Document:

Exhibit 10.1

 

COMERICA INCORPORATED

2006 AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN

 

SECTION 1

PURPOSE

 

The purpose of Comerica’s 2006 Amended and Restated
Long-Term Incentive Plan is to align the interests of employees of the
Corporation selected to receive awards with those of stockholders by rewarding
long term decision-making and actions for the betterment of the
Corporation.  Accordingly, Eligible
Individuals may receive Awards of Options, Stock Appreciation Rights,
Restricted Stock or Restricted Stock Units, Performance Awards and Other
Stock-Based Awards.  Equity-based
compensation assists in the attraction and retention of qualified employees,
and provides them with additional incentive to devote their best efforts to
pursue and sustain the Corporation’s superior long-term performance.  This enhances the value of the Corporation
for the benefit of its stockholders.

 

SECTION 2

DEFINITIONS

 

A.            “Affiliate”
means (i) any corporation, partnership, joint venture or other
entity that is controlled by the Corporation, whether
directly or indirectly, and (ii) any corporation, partnership,
joint venture or other entity in which the
Corporation has a significant equity interest, as determined by the Committee; provided,
however, that with respect to an Award of an Incentive Stock Option and an
Award that is subject to Code Section 409A, the term “Affiliate” shall
refer solely to a Subsidiary.

 

B.            “Aggregated
Plan” means all agreements, methods, programs, and other arrangements
sponsored by the Corporation that would be aggregated with this Plan under Section 1.409A-1(c) of the Regulations.

 

C.            “Award” means an
Option, a Stock Appreciation Right, a Share of Restricted Stock, a Restricted
Stock Unit, a Performance Award, including a Qualified Performance-Based Award,
or an Other Stock-Based Award pursuant to the Plan.  Each Award shall be evidenced by an Award
Agreement.

 

D.            “Award
Agreement” means a written agreement, in a form approved by the Committee,
which sets forth the terms and conditions of an Award, including, but not
limited to, the Performance Period and/or Restriction Period, as
appropriate.  Agreements shall be subject
to the express terms and conditions set forth herein, and to such other terms
and conditions not inconsistent with the Plan as the Committee shall deem
appropriate.

 

E.             “Award
Recipient” means an Eligible Individual who has been granted an Award under
the Plan and has entered into an Award Agreement evidencing the grant 

 

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of
such Award or otherwise accepted the terms of an Award Agreement, including by
electronic acceptance or acknowledgement.

 

F.             “Beneficiary”
means any person(s) designated by an Award Recipient on a beneficiary
designation form submitted to the Plan Administrator, or, if no form has been
submitted, any person(s) entitled to receive any amounts owing to such
Award Recipient under this Plan upon his or her death by reason of having been
named in the Award Recipient’s will or trust agreement or having qualified as a
taker of the Award Recipient’s property under the laws of intestacy.  If an Award Recipient authorizes any person,
in writing, to exercise such individual’s Options or Stock Appreciation Rights
following the Award Recipient’s death, the term “Beneficiary” shall include any
person in whose favor such Options or Stock Appreciation Rights are exercised
by the person authorized to exercise the Options or Stock Appreciation Rights.

 

G.            “Board”
means the Board of Directors of the Corporation.

 

H.            “Cause” means (1) conviction
of the Award Recipient for committing a felony under Federal law or the law of
the state in which such action occurred, (2) dishonesty in the course of
fulfilling the Award Recipient’s employment duties, (3) willful and
deliberate failure on the part of the Award Recipient to perform his or her
employment duties in any material respect, or (4) before a Change of
Control, such other events as shall be determined by the Committee.  Before a Change of Control, the Committee
shall, unless otherwise provided in an Individual Agreement with the Award
Recipient, have the sole discretion to determine whether “Cause” exists, and
its determination shall be final.

 

I.              “Change
of Control” shall have the meaning set forth in Exhibit A to this
Plan.

 

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

 

K.            “Committee”
means the Governance, Compensation and Nominating Committee of the Board
or such other committee of the Board as the Board may from time to time
designate, which, with respect to the establishment of Performance Measures,
shall be composed solely of not less than two outside directors (as described
under Regulations Section 1.162-27(e)(3)), and shall be appointed by and
serve at the pleasure of the Board.

 

L.             “Corporation”
means Comerica Incorporated, a Delaware corporation, and its successors and
assigns.

 

M.           “Date
of Grant” means the effective date of an Award granted by the
Committee to an Award Recipient.

 

N.            “Disabled”
or “Disability” means “Totally Disabled” (or any derivation of
such term) within the meaning of the Long-Term Disability Plan of Comerica
Incorporated, or if there is no such plan, “Disability” as
determined by the Committee.  However, with respect to the rules relating
to Incentive Stock Options, the term “Disabled” shall mean disabled as that
term is utilized in Sections 422 and 22(e)(3) of the Code, or any
successor Code provisions relating to ISOs. 
Furthermore, with respect to Awards subject to Section 409A of the
Code, “Disabled” shall not have either

 

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of
the prior meanings, but shall mean an Award Recipient’s inability to engage in
any substantial gainful activity due to a medically determinable physical or
mental impairment which can be expected to result in death or can be expected
to last for a continuous period of not less than twelve (12) months.

 

O.            “Disaffiliation”
means a Subsidiary’s or Affiliate’s ceasing to be a Subsidiary or Affiliate for
any reason (including, without limitation, as a result of a public offering, or
a spinoff or sale by the Corporation, of the stock of the Subsidiary or
Affiliate) or a sale of a division of the Corporation and its Affiliates.

 

P.             “Eligible
Individual” means any officers and employees of the Corporation or
any of its Subsidiaries or Affiliates, and prospective officers and employees
who have accepted offers of employment from the Corporation or its Subsidiaries
or Affiliates.  Notwithstanding the foregoing, an Eligible
Individual for purposes of receipt of the grant of an ISO shall be limited to
those individuals who are eligible to receive ISOs under rules set forth
in the Code and applicable Regulations.

 

Q.            “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

 

R.            “Fair
Market Value” means the closing price of a Share on the New York Stock
Exchange as reported on the Composite Tape as published in the Wall Street
Journal; if, however, there is no trading of Shares on the date in
question, then the closing price of the Shares as so reported, on the last
preceding trading day shall instead be used to determine Fair Market
Value.  If Fair Market Value for any date
in question cannot be determined as provided above, Fair Market Value shall be
determined by the Committee in its good faith discretion based on a reasonable
valuation method in accordance with the Regulations and applicable guidance
promulgated under Code Section 409A.

 

S.             “Incentive
Stock Option” or “ISO Award” means an Option granted pursuant to the
Plan that is designated in the applicable Award Agreement as an “incentive stock
option” within the meaning of Section 422 of the Code, and that in fact so
qualifies.

 

T.            “Nonqualified
Stock Option” or “NQSO Award” means an Option granted  pursuant to the Plan that is not intended to
be, or does not qualify as, an Incentive Stock Option.

 

U.            “Option”
means a Nonqualified Stock Option or an Incentive Stock Option granted pursuant
to Section 6(A) of the Plan.

 

V.            “Other
Stock-Based Award” means any right granted under Section 6(F) of
the Plan.

 

W.           “Performance
Award” means any Award, including a Qualified Performance-Based Award,
granted pursuant to Section 6(E) of the Plan.

 

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X.            “Performance
Measures” means the performance goals established by the
Committee and relating to a Performance Period in connection with the grant of
an Award.  In the case of any Qualified
Performance-Based Award, such goals shall be (i) based on the attainment
of specified levels of one or more of the following measures (a) earnings per share, (b) return measures (including, but not
limited to, return on assets, equity or sales), (c) net income (before or
after taxes), (d) cash flow (including, but not limited to, operating cash
flow and free cash flow), (e) cash flow return on investments, which
equals net cash flows divided by owner’s equity, (f) earnings before or
after taxes, interest, depreciation and/or amortization, (g) internal rate
of return or increase in net present value, (h) gross revenues, (i) gross
margins or (j) stock price (including, but not limited to, growth measures
and total stockholder return) and (ii) set by the Committee within
the time period prescribed by Section 162(m) of the Code.  Performance Measures may be
absolute in their terms or measured against or in relationship to other
companies comparably, similarly or otherwise situated and may be based on or
adjusted for any other objective goals, events, or occurrences established by
the Committee for a Performance Period. 
Such Performance Measures may be particular to a line of business,
Subsidiary or other unit or may be based on the performance of the Corporation
generally.  Such Performance Measures may
cover the Performance Period(s) as specified by the Committee.  Performance Measures may be adjusted by
the Committee in its sole discretion to eliminate the unbudgeted effects of
charges for restructurings, charges for discontinued operations, charges for
extraordinary items and other unusual or non-recurring items of loss or
expense, merger related charges, cumulative effect of accounting changes, the
unbudgeted financial impact of any acquisition or divestiture made during the
applicable Performance Period, and any direct or indirect change in the Federal
corporate tax rate affecting the Performance Period, each as defined by
generally accepted accounting principles and identified in the audited
financial statements, notes to the audited financial statements, management’s
discussion and analysis or other Corporation filings with the Securities and Exchange
Commission

 

Y.            “Performance
Period” means the period designated by the Committee during which the
Performance Measures applicable to an Award shall be measured.  The Performance Period shall be established
at or before the time of the grant of the Award, and the length of any
Performance Period shall be within the discretion of the Committee.

 

Z.            “Plan”
means the Comerica Incorporated 2006 Amended and Restated Long-Term Incentive
Plan, as may be amended from time to time.

 

AA.        “Qualified
Performance-Based Award” means an Award intended to qualify for the Section 162(m) Exemption,
as provided in Section 7.

 

BB.          “Regulations”
means the Treasury Regulations promulgated under the Code.

 

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CC.          “Restriction
Period” means the period designated by the Committee during which Shares of
a Restricted Stock Award remain forfeitable or a Restricted Stock Unit Award is
subject to vesting requirements.

 

DD.         “Restricted
Stock” or “Restricted Stock Award” means an award of Shares pursuant
to Section 6(C) of the Plan subject to the terms, conditions and such restrictions as may be determined by the Committee and set forth
in the applicable Award Agreement.  Shares of Restricted Stock shall constitute
issued and outstanding Shares for all corporate purposes.

 

EE.          “Restricted Stock Units”
or “Restricted Stock Unit Award” means an Award
granted pursuant to Section 6(D) of the Plan denominated in Shares
subject to the terms, conditions and restrictions determined by the Committee
and set forth in the applicable Award Agreement.

 

FF.          “Retirement”
means, unless otherwise provided in an Award Agreement or determined by the
Committee, an Award Recipient’s Termination of Employment (or with respect to
Awards subject to Code Section 409A, an Award Recipient’s Separation from
Service) at or after age 65  or
after attainment of both age 55 and ten (10) years of service with the
Corporation and Affiliates.

 

GG.          “Section 162(m) Exemption”
means the exemption from the limitation on deductibility imposed by Section 162(m) of
the Code that is set forth in Section 162(m)(4)(C) of the Code.

 

HH.         “Separation
from Service” means, with respect to any Award that is subject to Code Section 409A,
the date on which the Corporation and the Award Recipient reasonably anticipate
a permanent reduction in the level of bona fide services performed by the Award
Recipient for the Corporation or any Affiliate to 20% or less of the average
level of bona fide services performed by the Award Recipient for the
Corporation or any Affiliate (whether as an employee or an independent
contractor) in the immediately preceding thirty-six (36) months (or the full
period of service to the Corporation and any Affiliate if the Award Recipient
has been providing services to the Corporation and its Affiliates for less than
thirty-six (36) months).  The
determination of whether a Separation from Service has occurred shall be made
by the Plan Administrator in accordance with the provisions of Code Section 409A
and the Regulations promulgated thereunder.

 

II.            “Share”
means a share of common stock, $5.00 par value, of the Corporation or such
other securities or property as may become subject to Awards pursuant to an
adjustment made under Section 3(D) of the Plan.

 

JJ.            “Specified
Employee” means a key employee of the Corporation as defined in Code Section 416(i) without
regard to paragraph (5) thereof. 
The determination of whether an Award Recipient is a Specified Employee
shall be made by the Committee as of the specified employee identification date
adopted by the 

 

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Corporation
in accordance with the provisions of Code Section 409A and the Regulations
promulgated thereunder.

 

KK.         “Stock
Appreciation Right” or “SAR Award” means a right granted under Section 6(B) of
the Plan.

 

LL.          “Subsidiary” means
any entity (other than the Corporation) in an unbroken chain of entities
beginning with the Corporation, provided each entity (other than the last
entity) in the unbroken chain owns, at the time of the determination, ownership
interests possessing fifty percent (50%) or more of the total combined voting
power of all classes of ownership interests in one of the other entities in
such chain; provided, however, with respect to any Award that is an Incentive
Stock Option, the term “Subsidiary” shall refer solely to an entity that is
taxed under Federal tax law as a corporation.

 

MM.       “Tax
Withholding Date” shall mean the earliest date the obligation to withhold
tax with respect to an Award arises.

 

NN.         “Term” means the
maximum period during which an Option or Stock Appreciation Right may remain
outstanding (subject to earlier termination upon Termination of Employment or
otherwise) as specified in the applicable Award Agreement or, to the extent not
specified in the Award Agreement, as provided in the Plan.

 

OO.         “Termination of
Employment” means the termination of the applicable Award Recipient’s
employment with the Corporation and any of its Affiliates.  An Award Recipient employed by an Affiliate
or a division of the Corporation or any of its Affiliates shall be deemed to
incur a Termination of Employment if, as a result of a Disaffiliation, such
Affiliate or division ceases to be an Affiliate or division, as the case may
be, and the Award Recipient does not immediately thereafter become an employee
of the Corporation or an Affiliate. 
Neither a temporary absence from employment because of illness, vacation
or leave of absence nor a transfer among the Corporation and its Affiliates
shall be considered a Termination of Employment.

 

SECTION 3

STOCK SUBJECT TO THE PLAN

 

A.            Plan Maximums.  The
maximum number of Shares that may be delivered pursuant to Awards under the
Plan shall be the sum of (i) thirteen-and-one-half million (13,500,000), (ii) any
Shares available for future awards under the Amended and Restated Comerica
Incorporated 1997 Long-Term Incentive Plan (the “Prior Plan”) as of the
Effective Date, and (iii) any Shares that are represented by awards
granted under the Prior Plan which are forfeited, expire or are cancelled
without delivery of Shares or which result in the forfeiture of Shares back to
the Corporation.  No additional Shares
will be granted pursuant to the terms of the Prior Plan as of the Effective
Date of the Plan.  The maximum number of
Shares that may be delivered pursuant to Options intended to be Incentive Stock
Options shall be one million (1,000,000) Shares.  No more than 4.7
million (4,700,000) Shares may be issued during the term of the Plan 

 

6

 

pursuant to Awards other
than Options and Stock Appreciation Rights.  Shares subject to an Award under the Plan may
be authorized and unissued Shares or treasury Shares.

 

B.            Individual Limits.  No Award Recipient may be granted Awards with
respect to more than 350,000 Shares in any calendar year, and the maximum
number of Shares underlying Awards of Options and Stock Appreciation Rights
that may be granted to an Award Recipient in any calendar year is 350,000.

 

C.            Rules for Calculating
Shares Delivered.  Any Shares
covered by an Award that has been granted shall be counted as used under the
Plan as of the Date of Grant.  To the
extent that any Award is forfeited, or any Option or Stock Appreciation Right
terminates, expires or lapses without being exercised, the Shares subject to
such Awards not delivered as a result thereof shall again be available for
Awards under the Plan.  The following
Shares, however, may not again be made available for issuance in respect of Awards
under this Plan: (i) Shares not issued or delivered as a result of the net
settlement of an outstanding Stock Appreciation Right; (ii) Shares used to
pay the exercise price or withholding taxes related to an outstanding Award; or
(iii) Shares repurchased by the Corporation on the open market with the
proceeds of an Option exercise price to settle an Option.

 

D.            Adjustment Provision.  In the event of (i) a stock dividend,
stock split, reverse stock split, share combination, or recapitalization or
similar event affecting the capital structure of the Corporation (each, a “Share
Change”), or (ii) a merger, consolidation, acquisition of property or
shares, separation, spinoff, reorganization, stock rights offering,
liquidation, Disaffiliation, or similar event affecting the Corporation or any
of its Subsidiaries (each, a “Corporate Transaction”), the Committee or
the Board shall make such substitutions or adjustments as it deems appropriate
and equitable, if any, to (A) the aggregate number and kind of Shares or
other securities reserved for issuance and delivery under the Plan, (B) the
various maximum limitations set forth in Sections 3(A) and 3(B) upon
certain types of Awards and upon the grants to individuals of certain types of
Awards, (C) the number and kind of Shares or other securities subject to
outstanding Awards, and (D) the exercise price of outstanding Options and
Stock Appreciation Rights, provided that the aggregate exercise price or
aggregate grant price of the Options or Stock Appreciation Rights is not less
than the aggregate exercise price or aggregate grant price before the Corporate
Transaction.  In the case of Corporate
Transactions, such adjustments may include, without limitation, (1) the
cancellation of outstanding Awards in exchange for payments of cash, property
or a combination thereof having an aggregate value equal to the value of such
Awards, as determined by the Committee or the Board in its sole discretion (it
being understood that in the case of a Corporate Transaction with respect to
which stockholders of Common Stock receive consideration other than publicly
traded equity securities of the ultimate surviving entity, any such
determination by the Committee that the value of an Option or Stock
Appreciation Right shall for this purpose be deemed to equal the excess, if any,
of the value of the consideration being paid for each Share pursuant to such
Corporate Transaction over the exercise price of such Option or Stock
Appreciation Right shall conclusively be deemed valid); (2) the
substitution of other property (including, without 

 

7

 

limitation, cash or other
securities of the Corporation and securities of entities other than the
Corporation) for the Shares subject to outstanding Awards; and (3) in
connection with any Disaffiliation, arranging for the assumption of Awards, or
replacement of Awards with new awards based on other property or other
securities (including, without limitation, other securities of the Corporation
and securities of entities other than the Corporation), by the affected
Subsidiary, Affiliate, or division or by the entity that controls such
Subsidiary, Affiliate, or division following such Disaffiliation (as well as
any corresponding adjustments to Awards that remain based upon Corporation
securities).  Any such adjustments shall
be made in a manner that (i) with respect to Awards that are not
considered to be deferred compensation within the meaning of Section 409A
of the Code immediately prior to such adjustment, would not cause such Awards
to become deferred compensation subject to Section 409A of the Code and (ii) with
respect to Awards that are considered deferred compensation within the meaning
of Section 409A of the Code, would not cause such Awards to be
non-compliant with the requirements of Section 409A of the Code.

 

SECTION 4

ADMINISTRATION

 

A.            Committee.  The Plan shall be administered by
the Committee.  In addition to any
implied powers and duties that may be needed to carry out the provisions of the
Plan, the Committee shall have all the powers vested in it by the terms of the
Plan, including exclusive authority to: 
select Eligible Individuals; to make Awards; to determine the type,
size, terms and timing of Awards (which need not be uniform); to accelerate the
vesting of Awards, including upon the occurrence of a Change of Control of the
Corporation or an Award Recipient’s Termination of Employment; to prescribe the
form of the Award Agreement; to modify, amend or adjust the terms and
conditions of any Award, subject to Sections 7 and 10; to adopt, alter and
repeal such administrative rules, guidelines and practices governing the Plan
as it shall from time to time deem advisable; to interpret the terms and
provisions of the Plan and any Award issued under the Plan (and any Award
Agreement relating thereto); make any other
determinations it believes necessary or advisable in connection with the
administration of the Plan; correct any defect, supply any omission or
reconcile any inconsistency in the Plan or in any Award Agreement; establish any “blackout”
period that the Committee in its sole discretion deems necessary or advisable;
and to otherwise administer the Plan.

 

B.            Procedures.  Determinations of the Committee shall be made
by a majority vote of its members at a meeting at which a quorum is present or
pursuant to a unanimous written consent of its members.  A majority of the members of the Committee
shall constitute a quorum.  Subject to Section 7(D),
any authority granted to the Committee may also be exercised by the full
Board.  To the extent that any permitted
action taken by the Board conflicts with action taken by the Committee, the
Board action shall control.  The
Committee may authorize any one or more of its members, or any officer of the
Corporation, to execute and deliver documents on behalf of the Committee.

 

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Except to the extent prohibited by applicable law or
the applicable rules of a stock exchange, the Committee may (i) allocate
all or any portion of its responsibilities and powers to any one or more of its
members and/or (ii) delegate all or any part of its responsibilities and
powers to any person or persons selected by it, provided that, the Committee may not delegate its
responsibilities and powers if such delegation would cause an Award made to an
individual subject to Section 16 of the Exchange Act not to qualify for an
exemption from Section 16(b) of the Exchange Act or cause an Award
intended to be a Qualified Performance-Based Award not to qualify for, or to
cease to qualify for, the Section 162(m) Exemption.  Any such allocation or delegation may be
revoked by the Committee at any time.

 

All decisions made by the Committee (or any person or
persons to whom the Committee has allocated or delegated all or any portion of
its responsibilities and powers in accordance with this Plan) shall be final
and binding on all persons, including the Corporation, its Affiliates,
Subsidiaries, stockholders, Eligible Individuals, Award Recipients,
Beneficiaries and other interested parties.

 

C.            Discretion of the Committee.  Subject to Section 1(G), any
determination made by the Committee or by an appropriately delegated officer
pursuant to delegated authority under the provisions of the Plan with respect
to any Award shall be made in the sole discretion of the Committee or such
delegate at the time of the grant of the Award or, unless in contravention of
any express term of the Plan, at any time thereafter.  All decisions made by the Committee or any appropriately
delegated officer pursuant to the provisions of the Plan shall be final and
binding on all persons, including the Corporation, Award Recipients and
Eligible Individuals.

 

D.            Cancellation or Suspension
of Awards.  The Committee may cancel all or any portion of any Award, whether or not
vested or deferred, as set forth below. 
Upon cancellation, the Award Recipient shall forfeit the Award and any
benefits attributable to such canceled Award or portion thereof.  The Committee may cancel an Award if, in its
sole discretion, the Committee determines in good faith that the Award
Recipient has done any of the following: 
(i) committed a felony; (ii) committed fraud; (iii) embezzled;
(iv) disclosed confidential information or trade secrets; (v) was
terminated for Cause; (vi) engaged in any activity in competition with the
business of the Corporation or any Subsidiary or Affiliate of the Corporation;
or (vii) engaged in conduct that adversely affected the Corporation.  The Executive Vice President — Director of
Human Resources, or such other person designated from time to time by the Chief
Executive Officer of the Corporation (the “Delegate”), shall have the
power and authority to suspend all or any portion of any Award if the Delegate
makes in good faith the determination described in the preceding sentence.  Any such suspension of an Award shall remain
in effect until the suspension shall be presented to and acted on by the
Committee at its next meeting.  This Section 4(D) shall
have no application for a two year period following a Change of Control of the
Corporation.

 

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SECTION 5

ELIGIBILITY

 

Awards may only be made to Eligible Individuals.

 

SECTION 6

AWARDS

 

A.            Options.  The Committee may grant Options to
Eligible Individuals in accordance with the provisions of this subsection
subject to such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine to be appropriate.

 

1.             Exercise Price.  The exercise price per Share of an Option
shall be determined by the Committee; provided,
however, that such exercise price shall not be less than 100% of the
Fair Market Value of a Share on the Date of Grant of such Option, and such
exercise price may not be decreased during the Term of the Option except
pursuant to an adjustment in accordance with Section 3(D).

 

2.             Option Term.  The Term of each Option shall be fixed by the
Committee and the maximum Term of each Option shall be ten (10) years.

 

3.             Time and Manner of Exercise.  The Committee shall determine the time or
times at which an Option may be exercised, and the manner in which (including,
without limitation, cash, Shares, other securities, other Awards or other
property, or any combination thereof, having a Fair Market Value on the
exercise date equal to the relevant exercise price) payment of the exercise
price with respect thereto may be made, or deemed to have been made.  The Committee may authorize the use of any
form of “cashless” exercise of an Option that is legally permissible.

 

4.             Employment Status.  Except as provided in paragraphs (a) through
(d) below or as may otherwise be provided by the Committee (either at the
time of grant of an Option or thereafter), an Award Recipient’s Options
and Stock Appreciation Rights shall be immediately forfeited upon his or her
Termination of Employment.

 

a.             Retirement.  An Award Recipient’s Retirement shall not
affect any Option outstanding as of the Termination of Employment due to
Retirement other than those granted in the calendar year of Retirement.  All Options outstanding as of the Termination
of Employment due to Retirement other than those granted in the calendar year
of such Termination of Employment shall continue to vest pursuant to the
vesting schedule applicable to such Options, and any vested Options outstanding
as of the Termination of Employment due to Retirement (including any ISO held
by an Award Recipient who is not Disabled) shall continue in full force and
effect for the remainder of the Term of the Option.  All Options granted in the calendar year of
Termination of Employment due to

 

10

 

 

Retirement that have not
otherwise vested as of such termination shall terminate upon the date of
Retirement.

 

b.             Disability.  Upon the cessation of the Award Recipient’s
employment due to Disability, any Option held by such individual that was
exercisable immediately before the Termination of Employment due to Disability shall continue to be exercisable until the earlier of (i) the third
anniversary of the Award Recipient’s Termination of Employment (or, in the case
of any ISO held by an Award Recipient who is Disabled, the first anniversary of
the Award Recipient’s Termination of Employment) and (ii) the expiration
of the Term of the Option.

 

c.             Death.  Upon the Award Recipient’s death (whether
during his or her employment with the Corporation or an Affiliate or during any
otherwise applicable post-termination exercise period, which in the case of an
ISO, shall not exceed three (3) months), any Option held by such
individual that was exercisable immediately before the Termination of Employment shall continue to be exercisable by the Beneficiary(ies) of the decedent,
until the earlier of (i) the first anniversary of the date of the Award
Recipient’s death and (ii) the expiration of the Term of the Option.

 

d.             Other
Terminations of Employment.  Upon the Award Recipient’s Termination of
Employment for any reason other than Retirement, Disability, death or for Cause, any Option held by such individual that was exercisable
immediately before the Termination of Employment
shall continue to be exercisable until the earlier of (i) the expiration
of the three-month period following the Award Recipient’s Termination of
Employment and (ii) the expiration of the Term of the Option.

 

e.             Extension or Reduction of Exercise Period.  In any of the foregoing circumstances, subject
to Section 8, the Committee may extend or shorten the exercise period, but
may not extend any such period beyond the Term of the Option as originally
established (or, insofar as this paragraph relates to Stock Appreciation
Rights, the Term of the SAR Award as originally established).  Further, with respect to ISOs, as a condition
of any such extension, the holder shall be required to deliver to the
Corporation a release which provides that such individual will hold the
Corporation and/or Affiliates harmless with respect to any adverse tax
consequences the individual may suffer by reason of any such extension.

 

B.            Stock
Appreciation Right Awards.  The Committee may grant Stock Appreciation
Rights to Eligible Individuals in accordance with the provisions of this
subsection subject to such additional terms and conditions, not inconsistent
with the provisions of the Plan, as the Committee shall determine to be
appropriate.  The Term of each SAR Award
shall be fixed by the Committee and the maximum Term of each SAR Award shall be
ten (10) years.  A Stock
Appreciation Right granted under the Plan 

 

11

 

shall
confer on the Award Recipient a right to receive upon exercise thereof the
excess (if any) of (i) the Fair Market Value of one Share on the date of
exercise over (ii) the grant price of the Stock Appreciation Right Award
as specified by the Committee, which price shall not be less than 100% of the
Fair Market Value of one Share on the Date of Grant of the Stock Appreciation
Right.  Subject to the terms of the Plan,
the Committee shall determine the grant price, Term, manner of exercise, dates
of exercise, methods of settlement (cash, Shares or a combination thereof) and
any other terms and conditions of any SAR Award.  The Committee may impose such conditions or
restrictions on the exercise of any SAR Award as it may deem appropriate.  Except as otherwise provided by the Committee
or in an Award Agreement, any SAR Award must be exercised during the period of the
Award Recipient’s employment with the Corporation or Affiliate, provided that the provisions of Section 6(A)(4)(a)-(e) hereof
shall apply for purposes of determining the exercise period in the event of the
Award Recipient’s Retirement, Disability, death or other Termination of
Employment.

 

C.            Restricted
Stock Awards.  The Committee may make Restricted Stock
Awards to Eligible Individuals in accordance with the provisions of this
subsection subject to such additional terms and conditions not inconsistent
with the provisions of the Plan as the Committee shall determine to be
appropriate.

 

1.             Nature of Restrictions.  Restricted Stock Awards shall be subject to
such restrictions, including Performance Measures, as the Committee may impose
(including, without limitation, any limitation on the right to vote a Share of
Restricted Stock or the right to receive any dividend or other right or
property with respect thereto), which restrictions may lapse separately or in
combination at such time or times, in such installments or otherwise as the
Committee may deem appropriate.  Subject
to the Committee’s authority under Section 6(C)(3) below, the minimum
Restriction Period with respect to a Restricted Stock Award that is subject to
restrictions that are Performance Measures shall be one (1) year, and the
minimum Restriction Period with respect to a Restricted Stock Award that is
subject to restrictions that are not Performance Measures shall be three (3) years.  The Committee may, as of the Date of Grant,
designate an Award of Restricted Stock that is subject to Performance Measures
as a Qualified Performance-Based Award.

 

2.             Stock Certificates.  Restricted Stock Awards granted under the
Plan shall be evidenced by the issuance of a stock certificate(s), which shall
be held by the Corporation.  Such
certificate(s) shall be registered in the name of the Award Recipient and
shall bear an appropriate legend which refers to the restrictions applicable to
such Restricted Stock Award. 
Alternatively, shares of Restricted Stock under the Plan may be recorded
in book entry form.

 

3.             Forfeiture; Delivery of Shares.  Except as may be otherwise provided in an
Award Agreement, upon an Award Recipient’s Termination of Employment (as
determined under criteria established by the Committee) during the applicable
Restriction Period, all Shares of Restricted Stock shall be immediately
forfeited and revert to the Corporation; provided,
however, that the 

 

12

 

Committee may waive, in
whole or in part, any or all remaining restrictions applicable to the
Restricted Stock Award.  Shares
comprising any Restricted Stock Award held by the Corporation that are no
longer subject to restrictions shall be delivered to the Award Recipient (or
his or her Beneficiary) promptly after the applicable restrictions lapse or are
waived.

 

D.            Restricted Stock Unit Awards.  The Committee may grant Awards of Restricted
Stock Units to Eligible Individuals, subject to Section 8 hereof and such
other terms and conditions, not inconsistent with the provisions of the Plan,
as the Committee shall determine to be appropriate.  A Restricted Stock Unit shall represent an
unfunded, unsecured right to receive one Share or cash equal to the Fair Market
Value of a Share.

 

1.             Nature
of Restrictions.  Restricted Stock Unit Awards shall be subject
to such restrictions, including Performance Measures, as the Committee may
impose, which restrictions may lapse separately or in combination at such time
or times, in such installments or otherwise as the Committee may deem
appropriate.  Subject to the Committee’s
authority under Section 6(D)(3) below, the minimum Restriction Period
with respect to a Restricted Stock Unit Award that is subject to restrictions
that are Performance Measures shall be one (1) year, and the minimum
Restriction Period with respect to a Restricted Stock Unit Award that is
subject to restrictions that are not Performance Measures shall be three (3) years.  The Committee may, as of the Date of Grant,
designate an Award of Restricted Stock as a Qualified Performance-Based Award.

 

2.             Rights as a Stockholder.  An Eligible Individual to whom Restricted
Stock Units are granted shall not have any rights of a stockholder of the
Corporation with respect to the Share represented by the Restricted Stock Unit
Award.  If so determined by the
Committee, in its sole and absolute discretion, Restricted Stock Units may
include a dividend equivalent right, pursuant to which the Award Recipient will
either receive cash amounts (either paid currently or on a contingent basis)
equivalent to the dividends and other distributions payable with respect to the
number of Shares represented by the Restricted Stock Units, or additional
Restricted Stock Units with a Fair Market Value equal to such dividends and
other distributions, as specified in the Award Agreement.  Dividend equivalent rights that the Committee
determines are subject to Section 409A of the Code shall be paid or
settled in accordance with Section 8 hereof.

 

3.             Forfeiture/Settlement.  Except as may be otherwise provided in an
Award Agreement, upon an Award Recipient’s Termination of Employment (as
determined under criteria established by the Committee) during the applicable
Restriction Period, all Restricted Stock Units shall be immediately forfeited; provided, however, that the Committee may
waive, in whole or in part, any or all remaining vesting requirements or
restrictions applicable to the Restricted Stock Unit Award.  Subject to Section 11(D) hereof, an Award of
Restricted Stock Units shall be settled in Shares as and when the Restricted
Stock Units vest or at a later time permitted under Section 8 hereof and
specified by the Committee in the Award Agreement.

 

13

 

E.             Performance
Awards.  The
Committee may grant Performance Awards (designated as Qualified
Performance-Based Awards or not) to Eligible Individuals in accordance with the
provisions of this Section 6(E), subject to Section 8 hereof and such
additional terms and conditions, not inconsistent with the provisions of the
Plan, as the Committee shall determine to be appropriate.  A Performance Award granted under the Plan (i) may
be denominated or payable in cash, Shares (including, without limitation,
Restricted Shares), other securities, other Awards, or other property, and (ii) shall
confer on the Award Recipient the right to receive a dollar amount or number of
Shares upon the attainment of Performance Measures during any Performance
Period, as established by the Committee. 
Subject to the terms of the Plan and any applicable Award Agreement, the
Performance Measures to be achieved during any Performance Period, the length
of any Performance Period and the amount of any payment or number of Shares in
respect of a Performance Award shall be determined by the Committee.

 

F.             Other
Stock-Based Awards.  The Committee may grant Other Stock-Based
Awards to Eligible Individuals in accordance with the provisions of this Section 6(F),
subject to Section 8 hereof and such other additional terms and
conditions, including Performance Measures, not inconsistent with the
provisions of the Plan, as the Committee shall determine.  Other Stock-Based Awards may be denominated
or payable in, valued in whole or in part by reference to, or otherwise based on
or related to, Shares (including, without limitation, securities convertible
into Shares), as are deemed by the Committee to be consistent with the purpose
of the Plan.

 

G.            General.  Except as otherwise specified in
the Plan or an applicable Award Agreement, the following provisions shall apply
to Awards granted under the Plan:

 

1.             Consideration
for Awards.  Other than the payment of the exercise price
or grant price in connection with the exercise of an Option or Stock
Appreciation Right, Awards shall be made without monetary consideration or for
such minimal monetary consideration as may be required by applicable law.  In no event may any Option
or Stock Appreciation Right granted under this Plan be amended, other than
pursuant to Section 3(D), to decrease the exercise or grant price thereof,
be cancelled in conjunction with the grant of any new Option or Stock
Appreciation Right with a lower exercise or grant price, or otherwise be
subject to any action that would be treated, for accounting purposes, as a “repricing”
of such Option or Stock Appreciation Right, unless such amendment,
cancellation, or action is approved by the Corporation’s stockholders.

 

2.             Forms of Payment under Awards.  Subject to the terms of the Plan and of any
applicable Award Agreement, payments or transfers of Shares to be made by the
Corporation or an Affiliate upon the grant, exercise or satisfaction of an
Award may be made in such form or forms as the Committee shall determine
(including, without limitation, cash, Shares, other securities, other Awards or
other property or any combination thereof), and may be made in a single payment
or transfer, or in installments, and may be made upon vesting or such 

 

14

 

later date permitted under Section 8
hereof and specified in the applicable Award Agreement, and, in each case, in
accordance with rules and procedures established by the Committee.  Such rules and procedures may include,
without limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments.

 

3.             Limits on Transfer of Awards.  No Award and no right under any such Award
shall be transferable by an Award Recipient otherwise than by will or by the
laws of intestacy; provided, however,
that, an Award Recipient may, in the manner established by the Committee,
designate a Beneficiary to exercise the rights of the Award Recipient and to
receive any property distributable with respect to any Award upon the death of
the Award Recipient.  Each Award or right
under any Award shall be exercisable during the Award Recipient’s lifetime only
by the Award Recipient or, if permissible under applicable law, by the Award
Recipient’s guardian or legal representative. 
No Award or right under any such Award may be pledged, alienated,
attached or otherwise encumbered, and any purported pledge, alienation,
attachment or encumbrance thereof shall be void and unenforceable against the
Corporation or any Affiliate.

 

4.             Term of Awards.  Subject to any specific provisions of the
Plan, the term of each Award shall be for such period as may be determined by
the Committee.

 

5.             Securities Law Restrictions.  All certificates for Shares or other
securities delivered under the Plan pursuant to any Award or the exercise thereof
shall be subject to such restrictions as the Committee may deem advisable under
the Plan, or the rules, regulations and other requirements of the Securities
and Exchange Commission, the New York Stock Exchange, any other exchange on
which Shares may be eligible to be traded or any applicable federal or state
securities laws, and the Committee may cause a legend or legends to be placed
on any such certificates to make appropriate reference to such restrictions.

 

6.             Deferring
Awards.  Under no circumstances may an
Award Recipient elect to defer, until a time or times later than the exercise
of an Option or a Stock Appreciation Right or the settlement or distribution of
Shares or cash in respect of other Awards, receipt of all or a portion of the
Shares or cash subject to such Award, or dividends and dividend equivalents
payable thereon.

 

SECTION 7 

QUALIFIED PERFORMANCE-BASED AWARDS

 

A.            Section 162(m) Exemption.  The provisions of this Plan
are intended to ensure that all Options and Stock Appreciation Rights granted
hereunder to any Award Recipient who is or may be a “covered employee” (within
the meaning of Section 162(m)(3) of the Code) or otherwise subject to
Section 162(m) in the tax year in which such Option or Stock
Appreciation Right is expected to be deductible to the Corporation qualify for
the Section 162(m) Exemption, and all such Awards shall therefore be 

 

15

 

considered Qualified
Performance-Based Awards and this Plan shall be interpreted and operated
consistent with that intention (including, without limitation, to require that
all such Awards be granted by a committee composed solely of members who
satisfy the requirements for being “outside directors” for purposes of the Section 162(m) Exemption
(“Outside Directors”)).  When
granting any Award other than an Option or Stock Appreciation Right, the
Committee may designate such Award as a Qualified Performance-Based Award,
based upon a determination that (i) the recipient is or may be a “covered
employee” (within the meaning of Section 162(m)(3) of the Code) or
otherwise subject to Section 162(m) with respect to such Award, and (ii) the
Committee wishes such Award to qualify for the Section 162(m) Exemption,
and the terms of any such Award (and of the grant thereof) shall be consistent
with such designation (including, without limitation, that all such Awards be
granted by a committee composed solely of Outside Directors).

 

B.            Limitation on Amendment.  Each Qualified Performance-Based Award (other
than an Option or Stock Appreciation Right) shall be earned, vested and payable
(as applicable) only upon the achievement of one or more Performance Measures,
together with the satisfaction of any other conditions, such as continued
employment, as the Committee may determine to be appropriate, and no Qualified
Performance-Based Award may be amended, nor may the Committee exercise any
discretionary authority it may otherwise have under this Plan with respect to a
Qualified Performance-Based Award, in any manner that would cause the Qualified
Performance-Based Award to cease to qualify for the Section 162(m) Exemption;
provided, however, that (i) the
Committee may provide, either in connection with the grant of the applicable
Award or by amendment thereafter, that achievement of such Performance Measure
will be waived upon the death or Disability of the Award Recipient (or under
any other circumstance with respect to which the existence of such possible
waiver will not cause the Award to fail to qualify for the Section 162(m) Exemption),
and (ii) any rights to vesting or accelerated payment on a Change of
Control shall apply notwithstanding this Section 7(B).

 

C.            Maximum
Cash Award.  For purposes of the Section 162(m) Exemption,
the maximum amount of compensation payable with respect to an Award granted
under the Plan to any Award Recipient who is a “covered employee” (as defined
in Section 162(m) of the Code) that is denominated as a dollar amount
will not exceed $5,000,000 for any calendar year.

 

D.            Limitation on Action by the
Full Board.  The full
Board shall not be permitted to exercise authority granted to the Committee to
the extent that the grant or exercise of such authority would cause an Award
designated as a Qualified Performance-Based Award not to qualify for, or to
cease to qualify for, the Section 162(m) Exemption.

 

16

 

SECTION 8 

SECTION 409A OF THE CODE

 

It is the intention of the
Corporation that no Award shall be “deferred compensation” subject to Section 409A
of the Code, unless and to the extent that the Committee specifically
determines otherwise, and the Plan and the terms and conditions of all Awards
shall be interpreted accordingly.  If the
Committee determines that an Award is subject to Section 409A of the Code,
then the Award shall be paid or settled only upon the Award Recipient’s death,
Disability, or Separation from Service, or upon a Change of Control, or upon
such date(s) or pursuant to a schedule designated by the Committee, as
specified in the applicable Award Agreement, subject to the following
provisions:

 

1.             Delay for Specified
Employees. 
Notwithstanding any provision of this Plan or the terms of an Award
Agreement to the contrary, an Award that is granted to a Specified Employee and
that is to be paid or settled upon such Specified Employee’s Separation from
Service shall not be paid or settled prior to the earlier of (i) the first
business date following six months after the date of such Specified Employee’s
Separation from Service or (ii) the Specified Employee’s death.

 

2.             Distribution
in the Event of Income Inclusion Under Code Section 409A.  If an Award fails to meet the
requirements of Section 409A of the Code, the Award Recipient may receive
payment in connection with the Award before the Award would otherwise be paid,
provided, however, that the amount paid to the Award Recipient shall not exceed
the lesser of: (i) the amount payable under such Award, or (ii) the
amount to be reported pursuant to Section 409A of the Code on the applicable
Form W-2 (or Form 1099) as taxable income to the Award Recipient.

 

3.             Distribution Necessary to
Satisfy Applicable Tax Withholding.  If the Corporation is required to withhold
amounts to pay the Award Recipient’s portion of the Federal Insurance Contributions
Act (FICA) tax imposed under Code Sections 3101, 3121(a) or 3121(v)(2) with
respect to an amount that is or will be paid to the Award Recipient under the
Award before the amount otherwise would be paid, the Committee may withhold an
amount equal to the lesser of: (i) the amount payable under such Award, or
(ii) the aggregate of the FICA taxes imposed and the income tax
withholding related to such amount.

 

4.             Delay in Payments Subject to
Code Section 162(m).  In
the event the Corporation reasonably anticipates that the payment of benefits
under an Award would result in the loss of the Corporation’s Federal income tax
deduction with respect to such payment due to the application of Code Section 162(m),
the Committee may delay the payment of all such benefits under the Award until (i) the
first taxable year in which the Corporation reasonably anticipates, or should
reasonably anticipate, that if the payment were made during such year, the
deduction of such payment would not be barred by application of Code Section 

 

17

 

162(m) or (ii) during the period beginning
with the date of the Award Recipient’s Separation from Service (or, for
Specified Employees, the date which is six (6) months after the date of
the Award Recipient’s Separation from Service) and ending on the later of (A) the
last day of the taxable year of the Corporation which includes such date or (B) the
15th day of the third month following the date of the Award Recipient’s
Separation from Service (or, for Specified Employees, the date which is six (6) months
after the date of the Award Recipient’s Separation from Service).

 

5.             Delay for Payments in
Violation of Federal Securities Laws or Other Applicable Law.  In the event the Corporation reasonably
anticipates that the payment of benefits under an Award would violate Federal
securities laws or other applicable law, the Committee may delay the payment
until the earliest date at which the Corporation reasonably anticipates that
making of such payment would not cause such violation.

 

6.             Delay for Insolvency or
Compelling Business Reasons.  In the event the Corporation determines that
the making of any payment of benefits on the date specified under an Award
would jeopardize the ability of the Corporation to continue as a going concern,
the Committee may delay the payment of benefits until the first calendar year
in which the Corporation notifies the Committee that the payment of benefits
would not have such effect.

 

7.             Administrative Delay in Payment.  In the case of administrative necessity, the
payment of benefits under an Award may be delayed up to the later of the last
day of the calendar year in which payment would otherwise be made or the 15th
day of the third calendar month following the date on which payment would
otherwise be made.  Further, if, as a
result of events beyond the control of the Award Recipient (or following the
Award Recipient’s death, the Award Recipient’s Beneficiary), it is not
administratively practicable to calculate the amount of benefits due to the
Award Recipient as of the date on which payment would otherwise be made, the
payment may be delayed until the first calendar year in which calculation of
the amount is administratively practicable.

 

8.             No Award Recipient Election.  Notwithstanding the foregoing provisions, if
the period during which payment of benefits under an Award will be made occurs,
or will occur, in two calendar years, the Award Recipient shall not be
permitted to elect the calendar year in which the payment shall be made.

 

SECTION 9

WITHHOLDING OF TAXES

 

The Corporation will, if required by applicable law,
withhold the minimum statutory amount of Federal, state and/or local
withholding taxes no later than the date as of which an amount first becomes includible
in the gross income of an Award Recipient for Federal, state, local or foreign
income or employment or other tax. 
Unless otherwise provided in the applicable Award Agreement, each Award
Recipient may 

 

18

 

satisfy any such tax
withholding obligation by any of the following means, or by a combination of
such means:  (i) a cash payment; (ii) by
delivery to the Corporation of already-owned Shares which have been held by the
individual for at least six (6) months having a Fair Market Value, as of
the Tax Withholding Date, sufficient to satisfy the amount of the withholding
tax obligation arising from an exercise or vesting of an Award; (iii) by
authorizing the Corporation to withhold from the Shares otherwise issuable to
the individual pursuant to the exercise or vesting of an Award, a number of
shares having a Fair Market Value, as of the Tax Withholding Date, which will
satisfy the amount of the withholding tax obligation; or (iv) by a
combination of such methods of payment. 
If the amount requested is not paid, the Corporation may refuse to
satisfy the Award.  The obligations of
the Corporation under the Plan shall be conditional on such payment or
arrangements, and the Corporation and its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
otherwise due to such Award Recipient. 
The Committee may establish such procedures as it deems appropriate,
including making irrevocable elections, for the settlement of withholding
obligations with Shares.

 

SECTION 10

AMENDMENT AND TERMINATION

 

A.            Amendments to and
Termination of the Plan.  The
Committee or the Board may amend, alter, or discontinue the Plan at any time by
written resolution, but no amendment, alteration or discontinuation shall be
made which would materially impair the rights of the Award Recipients with
respect to a previously granted Award without such Award Recipient’s consent,
except such an amendment made to comply with applicable law, including without
limitation Section 409A of the Code, stock exchange rules or
accounting rules.  In addition, no such
amendment shall be made without the approval of the Corporation’s stockholders
to the extent such approval is required by applicable law (including Section 422
of the Code) or the listing standards of the applicable stock exchange.

