-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MUUyOk0aBu+uouPxblOGhmBRk/amJEo2SwDj/AimjbUCy9CPm8CpzsbXMVZxb9EU 8dOXMZulQAVUKN3ZJI/PXw== 0000950123-04-009370.txt : 20040806 0000950123-04-009370.hdr.sgml : 20040806 20040806154158 ACCESSION NUMBER: 0000950123-04-009370 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040806 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHUBB CORP CENTRAL INDEX KEY: 0000020171 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 132595722 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08661 FILM NUMBER: 04958021 BUSINESS ADDRESS: STREET 1: 15 MOUNTAIN VIEW RD P O BOX 1615 CITY: WARREN STATE: NJ ZIP: 07061 BUSINESS PHONE: 9089032000 10-Q 1 y99136e10vq.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2004 OR ____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _____________ Commission file number 1-8661 THE CHUBB CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) NEW JERSEY 13-2595722 - ------------------------------- -------------------- (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) 15 MOUNTAIN VIEW ROAD, WARREN, NEW JERSEY 07061-1615 - ----------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (908) 903-2000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO _____ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES X NO _____ The number of shares of common stock outstanding as of June 30, 2004 was 190,999,729. THE CHUBB CORPORATION INDEX
Page Number ----------- Part I. Financial Information: Item 1 - Financial Statements: Consolidated Statements of Income for the Three Months and Six Months Ended June 30, 2004 and 2003....................................... 1 Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003.......................... 2 Consolidated Statements of Comprehensive Income for the Three Months and Six Months Ended June 30, 2004 and 2003....................................... 3 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003...................... 4 Notes to Consolidated Financial Statements.................... 5 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 8 Item 4 - Controls and Procedures................................ 29 Part II. Other Information: Item 6 - Exhibits and Reports on Form 8-K....................... 30 Signatures........................................................ 31
Page 1 Part I. Financial Information Item 1 - Financial Statements THE CHUBB CORPORATION CONSOLIDATED STATEMENTS OF INCOME PERIODS ENDED JUNE 30
Second Quarter Six Months ------------------ ------------------ 2004 2003 2004 2003 -------- -------- -------- -------- (in millions) Revenues Premiums Earned....................... $2,861.6 $2,533.2 $5,655.6 $4,858.4 Investment Income..................... 308.6 271.7 604.5 528.7 Other Revenues........................ 19.0 12.9 26.5 42.1 Realized Investment Gains............. 16.7 20.7 97.6 25.2 -------- -------- -------- -------- Total Revenues................. 3,205.9 2,838.5 6,384.2 5,454.4 -------- -------- -------- -------- Losses and Expenses Insurance Losses and Loss Expenses.... 1,805.9 1,633.2 3,546.5 3,138.7 Amortization of Deferred Policy Acquisition Costs.................... 703.0 630.3 1,390.2 1,210.4 Other Insurance Operating Costs and Expenses......................... 159.2 182.6 348.0 359.6 Investment Expenses................... 6.1 6.2 13.4 16.4 Other Expenses........................ 25.8 19.9 53.0 36.9 Corporate Expenses.................... 39.6 37.4 77.8 81.3 -------- -------- -------- -------- Total Losses and Expenses...... 2,739.6 2,509.6 5,428.9 4,843.3 -------- -------- -------- -------- Income Before Federal and Foreign Income Tax............................. 466.3 328.9 955.3 611.1 Federal and Foreign Income Tax.......... 110.2 76.8 238.5 134.4 -------- -------- -------- -------- Net Income.............................. $ 356.1 $ 252.1 $ 716.8 $ 476.7 ======== ======== ======== ======== Net Income Per Share Basic.................................. $ 1.88 $ 1.46 $ 3.80 $ 2.78 Diluted................................ 1.85 1.45 3.73 2.76 Dividends Declared Per Share............ .39 .36 .78 .72
See Notes to Consolidated Financial Statements. Page 2 THE CHUBB CORPORATION CONSOLIDATED BALANCE SHEETS
June 30, Dec. 31, 2004 2003 --------- --------- (in millions) Assets Invested Assets Short Term Investments............................... $ 1,627.1 $ 2,695.9 Fixed Maturities Held-to-Maturity - Tax Exempt (market $424.5 and $502.2)....................................... 400.2 467.0 Available-for-Sale Tax Exempt (cost $12,004.4 and $10,509.7)......... 12,269.6 11,154.0 Taxable (cost $12,016.3 and $10,531.8)............ 12,057.1 10,790.7 Equity Securities (cost $1,538.1 and $1,381.4)....... 1,665.9 1,514.4 --------- --------- TOTAL INVESTED ASSETS......................... 28,019.9 26,622.0 Cash................................................... 48.1 52.2 Securities Lending Collateral.......................... 1,980.6 704.8 Accrued Investment Income.............................. 319.2 286.8 Premiums Receivable.................................... 2,392.3 2,188.0 Reinsurance Recoverable on Unpaid Losses and Loss Expenses..................................... 3,593.5 3,426.6 Prepaid Reinsurance Premiums........................... 370.4 391.0 Deferred Policy Acquisition Costs...................... 1,394.5 1,343.4 Real Estate Assets..................................... 500.8 518.8 Investment in Partially Owned Company.................. 345.3 312.3 Deferred Income Tax.................................... 789.1 641.4 Goodwill............................................... 467.4 467.4 Other Assets........................................... 1,456.9 1,405.9 --------- --------- TOTAL ASSETS.................................. $41,678.0 $38,360.6 ========= ========= Liabilities Unpaid Losses and Loss Expenses........................ $19,053.3 $17,947.8 Unearned Premiums...................................... 6,218.5 5,939.4 Securities Lending Payable............................. 1,980.6 704.8 Long Term Debt......................................... 2,811.6 2,813.9 Dividend Payable to Shareholders....................... 74.5 67.7 Accrued Expenses and Other Liabilities................. 2,636.6 2,365.0 --------- --------- TOTAL LIABILITIES............................. 32,775.1 29,838.6 --------- --------- Shareholders' Equity Common Stock - $1 Par Value; 195,803,824 and 195,803,824 Shares.................................... 195.8 195.8 Paid-In Surplus........................................ 1,302.6 1,318.8 Retained Earnings...................................... 7,437.2 6,868.9 Accumulated Other Comprehensive Income Unrealized Appreciation of Investments, Net of Tax.... 282.0 673.6 Foreign Currency Translation Gains, Net of Tax........ 18.9 12.0 Receivable from Employee Stock Ownership Plan.......... (9.3) (17.9) Treasury Stock, at Cost - 4,804,095 and 7,840,448 Shares...................................... (324.3) (529.2) --------- --------- TOTAL SHAREHOLDERS' EQUITY.................... 8,902.9 8,522.0 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.... $41,678.0 $38,360.6 ========= =========
See Notes to Consolidated Financial Statements. Page 3 THE CHUBB CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME PERIODS ENDED JUNE 30
Second Quarter Six Months ----------------- ---------------- 2004 2003 2004 2003 ------- ------ ------- ------ (in millions) Net Income................................ $ 356.1 $252.1 $ 716.8 $476.7 ------- ------ ------- ------ Other Comprehensive Income Change in Unrealized Appreciation of Investments, Net of Tax............. (516.1) 198.6 (391.6) 240.9 Foreign Currency Translation Gains (Losses), Net of Tax................... (2.7) 36.9 6.9 46.4 ------- ------ ------- ------ (518.8) 235.5 (384.7) 287.3 ------- ------ ------- ------ Comprehensive Income (Loss)............... $(162.7) $487.6 $ 332.1 $764.0 ======= ====== ======= ======
See Notes to Consolidated Financial Statements. Page 4 THE CHUBB CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30
2004 2003 --------- --------- (in millions) Cash Flows from Operating Activities Net Income............................................ $ 716.8 $ 476.7 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Increase in Unpaid Losses and Loss Expenses, Net.... 938.6 767.2 Increase in Unearned Premiums, Net.................. 291.4 433.6 Increase in Premiums Receivable..................... (204.3) (102.1) Increase in Deferred Policy Acquisition Costs....... (49.4) (77.3) Change in Deferred Income Tax....................... 54.1 18.9 Depreciation........................................ 54.1 55.8 Realized Investment Gains........................... (97.6) (25.2) Other, Net.......................................... 89.7 (275.9) --------- --------- Net Cash Provided by Operating Activities............. 1,793.4 1,271.7 --------- --------- Cash Flows from Investing Activities Proceeds from Sales of Fixed Maturities............... 1,800.2 2,971.5 Proceeds from Maturities of Fixed Maturities.......... 1,126.3 1,063.5 Proceeds from Sales of Equity Securities.............. 465.1 197.3 Purchases of Fixed Maturities......................... (5,848.4) (5,593.1) Purchases of Equity Securities........................ (491.9) (421.1) Decrease (Increase) in Short Term Investments, Net.... 1,068.8 (1,832.3) Increase in Net Payable from Security Transactions Not Settled............................. 62.4 654.5 Purchases of Property and Equipment, Net.............. (32.2) (40.8) Other, Net............................................ (1.1) - --------- --------- Net Cash Used in Investing Activities................. (1,850.8) (3,000.5) --------- --------- Cash Flows from Financing Activities Proceeds from Issuance of Long Term Debt.............. - 960.0 Repayment of Long Term Debt........................... (.2) (100.2) Increase in Funds Held Under Deposit Contracts........ 22.6 92.4 Proceeds from Common Stock Offering................... - 886.8 Proceeds from Issuance of Common Stock Under Incentive and Purchase Plans......................... 164.0 14.4 Dividends Paid to Shareholders........................ (141.7) (121.7) Other, Net............................................ 8.6 (13.6) --------- --------- Net Cash Provided by Financing Activities............. 53.3 1,718.1 --------- --------- Net Decrease in Cash.................................... (4.1) (10.7) Cash at Beginning of Year............................... 52.2 41.9 --------- --------- Cash at End of Period................................. $ 48.1 $ 31.2 ========= =========
See Notes to Consolidated Financial Statements. Page 5 THE CHUBB CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1) General The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and include the accounts of The Chubb Corporation and its subsidiaries (collectively, the Corporation). Significant intercompany transactions have been eliminated in consolidation. The amounts included in this report are unaudited but include those adjustments, consisting of normal recurring items, which management considers necessary for a fair presentation. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes in the Notes to Consolidated Financial Statements included in the Corporation's 2003 Annual Report on Form 10-K. 2) Investments Short term investments, which have an original maturity of one year or less, are carried at amortized cost which approximates market value. Fixed maturities classified as held-to-maturity are carried at amortized cost. Fixed maturities classified as available-for-sale and equity securities are carried at market value as of the balance sheet date. The net change in unrealized appreciation or depreciation of investments carried at market value was as follows:
Periods Ended June 30 ------------------------------------ Second Quarter Six Months ---------------- ---------------- 2004 2003 2004 2003 ------- ------ ------- ------ (in millions) Change in unrealized appreciation or depreciation of equity securities... $ (39.0) $ 78.3 $ (5.2) $ 73.1 Change in unrealized appreciation of fixed maturities.................... (755.1) 227.2 (597.2) 297.5 ------- ------ ------- ------ (794.1) 305.5 (602.4) 370.6 Deferred income tax (credit)......... (278.0) 106.9 (210.8) 129.7 ------- ------ ------- ------ Change in unrealized appreciation of investments, net................. $(516.1) $198.6 $(391.6) $240.9 ======= ====== ======= ======
Page 6 3) Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share:
Periods Ended June 30 ----------------------------------- Second Quarter Six Months --------------- --------------- 2004 2003 2004 2003 ------ ------ ------ ------ (in millions, except per share amounts) Basic earnings per share: Net income......................... $356.1 $252.1 $716.8 $476.7 ====== ====== ====== ====== Weighted average number of common shares outstanding................... 189.5 172.5 188.7 171.5 ====== ====== ====== ====== Basic earnings per share.............. $ 1.88 $ 1.46 $ 3.80 $ 2.78 ====== ====== ====== ====== Diluted earnings per share: Net income........................... $356.1 $252.1 $716.8 $476.7 ====== ====== ====== ====== Weighted average number of common shares outstanding................... 189.5 172.5 188.7 171.5 Additional shares from assumed exercise of stock-based compensation awards.................. 3.0 1.8 3.4 1.4 ------ ------ ------ ------ Weighted average number of common shares and potential common shares assumed outstanding for computing diluted earnings per share........... 192.5 174.3 192.1 172.9 ====== ====== ====== ====== Diluted earnings per share............ $ 1.85 $ 1.45 $ 3.73 $ 2.76 ====== ====== ====== ======
4) Segments Information The principal business of the Corporation is property and casualty insurance. The profitability of the property and casualty insurance business depends on the results of both underwriting operations and investments, which are viewed as two distinctive operations. The under-writing operations are managed separately from the investment function. The property and casualty underwriting operations consist of three separate business units: personal insurance, commercial insurance and specialty insurance. The personal segment targets the personal insurance market. The personal classes include automobile, homeowners and other personal coverages. The commercial segment includes those classes of business that are generally available in broad markets and are of a more commodity nature. Commercial classes include multiple peril, casualty, workers' compensation and property and marine. The specialty segment includes those classes of business that are available in more limited markets since they require specialized underwriting and claim settlement. Specialty classes include executive protection, financial institutions and other specialty coverages. Chubb Financial Solutions' non-insurance business was primarily structured credit derivatives, principally as a counterparty in portfolio credit default swap contracts. The Corporation has implemented a plan to exit the credit derivatives business. Corporate and other includes investment income earned on corporate invested assets, corporate expenses and the Corporation's real estate and other non-insurance subsidiaries. Page 7 Revenues and income before income tax of the operating segments were as follows:
Periods Ended June 30 --------------------------------------- Second Quarter Six Months ------------------ ------------------ 2004 2003 2004 2003 -------- -------- -------- -------- (in millions) Revenues Property and casualty insurance Premiums earned Personal insurance............... $ 668.2 $ 604.1 $1,328.0 $1,183.9 Commercial insurance............. 1,084.4 922.1 2,138.9 1,800.8 Specialty insurance.............. 1,109.0 1,007.0 2,188.7 1,873.7 -------- -------- -------- -------- 2,861.6 2,533.2 5,655.6 4,858.4 Investment income.................. 296.8 266.5 580.8 520.1 -------- -------- -------- -------- Total property and casualty insurance....................... 3,158.4 2,799.7 6,236.4 5,378.5 Chubb Financial Solutions non-insurance business.............. 1.8 .5 (3.2) 17.9 Corporate and other.................. 29.0 17.6 53.4 32.8 Realized investment gains............ 16.7 20.7 97.6 25.2 -------- -------- -------- -------- Total revenues................... $3,205.9 $2,838.5 $6,384.2 $5,454.4 ======== ======== ======== ======== Income (loss) before income tax Property and casualty insurance Underwriting Personal insurance............... $ 38.6 $ 8.2 $ 53.8 $ (7.4) Commercial insurance............. 223.2 65.7 351.2 119.9 Specialty insurance.............. (76.6) 18.0 (81.0) (18.4) -------- -------- -------- -------- 185.2 91.9 324.0 94.1 Increase in deferred policy acquisition costs............... 9.8 9.4 49.4 77.3 -------- -------- -------- -------- Underwriting income.............. 195.0 101.3 373.4 171.4 Investment income.................. 291.0 260.8 568.7 507.1 Other charges...................... (1.5) (14.2) (2.5) (21.7) -------- -------- -------- -------- Total property and casualty insurance....................... 484.5 347.9 939.6 656.8 Chubb Financial Solutions non-insurance business.............. (2.9) (5.8) (17.2) 8.2 Corporate and other loss............. (32.0) (33.9) (64.7) (79.1) Realized investment gains............ 16.7 20.7 97.6 25.2 -------- -------- -------- -------- Total income before income tax... $ 466.3 $ 328.9 $ 955.3 $ 611.1 ======== ======== ======== ========
Page 8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations for the Six Months Ended June 30, 2004 and 2003 and for the Quarters Ended June 30, 2004 and 2003 Certain statements in this document are "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995 (PSLRA). These forward-looking statements are made pursuant to the safe harbor provisions of the PSLRA and include estimates and assumptions related to economic, competitive, regulatory, judicial, legislative and other developments. These include statements relating to trends in, or representing management's beliefs about, our future strategies, operations and financial results, as well as other statements that include words such as "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "should," "will," or other similar expressions. Forward-looking statements are made based upon management's current expectations and beliefs concerning trends and future developments and their potential effects on us. These statements are not guarantees of future performance. Actual results may differ materially from those suggested by forward-looking statements as a result of risks and uncertainties, which include, among others, those discussed or identified from time to time in our public filings with the Securities and Exchange Commission and those associated with: - - the availability of primary and reinsurance coverage, including the implications relating to terrorism legislation and regulation; - - global political conditions and the occurrence of any terrorist attacks, including any nuclear, biological, chemical or radiological events; - - the effects of outbreak or escalation of war or hostilities; - - premium price increases and profitability or growth estimates overall or by lines of business or geographic area, and related expectations with respect to the timing and terms of any required regulatory approvals; - - adverse changes in loss cost trends; - - our ability to retain existing business; - - material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements; - - our expectations with respect to cash flow projections and investment income and with respect to other income; - - the adequacy of loss reserves including: - our expectations relating to reinsurance recoverables; - the effects of proposed asbestos liability legislation, including the impact of claims patterns arising from the possibility of legislation and those that may arise if legislation is not passed; - our estimates relating to ultimate asbestos liabilities and related reinsurance recoverables; - the impact from the bankruptcy protection sought by various asbestos producers and other related businesses; - the willingness of parties, including us, to settle disputes; - developments in judicial decisions or regulatory or legislative actions relating to coverage and liability for asbestos, toxic waste and mold claims; - development of new theories of liability; Page 9 - - the impact of economic factors on companies on whose behalf we have issued surety bonds, and, in particular, on those companies that have filed for bankruptcy or otherwise experienced deterioration in creditworthiness; - - the effects of disclosures by, and investigations of, public companies relating to possible accounting irregularities, practices in the energy and securities industries and other corporate governance issues, including: - the effects on the energy markets and the companies that participate in them, and in particular as they may relate to concentrations of risk in our surety business; - the effects on the capital markets and the markets for directors and officers and errors and omissions insurance; - claims and litigation arising out of actual or alleged accounting or other corporate malfeasance by other companies; - claims and litigation arising out of investment banking practices; - legislative or regulatory proposals or changes, including the changes in law and regulation implemented under the Sarbanes-Oxley Act of 2002; - - the occurrence of significant weather-related or other natural or human-made disasters, particularly in locations where we have concentrations of risk; - - any downgrade in our claims-paying, financial strength or other credit ratings; - - the ability of our subsidiaries to pay us dividends; - - general economic conditions including: - changes in interest rates, market credit spreads and the performance of the financial markets, generally and as they relate to credit risks assumed by our Chubb Financial Solutions unit in particular; - the effects of inflation; - changes in domestic and foreign laws, regulations and taxes; - changes in competition and pricing environments; - regional or general changes in asset valuations; - the inability to reinsure certain risks economically; - changes in the litigation environment; - general market conditions; and - - the ability to implement management's strategic plans and initiatives. The Corporation assumes no obligation to update any forward-looking information set forth in this document, which speak as of the date hereof. Page 10 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS The consolidated financial statements include amounts based on informed estimates and judgments of management for those transactions that are not yet complete. Such estimates and judgments affect the reported amounts in the financial statements. Those estimates and judgments that were most critical to the preparation of the financial statements involved the adequacy of loss reserves and the recoverability of related reinsurance recoverables, the fair value of future obligations under financial products contracts and the recoverability of the carrying value of real estate properties. These estimates and judgments, which are discussed within the following analysis of our results of operations, require the use of assumptions about matters that are highly uncertain and therefore are subject to change as facts and circumstances develop. If different estimates and judgments had been applied, materially different amounts might have been reported in the financial statements. EXECUTIVE SUMMARY The following highlights do not address all of the matters covered in the other sections of Management's Discussion and Analysis of Financial Condition and Results of Operations or contain all of the information that may be important to the Corporation's shareholders or the investing public. This summary should be read in conjunction with the other sections of Management's Discussion and Analysis of Financial Condition and Results of Operations. - - Net income was $716.8 million in the first six months of 2004 and $356.1 million in the second quarter compared with $476.7 million and $252.1 million, respectively, in the comparable periods of 2003. - - The fundamentals of our property and casualty insurance business remain strong. Premium growth was 12% in both the first six months and second quarter of 2004. - - Our combined loss and expense ratio was 92.7% in the first six months of 2004 and 92.8% in the second quarter compared with 95.3% in both corresponding periods of 2003. - - Our underwriting results in the second quarter of 2004 were adversely affected by an increase in net loss reserves of about $160 million for errors and omissions losses related to investment banks. Conversely, these results benefited from an $80 million reduction in net loss reserves related to the September 11, 2001 attack. - - We reached an agreement in July 2004 that resulted in Aquila providing us with collateral sufficient to cover our entire $500 million exposure under surety bonds issued for Aquila. - - Property and casualty investment income after taxes increased by 12% in both the first six months and second quarter of 2004. Page 11 A summary of the Corporation's results for the second quarter and six months ended June 30, 2004 and 2003 is as follows:
Periods Ended June 30 ------------------------------------------- Second Quarter Six Months -------------------- -------------------- 2004 2003 2004 2003 -------- -------- -------- -------- (in millions) PROPERTY AND CASUALTY INSURANCE Underwriting Net Premiums Written........... $2,929.6 $2,617.3 $5,947.0 $5,292.0 Increase in Unearned Premiums.. (68.0) (84.1) (291.4) (433.6) -------- -------- -------- -------- Premiums Earned............. 2,861.6 2,533.2 5,655.6 4,858.4 -------- -------- -------- -------- Losses and Loss Expenses....... 1,805.9 1,633.2 3,546.5 3,138.7 Operating Costs and Expenses... 863.3 802.1 1,770.6 1,613.6 Increase in Deferred Policy Acquisition Costs............. (9.8) (9.4) (49.4) (77.3) Dividends to Policyholders..... 7.2 6.0 14.5 12.0 -------- -------- -------- -------- Underwriting Income............ 195.0 101.3 373.4 171.4 -------- -------- -------- -------- Investments Investment Income Before Expenses...................... 296.8 266.5 580.8 520.1 Investment Expenses............ 5.8 5.7 12.1 13.0 -------- -------- -------- -------- Investment Income.............. 291.0 260.8 568.7 507.1 -------- -------- -------- -------- Other Charges................... (1.5) (14.2) (2.5) (21.7) -------- -------- -------- -------- Property and Casualty Income.... 484.5 347.9 939.6 656.8 CHUBB FINANCIAL SOLUTIONS NON-INSURANCE BUSINESS.......... (2.9) (5.8) (17.2) 8.2 CORPORATE AND OTHER.............. (32.0) (33.9) (64.7) (79.1) REALIZED INVESTMENT GAINS........ 16.7 20.7 97.6 25.2 -------- -------- -------- -------- CONSOLIDATED INCOME BEFORE INCOME TAX...................... 466.3 328.9 955.3 611.1 Federal and Foreign Income Tax... 110.2 76.8 238.5 134.4 -------- -------- -------- -------- CONSOLIDATED NET INCOME.......... $ 356.1 $ 252.1 $ 716.8 $ 476.7 ======== ======== ======== ======== PROPERTY AND CASUALTY INVESTMENT INCOME AFTER INCOME TAX......... $ 232.4 $ 207.2 $ 454.2 $ 405.2 ======== ======== ======== ========
Net income included realized investment gains after taxes of $67.7 million in the first six months of 2004 and $15.1 million in the second quarter compared with realized investment gains after taxes of $16.4 million and $13.5 million in the comparable periods of 2003. Decisions to sell securities are governed principally by considerations of investment opportunities and tax consequences. As a result, realized gains and losses on the sale of investments may vary significantly from period to period. Page 12 PROPERTY AND CASUALTY INSURANCE RESULTS Earnings from our property and casualty business were significantly higher in the first six months and second quarter of 2004 compared with the same periods of 2003. Underwriting income was substantially higher in 2004 due to the exceptionally strong results in our commercial business and, to a lesser extent, improvement in our personal business. Investment income also increased significantly in 2004 compared with 2003. Property and casualty income before taxes amounted to $939.6 million in the first six months of 2004 and $484.5 million in the second quarter compared with $656.8 million and $347.9 million, respectively, in 2003. The profitability of the property and casualty insurance business depends on the results of both underwriting operations and investments, which we view as two distinctive operations. The underwriting functions are managed separately from the investment function. Accordingly, in assessing our performance, we evaluate underwriting results separately from investment results. UNDERWRITING RESULTS We evaluate the underwriting results of our property and casualty insurance business in the aggregate and also for each of our three separate business units: personal insurance, commercial insurance and specialty insurance. The combined loss and expense ratio, expressed as a percentage, is the key measure of underwriting profitability traditionally used in the property and casualty business. We evaluate the performance of our underwriting operations and of each of our business units using the combined loss and expense ratio calculated in accordance with statutory accounting principles. It is the sum of the ratio of losses to premiums earned (loss ratio) plus the ratio of underwriting expenses to premiums written (expense ratio) after reducing both premium amounts by dividends to policyholders. When the combined ratio is under 100%, underwriting results are generally considered profitable; when the combined ratio is over 100%, underwriting results are generally considered unprofitable. Statutory accounting principles differ in certain respects from generally accepted accounting principles (GAAP). Under statutory accounting principles applicable to property and casualty insurance companies, policy acquisition and other underwriting expenses are recognized immediately, not at the time premiums are earned. We use underwriting results determined in accordance with GAAP, among other measures, to assess the overall performance of the underwriting operations. To convert statutory underwriting results to a GAAP basis, policy acquisition expenses are deferred and amortized over the period in which the related premiums are earned. Underwriting income determined in accordance with GAAP is defined as premiums earned less losses incurred and GAAP underwriting expenses incurred. Net Premiums Written Net premiums written were $5.9 billion in the first six months of 2004 and $2.9 billion in the second quarter, representing increases of 12% compared with the same periods in 2003. Premium growth was particularly strong in our reinsurance assumed business generated by Chubb Re. Page 13 About 80% of our net premiums written are in the United States. U.S. premiums grew 12% in both the first six months and second quarter of 2004. Premiums produced by Chubb Re accounted for 4 percentage points of the U.S. growth in the first six months of 2004 and 2 percentage points of such growth in the second quarter. On a reported basis, non U.S. premiums grew 15% in the first six months of 2004 and 12% in the second quarter. In local currencies, such growth was 4% and 5%, respectively. We experienced premium growth in the first six months of 2004 in all segments of our business. The growth was the result of our retaining a high percentage of our existing customers, attracting new customers and securing modest rate increases. As was true for most of 2003, the size of rate increases has decelerated as the marketplace has become more competitive. We expect that this trend will continue throughout 2004. Reinsurance Our premiums written are net of amounts ceded to reinsurers who assume a portion of the risk under the insurance policies that are subject to the reinsurance. As a result of the substantial losses incurred by reinsurers in recent years, the cost of reinsurance in the marketplace has increased significantly and reinsurance capacity for certain coverages, such as terrorism, is limited and expensive. Our reinsurance costs are expected to increase modestly in 2004. We discontinued a casualty per risk treaty that responded primarily to excess liability exposures over $25 million, as underwriting actions we have taken in recent years have resulted in a reduction in the number of such exposures, which we believe made this treaty no longer economical. Our executive protection per risk treaty was renewed with coverage similar to the prior year. On our casualty clash treaty, which operates like a catastrophe treaty, our retention remained at $50 million. Our property reinsurance program was renewed in April 2004. On the property per risk treaty, our retention remained at $15 million. Our property catastrophe treaty for events in the United States was modified to increase our initial retention from $150 million to $250 million and to increase the reinsurance coverage at the top. The program now provides coverage of approximately 88% of losses between $250 million and $1.25 billion, with additional coverage of 95% of losses between $1.25 billion and $1.5 billion in the northeastern part of the country. We are making a concerted effort to monitor and control terrorism risk aggregations. However, given the uncertainty of any potential terrorist attack and the limited terrorism coverage in our reinsurance program, our future operating results could be more volatile. Profitability Underwriting results were more profitable in the first six months and second quarter of 2004 than in the comparable periods in 2003. Our combined loss and expense ratio was 92.7% in the first six months of 2004 and 92.8% in the second quarter compared with 95.3% in both periods of 2003. Page 14 Underwriting results in the second quarter of 2004 were adversely affected by an increase in net loss reserves of about $160 million for errors and omissions losses related to investment banks. Such results benefited from an $80 million reduction in net loss reserves related to the September 11, 2001 attack. These reserve adjustments are further discussed under "Loss Reserves." The loss ratio was 62.9% for the first six months of 2004 and 63.3% for the second quarter compared with 64.8% and 64.6%, respectively, in the prior year. Catastrophe losses during the first six months of 2004 amounted to $142.4 million, which represented 2.5 percentage points of the loss ratio compared with $165.5 million or 3.4 percentage points in 2003. Catastrophe losses for the second quarter of 2004 amounted to $45.7 million or 1.6 percentage points of the loss ratio compared with $70.6 million or 2.8 percentage points in 2003. The above 2004 catastrophe loss amounts exclude the $80 million reduction in loss reserves related to the September 11, 2001 attack, which reduced the loss ratio by 1.4 and 2.8 percentage points in the first six months and second quarter, respectively. Our expense ratio was 29.8% for the first six months of 2004 and 29.5% for the second quarter compared with 30.5% and 30.7%, respectively, in 2003. The decrease in the expense ratio was due primarily to premiums written growing at a higher rate than overhead expenses. Page 15 REVIEW OF UNDERWRITING RESULTS BY BUSINESS UNIT Underwriting results during 2004 and 2003 by business unit were as follows:
Net Premiums Combined Loss and Written Expense Ratios ------------------- ----------------- 2004 2003 2004 2003 -------- -------- ----- ----- (in millions) Six Months Ended June 30 PERSONAL INSURANCE Automobile........................ $ 310.4 $ 289.3 95.0% 100.2% Homeowners........................ 774.4 711.3 100.6 105.5 Other............................. 278.4 259.3 79.4 77.3 -------- -------- ----- ----- Total Personal................ 1,363.2 1,259.9 95.1 98.5 -------- -------- ----- ----- COMMERCIAL INSURANCE Multiple Peril.................... 591.6 532.8 76.6 89.0 Casualty.......................... 783.4 678.6 86.1 87.5 Workers' Compensation............. 388.9 317.5 92.7 91.0 Property and Marine............... 558.3 512.5 72.0 90.8 -------- -------- ----- ----- Total Commercial.............. 2,322.2 2,041.4 80.9 89.1 -------- -------- ----- ----- SPECIALTY INSURANCE Executive Protection.............. 1,051.7 1,001.0 101.6 103.8 Financial Institutions............ 458.1 420.6 135.2 111.7 Other............................. 751.8 569.1 85.5 82.2 -------- -------- ----- ----- Total Specialty............... 2,261.6 1,990.7 102.8 99.3 -------- -------- ----- ----- TOTAL......................... $5,947.0 $5,292.0 92.7% 95.3% ======== ======== ===== ===== Quarter Ended June 30 PERSONAL INSURANCE Automobile........................ $ 165.8 $ 156.4 94.1% 99.0% Homeowners........................ 432.7 398.8 92.3 97.8 Other............................. 148.9 139.7 81.9 76.9 -------- -------- ----- ----- Total Personal................ 747.4 694.9 90.7 93.8 -------- -------- ----- ----- COMMERCIAL INSURANCE Multiple Peril.................... 288.8 256.3 68.7 90.0 Casualty.......................... 371.2 334.5 84.8 89.7 Workers' Compensation............. 167.4 129.1 95.5 95.5 Property and Marine............... 267.7 239.2 72.2 93.9 -------- -------- ----- ----- Total Commercial.............. 1,095.1 959.1 79.0 91.6 -------- -------- ----- ----- SPECIALTY INSURANCE Executive Protection.............. 497.1 479.4 101.8 104.1 Financial Institutions............ 223.9 196.8 159.8 112.3 Other............................. 366.1 287.1 86.7 85.3 -------- -------- ----- ----- Total Specialty............... 1,087.1 963.3 107.5 99.5 -------- -------- ----- ----- Total......................... $2,929.6 $2,617.3 92.8% 95.3% ======== ======== ===== =====
