Document:

Exhibit 10.12

 

EXECUTION COPY

 

STRIP COVERAGE LIQUIDITY 

AND SECURITY AGREEMENT

 

between

 

FINANCIAL SECURITY ASSURANCE INC.,

AS BORROWER,

 

and

 

DEXIA CRÉDIT LOCAL S.A., ACTING THROUGH ITS NEW YORK
BRANCH,

AS LENDER

 

 

Dated as of July 1, 2009

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 1.

  	
  DEFINITIONS AND PRINCIPLES OF CONSTRUCTION

  	
  1

  
	
  1.01

  	
  Defined
  Terms

  	
  1

  
	
  1.02

  	
  Principles
  of Construction

  	
  11

  
	
  SECTION 2.

  	
  AMOUNT AND TERMS OF CREDIT

  	
  11

  
	
  2.01

  	
  The
  Loans

  	
  11

  
	
  2.02

  	
  Amount
  of Each Borrowing

  	
  12

  
	
  2.03

  	
  Notice
  of Borrowing

  	
  12

  
	
  2.04

  	
  Disbursement
  of Funds

  	
  12

  
	
  2.05

  	
  Note

  	
  12

  
	
  2.06

  	
  Reserved

  	
  13

  
	
  2.07

  	
  Interest

  	
  13

  
	
  2.08

  	
  Change
  of Office

  	
  13

  
	
  2.09

  	
  Strip
  Policies

  	
  14

  
	
  SECTION 3.

  	
  COMMISSIONS; FEES; REDUCTIONS OF COMMITMENT

  	
  14

  
	
  3.01

  	
  Fees

  	
  14

  
	
  3.02

  	
  Voluntary
  Reduction of Commitment

  	
  14

  
	
  3.03

  	
  Mandatory
  Reduction of Commitments

  	
  14

  
	
  SECTION 4.

  	
  PREPAYMENTS; PAYMENTS

  	
  15

  
	
  4.01

  	
  Voluntary
  Prepayments

  	
  15

  
	
  4.02

  	
  Mandatory
  Payments

  	
  15

  
	
  4.03

  	
  Method
  and Place of Payment

  	
  16

  
	
  4.04

  	
  Net
  Payments

  	
  16

  
	
  SECTION 5.

  	
  CONDITIONS PRECEDENT TO EFFECTIVENESS

  	
  18

  
	
  5.01

  	
  Execution
  of Agreement

  	
  18

  
	
  5.02

  	
  Closing

  	
  18

  
	
  5.03

  	
  Note

  	
  18

  
	
  SECTION 6.

  	
  CONDITIONS PRECEDENT TO ALL CREDIT EVENTS

  	
  19

  
	
  6.01

  	
  Effectiveness

  	
  19

  
	
  6.02

  	
  No
  Default. No Default or Event of Default shall have occurred and be continuing
  on the date of such Credit Event

  	
  19

  
	
  6.03

  	
  Representations
  and Warranties

  	
  19

  

 

i

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  6.04

  	
  Covenants

  	
  19

  
	
  6.05

  	
  Judgments

  	
  19

  
	
  6.06

  	
  Borrower
  Change of Control

  	
  19

  
	
  6.07

  	
  Notice
  of Borrowing

  	
  19

  
	
  SECTION 7.

  	
  REPRESENTATIONS, WARRANTIES AND AGREEMENTS

  	
  20

  
	
  7.01

  	
  Corporate
  Status

  	
  20

  
	
  7.02

  	
  Corporate
  Power and Authority

  	
  20

  
	
  7.03

  	
  No
  Violation

  	
  20

  
	
  7.04

  	
  Governmental
  Approvals

  	
  21

  
	
  7.05

  	
  Litigation

  	
  21

  
	
  7.06

  	
  Use
  of Proceeds; Margin Regulations

  	
  21

  
	
  7.07

  	
  Tax
  Returns and Payments

  	
  21

  
	
  7.08

  	
  Financial
  Statements; Financial Condition; Undisclosed Liabilities; etc.

  	
  22

  
	
  7.09

  	
  Compliance
  with Statutes, etc.

  	
  22

  
	
  SECTION 8.

  	
  AFFIRMATIVE COVENANTS

  	
  22

  
	
  8.01

  	
  Information
  Covenants

  	
  22

  
	
  8.02

  	
  Books,
  Records and Inspections

  	
  23

  
	
  8.03

  	
  Reserved

  	
  23

  
	
  8.04

  	
  Compliance
  with Statutes, etc.

  	
  24

  
	
  8.05

  	
  Reserved

  	
  24

  
	
  8.06

  	
  Payment
  of Taxes

  	
  24

  
	
  8.07

  	
  Use
  of Proceeds

  	
  24

  
	
  8.08

  	
  Strip
  Policies

  	
  24

  
	
  8.09

  	
  Collection
  of Recoveries

  	
  24

  
	
  8.10

  	
  Business

  	
  25

  
	
  SECTION 9.

  	
  NEGATIVE COVENANTS

  	
  25

  
	
  9.01

  	
  Consolidation,
  Merger, Sale of Assets, etc.

  	
  25

  
	
  9.02

  	
  Dividends

  	
  25

  
	
  9.03

  	
  Debt
  to Total Capitalization Ratio

  	
  26

  
	
  9.04

  	
  Minimum
  Net Worth

  	
  26

  

 

ii

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  9.05

  	
  Liens

  	
  26

  
	
  SECTION 10.

  	
  EVENTS OF DEFAULT

  	
  26

  
	
  10.01

  	
  Payments

  	
  26

  
	
  10.02

  	
  Bankruptcy,
  etc.

  	
  27

  
	
  10.03

  	
  Default
  Under Other Agreements

  	
  27

  
	
  SECTION 11.

  	
  RESERVED

  	
  28

  
	
  SECTION 12.

  	
   

  	
  28

  
	
  12.01

  	
  Grant
  of Security Interest

  	
  28

  
	
  12.02

  	
  Perfection
  of Security Interests

  	
  29

  
	
  12.03

  	
  Certain
  Remedies

  	
  29

  
	
  12.04

  	
  Release
  of Security Interest; Removal from Schedule II

  	
  30

  
	
  12.05

  	
  Savings
  Clause

  	
  30

  
	
  SECTION 13.

  	
  MISCELLANEOUS

  	
  31

  
	
  13.01

  	
  Payment
  of Expenses, etc.

  	
  31

  
	
  13.02

  	
  Transaction
  Agreement

  	
  31

  
	
  13.03

  	
  Notices

  	
  31

  
	
  13.04

  	
  Benefit
  of Agreement

  	
  31

  
	
  13.05

  	
  No
  Waiver; Remedies Cumulative

  	
  32

  
	
  13.06

  	
  Calculations;
  Computations

  	
  32

  
	
  13.07

  	
  Governing
  Law; Submission to Jurisdiction; Venue

  	
  33

  
	
  13.08

  	
  Obligation
  to Make Payments in Dollars

  	
  33

  
	
  13.09

  	
  Counterparts

  	
  33

  
	
  13.10

  	
  Effectiveness

  	
  34

  
	
  13.11

  	
  Table
  of Contents and Headings Descriptive

  	
  34

  
	
  13.12

  	
  Amendment
  or Waiver

  	
  34

  
	
  13.13

  	
  SOVEREIGN
  IMMUNITY

  	
  34

  
	
  13.14

  	
  WAIVER
  OF JURY TRIAL

  	
  34

  
	
  13.15

  	
  Survival

  	
  34

  
	
  13.16

  	
  Confidentiality

  	
  34

  

 

iii

 

SCHEDULE I Office

SCHEDULE II Strip Policies

SCHEDULE III Facility
Commitment Schedule

 

EXHIBIT A Notice of Borrowing

EXHIBIT B Form of Note

EXHIBIT C Officer’s
Certificate

 

iv

 

STRIP COVERAGE LIQUIDITY AND
SECURITY AGREEMENT, dated as of July 1, 2009, between FINANCIAL SECURITY
ASSURANCE INC., a New York corporation (“FSA” or the “Borrower”)
and DEXIA CRÉDIT LOCAL S.A., a French share company licensed as a bank under
French law, acting through its New York branch (“DCL” or the “Lender”).

 

W I T N E S S E T H:

 

WHEREAS, Dexia Holdings
Inc., in its capacity as “Seller” thereunder (the “Seller”), DCL, in its
capacity as “Seller’s Parent” thereunder, and Assured Guaranty Ltd., a Bermuda
company (“Assured”), in its capacity as “Buyer” thereunder (the “Buyer”),
entered into that certain Purchase Agreement, dated as of November 14,
2008 (as amended on or prior to the Closing Date, the “Purchase Agreement”);

 

WHEREAS, Section 6.13(e) of
the Purchase Agreement provides that, upon the closing of the transactions
contemplated in the Purchase Agreement and in consideration of the assumption
by the Buyer of the Leveraged Tax Lease Business (as such term is defined in
the Purchase Agreement), the Lender and the Borrower shall enter into a
liquidity facility for the purpose of covering liquidity risk arising out of
the “strip coverages” identified in FSA’s Quarterly Report on Form 10-Q
filed with the SEC for the fiscal quarter ended September 30, 2008; and

 

WHEREAS, subject to and upon
the terms and conditions herein set forth, the Lender is willing to make
available to the Borrower the liquidity facility provided for herein.

 

NOW, THEREFORE, in
consideration of the foregoing, the parties hereto covenant and agree as
follows:

 

SECTION 1.

 

DEFINITIONS AND PRINCIPLES OF CONSTRUCTION.

 

1.01         Defined Terms. Capitalized terms used herein but not defined herein
shall have the meaning specified in the Separation Agreement. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):

 

“Affected Collateral”
shall mean (a) with respect to any Event of Default under Section 10.01
with respect to a Loan, the Collateral securing such Loan or (b) with
respect to any Event of Default under Sections 10.02 or 10.03, all
Collateral.

 

“Affiliate” shall
mean, with respect to any Person, any other Person (other than an individual)
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. A Person shall be deemed to control another
Person if such Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of such other Person,
whether through the ownership of voting securities, by contract or otherwise.

 

 

“Agreement” shall
mean this Strip Coverage Liquidity and Security Agreement, as modified,
supplemented or amended from time to time.

 

“Agreement Default”
shall have the meaning provided in clause (b) of the final
paragraph of Section 10.

 

“Alternative Rating Agency
Condition” shall mean, with respect to any Person and with respect to any
event or circumstance, that:

 

(a)           such Person has used
commercially reasonable efforts to cause the applicable Rating Agency to
provide a written confirmation that the occurrence of such event or
circumstance will not cause such Rating Agency to downgrade or withdraw its
Rating assigned to such Person;

 

(b)           such Rating Agency has
indicated to DCL and FSA, orally or in writing that, as a matter of policy,
such Rating Agency will not issue the written confirmation referred to in clause
(a) above;

 

(c)           such Person has provided
such Rating Agency with the documents and other information as such Rating
Agency requests in order for such Rating Agency to evaluate the effect of such
event or circumstance on the Rating of such Person;

 

(d)           more than 30 Business Days
have elapsed since the date on which all such documents and information have
been provided to such Rating Agency; and

 

(e)           during such 30-Business Day
period, such Rating Agency has not (i) downgraded or withdrawn the Rating
of such Person as a result of such event or circumstances or (ii) indicated
to DCL and FSA that such event or circumstance would have negative implications
for its Rating of such Person.

 

Notwithstanding the foregoing,
(a) the Alternative Rating Agency Condition will not apply to FSA if (x) FSA
requests that DCL waive the Alternative Rating Agency Condition and (y) DCL
consents to such waiver (with such consent not to be unreasonably withheld) and
(b) the Alternative Rating Agency Condition will not apply to DCL if (x) DCL
requests that FSA waive the Alternative Rating Agency Condition and (y) FSA
consents to such waiver (with such consent not to be unreasonably withheld).

 

“Assured” shall have
the meaning provided in the first recital of this Agreement.

 

“Bankruptcy Code”
shall have the meaning provided in Section 10.02.

 

“Base Consolidated Net
Worth” means an amount equal to 75% of the Consolidated Net Worth as of the
Financial Cutoff Date.

 

“Borrower”
shall have the meaning provided in the first paragraph of this
Agreement, and shall also mean each successor and assign and purchaser of
substantially all of the assets thereof that has assumed the obligations of the
Borrower hereunder in accordance with the terms of this Agreement.

 

2

 

“Borrower Change of
Control” shall mean and include the occurrence of any of the following
events: any Person, entity or “group” (within the meaning of Section 13(d) or
14(d) of the Securities Exchange Act of 1934), other than Assured or one
of its Affiliates, individually or taken as a whole, (a) shall have
acquired beneficial ownership of 50% or more of any outstanding class of
capital stock of the Borrower having ordinary voting power in the election of
directors or (b) shall have obtained the power (whether or not exercised)
to elect the majority of the Board of Directors of the Borrower; provided
that this definition of “Borrower Change of Control” shall exclude any Borrower
Change of Control that would otherwise result from a transaction permitted by Section 9.01.

 

“Borrowing” shall
mean the borrowing of a Loan from the Lender to fund a Strip Policy Claim on a
given date.

 

“Borrowing Date”
shall mean any date on which a Borrowing occurs.

 

“Business Day” shall
mean any day except Saturday, Sunday and any day which shall be in New York
City a legal holiday or a day on which banking institutions are authorized or
required by law or other government action to close.

 

“Buyer” shall have
the meaning provided in the first recital of this Agreement.

 

“Code” shall mean the
Internal Revenue Code of 1986, as amended from time to time, and the
regulations promulgated and rulings issued thereunder. Section references
to the Code are to the Code, as in effect at the date of this Agreement and any
subsequent provisions of the Code, amendatory thereof, supplemental thereto or
substituted therefor.

 

“Collateral” shall
have the meaning set forth in Section 12.01.

 

“Commitment” shall
mean the Lender’s commitment under Section 2.01 to make Loans to
the Borrower in accordance with the terms and subject to the conditions of this
Agreement in an aggregate principal amount not to exceed the Commitment Amount
as of such date.

 

“Commitment Amount”
shall mean $1,000,000,000, as such amount may be reduced from time to time
pursuant to Section 3.02, 3.03 or 10.

 

“Commitment Commission”
shall have the meaning provided in Section 3.01(a).

 

“Commitment Commission
Percentage” shall have the meaning provided in Section 3.01(a).

 

“Commitment Termination
Date” shall mean the earliest of (a) the date a Borrower Change of
Control occurs, (b) the date the Commitment Amount is reduced to zero in
accordance with Section 3.02, 3.03 or 10 and (c) January 31,
2042.

 

“Consolidated
Long Term Debt” shall mean, on any date of determination, the total
Indebtedness of the Borrower and its Consolidated Subsidiaries having a
maturity of one year or more from the date of its creation, and shown or
reflected as “long-term indebtedness” on the consolidated balance sheet of the
Borrower as of the most recent fiscal quarter end immediately 

 

3

 

preceding
such date of determination for which consolidated financial statements of the
Borrower have been issued, and determined in accordance with GAAP; provided
that “Consolidated Long Term Debt” shall not include (a) any Indebtedness
of or related to each variable interest entity that the Borrower and its
Consolidated Subsidiaries are required to consolidate (including, without
limitation, pursuant to FASB Interpretation No. 46R — Consolidation of
Variable Interest Entities: an interpretation of ARB No. 51 (December 2003)
(or any amendment, supplement or restatement thereof)), (b) any
Indebtedness of the Borrower and its Consolidated Subsidiaries under the
Existing Soft Capital Facility or any other Soft Capital Indebtedness, (c) any
Indebtedness of the Borrower and its Consolidated Subsidiaries existing on the
Effective Date (and any and all refinancings thereof) and (d) any of the
Obligations.

 

“Consolidated
Net Income (or Loss)” shall mean, for any period, the net income (or loss)
of the Borrower and its Consolidated Subsidiaries on a consolidated basis in
each case shown for such period as shown on the consolidated financial
statements of the Borrower and determined in accordance with GAAP; provided
the effect of any and all accumulated other comprehensive income and losses and
all Unrealized Gains and Losses shall be excluded from the definition of Consolidated
Net Income (or Loss).