 

B.            Amendments to Awards.  Subject to Section 6(G)(1), the
Committee may unilaterally amend the terms of any Award theretofore granted,
but no such amendment shall cause a Qualified Performance-Based Award to cease
to qualify for the Section 162(m) Exemption or, without the Award
Recipient’s consent, materially impair the rights of any Award Recipient with
respect to an Award, except such an amendment made to cause the Plan or Award
to comply with applicable law, stock exchange rules or accounting
rules.  Furthermore, no amendment may be
made to a NQSO Award or a SAR Award which would cause the exercise price or the
grant price (as applicable) to be less than 100% of the Fair Market Value of
one Share as of the Date of Grant except as provided in Section 3(D).

 

C.            Payment of Benefits Upon
Termination of Plan.  Upon
termination of the Plan, the Corporation may settle any outstanding Award that
is not subject to Code Section 409A as soon as is practicable following
such termination and may settle any outstanding Award that is subject to Code Section 409A
in accordance with one of the following:

 

19

 

1.             the termination and liquidation
of the Plan within twelve (12)  months of
a complete dissolution of the Corporation taxed under Section 331 of the
Code or with the approval of a bankruptcy court pursuant to 11 U.S.C.
§ 503(b)(1)(A); provided that the amounts deferred under this Plan are
included in the Participants’ gross incomes in the latest of the following
years (or, if earlier, the taxable year in which the amount is actually or
constructively received): (i) the calendar year in which the Plan is
terminated; (ii) the first calendar year in which the amount is no longer
subject to a substantial risk of forfeiture; or (iii) the first calendar
year in which the payment is administratively practicable.

 

2.             the termination and
liquidation of the Plan pursuant to irrevocable action taken by the Committee
or the Corporation within the thirty (30) days preceding or the twelve (12)
months following a Change of Control; provided that all Aggregated Plans are
terminated and liquidated with respect to each Participant that experienced the
Change of Control, so that under the terms of the termination and liquidation,
all such Participants are required to receive all amounts of deferred
compensation under this Plan and any other Aggregated Plans within twelve (12)
months of the date the Committee or the Corporation irrevocably takes all
necessary action to terminate and liquidate this Plan and the Committee or the
Corporation, as the case may be, takes all necessary action to terminate and
liquidate such other Aggregated Plans;

 

3.             the termination and
liquidation of the Plan, provided that: (i) the termination and
liquidation does not occur proximate to a downturn in the Corporation’s
financial health; (2) the Committee or the Corporation, as the case may
be, terminates and liquidates all Aggregated Plans; (3) no payments in
liquidation of this Plan are made within twelve (12) months of the date the
Committee or the Corporation irrevocably takes all necessary action to
terminate and liquidate this Plan, other than payments that would be payable
under the terms of this Plan if the action to terminate and liquidate this Plan
had not occurred; (4) all payments are made within twenty four (24) months
of the date on which the Committee or the Corporation irrevocably takes all
action necessary to terminate and liquidate this Plan; and (5) the
Corporation does not adopt a new Aggregated Plan at any time within three (3) years
following the date on which the Committee or the Corporation irrevocably takes
all action necessary to terminate and liquidate the Plan.

 

SECTION 11

MISCELLANEOUS PROVISIONS

 

A.            Conditions for Issuance.  The Committee may require each person
purchasing or receiving Shares pursuant to an Award to represent to and agree
with the Corporation in writing that such person is acquiring the Shares
without a view to the distribution thereof. 
The certificates for such Shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.  Notwithstanding any other provision of the
Plan or Award Agreements made pursuant thereto, with

 

20

 

 

respect to any Award other
than an Award that is subject to Code Section 409A, the Corporation shall
not be required to issue or deliver any certificate or certificates for Shares
under the Plan prior to fulfillment of all of the following conditions:  (i) listing or approval for listing upon
notice of issuance, of such Shares on the applicable stock exchange; (ii) any
registration or other qualification of such Shares of the Corporation under any
state or Federal law or regulation, or the maintaining in effect of any such
registration or other qualification which the Committee shall, in its absolute
discretion upon the advice of counsel, deem necessary or advisable; and (iii) obtaining
any other consent, approval, or permit from any state or Federal governmental
agency which the Committee shall, in its absolute discretion after receiving
the advice of counsel, determine to be necessary or advisable, and, with
respect to any Award that is subject to Code Section 409A, the Corporation
shall not be required to issue or deliver any certificate or certificates for
Shares under the Plan if the Corporation reasonably anticipates that such
issuance or delivery would violate applicable Federal securities laws or other
applicable law, provided the Corporation issues or delivers the Shares at the
earliest date on which the Corporation reasonably anticipates that such
issuance or delivery would not cause such violation.

 

B.            Additional Compensation
Arrangements.  Nothing
contained in the Plan shall prevent the Corporation or any Subsidiary or
Affiliate from adopting other or additional compensation arrangements for its
employees.  Participation
in the Plan shall not affect an individual’s eligibility to participate in any
other benefit or incentive plan of the Corporation.

 

C.            No Contract of Employment or
Rights to Awards.  The Plan
shall not constitute a contract of employment, and adoption of the Plan shall
not confer upon any employee any right to continued employment, nor shall it
interfere in any way with the right of the Corporation or any Subsidiary or
Affiliate to terminate the employment of any employee at any time. No employee or other person shall have any claim or right to receive an
Award under the Plan.  Receipt of an
Award shall not confer upon the Award Recipient any rights of a stockholder
with respect to any Shares subject to such Award except as specifically
provided in the Agreement relating to the Award.

 

D.            Limitation on Dividend
Reinvestment and Dividend Equivalents.  Reinvestment of dividends in additional
Restricted Stock at the time of any dividend payment, and the reinvestment of
dividend equivalent rights in additional Restricted Stock Units payable in
Shares shall only be permissible if sufficient Shares are available under Section 3
for such reinvestment or payment (taking into account then outstanding
Awards).  In the event that sufficient
Shares are not available, such reinvestment of dividends and dividend
equivalent rights shall be made in the form of a grant of Restricted Stock
Units equal in number to the Shares that would have been obtained by such
reinvestment and the terms of which Restricted Stock Units shall provide for
settlement in cash.

 

E.             Subsidiary Employees.  In the case of a grant of an Award to any
employee of a Subsidiary of the Corporation, the Corporation may, if the
Committee so directs, issue or transfer the Shares, if any, covered by the
Award to the Subsidiary, for 

 

21

 

such lawful consideration as
the Committee may specify, upon the condition or understanding that the
Subsidiary will transfer the Shares to the employee in accordance with the
terms of the Award specified by the Committee pursuant to the provisions of the
Plan.  All Shares underlying Awards that
are forfeited or canceled shall revert to the Corporation.

 

F.             Governing Law and
Interpretation.  The Plan and all Awards made and
actions taken thereunder shall be governed by and construed in accordance with
the laws of the State of Delaware, without reference to principles of conflict
of laws, except to the extent preempted by Federal law.  To the extent that any Award is subject to
Code Section 409A, the terms of the Award Agreement and this Plan shall be
construed and interpreted in accordance with Code Section 409A and the
Regulations and interpretative guidance promulgated thereunder.  The captions of this Plan are not part of the
provisions hereof and shall have no force or effect.

 

G.            Foreign Employees and
Foreign Law Considerations.  The Committee may grant Awards to Eligible
Individuals who are foreign nationals, who are located outside the United
States  or who are not compensated
from a payroll maintained in the United States, or who are otherwise subject to
(or could cause the Corporation to be subject to) legal or regulatory
provisions of countries or jurisdictions outside the United States, on such
terms and conditions different from those specified in the Plan as may, in the
judgment of the Committee, be necessary or desirable to foster and promote achievement
of the purposes of the Plan, and, in furtherance of such purposes, the
Committee may make such modifications, amendments, procedures, or subplans as
may be necessary or advisable to comply with such legal or regulatory
provisions.

 

H.            Expenses.  The expenses of the Plan shall be
borne by the Corporation.

 

I.              Acceptance
of Terms.  By accepting an Award under the Plan or
payment pursuant to any Award, each Award Recipient, legal representative and
Beneficiary shall be conclusively deemed to have indicated his or her
acceptance and ratification of, and consent to, any action taken under the Plan
by the Committee or the Corporation.  A
breach by any Award Recipient, his or her Beneficiary(ies), or legal
representative, of any restrictions, terms or conditions contained in the Plan,
any Award Agreement, or otherwise established by the Committee with respect to
any Award will, unless waived in whole or in part by the Committee, cause a
forfeiture of such Award.

 

SECTION 12

EFFECTIVE AND TERMINATION

 

The Comerica Incorporated 2006 Amended and Restated
Long-Term Incentive Plan was originally adopted by the Board on March 28,
2006, was effective on May 16, 2006, the date of stockholder approval, and
was subsequently amended and restated effective November 14, 2006 and
again amended and restated effective December 31, 2008.  This Comerica Incorporated 2006 Amended and
Restated Long-Term Incentive Plan was adopted by the Board and approved by the
Governance, Compensation and Nominating Committee on February 16, 2010, as
an amendment and restatement of the 

 

22

 

prior version of the
Plan, and will be effective on the date that it is approved by at least a
majority of the shares of the Corporation present and entitled to vote, at a
meeting of the Corporation’s stockholders at which there is a quorum (the “Effective
Date”).  The Plan will terminate on
the tenth (10th) anniversary of the Effective Date,
unless earlier terminated in accordance with Section 10.  Awards outstanding as of the date of
termination of the Plan shall not be affected or impaired by the termination of
the Plan.

 

Prior Plan Versions:

 

Compensation Committee/Governance,
Compensation and Nominating Committee Approved: 
February 22, 2006 (Original Plan); Prior
Amendments and Restatements were Approved November 14, 2006; and November 18,
2008 (effective December 31, 2008).

 

Board Approved:  March 28, 2006 (Original
Plan); Prior Amendments and Restatements were Approved November 14, 2006;
and November 18, 2008 (effective December 31, 2008).

 

Stockholders Approved:  May 16, 2006 (Original
Plan).

 

This 2010 Amendment and
Restatement:

 

Governance, Compensation and
Nominating Committee Approved: February 16, 2010.

 

Board Approved:  February 16, 2010.

 

Stockholders Approved:  April 27, 2010

 

23

 

EXHIBIT A

 

CHANGE OF CONTROL

 

A.            For the purpose of this
Plan, a “Change of Control” shall mean:

 

1.             The acquisition by any individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of the
Corporation (the “Outstanding Corporation
Common Stock”) or (ii) the combined voting power of the then
outstanding voting securities of the Corporation entitled to vote generally in
the election of directors (the “Outstanding
Corporation Voting Securities”); provided,
however, that for purposes of this subsection 1, the following
acquisitions shall not constitute a Change of Control:  (i) any acquisition directly from the
Corporation, (ii) any acquisition by the Corporation, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any corporation controlled by the Corporation
or (iv) any acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection A.3. of this Exhibit A;
or

 

2.             Individuals who, as of the date hereof,
constitute the Corporation’s Board of Directors (the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the Corporation’s
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board; or

 

3.             Consummation of a reorganization, merger
or consolidation or sale or other disposition of all or substantially all of
the Corporation’s assets (a “Business
Combination”), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Corporation
Common Stock and Outstanding Corporation Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the company
resulting from such Business 

 

24

 

Combination (including, without limitation, a
corporation which as a result of such transaction owns the Corporation or all
or substantially all of the Corporation’s assets either directly or through one
or more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Corporation
Common Stock and Outstanding Corporation Voting Securities, as the case may be,
(ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Corporation
or such corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the company resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the
members of the board of directors of the company resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or

 

4.             Approval by the Corporation’s
stockholders of a complete liquidation or dissolution of the Corporation.

 

B.            With respect to any Award
subject to Section 409A of the Code, the above definition of “Change of
Control” shall mean:

 

1.             any one person, or more than one person
acting as a group, acquires ownership of stock of the Corporation that,
together with stock held by such person or group, constitutes more than 50% of
the total fair market value or total voting power of the stock of the
Corporation;

 

2.             any one person, or more than one person
acting as a group, acquires (or has acquired during any twelve (12) month
period) ownership of stock of the Corporation possessing 30% or more of the
total voting power of the stock of the Corporation;

 

3.             a majority of the members of the Board is
replaced during any twelve (12) month period by directors whose appointment is
not endorsed by a majority of the members of the Board before the date of the
appointment or election; or

 

4.             any one person, or more than one person
acting as a group, acquires (or has acquired during any twelve (12) month
period) assets from the Corporation that have a total gross fair market value
equal to or more than 40% of the total gross fair market value of all of the
assets of the Corporation immediately before such acquisition or acquisitions.

 

25

 

The determination of whether a Change of Control has
occurred under this Section B of Exhibit A shall be made by the
Committee in accordance with the provisions of Code Section 409A and the
Regulations promulgated thereunder.

 

26Exhibit
10.1

 

 

 

CREDIT
AGREEMENT

 

Dated as of May 3, 2010

 

among

 

KKR
FINANCIAL HOLDINGS LLC

 

and

 

THE
SUBSIDIARIES OF

 

KKR
FINANCIAL HOLDINGS LLC

 

PARTIES
HERETO

 

as the Borrowers,

 

CITIBANK, N.A.,

as Administrative Agent

 

CITIBANK, N.A.,

as Swingline Lender and Issuing Bank

 

and

 

The Other Lenders Party Hereto

 

and

 

CITIGROUP GLOBAL MARKETS INC.,

as

Sole Lead Arranger and Sole Book Manager

 

and

 

BANK OF AMERICA, N.A.,

and

DEUTSCHE BANK AG NEW YORK BRANCH,

as Syndication Agents

 

 

 

TABLE OF
CONTENTS

	
  Section

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I. DEFINITIONS AND
  ACCOUNTING TERMS

  	
   

  	
  1

  
	
  1.01

  	
  Defined Terms

  	
   

  	
  1

  
	
  1.02

  	
  Other Interpretive Provisions

  	
   

  	
  27

  
	
  1.03

  	
  Accounting Terms

  	
   

  	
  28

  
	
  1.04

  	
  Rounding

  	
   

  	
  28

  
	
  1.05

  	
  Exchange Rates; Currency Equivalents

  	
   

  	
  29

  
	
  1.06

  	
  Times of Day

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II. THE
  COMMITMENTS AND BORROWINGS

  	
   

  	
  29

  
	
  2.01

  	
  Revolving Loans

  	
   

  	
  29

  
	
  2.02

  	
  Borrowings, Conversions and Continuations of
  Revolving Loans

  	
   

  	
  29

  
	
  2.03

  	
  Swingline Loans

  	
   

  	
  31

  
	
  2.04

  	
  Letters of Credit

  	
   

  	
  33

  
	
  2.05

  	
  Prepayments

  	
   

  	
  38

  
	
  2.06

  	
  Termination or Reduction of Commitments

  	
   

  	
  39

  
	
  2.07

  	
  Repayment of Loans

  	
   

  	
  39

  
	
  2.08

  	
  Interest

  	
   

  	
  39

  
	
  2.09

  	
  Fees

  	
   

  	
  40

  
	
  2.10

  	
  Computation of Interest and Fees

  	
   

  	
  41

  
	
  2.11

  	
  Evidence of Debt

  	
   

  	
  41

  
	
  2.12

  	
  Payments Generally; Administrative Agent’s
  Clawback

  	
   

  	
  42

  
	
  2.13

  	
  Sharing of Payments by Lenders

  	
   

  	
  43

  
	
  2.14

  	
  Increase in Commitments

  	
   

  	
  44

  
	
  2.15

  	
  Concerning Joint and Several Liability of the
  Borrowers

  	
   

  	
  45

  
	
  2.16

  	
  Contribution

  	
   

  	
  48

  
	
  2.17

  	
  Collateral Security

  	
   

  	
  48

  
	
  2.18

  	
  Additional Borrowers

  	
   

  	
  49

  
	
  2.19

  	
  Defaulting Lender Provisions

  	
   

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III. TAXES, YIELD
  PROTECTION AND ILLEGALITY

  	
   

  	
  52

  
	
  3.01

  	
  Taxes

  	
   

  	
  52

  
	
  3.02

  	
  Illegality

  	
   

  	
  54

  
	
  3.03

  	
  Inability to Determine Rates

  	
   

  	
  54

  
	
  3.04

  	
  Increased Costs; Reserves on Eurodollar Loans

  	
   

  	
  55

  
	
  3.05

  	
  Compensation for Losses

  	
   

  	
  56

  
	
  3.06

  	
  Mitigation Obligations

  	
   

  	
  57

  
	
  3.07

  	
  Survival

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV. CONDITIONS
  PRECEDENT TO BORROWINGS

  	
   

  	
  57

  
	
  4.01

  	
  Conditions to Effectiveness

  	
   

  	
  57

  
	
  4.02

  	
  Conditions of Initial Borrowing

  	
   

  	
  57

  
	
  4.03

  	
  Conditions to all Borrowings

  	
   

  	
  59

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V. REPRESENTATIONS
  AND WARRANTIES

  	
   

  	
  59

  
	
  5.01

  	
  Existence, Qualification and Power

  	
   

  	
  59

  

 

i

 

	
  5.02

  	
  Authorization; No Contravention

  	
   

  	
  60

  
	
  5.03

  	
  Governmental Authorization; Other Consents

  	
   

  	
  60

  
	
  5.04

  	
  Binding Effect

  	
   

  	
  60

  
	
  5.05

  	
  Financial Statements; No Material Adverse Effect

  	
   

  	
  60

  
	
  5.06

  	
  Litigation

  	
   

  	
  61

  
	
  5.07

  	
  No Default

  	
   

  	
  61

  
	
  5.08

  	
  Insurance

  	
   

  	
  61

  
	
  5.09

  	
  Taxes

  	
   

  	
  61

  
	
  5.10

  	
  ERISA Compliance

  	
   

  	
  61

  
	
  5.11

  	
  Properties

  	
   

  	
  61

  
	
  5.12

  	
  Investment Company Act

  	
   

  	
  62

  
	
  5.13

  	
  Disclosure

  	
   

  	
  62

  
	
  5.14

  	
  Compliance with Laws

  	
   

  	
  62

  
	
  5.15

  	
  Solvency

  	
   

  	
  62

  
	
  5.16

  	
  Borrowing Base Report

  	
   

  	
  62

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI. AFFIRMATIVE
  COVENANTS

  	
   

  	
  62

  
	
  6.01

  	
  Financial Statements

  	
   

  	
  62

  
	
  6.02

  	
  Certificates; Other Information

  	
   

  	
  63

  
	
  6.03

  	
  Notices

  	
   

  	
  65

  
	
  6.04

  	
  Payment of Obligations

  	
   

  	
  65

  
	
  6.05

  	
  Preservation of Existence, Etc.

  	
   

  	
  65

  
	
  6.06

  	
  Maintenance of Properties

  	
   

  	
  65

  
	
  6.07

  	
  Maintenance of Insurance

  	
   

  	
  65

  
	
  6.08

  	
  Compliance with Laws

  	
   

  	
  66

  
	
  6.09

  	
  Books and Records

  	
   

  	
  66

  
	
  6.10

  	
  Inspection Rights

  	
   

  	
  66

  
	
  6.11

  	
  Audit Rights

  	
   

  	
  66

  
	
  6.12

  	
  Use of Proceeds

  	
   

  	
  66

  
	
  6.13

  	
  Investment Policies

  	
   

  	
  66

  
	
  6.14

  	
  Further Assurances

  	
   

  	
  66

  
	
  6.15

  	
  Portfolio Valuation and Diversification, Etc.

  	
   

  	
  67

  
	
  6.16

  	
  Calculation of Borrowing Base

  	
   

  	
  68

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII. NEGATIVE
  COVENANTS

  	
   

  	
  73

  
	
  7.01

  	
  Liens

  	
   

  	
  73

  
	
  7.02

  	
  Investments

  	
   

  	
  74

  
	
  7.03

  	
  Indebtedness

  	
   

  	
  74

  
	
  7.04

  	
  Fundamental Changes

  	
   

  	
  75

  
	
  7.05

  	
  Dispositions

  	
   

  	
  76

  
	
  7.06

  	
  Restricted Payments

  	
   

  	
  77

  
	
  7.07

  	
  Transactions with Affiliates

  	
   

  	
  77

  
	
  7.08

  	
  Burdensome Agreements

  	
   

  	
  77

  
	
  7.09

  	
  Financial Covenants

  	
   

  	
  78

  
	
  7.10

  	
  Fiscal Year

  	
   

  	
  79

  
	
  7.11

  	
  Lines of Business

  	
   

  	
  79

  
	
  7.12

  	
  Margin Regulations; Securities Laws

  	
   

  	
  79

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII. EVENTS OF
  DEFAULT AND REMEDIES

  	
   

  	
  79

  
	
  8.01

  	
  Events of Default

  	
   

  	
  79

  
	
  8.02

  	
  Remedies Upon Event of Default

  	
   

  	
  80

  

 

ii

 

	
  8.03

  	
  Application of Funds

  	
   

  	
  81

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX. ADMINISTRATIVE
  AGENT

  	
   

  	
  81

  
	
  9.01

  	
  Appointment and Authority

  	
   

  	
  81

  
	
  9.02

  	
  Rights as a Lender

  	
   

  	
  82

  
	
  9.03

  	
  Exculpatory Provisions

  	
   

  	
  82

  
	
  9.04

  	
  Reliance by Administrative Agent

  	
   

  	
  83

  
	
  9.05

  	
  Delegation of Duties

  	
   

  	
  83

  
	
  9.06

  	
  Resignation of Administrative Agent

  	
   

  	
  83

  
	
  9.07

  	
  Non-Reliance on Administrative Agent and Other
  Lenders

  	
   

  	
  84

  
	
  9.08

  	
  No Other Duties, Etc.

  	
   

  	
  84

  
	
  9.09

  	
  Administrative Agent May File Proofs of
  Claim

  	
   

  	
  84

  
	
  9.10

  	
  Collateral Matters

  	
   

  	
  85

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X. MISCELLANEOUS

  	
   

  	
  85

  
	
  10.01

  	
  Amendments, Etc.

  	
   

  	
  85

  
	
  10.02

  	
  Notices; Effectiveness; Electronic Communication

  	
   

  	
  87

  
	
  10.03

  	
  No Waiver; Cumulative Remedies

  	
   

  	
  88

  
	
  10.04

  	
  Expenses; Indemnity; Damage Waiver

  	
   

  	
  88

  
	
  10.05

  	
  Payments Set Aside

  	
   

  	
  90

  
	
  10.06

  	
  Successors and Assigns

  	
   

  	
  91

  
	
  10.07

  	
  Treatment of Certain Information;
  Confidentiality

  	
   

  	
  94

  
	
  10.08

  	
  Right of Setoff

  	
   

  	
  95

  
	
  10.09

  	
  Interest Rate Limitation

  	
   

  	
  95

  
	
  10.10

  	
  Counterparts; Integration; Effectiveness

  	
   

  	
  96

  
	
  10.11

  	
  Survival of Representations and Warranties

  	
   

  	
  96

  
	
  10.12

  	
  Severability

  	
   

  	
  96

  
	
  10.13

  	
  Replacement of Lenders

  	
   

  	
  96

  
	
  10.14

  	
  Governing Law; Jurisdiction; Etc.

  	
   

  	
  97

  
	
  10.15

  	
  No Advisory or Fiduciary Responsibility

  	
   

  	
  98

  
	
  10.16

  	
  U.S. PATRIOT Act Notice

  	
   

  	
  99

  
	
  10.17

  	
  Entire Agreement

  	
   

  	
  99

  
	
  10.18

  	
  Judgment Currency

  	
   

  	
  99

  

 

iii

 

	
  SCHEDULES

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.01

  	
  Commitments and Applicable Percentages

  	
   

  	
   

  
	
  5.06

  	
  Litigation

  	
   

  	
   

  
	
  7.01

  	
  Existing Liens

  	
   

  	
   

  
	
  7.03

  	
  Existing Indebtedness

  	
   

  	
   

  
	
  7.08

  	
  Burdensome Agreements

  	
   

  	
   

  
	
  10.02

  	
  Administrative Agent’s Office; Certain Addresses for Notices

  	
   

  	
   

  
	
  10.06

  	
  Processing and Recordation Fees

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  A

  	
  Form of Revolving Loan Notice

  	
   

  	
   

  
	
  B

  	
  Form of Swingline Loan Notice

  	
   

  	
   

  
	
  C

  	
  Form of Promissory Note

  	
   

  	
   

  
	
  D

  	
  Form of Borrowing Base Report

  	
   

  	
   

  
	
  E

  	
  Form of Compliance Certificate

  	
   

  	
   

  
	
  F

  	
  Form of Assignment and Assumption

  	
   

  	
   

  
	
  G-1

  	
  Form of Opinion of Simpson Thacher & Bartlett LLP

  	
   

  	
   

  
	
  G-2

  	
  Form of Opinion of In-house General Counsel for the Borrowers

  	
   

  	
   

  
	
  G-3

  	
  Form of Opinion of Maples and Calder

  	
   

  	
   

  

 

iv

 

 

CREDIT
AGREEMENT

 

This CREDIT AGREEMENT (this “Agreement”)
is entered into as of May 3, 2010, among KKR FINANCIAL HOLDINGS LLC, a
Delaware limited liability company (“KKR Financial”); KKR FINANCIAL
HOLDINGS II, LLC, a Delaware limited liability company (“KKR Holdings II”);
KKR FINANCIAL HOLDINGS III, LLC, a Delaware limited liability company (“KKR
Holdings III”); KKR FINANCIAL HOLDINGS, INC., a Delaware corporation (“KKR
Holdings”); KKR FINANCIAL HOLDINGS, LTD., a Cayman Islands company (“KKR
Holdings LTD”); KKR TRS HOLDINGS, LTD., a Cayman Islands company (“KKR
TRS LTD”); KKR FINANCIAL CLO 2009-1, LTD., a Cayman Islands company (“KKR
CLO 2009”); KFH III HOLDINGS LTD., a Cayman Islands company (“KFH III”);
and any other Borrower from time to time party hereto; each lender from time to
time party hereto (collectively, the “Lenders” and individually, a “Lender”);
CITIBANK, N.A., as Swingline Lender and Issuing Bank; and CITIBANK, N.A., as
Administrative Agent.

 

W I T N E S S E T H:

 

The Borrowers,
the Lenders, the Administrative Agent, the Issuing Bank and the Swingline
Lender agree as follows:

 

ARTICLE I.

DEFINITIONS AND ACCOUNTING TERMS

 

1.01        Defined Terms.  As used in this Agreement, the following terms shall have
the meanings set forth below:

 

“Adjusted Consolidated
Tangible Net Worth” means, as of any date of determination, an amount equal
to (a) the Consolidated Net Worth for KKR Financial and its consolidated
Subsidiaries (as of such date of determination, and calculated without regard
to any accumulated other comprehensive income or loss), less
(b) the Intangible Assets for KKR Financial and its consolidated
Subsidiaries (as of such date of determination), excluding accumulated other
comprehensive income or loss (a component of shareholders’ equity) plus (c) Trust Preferred Indebtedness (as of such date
of determination, but in no event greater than $440,000,000).

 

“Adjusted Total
Liabilities” means, as of any date of determination, Consolidated Total
Liabilities less (i) Non-Company VIE
Liabilities and (ii) Trust Preferred Indebtedness (as of such date of
determination, but in no event greater than $440,000,000).

 

“Administrative Agent”
means Citibank, N.A. in its capacity as administrative agent under any of the
Loan Documents, or any successor administrative agent.

 

“Administrative Agent’s
Office” means the Administrative Agent’s address and, as appropriate,
account as set forth on Schedule 10.02, or such other address or account
as the Administrative Agent may from time to time notify to the Borrowers and
the Lenders.

 

“Administrative
Questionnaire” means an Administrative Questionnaire in a form supplied by
the Administrative Agent.

 

“Affiliate” means,
with respect to any Person, another Person that directly, or indirectly through
one or more intermediaries, Controls or is Controlled by or is under common
Control with the Person 

 

1

 

specified;
provided, however, that neither Maples Finance Limited nor any
special purpose companies for which it provides corporate administrative
services shall be deemed to be an affiliate of KKR TRS LTD.

 

“Affiliated Debt Fund”
means any investment fund managed or advised by Affiliates of Kohlberg Kravis
Roberts & Co. L.P. that is a bona fide debt fund.

 

“Agent Parties” has
the meaning specified in Section 10.02(c).

 

“Aggregate Commitments”
means, collectively, all Commitments of all Lenders at any time outstanding.

 

“Aggregate Commitment
Amount” means the aggregate principal amount of the Aggregate Commitments
from time to time.  On the date hereof,
the Aggregate Commitment Amount equals $210,000,000.  The Aggregate Commitment Amount may be
increased to an amount up to $600,000,000 in accordance with Section 2.14.

 

“Agreement” means
this Credit Agreement, as further amended, restated, extended, supplemented or
otherwise modified in writing from time to time.

 

“Allocable Amount”
has the meaning specified in Section 2.16.

 

“Alternate Currency”
means Euros, British Pounds Sterling, Canadian Dollars, Australian Dollars and
any other currency reasonably acceptable to the Administrative Agent that is
freely convertible into Dollars and readily available in the London interbank
market.

 

“Alternate Currency
Equivalent” means, at any time, as to any amount denominated in Dollars as
of any date of determination, the equivalent amount thereof in the applicable
Alternate Currency as determined by the Administrative Agent at such time on
the basis of the Spot Rate (determined in respect of the most recent
Revaluation Date) for the purchase of such Alternate Currency with Dollars.

 

“Alternate Currency Loan”
means each Loan denominated in an Alternate Currency.

 

“Applicable Percentage”
means with respect to any Lender at any time, the percentage (carried out to
the ninth decimal place) of the Aggregate Commitment Amount represented by such
Lender’s Commitment at such time.  If the
commitment of each Lender to make Loans has been terminated pursuant to Section 8.02
or if the Aggregate Commitments have expired, then the Applicable Percentage of
each Lender shall be determined based on the Applicable Percentage of such
Lender most recently in effect, giving effect to any subsequent
assignments.  The initial Applicable
Percentage of each Lender is set forth opposite the name of such Lender on Schedule 2.01
or in the Assignment and Assumption pursuant to which such Lender becomes a
party hereto, as applicable.

 

“Applicable Rate”
means a per annum rate equal to (a) 2.25%, in the case of Base Rate Loans
and (b) 3.25%, in the case of Eurodollar Loans.

 

“Applicable Time”
means, with respect to any borrowings and payments in any Alternate Currency,
the local time in the place of settlement for such Alternate Currency as may be
determined by the Administrative Agent to be necessary for timely settlement on
the relevant date in accordance with normal banking procedures in the place of
payment.

 

“Approved Currency”
means: (a) with respect to Base Rate Loans and Daily Floating Eurodollar
Loans, Dollars; (b) with respect to Fixed Period Eurodollar Loans, each of
Dollars, Euros, British Pounds 

 

2

 

Sterling,
Canadian Dollars, Australian Dollars and any other Alternate Currency; and (c) with
respect to Specified Financial Assets, each of Dollars, Euros, British Pounds
Sterling, Canadian Dollars, Australian Dollars and Yen.

 

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

 

“Arranger” means
Citigroup Global Markets Inc., in its capacity as sole lead arranger and
sole book manager.

 

“Assignee Group”
means two or more Eligible Assignees that are Affiliates of one another or two
or more Approved Funds managed by the same investment advisor.

 

“Assignment and
Assumption” means an assignment and assumption entered into by a Lender and
an Eligible Assignee with the consent of any party whose consent is required by
Section 10.06(b), and accepted by the Administrative Agent, in
substantially the form of Exhibit F or any other form approved by
the Administrative Agent.

 

“Attributable
Indebtedness” means, on any date, (a) in respect of any capital lease
of any Person, the capitalized amount thereof that would appear on a balance
sheet of such Person prepared as of such date in accordance with GAAP, and (b) in
respect of any Synthetic Lease Obligation, the capitalized amount of the
remaining lease payments under the relevant lease that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP
if such lease were accounted for as a capital lease.

 

“Audited Financial
Statements” means the audited consolidated balance sheet of KKR Financial
and its Subsidiaries for the fiscal year ended December 31, 2009, and the related consolidated statements of
income or operations, shareholders’ equity and cash flows for such fiscal year
of KKR Financial and its Subsidiaries, including the notes thereto.

 

“Australian Dollars”
means the lawful currency of Australia.

 

“Availability” shall
mean, at any time, an amount equal to the Line Cap minus the Total Revolving
Credit Exposure.

 

“Availability Period”
means the period from and including the Closing Date to the earliest of (a) the
Maturity Date, (b) the date of termination of the Aggregate Commitments
pursuant to Section 2.06, and (c) the date of termination of
the commitment of each Lender to make Loans pursuant to Section 8.02.

 

“Bank” means a
financial institution that (i) has, or is part of a Consolidated Group
that has, at least $2.0 billion in capital, and is, or is an affiliate of
another entity within such Consolidated Group that is, regulated by the Office
of the Comptroller of the Currency, the Federal Reserve or the Office of Thrift
Supervision; or (ii) is, or is an affiliate of another entity within a
Consolidated Group that is, a registered broker/dealer under the Securities
Exchange Act of 1934, and has, or is part of a Consolidated Group that has, a
senior unsecured debt rating of at least A-/A3; provided, that an institution that does not
meet the criteria of clause (i) or clause (ii) above may nonetheless
be classified as a “Bank” on the following conditions: (x) the
Administrative Agent, in its sole discretion, exercised in a commercially
reasonable manner, which discretionary decision shall not be unreasonably
withheld or delayed, shall have expressly agreed to such classification, and (y) the
Value of all Eligible Specified Financial Assets that are Bank Loans originated
by such financial institution does not exceed $50 million (or such greater
amount as the 

 

3

 

Administrative
Agent, in its sole discretion, exercised in a commercially reasonable manner,
may determine) at any time.

 

“Bank Loan” has the
meaning specified in Section 6.16(b).

 

“Base Rate” means for
any day a fluctuating rate per annum equal to the highest of (a) the
Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect
for such day as publicly announced from time to time by Citibank, N.A. as its “base
rate” and (c) the Eurodollar Rate for loans with an Interest Period of one
(1) month in effect on such date plus 1%. 
The “prime rate” is a rate set by Citibank, N.A. based upon various
factors including Citibank, N.A.’s costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate.  Any change in such rate announced by Citibank,
N.A. shall take effect at the opening of business on the day specified in the
public announcement of such change.

 

“Base Rate Loan”
means a Loan that bears interest at a per
annum rate equal to the Base Rate plus the Applicable Rate.

 

“BBA LIBOR” has the
meaning specified in the definition of “Daily Floating Eurodollar Rate”.

 

“Borrowers” and “Borrower”
means (i) each of KKR Financial, KKR Holdings II, KKR Holdings III, KKR
Holdings, KKR Holdings LTD, KKR TRS LTD, KKR CLO 2009 and KFH III and (ii) any
other direct or indirect wholly owned Subsidiary of KKR Financial, reasonably
acceptable to the Administrative Agent, that becomes party to this Agreement by
executing a joinder agreement in accordance with Section 2.18.

 

“Borrowing” means (i) Revolving
Loans of the same Interest Rate Type and Currency Type, made, converted or
continued on the same date and, in the case of Fixed Period Eurodollar Loans,
as to which a single Interest Period is in effect, or (ii) Swingline Loans
of the same duration, as applicable.

 

“Borrowing Base” has
the meaning specified in Section 6.16(a).

 

“Borrowing Base
Deficiency” means, at any date on which the same is determined, the amount,
if any, that (a) the amount of Total Revolving Credit Exposure as of such
date exceeds (b) the Borrowing Base as of such date.

 

“Borrowing Base Report”
means a report signed by a Responsible Officer of each of Borrowers, in
substantially the form of Exhibit D hereto, delivered to the
Administrative Agent.

 

“Borrower Materials”
has the meaning specified in Section 6.02.

 

“Bridge Loan” means
debt financing with an original maturity of not more than one (1) year
with an expected repayment from a capital markets transaction.

 

“British Pounds Sterling”
means the lawful currency of Great Britain.

 

“Business Day” means
any day other than a Saturday, Sunday or other day on which commercial banks
are authorized to close under the Laws of, or are in fact closed in, the state
where the Administrative Agent’s Office with respect to Obligations denominated
in Dollars is located and:

 

(a)           if such day relates to any interest rate settings as
to a Eurodollar Loan denominated in Dollars, any fundings, disbursements,
settlements and payments in 

 

4

 

Dollars in respect of any
such Eurodollar Loan, or any other dealings in Dollars to be carried out
pursuant to this Agreement in respect of any such Eurodollar Loan, means any
such day on which dealings in deposits in Dollars are conducted by and between
banks in the London interbank Eurodollar market;

 

(b)           if such day relates to any interest rate settings as
to a Fixed Period Eurodollar Loan denominated in Euros, any fundings,
disbursements, settlements and payments in Euros in respect of any such
Eurodollar Loan, or any other dealings in Euros to be carried out pursuant to
this Agreement in respect of any such Eurodollar Rate Loan, means a TARGET Day;

 

(c)           if such day relates to any interest rate settings as
to a Fixed Period Eurodollar Loan denominated in an Approved Currency other
than Dollars or Euros, means any such day on which dealings in deposits in the
relevant Approved Currency are conducted by and between banks in the London or
other applicable offshore interbank market for such Approved Currency; and

 

(d)           if such day relates to any fundings, disbursements,
settlements and payments in an Approved Currency other than Dollars or Euros in
respect of a Fixed Period Eurodollar Loan denominated in a currency other than
Dollars or Euros, or any other dealings in any Approved Currency other than
Dollars or Euros to be carried out pursuant to this Agreement in respect of any
such Eurodollar Loan (other than any interest rate settings), means any such
day on which banks are open for foreign exchange business in the principal
financial center of the country of such Approved Currency.

 

“Canadian Dollars”
means the lawful currency of Canada.

 

“Capital Lease
Obligations” of any Person means the obligations of such Person to pay rent
or other amounts under any lease of (or other arrangement conveying the right
to use) real or personal property, or a combination thereof, which obligations
are required to be classified and accounted for as capital leases on a balance
sheet of such Person under GAAP, and the amount of such obligations shall be
the capitalized amount thereof determined in accordance with GAAP.

 

“Cash Collateralize”
means, in respect of an obligation, to provide and pledge (as a first priority
perfected security interest) cash collateral in Dollars, at a location and
pursuant to documentation in form and substance reasonably satisfactory to the
Administrative Agent (and “Cash Collateralization” has a corresponding
meaning).

 

“Cash Equivalents”
has the meaning specified in Section 6.16(b).

 

“Change in Law” means
the occurrence, after the date of this Agreement, of any of the following: (a) the
adoption or taking effect of any law, rule, regulation or treaty, (b) any
change in any law, rule, regulation or treaty or in the administration,
interpretation or application thereof by any Governmental Authority or (c) the
making or issuance of any request, guideline or directive (whether or not
having the force of law) by any Governmental Authority.

 

“Change of Control”
means (a) the acquisition of ownership, directly or indirectly,
beneficially or of record, by any Person or group (within the meaning of the
Securities Exchange Act of 1934 and the rules of the SEC thereunder as in
effect on the date hereof), of Equity Interests representing more than 50% of
the aggregate ordinary voting power represented by the issued and outstanding
Equity Interests of KKR Financial; (b) occupation of a majority of the
seats (other than vacant seats) on the board of 

 

5

 

directors
of KKR Financial by Persons who were neither (i) nominated by the board of
directors of KKR Financial nor (ii) appointed by directors so nominated;
or (c) the acquisition of direct or indirect Control of any Borrower by
any Person or group (within the meaning of the Securities Exchange Act of 1934
and the rules of the SEC thereunder as in effect on the date hereof) not
in Control of any such Borrower on the Closing Date. It is understood and
agreed that KKR Financial LLC does not Control KKR Financial solely for
purposes of this definition.

 

“CLO” means a special
purpose entity managed by KKR Financial Advisors II, LLC or its Affiliates that
is formed for the purpose of securitizing corporate debt instruments and of
which at least one Person unaffiliated with KKR Financial holds any of the
issued and outstanding notes.

 

“Closing Date” means
the earliest date on which each of the conditions precedent set forth in Sections
4.01, 4.02 and 4.03 have either been satisfied or waived.

 

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

 

“Collateral” means the
specific Eligible Specified Financial Assets and other property, accounts,
rights and interests of the Borrowers that are or are intended to be subject to
the Liens created by the Security Documents. 
It is understood and agreed that the Borrowers shall be permitted to
replace, withdraw or otherwise dispose of Collateral at any time for any reason
so long as after giving effect to any such replacement, withdrawal or
disposition, the Borrowers remain in compliance with each of the financial
covenants set forth in Section 7.09.  For the avoidance of doubt, Collateral shall
include a first lien pledge on the notes and common shares held by the
Borrowers in the CLOs (other than KKR CLO 2009).

 

“Collateral Agreement”
means the Collateral Agency Agreement to be executed and delivered in
connection with this Agreement, among the Borrowers, the Administrative Agent
and the Custodian, as further amended, restated, extended, supplemented or
otherwise modified in writing from time to time, or such other agreement (the
terms of which will be substantially consistent with the existing Collateral
Agreement at such time, unless otherwise agreed by the Borrowers) in
replacement thereof as the Administrative Agent may require, with the consent
of the Borrowers, which consent shall not be unreasonably withheld or delayed.

 

“Commitment” means,
as to each Lender, its obligation to (a) make Revolving Loans to the
Borrowers pursuant to Section 2.01 and (b) purchase
participations in Swingline Loans, in an aggregate principal amount at any one
time outstanding not to exceed the amount set forth opposite such Lender’s name
on Schedule 2.01 or in the Assignment and Assumption pursuant to
which such Lender becomes a party hereto, as applicable, as such amount may be
adjusted from time to time in accordance with this Agreement.

 

“Compliance Certificate”
means a certificate substantially in the form of Exhibit E.

 

“Consolidated Group”
means the collective group of affiliated entities that are required, in
accordance with GAAP, to issue consolidated financial statements.

 

“Consolidated Net Worth”
means, as of any date of determination, the aggregate sum of all amounts which
would be included on a consolidated balance sheet of KKR Financial and its
Consolidated Subsidiaries under shareholders’ equity as of such date in
accordance with GAAP.

 

“Consolidated Total
Assets” means, as of any date of determination, the sum of (a) all
assets (“consolidated balance sheet assets”) of KKR Financial and its
Subsidiaries determined on a consolidated 

 

6

 

basis
in accordance with GAAP, plus (b) without duplication, all assets leased
by KKR Financial or any Subsidiary as lessee under any Synthetic Lease to the
extent that such assets would have been consolidated balance sheet assets had
the Synthetic Lease been treated for accounting purposes as a capital lease,
plus (c) without duplication, all proceeds of sold receivables in respect
of sales of (i) accounts or general intangibles for money due or to become
due, (ii) chattel paper, instruments or documents creating or evidencing a
right to payment of money or (iii) other receivables (collectively “receivables”),
whether pursuant to a purchase facility or otherwise, other than in connection
with the disposition of the business operations of such Persons relating
thereto or a disposition of defaulted receivables for collection and not as a
financing arrangement, and together with any obligation of such Persons to pay
any discount, interest, fees, indemnities, penalties, recourse, expenses or
other amounts in connection therewith, to the extent that such receivables
would have been consolidated balance sheet assets had they not been sold.

 

“Consolidated Total
Liabilities” means, as of any date of determination, all liabilities of KKR
Financial and its Subsidiaries determined on a consolidated basis in accordance
with GAAP and classified as such on the consolidated balance sheet of KKR
Financial and its Subsidiaries and, without duplication, all other Indebtedness
of KKR Financial and its Subsidiaries, whether or not so classified; provided,
that for purposes of this definition, in the case of a Trust Preferred
Securities Transaction of KKR Financial or any Subsidiary of KKR Financial,
only the Trust Preferred Indebtedness issued or incurred by KKR Financial or
any Subsidiary of KKR Financial in connection therewith, excluding Trust
Preferred Indebtedness relating solely to the common equity securities of the
applicable Trust Preferred Financing Vehicle, shall be included in determining
the liabilities and other Indebtedness of KKR Financial and its
Subsidiaries.  Notwithstanding the
foregoing, Consolidated Total Liabilities shall not include liabilities arising
out of any Disposition by KKR Financial of all of its residential real estate
assets as contemplated by Section 7.05(b) (i) that are
nonrecourse to the Borrowers and (ii) are recorded by KKR Financial based
on required application of FAS 140 or FIN-46(R).

 

“Contractual Obligation”
means, as to any Person, any provision of any security issued by such Person or
of any agreement, instrument or other undertaking to which such Person is a
party or by which it or any of its property is bound.

 

“Control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled”
have meanings correlative thereto.

 

“Convertible Securities”
has the meaning specified in Section 6.16(b).

 

“Currency Type”
means, with respect to any Loan, its character based upon the Approved Currency
in which it was made and is repayable.

 

“Custodial Account”
means the account established and maintained pursuant to the Collateral
Agreement in which Collateral will be deposited by the Borrowers and pledged to
the Administrative Agent and any demand deposit account established and
maintained in connection therewith.

 

“Custodian” means The
Bank of New York Mellon or another institution selected by the Administrative
Agent with the consent of the Borrowers, which consent shall not be
unreasonably withheld or delayed.

 

“Daily Floating
Eurodollar Loan” means a Loan that bears interest at a per annum rate equal
to the Daily Floating Eurodollar Rate plus the Applicable Rate.

 

7

 

“Daily Floating
Eurodollar Rate” means, for any day, a fluctuating rate per annum equal to
the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published
by Reuters (or other commercially available source providing quotations of BBA
LIBOR as designated by the Administrative Agent from time to time) at
approximately 11:00 a.m. (London time) on such day (if such day is a
Business Day) or the immediately preceding Business Day (if such day is not a
Business Day), for deposits in the relevant Approved Currency with a term
equivalent to one (1) month.  If
such rate is not available at such time for any reason, then the “Daily
Floating Eurodollar Rate” shall be the rate per annum determined by the
Administrative Agent to be the rate at which deposits in the relevant Approved
Currency in Same Day Funds in the approximate amount of the Daily Floating
Eurodollar Loan being made, continued or converted by Citibank, N.A. and with a
term equivalent to one (1) month would be offered by Citibank, N.A.’s
London Branch to major banks in the London interbank eurodollar market for such
Approved Currency at their request at approximately 11:00 a.m. (London
time) on such day (if such day is a Business Day) or the immediately preceding
Business Day (if such day is not a Business Day).

