable law which would reasonably be expected to have a Material Adverse
Effect and any other event (including strikes, labor disputes or loss of use of
material patents or trademarks) which could reasonably be expected to have a
Material Adverse Effect;

40

 

     (e) promptly after S&P shall have announced a change in the rating
established or deemed to have been established for the Index Debt, written
notice of such rating change; and

Borrower will also notify Agent in writing at least 30 days prior to the date
that any Obligor changes its name or the location of its chief executive office
or principal place of business or the place where it keeps its books and
records.

     7.9 ERISA Information and Compliance. Furnish to Agent (i) within five
(5) days after receipt, a copy of any notice of complete or partial withdrawal
liability under Title IV of ERISA which would reasonably be expected to have a
Material Adverse Effect and any notice from the PBGC under Title IV of ERISA of
an intent to terminate or appoint a trustee to administer any Plan which would
reasonably be expected to have a Material Adverse Effect, (ii) if requested by
Agent, promptly after the filing thereof with the United States Secretary of
Labor or the PBGC or the Internal Revenue Service, copies of each annual and
other report with respect to each Plan or any trust created thereunder, (iii)
within five (5) days after becoming aware of the occurrence of any “reportable
event,” as such term is defined in Section 4043 of ERISA which would reasonably
be expected to have a Material Adverse Effect, for which the disclosure
requirements of Regulation Section 4043 promulgated by the PBGC have not been
waived, or of any “prohibited transaction,” as such term is defined in Section
4975 of the Code, in connection with any Plan or any trust created thereunder
which would reasonably be expected to have a Material Adverse Effect, a written
notice signed by the President or the principal financial officer of Borrower
or the applicable member of the Controlled Group specifying the nature thereof,
what action Borrower or the applicable member of the Controlled Group is taking
or proposes to take with respect thereto, and, when known, any action taken by
the PBGC, the Internal Revenue Service or the Department of Labor with respect
thereto, (iv) within five (5) days after the filing or receiving thereof by
Borrower or any member of the Controlled Group of any notice of the institution
of any proceedings or other actions which may result in the termination of any
Plan which would reasonably be expected to have a Material Adverse Effect, and
(v) each request for waiver of the funding standards or extension of the
amortization periods required by Sections 303 and 304 of ERISA or Section 412
of the Code within five (5) days after the request is submitted by Borrower or
any member of the Controlled Group to the Secretary of the Treasury, the
Department of Labor or the Internal Revenue Service, as the case may be. To
the extent required under applicable statutory funding requirements, Borrower
will fund, or will cause the applicable member of the Controlled Group to fund,
all current service pension liabilities as they are incurred under the
provisions of all Plans from time to time in effect, and comply with all
applicable provisions of ERISA, in each case, except to the extent that failure
to do the same would not reasonably be expected to have a Material Adverse
Effect. Except to the extent that failure to do the same would not reasonably
be expected to have a Material Adverse Effect, Borrower covenants that it shall
and shall cause each member of the Controlled Group to (1) make contributions
to each Plan in accordance with the time limits imposed by ERISA and in an
amount sufficient to comply with the contribution obligations under such Plan
and the minimum funding standards requirements of ERISA; (2) prepare and file
in accordance with the time limits imposed by ERISA all notices and reports
required under the terms of ERISA including but not limited to annual reports;
and (3) pay in accordance with the time limits imposed by ERISA all required
PBGC premiums.

41

 

8. Negative Covenants.

     Borrower covenants and agrees with Agent and the Lenders that prior to the
termination of this Agreement it will not, and will not suffer or permit any of
its Subsidiaries to, do any of the following without the prior written consent
of the Majority Lenders:

     8.1 Borrowed Money Indebtedness. Create, incur, suffer or permit to
exist, or assume or guarantee, directly or indirectly, or become or remain
liable with respect to any Borrowed Money Indebtedness, whether direct,
indirect, absolute, contingent or otherwise, except the following:

	 	(i)	 	Indebtedness under this Agreement and the other Loan
Documents and Indebtedness secured by Liens permitted by Section 8.2
hereof;
	 
	 	(ii)	 	the liabilities and other credit facilities (whether or not
funded) existing on the date of this Agreement and disclosed in the
financial statements delivered on or prior to the Effective Date
pursuant to Section 6.2 hereof and set forth on Exhibit G hereto,
and all renewals, extensions and replacements (but not increases) of
any of the foregoing;
	 
	 	(iii)	 	the Interest Rate Risk Indebtedness;
	 
	 	(iv)	 	current liabilities incurred in the ordinary course of
business;
	 
	 	(v)	 	purchase money Indebtedness (whether for the purchase of real
or personal Property) and/or real estate construction Indebtedness
which does not result in an Event of Default;
	 
	 	(vi)	 	Indebtedness under sale and leaseback transactions not to
exceed $10,000,000 in the aggregate at any time outstanding;
	 
	 	(vii)	 	unsecured Indebtedness of Subsidiaries of the Borrower not
to exceed $25,000,000 in the aggregate at any time outstanding
(inclusive of amounts shown on Exhibit G hereto);
	 
	 	(viii)	 	other unsecured Indebtedness of the Borrower which does not result
in an Event of Default.

     8.2 Liens. Create or suffer to exist any Lien upon any of its Property
now owned or hereafter acquired, or acquire any Property upon any conditional
sale or other title retention device or arrangement or any purchase money
security agreement; or in any manner directly or indirectly sell, assign,
pledge or otherwise transfer any of its Accounts or General Intangibles;
provided, however, that Borrower or any of its Subsidiaries may create or
suffer to exist the following:

	 	(i)	 	artisans’, mechanics’ or other Liens imposed by law arising
in the ordinary course of business, but only to the extent that
payment thereof shall not at the time be overdue by more than 30
days or, if overdue by more than 30 days, the

42

 

	 	 	 	payment thereof is being diligently contested in good faith and
adequate reserves computed in accordance with GAAP have been set
aside therefor;
	 
	 	(ii)	 	normal encumbrances and restrictions on, and defects in,
title including, without limitation, zoning restrictions, easements,
rights-of-way, restrictions and similar encumbrances, which do not
secure Borrowed Money Indebtedness and which would not be reasonably
expected to have, in the aggregate, a Material Adverse Effect;
	 
	 	(iii)	 	Liens in favor of Agent or any Lender under the Loan
Documents, including, without limitation, Liens securing Interest
Rate Risk Indebtedness owed to one or more of the Lenders or
Affiliate thereof (but not to any Person which is not, at the time
the Interest Rate Risk Indebtedness is incurred, a Lender or an
Affiliate thereof);
	 
	 	(iv)	 	Liens incurred or deposits made in the ordinary course of
business (1) in connection with workmen’s compensation, unemployment
insurance, social security and other like laws, or (2) to secure
insurance in the ordinary course of business, the performance of
bids, tenders, contracts, leases, licenses, statutory obligations,
surety, appeal and performance bonds and other similar obligations
incurred in the ordinary course of business, not, in any of the
cases specified in this clause (2), incurred in connection with the
borrowing of money, the obtaining of advances or the payment of the
deferred purchase price of Property;
	 
	 	(v)	 	attachments, judgments and other similar Liens arising in
connection with court proceedings, provided that the execution and
enforcement of such Liens are effectively stayed and the claims
secured thereby are being actively contested in good faith with
adequate reserves made therefor in accordance with GAAP;
	 
	 	(vi)	 	Liens securing obligations in respect of capital leases
covering the property subject to the applicable capital lease
provided that such capital leases are permitted under the other
provisions of this Agreement;
	 
	 	(vii)	 	existing Liens as of Effective Date as set forth on Exhibit
H hereto;
	 
	 	(viii)	 	Liens for taxes, fees, assessments or other governmental charges,
but only to the extent that payment thereof shall not at the time be
due or if due, the payment thereof is being diligently contested in
good faith and adequate reserves computed in accordance with GAAP
have been set aside therefor;
	 
	 	(ix)	 	Liens securing purchase money Indebtedness permitted under
Section 8.1 hereof and sale and leaseback Indebtedness permitted
under Section 8.1 hereof and covering the Property so purchased or
leased (as the case may be);
	 
	 	(x)	 	Liens arising from precautionary Uniform Commercial Code
financing statement filings with respect to operating leases or
consignment arrangements otherwise permitted hereunder entered into
by Borrower or any of its Subsidiaries in the ordinary course of
business;

43

 

	 	(xi)	 	licenses, leases and subleases permitted under this Agreement
and granted to others that do not interfere in any material respect
with the business or operations of Borrower and its Subsidiaries
taken as a whole; and
	 
	 	(xii)	 	extensions, renewals and replacements of Liens referred to
in clauses (i) through (xi) above; provided that any such extension,
renewal or replacement Lien shall be limited to the Property or
assets covered by the Lien extended, renewed or replaced and that
the Borrowed Money Indebtedness secured by any such extension,
renewal or replacement Lien shall be in an amount not greater than
the amount of the Indebtedness secured by the Lien extended, renewed
or replaced.

     8.3 Contingent Liabilities. Directly or indirectly guarantee the
performance or payment of, or purchase or agree to purchase, or assume or
contingently agree to become or be secondarily liable in respect of, any
obligation or liability of any other Person (other than Subsidiaries) except
for (a) the endorsement of checks or other negotiable instruments in the
ordinary course of business; (b) obligations disclosed to Agent in the
financial statements delivered on or prior to the Effective Date pursuant to
Section 6.2 hereof (but not increases of such obligations after the Effective
Date); (c) those liabilities permitted under Section 8.1 hereof (including
without limitation liabilities under letter of credit facilities permitted
under Section 8.1 hereof) and (d) other contingent liabilities not relating to
Borrowed Money Indebtedness arising in the ordinary course of the insurance
company business.

     8.4 Mergers and Consolidations. In any single transaction or series of
transactions, directly or indirectly: (a) liquidate or dissolve; (b) be a party
to any merger or consolidation unless and so long as (i) no Default or Event of
Default has occurred that is then continuing, (ii) immediately thereafter and
giving effect thereto, no event will occur and be continuing which constitutes
a Default and (iii) the applicable Obligor (or one of such Obligors if such
merger is between Obligors) subject to such merger is the surviving Person.
Notwithstanding the foregoing, so long as no Event of Default has occurred
which is continuing (or will arise by reason thereof) (a) any Subsidiary of
Borrower may merge with Borrower or any Obligor provided that Borrower or such
Obligor is the surviving entity or, so long as such Subsidiary is not an
Obligor, with one or more Subsidiaries of Borrower, including without
limitation mergers between newly acquired Subsidiaries in connection with any
acquisition permitted hereunder, provided that if any merger is between a
wholly-owned Subsidiary of Borrower and a Subsidiary of Borrower which is not a
wholly-owned Subsidiary, such wholly-owned Subsidiary of Borrower shall be the
surviving entity, (b) any Subsidiary of Borrower may sell all or substantially
all of its assets (upon voluntary liquidation or otherwise) to Borrower or any
other Obligor or, so long as such Subsidiary is not an Obligor, to another
wholly-owned Subsidiary of Borrower, (c) any Subsidiary which is not a Material
Subsidiary may be liquidated or dissolved, and (d) mergers, consolidations or
dissolutions by any Subsidiary of Borrower to change its state of incorporation
or to change the form of entity are not prohibited.

     8.5 Redemption, Dividends and Distributions. At any time: (a) redeem,
retire or otherwise acquire, directly or indirectly, any equity interest in
Borrower other than stock repurchases not exceeding, in the aggregate and on a
cumulative basis from and after the Effective Date, $200,000,000 which may be
made so long as no Event of Default has occurred which is continuing (or would
result therefrom) or (b) make any distributions of any Property or

44

 

cash to the owner of any of the equity interests in Borrower or any of its
Subsidiaries other than Permitted Dividends.

     8.6 Nature of Business. Change the general nature of its business from
insurance, insurance services and related operations.

     8.7 Transactions with Related Parties. Enter into any material
transaction or material agreement with any officer, director or holder of any
equity interest in Borrower or any of its Subsidiaries (or any Affiliate of any
such Person) unless the same is upon terms substantially similar to those
obtainable from wholly unrelated sources (to the best knowledge of the
executive officers of Borrower); provided that the foregoing shall not prohibit
Borrower or any Subsidiary from entering into transactions by and among
Borrower and its Subsidiaries, subject to the provisions of Section 8.13
hereof. Notwithstanding the foregoing, Borrower and its Subsidiaries shall be
entitled to make the following payments and/or enter into the following
transactions: (i) the payment of reasonable and customary fees and
reimbursement arrangements with respect to the procurement of services from any
Subsidiary in the ordinary course of business; (ii) the payment of reasonable
and customary fees and reimbursement of expenses payable to officers and
directors of Borrower and its Subsidiaries; and (iii) the payment of reasonable
lease payments for the use of vehicles, office space, equipment and other
Property in which any officer or director of Borrower or any Subsidiary has a
direct or indirect ownership interest.

     8.8 Loans and Investments. Make any loan, advance, extension of credit or
capital contribution to, or make or have any Investment in, any Person, or make
any commitment to make any such extension of credit or Investment, except to
the extent such loans, advances, extensions of credit, capital contributions or
Investments are not prohibited by applicable Legal Requirements.

     8.9 Organizational Documents. Amend, modify, restate or supplement any of
its Organizational Documents if such action would reasonably be expected to
have a Material Adverse Effect, unless such action shall be consented to in
writing by the Majority Lenders, which consent shall not be unreasonably
withheld.

     8.10 Unfunded Liabilities. Incur any Unfunded Liabilities after the
Effective Date or allow any Unfunded Liabilities in excess of $2,000,000, in
the aggregate, to arise or exist.