 

“Consolidated Net Worth”
shall mean, on any date of determination, (a) the total consolidated
stockholders’ equity of the Borrower and its Consolidated Subsidiaries plus
(b) amounts classified as “Preferred Stock of Subsidiary,” or minority
interest, in each case as shown or reflected on the consolidated balance sheet
of the Borrower as of the most recent fiscal quarter ending on or immediately
preceding such date of determination for which consolidated financial
statements of the Borrower have been issued, and determined in accordance with
GAAP plus (c), to the extent deducted in computing the total
consolidated stockholders’ equity of the Borrower and its Consolidated
Subsidiaries, any losses, reserves or other liabilities which the Borrower
reflects in its financial statements on account of losses, loss adjustment
expenses or expected losses relating to the Medium Term Note Business (as
defined in the Purchase Agreement); provided (x) the effect of any
and all accumulated other comprehensive income and losses shall be excluded
from the definition of Consolidated Net Worth and (y) for all purposes,
other than calculation of Consolidated Net Worth on the Financial Cutoff Date,
the effect of any and all Unrealized Gains and Losses shall be excluded from
the definition of Consolidated Net Worth.

 

“Consolidated
Subsidiaries” shall mean, as to any Person, all Subsidiaries of such Person
which are consolidated with such Person for financial reporting purposes in
accordance with GAAP.

 

“Contingent Obligation”
shall mean, as to any Person, any payment obligation of such Person
guaranteeing or intended to guarantee any Indebtedness, leases or other
obligations (“primary obligations”) of any other Person other than a
Consolidated Subsidiary (the “primary obligor”) in any manner, whether
directly or indirectly, including, without limitation and without duplication,
any obligation of such Person, whether or not contingent, (i) to purchase
any such primary obligation or any property constituting direct or indirect
security therefor, (ii) to advance or supply funds (a) for the
purchase or payment of any such primary obligation or (b) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the 

 

4

 

purpose
of assuring the holder of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (iv) otherwise
to assure or hold harmless the holder of such primary obligation against loss
in respect thereof; provided that the term Contingent Obligation shall
not include (1) endorsements of instruments for deposit or collection in
the ordinary course of business or (2) obligations under or created by or
in connection with insurance contracts, credit default swaps or similar
arrangements entered into in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform thereunder) as determined by such Person in good
faith.

 

“Credit Documents”
shall mean this Agreement and each Note.

 

“Credit Event” shall
mean the making of any Loan.

 

“Cure Period” means,
with respect to a payment default under Section 10.01, five
Business Days following receipt by the Borrower of written notice from the
Lender of such default (or, in the case of any nonpayment resulting from an
administrative or operational error or omission or a force majeure, eight
Business Days following the Borrower’s receipt of notice of such default; provided,
however, that the Borrower has provided notice to the Lender no later
than the third Business Day after receipt of such notice of default that such nonpayment
has occurred due to administrative or operational error or omission or a force
majeure).

 

“DCL” shall have the
meaning provided in the first paragraph of this Agreement.

 

“Default” shall mean
any event, act or condition which with notice or lapse of time, or both, would
constitute an Event of Default.

 

“Direct Payment”
shall mean with respect to any Borrowing, a payment in immediately available
funds directly to the account into which the Borrower is required to make
payments under the Strip Policy related to such Borrowing.

 

“Dollars” and the
sign “$” shall each mean freely transferable lawful money of the United States.

 

“Effective Date”
shall mean the date first written above.

 

“EMMA” shall mean the
Electronic Municipal Market Access system.

 

“Event of Default”
shall have the meaning provided in Section 10.

 

“Existing Soft Capital
Facility” shall mean the $350,000,000 soft capital facility provided
pursuant to the Third Amended and Restated Credit Agreement, dated as of April 30,
2005, among FSA, FSA OK, various banks and Bayerische Landesbank acting through
its New York Branch individually and as Agent, as amended, supplemented or
otherwise modified from time to time.

 

5

 

“Fees” shall mean all
amounts payable pursuant to or referred to in Section 3.01.

 

“Financial Cutoff Date”
means the last day of the fiscal quarter immediately prior to the Effective
Date; provided, however, that if the Effective Date occurs on the last day of a
fiscal quarter, then the “Financial Cutoff Date” shall be the Effective Date.

 

“Fitch” means Fitch, Inc.

 

“FSA” shall have the
meaning provided in the first paragraph of this Agreement, and each successor
and assign thereof.

 

“FSA OK” shall mean
FSA Insurance Company, a corporation organized under the laws of Oklahoma.

 

“FSA UK” shall mean
Financial Security Assurance (U.K.) Limited.

 

“GAAP” shall mean
generally accepted accounting principles 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; provided that if the Borrower adopts the use of IFRS, for
financial reporting purposes, then references to GAAP shall be deemed to mean IFRS.

 

“Hedging Agreement”
shall mean any financial futures contracts, agreement to purchase and sell (or
write) exchange listed or over-the-counter put and call options on securities,
fixed income indices, foreign exchange contracts, currency swap agreements,
mortgage swap agreements, agreements to purchase securities on a when issued or
delayed delivery basis, short sales of U.S. governmental securities and
financial futures contracts reasonably established by a Person to have been
entered into for hedging, duration management and/or risk management purposes.

 

“IFRS” means the
International Financial Reporting Standards adopted by the International
Accounting Standards Board.

 

“Indebtedness” shall
mean, as to any Person, without duplication, (i) all indebtedness
(including principal, interest, fees and charges) of such Person for borrowed
money or for the deferred purchase price of property or services, (ii) the
amount available to be drawn under all letters of credit issued for the account
of such Person and all drafts drawn and unreimbursed thereunder, (iii) all
indebtedness secured by any Lien on any property owned by such Person, whether
or not such indebtedness has been assumed by such Person, (iv) the
aggregate amount required to be capitalized under leases under which such
Person is the lessee and (v) all Contingent Obligations of such Person; provided
that, the term Indebtedness with respect to any Person shall not include (a) any
indebtedness of a Person that is not required to be classified as indebtedness
on such Person’s balance sheet in accordance with GAAP, (b) intercompany
indebtedness, and (c) indebtedness constituting the purchase price of
goods used in the ordinary course of business.

 

6

 

“Initial Supplemental
Calculation Date” means the fifth anniversary of the Financial Cutoff Date.

 

“Interest
Rate” shall mean, for each Loan, the lesser of (a) the stated rate per
annum to be charged to lessees or sub-lessees by the Borrower in connection with
the related Strip Policy associated with such Loan for claims paid by (or on
behalf of) the Borrower under such Strip Policy (without giving effect to any reduction by the Borrower of such stated rate
after the Effective Date) and (b) the maximum rate permissible
under applicable usury or similar laws limiting interest rates.  The same day counting convention applied in
determining the interest rate charged to lessees or sub-lessees, as the case
may be, will also apply in calculating the Interest Rate for purposes of this
Agreement.

 

“Lender” shall have
the meaning provided in the first paragraph of this Agreement, and shall
also include each transferee and assignee thereof that has assumed the
obligations of the Lender hereunder in accordance with the terms of this
Agreement.

 

“Lien” shall mean any
mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or other), preference, priority or other security agreement of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any financing or similar statement or
notice filed under the Uniform Commercial Code of any jurisdiction or any other
similar recording or notice statute, and any lease having substantially the
same effect as any of the foregoing), but shall expressly exclude any Hedging
Agreement or Repurchase Agreement.

 

“Loan Maturity Date”
shall mean, with respect to each Loan, the second anniversary of the date of
the Borrowing of such Loan.

 

“Loans” shall have
the meaning set forth in Section 2.01.

 

“Margin Stock” shall
have the meaning provided in Regulations T, U and X of the Board of Governors
of the Federal Reserve System.

 

“Material Subsidiaries”
shall mean each of FSA UK and FSA OK, and for the avoidance of doubt, “Material
Subsidiaries” shall not mean or include any successor (by merger, consolidation
or otherwise) or assign of FSA UK or FSA OK, any of their respective
Subsidiaries or any other Subsidiary of the Borrower.

 

“Moody’s” shall mean
Moody’s Investors Service, Inc.

 

“Non-Excluded Taxes” shall mean any Taxes other than Taxes
imposed on the Lender (i) by
any governmental authority under the laws of which the Lender, as applicable,
is organized or in which it maintains its applicable lending office, or (ii) as a result of any present or former connection between the
Lender and the relevant taxing jurisdiction other than any such connection
arising solely  as a result of the Lender having
executed, delivered or performed its obligations or received a payment under,
or enforced, this Agreement.

 

“Note”
shall have the meaning provided in Section 2.05(a).

 

7

 

“Notice of Borrowing”
shall have the meaning provided in Section 2.03.

 

“Notice of Claim”
shall have the meaning provided in Section 2.01.

 

“Obligations” shall
mean all amounts owing to the Lender pursuant to the terms of this Agreement or
any other Credit Document.

 

“Office” shall mean
the office of the Lender and the Borrower as set forth on Schedule I
hereto, or such other office as the related Person may hereafter designate in
writing to the other party hereto.

 

“Other Taxes” shall
have the meaning provided in Section 4.04(b).

 

“Person” shall mean
any individual, partnership, joint venture, firm, corporation, limited
liability company, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.

 

“Pledge and
Administration Agreement” shall have the meaning provided in the Separation
Agreement.

 

“Purchase Agreement”
shall have the meaning provided in the first recital of this Agreement.

 

“Rating” shall mean,
with respect to any Person and any date of determination, either (a) the
claims-paying ability, insured financial strength or insurer financial strength
rating given by a Rating Agency with respect to such Person on and as of such
date, if such Person is an insurance company, or (b) the long-term
unsecured debt rating given by a Rating Agency with respect to such Person on
and as of such date, if such Person is not an insurance company, as applicable.

 

“Rating Agency” shall
mean any of Moody’s, Fitch or S&P.

 

“Rating Agency Condition”
means, with respect to any Person and with respect to any event or
circumstance, (a) written confirmation by each Rating Agency that the
occurrence of such event or circumstance will not cause such Rating Agency to
downgrade or withdraw its Rating assigned to such Person or (b) (i) written
confirmation by two Rating Agencies that the occurrence of such event or
circumstance will not cause such Rating Agencies to downgrade or withdraw their
respective Ratings assigned to such Person and (ii) with respect to the
remaining Rating Agency, satisfaction of the Alternative Rating Agency
Condition with respect to such Person. Notwithstanding the foregoing, the
Rating Agency Condition with respect to any event or circumstance shall not be
satisfied in the event that any Rating Agency indicates in writing that such
event or circumstance would adversely affect its Ratings of, or its outlook on
its Ratings of, such Person.

 

“Ratings
Event” means, with respect to the Borrower and any date of determination,
that the Rating of the Borrower is reduced on or as of such date to below
Investment Grade by two or more Rating Agencies. As used herein, the term “Investment
Grade”means “BBB-” by S&P, “Baa3” by Moody’s and “BBB-” by Fitch.

 

8

 

“Recoveries”
shall mean, with respect to any Strip Policy Claim in respect of which a
Borrowing has been made hereunder, the Borrower’s right to repayment of any and
all moneys and other payments, property and other consideration and
compensation received or receivable by or for the account of the Borrower or
its Affiliates at such time (excluding the aggregate amount of any and all
moneys, payments, property, consideration and compensation paid or payable to
any Person other than the Borrower or an Affiliate of the Borrower, under
reinsurance agreements (whether facultative or treaty) and similar
arrangements) and all other rights of the Borrower in respect of, or arising
out of, the payment of such Strip Policy Claim by the Borrower under the
related Strip Policy and all premiums received by the Borrower in respect of
such Strip Policy (but only if such Strip Policy Claim was paid from the
proceeds of a Borrowing prior to receipt of such premiums), whether such rights
arise under (a) such Strip Policy, any reimbursement agreement, guaranty,
letter of credit, mortgage, security agreement, pledge agreement or other
contract, agreement or arrangement, (b) any account or account receivable,
(c) any compromise, settlement or similar arrangement, (d) any
voluntary payment or gift, (e) any payments received by the Borrower under
any reinsurance of such Strip Policy (for the avoidance of doubt, reinsurance
payments received will be subject to the rights of the related reinsurer), (f) any
contractual, statutory, common law or other right of subrogation, (g) any
realization upon any mortgage, security interest or other Lien, (h) any
cause of action, whether sounding in tort, contract or otherwise, and any
judicial, arbitration or other proceeding by or before any court, agency,
tribunal, association or other governmental or private body, or (i) any other
legal or equitable right or claim, whether or not similar to the foregoing,
less the out of pocket costs and expenses, including without limitation
attorneys fees and court costs, reasonably incurred by the Borrower in
connection with the collection or other realization of such moneys and other
payments, property and other consideration and compensation (including by
liquidation).

 

“Register”
shall have the meaning provided in Section 13.04(b).

 

“Related
Agreements” shall mean the Purchase Agreement, the “Transaction Documents”
(as such term is defined in the Pledge and Administration Agreement) and the “Separation
Documents” (as such term is defined in the Separation Agreement).

 

“Replacement Lender”
shall have the meaning provided in Section 2.08.

 

“Representation Breach”
shall have the meaning provided in clause (a) of the final
paragraph of Section 10.

 

“Repurchase Agreement”
shall mean any agreement to purchase an asset presently and to sell such asset
to a third party in the future or any agreement to sell an asset presently and
to repurchase such asset from a third party in the future.

 

“SEC” means the
Securities and Exchange Commission or any successor thereto.

 

“Seller” shall have
the meaning provided in the first recital of this Agreement.

 

“Separation Agreement”
means that certain Separation Agreement, dated 1, 2009, by and among DCL,
Financial Security Assurance International Ltd., FSA, Premier International
Funding Co. and FSA Global Funding Limited.

 

9

 

“Soft Capital
Indebtedness” means indebtedness of a Person which is limited recourse to
such Person and in the nature (as to its purpose and limited recourse
structure) of that existing Indebtedness of FSA under the Existing Soft Capital
Facility.

 

“Strip Policy” shall
mean each financial guaranty insurance policy that was issued by the Borrower
or an Affiliate or Subsidiary thereof with respect to the equity strip portion
of a leveraged tax lease transaction, and was outstanding as of November 13,
2008, and including, without limitation, all such policies listed on Schedule
II attached hereto, but excluding any Strip Policies released from this
Agreement in accordance with Section 12.04.

 

“Strip Policy Claim”
shall mean, with respect to any Strip Policy, any claim for payment made under
such Strip Policy by a Holder (as such term is defined in the related Strip
Policy).

 

“Subsequent Supplemental
Calculation Date” means each anniversary of the Initial Supplemental
Calculation Date.

 

“Subsidiary”
shall mean, as to any Person, (i) any corporation more than 50% of whose
stock of any class or classes having by the terms thereof ordinary voting power
to elect a majority of the directors of such corporation (irrespective of
whether or not at the time stock of any class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time owned by such Person and/or one or more
Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Subsidiaries of
such Person has more than a 50% equity interest and the ability to direct such
partnership, association, joint venture or other entity at the time.

 

“Supplemental Calculation
Date” means the Initial Supplemental Calculation Date or any Subsequent
Supplemental Calculation Date, as applicable.

 

“Supplemental
Consolidated Net Worth Amount” means, on any Supplemental Calculation Date,
an amount equal to the product of:

 

(a)                                  the greater of (i) zero
and (ii) 25% of the aggregate of Consolidated Net Income (or Loss) for the
period beginning on the first day after the Financial Cutoff Date and ending on
the fifth anniversary of the Financial Cutoff Date, and

 

(b)                                 a fraction, the
numerator of which is the Commitment Amount as of such Supplemental Calculation
Date and the denominator of which is $1,000,000,000.

 

“S&P”
shall mean Standard & Poor’s Ratings Services.

 

“Taxes” shall mean
any present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdiction
or by any political subdivision or taxing authority thereof or therein, and all
interest, penalties or similar liabilities with respect thereto.

 

“Total Capitalization”
means, on any date of determination, the Consolidated Net Worth as of such
date  plus the Consolidated Long
Term Debt as of such date.

 

10

 

“UCC” means the
Uniform Commercial Code as in effect in the State of New York; provided that, if perfection or the effect of
perfection or non-perfection or the priority of any security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New
York, “UCC” means the Uniform Commercial Code as in effect from
time to time in such other jurisdiction for purposes of the provisions hereof
relating to such perfection, effect of perfection or non-perfection or
priority.

 

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

 

“Unrealized Gains and
Losses” means unrealized gains and losses relating to derivative
instruments and securities held in portfolios and deemed available for sale.

 

“Unutilized Commitment”
shall mean, at any time, the Commitment Amount as of such date less the
aggregate outstanding principal amount of all Loans as of such time.

 

“Utilization Commission”
shall have the meaning provided in Section 3.01(b).

 

“Wholly-Owned Subsidiary”
shall mean, as to any Person, (i) any corporation 100% of whose capital
stock is at the time owned by such Person and/or one or more Wholly-Owned
Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Wholly-Owned
Subsidiaries of such Person has a 100% equity interest and the ability to
direct such partnership, association, joint venture or other entity at such
time.

