Exhibit 10.1

 

CONSENT AND FIRST AMENDMENT TO CREDIT AGREEMENT

 

THIS CONSENT AND FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of May 14, 2015
(this “Amendment”), amends the Credit Agreement, dated as of May 15, 2014 (the
“Credit Agreement”), among BLUE CAPITAL GLOBAL REINSURANCE FUND LIMITED (the
“Company”), MONTPELIER RE HOLDINGS LTD. (the “Guarantor”) and BARCLAYS BANK PLC
(the “Lender”).  Terms defined in the Credit Agreement are, unless otherwise
defined herein or the context otherwise requires, used herein as defined
therein.

 

WHEREAS, the Company and the Guarantor have informed the Lender that pursuant to
the Agreement and Plan of Merger dated as of March 31, 2015, among the
Guarantor, Endurance Specialty Holdings Ltd., a Bermuda exempted limited
liability company (the “Parent”), and Millhill Holdings Ltd., a Bermuda exempted
limited liability company and a direct, wholly owned subsidiary of the Parent
(“Merger Sub”), Guarantor intends to merge with and into Merger Sub, with Merger
Sub surviving such merger as a wholly owned subsidiary of the Parent (the
“Merger”).

 

WHEREAS, the parties hereto desire to amend the Credit Agreement to, among other
things, extend the commitment termination thereof on the terms set forth herein.

 

NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties hereto agree as follows:

 

1.                                  AMENDMENTS.  Subject to the effectiveness
hereof pursuant to Section 4, the Credit Agreement is hereby amended as follows:

 

1.1                               The definition of “Commitment Termination
Date,” in Section 1.01 is amended and restated in its entirety to read as
follows:

 

“Commitment Termination Date” means the earlier of (a) May 12, 2016 and (b) the
date of termination of all of the Commitment Amount pursuant to Section 2.08 or
Section 7.01.

 

1.2                               The following definitions are added to
Section 1.01 in proper alphabetical order:

 

“Anti-Corruption Laws” is defined in Section 3.20.

 

“Anti-Terrorism Laws” is defined in Section 3.19.

 

1.3                               The following Sections 3.19 and 3.20 are added
to the end of Article III:

 

Section 3.19                             Anti-Money Laundering and
Anti-Terrorism Finance Laws.  The Company and each of its Subsidiaries is in
compliance, in all material respects, with all applicable anti-money laundering
laws and anti-terrorism finance laws including the Bank Secrecy Act and the
PATRIOT Act (the “Anti-Terrorism Laws”).

 

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Section 3.20                             Anti-Corruption Laws.  No part of the
proceeds of the Loans shall be used, directly or indirectly: (a) to offer or
give anything of value to any official or employee of any foreign government
department or agency or instrumentality or government-owned entity, to any
foreign political party or party official or political candidate or to any
official or employee of a public international organization, or to anyone else
acting in an official capacity (collectively, “Foreign Official”), in order to
obtain, retain or direct business by (i) influencing any act or decision of such
Foreign Official in his official capacity, (ii) inducing such Foreign Official
to do or omit to do any act in violation of the lawful duty of such Foreign
Official, (iii) securing any improper advantage or (iv) inducing such Foreign
Official to use his influence with a foreign government or instrumentality to
affect or influence any act or decision of such government or instrumentality;
(b) to cause the Lender to violate the U.S. Foreign Corrupt Practices Act of
1977 or the UK Bribery Act 2010; or (c) to cause the Lender to violate any other
anti-corruption law applicable to the Lender (all laws referred to in clauses
(b) and (c) being “Anti-Corruption Laws”).

 

1.4                               The following Section 6.14 is added to the end
of Article VI:

 

Section 6.14                             Anti-Money Laundering and
Anti-Terrorism Finance Laws; Foreign Corrupt Practices Act.  The Company shall
not, and shall not permit any Subsidiary to, (a) engage in or conspire to engage
in any transaction that evades or avoids, or has the purpose of evading or
avoiding, or otherwise violates any Anti-Terrorism Law or Anti-Corruption Law,
(b) cause or permit any of the funds that are used to repay the Obligations to
be derived from any unlawful activity with the result that the Lender or the
Company would be in violation of any applicable Law or (c) use any part of the
proceeds of the Loans, directly or indirectly, for any conduct that would cause
the representations and warranties in Sections 3.19 and 3.20 to be untrue as if
made on the date any such conduct occurs.