 

“Debt Rating” means,
as of any date, the rating that has been most recently assigned (either
publicly or privately, and including a “shadow” rating) by S&P or Moody’s
(or, if no such rating is available with respect to Rule 144A Debt
Securities only, NAIC), as the case may be, for either (i) any Eligible
Specified Financial Asset or (ii) if no such rating is available from any
such rating agency with respect to senior unsecured Bank Loans only, for a
class of non-credit enhanced long-term senior unsecured debt issued by the
applicable obligor of such senior unsecured Bank Loan.  For purposes of the foregoing, (a) if
only one of S&P or Moody’s (or, if no such rating is available with respect
to Rule 144A Debt Securities only, NAIC) shall have in effect a Debt
Rating, the Debt Rating for the purposes of this Agreement shall be determined
by reference to the available rating, (b) if more than one Debt Rating shall
be in effect, the Debt Rating for the purposes of this Agreement shall be
determined by reference to the lowest rating issued by S&P or Moody’s, (c) if
any Debt Rating established by S&P or Moody’s (or, if no such rating is
available with respect to Rule 144A Debt Securities only, NAIC) shall be
changed after the date of initial determination thereof hereunder or if any
agency establishes a Debt Rating for any Eligible Specified Financial Asset
where, previously, there was no Debt Rating, such new Debt Rating shall be
effective, subject to clause (b) above, as of the date on which such
change is first announced publicly or privately by the rating agency making
such change or issuing such rating, as applicable, and (d) if S&P or
Moody’s (or, for Rule 144A Debt Securities, NAIC) shall change the basis
on which Debt Ratings are established, each reference to the Debt Rating
assigned by S&P or Moody’s (or, for Rule 144A Debt Securities, NAIC),
as the case may be, shall refer to the then equivalent rating by S&P or
Moody’s (or, for Rule 144A Debt Securities, NAIC), as the case may be.

 

“Debt Securities” as
used in the other definitions contained herein, means securities evidencing
debt obligations, including, without limitation, certificates representing an interest
in a trust, the principal assets of which consist of debt obligations.

 

“Debtor Relief Laws”
means the Bankruptcy Code of the United States, and all other liquidation,
conservatorship, bankruptcy, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization, or similar
debtor relief Laws of the United States or other applicable jurisdictions from
time to time in effect and affecting the rights of creditors generally.

 

“Default” means any
event or condition that constitutes an Event of Default or that, with the
giving of any notice, the passage of time, or both, would be an Event of
Default.

 

“Default Rate” means,
when used with respect to Obligations, (i) with respect to Base Rate
Loans, an interest rate equal to (A) the Base Rate plus (B) 2%
per annum; and (ii) with respect to a Eurodollar Loan, an interest rate
equal to (A) the interest rate (including any Applicable Rate) otherwise
applicable to such Eurodollar Loan plus (B) 2% per annum.

 

8

 

“Defaulting Lender”
means, at any time, a Lender (i) that has failed for three or more
Business Days to comply with its obligations under this Agreement to make a
Loan, make a payment to the Issuing Bank in respect of an LC Payment and/or
make a payment to the Swingline Lender in respect of a Swingline Loan (each a “funding
obligation”), (ii) that has notified the Administrative Agent, or has
stated publicly, that it will not comply with any such funding obligation hereunder,
or has defaulted on its funding obligations under any other loan agreement or
credit agreement or other financing agreement, (iii) that has, for three
or more Business Days, failed to confirm in writing to the Administrative
Agent, in response to a written request of the Administrative Agent, that it
will comply with its funding obligations hereunder, or (iv) in respect of
which a Lender Insolvency Event has occurred and is continuing, in the case of
clauses (i) through (iv) above unless the subject of a good faith
dispute and such Lender has notified the Administrative Agent in writing of
such (provided that neither the reallocation of funding obligations provided
for in Section 2.19(c) as a result of a Lender’s being a Defaulting
Lender nor the performance by Non-Defaulting Lenders of such reallocated
funding obligations will by themselves cause the relevant Defaulting Lender to
become a Non-Defaulting Lender).  Any
determination that a Lender is a Defaulting Lender under clauses (i) through
(iv) above will be made by the Administrative Agent in its reasonable
discretion acting in good faith.  The
Administrative Agent will promptly send to all parties hereto a copy of any
notice to the Borrowers provided for in this definition.

 

“Delayed Draw Loan” means,
as of any date, a term loan that has not yet been fully funded.

 

“Delayed Draw Reserve”
means, as of any date, an amount equal to the aggregate amount of the
respective Unfunded Delayed Draw Amounts for each Delayed Draw Loan that is a
Specified Financial Asset as of such date.

 

“Disposition” means
the sale, transfer, license, lease or other disposition (including any sale and
leaseback transaction) of any property by any Person, including any sale,
assignment, transfer or other disposal, with or without recourse, of any notes
or accounts receivable or any rights and claims associated therewith.

 

“Dollar” and “$”
mean the lawful currency of the United States.

 

“Dollar Equivalent”
means, at any time, (a) with respect to any amount denominated in Dollars,
such amount, and (b) with respect to any amount denominated in any
Alternate Currency, the equivalent amount thereof in Dollars as determined by
the Administrative Agent at such time on the basis of the Spot Rate (determined
in respect of the most recent Revaluation Date) for the purchase of Dollars
with such Alternate Currency.

 

“Eligible Assignee”
means (a) any Person that meets the requirements to be an assignee under Sections 10.06(b)(iii),
10.06(b)(v) and 10.06(b)(vi), (b) a commercial bank organized
under the laws of the United States, or any State thereof, having total assets
in excess of $500,000,000 or any commercial finance or asset based lending
affiliate of any such commercial bank, (c) a savings and loan association
or savings bank organized under the laws of the United States, or any State
thereof, having a net worth of at least $250,000,000 calculated in accordance
with GAAP, (d) any Lender (or any Affiliate of any Lender) listed on the
signature page of this Agreement, (e) other financial institutions
with a net worth of at least $250,000,000 and (f) any Affiliated Debt
Fund.

 

“Eligible Specified
Financial Asset” means a Specified Financial Asset, or a Participation
Interest therein, of any Borrowers:

 

(a)           in which, to secure the Obligations, whether contingent or
otherwise, the Administrative Agent has a security interest (i) perfected
by the Administrative Agent’s possession or by “control” (as 

 

9

 

defined
in §§ 8-106, 9-104, 9-105 and 9-106 of the Uniform Commercial Code of the State
of New York) in favor of the Administrative Agent (with, if the Administrative
Agent so elects and terminates the Collateral Agreement, another Custodian or
securities intermediary designated by the Administrative Agent with the
Borrowers’ consent, which consent shall not be unreasonably withheld or
delayed, for the purposes of obtaining control), or, if in the reasonable
opinion of the Administrative Agent it is not possible or practicable to
perfect the security interest by the Administrative Agent’s possession or by “control”
in favor of the Administrative Agent, is otherwise perfected, and perfected in
such a way as to be entitled to first priority, to the reasonable satisfaction
of the Administrative Agent and (ii) is capable of being enforced by the
Administrative Agent without the consent of any third party (other than, in the
case of a Specified Financial Asset that is a loan, the customary requirement
of the consent of the administrative agent or, unless the loan is in default,
borrower or material obligor of the loan) or resort to judicial process;

 

(b)           which
is not otherwise subject to any equal or prior security interest, lien or
encumbrance other than liens in favor of the Administrative Agent for the benefit
of the Lenders;

 

(c)           which
is not in default as of the date on which such asset was acquired by the
Borrowers;

 

(d)           which
is not subject to any right of recoupment or set-off;

 

(e)           for
any Loan Collateral (as defined in the Security Agreement) of any Borrower, in
respect of which, the Administrative Agent or the Custodian, on behalf of the
Administrative Agent, as directed by the Administrative Agent, has received an
original or copy of (1) a credit agreement indicating such Borrower as a
lender thereunder with respect to the loan or advance, (2) a promissory
note indicating such Borrower as a payee of the loan or advance, (3) an
assignment agreement indicating such Borrower as an assignee of the loan or
advance or (4) a participation agreement or participation certificate
indicating such Borrower as a participant in the loan or advance;

 

(f)            in
respect of which, unless under the “control” (as defined in §§ 8-106, 9-104,
9-105 and 9-106 of the Uniform Commercial Code of the State of New York) of the
Administrative Agent acting as a securities intermediary, such Borrower has
issued to the applicable issuer or material obligor (or, if payments are made
through an agent, to the applicable agent) an instruction directing all
payments of amounts payable to such Borrower in respect of such Specified
Financial Asset to the Custodial Account or another account approved by the
Administrative Agent over which the Administrative Agent has such “control”;

 

(g)           the
Value of which to be included, for purposes of the computation of the
applicable Borrowing Base at any time, has been determined, or, if required to
be updated, has been determined in response to the update requirement set forth
in Section 6.02(d), (e) or (f), and to the extent such Value
is not being disputed by the Administrative Agent;

 

(h)           for
which the depositary bank, issuer or material obligor, as the case may be,
excluding any issuer of securities by a special purpose entity in a
securitization, is organized and has its chief executive office in (i) the
United States of America, or (ii) if approved by the Administrative Agent
in its sole discretion, which shall be exercised in a commercially reasonable
manner, Belgium, France, Italy, Luxembourg, Netherlands, Germany, Denmark,
Ireland, United Kingdom, Austria, Finland, Sweden or Japan;

 

(i)            which
is denominated in Dollars, Euros, British Pounds Sterling or Yen;

 

(j)            is
not “margin stock” as defined in Regulation U of the Federal Reserve Board;

 

10

 

(k)           in
the case of a first or second lien Bank Loan, a Mezzanine Obligations or a
Bridge Loan, that is a term loan, and is either a Delayed Draw Loan or has been
fully funded (i.e., is not subject to an additional lending commitment) and is
not in default; and

 

(l)            in
the case of a Participation Interest, which the Administrative Agent is
reasonably satisfied is a “true” participating interest rather than being a
financing and is consistent with market norms for agreements between
unaffiliated entities dealing at arm’s length.

 

Notwithstanding the
foregoing, the Borrowing Base on any date may include an asset to be purchased
by any Borrower with the proceeds of a Loan to be made on that date so long as (i) the
Administrative Agent has been directed by such Borrower to pay the proceeds of
such Loan directly to the seller of the asset (to the extent of the purchase
price thereof), and (ii) the seller has been directed to deliver the asset
to the Administrative Agent or its nominee before or against payment by such
Borrower, or, if such delivery is not possible or practical, in such other
manner as is reasonably acceptable to the Administrative Agent to satisfy the
requirements of clauses (a), (b) and (c) of this definition of “Eligible
Specified Financial Asset.”  In such
instance, the requirements of clauses (a), (b), (c) and (d) need not
be met for the asset to qualify as an Eligible Specified Financial Asset until
the expiration of three Business Days following the date of the Borrowing so
long as during the three Business Day period, the Administrative Agent has a
first priority perfected security interest in the asset, provided, however, that the Value of the
asset does not exceed $25,000,000.

 

“Environmental Laws”
means any and all Federal, state, local, and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including those related to
hazardous substances or wastes, air emissions and discharges to waste or public
systems.

 

“Environmental Liability”
means any liability, contingent or otherwise (including any liability for damages,
costs of environmental remediation, fines, penalties or indemnities), of KKR
Financial or any of its respective Subsidiaries directly or indirectly
resulting from or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of
any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the
release or threatened release of any Hazardous Materials into the environment
or (e) any contract, agreement or other consensual arrangement pursuant to
which liability is assumed or imposed with respect to any of the foregoing.

 

“Equity Interests”
means, with respect to any Person, all of the shares of capital stock of (or
other ownership or profit interests in) such Person, all of the warrants,
options or other rights for the purchase or acquisition from such Person of
shares of capital stock of (or other ownership or profit interests in) such
Person, all of the securities convertible into or exchangeable for shares of
capital stock of (or other ownership or profit interests in) such Person or
warrants, rights or options for the purchase or acquisition from such Person of
such shares (or such other interests), and all of the other ownership or profit
interests in such Person (including partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares,
warrants, options, rights or other interests are outstanding on any date of
determination.

 

“ERISA” means the
Employee Retirement Income Security Act of 1974.

 

“ERISA Affiliate”
means any trade or business (whether or not incorporated) under common control
with any Borrower within the meaning of Section 414(b) or (c) of
the Code (and Sections 414(m) and (o) of the Code for purposes
of provisions relating to Section 412 of the Code).

 

11

 

“ERISA Event” means (a) a
Reportable Event with respect to a Pension Plan; (b) a withdrawal by any
Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063
of ERISA during a plan year in which it was a substantial employer (as defined
in Section 4001(a)(2) of ERISA) or a cessation of operations that is
treated as such a withdrawal under Section 4062(e) of ERISA; (c) a
complete or partial withdrawal by a any Borrower or any ERISA Affiliate from a
Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or 4041A
of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which constitutes
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan or Multiemployer Plan;
or (f) the imposition of any liability under Title IV of ERISA, other than
for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon
any Borrower or any ERISA Affiliate.

 

“Euro” means the
single currency of the members of the European Union from time to time which
adopt a single, shared currency.

 

“Eurodollar Loans”
means Fixed Period Eurodollar Loans or Daily Floating Eurodollar Loans.

 

“Eurodollar Rate”
means the Fixed Period Eurodollar Rate or the Daily Floating Eurodollar Rate.

 

“Event of Default”
has the meaning specified in Section 8.01.

 

“Excluded Taxes”
means, with respect to the Administrative Agent, any Lender or any other
recipient of any payment to be made by or on account of any obligation of any
Borrower hereunder, (a) taxes imposed on or measured by its overall gross
or net income (however denominated), and franchise taxes imposed on it (in lieu
of net income taxes), in each case, by the jurisdiction (or any political
subdivision thereof including, without limitation, a state of the United States
and any political subdivision of such state) under the laws of which such
recipient is organized (or political subdivision thereof) or in which its
principal office is located or, in the case of any Lender, in which its
applicable Lending Office is located, (b) any branch profits taxes imposed
by the United States or any similar tax imposed by any other jurisdiction (or
political subdivision thereof) in which any Borrower is located, (c) in
the case of a Foreign Lender (other than an assignee pursuant to a request by
any Borrower under Section 10.13), any and all Taxes (including
withholding tax) that are imposed on amounts payable to such Foreign Lender at
the time such Foreign Lender becomes a party hereto (or designates a new
Lending Office), except to the extent that such Foreign Lender (or its
assignor, if any) was entitled, at the time of designation of a new Lending
Office (or assignment), to receive additional amounts from any Borrower with
respect to such withholding tax pursuant to Section 3.01(a), or are
attributable to such Foreign Lender’s failure or inability (other than as a
result of a Change in Law) to comply with Section 3.01(e), (d) any
and all Taxes imposed on it as a result of a trade or business, a permanent
establishment, or a present or former connection between such Lender or the
Administrative Agent (as the case may be) and the jurisdiction of the
Governmental Authority imposing such tax or any taxing authority thereof or
therein (other than any connection resulting from being a Lender hereunder) and
(e) any taxes that are imposed by reason of Section 1471 or Section 1472
of the Code.

 

“Existing Credit
Agreement” means that certain Credit Agreement, dated as of November 10,
2008 (as amended) among certain of the Borrowers and the lenders and agents
party thereto.

 

“Federal Funds Rate”
means, for any day, the rate per annum equal to the weighted average (rounded
upwards, if necessary, to a whole multiple of 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding 

 

12

 

such
day; provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate (rounded
upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Citibank,
N.A. on such day on such transactions as determined by the Administrative
Agent.

 

“Fee Letter” means
the fee letter agreement, dated the date hereof, among the Borrowers and the
Administrative Agent, as amended.

 

“Financing SPE” means
any bankruptcy-remote special purpose Subsidiary formed by any Borrower or an
Affiliate and which is, or is established for the purpose of becoming, an
issuer in a Securitization.  It is
understood and agreed that KKR CLO 2009 is a Financing SPE for purposes of this
Agreement.

 

“First Lien Bank Loan”
has the meaning specified in Section 6.16(b).

 

“Fixed Period Eurodollar
Loan” means any Revolving Loan that bears interest at a per annum rate
equal to the Fixed Period Eurodollar Rate plus the Applicable Rate.

 

“Fixed Period Eurodollar
Rate” means, for any day, a fixed rate equal to BBA LIBOR, as published by
Reuters (or other commercially available source providing quotations of BBA
LIBOR as designated by the Administrative Agent from time to time) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, for U.S. dollar deposits (for delivery on
the first day of such Interest Period) with a term equivalent to such Interest
Period.  If such rate is not available at
such time for any reason, then the “Fixed Period Eurodollar Rate” for such
Interest Period shall be the rate per annum determined by the Administrative
Agent to be the rate at which deposits in U.S. dollars for delivery on the
first day of such Interest Period in same day funds in the approximate amount
of the Fixed Period Eurodollar Loan being made, continued or converted by
Citibank, N.A. and with a term equivalent to such Interest Period would be
offered by Citibank, N.A.’s London Branch to major banks in the London
interbank eurodollar market at their request at approximately 11:00 a.m.
(London time) two Business Days prior to the commencement of such Interest
Period.

 

“Foreign Lender”
means any Lender that is organized under the laws of a jurisdiction other than
that in which any Borrower is resident for tax purposes.  For purposes of this definition, the United
States, each State thereof and the District of Columbia shall be deemed to
constitute a single jurisdiction.

 

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

 

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

 

“GAAP” means
generally accepted accounting principles in the United States set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or such other principles as may be
approved by a significant segment of the accounting profession in the United
States, that are applicable to the circumstances as of the date of
determination, consistently applied.

 

13

 

“Governmental Authority”
means the government of the United States or any other nation, or of any
political subdivision thereof, whether state or local, and any agency,
authority, instrumentality, regulatory body, court, central bank or other
entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including
any supra-national bodies such as the European Union or the European Central Bank).

 

“Guarantee” means, as
to any Person, (a) any obligation, contingent or otherwise, of such Person
guaranteeing or having the economic effect of guaranteeing any Indebtedness or
other obligation payable or performable by another Person (the “primary obligor”)
in any manner, whether directly or indirectly, and including any obligation of
such Person, direct or indirect, (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness or other
obligation, (ii) to purchase or lease property, securities or services for
the purpose of assuring the obligee in respect of such Indebtedness or other
obligation of the payment or performance of such Indebtedness or other
obligation, (iii) to maintain working capital, equity capital or any other
financial statement condition or liquidity or level of income or cash flow of
the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation, or (iv) entered into for the purpose of
assuring in any other manner the obligee in respect of such Indebtedness or
other obligation of the payment or performance thereof or to protect such
obligee against loss in respect thereof (in whole or in part), or (b) any
Lien on any assets of such Person securing any Indebtedness or other obligation
of any other Person, whether or not such Indebtedness or other obligation is
assumed by such Person (or any right, contingent or otherwise, of any holder of
such Indebtedness to obtain any such Lien); provided that the term “Guarantee”
shall not include endorsements for collection or deposit in the ordinary course
of business.  The amount of any Guarantee
shall be deemed to be an amount equal to the stated or determinable amount of
the related primary obligation, or portion thereof, in respect of which such
Guarantee is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by the guaranteeing
Person in good faith.  The term “Guarantee”
as a verb has a corresponding meaning.

 

“Guarantor Payment”
has the meaning specified in Section 2.16.

 

“Hazardous Materials”
means all explosive or radioactive substances or wastes and all hazardous or
toxic substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos-containing materials, polychlorinated
biphenyls, radon gas, infectious or medical wastes and all other substances or
wastes of any nature regulated pursuant to any Environmental Law.

 

“High Yield Securities”
has the meaning specified in Section 6.16(b).

 

“Increase Effective Date”
has the meaning specified in Section 2.14(d).

 

“Indebtedness” means,
as to any Person at a particular time, without duplication, all of the
following, whether or not included as indebtedness or liabilities in accordance
with GAAP:

 

(a)           all obligations of such Person for
borrowed money and all obligations of such Person evidenced by bonds,
debentures, notes, loan agreements or other similar instruments;

 

(b)           all
direct or contingent obligations of such Person arising under letters of credit
(including standby and commercial), bankers’ acceptances, bank guaranties,
surety bonds and similar instruments;

 

(c)           net
obligations of such Person under any Swap Contract;

 

14

 

(d)           all
obligations of such Person to pay the deferred purchase price of property or
services (other than trade accounts payable in the ordinary course of business
and, in each case, not past due for more than 60 days after the date on which
such trade account payable was created);

 

(e)           indebtedness
(excluding prepaid interest thereon) secured by a Lien on property owned or
being purchased by such Person (including indebtedness arising under
conditional sales or other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is limited in recourse;

 

(f)            Capital
Lease Obligations and Synthetic Lease Obligations;

 

(g)           all
obligations of such Person to purchase, redeem, retire, defease or otherwise
make any payment in respect of any Equity Interest in such Person or any other
Person, valued, in the case of a redeemable preferred interest, at the greater
of its voluntary or involuntary liquidation preference plus accrued and
unpaid dividends; and

 

(h)           all
Guarantees of such Person in respect of any of the foregoing.

 

For all purposes hereof, the
Indebtedness of any Person shall include the Indebtedness of any partnership,
joint venture (other than a joint venture that is itself a corporation or
limited liability company) or other business venture (collectively with a
partnership and a joint venture, referred to hereinafter as a “Venture”),
but only to the extent that such Person is directly or indirectly liable for
such Indebtedness, whether by reason of its status as general partner, joint
venturer or otherwise, unless, and only to the extent that, such Indebtedness
is expressly made non-recourse to such Person or Venture.  The amount of any net obligation under any
Swap Contract on any date shall be deemed to be the Swap Termination Value
thereof as of such date.  The amount of
any Capital Lease Obligation or Synthetic Lease Obligation as of any date shall
be deemed to be the amount of Attributable Indebtedness in respect thereof as
of such date.

 

“Indemnified Taxes”
means Taxes other than Excluded Taxes.

 

“Indemnitees” has the
meaning specified in Section 10.04(b).

 

“Industry Classification
Group” means (a) any of the Moody’s classification groups, together
with any such classification groups that may be subsequently established by
Moody’s and provided by the Borrowers to the Lenders and (b) up to three
additional industry group classifications established by the Borrowers pursuant
to Section 6.15(a).

 

“Information” has the
meaning specified in Section 10.07.

 

“Intangible Assets”
means, as of any date of determination, the sum (without duplication) of the
following (in each case, to the extent included in Consolidated Total
Assets):  (a) the total book value
of all assets of KKR Financial and its Subsidiaries properly classified as
intangible assets under GAAP, including such items as goodwill, the purchase
price of acquired assets in excess of the fair market value thereof,
trademarks, trade names, service marks, brand names, copyrights, patents and
licenses, and rights with respect to the foregoing; plus (b) all amounts
representing any write-up in the book value of any assets of KKR Financial or
its Subsidiaries resulting from a revaluation thereof subsequent to December 31,
2007, excluding adjustments to translate foreign assets and liabilities for
changes in foreign exchange rates made in accordance with Statement of
Financial Accounting Standards No. 52.

 

15

 

“Interest Payment Date”
means, (a) as to any Loan other than a Base Rate Loan or a Daily Floating
Eurodollar Loan, the last day of each Interest Period applicable to such Loan
and the Maturity Date; provided, however, that if any Interest
Period for a Fixed Period Eurodollar Loan exceeds three months, the respective
dates that fall every three months after the beginning of such Interest Period
shall also be Interest Payment Dates; and (b) as to any Base Rate Loan or
a Daily Floating Eurodollar Loan (including a Swingline Loan), the last
Business Day of each March, June, September and
December and the Maturity Date.

 

“Interest Period”
means, as to each Fixed Period Eurodollar Loan, the period commencing on the
date such Fixed Period Eurodollar Loan is disbursed or converted to or
continued as a Fixed Period Eurodollar Loan and ending on the date, one, two,
three or six months thereafter, as selected by any Borrower in its Loan Notice;
provided that:

 

(a)           any Interest Period that would
otherwise end on a day that is not a Business Day shall be extended to the next
succeeding Business Day unless such Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding
Business Day;

 

(b)           any
Interest Period that begins on the last 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 Business Day of the
calendar month at the end of such Interest Period; and

 

(c)           no
Interest Period shall extend beyond the Maturity Date.

 

“Interest Rate Type”
means, with respect to any Loan, its characterization as a Base Rate Loan, a
Daily Floating Eurodollar Loan or a Fixed Period Eurodollar Loan.

 

“Investment” means,
as to any Person, any direct or indirect acquisition or investment by such
Person, whether by means of (a) the purchase or other acquisition of
capital stock or other securities of another Person, (b) a loan, advance
or capital contribution to, Guarantee or assumption of debt of, or purchase or
other acquisition of any other debt or equity participation or interest in,
another Person, including any partnership or joint venture interest in such
other Person and any arrangement pursuant to which the investor Guarantees
Indebtedness of such other Person, or (c) the purchase or other
acquisition (in one transaction or a series of transactions) of assets of
another Person that constitute a business unit. 
For purposes of covenant compliance, the amount of any Investment shall be
the amount actually invested, without adjustment for subsequent increases or
decreases in the value of such Investment.

 

“Investment Company Act”
means the Investment Company Act of 1940, as amended.

 

“IRS” means the
United States Internal Revenue Service.

 

“Issuing Bank” means (i)
Citibank, N.A., in its capacity as the issuer of Letters of Credit hereunder,
and its successors in such capacity or (ii) or any other Lender that, at the
request of the Borrowers and with the consent of the Administrative Agent,
agrees, in such Lender’s sole discretion, to become an Issuing Bank for the
purpose of issuing Letters of Credit pursuant to Section 2.04.  In the case of any Letter of Credit to be
issued in an Approved Currency, a Lender that is an Issuing Bank pursuant to
the foregoing clauses (i) or (ii) may designate any of its affiliates as the “Issuing
Bank” for purposes of such Letter of Credit.

 

“Judgment Currency”
has the meaning specified in Section 10.18(a).

 

“Judgment Currency
Conversion Date” has the meaning specified in Section 10.18(a).

 

“KFH III” has the
meaning specified in the introductory paragraph hereto.

 

16

 

“KKR CLO 2009” has
the meaning specified in the introductory paragraph hereto.

 

“KKR Financial” has
the meaning specified in the introductory paragraph hereto.

 

“KKR
Financial Form 10-K” means KKR Financial’s Form 10-K filed with
the SEC on March 1, 2010, as amended prior to the date hereof.

 

“KKR Holdings” has
the meaning specified in the introductory paragraph hereto.

 

“KKR Holdings II” has
the meaning specified in the introductory paragraph hereto.

 

“KKR Holdings III”
has the meaning specified in the introductory paragraph hereto.

 

“KKR Holdings LTD”
has the meaning specified in the introductory paragraph hereto.

 

“KKR TRS LTD” has the
meaning specified in the introductory paragraph hereto.

 

“L/C Maturity Date”
means the date that is five Business Days prior to the Maturity Date.

 

“L/C Participant” has
the meaning specified in Section 2.04(c).

 

“L/C Participation”
has the meaning specified in Section 2.04(c).

 

“Laws” means,
collectively, all international, foreign, Federal, state and local statutes,
treaties, rules, guidelines, regulations, ordinances, codes and administrative
or judicial precedents or authorities, including the interpretation or
administration thereof by any Governmental Authority charged with the
enforcement, interpretation or administration thereof, and all applicable
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authority, in each case
whether or not having the force of law.

 

“Lender” has the
meaning specified in the introductory paragraph hereto and, as the context
requires, includes the Swingline Lender.

 

“Lender Insolvency Event”
means that (i) a Lender or its Parent Company is insolvent, or is
generally unable to pay its debts as they become due, or admits in writing its
inability to pay its debts as they become due, or makes a general assignment
for the benefit of its creditors, or (ii) such Lender or its Parent
Company is the subject of a bankruptcy, insolvency, reorganization, liquidation
or similar proceeding, or a receiver, trustee, conservator, intervenor or
sequestrator or the like has been appointed for such Lender or its Parent
Company, or such Lender or its Parent Company has taken any action in
furtherance of or indicating its consent to or acquiescence in any such
proceeding or appointment.

 

“Lending Office”
means, as to any Lender, the office or offices of such Lender described as such
in such Lender’s Administrative Questionnaire, or such other office or offices
as a Lender may from time to time notify the Borrowers and the Administrative
Agent.

 

“Letter of Credit”
means any letter of credit issued pursuant to this Agreement.

 

“Letter of Credit
Commitment” means $25,000,000.

 

“Letter of Credit
Exposure” means, at any time, the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (b) the
aggregate amount of all payments made by the 

 

17

 

Issuing
Bank pursuant to Letter of Credits that have not yet been reimbursed by or on
behalf of the Borrowers at such time.

 

“Letters of Credit
Outstanding” shall mean, at any time, the sum of, without duplication, (a) the
aggregate stated amount of all outstanding Letters of Credit and (b) the
aggregate amount of all unreimbursed drawings or payments in respect of all
Letters of Credit.

 

“Letters of Credit
Request” has the meaning specified in Section 2.04(b).

 

“Lien” means any
mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or other), charge, or preference, priority or other security
interest or preferential arrangement in the nature of a security interest of
any kind or nature whatsoever (including any conditional sale or other title
retention agreement, any easement, right of way or other encumbrance on title
to real property, and any financing lease having substantially the same
economic effect as any of the foregoing).

 

“Line Cap” means, at
any time, the lesser of (a) the Aggregate Commitment Amount and (b) the
Borrowing Base, in each case at or as of such time.

 

“Loan” means any
Revolving Loan or Swingline Loan.

 

“Loan Documents”
means this Agreement, the Collateral Agreement, the Security Documents, and
each Note, if any, issued hereunder.

 

“Loan Notice” means
either a Revolving Loan Notice or a Swingline Loan Notice.

 

“Long-Term U.S.
Government Securities” has the meaning specified in Section 6.16(b).

 

“Management Agreement”
means that certain Amended and Restated Management Agreement, dated as of May 4,
2007, between KKR Financial and KKR Financial Advisors LLC, as amended.

 

“Material Adverse Effect”
means a material adverse effect on (a) the business, assets, operations or
condition, financial or otherwise, of the Borrowers and their respective
Subsidiaries taken as a whole, (b) the ability of any Borrower to perform
any of its obligations under this Agreement or any other Loan Document or (c) the
rights of or benefits available to the Administrative Agent or the Lenders
under this Agreement or any other Loan Document.

 

“Material Indebtedness”
means Indebtedness (other than the Loans and Indebtedness in respect of Swap
Contracts and Repurchase Agreement) of any one or more of each of the Borrowers
and their respective Subsidiaries in an aggregate principal amount exceeding
$25,000,000.

 

“Maturity Date” means
May 3, 2014, and, if such date is
not a Business Day, the Maturity Date shall be the next preceding Business Day.

 

“Maximum Rate” has
the meaning specified in Section 10.09.

 

“Mezzanine Obligations”
has the meaning specified in Section 6.16(b).

 

“Moody’s” means Moody’s
Investors Service, Inc. and any successor thereto.

 

18

 

“Multiemployer Plan”
means any employee benefit plan of the type described in Section 4001(a)(3) of
ERISA, to which any Borrower or any ERISA Affiliate makes or is obligated to
make contributions, or during the preceding five plan years, has made or been
obligated to make contributions.

 

“Net Value Amount”
means, in relation to an Eligible Specified Financial Asset, the product of the
Value of such Eligible Specified Financial Asset and the relevant Specified
Percentage applicable to such Eligible Specified Financial Asset.

 

“Non-Cash Pay Investments”
has the meaning specified in Section 6.16(b).

 

“Non-Company VIE
Liabilities” means, as of any date of determination, all non-recourse
liabilities of the consolidated GAAP balance sheet of the Borrowers and their
consolidated Subsidiaries arising from the required application of GAAP.

 

“Non-Defaulting Lender”
means, at any time, a Lender that is not a Defaulting Lender or a Potential
Defaulting Lender.

 

“Non-U.S. Borrower”
means any Borrower that is not organized under the laws of the United States,
any state or territory thereof, or the District of Columbia.

 

“Note” means a
promissory note made by any Borrower in favor of a Lender evidencing Loans made
by such Lender, substantially in the form of Exhibit C.

 

“Obligations” means
all advances to, and debts, liabilities, obligations, covenants and duties of,
any Borrower arising under any Loan Document or otherwise with respect to any
Loan hereunder, whether direct or indirect (including those acquired by
assumption), absolute or contingent, due or to become due, now existing or
hereafter arising and including interest and fees that accrue after the
commencement by or against any Borrower or any Affiliate thereof of any
proceeding under any Debtor Relief Laws naming such Person as the debtor in
such proceeding, regardless of whether such interest and fees are allowed
claims in such proceeding.

 

“Organization Documents”
means, (a) with respect to any corporation, the certificate or articles of
incorporation and the bylaws (or equivalent or comparable constitutive
documents with respect to any non-U.S. jurisdiction); (b) with respect to
any limited liability company, the certificate or articles of formation or
organization and operating agreement; and (c) with respect to any
partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity.

 

“Other Letter of Credit
Obligations” means reimbursement obligations of either of the Borrowers in
respect of letters of credit issued for the benefit of either of the Borrowers
or any of their respective Subsidiaries, which reimbursement obligations may be
unsecured or may be collateralized by means of a deposit of cash with the
issuer of any such letter of credit.

 

“Other Short-Term
Securities” has the meaning specified in Section 6.16(b).

 

“Other Taxes” means
all present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies of the United States or any political
subdivision thereof (including, without limitation, any state in the United
States and any political subdivision of any such 

 

19

 

state)
(including interest, fines, penalties and additions to tax) arising from the
execution, delivery, performance or enforcement of, or otherwise with respect
to, this Agreement or any other Loan Document.

 

“Outstanding Amount”
means with respect to all Loans hereunder, on any date, the aggregate
outstanding principal amount thereof after giving effect to any borrowings and
prepayments or repayments of Loans occurring on such date.

 

“Parent Company”
means, with respect to a Lender, the bank holding company (as defined in
Federal Reserve Board Regulation Y), if any, of such Lender, and/or any Person
owning, beneficially or of record, directly or indirectly, a majority of the
shares of such Lender.

 

“Participant” has the
meaning specified in Section 10.06(d).

 

“Participation Interest”
means any participating interest in any Specified Financial Asset which is a
collateralized loan obligation, collateralized bond obligation, collateralized
debt obligation, first lien Bank Loan, second lien Bank Loan, Mezzanine
Obligation or Bridge Loan where the record holder of such interest is a
Financing SPE or a financial institution which has a Debt Rating equal to A+ by
S&P, or its equivalent from another rating agency, or higher.

 

“Patriot Act” has the
meaning specified in Section 10.16.

 

“PBGC” means the
Pension Benefit Guaranty Corporation or any successor entity performing similar
functions.

 

“PCAOB” means the
Public Company Accounting Oversight Board.

 

“Pension Plan” means
any “employee pension benefit plan” (as such term is defined in Section 3(2) of
ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA
and is sponsored or maintained by KKR Financial or any ERISA Affiliate or to
which KKR Financial or any ERISA Affiliate contributes or has an obligation to
contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of
ERISA, has made contributions at any time during the immediately preceding five
plan years.

 

“Performing” has the
meaning specified in Section 6.16(b).

 

“Performing Cash Pay
Mezzanine Obligations” has the meaning specified in Section 6.16(b).

 

“Performing Common Equity”
has the meaning specified in Section 6.16(b).

 

“Performing First Lien
Bank Loans” has the meaning specified in Section 6.16(b).

 

“Performing Non-Cash Pay
High Yield Securities” has the meaning specified in Section 6.16(b).

 

“Performing Non-Cash Pay
Mezzanine Obligations” has the meaning specified in Section 6.16(b).

 

“Performing Second Lien
Bank Loans” has the meaning specified in Section 6.16(b).

 

“Performing Secured Cash
Pay High Yield Securities” has the meaning specified in Section 6.16(b).

 

20

 

“Performing Unsecured
Bank Loans” has the meaning specified in Section 6.16(b).

 

“Performing Unsecured
Cash Pay High Yield Securities” has the meaning specified in Section 6.16(b).

 

“Permitted Encumbrances”
means:

 

(a)           Liens imposed by law for taxes that are
not yet due or are being contested in good faith by the Borrowers or a
Subsidiary thereof and for which adequate reserves have been set aside;

 

(b)           landlords’,
carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other
like Liens imposed by law, arising in the ordinary course of business and
securing obligations that are not overdue by more than 30 days or are being
contested in good faith by the Borrowers or a Subsidiary thereof;

 

(c)           pledges
and deposits made in the ordinary course of business in compliance with workers’
compensation, unemployment insurance and other social security laws or
regulations and deposits securing liability to insurance carriers in relation
to the foregoing;

 

(d)           deposits
to secure the performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations
of a like nature, in each case in the ordinary course of business;

 

(e)           judgment
liens in respect of judgments that do not constitute an Event of Default; and

 

(f)            easements,
zoning restrictions, rights-of-way and similar encumbrances on real property
imposed by law or arising in the ordinary course of business that do not secure
any monetary obligations and do not materially interfere with the ordinary
conduct of business of any Borrower or any Subsidiary;

 

provided that the term “Permitted
Encumbrances” shall not include any Lien securing Indebtedness.

 

“Permitted Investments”
means:

 

(a)           direct obligations of, or obligations
the principal of and interest on which are unconditionally guaranteed by, the
United States of America (or by any agency thereof to the extent such
obligations are backed by the full faith and credit of the United States of
America), in each case maturing within one year from the date of acquisition
thereof;

 

(b)           investments
in commercial paper maturing within 270 days from the date of acquisition
thereof and having, at such date of acquisition, the highest credit rating
obtainable from S&P or Moody’s;

 

(c)           investments
in certificates of deposit, banker’s acceptances and time deposits maturing
within 180 days from the date of acquisition thereof issued or guaranteed by or
placed with, and money market deposit accounts issued or offered by, any
domestic office of any commercial bank organized under the laws of the United
States of America or any State thereof which has a combined capital and surplus
and undivided profits of not less than $500,000,000;

 

(d)           fully
collateralized Repurchase Agreements with a term of not more than 30 days for
securities described in clause (a) above and entered into with a financial
institution satisfying the criteria described in clause (c) above; and

 

21

 

(e)           money
market funds that (i) comply with the criteria set forth in SEC Rule 2a-7
under the Investment Company Act, (ii) have a Debt Rating of AAA by
S&P, or its equivalent from another rating agency, and (iii) have
portfolio assets of at least $5,000,000,000.

 

“Person” means any
natural person, corporation, limited liability company, trust, joint venture,
association, company, partnership, Governmental Authority or other entity.

 

“Plan” means any “employee
benefit plan” (as such term is defined in Section 3(3) of ERISA)
established by any Borrower or, with respect to any such plan that is subject
to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.

 

“Platform” has the
meaning specified in Section 6.02.

 

“Potential Defaulting
Lender” means, at any time, a Lender (i) as to which the Administrative
Agent has notified the Borrowers that an event of the kind referred to in the
definition of “Lender Insolvency Event” has occurred and is continuing in
respect of any Subsidiary of such Lender, (ii) as to which the
Administrative Agent, the Issuing Bank or the Swingline Lender has in good
faith determined and notified the Borrowers and (in the case of the Issuing
Bank or the Swingline Lender) the Administrative Agent that such Lender or its
Parent Company or a Subsidiary thereof has notified the Administrative Agent,
or has stated publicly, that it will not comply with its funding obligations
under any other loan agreement or credit agreement or other similar financing
agreement or (iii) that has, or whose Parent Company has, a non-investment
grade rating from Moody’s or S&P or another nationally recognized rating
agency.  Any determination that a Lender
is a Potential Defaulting Lender under any of clauses (i) through (iii) above
will be made by the Administrative Agent or, in the case of clause (ii), the
Issuing Bank or the Swingline Lender, as the case may be, in its reasonable
discretion acting in good faith.  The
Administrative Agent will promptly send to all parties hereto a copy of any
notice to the Borrowers provided for in this definition.

 

“Preferred Stock” has
the meaning specified in Section 6.16(b).

 

“Public Lender” has
the meaning specified in Section 6.02.

 

“Publicly Trade Common
Equity” has the meaning specified in Section 6.16(b).

 

“Register” has the
meaning specified in Section 10.06(c).

 

“Registered Public
Accounting Firm” has the meaning specified in the Securities Laws and shall
be independent of the Borrowers as prescribed by the Securities Laws.

 

“Related Borrowing Base
Information” means, with respect to any “Specified Financial Asset” as
defined herein, or Participation Interest therein, included or to be included
in the Borrowing Base, (a) the category of the Specified Financial Asset
as referred to in clauses (a) through (k) of the definition and, if a
Participation Interest is applicable, the participating interest, (b) the
identification of all primary and secondary material obligors obligated on the
Specified Financial Asset, (c) the CUSIP number, if any, corresponding to
such Eligible Specified Financial Asset, (d) the principal amount of the
loan, debt or other monetary obligation in which any Borrower has an interest, (e) the
scheduled maturity of the loan, debt or other monetary obligation, (f) the
type of collateral securing the loan, debt or other monetary obligation and (g) the
source of information used in the determination of the Value.

 

“Related Parties”
means, with respect to any Person, such Person’s Affiliates and the partners,
directors, officers, employees, agents and advisors of such Person and of such
Person’s Affiliates.

 

22

 

“Reportable Event”
means any of the events set forth in Section 4043(c) of ERISA, other
than events for which the 30 day notice period has been waived.

 

“Repurchase Agreement”
means any agreement involving the sale or purchase of financial or other assets
whereby the seller of such assets agrees to repurchase such assets at an agreed
upon price and at a stated time.

 

“Request for Borrowing”
means (a) with respect to a Borrowing, conversion or continuation of
Revolving Loans, a Revolving Loan Notice and (b) with respect to a
Swingline Loan, a Swingline Loan Notice.

 

“Required Lenders”
means, as of any date of determination, the Lenders having Commitments in the
aggregate representing more than 50% of the Aggregate Commitments at such time
or, if the commitment of each Lender to make Loans has been terminated pursuant
to Section 8.02, at least two Lenders holding in the aggregate more
than 50% of the Total Revolving Credit Exposure (with the aggregate amount of
each Lender’s risk participation in Swingline Loans being deemed “held” by such
Lender for purposes of this definition); provided that the Commitment
of, and the portion of the Total Revolving Credit Exposure held or deemed held
by, any Defaulting Lender shall be excluded for purposes of making a
determination of Required Lenders.

 

“Responsible Officer”
means the chief executive officer, president, chief financial officer,
treasurer, assistant treasurer or controller of a Borrower or any other officer
of the applicable Borrower (i) so designated by any of the foregoing
officers in a notice to the Administrative Agent or (ii) so authorized by
resolutions of the applicable Borrower’s board of directors.  Any document delivered hereunder that is
signed by a Responsible Officer of a Borrower shall be conclusively presumed to
have been authorized by all necessary corporate, partnership and/or other
action on the part of such Borrower and such Responsible Officer shall be
conclusively presumed to have acted on behalf of such Borrower.

 

“Restricted Payment”
means any dividend or other distribution (whether in cash, securities or other
property) with respect to any capital stock or other Equity Interest of the
Borrowers or any Subsidiary, or any payment (whether in cash, securities or
other property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any such capital stock or other Equity Interest, or on account of any return
of capital to any Borrower’s stockholders, partners or members (or the
equivalent Person thereof).

 

“Revaluation Date”
means, with respect to any Loan, (a) each date of a Borrowing of a Fixed
Period Eurodollar Loan denominated in an Alternate Currency and (b) each
date of a continuation of a Fixed Period Eurodollar Loan denominated in an
Alternate Currency pursuant to Section 1.05.

 

“Revolving Credit
Exposure” means, with respect to any Lender at any time, the sum of the
aggregate Dollar Equivalent of (a) the Outstanding Amount of the Revolving
Loans of such Lender, (b) such Lender’s Applicable Percentage of Letter of
Credit Exposure then outstanding and (c) such Lender’s Applicable
Percentage of the Outstanding Amount of all Swingline Loans.

 

“Revolving Credit
Facility” means the credit facility pursuant to which Revolving Loans are
made available to the Borrowers in accordance with this Agreement.

 

“Revolving Loan”
means an extension of credit made by a Lender to a Borrower pursuant to Section 2.01
of this Agreement.

 

23

 

“Revolving Loan Notice”
means a notice of (a) a Borrowing of a Revolving Loan, (b) a
conversion of Revolving Loans from one Interest Rate Type to another, or (c) a
continuation of Fixed Period Eurodollar Loans pursuant to Section 2.02(a),
which, if in writing, shall be substantially in the form of Exhibit A.

 

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

 

“Same Day Funds”
means (a) with respect to disbursements and payments in Dollars,
immediately available funds, and (b) with respect to disbursements and
payments in an Alternate Currency, same day or other funds as may be determined
by the Administrative Agent to be customary in the place of disbursement or
payment for the settlement of international banking transactions in the
relevant Alternate Currency.

 

“Sarbanes-Oxley”
means the Sarbanes-Oxley Act of 2002.

 

“SEC” means the
Securities and Exchange Commission, or any Governmental Authority succeeding to
any of its principal functions.

 

“Second Lien Bank Loan”
has the meaning specified in Section 6.16(b).

 

“Secured Indebtedness”
means secured Indebtedness incurred by any Borrower or any Subsidiary in the
course of its business as such business is described in the KKR Financial Form 10-K,
including any such Indebtedness incurred pursuant to or in connection with any
loan warehouse agreement, Repurchase Agreement, Swap Agreement, collateralized
bond obligation, collateralized loan obligation, collateralized debt obligation
or Securitization.

 

“Securities” has the
meaning specified in Section 6.16(b).

 

“Securitization”
means the issuance by a bankruptcy-remote special purpose entity of evidences
of debt obligations or Equity Interests to holders which are third party
institutional investors and which entitle the holders to receive payments that
depend primarily on the cash flow of accounts, chattel paper, instruments,
investment property or payment intangibles owned by the special purpose entity.

 

“Security Agreement”
means the Security Agreement executed and delivered in connection with this
Agreement, among the Borrowers and the Administrative Agent, as further
amended, amended and restated, supplemented or otherwise modified from time to
time.

 

“Security Documents”
means the Security Agreement and all other instruments and documents, including
without limitation, Uniform Commercial Code financing statements, which (a) are
required to be executed, delivered or filed pursuant to the Security Agreement
or any other Loan Document or (b) are necessary for the creation or
perfection of any Lien in favor of the Administrative Agent for the benefit of
the Lenders to secure any of the Obligations.

 

“Securities Laws”
means the Securities Act of 1933, the Securities Exchange Act of 1934,
Sarbanes-Oxley and the applicable accounting and auditing principles, rules,
standards and practices promulgated, approved or incorporated by the SEC or the
PCAOB.

 

“Short-Term U.S. Government
Securities” has the meaning specified in Section 6.16(b).

 

“Single Obligor”
means, collectively, all obligors that are Affiliates.

 

24

 

“Solvent” means, with
respect to any Person as of a particular date, that, on such date (a) such
Person is able to pay its debts and other liabilities, contingent obligations
and other commitments as they mature in the normal course of business, (b) such
Person does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person’s ability to pay as such debts and liabilities
mature in their ordinary course, (c) such Person is not engaged in a
business or a transaction, and is not about to engage in a business or a
transaction, for which such Person’s assets would constitute unreasonably small
capital after giving due consideration to the prevailing practice in the
industry in which such Person is engaged or is to engage, (d) the fair
value of the assets of such Person is greater than the total amount of
liabilities, including, without limitation, contingent liabilities, of such
Person, and (e) the present fair saleable value of the assets of such
Person is not less than the amount that will be required to pay the probable
liability of such Person on its debts as they become absolute and matured. In
computing the amount of contingent liabilities at any time, it is intended that
such liabilities will be computed at the amount which, in light of all the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.