 

1.02        Principles of Construction.  (a) All references to sections,
schedules and exhibits are to sections, schedules and exhibits in or to this
Agreement unless otherwise specified. 
Any definition of or reference to any agreement, instrument or other
document in or to this Agreement 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).  The words “hereof,” “herein” and “hereunder”
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement.  Unless the context requires
otherwise, any reference herein to any Person shall be construed to include
such Person’s successors and assigns.

 

(b)           All accounting terms not specifically
defined herein shall be construed in accordance with GAAP.

 

SECTION 2.

 

AMOUNT AND TERMS OF CREDIT.

 

2.01        The Loans.  Subject to and upon the terms and conditions
set forth herein, the Lender agrees, at any time and from time to time prior
to, but excluding, the Commitment Termination Date, upon request of the
Borrower, to make loans in Dollars to the Borrower to finance payment of Strip
Policy Claims (any such loan made in Dollars by the Lender to the Borrower with
respect to a Strip Policy Claim, a “Loan” and all Loans made by the
Lender, the “Loans”), which Loans are to be repaid and may be prepaid in
accordance with the provisions

 

11

 

hereof; provided
that the aggregate principal amount of Loans outstanding under this Agreement
as of any date shall at no time exceed the Commitment Amount as of such date
and no individual Borrowing shall exceed that amount stated in the notice of
claim delivered to the Borrower under the related Strip Policy (the “Notice
of Claim”).  Amounts borrowed under
this Section 2.01 may not be reborrowed.  Subject to the provisions of this Section 2,
more than one Borrowing may occur on the same date.  Notwithstanding anything contained herein to
the contrary, each Loan shall be deemed to be a separate tranche of loans
hereunder and the use of “Loans” shall mean all such tranches.  For the avoidance of doubt, to the extent
there are multiple Strip Policy Claims under a Strip Policy, then multiple
Loans may be requested with respect to such Strip Policy but without
duplication of other amounts borrowed to pay the same claim amount.

 

2.02        Amount of Each Borrowing.  The aggregate principal amount of each
Borrowing hereunder shall be the amount set forth in the related Notice of
Borrowing and may not exceed the amount of the claim stated in the relevant
Notice of Claim.

 

2.03        Notice of Borrowing.  Whenever the Borrower desires to make or
arrange for a Borrowing of Loans hereunder, it shall give the Lender at its
Office at least one Business Day’s prior notice of each Loan to be made
hereunder; provided that any such notice shall be deemed to have been
given on a certain day only if given before 3:00 P.M. (New York time) on
such day.  Each such notice (each a “Notice
of Borrowing”) shall be in the form of Exhibit A attached
hereto, appropriately completed and including the attachments identified
therein.

 

2.04        Disbursement of Funds. 
No later than 10:00 A.M. (New York time) on the date specified as
the “Business Day of the Proposed Borrowing” in the related Notice of
Borrowing, the Lender will make available to the Borrower, through the Lender’s
Office, Loans (or, at the request of the Borrower in the relevant Notice of
Borrowing, the Lender will make a Direct Payment) in Dollars and in immediately
available funds, in the amount requested by the Borrower in such Notice of
Borrowing.

 

2.05        Note.  (a) The Borrower’s obligation to pay the
principal of, and interest on, the Loans made by the Lender shall be evidenced
by a promissory note duly executed and delivered by the Borrower, substantially
in the form of Exhibit B attached hereto, with blanks appropriately
completed in conformity herewith (the “Note”).

 

(b)           The Note issued to the Lender shall (i) be
executed by the Borrower, (ii) be payable to the order of the Lender and
be dated the Effective Date, (iii) be in a stated principal amount equal
to the amount of the Commitment of the Lender and be payable in the outstanding
principal amount of the Loan evidenced thereby, (iv) mature, with respect
to each Loan evidenced thereby, on the applicable Loan Maturity Date, (v) bear
interest as provided in the appropriate clause of Section 2.07 in
respect of the Loan evidenced thereby, (vi) be subject to mandatory
repayment as provided in Section 4.02 and (vii) be entitled to
the benefits of this Agreement and the other Credit Documents.

 

(c)           The Lender will note on its internal
records the amount of each Loan made by it and each payment in respect thereof
and will, prior to any transfer of the Note, endorse on the reverse side
thereof the outstanding principal amount of the Loan evidenced thereby.  Failure to make any such notation shall not
affect the Borrower’s obligations in respect of such Loans.

 

12

 

2.06        Reserved.

 

2.07        Interest.  (a) The Borrower agrees to pay
interest in respect of the unpaid principal amount of each Loan from the date
the proceeds thereof are made available to the Borrower until the date such
Loan is paid in full (whether by acceleration or otherwise) at a rate per annum
which shall be equal to the Interest Rate associated with such Loan.  The Lender shall determine the Interest Rate
as applicable for each Loan as such Interest Rate may change from time to time,
and shall promptly notify the Borrower. 
Each such determination shall, absent demonstrable error, be final and
conclusive and binding on all parties hereto. 
The Borrower and the Lender will act promptly in good faith to resolve
and pay to each other, as applicable, disputed Interest Rate amounts.

 

(b)           Overdue principal and, to the extent
permitted by law, overdue interest in respect of each Loan of the Borrower and
any other overdue amount payable by the Borrower hereunder shall bear interest
at a rate per annum equal to 2% per annum in excess of the Interest Rate
associated with the related Loan in effect from time to time (or, in the case
of other overdue amounts payable, the highest Interest Rate then in effect on
the related Loan plus a margin of 2% per annum); provided that,
to the extent permitted by law, no Loan shall bear interest after maturity at a
rate per annum less than 2% in excess of the rate of interest applicable
thereto at maturity.

 

(c)           Accrued (and theretofore unpaid) interest
shall be payable (i) quarterly in arrears on the last Business Day of each
March, June, September and December of each year, and (ii) in
respect of each Loan, at maturity of such Loan (whether by acceleration or
otherwise) and, after such maturity, on demand.

 

2.08        Change of Office.    The Lender agrees that, upon the occurrence
of any event giving rise to the operation of Section 4.04 with
respect to the Lender, it will, if requested by the Borrower, use reasonable
efforts (subject to overall policy considerations of the Lender) to designate
another Office for any Loans affected by such event, provided that such
designation is made on such terms that such designation will not subject the
Lender to any material unreimbursed cost or expense and will not otherwise be
materially disadvantageous to it, with the object of avoiding the consequence
of the event giving rise to the operation of any such Section.  If, after such reasonable efforts, the Lender
does not so designate a different one of its Offices so as to eliminate the
Borrower’s obligation to pay any future amounts to the Lender pursuant to Section 4.04,
then the Borrower (without prejudice to any amounts then due to the Lender
under Section 4.04) may, unless prior to the effective date of any
such assignment the Lender withdraws its request for such additional amounts
under Section 4.04, designate another Lender reasonably acceptable
to the Lender to purchase the Loans owed to the Lender and the Lender’s
Commitments hereunder (a “Replacement Lender”), the Lender shall assign
to the Replacement Lender its Loans, pursuant to an assignment and assumption
agreement in form and substance reasonably satisfactory to the Borrower, and
upon such purchase by the Replacement Lender, such Replacement Lender shall be
deemed to be the “Lender” for purposes of this Agreement and, subject to Section 13.04,
the selling Lender shall cease to be the “Lender” for purposes of this
Agreement.  Nothing in this Section 2.08
shall affect or postpone any of the obligations of the Borrower or the rights
of the Lender provided in Section 4.04.

 

13

 

2.09        Strip Policies.  The Lender represents and warrants that the
Strip Policies identified on Schedule II of this Agreement includes all
Strip Policies outstanding on the Closing Date and is true, correct and
complete in all material respects; provided, that the Lender shall not
be liable for any amendment to such Schedule II if such amendment does
not cause the aggregate amount of coverage under the Strip Policies during any
calendar month to exceed the amount set forth for such calendar month under the
column entitled “Aggregate Strip Policy Exposure” on Schedule III.

 

SECTION 3.

 

COMMISSIONS; FEES; REDUCTIONS OF COMMITMENT.

 

3.01        Fees.

 

(a)           The Borrower agrees to pay to the Lender
a commitment commission (the “Commitment Commission”) for the period
from the Effective Date to the Commitment Termination Date equal to the
Commitment Commission Percentage, as indicated below, for the relevant day
multiplied by the Unutilized Commitment of the Lender for such day, divided by
360.  Any Commitment Commission shall be
due and payable quarterly in arrears on the last Business Day of each March,
June, September and December of each year and on the Commitment
Termination Date.  For purposes hereof, the “Commitment
Commission Percentage” shall mean either (a) during any period when
the Borrower’s Ratings are not below Baa2 by Moody’s, not below BBB by S&P
and not below BBB by Fitch, 0.625% per annum or (b) during all other
periods, 1.00% per annum.  Any change in
the Commitment Commission Percentage shall take effect on the date of the
relevant Ratings change.

 

(b)           The Borrower agrees to pay to the
Lender a utilization commission (the “Utilization Commission”) during
any period when the aggregate principal amount of Loans outstanding is greater
than 50% of the Commitment Amount as of such date, computed at a rate of 0.10%
per annum on the daily average of such outstanding amounts.  Any Utilization Commission shall be due and
payable quarterly in arrears on the last Business Day of each March, June, September and
December of each year and on the Commitment Termination Date.

 

(c)           The Borrower agrees to pay to the
Lender, on the Effective Date, a fee equal to 0.02% of the Commitment Amount as
of the Effective Date.

 

3.02        Voluntary Reduction of Commitment.  Upon at least five Business Days’ prior
notice to the Lender at its Office, the Borrower shall have the right, without
premium or penalty, to reduce the Commitment Amount as of such date in whole or
in part in integral multiples of $1,000,000 (or such lesser amount if the
Commitment Amount is being reduced to $0).

 

3.03        Mandatory Reduction of Commitments.  (a) On the first day of each calendar
month set forth in the column labeled “Period Beginning” on Schedule III
attached hereto, the Commitment Amount shall be reduced to the amount set forth
opposite such date under the column heading “Initial Maximum Commitment Amount,”
subject to the adjustment of such amount as described in Section 3.03(d).

 

14

 

(b)              If the Borrower’s Consolidated Net
Worth as of the fifth anniversary of the Financial Cutoff Date is less than the
sum of (a) the Base Consolidated Net Worth plus (b) the
Supplemental Consolidated Net Worth Amount as of the Initial Supplemental
Calculation Date, then the Commitment Amount shall be reduced to $750,000,000,
and shall be amortized pursuant to Section 3.03(d).

 

(c)              The Commitment of the Lender to
make a Loan shall terminate in its entirety on the Commitment Termination Date.

 

(d)              With respect to any reduction of
the Commitment Amount pursuant to Section 3.02 or Section 3.03(b) (the
Commitment Amount after such reduction being referred to as the “Reduced
Commitment Amount”), the “Initial Maximum Commitment Amount” as shown on Schedule
III for each calendar month subsequent to the calendar month in which such
reduction occurred shall be deemed to be reduced to an amount equal to the
product of (i) the Initial Maximum Commitment shown on Schedule III
for such subsequent calendar month times (ii) a fraction, the
numerator of which is the Reduced Commitment Amount and the denominator of
which is the “Initial Maximum Commitment Amount” shown on Schedule III
opposite the calendar month in which such reduction occurred.

 

SECTION 4.

 

PREPAYMENTS; PAYMENTS.

 

4.01        Voluntary
Prepayments.  The Borrower shall have
the right to prepay the Loans made to it, without premium or penalty, in whole
or in part from time to time; provided, that (i) the Borrower shall
give the Lender at its Office at least three Business Days’ prior notice of its
intent to prepay any Loans and the amount of such prepayment; (ii) the
minimum amount of each prepayment shall be no less than $1,000,000 (or if less,
the outstanding principal amount of a Loan if the entire amount of such Loan is
being prepaid); and (iii) each prepayment in respect of any Loan made
pursuant to a Borrowing shall be applied by the Lender first to any accrued and unpaid interest on the corresponding Loan and then
to principal on such corresponding Loan.

 

4.02        Mandatory Payments.  The Borrower shall make mandatory repayments
of the Loans to the Lender as follows:

 

(a)           within 10 Business Days of receipt of
any Recoveries paid, reimbursed or otherwise credited to or for the benefit of
the Borrower in connection with any Strip Policy Claim related to a Loan, the
Borrower shall repay such Loan in an amount equal to the lesser of (i) the
outstanding principal balance of such Loan on such date and (ii) the
amount of such Recoveries;

 

(b)           on the Loan Maturity Date for any
Loan, the Borrower shall repay such Loan in full;

 

(c)           if on any date the outstanding
principal amount of all Loans exceeds the Commitment Amount on such date, the
Borrower shall repay the Loans in the amount of such excess (such repayment to
be applied among the Loans in accordance with the direction of the Borrower);

 

15

 

(d)           if a Borrower Change of Control has
become effective, then: (i) if the Rating Agency Condition has been
satisfied with respect to such Borrower Change of Control, the Borrower shall
repay the Loans in full not later than the 365th day following the effectiveness of such
Borrower Change of Control or (ii) if a Rating Agency Condition has not
been satisfied with respect to such Borrower Change of Control, then the
Borrower shall repay the Loans in full on the date such Borrower Change of
Control shall become effective,

 

(e)           on the date any Loans are accelerated
in accordance with Section 10, the Borrower shall repay all such
Loans in full, and

 

(f)            if the Borrower agrees to
reduce the principal amount of any repayment right of the Borrower in respect
of, or arising out of, the payment of a Strip Policy Claim, then, within 10
Business Days following such reduction, the Borrower shall repay that portion
of the outstanding principal of the related Loan equal to the amount of such
reduction.

 

All repayments of Loans shall include payment of
accrued and unpaid interest on the amount of such Loan repaid.  Amounts paid pursuant to this Section shall
be credited first to accrued and unpaid interest on the corresponding Loan and
then to principal on such corresponding Loan.

 

4.03        Method and Place of Payment.  (a) Except as otherwise specifically
provided herein, all payments made by the Borrower under this Agreement or any
Note shall be made to the Lender not later than 12:00 P.M. (New York time)
on the date when due and shall be made in Dollars in immediately available
funds at the Lender’s Office.  Whenever
any payment to be made hereunder or under any Note shall be stated to be due on
a day which is not a Business Day, the due date thereof shall be extended to
the next succeeding Business Day and, with respect to payments of principal,
interest shall be payable at the applicable rate during such extension.

 

4.04        Net Payments.  (a)  All payments made by the Borrower
hereunder or under any Note will be made without setoff, counterclaim or other
defense.  Except as provided in Section 4.04(d),
all such payments will be made free and clear of, and without deduction or
withholding for, any Non-Excluded Taxes. 
If any Non-Excluded Taxes are so levied or imposed, the Borrower agrees
to pay the full amount of such Non-Excluded Taxes and such additional amounts
as may be necessary so that every payment of all amounts due hereunder or under
any Note, after withholding or deduction for or on account of any Non-Excluded
Taxes, will not be less than the amount provided for herein or in such
Note.  The Borrower will furnish to the
Lender within 45 days after the date the payment of any Non-Excluded Taxes is
due pursuant to applicable law certified copies of tax receipts evidencing such
payment by the Borrower.  Notwithstanding
the foregoing, the Borrower shall not be required to pay additional amounts
with respect to any payment of principal, interest or any other amounts on, any
Note to any holder who is a fiduciary or partnership or other than the sole
beneficial owner of such Note to the extent such payment would be required by
the laws of the relevant taxing jurisdiction (or any political subdivision or
relevant taxing authority thereof or therein) to be included in the income for
tax purposes of a beneficiary or partner or settler with respect to such
fiduciary or a member of such partnership or a beneficial owner who would not
have been entitled to such additional amounts had it been the holder of such
Note.

 

16

 

(b)           The Borrower shall pay any and all
present and future stamp and other similar taxes (“Other Taxes”) imposed
in connection with the enforcement of this Agreement and the other Credit
Documents and the documents and instruments referred to herein and therein to
the relevant governmental authority imposing such Other Taxes in accordance
with applicable law.

 

(c)           Subject to Section 4.04(d),
the Borrower shall indemnify the Lender for any Non-Excluded Taxes and Other
Taxes levied, imposed or assessed on the Lender.  Promptly upon having knowledge that any such
Non-Excluded Taxes or Other Taxes have been levied, imposed or assessed, and
promptly upon notice thereof by the Lender, the Borrower shall pay such
Non-Excluded Taxes or Other Taxes directly to the relevant governmental
authority.  In addition, the Borrower
shall indemnify the Lender for any incremental Taxes that may become payable by
the Lender as a result of any failure of the Borrower to pay any Non-Excluded
Taxes or Other Taxes when due to the appropriate governmental authority; provided
that if the Lender fails to notify the Borrower of the imposition of any
Non-Excluded Taxes or Other Taxes within 120 days following its receipt of
actual written notice of the imposition of such Non-Excluded Taxes or Other
Taxes, the Borrower will not have an obligation to pay any such incremental
Taxes attributable to the period beginning after such 120th day and ending 7
days after the Borrower receives notice from the Lender.