     8.11 Intentionally Left Blank.

     8.12 Subsidiaries. Form, create or acquire any Subsidiary except that
Borrower or any of its Subsidiaries may form, create or acquire a wholly-owned
Subsidiary so long as (a) immediately thereafter and giving effect thereto, no
event will occur and be continuing which constitutes a Default (and Agent or
the Majority Lenders may request evidence that, after such formation, creation
or acquisition, Borrower shall continue to be in compliance with the provisions
of Section 8.13 hereof); (b) to the extent such Subsidiary constitutes an
Agency Subsidiary which is not a Foreign Subsidiary, such Subsidiary shall
execute and deliver to the Agent a Guaranty, in Proper Form, within forty-five
(45) days after its formation, creation or acquisition and (c) to the extent
such Subsidiary constitutes a Material Subsidiary, the owner(s) of the equity
interests in and to such Subsidiary shall execute and deliver to the Agent such
Security Documents, in Proper Form, as the Agent may reasonably require to
create a first and

45

 

prior Lien upon such equity interests (or, in the case of Foreign
Subsidiaries, 65% of such equity interests) securing the Obligations within
forty-five (45) days after its formation, creation or acquisition.

     8.13 Property and Earnings of Material Subsidiaries. Borrower will not
permit the aggregate book value, on a consolidated basis, of the Property owned
by the Material Subsidiaries and Newly Acquired Subsidiaries to at any time be
less than ninety percent (90%) of the aggregate consolidated book value of the
Property owned by Borrower and its Subsidiaries and Borrower will not permit
the aggregate earnings, on a consolidated basis, of the Material Subsidiaries
and Newly Acquired Subsidiaries for the twelve month period ending on the last
day of any fiscal quarter to be less than ninety percent (90%) of the aggregate
consolidated earnings of Borrower and its Subsidiaries for such period.
Excluding those transfers made in the ordinary course of business, aggregate
transfers of Property from Material Subsidiaries which are not Foreign
Subsidiaries to Material Subsidiaries which are Foreign Subsidiaries shall not
exceed $1,000,000 in any fiscal year.

9. Defaults.

     9.1 Events of Default. If any one or more of the following events (herein
called “Events of Default”) shall occur, then Agent may (with the consent of
the Majority Lenders) and shall (upon direction by the Majority Lenders), do
any or all of the following: (1) without notice to Borrower or any other
Person, declare the Commitments terminated (whereupon the Commitments shall be
terminated) and/or accelerate the Revolving Loan Termination Date to a date as
early as the date of termination of the Commitments; (2) terminate any Letter
of Credit allowing for such termination, by sending a notice of termination as
provided therein and require Borrower to provide Cover for outstanding Letters
of Credit; (3) declare the principal amount then outstanding of and the unpaid
accrued interest on the Loans and Reimbursement Obligations and all fees and
all other amounts payable hereunder, under the Notes and under the other Loan
Documents to be forthwith due and payable, whereupon such amounts shall be and
become immediately due and payable, without notice (including, without
limitation, notice of acceleration and notice of intent to accelerate),
presentment, demand, protest or other formalities of any kind, all of which are
hereby expressly waived by Borrower; provided that in the case of the
occurrence of an Event of Default with respect to Borrower or any of its
Subsidiaries referred to in clause (f), (g) or (h) of this Section 9.1, the
Commitments shall be automatically terminated and the principal amount then
outstanding of and unpaid accrued interest on the Loans and the Reimbursement
Obligations and all fees and all other amounts payable hereunder, under the
Notes and under the other Loan Documents shall be and become automatically and
immediately due and payable, without notice (including, without limitation,
notice of acceleration and notice of intent to accelerate), presentment,
demand, protest or other formalities of any kind, all of which are hereby
expressly waived by Borrower, and (4) exercise any or all other rights and
remedies available to Agent or any of the Lenders under the Loan Documents, at
law or in equity:

     (a) Payments - (i) any Obligor shall fail to make any payment or required
prepayment of any installment of principal on the Loans or any Reimbursement
Obligation payable under the Notes, this Agreement or the other Loan Documents
when due or (ii) any Obligor fails to make any payment or required prepayment
of interest with respect to the Loans, any Reimbursement Obligation or any
other fee or amount under the Notes, this Agreement or the other Loan

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Documents when due and such failure to pay continues unremedied for a
period of three Business Days; or

     (b) Other Obligations - Borrower or any of its Subsidiaries shall default
in the payment when due of any principal of or interest on any Indebtedness
having an outstanding principal amount of at least $2,500,000 (other than the
Loans and Reimbursement Obligations) and such default shall continue beyond any
applicable period of grace; or any event or condition shall occur which results
in the acceleration of the maturity of any Indebtedness having an outstanding
principal amount of at least $2,500,000 (other than the Loans and Reimbursement
Obligations) or enables (or, with the giving of notice or lapse of time or
both, would enable) the holder of any such Indebtedness or any Person acting on
such holder’s behalf to accelerate the maturity thereof and such event or
condition shall not be cured within any applicable period of grace; or

     (c) Representations and Warranties - any representation or warranty made
or deemed made by or on behalf of any Obligor in this Agreement or any other
Loan Document or in any certificate furnished or made by any Obligor to Agent
or the Lenders in connection herewith or therewith shall prove to have been
incorrect, false or misleading in any material respect as of the date thereof
or as of the date as of which the facts therein set forth were stated or
certified or deemed stated or certified; or

     (d) Affirmative Covenants - (i) default shall be made in the due
observance or performance of any of the covenants or agreements contained in
Sections 7.3 or 7.8(c) hereof or (ii) default is made in the due observance or
performance of any of the other covenants and agreements contained in Section 7
hereof or any other affirmative covenant of any Obligor contained in this
Agreement or any other Loan Document and such default continues unremedied for
a period of 30 days after (x) notice thereof is given by Agent to Borrower or
(y) such default otherwise becomes known to any executive officer of Borrower,
whichever is earlier; or

     (e) Negative Covenants - default is made in the due observance or
performance by Borrower of any of the covenants or agreements contained in
Section 8 of this Agreement or of any other negative covenant of any Obligor
contained in this Agreement or any other Loan Document; or

     (f) Involuntary Bankruptcy or Receivership Proceedings - a receiver,
conservator, liquidator or trustee of Borrower or any of its Subsidiaries or of
any of its Property is appointed by the order or decree of any court or agency
or supervisory authority having jurisdiction, and such decree or order remains
in effect for more than 90 days; or Borrower or any of its Subsidiaries is
adjudicated bankrupt or insolvent; or any of such Person’s Property is
sequestered by court order and such order remains in effect for more than 90
days; or a petition is filed against Borrower or any of its Subsidiaries under
any state or federal bankruptcy, reorganization, arrangement, insolvency,
readjustment or debt, dissolution, liquidation or receivership law or any
jurisdiction, whether now or hereafter in effect, and is not dismissed within
90 days after such filing; or

     (g) Voluntary Petitions or Consents - Borrower or any of its Subsidiaries
commences a voluntary case or other proceeding or order seeking liquidation,
reorganization, arrangement, insolvency, readjustment of debt, dissolution,
liquidation or other relief with respect to itself or

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its debts or other liabilities under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its Property, or consents to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or fails generally to, or cannot, pay
its debts generally as they become due (taking into account applicable grace
periods) or takes any corporate action to authorize or effect any of the
foregoing; or

     (h) Assignments for Benefit of Creditors or Admissions of Insolvency -
Borrower or any of its Subsidiaries makes an assignment for the benefit of its
creditors, or admits in writing its inability to pay its debts generally as
they become due, or consents to the appointment of a receiver, trustee, or
liquidator of such Person or of all or any substantial part of its Property; or

     (i) Undischarged Judgments - a final non-appealable judgment or judgments
for the payment of money exceeding, in the aggregate, $2,500,000 (exclusive of
amounts covered by insurance and exclusive of judgments in the ordinary course
of the insurance business of such Person) is rendered by any court or other
governmental body against Borrower or any of its Subsidiaries and such Person
does not discharge the same or provide for its discharge in accordance with its
terms, or procure a stay of execution thereof within 90 days from the date of
entry thereof; or

     (j) Security Documents; Guaranties - any Security Document for any reason
ceases to create a valid and perfected Lien of the first priority (subject to
the Permitted Liens), required thereby on any of the Collateral purported to be
covered thereby and securing that portion of the Obligations which is therein
designated as being secured, or any Agency Subsidiary shall cease to be subject
to a duly executed Guaranty or any Guaranty for any reason ceases to be the
valid and binding obligation of the applicable Obligor, or any Obligor (or any
other Person who may have granted or purported to grant such Lien or execute
such Guaranty) will so state in writing (provided, however, that this clause
(j) shall be subject to the release rights set forth in the definition of
“Agency Subsidiaries” in Section 1.1 hereof); or

     (k) Concealment - Borrower or any of its Subsidiaries shall have
concealed, removed, or permitted to be concealed or removed, any part of its
Property, with intent to hinder, delay or defraud its creditors or any of them,
or shall have made any transfer of its Property to or for the benefit of a
creditor at a time when other creditors similarly situated have not been paid;
or

     (l) Ownership of Certain Subsidiaries - Borrower shall cease to own,
directly or through one or more wholly-owned Subsidiaries of Borrower, all of
the issued and outstanding equity interests in and to each of the Material
Subsidiaries of Borrower or Agent shall cease to have a valid, perfected, first
priority Lien upon all such equity interests (other than Foreign Subsidiaries,
with respect to which Agent shall have a valid, perfected, first priority Lien
upon only 65% of their issued and outstanding equity interests); or

     (m) Change of Control -  there should occur any Change of Control.

     9.2 Right of Setoff. Upon the occurrence and during the continuance of
any Event of Default, each Lender is hereby authorized at any time and from
time to time, without notice to any Obligor (any such notice being expressly
waived by Borrower and the other

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Obligors), to setoff and apply any and all deposits (general or special,
time or demand, provisional or final (but excluding the funds held in accounts
clearly designated as escrow or trust accounts held by Borrower or any other
Obligor for the benefit of Persons which are not Affiliates of any Obligor,
whether or not such setoff results in any loss of interest or other penalty,
and including without limitation all certificates of deposit) at any time held,
and any other funds or Property at any time held, and other Indebtedness at any
time owing by such Lender to or for the credit or the account of Borrower or
any other Obligor against any and all of the Obligations irrespective of
whether or not such Lender or Agent will have made any demand under this
Agreement, the Notes or any other Loan Document. Should the right of any
Lender to realize funds in any manner set forth hereinabove be challenged and
any application of such funds be reversed, whether by court order or otherwise,
the Lenders shall make restitution or refund to Borrower pro rata in accordance
with their Commitments. Each Lender agrees to promptly notify Borrower and
Agent after any such setoff and application, provided that the failure to give
such notice will not affect the validity of such setoff and application. The
rights of Agent and the Lenders under this Section are in addition to other
rights and remedies (including without limitation other rights of setoff) which
Agent or the Lenders may have. This Section is subject to the terms and
provisions of Sections 4.5 and 11.7 hereof.

     9.3 Collateral Account. Borrower hereby agrees, in addition to the
provisions of Section 9.1 hereof, that upon the occurrence and during the
continuance of any Event of Default, it shall, if requested by Agent or the
Majority Lenders (through Agent), pay to Agent an amount in immediately
available funds equal to the then aggregate amount available for drawings under
all Letters of Credit issued for the account of Borrower, which funds shall be
held by Agent as Cover.

     9.4 Preservation of Security for Unmatured Reimbursement Obligations. In
the event that, following (i) the occurrence of an Event of Default and the
exercise of any rights available to Agent or any Lender under the Loan
Documents, and (ii) payment in full of the principal amount then outstanding of
and the accrued interest on the Loans and Reimbursement Obligations and fees
and all other amounts payable hereunder and under the Notes, any Letters of
Credit shall remain outstanding and undrawn upon, Agent shall be entitled to
hold (and Borrower and each other Obligor hereby grants and conveys to Agent a
security interest in and to) all cash or other Property (“Proceeds of
Remedies”) realized or arising out of the exercise of any rights available
under the Loan Documents, at law or in equity, including, without limitation,
the proceeds of any foreclosure, as collateral for the payment of any amounts
due or to become due under or in respect of such Letters of Credit. Such
Proceeds of Remedies shall be held for the ratable benefit of the Lenders. The
rights, titles, benefits, privileges, duties and obligations of Agent with
respect thereto shall be governed by the terms and provisions of this
Agreement. Agent may, but shall have no obligation to, invest any such
Proceeds of Remedies in such manner as Agent, in the exercise of its sole
discretion, deems appropriate. Such Proceeds of Remedies shall be applied to
Reimbursement Obligations arising in respect of any such Letters of Credit
and/or the payment of any Lender’s obligations under any such Letter of Credit
when such Letter of Credit is drawn upon. Nothing in this Section shall cause
or permit an increase in the maximum amount of the Revolving Loan Obligations
permitted to be outstanding from time to time under this Agreement.

     9.5 Remedies Cumulative. No remedy, right or power conferred upon Agent
or any Lender is intended to be exclusive of any other remedy, right or power
given hereunder or now

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or hereafter existing at law, in equity, or otherwise, and all such
remedies, rights and powers shall be cumulative.