 

2.                                  WAIVER AND CONSENT.

 

(a)                                 The Lender (i) consents to the Merger and
agrees that the Merger shall not constitute a Change of Control and (ii) waives
any Event of Default under Section 7.01(n) of the Credit Agreement that would
occur solely as a result of the Merger, in each case, provided that the Merger
Conditions shall have been satisfied or waived in accordance with Section 9.02
of the Credit Agreement prior to or substantially concurrently with the
consummation of the Merger.

 

(b)                                 The Lender (i) consents to the making of the
Special Dividend (as defined in the Merger Agreement), (ii) waives any Event of
Default under Section 7.01(d) of the Credit Agreement and any breach of any of
the Sections referred to therein that would occur solely as a result of the
Special Dividend and (iii) waives any breach of Section

 

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6.09 of the Credit Agreement and any Event of Default under Section 7.01(e) of
the Credit Agreement that would occur solely as a result of the Special
Dividend, in each case, provided that the Merger Conditions shall have been
satisfied or waived in accordance with Section 9.02 not later than the Business
Day next following the making of the Special Dividend.

 

(c)                                  The Lender waives (i) any provision of
Section 6.05 of the Credit Agreement that would prevent the Merger and (ii) any
Event of Default under Section 7.01(d) of the Credit Agreement that would occur
solely as a result of the Merger, in each case, provided that the Merger
Conditions shall have been satisfied or waived in accordance with Section 9.02
of the Credit Agreement prior to or substantially concurrently with the
consummation of the Merger.

 

3.                                  ADDITIONAL AMENDMENTS TO THE CREDIT
AGREEMENT.  Effective as of the Merger Conditions Effective Date (as defined
below), the Credit Agreement is hereby amended in its entirety to read as set
forth on Exhibit A hereto (such amendment, the “Additional Amendment”).

 

4.                                  CONDITIONS PRECEDENT.  This Amendment shall
become effective on the date when each of the conditions precedent set forth in
this Section 4 shall have been satisfied or waived in accordance with
Section 9.02 of the Credit Agreement (such date, the “First Amendment Effective
Date”).

 

4.1                               Receipt of Documents.  The Lender shall have
received a fully executed original copy of this Amendment.

 

4.2                               Certificates.  The Lender shall have received
such customary certificates of resolutions or other action, incumbency
certificates and/or other certificates of Responsible Officers of each Loan
Party (for the avoidance of doubt, excluding the Parent and Merger Sub) as the
Lender may require evidencing the identity, authority and capacity of each
Responsible Officer thereof authorized to act as a Responsible Officer in
connection with this Amendment and the other Loan Documents.

 

4.3                               Corporate Documents.  The Lender shall have
received such other documents and certificates (including Organizational
Documents and good standing certificates) as the Lender may reasonably request
relating to the organization, existence and good standing of each Loan Party
(for the avoidance of doubt, excluding the Parent and Merger Sub) and any other
legal matters relating to each such Loan Party, the Loan Documents or the
transactions contemplated thereby.

 

4.4                               Opinion of Counsel to Company.  The Lender
shall have received an opinion of Cravath, Swaine & Moore LLP, New York counsel
to the Company, addressed to the Lender and dated the First Amendment Effective
Date (and each Loan Party hereby instructs such counsel to deliver such opinion
to the Lender).

 

4.5                               Opinion of Bermuda Counsel to Company.  The
Lender shall have received an opinion of Appleby (Bermuda) Limited, Bermuda
counsel to the Loan Parties, addressed to the

 

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Lender and dated the First Amendment Effective Date (and each Loan Party hereby
instructs such counsel to deliver such opinion to the Lender).

 

4.6                               Compliance with Warranties, No Default, etc. 
Both before and after giving effect to this Amendment, the following statements
by each Loan Party shall be true and correct (and each Loan Party, by its
execution of this Amendment, hereby represents and warrants to the Lender that
such statements are true and correct as at such times):

 

(a)                                 the representations and warranties of the
Loan Parties set forth in the Credit Agreement and in any other Loan Document
are true and correct in all material respects (or, in the case of any such
representation or warranty already qualified by materiality, in all respects) on
and as of the date hereof (or, in the case of any such representation or
warranty expressly stated to have been made as of a specific date, as of such
specific date); and

 

(b)                                 no Default has occurred and is continuing or
exists on the date hereof.