 

“Special Event”
means, in connection with a Trust Preferred Financing Vehicle, the receipt by a
Borrower (or its Subsidiary) of an opinion of counsel that as a result of
certain changes in or interpretations of the tax law or the Investment Company
Act or, in each case, regulations thereunder, there is more than an
insubstantial risk that the Trust Preferred Vehicle will be considered an “investment
company” under the Investment Company Act or that the Trust Preferred Vehicle
will be subject to United States federal income tax or subject to more than a
de minimus amount of other taxes or governmental charges or that interest
payable by the maker of the Trust Preferred Indebtedness will not be eligible
as a tax deduction by such maker.

 

“Spot Rate” for a
currency means the rate determined by the Administrative Agent to be the rate
quoted by the Person acting in such capacity as the spot rate for the purchase
by such Person of such currency with another currency through its principal
foreign exchange trading office at approximately 11:00 a.m. on the date
two (2) Business Days prior to the date as of which the foreign exchange
computation is made; provided that the Administrative Agent may obtain such
spot rate from another financial institution designated by the Administrative
Agent if the Person acting in such capacity does not have as of the date of
determination a spot buying rate for any such currency.

 

“Stated Amount” of
any Letter of Credit shall mean, at any time, the Dollar Equivalent of the
maximum amount available to be drawn thereunder at such time, determined
without regard to whether any conditions to drawing could then be met.

 

“Subsidiary” of a Person
means a corporation, partnership, joint venture, limited liability company or
other business entity of which a majority of the shares of securities or other
interests having ordinary voting power for the election of directors or other
governing body (other than securities or interests having such power only by
reason of the happening of a contingency) are at the time beneficially owned,
or the management of which is otherwise controlled, directly, or indirectly
through one or more intermediaries, or both, by such Person; provided,
that each Non-U.S. Borrower shall be considered a Subsidiary of KKR Financial
so long as KKR Financial owns (directly or indirectly through other
Subsidiaries) a majority of the preferred shares of such Non-U.S. Borrower; and
provided  further that none of the CLO Entities (other than KKR
CLO 2009) shall be considered a Subsidiary of any Borrower for so long as any
Person other than KKR Financial or a Subsidiary or any affiliate thereof holds
any Indebtedness of such CLO Entity.. 
Unless otherwise specified, all references herein to a “Subsidiary” or
to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of KKR Financial.

 

“Swap Contract” means
(a) any and all rate swap transactions, basis swaps, credit derivative
transactions, forward rate transactions, commodity swaps, commodity options,
forward commodity 

 

25

 

contracts,
equity or equity index swaps or options, bond or bond price or bond index swaps
or options or forward bond or forward bond price or forward bond index
transactions, interest rate options, forward foreign exchange transactions, cap
transactions, floor transactions, collar transactions, currency swap
transactions, cross-currency rate swap transactions, currency options, spot
contracts, or any other similar transactions or any combination of any of the
foregoing (including any options to enter into any of the foregoing), whether
or not any such transaction is governed by or subject to any master agreement,
and (b) any and all transactions of any kind, and the related
confirmations, which are subject to the terms and conditions of, or governed
by, any form of master agreement published by the International Swaps and
Derivatives Association, Inc., any International Foreign Exchange Master
Agreement, or any other master agreement (any such master agreement, together
with any related schedules, a “Master Agreement”), including any such
obligations or liabilities under any Master Agreement.

 

“Swap Termination Value”
means, in respect of any one or more Swap Contracts, after taking into account
the effect of any legally enforceable netting agreement relating to such Swap
Contracts, (a) for any date on or after the date such Swap Contracts have
been closed out and termination value(s) determined in accordance
therewith, such termination value(s), and (b) for any date prior to the
date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon
one or more mid-market or other readily available quotations provided by any
recognized dealer in such Swap Contracts (which may include a Lender or any
Affiliate of a Lender). “Swingline Borrowing” means a borrowing of a
Swingline Loan pursuant to Section 2.03.

 

“Swingline Lender”
means Citibank, N.A. in its capacity as provider of Swingline Loans, or
any successor swingline lender hereunder.

 

“Swingline Loan” has
the meaning specified in Section 2.03(a).

 

“Swingline Loan Notice”
means a notice of a Swingline Borrowing pursuant to Section 2.03(b),
which, if in writing, shall be substantially in the form of Exhibit B.

 

“Swingline Sublimit”
means, at any time, an amount equal to the lesser of (a) $25,000,000 and (b) the
Aggregate Commitment Amount.  The
Swingline Sublimit is part of, and not in addition to, the Aggregate Commitment
Amount.

 

“Syndication Agents”
means, collectively, Bank of America, N.A. and Deutsche Bank AG New York
Branch.

 

“Synthetic Lease”
means any lease of goods or other property, whether real or personal, which is
treated as an operating lease under GAAP and as a loan or financing for U.S.
income tax purposes.

 

“Synthetic Lease
Obligation” means the monetary obligation of a Person under a Synthetic
Lease.

 

“TARGET” means the
Trans-European Automated Real-time Gross Settlement Express Transfer payment
system which utilizes a single shared platform and which was launched on 19 November 2007.

 

“TARGET Day” means
any day on which TARGET is open for the settlement of payments in Euro.

 

“Taxes” means all
present or future taxes, levies, imposts, duties, deductions, withholdings,
assessments, fees or other charges imposed by any Governmental Authority,
including any interest, additions to tax or penalties applicable thereto.

 

26

 

“Total Revolving Credit
Exposure” means, at any date, the sum of the Revolving Credit Exposures of
all Lenders.

 

“Trust Preferred
Financing Vehicle” has the meaning assigned to such term in the definition
of Trust Preferred Securities Transaction.

 

“Trust Preferred Securities
Transaction” means a transaction pursuant to which (i) a Borrower (or
any Subsidiary of a Borrower) issues unsecured, subordinated, Debt Securities
to, or borrows on an unsecured, subordinated basis from, any trust or other
entity that, as its primary purpose, provides financing to a Borrower (or any
Subsidiary of a Borrower) (a “Trust Preferred Financing Vehicle”; such
indebtedness of a Borrower or any of its Subsidiaries owing to a Trust
Preferred Financing Vehicle, “Trust Preferred Indebtedness”) and (ii) the
Trust Preferred Financing Vehicle funds such financing of such Borrower (or
such Subsidiary of a Borrower) by issuing and selling preferred securities
having a mandatory redemption date no earlier than 30 years and not subject to
redemption in less than 5 years from the date of their issuance (other than at
the option of a Borrower or applicable Subsidiary upon the occurrence of a
Special Event) (“Trust Preferred Securities”), which securities may be
guaranteed on an unsecured, subordinated basis by such Borrower or such
Subsidiary to the extent that the trustee has failed to make distributions from
payments received from such Borrower or such Subsidiary (each such guaranty, a “Trust
Preferred Guaranty”, collectively, “Trust Preferred Guarantees”).

 

“Type” means, with
respect to any Loan, its Interest Rate Type or Currency Type.

 

“Unfunded Delayed Draw
Amount” means, as of any date, and for any Delayed Draw Loan that is a
Specified Financial Asset as of such date, an amount equal to the maximum unfunded
portion of such Delayed Draw Loan that could be required to be funded by a
Borrower as of or after such date.

 

“United States” and “U.S.”
mean the United States of America.

 

“Unpaid Drawing” has
the meaning specified in Section 2.04(d).

 

“Unquoted Common Equity”
has the meaning specified in Section 6.16(b).

 

“Unsecured Bank Loan”
has the meaning specified in Section 6.16(b).

 

“Unsecured Indebtedness”
means unsecured Indebtedness incurred by any Borrower or any Subsidiary in the
course of its business as such business is described in the KKR Financial Form 10-K.

 

“U.S. Government
Securities” has the meaning specified in Section 6.16(b).

 

“Value” means, on any
date, in relation to an Eligible Specified Financial Asset, the fair market
value of the Eligible Specified Financial Asset, determined, in accordance with
Section 6.15.

 

“Yen” means the
lawful currency of Japan.

 

1.02        Other Interpretive Provisions.  With
reference to this Agreement and each other Loan Document, unless otherwise
specified herein or in such other Loan Document:

 

(a)           The
definitions of terms herein shall apply equally to the singular and plural
forms of the terms defined.  Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms.  The words “include,”
“includes” and “including” shall be deemed to be followed by the
phrase “without limitation.”  The word “will”
shall be construed to have the same 

 

27

 

meaning
and effect as the word “shall.” 
Unless the context requires otherwise, (i) any definition of or
reference to any agreement, instrument or other document (including any
Organization Document) shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on such amendments, supplements
or modifications set forth herein or in any other Loan Document), (ii) any
reference herein to any Person shall be construed to include such Person’s
successors and assigns, (iii) the words “herein,” “hereof”
and “hereunder,” and words of similar import when used in any Loan
Document, shall be construed to refer to such Loan Document in its entirety and
not to any particular provision thereof, (iv) all references in a Loan
Document to Articles, Sections, Exhibits and Schedules shall be construed to
refer to Articles and Sections of, and Exhibits and Schedules to, the Loan
Document in which such references appear, (v) any reference to any law
shall include all statutory and regulatory provisions consolidating, amending,
replacing or interpreting such law and any reference to any law or regulation
shall, unless otherwise specified, refer to such law or regulation as amended,
modified or supplemented from time to time, and (vi) the words “asset”
and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.

 

(b)           In
the computation of periods of time from a specified date to a later specified
date, the word “from” means “from and including;” the words “to”
and “until” each mean “to but excluding;” and the word “through”
means “to and including.”

 

(c)           Section headings
herein and in the other Loan Documents are included for convenience of
reference only and shall not affect the interpretation of this Agreement or any
other Loan Document.

 

1.03        Accounting Terms.  (a) 
Generally.  All accounting terms
not specifically or completely defined herein shall be construed in conformity
with, and all financial data (including financial ratios and other financial
calculations) required to be submitted pursuant to this Agreement shall be
prepared in conformity with, GAAP applied on a consistent basis, as in effect
from time to time, applied in a manner consistent with that used in preparing
the Audited Financial Statements, except as otherwise specifically
prescribed herein.

 

(b)           Changes
in GAAP.  KKR Financial shall provide
a written summary of material changes in GAAP or in the consistent application
thereof in accordance with Section 6.02(a).  If at any time any change in GAAP would
affect the computation of any financial ratio or requirement set forth in any
Loan Document, and either the Borrowers or the Required Lenders shall so
request, the Administrative Agent, the Lenders and the Borrowers shall
negotiate in good faith to amend such ratio or requirement to preserve the
original intent thereof in light of such change in GAAP (subject to the
approval of the Required Lenders); provided that, until so amended, (i) such
ratio or requirement shall continue to be computed in accordance with GAAP
prior to such change therein and (ii) the Borrowers shall provide to the
Administrative Agent and the Lenders financial statements and other documents
required under this Agreement or as reasonably requested hereunder setting
forth a reconciliation between calculations of such ratio or requirement made
before and after giving effect to such change in GAAP.

 

(c)           Consolidation
of Variable Interest Entities.  All
references herein to consolidated financial statements of KKR Financial and its
Subsidiaries or to the determination of any amount for KKR Financial and its
Subsidiaries on a consolidated basis or any similar reference shall, in each
case, be deemed to include each variable interest entity that KKR Financial is
required to consolidate pursuant to GAAP as if such variable interest entity
were a Subsidiary as defined herein.

 

1.04        Rounding.  Any financial
ratios required to be maintained by KKR Financial pursuant to this Agreement
shall be calculated by dividing the appropriate component by the other
component, 

 

28

 

carrying
the result to one place more than the number of places by which such ratio is
expressed herein and rounding the result up or down to the nearest number (with
a rounding-up if there is no nearest number).

 

1.05        Exchange Rates; Currency Equivalents.

 

(a)           The
Administrative Agent shall determine the Spot Rates as of each Revaluation Date
to be used for calculating the Dollar Equivalent of any particular amounts
herein specified that are denominated in Alternate Currencies.  Such Spot Rates shall become effective as of
such Revaluation Date and shall be the Spot Rates employed in converting any
amounts between the applicable currencies until the next Revaluation Date to
occur.  Except for purposes of financial
statements delivered by the Borrowers hereunder or calculating financial
covenants hereunder or except as otherwise provided herein, the applicable
amount of any currency (other than Dollars) for purposes of the Loan Documents
shall be such Dollar Equivalent amount as so determined by the Administrative
Agent.

 

(b)           Wherever
in this Agreement in connection with a Borrowing, conversion, continuation or
prepayment of a Fixed Period Eurodollar Loan, an amount, such as a required
minimum or multiple amount, is expressed in Dollars, but such Borrowing or
Fixed Period Eurodollar Loan is denominated in an Alternate Currency, such
amount shall be the relevant Alternate Currency Equivalent of such Dollar
amount (rounded to the nearest unit of such Alternate Currency, with 0.5 of a
unit being rounded upward), as determined by the Administrative Agent.

 

1.06        Times of Day.  Unless
otherwise specified, all references herein to times of day shall be references
to Eastern time (daylight or standard, as applicable).

 

ARTICLE
II.

THE
COMMITMENTS AND BORROWINGS

 

2.01        Revolving Loans.  Subject
to the terms and conditions set forth herein, each Lender severally agrees to
make Revolving Loans to the Borrowers from time to time, on any Business Day
during the Availability Period, in an aggregate amount not to exceed at any
time outstanding the amount of such Lender’s Commitment; provided that,
after giving effect to any Revolving Loan, (i) the Total Revolving Credit
Exposure does not exceed the Line Cap, and (ii) the aggregate amount of
such Lender’s Revolving Credit Exposure does not exceed such Lender’s
Commitment.  Within the limits of each
Lender’s Commitment, and subject to the other terms and conditions hereof, the
Borrowers may borrow under this Section 2.01, prepay under Section 2.05,
and reborrow under this Section 2.01.  Revolving Loans may be Base Rate Loans, Fixed
Period Eurodollar Loans or Daily Floating Eurodollar Loans, as further provided
herein.

 

Notwithstanding
anything to the contrary herein, each Lender may, at its option, make Revolving
Loans available to any Non-U.S. Borrower by causing any foreign or domestic
branch or Affiliate of such Lender to make such Revolving Loans; provided,
that any exercise of such option shall not affect the obligation of such
Non-U.S. Borrower to repay such Revolving Loan in accordance with the terms of
this Agreement and to comply with all other terms and conditions of this
Agreement.

 

2.02        Borrowings, Conversions and Continuations of Revolving Loans.

 

(a)           Each
Revolving Loan, each conversion of Revolving Loans from one Interest Rate Type
to another, and each continuation of Fixed Period Eurodollar Loans shall be
made upon a Borrower’s irrevocable notice to the Administrative Agent, which
may be given by telephone.  Each such
notice must be received by the Administrative Agent not later than 11:00 a.m.
(i) three Business Days prior to the 

 

29

 

requested
date of any Borrowing of, conversion to or continuation of Fixed Period
Eurodollar Loans or of any conversion of Fixed Period Eurodollar Loans to Base
Rate Loans, (ii) one Business Day prior to the requested date of any
Borrowing of, conversion to or continuation of Daily Floating
Eurodollar Loans or of any conversion of Daily
Floating Eurodollar Loans to Base
Rate Loans and (iii) on the requested date of any Borrowing of Base Rate
Loans.  Each telephonic notice by any
Borrower pursuant to this Section 2.02(a) must be confirmed
promptly by delivery to the Administrative Agent of a written Revolving Loan
Notice, appropriately completed and signed by a Responsible Officer of the
requesting Borrower.  Each Borrowing of,
conversion to or continuation of Fixed Period Eurodollar Loans or Daily
Floating Eurodollar Loan shall be
in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess
thereof.  Except as provided in Section 2.03(c),
each Borrowing of or conversion to Base Rate Loans shall be in a principal
amount of $500,000 or a whole multiple of $100,000 in excess thereof.  Each Revolving Loan Notice (whether
telephonic or written) shall specify (i) whether such Borrower is
requesting a Revolving Loan, a conversion of Revolving Loans from one Interest
Rate Type to the other, or a continuation of Fixed Period Eurodollar Loans, (ii) the
requested date of the Revolving Loan, conversion or continuation, as the case
may be (which shall be a Business Day), (iii) the principal amount of
Revolving Loans to be borrowed, converted or continued, (iv) the Interest
Rate Type of Revolving Loans to be borrowed or to which existing Revolving
Loans are to be converted or continued and (v) if applicable, the duration
of the Interest Period with respect thereto. If the applicable Borrower fails
to specify a Currency Type of a new Revolving Loan in a Revolving Loan Notice,
then the Revolving Loan shall be made in Dollars.  If the applicable Borrower fails to specify
an Interest Rate Type of Revolving Loan in a Revolving Loan Notice or if such
Borrower fails to give a timely notice requesting a conversion or continuation,
then the applicable Revolving Loans shall be made as, or converted to, Daily
Floating Eurodollar Loans; provided, however, that in the case of
a failure to timely request a continuation of Fixed Period Eurodollar Loans
denominated in an Alternate Currency, such Loans shall be continued as Fixed
Period Eurodollar Loans in their original currency with an Interest Period of
one month.  Any such automatic conversion
to Daily Floating Eurodollar Loans shall be effective as of the last day of the
Interest Period then in effect with respect to the applicable Fixed Period
Eurodollar Loans.  If the applicable
Borrower requests a Revolving Loan of, conversion to, or continuation of Fixed
Period Eurodollar Loans in any such Revolving Loan Notice, but fails to specify
an Interest Period, it will be deemed to have specified an Interest Period of
one month.  Fixed Period Eurodollar Loans
denominated in an Alternate Currency may not be converted to a different
Interest Rate Type.  No Revolving Loan
may be converted into or continued as a Revolving Loan denominated in a
different currency, but instead must be prepaid in the original currency of
such Revolving Loan and reborrowed in the other currency.

 

(b)           Following
receipt of a Revolving Loan Notice, the Administrative Agent shall promptly
notify each Lender of the amount of its Applicable Percentage of the applicable
Revolving Loans (and the of the currency of such Loans), and if no timely
notice of a conversion or continuation is provided by the Borrowers, the
Administrative Agent shall promptly notify each Lender of the details of any
automatic conversion to Base Rate Loans described in the preceding
subsection.  In the case of a Revolving
Loan, each Lender shall make the amount of its Revolving Loan available to the
Administrative Agent in immediately available funds at the Administrative
Agent’s Office not later than 1:00 p.m. in the case of a Loan denominated
in Dollars, and not later than the Applicable Time specified by the
Administrative Agent, in the case of an Alternate Currency Loan, in each case
on the Business Day specified in the applicable Revolving Loan Notice.  Upon satisfaction of the applicable
conditions set forth in ARTICLE IV (and, if such Borrowing is the
initial Borrowing, Section 4.01), the Administrative Agent shall
make all funds so received available to the Borrowers in like funds as received
by the Administrative Agent by wire transfer of such funds to the account
specified by the applicable Borrower.

 

(c)           Except as otherwise provided herein, a Fixed Period
Eurodollar Loan may be continued or converted only on the last day of an
Interest Period for such Loan.  If during
the existence of a Default the Required Lenders have determined in their sole
discretion not to permit such conversion or continuation, then no Loans may be
converted to or continued as Fixed Period Eurodollar Loans or Daily Floating
Eurodollar Loans.

 

 

30

 

(d)           The
Administrative Agent shall promptly notify the Borrowers and the Lenders of the
interest rate applicable to any Daily Floating Eurodollar Loans or any Interest
Period for Fixed Period Eurodollar Loans upon determination of such interest
rate.  At any time that Base Rate Loans
are outstanding, the Administrative Agent shall notify the Borrowers and the
Lenders of any change in Citibank, N.A.’s prime rate used in determining the
Base Rate promptly following the public announcement of such change.

 

(e)           After giving
effect to all Revolving Loans, all conversions of Revolving Loans from one
Interest Rate Type to the other, and all continuations of Revolving Loans as
the same Interest Rate Type, there shall not be more than ten (10) Interest
Periods in effect with respect to Revolving Loans.

 

2.03        Swingline Loans.

 

(a)           The
Swingline.  Subject to the terms and conditions set forth
herein, the Swingline Lender agrees, in reliance upon the agreements of the
other Lenders set forth in this Section 2.03, to make swingline
loans (each such loan, a “Swingline Loan”) to the Borrowers in Dollars
from time to time on any Business Day during the Availability Period in an
aggregate amount not to exceed at any time outstanding the amount of the
Swingline Sublimit, notwithstanding the fact that such Swingline Loans, when
aggregated with such Lender’s Applicable Percentage of Letter of Credit Exposure
then outstanding and the Applicable Percentage of the Outstanding Amount of
Revolving Loans of the Lender acting as Swingline Lender, may exceed the amount
of such Lender’s Commitment; provided, however, that after giving
effect to any Swingline Loan, (i) the Total Revolving Credit Exposure does
not exceed the Line Cap and (ii) the aggregate amount of such Lender’s
Revolving Credit Exposure does not exceed such Lender’s Commitment, and provided,
further, that the applicable Borrower shall not use the proceeds of any
Swingline Loan to refinance any outstanding Swingline Loan.  Within the foregoing limits, and subject to
the other terms and conditions hereof, the Borrowers may borrow under this Section 2.03,
prepay under Section 2.05, and reborrow under this Section 2.03.  Each Swingline Loan shall be either a Base
Rate Loan or a Daily Floating Eurodollar Loan as selected by the applicable
Borrower.  Immediately upon the making of
a Swingline Loan, each Lender shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the Swingline Lender a risk
participation in such Swingline Loan in an amount equal to the product of such
Lender’s Applicable Percentage times the amount of such Swingline
Loan.  Notwithstanding the foregoing and
subject to subsection (c) below, no Lender hereunder, other than the
Swingline Lender, shall be required to make a Daily Floating Eurodollar Loan.

 

(b)           Borrowing
Procedures.  Each Swingline Borrowing shall be made upon
the applicable Borrower’s irrevocable notice to the Swingline Lender and the
Administrative Agent, which may be given by telephone.  Each such notice must be received by the
Swingline Lender and the Administrative Agent not later than 3:00 p.m. on
the requested borrowing date, and shall specify (i) the amount to be
borrowed, which shall be a minimum of $1,000,000, and (ii) the requested
borrowing date, which shall be a Business Day. 
Each such telephonic notice must be confirmed promptly by delivery to
the Swingline Lender and the Administrative Agent of a written Swingline Loan
Notice, which shall specify (i) the requested date of the Swingline
Borrowing, (ii) the principal amount of Swingline Loan and (iii) the
duration with respect thereto.  Promptly
after receipt by the Swingline Lender of any telephonic Swingline Loan Notice,
the Swingline Lender will confirm with the Administrative Agent (by telephone
or in writing) that the Administrative Agent has also received such Swingline
Loan Notice and, if not, the Swingline Lender will notify the Administrative
Agent (by telephone or in writing) of the contents thereof.  Unless the Swingline Lender has received
notice (by telephone or in writing) from the Administrative
Agent (including at the request of any Lender) prior to 4:00 p.m. on the date
of the

 

31

 

proposed
Swingline Borrowing (A) directing the Swingline Lender not to make such
Swingline Loan as a result of the limitations set forth in the proviso to the
first sentence of Section 2.03(a), or (B) that one or more of
the applicable conditions specified in Article IV is not then
satisfied, then, subject to the terms and conditions hereof, the Swingline
Lender will, not later than 4:00 p.m. on the borrowing date specified in
such Swingline Loan Notice, make the amount of its Swingline Loan available to
the applicable Borrower at its office by wire transfer to the account specified
by the applicable Borrower.

 

(c)                                  Refinancing of Swingline Loans.

 

(i)            The Swingline Lender, at any
time in its sole and absolute discretion, may request, on behalf of the
Borrowers (each of which hereby irrevocably authorizes the Swingline Lender to
so request on its behalf), that each Lender make a Base Rate Loan or Fixed
Period Eurodollar Loan, as applicable, in an amount equal to such Lender’s
Applicable Percentage of the amount of Swingline Loans then outstanding.  Such request shall be made in writing (which
written request shall be deemed to be a Revolving Loan Notice for purposes
hereof) and in accordance with the requirements of Section 2.02,
without regard to the minimum and multiples specified therein for the principal
amount of Base Rate Loans or Fixed Period Eurodollar Loans, but subject to the
unutilized portion of the Aggregate Commitments and the conditions set forth in
Section 4.03.  The Swingline
Lender shall furnish the applicable Borrower with a copy of the applicable
Revolving Loan Notice promptly after delivering such notice to the
Administrative Agent.  Each Lender shall
make an amount equal to its Applicable Percentage of the amount specified in
such Revolving Loan Notice available to the Administrative Agent in immediately
available funds for the account of the Swingline Lender at the Administrative
Agent’s Office not later than 1:00 p.m. on the day specified in such
Revolving Loan Notice, whereupon, subject to Section 2.03(c)(ii),
each Lender that so makes funds available shall be deemed to have made a Base
Rate Loan or Fixed Period Eurodollar Loan, as applicable, to the applicable
Borrower in such amount.  The
Administrative Agent shall remit the funds so received to the Swingline Lender.

 

(ii)           If for any reason any
Swingline Loan cannot be refinanced by such a Revolving Loan in accordance with
Section 2.03(c)(i), the request for Base Rate Loans or Fixed Period
Eurodollar Loans, as applicable, submitted by the Swingline Lender as set forth
herein shall be deemed to be a request by the Swingline Lender that each of the
Lenders fund its risk participation in the relevant Swingline Loan and each Lender’s
payment to the Administrative Agent for the account of the Swingline Lender
pursuant to Section 2.03(c)(i) shall be deemed payment in
respect of such participation.

 

(iii)          If any Lender fails to make
available to the Administrative Agent for the account of the Swingline Lender
any amount required to be paid by such Lender pursuant to the foregoing
provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(i),
the Swingline Lender shall be entitled to recover from such Lender (acting through
the Administrative Agent), on demand, such amount with interest thereon for the
period from the date such payment is required to the date on which such payment
is immediately available to the Swingline Lender at a rate per annum equal to
the greater of the Federal Funds Rate and a rate determined by the Swingline
Lender in accordance with banking industry rules on interbank
compensation, plus any administrative, processing or similar fees customarily
charged by the Swingline Lender in connection with the foregoing.  If such Lender pays such amount (with
interest and fees as aforesaid), the amount so paid shall constitute such
Lender’s Revolving Loan included in the relevant Borrowing or funded
participation in the relevant Swingline Loan, as the case may be.  A certificate of the Swingline Lender
submitted to any Lender (through the Administrative Agent) with respect to any
amounts owing under this clause (iii) shall be conclusive absent manifest
error.

 

32

 

(iv)          Each Lender’s obligation to
make Revolving Loans or to purchase and fund risk participations in Swingline
Loans pursuant to this Section 2.03(c) shall be absolute and
unconditional and shall not be affected by any circumstance, including (A) any
setoff, counterclaim, recoupment, defense or other right which such Lender may
have against the Swingline Lender, the Borrowers or any other Person for any
reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any
other occurrence, event or condition, whether or not similar to any of the
foregoing; provided, however, that each Lender’s obligation to
make Revolving Loans pursuant to this Section 2.03(c) is
subject to the conditions set forth in Section 4.03.  No such funding of risk participations shall
relieve or otherwise impair the obligation of the Borrowers to repay Swingline
Loans, together with interest as provided herein.

 

(d)                                 Repayment of Participations.

 

(i)            At any time after any Lender
has purchased and funded a risk participation in a Swingline Loan, if the
Swingline Lender receives any payment on account of such Swingline Loan, the
Swingline Lender will distribute to such Lender its Applicable Percentage
thereof in the same funds as those received by the Swingline Lender.

 

(ii)           If any payment received by
the Swingline Lender in respect of principal or interest on any Swingline Loan
is required to be returned by the Swingline Lender under any of the
circumstances described in Section 10.05 (including pursuant to any
settlement entered into by the Swingline Lender in its discretion), each Lender
shall pay to the Swingline Lender its Applicable Percentage thereof on demand
of the Administrative Agent, plus interest thereon from the date of such demand
to the date such amount is returned, at a rate per annum equal to the Federal
Funds Rate.  The Administrative Agent
will make such demand upon the request of the Swingline Lender.  The obligations of the Lenders under this
clause shall survive the payment in full of the Obligations and the termination
of this Agreement.

 

(e)           Interest
for Account of Swingline Lender.  The Swingline Lender shall be responsible for
invoicing the Borrowers for interest on the Swingline Loans.  Until each Lender funds its Base Rate Loan or
Fixed Period Eurodollar Loan, as applicable, or risk participation pursuant to
this Section 2.03 to refinance such Lender’s Applicable Percentage
of any Swingline Loan, interest in respect of such Applicable Percentage shall
be solely for the account of the Swingline Lender.

 

2.04        Letters of Credit.  (a) Subject
to and upon the terms and conditions herein set forth, at any time and from
time to time after the Closing Date and prior to the L/C Maturity Date, (i) any
Borrower may request that the Issuing Bank issue for the account of such
Borrower a Letter of Credit or Letters of Credit in Dollars or any Approved
Currency in such form as may be approved by the Issuing Bank in its reasonable
discretion.

 

Notwithstanding the
foregoing, (i) no Letter of Credit shall be issued the Stated Amount of
which, when added to the Letters of Credit Outstanding at such time, would
exceed the Letter of Credit Commitment then in effect; (ii) no Letter of
Credit shall be issued, amended (to increase the Stated Amount thereof),
extended or renewed if, after giving effect to such issuance, amendment,
extension or renewal, the Total Revolving Credit Exposure would exceed the Line
Cap then in effect; (iii) each Letter of Credit shall have an expiration
date occurring no later than one year after the date of issuance thereof,
unless otherwise agreed upon by the Administrative Agent and the Issuing Bank,
provided that in no event shall such expiration date occur later than the L/C
Maturity Date; (iv) no Letter of Credit shall be 

 

33

 

issued if it would be illegal under any
applicable law for the beneficiary of the Letter of Credit to have a Letter of
Credit issued in its favor; and (v) no Letter of Credit shall be issued by
an Issuing Bank after it has received a written notice from a Borrower or any
Lender stating that a Default has occurred and is continuing until such time as
the Issuing Bank shall have received a written notice of (x) rescission of
such notice from the party or parties originally delivering such notice or (y) the
waiver of such Default in accordance with the provisions of Section 10.01.

 

Upon at least one Business
Day’s prior written notice (or telephonic notice promptly confirmed in writing)
to the Administrative Agent and the Issuing Bank (which notice the
Administrative Agent shall promptly transmit to each of the applicable
Lenders), the Borrowers shall have the right, on any day, permanently to
terminate or reduce the Letter of Credit Commitment in whole or in part,
provided that, after giving effect to such termination or reduction, the
Letters of Credit Outstanding shall not exceed the Letter of Credit Commitment.

 

(b)                                 Letter of Credit Requests.

 

(i)            Whenever a Borrower desires
that a Letter of Credit be issued for its account, it shall give the
Administrative Agent and the Issuing Bank at least five (or such lesser number
as may be agreed upon by the Administrative Agent and the Issuing Bank)
Business Days’ written notice thereof. 
Each notice shall be executed by the applicable Borrower and shall be in
a form reasonably acceptable to the Issuing Bank and the Administrative Agent
(each a “Letter of Credit Request”). 
The Administrative Agent shall promptly transmit copies of each Letter
of Credit Request to each Lender.

 

(ii)           The making of each Letter of
Credit Request shall be deemed to be a representation and warranty by the
applicable Borrower that the Letter of Credit may be issued in accordance with,
and will not violate the requirements of, Section 2.04(a).

 

(c)                                  Letter of Credit Participations.

 

(i)            Immediately upon the
issuance by the Issuing Bank of any Letter of Credit, the Issuing Bank shall be
deemed to have sold and transferred to each other Lender that has a Commitment
(each such other Lender, in its capacity under this Section 2.04(c),
an “L/C Participant”), and each such L/C Participant shall be deemed
irrevocably and unconditionally to have purchased and received from the Issuing
Bank, without recourse or warranty, an undivided interest and participation
(each an “L/C Participation”), to the extent of such L/C Participant’s
Applicable Percentage of such Letter of Credit, each substitute letter of
credit, each drawing made thereunder and the obligations of any Borrower under
this Agreement with respect thereto, and any security therefor or guaranty
pertaining thereto (although Letter of Credit Fees will be paid directly to the
Administrative Agent for the ratable account of the L/C Participants as
provided in Section 2.09(b) and the L/C Participants shall
have no right to receive any portion of any Fronting Fees).

 

(ii)           In determining whether to
pay under any Letter of Credit, the Issuing Bank shall have no obligation
relative to the L/C Participants other than to confirm that any documents
required to be delivered under such Letter of Credit have been delivered and
that they appear to comply on their face with the requirements of such Letter
of Credit.  Any action taken or omitted
to be taken by the Issuing Bank under or in connection with any Letter of
Credit issued by it, if taken or omitted in the absence of gross negligence or
willful misconduct, shall not create for the Issuing Bank any resulting
liability.

 

34

 

(iii)          In the event that the
Issuing Bank makes any payment under any Letter of Credit issued by it and the
Borrowers shall not have repaid such amount in full to the respective Issuing
Bank pursuant to Section 2.04(d), the Issuing Bank shall promptly
notify the Administrative Agent and each L/C Participant of such failure, and
each L/C Participant shall promptly and unconditionally pay to the
Administrative Agent, for the account of the Issuing Bank, the amount of such
L/C Participant’s Applicable Percentage of such unreimbursed payment in Dollars
and in immediately available funds; provided, however, that no
L/C Participant shall be obligated to pay to the Administrative Agent for the
account of the Issuing Bank its Applicable Percentage of such unreimbursed
amount arising from any wrongful payment made by the Issuing Bank under a
Letter of Credit as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of the Issuing Bank.  If the Issuing Bank so notifies, prior to
11:00 a.m. (New York time) on any Business Day, any L/C Participant
required to fund a payment under a Letter of Credit, such L/C Participant shall
make available to the Administrative Agent for the account of the Issuing Bank
such L/C Participant’s Applicable Percentage of the amount of such payment on
such Business Day in immediately available funds.  If and to the extent such L/C Participant
shall not have so made its Applicable Percentage of the amount of such payment
available to the Administrative Agent, for the account of the Issuing Bank,
such L/C Participant agrees to pay to the Administrative Agent, for the account
of the Issuing Bank, forthwith on demand, such amount, together with interest
thereon for each day from such date until the date such amount is paid to the
Administrative Agent, for the account of the Issuing Bank at a rate equal to
the greater of (x) the Federal Funds Effective Rate and (y) a rate
determined by the Administrative Agent in accordance with banking industry rules on
interbank compensation.  The failure of
any L/C Participant to make available to the Administrative Agent, for the
account of the Issuing Bank its Applicable Percentage of any payment under any
Letter of Credit shall not relieve any other L/C Participant of its obligation
hereunder to make available to the Administrative Agent, for the account of the
Issuing Bank its Applicable Percentage of any payment under such Letter of
Credit on the date required, as specified above, but, except as provided in Section 2.19,
no L/C Participant shall be responsible for the failure of any other L/C
Participant to make available to the Administrative Agent such other L/C
Participant’s Applicable Percentage of any such payment.

 

(iv)          Whenever the Issuing Bank
receives a payment in respect of an unpaid reimbursement obligation as to which
the Administrative Agent has received for the account of the Issuing Bank any
payments from the L/C Participants pursuant to paragraph (iii) above, the
Issuing Bank shall pay to the Administrative Agent and the Administrative Agent
shall promptly pay to each L/C Participant that has paid its Applicable
Percentage of such reimbursement obligation, in Dollars and in immediately
available funds, an amount equal to such L/C Participant’s share (based upon
the proportionate aggregate amount originally funded by such L/C Participant to
the aggregate amount funded by all L/C Participants) of the principal amount of
such reimbursement obligation and interest thereon accruing after the purchase
of the respective L/C Participations.

 

(v)           The obligations of the L/C
Participants to make payments to the Administrative Agent for the account of
the Issuing Bank with respect to Letters of Credit shall be irrevocable and not
subject to counterclaim, set-off or other defense or any other qualification or
exception whatsoever and shall be made in accordance with the terms and
conditions of this Agreement under all circumstances, including under any of
the following circumstances:

 

(A)          any lack of validity or
enforceability of this Agreement or any of the other Loan Documents;

 

35

 

(B)           the existence of any claim,
set-off, defense or other right that any Borrower may have at any time against
a beneficiary named in a Letter of Credit, any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), the
Administrative Agent, the Issuing Bank, any Lender or other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transaction between any Borrower and the beneficiary named in any such Letter
of Credit);

 

(C)           any draft, certificate or
any other document presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;

 

(D)          the surrender or impairment
of any security for the performance or observance of any of the terms of any of
the Loan Documents; or

 

(E)           the occurrence of any
Default;

 

provided, however, that no L/C Participant shall be obligated
to pay to the Administrative Agent for the account of the Issuing Bank its
Applicable Percentage of any unreimbursed amount arising from any wrongful
payment made by the Issuing Bank under a Letter of Credit as a result of acts
or omissions constituting willful misconduct or gross negligence on the part of
the Issuing Bank.

 

(d)                                 Agreement to Repay Letter of Credit Drawings.

 

(i)            Each Borrower hereby agrees
to reimburse the Issuing Bank, by making payment in Dollars or the applicable
Approved Currency to the Administrative Agent in immediately available funds
for any payment or disbursement made by the Issuing Bank under any Letter of
Credit (the amount of each such amount so paid until reimbursed, an “Unpaid
Drawing”) immediately after, and in any event within two Business Days of,
such payment, with interest on the amount so paid or disbursed by the Issuing
Bank, to the extent not reimbursed prior to 5:00 p.m. (New York time) on
the second Business Day following such payment or disbursement, from and
including the date paid or disbursed to but excluding the date the Issuing Bank
is reimbursed therefor at a rate per annum that shall at all times be the
Applicable Rate for Base Rate Loans plus the Base Rate as in effect from time
to time, provided that, notwithstanding anything contained in this Agreement to
the contrary, (i) unless the applicable Borrower shall have notified the
Administrative Agent and the Issuing Bank prior to 10:00 a.m. (New York
time) on the date of such drawing that such Borrower intends to reimburse the
Issuing Bank for the amount of such drawing with funds other than the proceeds
of Loans, such Borrower be shall be deemed to have given a Request for
Borrowing requesting that the Lenders with Commitments make Revolving Loans
(which shall be Base Rate Loans) on the date on which such drawing is honored
in an amount equal to the amount of such drawing and (ii) the
Administrative Agent shall promptly notify each relevant L/C Participant of such
drawing and the amount of its Revolving Loan to be made in respect thereof,
and, subject to the conditions set forth in Section 2.01, each L/C
Participant shall be irrevocably obligated to make a Revolving Loan to such
Borrower in the manner deemed to have been requested in the amount of its
Applicable Percentage of the applicable Unpaid Drawing by 12:00 noon (New York
time) on such Business Day by making the amount of such Revolving Loan
available to the Administrative Agent. 
Such Revolving Loans shall be made without regard to the minimum
Borrowing amount for Base Rate Loans. 
The Administrative Agent shall use the proceeds of such Revolving Loans
solely for purpose of reimbursing the Issuing Bank for the related Unpaid
Drawing.

 

36

 

(ii)           The obligations of each
Borrower under this Section 2.04(d) to reimburse the Issuing
Bank with respect to Unpaid Drawings (including, in each case, interest
thereon) shall be absolute and unconditional under any and all circumstances
and irrespective of any set-off, counterclaim or defense to payment that any
such Borrower or any other Person may have or have had against the Issuing
Bank, the Administrative Agent or any Lender (including in its capacity as an
L/C Participant), including any defense based upon the failure of any drawing
under a Letter of Credit to conform to the terms of the Letter of Credit or any
non-application or misapplication by the beneficiary of the proceeds of such
drawing, provided that no Borrower shall be obligated to reimburse the Issuing
Bank for any wrongful payment made by the Issuing Bank under the Letter of
Credit issued by it as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of the Issuing Bank.

 

(e)           Increased
Costs.  If after the date hereof, the adoption of any
applicable law, rule or regulation, or any change therein, or any change
in the interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or actual compliance by the Issuing Bank or any L/C
Participant with any request or directive made or adopted after the date hereof
(whether or not having the force of law), by any such authority, central bank
or comparable agency shall either (a) impose, modify or make applicable
any reserve, deposit, capital adequacy or similar requirement against letters
of credit issued by the Issuing Bank, or any L/C Participant’s L/C
Participation therein, or (b) impose on the Issuing Bank or any L/C
Participant any other conditions affecting its obligations under this Agreement
in respect of Letters of Credit or L/C Participations therein or any Letter of
Credit or such L/C Participant’s L/C Participation therein, and the result of
any of the foregoing is to increase the cost to the Issuing Bank or such L/C
Participant of issuing, maintaining or participating in any Letter of Credit,
or to reduce the amount of any sum received or receivable by the Issuing Bank
or such L/C Participant hereunder (other than any such increase or reduction
attributable to taxes) in respect of Letters of Credit or L/C Participations
therein, then, promptly after receipt of written demand to the applicable
Borrower by the Issuing Bank or such L/C Participant, as the case may be, (a
copy of which notice shall be sent by the Issuing Bank or such L/C Participant
to the Administrative Agent), such Borrower shall pay to the Issuing Bank or
such L/C Participant such additional amount or amounts as will compensate the
Issuing Bank or such L/C Participant for such increased cost or reduction, it
being understood and agreed, however, that the Issuing Bank or a L/C
Participant shall not be entitled to such compensation as a result of such Person’s
compliance with, or pursuant to any request or directive to comply with, any
such law, rule or regulation as in effect on the date hereof.  A certificate submitted to the applicable
Borrower by the relevant Issuing Bank or a L/C Participant, as the case may be,
(a copy of which certificate shall be sent by the Issuing Bank or such L/C
Participant to the Administrative Agent) setting forth in reasonable detail the
basis for the determination of such additional amount or amounts necessary to
compensate the Issuing Bank or such L/C Participant as aforesaid shall be
conclusive and binding on such Borrower absent clearly demonstrable error.

 

(f)            Successor
Issuing Bank.  An Issuing Bank may resign as Issuing Bank
upon 60 days’ prior written notice to the Administrative Agent, the Lenders and
the Borrowers.  If the Issuing Bank shall
resign as Issuing Bank under this Agreement, then the Borrowers shall appoint
from among the Lenders (with the consent of such Lender) with Commitments a
successor issuer of Letters of Credit, whereupon such successor issuer shall
succeed to the rights, powers and duties of the Issuing Bank, and the term “Issuing
Bank” shall mean such successor issuer effective upon such appointment (except
with respect to Letters of Credit issued by the resigning Issuing Bank).  After the resignation of the Issuing Bank
hereunder, the resigning Issuing Bank shall remain a party hereto and shall
continue to have all the rights and obligations of an Issuing Bank under this
Agreement and the other Loan Documents with respect to Letters of Credit issued
by it prior to such resignation, but shall not be required to issue additional
Letters of Credit.  After any retiring
Issuing Bank’s resignation as Issuing Bank, the provisions of this Agreement 

 

37

 

relating
to the Issuing Bank shall inure to its benefit as to any actions taken or
omitted to be taken by it (a) while it was Issuing Bank under this
Agreement or (b) at any time with respect to Letters of Credit issued by
such Issuing Bank.

 

(g)                                 Cash Collateral.

 

(i)            Upon the request of the
Required Lenders if, as of the L/C Maturity Date, there are any Letters of
Credit Outstanding, the Borrowers shall immediately Cash Collateralize the then
Letters of Credit Outstanding.

 

(ii)           The Administrative Agent
acting in its reasonable discretion, may, at any time and from time to time
after the initial deposit of Cash Collateral, request that additional Cash
Collateral be provided in the event such Cash Collateral previously provided is
inadequate as a result of exchange rate fluctuations.

 

(iii)          If any Event of Default
shall occur and be continuing, the Administrative Agent or the Lenders with
Letter of Credit Exposure representing greater than 50% of the total Letter of
Credit Exposure may require that the L/C Obligations be Cash Collateralized.

 

2.05                        Prepayments.

 

(a)           The
Borrowers may, upon notice to the Administrative Agent, at any time or from
time to time voluntarily prepay Revolving Loans in whole or in part without
premium or penalty; provided that (i) such notice must be received
by the Administrative Agent not later than 11:00 a.m. (A) three
Business Days prior to any date of prepayment of Fixed Period Eurodollar Loans,
(B) one Business Day prior to any date of prepayment of Daily
Floating Eurodollar Loans and (C) on
the date of prepayment of Base Rate Loans; (ii) any prepayment of Fixed
Period Eurodollar Loans and Daily Floating Eurodollar Loans shall be in a principal amount of $5,000,000 or a
whole multiple of $1,000,000 in excess thereof; and (iii) any prepayment
of Base Rate Loans shall be in a principal amount of $500,000 or a whole
multiple of $100,000 in excess thereof or, in each case, if less, the entire
principal amount thereof then outstanding. 
Each such notice shall specify the date and amount of such prepayment
and the Currency Type and Interest Rate Type of Revolving Loans to be prepaid
and, if Fixed Period Eurodollar Loans are to be prepaid, the Interest Period(s) of
such Loans.  The Administrative Agent
will promptly notify each Lender of its receipt of each such notice, and of the
amount of such Lender’s Applicable Percentage of such prepayment.  If such notice is given by any Borrower, such
Borrower shall make such prepayment and the payment amount specified in such
notice shall be due and payable on the date specified therein.  Any prepayment of a Fixed Period Eurodollar
Loan or a Daily Floating Eurodollar Loan
shall be accompanied by all accrued interest on the amount prepaid, together
with any additional amounts required pursuant to Section 3.05.  Each such prepayment shall be applied to the
Revolving Loans of the Lenders in accordance with their respective Applicable
Percentages.

 

(b)           The
Borrowers may, upon notice to the Swingline Lender (with a copy to the
Administrative Agent), at any time or from time to time, voluntarily prepay
Swingline Loans in whole or in part without premium or penalty; provided
that (i) such notice must be received by the Swingline Lender and the
Administrative Agent not later than 1:00 p.m. on the date of the
prepayment, and (ii) any such prepayment shall be in a minimum principal
amount of $1,000,000.  Each such notice
shall specify the date and amount of such prepayment.  If such notice is given by any Borrower, such
Borrower shall make such prepayment and the payment amount specified in such
notice shall be due and payable on the date specified therein.

 

38

 

(c)           If
for any reason, at any time, the Total Revolving Credit Exposure exceeds the
Line Cap at such time, the Borrowers shall immediately prepay the applicable
Loans in an aggregate amount of such excess, as applicable.

 

(d)           In
the event that at any time any Borrowing Base Deficiency shall exist, the
Borrowers shall prepay the Loans (or Cash Collateralize Letters of Credit as
contemplated by Section 2.04(g)) in such amounts as shall be
necessary so that such Borrowing Base Deficiency no longer exists; provided
that if, within five Business Days after delivery of a Borrowing Base Report
demonstrating such Borrowing Base Deficiency (and/or at such other times as any
Borrower has knowledge of such Borrowing Base Deficiency), the Borrowers shall
present the Administrative Agent with a reasonably feasible plan to cause such
Borrowing Base Deficiency to no longer exist within 20 Business Days (which
20-Business Day period shall include the five Business Days permitted for
delivery of such plan), then such prepayment or reduction (or Cash
Collateralization) shall not be required to be effected immediately but may be
effected in accordance with such plan (with such modifications as the Borrowers
may reasonably determine), so long as such Borrowing Base Deficiency no longer
exists prior to the end of such 20-Business Day period.