10. Agent.

     10.1 Appointment, Powers and Immunities. Each Lender hereby irrevocably
appoints and authorizes Agent to act as its agent hereunder, under the Letters
of Credit and under the other Loan Documents with such powers as are
specifically delegated to Agent by the terms hereof and thereof, together with
such other powers as are reasonably incidental thereto. Any Loan Documents
executed in favor of Agent shall be held by Agent for the ratable benefit of
the Lenders. Agent (“Agent” as used in this Section 10 shall include reference
to its Affiliates and its own and its Affiliates’ respective officers,
shareholders, directors, employees and agents) (a) shall not have any duties or
responsibilities except those expressly set forth in this Agreement, the
Letters of Credit and the other Loan Documents, and shall not by reason of this
Agreement or any other Loan Document be a trustee or fiduciary for any Lender;
(b) shall not be responsible to any Lender for any recitals, statements,
representations or warranties contained in this Agreement, the Letters of
Credit or any other Loan Document, or in any certificate or other document
referred to or provided for in, or received by any of them under, this
Agreement, the Letters of Credit or any other Loan Document, or for the value,
validity, effectiveness, genuineness, enforceability, execution, filing,
registration, collectibility, recording, perfection, existence or sufficiency
of this Agreement, the Letters of Credit or any other Loan Document or any
other document referred to or provided for herein or therein or any Property
covered thereby or for any failure by any Obligor or any other Person to
perform any of its obligations hereunder or thereunder, and shall not have any
duty to inquire into or pass upon any of the foregoing matters; (c) shall not
be required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Loan Document except to the extent requested by
the Majority Lenders; (d) shall not be responsible for any mistake of law or
fact or any action taken or omitted to be taken by it hereunder or under any
other Loan Document or any other document or instrument referred to or provided
for herein or therein or in connection herewith or therewith, including,
without limitation, pursuant to its own negligence, except for its own gross
negligence or willful misconduct; (e) shall not be bound by or obliged to
recognize any agreement among or between Borrower and any Lender to which Agent
is not a party, regardless of whether Agent has knowledge of the existence of
any such agreement or the terms and provisions thereof; (f) shall not be
charged with notice or knowledge of any fact or information not herein set out
or provided to Agent in accordance with the terms of this Agreement or any
other Loan Document; (g) shall not be responsible for any delay, error,
omission or default of any mail, telegraph, cable or wireless agency or
operator, and (h) shall not be responsible for the acts or edicts of any
Governmental Authority. Agent may employ agents and attorneys-in-fact and
shall not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Without in any way
limiting any of the foregoing, each Lender acknowledges that Agent shall have
no greater responsibility in the operation of the Letters of Credit than is
specified in the Uniform Customs and Practice for Documentary Credits (1993
Revision, International Chamber of Commerce Publication No. 500). In any
foreclosure proceeding concerning any Collateral, each holder of an Obligation
if bidding for its own account or for its own account and the accounts of other
Lenders is prohibited from including in the amount of its bid an amount to be
applied as a credit against the Obligations held by it or the Obligations held
by the other Lenders; instead, such holder must bid in cash only. However, in
any such foreclosure proceeding, Agent may (but shall not be obligated to)
submit a bid for all

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Lenders (including itself) in the form of a credit against the
Obligations, and Agent or its designee may (but shall not be obligated to)
accept title to such collateral for and on behalf of all Lenders.

     10.2 Reliance. Agent shall be entitled to rely upon any certification,
notice or other communication (including any thereof by telephone, telex,
telegram or cable) believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel (which may be counsel for Borrower),
independent accountants and other experts selected by Agent. Agent shall not
be required in any way to determine the identity or authority of any Person
delivering or executing the same. As to any matters not expressly provided for
by this Agreement, the Letters of Credit or any other Loan Document, Agent
shall in all cases be fully protected in acting, or in refraining from acting,
hereunder and thereunder in accordance with instructions of the Majority
Lenders, and any action taken or failure to act pursuant thereto shall be
binding on all of the Lenders. Pursuant to instructions of the requisite
Lenders, Agent shall have the authority to execute releases of the Security
Documents on behalf of the Lenders without the joinder of any Lender. If any
order, writ, judgment or decree shall be made or entered by any court affecting
the rights, duties and obligations of Agent under this Agreement or any other
Loan Document, then and in any of such events Agent is authorized, in its sole
discretion, to rely upon and comply with such order, writ, judgment or decree
which it is advised by legal counsel of its own choosing is binding upon it
under the terms of this Agreement, the relevant Loan Document or otherwise; and
if Agent complies with any such order, writ, judgment or decree, then it shall
not be liable to any Lender or to any other Person by reason of such compliance
even though such order, writ, judgment or decree may be subsequently reversed,
modified, annulled, set aside or vacated.

     10.3 Defaults. Agent shall not be deemed to have knowledge of the
occurrence of a Default (other than the non-payment of principal of or interest
on Loans or Reimbursement Obligations) unless Agent has received notice from a
Lender or Borrower specifying such Default and stating that such notice is a
“Notice of Default.” In the event that Agent receives such a Notice of
Default, Agent shall give prompt notice thereof to the Lenders (and shall give
each Lender prompt notice of each such non-payment). Agent shall (subject to
Section 10.7 hereof) take such action with respect to such Notice of Default as
shall be directed by the Majority Lenders and within its rights under the Loan
Documents and at law or in equity, provided that, unless and until Agent shall
have received such directions, Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, permitted hereby with respect
to such Notice of Default as it shall deem advisable in the best interests of
the Lenders and within its rights under the Loan Documents, at law or in
equity.

     10.4 Material Written Notices. In the event that Agent receives any
written notice of a material nature from the Borrower or any Obligor under the
Loan Documents, Agent shall promptly inform each of the Lenders thereof. Agent
shall promptly distribute the financial statements delivered to Agent pursuant
to Section 7.2 hereof and any notices delivered to Agent pursuant to Section
7.8 hereof.

     10.5 Rights as a Lender. With respect to its Commitments and the Loans
made and Letter of Credit Liabilities, Wells Fargo in its capacity as a Lender
hereunder shall have the same rights and powers hereunder as any other Lender
and may exercise the same as though it were not acting in its agency capacity,
and the term “Lender” or “Lenders” shall, unless the context

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otherwise indicates, include Agent in its individual capacity. Agent may
(without having to account therefor to any Lender) accept deposits from, lend
money to and generally engage in any kind of banking, trust, letter of credit,
agency or other business with Borrower (and any of its Affiliates) as if it
were not acting as Agent, and Agent may accept fees and other consideration
from Borrower (in addition to the fees heretofore agreed to between Borrower
and Agent) for services in connection with this Agreement or otherwise without
having to account for the same to the Lenders.

     10.6 Indemnification. The Lenders agree to indemnify Agent (to the extent
not reimbursed under Section 11.3 or Section 11.4 hereof, but without limiting
the obligations of Borrower under said Sections 11.3 and 11.4), ratably in
accordance with the Lenders’ respective Commitments, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind and nature whatsoever,
REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY
INDEMNIFIED PARTIES, which may be imposed on, incurred by or asserted against
Agent in any way relating to or arising out of this Agreement or any other Loan
Document or any other documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby (including, without
limitation, the costs and expenses which Borrower is obligated to pay under
Sections 11.3 and 11.4 hereof, interest, penalties, attorneys’ fees and amounts
paid in settlement, but excluding, unless a Default has occurred and is
continuing, normal administrative costs and expenses incident to the
performance of its agency duties hereunder) or the enforcement of any of the
terms hereof or thereof or of any such other documents; provided that no Lender
shall be liable for any of the foregoing to the extent they arise from the
gross negligence or willful misconduct of the party to be indemnified. The
obligations of the Lenders under this Section 10.6 shall survive the
termination of this Agreement and the repayment of the Obligations.

     10.7 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it
has received current financial information with respect to Borrower and each
other Obligor that it has, independently and without reliance on Agent or any
other Lender and based on such documents and information as it has deemed
appropriate, made its own credit analysis of Borrower and each other Obligor
and decision to enter into this Agreement and that it will, independently and
without reliance upon Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under this Agreement
or any of the other Loan Documents. Agent shall not be required to keep itself
informed as to the performance or observance by any Obligor of this Agreement,
the Letters of Credit or any of the other Loan Documents or any other document
referred to or provided for herein or therein or to inspect the properties or
books of any Obligor. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by Agent
hereunder, under the Letters of Credit or under the other Loan Documents, Agent
shall not have any duty or responsibility to provide any Lender with any credit
or other information concerning the affairs, financial condition or business of
any Obligor (or any of their affiliates) which may come into the possession of
Agent.

     10.8 Failure to Act. Except for action expressly required of Agent
hereunder, under the Letters of Credit or under the other Loan Documents, Agent
shall in all cases be fully justified in failing or refusing to act hereunder
and thereunder unless it shall receive further

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assurances to its satisfaction by the Lenders of their indemnification
obligations under Section 10.6 hereof against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action.

     10.9 Resignation or Removal of Agent. Subject to the appointment and
acceptance of a successor Agent as provided below, Agent may resign at any time
by giving notice thereof to the Lenders and Borrower, and Agent may be removed
at any time with or without cause by the Majority Lenders; provided, that Agent
shall continue as Agent until such time as any successor shall have accepted
appointment as Agent hereunder. Upon any such resignation or removal, (i) the
Majority Lenders without the consent of Borrower shall have the right to
appoint a successor Agent so long as such successor Agent is also a Lender at
the time of such appointment and (ii) the Majority Lenders shall have the right
to appoint a successor Agent that is not a Lender at the time of such
appointment so long as Borrower consents to such appointment (which consent
shall not be unreasonably withheld). If no successor Agent shall have been so
appointed by the Majority Lenders and accepted such appointment within 30 days
after the retiring Agent’s giving of notice of resignation or the Majority
Lenders’ removal of the retiring Agent, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent. Any successor Agent shall be a bank
which has an office in the United States and a combined capital and surplus of
at least $250,000,000. 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
retiring Agent and the retiring Agent shall be discharged from its duties and
obligations hereunder and under any other Loan Documents. Such successor Agent
shall promptly specify by notice to Borrower its Principal Office referred to
in Section 3.1 and Section 4 hereof. After any retiring Agent’s resignation or
removal hereunder as Agent, the provisions of this Section 10 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as Agent.

     10.10 No Partnership. Neither the execution and delivery of this
Agreement nor any of the other Loan Documents nor any interest the Lenders,
Agent or any of them may now or hereafter have in all or any part of the
Obligations shall create or be construed as creating a partnership, joint
venture or other joint enterprise between the Lenders or among the Lenders and
Agent. The relationship between the Lenders, on the one hand, and Agent, on
the other, is and shall be that of principals and agent only, and nothing in
this Agreement or any of the other Loan Documents shall be construed to
constitute Agent as trustee or other fiduciary for any Lender or to impose on
Agent any duty, responsibility or obligation other than those expressly
provided for herein and therein.

     10.11 No Waiver. None of the provisions of this Section 10 shall be
construed as limiting or otherwise waiving any rights or remedies which
Borrower or any other Obligor may have against Agent or any Lender.

     10.12 Syndications Agent. Wachovia Bank, National Association, in its
capacity as Syndications Agent, shall have no rights, powers, duties,
obligations or liabilities under this Agreement or any of the other Loan
Documents, but to the extent that for any reason any Person makes a claim
against Wachovia Bank, National Association, in its capacity as Syndications
Agent, and not as a Lender, the indemnification provisions in Section 10.6
shall apply.

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11. Miscellaneous.

     11.1 Waiver. No waiver of any Default or Event of Default shall be a
waiver of any other Default or Event of Default. No failure on the part of
Agent, any Lender or Borrower or any other Obligor to exercise and no delay in
exercising, and no course of dealing with respect to, any right, power or
privilege under any Loan Document shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege thereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law or in equity.

     11.2 Notices.

     (a) All notices and other communications provided for herein (including,
without limitation, any modifications of, or waivers or consents under, this
Agreement) shall be given or made by telex, telegraph, telecopy (confirmed by
mail), cable or other writing and telexed, telecopied, telegraphed, cabled,
mailed or delivered to the intended recipient at the “Address for Notices”
specified below its name on the signature pages hereof (or provided for in an
Assignment and Acceptance); or, as to any party hereto, at such other address
as shall be designated by such party in a notice (given in accordance with this
Section) (i) as to Borrower, to Agent, (ii) as to Agent, to Borrower and to
each Lender, and (iii) as to any Lender, to Borrower and Agent. Except as
otherwise provided in this Agreement, all such notices or communications shall
be deemed to have been duly given when (i) transmitted by telex or telecopier
or delivered to the telegraph or cable office, (ii) personally delivered (iii)
one Business Day after deposit with an overnight mail or delivery service,
postage prepaid or (iv) three Business Days’ after deposit in a receptacle
maintained by the United States Postal Service, postage prepaid, registered or
certified mail, return receipt requested, in each case given or addressed as
aforesaid.

     (b) Borrower agrees that Agent may make any material delivered by Borrower
to Agent, as well as any amendments, waivers, consents, and other written
information, documents, instruments and other materials relating to Borrower,
any of its Subsidiaries, or any other materials or matters relating to this
Agreement, the Notes or any of the transactions contemplated hereby
(collectively, the “Communications”) available to the Lenders by posting such
notices on an electronic delivery system (which may be provided by Agent, an
Affiliate of Agent, or any Person that is not an Affiliate of Agent), such as
IntraLinks, or a substantially similar electronic system (the “Platform”).
Borrower acknowledges that (i) the distribution of material through an
electronic medium is not necessarily secure and that there are confidentiality
and other risks associated with such distribution, (ii) the Platform is
provided “as is” and “as available” and (iii) neither Agent nor any of its
Affiliates warrants the accuracy, completeness, timeliness, sufficiency, or
sequencing of the Communications posted on the Platform. Agent and its
Affiliates expressly disclaim with respect to the Platform any liability for
errors in transmission, incorrect or incomplete downloading, delays in posting
or delivery, or problems accessing the Communications posted on the Platform
and any liability for any losses, costs, expenses or liabilities that may be
suffered or incurred in connection with the Platform. No warranty of any kind,
express, implied or statutory, including, without limitation, any warranty of
merchantability, fitness for a particular purpose, non-infringement of third
party rights or freedom from viruses or other code defects, is made by Agent or
any of its Affiliates in connection with the Platform. Each Lender agrees that
notice to it (as provided in the next

54

 

sentence) (a “Notice”) specifying that any Communication has been posted
to the Platform shall for purposes of this Agreement constitute effective
delivery to such Lender of such information, documents or other materials
comprising such Communication. Each Lender agrees (i) to notify, on or before
the date such Lender becomes a party to this Agreement, Agent in writing of
such Lender’s e-mail address to which a Notice may be sent (and from time to
time thereafter to ensure that Agent has on record an effective e-mail address
for such Lender) and (ii) that any Notice may be sent to such e-mail address.