 

(d)           Each Lender that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code)
for U.S. Federal income tax purposes agrees (i) in the case of any such
Lender that is a “bank” within the meaning of Section 881(c)(3)(A) of
the Code and that constitutes a Lender hereunder on the Effective Date, to
provide to the Borrower on or prior to the Effective Date two original signed
copies of Internal Revenue Service Form W-8 ECI or Form W-8 BEN
certifying to such Lender’s entitlement to an exemption from United States
withholding tax with respect to payments to be made under this Agreement and
under any Note, (ii) in the case of any such Lender that is a “bank”
within the meaning of Section 881(c)(3)(A) of the Code, that, (A) with
respect to a Lender that is an assignee or transferee of an interest under this
Agreement pursuant to Section 13.04(b) (unless the respective
Lender was already a Lender hereunder immediately prior to such assignment or
transfer), upon the date of such assignment or transfer to such Lender, and (B) to
the extent legally entitled to do so, with respect to any such Lender, from
time to time upon the reasonable written request of the Borrower after the
Effective Date, such Lender will provide to the Borrower within 60 days of such
request two original signed copies of Internal Revenue Service Form W-8
ECI or Form W-8 BEN (or any successor forms) certifying to such Lender’s
entitlement to an exemption from, or reduction in, United States withholding
tax with respect to payments to be made under this Agreement and under any
Note, (iii) in the case of a Lender other than a Lender described in
clause (i) or (ii) above and that constitutes a Lender hereunder on
the Effective Date, to provide to the Borrower on or prior to
the Effective Date, two accurate and complete original signed copies of
Internal Revenue Service Form W-8 BEN, certifying to such Lender’s
entitlement at the date of such certificate, to an exemption from U.S.
withholding tax under the provisions of Section 881(c) of the Code
with respect to payments to be made under this Agreement and under any Note and
(iv) in the case of any such Lender (other than a Lender described in
clause (i) or (ii) above), (A) with respect to a Lender that is
an assignee or transferee of an interest under this Agreement pursuant to Section 13.04(b) (unless
the respective Lender was already a Lender hereunder immediately prior to such
assignment or transfer), upon the date of such assignment or transfer to such
Lender, and (B) to

 

17

 

the extent legally entitled
to do so, with respect to any such Lender, from time to time upon the
reasonable written request of the Borrower after the
Effective Date, to provide to the Borrower within 60 days
of such request such other forms as may be required in order to establish the
entitlement of such Lender to an exemption from withholding with respect to
payments under this Agreement and under any Note.  Notwithstanding anything to the contrary
contained in this Section 4.04(d), the Borrower shall be entitled,
to the extent it is required to do so by law, to deduct or withhold Taxes
imposed by the United States (or any political subdivision or taxing authority
thereof or therein) from interest, fees or other amounts payable hereunder
(without any obligation to pay the respective Lender additional amounts with
respect thereto) for the account of any Lender which is not a United States
person (as such term is defined in Section 7701(a)(30) of the Code) for
U.S. Federal income tax purposes and which has not provided to the Borrower
such forms required to be provided to the Borrower pursuant to the first
sentence of this Section 4.04(d) (or to the extent such forms
do not establish a complete exemption from such withholding), unless the
failure to deliver such forms pursuant to clause (ii)(B) or (iv)(B) above
is due to a change in any applicable statute, treaty, regulation or other
applicable law or any interpretation of any of the foregoing occurring after the
date hereof, which change rendered such Lender no longer legally entitled to
deliver such forms or rendered the information provided in such forms untrue or
inaccurate in any material respect.

 

(e)           In the event that the Lender
receives a payment from the Borrower with respect to Taxes pursuant to this Section 4.04,
and the Borrower makes a written request to the Lender for its cooperation, the
Lender shall cooperate with the Borrower in challenging such Taxes, provided
that (i) the Lender reasonably determines in good faith that it will not
suffer any adverse effect as a result thereof, (ii) all costs of such
challenge are for the account of the Borrower, and (iii) the Borrower
delivers to the Lender an opinion of counsel reasonably satisfactory to the Lender
to the effect that there is substantial authority (within the meaning of Code
section 6662(d)(2)(B)(i)) to prevail on such refund claim.

 

SECTION 5.

 

CONDITIONS PRECEDENT TO EFFECTIVENESS.

 

This Agreement shall become
effective subject to the satisfaction (or waiver by the Lender) of the
following conditions:

 

5.01        Execution of Agreement.  The Borrower and the Lender shall have signed
a copy of this Agreement (whether the same or different copies).

 

5.02        Closing.  The Closing (as defined in the Purchase
Agreement) shall have occurred.

 

5.03        Note.  The Lender shall have received a Note,
executed by the Borrower in the amount, maturity and as otherwise provided
herein.

 

18

 

SECTION 6.

 

CONDITIONS PRECEDENT TO ALL CREDIT EVENTS.

 

The obligation of the Lender
to make any Loan is subject to the satisfaction of the following conditions at
the time of the related Credit Event:

 

6.01        Effectiveness.  The Effective Date shall have occurred.

 

6.02        No Default.            No Default or Event of Default shall
have occurred and be continuing on the date of such Credit Event.

 

6.03        Representations and Warranties.  The representations and warranties of the
Borrower under this Agreement shall be accurate and complete in all material respects
on the date of such Credit Event.

 

6.04        Covenants.  The Borrower shall not have (i) failed
in the due performance or observance by it of any term, covenant or agreement
contained in Section 9 or Section 8.07 or (ii) failed
in the due performance or observance by it of any term, covenant or agreement
(other than those referred to in clause (i) of this Section 6.04)
contained in this Agreement which failure, in case of clause (ii), shall
have continued unremedied for a period of 8 Business Days after the earlier of
the date on which the Borrower has actual knowledge of such failure or the date
on which the Lender gives written notice to the Borrower of such failure, and
in the case of either clause (i) or (ii), such failure is
continuing at the time of such Credit Event, but without regard to whether such
term covenant or agreement was required to be performed at a previous time.

 

6.05        Judgments.  As of the date of such Credit Event, one or
more judgments or decrees shall not have been entered against the Borrower or
any of its Material Subsidiaries involving in the aggregate for the Borrower
and its Material Subsidiaries a liability (not paid or fully covered by
insurance) of $25,000,000 or more unless (A) less than 30 days (or such
longer period of time to vacate, discharge, pay, stay or bond such judgments or
decrees as is permitted under applicable law) have elapsed since the entry of
such judgments or decrees or (B) such judgments or decrees shall have been
vacated, discharged, paid, stayed or bonded pending appeal (which appeal
suspends the relevant payment obligation such that the amount of the judgment
or decree then payable and not covered by insurance is less than $25,000,000)
as of the date of such Credit Event.

 

6.06        Borrower Change of Control.  No Borrower Change of Control shall have
occurred.

 

6.07        Notice of Borrowing.  Prior to the making of such Loan, the Lender
shall have received a Notice of Borrowing meeting the requirements of Section 2.03.

 

For
purposes of the condition precedent specified in Section 6.03, if
any representation or warranty of the Borrower under this Agreement shall fail
to be accurate and complete in all material respects at the time of any Credit
Event, such failure shall not prevent the satisfaction of

 

19

 

such condition precedent at
the time of any subsequent Credit Event if such failure has been cured by the
time of such subsequent Credit Event.

 

For
purposes of the condition precedent specified in Section 6.04,

 

(a)           if any covenant of the Borrower under
Section 9.03 or Section 9.04 (as it relates to the end
of a particular fiscal quarter) is breached, such breach shall not prevent the
satisfaction of such condition precedent so long as such covenant is satisfied
as of the end of the fiscal quarter immediately preceding the related Credit
Event (or such covenant is otherwise satisfied subsequent to the end of such
fiscal quarter and on or prior to such Credit Event, through capital
contributions, reductions of Consolidated Indebtedness or otherwise); and

 

(b)           if any other covenant of the Borrower
under this Agreement remains breached at the time of any Credit Event, such
breach shall not prevent the satisfaction of such condition precedent at the
time of any subsequent Credit Event if at or prior to such time such breach has
been cured through the satisfaction of the related obligation, in the case of
an affirmative covenant, or remedy of the prohibited action, in the case of a
negative covenant.

 

The acceptance of the proceeds
of a Credit Event shall constitute a representation and warranty by the
Borrower to the Lender that the conditions specified in this Section 6
have been satisfied at the time of such Credit Event and with respect to the
related Loan.

 

SECTION 7.

 

REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

 

In order to induce the
Lender to make a Loan, the Borrower makes the following representations,
warranties and agreements, all as of the date of the related Credit Event and
all of which shall survive the execution and delivery of this Agreement, the
Note and the making of the Loans:

 

7.01        Corporate Status.  The Borrower is a duly organized and validly
existing corporation under the laws of the jurisdiction of its incorporation.

 

7.02        Corporate Power and Authority.  The Borrower has the corporate power to
execute, deliver and perform the terms and provisions of each of the Credit
Documents and has taken all necessary corporate action to authorize the
execution, delivery and performance by it of the Credit Documents.  The Borrower has duly executed and delivered
each of the Credit Documents to which it is party, and each Credit Document
constitutes the legal, valid and binding obligation of the Borrower enforceable
in accordance with its terms.

 

7.03        No Violation.  Neither the execution, delivery or
performance by the Borrower of the Credit Documents, nor compliance by it with
the terms and provisions thereof, nor the use of the proceeds of the Loans by
the Borrower (i) will contravene any provision of any law, statute, rule or
regulation or any order, writ, injunction or decree of any court or
governmental instrumentality, applicable to the Borrower or to which it is
subject, (ii) will conflict or be inconsistent with, or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, the terms of any indenture, mortgage, deed of
trust, credit

 

20

 

agreement, loan agreement
or any other agreement, contract or instrument to which the Borrower or any of
its Material Subsidiaries is a party or by which it or any of its property or
assets is bound or to which it may be subject, (iii) result in the
creation or imposition of (or the obligation to create or impose) any Lien
prohibited by Section 9.05, or (iv) will violate any provision
of the charter documents of the Borrower or any of its  Material Subsidiaries, except, in the case of
each of clauses (i), (ii), (iii) and (iv) above,
such contraventions, conflicts, inconsistencies, breaches, defaults, Liens
prohibited under Section 9.05 or violations which either existed on
the Effective Date or are not reasonably likely to materially and adversely
affect the business, operations, property, assets, or condition (financial or
otherwise) of the Borrower and its Subsidiaries taken as a whole.

 

7.04        Governmental Approvals.  No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with
(except as have been obtained or made), or exemption by, any governmental or
public body or authority, or any subdivision thereof, is required to authorize,
or is required in connection with, (i) the execution, delivery and
performance by the Borrower of any Credit Document or (ii) the legality,
validity, binding effect or enforceability of any Credit Document (except, in
any case, as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors’ rights
generally and by principles of equity).

 

7.05        Litigation.  There are no actions, suits or proceedings
that have arisen after the Effective Date that are pending or, to the best
knowledge of the Borrower, threatened, (i) with respect to any Credit
Document or (ii) that are reasonably likely to materially and adversely
affect the business, operations, property, assets or condition (financial or
otherwise) of the Borrower and its Material Subsidiaries taken as a whole.

 

7.06        Use of Proceeds; Margin Regulations.  No part of the proceeds of any Loan will be
used by the Borrower to purchase or carry any Margin Stock or to extend credit
to others for the purpose of purchasing or carrying any Margin Stock.  Neither the making of any Loan nor the use of
the proceeds thereof will violate or be inconsistent with the provisions of
Regulations T, U or X of the Board of Governors of the Federal Reserve System.

 

7.07        Tax Returns and Payments.  The Borrower and each of its Material
Subsidiaries has filed all tax returns required to be filed by it and has paid
all income taxes payable by it which have become due pursuant to such tax
returns and all other taxes and assessments payable by it which have become
due, other than those not yet delinquent and except for those (x) contested
or which will be contested in good faith and for which adequate reserves (in
the good faith judgment of the management of the Borrower) have been
established or (y) as would not reasonably be expected to have, in the
aggregate, a material adverse effect on the business, operations, property,
assets or condition (financial or otherwise) of the Borrower and its
Subsidiaries taken as a whole.  The
Borrower and each of its Material Subsidiaries has paid, or has provided
adequate reserves (in the good faith judgment of the management of the
Borrower) for the payment of, all material federal and state income taxes
applicable for all prior fiscal years and for the current fiscal year to the
date hereof, except as would not reasonably be expected to have, in the
aggregate, a material adverse effect on the business, operations, property,
assets or condition (financial or otherwise) of the Borrower and its
Subsidiaries taken as a whole.

 

21

 

7.08        Financial Statements; Financial
Condition; Undisclosed Liabilities; etc. 
As of the date financial statements are furnished to the Lender pursuant
to Sections 8.01(a) and (b), such financial statements
present fairly the consolidated financial condition of the Borrower and its
Consolidated Subsidiaries at the date of such balance sheet and the
consolidated results of the operations of the Borrower and its Consolidated
Subsidiaries for the fiscal year referenced therein and the Borrower has not
determined that such financial statements (to the extent they relate to fiscal
periods occurring after the Effective Date) are required to be restated; provided
that if any such financial statements relating to fiscal periods occurring
after the Effective Date are required to be restated and such financial
statements following such restatement present fairly the consolidated financial
condition of the Borrower and its Consolidated Subsidiaries in accordance with
GAAP as of the date of such restated financial statements, then the
representation and warranty in this Section 7.08 shall be deemed to
be true and correct with respect to such financial statements.  All such financial statements shall be
prepared in accordance with GAAP.

 

7.09        Compliance with Statutes, etc.  The Borrower and each of its Material
Subsidiaries are in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its respective business and
the ownership of its respective property (including applicable statutes,
regulations, orders and restrictions relating to environmental standards and
controls), except such noncompliances as would not reasonably be expected to
have, in the aggregate, a material adverse effect on the business, operations,
property, assets or condition (financial or otherwise) of the Borrower and its
Subsidiaries taken as a whole.

 

SECTION 8.

 

AFFIRMATIVE COVENANTS.

 

8.01        Information Covenants.  The Borrower will furnish (or caused to be
furnished) to the Lender:

 

(a)           Quarterly Financial Statements.  Within 60 days after the close of the first
three quarterly accounting periods in each fiscal year of the Borrower, the
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as
at the end of such quarterly accounting period and the related consolidated
statements of income, changes in shareholders’ equity and cash flows for such
quarterly accounting period and for the elapsed portion of the fiscal year
ended with the last day of such quarterly accounting period, in each case
setting forth comparative figures for the related periods in the prior fiscal
year, all of which shall be prepared in accordance with GAAP and shall be
certified by the Treasurer, Chief Financial Officer or Chief Accounting Officer
of the Borrower, subject to normal year-end audit adjustments.

 

(b)           Annual Financial Statements.  Within 115 days after the close of each
fiscal year of the Borrower, (i) the consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as at the end of such fiscal year
and the related consolidated statements of income, changes in shareholders’
equity cash flows for such fiscal year in each case prepared in accordance with
GAAP and setting forth comparative figures for the preceding fiscal year and
certified by PricewaterhouseCoopers LLP or such other independent certified

 

22

 

public accountants of
recognized national standing, together with a report of such accounting firm
stating that such audit was conducted in accordance with generally accepted
auditing standards, which report 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 (ii) management’s discussion and analysis of consolidated financial
condition and results of operations for such fiscal year.

 

(c)           Officer’s Certificates.  At the time of the delivery of the financial
statements provided for in Sections 8.01(a) and 8.01(b), a
certificate of the Chief Financial Officer, the Chief Accounting Officer or the
Treasurer of the Borrower, in substantially the form of Exhibit C
attached hereto, to the effect that, to the best of such officer’s
knowledge  no Default or Event of Default
has occurred and is continuing as of such time or, if any Default or Event of
Default has occurred and is continuing as of such time, specifying the nature
and extent thereof, which certificate shall, in the case of any such financial
statements delivered in respect of a period ending on the last day of a fiscal
quarter or year of the Borrower, set forth the calculations required to
establish whether the Borrower was in compliance with the provisions of Sections
9.03 and 9.04.