 

2.06                        Termination or Reduction of Commitments.  The Borrowers may,
upon notice to the Administrative Agent, terminate the Commitments hereunder,
and, from time to time, permanently reduce the Aggregate Commitment Amount; provided
that (i) any such notice shall be received by the Administrative Agent not
later than 11:00 a.m. five (5) Business Days prior to the date of
termination or reduction, (ii) any such partial reduction shall be in an
aggregate amount of $5,000,000 or any whole multiple of $1,000,000 in excess
thereof, (iii) the Borrowers shall not terminate or reduce the Aggregate
Commitments if, after giving effect thereto and to any concurrent prepayments
hereunder, the Total Revolving Credit Exposure would exceed the Aggregate
Commitment Amount, (iv) if, after giving effect to any reduction of the
Aggregate Commitments, the Swingline Sublimit exceeds the Aggregate Commitment
Amount, such Sublimit shall be automatically reduced by the amount of such
excess and (v) in the case of a partial termination or reduction of the
Commitments, the Aggregate Commitment Amount shall not be less than
$50,000,000.  The Administrative Agent
will promptly notify the Lenders of any such notice of termination or reduction
of the Aggregate Commitments.  Any
reduction of the Aggregate Commitment Amount shall be applied to the Commitment
of each Lender according to its Applicable Percentage.  All fees accrued until the effective date of
any termination of the Aggregate Commitments shall be paid on the effective
date of such termination.

 

2.07                        Repayment of Loans.

 

(a)           The
Borrowers shall repay to the Lenders on the Maturity Date the aggregate
principal amount of Revolving Loans outstanding on such date.

 

(b)           The
Borrowers shall repay each Swingline Loan on the earliest to occur of (i) the
Maturity Date or (ii) the date requested by the Swingline Lender which
shall not be earlier than the Business Day in which the Borrowers may request
Base Rate Loans pursuant to Section 2.02.

 

2.08                        Interest.

 

(a)           Subject
to the provisions of subsection (b) below, (i) each Fixed Period
Eurodollar Loan shall bear interest on the outstanding principal amount thereof
for each Interest Period at a rate per annum equal to the Fixed Period
Eurodollar Rate for such Interest Period plus the
relevant Applicable Rate, (ii) each Daily Floating
Eurodollar Loan shall bear interest on the
outstanding principal amount thereof from the applicable borrowing date to the
date of payment thereof at a rate per annum equal to the Daily
Floating Eurodollar Rate plus the relevant Applicable Rate, (iii) each Base Rate
Loan shall bear interest 

 

39

 

on
the outstanding principal amount thereof at a rate per annum equal to the Base
Rate plus the relevant Applicable Rate; and (iv) each
Swingline Loan shall bear interest on the outstanding principal amount thereof
from the applicable borrowing date to the date of payment thereof at a rate per
annum equal to, at the election of the Borrowers, (A) the Base Rate or (B) the
Daily Floating Eurodollar Rate plus the
relevant Applicable Rate.

 

(b)                                 (i)            If
any amount of principal of any Loan is not paid when due (without regard to any
applicable grace periods), whether at stated maturity, by acceleration or
otherwise, such amount shall thereafter bear interest at a fluctuating interest
rate per annum at all times equal to the Default Rate to the fullest extent
permitted by applicable Laws.

 

(ii)           If any amount (other than
principal of any Loan) payable by the Borrowers under any Loan Document is not
paid when due (without regard to any applicable grace periods), whether at
stated maturity, by acceleration or otherwise, then upon the request of the
Required Lenders, such amount shall thereafter bear interest at a fluctuating
interest rate per annum at all times equal to the Default Rate to the fullest
extent permitted by applicable Laws.

 

(iii)          Upon
the request of the Required Lenders, while any Event of Default
exists, the Borrowers shall pay interest on the principal amount of all
outstanding Obligations hereunder at a fluctuating interest rate per annum at
all times equal to the Default Rate to the fullest extent permitted by
applicable Laws.

 

(iv)          Accrued and unpaid interest
on past due amounts (including interest on past due interest) shall be due and
payable upon demand.

 

(c)           Interest
on each Loan shall be due and payable in arrears on each Interest Payment Date
applicable thereto and at such other times as may be specified herein.  Interest hereunder shall be due and payable
in accordance with the terms hereof before and after judgment, and before and
after the commencement of any proceeding under any Debtor Relief Law.

 

2.09        Fees.

 

(a)           Commitment
Fee.  The Borrowers shall pay to the Administrative
Agent for the account of each Lender in accordance with its Applicable
Percentage, a commitment fee equal to 0.50% per annum times
the average daily unused amount of Commitments of such Lender during the period
from and including the Closing Date to but excluding the earlier of the date
such Commitment terminates and the Commitment Termination Date.  The Commitment Fee shall accrue at all times
during the Availability Period and shall be due and payable quarterly in
arrears on the last Business Day of each March, June, September and
December, commencing with the first such date to occur after the Closing Date,
and on the last day of the Availability Period.

 

(b)           Letter
of Credit Fees. Each
Borrower agrees to pay (i) to the Administrative Agent in Dollars for the
account of the Lenders pro rata on the basis of their respective LC Exposure, a
fee in respect of each Letter of Credit (the “Letter of Credit Fee”),
for the period from the date of issuance of such Letter of Credit to the
termination date of such Letter of Credit computed at the per annum rate for
each day equal to the Applicable Rate for Eurodollar Loans minus 0.125% per
annum on the average daily stated amount of such Letter of Credit (excluding
any portion thereof attributable to unreimbursed LC Disbursements) during the
period from and including the Closing Date to but excluding the later of the
date on which such Lender’s Commitment terminates and the date on which such
Lender ceases to have any LC Exposure and (ii) to the Issuing Bank a
fronting fee (the “Fronting Fee”), which shall accrue at the rate of
0.125% per annum on the average daily amount of the LC Exposure (excluding any
portion

 

40

 

thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the Closing Date to but excluding the later of the date of
termination of the Commitments and the date on which there ceases to be any LC
Exposure, as well as the Issuing Bank’s standard fees with respect to the
issuance, amendment, renewal or extension of any Letter of Credit or processing
of drawings thereunder; provided that, no fees will accrue under this Section 2.09
on any Defaulting Lender’s portion of a Letter of Credit that any Borrower has
Cash Collateralized pursuant to Section 2.04(g).  Letter of Credit Fees and Fronting Fees shall
accrue during the Availability Period and shall be due and payable quarterly in
arrears on the last Business Day of each March, June, September and
December, commencing with the first such date to occur after the Closing Date,
provided that Letter of Credit Fees and Fronting Fees shall be payable on the
date on which the Commitments terminate. 
Any other fees payable to the Issuing Bank pursuant to this paragraph
shall be payable within 20 business days after demand.  Letter of Credit Fees and Fronting Fees shall
be computed on the basis of a year of 360 days and shall be payable for the actual
number of days elapsed (including the first day but excluding the last day).

 

(c)                                  Other Fees.  (i)  The Borrowers shall pay to the Arranger and the
Administrative Agent for their own respective accounts fees in the amounts and
at the times set forth in the Fee Letter or as otherwise separately agreed
between such parties.  Such fees shall be
fully earned when paid and shall not be refundable for any reason whatsoever.

 

(ii)                                  The Borrowers
shall pay to the Lenders such fees as shall have been separately agreed upon in
writing in the amounts and at the times so specified.  Such fees shall be fully earned when paid and
shall not be refundable for any reason whatsoever.

 

2.10                        Computation of Interest and Fees.  All
computations of interest for Base Rate Loans or Daily Floating Eurodollar Loans
shall be made on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed.  All other
computations of fees and interest shall be made on the basis of a 360-day year
and actual days elapsed (which results in more fees or interest, as applicable,
being paid than if computed on the basis of a 365-day year).  Interest shall accrue on each Loan for the
day on which the Loan is made, and shall not accrue on a Loan, or any portion
thereof, for the day on which the Loan or such portion is paid, provided
that any Loan that is repaid on the same day on which it is made shall, subject
to Section 2.12(a), bear interest for one day.  Each determination by the Administrative
Agent of an interest rate or fee hereunder shall be conclusive and binding for
all purposes, absent manifest error.

 

2.11                        Evidence of Debt.

 

(a)                                  The Loans made by each Lender shall be evidenced by one or
more accounts or records maintained by such Lender and by the Administrative
Agent in the ordinary course of business. 
The accounts or records maintained by the Administrative Agent and each
Lender shall be conclusive absent manifest error of the amount of the Loans
made by the Lenders to the Borrowers and the interest and payments
thereon.  Any failure to so record or any
error in doing so shall not, however, limit or otherwise affect the obligation
of the Borrowers hereunder to pay any amount owing with respect to the
Obligations.  In the event of any
conflict between the accounts and records maintained by any Lender and the accounts
and records of the Administrative Agent in respect of such matters, the
accounts and records of the Administrative Agent shall control in the absence
of manifest error.  Upon the request of
any Lender made through the Administrative Agent, the Borrowers shall execute
and deliver to such Lender (through the Administrative Agent) a Note, which
shall evidence such Lender’s Loans in addition to such accounts or
records.  Each Lender may attach
schedules to its Note and endorse thereon the date, Interest Rate Type (if
applicable), amount, Approved Currency and maturity of its Loans and payments
with respect thereto.

 

41

 

(b)                                 In addition to the accounts and records referred to in
subsection (a), each Lender and the Administrative Agent shall maintain in
accordance with its usual practice accounts or records evidencing the purchases
and sales by such Lender of participations in Swingline Loans.  In the event of any conflict between the
accounts and records maintained by the Administrative Agent and the accounts
and records of any Lender in respect of such matters, the accounts and records
of the Administrative Agent shall control in the absence of manifest error.

 

2.12                        Payments Generally; Administrative Agent’s
Clawback.

 

(a)                                  General.  All payments to be made by any Borrower shall
be made without condition or deduction for any counterclaim, defense,
recoupment or setoff.  Except as
otherwise expressly provided herein and except with respect to principal of and
interest on Alternate Currency Loans, all payments by any Borrower hereunder
shall be made to the Administrative Agent, for the account of the respective
Lenders to which such payment is owed, at the Administrative Agent’s Office in
the relevant Approved Currency and in Same Day Funds not later than 2:00 p.m.
on the date specified herein.  Except as
otherwise expressly provided herein, all payments by the Borrowers hereunder
with respect to principal and interest on Alternate Currency Loans shall be
made to the Administrative Agent, for the account of the respective Lenders to
which such payment is owed, at the applicable Administrative Agent’s Office in
such Alternate Currency and in Same Day Funds not later than the Applicable
Time specified by the Administrative Agent on the dates specified herein.  Without limiting the generality of the
foregoing, the Administrative Agent may require that any payments due under
this Agreement be made in the United States. 
If, for any reason, any Borrower is prohibited by any Law from making
any required payment hereunder in an Alternate Currency, such Borrower shall
make such payment in Dollars in the Dollar Equivalent of the Alternate Currency
payment amount.  The Administrative Agent
will promptly distribute to each Lender its Applicable Percentage (or other
applicable share as provided herein) of such payment in like funds as received
by wire transfer to such Lender’s Lending Office.  All payments received by the Administrative
Agent (i) after 2:00 p.m., in the case of payments in Dollars, or (ii) after
the Applicable Time specified by the Administrative Agent, in the case of
payments in an Alternate Currency, shall be deemed received on the next
succeeding Business Day and any applicable interest or fee shall continue to
accrue.  If any payment to be made by any
Borrower shall come due on a day other than a Business Day, payment shall be
made on the next following Business Day, and such extension of time shall be
reflected in computing interest or fees, as the case may be.  Unless otherwise expressly stated, all
payments hereunder shall be made in Dollars.

 

(b)                                 (i)  Funding by Lenders; Presumption by
Administrative Agent.  Unless the
Administrative Agent shall have received notice from a Lender prior to the
proposed date of any Borrowing of Eurodollar Loans (or, in the case of any
Revolving Loan of Base Rate Loans, prior to 12:00 noon on the date of such
Revolving Loan) that such Lender will not make available to the Administrative
Agent such Lender’s share of such Revolving Loan, the Administrative Agent may
assume that such Lender has made such share available on such date in
accordance with Section 2.02 (or, in the case of a Borrowing of
Base Rate Loans, that such Lender has made such share available in accordance
with and at the time required by Section 2.02) and may, in reliance
upon such assumption, make available to the Borrowers in the relevant Approved
Currency a corresponding amount.  In such
event, if a Lender has not in fact made its share of the applicable Revolving
Loan available to the Administrative Agent, then the applicable Lender and the
Borrowers severally agree to pay to the Administrative Agent in the relevant
Approved Currency forthwith on demand such corresponding amount in immediately
available funds with interest thereon, for each day from and including the date
such amount is made available to the Borrowers to, but excluding, the date of
payment to the Administrative Agent, at (A) in the case of a payment to be
made by such Lender, the greater of the Federal Funds Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules on
interbank compensation, plus any administrative, processing or similar fees
customarily charged by the Administrative Agent in connection with the 

 

42

 

foregoing,
and (B) in the case of a payment to be made by the Borrowers, the interest
rate applicable to Base Rate Loans.  If
the Borrowers and such Lender shall pay such interest to the Administrative
Agent for the same or an overlapping period, the Administrative Agent shall
promptly remit to the Borrowers the amount of such interest paid by the
Borrowers for such period.  If such
Lender pays its share of the applicable Revolving Loan to the Administrative
Agent, then the amount so paid shall constitute such Lender’s Revolving Loan
included in such Borrowing.  Any payment
by the Borrowers shall be without prejudice to any claim the Borrowers may have
against a Lender that shall have failed to make such payment to the
Administrative Agent.

 

(ii)                                  Payments by
Borrowers; Presumptions by Administrative Agent.  Unless the Administrative Agent shall have
received notice from the Borrowers prior to the date on which any payment is
due to the Administrative Agent for the account of the Lenders hereunder that
the Borrowers will not make such payment, the Administrative Agent may assume
that the Borrowers have made such payment on such date in accordance herewith
and may, in reliance upon such assumption, distribute to the Lenders, as the
case may be, the amount due.  In such
event, if the Borrowers have not in fact made such payment, then each of the
Lenders, as the case may be, severally agrees to repay to the Administrative
Agent forthwith on demand the amount so distributed to such Lender, in
immediately available funds with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date
of payment to the Administrative Agent, at the greater of the Federal Funds
Rate and a rate determined by the Administrative Agent in accordance with
banking industry rules on interbank compensation.

 

A notice of the
Administrative Agent to any Lender or the Borrowers with respect to any amount
owing under this subsection (b) shall be conclusive, absent manifest
error.

 

(c)                                  Failure to Satisfy Conditions Precedent.  If any Lender makes
available to the Administrative Agent funds for any Loan to be made by such
Lender as provided in the foregoing provisions of this Article II,
and such funds are not made available to the Borrowers by the Administrative
Agent because the conditions to the applicable Borrowing set forth in Article IV
are not satisfied or waived in accordance with the terms hereof, the
Administrative Agent shall promptly return such funds (in like funds as
received from such Lender) to such Lender, without interest.

 

(d)                                 Obligations of Lenders Several.  All obligations of
the Lenders pursuant to this Agreement (including obligations to make Revolving
Loans, to fund participations in Swingline Loans and to make payments pursuant
to Section 10.04(c)) are several and not joint.  The failure of any Lender to make any
Revolving Loan, to fund any such participation or to make any payment under Section 10.04(c) on
any date required hereunder shall not relieve any other Lender of its
corresponding obligation to do so on such date, and no Lender shall be
responsible for the failure of any other Lender to so make its Revolving Loan,
to purchase its participation or to make its payment under Section 10.04(c).

 

(e)                                  Funding Source.  Nothing herein shall be deemed to obligate
any Lender to obtain the funds for any Loan in any particular place or manner
or to constitute a representation by any Lender that it has obtained or will obtain
the funds for any Loan in any particular place or manner.

 

2.13                        Sharing of Payments by Lenders.  If any Lender shall, by exercising any right of setoff or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of the Revolving Loans made by it, or the participations in
Swingline Loans held by it resulting in such Lender’s receiving payment of a
proportion of the aggregate amount of such Revolving Loans or participations
and accrued interest thereon greater than its pro  rata share
thereof as provided herein, then the Lender receiving such greater proportion
shall (a) notify the Administrative Agent of such fact, and (b) purchase
(for cash at face value in the relevant Approved Currency) participations in
the Revolving 

 

43

 

Loans
and subparticipations in Swingline Loans of the other Lenders, or make such
other adjustments as shall be equitable, so that the benefit of all such
payments shall be shared by the Lenders ratably in accordance with the
aggregate amount of principal of and accrued interest on their respective
Revolving Loans and other amounts owing them, provided that:

 

(i)                                     if any such
participations or subparticipations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations or
subparticipations shall be rescinded and the purchase price restored to the
extent of such recovery, without interest; and

 

(ii)                                  the provisions
of this Section shall not be construed to apply to (x) any payment
made by the Borrowers pursuant to and in accordance with the express terms of
this Agreement or (y) any payment obtained by a Lender as consideration
for the assignment of or sale of a participation in any of its Revolving Loans
or subparticipations in Swingline Loans to any assignee or participant, other
than to the Borrowers or any Subsidiary thereof (as to which the provisions of
this Section shall apply).

 

Each Borrower consents to
the foregoing and agrees, to the extent it may effectively do so under
applicable law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against such Borrower rights of setoff and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of such Borrower in the amount of such participation.

 

2.14                        Increase in Commitments.

 

(a)                                  Request for Increase.  Provided there exists no Default, upon notice
to the Administrative Agent (which shall promptly notify the Lenders), the
Borrowers may from time to time, request an increase in the Aggregate
Commitment Amount by amounts such that immediately after giving effect to any
such increase, the total Commitments of all of the Lenders hereunder shall not
exceed $600,000,000; provided that (i) any such request for an
increase shall be in a minimum amount of $10,000,000 and integral multiples of
$2,500,000 in excess thereof, and (ii) the Borrowers may make a maximum of
four (4) such requests in any 12 month period.  At the time of sending such notice, the
Borrowers (in consultation with the Administrative Agent) shall specify the
time period within which each Lender is requested to respond (which shall in no
event be less than ten (10) Business Days from the date of delivery of
such notice to the Lenders).

 

(b)                                 Lender Elections to Increase.  Each Lender shall notify the Administrative
Agent within such time period whether or not it agrees to increase its
Commitment and, if so, whether by an amount equal to, greater than, or less
than its Applicable Percentage of such requested increase.  Any Lender not responding within such time
period shall be deemed to have declined to increase its Commitment.  No Lender shall be obligated to increase its
Commitment hereunder.

 

(c)                                  Notification by Administrative Agent; Additional Lenders.  The Administrative
Agent shall notify the Borrowers and each Lender of the Lenders’ responses to
each request made hereunder.  To achieve
the full amount of a requested increase and subject to the approval of the
Administrative Agent and the Swingline Lender (which approvals shall not be
unreasonably withheld), the Borrowers may also invite additional Eligible
Assignees to become Lenders pursuant to a joinder agreement in form and
substance satisfactory to the Administrative Agent and its counsel.

 

(d)                                 Effective Date and Allocations.  If the Aggregate
Commitments are increased in accordance with this Section, the Administrative
Agent and the Borrowers shall determine the effective date (the “Increase
Effective Date”) and the final allocation of such increase.  The Administrative Agent shall promptly
notify the Borrowers and the Lenders of the final allocation of such increase
and the Increase Effective Date.

 

44

 

(e)                                  Conditions to Effectiveness of Increase.  As a condition
precedent to such increase, the Borrowers shall deliver to the Administrative
Agent a certificate of each Borrower dated as of the Increase Effective Date
(in sufficient copies for each Lender) signed by a Responsible Officer of such
Borrower (i) certifying and attaching the resolutions adopted by such
Borrower approving or consenting to such increase, and (ii) certifying
that, before and after giving effect to such increase, (A) the
representations and warranties contained in Article V and the other
Loan Documents are true and correct on and as of the Increase Effective Date,
except to the extent that such representations and warranties specifically
refer to an earlier date, in which case they are true and correct as of such
earlier date, and except that for purposes of this Section 2.14,
the representations and warranties contained in subsections (a) and (b) of
Section 5.05 shall be deemed to refer to the most recent statements
furnished pursuant to clauses (a) and (b), respectively, of Section 6.01,
and (B) no Default exists.

 

(f)                                    Loans; Reallocation of Outstanding Amounts.

 

(i)                                     Except as set
forth in subsection (ii) of this subsection (f), if any Eligible Assignee
becomes a Lender hereunder or any Lender’s Commitment is increased pursuant to
this Section, Loans made on or after the applicable Increase Effective Date
shall be made in accordance with the Applicable Percentages of each Lender in
effect on and after such Increase Effective Date (except to the extent that any
such Loan would result in any Lender making an aggregate principal amount of
Loans in excess of its Commitment, in which case such excess amount will be
allocated to and made by, any new Lenders and Lenders with increased
Commitments pursuant to subsection (b) above, in each case, in accordance
with their Applicable Percentages).

 

(ii)                                  Upon any
increase in the Aggregate Commitment Amount pursuant to this Section 2.14
(a) each of the Lenders with an existing Commitment (each, an “Existing
Lender”) shall assign to each Lender with a new Commitment (each, a “New
Lender”) and each of the New Lenders shall purchase from each of the
Existing Lenders, at the principal amount thereof and in the applicable
currency or currencies, such interests in the Loans outstanding on such
Increase Effective Date as shall be necessary in order that, after giving
effect to all such assignments and purchases, the Loans will be held by
Existing Lenders and New Lenders ratably in accordance with their Commitments
after giving effect to the addition of the Commitments of the New Lenders, (b) each
new Commitment of a New Lender shall be deemed for all purposes a Commitment
hereunder and each Loan made thereunder (a “New Loan”) shall be deemed,
for all purposes, a Loan and (c) each New Lender shall become a Lender
with respect to the Commitments and all matters relating thereto.

 

(g)                                 Conflicting Provisions.  This Section shall supersede any
provisions in Section 2.13 or 10.01 to the contrary.

 

2.15                        Concerning Joint and Several Liability of the
Borrowers.

 

(a)                                  Each of the Borrowers is accepting joint and several
liability hereunder and under the other Loan Documents in consideration of the
financial accommodations to be provided by the Lenders and the Administrative
Agent under this Agreement, for the mutual benefit, directly and indirectly, of
each of the Borrowers and in consideration of the undertakings of each other
Borrower to accept joint and several liability for the Obligations.

 

45

 

(b)                                 Each of the Borrowers, jointly and severally, hereby
irrevocably and unconditionally accepts, not merely as a surety but also as a
primary obligor and co-debtor, joint and several liability with each other
Borrower, with respect to the payment and performance of all of the Obligations
(including, without limitation, any Obligations arising under this Section 2.15),
it being the intention of the parties hereto that all the Obligations shall be
the joint and several obligations of each of the Borrowers without preferences
or distinction among them.

 

(c)                                  If and to the extent that any of the Borrowers shall fail to
make any payment with respect to any of the Obligations as and when due or to
perform any of the Obligations in accordance with the terms thereof, then, in
each such event, the other Borrowers will make such payment with respect to, or
perform, such Obligation.

 

(d)                                 The Obligations of each of the Borrowers under the
provisions of this Section 2.15 constitute the full recourse
Obligations of each of the Borrowers enforceable against each such Person to
the full extent of its properties and assets, irrespective of the validity,
regularity or enforceability of this Agreement or the other Loan Documents or
any other circumstance whatsoever.

 

(e)                                  Except as otherwise expressly provided herein, each Borrower
hereby waives promptness, diligence, presentment, demand, protest, notice of
acceptance of its joint and several liability, notice of any and all advances
of the Loans made under this Agreement and any promissory note issued
hereunder, notice of occurrence of any Default or Event of Default (except to
the extent notice is expressly required to be given pursuant to the terms of
this Agreement or any of the other Loan Documents), or of any demand for any
payment under this Agreement, notice of any action at any time taken or omitted
by the Administrative Agent or the Lenders under or in respect of any of the
Obligations hereunder, any requirement of diligence and, generally, all
demands, notices and other formalities of every kind in connection with this
Agreement and the other Loan Documents. 
Each Borrower hereby waives all defenses which may be available by
virtue of any valuation, stay, moratorium law or other similar law now or
hereafter in effect, any right to require the marshaling of assets of the
Borrowers and any other entity or Person primarily or secondarily liable with
respect to any of the Obligations, and all surety ship defenses generally.  Each Borrower hereby assents to, and waives
notice of, any extension or postponement of the time for the payment, or place
or manner for payment, compromise, refinancing, consolidation or renewals of
any of the Obligations hereunder, the acceptance of any partial payment
thereon, any waiver, consent or other action or acquiescence by the
Administrative Agent and the Lenders at any time or times in respect of any
default by any Borrower in the performance or satisfaction of any term,
covenant, condition or provision of this Agreement and the other Loan Documents,
any and all other indulgences whatsoever by the Administrative Agent and the
Lenders in respect of any of the Obligations hereunder, and the taking,
addition, substitution or release, in whole or in part, at any time or times,
of any security for any of such Obligations or the addition, substitution or
release, in whole or in part, of any Borrower or any other entity or Person
primarily or secondarily liable for any Obligation. Such Borrower further
agrees that its Obligations shall not be released or discharged, in whole or in
part, or otherwise affected by the adequacy of any rights which the
Administrative Agent or any Lender may have against any collateral security or
other means of obtaining repayment of any of the Obligations, the impairment of
any collateral security securing the Obligations, including, without
limitation, the failure to protect or preserve any rights which any
Administrative Agent or any Lender may have in such collateral security or the
substitution, exchange, surrender, release, loss or destruction of any such
collateral security, any other act or omission which might in any manner or to
any extent vary the risk of such Borrower, or otherwise operate as a release or
discharge of such Borrower, all of which may be done without notice to such
Borrower.  If for any reason any other
Borrower has no legal existence or is under no legal obligation to discharge
any of the Obligations, or if any of the Obligations have become irrecoverable
from any other Borrower by reason of such other Borrower’s insolvency,
bankruptcy or reorganization or by other operation of law or for any reason,
this Agreement and the other Loan 

 

46

 

Documents
to which it is a party shall nevertheless be binding on such Borrower to the
same extent as if such Borrower at all times had been the sole obligor on such
Obligations. Without limiting the generality of the foregoing, each Borrower
assents to any other action or delay in acting or failure to act on the part of
the Administrative Agent and the Lenders, including, without limitation, any
failure strictly or diligently to assert any right or to pursue any remedy or
to comply fully with applicable laws or regulations thereunder which might, but
for the provisions of this Section 2.15, afford grounds for
terminating, discharging or relieving such Borrower, in whole or in part, from
any of its obligations under this Section 2.15, it being the
intention of each Borrower that, so long as any of the Obligations hereunder
remain unsatisfied, the obligations of such Borrower under this Section 2.15
shall not be discharged except by performance and then only to the extent of
such performance. The Obligations of each Borrower under this Section 2.15
shall not be diminished or rendered unenforceable by any winding up,
reorganization, arrangement, liquidation, reconstruction or similar proceeding
with respect to any reconstruction or similar proceeding with respect to any
other Borrower, or any of the Lenders. 
The joint and several liability of the Borrowers hereunder shall
continue in full force and effect notwithstanding any absorption, merger,
amalgamation or any other change whatsoever in the name, ownership, membership,
constitution or place of formation of any Borrower or the Lenders.  Each of the Borrowers acknowledges and
confirms that it has itself established its own adequate means of obtaining
from the other Borrowers on a continuing basis all information desired by such
Borrower concerning the financial condition of the other Borrowers and that
each such Borrower will look to the other Borrowers and not to the
Administrative Agent or any Lender in order for such Borrower to keep
adequately informed of changes in the other Borrowers’ respective financial
conditions.

 

(f)                                    The provisions of this Section 2.15 are made for
the benefit of the Lenders and the Administrative Agent and their respective
permitted successors and assigns, and may be enforced by it or them from time
to time against any or all of the Borrowers as often as occasion therefor may
arise and without requirement on the part of the Lenders, the Administrative
Agent or such successor or assign first to marshal any of its or their claims
or to exercise any of its or their rights against the other Borrowers or to
exhaust any remedies available to it or them against any other Borrower or to
resort to any other source or means of obtaining payment of any of the
Obligations hereunder or to elect any other remedy.  The provisions of this Section 2.15
shall remain in effect until all of the Obligations shall have been paid in
full or otherwise fully satisfied.  If at
any time, any payment, or any part thereof; made in respect of any of the
Obligations, is rescinded or must otherwise be restored or returned by any Lender
or any Administrative Agent upon the insolvency, bankruptcy or reorganization
of any of the Borrowers, or otherwise, the provisions of this Section 2.15
will forthwith be reinstated in effect, as though such payment had not been
made.

 

(g)                                 Each of the Borrowers hereby agrees that it will not enforce
any of its rights of reimbursement, contribution, subrogation or the like
against any other Borrower with respect to any liability incurred by it
hereunder or under any of the other Loan Documents, any payments made by it to
any of the Lenders or the Administrative Agent with respect to any of the
Obligations or any collateral security therefor until such time as all of the
Obligations have been indefeasibly paid in full in cash.  Any claim which any Borrower may have against
any other Borrower with respect to any payments to the Lenders or the
Administrative Agent hereunder or under any other Loan Documents are hereby
expressly made subordinate and junior in right of payment, without limitation
as to any increases in the Obligations arising hereunder or thereunder, to the
prior payment in full of the Obligations and, in the event of any insolvency,
bankruptcy, receivership, liquidation, reorganization or other similar
proceeding under the laws of any jurisdiction relating to any Borrower, its
debts or its assets, whether voluntary or involuntary, all such Obligations
shall be paid in full before any payment or distribution of any character,
whether in cash, securities or other property, shall be made to any other
Borrower therefore.

 

47

 

(h)                                 Each of the Borrowers hereby agrees that the payment of any
amounts due with respect to the indebtedness owing by any Borrower to any other
Borrower is hereby subordinated to the prior payment in full in cash of the
Obligations.  Each Borrower hereby agrees
that after the occurrence and during the continuance of any Default or Event of
Default, such Borrower will not demand, sue for or otherwise attempt to collect
any indebtedness of any other Borrower owing to such Borrower until the
Obligations shall have been paid in full in cash.  If, notwithstanding the foregoing sentence,
such Borrower shall collect, enforce or receive any amounts in respect of such
indebtedness, such amounts shall be collected, enforced and received by such
Borrower as trustee for the Administrative Agent and be paid over to the
Administrative Agent for the pro  rata accounts of the Lenders to
be applied to repay the Obligations.

 

2.16                        Contribution.

 

(a)                                  To the extent that any Borrower shall make a payment under Section 2.15
of all or any of the Obligations (other than Loans made to that Borrower for
which it is primarily liable) (a “Guarantor Payment”) that, taking into
account all other Guarantor Payments then previously or concurrently made by
any other Borrower, exceeds the amount that such Borrower would otherwise have
paid if each Borrower had paid the aggregate Obligations satisfied by such
Guarantor Payment in the same portion that such Borrower’s “Allocable Amount”
(as defined below) (as determined immediately prior to such Guarantor Payment)
bore to the aggregate Allocable Amounts of each of the Borrowers as determined
immediately prior to the making of such Guarantor Payment, then, following
indefeasible payment in full in cash of the Obligations and termination of the
Commitments, such Borrower shall be entitled to receive contribution and
indemnification payments from, and be reimbursed by, the other Borrowers for
the net amount of such excess, pro rata based upon their respective Allocable
Amounts in effect immediately prior to such Guarantor Payment.

 

(b)                                 As of any date of determination, the “Allocable Amount”
of any Borrower shall be equal to the maximum amount of the claim that could
then be recovered from such Borrower under Section 2.16 without
rendering such claim voidable or avoidable under Section 548 of Chapter 11
of the Bankruptcy Code or under any applicable state Uniform Fraudulent
Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common
law.

 

(c)                                  This Section 2.16 is intended only to define the
relative rights of Borrowers and nothing set forth in this Section 2.16
is intended or shall impair the obligations of the Borrowers, jointly and
severally, to pay any amounts as and when the same shall become due and payable
in accordance with the terms of this Agreement, including Section 2.15.  Nothing contained in this Section 2.16
shall limit the liability of any Borrower to pay the Loans made directly or
indirectly to that Borrower and accrued interest, fees and expenses with
respect thereto for which such Borrower shall be primarily liable.

 

(d)                                 The parties hereto acknowledge that the rights of
contribution and indemnification of any Borrower under this Section 2.16
shall constitute assets of such Borrower.

 

(e)                                  The rights of an indemnifying Borrower against the other
Borrowers under this Section shall be exercisable upon the full and
indefeasible payment of the Obligations and the termination of Commitments.

 

2.17                        Collateral Security.  The Obligations shall be secured by a perfected first
priority security interest in all of the Borrowers’ interest in the Collateral,
whether now owned or hereafter acquired, as described in the Security Documents
to which any of the Borrowers is a party.

 

48

 

2.18                        Additional Borrowers.                       Any direct or indirect wholly owned Subsidiary of KKR
Financial (i) designated by an existing Borrower and (ii) other than
in the case of such Subsidiaries organized in the Cayman Islands or the United
States (or any state or territory thereof, or the District of Columbia),
consented to by the Administrative Agent and each Lender (in each case, such
consent not to be unreasonably withheld or delayed), may become a Borrower
hereunder by executing a customary joinder agreement, reasonably satisfactory
to the Administrative Agent and the Borrowers, and delivering customary
certificates consistent with those delivered in connection with Section 4.02(d),
customary legal opinions and such other documentation as may be reasonably
requested by the Administrative Agent.

 

2.19                        Defaulting
Lender Provisions.

 

(a)                                  Conditions Precedent.  In addition to the other conditions precedent
herein set forth, if any Lender becomes, and during the period it remains, a
Defaulting Lender or a Potential Defaulting Lender, the Issuing Bank will not
be required to issue any Letter of Credit or to amend any outstanding Letter of
Credit to increase the face amount thereof, alter the drawing terms thereunder
or extend the expiry date thereof, and the Swingline Lender will not be
required to make any Swingline Loan, unless the Issuing Bank or the Swingline
Lender, as the case may be, is satisfied that any exposure that would result
therefrom is fully covered or eliminated by any combination satisfactory to the
Issuing Bank or Swingline Lender of the following:

 

(i)                                     in the case of
a Defaulting Lender, the LC Exposure and the Swingline Exposure of such
Defaulting Lender is reallocated, as to outstanding and future Letters of
Credit and Swingline Loans, to the Non-Defaulting Lenders as provided in clause
(1) of Section 2.19(c);

 

(ii)                                  in the case of
a Defaulting Lender or a Potential Defaulting Lender, without limiting the
provisions of Section 2.19(b), the Borrowers Cash Collateralize the
obligations of the Borrowers in respect of such Letter of Credit or Swingline
Loan in an amount at least equal to the aggregate amount of the unreallocated
obligations (contingent or otherwise) of such Defaulting Lender or Potential
Defaulting Lender in respect of such Letter of Credit or Swingline Loan, or
makes other arrangements satisfactory to the Administrative Agent, the Issuing
Bank and the Swingline Lender in their sole discretion to protect them against
the risk of non-payment by such Defaulting Lender or Potential Defaulting
Lender; and

 

(iii)                               in the case of
a Defaulting Lender or a Potential Defaulting Lender, then in the case of a
proposed issuance of a Letter of Credit or making of a Swingline Loan, by an
instrument or instruments in form and substance satisfactory to the
Administrative Agent, and to the Issuing Bank and the Swingline Lender, as the
case may be, the Borrowers agree that the face amount of such requested Letter
of Credit or the principal amount of such requested Swingline Loan will be
reduced by an amount equal to the unreallocated, non-Cash Collateralized
portion thereof as to which such Defaulting Lender or Potential Defaulting
Lender would otherwise be liable, in which case the obligations of the
Non-Defaulting Lenders in respect of such Letter of Credit or Swingline Loan
will, subject to the first proviso below, be on a pro rata basis in accordance
with the Commitments of the Non-Defaulting Lenders, and the pro rata payment
provisions of Section 2.13 will be deemed adjusted to reflect this
provision;

 

provided that (a) the
sum of each Non-Defaulting Lender’s total Revolving Credit Exposure, total
Swingline Exposure and total LC Exposure may not in any event exceed the
Commitment of such Non-Defaulting Lender, and (b) neither any such
reallocation nor any payment by a Non-Defaulting Lender pursuant thereto nor
any such Cash Collateralization or reduction will constitute a waiver or
release of any claim the Borrower, the Administrative Agent, the Issuing Bank,
the Swingline Lender or any other Lender may have against such Defaulting
Lender, or cause such Defaulting Lender or Potential Defaulting Lender to be a
Non-Defaulting Lender.

 

49

 

(b)                                 Cash Collateral Call.  If any Lender becomes, and during the period
it remains, a Defaulting Lender or a Potential Defaulting Lender, if any Letter
of Credit or Swingline Loan is at the time outstanding, the Issuing Bank and
the Swingline Lender, as the case may be, may (except, in the case of a
Defaulting Lender, to the extent the Commitments have been fully reallocated
pursuant to Section 2.19(c)), by notice to the Borrowers and such
Defaulting Lender or Potential Defaulting Lender through the Administrative
Agent, require the Borrowers to Cash Collateralize the obligations of the
Borrowers to the Issuing Bank and the Swingline Lender in respect of such
Letter of Credit or Swingline Loan in amount at least equal to the aggregate
amount of the unreallocated obligations (contingent or otherwise) of such
Defaulting Lender or such Potential Defaulting Lender in respect thereof, or to
make other arrangements satisfactory to the Administrative Agent, and to the
Issuing Bank and the Swingline Lender, as the case may be, in their sole
discretion to protect them against the risk of non-payment by such Defaulting
Lender or Potential Defaulting Lender.

 

(c)                                  Reallocation of Defaulting Lender Commitment, Etc.  If a Lender
becomes, and during the period it remains, a Defaulting Lender, the following
provisions shall apply with respect to any outstanding LC Exposure and any
outstanding Swingline Exposure of such Defaulting Lender:

 

(i)                                     the LC Exposure
and the Swingline Exposure of such Defaulting Lender will, subject to the
limitation in the first proviso below, automatically be reallocated (effective
on the day such Lender becomes a Defaulting Lender) among the Non-Defaulting
Lenders pro rata in accordance with their respective Commitments;  provided that (a) the sum of each
Non-Defaulting Lender’s total Revolving Credit Exposure, total Swingline
Exposure and total LC Exposure may not in any event exceed the Commitment of
such Non-Defaulting Lender as in effect at the time of such reallocation and (b) neither
such reallocation nor any payment by a Non-Defaulting Lender pursuant thereto
will constitute a waiver or release of any claim the Borrower, the
Administrative Agent, the Issuing Bank, the Swingline Lender or any other
Lender may have against such Defaulting Lender or cause such Defaulting Lender
to be a Non-Defaulting Lender; and

 

(ii)                                  to the extent
that any portion (the “unreallocated portion”) of the Defaulting Lender’s
LC Exposure and Swingline Exposure cannot be so reallocated, whether by reason
of the first proviso in clause (i) above or otherwise, the Borrowers will,
not later than 10 Business Days after demand by the Administrative Agent (at
the direction of the Issuing Bank and/or the Swingline Lender, as the case may
be), (a) Cash Collateralize the obligations of the Borrowers to the
Issuing Bank and the Swingline Lender in respect of such LC Exposure or
Swingline Exposure, as the case may be, in an amount at least equal to the
aggregate amount of the unreallocated portion of such LC Exposure or Swingline
Exposure, or (b) in the case of such Swingline Exposure, prepay (subject
to clause (iii) below) and/or Cash Collateralize in full the unreallocated
portion thereof, or (c) make other arrangements satisfactory to the
Administrative Agent, and to the Issuing Bank and the Swingline Lender, as the
case may be, in their sole discretion to protect them against the risk of
non-payment by such Defaulting Lender; and

 

(iii)                               any amount
(other than fees that would otherwise be payable by the Borrowers pursuant to Section 2.09(a),
which for avoidance of doubt, shall cease to accrue or be payable on the
Commitments of such Defaulting Lender) paid by the Borrowers for the account of
a Defaulting Lender under this Agreement (whether on account of principal,
interest, indemnity payments or other amounts) will not be paid or distributed
to such Defaulting Lender, but will instead be retained by the Administrative
Agent in a segregated non-interest bearing account until 

 

50

 

(subject to Section 2.19(h)) the termination of
the Commitments and payment in full of all obligations of the Borrowers
hereunder and will be applied by the Administrative Agent, to the fullest
extent permitted by law, to the making of payments from time to time in the
following order of priority:  first
to the payment of any amounts owing by such Defaulting Lender to the
Administrative Agent under this Agreement, second to the payment of any
amounts owing by such Defaulting Lender to the Issuing Bank or the Swingline
Lender (pro rata as to the respective amounts owing to each of them) under this
Agreement, third to the payment of post-default interest and then
current interest due and payable to the Lenders hereunder other than Defaulting
Lenders, ratably among them in accordance with the amounts of such interest
then due and payable to them, fourth to the payment of fees then due and
payable to the Non-Defaulting Lenders hereunder, ratably among them in
accordance with the amounts of such fees then due and payable to them, fifth
to pay principal and unreimbursed LC Disbursements then due and payable to the
Non-Defaulting Lenders hereunder ratably in accordance with the amounts thereof
then due and payable to them, sixth to the ratable payment of other
amounts then due and payable to the Non-Defaulting Lenders, and seventh after
the termination of the Commitments and payment in full of all obligations of
the Borrowers hereunder, to pay amounts owing under this Agreement to such
Defaulting Lender or as a court of competent jurisdiction may otherwise direct.

 

(d)           Right
to Give Drawdown Notices.  In
furtherance of the foregoing, if any Lender becomes, and during the period it
remains, a Defaulting Lender or a Potential Defaulting Lender, each of the
Issuing Bank and the Swingline Lender is hereby authorized by the Borrowers
(which authorization is irrevocable and coupled with an interest) to give, in
its discretion, through the Administrative Agent, Revolving Loan Notice
pursuant to Section 2.02 in such amounts and in such times as may be
required to (i) reimburse an outstanding LC Disbursement, (ii) repay an
outstanding Swingline Loan, and/or (iii) Cash Collateralize the
obligations of the Borrowers in respect of outstanding Letters of Credit or
Swingline Loans in an amount at least equal to the aggregate amount of the
obligations (contingent or otherwise) of such Defaulting Lender or Potential
Defaulting Lender in respect of such Letter of Credit or Swingline Loan.

 

(e)           Fees.  Anything herein to the contrary notwithstanding,
during such period as a Lender is a Defaulting Lender, such Defaulting Lender
will not be entitled to any fees accruing during such period pursuant to Sections
2.09(a) and 2.09(b) (without prejudice to the rights of
the Lenders other than Defaulting Lenders in respect of such fees), provided
that (a) to the extent that a portion of the LC Exposure or the Swingline
Exposure of such Defaulting Lender is reallocated to the Non-Defaulting Lenders
pursuant to Section 2.19(c), such fees that would have accrued for
the benefit of such Defaulting Lender will instead accrue for the benefit of
and be payable to such Non-Defaulting Lenders, pro rata in accordance with
their respective Commitments, and (b) to the extent any portion of such LC
Exposure or Swingline Exposure cannot be so reallocated, such fees will instead
accrue for the benefit of and be payable to the Issuing Bank and the Swingline
Lender as their interests appear (and the pro rata payment provisions of Section 2.13
will automatically be deemed adjusted to reflect the provisions of this
Section).

 

(f)            Removal
of Administrative Agent.  Anything
herein to the contrary notwithstanding, if at any time the Requisite Lenders
determine that the Person serving as Administrative Agent is (without taking
into account any provision in the definition of “Defaulting Lender” or “Potential
Defaulting Lender” requiring notice from the Administrative Agent or any other
party) a Defaulting Lender or a Potential Defaulting Lender, the Requisite
Lenders (determined after giving effect to Section 10.01) may by
notice to the Borrowers and such Person remove such Person as Administrative
Agent and appoint a replacement Administrative Agent reasonably acceptable to
the Borrrowers.  Such removal will, to
the fullest extent permitted by applicable law, be effective on the earlier of (i) the
date a replacement Administrative Agent is appointed and (ii) the date 60
Business Days after the giving of such notice by the Requisite Lenders
(regardless of whether a replacement Administrative Agent has been appointed).

 

51

 

(g)           Termination
of Defaulting Lender Commitment.  The
Borrowers may terminate the unused amount of the Commitment of a Defaulting
Lender upon not less than two Business Days’ prior notice to the Administrative
Agent (which will promptly notify the Lenders thereof), and in such event the
provisions of Section 2.19(c)(iii) will apply to all amounts
thereafter paid by the Borrowers for the account of such Defaulting Lender
under this Agreement (whether on account of principal, interest, fees,
indemnity or other amounts), provided that such termination will not be deemed
to be a waiver or release of any claim the Borrower, the Administrative Agent,
the Issuing Bank, the Swingline Lender or any Lender may have against such
Defaulting Lender.

 

(h)           Cure.  If the Borrower, the Administrative Agent,
the Issuing Bank and the Swingline Lender agree in writing in their discretion
that a Lender that is a Defaulting Lender or a Potential Defaulting Lender
should no longer be deemed to be a Defaulting Lender or Potential Defaulting
Lender, as the case may be, the Administrative Agent will so notify the parties
hereto, whereupon as of the effective date specified in such notice and subject
to any conditions set forth therein (which may include arrangements with
respect to any amounts then held in the segregated account referred to in Section 2.19(c)),
such Lender will, to the extent applicable, purchase such portion of
outstanding Loans of the other Lenders and/or make such other adjustments as
the Administrative Agent may determine to be necessary to cause the Revolving
Credit Exposure, LC Exposure and Swingline Exposure of the Lenders to be on a
pro rata basis in accordance with their respective Commitments, whereupon such
Lender will cease to be a Defaulting Lender or Potential Defaulting Lender and
will be a Non-Defaulting Lender (and such Exposure of each Lender will
automatically be adjusted on a prospective basis to reflect the foregoing); provided
that no adjustments will be made retroactively with respect to fees accrued or
payments made by or on behalf of the Borrowers while such Lender was a
Defaulting Lender; and provided, further, that except to the extent otherwise
expressly agreed by the affected parties, no change hereunder from Defaulting
Lender or Potential Defaulting Lender to Non-Defaulting Lender will constitute
a waiver or release of any claim of any party hereunder arising from such
Lender’s having been a Defaulting Lender or Potential Defaulting Lender.

 

ARTICLE III.