     11.3 Expenses, Etc. Whether or not any Loan is ever made or any Letter of
Credit ever issued, Borrower shall pay or reimburse within 10 days after
written demand (a) Agent for paying the reasonable fees and expenses of outside
legal counsel to Agent in connection with the preparation, negotiation,
execution and delivery of this Agreement (including the exhibits and schedules
hereto), the other Loan Documents and the making of the Loans and the issuance
of Letters of Credit hereunder, and any modification, supplement or waiver of
any of the terms of this Agreement, the Letters of Credit or any other Loan
Document; (b) Agent for any lien search fees; (c) Agent for reasonable
out-of-pocket expenses incurred by Agent in connection with the preparation,
documentation, administration and syndication of the Loans or any of the Loan
Documents (including, without limitation, the marketing, printing, duplicating,
mailing and similar expenses) of the Loans and Letter of Credit Liabilities;
(d) Agent for paying all transfer, stamp, documentary or other similar taxes,
assessments or charges levied by any governmental or revenue authority in
respect of this Agreement, any Letter of Credit or any other Loan Document or
any other document referred to herein or therein; (e) Agent for paying all
costs, expenses, taxes, assessments and other charges incurred in connection
with any filing, registration, recording or perfection of any security interest
contemplated by this Agreement or any document referred to herein and (f)
following the occurrence and during the continuation of an Event of Default,
any Lender or Agent for paying all amounts (including reasonable attorneys’
fees) reasonably expended, advanced or incurred by such Lender or Agent to
satisfy any obligation of any Obligor under this Agreement or any other Loan
Document, to protect Collateral, to collect the Obligations or to enforce,
protect, preserve or defend the rights of the Lenders or Agent under this
Agreement or any other Loan Document, including, without limitation, reasonable
fees and expenses incurred in connection with such Lender’s or Agent’s
participation as a member of a creditor’s committee in a case commenced under
the Bankruptcy Code or other similar law, fees and expenses incurred in
connection with lifting the automatic stay prescribed in § 362 of the
Bankruptcy Code and reasonable fees and expenses incurred in connection with
any action pursuant to § 1129 of the Bankruptcy Code and all other customary
and reasonable out-of-pocket expenses incurred by such Lender or Agent in
connection with such matters, together with interest thereon at the Base Rate
on each such amount until the earlier of payment or ten (10) days after written
demand therefor, and if such amount has not been paid within ten (10) days
after written demand therefor, at the Past Due Rate until the date of
reimbursement to such Lender or Agent.

55

 

     11.4 Indemnification. Borrower shall indemnify each of Agent, the
Lenders, and each Affiliate thereof and their respective directors, officers,
employees and agents from, and hold each of them harmless against, any and all
losses, liabilities, claims or damages to which any of them may become subject,
REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY
INDEMNIFIED PARTIES, insofar as such losses, liabilities, claims or damages
arise out of or result from any (i) actual or proposed use by Borrower of the
proceeds of any extension of credit (whether a Loan or a Letter of Credit) by
any Lender hereunder; (ii) breach by any Obligor of this Agreement or any other
Loan Document; (iii) violation by any Obligor of any Legal Requirement; (iv)
investigation, litigation or other proceeding relating to any of the foregoing,
and Borrower shall reimburse Agent, each Lender, and each Affiliate thereof and
their respective directors, officers, employees and agents, within five (5)
days after demand for any reasonable expenses (including reasonable legal fees)
incurred in connection with any such investigation or proceeding, or (v) taxes
(excluding income taxes, franchise taxes or any similar taxes) payable or ruled
payable by any Governmental Authority in respect of the Obligations or any Loan
Document, together with interest and penalties, if any; provided that Borrower
shall not be required to indemnify any party seeking indemnification for any
claims, damages, losses, liabilities, costs or expenses to the extent, but only
to the extent, caused by (i) the willful misconduct or gross negligence of the
party seeking indemnification or (ii) the failure by the party seeking
indemnification to pay under any Letter of Credit after the presentation to it
of a request required to be paid under applicable law or (iii) disputes between
or among any and all of Agent, Lenders and Issuers. Nothing in this Section is
intended to limit the obligations of Borrower under any other provision of this
Agreement.

     11.5 Amendments, Etc. No amendment or modification of this Agreement, the
Notes or any other Loan Document shall in any event be effective against
Borrower unless the same shall be agreed or consented to in writing by
Borrower. No amendment, modification or waiver of any provision of this
Agreement, the Notes or any other Loan Document, nor any consent to any
departure by Borrower therefrom, shall in any event be effective against the
Lenders unless the same shall be agreed or consented to in writing by the
Majority Lenders, and each such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given; provided,
that no amendment, modification, waiver or consent shall, unless in writing and
signed by each Lender affected thereby, do any of the following: (a) increase
any Commitment of any of the Lenders (or reinstate any termination or reduction
of the Commitments) or subject any of the Lenders to any additional
obligations; (b) reduce the principal of, or interest on, any Loan,
Reimbursement Obligation or fee hereunder; (c) postpone or extend the Revolving
Loan Maturity Date, the Revolving Loan Termination Date, the Revolving Loan
Availability Period or any scheduled date fixed for any payment of principal
of, or interest on, any Loan, Reimbursement Obligation, fee or other sum to be
paid hereunder or waive any Event of Default described in Section 9.1(a)
hereof; (d) change the percentage of any of the Commitments or of the aggregate
unpaid principal amount of any of the Loans and Letter of Credit Liabilities,
or the percentage of Lenders, which shall be required for the Lenders or any of
them to take any action under this Agreement (including, without limitation,
the definition of “Majority Lenders”); (e) change any provision contained in
Sections 3.4, 11.3 or 11.4 hereof or this Section 11.5; (f) release any
Person from liability under a Guaranty or release substantially all of the
security for the Obligations or release Collateral in any one (1) calendar year
ascribed an aggregate value on the most recent financial statements of Borrower
delivered to Agent in excess of $10,000,000 so long as no Event of Default
exists or would result therefrom (provided, however, that the foregoing shall
not apply to releases which Agent is obligated to provide

56

 

pursuant to this Agreement (including releases required under the
definitions of “Agency Subsidiaries” and “Insurance Company Subsidiaries” set
forth in Section 1.1 hereof) or any of the other Loan Documents or by law), or
(g) modify the provisions of Sections 4.1(b) or 4.2 hereof regarding pro rata
application of amounts after an Event of Default shall have occurred and be
continuing. Notwithstanding anything in this Section 11.5 to the contrary, no
amendment, modification, waiver or consent shall be made with respect to
Section 10 without the consent of Agent to the extent it affects Agent, as
Agent.

     11.6 Successors and Assigns.

     (a) This Agreement shall be binding upon and inure to the benefit of
Borrower, Agent and the Lenders and their respective successors and assigns;
provided, however, that Borrower may not assign or transfer any of its rights
or obligations hereunder without the prior written consent of all of the
Lenders, and any such assignment or transfer without such consent shall be null
and void. Each Lender may sell participations to any Person in all or part of
any Loan, or all or part of its Notes, Commitments or interests in Letters of
Credit, in which event, without limiting the foregoing, the provisions of the
Loan Documents shall inure to the benefit of each purchaser of a participation;
provided, however, the pro rata treatment of payments, as described in Section
4.2 hereof, shall be determined as if such Lender had not sold such
participation. Any Lender that sells one or more participations to any Person
shall not be relieved by virtue of such participation from any of its
obligations to Borrower under this Agreement relating to the Loans. In the
event any Lender shall sell any participation, such Lender shall retain the
sole right and responsibility to enforce the obligations of Borrower relating
to the Loans, including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement other than
amendments, modifications or waivers with respect to (i) any fees payable
hereunder to the Lenders, (ii) the amount of principal or the rate of interest
payable on, or the dates fixed for the scheduled repayment of principal of, the
Loans and (iii) the release of the Liens on all or substantially all of the
Collateral.

     (b) Each Lender may assign to one or more Lenders or any other Person all
or a portion of its interests, rights and obligations under this Agreement;
provided, however, that (i) the aggregate amount of the Commitments of the
assigning Lender subject to each such assignment shall in no event be less than
$5,000,000; (ii) any assignment by any Lender of all or a portion of its rights
and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it) shall require the prior
written consent of the Issuers (such consent not to be unreasonably withheld);
(iii) other than in the case of an assignment to another Lender (that is, at
the time of the assignment, a party hereto) or to an Affiliate of such Lender
or to a Federal Reserve Bank, Agent and, so long as no Event of Default shall
have occurred and be continuing, Borrower must each give its prior written
consent, which consents shall not be unreasonably withheld, and (iv) the
parties to each such assignment shall execute and deliver to Agent, for its
acceptance an Assignment and Acceptance in the form of Exhibit D hereto (each
an “Assignment and Acceptance”) with blanks appropriately completed, together
with any Note or Notes subject to such assignment and a processing and
recording fee of $3,000 paid by the assignee (for which Borrower will have no
liability). Upon such execution, delivery and acceptance, from and after the
effective date specified in each Assignment and Acceptance, (A) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and (B) the Lender thereunder shall, to the extent provided in such
Assignment and

57

 

Acceptance, be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the remaining portion
of an assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto except in respect of provisions of this
Agreement which survive payment of the Obligations and termination of the
Commitments). Notwithstanding anything contained in this Agreement to the
contrary, any Lender may at any time assign all or any portion of its rights
under this Agreement and the Notes issued to it as collateral to a Federal
Reserve Bank; provided that no such assignment shall release such Lender from
any of its obligations hereunder.

     (c) By executing and delivering an Assignment and Acceptance, the Lender
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than the
representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim, such
Lender assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or any of the other Loan Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement or any of the other Loan Documents or any other
instrument or document furnished pursuant thereto; (ii) such Lender assignor
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of Borrower or the performance or observance by
Borrower of any of its obligations under this Agreement or any of the other
Loan Documents or any other instrument or document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in Section 6.2
hereof and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance upon
Agent, such Lender 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 this Agreement and the
other Loan Documents; (v) such assignee appoints and authorizes Agent to take
such action as agent on its behalf and to exercise such powers under this
Agreement and the other Loan Documents as are delegated to Agent by the terms
hereof, together with such powers as are reasonably incidental thereto; and
(vi) such assignee agrees that it will perform in accordance with their terms
all obligations that by the terms of this Agreement and the other Loan
Documents are required to be performed by it as a Lender.

     (d) The entries in the records of Agent as to each Assignment and
Acceptance delivered to it and the names and addresses of the Lenders and the
Commitments of, and principal amount of the Loans owing to, each Lender from
time to time shall create a rebuttable presumption as to the accuracy thereof
and Borrower, Agent and the Lenders may treat each Person the name of which is
recorded in the books and records of Agent as a Lender hereunder for all
purposes of this Agreement and the other Loan Documents.

     (e) Upon Agent’s receipt of an Assignment and Acceptance executed by an
assigning Lender and the assignee thereunder, together with any Note or Notes
subject to such assignment and the written consent to such assignment (to the
extent consent is required), Agent shall, if such Assignment and Acceptance has
been completed with blanks appropriately filled, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in its records and
(iii) give prompt notice thereof to Borrower. Within fifteen (15) Business
Days after receipt of

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notice (and provided that Borrower has consented to the applicable
assignment to the extent Borrower’s consent is required with respect thereto),
Borrower, at its own expense (but without incurring any expense or cost
incurred by Agent or any Lender), shall execute and deliver to Agent in
exchange for the surrendered Notes new Notes to the order of such assignee in
an amount equal to the respective Commitments assumed by it pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained Commitments
hereunder, new Notes to the order of the assigning Lender in an amount equal to
the respective Commitments retained by it hereunder. Such new Notes shall be
in an aggregate principal amount equal to the aggregate principal amount of
such surrendered Notes, shall be dated the effective date of such Assignment
and Acceptance and shall otherwise be in substantially the form of the
respective Note. Thereafter, such surrendered Notes shall be marked renewed
and substituted and the originals thereof delivered to Borrower (with copies,
certified by Borrower as true, correct and complete, to be retained by Agent).

     (f) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 11.6, disclose to
the assignee or participant or proposed assignee or participant, any
information relating to Borrower furnished to such Lender by or on behalf of
Borrower.

     (g) Any assignment by any Lender of all or a portion of its rights and
obligations under this Credit Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it) shall require the prior
written consent of the applicable Issuers (such consent not to be unreasonably
withheld).

     11.7 Limitation of Interest. Borrower and the Lenders intend to strictly
comply with all applicable federal and Texas laws, including applicable usury
laws (or the usury laws of any jurisdiction whose usury laws are deemed to
apply to the Notes or any other Loan Documents despite the intention and desire
of the parties to apply the usury laws of the State of Texas). Accordingly,
the provisions of this Section 11.7 shall govern and control over every other
provision of this Agreement or any other Loan Document which conflicts or is
inconsistent with this Section, even if such provision declares that it
controls. As used in this Section, the term “interest” includes the aggregate
of all charges, fees, benefits or other compensation which constitute interest
under applicable law, provided that, to the maximum extent permitted by
applicable law, (a) any non-principal payment shall be characterized as an
expense or as compensation for something other than the use, forbearance or
detention of money and not as interest, and (b) all interest at any time
contracted for, reserved, charged or received shall be amortized, prorated,
allocated and spread throughout the full term of the Obligations so that such
interest does not exceed the Ceiling Rate. In no event shall Borrower or any
other Person be obligated to pay, or any Lender have any right or privilege to
reserve, receive or retain, (a) any interest in excess of the maximum amount of
nonusurious interest permitted under the laws of the State of Texas or the
applicable laws (if any) of the United States or of any other jurisdiction, or
(b) total interest in excess of the amount which such Lender could lawfully
have contracted for, reserved, received, retained or charged had the interest
been calculated for the full term of the Obligations at the Ceiling Rate. The
daily interest rates to be used in calculating interest at the Ceiling Rate
shall be determined by dividing the applicable Ceiling Rate per annum by the
number of days in the calendar year for which such calculation is being made.
None of the terms and provisions contained in this Agreement or in any other
Loan Document (including, without limitation, Section 9.1 hereof) which
directly or indirectly relate to interest shall ever be

59

 

construed without reference to this Section 11.7, or be construed to
create a contract to pay for the use, forbearance or detention of money at an
interest rate in excess of the Ceiling Rate. If the term of any Obligation is
shortened by reason of acceleration of maturity as a result of any Default or
by any other cause, or by reason of any required or permitted prepayment, and
if for that (or any other) reason any Lender at any time, including but not
limited to, the stated maturity, is owed or receives (and/or has received)
interest in excess of interest calculated at the Ceiling Rate, then and in any
such event all of any such excess interest shall be canceled automatically as
of the date of such acceleration, prepayment or other event which produces the
excess, and, if such excess interest has been paid to such Lender, it shall be
credited pro tanto against the then-outstanding principal balance of Borrower’s
obligations to such Lender, effective as of the date or dates when the event
occurs which causes it to be excess interest, until such excess is exhausted or
all of such principal has been fully paid and satisfied, whichever occurs
first, and any remaining balance of such excess shall be promptly refunded to
its payor.