 

(d)           Notice of Default or Litigation.  Promptly, and in any event within five
Business Days after an executive officer of the Borrower obtains knowledge
thereof, notice of (i) the occurrence after the Effective Date of any
event which constitutes a Default or Event of Default and (ii) any
litigation or governmental investigation arising after the Effective Date or
proceeding pending which was initiated after the Effective Date (A) against
the Borrower which could reasonably be expected to materially and adversely
affect the business, operations, property, assets, liabilities or condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as a whole,
(B) with respect to any Indebtedness for borrowed money in excess of
$25,000,000 of the Borrower or any of its Material Subsidiaries or (C) with
respect to any Credit Document.

 

Information
required to be delivered pursuant to Section 8.01(a) and (b) may
be delivered electronically and if so delivered, shall be deemed to have been
delivered on the date (i) on which the Borrower posts such documents, or
provides a link thereto, on the Borrower’s or Assured’s website or (ii) on
which such documents are posted on an Internet or intranet website, if any, to
which the Lender has access (whether a commercial, third-party website or
whether sponsored by the Lender and including, but not limited to, the websites
of the SEC, EMMA and Assured).

 

8.02        Books, Records and Inspections.  The Borrower will keep proper books of record
and account with respect to (i) the Loans made hereunder, (ii) the
use of such Loans pursuant to Sections 7.06 and 8.07 and (iii) all
Recoveries.  The Borrower will permit
officers and designated representatives of the Lender to visit, inspect and
examine, during regular business hours and under the guidance of officers of
the Borrower, the books of account of the Borrower with respect to the matters
in this Section 8.02, at such reasonable times and intervals and to
such reasonable extent as the Lender may request.

 

8.03        Reserved.

 

23

 

8.04        Compliance with Statutes, etc.  The Borrower will, and will cause each of its
Material Subsidiaries to, comply with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the
ownership of its property (including applicable statutes, regulations, orders
and restrictions relating to environmental standards and controls), except such
noncompliances as could not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the business, operations,
property, assets, liabilities or condition (financial or otherwise) of the
Borrower and its Material Subsidiaries taken as a whole.

 

8.05        Reserved.

 

8.06        Payment of Taxes.  The Borrower will pay and discharge or cause
to be paid and discharged, and will cause each of its Material Subsidiaries to
pay and discharge, all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits, or upon any material properties
belonging to it, in each case on a timely basis, and all lawful claims which,
if unpaid, might become a lien or charge upon any properties of the Borrower or
any of its Material Subsidiaries; provided that neither the Borrower nor
any Material Subsidiary of the Borrower shall be required to pay or discharge
any such tax, assessment, charge, levy or claim (x) which is being or
which will be contested in good faith and by proper proceedings if it has
maintained adequate reserves (in the good faith judgment of the management of
the Borrower) with respect thereto in accordance with GAAP or (y) to the
extent that such non-payment could not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the business,
operations, property, assets, liabilities or condition (financial or otherwise)
of the Borrower and its Material Subsidiaries taken as a whole.

 

8.07        Use of Proceeds.  The Borrower shall use all proceeds of each
Loan only for the payment of Strip Policy Claims.

 

8.08        Strip Policies.  The Borrower shall (i) use its
commercially reasonable efforts to avoid the termination of any lease covered
by a Strip Policy unless such termination is accompanied by cancellation
without payment of the related Strip Policy (which efforts shall not include
covering the obligations referenced in such Strip Policy), (ii) to the
extent the Borrower has received such information in writing, promptly provide
the Lender all non-confidential and non-privileged information concerning the
Strip Policies as reasonably requested by the Lender and (iii) not amend
any Strip Policy without the prior written consent of the Lender (which consent
shall not be unreasonably withheld or delayed).

 

8.09        Collection of Recoveries.  The Borrower shall at all times use its
commercially reasonable efforts to collect and otherwise realize upon all
Recoveries in compliance with the applicable Strip Policy and applicable law.  In the event that the Borrower is
pursuing such efforts to collect and otherwise realize upon Recoveries owed by
a Person at the same time the Borrower is pursuing efforts to collect or
otherwise realize upon amounts other than Recoveries owing by such Person to
the Borrower, the Borrower shall pursue such efforts to collect and otherwise
realize upon such Recoveries in a way that the Borrower in good faith believes
does not adversely discriminate against the rights of the Lender in any
material respect.

 

24

 

8.10        Business.  The Borrower shall be licensed to operate as
an insurance company in either the United States generally or in at least one
State thereof.

 

SECTION 9.

 

NEGATIVE COVENANTS.

 

9.01        Consolidation, Merger, Sale of
Assets, etc.  The Borrower will not (x) wind
up, liquidate or dissolve its affairs or enter into any transaction of merger
or consolidation (other than for purposes of changing domicile or type of
organization), or (y) convey, sell, lease or otherwise dispose of (or
agree to do any of the foregoing at any future time) all or substantially all
of its property or assets; provided that

 

(a)           the Borrower may merge with any
Person, so long as immediately following such transaction (i) the Borrower
is the surviving entity of such merger, or if the Borrower is not the surviving
entity, the surviving entity is a direct or indirect Subsidiary or Affiliate of
Assured, (ii) such surviving entity is licensed to operate as an insurance
company in the United States generally, or in at least one of the States
thereof and shall have assumed the Obligations and (iii) the Rating Agency
Condition with respect to the surviving entity shall be satisfied with respect
to such merger; and

 

(b)          the Borrower may dispose of all or
substantially all of its assets (upon voluntary liquidation or otherwise) to
any Person so long as (i) such Person is a direct or indirect Subsidiary
or Affiliate of Assured, (ii) such Person is licensed to operate as an
insurance company in the United States generally, or in at least one of the
States thereof and shall have assumed the Obligations and (iii) the Rating
Agency Condition with respect to such Person shall be satisfied with respect to
such disposition.

 

9.02        Dividends.  The Borrower will not, nor will it permit any
of its Subsidiaries to, declare or pay any dividends, or make any payments
constituting a return of capital under GAAP, to its stockholders, or authorize
or make any other distribution, payment or delivery of property or cash to its
stockholders as such generally (which distributions, payments or delivery would
constitute a dividend or distribution under the laws of the jurisdiction of
organization of the Borrower or such Subsidiary, as the case may be) or redeem,
retire, purchase or otherwise acquire, directly or indirectly, for
consideration, any shares of any class of its capital stock now or hereafter
outstanding (or any options or warrants issued by the Borrower or such
Subsidiary with respect to its capital stock, other than options or warrants
issued under an employee or director option or restricted stock plan approved
by the Board of Directors of the Borrower), or set aside any funds for any of
the foregoing purposes, except that (i) the declaration, payment,
distribution and delivery of dividends or distributions in shares of
capital stock of the
Borrower or its Subsidiaries is permitted, (ii) any Subsidiary may pay,
declare, distribute and deliver dividends to, and purchase capital stock from, the Borrower or any Wholly-Owned
Subsidiary of the
Borrower, and (iii) the Borrower or any Subsidiary may pay
dividends or take any other action otherwise restricted or prohibited by this Section 9.02,
so long as no Event of Default under Section 10.02 is then in
existence and is uncured or not waived (and would not be in

 

25

 

existence
as a result of the payment of such dividends or other action), to the extent
such actions are not
prohibited by Section 4105 of New York Insurance Law.

 

9.03        Debt to Total Capitalization Ratio.  Commencing with the end of the first full
fiscal quarter after the Effective Date, the Borrower will not permit the ratio
of Consolidated Long Term Debt to Total Capitalization at any fiscal quarter
end of the Borrower to be greater than 0.3 to 1.0.

 

9.04        Minimum Net Worth.  The Borrower will not permit its Consolidated
Net Worth as of the end of any fiscal quarter to be less than the sum of (a) the
Base Consolidated Net Worth plus (b) (i) the Supplemental
Consolidated Net Worth Amount as of the most recent Subsequent Supplemental
Calculation Date, in the event that the Commitment Amount was not reduced
pursuant to Section 3.03(b) or (ii) $0, in the event that
the Commitment Amount was reduced pursuant to Section 3.03(b).

 

9.05        Liens.  The Borrower will not create, incur, assume
or suffer to exist any Lien upon or with respect to any of its rights under or
with respect to Strip Policies or Strip Policy Claims, whether now owned or
hereafter acquired, provided that the provisions of this Section 9.05
shall not prevent the creation, incurrence, assumption or existence of:

 

(a)                                 Liens for taxes not yet due, or Liens for
taxes being contested in good faith and by appropriate proceedings for which
adequate reserves have been established;

 

(b)                                Liens imposed by operation of law (i) which
do not in the aggregate materially detract from the value of such Strip
Policies or Strip Policy Claims or materially impair the collateral value
thereof or (ii) which are being contested in good faith by appropriate
proceedings, which proceedings have the effect of preventing the forfeiture or
sale of the property or assets subject to any such Lien;

 

(c)                                 Liens renewing, extending or refunding
any Lien permitted by Sections 9.05(d) and 9.05(e), provided
that the amount secured is not increased and such Liens are not extended to any
other property;

 

(d)                                 rights of any reinsurer; and

 

(e)                                 Liens existing on the Effective Date and
Liens under Section 12 hereof.

 

SECTION 10.

 

EVENTS OF DEFAULT.

 

Upon the occurrence of any
of the following specified events (each an “Event of Default”):

 

10.01      Payments.  The Borrower shall default in the payment
when due of any principal of any Loan or any Note (including any mandatory
payments under Section 4.02) or default in the payment when due of
any interest on any Loan or any Note or any Fees or any other amounts

 

26

 

owing hereunder or under
any Note, in each case in an amount of $10,000,000 or more, and any such
default described in this Section 10.01 is not cured during the
Cure Period; or

 

10.02      Bankruptcy, etc.  The Borrower or any of its Material
Subsidiaries shall commence a voluntary case concerning itself under Title 11
of the United States Code entitled “Bankruptcy,” as now or hereafter in effect,
or any successor thereto (the “Bankruptcy Code”); or an involuntary case
is commenced against the Borrower or any of its Material Subsidiaries, and the
petition is not controverted within 10 days, or is not dismissed within 60 days,
after commencement of the case; or a custodian (as defined in the Bankruptcy
Code) is appointed for, or takes charge of, all or substantially all of the
property of the
Borrower or any of its Material Subsidiaries, or the Borrower or any of its Material
Subsidiaries commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Borrower or any of its Material Subsidiaries, or there is
commenced against the
Borrower or any of its Material Subsidiaries any such proceeding which
remains undismissed or unstayed for a period of 60 days, or the Borrower or any of its Material
Subsidiaries is adjudicated insolvent or bankrupt; or any order
of relief or other order approving any such case or proceeding is entered; or the Borrower or any of its Material
Subsidiaries suffers any appointment of any custodian or the like
for it or any substantial part of its property to continue undischarged or
unstayed for a period of 60 days; or the Borrower or any of its Material Subsidiaries makes a general
assignment for the benefit of creditors; or any corporate action is taken by the Borrower or any of its Material
Subsidiaries for the purpose of effecting any of the foregoing;
or

 

10.03      Default Under Other Agreements.  The Borrower or any of its Material
Subsidiaries shall (a) default in any payment in excess of $25,000,000
with respect to any Indebtedness for borrowed money beyond the period of grace,
if any, provided in the instrument or agreement under which such Indebtedness
was created or (b) any Indebtedness for borrowed money in excess of
$25,000,000 of the Borrower or any of its Material Subsidiaries shall be
declared to be due and payable, or shall be required to be prepaid other than
by a regularly scheduled required prepayment or as a mandatory prepayment
(unless such required prepayment or mandatory prepayment results from a default
thereunder or an event of the type that constitutes an Event of Default), prior
to the stated maturity thereof;

 

then, and in any such event, and at any time
thereafter, if any Event of Default shall then be continuing, the Lender may by
written notice to the Borrower, take any or all of the following actions,
without prejudice to the rights of the Lender or the holder of any Note to
enforce its claims against the Borrower (provided that, if an Event of
Default specified in Section 10.02 shall occur with respect to the
Borrower, the result which would occur upon the giving of written notice by the
Lender to the Borrower as specified in clauses (i) and (ii) below
shall occur automatically without the giving of any such notice): (i) declare
that the Commitment Amount has been reduced to zero, whereupon the Commitment
shall forthwith terminate immediately and any accrued and unpaid Commitment
Commission on and as of such date shall forthwith become due and payable
without any other notice of any kind; and (ii) declare the principal of
and any accrued interest in respect of all Loans and the Note and all
obligations owing hereunder and thereunder to be, whereupon the same shall
become, forthwith due and payable without

 

27

 

presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower.

 

Notwithstanding anything
contained or provided in this Agreement:

 

(a)  if any
representation, warranty or statement made by or on behalf of or with respect
to the Borrower or any Subsidiary thereof herein or in any other Credit
Document or in any certificate delivered pursuant hereto or thereto shall not
be true, accurate and complete on the date as of which it was made or deemed
made (herein, a “Representation Breach”) and the event, fact, condition,
circumstance, act, omission or failure to act which relates to such
Representation Breach either (i) existed or occurred, or arose from other
events, facts, conditions, circumstances, acts, omissions or failures to act
which existed or occurred, on or prior to the Effective Date or (ii) otherwise
arises from facts giving rise to a breach of any representation, warranty or
statement made by or on behalf of or with respect to any of the Seller, the
Seller’s Parent, a Seller Insurance Subsidiary, the Company, any Company
Subsidiary, or other Affiliate thereof (as each such term is defined in the
Purchase Agreement) or Premier International Funding Co. pursuant to the
Purchase Agreement and Related Agreements, then such Representation Breach shall
not operate as a failure of a condition to borrowing under Section 6
or a breach of a covenant hereunder; and

 

(b)  if any event,
fact, condition, circumstance, act, omission or failure to act exists which
would constitute or give rise to any Default or Event or Default or other
breach of a covenant by the Borrower hereunder (a “Covenant Breach”),
and such event, fact, condition, circumstance, act, omission or failure to act
also existed or occurred, or arose from other events, facts, conditions, circumstances,
acts, omissions or failures to act which existed or occurred, on or prior to
the Effective Date, then such Covenant Breach shall not operate as a failure of
a condition to borrowing under Section 6 or a breach of a covenant
hereunder;

 

provided, that clause
(a) and (b) shall have no effect with respect to (A) a
breach by the Borrower of Sections 9.03 or 9.04 of this Agreement
with respect to any fiscal quarter commencing after June 30, 2013 or (B) an
Event of Default under Section 10.01, 10.02 or 10.03.

 

SECTION 11.

 

RESERVED.

 

SECTION 12.

 

GRANT AND PERFECTION OF
SECURITY INTEREST

 

12.01      Grant of Security Interest.  To secure payment and performance when due of
each Loan (and all accrued and unpaid interest thereon), the Borrower hereby
grants to the Lender, a continuing security interest in all Recoveries related
to such Loan (the “Collateral”). 
It being acknowledged and agreed that no Recoveries shall secure any
Loan other than the Loan that was made in connection with the Strip Policy
Claim related to such Recoveries.  The
rights of the Lender to the Collateral and the Recoveries in respect of any
Strip Policy are subject to any rights of any reinsurer of such Strip Policy.

 

28

 

12.02      Perfection of Security Interests.  (a) The Borrower irrevocably and
unconditionally authorizes the Lender (or its agent) to prepare and file at any
time and from time to time such financing statements with respect to the
Collateral naming the Lender or its designee as the secured party and the
Borrower as debtor, as the Lender may require, and including any other
information with respect to the Borrower or otherwise required by part 5 of Article 9
of the UCC, together with any amendment and continuations with respect thereto.  In no event shall the Borrower at any time
file, or authorize or cause to be filed (other than by the Lender), any
correction statement or termination statement with respect to any financing
statement (or amendment or continuation with respect thereto) naming the Lender
or its designee as secured party and the Borrower as debtor, unless (x) the
Loan and any related accrued and unpaid interest related to such Affected
Collateral has been paid in full or (y) the Collateral subject to a UCC
filing has been released from the Lien of this Agreement.

 

(b)          The Borrower shall take any other
actions reasonably requested by the Lender from time to time to cause the
attachment, perfection of, and the ability of the Lender to enforce, the
security interest of the Lender in any and all of the Collateral.  In the event that a Ratings Event occurs on
any date, the Borrower shall segregate into a separate account, in which the
Lender will have a first priority perfected security interest, all Recoveries
received by it for the benefit of the Lender (subject to the rights of
reinsurers as provided under the terms of their reinsurance arrangements with
the Borrower and the rights of the financial institution at which such account
is maintained) and shall hold all Recoveries received after such date in
respect of Loans in trust for the benefit of the Lender and such reinsurers.