TAXES, YIELD PROTECTION AND ILLEGALITY

 

3.01        Taxes.

 

(a)           Payments
Free of Taxes.  Any and all payments
by or on account of any obligation of the Borrowers hereunder or under any
other Loan Document shall be made free and clear of and without reduction or
withholding for any Indemnified Taxes, provided that if the Borrowers
shall be required by applicable law to deduct any Indemnified Taxes from such
payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent or Lender,
as the case may be, receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrowers shall make such
deductions or withholdings and (iii) the Borrowers shall timely pay the
full amount deducted to the relevant Governmental Authority in accordance with
applicable law.

 

(b)           Payment
of Other Taxes by the Borrowers. 
Without limiting the provisions of subsection (a) above, the
Borrowers shall timely pay any Other Taxes to the relevant Governmental
Authority in accordance with applicable law.

 

(c)           Indemnification
by the Borrowers.  The Borrowers
shall indemnify the Administrative Agent and each Lender, within 10 days after
written demand therefor, for the full amount of any Indemnified Taxes or Other
Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) paid by the Administrative
Agent or any such 

 

52

 

Lender,
as the case may be, and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority; provided, however the Borrowers shall not
indemnify the Administrative Agent or any Lender for any penalities or interest
that are imposed either solely as a result of the gross negligence or willful
misconduct of the Administrative Agent or any Lender or a failure by the
Administrative Agent or any Lender to provide the Borrowers with timely notice
of the impostion of any Indemnified Taxes or Other Taxes.  A certificate as to the amount of such
payment or liability delivered to the Borrowers by a Lender (with a copy to the
Administrative Agent), or by the Administrative Agent on its own behalf or on
behalf of a Lender, shall be conclusive absent manifest error.

 

(d)           Evidence
of Payments.  As soon as practicable
after any payment of Indemnified Taxes or Other Taxes by the Borrowers to a
Governmental Authority, the Borrowers shall deliver to the Administrative Agent
the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment
or other evidence of such payment reasonably satisfactory to the Administrative
Agent.  As soon as practicable after any
payment of Indemnified Taxes or Other Taxes by the Administrative Agent or any
Lender to a Governmental Authority, the Administrative Agent or Lender shall,
upon request from a Borrower, following receipt of any such item, deliver to
the Borrowers the original or a certified copy of a receipt issued by such
Governmental Authority evidencing such payment or other reasonable evidence of
such payment; provided, that in no event shall the Administrative Agent or any
Lender be required to deliver to the Borrowers its tax returns or any other
information regarding its tax affairs or computations or any information that
is confidential, proprietary, or constitutes internal work product.

 

(e)           Status
of Lenders.  Any Foreign Lender that
is entitled to an exemption from or reduction of withholding tax under the law
of the jurisdiction in which any Borrower is resident for tax purposes, or any
treaty to which such jurisdiction is a party, with respect to payments
hereunder or under any other Loan Document shall deliver to the Borrowers (with
a copy to the Administrative Agent), at the time or times prescribed by
applicable law or reasonably requested by the Borrowers or the Administrative
Agent, such properly completed and executed documentation prescribed by applicable
law as will permit such payments to be made without withholding or at a reduced
rate of withholding (including any documentation necessary to prevent
withholding under Section 1471 or Section 1472 of the Code).  In addition, any Lender, if requested by the
Borrowers or the Administrative Agent, shall deliver such other documentation
prescribed by applicable law or reasonably requested by the Borrowers or the
Administrative Agent as will enable the Borrowers or the Administrative Agent
to determine whether or not such Lender is subject to backup withholding or
information reporting requirements.  In
addition, each Foreign Lender shall, upon request from a Borrower, deliver new
forms promptly upon the obsolescence or invalidity of any form previously delivered
by such Foreign Lender.  Each Foreign
Lender shall notify the Borrower at any time it determines that it is no longer
in a position to provide any previously delivered certificate to the Borrower

 

Any Foreign Lender shall
deliver to the Borrowers and the Administrative Agent (in such number of copies
as shall be requested by the recipient) on or prior to the date on which such
Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the request of the Borrowers or the Administrative Agent, but
only if such Foreign Lender is legally entitled to do so), whichever of the
following is applicable:

 

(i)            duly completed copies of Internal Revenue Service Form W-8BEN
claiming eligibility for benefits of an income tax treaty to which the United
States is a party,

 

(ii)           duly completed copies of Internal Revenue Service Form W-8ECI,

 

53

 

(iii)          in the case of a Foreign Lender claiming the benefits of
the exemption for portfolio interest under section 881(c) of the Code, (x) a
certificate to the effect that such Foreign Lender is not (A) a “bank”
within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent
shareholder” of any Borrower within the meaning of section 881(c)(3)(B) of
the Code, or (C) a “controlled foreign corporation” described in section
881(c)(3)(C) of the Code and (y) duly completed copies of  Internal Revenue Service Form W-8BEN, or

 

(iv)          any other form prescribed by applicable law as a basis for
claiming exemption from or a reduction in United States Federal withholding tax
duly completed together with such supplementary documentation as may be
prescribed by applicable law to permit the Borrowers to determine the
withholding or deduction required to be made.

 

(f)            Treatment
of Certain Refunds.  If the
Administrative Agent or any Lender determines, in its sole discretion, which shall be
exercised in a commercially reasonable manner, that
it has received a refund of any Taxes or Other Taxes as to which it has been
indemnified by the Borrowers or with respect to which any Borrower has paid
additional amounts pursuant to this Section, it shall pay to such Borrower an
amount equal to such refund (but only to the extent of indemnity payments made,
or additional amounts paid, by the Borrowers under this Section with
respect to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the Administrative Agent or such Lender, as the case
may be, and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund), provided that each
Borrower, upon the request of the Administrative Agent or such Lender, agrees
to repay the amount paid over to such Borrower (plus any penalties, interest or
other charges imposed by the relevant Governmental Authority) to the
Administrative Agent or such Lender in the event the Administrative Agent or
such Lender is required to repay such refund to such Governmental Authority.  This subsection shall not be construed to
require the Administrative Agent or any Lender to make available its tax
returns (or any other information relating to its taxes that it deems
confidential) to the Borrowers or any other Person.

 

3.02        Illegality.  If
any Lender determines that any Law has made it unlawful, or that any
Governmental Authority has asserted that it is unlawful, for any Lender or its
applicable Lending Office to make, maintain or fund Fixed Period Eurodollar
Loans or Daily Floating Eurodollar Loans,
or to determine or charge interest rates based upon the Fixed Period Eurodollar
Rate or the Daily Floating Eurodollar Rate, or any Governmental Authority has imposed material
restrictions on the authority of such Lender to purchase or sell, or to take
deposits of, Dollars in the London interbank market, then, on notice thereof by
such Lender to the Borrowers through the Administrative Agent, any obligation
of such Lender to make or continue Fixed Period Eurodollar Loans or Daily
Floating Eurodollar Loans or to
convert Base Rate Loans to Fixed Period Eurodollar Loans or Daily
Floating Eurodollar Loans shall
be suspended until such Lender notifies the Administrative Agent and the
Borrowers that the circumstances giving rise to such determination no longer
exist.  Upon receipt of such notice, the
Borrowers shall, upon demand from such Lender (with a copy to the
Administrative Agent), prepay or, if applicable, convert all Fixed Period
Eurodollar Loans or Daily Floating Eurodollar Loans of such Lender to Base Rate Loans, either on the last day of
the Interest Period therefor, if such Lender may lawfully continue to maintain
such Loans to such day, or immediately, if such Lender may not lawfully
continue to maintain such Loans.  Upon
any such prepayment or conversion, the Borrowers shall also pay accrued
interest on the amount so prepaid or converted.

 

3.03        Inability to Determine Rates.  If
the Administrative Agent or the Required Lenders determine that for any reason
in connection with any request for a Fixed Period Eurodollar Loan or a Daily
Floating Eurodollar Loan, as applicable, or a conversion to or continuation
thereof that (a)  deposits in the relevant Approved Currency are not being
offered to banks in the London interbank eurodollar market for the applicable
amount and Interest Period of such Fixed Period Eurodollar Loan or Daily 

 

54

 

Floating
Eurodollar Loan, (b) adequate and reasonable means do not exist for determining
the Fixed Period Eurodollar Rate or Daily Floating Eurodollar Rate, as
applicable, for any requested Interest Period with respect to a proposed Fixed
Period Eurodollar Loan or Daily Floating Eurodollar Loan, as applicable, or (c) the
Fixed Period Eurodollar Rate or Daily Floating Eurodollar Rate for any requested
Interest Period with respect to a proposed Fixed Period Eurodollar Loan or
Daily Floating Eurodollar Loan does not adequately and fairly reflect the cost
of funding such Loan, the Administrative Agent will promptly so notify the
Borrowers and each Lender.  Thereafter,
the obligation of the Lenders to make or maintain Fixed Period Eurodollar Loans
or Daily Floating Eurodollar Loans in the affected currency or currencies shall
be suspended until the Administrative Agent (upon the instruction of the
Required Lenders) revokes such notice. 
Upon receipt of such notice, the Borrowers may revoke any pending
Request for Borrowing of, conversion to or continuation of Fixed Period
Eurodollar Loans or Daily Floating Eurodollar Loans, as applicable, or, failing
that, will be deemed to have converted such request into a request for a Base
Rate Loan in the amount specified therein.

 

3.04        Increased
Costs; Reserves on Eurodollar Loans.

 

(a)           Increased
Costs Generally.  If any Change in
Law shall:

 

(i)            impose, modify or deem applicable any reserve, special
deposit, compulsory loan, insurance charge or similar requirement against
assets of, deposits with or for the account of, or credit extended or
participated in by, any Lender (except any reserve requirement reflected contemplated
by Section 3.04(e));

 

(ii)           impose on any Lender or the London interbank market any
other condition, cost or expense affecting this Agreement or Eurodollar Loans
made by such Lender;

 

and the result of any of the
foregoing shall be to increase the cost to such Lender of making or maintaining
any Eurodollar Loan (or of maintaining its obligation to make any such Loan),
or to reduce the amount of any sum received or receivable by such Lender
(whether of principal, interest or any other amount) then, upon request of such
Lender, the Borrowers will pay to such Lender, as the case may be, such
additional amount or amounts as will compensate such Lender, as the case may
be, for such additional costs incurred or reduction suffered.

 

(b)           Capital
Requirements.  If any Lender
determines that any Change in Law affecting such Lender or any Lending Office
of such Lender or such Lender’s holding company, if any, regarding capital
requirements has or would have the effect of reducing the rate of return on
such Lender’s capital or on the capital of such Lender’s holding company, if
any, as a consequence of this Agreement, the Commitments of such Lender or the
Loans made by, such Lender, to a level below that which such Lender or such
Lender’s holding company could have achieved but for such Change in Law (taking
into consideration such Lender’s policies and the policies of such Lender’s
holding company with respect to capital adequacy), then from time to time the
Borrowers will pay to such Lender, as the case may be, such additional amount
or amounts as will compensate such Lender or such Lender’s holding company for
any such reduction suffered.

 

(c)           Certificates
for Reimbursement.  A certificate of
a Lender setting forth the amount or amounts necessary to compensate such
Lender or its holding company, as the case may be, as specified in subsection (a) or
(b) of this Section and delivered to the Borrowers shall be
conclusive absent manifest error.  The
Borrowers shall pay such Lender, as the case may be, the amount shown as due on
any such certificate within 10 days after receipt thereof.

 

55

 

(d)           Delay
in Requests.  Failure or delay on the
part of any Lender to demand compensation pursuant to the foregoing provisions
of this Section shall not constitute a waiver of such Lender’s right to
demand such compensation, provided that the Borrowers shall not be
required to compensate a Lender pursuant to the foregoing provisions of this Section for
any increased costs incurred or reductions suffered more than 180 days prior to
the date that such Lender, as the case may be, notifies the Borrowers of the
Change in Law giving rise to such increased costs or reductions and of such
Lender’s intention to claim compensation therefor (except that, if the Change
in Law giving rise to such increased costs or reductions is retroactive, then
the 180 days period referred to above shall be extended to include the period
of retroactive effect thereof).

 

(e)           Reserves
on Eurodollar Loans.  The Borrowers
shall pay to each Lender, as long as such Lender shall be required to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”),
additional interest on the unpaid principal amount of each Eurodollar Loan
equal to the actual costs of such reserves allocated to such Loan by such
Lender (as determined by such Lender in good faith, which determination shall
be conclusive), which shall be due and payable on each date on which interest
is payable on such Loan, provided the Borrowers shall have received at
least 10 days’ prior notice (with a copy to the Administrative Agent) of such
additional interest from such Lender.  If
a Lender fails to give notice 10 days prior to the relevant Interest Payment
Date, such additional interest shall be due and payable 10 days from receipt of
such notice.

 

3.05        Compensation for Losses.  Upon
demand of any Lender (with a copy to the Administrative Agent) from time to
time, the Borrowers shall promptly compensate such Lender for and hold such
Lender harmless from any loss, cost or expense incurred by it as a result of:

 

(a)           any
continuation, conversion, payment or prepayment of any Loan other than a Base
Rate Loan or a Daily Floating Eurodollar Loan on a day other than the last day
of the Interest Period for such Loan (whether voluntary, mandatory, automatic,
by reason of acceleration, or otherwise);

 

(b)           any
failure by the Borrowers (for a reason other than the failure of such Lender to
make a Loan) to prepay, borrow, continue or convert any Loan other than a Base
Rate Loan or a Daily Floating Eurodollar Loan on the date or in the amount
notified by the Borrowers; or

 

(c)           any
assignment of a Fixed Period Eurodollar Loan on a day other than the last day
of the Interest Period therefor as a result of a request by the Borrowers
pursuant to Section 10.13;

 

including any loss of
anticipated profits and any loss or expense arising from the liquidation or
reemployment of funds obtained by it to maintain such Loan or from fees payable
to terminate the deposits from which such funds were obtained.  The Borrowers shall also pay any customary
administrative fees charged by such Lender in connection with the
foregoing.  Notwithstanding the foregoing,
if, during the 120 day period following the Closing Date, the Administrative
Agent incurs any breakage costs on account of the syndication of the credit
facility established hereunder, the Borrowers shall immediately reimburse the
Administrative Agent for any such breakage costs.

 

For purposes of calculating
amounts payable by the Borrowers to the Lenders under this Section 3.05,
each Lender shall be deemed to have funded each Fixed Period Eurodollar Loan
made by it at the Fixed Period Eurodollar Rate used in determining the Fixed
Period Eurodollar Rate for such Loan by a matching deposit or other borrowing
in the London interbank eurodollar market for a comparable amount and for a
comparable period, whether or not such Fixed Period Eurodollar Loan was in fact
so funded.

 

56

 

3.06        Mitigation Obligations.  If any Lender requests compensation under Section 3.04,
or any Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.01,
or if any Lender gives a notice pursuant to Section 3.02, then such
Lender shall use reasonable efforts to designate a different Lending Office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the
judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04,
as the case may be, in the future, or eliminate the need for the notice
pursuant to Section 3.02, as applicable, and (ii) in each
case, would not subject such Lender to any unreimbursed cost or expense and
would not otherwise be disadvantageous to such Lender.  Each Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.

 

3.07        Survival.  All of the Borrowers’ obligations under this Article III
shall survive termination of the Aggregate Commitments and repayment of all
other Obligations hereunder.

 

ARTICLE IV.

CONDITIONS PRECEDENT TO BORROWINGS

 

4.01        Conditions to Effectiveness.  The
parties hereto acknowledge and agree that this Agreement shall become effective
upon receipt by each party hereto of this Agreement, executed and delivered by
a Responsible Officer of each Borrower and each Lender; provided, however,
that the obligation of any Lender to make any Loans, or of the Issuing Bank to
issue any Letters of Credit, hereunder is subject to the satisfaction of the
conditions set forth in Sections 4.02 and 4.03 hereunder.

 

4.02        Conditions of Initial Borrowing.  The
obligation of each Lender to make its initial Revolving Loans hereunder, and of
the Issuing Bank to initially issue any Letters of Credit, is subject to
satisfaction of the following conditions precedent:

 

(a)           The
Administrative Agent shall have received:

 

(i)            this Agreement as provided in Section 4.01;

 

(ii)           a Borrowing Base Report, certified as complete and correct
in all material respects, which calculates the Borrowing Base as of the last
Business Day of the most recent month ended at least 20 Business Days prior to
the Closing Date;

 

(iii)          the other Loan Documents (other than Notes), executed and
delivered by a duly authorized officer or signatory of each grantor party
thereto; and

 

(iv)          a Note executed by the Borrowers in favor of each Lender
that has requested a Note at least two Business Days prior to the date on which
the initial Revolving Loans are to be made.

 

(b)           Collateral.  All documents and instruments, including
Uniform Commercial Code or other applicable personal property and financing
statements, reasonably requested by the Administrative Agent to be filed,
registered or recorded to create the Liens on the Collateral intended to be
created by the Security Agreement and perfect such Liens to the extent required
by, and with the priority required by, the Security Agreement shall have been
delivered to the Administrative Agent for filing, registration or recording and
none of the Collateral shall be subject to any other pledges, security
interests or mortgages, except for liens permitted hereunder.

 

57

 

(c)           Legal
Opinions.  The Administrative Agent
shall have received the executed legal opinions of (a) Simpson Thacher &
Bartlett LLP, special New York counsel to the Borrowers, substantially in the
form of Exhibit G-1, (b) the in-house general counsel for the
Borrowers, substantially in the form of Exhibit G-2, and (c) Maples and
Calder, counsel for the Borrowers that are Cayman Islands companies, with
respect to matters of Cayman Islands law substantially in the form of Exhibit G-3.  The Borrowers hereby request such counsel to
deliver such opinions.

 

(d)           Closing
Certificates.  The Administrative
Agent shall have received a certificate of each Borrower, dated as of the
Closing Date, with appropriate insertions, executed by the President or any
Vice President and the Secretary or any Assistant Secretary or any other
Responsible Officer or duly authorized signatory of such Borrower, and
attaching the documents referred to in clause (e) below and such other
closing certificates as it may reasonably request.

 

(e)           Authorization
of Proceedings of Each Borrower; Incumbency; Due Organization; Good Standing.

 

(i)            The Administrative Agent shall have received a copy of
the resolutions, in form and substance satisfactory to the Administrative
Agent, of the board of directors or other managers of each Borrower (or a duly
authorized committee thereof) authorizing (x) the execution, delivery and
performance of the Loan Documents (and any agreements relating thereto) to
which it is a party and (y) in the case of each Borrower, the extensions
of credit contemplated hereunder.

 

(ii)           The Administrative Agent shall have received such
certificates of resolutions or other action, incumbency certificates and/or
other certificates of Responsible Officers of each Borrower as the
Administrative Agent may require evidencing the identity, authority and capacity
of each Responsible Officer thereof authorized to act as a Responsible Officer
in connection with this Agreement and the other Loan Documents to which such
Borrower is a party;

 

(iii)          The Administrative Agent shall have received such documents
and certifications as the Administrative Agent may reasonably require to
evidence that each Borrower is duly organized or formed and that each of the
Borrowers is validly existing, in good standing and qualified to engage in
business in each jurisdiction where such Borrowers’ ownership, lease or
operation of properties or the conduct of its business requires such
qualification, except to the extent that failure to do so could not reasonably
be expected to have a Material Adverse Effect;

 

(f)            Fees.
The Administrative Agent shall have received the fees in the amounts previously
agreed in writing to be received on the Closing Date and all expenses
(including the reasonable fees, disbursements and other charges of counsel)
payable by the Borrowers for which invoices have been presented prior to the
Closing Date shall have been paid.

 

(g)           Existing
Credit Agreement. The Administrative Agent shall have received customary
evidence indicating that the Existing Credit Agreement has been, or
concurrently with the Closing Date is being, terminated and all amounts
outstanding thereunder are being repaid in full and all liens securing
obligations thereunder have been, or concurrently with the Closing Date are
being, released.

 

(h)           Representations;
No Default. The Administrative Agent shall have received a customary
certificate signed by a Responsible Officer of each Borrower, in a form
satisfactory to the Administrative Agent, certifying that the conditions
specified in Sections 4.03(a) and 4.03(b) have been satisfied.

 

58

 

4.03        Conditions
to all Borrowings.  The obligation of each Lender to honor any
Request for Borrowing (other than a Revolving Loan Notice requesting only a
conversion of Revolving Loans to another Interest Rate Type, or a continuation
of Fixed Period Eurodollar Loans) is subject to the following conditions
precedent:

 

(a)           The
representations and warranties of the Borrowers contained in Article V
and any other Loan Document shall, after taking into account any materiality or
other qualification contained therein, be true and correct on and as of the
date of such Borrowing, except to the extent that such representations and
warranties specifically refer to an earlier date, in which case they shall be
true and correct as of such earlier date.

 

(b)           No
Default shall exist, or would result from such proposed Borrowing or from the
application of the proceeds thereof.

 

(c)           Either
(i) the Total Revolving Credit Exposure (after giving effect to such
extension of credit) shall not exceed the Borrowing Base reflected on the
Borrowing Base Report most recently delivered to the Administrative Agent or (ii) the
Borrowers shall have delivered an updated Borrowing Base Report demonstrating
that the Total Revolving Credit Exposure (after giving effect to such extension
of credit) shall not exceed the Borrowing Base after giving effect to such
extension of credit as well as any concurrent acquisitions of Specified
Financial Assets or payment of outstanding Loans.

 

(d)           In the event that an
asset to be purchased with the proceeds of a Borrowing made on the date of the
Borrowing is to be included in the Borrowing Base as of the date of the
Borrowing, the Administrative Agent shall have received evidence reasonably
satisfactory to it that the conditions referred to in clauses (i) and
(ii) in the proviso to Section 2.01, as applicable, have been
satisfied.

 

(e)           The
Administrative Agent and, if applicable, the Swingline Lender shall have
received a Request for Borrowing in accordance with the requirements hereof.

 

Each Request for Borrowing
(other than a Revolving Loan Notice requesting only a conversion of Revolving
Loans to another Interest Rate Type or a continuation of Fixed Period
Eurodollar Loans) submitted by the Borrowers shall be deemed to be a
representation and warranty that the conditions specified in Sections  4.03(a) and
4.03(b) have been satisfied on and as of the date of the applicable
Borrowing.

 

ARTICLE V.

REPRESENTATIONS AND WARRANTIES

 

The Borrowers represent and
warrant to the Administrative Agent and the Lenders that:

 

5.01        Existence, Qualification and Power.  Each
Borrower (a) is duly organized or formed, validly existing and, as
applicable, in good standing under the Laws of the jurisdiction of its
incorporation or organization, (b) has all requisite power and authority
and all requisite and relevant governmental licenses, authorizations, consents
and approvals to (i) own or lease its assets and carry on its business and
(ii) execute, deliver and perform its obligations under the Loan Documents
to which it is a party, and (c) is duly qualified and is licensed where
applicable and, as applicable, in good standing under the Laws of each
jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification or license; except in each
case referred to in clause (b)(i) or (c), to the extent that failure to do
so could not reasonably be expected to have a Material Adverse Effect.

 

59

 

5.02        Authorization; No Contravention.  The
execution, delivery and performance by each Borrower of each Loan Document to
which such Person is party, have been duly authorized by all necessary
corporate or other organizational action, and do not and will not (a) contravene
the terms of any of such Person’s Organization Documents; (b) conflict
with or result in any breach or contravention of, or require any payment to be
made under (i) any Contractual Obligation to which such Person is a party
or affecting such Person or the properties of such Person or any of its
Subsidiaries or (ii) any order, injunction, writ or decree of any
Governmental Authority or any arbitral award to which such Person or its
property is subject; (c) violate any Law; except, in each case referred to
in clause (b) or (c) to the extent such conflict, breach,
contravention, payment or violation would not reasonably be expected to have a
Material Adverse Effect or (d) result in the creation or imposition of any
Lien on any asset of any of the Borrowers or any of their Subsidiaries other
than the Liens created pursuant to the Loan Documents.

 

5.03        Governmental Authorization; Other Consents.  No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any Governmental
Authority or any other Person is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, any Borrower of
this Agreement or any other Loan Document except (i) for the filing of UCC
financing statements and (ii) such approvals, consents, exemptions,
authorizations or other actions, notices or filings as have been obtained or
made and are in full force and effect or where the failure to obtain or make
such approvals, consents, exemptions, authorizations or other actions, notices
or filings would not have a Material Adverse Effect.

 

5.04        Binding Effect.  This Agreement has been, and each other Loan
Document, when delivered hereunder, will have been, duly executed and delivered
by each Borrower that is a party thereto. 
This Agreement constitutes, and each other Loan Document when so
delivered will constitute, a legal, valid and binding obligation of such
Borrower, enforceable against each Borrower that is party thereto in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors’ rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.

 

5.05                        Financial Statements; No Material Adverse
Effect.

 

(a)                                  The Audited Financial Statements (i) were prepared in
accordance with GAAP consistently applied throughout the period covered
thereby, except as otherwise expressly noted therein; and (ii) fairly
present the financial condition of KKR Financial  and its consolidated Subsidiaries as of the
date thereof and their results of operations for the period covered thereby in
accordance with GAAP consistently applied throughout the period covered
thereby, except as otherwise expressly noted therein.

 

(b)                                 The unaudited consolidated balance sheet of KKR Financial
and its consolidated Subsidiaries dated September 30, 2009, and the
related consolidated statements of income or operations, shareholders’ equity
and cash flows for the fiscal quarter ended on that date (i) were prepared
in accordance with GAAP consistently applied throughout the period covered
thereby, except as otherwise expressly noted therein, and (ii) fairly
present the financial condition of KKR Financial and its Subsidiaries as of the
date thereof and their results of operations for the period covered thereby,
subject, in the case of clauses (i) and (ii), to the absence of footnotes
and to normal year-end audit adjustments.

 

(c)                                  Since the date of the Audited Financial Statements, there
has been no event or circumstance, either individually or in the aggregate,
that has had or could reasonably be expected to have a Material Adverse Effect.

 

60

 

5.06        Litigation.  Except
as set forth on Schedule 5.06, there are no actions, suits, proceedings,
formal investigations, claims or disputes pending or, to the knowledge of the
Borrowers after due and diligent investigation, threatened or contemplated, at law,
in equity, in arbitration or before any Governmental Authority, by or against
any Borrower or any of its Subsidiaries or against any of their properties or
revenues that (a) purport to affect or pertain to this Agreement or any
other Loan Document, or any of the transactions contemplated hereby, or (b) either
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.

 

5.07        No Default.  Neither
any Borrower nor any Subsidiary thereof is in default under or with respect to
any Contractual Obligation that could, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.  No Default has occurred and is continuing or
would result from the consummation of the transactions contemplated by this
Agreement or any other Loan Document.

 

5.08        Insurance.  The
properties of the Borrowers and their Subsidiaries are insured with financially
sound and reputable insurance companies, in such amounts, with such deductibles
and covering such risks as are customarily carried by companies engaged in
similar businesses and owning similar properties in localities where the
Borrowers or the applicable Subsidiary operates.

 

5.09        Taxes.  Each
Borrower and its Subsidiaries have filed all Federal, state and other material
tax returns and reports required to be filed, and have paid all Federal, state
and other material taxes, assessments, fees and other governmental charges
levied or imposed upon them or their properties, income or assets otherwise due
and payable, except (i) those which are being contested in good faith by
appropriate proceedings diligently conducted and for which adequate reserves
have been provided in accordance with GAAP and (ii) to the extent that the
failure to do so could not reasonably be expected to have a Material Adverse
Effect.

 

5.10        ERISA Compliance.  No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events
for which liability is reasonably expected to occur, could reasonably be
expected to result in a Material Adverse Effect.  The present value of all accumulated benefit
obligations under each Plan (based on the assumptions used for purposes of
Statement of Financial Accounting Standards No. 87) did not, as of the
date of the most recent financial statements reflecting such amounts, exceed by
more than $25,000,000 the fair market value of the assets of such Plan, and the
present value of all accumulated benefit obligations of all underfunded Plans
(based on the assumptions used for purposes of Statement of Financial
Accounting Standards No. 87) did not, as of the date of the most recent
financial statements reflecting such amounts, exceed by more than $25,000,000
the fair market value of the assets of all such underfunded Plans.

 

5.11        Properties.  (i) Each
of the Borrowers and each of their Subsidiaries has good title to, or valid
leasehold, easement or other property interests in, all its real and personal
property necessary to its business, except for minor defects in title that do
not interfere with its ability to conduct its business as currently conducted
or to utilize such properties for their intended purposes and except where the
failure to have such title would not have a Material Adverse Effect.

 

(ii)           Each of the Borrowers and
each of their Subsidiaries owns, or is licensed to use, all trademarks,
tradenames, copyrights, patents and other intellectual property necessary to
its business, and the use thereof by such Person does not infringe upon the
rights of any other Person, except for any such infringements that,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.

 

61

 

5.12        Investment Company Act.  None of the Borrowers, and none of the Persons
Controlling any of the Borrowers, is or is required to be registered as an “investment
company” under the Investment Company Act of 1940.

 

5.13        Disclosure.  The
Borrowers have disclosed to the Administrative Agent and the Lenders all
agreements, instruments and corporate or other restrictions to which it or any
of its Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.  No report,
financial statement, certificate or other written information furnished by or
on behalf of any Borrower to the Administrative Agent or any Lender in
connection with the transactions contemplated hereby and the negotiation of
this Agreement or delivered hereunder or under any other Loan Document (in each
case, as modified or supplemented by other information so furnished) contains
any material misstatement of fact or omits to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading as of the date furnished; provided that,
with respect to projected financial information, the Borrowers represent only
that such information was prepared in good faith based upon assumptions
believed to be reasonable at the time.

 

5.14        Compliance with Laws.  Each Borrower and each Subsidiary thereof is in
compliance in all material respects with the requirements of all Laws and all
orders, writs, injunctions and decrees applicable to it or to its properties,
except in such instances in which (a) such requirement of Law or order,
writ, injunction or decree is being contested in good faith by appropriate
proceedings diligently conducted or (b) the failure to comply therewith,
either individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.

 

5.15        Solvency.  Each
of the Borrowers is and, after consummation of the transactions contemplated by
the Loan Documents, will be Solvent.

 

5.16        Borrowing Base Report.  The most recent Borrowing Base Report delivered
by the Borrowers accurately reflects the Borrowing Base and the Value of all
Eligible Specified Financial Assets included therein on and as of the date of
such Borrowing Base Report (or, in the case of Values, as of the most recent
date that such Values are required to be determined) and all Related Borrowing
Base Information set forth therein and the Value of all Eligible Specified
Financial Assets is true and correct in all material respects on and as of the
date of such Borrowing Base Report (or, in the case of Values, as of the most
recent date that such Values are required to be determined).

 

ARTICLE VI.

AFFIRMATIVE COVENANTS

 

So long as any Lender shall
have any Commitment hereunder, any Loan or other Obligation hereunder shall
remain unpaid or unsatisfied, the Borrowers shall, and shall (except in the
case of the covenants set forth in Sections 6.01, 6.02, and 6.03)
cause each Subsidiary to:

 

6.01        Financial Statements.  Deliver to the Administrative Agent and each
Lender:

 

(a)           as
soon as available, but in any event within 90 days after the end of each fiscal
year of KKR Financial, a consolidated balance sheet of KKR Financial and its
Subsidiaries as at the end of such fiscal year, and the related consolidated
statements of income or operations, shareholders’ equity and cash flows for
such fiscal year, setting forth, in each case, in comparative form the figures
for the previous fiscal year, all in reasonable detail and prepared in accordance
with GAAP, audited and accompanied by a report and opinion of Deloitte &
Touche LLP or another Registered Public Accounting Firm of nationally
recognized standing, which report and opinion shall be prepared in accordance
with generally accepted

 

62

 

auditing
standards and applicable Securities Laws and shall not be subject to any “going
concern” or like qualification or exception or any qualification or exception
as to the scope of such audit or with respect to the absence of any material
misstatement; and

 

(b)           as
soon as available, but in any event within 45 days after the end of each of the
first three fiscal quarters of each fiscal year of KKR Financial, a
consolidated balance sheet of KKR Financial and its Subsidiaries as at the end
of such fiscal quarter, and the related consolidated statements of income or
operations, shareholders’ equity and cash flows for such fiscal quarter and for
the portion of KKR Financial’s fiscal year then ended, setting forth in each
case in comparative form the figures for the corresponding fiscal quarter of
the previous fiscal year and the corresponding portion of the previous fiscal
year, all in reasonable detail, certified by the chief executive officer, chief
financial officer, treasurer or controller of KKR Financial as fairly
presenting the financial condition, results of operations, shareholders’ equity
and cash flows of KKR Financial and its Subsidiaries in accordance with GAAP,
subject only to normal year-end audit adjustments and the absence of footnotes.

 

As to any information
contained in materials furnished pursuant to Section 6.02(d), the Borrowers shall not be
separately required to furnish such information under clause (a) or (b) above,
but the foregoing shall not be in derogation of the obligation of the Borrowers
to furnish the information and materials described in clauses (a) and (b) above
at the times specified therein.

 

6.02        Certificates; Other Information.    Deliver
to the Administrative Agent and each Lender, in form and detail reasonably
satisfactory to the Administrative Agent:

 

(a)           concurrently
with the delivery of the financial statements referred to in Section 6.01(a),
(i) a certificate of the Registered Public Accounting Firm certifying such
financial statements and stating that in making the examination necessary
therefor no knowledge was obtained of any Default or, if any such Default shall
exist, stating the nature and status of such event (which certificate may be
limited to the extent required by accounting rules, guidelines or practices), (ii) setting
forth reasonably detailed calculations demonstrating compliance with the
financial covenants contained in Section 7.09 and (iii) stating
whether any change in GAAP or in the application thereof which is material in
any respect to KKR Financial’s financial statements has occurred since the date
of the Audited Financial Statements and, if any such change has occurred,
specifying the effect of such change on the financial statements accompanying
such certificate;

 

(b)           concurrently
with the delivery of the financial statements referred to in Sections 6.01(a) and
6.01(b), a duly completed Compliance Certificate signed by the chief
executive officer, chief financial officer, treasurer or controller of the
Borrowers;

 

(c)           as
soon as available and in any event not later than the 20th Business Day of the
calendar month following each monthly accounting period (ending on the last day
of each calendar month) of the Borrowers, a Borrowing Base Report as at the
last day of such accounting period;

 

(d)           promptly
but no later than five Business Days after any date on which a Borrower grants
a Lien on assets in connection with the incurrence of Indebtedness (including,
for avoidance of doubt, any issuance of secured bonds or issuance of notes in
connection with a CLO), a Borrowing Base Report as of the date of the
incurrence of such Indebtedness;

 

(e)           promptly
but no later than five Business Days after any Borrower shall at any time have
knowledge that there is a Borrowing Base Deficiency, a Borrowing Base Report as
at the date any Borrower has knowledge of such Borrowing Base Deficiency
indicating the amount of the Borrowing Base Deficiency as at the date such
Borrower obtained knowledge of such deficiency and the amount of the Borrowing
Base Deficiency as of the date not earlier than two Business Days prior to the
date the Borrowing Base Report is delivered pursuant to this paragraph;

 

63

 

(f)            on
a monthly basis or as otherwise approved by the Administrative Agent, an update
as to the Value of all Eligible Specified Financial Assets contained in the
Borrowing Base; provided that during any period in which, and for so
long as, Availability is equal to an amount that is less than 10% of the
Borrowing Base, such updates as to Value shall be delivered on a weekly basis;

 

(g)           promptly
after the same are available, copies of each annual report, proxy or financial
statement or other report or communication sent to the stockholders of KKR
Financial, and copies of all annual, regular, periodic and special reports and
registration statements which KKR Financial may file or be required to file
with the SEC under Section 13 or 15(d) of the Securities Exchange Act
of 1934, and not otherwise required to be delivered to the Administrative Agent
pursuant hereto; and

 

(h)           promptly
following any request therefor, such other information regarding the
operations, business affairs and financial condition of the Borrowers, or
compliance with the terms of this Agreement, as the Administrative Agent or any
Lender may reasonably request.

 

Documents required to be
delivered pursuant to Section 6.01(a) or 6.01(b) or
Section 6.02(f) (to the extent any such documents are included
in materials otherwise filed with the SEC) may be delivered electronically and
if so delivered, shall be deemed to have been delivered on the date (i) on
which KKR Financial posts such documents, or provides a link thereto on KKR
Financial’s website on the Internet at the website address listed on Schedule 10.02;
or (ii) on which such documents are posted on KKR Financial’s behalf on an
Internet or intranet website, if any, to which each Lender and the
Administrative Agent have access (whether a commercial, third-party website or
whether sponsored by the Administrative Agent); provided that (i) the
Borrowers shall deliver paper copies of such documents to the Administrative
Agent or any Lender that requests the Borrowers to deliver such paper copies
until a written request to cease delivering paper copies is given by the
Administrative Agent or such Lender and (ii) the Borrowers shall notify
the Administrative Agent and each Lender (by telecopier or electronic mail) of
the posting of any such documents and provide to the Administrative Agent by
electronic mail electronic versions (i.e., soft copies) of such documents.  The Administrative Agent shall have no
obligation to request the delivery or to maintain copies of the documents
referred to above, and in any event shall have no responsibility to monitor
compliance by the Borrowers with any such request for delivery, and each Lender
shall be solely responsible for requesting delivery to it or maintaining its
copies of such documents.

 

The Borrowers hereby
acknowledge that (a) the Administrative Agent and/or the Arranger will
make available to the Lenders materials and/or information provided by or on
behalf of the Borrowers hereunder (collectively, “Borrower Materials”)
by posting the Borrower Materials on IntraLinks or another similar electronic
system (the “Platform”) and (b) certain of the Lenders may be “public-side”
Lenders (i.e., Lenders that do
not wish to receive material non-public information with respect to KKR
Financial or its securities) (each, a “Public Lender”).  Each of the Borrowers hereby agrees that (w) all
Borrower Materials that are to be made available to Public Lenders shall be
clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that
the word “PUBLIC” shall appear prominently on the first page thereof; (x) by
marking Borrower Materials “PUBLIC,” the Borrowers shall be deemed to have
authorized the Administrative Agent, the Arranger and the Lenders to treat such
Borrower Materials as not containing any material non-public information with respect
to the Borrowers or any securities for purposes of United States Federal and
state securities laws (provided, however, that to the extent such
Borrower Materials constitute Information, they shall be treated as set forth
in Section 10.07); (y) all Borrower Materials marked “PUBLIC”
are permitted to be made available through a portion of the Platform designated
“Public Investor;” and (z) the Administrative Agent and the Arranger shall
be entitled to treat any Borrower Materials that are not marked “PUBLIC” as
being suitable only for posting on a portion of the Platform other than that
which is designated “Public Investor.”

 

64

 

6.03        Notices.  Promptly
notify the Administrative Agent and each Lender upon a Responsible Officer of a
Borrower obtaining knowledge thereof:

 

(a)           of
the occurrence of any Default;

 

(b)           of
the occurrence of any ERISA Event that, alone or together with any other ERISA
Events that have occurred, could reasonably be expected to result in liability
of the Borrowers and their Subsidiaries in an aggregate amount exceeding
$25,000,000; and

 

(c)           any
other development that results in, or could reasonably be expected to result
in, a Material Adverse Effect; including (i) breach or non-performance of,
or any default under, a Contractual Obligation of either of the Borrowers or
any Subsidiary; (ii) any dispute, litigation, investigation, proceeding or
suspension between either of the Borrowers or any Subsidiary and any
Governmental Authority; or (iii) the filing or commencement of, or any
material development in, any litigation or proceeding affecting the either of
the Borrowers or any Subsidiary, including pursuant to any applicable
Environmental Laws;

 

Each notice pursuant to this
Section 6.03 shall be accompanied by a statement of a Responsible
Officer of the applicable Borrower setting forth details of the occurrence
referred to therein and stating what action such Borrower has taken and
proposes to take with respect thereto. 
Each notice pursuant to Section 6.03(a) shall describe
with particularity any and all provisions of this Agreement and any other Loan
Document that have been breached.

 

6.04        Payment of Obligations.  Pay and discharge its obligations, including
Tax liabilities, that, if not paid, could result in a Material Adverse Effect
before the same shall become delinquent or in default, except where (a) the
validity or amount thereof is being contested in good faith by appropriate
proceedings, (b) such Borrower or such Subsidiary has set aside on its
books adequate reserves with respect thereto in accordance with GAAP and (c) the
failure to make payment pending such contest could not reasonably be expected
to result in a Material Adverse Effect.

 

6.05        Preservation of Existence, Etc.  (a) Preserve, renew and maintain in full
force and effect its legal existence and good standing under the Laws of the
jurisdiction of its organization except in a transaction permitted by Section 7.04
or 7.05; and (b) take all reasonable action to maintain all rights,
privileges, permits, licenses and franchises necessary in the normal conduct of
its business, except to the extent that failure to do so could not reasonably
be expected to have a Material Adverse Effect.

 

6.06        Maintenance of Properties.  (a) Maintain, preserve and protect all of
its material properties and equipment necessary in the operation of its
business in good working order and condition, ordinary wear and tear excepted;
and (b) make all necessary repairs thereto and renewals and replacements
thereof except where the failure to do so could not reasonably be expected to
have a Material Adverse Effect.

 

6.07        Maintenance of Insurance.  Maintain with financially sound and reputable
insurance companies, insurance with respect to its properties and business
against loss or damage of the kinds customarily insured against by Persons
engaged in the same or similar business, of such types and in such amounts as
are customarily carried under similar circumstances by such other Persons.

 

65

 

6.08        Compliance with Laws.  Comply in all material respects with the
requirements of all relevant Laws and all orders, writs, injunctions and
decrees applicable to it or to its business or property, except in such instances
in which (a) such requirement of Law or order, writ, injunction or decree
is being contested in good faith by appropriate proceedings diligently
conducted; or (b) the failure to comply therewith could not reasonably be
expected to have a Material Adverse Effect.

 

6.09        Books and Records.  Maintain proper books of record and account, in
conformity with GAAP consistently applied.

 

6.10        Inspection Rights.  Permit representatives and independent
contractors of the Administrative Agent and each Lender to visit and inspect
any of its properties, to examine its corporate, financial and operating
records, and make copies thereof or abstracts therefrom, and to discuss its
affairs, finances and accounts with its directors, officers, and independent
public accountants, all at such reasonable times during normal business hours
and as often as may be reasonably desired, upon reasonable advance notice to
the Borrowers (subject to reasonable requirements of confidentiality); provided,
however, that when an Event of Default exists the Administrative Agent
or any Lender (or any of their respective representatives or independent
contractors) may do any of the foregoing at the expense of the Borrowers at any
time during normal business hours and without advance notice.

 

6.11        Audit Rights.  Permit
representatives designated by Administrative Agent (including any consultants,
accountants, lawyers and appraisers retained by the Administrative Agent) to
conduct evaluations and appraisals of the Borrower’s computation of the Borrowing
Base and the assets included in the Borrowing Base, all at such reasonable
times as requested; provided that, so long as no Default has occurred
and is continuing, the audit rights set forth in this Section 6.11
may be exercised only twice per calendar year. 
The Borrowers shall pay the reasonable fees and expenses of any
representatives retained by the Administrative Agent to conduct any such
evaluation or appraisal; provided that the Borrowers shall not be
required to pay such fees and expenses for more than one such evaluation or
appraisal during any calendar year unless an Event of Default has occurred and
is continuing at the time of any subsequent evaluation or appraisal during such
calendar year.  The Borrowers also agree
to modify or adjust the computation of the Borrowing Base in accordance with
the terms of this Agreement to the extent required by the Administrative Agent
or the Required Lenders as a result of any such evaluation or appraisal,
provided that if the Borrowers demonstrate that such evaluation or appraisal is
incorrect, the Borrowers shall be permitted to re-adjust their computation of
the Borrowing Base.

 

6.12        Use of Proceeds.  Use the proceeds of the Loans only for working
capital requirements and other general corporate purposes consistent with KKR
Financial Form 10-K, including the acquisition and funding (either
directly or through one or more wholly owned subsidiaries) of secured and
unsecured leveraged loans, mezzanine loans, high-yield securities, mortgage
bonds and other portfolio investments. 
No part of the proceeds of any Loan will be used, whether directly or
indirectly, for any purpose that entails a violation of any of the Regulations
of the FRB, including Regulations T, U and X.

 

6.13        Investment Policies.  Comply with the investment policies adopted by
the board of directors of KKR Financial as in effect on the Closing Date (as
such policies may be amended, supplemented or modified from time to time),
except to the extent that the failure to so comply could not reasonably be
expected to result in a Material Adverse Effect.

 

6.14        Further Assurances.  Take such action from time to time as shall
reasonably be requested by the Administrative Agent to effectuate the purposes
and objectives of this Agreement. Without limiting the generality of the
foregoing, the Borrowers shall take such action from time to time (including
filing appropriate Uniform Commercial Code financing statements and executing
and delivering such assignments, security agreements and other instruments) as
shall be reasonably requested by the Administrative Agent to create, in favor
of the Collateral Agent for the benefit of the Lenders, perfected security
interests and Liens in the Collateral.

 

66

 

6.15        Portfolio Valuation and
Diversification, Etc.

 

(a)           Industry
Classification Groups.  For purposes of this Agreement, each Borrower
shall in its reasonable determination assign each Specified Financial Asset to
an Industry Classification Group.  To the
extent that any Specified Financial Asset is not correlated with the risks of
other Specified Financial Assets in an Industry Classification Group
established by Moody’s, such Portfolio Investment may be assigned by the
applicable Borrower to an Industry Classification Group that is more closely
correlated to such Specified Financial Asset. 
In the absence of any correlation, such Borrower shall be permitted,
upon notice to the Administrative Agent to create up to three additional
industry classification groups for purposes of this Agreement.

 

(b)           Portfolio
Valuation, Etc.

 

(i)            Settlement Date Basis. Solely for
purposes of determining the Borrowing Base, all determinations of whether an
investment is to be included as an Eligible Specified Financial Asset shall be
determined on a settlement-date basis (meaning that any investment that has
been purchased will not be treated as an Eligible Specified Financial Asset
until such purchase has settled, and any Eligible Specified Financial Asset
which has been sold will not be excluded as a Eligible Specified Financial
Asset until such sale has settled); provided that no such investment
shall be included as an Eligible Specified Financial Asset to the extent that
it has not been paid for in full.