 

4.7                               Fees and Expenses.  The Lender shall have
received:

 

(a)                                 an upfront fee in an amount equal to
$30,000; and

 

(b)                                 payment of all other fees, costs and
expenses (including legal fees and expenses) agreed to be paid by it to the
Lender in connection herewith to the extent due (and, in the case of expenses
(including legal fees and expenses), to the extent that statements for such
expenses shall have been delivered to the Company prior to the date of the
effectiveness hereof).

 

5.                                  CONDITIONS TO EFFECTIVENESS OF THE
ADDITIONAL AMENDMENTS.  The Additional Amendments shall become effective on the
date that each of the following conditions precedent (such conditions precedent,
the “Merger Conditions”) is satisfied or waived in accordance with Section 9.02
of the Credit Agreement (such date, the “Merger Conditions Effective Date”):

 

5.1                               Consummation of the Merger.  The Merger shall
have been consummated and all conditions precedent to the consummation of the
Merger shall have been satisfied or waived, in each case pursuant to and on the
terms set forth in the Merger Agreement, and the Lender shall have received a
certificate signed by a Responsible Officer of the Company, dated as of the
Merger Conditions Effective Date, certifying that the condition precedent
specified in this Section 5.1 has been satisfied.

 

5.2                               Receipt of Documents  The Lender shall have
received each of the following, each in form and substance reasonably
satisfactory to the Lender:

 

(a)                                 counterparts of a supplement to the Credit
Agreement pursuant to which Parent becomes a party to the Credit Agreement,
executed by Parent and the Lender;

 

(b)                                 such customary certificates of resolutions
or other action, incumbency certificates and/or other certificates of
Responsible Officers of the Parent as the Lender

 

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may require evidencing the identity, authority and capacity of each Responsible
Officer thereof authorized to act as a Responsible Officer in connection with
the Loan Documents;

 

(c)                                  such other documents and certificates
(including Organizational Documents and good standing certificates) as the
Lender may reasonably request relating to the organization, existence and good
standing of the Parent and any other legal matters relating the Parent, the Loan
Documents or the transactions contemplated thereby;

 

(d)                                 Process Agent Letter.  A letter from an
entity reasonably acceptable to the Lender setting forth its consent to serve as
agent for service of process for the Parent in relation to any proceedings
before any United States court in connection with any of the Loan Documents;

 

(e)                                  an opinion of Skadden, Arps, Slate,
Meagher & Flom LLP, New York counsel to the Parent, addressed to the Lender and
dated the Merger Conditions Effective Date; and

 

(f)                                   an opinion of ASW (or such other counsel
as reasonably acceptable to the Lender), Bermuda counsel to the Parent,
addressed to the Lender and dated the Merger Conditions Effective Date.

 

5.3                               Know your Customer.  Parent shall have
provided the documentation and other information to the Lender as it reasonably
determines are required by bank regulatory authorities under applicable
“know-your-customer” and anti-money laundering laws, including the PATRIOT Act,
at least five Business Days prior to the Merger Conditions Effective Date, to
the extent requested at least 10 Business Days prior to the Merger Conditions
Effective Date.

 

5.4                               Pro Forma Compliance.  There will not exist
(pro forma for the satisfaction of the Merger Conditions and the effectiveness
of the Additional Amendments) any “event of default” under any Material
Indebtedness (as defined below) of Parent or its Subsidiaries, and the
Administrative Agent shall have received a certificate signed by a Responsible
Officer of Parent, on behalf of the Company, dated as of the Merger Conditions
Effective Date, certifying that the condition precedent specified in this
paragraph has been satisfied.  For purposes of this Section 5.4, “Material
Indebtedness” shall mean (a) with respect to the Company, indebtedness in an
aggregate principal amount in excess of $25,000,000 and (b) with respect to the
Parent, indebtedness in an aggregate principal amount in excess of $50,000,000.

 

5.5                               First Amendment Effectiveness.  The First
Amendment Effective Date shall have occurred.