 

12.03      Certain Remedies.  If any Event of Default under (x) Section 10.01
with respect to any Loan or (y) Section 10.02 or Section 10.03
shall have occurred and be continuing:

 

(a)           The Lender may (subject to all rights
and remedies granted by the Borrower with respect to reinsurers) exercise in
respect of the Affected Collateral in addition to other rights and remedies
provided for herein or otherwise available to it, all the rights and remedies
of a secured party on default under the UCC (whether or not the UCC applies to
the Affected Collateral) and also may

 

(i)            take possession of any Affected
Collateral not already in its possession without demand and without legal
process;

 

(ii)           transfer all or any part of the
Affected Collateral into the name of the Lender or its nominee, with or without
disclosing that such Affected Collateral is subject to the Lien hereunder;

 

(iii)          notify the parties obligated on any of
the Affected Collateral to make payment to the Lender of any amount due or to
become due thereunder;

 

(iv)          enforce collection of any of the
Affected Collateral by suit or otherwise, and surrender, release or exchange
all or any part thereof, or compromise or extend or renew for any period
(whether or not longer than the original period) any obligations of any nature
of any party with respect thereto;

 

29

 

(v)           execute (in the name, place and stead
of the Borrower) endorsements, assignments and other instruments of conveyance
or transfer with respect to all or any of the Affected Collateral; and

 

(vi)          without notice except as specified
below, dispose of the Affected Collateral or any part thereof in one or more
parcels at public or private sale, at any of the Lender’s offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms as the
Lender may deem commercially reasonable. 
The Borrower agrees that, to the extent notice of sale shall be required
by law, at least ten days’ prior notice to the Borrower of the time and place
of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification.  The
Lender shall not be obligated to make any sale of Affected Collateral
regardless of notice of sale having been given. 
The Lender may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.

 

(b)          All cash proceeds received by the
Lender in respect of any sale of, collection from, or other realization upon,
all or any part of the Collateral shall (subject to the rights of reinsurers to
receive amounts in accordance with the terms of their insurance arrangements)
be applied by the Lender against, all or any part of the relevant Loans and
accrued and unpaid interest thereon until paid in full, and the remainder shall
be distributed to the Borrower.

 

12.04      Release of Security Interest; Removal
from Schedule II.  Upon payment in
full of any Loan and any accrued and unpaid interest thereon, the security
interest in the related Collateral shall be automatically released from the
Lien of this Agreement.  Notwithstanding
anything to the contrary contained in this Agreement, so long as no Borrowing
has been made with respect to a Strip Policy, the Borrower may request that
such Strip Policy be removed from Schedule II hereof and any and all
Liens created under this Agreement with respect to the related Collateral shall
be released.  Once such Strip Policy is
removed from Schedule II hereof and such Lien is released, no Borrowing
may be requested or made in connection with such Strip Policy.  Upon any such release, the Lender shall, at
the Borrower’s request, deliver to the Borrower a certificate stating that such
Collateral is free and clear of Liens, if any, that were created upon such
Collateral by the Lender pursuant to Section 12.02 and, upon request
of the Borrower, shall file UCC termination or amendment filings reflecting the
release of such Collateral from the Lien of this Agreement.  The Lender shall have the authority to act in
connection with the release of the security interest in the Collateral as
contemplated by this Section 12.04.

 

12.05      Savings Clause.  The security interest of Lender hereunder is
subject to all terms, conditions and limitations in respect thereof set forth
in and pursuant to the terms of the related Strip Policies, the transaction
documents relating thereto, the rights of reinsurers with respect thereto and
applicable law.

 

30

 

SECTION 13.

 

MISCELLANEOUS.

 

13.01      Payment of Expenses, etc.  The Borrower shall pay all reasonable out of
pocket costs and expenses of the Lender in connection with the enforcement of
this Agreement and the other Credit Documents and the documents and instruments
referred to herein and therein (including, without limitation, the reasonable
fees and disbursements of counsel for the Lender).  Notwithstanding anything contained herein or
in any other agreement entered into by the Borrower and the Lender, the
Borrower shall not be obligated to pay to the Lender any fees for any consents
granted by the Lender under or with respect to this Agreement or any other
Credit Document.

 

13.02      Transaction Agreement.  This Agreement is a Transaction Agreement
executed pursuant to the Purchase Agreement.

 

13.03      Notices.  Except as otherwise expressly provided
herein, all notices and other communications provided for hereunder shall be in
writing (including telegraphic, telex, facsimile or cable communication) and
mailed, telegraphed, telexed, telecopied (with telephonic confirmation in the
case of any notice to the Lender), cabled or delivered to the Borrower or the
Lender at its Office listed on Schedule I hereto; or at such other
address as shall be designated by such party in a written notice to the other
party hereto.  All such notices and
communications shall when mailed, telegraphed, telexed, telecopied, cabled or
sent by overnight courier, be effective upon receipt.

 

13.04      Benefit of Agreement.

 

(a)           Neither this Agreement nor any
interest or obligation in or under this Agreement may be transferred (whether
by way of security or otherwise) by FSA without the consent of DCL, not to be
unreasonably withheld, other than pursuant to a transaction permitted under Section 9.01.

 

(b)          Neither this Agreement nor any
interest or obligation in or under this Agreement may be transferred (whether
by way of security or otherwise) by DCL without the consent of FSA, not to be
unreasonably withheld, other than pursuant to a consolidation, amalgamation,
merger, transfer of all or substantially all DCL’s assets or liabilities, or
any other type of corporate reorganization relating to DCL, with respect to
which:

 

(i)            such successor or transferee
succeeds in full to DCL’s obligations hereunder;

 

(ii)           such successor or transferee is a
regulated financial institution with a state or Federal branch within the
United States;

 

(iii)          such successor or transferee delivers
to FSA the forms described in Section 4.04(d)(ii)(A) or Section 4.04(d)(iv)(A),
as applicable;

 

(iv)          the Rating Agency Condition with
respect to FSA is satisfied with respect to such consolidation, amalgamation,
merger, transfer or corporate reorganization;

 

31

 

(v)           the jurisdiction of organization of
such successor or transferee is France, Belgium, Germany, Spain, Italy,
Netherlands, Luxembourg, United Kingdom, Japan, Australia, New Zealand, Canada,
Ireland, Switzerland or the United States; and

 

(vi)          the credit ratings of such successor
or transferee are the same or better as those of DCL at the time of such
consolidation, amalgamation, merger, transfer or corporate reorganization;

 

provided, that the
Lender may not transfer any interest or obligation in or under this Agreement,
and no other transfer shall be effective, irrespective of whether FSA has
consented to such transfer, unless such transfer shall have been registered by
the Lender pursuant to Section 13.04(c).

 

(c)           The Borrower hereby designates the
Lender to serve as the Borrower’s agent, solely for the purpose of this
paragraph, to maintain a register (the “Register”) on which the Lender
will record each Commitment, the Loans made by the Lender, and each repayment
in respect of the principal amount of the Loans of the Lender.  The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower and the Lender
shall treat each Person in whose name a Loan is registered as the owner thereof
for all purposes of this Agreement, notwithstanding notice or any provisions
herein to the contrary.  Subject to
clause (b) above, a Commitment and the Loans made pursuant thereto may be
assigned or otherwise transferred in whole or in part only by registration of
such assignment or transfer in the Register. 
Any assignment or transfer of a Commitment or the Loans made pursuant
thereto shall be registered in the Register only upon delivery to the Borrower
of an assignment and assumption agreement duly executed by the assignor
thereof.

 

(d)          Nothing in this Agreement shall
prevent or prohibit the Lender from pledging its Loans and Note to a Federal
Reserve Bank in support of borrowings made by the Lender from such Federal
Reserve Bank.

 

13.05      No Waiver; Remedies Cumulative.  No failure or delay on the part of the Lender
or the holder of any Note in exercising any right, power or privilege hereunder
or under any other Credit Document and no course of dealing between the
Borrower and the Lender or the holder of any Note shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder.  Except as
otherwise expressly provided herein or in any other Credit Document, the rights,
powers and remedies herein or in any other Credit Document expressly provided
are cumulative and not exclusive of any rights, powers or remedies which the
Lender would otherwise have.  No notice
to or demand on the Borrower in any case shall entitle the Borrower to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Lender or the holder of any Note to
any other or further action in any circumstances without notice or demand.

 

13.06      Calculations; Computations.  (a) The financial statements to be
furnished to the Lender pursuant to Sections 8.01(a) and 8.01(b) shall
be made and prepared in accordance with GAAP.

 

32

 

(b)          Unless otherwise specified herein, all
computations of interest, Commitment Commission and Fees hereunder shall be
made on the basis of a year of 360 days for the actual number of days
(including the first day but excluding the last day) occurring in the period
for which such interest, Commitment Commission or Fees are payable.

 

13.07      Governing Law; Submission to
Jurisdiction; Venue.  THIS AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS
OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES OTHER
THAN SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK AND CHOICE OF LAW PROVISION OF THE UCC).  Each of the parties hereto hereby irrevocably
submits to the exclusive jurisdiction, subject matter jurisdiction and venue of
any U.S. federal or state court located in The City of New York or with
appellate jurisdiction thereto for the purpose of any suit, action, proceeding
or judgment arising out of or relating to this Agreement.  Each of the parties hereto hereby consents to
the laying of venue in any such suit, action or proceeding in New York County,
New York, and hereby irrevocably waives any claim that any such suit, action or
proceeding brought in such a court has been brought in an inconvenient forum
and agrees not to plead or claim the same. 
Any process in any such action shall be duly served if mailed by
registered mail, postage prepaid, with respect to (i) FSA, the Borrower
and its Affiliates, at the respective addresses set forth on Schedule I
attached hereto and (ii) with respect to DCL, the Lender and its
Affiliates, at the respective addresses set forth on Schedule I attached
hereto.  DCL may appoint a process agent
with an office in the State of New York by notice to FSA.  Such service may be made by mailing or
delivering a copy of such process to DCL in care of the Process Agent at the
Process Agent’s above address, and DCL hereby authorizes and directs the
Process Agent to accept such service on its behalf.  DCL may appoint a replacement Process Agent
with an office in the State of New York by notice to FSA.

 

13.08      Obligation to Make Payments in Dollars.  The obligation of the Borrower to make
payment in Dollars of the principal of and interest on the Note and any other
amounts due hereunder or under any other Credit Document to the Office of the
Lender as provided in Section 4.03 shall not be discharged or
satisfied by any tender, or any recovery pursuant to any judgment, which is
expressed in or converted into any currency other than Dollars, except to the
extent such tender or recovery shall result in the actual receipt by the Lender
at its Office of the full amount of Dollars expressed to be payable in respect
of the principal of and interest on the Note and all other amounts due
hereunder or under any other Credit Document. 
The obligation of the Borrower to make payments in Dollars shall be
enforceable as an alternative or additional cause of action for the purpose of
recovery in Dollars of the amount, if any, by which such actual receipt shall
fall short of the full amount of Dollars expressed to be payable in respect of
the principal of and interest on the Note and any other amounts due under any
other Credit Document, and shall not be affected by judgment being obtained for
any other sums due under this Agreement or under any other Credit Document.

 

13.09      Counterparts.  This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.  A set of counterparts executed by all the
parties hereto shall be lodged with the Borrower.

 

33

 

13.10      Effectiveness.  This Agreement shall become effective on the
Effective Date.

 

13.11      Table of Contents and Headings
Descriptive.  The table of contents
and the headings of the several sections and subsections of this Agreement are
inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.

 

13.12      Amendment or Waiver.  Neither this Agreement nor any other Credit
Document nor any terms hereof or thereof may be changed, waived, discharged or
terminated unless such change, waiver, discharge or termination is in writing
signed by the Borrower and the Lender.

 

13.13      SOVEREIGN IMMUNITY.  To the extent that DCL, or
any of its properties, assets or revenues may have or may hereafter become
entitled to, or have attributed to them, any right of immunity, on the grounds
of sovereignty or otherwise, from any legal action, suit or proceeding, from
the giving of any relief in any respect thereof, from setoff or counterclaim,
from the jurisdiction of any court, from service of process, from attachment
upon or prior to judgment, from attachment in aid of execution of judgment, or
from execution of judgment, or other legal process or proceeding for the giving
of any relief or for the enforcement of any judgment, in any jurisdiction in
which proceedings may at any time be commenced, with respect to its
obligations, liabilities or any other matter under or arising out of or in
connection with this Agreement, FSA and DCL hereby irrevocably and
unconditionally waive, and agree not to plead or claim, to the fullest extent permitted
by applicable law, any such immunity and consent to such relief and
enforcement.

 

13.14      WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

13.15      Survival.  The indemnities set forth in Section 4.04
shall survive the execution and delivery of this Agreement and the Note and the
making and repayment of the Loans.

 

13.16      Confidentiality.  The Lender agrees to keep information
delivered or made available by or on behalf of the Borrower pursuant to this
Agreement confidential from anyone other than its employees, directors, legal
counsel, independent auditors, other advisors and prospective assignees and
participants (who shall have agreed to similar restrictions); provided
that nothing herein shall prevent the Lender from disclosing such information (a) in
response to a subpoena or other order of a court or administrative agency
provided that the Lender shall (to the extent legally permitted) promptly
notify the Borrower of such subpoena or other order, (b) to the extent
necessary in connection with the exercise of any remedy hereunder, (c) if
such information is or becomes generally available to the public other than as
a result of a disclosure by the Lender prohibited by this Agreement or (d) if
such information is or becomes available to the Lender from a source (other
than the Borrower) that is not bound by an obligation of confidentiality to the
Borrower.

 

34

 

IN WITNESS WHEREOF, the
parties hereto have caused their duly authorized officers to execute and
deliver this Agreement as of the date first above written.

 

Address:

 

FINANCIAL SECURITY ASSURANCE INC.

31 West 52nd Street

New York, New York 10019

 

	
  By:

  	
   

  	
   

  
	
  Attention:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  

 

with a copy to:

 

FINANCIAL SECURITY ASSURANCE INC.

31 West 52nd Street

New York, New York 10019

Attention: General Counsel

 

and

 

Assured Guaranty US Holdings Inc.

1325 Avenue of the Americas

New York, New York 10019

Attention: 
CFO

 

and

 

Assured Guaranty Ltd.

30 Woodbourne Avenue - 5th Floor

Hamilton HM 08, Bermuda

Attention: General Counsel

 

DEXIA CRÉDIT LOCAL S.A., ACTING THROUGH
ITS NEW YORK BRANCH

 

 

	
  By:

  	
   

  	
   

  
	
  Attention:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:Exhibit
10.13

 

EXECUTION COPY

 

INDEMNIFICATION AGREEMENT

(FSA Global Business)

 

This INDEMNIFICATION AGREEMENT (this “Agreement”),
dated as of July 1, 2009, is made by and between Financial Security
Assurance Inc. (“FSA”), a New York corporation, Assured Guaranty Ltd., a
Bermuda company (“Assured”) and Dexia Crédit Local S.A., a French share
company licensed as a bank under French law (“DCL”).

 

RECITALS

 

WHEREAS, pursuant to a Purchase Agreement,
dated as of November 14, 2008 (as amended, modified or otherwise
supplemented from time to time, the “Purchase Agreement”), among Dexia
Holdings, Inc. (“DHI”), DCL and Assured, DHI has agreed to sell and
transfer to Assured all of the Shares (as defined in the Purchase Agreement)
owned by DHI of Financial Security Assurance Holdings Ltd. (“FSAH”);

 

WHEREAS, in connection with the transactions
contemplated by the Purchase Agreement, (a) DHI has agreed to (i) assume
all rights and obligations related to and incurred in connection with the
operation of the Medium-Term Note Business and (ii) manage the day-to-day
operations of the Medium-Term Note Business in each case through its Affiliate,
DCL and (b) FSA has agreed to (i) retain all rights and obligations
related to and incurred in connection with the operation of the Leveraged Tax
Lease Business and (ii) manage the day-to-day operations of the Leveraged
Tax Lease Business (such agreements being collectively referred to as the “FSA
Global Business Separation”);

 

WHEREAS, in furtherance of the FSA Global
Business Separation, the parties hereto desire to enter into this Agreement in
order to, among other things, provide for certain indemnities, on the terms and
subject to the conditions set forth herein;

 

WHEREAS, in addition to this Agreement, the
FSA Global Business Separation will be effectuated by, among other agreements,
the Separation Agreement, dated as of the date hereof (the “Separation
Agreement”) by and among FSA, Financial Security Assurance International
Ltd. (“FSA International”), DCL, FSA Global Funding Limited (“FSA
Global”) and Premier International Funding Company (“Premier”), the
FSA Global DCL Guarantees, the FSA Global Guarantee Reimbursement Agreement;

 

NOW, THEREFORE, in consideration of the
promises and covenants set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Parties hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1                                      Certain Definitions.  Unless
otherwise defined herein, capitalized terms used herein shall have the meanings
set forth (x) in the Separation Agreement or (y) if not defined
therein, then in the Purchase Agreement.