 

(ii)           Determination of Values. The Borrowers
will conduct reviews of the value to be assigned to each of its Eligible
Specified Financial Assets as follows:

 

(A)          Quoted Investments. With respect
to Specified Financial Assets (including Cash Equivalents) for which market
quotations are readily available, the Borrowers shall, not less frequently than
once each calendar month, determine the market value of such Specified
Financial Assets in accordance with their valuation policies, as follows (in
the following order of priority):

 

(1)          If the Eligible Specified
Financial Asset is of a type sold on a recognized exchange, the Value is the
Dollar Equivalent amount of the closing price on the exchange as of such date;

 

(2)          If the Eligible Specified
Financial Asset is of a type for which sales quotations are provided by IDC,
Markit, Loan Pricing Corporation, IPS or any other pricing service approved by
the Administrative Agent, in its reasonable discretion, the Value is the Dollar
Equivalent amount of the sales price provided by the pricing service as of such
date;

 

(3)          If the Eligible Specified
Financial Asset is of a type for which sales quotations are available from Bank
of America, Barclays Bank PLC, Citigroup, Credit Suisse, Deutsche Bank, Goldman
Sachs, JPMorgan, Morgan Stanley, UBS, Wells Fargo or any of their respective
Affiliates or any other dealers approved by the Administrative Agent, in its
reasonable discretion, the Value is the Dollar Equivalent amount of the bid
price as of such date provided by any such dealer; and

 

67

 

(4)          In all other cases, the
Value is the amount determined by a pricing or quotation service approved by
the applicable Borrower’s board of directors and designated in writing to the
Administrative Agent (which designation shall be accompanied by a copy of a
resolution of the board that such pricing or quotation service has been
approved by the Borrower).

 

(B)           Unquoted Investments. With respect
to any Specified Financial Asset for which market quotations are not readily
available, the Borrowers shall conduct internal reviews of such Specified
Financial Asset at least once each calendar month in order to determine the
fair value of such Specified Financial Asset. 
Such internal reviews and determinations of value shall take into
account any events of which the Borrowers have knowledge that adversely affect
the Value of Specified Financial Assets.

 

For any particular Eligible Specified
Financial Asset whose current Value is determined pursuant to an internal
review in accordance with this Section 6.15(b)(ii)(B), to the extent such
Eligible Specified Financial Asset is (i) included in the Borrowing Base
and (ii) has a fair value in excess of $10 million individually or in
excess of $25 million in the aggregate when taken together with all other such
Eligible Specified Financial Assets, the Borrowers shall deliver to the
Administrative Agent a negative assurance or valuation opinion from an
independent third-party appraisal firm within 45 days of the end of each
applicable fiscal quarter.

 

(C)           Failure to Determine Values. If the
Borrowers shall fail to determine the value of any Eligible Specified Financial
Asset for which market quotation(s) are not readily available as at any
date pursuant to the requirements of the foregoing sub-clauses (A) or (B),
then the “Value” of such Portfolio Investment as at such date shall be deemed
to be zero.

 

6.16        Calculation of Borrowing Base.  (a) For purposes of this Agreement, the “Borrowing
Base” shall mean and be determined as, as at any date of determination, the
sum (expressed in Dollars) of the products of (x) the Value of each
Specified Financial Asset that is an Eligible Specified Financial Asset as of
the most recent date such Value is required to be determined pursuant to Section 6.02
and (y) the Specified Percentage applicable to such Specified Financial
Asset; provided that:

 

(i)            to the extent that the
aggregate Value (without duplication) of any Eligible Specified Financial Asset
shown in the table below would exceed the applicable sublimit set forth across
from such Eligible Specified Financial Asset, such excess shall be excluded
from the Borrowing Base (i.e., the Specified Percentage applicable to the
excess over such sublimit shall be 0%):

 

	
  Eligible Specified Financial Asset

  	
   

  	
  Sublimits

  	
   

  
	
  Eligible Specified
  Financial Assets that have a rating between CCC+ and CCC- (inclusive)

  	
   

  	
  $200 million

  	
   

  
	
  Eligible Specified
  Financial Assets that are Mezzanine Obligations

  	
   

  	
  $160 million

  	
   

  
	
  Eligible Specified
  Financial Assets that are Mortgage-related Debt Securities

  	
   

  	
  $40 million

  	
   

  

 

68

 

(ii)           to the extent that the
aggregate Net Value Amounts of Eligible Specified Financial Assets of all
issuers in a consolidated group of corporations or other entities would exceed
10% of the Borrowing Base, such excess shall be excluded from the Borrowing
Base;

 

(iii)          to the extent that the
aggregate Net Value Amounts of Eligible Specified Financial Assets in any
single Industry Classification Group would exceed 20% of the Borrowing Base
(which for purposes of this calculation shall exclude the aggregate amount of
investments in, and advances to, Financing Subsidiaries), such excess shall be
disregarded for purposes of calculating the Borrowing Base; provided
that, with respect to Eligible Specified Financial Assets in a single Industry
Classification Group from time to time designated by the Borrowers to the
Administrative Agent, such 20% figure shall be increased to 30% and,
accordingly, only to the extent that the Net Value Amounts of Eligible
Specified Financial Assets for such single Industry Classification Group would
exceed 30% of the Borrowing Base shall such excess be excluded from the
Borrowing Base;

 

(iv)          to the extent that the
aggregate Net Value Amounts of Eligible Specified Financial Assets comprised of
Non-Cash Pay Investments would exceed 20% of the Borrowing Base, such excess
shall be excluded from the Borrowing Base;

 

(v)           to the extent that the
aggregate amount of Revolving Credit Exposure of all Lenders exceeds $50,000,000
and the aggregate Net Value Amounts of Eligible Specified Financial Assets (i) comprised
of Mezzanine Obligations or (ii) that have a rating between CCC+ and CCC-
(inclusive) would (A) in either case exceed 30% of the Borrowing Base or (B) in
combined aggregate amount for such categories exceed 50% of the Borrowing Base,
such excess shall be excluded from the Borrowing Base;

 

(vi)          to the extent that the
aggregate amount of Revolving Credit Exposure of all Lenders exceeds
$50,000,000 and the aggregate Net Value Amounts of Eligible Specified Financial
Assets denominated in an Alternate Currency other than Dollars would exceed 25%
of the Borrowing Base, such excess shall be excluded from the Borrowing Base;

 

(vii)         to the extent that the
aggregate amount of Revolving Credit Exposure of all Lenders exceeds
$50,000,000 and the aggregate Net Value Amounts of Eligible Specified Financial
Assets comprised of mortgage-related debt securities rated A or better would
exceed 15% of the Borrowing Base, such excess shall be excluded from the
Borrowing Base;

 

(viii)        to the extent that the
Borrowers own Publicly Traded Common Equity of a particular issuer comprising
more than 4.9% of total such shares outstanding or to the extent that the
number of such shares controlled by KKR Financial or its Subsidiaries exceeds
2.5x the three month average daily trading volume of such shares (as calculated
at month end), the Value of the excess over such percentage shall be excluded
from the Borrowing Base.

 

(b)           As
used herein, the following terms have the following meanings:

 

“Specified Financial
Asset” means any financial asset described in one of the following
categories:

 

(a)           Cash, Cash Equivalents and Short-Term U.S. Government
Securities;

 

(b)           Long-Term U.S. Government Securities;

 

69

 

(c)           Other Short-Term Securities;

 

(d)           Performing First Lien Bank Loans;

 

(e)           Performing Second Lien Bank Loans;

 

(f)            Performing Unsecured Bank Loans;

 

(g)           Performing Secured Cash Pay High Yield Securities;

 

(h)           Performing Unsecured Cash Pay High Yield Securities;

 

(i)            Performing Cash Pay Mezzanine Obligations / Preferred Stock
and Convertible Securities;

 

(j)            Performing Non-Cash Pay High Yield Securities;

 

(k)           Performing Non-Cash Pay Mezzanine Obligations / Preferred
Stock and Convertible Securities;

 

(l)            Mortgage bonds rated A or better; and

 

(m)          Publicly Traded Common Equity;

 

“Specified Percentage”
means, in relation to any Eligible Specified Financial Asset, the percentage
set forth in the table below opposite such Eligible Specified Financial Asset:

 

	
  Specified
  Financial Asset

  	
   

  	
  Quoted

  	
   

  	
  Unquoted

  	
   

  
	
  Cash, Cash Equivalents and
  Short-Term U.S. Government Securities

  	
   

  	
  100

  	
  %

  	
  n.a.

  	
   

  
	
  Long-Term U.S. Government
  Securities

  	
   

  	
  95

  	
  %

  	
  n.a.

  	
   

  
	
  Other Short-Term Securities

  	
   

  	
  90

  	
  %

  	
  80

  	
  %

  
	
  Performing First Lien Bank
  Loans

  	
   

  	
  75

  	
  %

  	
  65

  	
  %

  
	
  Performing Second Lien Bank
  Loans

  	
   

  	
  65

  	
  %

  	
  55

  	
  %

  
	
  Performing Unsecured Bank
  Loans

  	
   

  	
  60

  	
  %

  	
  50

  	
  %

  
	
  Performing Secured Cash Pay
  High Yield Securities

  	
   

  	
  70

  	
  %

  	
  60

  	
  %

  
	
  Performing Unsecured Cash
  Pay High Yield Securities

  	
   

  	
  65

  	
  %

  	
  55

  	
  %

  
	
  Performing Cash Pay
  Mezzanine Obligations / Preferred and Convertible Securities

  	
   

  	
  50

  	
  %

  	
  40

  	
  %

  
	
  Performing Non-Cash Pay
  High Yield Securities

  	
   

  	
  55

  	
  %

  	
  45

  	
  %

  
	
  Performing Non-Cash Pay
  Mezzanine Obligations / Preferred and Convertible Securities

  	
   

  	
  40

  	
  %

  	
  30

  	
  %

  
	
  Mortgage bonds rated A or
  better

  	
   

  	
  50

  	
  %

  	
  40

  	
  %

  
	
  Publicly Traded Common
  Equity

  	
   

  	
  40

  	
  %

  	
  0

  	
  %

  

 

“Bank Loan” means
either (i) a Delayed Draw Loan or (ii) a fully funded term debt
obligation (including, without limitation, term loans, debtor-in-possession
financings and synthetic letter of credit facilities and other similar loans
and investments including interim loans and senior subordinated loans), which
are generally under a syndicated loan or credit facility provided or originated
by a Bank or for which a Bank has acted as underwriter or agent.

 

70

 

“Cash Equivalents”
means any of the following:

 

(a)  direct obligations of, or
obligations the principal of and interest on which are unconditionally
guaranteed by, the United States of America (or by any agency thereof to the
extent such obligations are backed by the full faith and credit of the United
States of America), in each case maturing within eighteen months from the date
of acquisition thereof;

 

(b)                                 investments in commercial
paper maturing within 270 days from the date of issuance thereof and having, at
such date of acquisition, the highest credit rating obtainable from S&P or
from Moody’s;

 

(c)                                  investments in certificates
of deposit, banker’s acceptances and time deposits maturing within one year
from the date of acquisition thereof issued or guaranteed by or placed with,
and money market deposit accounts issued or offered by, the Administrative
Agent or any domestic office of any commercial bank organized under the laws of
the United States of America or any State thereof that has a combined capital
and surplus and undivided profits of not less than $500,000,000 and that issues
(or the parent of which issues) commercial paper rated at least “Prime-1” (or
the then equivalent grade) by Moody’s or “A-1” (or the then equivalent grade)
by S&P;

 

(d)                                 fully collateralized
repurchase agreements with a term of not more than 30 days for securities
described in clause (a) above and entered into with a financial
institution satisfying the criteria of clause (c) above;

 

(e)                                  investments in “money market
funds” within the meaning of Rule 2a-7 of the Investment Company Act
substantially all of whose assets are invested in investments of the type
described in clauses (a) through (d) above; and

 

(f)                                    other short-term investments
utilized by Foreign Subsidiaries in accordance with normal investment practices
for cash management in investments of a type analogous to the foregoing

 

“Convertible Securities”
means, with respect to any Person, the Equity Interests in such Person
comprised of securities convertible into or exchangeable for shares of capital
stock of (or other ownership or profit interests in) such Person.

 

“First Lien Bank Loan”
means a Bank Loan that is entitled to the benefit of a first lien and first
priority perfected security interest on a substantial portion of the assets of
the respective borrower and guarantors obligated in respect thereof.

 

“High Yield Securities”
means debt Securities and Preferred Stock, in each case (a) issued by
public or private issuers, (b) issued pursuant to an effective registration
statement or pursuant to Rule 144A under the Securities Act (or any
successor provision thereunder) and (c) that are not Cash Equivalents,
Mezzanine Obligations or Bank Loans.

 

“Long-Term U.S.
Government Securities” means U.S. Government Securities maturing more than
one year from the applicable date of determination.

 

“Mezzanine Obligations”
means subordinate loans or Debt Securities (including convertible Debt
Securities) that are senior to all equity classes. For clarity, Mezzanine
Obligations shall not include any preferred stock or any equity security that
is mandatorily redeemable as defined by GAAP.

 

71

 

“Non-Cash Pay Investments”
means Performing Non-Cash Pay High Yield Securities and Performing Non-Cash Pay
Mezzanine Obligations.

 

“Other Short-Term
Securities” means securities (other than U.S Government Securities)
maturing within one year of the applicable date of determination.

 

“Performing” means (a) with
respect to any Specified Financial Asset that is debt, the issuer of such
Specified Financial Asset is not in default of any payment obligations in
respect thereof, after the expiration of any applicable grace period and (b) with
respect to any Specified Financial Asset that is Preferred Stock, the issuer of
such Specified Financial Asset has not failed to meet any scheduled redemption
obligations or to pay its latest declared cash dividend, after the expiration
of any applicable grace period.

 

“Performing Cash Pay
Mezzanine Obligations” means Mezzanine Obligations (a) as to which, at
the time of determination, a portion of the interest (including accretions and “pay-in-kind”
interest) for the current monthly, quarterly, semi-annual or annual period (as
applicable) is payable in cash and (b) which are Performing.

 

“Performing Common Equity”
means Equity Interests (other than Preferred Stock) and warrants of an issuer
all of whose outstanding debt is Performing.

 

“Performing First Lien
Bank Loans” means First Lien Bank Loans which are Performing.

 

“Performing Non-Cash Pay
High Yield Securities” means Performing High Yield Securities other than
Performing Cash Pay High Yield Securities.

 

“Performing Non-Cash Pay
Mezzanine Obligations” means Performing Mezzanine Obligations other than
Performing Cash Pay Mezzanine Obligations.

 

“Performing Second Lien
Bank Loans” means Second Lien Bank Loans which are Performing.

 

“Performing Secured Cash
Pay High Yield Securities” means High Yield Securities (a) which are
entitled to the benefit of a security interest on a portion of the assets of
the respective issuer, (b) as to which, at the time of determination, a
portion of the interest (including accretions and “pay-in-kind” interest) for
the current monthly, quarterly, semi-annual or annual period (as applicable) is
payable in cash and (c) which are Performing.

 

“Performing Unsecured
Bank Loans” means Unsecured Bank Loans which are Performing.

 

“Performing Unsecured
Cash Pay High Yield Securities” means High Yield Securities (a) which
are unsecured, (b) as to which, at the time of determination, a portion of
the interest (including accretions and “pay-in-kind” interest) for the current
monthly, quarterly, semi-annual or annual period (as applicable) is payable in
cash and (c) which are Performing.

 

“Preferred Stock” as
applied to the Equity Interests of any Person, means Equity Interests of such
Person of any class or classes (however designated) that ranks prior, as to the
payment of dividends or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person, to any
shares (or other interests) of other Equity Interests of such Person, and shall
include, without limitation, cumulative preferred, non-cumulative preferred,
participating preferred and convertible preferred Equity Interests.

 

72

 

“Publicly Traded Common
Equity” means Securities traded on an exchange or other public marketplace
for trading shares.

 

“Second Lien Bank Loan”
means a Bank Loan that is entitled to the benefit of a second lien and second
priority perfected security interest on a substantial portion of the assets of
the respective borrower and guarantors obligated in respect thereof.

 

“Securities” means
common and preferred stock, units and participations, member interests in
limited liability companies, partnership interests in partnerships, notes,
bonds, debentures, trust receipts and other obligations, instruments or
evidences of indebtedness, including debt instruments of public and private
issuers and tax-exempt securities (including warrants, rights, put and call
options and other options relating thereto, representing rights, or any
combination thereof) and other property or interests commonly regarded as
securities or any form of interest or participation therein, but not including
Bank Loans.

 

“Short-Term U.S.
Government Securities” means U.S. Government Securities maturing within one
year of the applicable date of determination.

 

“Unquoted Common Equity”
means Equity Interests (other than Preferred Stock) the value of which is
determined pursuant to Section 6.15(b)(ii)(B) for Borrowing
Base purposes.

 

“Unsecured Bank Loan”
means a Bank Loan that is unsecured with respect to the assets of the
respective borrower.

 

“U.S. Government Securities”
means securities that are direct obligations of, and obligations the timely
payment of principal and interest on which is fully guaranteed by, the United
States or any agency or instrumentality of the United States the obligations of
which are backed by the full faith and credit of the United States and in the
form of conventional bills, bonds, and notes.

 

ARTICLE VII.

NEGATIVE COVENANTS

 

So long as any Lender shall
have any Commitment hereunder, any Loan or other Obligation hereunder shall
remain unpaid or unsatisfied, the Borrowers shall not, nor shall they permit
any Subsidiary to, directly or indirectly:

 

7.01                        Liens.  Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, other than the following:

 

(a)                                  as to Collateral only, Liens pursuant to or as contemplated
in any Loan Document and Permitted Encumbrances (only with respect to clauses (a) and
(e) of the definition thereof) subordinate to such Liens; and

 

(b)                                 as to all other assets and properties of the Borrowers and
their Subsidiaries other than Collateral:

 

(i)                                     Permitted
Encumbrances;

 

(ii)                                  Liens pursuant
to or as contemplated in any Loan Document;

 

73

 

(iii)                               Liens existing
on the date hereof and listed on Schedule 7.01 and any renewals or
extensions thereof, provided that (i) the property or asset covered
thereby is not changed, (ii) the amount secured or benefited thereby is
not increased except as contemplated by Section 7.03(b), (iii) the
direct or any contingent obligor with respect thereto is not changed, and (iv) any
renewal or extension of the obligations secured or benefited thereby is
permitted by Section 7.03(b);

 

(iv)                              Liens securing
Indebtedness permitted under Section 7.03(k);

 

(v)                                 Liens on cash
deposits with issuers of letters of credit in support of Other Letter of Credit
Obligations permitted under Section 7.03(i);

 

(vi)                              any Lien
existing on any property or asset prior to the acquisition thereof by any of
the Borrowers or any Subsidiary or existing on any property or asset of any
Person that becomes a Subsidiary after the date hereof prior to the time such
Person becomes a Subsidiary; provided that (i) such Lien is not
created in contemplation of or in connection with such acquisition or such
Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not
apply to any other property or assets of any of the Borrowers or any Subsidiary
and (iii) such Lien shall secure only those obligations which it secures
on the date of such acquisition or the date such Person becomes a Subsidiary,
as the case may be; and

 

(vii)                           Liens on any
property or asset that secures any Swap Contract (including any total rate of
return Swap Contract) or any other Secured Indebtedness or any related
obligation incurred in connection with the transactions contemplated thereby.

 

For the avoidance of doubt, except to the
extent that the Borrowers grant a Lien to the trustee of any Trust Preferred
Financing Vehicle, the parties agree that the rights of such trustee in respect
of any Trust Preferred Indebtedness permitted under this Agreement shall not be
deemed a Lien hereunder.

 

7.02                        Investments.  Make any Investments, except:

 

(a)                                  Permitted Investments;

 

(b)                                 Investments by any Borrower or any Subsidiary existing as of
the Closing Date;

 

(c)                                  Investments of the Borrowers in any Subsidiary or CLO and
Investments of any Subsidiary in any Borrower or in another Subsidiary or CLO;

 

(d)                                 Guarantees of Other Letter of Credit Obligations permitted
by Section 7.03;

 

(e)                                  Investments in any Financing SPE or Trust Preferred
Financing Vehicle, including any Financing SPE or Trust Preferred Financing
Vehicle established after the date hereof, for the purpose of facilitating a
Securitization or Trust Preferred Securities Transaction; and

 

(f)                                    other Investments (including total rate of return Swap
Contracts and other Swap Contacts) made by any Borrower or any Subsidiary in
the course of such Borrower’s or such Subsidiary’s business and consistent with
the description of business in the KKR Financial Form 10-K.

 

7.03                        Indebtedness.  Create, incur, assume or suffer to exist any
Indebtedness, except:

 

(a)                                  Indebtedness under the Loan Documents;

 

74

 

(b)                                 Indebtedness outstanding on the date hereof and listed on Schedule 7.03
and any refinancings, refundings, renewals or extensions thereof; provided
that (i) the terms and conditions of such extensions, renewals or
refinancings of such Indebtedness do not, in the Administrative Agent’s
reasonable judgment, materially impair the prospects of repayment of the
Obligations by the Borrowers or impair any Borrower’s creditworthiness and (ii) such
extensions, renewals or refinancings of such Indebtedness do not result in an
increase in the principal amount of such Indebtedness so extended, renewed or
refinanced or add any Borrower as liable with respect thereto if such Borrower
was not liable with respect to the original Indebtedness;

 

(c)                                  Indebtedness of any Borrower to any Subsidiary and of any
Subsidiary to any Borrower or any other Subsidiary;

 

(d)                                 Guarantees of the Borrowers or any Subsidiary in respect of
Indebtedness otherwise permitted hereunder of the Borrowers or any Subsidiary;

 

(e)                                  obligations (contingent or otherwise) of the Borrowers or
any Subsidiary existing or arising under any Swap Contract (including any total
rate of return Swap Contract);

 

(f)                                    Indebtedness owed to (including obligations in respect of
letters of credit for the benefit of) any person providing workers’
compensation, health, disability or other employee benefits or property,
casualty or liability insurance to any Borrower or any Subsidiary, pursuant to
reimbursement or indemnification obligations to such person;

 

(g)                                 Indebtedness in respect of performance bonds, bid bonds,
appeal bonds, surety bonds and completion guarantees and similar obligations,
in each case, provided in the course of ordinary business, including those
incurred to secure health, safety and environmental obligations in the ordinary
course of business;

 

(h)                                 Unsecured Indebtedness;

 

(i)                                     Other Letter of Credit Obligations, up to a maximum amount
outstanding at any time not greater than $10,000,000;

 

(j)                                     Indebtedness arising from the occasional honoring by a bank
or other financial institution of a check, draft or similar instrument drawn
against insufficient funds in the ordinary course of business and not from an
overdraft credit facility granted by the bank or other financial institution;

 

(k)                                  other Secured Indebtedness and any other Indebtedness that
is secured by assets not comprising Collateral; and

 

(l)                                     Trust Preferred Indebtedness and related Trust Preferred
Guarantees and Trust Preferred Securities incurred, executed or issued
respectively, as part of a Trust Preferred Securities Transaction.

 

7.04                        Fundamental Changes.  Merge, dissolve, liquidate,
consolidate with or into another Person, or Dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to or in favor of any Person,
except that, so long as no Default exists or would result therefrom:

 

75

 

(a)                                  any Subsidiary may merge with (i) a Borrower, provided
that such Borrower shall be the continuing or surviving Person, or (ii) any
one or more other Subsidiaries; provided that any such merger involving
a Person that is not a wholly owned Subsidiary immediately prior to such merger
shall not be permitted unless also permitted by Section 7.02;

 

(b)                                 any Subsidiary may Dispose of all or substantially all of
its assets (upon voluntary liquidation or otherwise) to a Borrower or to
another Subsidiary;

 

(c)                                  any Subsidiary may liquidate or dissolve if the Borrower
which is the parent of such Subsidiary determines in good faith that such
liquidation or dissolution is in the best interests of such Borrower and is not
materially disadvantageous to the Lenders;

 

(d)                                 any
Borrower may effect a Disposition permitted by Section 7.05;
and

 

(e)                                  any Financing SPE may sell, transfer, lease or otherwise
dispose of (in one transaction or in a series of related transactions) all or
substantially all of its assets in connection with a Securitization, provided
that the proceeds of such Securitization in excess of the amount such Financing
SPE is required to pay to any holder of any debt obligation or equity interests
issued by such Financing SPE pursuant to the terms of such Securitization are
paid to a Borrower promptly thereafter.

 

Notwithstanding the foregoing,
none of the Borrowers will, nor will permit any of its Subsidiaries to, engage
to any material extent in any business other than businesses of the type
conducted by such Borrower and its Subsidiaries on the date of execution of
this Agreement, businesses reasonably related thereto or that is a reasonable
extension, development or expansion thereof. It is understood that a Trust
Preferred Securities Transaction consummated for purposes of financing the type
of business of such Borrower or Subsidiary as of the date of execution of this
Agreement shall not be deemed to violate the foregoing restriction.

 

For the avoidance of doubt,
the transfer of legal ownership of any Trust Preferred Indebtedness permitted
under this Agreement to a trustee pursuant to a Trust Preferred Securities
Transaction shall not be deemed to be a sale, transfer, lease or other
disposition of any assets to such trustee.

 

7.05                        Dispositions.  Make
any Disposition or enter into any agreement to make any Disposition, except:

 

(a)                                  Dispositions of obsolete or worn out property, whether now
owned or hereafter acquired, in the ordinary course of business;

 

(b)                                 Dispositions
(without recourse or indemnification for credit losses, provided that ordinary
and customary indemnification is permitted in accordance with prevailing market
practices) of residential real estate assets of the Borrowers (including,
without limitation, the Disposition of mortgage-backed securities), so long as no Default or Event of Default has occurred and
is continuing or would be caused thereby; provided, however that,
to the extent any such residential real estate assets constitute Collateral,
Borrowers shall comply with the Security Documents with respect to any
Dispositions thereof;

 

(c)                                  Dispositions of assets other than Collateral in the course
of any Borrower’s or any Subsidiary’s business and consistent with the
description of business in the KKR Financial Form 10-K;

 

(d)                                 Dispositions of equipment or real property to the extent
that (i) such property is exchanged for credit against the purchase price
of similar replacement property or (ii) the proceeds of such Disposition
are reasonably promptly applied to the purchase price of such replacement
property;

 

76

 

(e)                                  Dispositions of property by any Borrower or Subsidiary to a
Borrower or to a consolidated Subsidiary;

 

(f)                                    Dispositions of Collateral to the extent permitted by this
Agreement or the Security Documents;

 

(g)                                 Dispositions permitted by Section 7.04; and

 

(h)                                 the Disposition (without recourse or indemnification for
credit losses, provided that ordinary and customary indemnification is
permitted in accordance with prevailing market practices) by KKR Financial of
all of the common stock of KKR Holdings II.

 

For the avoidance of doubt,
the transfer of legal ownership of any Trust Preferred Indebtedness permitted
under this Agreement to a trustee pursuant to a Trust Preferred Securities
Transaction shall not be deemed to be a sale, transfer, lease or other
disposition of any assets to said trustee.

 

7.06                        Restricted Payments.  Declare or make, directly or
indirectly, any Restricted Payment, or incur any obligation (contingent or
otherwise) to do so, except that:

 

(a)                                  so long as (i) no event constituting a Default under Sections
8.01(a), 8.01(g) or 8.01(h) or shall have occurred
and be continuing, and (ii) no Event of Default shall have occurred and be
continuing, in each case, at the time of or would result therefrom, KKR
Financial may declare and make Restricted Payments in cash to any Person that
owns an Equity Interest in KKR Financial, ratably according to their respective
holdings of the type of Equity Interest of the applicable class or series in
respect of which such Restricted Payment is being made;

 

(b)                                 each Subsidiary (including, without limitation, the
Subsidiaries of KKR Financial party hereto as Borrowers) may declare and make
Restricted Payments to the Borrowers, and to any other Person that owns an
Equity Interest in such Subsidiary, ratably according to their respective
holdings of the type of Equity Interest of the applicable class or series in
respect of which such Restricted Payment is being made;

 

(c)                                  the Borrowers and each Subsidiary may declare and make
dividend payments or any other Restricted Payments (including, for avoidance of
doubt, any distributions for purposes of settling the conversion of Convertible
Securities) payable solely in the common stock or other common Equity Interests
of such Person; and

 

(d)                                 any Borrower may make Restricted Payments pursuant to and in
accordance with stock option plans or other benefit plans for management or
employees of such Borrower and its Subsidiaries.

 

7.07                        Transactions with Affiliates.  Enter into any transaction of any
kind with any Affiliate of any Borrower except (a) in the ordinary course
of business at prices and on terms and conditions not less favorable to such
Borrower or such Subsidiary than could be obtained on an arm’s-length basis
from unrelated third parties, (b) transactions between or among any Borrower
and its wholly owned Subsidiaries not involving any other Affiliate, (c) transactions
for which KKR Financial or such
Subsidiary is obligated under the Management Agreement and (d) any
Restricted Payment permitted by Section 7.06.

 

7.08                        Burdensome Agreements.  Enter into any Contractual
Obligation (other than this Agreement or any other Loan Document) that
restricts or imposes any condition upon (i) the ability of any Borrower or
any Subsidiary to create, incur or permit to exist any Lien upon any of its
property or 

 

77

 

assets,
or (ii) the ability of any Subsidiary to pay dividends or other
distributions with respect to any shares of its capital stock or to make or
repay loans or advances to any Borrower or any other Subsidiary or to Guarantee
Indebtedness of any Borrower or any other Subsidiary; provided that (A) the
foregoing shall not apply to restrictions and conditions imposed by law or by
this Agreement or any other Loan Document or upon any Financing SPE by any
lender thereto or investor therein or upon any Trust Preferred Financing
Vehicle in respect of its common securities issued to a Borrower or any
Subsidiary of a Borrower, (B) the foregoing shall not apply to
restrictions and conditions existing on the date hereof identified on Schedule
7.08 (but shall apply to any extension or renewal of, or any amendment or
modification expanding the scope of, any such restriction or condition), (C) the
foregoing shall not apply to customary restrictions and conditions contained in
agreements relating to the sale of a Subsidiary pending such sale, provided
such restrictions and conditions apply only to the Subsidiary that is to be
sold and such sale is permitted hereunder, (D) clause (i) of the
foregoing shall not apply to restrictions or conditions imposed by any
agreement relating to secured Indebtedness permitted by this Agreement if such
restrictions or conditions apply only to the property or assets securing such
Indebtedness and (E) clause (i) of the foregoing shall not apply to
customary provisions in leases and other contracts restricting the assignment
thereof.

 

For the avoidance of doubt,
except to the extent that the Borrowers grant a Lien to the trustee of any
Trust Preferred Financing Vehicle, the parties agree that the rights of such
trustee in respect of any Trust Preferred Indebtedness permitted under this
Agreement shall not be deemed a Lien hereunder.

 

7.09                        Financial Covenants.

 

(a)                                  Consolidated Tangible Net Worth.  Permit Adjusted
Consolidated Tangible Net Worth, at any time, to be less than $700,000,000,
plus an amount equal to 25% of the net proceeds received from the issuance and
sale, at any time after the Closing Date, of Equity Interests of KKR Financial
or any Subsidiary (other than issuances to any Borrower or a wholly-owned
Subsidiary), including upon any conversion of Debt Securities of KKR Financial
into such Equity Interests.

 

(b)                                 Coverage Ratio.  Permit the ratio of (A) the aggregate
Value of the Collateral to (B) Total Revolving Credit Exposure to be less
than 2.00 to 1.00 at any time.

 

(c)                                  Leverage Ratio.  Permit the ratio of Adjusted Total
Liabilities to Adjusted Consolidated Tangible Net Worth, at any time, to exceed
the ratio of 2.00 to 1.00.

 

(d)                                 Distributions.  Make any distributions to their respective
shareholders (other than any such shareholder that is itself a Borrower or a
Subsidiary) in respect of any taxable year in an aggregate amount (as to all
such shareholders) in excess of 65% of KKR Financial’s estimated taxable income
in respect of such taxable year as reasonably determined by KKR Financial
(determined without regard to any “passive activity losses” within the meaning
of Section 469 of the Code, any “miscellaneous itemized deductions” within
the meaning of Section 67 of the Code and any capital gains and capital
losses recognized on the disposition of assets, which are generally determined
on a partner-by-partner basis with reference to each partner’s tax basis in
their partnership interest); provided, that no such distributions shall
be made unless, before and after giving effect thereto, no Borrowing Base
Deficiency exists or would exist; and provided, further, that
notwithstanding the limitation on distributions (and in addition to the amount
of permitted distributions) set forth above in this Section 7.09(d),
any Borrower or Subsidiary that is a real estate investment trust for tax
purposes may make distributions in respect of any class of preferred shares
that was issued to satisfy the 100-shareholder requirement in Section 856(a)(5) of
the Code in accordance with the terms of such preferred class of shares.

 

78

 

7.10                        Fiscal Year.  Permit
the fiscal year of the Borrowers to end on a day other than December 31 or
permit the fiscal quarters to end on dates other than in a manner consistent
with Borrower’s current practice; provided, however, that the
Borrowers may, upon written notice to the Administrative Agent change the
financial reporting convention specified above to any other financial reporting
convention reasonably acceptable to the Administrative Agent.

 

7.11                        Lines of Business.  Alter in a fundamental manner the
character of their business, taken as a whole, from the business conducted on
the Closing Date and other business activities incidental or reasonably related
to any of the foregoing.

 

7.12                        Margin Regulations; Securities Laws.  Use all or any portion of the
proceeds of any credit extended under this Agreement to purchase or carry
Margin Stock.

 

ARTICLE VIII.

EVENTS OF DEFAULT AND REMEDIES

 

8.01                        Events of Default.  Any of the following shall
constitute an Event of Default:

 

(a)                                  Non-Payment.  Any Borrower fails to pay (i) when due
or as required to be paid herein, any amount of principal of any Loan or (ii) within
five Business Days after the same becomes due, any interest on any Loan, or any
fee due hereunder, or any other amount payable hereunder or under any other
Loan Document; or

 

(b)                                 Specific Covenants.  Any Borrower fails to perform or observe any
term, covenant or agreement contained in any of Section 6.03, Section 6.05(a) or
Article VII.  Any Borrower
fails to perform or observe any covenant contained in Section 6.02
(Certificates; Other Information) (other than the proviso in the first sentence
of the penultimate paragraph thereof) or Section 6.12 and such
failure continues for five (5) Business Days after notice thereof from the
Administrative Agent; or

 

(c)                                  Borrowing Base Deficiency.  There shall occur and continue unremedied for
a period of five or more Business Days after delivery of a Borrowing Base
Report demonstrating such Borrowing Base Deficiency pursuant to Section 6.02(e);
provided that it shall not be an Event of Default hereunder if the
Borrowers shall present the Administrative Agent with a reasonably feasible
plan to enable such Borrowing Base Deficiency to be cured within 20 Business
Days (which 20-Business Day period shall include the five Business Days
permitted for delivery of such plan), so long as such Borrowing Base Deficiency
is cured within such 20-Business Day period;

 

(d)                                 Other Defaults.  Any Borrower fails to perform or observe any
other covenant or agreement (not specified in subsection (a) or (b) above)
contained in any Loan Document on its part to be performed or observed and such
failure continues for 20 Business Days after notice thereof from the
Administrative Agent to the Borrowers; or

 

(e)                                  Representations and Warranties.  Any representation
or warranty made or deemed made by or on behalf of any Borrower in or in
connection with this Agreement or any other Loan Document or any amendment or
modification hereof or thereof or waiver hereunder or thereunder, or in any
report, certificate, financial statement or other document furnished pursuant
to or in connection with this Agreement, any other Loan Document or any
amendment or modification hereof or thereof or waiver hereunder or thereunder,
shall, after taking into account any materiality or other qualification
contained therein, prove to have been incorrect when made or deemed made; or

 

79

 

(f)                                    Cross-Default.  Any Borrower (i) fails to make any
payment (whether of principal or interest and regardless of amount) in respect
of any Material Indebtedness, when and as the same shall become due and payable
(with all applicable grace periods having expired), or (ii) any event or
condition occurs that results in any Material Indebtedness becoming due prior
to its scheduled maturity (other than, with respect to Indebtedness consisting
of any Swap Contracts, due to a termination event or equivalent event pursuant
to the terms of such Swap Contracts); provided that this Section 8.01(f)(ii) shall
not apply to secured Indebtedness that becomes due as a result of the voluntary
sale or transfer of the property or assets securing such Indebtedness; or

 

(g)                                 Insolvency Proceedings, Etc.  (i) Any Borrower (A) voluntarily
commences any proceeding or files any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect, (B) consents
to the institution of, or fails to contest in a timely and appropriate manner,
any proceeding or petition described in sub-part (ii) of this Section 8.01(g),
(C) applies for or consents to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for any Borrower or
for a substantial part of its assets, (D) files an answer admitting the
material allegations of a petition filed against it in any such proceeding, (E) makes
a general assignment for the benefit of creditors or (F) takes any action
for the purpose of effecting any of the foregoing, or (ii) an involuntary
proceeding is commenced or an involuntary petition is filed seeking (A) liquidation,
reorganization or other relief in respect of any Borrower or its debts, or of a
substantial part of its assets, under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or (B) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for any Borrower or for a substantial part of its assets, and,
in any such case, such proceeding or petition shall continue undismissed for 60
days or an order or decree approving or ordering any of the foregoing shall be
entered; or

 

(h)                                 Inability to Pay Debts; Attachment.  Any Borrower
becomes unable, admits in writing its inability or fails generally to pay its
debts as they become due; or

 

(i)                                     Judgments.  One or more judgments for the payment of
money in an aggregate amount in excess of $25,000,000 is rendered against any
Borrower and the same shall remain undischarged for a period of 30 consecutive
days during which execution shall not be effectively stayed, or any action is
legally taken by a judgment creditor to attach or levy upon any assets of any
Borrower to enforce any such judgment; or

 

(j)                                     ERISA.  An ERISA Event occurs that, in the opinion of
the Required Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in a Material Adverse Effect;
or

 

(k)                                  Invalidity of Loan Documents.  Any Loan Document shall cease to be valid and
binding on, or enforceable against, any Borrower, or any Borrower shall so
assert in writing; or

 

(l)                                     Change of Control.  There occurs any Change of Control.

 

8.02                        Remedies Upon Event of Default.  If any Event of Default occurs and
is continuing (other than an event with respect to a Borrower described in Section 8.01(g)),
and at any time thereafter during the continuance of such event, the
Administrative Agent may, and at the request of the Required Lenders shall, by
notice to the Borrowers, take either or both of the following actions, at the
same or different times:

 

(b)                                 terminate the Commitments, and thereupon the Commitments
shall terminate immediately, and;

 

80

 

(c)                                  declare the Loans then outstanding to be due and payable in
whole (or in part, in which case any principal not so declared to be due and
payable may thereafter be declared to be due and payable), and thereupon the
principal of the Loans so declared to be due and payable, together with accrued
interest thereon and all fees and other obligations of the Borrowers accrued
hereunder, shall become due and payable immediately, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
each of the Borrowers;

 

provided, however,
that in case of any event with respect to a Borrower described in Section 8.01(g),
the Commitments shall automatically terminate and the principal of the Loans
then outstanding, together with accrued interest thereon and all fees and other
Obligations, shall automatically become due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
each of the Borrowers.

 

8.03                        Application of Funds.  In the event that, following the
occurrence or during the continuance of any Event of Default, the
Administrative Agent or any Lender, as the case may be, receives any monies in
connection the exercise of remedies provided for in Section 8.02
(or after the Loans have automatically become immediately due and payable),
such monies shall be distributed for application as follows:

 

First, to the
payment of, or (as the case may be) the reimbursement of, the Administrative
Agent for or in respect of all reasonable costs, expenses, disbursements and
losses which shall have been incurred or sustained by the Administrative Agent
in connection with the collection of such monies by the Administrative Agent,
for the exercise, protection or enforcement by the Administrative Agent of all
or any of the rights, remedies, powers and privileges of the Administrative
Agent under this Agreement or any of the other Loan Documents or in respect of
the Collateral or in support of any provision of adequate indemnity to the
Administrative Agent against any taxes or liens which by law shall have, or may
have, priority over the rights of the Administrative Agent to such monies;

 

Second, to all other
Obligations in such order or preference as the Required Lenders may determine; provided,
however, that (i) distributions shall be made (A) pari  passu
among Obligations with respect to any fees payable to the Administrative Agent
and all other Obligations and (B) with respect to each type of Obligation
owing to the Lenders, such as interest, principal, fees and expenses, among the
Lenders pro  rata, and (ii) the Administrative Agent may in
its discretion make proper allowance to take into account any Obligations not
then due and payable;

 

Third, upon payment
and satisfaction in full or other provisions for payment in full satisfactory
to the Lenders and the Administrative Agent of all of the Obligations, to the
payment of any obligations required to be paid pursuant to §9-608(a)(1)(C) or
9-615(a)(3) of the Uniform Commercial Code of the State of New York;

 

Fourth, the excess,
if any, shall be returned to the Borrowers or to such other Persons as are
entitled thereto;

 

ARTICLE IX.

ADMINISTRATIVE AGENT

 

9.01                        Appointment and Authority.  Each of the Lenders
hereby irrevocably appoints Citibank, N.A. to act on its behalf as the
Administrative Agent hereunder and under the other Loan

 

81

 

Documents
and authorizes the Administrative Agent to take such actions on its behalf and
to exercise such powers as are delegated to the Administrative Agent by the
terms hereof or thereof, together with such actions and powers as are
reasonably incidental thereto.  The
provisions of this Article are solely for the benefit of the
Administrative Agent.  No Lender or
Borrower shall have rights as a third party beneficiary of any of such
provisions.

 

9.02        Rights as a Lender.  The Person serving as the Administrative
Agent hereunder shall have the same rights and powers in its capacity as a
Lender as any other Lender and may exercise the same as though it were not the
Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise
expressly indicated or unless the context otherwise requires, include the
Person serving as the Administrative Agent hereunder in its individual
capacity.  Such Person and its Affiliates
may accept deposits from, lend money to, act as the financial advisor or in any
other advisory capacity for and generally engage in any kind of business with
the Borrowers or any Subsidiary or other Affiliate thereof as if such Person
were not the Administrative Agent hereunder and without any duty to account
therefor to the Lenders.

 

9.03        Exculpatory Provisions.  The Administrative Agent shall not have any
duties or obligations except those expressly set forth herein and in the other
Loan Documents.  Without limiting the
generality of the foregoing, the Administrative Agent:

 

(a)           shall
not be subject to any fiduciary or other implied duties, regardless of whether
a Default has occurred and is continuing;

 

(b)           shall
not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Loan Documents that the Administrative
Agent is required to exercise as directed in writing by the Required Lenders
(or such other number or percentage of the Lenders as shall be expressly
provided for herein or in the other Loan Documents), provided that the
Administrative Agent shall not be required to take any action that, in its
opinion or the opinion of its counsel, may expose the Administrative Agent to
liability or that is contrary to any Loan Document or applicable law; and

 

(c)           shall
not, except as expressly set forth herein and in the other Loan Documents, have
any duty to disclose, and shall not be liable for the failure to disclose, any
information relating to any Borrower or any of its Affiliates that is
communicated to or obtained by the Person serving as the Administrative Agent
or any of its Affiliates in any capacity.

 

The Administrative Agent
shall not be liable for any action taken or not taken by it (i) with the
consent or at the request of the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary, or as the Administrative Agent
shall believe in good faith shall be necessary, under the circumstances as
provided in Sections 10.01 and 8.02) or (ii) in the absence
of its own gross negligence or willful misconduct.  The Administrative Agent shall be deemed not
to have knowledge of any Default unless and until notice describing such
Default is given to the Administrative Agent by any Borrower or a Lender.

 

The Administrative Agent
shall not be responsible for or have any duty to ascertain or inquire into (i) any
statement, warranty or representation made in or in connection with this
Agreement or any other Loan Document, (ii) the contents of any
certificate, report or other document delivered hereunder or thereunder or in
connection herewith or therewith, (iii) the performance or observance of
any of the covenants, agreements or other terms or conditions set forth herein
or therein or the occurrence of any Default, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document or (v) the
satisfaction of any condition set forth in Article IV or elsewhere
herein, other than to confirm receipt of items expressly required to be
delivered to the Administrative Agent.

 

82

 

9.04        Reliance by Administrative Agent.

 

(a)           The
Administrative Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing (including any electronic
message, Internet or intranet website posting or other distribution) believed
by it to be genuine and to have been signed, sent or otherwise authenticated by
the proper Person.  The Administrative
Agent also may rely upon any statement made to it orally or by telephone and
believed by it to have been made by the proper Person, and shall not incur any
liability for relying thereon.  In
determining compliance with any condition hereunder to the making of a Loan,
that by its terms must be fulfilled to the satisfaction of a Lender or the
Administrative Agent may presume that such condition is satisfactory to such
Lender unless the Administrative Agent shall have received notice to the
contrary from such Lender prior to the making of such Loan.  The Administrative Agent may consult with
legal counsel (who may be counsel for any Borrower), independent accountants
and other experts selected by it, and shall not be liable for any action taken
or not taken by it in accordance with the advice of any such counsel,
accountants or experts.

 

(b)           For
purposes of determining compliance with the conditions specified in Section 4.01,
each Lender that has signed this Agreement shall be deemed to have consented
to, approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender unless the Administrative Agent shall have received
notice from such Lender prior to the proposed Closing Date specifying its
objection thereto.

 

9.05        Delegation of Duties.  The Administrative Agent may perform any and
all of its duties and exercise its rights and powers hereunder or under any
other Loan Document by or through any one or more sub-agents appointed by the
Administrative Agent. The Administrative Agent and any such sub-agent may
perform any and all of its duties and exercise its rights and powers by or
through their respective Related Parties. 
The exculpatory provisions of this Article shall apply to any such
sub-agent and to the Related Parties of the Administrative Agent and any such
sub-agent, and shall apply to their respective activities in connection with
the syndication of the credit facilities provided for herein as well as
activities as Administrative Agent.

 

9.06        Resignation of Administrative Agent.  The Administrative Agent may at any time give
notice of its resignation to the Lenders and the Borrowers.  Upon receipt of any such notice of
resignation, the Required Lenders shall have the right, in consultation with
the Borrowers, to appoint a successor, which shall be a bank with an office in
the United States, or an Affiliate of any such bank with an office in the
United States.  If no such successor
shall have been so appointed by the Required Lenders and shall have accepted
such appointment within 30 days after the retiring Administrative Agent
gives notice of its resignation, then the retiring Administrative Agent may on
behalf of the Lenders, appoint a successor Administrative Agent meeting the
qualifications set forth above; provided that if the Administrative
Agent shall notify the Borrowers and the Lenders that no qualifying Person has
accepted such appointment, then such resignation shall nonetheless become
effective in accordance with such notice and (1) the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder and under the other Loan Documents (except that in the case of any
collateral security held by the Administrative Agent on behalf of the Lenders
under any of the Loan Documents, the retiring Administrative Agent shall
continue to hold such collateral security until such time as a successor
Administrative Agent is appointed) and (2) all payments, communications
and determinations provided to be made by, to or through the Administrative
Agent shall instead be made by or to each Lender directly, until such time as
the Required Lenders appoint a successor Administrative Agent as provided for
above 

 

83

 

in
this Section.  Upon the acceptance of a
successor’s appointment as Administrative Agent hereunder, such successor shall
succeed to and become vested with all of the rights, powers, privileges and
duties of the retiring (or retired) Administrative Agent, and the retiring
Administrative Agent shall be discharged from all of its duties and obligations
hereunder or under the other Loan Documents (if not already discharged
therefrom as provided above in this Section). 
The fees payable by the Borrowers to a successor Administrative Agent
shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrowers and such successor. 
After the retiring Administrative Agent’s resignation hereunder and
under the other Loan Documents, the provisions of this Article and Section 10.04
shall continue in effect for the benefit of such retiring Administrative Agent,
its sub-agents and their respective Related Parties in respect of any actions
taken or omitted to be taken by any of them while the retiring Administrative
Agent was acting as Administrative Agent.