 

6.                                  RELEASE OF MONTPELIER RE HOLDINGS LTD.  For
the avoidance of doubt, the Lender confirms that on the Merger Conditions
Effective Date, upon the satisfaction of the Merger Conditions, Montpelier Re
Holdings Ltd. shall be automatically released from the Credit Agreement
(including the Guaranty).  The Lender will, at the Company’s expense, execute
and deliver such documents as the Company may reasonably request to evidence the
release of Montpelier Re Holdings Ltd. from its obligations under the Credit
Agreement.

 

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7.                                  REPRESENTATIONS AND WARRANTIES.  To induce
the Lender to consent to this Amendment, each Loan Party hereby represents and
warrants to the Lender as follows:

 

7.1                               Authorization.  The execution, delivery and
performance of this Amendment by such Loan Party (a) are within the corporate
(or the equivalent company) authority of such Loan Party, (b) have been duly
authorized by all necessary corporate (or the equivalent company) proceedings,
(c) do not and will not conflict with or result in any breach or contravention
of any provision of law, statute, rule or regulation to which such Loan Party is
subject or any judgment, order, writ, injunction, license or permit applicable
to such Loan Party and (d) do not conflict with any provision of the
Organizational Documents of, or any agreement or other instrument binding upon,
such Loan Party.

 

7.2                               Government Approval, Regulation, etc.  The
execution, delivery and performance of this Amendment by such Loan Party do not
require the approval or consent of, or filing with, any governmental agency or
authority other than those already obtained.

 

7.3                               Validity, etc.  This Amendment constitutes the
legal, valid and binding obligation of such Loan Party enforceable in accordance
with its terms.

 

8.                                  MISCELLANEOUS.

 

8.1                               Continuing Effectiveness, etc.  This Amendment
shall be deemed to be an amendment to the Credit Agreement, and the Credit
Agreement, as amended hereby, shall remain in full force and effect and is
hereby ratified, approved and confirmed in each and every respect.

 

8.2                               Counterparts.  This Amendment may be executed
in counterparts (and by different parties hereto in different counterparts),
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract.  Delivery of an executed counterpart of a
signature page of this Amendment by facsimile or in electronic (i.e., “pdf” or
“tif”) format shall be effective as delivery of a manually executed counterpart
of this Amendment.

 

8.3                               Incorporation of Credit Agreement Provisions. 
The provisions of Section 9.07 (Severability) and Section 9.10 (Waiver of Jury
Trial) of the Credit Agreement are incorporated by reference as if fully set
forth herein, mutatis mutandis.

 

8.4                               Headings.  The various headings of this
Amendment are inserted for convenience only and shall not affect the meaning or
interpretation of this Amendment or any provisions hereof.

 

8.5                               Governing Law.  THIS AMENDMENT SHALL BE DEEMED
TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK.

 

[Signatures begin on next page]

 

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IN WITNESS WHEREOF, this Amendment has been duly executed and delivered as of
the day and year first above written.

 

 

 

BLUE CAPITAL GLOBAL REINSURANCE

 

FUND LIMITED

 

 

 

 

 

By

/s/ WILLIAM POLLETT

 

 

Name: William Pollett

 

 

Title: President, Chief Executive Officer and

 

 

Director of Blue Capital Management Ltd,

 

 

investment manager of Blue Capital Global

 

 

Reinsurance Fund Limited

 

 

 

 

 

MONTPELIER RE HOLDINGS LTD.

 

 

 

 

 

By

/s/ MICHAEL S. PAQUETTE

 

 

Name: Michael S. Paquette

 

 

Title: Executive Vice President and Chief

 

 

Executive Officer

 

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LENDER:

 

 

 

BARCLAYS BANK PLC, as Lender

 

 

 

 

 

 

 

By

/s/ DAN BROOME

 

 

Name: Dan Broome

 

 

Title: Director

 

 

 

 

 

Executed in New York

 

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CREDIT AGREEMENT

 

dated as of

 

May 15, 2014

 

among

 

BLUE CAPITAL GLOBAL REINSURANCE FUND LIMITED,

 

as the Company,

 

ENDURANCE SPECIALTY HOLDINGS LTD.,

 

as the Guarantor

 

and

 

BARCLAYS BANK PLC,
as the Lender

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

 

ARTICLE I.

 

 

DEFINITIONS

 

 

1

 

 

 

 

Section 1.01

Defined Terms

1

Section 1.02

Terms Generally

12

Section 1.03

Changes in GAAP

13

 

 

 

 

ARTICLE II.