     11.8 Survival. The obligations of Borrower under Sections 2.7(c), 2.7(d),
3.3, 3.4, 11.3 and 11.4 hereof and all other obligations of Borrower in any
other Loan Document (to the extent stated therein as surviving), the
obligations or each Issuer under the last sentence of Section 2.7(b)(iii) and
the obligations of the Lenders under Section 10.5 and 11.7 hereof, shall,
notwithstanding anything herein to the contrary, survive the repayment of the
Loans and Reimbursement Obligations and the termination of the Commitments and
the Letters of Credit.

     11.9 Captions. Captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.

     11.10 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
agreement and any of the parties hereto may execute this Agreement by signing
any such counterpart.

     11.11 Governing Law. THIS AGREEMENT AND (EXCEPT AS THEREIN PROVIDED) THE
OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
APPLICABLE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE TEXAS
CONFLICT OF LAWS RULES) AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN
EFFECT.

     11.12 Severability. Whenever possible, each provision of the Loan
Documents shall be interpreted in such manner as to be effective and valid
under applicable law. If any provision of any Loan Document shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions of such Loan Document
shall not be affected or impaired thereby.

     11.13 Tax Forms. Each Lender which is organized under the laws of a
jurisdiction outside the United States shall, on the day of the initial
borrowing from each such Lender hereunder and from time to time thereafter if
requested by Borrower or Agent, provide Agent and Borrower with the forms
prescribed by the Internal Revenue Service of the United States certifying as
to such Lender’s status for purposes of determining exemption from United
States withholding taxes with respect to all payments to be made to such Lender
hereunder or other

60

 

documents satisfactory to such Lender, Borrower and Agent indicating that
all payments to be made to such Lender hereunder are not subject to United
States withholding tax or are subject to such tax at a rate reduced by an
applicable tax treaty. Unless Borrower and Agent shall have received such
forms or such documents indicating that payments hereunder are not subject to
United States withholding tax or are subject to such tax at a rate reduced by
an applicable tax treaty, Borrower or Agent shall withhold taxes from such
payments at the applicable statutory rate.

     11.14 Venue. The Borrower hereby irrevocably (a) agrees that any legal
proceeding against the Agent or any Lender arising out of or in connection with
the Loan Documents shall be brought in the district courts of Harris County,
Texas, or in the United States District Court for the Southern District of
Texas, Houston Division (collectively, the “Houston Courts”); (b) submits to
the non-exclusive jurisdiction of the Houston Courts; (c) agrees and consents
that service of process may be made upon it in any proceeding arising out of
the Loan Documents or any transaction contemplated thereby by service of
process as provided by Texas law; (d) WAIVES, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the laying of venue
of any suit, action or proceeding arising out of any Loan Document or the
transactions contemplated thereby in the Houston Courts; and (e) WAIVES any
claim that any such suit, action or proceeding in any Houston Court has been
brought in an inconvenient forum. All of the obligations of the Borrower under
the Loan Documents are performable in Harris County, Texas. Nothing herein
shall affect the right of the Agent or any Lender to commence legal proceedings
or otherwise proceed against the Borrower in any jurisdiction or to serve
process in any manner permitted by applicable law. The Borrower agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions in any manner provided by law.

     11.15 Jury Waiver. BORROWER, AGENT AND LENDERS EACH WAIVE ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS. INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY.

     11.16 Conflicts Between This Agreement and the Other Loan Documents. In
the event of any conflict between the terms of this Agreement and the terms of
any of the other Loan Documents, the terms of this Agreement shall control.

     11.17 Disclosure to Other Persons; Confidentiality. Agent and each Lender
agree that it may deliver copies of any financial statements and other
documents or information delivered to it and disclose any other information
disclosed to it by or on behalf of Borrower or any Subsidiary of Borrower in
connection with or pursuant to this Agreement and the other Loan Documents only
to:

61

 

     (i) its and its affiliates’ directors, officers, employees,
auditors, attorneys and professional consultants;

     (ii) any other Lender;

     (iii) any Person to which such Lender offers to sell its Note or any
part thereof, provided that each such Person agrees in writing to observe
the confidentiality standards described in this Section;

     (iv) any Person to which such Lender sells or offers to sell a
participation in all or any part of its Note, provided that each such
Person agrees in writing to observe the confidentiality standards
described in this Section;

     (v) any federal or state regulatory authority having jurisdiction
over it;

     (vi) any other Person to which such delivery or disclosure may be
legally required in response to any subpoena or other legal process or
investigative demand (in which event the Agent or the applicable Lender,
as the case may be, shall, unless prohibited by applicable law, notify
Borrower as soon as practicable), and

     (vii) any other Person in connection with any litigation involving
any obligation, right or remedy of Agent or any Lender under the Loan
Documents.

Subject to the foregoing, Agent and each Lender hereby agrees to use its best
efforts to hold in confidence and not to disclose any Confidential Information;
provided, that such Person will be free, after notice to Borrower, to correct
any false or misleading information which may become public concerning its
relationship to Borrower. For the purpose of this Section, the term
“Confidential Information” shall mean information about Borrower or any
Subsidiary of Borrower furnished by Borrower or any such Subsidiary, but does
not include any information which (i) is publicly known, or otherwise known to
such holder, at the time of disclosure; (ii) subsequently becomes publicly
known, but not through any act or omission by such holder, or (iii) otherwise
becomes known to such holder other than through disclosure by Borrower or any
Subsidiary of Borrower from any Person which is not known to be subject to a
confidentiality agreement with Borrower or the applicable Subsidiary of
Borrower.

     11.18 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
information that identifies the Borrower, which information includes the name
and address of the Borrower and other information that will allow such Lender
to identify the Borrower in accordance with the Act.

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     11.19 Amendment and Restatement; Renewal Notes. This Agreement amends and
restates in its entirety, effective as of the initial funding hereunder, that
certain Loan Agreement (the “Prior Loan Agreement”) dated as of December 17,
1999 executed by and among Borrower, Wells Fargo Bank, National Association (or
its predecessor in interest), as Agent, and certain financial institutions
therein set forth. The Notes have been given in renewal, extension and
modification of the revolving credit facility previously provided to Borrower
pursuant to such Loan Agreement.

[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.

	 	 	 	 	 
	 	HCC INSURANCE HOLDINGS, INC.,

a Delaware corporation

 	 
	 	By:  	/s/  Edward H. Ellis, Jr.
 	 
	 	 	Edward H. Ellis, Jr., Executive Vice 	 
	 	 	President and Chief Financial
Officer 	 
	 

	 	 	 	 	 
	 	Address for Notices:

13403 Northwest Freeway

Houston, Texas 77040

Attention: President

Telecopy No.: (713) 462-2401
 	 

64

 

	 	 	 	 	 

	 	 	 	 	 
	 	WELLS FARGO BANK, NATIONAL

ASSOCIATION, as Administrative Agent and Lead

Arranger and as a Lender

 	 
	 	By:  	/s/ Ben R. McCaslin
 	 
	 	 	Ben R. McCaslin, Vice President 	 

	 	 	 	 	 
	 	Address for Notices:

Wells Fargo Bank, N.A.

1700 Lincoln Ave.

MAC C7300-034

Denver, Colorado 80203

Telecopy No.: 303-863-5533

with a copy to:

12941 I-45 North Freeway

Suite 400

MAC T5015-040

Houston, TX 77060

Attention: Ben R. McCaslin

Telecopy No.: 281-877-1884
 	 

65

 

	 	 	 	 	 

WACHOVIA BANK, NATIONAL

ASSOCIATION, as Syndications Agent and as a Lender

		
	By: 	/s/ Karen Hanke 
 

Name: Karen Hanke

Title: Director

Address for Notices:

Wachovia Bank, National Association

Global Corporate Loan Administration

201 S. College St, CP9, NC 1183

Charlotte, NC 28288

Attn: Dianne Taylor

Fax: 704-715-0096

66

 

SOUTHWEST BANK OF TEXAS, N.A.

		
	By: 	/s/ Laif Afseth 
 

Name: Laif Afseth

Title: Senior Vice President

Address for Notices:

Southwest Bank of Texas

4400 Post Oak Parkway, POP 312

Houston, Texas 77027

Attention: Laif Afseth

Telecopy No.: 713-232-8541

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CITIBANK, N.A

		
	By: 	/s/ Maria G. Hackley 
 

Name: Maria G. Hackley

Title: Managing Director

Address for Notices:

388 Greenwich St., 23rd Floor

New York, New York 10013

Attention: Stephen Mazza

Telecopy No.: 212-816-4144

68

 

ROYAL BANK OF SCOTLAND

		
	By: 	/s/ Marie Fitzgerald 
 

Name: Marie Fitzgerald

Title: Senior Corporate Manager

Address for Notices:

9th Floor

280 Biglespsgate

London LC2 U4R6

Attention: Marie Fitzgerald

Telecopy No.: 020 7672 1093

69

 

BANK OF NEW YORK

		
	By: 	/s/ Scott Schaffer 
 

Name: Scott Schaffer

Title: Vice President

Address for Notices:

The Bank of New York

One Wall Street

17th Floor

New York, NY 10286

Attention: Scott Schaffer

Telecopy No.: 212-809-9520

70

 

SCHEDULE I

COMMITMENTS

	 	 	 	 	 
	Wells Fargo Bank (Texas), National Association
	 	$	50,000,000	 
	Wachovia Bank, National Association
	 	$	40,000,000	 
	Citibank, N.A.
	 	$	40,000,000	 
	Royal Bank of Scotland
	 	$	30,000,000	 
	Southwest Bank of Texas, N.A.
	 	$	25,000,000	 
	The Bank of New York
	 	$	15,000,000	 

1

 

SCHEDULE II

AGENCY SUBSIDIARIES

HCC Benefits Corporation, a Delaware corporation

ASU International, Inc., a Massachusetts corporation

HCC Global Financial Products, LLC, a Delaware limited liability company

Covenant Underwriters, Ltd., a Louisiana corporation

Continental Underwriters Ltd., a Louisiana corporation

HCC Risk Management Corporation, a Texas corporation

Professional Indemnity Agency, Inc., a New Jersey corporation

HCCS Corporation, a Delaware corporation

HCC Acquisitions (U.K.) Ltd., a company organized under the laws of England and
Wales

HCC Employer Services, Inc., an Illinois corporation

HCC Employee Benefits, Inc., a Delaware corporation

1

 

SCHEDULE III

INSURANCE COMPANY SUBSIDIARIES

Houston Casualty Company, a Texas corporation

Avemco Insurance Company, a Maryland corporation

HCC Reinsurance Company Limited, an insurance company organized under the laws
of Bermuda

1

 

EXHIBIT A

[LETTERHEAD OF THE BORROWER]

REQUEST FOR EXTENSION OF CREDIT

                                      , 20           

WELLS FARGO BANK, NATIONAL

ASSOCIATION, as Administrative Agent

1700 Lincoln Ave.

MAC C7300-034

Denver, Colorado 80203

Gentlemen:

     The undersigned hereby certifies that he is the
                                       of HCC INSURANCE HOLDINGS, INC., a Delaware
corporation (the “Borrower”), and that as such he is authorized to execute
this Request for Extension of Credit (the “Request”) on behalf of the Borrower
pursuant to the Loan Agreement (as it may be amended, supplemented or restated
from time to time, the “Agreement”) dated as of November 24, 2004, by and among
the Borrower, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent
and Lead Arranger, WACHOVIA BANK, NATIONAL ASSOCIATION, as Syndications Agent,
and the Lenders therein named.

     The (CHECK ONE) [      ] Revolving Loan [      ] Letter of Credit being
requested hereby is to be in the amount set forth in (b) below and is requested
to be made on                                       , which is a Business Day. The undersigned
further certifies, represents and warrants that to his knowledge, after due
inquiry (each capitalized term used herein having the same meaning given to it
in the Agreement unless otherwise specified herein):

	(A)	 	As of the date hereof:

	 	 	 	 	 
	(1)

	 	The aggregate Commitments are:
	 	$                      
	 
	 	 	 	 
	(2)

	 	The aggregate outstanding principal of
Notes, before giving effect to the Loan
(if any) requested hereby, is:
	 	(                      )
	 
	 	 	 	 
	(3)

	 	The aggregate Letter of Credit Liabilities,
before giving effect to the Letter of Credit
(if any) requested hereby, is:
	 	(                      )

 

 

	 	 	 	 	 
	(4)

	 	The aggregate unused Commitments
of all Revolving Loan Lenders [A(1)
minus A(2) and A(3)], if positive, is:
	 	$                      

	(B)	 	If and only if the aggregate unused Commitments of all
Revolving Loan Lenders [A(4)] is positive, the Borrower hereby
requests under this Request a Loan or Letter of Credit (as indicated
above) in the amount of $                      (which is no more than the
aggregate unused Commitments of all Revolving Loan Lenders).
	 
	(C)	 	If a Letter of Credit is requested hereby, it should be
issued for the benefit of                                          and
should have an expiration date of                       (which date
is no later than the earlier of (x) one year from date of issuance
or (y) the date ten (10) Business Days prior to the end of the
Revolving Loan Availability Period) and any special language to be
incorporated into such Letter of Credit is attached hereto.
	 
	(D)	 	The representations and warranties made in each Loan Document
are true and correct in all material respects on and as of the time
of delivery hereof, with the same force and effect as if made on and
as of the time of delivery hereof (except for such representations
and warranties which expressly refer to a prior date in which case
they shall be true and correct as of such earlier date); provided,
however, that for purposes of this Request in each representation
and warranty in Article 6 of the Loan Agreement that makes reference
to a Schedule, the representation under this Request that such
representation and warranty in Article 6 of the Loan Agreement is
true on and as of the date of making of such Loan shall take into
account subsequent amendments to any Schedule referred to therein
and matters arising after the date of the Loan Agreement which do
not otherwise give rise to or constitute a Default under the Loan
Agreement.
	 