 

Any resignation by Citibank,
N.A. as Administrative Agent pursuant to this Section shall also
constitute its resignation as Swingline Lender. 
Upon the acceptance of a successor’s appointment as Administrative Agent
hereunder, (a) such successor shall succeed to and become vested with all
of the rights, powers, privileges and duties of the retiring Swingline Lender
and (b) the retiring Swingline Lender shall be discharged from all of
their respective duties and obligations hereunder or under the other Loan
Documents.

 

In addition to the
foregoing, if a Lender becomes, and during the period it remains, a Defaulting
Lender or a Potential Defaulting Lender, the Issuing Bank and/or the Swingline
Lender may, upon prior written notice to the Borrowers and the Administrative
Agent, resign as Issuing Bank or Swingline Lender, respectively, effective at
the close of business New York time on a date specified in such notice (which
date may not be less than 20 Business Days after the date of such notice); provided
that such resignation by the Issuing Bank will have no effect on the validity
or enforceability of any Letter of Credit then outstanding or on the
obligations of the Borrowers or any Lender under this Agreement with respect to
any such outstanding Letter of Credit or otherwise to the Issuing Bank; and provided,
further, that such resignation by the Swingline Lender will have no
effect on its rights in respect of any outstanding Swingline Loans or on the
obligations of the Borrowers or any Lender under this Agreement with respect to
any such outstanding Swingline Loan.

 

9.07        Non-Reliance on Administrative Agent and
Other Lenders. 
Each Lender acknowledges that it has, independently and without reliance
upon the Administrative Agent or any other Lender or any of their Related
Parties and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement.  Each Lender also acknowledges
that it will, independently and without reliance upon the Administrative Agent
or any other Lender or any of their Related Parties and based on such documents
and information as it shall from time to time deem appropriate, continue to
make its own decisions in taking or not taking action under or based upon this
Agreement, any other Loan Document or any related agreement or any document
furnished hereunder or thereunder.

 

9.08        No Other Duties, Etc.  Anything herein to
the contrary notwithstanding, the Syndication Agents and the Arranger listed on
the cover page hereof shall not have any powers, duties or
responsibilities under this Agreement or any of the other Loan Documents,
except in its capacity, as applicable, as the Administrative Agent or a Lender
hereunder.

 

9.09        Administrative Agent May File Proofs of
Claim. 
In case of the pendency of any proceeding under any Debtor Relief Law or
any other judicial proceeding relative to any Borrower, the Administrative
Agent (irrespective of whether the principal of any Loan shall then be due and
payable as herein expressed or by declaration or otherwise and irrespective of
whether the Administrative Agent shall have made any demand on the Borrowers)
shall be entitled and empowered, by intervention in such proceeding or
otherwise

 

84

 

(b)           to
file and prove a claim for the whole amount of the principal and interest owing
and unpaid in respect of the Loans and all other Obligations that are owing and
unpaid and to file such other documents as may be necessary or advisable in
order to have the claims of the Lenders and the Administrative Agent (including
any claim for the reasonable compensation, expenses, disbursements and advances
of the Lenders and the Administrative Agent and their respective agents and
counsel and all other amounts due the Lenders and the Administrative Agent
under Sections  2.09 and 10.05) allowed in such judicial
proceeding; and

 

(c)           to
collect and receive any monies or other property payable or deliverable on any
such claims and to distribute the same;

 

and any custodian, receiver,
assignee, trustee, liquidator, sequestrator or other similar official in any
such judicial proceeding is hereby authorized by each Lender to make such
payments to the Administrative Agent and, in the event that the Administrative
Agent shall consent to the making of such payments directly to the Lenders to
pay to the Administrative Agent any amount due for the reasonable compensation,
expenses, disbursements and advances of the Administrative Agent and its agents
and counsel, and any other amounts due the Administrative Agent under Sections 2.09
and 10.04.

 

Nothing contained herein
shall be deemed to authorize the Administrative Agent to authorize or consent
to or accept or adopt on behalf of any Lender any plan of reorganization,
arrangement, adjustment or composition affecting the Obligations or the rights
of any Lender to authorize the Administrative Agent to vote in respect of the
claim of any Lender in any such proceeding.

 

9.10        Collateral Matters.  The Lenders irrevocably authorize the
Administrative Agent, at its option and in its discretion, to release any Lien
on any property granted to or held by the Administrative Agent under any Loan
Document (i) upon termination of the Aggregate Commitments and payment in
full of all Obligations (other than contingent indemnification obligations), (ii) that
is sold or to be sold as part of or in connection with any sale permitted
hereunder or under any other Loan Document or where the Borrowers are permitted
to obtain such release pursuant to the terms of the Security Documents, or (iii) subject
to Section 10.01, if approved, authorized or ratified in writing by
the Required Lenders.

 

Upon request by the
Administrative Agent at any time, the Required Lenders will confirm in writing
the Administrative Agent’s authority to release or subordinate its interest in
particular types or items of property.

 

ARTICLE
X.

MISCELLANEOUS

 

10.01      Amendments, Etc.  No amendment or
waiver of any provision of this Agreement or any other Loan Document, and no
consent to any departure by any Borrower therefrom, shall be effective unless
in writing signed by the Required Lenders and applicable Borrower, as the case
may be, and acknowledged by the Administrative Agent, and each such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such
amendment, waiver or consent shall:

 

(a)           waive
any condition set forth in Section 4.01 without the written consent
of each Lender;

 

85

 

(b)           extend
or increase the Commitment of any Lender (or reinstate any Commitment
terminated pursuant to Section 8.02) without the written consent of
such Lender;

 

(c)           postpone
any date fixed by this Agreement or any other Loan Document for any payment or
mandatory prepayment of principal, interest, fees or other amounts due to the
Lenders (or any of them) hereunder or under any other Loan Document without the
written consent of each Lender directly affected thereby;

 

(d)           reduce
the principal of, or the rate of interest specified herein on, any Loan or
(subject to clause (iii) of the second proviso to this Section 10.01)
any fees or other amounts payable hereunder or under any other Loan Document
without the written consent of each Lender directly affected thereby; provided,
however, that only the consent of the Required Lenders shall be
necessary (i) to amend the definition of “Default Rate” or to waive any
obligation of the Borrowers to pay interest at the Default Rate or (ii) to
amend any financial covenants hereunder (or any defined term used therein);

 

(e)           change
any components of the definitions of Eligible Specified Financial Asset or
Specified Percentage, without the written consent of the Required Lenders; provided
that (i) the addition of any new type of Specified Financial Asset and (ii) any
increase in any Specified Percentage shall require the written consent of each
Lender;

 

(f)            change
Section 2.13 or Section 8.03 in a manner that would
alter the pro rata sharing of payments required thereby , or change any
provision relating to the pro rata disbursement of funds to the Lenders, in
each case, without the written consent of each Lender;

 

(g)           change
any provision of this Section or the definition of “Required Lenders” or
any other provision hereof specifying the number or percentage of Lenders
required to amend, waive or otherwise modify any rights hereunder or make any
determination or grant any consent hereunder without the written consent of
each Lender;

 

(h)           amend, modify or waive the provisions of Section 2.04(c) 
without the written consent of each Lender; or

 

(i)            release all or substantially all of the Collateral
and terminate the Security Agreement without the written consent of each
Lender.

 

and, provided  further,
that (i) no amendment, waiver or consent shall, unless in writing and
signed by the Swingline Lender in addition to the Lenders required above,
affect the rights or duties of the Swingline Lender under this Agreement, (ii) no
amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Lenders required above, affect the
rights or duties of the Administrative Agent under this Agreement or any other
Loan Document and (iii) the consent of Lenders holding not less than
two-thirds of the Revolving Credit Exposure and unused Commitments will be
required for any adverse change affecting the provisions of this Agreement
relating to the calculation of the Borrowing Base (including the definitions
set forth in Section 6.16(b)) unless otherwise expressly provided herein.

 

Anything
herein to the contrary notwithstanding, during such period as a Lender is a
Defaulting Lender, to the fullest extent permitted by applicable law, such
Lender will not be entitled to vote in respect of amendments and waivers
hereunder and the Commitment and the outstanding Loans or other extensions of
credit of such Lender hereunder will not be taken into account in determining
whether the Requisite Lenders or all of the Lenders, as required, have approved
any such amendment or waiver (and the definition of “Requisite Lenders” will
automatically be deemed modified accordingly for the duration 

 

86

 

of such period); provided,
that any such amendment or waiver that would increase or extend the term of the
Commitment of such Defaulting Lender, extend the date fixed for the payment of
principal or interest owing to such Defaulting Lender hereunder, reduce the
principal amount of any obligation owing to such Defaulting Lender, reduce the
amount of or the rate or amount of interest on any amount owing to such
Defaulting Lender or of any fee payable to such Defaulting Lender hereunder, or
alter the terms of this proviso, will require the consent of such Defaulting
Lender.

 

10.02      Notices; Effectiveness; Electronic Communication.

 

(a)           Notices
Generally.  Except in the case of notices and other
communications expressly permitted to be given by telephone (and except as
provided in subsection (b) below), all notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
telecopier as follows, and all notices and other communications expressly
permitted hereunder to be given by telephone shall be made to the applicable
telephone number, as follows:

 

(i)            if to the Borrowers, the
Administrative Agent or the Swingline Lender, to the address, telecopier
number, electronic mail address or telephone number specified for such Person
on Schedule 10.02; and

 

(ii)           if to any other Lender, to
the address, telecopier number, electronic mail address or telephone number
specified in its Administrative Questionnaire.

 

Notices sent by hand or
overnight courier service, or mailed by certified or registered mail, shall be
deemed to have been given when received; notices sent by telecopier shall be
deemed to have been given when sent (except that, if not given during normal
business hours for the recipient, shall be deemed to have been given at the
opening of business on the next business day for the recipient).  Notices delivered through electronic
communications to the extent provided in subsection (b) below, shall be
effective as provided in such subsection (b).

 

(b)           Electronic
Communications.  Notices and other communications to the
Lenders may be delivered or furnished by electronic communication (including e-mail
and Internet or intranet websites) pursuant to procedures approved by the
Administrative Agent, provided that the foregoing shall not apply to
service of process notices pursuant to Section 10.14, notices that
are prohibited from being so delivered under applicable law, and notices to any
Lender pursuant to Article II if such Lender, as applicable, has
notified the Administrative Agent that it is incapable of receiving notices
under such Article by electronic communication.  The Administrative Agent or any Borrower may,
in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it, provided
that approval of such procedures may be limited to particular notices or
communications.

 

Unless the Administrative
Agent otherwise prescribes, (i) notices and other communications sent to
an e-mail address shall be deemed received upon the sender’s receipt of an
acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written
acknowledgement), provided that if such notice or other communication is
not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next business day for the recipient, and (ii) notices or
communications posted to an Internet or intranet website shall be deemed
received upon the deemed receipt by the intended recipient at its e-mail
address as described in the foregoing clause (i) of notification that
such notice or communication is available and identifying the website address
therefor.

 

87

 

(c)           The
Platform.  THE PLATFORM IS PROVIDED “AS IS” AND “AS
AVAILABLE.”  THE AGENT PARTIES (AS
DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER
MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR
ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR
STATUTORY, INCLUDING 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 ANY AGENT PARTY IN CONNECTION WITH THE BORROWER
MATERIALS OR THE PLATFORM.  In no event
shall the Administrative Agent or any of its Related Parties (each an “Agent
Party”, or collectively, the “Agent Parties”) have any liability to
the Borrowers, any Lender or any other Person for losses, claims, damages,
liabilities or expenses of any kind (whether in tort, contract or otherwise)
arising out of the Borrowers’ or the Administrative Agent’s transmission of
Borrower Materials through the Internet, except to the extent that such losses,
claims, damages, liabilities or expenses are determined by a court of competent
jurisdiction by a final and nonappealable judgment to have resulted from the
gross negligence or willful misconduct of such Agent Party; provided, however,
that in no event shall any Agent Party have any liability to the Borrowers, any
Lender or any other Person for indirect, special, incidental, consequential or
punitive damages (as opposed to direct or actual damages).

 

(d)           Change
of Address, Etc.  Each of the Borrowers, the Administrative
Agent and the Swingline Lender may change its address, telecopier or telephone
number for notices and other communications hereunder by notice to the other
parties hereto.  Each other Lender may
change its address, telecopier or telephone number for notices and other
communications hereunder by notice to the Borrowers, the Administrative Agent
and the Swingline Lender.  In addition,
each Lender agrees to notify the Administrative Agent from time to time to
ensure that the Administrative Agent has on record (i) an effective
address, contact name, telephone number, telecopier number and electronic mail
address to which notices and other communications may be sent and (ii) accurate
wire instructions for such Lender.

 

(e)           Reliance
by Administrative Agent and Lenders.  The
Administrative Agent and the Lenders shall be entitled to rely and act upon any
notices (including telephonic Revolving Loan Notices and Swingline Loan
Notices) purportedly given by or on behalf of the Borrowers even if (i) such
notices were not made in a manner specified herein, were incomplete or were not
preceded or followed by any other form of notice specified herein, or (ii) the
terms thereof, as understood by the recipient, varied from any confirmation
thereof.  The Borrowers shall jointly and
severally indemnify the Administrative Agent, each Lender and the Related
Parties of each of them from all losses, costs, expenses and liabilities resulting
from the reliance by such Person on each notice purportedly given by or on
behalf of the Borrowers.  All telephonic
notices to and other telephonic communications with the Administrative Agent
may be recorded by the Administrative Agent, and each of the parties hereto
hereby consents to such recording.

 

10.03      No Waiver; Cumulative Remedies.  No failure by any Lender or the
Administrative Agent to exercise, and no delay by any such Person in
exercising, any right, remedy, power or privilege hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.

 

10.04      Expenses; Indemnity; Damage Waiver.

 

(a)           Costs
and Expenses.  The Borrowers shall pay (i) all
reasonable and documented out-of-pocket expenses incurred by the Administrative
Agent and its Affiliates (including the reasonable fees, 

 

88

 

charges
and disbursements of counsel for the Administrative Agent), in connection with
the syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration of this Agreement and the
other Loan Documents or any amendments, modifications or waivers of the
provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated by
any Security Document (or other document referenced therein) and (iii) all
out-of-pocket expenses incurred by the Administrative Agent or any Lender
(including the fees, charges and disbursements of any counsel for the
Administrative Agent and any Lender), in connection with the enforcement or
protection of its rights (A) in connection with this Agreement and the
other Loan Documents, including its rights under this Section, or (B) in
connection with the Loans made hereunder, including all such out-of-pocket
expenses incurred during any workout, restructuring or negotiations in respect
of such Loans.

 

(b)           Indemnification
by the Borrowers.  The Borrowers shall indemnify the
Administrative Agent (and any sub-agent thereof), each Lender, and each Related
Party of any of the foregoing Persons (each such Person being called an “Indemnitee”)
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses (including the fees, charges and
disbursements of any counsel for any Indemnitee), and shall indemnify and hold
harmless each Indemnitee from all fees and time charges and disbursements for
attorneys who may be employees of any Indemnitee, incurred by any Indemnitee or
asserted against any Indemnitee by any third party or by any of the Borrowers
arising out of, in connection with, or as a result of (i) the execution or
delivery of this Agreement, any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the performance by the parties
hereto of their respective obligations hereunder or thereunder, the
consummation of the transactions contemplated hereby or thereby, or, in the
case of the Administrative Agent (and any sub-agent thereof) and its Related
Parties only, the administration of this Agreement and the other Loan
Documents, (ii) any Loan or the use or proposed use of the proceeds
therefrom, (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by any of the Borrowers or
any of their Subsidiaries, or any Environmental Liability related in any way to
such Borrower or any such Subsidiaries, or (iv) any actual or prospective
claim, litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory, whether brought by a third
party or by any of the Borrowers, and regardless of whether any Indemnitee is a
party thereto, in all cases, whether or not caused by or arising, in whole or
in part, out of the comparative, contributory or sole negligence of the
Indemnitee; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses (x) are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the
gross negligence or willful misconduct of such Indemnitee or (y) result
from a claim brought by any of the Borrowers against an Indemnitee for breach
in bad faith of such Indemnitee’s obligations hereunder or under any other Loan
Document, if any Borrower has obtained a final and nonappealable judgment in
its favor on such claim as determined by a court of competent
jurisdiction.  Unless an Event of Default
shall have occurred and be continuing, the Borrowers shall be entitled to
assume the defense of any action for which indemnification is sought hereunder
with counsel of its choice at its expense (in which case the Borrowers shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by an Indemnitee except as set forth below); provided, however,
that such counsel shall be reasonably satisfactory to each such
Indemnitee.  Notwithstanding the
Borrowers’ election to assume the defense of such action, each Indemnitee shall
have the right to employ separate counsel and to participate in the defense of
such action, and the Borrowers shall bear the reasonable fees, costs and
expenses of such separate counsel if (i) the use of counsel chosen by the
Borrowers to represent such Indemnitee would present such counsel with a
conflict of interest; (ii) the actual or potential defendants in, or
targets of, any such action include the Borrowers and such Indemnitee and such
Indemnitee shall have reasonably concluded that there may be legal defenses
available to it that are different from or additional to those available to the
Borrowers; (iii) the Borrowers shall not have 

 

89

 

employed
counsel reasonably satisfactory to such Indemnitee to represent it within a
reasonable time after notice of the institution of such action; or (iv) the
Borrowers shall authorize such Indemnitee to employ separate counsel at the
Borrowers’ expense.  The Borrowers will
not be liable under this Agreement for any amount paid by an Indemnitee to
settle any claims or actions if the settlement is entered into without the
Borrowers’ consent, which consent may not be unreasonably withheld or delayed.

 

(c)           Reimbursement
by Lenders.  To the extent that any Borrower for any
reason fails to indefeasibly pay any amount required under subsection (a) or
(b) of this Section to be paid by it to the Administrative Agent (or
any sub-agent thereof) or any Related Party of any of the foregoing, each Lender
severally agrees to pay to the Administrative Agent (or any such sub-agent) or
such Related Party, as the case may be, such Lender’s Applicable Percentage
(determined as of the time that the applicable unreimbursed expense or
indemnity payment is sought) of such unpaid amount, provided that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against the
Administrative Agent (or any such sub-agent) in its capacity as such, or
against any Related Party of any of the foregoing acting for the Administrative
Agent (or any such sub-agent) in connection with such capacity. The obligations
of the Lenders under this subsection (c) are subject to the
provisions of Section 2.12(d).

 

(d)           Waiver
of Consequential Damages, Etc.  To the fullest extent permitted by applicable
law, the Borrowers shall not assert, and hereby waive, any claim against any
Indemnitee, on any theory of liability, for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement, any other Loan Document or
any agreement or instrument contemplated hereby, the transactions contemplated
hereby or thereby, any Loan or the use of the proceeds thereof.  No Indemnitee referred to in subsection (b) above
shall be liable for any damages arising from the use by unintended recipients
of any information or other materials distributed to such unintended recipients
by such Indemnitee through telecommunications, electronic or other information
transmission systems in connection with this Agreement or the other Loan
Documents or the transactions contemplated hereby or thereby other than for
direct or actual damages resulting from the gross negligence or willful
misconduct of such Indemnitee as determined by a final and nonappealable
judgment of a court of competent jurisdiction.

 

(e)           Payments.  All amounts due
under this Section shall be payable not later than ten (10) Business Days
after demand therefor.

 

(f)            Survival.  The agreements in
this Section shall survive the resignation of the Administrative Agent and
the Swingline Lender, the replacement of any Lender, the termination of the
Aggregate Commitments and the repayment, satisfaction or discharge of all the
other Obligations.

 

10.05      Payments Set Aside.  To the extent that any payment by or on
behalf of the Borrowers is made to the Administrative Agent or any Lender, or
the Administrative Agent or any Lender exercises its right of setoff, and such
payment or the proceeds of such setoff or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
(including pursuant to any settlement entered into by the Administrative Agent
or such Lender in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any proceeding under any Debtor Relief Law or
otherwise, then (a) to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such setoff had
not occurred, and (b) each Lender severally agrees to pay to the
Administrative Agent upon demand its applicable share (without duplication) of
any amount so recovered from or repaid by the Administrative Agent, plus
interest thereon from the date of such demand to the date such payment is made
at a rate per annum equal to the Federal Funds Rate from time to time in
effect.  The obligations of the Lenders
under clause (b) of the preceding sentence shall survive the payment in
full of the Obligations and the termination of this Agreement.

 

90

 

10.06      Successors and Assigns.

 

(a)           Successors
and Assigns Generally.  The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that the Borrowers
may not assign or otherwise transfer any of its rights or obligations hereunder
without the prior written consent of the Administrative Agent and each Lender
and no Lender may assign or otherwise transfer any of its rights or obligations
hereunder except (i) to an assignee in accordance with the provisions of
paragraph (b) of this Section, (ii) by way of participation in
accordance with the provisions of paragraph (d) of this Section or (iii) by
way of pledge or assignment of a security interest subject to the restrictions
of paragraph (f) of this Section (and any other attempted assignment
or transfer by any party hereto shall be null and void).  Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby, Participants
to the extent provided in paragraph (d) of this Section and, to the
extent expressly contemplated hereby, the Related Parties of each of the
Administrative Agent and the Lenders) any legal or equitable right, remedy or
claim under or by reason of this Agreement.

 

(b)           Assignments
by Lenders.  Any Lender may at any time assign to one or
more Eligible Assignees all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Commitment and the Loans
(including for purposes of this subsection (b), participations in Swingline
Loans) at the time owing to it); provided that any such assignment shall
be subject to the following conditions:

 

(i)            Minimum Amounts.

 

(A)          in the case of an assignment
of the entire remaining amount of the assigning Lender’s Commitment and the
Loans at the time owing to it or in the case of an assignment to a Lender, an
Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned;
and

 

(B)           in any case not described in
paragraph (b)(i)(A) of this Section, the aggregate amount of the
Commitment (which for this purpose includes Loans outstanding thereunder) or,
if the applicable Commitment is not then in effect, the principal outstanding
balance of the Loans of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Assumption with respect to such
assignment is delivered to the Administrative Agent or, if “Trade Date” is
specified in the Assignment and Assumption, as of the Trade Date) shall not be
less than $5,000,000 unless each of the Administrative Agent and, so long as no
Event of Default has occurred and is continuing, each Borrower otherwise
consents (each such consent not to be unreasonably withheld or delayed); provided,
however, that concurrent assignments to members of an Assignee Group and
concurrent assignments from members of an Assignee Group to a single assignee
(or to an assignee and members of its Assignee Group) will be treated as a single
assignment for purposes of determining whether such minimum amount has been
met.

 

(ii)           Proportionate Amounts.  Each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender’s rights and
obligations under this Agreement with respect to the Loan or the Commitment
assigned, except that this clause (ii) shall not apply to the Swingline
Lender’s rights and obligations in respect of Swingline Loans;

 

91

 

(iii)          Required Consents.  No consent shall be required for any
assignment except to the extent required by paragraph (b)(i)(B) of this Section and,
in addition:

 

(A)          the consent of each Borrower
(such consent not to be unreasonably withheld) shall be required unless (x) an
Event of Default has occurred and is continuing at the time of such assignment
or (y) such assignment is to a Lender, an Affiliate of a Lender or an
Approved Fund; provided that the Borrowers shall be deemed to have
consented to any such assignment unless it shall object thereto by written
notice to the Administrative Agent within 10 Business Days after having
received notice thereof;

 

(B)           the consent of the
Administrative Agent (such consent not to be unreasonably withheld or delayed)
shall be required for assignments if such assignment is to a Person that is not
a Lender, an Affiliate of such Lender or an Approved Fund with respect to such
Lender; and

 

(C)           the consent of the Issuing
Bank (such consent not to be unreasonably withheld or delayed) shall be
required for any assignment that increases the obligation of the assignee to
participate in exposure under one or more Letters of Credit (whether or not
then outstanding) and the consent of the Swingline Lender (such consent not to
be unreasonably withheld or delayed) shall be required if such assignment is to
a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund
with respect to such Lender.

 

(iv)          Assignment and Assumption.  The parties to each assignment shall execute
and deliver to the Administrative Agent an Assignment and Assumption, together
with a processing and recordation fee in the amount, if any, required as set
forth in Schedule 10.06; provided, however, that the
Administrative Agent may, in its sole discretion, elect to waive such
processing and recordation fee in the case of any assignment.  The assignee, if it is not a Lender, shall
deliver to the Administrative Agent an Administrative Questionnaire.

 

(v)           Assignment to Borrowers.  Assignments to the Borrowers and Affiliates
of the Borrowers shall be permitted subject to the following limitations
(which, for the avoidance of doubt, are not applicable in the case of
assignments to Affiliated Debt Funds):

 

(A)          any such Loans acquired by a
Borrower or any Subsidiaries of a Borrower shall be cancelled promptly upon the
acquisition thereof;

 

(B)           Lenders that are Affiliates
of the Borrowers shall have no right to consent to any amendment, modification,
waiver, consent or other such action with respect to any of the terms of this
Agreement or any other Loan Document, or otherwise vote on any matter related
to this Agreement or any other Loan Document.

 

(vi)          No Assignment to Natural
Persons.  No such assignment shall be
made to a natural person.

 

Subject
to acceptance and recording thereof by the Administrative Agent pursuant to
paragraph (c) of this Section, from and after the effective date specified
in each Assignment and Assumption, the assignee thereunder shall be a party to
this Agreement and, to the extent of the interest assigned by such Assignment
and Assumption, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Assumption, be released from its
obligations under this Agreement (and, in the case of an Assignment

 

92

 

and
Assumption covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto) but shall
continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05 and 10.04
with respect to facts and circumstances occurring prior to the effective date
of such assignment.  Upon request, each
Borrower (at its expense) shall execute and deliver a Note to the assignee
Lender.  Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with
this paragraph shall be treated for purposes of this Agreement as a sale by
such Lender of a participation in such rights and obligations in accordance
with paragraph (d) of this Section.

 

(c)                                  Register.  The Administrative Agent, acting solely for
this purpose as an agent of the Borrower, shall maintain at the Administrative
Agent’s Office a copy of each Assignment and Assumption delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the
Commitments of, and principal amounts of the Loans owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be
conclusive, and the Borrower, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the Register pursuant to the terms
hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary and the transfer of any Loan shall not
be recognized except to the extent reflected on the Register.  The Register shall be available for
inspection by the Borrowers and any Lender, at any reasonable time and from
time to time upon reasonable prior notice. 
This Section 10.06 is intended to cause the Loans to be treated as being
in registered form within the meaning of U.S. Treasury Regulation Section 103-1(c) and
will be interpreted in accordance with that intention.

 

(d)                                 Participations.  Any Lender may at any time, without the
consent of, or notice to, the Borrowers or the Administrative Agent, sell
participations to any Person (other than a natural person or any Borrowers or
any of the Borrowers’ Affiliates or Subsidiaries) (each, a “Participant”)
in all or a portion of such Lender’s rights and/or obligations under this Agreement
(including all or a portion of its Commitment and/or the Loans (including such
Lender’s participations in Swingline Loans) owing to it); provided that (i) such
Lender’s obligations under this Agreement shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (iii) the Borrower, the Administrative
Agent and the Lenders, Issuing Bank and Swingline Lender shall continue to deal
solely and directly with such Lender in connection with such Lender’s rights
and obligations under this Agreement.

 

Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any  provision of this Agreement; provided
that such agreement or instrument may provide that such Lender will not,
without the consent of the Participant, agree to any amendment, modification or
waiver described in the first proviso to Section 10.01 that affects such
Participant.  Subject to paragraph (e) of
this Section, each Borrower agrees that each Participant shall be entitled to
the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section.  To the extent permitted by
law, each Participant also shall be entitled to the benefits of Section 10.08
as though it were a Lender, provided such Participant agrees to be subject to Section 2.13
as though it were a Lender.  Each Lender
that sells a participation, acting solely for this purpose as an agent of the
Borrower, shall maintain a register on which it enters the name and address of
each Participant and the principal amounts (and stated interest) of each
Participant’s interest in the Loans or other obligations under this Agreement
(the “Participant Register”).  The
entries in the Participant Register shall be conclusive, and such Lender, each
Loan Party and the Administrative Agent shall treat each person whose name is
recorded in the Participant Register pursuant to the terms hereof as the owner
of such participation for all purposes of this Agreement, notwithstanding
notice to the contrary.

 

93

 

(e)                                  Limitations upon Participant Rights.  A Participant shall
not be entitled to receive any greater payment under Sections 3.01 or 3.04 than
the applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to
such Participant is made with the Borrower’s prior written consent.  A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 3.01
unless the Borrowers are notified of the participation sold to such Participant
and such Participant agrees, for the benefit of the Borrower, to comply with Section 3.01(e) as
though it were a Lender.

 

(f)                                    Certain Pledges.  Any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement
(including under its Note, if any) to secure obligations of such Lender,
including any pledge or assignment to secure obligations to a Federal Reserve
Bank; provided that no such pledge or assignment shall release such Lender from
any of its obligations hereunder or substitute any such pledgee or assignee for
such Lender as a party hereto.

 

(g)                                 Electronic Execution of Assignments.  The words “execution,”
“signed,” “signature,” and words of like import in any Assignment and
Assumption shall be deemed to include electronic signatures or the keeping of
records in electronic form, each of which shall be of the same legal effect,
validity or enforceability as a manually executed signature or the use of a
paper-based recordkeeping system, as the case may be, to the extent and as
provided for in any applicable law, including the Federal Electronic Signatures
in Global and National Commerce Act, the New York State Electronic Signatures
and Records Act, or any other similar state laws based on the Uniform
Electronic Transactions Act.

 

(h)                                 Resignation as Swingline Lender after Assignment.  Notwithstanding
anything to the contrary contained herein, if at any time Citibank, N.A.
assigns all of its Commitment and Loans pursuant to subsection (b) above, Citibank,
N.A. may upon 30 days’ notice to the Borrowers, resign as Swingline
Lender.  In the event of any such
resignation as Swingline Lender, the Borrowers shall be entitled to appoint
from among the Lenders a successor Swingline Lender hereunder; provided,
however, that no failure by the Borrowers to appoint any such successor
shall affect the resignation of Citibank, N.A. as Swingline Lender, as the case
may be.  If the Citibank, N.A. resigns as
Swingline Lender, it shall retain all the rights of the Swingline Lender
provided for hereunder with respect to Swingline Loans made by it and
outstanding as of the effective date of such resignation, including the right
to require the Lenders to make Base Rate Loans, Daily Floating Eurodollar Loans
or fund risk participations in outstanding Swingline Loans.  Upon the appointment of a successor Swingline
Lender, such successor shall succeed to and become vested with all of the
rights, powers, privileges and duties of the retiring Swingline Lender, as the
case may be.

 

10.07                 Treatment of Certain Information; Confidentiality.  Each of the Administrative Agent, the Lenders and the
Issuing Bank agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its
Affiliates and to its and its Affiliates’ respective managers, administrators,
trustees, partners, directors, officers, employees, agents, advisors and other
representatives (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent
requested by any regulatory authority purporting to have jurisdiction over it
(including any self-regulatory authority, such as the National Association of
Insurance Commissioners), (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other
party hereto, (e) in connection with the exercise of any remedies
hereunder or under any other Loan Document or any action or proceeding relating
to this Agreement or any other Loan Document or the enforcement of rights
hereunder or thereunder, (f) subject to an agreement executed and
delivered to and for the benefit of the Borrowers containing provisions
substantially the same as those of this Section, to (i) any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement, (ii) any actual or prospective
party (or its managers, 

 

94

 

administrators,
trustees, partners, directors, officers, employees, agents, advisors and other
representatives) to any swap, derivative or other transaction under which
payments are to be made by reference to the Borrowers and its obligations, this
Agreement or payments hereunder, (iii) any rating agency or (iv) the
CUSIP Service Bureau or any similar organization, (g) with the consent of
the Borrowers or (h) to the extent such Information (x) becomes
publicly available other than as a result of a breach of this Section or (y) becomes
available to the Administrative Agent, any Lender, the Issuing Bank or any of
their respective Affiliates on a nonconfidential basis from a source other than
the Borrower.

 

For
purposes of this Section, “Information” means all information received
from any Borrower or any of its Subsidiaries relating to the Borrowers or any
of their Subsidiaries or any of their respective businesses, other than any
such information that is available to the Administrative Agent, any Lender or
the Issuing Bank on a nonconfidential basis prior to disclosure by any Borrower
or any of its Subsidiaries, provided that, in the case of information received
from any Borrower or any of its Subsidiaries after the date hereof, such information
is clearly identified at the time of delivery as confidential or is material
non-public information.  Any Person
required to maintain the confidentiality of Information as provided in this Section shall
be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.

 

Each
of the Administrative Agent and the Lenders acknowledges that (a) the
Information may include material non-public information concerning the
Borrowers or a Subsidiary, as the case may be, (b) it has developed
compliance procedures regarding the use of material non-public information, (c) it
will handle such material non-public information in accordance with applicable
Law, including Federal and state securities Laws and (d) the
confidentiality provisions contained herein, in so far as such provisions
relate to material proprietary Information, shall survive for 12 months following
the Maturity Date and, in so far as such provisions relate to material
non-public information, shall survive in accordance with applicable law.

 

10.08                 Right of Setoff.  If an Event of Default shall have occurred and be
continuing, each Lender and each of their respective Affiliates is hereby
authorized at any time and from time to time, after providing prior written
notice to the Administrative Agent, to the fullest extent permitted by
applicable law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final, in whatever currency) at any time held
and other obligations (in whatever currency) at any time owing by such Lender
or any such Affiliate to or for the credit or the account of the applicable
Borrower  against any and all of the
obligations of the applicable Borrower now or hereafter existing under this
Agreement or any other Loan Document to such Lender, irrespective of whether or
not such Lender shall have made any demand under this Agreement or any other
Loan Document and although such obligations of such Borrower may be contingent
or unmatured or are owed to a branch or office of such Lender different from
the branch or office holding such deposit or obligated on such indebtedness.  The rights of each Lender and their
respective Affiliates under this Section are in addition to other rights
and remedies (including other rights of setoff) that such Lender or their
respective Affiliates may have.  Each
Lender agrees to notify the Borrowers and the Administrative Agent promptly
after any such setoff and application, provided that the failure to give
such notice shall not affect the validity of such setoff and application.

 

10.09                 Interest Rate Limitation.  Notwithstanding anything to the contrary contained in any
Loan Document, the interest paid or agreed to be paid under the Loan Documents
shall not exceed the maximum rate of non-usurious interest permitted by
applicable Law (the “Maximum Rate”). 
If the Administrative Agent or any Lender shall receive interest in an
amount that exceeds the Maximum Rate, the excess interest shall be applied to
the principal of the Loans or, if it exceeds such unpaid principal, refunded to
the Borrowers.  In determining whether
the interest contracted for, charged, or received by the Administrative Agent
or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted 

 

95

 

by
applicable Law, (a) characterize any payment that is not principal as an
expense, fee, or premium rather than interest, (b) exclude voluntary
prepayments and the effects thereof, and (c) amortize, prorate, allocate,
and spread in equal or unequal parts the total amount of interest throughout
the contemplated term of the Obligations hereunder.

 

10.10                 Counterparts; Integration; Effectiveness.  This Agreement may be executed in counterparts (and by
different parties hereto in different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract.  This Agreement and the
other Loan Documents constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof.  Except as provided in Section 4.01,
this Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof that, when taken together, bear the signatures of each of
the other parties hereto.  Delivery of an
executed counterpart of a signature page of this Agreement by telecopy
shall be effective as delivery of a manually executed counterpart of this
Agreement.

 

10.11                 Survival of Representations and Warranties.  All representations and warranties made hereunder and in any
other Loan Document or other document delivered pursuant hereto or thereto or
in connection herewith or therewith shall survive the execution and delivery
hereof and thereof.  Such representations
and warranties have been or will be relied upon by the Administrative Agent and
each Lender, regardless of any investigation made by the Administrative Agent
or any Lender or on their behalf and notwithstanding that the Administrative
Agent or any Lender may have had notice or knowledge of any Default at the time
of any Borrowing, and shall continue in full force and effect as long as any
Loan or any other Obligation hereunder shall remain unpaid or unsatisfied.

 

10.12                 Severability.  If any provision of this Agreement or the other Loan
Documents is held to be illegal, invalid or unenforceable, (a) the
legality, validity and enforceability of the remaining provisions of this
Agreement and the other Loan Documents shall not be affected or impaired
thereby and (b) the parties shall endeavor in good faith negotiations to
replace the illegal, invalid or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the illegal,
invalid or unenforceable provisions.  The
invalidity of a provision in a particular jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

 

10.13                 Replacement of Lenders.  If
any Lender requests compensation under Section 3.04, or if any
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.01,
if any Lender gives a notice pursuant to Section 3.02 or if any
Lender is a Defaulting Lender or if any other circumstance exists hereunder
that gives any Borrower the right to replace a Lender as a party hereto, then
such Borrower may, at its sole expense and effort, upon notice to such Lender
and the Administrative Agent, require such Lender to assign and delegate,
without recourse (in accordance with and subject to the restrictions contained
in, and consents required by, Section 10.06), all of its interests,
rights and obligations under this Agreement and the related Loan Documents to
an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment), provided that:

 

(b)                                 such Lender shall have received payment of an amount equal
to the outstanding principal of its Loans, accrued interest thereon, accrued
fees and all other amounts payable to it hereunder and under the other Loan
Documents (including any amounts under Section 3.05) from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Borrowers (in the case of all other amounts);

 

96

 

(c)                                  in the case of any such assignment resulting from a claim
for compensation under Section 3.04 or payments required to be made
pursuant to Section 3.01, such assignment will result in a
reduction in such compensation or payments thereafter;

 

(d)                                 such assignment does not conflict with applicable Laws; and

 

(e)                                  such assignment is made in accordance with Section 10.06(b)(iii)(B).

 

(f)                                    A Lender shall not be required to make any such assignment
or delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrowers to require such assignment
and delegation cease to apply.

 

10.14                 Governing Law; Jurisdiction; Etc.

 

(a)                                  GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CHOICE OF LAW PROVISIONS THEREOF OTHER THAN SECTION 5-1401 OF THE
NEW YORK GENERAL OBLIGATIONS LAW.

 

(b)                                 SUBMISSION TO JURISDICTION.  EACH OF THE BORROWERS IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY
AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK,
AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY
AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW.  NOTHING IN THIS
AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE
ADMINISTRATIVE AGENT OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY
BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

NOTWITHSTANDING
ANYTHING ABOVE IN THIS CLAUSE (B), THE ADMINISTRATIVE AGENT RESERVES FOR ITSELF
THE RIGHT TO PURSUE ENFORCEMENT OF ITS RIGHTS AGAINST ANY NON-US BORROWER
OUTSIDE OF NEW YORK (INCLUDING IN THE COUNTRY OF INCORPORATION OF SUCH NON-US
BORROWER) AND ANY NON-US BORROWER IRREVOCABLY AND UNCONDITIONALLY AGREES THAT
NEW YORK SHALL BE ITS EXCLUSIVE FORUM FOR INITIATING ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.

 

(c)                                  WAIVER OF VENUE.  EACH OF THE BORROWERS IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS 

 

97

 

AGREEMENT
OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF
THIS SECTION.  EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT.

 

(d)                                 SERVICE OF PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02.  NOTHING IN THIS AGREEMENT WILL AFFECT THE
RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
APPLICABLE LAW.

 

(e)                                  WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY).  EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT
IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.

 

10.15                 No Advisory or Fiduciary Responsibility.  In connection with all aspects of each transaction
contemplated hereby, each of the Borrowers acknowledges and agrees, and
acknowledges its Affiliates’ understanding, that: (i) the credit facility
provided for hereunder and any related arranging or other services in
connection therewith (including in connection with any amendment, waiver or
other modification hereof or of any other Loan Document) are an arm’s-length
commercial transaction between the Borrowers and their respective Affiliates,
on the one hand, and the Administrative Agent and the Arranger, on the other
hand, and each of the Borrowers is capable of evaluating and understanding and
understands and accepts the terms, risks and conditions of the transactions
contemplated hereby and by the other Loan Documents (including any amendment,
waiver or other modification hereof or thereof); (ii) in connection with
the process leading to such transaction, the Administrative Agent and the
Arranger each is and has been acting solely as a principal and is not the
financial advisor, agent or fiduciary, for the Borrowers or any of their
respective Affiliates, stockholders, creditors or employees or any other
Person; (iii) neither the Administrative Agent nor the Arranger has
assumed or will assume an advisory, agency or fiduciary responsibility in favor
of the Borrowers with respect to any of the transactions contemplated hereby or
the process leading thereto, including with respect to any amendment, waiver or
other modification hereof or of any other Loan Document (irrespective of
whether the Administrative Agent or the Arranger has advised or is currently
advising the Borrowers or any of their respective Affiliates on other matters)
and neither the Administrative Agent nor the Arranger has any obligation to the
Borrowers  or any of their respective
Affiliates with respect to the transactions contemplated hereby except those
obligations expressly set forth herein and in the other Loan Documents; (iv) the
Administrative Agent and the Arranger and their respective Affiliates may be
engaged in a broad range of transactions that involve interests that differ
from those of the Borrowers and their respective Affiliates, and neither the
Administrative Agent nor the Arranger has any obligation to disclose any of
such interests by virtue of any advisory, agency or fiduciary relationship; and
(v) the Administrative Agent and the Arranger have not provided and will
not provide any legal, accounting, regulatory or tax advice with respect to any
of the transactions contemplated hereby (including any amendment, waiver or
other modification hereof or of any other Loan Document) and each of the
Borrowers has consulted its own legal, accounting, 

 

98

 

regulatory
and tax advisors to the extent it has deemed appropriate.  Each of the Borrowers hereby waives and
releases, to the fullest extent permitted by law, any claims that it may have
against the Administrative Agent and the Arranger with respect to any breach or
alleged breach of agency or fiduciary duty.

 

10.16                 U.S. PATRIOT Act Notice.  Each Lender that is subject to the Patriot Act (as
hereinafter defined) and the Administrative Agent (for itself and not on behalf
of any Lender) hereby notifies the Borrowers that pursuant to the requirements
of the U.S. Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Patriot Act”), it is required to obtain, verify and record
information that identifies the Borrowers, which information includes the name
and address of the Borrowers and other information that will allow such Lender
or the Administrative Agent, as applicable, to identify the Borrowers in
accordance with the Patriot Act.

 

10.17                 Entire Agreement.  This Agreement and the other Loan Documents represent the
final agreement among the parties and may not be contradicted by evidence of
prior, contemporaneous, or subsequent oral agreements of the parties.  There are no unwritten oral agreements among
the parties.

 

10.18                 Judgment Currency.  (a) A Borrower’s obligation hereunder and under
the other Loan Documents to make payments in the applicable Approved Currency
(pursuant to such obligation, the “Obligation Currency”) shall not be
discharged or satisfied by any tender or recovery pursuant to any judgment
expressed in or converted into any currency other than the Obligation Currency,
except to the extent that such tender or recovery results in the effective
receipt by the Administrative Agent or the respective Lender of the full amount
of the Obligation Currency expressed to be payable to the Administrative Agent
or such Lender under this Agreement or the other Loan Documents.  If, for the purpose of obtaining or enforcing
judgment against a Borrower in any court or in any jurisdiction, it becomes
necessary to convert into or from any currency other than the Obligation
Currency (such other currency being hereinafter referred to as the “Judgment
Currency”) an amount due in the Obligation Currency, the conversion shall
be made at the Relevant Currency Equivalent, and in the case of other
currencies, the rate of exchange (as quoted by the Administrative Agent or if
the Administrative Agent does not quote a rate of exchange on such currency, by
a known dealer in such currency designated by the Administrative Agent)
determined, in each case, as of the Business Day immediately preceding the day
on which the judgment is given (such Business Day being hereinafter referred to
as the “Judgment Currency Conversion Date”).

 

(b)                                 If there is a change in the rate of exchange prevailing
between the Judgment Currency Conversion Date and the date of actual payment of
the amount due, Borrower covenants and agrees to pay, or cause to be paid, such
additional amounts, if any (but in any event not a lesser amount) as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the rate of exchange prevailing on the date of payment, will
produce the amount of the Obligation Currency which could have been purchased
with the amount of Judgment Currency stipulated in the judgment or judicial
award at the rate of exchange prevailing on the Judgment Currency Conversion
Date.

 

(c)                                  For purposes of determining the Relevant Currency Equivalent
or any other rate of exchange for this Section 10.18, such amounts shall
include any premium and costs payable in connection with the purchase of the
Obligation Currency.

 

[Remainder of page intentionally left blank;
signature pages follow]

 

99

 

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

 

 

	
   

  	
   

  	
  KKR
  FINANCIAL HOLDINGS LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:
  Michael McFerran

  
	
   

  	
   

  	
   

  	
  Title:COO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  KKR
  FINANCIAL HOLDINGS II, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:
  Michael McFerran

  
	
   

  	
   

  	
   

  	
  Title:COO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  KKR
  FINANCIAL HOLDINGS III, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:
  Michael McFerran

  
	
   

  	
   

  	
   

  	
  Title:COO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  KKR
  FINANCIAL HOLDINGS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:
  Michael McFerran

  
	
   

  	
   

  	
   

  	
  Title:COO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  KKR
  FINANCIAL CLO 2009-1, LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:
  Michael McFerran

  
	
   

  	
   

  	
   

  	
  Title:COO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  KFH
  III HOLDINGS LTD.

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:
  Michael McFerran

  
	
   

  	
   

  	
   

  	
  Title:COO

  

 

 

	
   

  	
   

  	
  KKR
  FINANCIAL HOLDINGS, LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:
  George Bashforth

  
	
   

  	
   

  	
   

  	
  Title:Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  KKR
  TRS HOLDINGS, LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:
  George Bashforth

  
	
   

  	
   

  	
   

  	
  Title:Director

  

 

 

	
   

  	
   

  	
  CITIBANK, N.A.,

  as Administrative Agent as Swingline Lender, as Issuing Bank and as Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:
  Alexander F. Duka

  
	
   

  	
   

  	
   

  	
  Title:Managing
  Director/Senior Credit Officer

  

 

 

	
   

  	
   

  	
  BANK OF AMERICA, N.A.,

  as Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:
  Laura Warner

  
	
   

  	
   

  	
   

  	
  Title:
  Vice President

  

 

 

	
   

  	
   

  	
  DEUTSCHE BANK AG NEW YORK
  BRANCH,

  as Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:
  Evelyn Thierry

  
	
   

  	
   

  	
   

  	
  Title:Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:
  Omayra Laucella

  
	
   

  	
   

  	
   

  	
  Title:Vice
  President

  

 

 

	
   

  	
   

  	
  MORGAN STANLEY BANK, N.A.,

  as Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:
  Ryan Vetsch

  
	
   

  	
   

  	
   

  	
  Title:   Authorized Signatory

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