Page 16 Personal Insurance Premiums from personal insurance coverages, which represent 23% of net premiums written, increased by 8% in both the first six months and second quarter of 2004 compared with the comparable periods in 2003. Premium growth occurred in all classes; however, growth has slowed somewhat from prior periods due to increased competition in the marketplace. The premium growth in our homeowners business was due to increased insurance-to-value and modestly higher rates; the in force policy count for this class was flat. Our personal insurance business produced profitable underwriting results in 2004 and 2003, but more so in 2004. The combined loss and expense ratio was 95.1% in the first six months of 2004 and 90.7% for the second quarter compared with 98.5% and 93.8%, respectively, in 2003. Results in both years were adversely affected by significant catastrophe losses. Excluding catastrophe losses, the combined ratio was 86.7% in the first six months of 2004 and 85.3% in the second quarter compared with 90.0% and 87.6%, respectively, in 2003. Our homeowners business produced near breakeven underwriting results in the first six months of 2004 compared with unprofitable results in 2003. Results in the second quarter of both years were profitable, but more so in 2004. The improvement in 2004 was largely the result of better pricing and contract wording changes. Results in both 2004 and 2003 were adversely affected by significant catastrophe losses, particularly in the first quarter due to severe winter weather in the northeastern part of the United States where we have a significant market presence. Catastrophe losses represented 14.4 percentage points of the loss ratio for this class in the first six months of 2004 and 8.9 percentage points in the second quarter compared with 14.7 and 10.1 percentage points, respectively, in 2003. Our remediation plan relating to our homeowners business in the United States, which began in the latter part of 2001, is on track. We have implemented rate increases in many states. In addition, we have made regulatory filings in most states to introduce contract changes that would enable us to treat mold as a separate peril available at an appropriate price. These changes, which have been implemented in 43 states, are beginning to reduce the frequency and severity of our water damage losses, particularly in Texas, the state in which such losses have been most significant. Our automobile business produced profitable results in 2004 compared with near breakeven results in 2003. The improvement was due to stable claim frequency and severity. Other personal coverages, which include insurance for valuable articles and excess liability, produced highly profitable results in 2004 and 2003 due to continued favorable loss experience. Commercial Insurance Premiums from commercial insurance, which represent 39% of our net writings, increased by 14% in both the first six months and second quarter of 2004 compared with the same periods a year ago. Growth occurred in all segments of this business but was particularly strong in the workers' compensation class. Rates continued to increase in 2004 although, as expected, the level of rate increases declined from 2003 levels as we experienced more competition in the marketplace. Despite this, retention levels in the first six months of 2004 were somewhat higher than those in the comparable period of 2003. New business remained strong but was down from 2003 levels due to a decrease in submission activity. We continue to get favorable terms and conditions on business written. Page 17 Our commercial insurance business produced highly profitable underwriting results in 2004 and 2003. The 2004 results were exceptionally profitable due to unusually low property losses. The combined loss and expense ratio for commercial business was 80.9% for the first six months of 2004 and 79.0% for the second quarter compared with 89.1% and 91.6%, respectively, in 2003. These profitable results reflect the cumulative effect of price increases, better terms and conditions and more stringent risk selection in recent years. Multiple peril produced highly profitable results in 2004 and 2003, but more so in 2004. Results in the property component of this business were exceptionally profitable in the second quarter of 2004 due to unusually low losses. Catastrophe losses represented 2.2 percentage points of the loss ratio for this class in the first six months of 2004 and 0.4 of a percentage point for the second quarter compared with 4.4 percentage points and 2.0 percentage points, respectively, in 2003. Our casualty business produced highly profitable results in 2004 and 2003. Such results were due to the price increases over the last several years and favorable loss experience. The automobile component of this business was highly profitable in both years. The excess liability component was profitable in both years, but more so in 2004 due to a $30 million reduction in net loss reserves in the second quarter related to the September 11, 2001 attack. The primary liability component was highly profitable in 2003 but was somewhat less profitable in 2004. Workers' compensation results were profitable in 2004 and 2003 due in large part to our disciplined risk selection during the past several years. Property and marine results were highly profitable in both years, particularly in 2004, due to few severe losses. Results in the second quarter of 2003 included one $25 million loss that resulted from an adverse arbitration decision rendered against an insurance pool in which we were formerly a participant. Catastrophe losses represented 3.1 percentage points of the loss ratio for this class in the first six months of 2004 and 2.8 percentage points in the second quarter compared with 7.5 percentage points and 9.2 percentage points, respectively, in 2003. Specialty Insurance Premiums from specialty insurance, which represent 38% of our net writings, increased by 14% in the first six months of 2004 and 13% in the second quarter compared with the similar periods in 2003. Premium growth in our specialty business was enhanced by the growth in premiums generated by Chubb Re. Premiums produced by Chubb Re grew 53% in the first six months of 2004 and 35% in the second quarter. We expect that Chubb Re's premium growth in the second half of the year will be minimal compared with the second half of 2003. The aggregate growth in our executive protection and financial institutions businesses was 6% in the first six months of 2004 and 7% in the second quarter. The pace of rate increases has dropped off significantly as a result of increased competition in the marketplace. New business in the first six months of 2004 was down slightly from 2003 levels. Retention levels, however, were significantly higher than in 2003 and we continued to get favorable terms and conditions on both renewals and new business. Page 18 Our specialty insurance business produced unprofitable underwriting results in the first six months and second quarter of 2004 compared with near breakeven results in the similar periods of 2003. The combined loss and expense ratio was 102.8% for the first six months of 2004 and 107.5% for the second quarter compared with 99.3% and 99.5%, respectively, in 2003. The deterioration in 2004 was in our financial institutions business. Executive protection results were unprofitable in 2004 and 2003, but showed improvement in 2004 due to the impact of higher premiums. Results in both years were adversely affected by unfavorable development on loss reserves related to accident years 2002 and prior. Financial institutions results were highly unprofitable in 2004 and 2003, but far more so in 2004. The deterioration in 2004 was due to an increase in net loss reserves of about $160 million in the second quarter for errors and omissions losses related to investment banks, offset in part by a $50 million reduction in net loss reserves related to the September 11, 2001 attack. Results for the professional liability component of this business were highly unprofitable in both years due to substantial unfavorable prior year development in the directors and officers liability and errors and omissions liability classes. Such results were particularly unprofitable in 2004 due to the reserve increase in the second quarter related to investment banks. Fidelity results were highly profitable in both years due to favorable loss experience. The standard commercial business written on financial institutions produced highly profitable results in both years, reflecting the rate increases and more stringent risk selection in recent years. Such results were particularly profitable in 2004 due to the $50 million reduction in loss reserves in the second quarter related to the September 11, 2001 attack. Our other specialty results were highly profitable in 2004 and 2003. Our surety business produced highly profitable results in both years, but more so in 2003 due to a $17 million recovery from the sale of a bankruptcy claim against various Enron entities. Our accident business was more profitable in 2004 than in 2003. Our reinsurance assumed business generated by Chubb Re was similarly profitable in 2004 and 2003. Our surety business tends to be characterized by infrequent but potentially high severity losses. Since the end of 2001, we have been reducing our exposure on an absolute basis and by specific bond type. The majority of our obligations are intended to be performance-based guarantees. When losses occur, they are mitigated by the customer's balance sheet, contract proceeds and bankruptcy recovery. Notwithstanding our efforts to manage and reduce our surety exposure, we continue to have substantial commercial surety exposure for outstanding bonds. In that regard, we have exposures related to commercial surety bonds issued on behalf of companies that have experienced deterioration in creditworthiness. We therefore may experience an increase in filed claims and may incur high severity losses. Such losses would be recorded if and when claims are filed and determined to be valid, and could have a material adverse effect on the Corporation's results of operations and liquidity. Page 19 We have in force $500 million of gas forward purchase surety bonds with one principal, Aquila. Our exposure under these bonds will decline over the terms of the bonds, which extend until 2012. These surety bonds secure Aquila's obligation to supply gas under long-term forward purchase agreements. Under the terms of these bonds, our entire obligation to pay could be triggered if Aquila failed to provide gas under its forward purchase contracts or was the subject of a bankruptcy filing. Neither of these events has occurred. In July 2004, a settlement was reached and approved by the court that resulted in Aquila providing us with collateral sufficient to cover our entire exposure under the surety bonds. The cost of this agreement to us will be no more than $15 million. LOSS RESERVES Loss reserves at June 30, 2004 and December 31, 2003 included significant amounts related to asbestos and toxic waste claims and the September 11, 2001 attack. The components of loss reserves were as follows:
June 30, December 31, 2004 2003 -------- ------------ (in millions) Gross loss reserves Total, per balance sheet $ 19,053 $ 17,948 Less: Related to asbestos and toxic waste claims 1,129 1,295 Related to September 11 attack 790 999 -------- ------------ Total, as adjusted $ 17,134 $ 15,654 ======== ============ Reinsurance recoverable Total, per balance sheet $ 3,593 $ 3,427 Less: Related to asbestos and toxic waste claims 55 57 Related to September 11 attack 649 748 -------- ------------ Total, as adjusted $ 2,889 $ 2,622 ======== ============ Net loss reserves Total $ 15,460 $ 14,521 Total, as adjusted 14,245 13,032
The loss reserves related to asbestos and toxic waste claims and the September 11 attack are significant components of our total loss reserves, but they distort the growth trend in our loss reserves. Adjusted to exclude such loss reserves, our loss reserves, net of reinsurance recoverable, increased by $1,213 million during the first six months of 2004. Page 20 Net loss reserves, as adjusted, by segment were as follows:
June 30, December 31, 2004 2003 -------- ------------ (in millions) Personal insurance $ 1,341 $ 1,219 Commercial insurance 5,518 5,248 Specialty insurance 7,386 6,565 -------- ------------ Net loss reserves, as adjusted $ 14,245 $ 13,032 ======== ============
Loss reserves for each of our business segments increased significantly in the first six months of 2004. The increase was most significant in specialty insurance, due in large part to directors and officers liability and errors and omissions liability claim activity, including the errors and omissions reserve increase related to investment banks discussed below, as well as the strong growth in our reinsurance assumed business. In the second quarter, we updated our analysis of our exposure to investment banking errors and omissions claims related to report years 2002 and prior. These claims pertain principally to allegations against investment banks of laddering or of aiding and abetting in certain of the high-profile corporate abuse cases. During the quarter, the last of the significant regulatory settlements was announced, clearing the way for intensified and accelerated attention to the class action litigation that drives our exposure. In addition, recent developments in litigation relating to various corporate abuse scandals have led a number of investment banks to focus on, and in some cases pursue vigorously, settlement strategies. These developments and other information about potential settlement ranges and allocations of responsibility among investment banks for which we were one of the insurers were considered as part of the analysis of our exposure that led to our decision to increase net loss reserves by about $160 million. Separately, we reduced our net loss reserves related to the September 11, 2001 attack by $80 million in the second quarter as a result of several recent events. In March, the deadline for filing a liability claim with respect to the September 11 attack expired. That enabled us to define more precisely the number of claimants under liability policies. Then, in June, the final award determinations for claimants of the World Trade Center Victims Compensation Fund were made. As for our property exposure, in April, the jury in the Silverstein case found that we had bound coverage under a policy form that defined the September 11 attack as one occurrence. The effect of that verdict was to eliminate the need for us to make any additional payment. While we expect an appeal by the August 15 filing deadline, we believe any appeal would have no merit. Page 21 We continually review and update our loss reserves. Based on all information currently available, we believe that the aggregate loss reserves of the property and casualty subsidiaries at June 30, 2004 were adequate to cover claims for losses that had occurred, including both those known to us and those yet to be reported. In establishing such reserves, we consider facts currently known and the present state of the law and coverage litigation. However, given the judicial decisions and legislative actions that have broadened the scope of coverage and expanded theories of liability in the past and the possibilities of similar interpretations in the future, particularly as they relate to asbestos claims and, to a lesser extent, toxic waste claims, additional liabilities may emerge in future periods for amounts in excess of carried reserves. Such increases in estimates could have a material adverse effect on the Corporation's future operating results. However, management does not expect that any such increases would have a material effect on the Corporation's consolidated financial condition or liquidity. INVESTMENT RESULTS Property and casualty investment income before taxes increased by 12% in both the first six months and second quarter of 2004 compared with the same periods in 2003. The growth in investment income was due to an increase in invested assets since the second quarter of 2003. The increase in invested assets was due to substantial cash flow from operations over the period as well as a capital contribution of $800 million to the property and casualty subsidiaries by the Corporation toward the end of the second quarter of 2003. Growth in investment income in 2004 was dampened, however, by lower available reinvestment rates on fixed maturities that matured over the past year. The effective tax rate on investment income was 20.1% in both the first six months of 2004 and 2003. The effective tax rate on investment income is lower than the statutory tax rate due to our holding a portion of our investment portfolio in tax-exempt securities. On an after-tax basis, property and casualty investment income increased by 12% both in the first six months and second quarter of 2004. Management uses property and casualty investment income after-tax, a non-GAAP financial measure, to evaluate its investment performance because it reflects the impact of any change in the proportion of the investment portfolio invested in tax-exempt securities and is therefore more meaningful for analysis purposes than investment income before income tax. OTHER CHARGES Other charges include miscellaneous income and expenses of the property and casualty subsidiaries. Other charges in the first six months of 2003 included expenses of $15 million related to the restructuring of our operations in Continental Europe, of which $11 million was expensed in the second quarter. The restructuring costs consisted primarily of severance costs. CHUBB FINANCIAL SOLUTIONS Chubb Financial Solutions (CFS) was organized in 2000 to develop and provide customized products to address specific financial needs of corporate clients. CFS operated through both the capital and insurance markets. In April 2003, the Corporation announced its intention to exit CFS's non-insurance business and to run-off the existing financial products portfolio. Page 22 CFS's non-insurance business was primarily structured credit derivatives, principally as a counterparty in portfolio credit default swap contracts. The Corporation guaranteed all of these obligations. Portfolio credit default swaps are derivatives and are carried in the financial statements at estimated fair value, which represents management's best estimate of the cost to exit the positions. Most of the credit default swaps tend to be unique transactions and there is no market for trading such exposures. To estimate the fair value of the obligation in each credit default swap, we use internal valuation models that are similar to external valuation models. The fair value of our credit default swaps is subject to fluctuations arising from, among other factors, changes in credit spreads, the financial ratings of referenced asset-backed securities, actual credit events reducing subordination, credit correlation within a portfolio, anticipated recovery rates related to potential defaults and changes in interest rates. Changes in fair value are included in income in the period of the change. Thus, CFS's results are subject to volatility, which has had a significant effect on the Corporation's results of operations from period to period. The non-insurance business of CFS produced a loss before taxes of $17.2 million in the first six months of 2004 compared with income of $8.2 million in the first six months of 2003. The loss in the first six months of 2004 was primarily related to the termination during the period of CFS's obligations under certain credit default swaps. Results for the first six months of 2003 benefited from an improvement in corporate credit spreads, partially offset by deterioration in the credit quality of the asset-backed portfolio and severance costs. Revenues from the non-insurance business of CFS, primarily consisting of the change in fair value of derivative contracts, were negative $3.2 million in the first six months of 2004 and positive $17.9 million in the same period of 2003. Revenues were negative in 2004 due to the termination of several portfolio credit default swaps during the period. CFS's aggregate exposure, or retained risk, from each of its in-force portfolio credit default swaps is referred to as notional amount. Notional amounts are used to express the extent of involvement in swap transactions. These amounts are used to calculate the exchange of contractual cash flows and are not necessarily representative of the potential for gain or loss. The notional amounts are not recorded on the balance sheet. The notional amount of CFS's credit default swaps was reduced to $11.4 billion at June 30, 2004 from $24.7 billion at December 31, 2003 and $43.0 billion at June 30, 2003. This reduction in notional amount of credit default swaps has been accomplished either by terminating the swap with the original counterparty at a negotiated settlement amount or by entering into a credit default swap with a third party that effectively offsets the existing credit default swap. As of June 30, 2004, approximately $1.5 billion of the reduction in notional amount of credit default swaps had been accomplished by entering into offsetting credit default swaps. Page 23 Our realistic loss exposure is a very small portion of the $11.4 billion notional amount due to several factors. Our position is senior to subordinated interests of $5.4 billion in the aggregate. Of the $5.4 billion of subordination, only $37 million has eroded due to defaults through June 30, 2004, none of which has pierced the subordination limits of any of our contracts. In addition, using internal rating models, CFS estimates that the credit ratings of the individual portfolio credit default swaps at June 30, 2004 were either AAA or AA. In addition to portfolio credit default swaps, CFS entered into a derivative contract linked to an equity market index and a few other insignificant non-insurance transactions. The notional amount and fair value of our future obligations under derivative contracts by type of risk were as follows:
Notional Amount Fair Value ----------------------- ----------------------- June 30, December 31, June 30, December 31, 2004 2003 2004 2003 -------- ------------ -------- ------------ (in billions) (in millions) Credit default swaps Corporate securities $ 1.3 $ 11.2 $ 6 $ 21 Asset-backed securities 7.4 10.5 9 23 Loan portfolios 2.7 3.0 1 2 -------- ------------ -------- ------------ 11.4 24.7 16 46 Other .3 .4 8 9 -------- ------------ -------- ------------ $ 11.7 $ 25.1 $ 24 $ 55 ======== ============ ======== ============
In the fourth quarter of 2003, CFS terminated two asset-backed portfolio credit default swaps that had experienced deterioration in credit quality and simultaneously entered into a new contract that guarantees principal and interest obligations. The Corporation guaranteed CFS's obligations under the contract. CFS's potential payment obligation extends to the date when the last of the underlying obligations expires. At June 30, 2004, the notional amount of referenced securities was $2.1 billion. Under the agreement, CFS's maximum potential payment obligation is limited to $500 million regardless of the amount of losses that might be incurred on the $2.1 billion of referenced securities. Moreover, if losses are incurred, CFS's payment obligations are limited to an extended payment schedule under which no payment would be due until 2010 at the earliest. CFS established a liability of $186 million related to the principal and interest contract, which represented the estimated fair value of the guarantee at its inception. The principal and interest guarantee is not a derivative contract. Therefore, the liability related to this contract is not marked-to-market each period. Due to the nature of the guarantee, we will reduce this liability only upon either the expiration or settlement of the guarantee. If actual losses are incurred, a liability for the losses will be established, and a portion of the guarantee liability will be released. The amount released will depend on our evaluation of expected ultimate loss experience. Page 24 CORPORATE AND OTHER Corporate and other includes investment income earned on corporate invested assets, interest expense and other expenses not allocated to the operating subsidiaries. Corporate and other produced a loss before taxes of $64.7 million in the first six months of 2004 compared with a loss of $79.1 million in the first six months of 2003. The lower loss in 2004 was due primarily to higher investment income and higher income from our investment in Allied World Assurance Company, Ltd. offset in part by higher interest expense. Investment income was higher in 2004 due to an increase in corporate invested assets resulting from the issuance of debt and equity securities during 2003. Interest expense was higher in 2004 due primarily to the issuance of $500 million of debt in the first quarter of 2003 and $460 million of debt in the second quarter of 2003. In both 2004 and 2003, corporate results included a loss at The Chubb Institute, Inc., our post secondary educational subsidiary. As part of our focus on our core insurance business, in May 2004, we entered into an agreement to sell Chubb Institute. The sale transaction is further discussed under "Realized Investment Gains and Losses." REAL ESTATE Real estate operations resulted in a loss before taxes of $8.5 million in the first six months of 2004 compared with a loss of $2.5 million in the same period in 2003, which amounts are included in the corporate and other results. We own approximately $275 million of land that we expect will be developed in the future. In addition, our real estate assets include approximately $175 million of commercial properties and land parcels under lease, of which $23 million relates to a variable interest entity in which we are the primary beneficiary. We are continuing to explore the sale of certain of our remaining properties. The recoverability of the carrying value of our real estate assets is assessed based on our ability to fully recover costs through a future revenue stream. The assumptions used reflect future improvement in demand for office space, an increase in rental rates and the ability and intent to obtain financing in order to hold and develop such remaining properties and protect our interests over the long term. We believe that we have made adequate provisions for impairment of real estate assets. However, if the assets are not sold or developed or if leased properties do not perform as presently contemplated, it is possible that additional impairment losses may be recognized that would have a material adverse effect on the Corporation's results of operations. Page 25 REALIZED INVESTMENT GAINS AND LOSSES Net investment gains realized were as follows:
Periods Ended June 30 --------------------------------------- Second Quarter Six Months ----------------- ----------------- 2004 2003 2004 2003 ------ ----- ------ ----- (in millions) Net realized gains (losses) Equity securities $ 73.8 $ 3.5 $129.9 $19.4 Fixed maturities (30.1) 40.1 (5.3) 52.7 Chubb Institute (27.0) - (27.0) - ------ ----- ------ ----- 16.7 43.6 97.6 72.1 ------ ----- ------ ----- Other than temporary impairment Equity securities - 5.2 - 13.3 Fixed maturities - 17.7 - 33.6 ------ ----- ------ ----- - 22.9 - 46.9 ------ ----- ------ ----- Realized investment gains before tax $ 16.7 $20.7 $ 97.6 $25.2 ====== ===== ====== ===== Realized investment gains after tax $ 15.1 $13.5 $ 67.7 $16.4 ====== ===== ====== =====
A substantial portion of the realized gains in 2004 from equity securities related to our share of gains recognized by investment partnerships in which we have an interest. In May 2004, we entered into an agreement to sell Chubb Institute. Based on the terms of the agreement, we recognized a loss of $27 million in the second quarter. The sale is expected to close in the third quarter. We regularly review our invested assets with a fair value below cost to determine if an other than temporary decline in value has occurred. In evaluating whether a decline in value of any investment is other than temporary, we consider various quantitative and qualitative factors including the length of time and the extent to which the fair value has been less than the cost, the financial condition and near term prospects of the issuer, whether the debtor is current on contractually obligated interest and principal payments, and our intent and ability to hold the investment for a period of time sufficient to allow us to recover our cost. If a decline in the fair value of an individual security is deemed to be other than temporary, the difference between cost and estimated fair value is charged to income as a realized investment loss. The fair value of the investment becomes its new cost basis. CAPITAL RESOURCES AND LIQUIDITY Capital resources and liquidity represent the overall financial strength of the Corporation and its ability to generate cash flows from its operating subsidiaries, borrow funds at competitive rates and raise new capital to meet operating and growth needs. Page 26 CAPITAL RESOURCES Capital resources provide protection for policyholders, furnish the financial strength to support the business of underwriting insurance risks and facilitate continued business growth. At June 30, 2004, the Corporation had shareholders' equity of $8.9 billion and total debt of $2.8 billion. Management continuously monitors the amount of capital resources that the Corporation maintains both for itself and its operating subsidiaries. In connection with our long-term capital strategy, the Corporation from time to time contributes capital to its property and casualty subsidiaries. In addition, in order to satisfy its capital needs as a result of any rating agency capital adequacy or other future rating issues, or in the event the Corporation were to need additional capital to make strategic investments in light of market opportunities, the Corporation may take a variety of actions, which could include the issuance of additional debt and/or equity securities. In June 2003, a shelf registration statement that the Corporation filed in March 2003 was declared effective by the Securities and Exchange Commission. Under the registration statement, up to $2.5 billion of various types of securities may be issued. At June 30, 2004, the Corporation had approximately $650 million remaining under the shelf registration statement. In July 1998, the Board of Directors authorized the repurchase of up to 12,500,000 shares of the Corporation's common stock. The authorization has no expiration. The Corporation made no share repurchases during the first six months of 2004. As of June 30, 2004, 3,287,100 shares remained under the share repurchase authorization. We do not anticipate that we will repurchase any shares of our common stock in 2004. RATINGS The Corporation and its insurance subsidiaries are rated by major rating agencies. These ratings reflect the rating agency's opinion of our financial strength, operating performance, strategic position and ability to meet our obligations to policyholders. Ratings are an important factor in establishing our competitive position in our operating businesses. There can be no assurance that our ratings will continue for any given period of time or that they will not be changed. Reductions in our ratings could adversely affect the competitive position of our operating businesses. It is possible that positive or negative ratings actions may occur in the future. If our ratings were downgraded, the Corporation may incur higher borrowing costs and may have more limited means to access capital. LIQUIDITY Liquidity is a measure of our ability to generate sufficient cash flows to meet the short and long term cash requirements of our business operations. Page 27 Our property and casualty operations provide liquidity in that premiums are generally received months or even years before losses are paid under the policies purchased by such premiums. Historically, cash receipts from operations, consisting of insurance premiums and investment income, have provided more than sufficient funds to pay losses, operating expenses and dividends to the Corporation. After satisfying our cash requirements, excess cash flows are used to build the investment portfolio and thereby increase future investment income. New cash from operations available for investment by the property and casualty subsidiaries was approximately $1.7 billion in the first six months of 2004 compared with $1.1 billion in the same period in 2003. The increase in new cash in 2004 was due to premium receipts increasing at a greater rate than paid losses and operating expenses. Our property and casualty subsidiaries maintain investments in highly liquid, short-term and other marketable securities to provide for immediate cash needs. The Corporation's liquidity requirements in the past have been met by dividends from its property and casualty subsidiaries and the issuance of commercial paper and debt and equity securities. Subject to our operating results, financial condition, capital structure and any regulatory constraints, it is expected that our liquidity requirements in the future will be met by these sources of funds or, if necessary, borrowings from our credit facilities. The Corporation has two credit agreements with a group of banks that provide for unsecured borrowings of up to $500 million in the aggregate. The $250 million short term revolving credit facility, which was to have terminated on June 24, 2004, was extended to June 22, 2005. The $250 million medium term revolving credit facility terminates on June 28, 2007. There have been no borrowings under these agreements. INVESTED ASSETS The main objectives in managing our investment portfolios are to maximize after-tax investment income and total investment returns while minimizing credit risks in order to provide maximum support to the insurance underwriting operations. Investment strategies are developed based on many factors including underwriting results and our resulting tax position, regulatory requirements, fluctuations in interest rates and consideration of other market risks. Investment decisions are centrally managed by investment professionals based on guidelines established by management and approved by the boards of directors. Our investment portfolio is primarily comprised of high quality bonds, principally tax-exempt, U.S. Treasury and government agency, mortgage-backed securities and corporate issues as well as foreign bonds that support our international operations. In addition, the portfolio includes equity securities held primarily with the objective of capital appreciation. In the first six months of 2004, we invested new cash in tax-exempt bonds and taxable bonds. The taxable bonds were primarily mortgage-backed securities and U.S. Treasury securities. Our objective is to achieve the appropriate mix of taxable and tax-exempt securities in our portfolio to balance both investment and tax strategies. Page 28 The unrealized appreciation before tax of investments carried at market value, which includes fixed maturities classified as available-for-sale and equity securities, was $434 million and $1,036 million at June 30, 2004 and December 31, 2003, respectively. Such unrealized appreciation is reflected in a separate component of other comprehensive income, net of applicable deferred income tax. The decrease in unrealized appreciation in the first six months of 2004 was due primarily to the impact of an increase in interest rates on the market value of our fixed maturities. The unrealized market appreciation before tax of those fixed maturities carried at amortized cost was $24 million at June 30, 2004 and $35 million at December 31, 2003. Such unrealized appreciation was not reflected in the consolidated financial statements. Page 29 Item 4 - Controls and Procedures As of June 30, 2004, an evaluation of the effectiveness of the design and operation of the Corporation's disclosure controls and procedures was performed under the supervision and with the participation of the Corporation's management, including the chief executive officer and chief financial officer. Based on that evaluation, the chief executive officer and chief financial officer concluded that the Corporation's disclosure controls and procedures were effective as of the evaluation date. During the three month period ended June 30, 2004, there were no changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting. Page 30 PART II. OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K A. Exhibits Exhibit (10) Material contracts (1) Medium-Term Credit Agreement, dated as of June 28, 2002, among The Chubb Corporation, the Banks listed on the signature pages thereof, Deutsche Bank Securities Inc. and Salomon Smith Barney Inc., as Arrangers, Deutsche Bank AG New York Branch, as Administrative Agent, and Citibank, N.A., as Syndication Agent. (2) Amended and Restated Short-Term Credit Agreement and Amendment to Medium-Term Credit Agreement, dated as of June 26, 2003, among The Chubb Corporation, the Banks listed on the signature pages thereof, Deutsche Bank Securities Inc. and Salomon Smith Barney Inc., as Arrangers, Deutsche Bank AG New York Branch and Citibank, N.A. as Swingline Lenders, Deutsche Bank AG New York Branch, as Administrative Agent, and Citibank, N.A., as Syndication Agent. (3) Amended and Restated Short-Term Credit Agreement, dated as of June 23, 2004, among The Chubb Corporation, the Banks listed on the signature pages thereof, Deutsche Bank Securities Inc. and Citigroup Global Markets Inc., as Arrangers, Deutsche Bank AG New York Branch and Citicorp USA, Inc. as Swingline Lenders, Deutsche Bank AG New York Branch, as Administrative Agent, and Citicorp USA, Inc., as Syndication Agent. Exhibit (31) Rule 13a-14(a)/15d-14(a) Certifications (1) Certification by John D. Finnegan (2) Certification by Michael O'Reilly Exhibit (32) Section 1350 Certifications (1) Certification by John D. Finnegan (2) Certification by Michael O'Reilly B. Reports on Form 8-K The Registrant filed a current report on Form 8-K on April 14, 2004 furnishing under Item 9 information with respect to the sale by the Registrant of its investment in Hiscox plc. The Registrant filed a current report on Form 8-K on April 26, 2004 furnishing under Item 12 information with respect to the issuance of a press release announcing its results for the quarter ended March 31, 2004 and the availability of its Supplementary Investor Information Report for the quarter ended March 31, 2004. The Registrant filed a current report on Form 8-K on May 4, 2004 under Item 5 regarding matters submitted to a vote of the Corporation's security holders at the Corporation's annual meeting conducted on April 27, 2004, including the voting results relating thereto. The Registrant filed a current report on Form 8-K on May 21, 2004 under Item 9 regarding the execution by one of its subsidiaries of an agreement to sell The Chubb Institute and regarding the Registrant's receipt of a subpoena from the Attorney General of the State of New York seeking information regarding broker compensation. Page 31 The Registrant filed a current report on Form 8-K on July 20, 2004 furnishing under Item 9 information with respect to a settlement agreement between two subsidiaries of the Registrant and Aquila, Inc. The Registrant filed a current report on Form 8-K on July 22, 2004 furnishing under Item 9 information with respect to court approval of the settlement agreement between two subsidiaries of the Registrant and Aquila, Inc. The Registrant filed a current report on Form 8-K on July 27, 2004 furnishing under Item 12 information with respect to the issuance of a press release announcing its results for the quarter ended June 30, 2004 and the availability of its Supplementary Investor Information Report for the quarter ended June 30, 2004. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, The Chubb Corporation has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE CHUBB CORPORATION (Registrant) By: /s/ Henry B. Schram ------------------- Henry B. Schram Senior Vice-President and Chief Accounting Officer Date: August 6, 2004 EX-10.1 2 y99136exv10w1.txt MEDIUM-TERM CREDIT AGREEMENT EXHIBIT 10.1 MEDIUM-TERM CREDIT AGREEMENT AGREEMENT dated as of June 28, 2002, among THE CHUBB CORPORATION, the BANKS listed on the signature pages hereof, DEUTSCHE BANK SECURITIES INC. and SALOMON SMITH BARNEY INC., as Arrangers, DEUTSCHE BANK AG NEW YORK BRANCH, as Administrative Agent and CITIBANK, N.A., as Syndication Agent. The parties hereto agree as follows: ARTICLE I Definitions SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings: "Absolute Rate Auction" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03. "Adjusted CD Rate" has the meaning set forth in Section 2.07(b). "Adjusted Consolidated Net Worth" means at any date the shareholders' equity of the Borrower and its Consolidated Subsidiaries determined as of such date, adjusted to exclude the effect of Statement of Financial Accounting Standards No. 115 (by excluding any unrealized appreciation or depreciation of fixed maturity investments, net of any related adjustments and any related deferred income taxes). "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in the form prepared by the Agent and submitted to the Agent (with a copy to the Borrower) duly completed by such Bank. "Agent" means Deutsche Bank AG New York Branch, in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity. "Alternative Currency" means any currency other than Dollars which is freely transferable and convertible into Dollars. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its Euro- Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its Money Market Loans, its Money Market Lending Office. "Arrangers" means Deutsche Bank Securities Inc. and Salomon Smith Barney Inc. in their capacities as joint lead arrangers and joint lead bookrunners for the Banks hereunder, and their successors in such capacities. "Assessment Rate" has the meaning set forth in Section 2.07(b). "Assignee" has the meaning set forth in Section 9.06(c). "Bank" means each bank listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1% plus the Federal Funds Rate for such day. "Base Rate Loan" means (i) a Committed Loan which bears interest at the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or the provisions of Article VIII or (ii) an overdue amount which was a Base Rate Loan immediately before it became overdue. "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multi employer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Borrower" means The Chubb Corporation, a New Jersey corporation, and its successors. "Borrower's 2001 Form 10-K" means the Borrower's annual report on Form 10K for 2001, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Borrowing" has the meaning set forth in Section 1.03. 3 "CD Base Rate" has the meaning set forth in Section 2.07(b). "CD Loan" means (i) a Committed Loan which bears interest at a CD Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a CD Loan immediately before it became overdue. "CD Margin" has the meaning set forth in Section 2.07(b). "CD Rate" means a rate of interest determined pursuant to Section 2.07(b) on the basis of an Adjusted CD Rate. "CD Reference Banks" means Citibank, N.A., and Deutsche Bank AG New York Branch. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof, as such amount may be reduced from time to time pursuant to Sections 2.09, 2.10, 6.01 and 9.06. "Committed Loan" means a loan made by a Bank pursuant to Section 2.01; provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Committed Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Borrower in its consolidated financial statements if such statements were prepared as of such date. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay 3 the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, and (vi) all Debt of others Guaranteed by such Person. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Dollar Amount" means, in relation to any Money Market Borrowing denominated in an Alternative Currency, the amount designated by the Borrower as the Dollar amount of such Money Market Borrowing in the related Notice of Money Market Borrowing, subject to Section 2.03(h). "Dollars" and the sign "$" mean lawful money of the United States of America. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Domestic Lending Office", means as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Agent; provided that any Bank may so designate separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and its CD Loans, on the other hand, in which case all references herein to the Domestic Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Domestic Loans" means CD Loans or Base Rate Loans or both. "Domestic Reserve Percentage" has the meaning set forth in Section 2.07(b). "Effective Date" means the date this Agreement becomes effective in accordance with Section 3.01. 4 "Equivalent Amount" means, in connection with the determination of the amount of a Money Market Loan to be made or theretofore made in any Alternative Currency in relation to the Dollar Amount of such Loan, the amount of such Alternative Currency converted from such Dollar Amount at the spot buying rate of the Bank that is to make or has made such Loan (based on the London interbank market rate then prevailing) for Dollars against such Alternative Currency as of approximately 9:00 A.M. (New York City time) three Euro-Dollar Business Days before the date on which such Loan is to be made or the date on which the Equivalent Amount thereof is to be determined, as the case may be. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Group" means the Borrower and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in Dollar deposits) in London, and, where funds are to be paid or made available in an Alternative Currency, on which commercial banks are open for domestic and international business (including dealings in deposits in such Alternative Currency) in both London and the place where such funds are paid or made available. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro- Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Agent. "Euro-Dollar Loan" means (i) a Committed Loan which bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a Euro-Dollar Loan immediately before it became overdue. 5 "Euro-Dollar Margin" has the meaning set forth in Section 2.07(c). "Euro-Dollar Rate" means a rate of interest determined pursuant to Section 2.07(c) on the basis of a London Interbank Offered Rate. "Euro-Dollar Reference Banks" means Citibank, N.A. and Deutsche Bank AG. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion Dollars in respect of "Euro-currency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). "Event of Default" has the meaning set forth in Section 6.01. "Existing Credit Agreement" means the Medium-Term Credit Agreement dated as of July 11, 1997, as amended as of July 8, 1998, and as of July 7, 1999, among the Borrower, certain banks and Deutsche Bank AG and Citibank, N.A., as co-agents for such banks, and Deutsche Bank AG, as Administrative Agent for such banks. "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business 6 Day, the Federal Funds Rate for such day shall be the average rate quoted to Deutsche Bank AG New York Branch on such day on such transactions as determined by the Agent. "Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Prime Rate pursuant to Section 8.01(a)) or any combination of the foregoing. "Group of Loans" means at any time a group of Loans consisting of (i) all Committed Loans which are Base Rate Loans at such time or (ii) all Committed Loans which are Fixed Rate Loans of the same type having the same Interest Period at such time; provided that, if a Committed Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant to Section 8.02 or 8.04, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Interest Period" means: (1) with respect to each Euro-Dollar Loan, a period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in the applicable Notice of Interest Rate Election and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable notice; provided that: 7 (a) with the consent of all Lenders (and otherwise in accordance with Section 9.05), the Interest Period may be extended for up to one year from the date of borrowing specified in the applicable Notice of Borrowing or the date specified in the applicable Notice of Interest Rate Election; (b) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro- Dollar Business Day; (c) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (d) below, end on the last Euro-Dollar Business Day of a calendar month; and (d) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date; (2) with respect to each CD Loan, a period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in the applicable Notice of Interest Rate Election and ending 30, 60, 90 or 180 days thereafter, as the Borrower may elect in the applicable notice; provided that: (a) with the consent of all Lenders (and otherwise in accordance with Section 9.05), the Interest Period may be extended for up to one year from the date of borrowing specified in the applicable Notice of Borrowing or the date specified in the applicable Notice of Interest Rate Election; (b) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause (c) below, be extended to the next succeeding Euro-Dollar Business Day; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date; 8 (3) with respect to each Base Rate Loan, a period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in the applicable Notice of Interest Rate Election and ending 30 days thereafter; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause (b) below, be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date; (4) with respect to each Money Market LIBOR Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such whole number of months thereafter as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro- Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date; (5) with respect to each Money Market Absolute Rate Loan, a period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such number of days thereafter (but not less than 7 days) as the Borrower may elect in accordance with Section 2.03; provided that: 9 (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause (b) below, be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Level I Pricing Period" means any period during which the Borrower's public long-term senior unsecured Debt is rated AA+ or better by S&P or Aa1 or better by Moody's; provided that, in the event of a split rating, the higher rating will apply for purposes of determining the Pricing Level unless the Pricing Level based on the higher rating is more than one Pricing Level removed from that of the lower rating, in which case the Pricing Level will be that which is the midpoint between (or, if there is no midpoint, the higher of the two intermediate Pricing Levels between) the Pricing Levels determined by the two ratings. "Level II Pricing Period" means any period (other than a Level I Pricing Period) during which the Borrower's public long-term senior unsecured Debt is rated AA or better by S&P or Aa2 or better by Moody's; provided that, in the event of a split rating, the higher rating will apply for purposes of determining the Pricing Level unless the Pricing Level based on the higher rating is more than one Pricing Level removed from that of the lower rating, in which case the Pricing Level will be that which is the midpoint between (or, if there is no midpoint, the higher of the two intermediate Pricing Levels between) the Pricing Levels determined by the two ratings. "Level III Pricing Period" means any period (other than a Level I Pricing Period or a Level II Pricing Period) during which the Borrower's public long-term senior unsecured Debt is rated AA- or better by S&P or Aa3 or better by Moody's; provided that, in the event of a split rating, the higher rating will apply for purposes of determining the Pricing Level unless the Pricing Level based on the higher rating is more than one Pricing Level removed from that of the lower rating, in which case the Pricing Level will be that which is the midpoint between (or, if there is no midpoint, the higher of the two 10 intermediate Pricing Levels between) the Pricing Levels determined by the two ratings. "Level IV Pricing Period" means any period (other than a Level I Pricing Period, a Level II Pricing Period or a Level III Pricing Period) during which the Borrower's public long-term senior unsecured Debt is rated A+ or better by S&P or A1 or better by Moody's; provided that, in the event of a split rating, the higher rating will apply for purposes of determining the Pricing Level unless the Pricing Level based on the higher rating is more than one Pricing Level removed from that of the lower rating, in which case the Pricing Level will be that which is the midpoint between (or, if there is no midpoint, the higher of the two intermediate Pricing Levels between) the Pricing Levels determined by the two ratings. "Level V Pricing Period" means any period (other than a Level I Pricing Period, a Level II Pricing Period, a Level III Pricing Period or a Level IV Pricing Period) during which the Borrower's public long-term senior unsecured Debt is rated A or better by S&P or A2 or better by Moody's; provided that, in the event of a split rating, the higher rating will apply for purposes of determining the Pricing Level unless the Pricing Level based on the higher rating is more than one Pricing Level removed from that of the lower rating, in which case the Pricing Level will be that which is the midpoint between (or, if there is no midpoint, the higher of the two intermediate Pricing Levels between) the Pricing Levels determined by the two ratings. "Level VI Pricing Period" means any period (other than a Level I Pricing Period, a Level II Pricing Period, a Level III Pricing Period, a Level IV Pricing Period or a Level V Pricing Period) during which the Borrower's public long-term senior unsecured Debt is rated A- or better by S&P or A3 or better by Moody's; provided that, in the event of a split rating, the higher rating will apply for purposes of determining the Pricing Level unless the Pricing Level based on the higher rating is more than one Pricing Level removed from that of the lower rating, in which case the Pricing Level will be that which is the midpoint between (or, if there is no midpoint, the higher of the two intermediate Pricing Levels between) the Pricing Levels determined by the two ratings. 11 "Level VII Pricing Period" means any period that is not a Level I Pricing Period, a Level II Pricing Period, a Level III Pricing Period, a Level IV Pricing Period, a Level V Pricing Period or a Level VI Pricing Period. "LIBOR Auction" means a solicitation of Money Market Quotes setting forth Money Market Margins based on the London Interbank Offered Rate pursuant to Section 2.03. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.07(c). "Material Debt" means Debt (other than the Notes) of the Borrower and/or one or more of its Significant Subsidiaries (other than a Real Estate Subsidiary), arising in one or more related or unrelated transactions, in an aggregate principal amount exceeding $50,000,000. "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $50,000,000. "Money Market Absolute Rate" has the meaning set forth in Section 2.03(d). "Money Market Absolute Rate Loan" means a loan to be made by a Bank pursuant to an Absolute Rate Auction. "Money Market Lending Office" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Money Market Lending office by notice to the Borrower and the Agent; provided that any Bank may from 12 time to time by notice to the Borrower and the Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Money Market LIBOR Loan" means a loan to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Prime Rate pursuant to Section 8.01(a)). "Money Market Loan" means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan. "Money Market Margin" has the meaning set forth in Section 2.03(d). "Money Market Quote" means an offer by a Bank to make a Money Market Loan in accordance with Section 2.03. "Moody's" means Moody's Investors Service, Inc., and its successors. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section 2.03(f)). "Notice of Interest Rate Election" has the meaning set forth in Section 2.15. 13 "Other Credit Agreement" means the Short-Term Credit Agreement dated as of the date hereof among the parties hereto as amended from time to time. "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 9.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Pricing Period" means a Level I Pricing Period, a Level II Pricing Period, a Level III Pricing Period, a Level IV Pricing Period, a Level V Pricing Period, a Level VI Pricing Period or a Level VII Pricing Period. "Prime Rate" means the rate of interest publicly announced by Deutsche Bank AG New York Branch in New York City from time to time as its Prime Rate. "Real Estate Subsidiaries" means (i) Bellemead Development Corporation and its current Subsidiaries and (ii) each other Subsidiary that is principally engaged in the real estate business. "Reference Banks" means the CD Reference Banks or the Euro-Dollar Reference Banks, as the context may 14 require, and "Reference Bank" means any one of such Reference Banks. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Required Banks" means at any time Banks having more than 50% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing more than 50% of the aggregate unpaid principal amount of the Loans. "Revolving Credit Period" means the period from and including the Effective Date to and including the Termination Date. "S&P" means Standard & Poor's Rating Service. "Significant Subsidiary" means at any time a "significant subsidiary" of the Borrower, within the meaning of Regulation S-X promulgated by the Securities and Exchange Commission, as such Regulation is in effect from time to time; provided that, if the Borrower notifies the Agent that the Borrower wishes to amend this Agreement to eliminate the effect of any change of such Regulation (or if the Agent notifies the Borrower that the Required Banks wish to amend this Agreement for such purpose), then, for purposes of determining the Borrower's compliance with this Agreement, "Significant Subsidiaries" of the Borrower shall be determined on the basis of such Regulation as in effect immediately before the relevant change thereto, until either such notice is withdrawn or this Agreement is amended in a manner satisfactory to the Borrower and the Required Banks. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Borrower. "Termination Date" means June 28, 2007, or, if such day is not a Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case 15 the Termination Date shall be the next preceding Euro- Dollar Business Day. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "Utilization Percentage" means, with respect to any calendar quarter, a fraction, expressed as a percentage, of which (i) the numerator is the daily average aggregate principal amount of Loans outstanding under this Agreement and "Loans" (as defined in the Other Credit Agreement) outstanding under the Other Credit Agreement, in each case during such calendar quarter and (ii) the denominator is the daily average aggregate amount of Commitments in effect under this Agreement and "Commitments" (as defined in the Other Credit Agreement) in effect under the Other Credit Agreement, in each case during such calendar quarter; provided that if it is necessary to determine the Utilization Percentage with respect to a calendar quarter prior to the end of such calendar quarter, then the Utilization Percentage shall be determined based upon the daily average aggregate principal amount of Loans outstanding and Commitments in effect during the elapsed portion of such calendar quarter, in each case under this Agreement and the Other Credit Agreement. "Wholly Owned Consolidated Subsidiary" means any Consolidated Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, 16 applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks; provided that, if the Borrower notifies the Agent that the Borrower wishes to amend any covenant in Article V to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Agent notifies the Borrower that the Required Banks wish to amend Article V for such purpose), then the Borrower's compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Banks. SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article II on the same date, all of which Loans are of the same type (subject to Article VIII) and, except in the case of Base Rate Loans, have the same Interest Period or initial Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article II under which participation therein is determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks participate in proportion to their Commitments, while a "Money Market Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith). ARTICLE II The Credits SECTION 2.01. Commitments to Lend. During the Revolving Credit Period each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this Section from time to time in amounts such that the aggregate principal amount of Committed Loans by such Bank at any one time outstanding shall not exceed the amount of its Commitment. Each 17 Borrowing under this Section shall be in an aggregate principal amount of $10,000,000 or any larger amount that is a multiple of $1,000,000; provided, that any Borrowing under this Section may be in the aggregate amount available in accordance with Section 3.02(b). Each Borrowing under this Section shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this Section, repay, or to the extent permitted by Section 2.11, prepay Loans and reborrow at any time during the Revolving Credit Period under this Section. SECTION 2.02. Notice of Committed. Borrowings. The Borrower shall give the Agent notice (a "Notice of Committed Borrowing") not later than 10:00 A.M. (New York City time) on (x) the date of each Base Rate Borrowing, (y) the second Domestic Business Day before each CD Borrowing and (z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (b) the aggregate amount of such Borrowing, (c) whether the Loans comprising such Borrowing are to be CD Loans, Base Rate Loans or Euro-Dollar Loans, and (d) in the case of a Fixed Rate Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. SECTION 2.03. Money Market Borrowings. (a) The Money Market Option. In addition to Committed Borrowings pursuant to Section 2.01, the Borrower may, as set forth in this Section, request the Banks during the Revolving Credit Period to make offers to make Money Market Loans to the Borrower. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. (b) Money Market Quote Request. When the Borrower wishes to request offers to make Money Market 18 Loans under this Section, it shall transmit to the Agent by telex or facsimile transmission a Money Market Quote Request substantially in the form of Exhibit B hereto so as to be received no later than 10:00 A.M. (New York City time) on (x) the fifth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction for Money Market Loans to be made in Dollars, or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction for Money Market Loans to be made in Dollars or (z) the sixth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or Absolute Rate Auction for Money Market Loans to be made in an Alternative Currency in accordance with subsection (h) of this Section (or, in any case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction (unless such Absolute Rate Auction relates to Money Market Loans to be made in an Alternative Currency, in which case a Euro-Dollar Business Day), (ii) the aggregate amount of such Borrowing (expressed in Dollars), which shall be $10,000,000 or a larger multiple of $1,000,000, (iii) the currency in which the proposed Borrowing is to be made, which shall be Dollars or, subject to subsection (h) of this Section, an Alternative Currency, (iv) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (v) whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate. The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market 19 Quote Request. No Money Market Quote Request shall be given within five Euro-Dollar Business Days (or such other number of days as the Borrower and the Agent may agree) of any other Money Market Quote Request. (c) Invitation for Money Market Quotes. Promptly upon receipt of a Money Market Quote Request, the Agent shall send to the Banks by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit C hereto, which shall constitute an invitation by the Borrower to each Bank to submit Money Market Quotes offering to make the Money Market Loans to which such Money Market Quote Request relates in accordance with this Section. (d) Submission and Contents of Money Market Quotes. (i) Each Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 9.01 not later than (x) 2:00 p.m. (New York City time) on the fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction for Money Market Loans to be made in Dollars, (y) 9:00 A.M. (New York City time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction for Money Market Loans to be made in Dollars or (z) 2:00 p.m. (New York City time) on the sixth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or Absolute Rate Auction for Money Market Loans to be made in an Alternative Currency (or, in any case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); provided that Money Market Quotes submitted by the Agent (or any affiliate of the Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than (x) one hour prior to the deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the other Banks, in the case of an Absolute Rate Auction. Subject to Articles III and VI, any Money Market Quote so 20 made shall be irrevocable except with the written consent of the Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: (A) the proposed date of Borrowing, (B) the principal amount of the Money Market Loan for which each such offer is being made (expressed in Dollars), which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $1,000,000 or a larger multiple of $1,000,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Bank may be accepted, (C) the currency of the Money Market Loan for which each such offer is being made, (D) in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the "Money Market Margin") offered for each such Money Market Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (E) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the "Money Market Absolute Rate") offered for each such Money Market Loan, and (F) the identity of the quoting Bank. A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes. (iii) Any Money Market Quote shall be disregarded if it: (A) is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection (d)(ii); 21 (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or (D) arrives after the time set forth in subsection (d)(i). (e) Notice to Borrower. The Agent shall promptly notify the Borrower of the terms (x) of any Money Market Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Agent's notice to the Borrower shall specify (A) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market Margins or Money Market Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted. (f) Acceptance and Notice by Borrower. Not later than 10:00 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction for Money Market Loans to be made in Dollars, (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction for Money Market Loans to be made in Dollars or (z) the fifth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or Absolute Rate Auction for Money Market Loans to be made in an Alternative Currency (or, in any case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify the Agent of its 22 acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted, expressed in Dollars. The Borrower may accept any Money Market Quote in whole or in part; provided that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in, and the currency thereof must be the currency set forth in, the related Money Market Quote Request, (ii) the principal amount of each Money Market Borrowing must be $10,000,000 or a larger multiple of $1,000,000, (iii) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be, and (iv) the Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement. (g) Allocation by Agent. If offers are made by two or more Banks with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Agent among such Banks as nearly as possible (in multiples of $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Agent of the pro rata amounts of Money Market Loans shall be conclusive in the absence of manifest error. (h) Money Market Loans in an Alternative Currency. The Borrower may request Money Market Loans in an Alternative Currency subject to the terms and conditions of this subsection (h), in addition to the other conditions applicable to such Loans hereunder. Any request for Money Market Loans in an Alternative Currency shall be subject to the condition that if there shall occur at or prior to 23 10:00 A.M. (New York City time) on the date of any Money Market Borrowing to be denominated in an Alternative Currency any change in national or international financial, political or economic conditions or currency exchange rates or exchange controls which would, in the reasonable opinion of any Bank that shall have offered to make any Money Market Loan in connection with such Borrowing, make it impracticable for such Bank's Loan to be denominated in such Alternative Currency, then such Bank may by notice to the Borrower and the Agent withdraw its offer to make such Loan. Any Money Market Loan which is to be made in an Alternative Currency in accordance with this subsection (h) shall be advanced in the Equivalent Amount of the Dollar Amount thereof and shall be repaid or prepaid in such Alternative Currency in the amount borrowed. Interest payable on any Loan denominated in an Alternative Currency shall be paid in such Alternative Currency. For purposes of determining whether the aggregate principal amount of Loans outstanding hereunder exceeds any applicable limitation expressed in Dollars, each Money Market Loan denominated in an Alternative Currency shall be deemed to be in a principal amount equal to the Dollar Amount thereof. The Dollar Amount of any Money Market Loan with an Interest Period exceeding six months in duration shall be adjusted on each date that would have been the last day of an Interest Period for such Loan if such Loan had successive Interest Periods of six months duration. Each such adjustment shall be made by the Bank holding such Loan by determining the amount in Dollars that would be required in order to result in an Equivalent Amount in the applicable Alternative Currency equal to the principal amount of the applicable Loan outstanding on the date of the adjustment, and the amount in Dollars so determined shall be the Dollar Amount of such Loan unless and until another adjustment is required hereby. Each Bank that makes a Money Market Loan denominated in an Alternative Currency agrees to determine any such adjustments if and when required to be made pursuant to this paragraph and to notify the Borrower and the Agent of each such adjustment promptly upon making such determination. SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such Borrowing 24 and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 12:00 Noon (New York City time) on the date of each Borrowing, each Bank participating therein shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Agent at its address specified in or pursuant to Section 9.01 or, subject to the provisions of Section 2.03(h), if such Borrowing is to be made in an Alternative Currency, make available the Equivalent Amount of such Alternative Currency on that day (in such funds as may then be customary for the settlement of international transactions in the Alternative Currency) to the account of the Agent at such place as shall have been notified by the Agent to the Banks by not less than five Domestic Business Days' notice. Unless the Agent determines that any applicable condition specified in Article III has not been satisfied, the Agent will make the funds so received from the Banks available to the Borrower at the Agent's aforesaid address. (c) If any Bank makes a new Loan hereunder on a day on which the Borrower is to repay all or any part of an outstanding Loan denominated in the same currency from such Bank, such Bank shall apply the proceeds of its new Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed and the amount being repaid shall be made available by such Bank to the Agent as provided in subsection (b), or remitted by the Borrower to the Agent as provided in Section 2.12, as the case may be. (d) Unless the Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Agent such Bank's share of such Borrowing, the Agent may assume that such Bank has made such share available to the Agent on the date of such Borrowing in accordance with subsections (b) and (c) of this Section 2.04 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the 25 date such amount is repaid to the Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. SECTION 2.05. Notes. (a) The Loans of each Bank shall be evidenced by a single Note payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank's Loans. (b) Each Bank may, by notice to the Borrower and the Agent, request that its Loans of a particular type be evidenced by a separate Note in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant type. Each reference in this Agreement to the "Note" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Bank's Note pursuant to Section 3.01(b), the Agent shall forward such Note to such Bank. Each Bank shall record the date, amount, type and maturity of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto and, in the case of Money Market Loans denominated in an Alternative Currency, the currency, amount and Dollar Amount of such Loans, and prior to any transfer of its Note shall endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. SECTION 2.06. Maturity of Loans. (a) All Committed Loans of each Bank shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the Termination Date. 26 (b) Each Money Market Loan shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the last day of the Interest Period applicable to such Money Market Loan. SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, (i) at a rate per annum equal to the Base Rate for such day, if such day falls within any calendar quarter with respect to which the Utilization Percentage is less than or equal to 50% or (ii) at a rate per annum equal to the sum of the Base Rate for such day and 0.10%, if such day falls within a calendar quarter with respect to which the Utilization Percentage is greater than 50%. Such interest shall be payable for each Interest Period on the last day thereof, and, with respect to the principal amount of any Base Rate Loan converted to a CD Loan or a Euro-Dollar Loan, on each date a Base Rate Loan is so converted. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Base Rate. (b) Each CD Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the CD Margin plus the applicable Adjusted CD Rate; provided that if any CD Loan or any portion thereof shall, as a result of clause (2)(b) of the definition of Interest Period, have an Interest Period of less than 30 days, such portion shall bear interest during such Interest Period at the rate applicable to Base Rate Loans during such period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 90 days, at intervals of 90 days after the first day thereof. In addition, with respect to the principal amount of any CD Loan converted to a Base Rate Loan or a Euro- Dollar Loan, such interest shall be payable on each date a CD Loan is so converted. Any overdue principal of or interest on any CD Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the CD Margin plus the Adjusted CD Rate applicable to such Loan and (ii) the rate applicable to Base Rate Loans for such day. 27 "CD Margin" applicable to any CD Loan outstanding on any day means: (i) if such day falls within a Level I Pricing Period, then (A) 0.2525%, if such day falls within any calendar quarter with respect to which the Utilization Percentage is less than or equal to 50% or (B) 0.3525%, if such day falls within a calendar quarter with respect to which the Utilization Percentage is greater than 50%; (ii) if such day falls within a Level II Pricing Period, then (A) 0.260%, if such day falls within any calendar quarter with respect to which the Utilization Percentage is less than or equal to 50% or (B) 0.360%, if such day falls within a calendar quarter with respect to which the Utilization Percentage is greater than 50%; (iii) if such day falls within a Level III Pricing Period, then (A) 0.280%, if such day falls within any calendar quarter with respect to which the Utilization Percentage is less than or equal to 50% or (B) 0.380%, if such day falls within a calendar quarter with respect to which the Utilization Percentage is greater than 50%; (iv) if such day falls within a Level IV Pricing Period, then (A) 0.295%, if such day falls within any calendar quarter with respect to which the Utilization Percentage is less than or equal to 50% or (B) 0.395%, if such day falls within a calendar quarter with respect to which the Utilization Percentage is greater than 50%; (v) if such day falls within a Level V Pricing Period, then (A) 0.335%, if such day falls within any calendar quarter with respect to which the Utilization Percentage is less than or equal to 50% or (B) 0.435%, if such day falls within a calendar quarter with respect to which the Utilization Percentage is greater than 50%; (vi) if such day falls within a Level VI Pricing Period, then (A) 0.375%, if such day falls within any calendar quarter with respect to which the Utilization Percentage is less than or equal to 50% or (B) 0.475%, if such day falls within a calendar quarter with 28 respect to which the Utilization Percentage is greater than 50%; and (vii) if such day falls within a Level VII Pricing Period, then (A) 0.450%, if such day falls within any calendar quarter with respect to which the Utilization Percentage is less than or equal to 50% or (B) 0.550%, if such day falls within a calendar quarter with respect to which the Utilization Percentage is greater than 50%. The "Adjusted CD Rate" applicable to any Interest Period means a rate per annum determined pursuant to the following formula: [ CDBR ]* ACDR = [----------- ] + AR [ 1.00 - DRP ] ACDR = Adjusted CD Rate CDBR = CD Base Rate DRP = Domestic Reserve Percentage Ar = Assessment Rate ---------------------- * The amount in brackets being rounded upward, if necessary, to the next higher 1/100 of 1% The "CD Base Rate" applicable to any Interest Period is the rate of interest determined by the Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each CD Reference Bank of its certificates of deposit in an amount comparable to the principal amount of the CD Loan of such CD Reference Bank to which such Interest Period applies and having a maturity comparable to such Interest Period. "Domestic Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the 29 Federal Reserve System (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion Dollars in respect of new non-personal time deposits in Dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage. "Assessment Rate" means for any Interest Period the net annual assessment rate (rounded upward, if necessary, to the next higher 1/100 of 1%) actually incurred by Deutsche Bank Trust Company Americas to the Federal Deposit Insurance Corporation (or any successor) for such Corporation's (or such successor's) insuring time deposits at offices of Deutsche Bank Trust Company Americas in the United States during the most recent period for which such rate has been determined prior to the commencement of such Interest Period. (c) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin plus the applicable London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. In addition, with respect to the principal amount of any Euro-Dollar Loan converted to a Base Rate Loan or a CD Loan, such interest shall be payable on each date a Euro-Dollar Loan is so converted. "Euro-Dollar Margin" applicable to any Euro- Dollar Loan outstanding on any day means: (i) if such day falls within a Level I Pricing Period, then (A) 0.1275%, if such day falls within any calendar quarter with respect to which the Utilization Percentage is less than or equal to 50% or (B) 0.2275%, if such day falls within a calendar quarter with respect to which the Utilization Percentage is greater than 50%; (ii) if such day falls within a Level II Pricing 30 Period, then (A) 0.135%, if such day falls within any calendar quarter with respect to which the Utilization Percentage is less than or equal to 50% or (B) 0.235%, if such day falls within a calendar quarter with respect to which the Utilization Percentage is greater than 50%; (iii) if such day falls within a Level III Pricing Period, then (A) 0.155%, if such day falls within any calendar quarter with respect to which the Utilization Percentage is less than or equal to 50% or (B) 0.255%, if such day falls within a calendar quarter with respect to which the Utilization Percentage is greater than 50%; (iv) if such day falls within a Level IV Pricing Period, then (A) 0.170%, if such day falls within any calendar quarter with respect to which the Utilization Percentage is less than or equal to 50% or (B) 0.270%, if such day falls within a calendar quarter with respect to which the Utilization Percentage is greater than 50%; (v) if such day falls within a Level V Pricing Period, then (A) 0.210%, if such day falls within any calendar quarter with respect to which the Utilization Percentage is less than or equal to 50% or (B) 0.310%, if such day falls within a calendar quarter with respect to which the Utilization Percentage is greater than 50%; (vi) if such day falls within a Level VI Pricing Period, then (A) 0.250%, if such day falls within any calendar quarter with respect to which the Utilization Percentage is less than or equal to 50% or (B) 0.350%, if such day falls within a calendar quarter with respect to which the Utilization Percentage is greater than 50%; and (vii) if such day falls within a Level VII Pricing Period, then (A) 0.325%, if such day falls within any calendar quarter with respect to which the Utilization Percentage is less than or equal to 50% or (B) 0.425%, if such day falls within a calendar quarter with respect to which the Utilization Percentage is greater than 50%. 31 The "London Interbank Offered Rate", applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/32 of 1%) of the respective rates per annum at which deposits in Dollars or, in the case of any Money Market LIBOR Loan denominated in an Alternative Currency, the relevant Alternative Currency are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro- Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. (d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the Euro-Dollar Margin plus the London Interbank Offered Rate applicable to such Loan and (ii) the Euro-Dollar Margin plus the average (rounded upward, if necessary, to the next higher 1/32 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than one month as the Agent may select) deposits in Dollars in an amount approximately equal to such overdue payment due to each of the Euro-Dollar Reference Banks are offered to such Euro-Dollar Reference Bank in the London interbank market for the applicable period determined as provided above (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the rate applicable to Base Rate Loans for such day). (e) Subject to Section 8.01(a), each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07(c) as if the related Money Market LIBOR Borrowing were a Committed Euro- Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, 32 for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.03. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Prime Rate for such day. (f) The Agent shall determine each interest rate applicable to the Loans hereunder in accordance with the provisions hereof. The Agent shall give prompt notice to the Borrower and the participating Banks by telex, cable or telecopy of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (g) Each Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated by this Section. If any Reference Bank does not furnish a timely quotation, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. SECTION 2.08. Fees. (a) Facility Fee. The Borrower shall pay to the Agent for the account of the Banks ratably a facility fee at the rate of (i) 0.060% per annum for each day falling within a Level I Pricing Period, (ii) 0.065% per annum for each day falling within a Level II Pricing Period, (iii) 0.070% per annum for each day falling within a Level III Pricing Period, (iv) 0.080% per annum for each day falling within a Level IV Pricing Period, (v) 0.090% per annum for each day falling within a Level V Pricing Period, (vi) 0.100% per annum for each day falling within a Level VI Pricing Period, and (vii) 0.175% per annum for each day falling within a Level VII Pricing Period. Such facility fee shall accrue from and including the Effective Date to but excluding the Termination Date, on the daily average aggregate amount of the Commitments (whether used or unused). If any Loans are outstanding and are not repaid on the Termination Date, such facility fee will continue to accrue from and including the Termination Date to but excluding the date all Loans are repaid, on the outstanding principal amount of the Loans. 33 (b) Payments. Accrued fees under subsection (a) of this Section shall be payable quarterly on the last day of February, May, August and November in each year (commencing August 2002) and upon the date of termination of the Commitments in their entirety (and, if later, the date the Loans shall be repaid in their entirety). SECTION 2.09. Optional Termination or Reduction of Commitments. The Borrower may, upon at least three Domestic Business Days' prior irrevocable written notice to the Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $10,000,000 or any larger multiple of $1,000,000, the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans. SECTION 2.10. Mandatory Termination of Commitments. The Commitments shall terminate on the Termination Date and any Loans then outstanding (together with accrued interest thereon) shall be due and payable on such date. SECTION 2.11. Optional Prepayments. (a) Subject to Section 2.13 in the case of Fixed Rate Loans, the Borrower may, upon at least one Domestic Business Day's notice to the Agent, prepay any Group of Loans, or any Money Market Borrowing bearing interest at the Base Rate pursuant to Section 8.01, in whole at any time, or from time to time in part in amounts aggregating $10,000,000 or any larger multiple of $1,000,000 (based on the Dollar Amount thereof, in the case of a Borrowing denominated in an Alternative Currency), by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment; provided that, except as expressly provided above, the Borrower may not prepay all or any portion of the principal amount of any Money Market Loan prior to the maturity thereof. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Group or Borrowing. (b) Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. 34 SECTION 2.12. General Provisions as to Payments. (a) Except as expressly provided in subsection (b) of this Section, the Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, in Dollars, not later than 12:00 Noon (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 9.01. The Agent will promptly distribute to each Bank its ratable share of each such payment received by the Agent for the account of the Banks. (b) All payments to be made by the Borrower hereunder or under the Notes in an Alternative Currency pursuant to Section 2.03(h) shall be made in such Alternative Currency in such funds as may then be customary for the settlement of international transactions in such Alternative Currency for the account of the Agent, at such time and at such place as shall have been notified by the Agent to such Borrower and the applicable Banks by not less than four Euro-Dollar Business Days' notice. The Agent will promptly cause any such payments for the account of any Bank to be distributed to the Bank entitled thereto in like funds. (c) Whenever any payment of principal of, or interest on, the Domestic Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, any Money Market Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (d) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make 35 such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate. SECTION 2.13. Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is converted (pursuant to Article II, VI or VIII or otherwise) on any day other than the last day of the Interest Period applicable thereto, or the end of an applicable period fixed pursuant to Section 2.07(d), or if the Borrower fails to borrow any Fixed Rate Loans (excluding a failure to borrow in a specified Alternative Currency due to the occurrence of any change in conditions described in Section 2.03(h)) after notice has been given to any Bank in accordance with Section 2.04(a), the Borrower shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or failure to borrow, provided that such Bank shall have delivered to the Borrower a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. SECTION 2.14. Computation of Interest and Fees. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.15. Method of Electing Interest Rates. (a) The Loans included in each Committed Borrowing shall bear interest initially at the type of rate specified 36 by the Borrower in the applicable Notice of Committed Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article VIII), as follows: (i) if such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to CD Loans as of any Domestic Business Day or to Euro-Dollar Loans as of any Euro-Dollar Business Day; (ii) if such Loans are CD Loans, the Borrower may elect to convert such Loans to Base Rate Loans or Euro-Dollar Loans or elect to convert or continue such Loans as CD Loans for a different or additional Interest Period, in each case effective on any Euro-Dollar Business Day; (iii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Base Rate Loans or CD Loans or elect to convert or continue such Loans as Euro-Dollar Loans for a different or additional Interest Period, in each case effective on any Euro-Dollar Business Day. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Agent at least three Euro-Dollar Business Days before the conversion or continuation selected in such notice is to be effective (unless the relevant Loans are to be converted from Domestic Loans to Domestic Loans of the other type or continued as Domestic Loans of the same type for an additional Interest Period, in which case such notice shall be delivered to the Agent at least two Domestic Business Days before such conversion or continuation is to be effective). A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, are each $10,000,000 or any larger multiple of $1,000,000. 37 (b) Each Notice of Interest Rate Election shall specify: (i) The Group of Loans (or portion thereof) to which such notice applies; (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection (a) above; (iii) if the Loans comprising such Group are to be converted, the new type of Loans and, if such new Loans are Fixed Rate Loans, the duration of the initial Interest Period applicable thereto; and (iv) if such Loans are to be continued as CD Loans or Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period. (c) Upon receipt of a Notice of Interest Rate Election from the Borrower pursuant to subsection (a) above, the Agent shall promptly notify each Bank of the contents thereof and such notice shall not thereafter be revocable by the Borrower. If the Borrower fails to deliver a timely Notice of Interest Rate Election to the Agent for any Group of Fixed Rate Loans, such Loans shall be converted into Base Rate Loans on the last day of the then current Interest Period applicable thereto. SECTION 2.16. Regulation D Compensation. If and for so long as any Bank maintains reserves against "Euro- currency liabilities" (or any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of such Bank to United States residents), then such Bank may require the Borrower to pay, contemporaneously with each payment of interest on Euro- Dollar Loans, additional interest on the related Euro- Dollar Loan of such Bank at a rate per annum determined by such Bank up to but not exceeding the excess of (i)(A) the applicable London Interbank Offered Rate divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the 38 applicable London Interbank Offered Rate. Any Bank wishing to require payment of such additional interest (x) shall so notify the Borrower and the Agent, in which case such additional interest on the Euro-Dollar Loans of such Bank shall be payable to such Bank at the place indicated in such notice with respect to each Interest Period commencing at least four Euro-Dollar Business Days after the giving of such notice and (y) shall notify the Borrower at least five Euro-Dollar Business Days prior to each date on which interest is payable on the Euro-Dollar Loans of the amount then due it under this Section. SECTION 2.17. Judgment Currency. If for the purposes of obtaining judgment in any court it is necessary to convert a sum due from the Borrower hereunder or under any of the Notes in the currency expressed to be payable herein or under the Notes ( the "specified currency") into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Agent could purchase the specified currency with such other currency at the Agent's New York office on the Euro-Dollar Business Day preceding that on which final judgment is given. The obligations of the Borrower in respect of any sum due to any Bank or the Agent hereunder or under any Note shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Euro-Dollar Business Day following receipt by such Bank or the Agent (as the case may be) of any sum adjudged to be so due in such other currency such Bank or the Agent (as the case may be) may in accordance with normal banking procedures purchase the specified currency with such other currency; if the amount of the specified currency so purchased is less than the sum originally due to such Bank or the Agent, as the case may be, in the specified currency, the Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Bank or the Agent, as the case may be, against such loss, and if the amount of the specified currency so purchased exceeds (a) the sum originally due to any Bank or the Agent, as the case may be, in the specified currency and (b) any amounts shared with other Banks as a result of allocations of such excess as a disproportionate payment to such Bank under Section 9.04, such Bank or the Agent, as the case may be, agrees to remit such excess to the Borrower. 39 ARTICLE III Conditions SECTION 3.01. Effectiveness. This Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 9.05): (a) receipt by the Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party); (b) receipt by the Agent for the account of each Bank of a duly executed Note dated on or before the Effective Date complying with the provisions of Section 2.05; (c) receipt by the Agent of an opinion of Joanne L. Bober, Esq., Senior Vice President and General Counsel of the Borrower, substantially in the form of Exhibit E hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (d) receipt by the Agent of written confirmation from the Borrower that the Borrower has (i) terminated all lending commitments under its Existing Credit Agreement and (ii) repaid all loans and other amounts, if any, outstanding or accrued thereunder; (e) receipt by the Agent of all documents it may reasonably request relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Agent; and (f) receipt by the Arrangers of all fees that are to be received by the Arrangers upon execution of this Agreement in the amounts previously agreed upon between the Borrower and the Agent; 40 provided that this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than July 2, 2002. The Agent shall promptly notify the Borrower and the Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto. SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions: (a) receipt by the Agent of a Notice of Borrowing as required by Section 2.02 or 2.03, as the case may be; (b) the fact that, immediately after such Borrowing, the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments; (c) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing; and (d) the fact that the representations and warranties of the Borrower contained in this Agreement shall be true on and as of the date of such Borrowing, except that the condition set forth in this clause (d) shall exclude the representation and warranty set forth in Section 4.04(c) for any Loans made after the Effective Date. Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (b), (c) and (d) of this Section. 41 ARTICLE IV Representations and Warranties The Borrower represents and warrants that: SECTION 4.01. Corporate Existence and Power. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of New Jersey, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Significant Subsidiaries. SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower and the Notes, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower, in each case enforceable in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other laws affecting creditor's rights generally from time to time in effect and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law). SECTION 4.04. Financial Information. (a) The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 2001, and the related consolidated statements of income, shareholders' equity and cash flow for the fiscal year then ended, reported on by Ernst & Young and set forth in the Borrower's 2001 Form 10-K, a copy of which has been 42 delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) The unaudited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of March 31, 2002, and the related unaudited consolidated statements of income and cash flow for the three months then ended, set forth in the Borrower's quarterly report for the fiscal quarter ended March 31, 2002, as filed with the Securities and Exchange Commission on Form 10-Q, a copy of which has been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles applied on a basis consistent with the financial statements referred to in subsection (a) of this Section, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such three month period (subject to normal year-end adjustments). (c) Since March 31, 2002, there has been no material adverse change in the financial position of the Borrower and its Consolidated Subsidiaries, considered as a whole, or in the ability of the Borrower to comply with its payment obligations under the Notes. SECTION 4.05. Litigation. There is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened in writing against the Borrower or any of its Significant Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could materially adversely affect the financial position of the Borrower and its Consolidated Subsidiaries, considered as a whole, or the ability of the Borrower to comply with its payment obligations under the Notes, or which in any manner draws into question the validity of this Agreement or the Notes. SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the presently 43 applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code to secure obligations aggregating in excess of $25,000,000 or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. SECTION 4.07. Not an Investment Company. The Borrower is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 4.08. Compliance with Laws. Each of the Borrower and its Significant Subsidiaries is in compliance in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, ERISA and the rules and regulations thereunder) except where the necessity of compliance therewith is being contested in good faith by appropriate proceedings. ARTICLE V Covenants The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid: SECTION 5.01. Information. The Borrower will deliver to each of the Banks: (a) as soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income, shareholders' equity and cash flow for such fiscal year, setting forth in each case in comparative form the figures for the previous 44 fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission by Ernst & Young or other independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income for such quarter and of income and cash flow for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in comparative form the consolidated statements of income for the corresponding quarter of the Borrower's previous fiscal year and of income and cash flow for the corresponding portion of the Borrower's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer or the chief accounting officer or the Treasurer of the Borrower; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer or the chief accounting officer or the Treasurer of the Borrower stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) simultaneously with the delivery of each set of financial statements referred to in clause (a) above, a statement of the firm of independent public accountants which reported on such statements whether anything has come to their attention to cause them to believe that any Default existed on the date of such statements; (e) within five days after the Chairman, the Vice-Chairman, the President, the chief financial officer, the chief accounting officer or the Treasurer of the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer or the chief accounting 45 officer or the Treasurer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (f) promptly upon the mailing thereof to the shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; (g) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8- K (or their equivalents) which the Borrower shall have filed with the Securities and Exchange Commission; (h) if and when any member of the ERISA Group gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or makes any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security to secure obligations aggregating in excess 46 of $10,000,000, a certificate of the chief financial officer or the chief accounting officer or the Treasurer of the Borrower setting forth details as to such occurrence and action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take; and (i) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Agent, at the request of any Bank, may reasonably request. SECTION 5.02. Payment of Obligations. The Borrower will pay and discharge, and will cause each Significant Subsidiary to pay and discharge, at or before maturity, all their respective material obligations and liabilities, including, without limitation, tax liabilities, except where the same may be contested in good faith by appropriate proceedings, and will maintain, and will cause each Significant Subsidiary to maintain, in accordance with generally accepted accounting principles, appropriate reserves for the accrual of any of the same. SECTION 5.03. Maintenance of Property. The Borrower will keep, and will cause each Significant Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted. SECTION 5.04. Conduct of Business and Maintenance of Existence. The Borrower will continue, and will cause each Significant Subsidiary to continue, to engage in business of the same general type as now conducted by the Borrower and its Subsidiaries, and will preserve, renew and keep in full force and effect, and will cause each Significant Subsidiary to preserve, renew and keep in full force and effect, their respective corporate existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in this Section 5.04 shall prohibit (i) the merger of a Significant Subsidiary into the Borrower or the merger or consolidation of a Significant Subsidiary with or into another Person if the corporation surviving such consolidation or merger is a Subsidiary and if, in each case, after giving effect thereto, no Default shall have occurred and be continuing or (ii) the termination of the corporate existence of any Significant Subsidiary if the Borrower in good faith 47 determines that such termination is in the best interest of the Borrower and is not materially disadvantageous to the Banks. SECTION 5.05. Compliance with Laws. The Borrower will comply, and cause each Significant Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, ERISA and the rules and regulations thereunder) except where the necessity of compliance therewith is contested in good faith by appropriate proceedings. SECTION 5.06. Inspection of Property, Books and Records. The Borrower will keep, and will cause each Significant Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each Significant Subsidiary to permit, representatives of any Bank at such Bank's expense to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable times and with reasonable notice and as often as may reasonably be desired. SECTION 5.07. Adjusted Consolidated Net Worth. The Borrower will at no time permit Adjusted Consolidated Net Worth to be less than $2,600,000,000. SECTION 5.08. Negative Pledge. Neither the Borrower nor any Significant Subsidiary (other than a Real Estate Subsidiary) will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens existing on the date of this Agreement securing Debt outstanding on the date of this Agreement; (b) any Lien existing on any asset of any corporation at the time such corporation becomes a Significant Subsidiary and not created in contemplation of such event; 48 (c) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, provided that such Lien attaches to such asset concurrently with or within 90 days after the acquisition thereof; (d) any Lien on any asset of any corporation existing at the time such corporation is merged or consolidated with or into the Borrower or a Subsidiary and not created in contemplation of such event; (e) any Lien existing on any asset prior to the acquisition thereof by the Borrower or a Subsidiary and not created in contemplation of such acquisition; (f) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section, provided that such Debt is not increased and is not secured by any additional assets; (g) Liens which (i) do not secure Debt, (ii) do not secure any obligation in an amount exceeding $100,000,000 and (iii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; and (h) Liens securing Debt, which Liens are not otherwise permitted by the foregoing clauses of this Section; provided, that in no event shall the Liens permitted by this clause (h) secure Debt in an aggregate principal amount exceeding 15% of Adjusted Consolidated Net Worth. SECTION 5.09. Consolidations, Mergers and Sales of Assets. The Borrower will not (i) consolidate or merge with or into any other Person (other than a Subsidiary of the Borrower) or (ii) sell, lease or otherwise transfer, directly or indirectly, all or substantially all of the assets of the Borrower and its Subsidiaries, taken as a whole, to any other Person. SECTION 5.10. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for general corporate purposes. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of 49 buying or carrying any "margin stock" within the meaning of Regulation U. ARTICLE VI Defaults SECTION 6.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Loan, or shall fail to pay within five Domestic Business Days after the date when due any interest on any Loan or any fees or any other amount payable hereunder; (b) the Borrower shall fail to observe or perform any covenant contained in Sections 5.07 to 5.10, inclusive; (c) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 30 days after written notice thereof has been given to the Borrower by the Agent at the request of Banks having at least 10% in aggregate amount of the Commitments; (d) any representation, warranty, certification or statement made by the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Borrower or any Significant Subsidiary shall fail to make any payment in respect of any Material Debt when due or within any applicable grace period; (f) any event or condition shall occur which results in the acceleration of the maturity of any Material Debt or enables the holder of such Debt or any Person acting on such holder's behalf to accelerate the maturity thereof; 50 (g) the Borrower or any Significant Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Borrower or any Significant Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstated for a period of 60 days; or an order for relief shall be entered against the Borrower or any Significant Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $75,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a 51 default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $200,000,000; (j) a final judgment or order (not subject to appeal) for the payment of money in excess of $100,000,000 shall be rendered against the Borrower or any Significant Subsidiary and such judgment or order shall continue unsatisfied and unstated for a period of 30 days; or (k) any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 50% or more of the outstanding shares of common stock of the Borrower; or, during any period of 12 consecutive calendar months, individuals who were directors of the Borrower on the first day of such period (the "incumbent directors"), together with individuals nominated to serve as directors by a majority of the incumbent directors and any directors so nominated, shall cease to constitute a majority of the board of directors of the Borrower; then, and in every such event, the Agent shall (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Borrower terminate the Commitments and they shall thereupon terminate, and (ii) if requested by Banks holding Notes evidencing more than 50% in aggregate principal amount of the Loans, by notice to the Borrower declare the Notes (together with accrued interest thereon) to be, and the Notes shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to the Borrower, without any notice to the Borrower or any other act by the Agent or the Banks, the Commitments shall thereupon terminate and the Notes (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. 52 SECTION 6.02. Notice of Default. The Agent shall give notice to the Borrower under Section 6.01(c) promptly upon being requested to do so by Banks having at least 10% in aggregate amount of the Commitments and shall thereupon notify all the Banks thereof. ARTICLE VII The Agent SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Agent to take such action as administrative agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to the Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. Agent and Affiliates. Deutsche Bank AG New York Branch shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and Deutsche Bank AG New York Branch and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not the Agent hereunder. SECTION 7.03. Action by Agent. The obligations of the Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article VI. SECTION 7.04. Consultation with Experts. The Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. Liability of Agent. Neither the Agent nor any of its directors, officers, agents, or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the 53 request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article III, except receipt of items required to be delivered to the Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex, facsimile transmission or similar writing) believed by it to be genuine or to be signed by the proper party or parties. SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Agent (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from the Agent's gross negligence or willful misconduct) that the Agent may suffer or incur in connection with this Agreement or any action taken or omitted by the Agent hereunder. SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Banks and the Borrower. Upon any such resignation, the Required Banks shall have the right to appoint a successor Agent, subject to the approval of the Borrower (which approval shall not be unreasonably withheld and, if an 54 Event of Default shall have occurred and be continuing, shall not be required). If no successor Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $250,000,000 or a commercial bank organized under the laws of any country which is a member of the Organization for Economic Cooperation and Development, or a political subdivision of any such country, and having a combined capital and surplus of at least $250,000,000, provided that such bank is acting through a branch or agency located in the United States. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. SECTION 7.09. Agent's Fee. The Borrower shall pay to the Agent for its own account fees in the amounts and at the times previously agreed upon between the Borrower and the Agent. SECTION 7.10. Arrangers. The Borrower and the Banks acknowledge and agree that (a) Arrangers do not have any duties or responsibilities hereunder in their capacities as such and (b) shall be entitled to the benefit of Sections 7.05 and 7.06 to the same extent as the Agent. ARTICLE VIII Change in Circumstances SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any CD Loan, Euro-Dollar Loan or Money Market LIBOR Loan: 55 (a) the Agent is advised by the Reference Banks that deposits in the applicable currency (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or (b) in the case of CD Loans or Euro-Dollar Loans, Banks having 50% or more of the aggregate principal amount of the affected Loans advise the Agent that the Adjusted CD Rate or the London Interbank Offered Rate, as the case may be, as determined by the Agent will not adequately and fairly reflect the cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may be, for such Interest Period, the Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case may be, or to convert outstanding Loans into or continue outstanding Loans as CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended and (ii) each outstanding CD Loan or Euro-Dollar Loan, as the case may be, shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. SECTION 8.02. Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable 56 agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans, or to convert outstanding Loans into or continue outstanding Loans as Euro-Dollar Loans, shall be suspended. Before giving any notice to the Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to maturity and shall so specify in such notice, the Borrower shall immediately prepay in full the then outstanding principal amount of each such Euro-Dollar Loan, together with accrued interest thereon. Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount from such Bank (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate Loan. SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after (x) the date hereof, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Money Market Quote, in the case of any Money Market Loan, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding (A) with respect to any CD Loan any such requirement included in an applicable Domestic Reserve Percentage and (B) with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage), special 57 deposit, insurance assessment (excluding, with respect to any CD Loan, any such requirement reflected in an applicable Assessment Rate) or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans, and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (b) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction. (c) Each Bank will promptly notify the Borrower and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office or attempt 58 to assign its Loans to a different branch or affiliate of such Bank, as applicable, if such designation or assignment will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. The Borrower shall not be obligated to compensate any Bank pursuant to this Section for increased costs or reduced return accruing prior to the date which is 90 days before such Bank requests compensation (in the case of a request for compensation pursuant to subsection (a) above) or prior to the first day of the most recent fiscal year of such Bank ending more than 90 days before such Bank requests compensation (in the case of a request for compensation pursuant to subsection (b) above). SECTION 8.04. Taxes. (a) For purposes of this Section 8.04, the following terms have the following meanings: "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings with respect to any payment by the Borrower pursuant to this Agreement or under any Note, and all liabilities with respect thereto, excluding (i) in the case of each Bank and the Agent, taxes imposed on its income, and franchise or similar taxes imposed on it, by a jurisdiction under the laws of which such Bank or the Agent (as the case may be) is organized or in which its principal executive office is located or, in the case of each Bank, in which its Applicable Lending Office is located and (ii) in the case of each Bank, any United States withholding tax imposed on such payments but only to the extent that such Bank is subject to United States withholding tax at the time such Bank first becomes party to this Agreement. "Other Taxes" means any present or future stamp or documentary taxes and any other excise or property taxes, or similar charges or levies, which arise from any payment made pursuant to this Agreement or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note. 59 (b) Any and all payments by the Borrower to or for the account of any Bank or the Agent hereunder or under any Note shall be made without deduction for any Taxes or Other Taxes; provided that, if the Borrower shall be required by law to deduct any Taxes or Other Taxes from any such payments, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Bank or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) the Borrower shall furnish to the Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt evidencing payment thereof. (c) The Borrower agrees to indemnify each Bank and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be paid within 15 days after such Bank or the Agent (as the case may be) makes demand therefor. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter if requested in writing by the Borrower (but only so long as such Bank remains lawfully able to do so), shall provide the Borrower with Internal Revenue Service Form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which exempts the Bank from United States withholding tax or reduces the rate of withholding tax on payments of interest for the account of such Bank or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. 60 (e) For any period with respect to which a Bank has failed to provide the Borrower with the appropriate form pursuant to Section 8.04(d) (unless such failure is due to a change in treaty, law or regulation occurring subsequent to the date on which such form originally was required to be provided), such Bank shall not be entitled to indemnification under Section 8.04(b) or (c) with respect to Taxes imposed by the United States; provided that if a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes. (f) If the Borrower is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.04, then such Bank will change the jurisdiction of its Applicable Lending Office if, in the judgment of such Bank, such change (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not otherwise disadvantageous to such Bank. The Borrower will not be obligated to indemnify any Bank pursuant to Section 8.04(c) for any amounts payable thereunder accruing more than 90 days prior to the date that such Bank requests compensation therefor. SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans. If (i) the obligation of any Bank to make or maintain Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03 or 8.04 with respect to its CD Loans or Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days prior notice to such Bank through the Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Loans which would otherwise be made by such Bank as (or continued as or converted into) CD Loans or Euro-Dollar Loans, as the case may be, shall instead be Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Loans of the other Banks), and 61 (b) after each of its CD Loans or Euro-Dollar Loans, as the case may be, has been repaid (or converted to a Base Rate Loan), all payments of principal which would otherwise be applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans instead. SECTION 8.06. Substitution of Bank. (a) If (i) the obligation of any Bank to make or maintain Euro- Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank (or any Participant in its Loans) has demanded compensation under Section 8.03 or 8.04, the Borrower shall have the right to seek a bank or banks ("Substitute Banks"), which may be one or more of the Banks or one or more other banks satisfactory to the Agent, to purchase the Note or Notes and assume the Commitment of such Bank (the "Affected Bank") and, if the Borrower locates a Substitute Bank, the Affected Bank shall, upon payment to it of the purchase price agreed between it and the Substitute Bank (or, failing such agreement, a purchase price in the amount of the outstanding principal amount of its Loans and accrued interest thereon to the date of payment) plus any amount (other than principal and interest) then due to it or accrued for its account hereunder, assign all its rights and obligations under this Agreement and the Notes (including its Commitment and its Loans) to the Substitute Bank, and the Substitute Bank shall assume such rights and obligations, whereupon the Substitute Bank shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment equal to the Commitment so assigned and assumed. (b) Notwithstanding the provisions of subsection (a) above, if an Affected Bank shall have outstanding Money Market Loans at the time it is required to assign its rights and obligations under this Agreement and its Note or Notes to a Substitute Bank, such Affected Bank shall not be obligated to so assign its rights with respect to such Money Market Loans prior to the maturity date thereof and shall not be obligated to deliver its Note or Notes to the Substitute Bank until it shall have received a new Note or Notes from the Borrower to evidence such Money Market Loans. 62 ARTICLE IX Miscellaneous SECTION 9.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower or the Agent, at its address or telex or telecopy number set forth on the signature pages hereof, (y) in the case of any Bank, at its address or telex or telecopy number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address or telex or telecopy number as such party may hereafter specify for the purpose by notice to the Agent and the Borrower; provided that notices, requests and other communications to the Borrower shall not be communicated by telex. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when delivered at the address or received at the telecopy number specified in this Section; provided that notices to the Agent under Article II or Article VIII shall not be effective until received. SECTION 9.02. No Waivers. No failure or delay by the Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay (i) all reasonable out-of- pocket expenses of the Agent, including reasonable fees and disbursements of special counsel for the Agent, in connection with the preparation of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Agent and each Bank, including fees and disbursements of counsel, in connection with such Event of Default and collection, 63 bankruptcy, insolvency and other enforcement proceedings resulting therefrom. (b) The Borrower agrees to indemnify each Bank and hold each Bank harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by any Bank (or by the Agent in connection with its actions as Agent hereunder) in connection with any investigative, administrative or judicial proceeding (whether or not such Bank shall be designated a party thereto) relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that no Bank shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction. SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participation in the Notes held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Notes. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note acquired pursuant to the foregoing arrangements may exercise rights of set- off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in 64 writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Agent are affected thereby, by the Agent); provided that: (a) no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Committed Loan or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Committed Loan or any fees hereunder or for any termination of any Commitment, (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement, or (v) amend, waive or modify the provisions of this Section 9.05; and (b) no such amendment or waiver shall, unless signed by each affected Bank, (i) reduce the principal of or rate of interest on any Money Market Loan, or (ii) postpone the date fixed for any payment of principal of or interest on any Money Market Loan. SECTION 9.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrower and the Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the 65 obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 9.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement and subject to the provisions of Section 9.06(e), be entitled to the benefits of Article VIII with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part of all (but, in the case of a partial assignment, not less than a part representing a Commitment of $10,000,000), of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit F hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Agent (which consent shall not be unreasonably withheld) and the Borrower; provided that (i) such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Money Market Loans and (ii) unless the Borrower otherwise consents, the transferor Bank shall not assign any of its rights and obligations under this Agreement while the Other Credit Agreement remains in effect without assigning the same percentage of its rights and obligations under the Other Credit Agreement, except that this clause (ii) shall not apply to any transfer required under paragraph (d) of Section 2.19 of the Other Credit Agreement. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. 66 Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note is issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Agent an administrative fee for processing such assignment in the amount of $2,000. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Borrower and the Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04. (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. SECTION 9.07. Collateral. Each of the Banks represents to the Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.08. Governing Law; Submission to Jurisdiction. This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrower irrevocably waives, to the fullest extent 67 permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. SECTION 9.09. Counterparts; Integration. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. SECTION 9.10. Confidentiality. Any information disclosed by the Borrower to the Agent or any of the Banks, which was either (x) so disclosed on or before the Effective Date or (y) designated proprietary or confidential at the time of receipt thereof by the Agent or such Bank, if such information is not otherwise in the public domain, shall not be disclosed by the Agent or such Bank to any other Person except (i) to its directors, officers, employees and agents, including its independent accountants and legal counsel (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential), (ii) pursuant to statutory and regulatory requirements, (iii) pursuant to any mandatory court order, subpoena or other legal process, (iv) to the Agent or any other Bank, (v) pursuant to any agreement heretofore or hereafter made between such Bank and the Borrower which permits such disclosure, (vi) in connection with the exercise of any remedy under this Agreement or the Notes or (vii) subject to an agreement containing provisions substantially the same as those of this Section, to any participant in or assignee of, or prospective participant in or assignee of, any Loan or Commitment. The provisions of this Section 9.10 shall be deemed satisfied by each Bank if and to the extent such Bank shall have used its reasonable best efforts to maintain the confidentiality of the data or information referred to above, exercising the same degree of care that such Bank would accord to its own confidential information or documents. SECTION 9.11. Waiver Under Existing Credit Agreement. By its execution hereof, each undersigned Bank 68 that also is a party to the Existing Credit Agreement hereby waives the provisions of the Existing Credit Agreement that would require advance notice for the termination of commitments thereunder or the prepayment of loans thereunder; provided that (a) the foregoing waiver shall apply only to the termination of all commitments under the Existing Credit Agreement and repayment of all loans outstanding thereunder in connection with the effectiveness of this Agreement and (b) the Borrower shall, in lieu of advance notice of any such termination or prepayment, give notice thereof to the Agent (as defined in the Existing Credit Agreement) on the date of such termination or prepayment. SECTION 9.12. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. THE CHUBB CORPORATION, by _____________________________ Name: Title: 15 Mountainview Road Warren, New Jersey 07059 Attention: 69 Commitments DEUTSCHE BANK AG, NEW YORK BRANCH by ______________________________________ Name: Title: by _______________________________________ Name: Title: CITIBANK, N.A. by ________________________________________ Name: Title: [ ] by ________________________________________ Name: Title: Total Commitments $250,000,000 70 DEUTSCHE BANK AG NEW YORK BRANCH, as Agent, by ________________________________________ Name: Title: by ________________________________________ Name: Title: 71 EX-10.2 3 y99136exv10w2.txt AMENDED & RESTATED CREDIT AGREEMENT Exhibit 10.2 AMENDED AND RESTATED SHORT-TERM CREDIT AGREEMENT and AMENDMENT TO MEDIUM-TERM CREDIT AGREEMENT, dated as of June 26, 2003, among THE CHUBB CORPORATION (the "Borrower"), the BANKS listed on the signature pages hereof (the "Banks"), DEUTSCHE BANK SECURITIES INC., and SALOMON SMITH BARNEY INC., as Arrangers, DEUTSCHE BANK AG NEW YORK BRANCH and CITIBANK, N.A. as Swingline Lenders, DEUTSCHE BANK AG NEW YORK BRANCH as Administrative Agent (the "Agent") and CITIBANK, N.A. as Syndication Agent. W I T N E S S E T H: WHEREAS certain of the parties hereto have heretofore entered into a Short-Term Credit Agreement dated as of June 26, 2002 (the "Short-Term Agreement") and a Medium-Term Credit Agreement, dated as of June 28, 2002 (the "Medium-Term Agreement" and, together with the Short-Term Agreement, collectively the "Agreements"); and WHEREAS the parties hereto desire to amend the Agreements and restate the Short-Term Agreement in its entirety to read as set forth in the Short-Term Agreement as in effect on the date hereof with the amendments specified below. NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Definitions; References. Unless otherwise specifically defined herein, each capitalized term used herein which is defined in the Short-Term Agreement shall have the meaning assigned to such term in the Short-Term Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Short-Term Agreement shall from and after the date hereof refer to such Agreement as amended hereby. SECTION 2. Amendment to Section 1.01 of the Short-Term Agreement. (a) The definition of "Termination Date" in Section 1.01 of the Short-Term Agreement is deleted and the following is substituted therefor: "Termination Date" means, at any time, the later of June 24, 2004 and the most recent date, if any, to which the Termination Date has been extended pursuant to Section 2.19." (b) The definition of "Borrower's 2001 Form 10-K" in Section 1.01 of the Short-Term Agreement is amended by replacing the year "2001" wherever it appears therein with "2002". SECTION 3. Amendment to Section 9.06(c) of the Agreements. (a) The first sentence in Section 9.06(c) of the Short-Term Agreement is amended to read as follows: Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part of all (but, in the case of a partial assignment, not less than a part representing a Commitment of $10,000,000), of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligation, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit F hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Agent and each Swingline Lender and the Borrower (which consents shall not be unreasonably withheld); provided that (i) such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Money Market Loans or, in the case of a Bank that is a Swingline Lender, its Swingline Commitment and Swingline Loans and (ii) unless the Borrower otherwise consents, the transferor Bank shall not assign any of its rights and obligations under this Agreement while the Other Credit Agreement remains in effect without assigning the same percentage of its rights and obligations under the Other Credit Agreement, except that this clause (ii) shall not apply to any transfer required under paragraph (d) of Section 2.19 of this Agreement. (b) The first sentence in Section 9.06(c) of the Medium-Term Agreement is amended to read as follows: Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part of all (but, in the case of a partial assignment, not less than a part representing a Commitment of $10,000,000), of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit F hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Agent and the Borrower (which consents shall no be unreasonably withheld); provided that (i) such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Money Market Loans and (ii) unless the Borrower otherwise consents, the transferor Bank shall not assign any of its rights and obligations under this Agreement while the Other Credit Agreement remains in effect without assigning the same percentage of its rights and obligations under the Other Credit Agreement, except that this clause (ii) shall not apply to any transfer required under paragraph (d) of Section 2.19 of the Other Credit Agreement. SECTION 4. Updated Representations. (a) The reference to "December 31, 2001" in Section 4.04(a) of the Short-Term Agreement is changed to "December 31, 2002". (b) The reference to "Borrower's 2001 Form 10-K" in Section 4.04(a) of the Short-Term Agreement is changed to "Borrower's 2002 Form 10-K". (c) The references to "March 31, 2002" in Sections 4.04(b) and (c) of the Short-Term Agreement are changed to "March 31, 2003". SECTION 5. Changes to Commitments. With effect from and including the date this Amendment and Restatement becomes effective in accordance with Section 8, the Commitment of each Bank (including each Swingline Lender in its capacity as such) under the Short-Term Agreement shall be the amount set forth opposite the name of such Bank on the signature pages hereof. Each Bank that has a Commitment under the Short-Term Agreement as a result of this Amendment and Restatement but that was not a party to the Short-Term Agreement prior to the effectiveness of this Amendment and Restatement shall upon the effectiveness of this Amendment and Restatement, be a party to the Short-Term Agreement with all of the rights and obligations of a Bank thereunder and with the Commitment as set forth herein. The Commitment of each Bank with a Commitment under the Short-Term Agreement prior to the effectiveness of this Amendment and Restatement that will not have a Commitment under the Short-Term Agreement after the effectiveness of this Amendment and Restatement shall terminate upon the effectiveness of this Amendment and Restatement, and such Bank shall no longer be a party to the Short-Term Agreement. SECTION 6. Representations and Warranties. The Borrower represents and warrants that as of the date hereof and after giving effect hereto: (a) no Default has occurred and is continuing; and (b) each representation and warranty of the Borrower set forth in the Short-Term Agreement after giving effect to this Amendment and Restatement is true and correct as though made on and as of such date. SECTION 7. Governing Law. This Amendment and Restatement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 8. Counterparts; Effectiveness. This Amendment and Restatement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment and Restatement shall become effective on June 26, 2003; provided that this Amendment and Restatement shall not become effective unless the Agent has received, on or prior to such date, executed counterparts hereof signed by all the Banks (or, in the case of any party as to which an executed counterpart shall not have been received, the Agent shall have received telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party). The Agent shall promptly notify the Borrower and the Banks of the effectiveness of this Amendment and Restatement, and such notice shall be conclusive and binding on all parties hereto. The extension of the Termination Date under the Short-Term Agreement effected by this Amendment and Restatement shall be without prejudice to the rights of the Borrower set forth in Section 2.19 of the Short-Term Agreement to request future extensions of the Termination Date in accordance with the provisions of such Section. IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. THE CHUBB CORPORATION, By /s/ Philip J. Sempier ----------------------- Name: Philip J. Sempier Title: Vice President & Treasurer Commitments - ------------ $35,000,000 DEUTSCHE BANK AG, NEW YORK BRANCH, By /s/ Clinton M. Johnson ---------------------------- Name: Clinton M. Johnson Title: Managing Director By /s/ John S. McGill ---------------------------- Name: /s/ John S. McGill Title: Director 35,000,000 CITIBANK, N.A., By /s/ Maria G. Hackley --------------------- Name: Maria G. Hackley Title: Managing Director $30,000,000 THE BANK OF NEW YORK By /s/ Jimmy Tse ----------------------------------- Name: Jimmy Tse Title: Vice President $20,000,000 THE BANK OF NOVA SCOTIA By /s/ J.W. Campbell ----------------------------------- Name: J.W. Campbell Title: Managing Director and Unit Head $20,000,000 ABN AMRO BANK N.V. By /s/ Neil R. Stein ----------------------------------- Name: Neil R. Stein Title: Group Vice President By /s/ Michael DeMarco ----------------------------------- Name: Michael DeMarco Title: Assistant Vice President $20,000,000 MELLON BANK, N.A. By /s/ Maria E. Totin ----------------------------------- Name: Maria E. Totin Title: Assistant Vice President $20,000,000 WACHOVIA BANK, NATIONAL ASSOCIATION By /s/ Kimberly Shaffer ----------------------------------- Name: Kimberly Shaffer Title: Director $20,000,000 HSBC BANK USA By /s/ Anthony C. Valencourt ----------------------------------- Name: Anthony C. Valencourt Title: Senior Vice President $20,000,000 JP MORGAN CHASE BANK By /s/ Marybeth Mullen ----------------------------------- Name: Marybeth Mullen Title: Vice President $15,000,000 FLEET NATIONAL BANK By /s/ Scott F. Davis ----------------------------------- Name: Scott F. Davis Title: Senior Associate $15,000,000 STATE STREET BANK AND TRUST COMPANY By /s/ Edward M. Anderson ----------------------------------- Name: Edward M. Anderson Title: Vice President DEUTSCHE BANK AG NEW YORK BRANCH, as Agent, By /s/ Clinton M. Johnson ----------------------------------- Name: Clinton M. Johnson Title: Managing Director By /s/ John S. McGill ----------------------------------- Name: John S. McGill Title: Director EX-10.3 4 y99136exv10w3.txt AMENDED & RESTATED CREDIT AGREEMENT EXHIBIT 10.3 EXECUTION COPY $250,000,000 AMENDED AND RESTATED SHORT-TERM CREDIT AGREEMENT dated as of June 23, 2004 among The Chubb Corporation The Banks Listed Herein Deutsche Bank AG and Citigroup Global Markets Inc. as Joint Lead Arrangers and Joint Book Runners and Deutsche Bank AG, as Administrative Agent ARTICLE I Definitions SECTION 1.01 Definitions........................................................................ 1 SECTION 1.02. Accounting Terms and Determinations................................................ 12 SECTION 1.03. Types of Borrowings................................................................ 12 ARTICLE II The Credits SECTION 2.01. Commitments to Lend................................................................ 13 SECTION 2.02. Notice of Committed Borrowings..................................................... 13 SECTION 2.03. Money Market Borrowings............................................................ 13 SECTION 2.04. Swingline Loans.................................................................... 18 SECTION 2.05. Notice to Banks; Funding of Loans.................................................. 19 SECTION 2.06. Evidence of Debt................................................................... 20 SECTION 2.07. Maturity of Loans.................................................................. 21 SECTION 2.08. Interest Rates..................................................................... 21 SECTION 2.09. Fees............................................................................... 24 SECTION 2.10. Optional Termination or Reduction of Commitments................................... 25 SECTION 2.11. Mandatory Termination of Commitments............................................... 25 SECTION 2.12. Optional Prepayments............................................................... 25 SECTION 2.13. General Provisions as to Payments.................................................. 26 SECTION 2.14. Funding Losses..................................................................... 27 SECTION 2.15. Computation of Interest and Fees................................................... 27 SECTION 2.16. Method of Electing Interest Rates.................................................. 27 SECTION 2.17. Regulation D Compensation.......................................................... 29 SECTION 2.18. Judgment Currency.................................................................. 29 SECTION 2.19. Extension of Termination Date...................................................... 29 ARTICLE III Conditions SECTION 3.01. Effectiveness...................................................................... 31 SECTION 3.02. Borrowings......................................................................... 32 ARTICLE IV Representations and Warranties
SECTION 4.01. Corporate Existence and Power...................................................... 32 SECTION 4.02. Corporate and Governmental Authorization; No Contravention......................... 32 SECTION 4.03. Binding Effect..................................................................... 33 SECTION 4.04. Financial Information.............................................................. 33 SECTION 4.05. Litigation......................................................................... 33 SECTION 4.06. Compliance with ERISA.............................................................. 33 SECTION 4.07. Not an Investment Company.......................................................... 34 SECTION 4.08. Compliance with Laws............................................................... 34 ARTICLE V Covenants SECTION 5.01. Information........................................................................ 34 SECTION 5.02. Payment of Obligations............................................................. 36 SECTION 5.03. Maintenance of Property............................................................ 36 SECTION 5.04. Conduct of Business and Maintenance of Existence................................... 36 SECTION 5.05. Compliance with Laws............................................................... 36 SECTION 5.06. Inspection of Property, Books and Records.......................................... 37 SECTION 5.07. Adjusted Consolidated Net Worth.................................................... 37 SECTION 5.08. Negative Pledge.................................................................... 37 SECTION 5.09. Consolidations, Mergers and Sales of Assets........................................ 38 SECTION 5.10. Use of Proceeds.................................................................... 38 ARTICLE VI Defaults SECTION 6.02. Notice of Default.................................................................. 40 ARTICLE VII The Agent SECTION 7.01. Appointment and Authorization...................................................... 40 SECTION 7.02. Agent and Affiliates............................................................... 40 SECTION 7.03. Action by Agent.................................................................... 40 SECTION 7.04. Consultation with Experts.......................................................... 40 SECTION 7.05. Liability of Agent................................................................. 41 SECTION 7.06. Indemnification.................................................................... 41 SECTION 7.07. Credit Decision.................................................................... 41 SECTION 7.08. Successor Agent.................................................................... 41 SECTION 7.09. Agent's Fee........................................................................ 42 SECTION 7.10. Arrangers; Swingline Lenders....................................................... 42 ARTICLE VIII Change in Circumstances
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair........................... 42 SECTION 8.02. Illegality......................................................................... 43 SECTION 8.03. Increased Cost and Reduced Return.................................................. 43 SECTION 8.04. Taxes.............................................................................. 44 SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans.......................... 46 SECTION 8.06. Substitution of Bank............................................................... 46 ARTICLE IX Miscellaneous SECTION 9.01. Notices............................................................................ 47 SECTION 9.02. No Waivers......................................................................... 47 SECTION 9.03. Expenses; Indemnification.......................................................... 47 SECTION 9.04. Sharing of Set-Offs................................................................ 48 SECTION 9.05. Amendments and Waivers............................................................. 48 SECTION 9.06. Successors and Assigns............................................................. 49 SECTION 9.07. Collateral......................................................................... 50 SECTION 9.08. Governing Law; Submission to Jurisdiction.......................................... 50 SECTION 9.09. Counterparts; Integration.......................................................... 51 SECTION 9.10. Confidentiality.................................................................... 51 SECTION 9.11. Restatement of Existing Credit Agreement........................................... 51 SECTION 9.12. USA PATRIOT Act.................................................................... 52 SECTION 9.13. WAIVER OF JURY TRIAL............................................................... 52 Exhibit A - Note Exhibit B - Money Market Quote Request Exhibit C - Invitation for Money Market Quotes Exhibit D - Money Market Quote Exhibit E-1 - Opinion of Counsel for the Borrower Exhibit E-2 - Opinion of Counsel for the Agent Exhibit F - Assignment and Assumption Agreement