 

 

LOANS

 

 

13

 

 

 

 

Section 2.01

Loan Commitment

13

Section 2.02

Loans

13

Section 2.03

Loan Requests

14

Section 2.04

Interest Elections

14

Section 2.05

Prepayments

15

Section 2.06

Termination or Reduction of Commitment

15

Section 2.07

Repayment of Loans

16

Section 2.08

Interest

16

Section 2.09

Evidence of Debt; Maintenance of Records

16

Section 2.10

Fees

16

Section 2.11

Payments Generally

17

Section 2.12

Compensation for Losses

17

Section 2.13

Taxes

18

Section 2.14

Increased Costs

19

Section 2.15

Inability to Determine Rates

20

Section 2.16

Illegality

20

Section 2.17

Mitigation Obligations; Designation of a Different Lending Office

21

 

 

 

 

ARTICLE III.

 

 

REPRESENTATIONS AND WARRANTIES

 

 

21

 

 

 

 

Section 3.01

Corporate Authority

21

Section 3.02

Governmental Approvals

22

Section 3.03

Financial Statements

22

Section 3.04

No Material Adverse Changes, etc.

22

 

i

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TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

Section 3.05

Franchises, Patents, Copyrights, etc.

23

Section 3.06

Litigation

23

Section 3.07

No Materially Adverse Contracts, etc.

23

Section 3.08

Compliance with Other Instruments, Laws, etc.

23

Section 3.09

Tax Status

23

Section 3.10

No Event of Default

24

Section 3.11

Investment Company Acts

24

Section 3.12

Use of Proceeds

24

Section 3.13

Subsidiaries, etc.

24

Section 3.14

Disclosure

24

Section 3.15

Foreign Assets Control Regulations, Etc.

24

Section 3.16

Investment Guidelines

25

Section 3.17

Representations as to Foreign Jurisdiction Matters

25

Section 3.18

ERISA

26

Section 3.19

Anti-Money Laundering and Anti-Terrorism Finance Laws

26

Section 3.20

Anti-Corruption Laws

26

Section 3.21

Incorporation of Parent Credit Agreement

26

 

 

 

 

ARTICLE IV.

 

 

CONDITIONS

 

 

26

 

 

 

 

Section 4.01

Closing Date

26

Section 4.02

Conditions to All Loans

28

 

 

 

 

ARTICLE V.

 

 

AFFIRMATIVE COVENANTS

 

 

28

 

 

 

 

Section 5.01

Punctual Payment

28

Section 5.02

Maintenance of Office

28

Section 5.03

Records and Accounts

29

Section 5.04

Financial Statements, Certificates and Information

29

Section 5.05

Notices

30

Section 5.06

Legal Existence; Maintenance of Properties

30

Section 5.07

Taxes

31

 

ii

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TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

Section 5.08

Inspection of Properties and Books, etc.

31

Section 5.09

Compliance with Laws, Contracts, Licenses, and Permits

31

Section 5.10

Use of Proceeds

31

Section 5.11

Further Assurances

31

Section 5.12

Incorporation of Parent Credit Agreement

32

 

 

 

 

ARTICLE VI.

 

 

NEGATIVE COVENANTS

 

 

32

 

 

 

 

Section 6.01

Business Activities

32

Section 6.02

Fiscal Year

32

Section 6.03

Transactions with Affiliates

32

Section 6.04

Disposition of Assets

32

Section 6.05

Mergers, Consolidations and Sales

32

Section 6.06

Debt

33

Section 6.07

Liens

33

Section 6.08

Sanctions

33

Section 6.09

Financial Covenants

33

Section 6.10

Restricted Payments

33

Section 6.11

Investment Guidelines

34

Section 6.12

Material Agreements

34

Section 6.13

Subsidiaries

34

Section 6.14

Anti-Money Laundering and Anti-Terrorism Finance Laws; Foreign Corrupt Practices
Act

34

Section 6.15

Incorporation of Parent Credit Agreement

34

 

 

 

 

ARTICLE VII.

 

 

EVENTS OF DEFAULT; ACCELERATION

 

 

34

 

 

 

 

Section 7.01

Events of Default and Acceleration

34

Section 7.02

Application of Payments

36

 

 

 

 

ARTICLE VIII.