	(E)	 	No event which could reasonably be expected to have a
Material Adverse Effect has occurred.
	 
	(F)	 	No Default or Event of Default has occurred and is
continuing.

     Thank you for your attention to this matter.

	 	 	 
	

	 	Very truly yours,
	 
	 	 
	

	 	[SIGNATURE OF AUTHORIZED OFFICER]

 

 

EXHIBIT B

RATE DESIGNATION NOTICE

     HCC INSURANCE HOLDINGS, INC., WELLS FARGO BANK, NATIONAL ASSOCIATION, as
Administrative Agent and Lead Arranger (in such capacity herein called
“Agent”), WACHOVIA BANK, NATIONAL ASSOCIATION, as Syndications Agent, , and
certain financial institutions executed and delivered that certain Loan
Agreement (as amended, supplemented and restated, the “Loan Agreement”) dated
as of November 24, 2004. Any term used herein and not otherwise defined herein
shall have the meaning herein ascribed to it in the Loan Agreement. In
accordance with the Loan Agreement, Borrower hereby notifies Agent of the
exercise of an Interest Option.

	 	 	 	 	 
	11.20

	 	 	 	Current borrowings
	 
	 	 	 	 
	(a)

	 	 	 	Interest Options now in effect:                    
	 
	 	 	 	 
	(b)

	 	 	 	Amounts: $                      
	 
	 	 	 	 
	(c)

	 	 	 	Expiration of current Interest Periods, if applicable:                    
	 
	 	 	 	 
	11.21

	 	 	 	Proposed election
	 
	 	 	 	 
	(a)

	 	 	 	Total Amount: $                   
	 
	 	 	 	 
	(b)

	 	 	 	Date Interest Option is to be effective:                    
	 
	 	 	 	 
	(c)

	 	 	 	Interest Option to be applicable (check one):
	 
	 	 	 	 
	

	 	[   ]
	 	Base Rate
	 
	 	 	 	 
	

	 	[   ]
	 	Eurodollar Rate
	 
	 	 	 	 
	(d)

	 	 	 	Interest Period:                       months (if available and if applicable)

     Borrower represents and warrants that the Interest Option and Interest
Period selected above comply with all provisions of the Loan Agreement and that
there exists no Event of Default or any event which, with the passage of time,
the giving of notice or both, would be an Event of Default.

 

 

	 	 	 	 	 
	Date:                    , 20         
	 	 	 	 
	 	 	HCC INSURANCE HOLDINGS, INC.,

a Delaware corporation
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	Name:	 	 
	

	 	 	 	

	

	 	Title:	 	 
	

	 	 	 	

 

 

EXHIBIT C

NOTE

Houston, Texas

			
	$                   
	 	       
           , 20              

     FOR VALUE RECEIVED, HCC INSURANCE HOLDINGS, INC., a Delaware corporation
(“Maker”), promises to pay to the order of                                          (“Payee”),
at the principal office of Wells Fargo Bank, National Association, a national
banking association, 1700 Lincoln Ave., MAC C7300-034, Denver, Colorado 80203,
in immediately available funds and in lawful money of the United States of
America, the principal sum of                                          Dollars
($                   ) (or the unpaid balance of all principal advanced against this
note, if that amount is less), together with interest on the unpaid principal
balance of this note from time to time outstanding at the rate or rates
provided in that certain Loan Agreement (as amended, supplemented, restated or
replaced from time to time, the “Loan Agreement”) dated as of November 24, 2004
among Maker, certain signatory banks named therein, WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Administrative Agent and Lead Arranger (in such capacity herein
called “Agent”), and WACHOVIA BANK, NATIONAL ASSOCIATION, as Syndications
Agent; provided, that for the full term of this note the interest rate produced
by the aggregate of all sums paid or agreed to be paid to the holder of this
note for the use, forbearance or detention of the debt evidenced hereby
(including, but not limited to, all interest on this note at the Stated Rate
plus the Additional Interest) shall not exceed the Ceiling Rate. Any term
defined in the Loan Agreement which is used in this note and which is not
otherwise defined in this note shall have the meaning ascribed to it in the
Loan Agreement.

     12. Loan Agreement; Advances; Security. This note has been issued
pursuant to the terms of the Loan Agreement, and is one of the Notes referred
to in the Loan Agreement. Advances against this note by Payee or other holder
hereof shall be governed by the terms and provisions of the Loan Agreement.
Reference is hereby made to the Loan Agreement for all purposes. Payee is
entitled to the benefits of and security provided for in the Loan Agreement.
The unpaid principal balance of this note at any time shall be the total of all
amounts lent or advanced against this note less the amount of all payments or
prepayments made on this note and by or for the account of Maker. All Loans
and advances and all payments and prepayments made hereon may be endorsed by
the holder of this note on a schedule which may be attached hereto (and thereby
made a part hereof for all purposes) or otherwise recorded in the holder’s
records; provided, that any failure to make notation of (a) any Loan or advance
shall not cancel, limit or otherwise affect Maker’s obligations or any holder’s
rights with respect to that Loan or advance, or (b) any payment or prepayment
of principal shall not cancel, limit or otherwise affect Maker’s entitlement to
credit for that payment as of the date received by the holder.

     13. Mandatory Payments of Principal and Interest.

     13.1 Accrued and unpaid interest on the unpaid principal balance of this
note shall be due and payable on the Interest Payment Dates.

     13.2 On the Revolving Loan Maturity Date, the entire unpaid principal
balance

 

 

of this note and all accrued and unpaid interest on the unpaid principal
balance of this note shall be finally due and payable.

     13.3 All payments hereon made pursuant to this Paragraph shall be applied
first to accrued interest, the balance to principal.

     13.4 The Loan Agreement provides for required prepayments of the
indebtedness evidenced hereby upon terms and conditions specified therein.

     14. No Usury Intended; Spreading. Notwithstanding any provision to the
contrary contained in this note or any of the other Loan Documents, it is
expressly provided that in no case or event shall the aggregate of (a) all
interest on the unpaid balance of this note, accrued or paid from the date
hereof and (b) the aggregate of any Additional Interest, ever exceed the
Ceiling Rate. In this connection, Maker and Payee stipulate and agree that it
is their common and overriding intent to contract in strict compliance with
applicable federal and Texas usury laws (and the usury laws of any other
jurisdiction whose usury laws are deemed to apply to this note or any of the
other Loan Documents despite the intention and desire of the parties to apply
the usury laws of the State of Texas). In furtherance thereof, none of the
terms of this note or any of the other Loan Documents shall ever be construed
to create a contract to pay, as consideration for the use, forbearance or
detention of money, interest at a rate in excess of the Ceiling Rate. Maker or
other parties now or hereafter becoming liable for payment of the indebtedness
evidenced by this note shall never be liable for interest in excess of the
Ceiling Rate. If, for any reason whatever, the interest paid or received on
this note during its full term produces a rate which exceeds the Ceiling Rate,
the holder of this note shall credit against the principal of this note (or, if
such indebtedness shall have been paid in full, shall refund to the payor of
such interest) such portion of said interest as shall be necessary to cause the
interest paid on this note to produce a rate equal to the Ceiling Rate. All
sums paid or agreed to be paid to the holder of this note for the use,
forbearance or detention of the indebtedness evidenced hereby shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of this note, so that the interest rate does
not exceed the Ceiling Rate. The provisions of this Paragraph shall control
all agreements, whether now or hereafter existing and whether written or oral,
between Maker and Payee.

     15. Default. The Loan Agreement provides for the acceleration of the
maturity of this note and other rights and remedies upon the occurrence of
certain events specified therein.

     16. Waivers by Maker and Others. Except to the extent, if any, that
notice of default is expressly required herein or in any of the other Loan
Documents, Maker and any and all co-makers, endorsers, guarantors and sureties
severally waive notice (including, but not limited to, notice of intent to
accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting
and the filing of suit for the purpose of fixing liability and consent that the
time of payment hereof may be extended and re-extended from time to time
without notice to any of them. Each such Person agrees that its liability on
or with respect to this note shall not be affected by any release of or change
in any guaranty or security at any time existing or by any failure to perfect
or to maintain perfection of any lien against or security interest in any such
security or the partial or complete unenforceability of any guaranty or other
surety obligation, in each case in whole or in part, with or without notice and
before or after maturity.

 

 

     17. Paragraph Headings. Paragraph headings appearing in this note are for
convenient reference only and shall not be used to interpret or limit the
meaning of any provision of this note.

     18. Choice of Law. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING
EFFECT TO THE TEXAS CONFLICT OF LAWS RULES) AND THE UNITED STATES OF AMERICA
FROM TIME TO TIME IN EFFECT.

     19. Successors and Assigns. This note and all the covenants and
agreements contained herein shall be binding upon, and shall inure to the
benefit of, the respective legal representatives, heirs, successors and assigns
of Maker and Payee.

     20. Records of Payments. The records of Payee shall be prima facie
evidence of the amounts owing on this note.

     21. Severability. If any provision of this note is held to be illegal,
invalid or unenforceable under present or future laws, the legality, validity
and enforceability of the remaining provisions of this note shall not be
affected thereby, and this note shall be liberally construed so as to carry out
the intent of the parties to it.

     22. Revolving Loan. Subject to the terms and provisions of the Loan
Agreement, Maker may use all or any part of the credit provided to be evidenced
by this note at any time before the Revolving Loan Maturity Date. Maker may
borrow, repay and reborrow hereunder; and except as set forth in the Loan
Agreement there is no limitation on the number of advances made hereunder.
Maker and Payee agree pursuant to Chapter 346 (“Chapter 346”) of the Texas
Finance Code, that Chapter 346 (which relates to open-end line of credit
revolving loan accounts) shall not apply to this note or any Loan evidenced
hereby and that neither this note nor any Loan evidenced hereby shall be
governed by Chapter 346 or subject to its provisions in any manner whatsoever.

     23. Business Loans. Maker warrants and represents to Payee and all other
holders of this note that all loans evidenced by this note are and will be for
business, commercial, investment or other similar purpose and not primarily for
personal, family, household or agricultural use, as such terms are used in the
Texas Finance Code.

	 	 	 	 	 
	 	 	HCC INSURANCE HOLDINGS, INC.,

a Delaware corporation
	 	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	Name:	 	 
	

	 	 	 	

	

	 	Title:	 	 
	

	 	 	 	

 

 

EXHIBIT D

ASSIGNMENT AND ACCEPTANCE

Dated:                    , 20         

     Reference is made to the Loan Agreement dated as of November 24, 2004 (as
restated, amended, modified, supplemented and in effect from time to time, the
“Loan Agreement”), among HCC INSURANCE HOLDINGS, INC., a Delaware corporation
(the “Borrower”), the Lenders named therein, WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Administrative Agent and Lead Arranger (in such capacity herein
called “Agent”), and WACHOVIA BANK, NATIONAL ASSOCIATION, as Syndications Agent
(the “Agent”). Capitalized terms used herein and not otherwise defined shall
have the meanings assigned to such terms in the Loan Agreement. This
Assignment and Acceptance, between the Assignor (as defined and set forth on
Schedule I hereto and made a part hereof) and the Assignee (as defined and set
forth on Schedule I hereto and made a part hereof) is dated as of the Effective
Date of Assignment (as set forth on Schedule I hereto and made a part hereof).

     24. The Assignor hereby irrevocably sells and assigns to the Assignee without
recourse to the Assignor, and the Assignee hereby irrevocably purchases and
assumes from the Assignor without recourse to the Assignor, as of the Effective
Date, an undivided interest (the “Assigned Interest”) in and to all the
Assignor’s rights and obligations under the Loan Agreement respecting those,
and only those, credit facilities contained in the Loan Agreement as are set
forth on Schedule I (collectively, the “Assigned Facilities,” individually, an
“Assigned Facility”), in a principal amount for each Assigned Facility as set
forth on Schedule I.

     25. The Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Agreement or any other Loan Document or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Loan Agreement, any other Loan Document or any other instrument or
document furnished pursuant thereto, other than that it is legally authorized
to enter into this Assignment and Acceptance and that it is the legal and
beneficial owner of the Assigned Interest and that the Assigned Interest is
free and clear of any adverse claim; (ii) makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrower or its Subsidiaries or the performance or observance by the Borrower
or its Subsidiaries of any of its respective obligations under the Loan
Agreement, any other Loan Document or any other instrument or document
furnished pursuant thereto; and (iii) attaches the Note(s) held by it
evidencing the Assigned Facility or Facilities, as the case may be, assigned
and requests that the Agent exchange such Note(s) for a new Note or Notes
payable to the Assignor (if the Assignor has retained any interest in the
Loans) and a new Note or Notes payable to the Assignee in the respective
amounts which reflect the assignment being made hereby (and after giving effect
to any other assignments which have become effective on the Effective Date of
Assignment).

     26. The Assignee (i) represents and warrants that it is legally authorized to
enter into this Assignment and Acceptance; (ii) confirms that it has received a
copy of the Loan Agreement, together with copies of the financial statements
referred to in Section 6.2 thereof, or if later, the

 

 

most recent financial statements delivered pursuant to Section 7.2 thereof, and
such other documents and information as it has deemed appropriate to make its
own credit analysis; (iii) agrees that it will, independently and without
reliance upon 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
Agreement; (iv) appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers under the Loan Agreement as are
delegated to the Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (v) agrees that it will be bound by the
provisions of the Loan Agreement and will perform in accordance with its terms
all the obligations which by the terms of the Loan Agreement are required to be
performed by it as a Lender; (vi) if the Assignee is organized under the laws
of a jurisdiction outside the United States, attaches the forms prescribed by
the Internal Revenue Service of the United States certifying as to the
Assignee’s exemption from United States withholding taxes with respect to all
payments to be made to the Assignee under the Loan Agreement or such other
documents as are necessary to indicate that all such payments are subject to
such tax at a rate reduced by an applicable tax treaty, and (vii) has supplied
the information requested on the administrative questionnaire provided by
Agent.