AMENDED AND RESTATED SHORT-TERM CREDIT AGREEMENT AGREEMENT dated as of June 23, 2004, among THE CHUBB CORPORATION, the BANKS listed on the signature pages hereof, DEUTSCHE BANK SECURITIES INC., and CITIGROUP GLOBAL MARKETS INC., as Arrangers, DEUTSCHE BANK AG NEW YORK BRANCH and CITICORP USA, INC. as Swingline Lenders, DEUTSCHE BANK AG NEW YORK BRANCH, as Administrative Agent and CITICORP USA, INC., as Syndication Agent. The parties hereto agree as follows: ARTICLE I Definitions SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings: "Absolute Rate Auction" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03. "Adjusted CD Rate" has the meaning set forth in Section 2.08(b). "Adjusted Consolidated Net Worth" means at any date the shareholders' equity of the Borrower and its Consolidated Subsidiaries determined as of such date, adjusted to exclude the effect of Statement of Financial Accounting Standards No. 115 (by excluding any unrealized appreciation or depreciation of fixed maturity investments, net of any related adjustments and any related deferred income taxes). "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in the form prepared by the Agent and submitted to the Agent (with a copy to the Borrower) duly completed by such Bank. "Agent" means Deutsche Bank AG New York Branch, in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity. "Alternative Currency" means any currency other than Dollars which is freely transferable and convertible into Dollars. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its Money Market Loans, its Money Market Lending Office. "Applicable Percentage" of any Bank means the percentage of the aggregate Commitments represented by such Bank's Commitment. "Arrangers" means Deutsche Bank Securities Inc. and Citigroup Global Markets Inc. in their capacities as joint lead arrangers and joint lead bookrunners for the Banks hereunder, and their successors in such capacities. "Assessment Rate" has the meaning set forth in Section 2.08(b). "Assignee" has the meaning set forth in Section 9.06(c). "Bank" means each bank listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1% plus the Federal Funds Rate for such day. "Base Rate Loan" means (i) a Committed Loan which bears interest at the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or the provisions of Article VIII or (ii) an overdue amount which was a Base Rate Loan immediately before it became overdue. "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multi employer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Borrower" means The Chubb Corporation, a New Jersey corporation, and its successors. "Borrower's 2003 Form 10-K" means the Borrower's annual report on Form 10K for 2003, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Borrowing" has the meaning set forth in Section 1.03. "CD Base Rate" has the meaning set forth in Section 2.08(b). "CD Loan" means (i) a Committed Loan which bears interest at a CD Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a CD Loan immediately before it became overdue. "CD Margin" has the meaning set forth in Section 2.08(b). "CD Rate" means a rate of interest determined pursuant to Section 2.08(b) on the basis of an Adjusted CD Rate. 2 "CD Reference Banks" means Citicorp USA, Inc. and Deutsche Bank AG New York Branch. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof, as such amount may be reduced from time to time pursuant to Sections 2.10, 2.11, 6.01 and 9.06. "Committed Exposure" means, with respect to any Bank at any time, the sum of the aggregate principal amount of such Bank's Committed Loans outstanding at such time and its Swingline Exposure at such time. "Committed Loan" means a loan made by a Bank pursuant to Section 2.01; provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Committed Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Borrower in its consolidated financial statements if such statements were prepared as of such date. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, and (vi) all Debt of others Guaranteed by such Person. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Dollar Amount" means, in relation to any Money Market Borrowing denominated in an Alternative Currency, the amount designated by the Borrower as the Dollar amount of such Money Market Borrowing in the related Notice of Money Market Borrowing, subject to Section 2.03(h). "Dollars" and the sign "$" mean lawful money of the United States of America. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Domestic Lending Office", means as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its 3 Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Agent; provided that any Bank may so designate separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and its CD Loans, on the other hand, in which case all references herein to the Domestic Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Domestic Loans" means CD Loans or Base Rate Loans or both. "Domestic Reserve Percentage" has the meaning set forth in Section 2.08(b). "Effective Date" means the date this Agreement becomes effective in accordance with Section 3.01. "Equivalent Amount" means, in connection with the determination of the amount of a Money Market Loan to be made or theretofore made in any Alternative Currency in relation to the Dollar Amount of such Loan, the amount of such Alternative Currency converted from such Dollar Amount at the spot buying rate of the Bank that is to make or has made such Loan (based on the London interbank market rate then prevailing) for Dollars against such Alternative Currency as of approximately 9:00 A.M. (New York City time) three Euro-Dollar Business Days before the date on which such Loan is to be made or the date on which the Equivalent Amount thereof is to be determined, as the case may be. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Group" means the Borrower and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in Dollar deposits) in London, and, where funds are to be paid or made available in an Alternative Currency, on which commercial banks are open for domestic and international business (including dealings in deposits in such Alternative Currency) in both London and the place where such funds are paid or made available. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Agent. 4 "Euro-Dollar Loan" means (i) a Committed Loan which bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a Euro-Dollar Loan immediately before it became overdue. "Euro-Dollar Margin" has the meaning set forth in Section 2.08(c). "Euro-Dollar Rate" means a rate of interest determined pursuant to Section 2.08(c) on the basis of a London Interbank Offered Rate. "Euro-Dollar Reference Banks" means Citicorp USA, Inc. and Deutsche Bank AG. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion Dollars in respect of "Euro-currency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). "Event of Default" has the meaning set forth in Section 6.01. "Existing Credit Agreement" means the Amended and Restated Short-Term Credit Agreement dated as of June 26, 2003 among the Borrower, certain banks and Deutsche Bank AG and Citibank, N.A., as co-agents and Swingline Lenders, and Deutsche Bank AG, as Administrative Agent. "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Deutsche Bank AG New York Branch on such day on such transactions as determined by the Agent. "Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Prime Rate pursuant to Section 8.01 (a)) or any combination of the foregoing. "Group of Loans" means at any time a group of Loans consisting of (i) all Committed Loans which are Base Rate Loans at such time or (ii) all Committed Loans 5 which are Fixed Rate Loans of the same type having the same Interest Period at such time; provided that, if a Committed Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant to Section 8.02 or 8.04, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Interest Period" means: (1) with respect to each Euro-Dollar Loan, a period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in the applicable Notice of Interest Rate Election and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable notice; provided that: (a) with the consent of all Lenders (and otherwise in accordance with Section 9.05), the Interest Period may be extended for up to one year from the date of borrowing specified in the applicable Notice of Borrowing or the date specified in the applicable Notice of Interest Rate Election; (b) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (c) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (d) below, end on the last Euro-Dollar Business Day of a calendar month; and (d) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date; (2) with respect to each CD Loan, a period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in the 6 applicable Notice of Interest Rate Election and ending 30, 60, 90 or 180 days thereafter, as the Borrower may elect in the applicable notice; provided that: (a) with the consent of all Lenders (and otherwise in accordance with Section 9.05), the Interest Period may be extended for up to one year from the date of borrowing specified in the applicable Notice of Borrowing or the date specified in the applicable Notice of Interest Rate Election; (b) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause (c) below, be extended to the next succeeding Euro-Dollar Business Day; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date; (3) with respect to each Base Rate Loan, a period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in the applicable Notice of Interest Rate Election and ending 30 days thereafter; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause (b) below, be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date; (4) with respect to each Money Market LIBOR Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such whole number of months thereafter as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date; 7 (5) with respect to each Money Market Absolute Rate Loan, a period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such number of days thereafter (but not less than 7 days) as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause (b) below, be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (6) with respect to each Swingline Loan, the period commencing on the date of such Loan and ending such number of days thereafter (but not exceeding three Domestic Business Days) as the Borrower may elect in accordance with Section 2.04; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "LIBOR Auction" means a solicitation of Money Market Quotes setting forth Money Market Margins based on the London Interbank Offered Rate pursuant to Section 2.03. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means a Domestic Loan, a Euro-Dollar Loan, a Swingline Loan or a Money Market Loan and "Loans" means Domestic Loans, Euro-Dollar Loans, Swingline Loans or Money Market Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.08(c). "Material Debt" means Debt (other than the Notes) of the Borrower and/or one or more of its Significant Subsidiaries (other than a Real Estate Subsidiary), arising 8 in one or more related or unrelated transactions, in an aggregate principal amount exceeding $50,000,000. "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $50,000,000. "Money Market Absolute Rate" has the meaning set forth in Section 2.03(d). "Money Market Absolute Rate Loan" means a loan to be made by a Bank pursuant to an Absolute Rate Auction. "Money Market Lending Office" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Money Market Lending office by notice to the Borrower and the Agent; provided that any Bank may from time to time by notice to the Borrower and the Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Money Market LIBOR Loan" means a loan to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Prime Rate pursuant to Section 8.01 (a)). "Money Market Loan" means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan. "Money Market Margin" has the meaning set forth in Section 2.03(d). "Money Market Quote" means an offer by a Bank to make a Money Market Loan in accordance with Section 2.03. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section 2.03(f)). 9 "Notice of Interest Rate Election" has the meaning set forth in Section 2.16. "Other Credit Agreement" means the Medium-Term Credit Agreement dated as of the date hereof among the parties hereto as amended from time to time. "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 9.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Prime Rate" means the rate of interest publicly announced by Deutsche Bank AG New York Branch in New York City from time to time as its Prime Rate. "Real Estate Subsidiaries" means (i) Bellemead Development Corporation and its current Subsidiaries and (ii) each other Subsidiary that is principally engaged in the real estate business. "Reference Banks" means the CD Reference Banks or the Euro-Dollar Reference Banks, as the context may require, and "Reference Bank" means any one of such Reference Banks. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Required Banks" means at any time Banks having more than 50% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding loans representing more than 50% of the aggregate unpaid principal amount of the Loans. "Revolving Credit Period" means the period from and including the Effective Date to and including the Termination Date. 10 "Significant Subsidiary" means at any time a "significant subsidiary" of the Borrower, within the meaning of Regulation S-X promulgated by the Securities and Exchange Commission, as such Regulation is in effect from time to time; provided that, if the Borrower notifies the Agent that the Borrower wishes to amend this Agreement to eliminate the effect of any change of such Regulation (or if the Agent notifies the Borrower that the Required Banks wish to amend this Agreement for such purpose), then, for purposes of determining the Borrower's compliance with this Agreement, "Significant Subsidiaries" of the Borrower shall be determined on the basis of such Regulation as in effect immediately before the relevant change thereto, until either such notice is withdrawn or this Agreement is amended in a manner satisfactory to the Borrower and the Required Banks. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Borrower. "Swingline Commitment" means, with respect to each Swingline Lender, the amount of such Swingline Lender's commitment to make Swingline Loans hereunder. The initial Swingline Commitment of each Swingline Lender, subject to reduction from time to time pursuant to Sections 2.10, 2.11 and 6.01, is $25,000,000. "Swingline Exposure" means at any time the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Bank at any time shall mean its Applicable Percentage of the Swingline Exposure at such time. "Swingline Lender" means Deutsche Bank AG New York Branch and Citicorp USA, Inc., in their capacities as lenders of Swingline Loans hereunder. "Swingline Loan" means a loan made by a Swingline Lender pursuant to Section 2.04. "Termination Date" means June 22, 2005 (subject to extension pursuant to Section 2.19), or, if such day is not a Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month or would be more than 364 days after the date of the most recent extension pursuant to Section 2.19, in which case the Termination Date shall be the next preceding Euro-Dollar Business Day. "Total Commitments" means at any time the sum of the Banks' Commitments at such time. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability 11 of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "Utilization Percentage" means, with respect to any calendar quarter, a fraction, expressed as a percentage, of which (i) the numerator is the daily average aggregate principal amount of Loans outstanding under this Agreement and "Loans" (as defined in the Other Credit Agreement) outstanding under the Other Credit Agreement, in each case during such calendar quarter and (ii) the denominator is the daily average aggregate amount of Commitments in effect under this Agreement and "Commitments" (as defined in the Other Credit Agreement) in effect under the Other Credit Agreement, in each case during such calendar quarter; provided that if it is necessary to determine the Utilization Percentage with respect to a calendar quarter prior to the end of such calendar quarter, then the Utilization Percentage shall be determined based upon the daily average aggregate principal amount of Loans outstanding and Commitments in effect during the elapsed portion of such calendar quarter, in each case under this Agreement and the Other Credit Agreement. "Wholly Owned Consolidated Subsidiary" means any Consolidated Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks; provided that, if the Borrower notifies the Agent that the Borrower wishes to amend any covenant in Article V to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Agent notifies the Borrower that the Required Banks wish to amend Article V for such purpose), then the Borrower's compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Banks. SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article II on the same date, all of which Loans are of the same type (subject to Article VIII) and, except in the case of Base Rate Loans, have the same Interest Period or initial Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article II under which participation therein is determined (i.e., a 12 "Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks participate in proportion to their Commitments, a "Money Market Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith and a "Swingline Borrowing" is a Borrowing of Swingline Loans). ARTICLE II The Credits SECTION 2.01. Commitments to Lend. During the Revolving Credit Period each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this Section from time to time in amounts such that the aggregate Committed Exposure of such Bank at any one time outstanding shall not exceed the amount of its Commitment. Each Borrowing under this Section shall be in an aggregate principal amount of $10,000,000 or any larger amount that is a multiple of $1,000,000; provided, that any Borrowing under this Section may be in the aggregate amount available in accordance with Section 3.02(b). Each Borrowing under this Section shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this Section, repay, or to the extent permitted by Section 2.12, prepay Loans and reborrow at any time during the Revolving Credit Period under this Section. SECTION 2.02. Notice of Committed Borrowings. The Borrower shall give the Agent notice (a "Notice of Committed Borrowing") not later than 10:00 A.M. (New York City time) on (x) the date of each Base Rate Borrowing, (y) the second Domestic Business Day before each CD Borrowing and (z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (b) the aggregate amount of such Borrowing, (c) whether the Loans comprising such Borrowing are to be CD Loans, Base Rate Loans or Euro-Dollar Loans, and (d) in the case of a Fixed Rate Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. SECTION 2.03. Money Market Borrowings. (a) The Money Market Option. In addition to Committed Borrowings pursuant to Section 2.01, the Borrower may, as set forth in this Section, request the Banks during the Revolving Credit Period to make offers to make Money Market Loans to the Borrower. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. 13 (b) Money Market Quote Request. When the Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Agent by telex or facsimile transmission a Money Market Quote Request substantially in the form of Exhibit B hereto so as to be received no later than 10:00 A.M. (New York City time) on (x) the fifth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction for Money Market Loans to be made in Dollars, or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction for Money Market Loans to be made in Dollars or (z) the sixth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or Absolute Rate Auction for Money Market Loans to be made in an Alternative Currency in accordance with subsection (h) of this Section (or, in any case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction (unless such Absolute Rate Auction relates to Money Market Loans to be made in an Alternative Currency, in which case a Euro-Dollar Business Day), (ii) the aggregate amount of such Borrowing (expressed in Dollars), which shall be $10,000,000 or a larger multiple of $1,000,000, (iii) the currency in which the proposed Borrowing is to be made, which shall be Dollars or, subject to subsection (h) of this Section, an Alternative Currency, (iv) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (v) whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate. The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. No Money Market Quote Request shall be given within five Euro-Dollar Business Days (or such other number of days as the Borrower and the Agent may agree) of any other Money Market Quote Request. (c) Invitation for Money Market Quotes. Promptly upon receipt of a Money Market Quote Request, the Agent shall send to the Banks by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit C hereto, which shall constitute an invitation by the Borrower to each Bank to submit Money Market Quotes offering to make the Money Market Loans to which such Money Market Quote Request relates in accordance with this Section. 14 (d) Submission and Contents of Money Market Quotes. (i) Each Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 9.01 not later than (x) 2:00 p.m. (New York City time) on the fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction for Money Market Loans to be made in Dollars, (y) 9:00 A.M. (New York City time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction for Money Market Loans to be made in Dollars or (z) 2:00 p.m. (New York City time) on the sixth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or Absolute Rate Auction for Money Market Loans to be made in an Alternative Currency (or, in any case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); provided that Money Market Quotes submitted by the Agent (or any affiliate of the Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than (x) one hour prior to the deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the other Banks, in the case of an Absolute Rate Auction. Subject to Articles III and VI, any Money Market Quote so made shall be irrevocable except with the written consent of the Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: (A) the proposed date of Borrowing, (B) the principal amount of the Money Market Loan for which each such offer is being made (expressed in Dollars), which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $1,000,000 or a larger multiple of $1,000,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Bank may be accepted, (C) the currency of the Money Market Loan for which each such offer is being made, (D) in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the "Money Market Margin") offered for each such Money Market Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, 15 (E) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the "Money Market Absolute Rate") offered for each such Money Market Loan, and (F) the identity of the quoting Bank. A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes. (iii) Any Money Market Quote shall be disregarded if it: (A) is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection (d)(ii); (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or (D) arrives after the time set forth in subsection (d)(i). (e) Notice to Borrower. The Agent shall promptly notify the Borrower of the terms (x) of any Money Market Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Agent's notice to the Borrower shall specify (A) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market Margins or Money Market Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted. (f) Acceptance and Notice by Borrower. Not later than 10:00 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction for Money Market Loans to be made in Dollars, (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction for Money Market Loans to be made in Dollars or (z) the fifth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or Absolute Rate Auction for Money Market Loans to be made in an Alternative Currency (or, in any case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify the Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall specify the aggregate principal 16 amount of offers for each Interest Period that are accepted, expressed in Dollars. The Borrower may accept any Money Market Quote in whole or in part; provided that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in, and the currency thereof must be the currency set forth in, the related Money Market Quote Request, (ii) the principal amount of each Money Market Borrowing must be $10,000,000 or a larger multiple of $1,000,000, (iii) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be, and (iv) the Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement. (g) Allocation by Agent. If offers are made by two or more Banks with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Agent among such Banks as nearly as possible (in multiples of $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Agent of the pro rata amounts of Money Market Loans shall be conclusive in the absence of manifest error. (h) Money Market Loans in an Alternative Currency. The Borrower may request Money Market Loans in an Alternative Currency subject to the terms and conditions of this subsection (h), in addition to the other conditions applicable to such Loans hereunder. Any request for Money Market Loans in an Alternative Currency shall be subject to the condition that if there shall occur at or prior to 10:00 A.M. (New York City time) on the date of any Money Market Borrowing to be denominated in an Alternative Currency any change in national or international financial, political or economic conditions or currency exchange rates or exchange controls which would, in the reasonable opinion of any Bank that shall have offered to make any Money Market Loan in connection with such Borrowing, make it impracticable for such Bank's Loan to be denominated in such Alternative Currency, then such Bank may by notice to the Borrower and the Agent withdraw its offer to make such Loan. Any Money Market Loan which is to be made in an Alternative Currency in accordance with this subsection (h) shall be advanced in the Equivalent Amount of the Dollar Amount thereof and shall be repaid or prepaid in such Alternative Currency in the amount borrowed. Interest payable on any Loan denominated in an Alternative Currency shall be paid in such Alternative Currency. 17 For purposes of determining whether the aggregate principal amount of Loans outstanding hereunder exceeds any applicable limitation expressed in Dollars, each Money Market Loan denominated in an Alternative Currency shall be deemed to be in a principal amount equal to the Dollar Amount thereof. The Dollar Amount of any Money Market Loan with an Interest Period exceeding six months in duration shall be adjusted on each date that would have been the last day of an Interest Period for such Loan if such Loan had successive Interest Periods of six months duration. Each such adjustment shall be made by the Bank holding such Loan by determining the amount in Dollars that would be required in order to result in an Equivalent Amount in the applicable Alternative Currency equal to the principal amount of the applicable Loan outstanding on the date of the adjustment, and the amount in Dollars so determined shall be the Dollar Amount of such Loan unless and until another adjustment is required hereby. Each Bank that makes a Money Market Loan denominated in an Alternative Currency agrees to determine any such adjustments if and when required to be made pursuant to this paragraph and to notify the Borrower and the Agent of each such adjustment promptly upon making such determination. SECTION 2.04. Swingline Loans. (a) During the Revolving Credit Period each Swingline Lender severally agrees, on the terms and conditions set forth in this Agreement, to make Loans to the Borrower pursuant to this Section from time to time amounts such that (i) the aggregate principal amount of Swingline Loans of such Swingline Lender at any time outstanding shall not exceed the amount of its Swingline Commitment and (ii) the aggregate Committed Exposure of all the Banks at any time shall not exceed the Total Commitments. All Swingline Loans shall be made in Dollars. Each Swingline Loan shall be made as part of a Borrowing consisting of Swingline Loans made by the Swingline Lenders ratably in accordance with their respective Swingline Commitments. (b) In order to request a Swingline Borrowing, the Borrower shall notify the Agent of such request not later than 2:00 P.M. (New York City time) on the day of a proposed Swingline Borrowing, specifying the proposed date (which shall be a Domestic Business Day) and amount of the requested Swingline Borrowing (which shall be $5,000,000 or a larger multiple of $1,000,000) and the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. The Agent will promptly advise the Swingline Lenders of any such notice received from the Borrower. Each Swingline Lender shall make each Swingline Loan available to the Agent in the same manner as for other Domestic Loans as provided in Section 2.05 (except that each Swingline Lender shall make each Swingline Loan available to the Agent by 5:00 P.M. (New York City time) on the requested date of such Swingline Loan), unless such Swingline Lender and the Borrower agree otherwise. (c) Each Swingline Lender may by written notice given to the Banks not later than 10:00 A.M. (New York City time) on any Domestic Business Day require the Banks to acquire participations on such Domestic Business Day in all or a portion of the Swingline Loans of such Swingline Lender outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which the Banks will acquire participations. In furtherance of the foregoing, each Bank hereby absolutely and unconditionally agrees, 18 upon receipt of notice as provided above, to pay to the Agent, for the account of the relevant Swingline Lender, such Bank's Applicable Percentage of such Swingline Loan or Loans. Each Bank acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Bank shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.05 with respect to Loans made by such Bank (and Section 2.05 shall apply, mutatis mutandis, to the payment obligations of the Banks). The Agent shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph. Any amounts received by a Swingline Lender from the Borrower (or other party on behalf of the Borrower) in respect of a Swingline Loan after receipt by such Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Agent; any such amounts received by the Agent shall be promptly remitted by the Agent to the Banks that shall have made their payments pursuant to this paragraph and to the relevant Swingline Lender, as their interests may appear. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the payment thereof. SECTION 2.05. Notice to Banks; Funding of Loans.(a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 12:00 Noon (New York City time) on the date of each Borrowing, each Bank participating therein shall (except as provided in Section 2.04 and subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Agent at its address specified in or pursuant to Section 9.01 or, subject to the provisions of Section 2.03(h), if such Borrowing is to be made in an Alternative Currency, make available the Equivalent Amount of such Alternative Currency on that day (in such funds as may then be customary for the settlement of international transactions in the Alternative Currency) to the account of the Agent at such place as shall have been notified by the Agent to the Banks by not less than five Domestic Business Days' notice. Unless the Agent determines that any applicable condition specified in Article III has not been satisfied, the Agent will make the funds so received from the Banks available to the Borrower at the Agent's aforesaid address. (c) If any Bank (including a Swingline Lender) makes a new Loan hereunder on a day on which the Borrower is to repay all or any part of an outstanding Loan denominated in the same currency from such Bank, such Bank shall apply the proceeds of its new Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed and the amount being repaid shall be made available by such Bank to the Agent as provided in subsection (b), or remitted by the Borrower to the Agent as provided in Section 2.13, as the case may be. 19 (d) Unless the Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Agent such Bank's share of such Borrowing, the Agent may assume that such Bank has made such share available to the Agent on the date of such Borrowing in accordance with subsections (b) and (c) of this Section 2.05 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.08 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. SECTION 2.06. Evidence of Debt. (a) Each Bank shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Bank resulting from each Loan made by such Bank, including the amounts of principal and interest payable and paid to such Bank from time to time hereunder. (b) The Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Bank hereunder and (iii) the amount of any sum received by the Agent hereunder for the account of the Banks and each Bank's share thereof. (c) The entries made in the accounts maintained pursuant to paragraph (a) or (b) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Bank or the Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement. (d) Any Bank may request that Loans made by it be evidenced by a Note, In such event, the Borrower shall prepare, execute and deliver to such Lender a Note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns). Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (including after assignment pursuant to Section 9.06) be represented by one or more Notes payable to the order of the payee named therein (or, if such Note is a registered note, to such payee and its registered assigns). (e) Each Bank may, by notice to the Borrower and the Agent, request that its Loans of a particular type be evidenced by a separate Note in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in 20 substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant type. Each reference in this Agreement to the "Note" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (f) Upon receipt of a Bank's Note pursuant to Section 3.01(b), the Agent shall forward such Note to such Bank. Each Bank shall record the date, amount, type and maturity of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto and, in the case of Money Market Loans denominated in an Alternative Currency, the currency, amount and Dollar Amount of such Loans, and prior to any transfer of its Note shall endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. SECTION 2.07. Maturity of Loans. (a) All Committed Loans of each Bank shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the Termination Date. (b) Each Money Market Loan and Swingline Loan shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the last day of the Interest Period applicable to such Loan. SECTION 2.08. Interest Rates. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, (i) at a rate per annum equal to the Base Rate for such day, if such day falls within any calendar quarter with respect to which the Utilization Percentage is less than or equal to 50% or (ii) at a rate per annum equal to the sum of the Base Rate for such day and 0.10%, if such day falls within a calendar quarter with respect to which the Utilization Percentage is greater than 50%. Such interest shall be payable for each Interest Period on the last day thereof, and, with respect to the principal amount of any Base Rate Loan converted to a CD Loan or a Euro-Dollar Loan, on each date a Base Rate Loan is so converted. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Base Rate. (b) Each CD Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the CD Margin plus the applicable Adjusted CD Rate; provided that if any CD Loan or any portion thereof shall, as a result of clause (2)(b) of the definition of Interest Period, have an Interest Period of less than 30 days, such portion shall bear interest during such Interest Period at the rate applicable to Base Rate Loans during such period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 90 days, at intervals of 90 days after the first day 21 thereof. In addition, with respect to the principal amount of any CD Loan converted to a Base Rate Loan or a Euro-Dollar Loan, such interest shall be payable on each date a CD Loan is so converted. Any overdue principal of or interest on any CD Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the CD Margin plus the Adjusted CD Rate applicable to such Loan and (ii) the rate applicable to Base Rate Loans for such day. "CD Margin" applicable to any CD Loan outstanding on any day means (i) 0.280%, if such day falls within any calendar quarter with respect to which the Utilization Percentage is less than or equal to 50% or (ii) 0.380%, if such day falls within a calendar quarter with respect to which the Utilization Percentage is greater than 50%. The "Adjusted CD Rate" applicable to any Interest Period means a rate per annum determined pursuant to the following formula: [CDBR ]* ACDR = [---------] + AR [1.00-DRP] ACDR = Adjusted CD Rate CDBR = CD Base Rate DRP = Domestic Reserve Percentage Ar = Assessment Rate - -------------- * The amount in brackets being rounded upward, if necessary, to the next higher 1/100 of 1% The "CD Base Rate" applicable to any Interest Period is the rate of interest determined by the Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each CD Reference Bank of its certificates of deposit in an amount comparable to the principal amount of the CD Loan of such CD Reference Bank to which such Interest Period applies and having a maturity comparable to such Interest Period. "Domestic Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion Dollars in respect of new non-personal time deposits in Dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted 22 automatically on and as of the effective date of any change in the Domestic Reserve Percentage. "Assessment Rate" means for any Interest Period the net annual assessment rate (rounded upward, if necessary, to the next higher 1/100 of 1%) actually incurred by Deutsche Bank Trust Company Americas to the Federal Deposit Insurance Corporation (or any successor) for such Corporation's (or such successor's) insuring time deposits at offices of Deutsche Bank Trust Company Americas in the United States during the most recent period for which such rate has been determined prior to the commencement of such Interest Period. (c) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin plus the applicable London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. In addition, with respect to the principal amount of any Euro-Dollar Loan converted to a Base Rate Loan or a CD Loan, such interest shall be payable on each date a Euro-Dollar Loan is so converted. "Euro-Dollar Margin" applicable to any Euro-Dollar Loan outstanding on any day means (i) 0.155%, if such day falls within any calendar quarter with respect to which the Utilization Percentage is less than or equal to 50% or (ii) 0.255%, if such day falls within a calendar quarter with respect to which the Utilization Percentage is greater than 50%. The "London Interbank Offered Rate", applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/32 of 1%) of the respective rates per annum at which deposits in Dollars or, in the case of any Money Market LIBOR Loan denominated in an Alternative Currency, the relevant Alternative Currency are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. (d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the Euro-Dollar Margin plus the London Interbank Offered Rate applicable to such Loan and (ii) the Euro-Dollar Margin plus the average (rounded upward, if necessary, to the next higher 1/32 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than one month as the Agent may select) deposits in Dollars in an amount approximately equal to such overdue payment due to each of the Euro-Dollar Reference Banks are offered to such 23 Euro-Dollar Reference Bank in the London interbank market for the applicable period determined as provided above (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the rate applicable to Base Rate Loans for such day). (e) Subject to Section 8.01 (a), each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.08(c) as if the related Money Market LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.03. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Prime Rate for such day. (f) Each Swingline Loan shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at such rate per annum as shall be agreed to in writing by the Borrower and the applicable Swingline Lender with respect to such Swingline Loan or, if no such agreement shall be made, at a rate per annum equal to the Base Rate for such date. Such interest shall be payable for each Interest Period on the last day thereof. Any overdue principal of or interest on any Swingline Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Base Rate for such day. (g) The Agent shall determine each interest rate applicable to the Loans hereunder in accordance with the provisions hereof. The Agent shall give prompt notice to the Borrower and the participating Banks by telex, cable or telecopy of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (h) Each Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated by this Section. If any Reference Bank does not furnish a timely quotation, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. SECTION 2.09. Fees. (a) Facility Fee. The Borrower shall pay to the Agent for the account of the Banks ratably a facility fee at the rate of 0.070% per annum. Such facility fee shall accrue from and including the Effective Date to but excluding the Termination Date, on the daily average aggregate amount of the 24 Commitments (whether used or unused). If any Loans are outstanding and are not repaid on the Termination Date, such facility fee will continue to accrue from and including the Termination Date to but excluding the date all Loans are repaid, on the outstanding principal amount of the Loans. (b) Payments. Accrued fees under subsection (a) of this Section shall be payable quarterly on the last day of February, May, August and November in each year (commencing August 2004) and upon the date of termination of the Commitments in their entirety (and, if later, the date the Loans shall be repaid in their entirety). SECTION 2.10. Optional Termination or Reduction of Commitments. (a) The Borrower may, upon at least three Domestic Business Days' prior irrevocable written notice to the Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $10,000,000 or any larger multiple of $1,000,000, the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans; provided that the Swingline Commitments must be terminated if the Commitments are terminated and, if the Commitments are reduced, the Swingline Commitments also must be reduced, if necessary, so that after giving effect to such reduction the aggregate amount of the Swingline Commitments shall not exceed the Total Commitments. (b) The Borrower may, upon at least three Domestic Business Days' notice to the Agent, (i) terminate the Swingline Commitments at any time, if no Swingline Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $5,000,000 or any larger multiple of $1,000,000, the aggregate amount of the Swingline Commitments in excess of the aggregate outstanding principal amount of the Swingline Loans. SECTION 2.11. Mandatory Termination of Commitments. The Commitments and the Swingline Commitments shall terminate on the Termination Date and any Loans then outstanding (together with accrued interest thereon) shall be due and payable on such date. SECTION 2.12. Optional Prepayments. (a) Subject to Section 2.14 in the case of Fixed Rate Loans, the Borrower may, upon at least one Domestic Business Day's notice to the Agent, prepay any Group of Loans (other than Swingline Loans, as to which subsection (b) below shall apply), or any Money Market Borrowing bearing interest at the Base Rate pursuant to Section 8.01, in whole at any time, or from time to time in part in amounts aggregating $10,000,000 or any larger multiple of $1,000,000 (based on the Dollar Amount thereof, in the case of a Borrowing denominated in an Alternative Currency), by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment; provided that, except as expressly provided above, the Borrower may not prepay all or any portion of the principal amount of any Money Market Loan prior to the maturity thereof. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Group or Borrowing. 25 (b) The Borrower may, upon notice to the Agent prior to 12:00 Noon (New York City time) on the date of prepayment (which shall be a Domestic Business Day), prepay any Swingline Borrowing in whole at any time, or from time to time in part in amounts aggregating $5,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each optional prepayment shall be applied to prepay ratably the Swingline Loans of the Swingline Lenders included in such Swingline Borrowing. (c) Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Bank (or, in the case of a Swingline Loan, each Swingline Lender) of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. SECTION 2.13. General Provisions as to Payments. (a) Except as expressly provided in subsection (b) of this Section, the Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, in Dollars, not later than 12:00 Noon (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 9.01. The Agent will promptly distribute to each Bank (or Swingline Lender, as applicable) its ratable share of each such payment received by the Agent for the account of the Banks (or Swingline Lenders, as applicable). (b) All payments to be made by the Borrower hereunder or under the Loans in an Alternative Currency pursuant to Section 2.03(h) shall be made in such Alternative Currency in such funds as may then be customary for the settlement of international transactions in such Alternative Currency for the account of the Agent, at such time and at such place as shall have been notified by the Agent to such Borrower and the applicable Banks by not less than four Euro-Dollar Business Days' notice. The Agent will promptly cause any such payments for the account of any Bank to be distributed to the Bank entitled thereto in like funds. (c) Whenever any payment of principal of, or interest on, the Domestic Loans, Swingline Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro- Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, any Money Market Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (d) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks or Swingline Lenders hereunder 26 that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank or Swingline Lender, as applicable, on such due date an amount equal to the amount then due such Bank or Swingline Lender. If and to the extent that the Borrower shall not have so made such payment, each Bank or Swingline Lender, as applicable, shall repay to the Agent forthwith on demand such amount distributed to such Bank or Swingline Lender together with interest thereon, for each day from the date such amount is distributed to such Bank or Swingline Lender until the date such Bank or Swingline Lender repays such amount to the Agent, at the Federal Funds Rate. SECTION 2.14. Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is converted (pursuant to Article II, VI or VIII or otherwise) on any day other than the last day of the Interest Period applicable thereto, or the end of an applicable period fixed pursuant to Section 2.08(d), or if the Borrower fails to borrow any Fixed Rate Loans (excluding a failure to borrow in a specified Alternative Currency due to the occurrence of any change in conditions described in Section 2.03(h)) after notice has been given to any Bank in accordance with Section 2.05(a), the Borrower shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or failure to borrow, provided that such Bank shall have delivered to the Borrower a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. For purposes of this Section, any Swingline Loan bearing interest at a fixed rate shall be deemed to be a Fixed Rate Loan. SECTION 2.15. Computation of Interest and Fees. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.16. Method of Electing Interest Rates, (a) The Loans included in each Committed Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Committed Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article VIII), as follows: (i) if such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to CD Loans as of any Domestic Business Day or to Euro-Dollar Loans as of any Euro-Dollar Business Day; 27 (ii) if such Loans are CD Loans, the Borrower may elect to convert such Loans to Base Rate Loans or Euro-Dollar Loans or elect to convert or continue such Loans as CD Loans for a different or additional Interest Period, in each case effective on any Euro-Dollar Business Day; (iii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Base Rate Loans or CD Loans or elect to convert or continue such Loans as Euro-Dollar Loans for a different or additional Interest Period, in each case effective on any Euro-Dollar Business Day. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Agent at least three Euro-Dollar Business Days before the conversion or continuation selected in such notice is to be effective (unless the relevant Loans are to be converted from Domestic Loans to Domestic Loans of the other type or continued as Domestic Loans of the same type for an additional Interest Period, in which case such notice shall be delivered to the Agent at least two Domestic Business Days before such conversion or continuation is to be effective). A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, are each $10,000,000 or any larger multiple of $1,000,000. (b) Each Notice of Interest Rate Election shall specify: (i) The Group of Loans (or portion thereof) to which such notice applies; (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection (a) above; (iii) if the Loans comprising such Group are to be converted, the new type of Loans and, if such new Loans are Fixed Rate Loans, the duration of the initial Interest Period applicable thereto; and (iv) if such Loans are to be continued as CD Loans or Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period. (c) Upon receipt of a Notice of Interest Rate Election from the Borrower pursuant to subsection (a) above, the Agent shall promptly notify each Bank of the contents thereof and such notice shall not thereafter be revocable by the Borrower. If the Borrower fails to deliver a timely Notice of Interest Rate Election to the Agent for any 28 Group of Fixed Rate Loans, such Loans shall be converted into Base Rate Loans on the last day of the then current Interest Period applicable thereto. SECTION 2.17. Regulation D Compensation. If and for so long as any Bank maintains reserves against "Eurocurrency liabilities" (or any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of such Bank to United States residents), then such Bank may require the Borrower to pay, contemporaneously with each payment of interest on EuroDollar Loans, additional interest on the related Euro-Dollar Loan of such Bank at a rate per annum determined by such Bank up to but not exceeding the excess of (i)(A) the applicable London Interbank Offered Rate divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the applicable London Interbank Offered Rate. Any Bank wishing to require payment of such additional interest (x) shall so notify the Borrower and the Agent, in which case such additional interest on the Euro-Dollar Loans of such Bank shall be payable to such Bank at the place indicated in such notice with respect to each Interest Period commencing at least four Euro-Dollar Business Days after the giving of such notice and (y) shall notify the Borrower at least five Euro-Dollar Business Days prior to each date on which interest is payable on the Euro-Dollar Loans of the amount then due it under this Section. SECTION 2.18. Judgment Currency. If for the purposes of obtaining judgment in any court it is necessary to convert a sum due from the Borrower hereunder or under any of the Loans in the currency expressed to be payable herein or under the Loans (the "specified currency") into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Agent could purchase the specified currency with such other currency at the Agent's New York office on the Euro-Dollar Business Day preceding that on which final judgment is given. The obligations of the Borrower in respect of any sum due to any Bank or the Agent hereunder or under any Loan shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Euro-Dollar Business Day following receipt by such Bank or the Agent (as the case may be) of any sum adjudged to be so due in such other currency such Bank or the Agent (as the case may be) may in accordance with normal banking procedures purchase the specified currency with such other currency; if the amount of the specified currency so purchased is less than the sum originally due to such Bank or the Agent, as the case may be, in the specified currency, the Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Bank or the Agent, as the case may be, against such loss, and if the amount of the specified currency so purchased exceeds (a) the sum originally due to any Bank or the Agent, as the case may be, in the specified currency and (b) any amounts shared with other Banks as a result of allocations of such excess as a disproportionate payment to such Bank under Section 9.04, such Bank or the Agent, as the case may be, agrees to remit such excess to the Borrower. SECTION 2.19. Extension of Termination Date. (a) The Borrower may, by notice to the Agent (which shall promptly deliver a copy to each of the Banks) 29 given not less than 30 days and not more than 45 days prior to the Termination Date then in effect, request that the Banks extend the Termination Date for an additional 364-day period from the Termination Date then in effect (the "Existing Termination Date"). Each Lender shall, by notice to the Borrower and the Administrative Agent given not earlier that the 30th day and not later than the 20th day prior to the Existing Termination Date (the "Extension Acceptance Date"), advise the Borrower whether or not such Bank agrees to such extension and any Bank that does not so advise the Borrower on or before such day shall be deemed to have advised the Borrower that it will not agree to such extension. (b) If (and only if) Banks having Commitments that represent at least 51% of the Total Commitments shall have agreed to extend the Existing Termination Date (such Banks that agree to such extension being called the "Continuing Banks"), then (i) the Termination Date shall be extended to the date that is 364 days after the Existing Termination Date (provided, that if such date is not a Domestic Business Day, then the Termination Date as so extended shall be the next preceding Domestic Business Day), (ii) the Commitment of each Bank that is not a Continuing Bank shall terminate (with the result that the Total Commitments will decrease by the amount of such Commitment), and all Loans of each such Bank shall become due and payable, together with all interest accrued thereon and all other amounts owed to such Bank hereunder, on the Existing Termination Date, and such Bank's obligations under paragraph (c) of Section 2.04 shall terminate on the Existing Termination Date. Notwithstanding the foregoing, no extension of the Termination Date shall be effective with respect to any Bank unless, on and as of the Existing Termination Date, the conditions set forth in paragraphs (c) and (d) of Section 3.02 shall be satisfied (with all references to a Borrowing being deemed to be references to such extension) and the Agent shall have received a certificate to that effect dated the Existing Termination Date and executed by a financial officer of the Borrower. (c) If a Bank that is also a Swingline Lender agrees to extend its Commitment pursuant to subsection (b) above, then such Bank also agrees to extend its Swingline Commitment for the same time period as its Commitment; provided that after giving effect to such extension the aggregate amount of the Swingline Commitments may not exceed the Total Commitments as a result of such extension. (d) The Borrower shall have the right after the Extension Acceptance Date and prior to the Existing Termination Date to require any Bank that is not a Continuing Bank to transfer without recourse as of the Existing Termination Date (in accordance with and subject to the restrictions contained in Section 9.06, except that the $2,000 processing fee set forth in Section 9.06(c) shall be paid by the Borrower) all its interests, rights and obligations under this Agreement to one or more other banks or other financial institutions (any such bank or other financial institution being called an "Additional Commitment Bank"), which may include any Bank; provided that (i) such Additional Commitment Bank, if not already a Bank hereunder, shall be subject to the approval of the Borrower and the Agent and each Swingline Lender that is a Continuing Bank (which approvals shall not be unreasonably withheld) and shall execute all such 30 documentation as the Agent shall specify to evidence its status as a Bank hereunder, (ii) such assignment shall become effective as of the Existing Termination Date and (iii) the Borrower shall pay to such Bank that is not a Continuing Bank in immediately available funds on the effective date of such assignment the principal of and interest accrued to the date of payment on the Loans made by it hereunder and all other amounts accrued for its account or owed to it hereunder. ARTICLE III Conditions SECTION 3.01. Effectiveness. This Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 9.05): (a) receipt by the Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party); (b) if requested pursuant to Section 2.06(d), receipt by the Agent for the account of each applicable Bank of a duly executed Note dated on or before the Effective Date complying with the provisions of Section 2.06; (c) receipt by the Agent of an opinion of W. Andrew Macan, Esq., Assistant Vice President and Associate Counsel of the Borrower, substantially in the form of Exhibit E-1 hereto and an opinion of Cravath, Swaine & Moore LLP, Counsel of the Agent, substantially in the form of Exhibit E-2 hereto; (d) receipt by the Agent of written confirmation from the Borrower that the Borrower has (i) terminated all lending commitments under the Existing Credit Agreement (other than those continuing hereunder as provided in Section 9.11) and (ii) repaid all loans and other amounts, if any, outstanding or accrued thereunder; (e) receipt by the Agent of all documents it may reasonably request relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Agent; and (f) receipt by the Arrangers of all fees that are to be received by the Arrangers upon execution of this Agreement in the amounts previously agreed upon between the Borrower and the Agent; provided that this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than June 24, 2004. The Agent shall promptly notify the Borrower and the Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto. 31 SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions: (a) receipt by the Agent of a Notice of Borrowing as required by Section 2.02 or 2.03 or receipt of a notice requesting a Swingline Borrowing as required by Section 2.04, as the case may be; (b) the fact that, immediately after such Borrowing, (i) the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments and (ii) the aggregate outstanding principal amount of the Swingline Loans will not exceed the aggregate amount of the Swingline Commitments; (c) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing; and (d) the fact that the representations and warranties of the Borrower contained in this Agreement shall be true on and as of the date of such Borrowing, except that the condition set forth in this clause (d) shall exclude the representation and warranty set forth in Section 4.04(c) for any Loans made after the Effective Date. Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (b), (c) and (d) of this Section. ARTICLE IV Representations and Warranties The Borrower represents and warrants that: SECTION 4.01. Corporate Existence and Power. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of New Jersey, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Significant Subsidiaries. 32 SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower and the Loans, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower, in each case enforceable in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other laws affecting creditor's rights generally from time to time in effect and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law). SECTION 4.04. Financial Information. (a) The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 2003, and the related consolidated statements of income, shareholders' equity and cash flow for the fiscal year then ended, reported on by Ernst & Young and set forth in the Borrower's 2003 Form 10-K, a copy of which has been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) The unaudited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of March 31, 2004, and the related unaudited consolidated statements of income and cash flow for the three months then ended, set forth in the Borrower's quarterly report for the fiscal quarter ended March 31, 2004, as filed with the Securities and Exchange Commission on Form 10-Q, a copy of which has been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles applied on a basis consistent with the financial statements referred to in subsection (a) of this Section, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such three month period (subject to normal year-end adjustments). (c) Since December 31, 2003, there has been no material adverse change in the financial position of the Borrower and its Consolidated Subsidiaries, considered as a whole, or in the ability of the Borrower to comply with its payment obligations in respect of the Loans. SECTION 4.05. Litigation. There is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened in writing against the Borrower or any of its Significant Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could materially adversely affect the financial position of the Borrower and its Consolidated Subsidiaries, considered as a whole, or the ability of the Borrower to comply with its payment obligations under the Loans, or which in any manner draws into question the validity of this Agreement or the Loans. SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. No member of the ERISA Group has (i) sought 33 a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code to secure obligations aggregating in excess of $25,000,000 or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. SECTION 4.07. Not an Investment Company. The Borrower is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 4.08. Compliance with Laws. Each of the Borrower and its Significant Subsidiaries is in compliance in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, ERISA and the rules and regulations thereunder) except where the necessity of compliance therewith is being contested in good faith by appropriate proceedings. ARTICLE V Covenants The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Loan remains unpaid: SECTION 5.01. Information. The Borrower will deliver to each of the Banks: (a) as soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income, shareholders' equity and cash flow for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission by Ernst & Young or other independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income for such quarter and of income and cash flow for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in comparative form the consolidated statements of income for the corresponding quarter of the Borrower's previous fiscal year and of income and cash flow for the corresponding portion of the Borrower's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted 34 accounting principles and consistency by the chief financial officer or the chief accounting officer or the Treasurer of the Borrower; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer or the chief accounting officer or the Treasurer of the Borrower stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) simultaneously with the delivery of each set of financial statements referred to in clause (a) above, a statement of the firm of independent public accountants which reported on such statements whether anything has come to their attention to cause them to believe that any Default existed on the date of such statements; (e) within five days after the Chairman, the Vice-Chairman, the President, the chief financial officer, the chief accounting officer or the Treasurer of the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer or the chief accounting officer or the Treasurer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (f) promptly upon the mailing thereof to the shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; (g) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the Securities and Exchange Commission; (h) if and when any member of the ERISA Group gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any 35 Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or makes any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security to secure obligations aggregating in excess of $10,000,000, a certificate of the chief financial officer or the chief accounting officer or the Treasurer of the Borrower setting forth details as to such occurrence and action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take; and (i) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Agent, at the request of any Bank, may reasonably request. SECTION 5.02. Payment of Obligations. The Borrower will pay and discharge, and will cause each Significant Subsidiary to pay and discharge, at or before maturity, all their respective material obligations and liabilities, including, without limitation, tax liabilities, except where the same may be contested in good faith by appropriate proceedings, and will maintain, and will cause each Significant Subsidiary to maintain, in accordance with generally accepted accounting principles, appropriate reserves for the accrual of any of the same. SECTION 5.03. Maintenance of Property. The Borrower will keep, and will cause each Significant Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted. SECTION 5.04. Conduct of Business and Maintenance of Existence. The Borrower will continue, and will cause each Significant Subsidiary to continue, to engage in business of the same general type as now conducted by the Borrower and its Subsidiaries, and will preserve, renew and keep in full force and effect, and will cause each Significant Subsidiary to preserve, renew and keep in full force and effect, their respective corporate existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in this Section 5.04 shall prohibit (i) the merger of a Significant Subsidiary into the Borrower or the merger or consolidation of a Significant Subsidiary with or into another Person if the corporation surviving such consolidation or merger is a Subsidiary and if, in each case, after giving effect thereto, no Default shall have occurred and be continuing or (ii) the termination of the corporate existence of any Significant Subsidiary if the Borrower in good faith determines that such termination is in the best interest of the Borrower and is not materially disadvantageous to the Banks. SECTION 5.05. Compliance with Laws. The Borrower will comply, and cause each Significant Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, ERISA and the rules and regulations thereunder) except where the necessity of compliance therewith is contested in good faith by appropriate proceedings. 36 SECTION 5.06. Inspection of Property, Books and Records. The Borrower will keep, and will cause each Significant Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each Significant Subsidiary to permit, representatives of any Bank at such Bank's expense to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable times and with reasonable notice and as often as may reasonably be desired. SECTION 5.07. Adjusted Consolidated Net Worth. The Borrower will at no time permit Adjusted Consolidated Net Worth to be less than $2,600,000,000. SECTION 5.08. Negative Pledge. Neither the Borrower nor any Significant Subsidiary (other than a Real Estate Subsidiary) will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens existing on the date of this Agreement securing Debt outstanding on the date of this Agreement; (b) any Lien existing on any asset of any corporation at the time such corporation becomes a Significant Subsidiary and not created in contemplation of such event; (c) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, provided that such Lien attaches to such asset concurrently with or within 90 days after the acquisition thereof; (d) any Lien on any asset of any corporation existing at the time such corporation is merged or consolidated with or into the Borrower or a Subsidiary and not created in contemplation of such event; (e) any Lien existing on any asset prior to the acquisition thereof by the Borrower or a Subsidiary and not created in contemplation of such acquisition; (f) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section, provided that such Debt is not increased and is not secured by any additional assets; (g) Liens which (i) do not secure Debt, (ii) do not secure any obligation in an amount exceeding $100,000,000 and (iii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; and 37 (h) Liens securing Debt, which Liens are not otherwise permitted by the foregoing clauses of this Section; provided, that in no event shall the Liens permitted by this clause (h) secure Debt in an aggregate principal amount exceeding 15% of Adjusted Consolidated Net Worth. SECTION 5.09. Consolidations, Mergers and Sales of Assets. The Borrower will not (i) consolidate or merge with or into any other Person (other than a Subsidiary of the Borrower) or (ii) sell, lease or otherwise transfer, directly or indirectly, all or substantially all of the assets of the Borrower and its Subsidiaries, taken as a whole, to any other Person. SECTION 5.10. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for general corporate purposes. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any "margin stock" within the meaning of Regulation U. ARTICLE VI Defaults SECTION 6.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Loan, or shall fail to pay within five Domestic Business Days after the date when due any interest on any Loan or any fees or any other amount payable hereunder; (b) the Borrower shall fail to observe or perform any covenant contained in Sections 5.07 to 5.10, inclusive; (c) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 30 days after written notice thereof has been given to the Borrower by the Agent at the request of Banks having at least 10% in aggregate amount of the Commitments; (d) any representation, warranty, certification or statement made by the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Borrower or any Significant Subsidiary shall fail to make any payment in respect of any Material Debt when due or within any applicable grace period; (f) any event or condition shall occur which results in the acceleration of the maturity of any Material Debt or enables the holder of such Debt or any Person acting on such holder's behalf to accelerate the maturity thereof; 38 (g) the Borrower or any Significant Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Borrower or any Significant Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstated for a period of 60 days; or an order for relief shall be entered against the Borrower or any Significant Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $75,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $200,000,000; (j) a final judgment or order (not subject to appeal) for the payment of money in excess of $100,000,000 shall be rendered against the Borrower or any Significant Subsidiary and such judgment or order shall continue unsatisfied and unstated for a period of 30 days; or (k) any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 50% or more of the outstanding shares of common stock of the Borrower; or, during any period of 12 consecutive calendar months, individuals who were directors of the Borrower on the first day of such period (the "incumbent directors"), together with individuals nominated to serve as directors by a majority of the incumbent directors and any directors so nominated, shall cease to constitute a majority of the board of directors of the Borrower; then, and in every such 39 event, the Agent shall (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Borrower terminate the Commitments and the Swingline Commitments and they shall thereupon terminate, and (ii) if requested by Banks having more than 50% in aggregate principal amount of the total amount of Committed Loans, Money Market Loans and Swingline Exposure, by notice to the Borrower declare the Loans (together with accrued interest thereon) to be, and the Loans shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to the Borrower, without any notice to the Borrower or any other act by the Agent or the Banks, the Commitments and the Swingline Commitments shall thereupon terminate and the Loans (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. SECTION 6.02. Notice of Default. The Agent shall give notice to the Borrower under Section 6.01 (c) promptly upon being requested to do so by Banks having at least 10% in aggregate amount of the Commitments and shall thereupon notify all the Banks thereof. ARTICLE VII The Agent SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Agent to take such action as administrative agent on its behalf and to exercise such powers under this Agreement and the Loans as are delegated to the Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. Agent and Affiliates. Deutsche Bank AG New York Branch shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and Deutsche Bank AG New York Branch and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not the Agent hereunder. SECTION 7.03. Action by Agent. The obligations of the Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article VI. SECTION 7.04. Consultation with Experts. The Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. 40 SECTION 7.05. Liability of Agent. Neither the Agent nor any of its directors, officers, agents, or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article III, except receipt of items required to be delivered to the Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Loans or any other instrument or writing furnished in connection herewith. The Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex, facsimile transmission or similar writing) believed by it to be genuine or to be signed by the proper party or parties. SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Agent (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from the Agent's gross negligence or willful misconduct) that the Agent may suffer or incur in connection with this Agreement or any action taken or omitted by the Agent hereunder. SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Banks and the Borrower. Upon any such resignation, the Required Banks shall have the right to appoint a successor Agent, subject to the approval of the Borrower (which approval shall not be unreasonably withheld and, if an Event of Default shall have occurred and be continuing, shall not be required). If no successor Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $250,000,000 or a commercial bank organized under the laws of any country which is a member of the Organization for Economic Cooperation and Development, or a political subdivision of any such country, and having a combined capital and surplus of at least $250,000,000, provided that such bank is acting through a branch or agency located in the United States. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to 41 and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. SECTION 7.09. Agent's Fee. The Borrower shall pay to the Agent for its own account fees in the amounts and at the times previously agreed upon between the Borrower and the Agent. SECTION 7.10. Arrangers; Swingline Lenders. The Borrower and the Banks acknowledge and agree that (a) Arrangers do not have any duties or responsibilities hereunder in their capacities as such and (b) Arrangers and Swingline Lenders shall be entitled to the benefit of Sections 7.05 and 7.06 to the same extent as the Agent. ARTICLE VIII Change in Circumstances SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any CD Loan, Euro-Dollar Loan or Money Market LIBOR Loan: (a) the Agent is advised by the Reference Banks that deposits in the applicable currency (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or (b) in the case of CD Loans or Euro-Dollar Loans, Banks having 50% or more of the aggregate principal amount of the affected Loans advise the Agent that the Adjusted CD Rate or the London Interbank Offered Rate, as the case may be, as determined by the Agent will not adequately and fairly reflect the cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may be, for such Interest Period, the Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case may be, or to convert outstanding Loans into or continue outstanding Loans as CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended and (ii) each outstanding CD Loan or Euro-Dollar Loan, as the case may be, shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. 42 SECTION 8.02. Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans, or to convert outstanding Loans into or continue outstanding Loans as Euro-Dollar Loans, shall be suspended. Before giving any notice to the Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to maturity and shall so specify in such notice, the Borrower shall immediately prepay in full the then outstanding principal amount of each such Euro-Dollar Loan, together with accrued interest thereon. Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount from such Bank (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate Loan. SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after (x) the date hereof, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Money Market Quote, in the case of any Money Market Loan, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding (A) with respect to any CD Loan any such requirement included in an applicable Domestic Reserve Percentage and (B) with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage), special deposit, insurance assessment (excluding, with respect to any CD Loan, any such requirement reflected in an applicable Assessment Rate) or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans, and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate 43 Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (b) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction. It is understood that the Banks are entering into this Agreement on the assumption that they will not be required to maintain capital in respect of their Commitments, and that the Borrower's obligations under this paragraph will apply in the event such assumption proves to be incorrect. (c) Each Bank will promptly notify the Borrower and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office or attempt to assign its Loans to a different branch or affiliate of such Bank, as applicable, if such designation or assignment will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. The Borrower shall not be obligated to compensate any Bank pursuant to this Section for increased costs or reduced return accruing prior to the date which is 90 days before such Bank requests compensation (in the case of a request for compensation pursuant to subsection (a) above) or prior to the first day of the most recent fiscal year of such Bank ending more than 90 days before such Bank requests compensation (in the case of a request for compensation pursuant to subsection (b) above). SECTION 8.04. Taxes. (a) For purposes of this Section 8.04, the following terms have the following meanings: "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings with respect to any payment by the Borrower 44 pursuant to this Agreement or under any Note, and all liabilities with respect thereto, excluding (i) in the case of each Bank and the Agent, taxes imposed on its income, and franchise or similar taxes imposed on it, by a jurisdiction under the laws of which such Bank or the Agent (as the case may be) is organized or in which its principal executive office is located or, in the case of each Bank, in which its Applicable Lending Office is located and (ii) in the case of each Bank, any United States withholding tax imposed on such payments but only to the extent that such Bank is subject to United States withholding tax at the time such Bank first becomes party to this Agreement. "Other Taxes" means any present or future stamp or documentary taxes and any other excise or property taxes, or similar charges or levies, which arise from any payment made pursuant to this Agreement or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note. (b) Any and all payments by the Borrower to or for the account of any Bank or the Agent hereunder or under any Note shall be made without deduction for any Taxes or Other Taxes; provided that, if the Borrower shall be required by law to deduct any Taxes or Other Taxes from any such payments, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Bank or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) the Borrower shall furnish to the Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt evidencing payment thereof. (c) The Borrower agrees to indemnify each Bank and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be paid within 15 days after such Bank or the Agent (as the case may be) makes demand therefor. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter if requested in writing by the Borrower (but only so long as such Bank remains lawfully able to do so), shall provide the Borrower with Internal Revenue Service Form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which exempts the Bank from United States withholding tax or reduces the rate of withholding tax on payments of interest for the account of such Bank or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. 45 (e) For any period with respect to which a Bank has failed to provide the Borrower with the appropriate form pursuant to Section 8.04(d) (unless such failure is due to a change in treaty, law or regulation occurring subsequent to the date on which such form originally was required to be provided), such Bank shall not be entitled to indemnification under Section 8.04(b) or (c) with respect to Taxes imposed by the United States; provided that if a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes. (f) If the Borrower is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.04, then such Bank will change the jurisdiction of its Applicable Lending Office if, in the judgment of such Bank, such change (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not otherwise disadvantageous to such Bank. The Borrower will not be obligated to indemnify any Bank pursuant to Section 8.04(c) for any amounts payable thereunder accruing more than 90 days prior to the date that such Bank requests compensation therefor. SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans. If (i) the obligation of any Bank to make or maintain Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03 or 8.04 with respect to its CD Loans or Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days prior notice to such Bank through the Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Loans which would otherwise be made by such Bank as (or continued as or converted into) CD Loans or Euro-Dollar Loans, as the case may be, shall instead be Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Loans of the other Banks), and (b) after each of its CD Loans or Euro-Dollar Loans, as the case may be, has been repaid (or converted to a Base Rate Loan), all payments of principal which would otherwise be applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans instead. SECTION 8.06. Substitution of Bank. (a) If (i) the obligation of any Bank to make or maintain EuroDollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank (or any Participant in its Loans) has demanded compensation under Section 8.03 or 8.04, the Borrower shall have the right to seek a bank or banks ("Substitute Banks"), which may be one or more of the Banks or one or more other banks satisfactory to the Agent, to purchase the Loan or Loans and assume the Commitment of such Bank (the "Affected Bank") and, if the Borrower locates a Substitute Bank, the Affected Bank shall, upon payment to it of the purchase price agreed between it and the Substitute Bank (or, failing such agreement, a purchase price in the amount of the 46 outstanding principal amount of its Loans and accrued interest thereon to the date of payment) plus any amount (other than principal and interest) then due to it or accrued for its account hereunder, assign all its rights and obligations under this Agreement and the Notes, (including its Commitment and its Loans) to the Substitute Bank, and the Substitute Bank shall assume such rights and obligations, whereupon the Substitute Bank shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment equal to the Commitment so assigned and assumed. (b) Notwithstanding the provisions of subsection (a) above, if an Affected Bank shall have outstanding Money Market Loans at the time it is required to assign its rights and obligations under this Agreement and any Note or Notes to a Substitute Bank, such Affected Bank shall not be obligated to so assign its rights with respect to such Money Market Loans prior to the maturity date thereof and shall not be obligated to deliver its Note or Notes (if any) to the Substitute Bank until it shall have received a new Note or Notes from the Borrower to evidence such Money Market Loans. ARTICLE IX Miscellaneous SECTION 9.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower, any Swingline Lender or the Agent, at its address or telex or telecopy number set forth on the signature pages hereof, (y) in the case of any Bank, at its address or telex or telecopy number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address or telex or telecopy number as such party may hereafter specify for the purpose by notice to the Agent and the Borrower; provided that notices, requests and other communications to the Borrower shall not be communicated by telex. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when delivered at the address or received at the telecopy number specified in this Section; provided that notices to the Agent under Article II or Article VIII shall not be effective until received. SECTION 9.02. No Waivers. No failure or delay by the Agent or any Bank in exercising any right, power or privilege hereunder or under any Loan shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses of the Agent, including reasonable fees and disbursements of special counsel for the Agent, in connection with the preparation of this 47 Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Agent and each Bank, including fees and disbursements of counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. (b) The Borrower agrees to indemnify each Bank and hold each Bank harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by any Bank (or by the Agent in connection with its actions as Agent hereunder) in connection with any investigative, administrative or judicial proceeding (whether or not such Bank shall be designated a party thereto) relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that no Bank shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction. SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to its Loans which are greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to the Loans of such other Bank, the Bank receiving such proportionately greater payment shall purchase such participation in the Loans held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Loans held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Loans. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Loan acquired pursuant to the foregoing arrangements may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or the Loans may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Agent or a Swingline Lender are affected thereby, by the Agent or such Swingline Lender, as the case may be); provided that: (a) no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Committed Loan or Swingline Loan or any fees hereunder, (iii) except as expressly provided in Section 2.19, postpone the date fixed for any payment of principal of or interest on any Committed Loan or Swingline Loan or any 48 fees hereunder or for any termination of any Commitment, (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement, or (v) amend, waive or modify the provisions of this Section 9.05; and (b) no such amendment or waiver shall, unless signed by each affected Bank, (i) reduce the principal of or rate of interest on any Money Market Loan, or (ii) postpone the date fixed for any payment of principal of or interest on any Money Market Loan. SECTION 9.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrower and the Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 9.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement and subject to the provisions of Section 9.06(e), be entitled to the benefits of Article VIII with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part of all (but, in the case of a partial assignment, not less than a part representing a Commitment of $10,000,000), of its rights and obligations under this Agreement and the Notes (if any), and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit F hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Agent and each Swingline Lender (which consents shall not be unreasonably withheld) and the Borrower; provided that (i) such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Money Market Loans or, in the case of a Bank that is a 49 Swingline Lender, its Swingline Commitment and Swingline Loans and (ii) unless the Borrower otherwise consents, the transferor Bank shall not assign any of its rights and obligations under this Agreement while the Other Credit Agreement remains in effect without assigning the same percentage of its rights and obligations under the Other Credit Agreement, except that this clause (ii) shall not apply to any transfer required under paragraph (d) of Section 2.19 of this Agreement. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note is issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Agent an administrative fee for processing such assignment in the amount of $2,000. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Borrower and the Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04. (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. SECTION 9.07. Collateral. Each of the Banks represents to the Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.08. Governing Law; Submission to Jurisdiction. This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such 50 proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. SECTION 9.09. Counterparts; Integration. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. SECTION 9.10. Confidentiality. Any information disclosed by the Borrower to the Agent or any of the Banks, which was either (x) so disclosed on or before the Effective Date or (y) designated proprietary or confidential at the time of receipt thereof by the Agent or such Bank, if such information is not otherwise in the public domain, shall not be disclosed by the Agent or such Bank to any other Person except (i) to its directors, officers, employees and agents, including its independent accountants and legal counsel (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential), (ii) pursuant to statutory and regulatory requirements, (iii) pursuant to any mandatory court order, subpoena or other legal process, (iv) to the Agent or any other Bank, (v) pursuant to any agreement heretofore or hereafter made between such Bank and the Borrower which permits such disclosure, (vi) in connection with the exercise of any remedy under this Agreement or the Notes or (vii) subject to an agreement containing provisions substantially the same as those of this Section, to any participant in or assignee of, or prospective participant in or assignee of, any Loan or Commitment. The provisions of this Section 9.10 shall be deemed satisfied by each Bank if and to the extent such Bank shall have used its reasonable best efforts to maintain the confidentiality of the data or information referred to above, exercising the same degree of care that such Bank would accord to its own confidential information or documents. SECTION 9.11. Restatement of Existing Credit Agreement. With effect from and including the Effective Date, the Existing Credit Agreement shall be deemed to be amended and restated in the form of this Agreement, with the effect that (a) the Commitments of the Banks shall be as set forth herein, (b) each Bank that has a commitment under the Existing Credit Agreement that is different then its Commitment hereunder shall be deemed to have continued its Commitment in the amount set forth herein and (c) each "Bank" with a commitment under the Existing Credit Agreement that is not a party hereto shall cease to be a Bank and its commitment under the Existing Credit Agreement shall be deemed terminated. By its execution hereof, each undersigned Bank that also is a party to the Existing Credit Agreement hereby waives the provisions of the Existing Credit Agreement that would require advance notice for the termination of commitments thereunder or the prepayment of loans thereunder; provided that (a) the foregoing waiver shall apply only to the termination of commitments under the Existing Credit Agreement on the Effective Date as contemplated by the preceding sentence and repayment of all loans outstanding thereunder in connection with the effectiveness of this Agreement and (b) the Borrower shall, in lieu of advance notice of any such termination 51 or prepayment, give notice thereof to the Agent (as defined in the Existing Credit Agreement) on the date of such termination or prepayment. SECTION 9.12. USA PATRIOT Act. Each Lender hereby notifies the Borrowers that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), such Lender is required to obtain, verify and record information that identifies the Borrowers, which information includes the name and address of the Borrowers and other information that will allow such Lender to identify the Borrowers in accordance with said Act. SECTION 9.13. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 52 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. THE CHUBB CORPORATION, by /s/ Douglas A. Nordstrom -------------------------------------- Name: Douglas A. Nordstrom Title: Vice President & Treasurer 15 Mountain View Road Warren, New Jersey 07059 Attention: Douglas A. Nordstrom Commitments $35,000,000 DEUTSCHE BANK AG, NEW YORK BRANCH, by /s/ Clinton M. Johnson -------------------------------------- Name: Clinton M. Johnson Title: Managing Director by /s/ John S. McGill -------------------------------------- Name: John S. McGill Title: Director Postal Fax Note 7671 Date : 6-2204 No of pages 2 To Rachel Cohen From Co./Dept. Co. Phone # Phone # Fax # 212 474-3700 Fax # 212 797-0270 $35,000,000 CITICORP USA, INC., By /s/ Maria Hackley -------------------------------------------- Name: Maria Hackley Title: Managing Director $30,000,000 THE BANK OF NEW YORK, by /s/ Scott Schaffer ----------------------------------------- Name: Scott Schaffer Title: Vice President $20,000,000 ABN AMRO BANK N.V., by /s/ Neil R. Stein -------------------------------------- Name: Neil R. Stein Title: Director by /s/ Michael DeMarco -------------------------------------- Name: Michael DeMarco Title: Assistant Vice President $20,000,000 HSBC BANK USA, by /s/ Kennath J. Johnson -------------------------------------- Name: Kennath J. Johnson Title: Senior Vice President $20,000,000 MELLON BANK, N.A., by /s/ Maria E. Totin -------------------------------------- Name: Maria E. Totin Title: Assistant Vice President $20,000,000 WACHOVIA BANK, NATIONAL ASSOCIATION., by /s/ Kimberly Shaffer -------------------------------------- Name: Kimberly Shaffer Title: Director $20,000,000 JPMORGAN CHASE BANK, by /s/ Lawrence Palumbo -------------------------------------- Name: Lawrence Palumbo Title: Vice President $15,000,000 BANK OF AMERICA, N.A., by /s/ Leslie Nannen -------------------------------------- Name: Leslie Nannen Title: Principal $15,000,000 STATE STREET BANK AND TRUST COMPANY, by /s/ Edward M. Anderson -------------------------------------- Name: Edward M. Anderson Title: Vice President $20,000,000 THE BANK OF NOVA SCOTIA, by /s/ Todd S. Meller -------------------------------------- Name: Todd S. Meller Title: Managing Director Total Commitments $250,000,000 DEUTSCHE BANK AG, NEW YORK BRANCH, as Agent, by /s/ Clinton M. Johnson -------------------------------------- Name: Clinton M. Johnson Title: Managing Director by /s/ John S. McGill -------------------------------------- Name: John S. McGill Title: Director EXHIBIT A NOTE New York, New York June [], 2004 For value received, The Chubb Corporation, a New Jersey corporation (the "Borrower"), promises to pay to the order of_____________________________ (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Amended and Restated Credit Agreement referred to below on the last day of the Interest Period relating to such Loan. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Amended and Restated Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Deutsche Bank AG, 31 West 52nd Street, New York, NY 10019. All Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, prior to any transfer hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding shall be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Amended and Restated Credit Agreement. This note is one of the Notes referred to in the Amended and Restated Short-Term Credit Agreement dated as of June 23, 2004, among the Borrower, the banks listed on the signature pages thereof, Deutsche Bank AG and Citigroup Global Markets Inc., as Joint Lead Arrangers and Joint Book Runners, Deutsche Bank AG, as Administrative Agent and Citicorp USA, Inc., as Syndication Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. THE CHUBB CORPORATION, by ______________________________________ Note (Cont'd) LOANS AND PAYMENTS OF PRINCIPAL
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2 EXHIBIT B Form of Money Market Quote Request [Date] To: Deutsche Bank AG (the "Agent") From: The Chubb Corporation Re: Amended and Restated Short-Term Credit Agreement (the "Credit Agreement") dated as of June 23, 2004, among the Borrower, the Banks listed on the signature pages thereof, Deutsche Bank AG and Citigroup Global Markets Inc., as Joint Lead Arrangers and Joint Book Runners, Deutsche Bank AG, as Administrative Agent and Citicorp USA, Inc., as Syndication Agent We hereby give notice pursuant to Section 2.03 of the Credit Agreement that we request Money Market Quotes for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________
Principal Amount(l) Currency(2) Interest Period(3) $
Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Terms used herein have the meanings assigned to them in the Credit Agreement. THE CHUBB CORPORATION, by ______________________________________ Name: Title: - ------------------- (1) Amount must be $10,000,000 or a larger multiple of $1,000,000 (2) Dollars or an Alternative Currency (3) Not less than one month (LIBOR Auction) or not less than 7 days (Absolute Rate Auction), subject to the provisions of the definition of Interest Period. EXHIBIT C Form of Invitation for Money Market Quotes To: [Name of Bank] Re: Invitation for Money Market Quotes to The Chubb Corporation (the "Borrower") Pursuant to Section 2.03 of the Amended and Restated Short-Term Credit Agreement dated as of June 23, 2004, among the Borrower, the Banks parties thereto and the undersigned, as Agent, we are pleased on behalf of the Borrower to invite you to submit Money Market Quotes to the Borrower for the following proposed Money Market Borrowing(s): Date of Borrowing:________________________
Principal Amount Currency Interest Period - ---------------- -------- --------------- $
Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Please respond to this invitation by no later than [2:00 P.M.] [9:00 A.M.] (New York City time) on [date]. DEUTSCHE BANK AG, by ______________________________________ Authorized Officer EXHIBIT D Form of Money Market Quote DEUTSCHE BANK AG, as Administrative Agent 31 West 52nd Street New York, NY 10019 Attention: Re: Money Market Quote to The Chubb Corporation (the "Borrower") In response to your invitation on behalf of the Borrower dated_______, 20_, we hereby make the following Money Market Quote on the following terms: 1. Quoting Bank: _________________________________________ 2. Person to contact at Quoting Bank: _____________ 3. Date of Borrowing: __________________(1) 4. Currency: ___________________________(2) - ------------------- (1) As specified in the related invitation. (2) Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Bids must be made for $1,000,000 or a larger multiple of $1,000,000 and must be expressed in Dollars. 5. We hereby offer to make Money Market Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates:
Money Market Principal Amount(2) Interest Period(3) [Margin(4)] [Absolute Rate(5)] $ $
[Provided, that the aggregate principal amount of Money Market Loans for which the above offers may be accepted shall not exceed $_______](2) We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Amended and Restated Short-Term Credit Agreement dated as of June 23, 2004, among the Borrower, the Banks listed on the signature pages thereof and yourselves, as Agent, irrevocably obligates us to make the Money Market Loan(s) for which any offer(s) are accepted, in whole or in part. Very truly yours, [NAME OF BANK] Dated:__________________ By:_________________________________________ Authorized Officer - ------------------- (3) Not less than one month or not less than seven days, as specified in the related invitation. No more than five bids are permitted for each Interest Period. (4) Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS". (5) Specify rate of interest per annum (to the nearest 1/10,000th of 1%). 2 EXHIBIT E-l OPINION OF COUNSEL FOR THE BORROWER [Effective Date] To the Banks and the Agent Referred to Below c/o Deutsche Bank AG, as Administrative Agent 31 West 52nd Street New York, NY 10019 Re: Amended and Restated Short Term Credit Agreement (the "Credit Agreement"), dated as of June 23, 2004, among the Borrower, the banks listed on the signature pages thereof, Deutsche Bank Securities Inc. and Citigroup Global Markets Inc., as Arrangers, Deutsche Bank AG New York Branch and Citicorp USA, Inc. as Swingline Lenders, Deutsche Bank AG New York Branch, as Administrative Agent and Citicorp USA, Inc., as Syndication Agent Ladies and Gentlemen: I am providing you with this opinion solely in my capacity as Assistant Vice President and Associate Counsel of The Chubb Corporation (the "Borrower"), and not in any individual or other capacity, in connection with the execution, delivery and performance of the Credit Agreement by the Borrower. I have examined and relied upon originals or copies of corporate documents and records of the Borrower, certificates of public officials and officers of the Borrower and such other documents and instruments as I have deemed necessary or appropriate for purposes of rendering the opinions expressed below. In addition, I have made such other investigations of law and inquiries of officers of the Borrower as I have deemed necessary or appropriate. I have assumed, without verifying, the authenticity of all documents submitted to me as originals and the conformity to authentic original documents of all documents submitted to me as certified, conformed or photostatic copies and the authenticity of the originals of such documents. As to matters material to my opinions, I have relied upon representations of the Borrower, including those set forth in the Credit Agreement. Based upon the foregoing, it is my opinion that the execution, delivery and performance by the Borrower of the Credit Agreement and the Notes (i) are within the Borrower's corporate powers, (ii) have been duly authorized by the requisite corporate action, and (iii) do not contravene the certificate of incorporation or by-laws of the Borrower. I am a member of the bar of the State of New Jersey. I express no opinion with respect to any matters governed by any law other than the corporate laws of the State of New Jersey. The foregoing opinions are rendered to you solely in connection with the matter described in the initial paragraph of this letter. The opinions expressed herein may not be relied upon by you for any other purpose or relied upon by or furnished to any other person without my prior written consent. The foregoing opinions speak only as of the date hereof and I undertake no obligation to update the matters discussed herein. Very truly yours, W. Andrew Macan Assistant Vice President and Associate Counsel 2 EXHIBIT E-2 [Letterhead of] CRAVATH, SWAINE & MOORE LLP [NEW YORK Office] June 23, 2004 The Chubb Corporation Amended and Restated Short-Term Credit Agreement Dated as of June 23, 2004 Ladies and Gentlemen: We have acted as special counsel for the Administrative Agent under and as defined in the Amended and Restated Short-Term Credit Agreement dated as of June 23, 2004 (the "Credit Agreement"), among The Chubb Corporation (the "Borrower"), the banks parties thereto (the "Banks"), Deutsche Bank Securities Inc. and Citigroup Global Markets Inc., as Arrangers, Deutsche Bank AG New York Branch and Citicorp USA, Inc. as Swingline Lenders, Deutsche Bank AG New York Branch, as Administrative Agent and Citicorp USA, Inc., as Syndication Agent. In that connection, we have examined originals, or copies certified or otherwise identified to our satisfaction, of such documents, corporate records and other instruments as we have deemed necessary or appropriate for purposes of this opinion. For purposes of giving the opinions set forth herein, we have assumed without independent investigation that (i) the Credit Agreement has been duly authorized, exercised and delivered by all parties thereto, including the Borrower, and (ii) the execution, delivery and performance by the Borrower of the Credit Agreement are within its powers and do not contravene or constitute a default under its organizational documents or any agreement, judgment, injunction, order, decree or other instrument binding upon it or any of its assets. Based on the foregoing and subject to the qualifications hereinafter set forth, we are of opinion that: 1. Based solely on a Certificate of Good Standing from the Secretary of State of the State of New Jersey, the Borrower is a corporation validly existing under the laws of the State of New Jersey. 2. The Credit Agreement constitutes a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other similar laws relating to or affecting creditors' rights generally from time to time in effect and to general principles of equity (including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law. With respect to the foregoing opinion, (i) insofar as provisions contained in the Credit Agreement provide for indemnification, the enforceability thereof may be limited by public policy considerations, (ii) the availability of a decree for specific performance or an injunction is subject to the discretion of the court requested to issue any such decree or injunction and (iii) we express no opinion as to the effect (if any) of any law of any jurisdiction (other than the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. We express no opinion as to Section 9.13 of the Credit Agreement insofar as such Section relates to the subject matter jurisdiction of the United States District Court for the Southern District of New York to adjudicate any controversy related to the Credit Agreement or provides for the waiver of an inconvenient forum. 3. The execution and delivery by the Borrower of the Credit Agreement and the performance of its obligations thereunder do not violate any applicable law, rule or regulation of the United States of America or the State of New York. We are members of the Bar of the State of New York and the foregoing opinion is limited to the law of the State of New York and the Federal laws of the United States of America. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon for any other purpose or relied upon by any other person without our prior written consent. Very truly yours, To the Banks and the Administrative Agent referred to above c/o Deutsche Bank AG, as Administrative Agent, 31 West 52nd Street New York, NY 10019 2 EXHIBIT F ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of , 20___ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), THE CHUBB CORPORATION (the "Borrower") and DEUTSCHE BANK AG, as Administrative Agent (the "Agent"). WITNESSETH WHEREAS this Assignment and Assumption Agreement (the "Agreement") relates to the Amended and Restated Short-Term Credit Agreement dated as of June 23, 2004, among the Borrower, the Assignor, the other Banks party thereto, as Banks, Deutsche Bank AG and Citigroup Global Markets Inc., as Joint Lead Arrangers and Joint Book Runners, Deutsche Bank AG, as Administrative Agent and Citicorp USA, Inc., as Syndication Agent (the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans to the Borrower in an aggregate principal amount at any time outstanding not to exceed $_____________; WHEREAS, Committed Loans made to the Borrower by the Assignor under the Credit Agreement in the aggregate principal amount of $___________are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $ (the "Assigned Amount"), together with a corresponding portion of its outstanding Committed Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Committed Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, the Borrower and the Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds an amount equal to $ (9). It is understood that facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. SECTION 4. Consent of the Borrower and the Agent. This Agreement is conditioned upon the consent of the Borrower and the Agent pursuant to Section 9.06(c) of the Credit Agreement. The execution of this Agreement by the Borrower and the Agent is evidence of this consent. Pursuant to Section 9.06(c) the Borrower agrees, if requested, to execute and deliver a Note payable to the order of the Assignee to evidence the assignment and assumption provided for herein. SECTION 5. Nonreliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Borrower, or the validity and enforceability of the obligations of the Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. - ------------------- (9) Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. 2 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR], by ______________________________________ Name: Title: [ASSIGNEE], by ______________________________________ Name: Title: THE CHUBB CORPORATION, by ______________________________________ Name: Title: DEUTSCHE BANK AG, by ______________________________________ Name: Title: 3 EX-31.1 5 y99136exv31w1.txt CERTIFICATION Exhibit 31.1 CERTIFICATION I, John D. Finnegan, certify that: 1. I have reviewed this quarterly report on Form 10-Q of The Chubb Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c)disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 6, 2004 /s/ John D. Finnegan - ---------------------------------------------- John D. Finnegan Chairman, President and Chief Executive Officer EX-31.2 6 y99136exv31w2.txt CERTIFICATION Exhibit 31.2 CERTIFICATION I, Michael O'Reilly, certify that: 1. I have reviewed this quarterly report on Form 10-Q of The Chubb Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c)disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 6, 2004 /s/ Michael O'Reilly - ----------------------------------------- Michael O'Reilly Vice Chairman and Chief Financial Officer EX-32.1 7 y99136exv32w1.txt CERTIFICATION Exhibit 32.1 CERTIFICATION OF PERIODIC REPORT I, John D. Finnegan, Chairman, President and Chief Executive Officer of The Chubb Corporation (the "Corporation"), certify, pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Quarterly Report on Form 10-Q of the Corporation for the quarterly period ended June 30, 2004 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. Dated: August 6, 2004 /s/ John D. Finnegan - ---------------------------------------------- John D. Finnegan Chairman, President and Chief Executive Officer EX-32.2 8 y99136exv32w2.txt CERTIFICATION Exhibit 32.2 CERTIFICATION OF PERIODIC REPORT I, Michael O'Reilly, Vice Chairman and Chief Financial Officer of The Chubb Corporation (the "Corporation"), certify, pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Quarterly Report on Form 10-Q of the Corporation for the quarterly period ended June 30, 2004 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. Dated: August 6, 2004 /s/ Michael O'Reilly - ----------------------------------------- Michael O'Reilly Vice Chairman and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----