 

 

Section 1.2                                      Other Terms.  Other terms
may be defined elsewhere in the text of this Agreement and, unless otherwise
indicated, shall have such meaning indicated throughout this Agreement.

 

Section 1.3                                      Other Definitional Provisions.

 

(a)                                  The words “hereof”, “herein”, and “hereunder”
and words of similar import, when used in this Agreement, shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.

 

(b)                                 The terms defined in the singular shall
have a comparable meaning when used in the plural, and vice versa.

 

(c)                                  The word “or” will be inclusive and not
exclusive unless the context requires otherwise.

 

ARTICLE II

 

FSA GLOBAL BUSINESS
INDEMNIFICATION

 

Section 2.1                                      Indemnification by Assured. 
Assured agrees (upon the terms and subject to the conditions of this
Agreement) to indemnify and hold harmless DCL, each Affiliate of DCL and each
of the past, present and future directors, officers, employees and agents of
DCL and each such Affiliate of DCL (collectively, the “Dexia Indemnified
Parties” and, together with the FSA Indemnified Parties, the “Indemnified
Parties”) against any and all actions, suits, hearings, proceedings,
injunctions, judgments, orders, decrees, rulings, losses, direct damages,
liabilities, and reasonable costs and expenses (including reasonable attorneys’
fees and expenses incurred in defending any losses covered hereby, but
excluding in each case any other indirect, consequential, special or punitive
damages as referenced in Section 3.5) (collectively, “Losses”)),
incurred after the Closing Date by any Dexia Indemnified Party arising out of
or as a result of:

 

(a)                                  the Leveraged Tax Lease Business
(including the Debt PUAs and the A-Loans) except to the extent that such Losses
resulted from:

 

(i)                                     the status of such Debt PUAs or A-Loans
as collateral securing the MTNs, Debt PUA Notes or Equity PUA Notes and
application of proceeds of the A-Loans to the MTNs or Equity PUA Notes,

 

(ii)                                  the failure of amounts paid to the Person
entitled to receive such amounts under the A-Loans to be applied to the Debt
PUA Notes,

 

(iii)                               the breach of any representation or
warranty of the FSA Parties under the Separation Documents as of the Closing
Date and the breach by any other party to the Separation Documents of any of
such party’s representations, warranties, covenants or other agreements under
the Separation Documents,

 

2

 

(iv)                              any tax shelter registration not being
filed with the Internal Revenue Service or any state or local taxing authority
or any tax shelter designation agreement not being entered into in connection
with the Leveraged Tax Lease Business, in each case on or before the date
required by applicable law or regulation, or

 

(v)                                 the failure of UCC financing statements,
UCC continuation statements, filings with the Surface Transportation Board and
other filings with Governmental Authorities to be timely filed in connection
with the Leveraged Tax Lease Business.

 

(b)                                 subject to Section 2.1(e) of
the Separation Agreement, any breach by the FSA Parties of any of the FSA
Parties’ covenants or other agreements under the Separation Documents; or

 

(c)                                  any third-party legal or other expenses
reasonably incurred by a Dexia Indemnified Party in connection with (A) investigating
any potential Loss where a Dexia Indemnified Party has received notice of a
potential claim, demand or legal action relating to such potential Loss from a
Person who is (i) not a Dexia Indemnified Party and (ii) not a
representative or agent of a Dexia Indemnified Party (other than a trustee,
collateral agent or other administrator under, or other Person delivering
notice pursuant to, the MTN Business Transaction Documents or Leveraged Lease
Transaction Documents), or (B) defending any loss, claim, damage,
liability or action relating to a Loss or potential Loss that, in the case of (A) or
(B), is indemnified by Assured as Indemnifying Party hereunder, or enforcing
its rights hereunder;

 

provided, however, that
Assured and its Affiliates shall have (x) no obligation to indemnify the
Dexia Indemnified Parties for any Losses, (y) no responsibility to any
Dexia Indemnified Party for costs of capital and (z) no obligation to post
collateral, in each case as contemplated under Section 6.13(d)(i)(F) of
the Purchase Agreement.  In addition,
Assured and its Affiliates shall have no obligation to indemnify the Dexia
Indemnified Parties hereunder for (x) any Losses incurred by such Dexia
Indemnified Party, if such Loss was incurred by such Person in connection with
an action, event or circumstance for which DCL indemnifies and holds harmless
an FSA Indemnified Party pursuant to Section 2.2 below or (y) amounts
paid under an FSA Global DCL Guarantee by DCL.

 

The indemnification provided in this Section 2.1
shall be in addition to any liability which Assured may otherwise have pursuant
to the Purchase Agreement, the Separation Documents or otherwise but without
duplication in respect of the same Loss. 
For the avoidance of doubt, (i) Assured hereby acknowledges that
the Limit to indemnification provided for in Section 9.1 of the Purchase
Agreement is not applicable to the indemnification provided in this Section 2.1,
(ii) Assured shall have no obligation to indemnify the Dexia Indemnified
Parties under this Agreement for any Losses related to the Leveraged Tax Lease
Business that arise after the Closing Date but relate to claims based on any
event, fact, condition, circumstance, act, omission or failure to act which
existed or occurred prior to or at the Closing Date and (iii) Losses shall
not include salaries, overhead costs, operating expenses or other ordinary
course business costs and expenses of the Dexia Indemnified Parties.

 

3

 

Section 2.2                                      Indemnification by DCL.  DCL agrees
(upon the terms and subject to the conditions of this Agreement) to indemnify
and hold harmless the FSA Parties and Assured, each Affiliate of the FSA
Parties and Assured, and each of the past, present and future directors,
officers, employees and agents of the FSA Parties, Assured and each such
Affiliate of the FSA Parties and Assured (collectively, the “FSA Indemnified
Parties”) against any and all Losses incurred after the Closing Date by any
FSA Indemnified Party arising out of or as a result of:

 

(a)                                  the Medium-Term Note Business (including,
the exercise or non-exercise by an FSA Party of an FSA Right pursuant to the
terms of the Separation Agreement), except to the extent (i) such Losses
result from the breach of any covenant or other agreement of any FSA Party
under the Separation Documents and (ii) such breach referred to in clause (i) above
does not arise out of or relate to a protected reliance, action, assumption or
failure to investigate by FSA pursuant to Section 2.1(e) of the
Separation Agreement;

 

(b)                                 any tax shelter registration not being
filed with the Internal Revenue Service or any state or local taxing authority
or any tax shelter designation agreement not being entered into in connection
with the Leveraged Tax Lease Business, in each case on or before the date
required by applicable law or regulation;

 

(c)                                  the status of the Debt PUAs or A-Loans as
collateral securing the MTNs, Debt PUA Notes or Equity PUA Notes and
application of proceeds of the A-Loans to the MTNs or Equity PUA Notes;

 

(d)                                 the failure of amounts paid to the Person
entitled to receive such amounts under the A-Loans to be applied to the Debt
PUA Notes;

 

(e)                                  the failure of UCC financing statements,
UCC continuation statements, filings with the Surface Transportation Board and
other filings with Governmental Authorities to be timely filed in connection
with the Leveraged Tax Lease Business; provided, that DCL shall not be
liable for any Loss caused by such failure and incurred by an FSA Indemnified
Party after the 18th month following the Closing Date, to the
extent that such Loss could have been avoided by such FSA Party filing a UCC
financing statement or continuation statement before the end of the 18th month following
the Closing Date and such UCC financing statement or continuation statement has
not been filed prior to the end of such 18th month;

 

(f)                                    the breach of any representation or
warranty of the FSA Parties under the Separation Documents as of the Closing
Date and the breach by any other party to the Separation Documents of any of
such party’s representations, warranties, covenants or other agreements under
the Separation Documents;

 

(g)                                 any third-party legal or other expenses
reasonably incurred by the FSA Indemnified Parties in connection with (A) investigating
any potential Loss where an FSA Indemnified Party has received notice of a
potential claim, demand or legal action relating to such potential Loss from a
Person who is (i) not an FSA Indemnified Party and (ii) not a
representative or agent of an FSA Indemnified Party (other than a trustee,
collateral agent or other administrator under, or other Person delivering
notice pursuant to, the MTN Business Transaction Documents or Leveraged Lease
Transaction Documents), or (B) defending any loss,

 

4

 

claim, damage, liability or action relating to a Loss
or potential Loss that, in the case of (A) or (B), is indemnified by DCL
as Indemnifying Party hereunder, or enforcing its rights hereunder; or

 

(h)                                 any breach of the representation and
warranty in Section 2.09 of the Strip Coverage Liquidity and Security
Agreement, dated as of July 1, 2009, by and between FSA and DCL;

 

provided, however, that,
except in connection with any Collateral Posting or Claims Reserve LOC (and any
breach by DCL of its obligations with respect to such Collateral Posting or
such Claims Reserve LOC ), DCL and its Affiliates shall have (x) no
obligation to indemnify the FSA Indemnified Parties hereunder for any Losses, (y) no
responsibility to any FSA Indemnified Party for costs of capital and (z) no
obligation to post collateral, in each case as contemplated under Section 6.13(d)(i)(F) of
the Purchase Agreement.  In addition, DCL
and its affiliates shall have no obligation to indemnify the FSA Indemnified
Parties for (x) any Losses incurred by such FSA Indemnified Party, if such
Loss was incurred by such Person in connection with an action, event or
circumstance for which Assured indemnifies and holds harmless a Dexia
Indemnified Party pursuant to Section 2.1 above or (y) the FSA
Percentage (if any) of any claim paid under an FSA Policy by an FSA Party.

 

The indemnification provided in this Section 2.2
shall be in addition to any liability which DCL may otherwise have pursuant to
the Purchase Agreement, the Separation Documents, or otherwise but without
duplication in respect of the same Loss. 
For the avoidance of doubt, (i) DCL hereby acknowledges that the
Limit to indemnification provided for in Section 9.1 of the Purchase
Agreement is not applicable to the indemnification provided in this Section 2.2,
(ii) amounts that have been timely paid by DCL under Section 2.1(b) of
the Funding Guaranty shall not give rise to Losses under this Section 2.2
unless such amounts become subject to a proceeding in connection with a
Bankruptcy Event related to DCL or an Affiliate thereof and (iii) Losses
shall not include salaries, overhead costs, operating expenses or other
ordinary course business costs and expenses of the FSA Indemnified Parties.

 

Section 2.3                                      Taxes. 
Notwithstanding any other provision of this Agreement to the contrary,
all rights and obligations with respect to Taxes imposed on or with respect to
payments made under this Agreement shall be governed solely by Section 8.2
of the Separation Agreement.

 

Section 2.4                                      Revocation of Limits.  For the
avoidance of doubt, the parties hereto and DHI hereby acknowledge and agree
that the limits to indemnification provided in the Purchase Agreement are
hereby superseded and revoked to the extent of the agreement of the parties
hereto set forth herein.  The rights of
the parties hereunder are in addition to rights the parties may have under
applicable law.

 

Section 2.5                                      Limitation on Indemnity.  The
indemnification provided in Sections 2.1 and 2.2 shall not
cover any Losses to the extent finally adjudicated, settled, determined or
otherwise agreed upon by the parties hereto to have resulted from a material
breach after the Closing Date by a Dexia Indemnified Party or an FSA
Indemnified Party, as applicable, of such Indemnified Party’s obligations under
the Separation Documents.  Any
determination that the

 

5

 

indemnification provided in Sections 2.1
and 2.2 is not available with respect to any Losses as a result of the
application of this Section 2.4 shall not be deemed a determination with
respect to any other Losses and shall not otherwise affect the availability of
the indemnification under Sections 2.1 and 2.2 for other
Losses.

 

Section 2.6                                      Lien Perfection.  DCL will on
demand reimburse FSA for 50% of the reasonably documented out-of-pocket costs
and expenses incurred by FSA in investigating and remedying potential failures
to make UCC and other filings to perfect liens relating to the Leveraged Tax
Lease Business, provided that the liability of DCL under this section will not
exceed $50,000.

 

ARTICLE III

 

INDEMNIFICATION PROCEDURES

 

Section 3.1                                      Mitigation of Losses.  Assured and
DCL shall each be required to take, and to cause any Indemnified Party under
its respective Control to take, all actions permitted to be taken by such
Person under the Separation Documents and reasonably necessary to mitigate any Losses
in respect of which they or, if applicable, their related Indemnified Parties
may seek indemnification hereunder during such period as the Indemnified Party
was aware of the claim giving rise to the Loss.

 

Section 3.2                                      Method of Asserting Claims, Etc.

 

(a)                                  All claims for indemnification by any
Indemnified Party under this Agreement shall be asserted and resolved as set
forth in this Section.  In the event that
any written claim or demand for which Assured or DCL, as the case may be (an “Indemnifying
Party”), may be liable to any Indemnified Party hereunder is asserted
against or sought to be collected from any Indemnified Party by a third party,
such Indemnified Party shall promptly, but in no event later than 15 days
following such Indemnified Party’s receipt of such claim or demand, notify in
writing the Indemnifying Party of such claim or demand and the amount or the
estimated amount thereof to the extent then feasible (which estimate shall not
be conclusive of the final amount of such claim or demand) (the “Third Party
Claim Notice”).  The failure by any
Indemnified Party to timely deliver the Third Party Claim Notice shall not
relieve the Indemnifying Party from any liability that it may have to such
Indemnified Party hereunder, except to the extent that the Indemnifying Party
has been materially prejudiced or suffers any Loss by such failure.

 

(b)                                 With respect to claims or demands for
which a Third Party Claim Notice has been delivered under Section 3.2(a),
the Indemnifying Party shall have thirty (30) days after the delivery of the
Third Party Claim Notice (the “Notice Period”) to notify the Indemnified
Party whether or not it desires to defend the Indemnified Party against such
claim or demand.  During the Notice
Period and thereafter the Indemnified Party shall provide the Indemnifying
Party with such information relating to the claim or demand as the Indemnifying
Party shall reasonably request. 
Assumption of the defense against any such claim or demand shall not in
any way be deemed an acknowledgment of any kind that such claim or demand is
subject to indemnification.  All costs
and expenses incurred by the Indemnifying Party in defending any such claim or
demand shall be borne by the Indemnifying Party.  Except as hereinafter provided, in the event

 

6

 

that the Indemnifying Party notifies the Indemnified
Party within the Notice Period that it desires to defend the Indemnified Party
against such claim or demand, the Indemnifying Party shall have the sole power
to direct and control such defense.  If
the Indemnifying Party so elects to assume the defense of such claim, the
Indemnifying Party shall not be liable to the Indemnified Party for any legal
expenses subsequently incurred by the Indemnified Party, except as hereinafter
provided.  If any Indemnified Party
desires to participate in, but not control, any such defense it may do so at
its sole cost and expense, except as hereinafter provided.  The Indemnified Party shall not settle,
compromise or discharge a claim or demand for which it is indemnified by the
Indemnifying Party or admit to any liability with respect to such claim or
demand without the prior written consent of the Indemnifying Party (which
consent shall not be unreasonably withheld or delayed).  The Indemnifying Party shall not, without the
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld or delayed), settle, compromise or offer to settle or
compromise any such claim or demand unless the terms of such settlement provide
for no relief other than payments (including without limitation payment of
monetary damages) that are not to be paid by the Indemnified Party or any of
its Affiliates.  To the extent the Indemnifying
Party shall direct, control or participate in the defense or settlement of any
third party claim or demand, the Indemnified Party shall provide the
Indemnifying Party and its counsel reasonable access (subject to
confidentiality obligations) to all relevant business records and other documents,
employees and properties and shall use its reasonable best efforts to assist,
and to cause the employees and counsel of the Indemnified Party to assist, in
defense of such claim. Notwithstanding the foregoing, if the Indemnifying Party
elects not to defend the Indemnified Party or if the Indemnified Party is
advised by outside counsel that a conflict of interest exists that requires the
Indemnified Party to be represented by separate counsel under the applicable rules of
professional responsibility or if the court or arbitrator to which the third
party claim is pending determines that a conflict of interest exists such that
the Indemnifying Party’s counsel is prohibited by such court or arbitrator or
otherwise unable to adequately represent the Indemnified Party with respect to
such third party claim, the Indemnified Party shall (at the sole cost and
expense of the Indemnifying Party in accordance with and subject to this Article III)
have the right and the obligation to vigorously defend the claim or demand by
appropriate proceedings and shall have the sole power to direct and control
such defense with respect to itself, subject to the restriction on settlement
pursuant to this Article III. 
In any event, the Indemnifying Party shall, at its own expense, have the
right to participate in the defense or settlement of any third party claim or
demand for which the Indemnifying Party may be liable hereunder.