     27. Following the execution of this Assignment and Acceptance, it will be
delivered to the Agent for acceptance by it and the Borrower and recording by
the Agent pursuant to Section 11.6 of the Loan Agreement, effective as of the
Effective Date of Assignment (which Effective Date of Assignment shall, unless
otherwise agreed to by the Agent, be at least five Business Days after the
execution of this Assignment and Acceptance).

     28. Upon such acceptance and recording, from and after the Effective Date of
Assignment, the Agent shall make all payments in respect of the Assigned
Interest (including payments of principal, interest, fees and other amounts) to
the Assignee, whether such amounts have accrued prior to the Effective Date of
Assignment or accrue subsequent to the Effective Date of Assignment. The
Assignor and Assignee shall make all appropriate adjustments in payments for
periods prior to the Effective Date of Assignment by the Agent or with respect
to the making of this assignment directly between themselves.

     29. From and after the Effective Date of Assignment, (i) the Assignee shall be
a party to the Loan Agreement and, to the extent provided in this Assignment
and Acceptance, have the rights and obligations of a Lender thereunder, and
(ii) the Assignor shall, to the extent provided in this Assignment and
Acceptance, relinquish its rights and be released from its obligations under
the Loan Agreement.

     30. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

          IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed by their respective duly authorized officers on
Schedule I hereto.

 

 

Schedule I to Assignment and Acceptance

	 	 	 	 	 
	Legal Name of Assignor:
	 	 	 	 
	

	 	

	 	 
	Legal Name of Assignee:
	 	 	 	 
	

	 	

	 	 

	 	 	 	 	 
	Effective Date of Assignment:
	 	 	 	 
	

	 	

	 	 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Percentage Assigned
	 	 	 	 	 	 	of each Assigned Facility
	 	 	 	 	 	 	(to at least 8 decimals)
	 	 	Principal	 	(Shown as a percentage
	Assigned	 	Amount of	 	of aggregate original principal
	Facilities
	 	Assigned Interest
	 	amount of all Lenders)

	Loans
	 	$	                   	 	 	 	          	%
	Commitments
	 	$	                   	 	 	 	          	%

	 	 	 
	

	 	 
	

	,	 
	as Assignor
	 	 

	 	 	 	 	 
	By:
	 	 	 	 
	

	 	

	 	 
	Name:
	 	 	 	 
	Title:

	 	
	 	 
	

	 	
	 	 

	 	 	 
	

	 	 
	

	,	 
	as Assignee
	 	 

	 	 	 	 	 
	By:
	 	 	 	 
	

	 	

	 	 
	Name:
	 	 	 	 
	Title:

	 	
	 	 
	

	 	
	 	 

 

 

HCC INSURANCE HOLDINGS, INC.,

a Delaware corporation

	 	 	 	 	 
	By:
	 	 	 	 
	

	 	

	 	 
	Name:
	 	 	 	 
	Title:

	 	
	 	 
	

	 	
	 	 

Accepted:

WELLS FARGO BANK, NATIONAL

ASSOCIATION, as Agent

	 	 	 	 	 
	By:
	 	 	 	 
	

	 	

	 	 
	Name:
	 	 	 	 
	Title:

	 	
	 	 
	

	 	
	 	 

 

 

EXHIBIT E

COMPLIANCE CERTIFICATE

     The undersigned hereby certifies that he is the
   of HCC INSURANCE HOLDINGS, INC., a Delaware
corporation (the “Borrower”), and that as such he is authorized to execute
this certificate on behalf of the Borrower pursuant to the Loan Agreement (the
“Agreement”) dated as of November 24, 2004, by and among the Borrower, WELLS
FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent and Lead Arranger,
WACHOVIA BANK, NATIONAL ASSOCIATION, as Syndications Agent, and the lenders
therein named; and that a review of the Borrower and the other Obligors has
been made under his supervision with a view to determining whether the Borrower
and the other Obligors have fulfilled all of their respective obligations under
the Agreement, the Notes and the other Loan Documents; and on behalf of the
Borrower further certifies, represents and warrants that to the best knowledge
of the officer executing this certificate, after due inquiry (each capitalized
term used herein having the same meaning given to it in the Agreement unless
otherwise specified):

          (a) The Borrower and the other Obligors have fulfilled, in all
material respects, their respective obligations under the Agreement, the
Notes and the other Loan Documents to which each is a party.

          (b) The representations and warranties made in each Loan Document are
true and correct in all material respects on and as of the time of
delivery hereof, with the same force and effect as if made on and as of
the time of delivery hereof (except for such representations and
warranties which expressly refer to a prior date in which case they shall
be true and correct as of such earlier date); provided, however, that for
purposes of this Compliance Certificate, in each representation and
warranty in Article 6 of the Loan Agreement that makes reference to a
Schedule, the representation under this Compliance Certificate that such
representation and warranty in Article 6 of the Loan Agreement is true on
and as of the date of making of such Loan shall take into account
subsequent amendments to any Schedule referred to therein and matters
arising after the date of the Loan Agreement which do not otherwise give
rise to or constitute a Default under the Loan Agreement.

          (c) The GAAP financial statements delivered to the Agent concurrently
with this Compliance Certificate have been prepared in accordance with
GAAP consistently followed throughout the period indicated and fairly
present in all material respects the financial condition and results of
operations of the applicable Persons as at the end of, and for, the period
indicated (subject, in the case of Quarterly Financial Statements, to
normal changes resulting from year-end adjustments).

          The SAP (Statutory Accounting Principles) financial statements
delivered to the Agent concurrently with this Compliance Certificate have
been prepared in accordance with SAP consistently followed throughout the
period indicated and fairly present in all material respects the financial
condition and results of operations of the applicable

 

 

Persons as at the end of, and for, the period indicated (subject, in
the case of Quarterly Financial Statements, to normal changes resulting
from year-end adjustments).

          (d) No Default or Event of Default has occurred and is continuing.
In this regard, the compliance with the provisions of Section 7.3 is as
follows:

	 	(i)	 	Section 7.3(a) – S&P Rating

	 	 	 	 	 	 	 	 	 
	Actual
	 	 	 	 	 	Required

	______%
	 	 	3	 	 	 	A-	%

	 	(ii)	 	Section 7.3(b) – A.M. Best Rating

	 	 	 	 	 	 	 	 	 
	Actual
	 	 	 	 	 	Required

	______%
	 	 	3	 	 	 	A	%

	 	(iii)	 	Section 7.3(c) — Debt to Capitalization Ratio

	 	 	 	 	 	 	 	 	 
	Actual
	 	 	 	 	 	Required

	______%
	 	 	<	 	 	 	35	%

	 	(iv)	 	Section 7.3(d) — Cash Flow Coverage Ratio

	 	 	 	 	 	 	 	 	 
	Actual
	 	 	 	 	 	Required

	______ to 1.00
	 	 	>	 	 	 	2.00 to 1.00	 

	 	(v)	 	Section 7.3(e) — Combined Ratio
	 
	 	 	 	The Combined Ratio on a consolidated basis using statutory
figures for the period ended    is:

	 	 	 	 	 	 	 	 	 
	Actual
	 	 	 	 	 	Required

	______%
	 	 	<	 	 	 	105	%

          (e) Attached hereto is a corporate chart of the Borrower and its
Subsidiaries as of the date hereof, with each Insurance Company Subsidiary
and Agency Subsidiary identified thereon and showing the applicable
owner(s) of each Subsidiary.

 

 

          (f) No event which could reasonably be expected to have a Material
Adverse Effect has occurred.

          DATED as of                    , 20            .

	 	 	 	 	 	 	 
	 	 	HCC INSURANCE HOLDINGS, INC.,

a Delaware corporation
	 
	 	 	 	 	 	 
	

	 	By:	 	 	 	 
	 

	 	 	 	
	 	 
	

	 	Name:	 	 	 	 
	

	 	Title:
	 	
	 	 
	

	 	 	 	
	 	 

 

 

EXHIBIT F

HCC INSURANCE HOLDINGS, INC.

SUBSIDIARIES

	 	 	 	 	 
	 	 	 	 	State or
	 	 	 	 	Country of
	NAME
	 	Incorporation

	1.

	 	5308 Acquisition Co., LLC
	 	Delaware
	 
	 	 	 	 
	2.

	 	American Contractors Indemnity Company
	 	California
	 
	 	 	 	 
	3.

	 	ASU International, Inc.
	 	Massachusetts
	 
	 	 	 	 
	4.

	 	ASU International Limited
	 	United Kingdom
	 
	 	 	 	 
	5.

	 	Avemco Corporation
	 	Delaware
	 
	 	 	 	 
	6.

	 	Avemco Insurance Agency, Inc.
	 	Maryland
	 
	 	 	 	 
	7.

	 	Avemco Insurance Company
	 	Maryland
	 
	 	 	 	 
	8.

	 	Avemco Services, Inc.
	 	Maryland
	 
	 	 	 	 
	9.

	 	Aviation & Marine Premium Acceptance Corporation
	 	Texas
	 
	 	 	 	 
	10.

	 	Centris Insurance Company
	 	Indiana
	 
	 	 	 	 
	11.

	 	Continental Underwriters Ltd.
	 	Louisiana
	 
	 	 	 	 
	12.

	 	Covenant Claims Services, LLC
	 	Louisiana
	 
	 	 	 	 
	13.

	 	Covenant Underwriters, Ltd.
	 	Louisiana
	 
	 	 	 	 
	14.

	 	Dickson Manchester & Company, Limited
	 	United Kingdom
	 
	 	 	 	 
	15.

	 	Eagles Aerobatic Flight Team, Inc.
	 	Wisconsin
	 
	 	 	 	 
	16.

	 	Euro Sports Underwriters Limited
	 	United Kingdom
	 
	 	 	 	 
	17.

	 	Great American Industries, Inc.
	 	Louisiana
	 
	 	 	 	 
	18.

	 	HCC Acquisition Sub, Inc.
	 	New York
	 
	 	 	 	 
	19.

	 	HCC Acquisition (U.K.) Ltd.
	 	United Kingdom
	 
	 	 	 	 
	20.

	 	HCC Administrators, Inc.
	 	Illinois
	 
	 	 	 	 
	21.

	 	HCC Aviation Insurance Group, Inc.
	 	Texas
	 
	 	 	 	 
	22.

	 	HCC Aviation, LLC
	 	Delaware
	 
	 	 	 	 
	23.

	 	HCC Aviation, Ltd.
	 	Texas
	 
	 	 	 	 
	24.

	 	HCC Benefits Corporation
	 	Delaware
	 
	 	 	 	 
	25.

	 	HCC Diversified Financial Products Limited
	 	United Kingdom
	 
	 	 	 	 
	26.

	 	HCC Employee Benefits, Inc.
	 	Delaware
	 
	 	 	 	 
	27.

	 	HCC Employer Services, Inc.
	 	Alabama
	 
	 	 	 	 
	28.

	 	HCC Employer Services, Inc.
	 	Illinois
	 
	 	 	 	 
	29.

	 	HCC Global Financial Products, LLC
	 	Delaware
	 
	 	 	 	 
	30.

	 	HCC Global Financial Products of Alabama, LLC
	 	Alabama
	 
	 	 	 	 
	31.

	 	HCC Global Financial Products of Texas, LLC
	 	Texas
	 
	 	 	 	 
	32.

	 	HCC Global Financial Products, SL, Unipersonal, a Spanish Sociedad Limitada
	 	Spain
	 
	 	 	 	 
	33.

	 	HCC Indemnity Guaranty Agency, Inc.
	 	New York
	 
	 	 	 	 
	34.

	 	HCC Intermediate Holdings, Inc.
	 	Delaware
	 
	 	 	 	 
	35.

	 	HCC Life Insurance Company
	 	Indiana
	 
	 	 	 	 
	36.

	 	HCC Properties, LLC
	 	Delaware
	 
	 	 	 	 
	37.

	 	HCC Reinsurance Company Limited
	 	Bermuda
	 
	 	 	 	 
	38.

	 	HCC Risk Management Corporation
	 	Texas
	 
	 	 	 	 
	39.

	 	HCC Service Company, Ltd.
	 	Texas
	 
	 	 	 	 
	40.

	 	HCC Service Delaware, LLC
	 	Delaware
	 
	 	 	 	 
	41.

	 	HCC Specialty Holdings (No. 1) Limited
	 	United Kingdom
	 
	 	 	 	 
	42.

	 	HCC Specialty Holdings (No. 2) Limited
	 	United Kingdom
	 
	 	 	 	 
	43.

	 	HCC Specialty Insurance Company
	 	Oklahoma

 

 

	 	 	 	 	 
	 	 	 	 	State or
	 	 	 	 	Country of
	NAME
	 	Incorporation

	44.

	 	HCC Specialty Insurance Holdings, Ltd.
	 	United Kingdom
	 
	 	 	 	 
	45.

	 	HCC Strategic Investments, LLC
	 	Delaware
	 
	 	 	 	 
	46.

	 	HCC Surety Group, Inc.
	 	Delaware
	 
	 	 	 	 
	47.

	 	HCC Trustees Limited
	 	United Kingdom
	 
	 	 	 	 
	48.

	 	HCC Underwriters, A Texas Corporation
	 	Texas
	 
	 	 	 	 
	49.

	 	HCCS Corporation
	 	Delaware
	 
	 	 	 	 
	50.

	 	Houston Casualty Company
	 	Texas
	 
	 	 	 	 
	51.

	 	Houston Casualty Company Europe, Seguros y Reaseguros, S.A.
	 	Spain
	 
	 	 	 	 
	52.

	 	InsPro Corporation
	 	California
	 
	 	 	 	 
	53.

	 	Intellicare, Inc.
	 	Alabama
	 
	 	 	 	 
	54.

	 	Interra, Inc.
	 	Indiana
	 
	 	 	 	 
	55.

	 	LDG Insurance Agency Incorporated
	 	Massachusetts
	 
	 	 	 	 
	56.

	 	LDG Re (London) Ltd.
	 	United Kingdom
	 
	 	 	 	 
	57.

	 	LDG Re Worldwide Limited
	 	Delaware
	 
	 	 	 	 
	58.

	 	LDG Re Worldwide Limited
	 	United Kingdom
	 
	 	 	 	 
	59.

	 	LDG Reinsurance Corporation
	 	Massachusetts
	 
	 	 	 	 
	60.

	 	Loss Management, Inc.
	 	Delaware
	 
	 	 	 	 
	61.

	 	Loss Management Services, Inc.
	 	Maryland
	 
	 	 	 	 
	62.

	 	MAG Acquisition Sub, Inc.
	 	Delaware
	 
	 	 	 	 
	63.

	 	Manchester Dickson Holdings, Limited
	 	United Kingdom
	 
	 	 	 	 
	64.

	 	Marshall Adjusting Corp.
	 	New York
	 
	 	 	 	 
	65.

	 	Marshall Rattner, Inc.
	 	New York
	 
	 	 	 	 
	66.

	 	Merger Sub, Inc.
	 	Texas
	 
	 	 	 	 
	67.

	 	National Insurance Underwriters
	 	Arkansas
	 
	 	 	 	 
	68.

	 	PEPYS Holdings Limited
	 	United Kingdom
	 
	 	 	 	 
	69.

	 	PEPYS Management Services Limited
	 	United Kingdom
	 
	 	 	 	 
	70.

	 	Premier Risk Services Limited
	 	United Kingdom
	 
	 	 	 	 
	71.

	 	Professional Indemnity Agency, Inc.
	 	New Jersey
	 
	 	 	 	 
	72.

	 	Professional Indemnity Agency, Inc. of N.Y.
	 	New York
	 
	 	 	 	 
	73.

	 	Profind Insurance Services Limited
	 	United Kingdom
	 
	 	 	 	 
	74.

	 	Rattner Mackenzie Limited (Bermuda) Ltd.
	 	Bermuda
	 
	 	 	 	 
	75.

	 	Rattner Mackenzie Limited
	 	United Kingdom
	 
	 	 	 	 
	76.

	 	Rattner Mackenzie Limited, (RML) (Exempted) Co.
	 	Jordan
	 
	 	 	 	 
	77.

	 	Rattner Mackenzie Limited (North America), Inc.
	 	New York
	 
	 	 	 	 
	78.

	 	SBS Insurance Holdings, A TexasCorporation
	 	Texas
	 
	 	 	 	 
	79.

	 	Signal Aviation Insurance Services, Inc.
	 	Nevada
	 
	 	 	 	 
	80.

	 	Specialty Reinsurance Intermediaries, Inc.
	 	Massachusetts
	 
	 	 	 	 
	81.

	 	Specialty Insurance Underwriters, Inc.
	 	Missouri
	 
	 	 	 	 
	82.

	 	Specialty Surety & Insurance Services, LLC
	 	California
	 
	 	 	 	 
	83.

	 	Surety Associates Holding Co., Inc.
	 	New Mexico
	 
	 	 	 	 
	84.

	 	The Centris Group, Inc.
	 	Delaware
	 
	 	 	 	 
	85.

	 	The Schanen Consulting Group, LLC
	 	Georgia
	 
	 	 	 	 
	86.

	 	TMD Rattner, L.L.C.
	 	New York
	 
	 	 	 	 
	87.

	 	TTR, LLC
	 	New York
	 
	 	 	 	 
	88.

	 	U.S. Specialty Insurance Company
	 	Texas
	 
	 	 	 	 
	89.

	 	US Holdings, Inc.
	 	Delaware
	 
	 	 	 	 
	90.

	 	USBenefits Insurance Services, Inc.
	 	California
	 
	 	 	 	 
	91.

	 	VASA Brougher, Inc.
	 	Indiana
	 
	 	 	 	 
	92.

	 	VASA North America, Inc.
	 	Indiana

 

 

EXHIBIT G

Existing Borrowed Money Indebtedness

	1.	 	$15,000,000 Forward Exchange Transactions Line (uncommitted) from
HSBC Bank plc to Rattner Mackenzie Limited.
	 
	2.	 	$125,000,000 1.3% Convertible Notes (unsecured).
	 
	3.	 	$172,451,000 2.0% Convertible Notes (unsecured).
	 
	4.	 	Letter Loan Agreement by and between Houston Casualty Company and
Wells Fargo Bank, National Association dated April 30, 1998, and
related documents, as amended (cash secured letter of credit facility).
	 
	5.	 	Letter Loan Agreement by and between U.S. Specialty Insurance
Company and Wells Fargo Bank, National Association dated June 29, 1998,
and related documents, as amended (cash secured letter of credit
facility).
	 
	6.	 	Letter Loan Agreement by and between HCC Insurance Holdings, Inc.
and Wells Fargo Bank, National Association dated April 29, 2002, and
related documents, as amended (cash secured letter of credit facility).
	 
	7.	 	Letter Loan Agreement by and between HCC Service Company, Ltd. and
Wells Fargo Bank, National Association dated August 26, 2004, and
related documents, as amended (cash secured letter of credit facility).
	 
	8.	 	Letter Loan Agreement by and between HCC Reinsurance Company
Limited and Wells Fargo Bank, National Association dated September 28,
2001, and related documents, as amended (cash secured letter of credit
facility).
	 
	9.	 	Note Payable of HCC Employer Services, Inc., payable to Caremark in
monthly installments, included in the rental payment, dated as of April
1, 1997, with a final payment due in November 2005 ($19,673 balance).

 

 

EXHIBIT H

Existing Liens

	1.	 	Security interest in cash collateral granted pursuant to the Letter
Loan Agreement by and between Houston Casualty Company and Wells Fargo
Bank, National Association dated April 30, 1998, and related documents,
as amended.
	 
	2.	 	Security interest in cash collateral granted pursuant to the Letter
Loan Agreement by and between U.S. Specialty Insurance Company and
Wells Fargo Bank, National Association dated June 29, 1998, and related
documents, as amended.
	 
	3.	 	Security interest in cash collateral granted pursuant to the Letter
Loan Agreement by and between HCC Insurance Holdings, Inc. and Wells
Fargo Bank, National Association dated April 29, 2002, and related
documents, as amended.
	 
	4.	 	Security interest in cash collateral granted pursuant to the Letter
Loan Agreement by and between HCC Service Company, Ltd. and Wells Fargo
Bank, National Association dated August 26, 2004, and related
documents, as amended.
	 
	5.	 	Security interest in cash collateral granted pursuant to the Letter
Loan Agreement by and between HCC Reinsurance Company Limited and Wells
Fargo Bank, National Association dated September    , 2001, and
related documents, as amended.
	 
	6.	 	Security interest in furniture granted pursuant to Note Payable of
HCC Employer Services, Inc. payable to Caremark dated April 1, 1997.exv4w1w1

 

Exhibit 4.1.1

FIRST AMENDMENT TO NOTE AND SECURITY AGREEMENT

     This
First Amendment dated as of September 30, 2004 (the or this “First
Amendment”) to the Note and Security Agreement dated as of December 31, 2003
(the “Note Agreement”) is between ORBIMAGE INC., a Delaware corporation (the
“Company”), and each of the institutions which is a signatory to this First
Amendment (collectively, the “Noteholders”).

RECITALS:

     A. The Company and the Noteholders have heretofore entered into the Note
Agreement, and the Company has heretofore issued its Senior Notes due 2008 (the
“Notes”) pursuant to the Note Agreement.

     B. The Company and the Noteholders now desire to amend the Note Agreement
in the respects, but only in the respects, hereinafter set forth (the
“Amendments”).

     C. Capitalized terms used herein shall have the respective meanings
ascribed thereto in the Note Agreement unless herein defined or the context
shall otherwise require.

     D. All requirements of law have been fully complied with and all other
acts and things necessary to make this First Amendment a valid, legal and
binding instrument according to its terms for the purposes herein expressed
have been done or performed.

     NOW, THEREFORE, upon the full and complete satisfaction of the conditions
precedent to the effectiveness of this First Amendment set forth in Section 2.1
hereof, and in consideration of good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the Company and the Noteholders do
hereby agree as follows:

SECTION 1. AMENDMENTS.

     1.1. Section 1.1 of the Note Agreement shall be amended as follows:

	 	(a)	 	amend the following definitions as described below:

     “Unrestricted Cash”:

	 	•	 	delete the “ and” immediately prior to the “(iii)” and
insert in its place “,”; and
	 
	 	•	 	delete the final “.” at the end of the paragraph and
insert in its place the following:
	 
	 	 	 	“, (iv) after the execution and delivery of the NextView Contract,
$45,000,000 and (v) an amount equal to the aggregate gross proceeds
received by the Company and reflected on such balance sheet from
each of (i) the Equity Financing and (ii) the issuance of the
Additional Senior Subordinated Indebtedness.”; and

     "Change of Control”:

1

 

	 	•	 	at the end of subparagraph (i), delete the “.” and
insert in its place “, provided that the Equity Financing shall
not be deemed to constitute a Change of Control;”; and

	 	(b)	 	add the following definitions in alphabetical order:

"Additional Senior Subordinated Indebtedness” means $155,000,000
aggregate principal amount of Indebtedness of the Company issued in one
or more transactions in connection with the execution and delivery of the
NextView Contract, provided that (i) the Notes rank at least pari passu
with such Additional Senior Subordinated Indebtedness and (ii) the
Additional Senior Subordinated Indebtedness does not provide for any
mandatory redemption or any other scheduled repayments or prepayments of
principal, and does not have a stated maturity date, prior to the Stated
Maturity.

"Equity Financing” means the issuance and sale in connection with the
execution and delivery of the NextView Contract, in one or more
transactions, of 6,500,000 shares of Common Stock at a price of $10 per
share, and in connection with such issuance and sale, the grant to
certain purchasers of such shares of Common Stock of 7,500,000 warrants,
maturing five years from the date of issuance, each to purchase one share
of Common Stock per warrant at a price of $10 per share.

"NextView Contract” means one or more agreements to be entered into
between the U.S. government and the Company under the U.S. government’s
NextView Second Vendor program pursuant to which (i) the Company will
agree to develop, manufacture and launch the OrbView-5 satellite, and the
U.S. government will share the costs of such development, manufacturing
and launch in an amount up to approximately $237.4 million, and (ii) the
U.S. government will agree to purchase images from the Company over a
period of approximately two years following the launch of the OrbView-5
satellite for an aggregate amount of approximately $196 million.

     1.2. Section 5.12 of the Note Agreement shall be amended as follows:

     (a) insert the following new subsection (d) after current subsection
(c):

     "(d) the Additional Senior Subordinated Indebtedness;”;

     (b) renumber current subsection (d) as subsection (e);

     (c) renumber current subsection (e) as subsection (f);

     (d) renumber current subsection (f) as subsection (g) and change the
reference to “this clause (f)” to “this clause (g)”;

     (e) renumber current subsection (g) as subsection (h);

     (f) renumber current subsection (h) as subsection (i);

     (g) renumber current subsection (i) as subsection (j); and

2

 

     (h) renumber current subsection (j) as subsection (k) and change the
reference to “clauses (b) through (i)” to “clauses (b) through (j)”.

     1.3. Section 5.21 of the Note Agreement shall be amended as follows:

     (a) insert “ (i)” in the final sentence following “provided that”;
and

     (b) delete the final “.” and insert in its place the following:

“ or (ii) such Capital Expenditures are made in connection with the
Company’s performance under the NextView Contract.”

SECTION 2. CONDITIONS TO EFFECTIVENESS OF THIS FIRST AMENDMENT.

     2.1. This First Amendment shall not become effective until, and shall
become effective when, each and every one of the following conditions shall
have been satisfied:

     (a) executed counterparts of this First Amendment, duly executed by
the Company and the Majority Holders, shall have been delivered to the
Noteholders;

     (b) the Noteholders shall have received a copy of the resolutions of
the Board of Directors of the Company authorizing the execution, delivery
and performance by the Company of this First Amendment, certified by an
Officer’s Certificate;

     (c) the Company and the trustee under the indenture governing the
Senior Subordinated Notes shall have entered into a supplemental
indenture implementing the proposed amendments to such indenture set
forth in the Consent Solicitation Statement of the Company dated
September 7, 2004;

     (d) the NextView Contract (as defined in the proposed amendment set
forth in Section 1.1(b) hereof) shall have been executed and delivered by
each of the Company and the U.S. government and shall be in full force
and effect; and

     (e) the Company shall have issued to each Noteholder, as
consideration for such Noteholder’s consent to the Amendments, additional
Notes in an aggregate principal amount equal to $20 for each $1,000
principal amount of Notes held by such Noteholder in respect of which
such Noteholder has consented to the Amendments;

     Upon occurrence of all of the foregoing, this First Amendment shall become
effective.

SECTION 3. MISCELLANEOUS.

     3.1. This First Amendment shall be construed in connection with and as
part of the Note Agreement, and except as modified and expressly amended by
this First Amendment, all terms, conditions and covenants contained in the Note
Agreement and the Notes are hereby ratified and shall be and remain in full
force and effect.

     3.2. Any and all notices, requests, certificates and other instruments
executed and delivered after the execution and delivery of this First Amendment
may refer to the Note Agreement without making specific reference to this First
Amendment but nevertheless all such references shall include this First
Amendment unless the context otherwise requires.

3

 

     3.3. The descriptive headings of the various Sections or parts of this
First Amendment are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.

     3.4. This First Amendment shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the law of the state
of New York, excluding choice-of-law principles of the law of such state that
would require the application of the laws of a jurisdiction other than such
state.

     3.5. This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.

	 	 	 	 	 
	 	ORBIMAGE INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

4

 

	 	 	 	 	 
	 	Accepted and Agreed to:

HARBERT DISTRESSED INVESTMENT MASTER

      FUND, LTD.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

5

 

	 	 	 	 	 
	 	Accepted and Agreed to:

REDWOOD MASTER FUND, LTD.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

6

 

	 	 	 	 	 
	 	Accepted and Agreed to:

TRIAGE OFFSHORE FUND, LTD.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

7

 

	 	 	 	 	 
	 	Accepted and Agreed to:

TRIAGE CAPITAL MANAGEMENT

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

8

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