 

(c)                                  In the event any Indemnified Party should
have a claim against any Indemnifying Party hereunder that does not involve a
third party, the Indemnified Party shall deliver express written notice of such
claim (a “Direct Claim Notice”) (specifying in reasonable detail the
basis for, and estimated amount of, such claim) with reasonable promptness to
the Indemnifying Party (and in any event, within 15 days of the date on which
the Indemnified Party becomes aware or, with the exercise of reasonable
diligence would have become aware, of such claim).  The failure by any Indemnified Party to so
notify the Indemnifying Party shall not relieve the Indemnifying Party from any
liability that it may have to such Indemnified Party hereunder, except to the
extent that the Indemnifying Party has been materially prejudiced or suffers
any Loss by such failure.

 

7

 

(d)                                 With respect to a claim against any
Indemnifying Party hereunder, the related indemnification payment provided for
hereunder, together with any Indemnification Payment Accrued Interest thereon,
shall be paid to the Indemnified Party by no later than the applicable
Indemnification Payment Due Date.

 

As used herein, the term “Indemnification
Payment Due Date” means the later of (i) 45 days following
delivery to the Indemnifying Party of the related Direct Claim Notice or Third
Party Claim Notice, as applicable, and (ii) 5 Business Days following the
date on which the Indemnified Party notifies the Indemnifying Party that the
Indemnified Party has incurred the related Loss, and the term “Indemnification
Payment Accrued Interest” means, with respect to a claim against any
Indemnifying Party hereunder, interest on the amount of such claim, calculated
using a per annum rate equal to the Prime Lending Rate and accruing from the
Indemnification Payment Due Date, unless such payment is a Good Faith Contested
Payment or an FSA Good Faith Contested Payment (as applicable), in which case
interest will only accrue on such payment from the date it is no longer a Good
Faith Contested Payment.

 

Section 3.3                                      Calculation of Losses.  The payment
of any amount by the Indemnifying Party to the Indemnified Party under this
Agreement shall be reduced by any amounts received by the Indemnified Party
from any third party (other than an Affiliate of the Indemnified Party) or
under applicable insurance policies owned by the Indemnified Party or its
Subsidiaries.  For the avoidance of
doubt, (i) payments under this Agreement shall in no event be in
duplication of any payments by Assured, the FSA Parties, DCL or any of their
Affiliates under the Separation Documents, the Purchase Agreement or any other
agreement entered into in connection therewith and (ii) this Agreement
shall not cover any Losses incurred in connection with other liabilities that
Assured, the FSA Parties, DCL or any of their Affiliates has expressly agreed
are not the responsibility of such party under the Separation Documents, the
Purchase Agreement or any other agreement entered into in connection
therewith.  DCL may treat Assured as the
authorized representative of any FSA Indemnified Parties for purposes of any
amendments, modifications or waiver to this Agreement or any communications
with the FSA Indemnified Parties relevant to indemnification for a Loss covered
under this Agreement.  Assured may treat
DCL as the authorized representative of any Dexia Indemnified Parties for
purposes of any amendments, modifications or waiver to this Agreement or any
communications with the Dexia Indemnified Parties relevant to indemnification
for a Loss covered under this Agreement.

 

Section 3.4                                      Assignment of Claims.  If an Indemnified
Party receives any payment from an Indemnifying Party in respect of any Losses
and the Indemnified Party could have recovered all or a part of such Losses
from a third party (a “Potential Contributor”) based on the underlying
claim or demand asserted against such Indemnifying Party, such Indemnified
Party shall, to the extent permitted by Law and subject to Section 2.3 of
the Separation Agreement, assign such of its rights to proceed against the
Potential Contributor as are necessary to permit such Indemnifying Party to
recover from the Potential Contributor the amount of such payment.

 

Section 3.5                                      No Consequential Damages. 
Notwithstanding anything to the contrary contained herein, no
Indemnifying Party shall be liable to or otherwise responsible to any
Indemnified Party for indirect, consequential, incidental, special or punitive
damages (including, without limitation, any lost profits, costs of capital or
the consequences of any downgrade of any Indemnified Party) that arise out of
or relate to this Agreement, the Purchase Agreement or the

 

8

 

Separation Documents or the performance or breach of,
or any liability retained or assumed under, such agreements.

 

Section 3.6                                      Contribution.  To provide
for just and equitable contribution if the indemnification provided by Assured
pursuant to Section 2.1 or DCL pursuant to Section 2.2
is determined to be unavailable for any Dexia Indemnified Party or FSA
Indemnified Party, respectively (other than due to application of this Article III),
Assured or DCL, as applicable, shall contribute to the Losses incurred by such
Indemnified Party in such proportion as shall be appropriate to reflect its
relative fault, on the one hand, and the relative fault of the Indemnified
Party, on the other hand.  No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.

 

ARTICLE IV

 

MISCELLANEOUS

 

Section 4.1                                      Transaction Agreement.  This
Agreement is a “Transaction Agreement” (as such term is defined in the Purchase
Agreement) executed pursuant to the Purchase Agreement and is also a Separation
Document.

 

Section 4.2                                      Amendment and Waiver.  Any provision
of this Agreement may be amended or waived if, and only if, such amendment or
waiver is in writing and signed, in the case of an amendment, by the parties
hereto, or in the case of a waiver, by the party against whom the waiver is to
be effective.  No failure or delay by any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof.

 

Section 4.3                                      Successors, Transferees and Assigns;
Transfers of Obligations, etc.

 

(a)                                  Neither this Agreement nor any interest
or obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by Assured without the consent of DCL, not to be unreasonably
withheld, other than pursuant to any consolidation, amalgamation, merger,
transfer of all or substantially all its assets or liabilities, or any other
type of corporate reorganization, where such successor or transferee succeeds
in full to Assured’s obligations hereunder.

 

(b)                                 Neither this Agreement nor any interest
or obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by DCL without the consent of Assured, not to be
unreasonably withheld, other than pursuant to a consolidation, amalgamation,
merger, transfer of all or substantially all its assets or liabilities, or any
other type of corporate reorganization, pursuant to which (i) such
successor or transferee succeeds in full to DCL’s obligations hereunder; (ii) such
successor or transferee is a regulated financial institution with a state or
Federal branch within the United States; (iii) the Rating Agency Condition
with respect to FSA is satisfied with respect to such consolidation,
amalgamation, merger, transfer or corporate reorganization; (iv) the
jurisdiction of organization of such successor or transferee is France,
Belgium, Germany, Spain, Italy, Netherlands, Luxembourg, United Kingdom, Japan,

 

9

 

Australia, New Zealand, Canada, Ireland, Switzerland
or the United States; and (v) the credit ratings of such successor or
transferee are the same or better as those of DCL at the time of such
consolidation, amalgamation, merger, transfer or corporate reorganization.

 

(c)                                  Any purported transfer that is not in
compliance with this Section will be void ab initio.

 

Section 4.4                                      Parties in Interest; No Third Party Beneficiaries. 
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.  Except as otherwise provided in Articles
II and III with respect to FSA Indemnified Parties and Dexia
Indemnified Parties, nothing in this Agreement, express or implied, is intended
to confer upon any Person other than Assured and DCL or their successors and
permitted assigns, any rights or remedies under or by reason of this Agreement.

 

Section 4.5                                      Counterparts.  This
Agreement and any amendments hereto may be executed in one or more
counterparts, each of which shall be deemed to be an original by the parties
executing such counterpart, but all of which shall be considered one and the
same instrument.

 

Section 4.6                                      Section Headings.  The section
and paragraph headings contained in this Agreement are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.

 

Section 4.7                                      Notices.  All notices
or other communications hereunder shall be deemed to have been duly given and
made upon receipt thereof if given and made in writing and if (a) served
by personal delivery upon the party for whom it is intended, (b) delivered
by international courier service, or (c) sent by facsimile; provided,
that the facsimile is promptly confirmed by telephone or by email and followed
by written confirmation by registered mail thereof, to the Person at the
address set forth below:

 

(a)                                  if to FSA, to:

 

Financial Security
Assurance Inc.

31 West 52nd Street

New York, New York 10019

Attention:  General Counsel

Telecopy No.:  (212) 339-3529

Telecopy No.:  (212) 857-0541

Confirmation:  (212) 826-0100

Email:  generalcounsel@fsa.com

 

with copies (none
of which shall constitute notice) to each of:

 

Assured Guaranty US Holdings
Inc.

1325 Avenue of the Americas

New York, New York 10019

Attention:  General Counsel

10

 

Telecopy No.:  212-445-8705

Confirmation:  (212) 974-0100

Email: 
generalcounsel@assuredguaranty.com

 

and

 

Assured
Guaranty Ltd.

30 Woodbourne Avenue

Hamilton HM 08 Bermuda

Attention: General Counsel

Telecopy No.:  (441) 296-3379

Confirmation:  (441) 299-9375

 

(b)                                 if to FSA International, to:

 

Financial
Security Assurance International Ltd.

30 Woodbourne Avenue  

Hamilton HM 08

Bermuda

Attention:  General Counsel

Telecopy No.:  (441) 296-2376

Confirmation:  (441) 299-9375

 

with
copies (which shall not constitute notice) to:

 

Financial
Security Assurance Inc.

31 West 52nd Street

New York, New York 10019

Attention: General Counsel

Telecopy No.: (212) 339-3529

Telecopy No.: (212) 857-0541

Confirmation: (212) 826-0100

Email: generalcounsel@fsa.com

 

and

 

Assured
Guaranty US Holdings Inc.

1325 Avenue of the Americas

New York, New York 10019

Attention: General Counsel

Telecopy No.: 212-445-8705

Confirmation: (212) 974-0100

Email: generalcounsel@assuredguaranty.com

 

(c)                                  if to Assured, to:

 

Assured Guaranty Ltd.

11

 

30
Woodbourne Avenue

Hamilton HM 08 Bermuda

Attention: General Counsel

Telecopy No.:  (441) 296-3379

Telecopy No.:  212-445-8705

Confirmation:  (441) 299-9375

Email: 
generalcounsel@assuredguaranty.com

 

(d)                                 if to DCL, to:

 

Dexia Crédit Local S.A.

1, Passerelle des Reflets

Tour Dexia la Défense

TSA
12203

92919 la Défense Cedex

Attention:
Secretary General

France

Facsimile: +33 1
58 58 69 90

 

with a copy (which shall
not constitute notice) to:

 

Cleary Gottlieb Steen &
Hamilton LLP

Rue de la Loi, 57

1040 Brussels, Belgium

Attention: Laurent Legein

Facsimile: 32 2 231 1661

 

and

 

Cleary Gottlieb Steen &
Hamilton LLP

One Liberty Plaza

New York, New York 10006

Attention:  Neil Whoriskey

Facsimile: (212) 225-3999

 

and

 

Dexia Crédit
Local, New York Branch

445 Park Avenue

New York, New York
10022

Attention: General
Counsel

Facsimile: (212)
753 5522

 

With a copy to:

 

Dexia SA/NV

Place Rogier 11

 

12

 

1210 Brussels,
Belgium

Attention:
Secretary General

Facsimile: +32 2
213 58 90

Email:
secretarygeneral@dexia.com

 

and

 

HF Services LLC

 

Prior to July 27,
2009:

 

31 West 52nd
Street

New York, NY  10019

Attention:  FP Operations

Telephone:  (212) 893-2700

Fax: (212)
893-2717

Email:  gicops@fsa.com

 

On and
after July 27, 2009:

 

445 Park Avenue

5th Floor

New York, New York
10022

Attention:  FP Operations

Telephone:  (212) 893-2700

Facsimile: (212)
893-2717

Email: ops@hfservicesllc.com

 

or such other address or facsimile number as such
party may hereafter specify for the purpose by notice to the other parties
hereto.  All such notices or other
communications shall be deemed received on the date of receipt by the recipient
thereof if received prior to 3:00 P.M. in the place of receipt and such
day is a Business Day in the place of receipt. 
Otherwise, any such notice, request or communication shall be deemed not
to have been received until the next succeeding Business Day in the place of
receipt.

 

Section 4.8                                      Governing Law.  THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES OTHER THAN
SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK AND THE MANDATORY CHOICE OF LAW RULES CONTAINED IN THE UCC.  Each of Assured and DCL hereby irrevocably
submits to the exclusive jurisdiction of any U.S. federal or state court in the
City of New York for the purpose of any suit, action, proceeding or judgment
arising out of or relating to this Agreement. 
Each of Assured and DCL hereby consents to the laying of venue in any
such suit, action or proceeding in New York County, New York, and hereby
irrevocably waives any claim that any such suit, action or proceeding brought
in such a court has been brought in an inconvenient forum and agrees not to

 

13

 

plead or claim the same.  Notwithstanding the foregoing, nothing contained
in this Agreement shall limit or affect the rights of any party hereto to
enforce any judgment related to this Agreement in any jurisdiction or
venue.  Any process in any such action
shall be duly served if mailed by registered mail, postage prepaid, (i) with
respect to any party (other than DCL) at its address designated pursuant to Section 4.7
and (ii) with respect to DCL, DCL appoints HF Services LLC (the “Process
Agent”), with an office (a) on the date hereof and until July 27,
2009, at 31 West 52nd Street , New York, New York 10019, United
States and (b) on and after July 27, 2009, at 445 Park Avenue, 5th
Floor, New York, New York 10022, United States, as its agent to receive, on
behalf of  DCL and its property, service
of copies of the summons and complaint and any other process which may be
served in any such action or proceeding. 
Such service may be made by mailing or delivering a copy of such process
to DCL in care of the Process Agent at the Process Agent’s above address, and
DCL hereby authorizes and directs the Process Agent to accept such service on
its behalf.  DCL may appoint a
replacement Process Agent with an office in the State of New York by notice to
FSA and Assured.

 

Section 4.9                                      WAIVER OF JURY TRIAL. 
EACH OF ASSURED AND DCL HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

 

Section 4.10                                SOVEREIGN IMMUNITY.  To the extent that DCL, or any of its
properties, assets or revenues may have or may hereafter become entitled to, or
have attributed to them, any right of immunity, on the grounds of sovereignty
or otherwise, from any legal action, suit or proceeding, from the giving of any
relief in any respect thereof, from setoff or counterclaim, from the
jurisdiction of any court, from service of process, from attachment upon or
prior to judgment, from attachment in aid of execution of judgment, or from
execution of judgment, or other legal process or proceeding for the giving of
any relief or for the enforcement of any judgment, in any jurisdiction in which
proceedings may at any time be commenced, with respect to its obligations,
liabilities or any other matter under or arising out of or in connection with
this Agreement, Assured and DCL hereby irrevocably and unconditionally waive,
and agree not to plead or claim, to the fullest extent permitted by applicable
law, any such immunity and consent to such relief and enforcement.

 

Section 4.11                                Severability.  The
provisions of this Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof unless such invalidity or
unenforceability, after taking into account the mitigation contemplated by the
next sentence, deprives a party of a material benefit contemplated by this
Agreement.  If any provision of this
Agreement, or the application thereof to any Person or any circumstance, is
invalid or unenforceable: (a) a suitable and equitable provision shall be
substituted therefor in order to carry out, as far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision;
and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.

 

14

 

Section 4.12                                Survival.  This
Agreement shall survive until the first anniversary of the date on which (A) all
obligations under the FSA MTN Business Policies and FSA Leveraged Tax Lease
Policies are either terminated or paid in full and (B) all amounts owing
to the FSA Parties under the MTN Business Transaction Documents (other than
amounts owing to FSA Parties under the Insurance and Indemnity Agreements
related to the FSA Percentage) have been paid in full.

 

Section 4.13                                Construction.  This
Agreement has been negotiated by the parties and their respective counsel in
good faith and will be fairly interpreted in accordance with its terms and
without any strict construction in favor of or against any party.

 

[Signature Page Follows]

 

15

 

IN WITNESS WHEREOF, this Agreement has been
signed on behalf of each of the parties hereto as of the date first written
above.

 

 

	
   

  	
  FINANCIAL
  SECURITY ASSURANCE INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ASSURED
  GUARANTY LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:
  Robert Mills

  
	
   

  	
   

  	
  Title:
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DEXIA CRÉDIT LOCAL S.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  ACKNOWLEDGED
  AND AGREED TO SOLELY WITH RESPECT TO SECTION 2.4:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  DEXIA
  HOLDINGS, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

S-1

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