 

 

GUARANTY

 

 

37

 

 

 

 

Section 8.01

Guaranty of the Obligations

37

 

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TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

Section 8.02

Payment by Guarantor

37

Section 8.03

Liability of Guarantors Absolute

37

Section 8.04

Waivers by Guarantor

39

Section 8.05

Guarantor’s Rights of Subrogation, Contribution, Etc.

39

Section 8.06

Subordination of Other Obligations

40

Section 8.07

Continuing Guaranty

40

Section 8.08

Authority of Guarantors or the Company

40

Section 8.09

Financial Condition of the Company

40

Section 8.10

Bankruptcy, Etc.

41

 

 

 

 

ARTICLE IX.

 

 

MISCELLANEOUS

 

 

41

 

 

 

 

Section 9.01

Notices

41

Section 9.02

Waivers; Amendments

43

Section 9.03

Expenses; Indemnity; Etc.

43

Section 9.04

Successors and Assigns

44

Section 9.05

Survival

45

Section 9.06

Counterparts; Integration; Effectiveness; Electronic Execution

45

Section 9.07

Severability

45

Section 9.08

Right of Setoff

46

Section 9.09

Governing Law; Jurisdiction; Etc.

46

Section 9.10

WAIVER OF JURY TRIAL

47

Section 9.11

Headings

48

Section 9.12

Confidentiality

48

Section 9.13

PATRIOT Act

48

Section 9.14

Interest Rate Limitation

49

Section 9.15

Payments Set Aside

49

Section 9.16

No Advisory or Fiduciary Responsibility

49

Section 9.17

Judgment Currency

50

 

 

 

SCHEDULES

 

 

 

 

SCHEDULE 3.06

-

 

Litigation

 

SCHEDULE 6.12

-

 

Material Agreements

 

 

iv

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TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

 

SCHEDULE 9.01

-

 

Information for Notices

 

 

 

 

 

 

EXHIBITS

 

 

 

 

 

 

 

 

 

EXHIBIT A

-

 

Loan Request

 

EXHIBIT B

-

 

Interest Election Request

 

EXHIBIT C

-

 

Prepayment Notice

 

EXHIBIT D

-

 

Compliance Certificate

 

 

v

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CREDIT AGREEMENT dated as of May 15, 2014, among BLUE CAPITAL GLOBAL REINSURANCE
FUND LIMITED (the “Company”), ENDURANCE SPECIALTY HOLDINGS LTD. (the
“Guarantor”) and BARCLAYS BANK PLC (the “Lender”).

 

The Company has requested that the Lender provide a revolving credit facility
and the Lender is willing to do so on the terms and conditions set forth
herein.  In consideration of the mutual covenants and agreements herein
contained, the parties hereto agree as follows:

 

ARTICLE I.

 

DEFINITIONS

 

Section 1.01                             Defined Terms.  As used in this
Agreement, the following terms have the meanings specified below:

 

“Affiliate” means, as to any Person, another Person that directly, or indirectly
through one or more intermediaries, Controls or is Controlled by or is under
common Control with the Person specified.  “Control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ability to exercise
voting power, by contract or otherwise.  “Controlling” and “Controlled” have
meanings correlative thereto.

 

“Agreement” means this Credit Agreement.

 

“Agreement Currency” has the meaning assigned to such term in Section 9.17.

 

“Anti-Corruption Laws” is defined in Section 3.20.

 

“Anti-Terrorism Laws” is defined in Section 3.19.

 

“Authority” means any of the United Nations, the European Union, Her Majesty’s
Treasury, any European Union member state, the Office of Foreign Assets Control
of the U.S. Treasury Department (“OFAC”) or any other United States government
entity, the State Secretariat for Economic Affairs (“SECO”) of Switzerland, the
Hong Kong Monetary Authority (“HKMA”), the Monetary Authority of Singapore
(“MAS”) and/or any other body notified in writing by the Lender to the Company
from time to time.

 

“Availability Period” means the period from and including the Closing Date to
the Commitment Termination Date.

 

“Balance Sheet Date” means December 31, 2013.

 

“Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy”.

 

“Barclays Bank” means Barclays Bank PLC.

 

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“Base Rate” means, for any day, a rate per annum equal to the higher of (a) the
Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in
effect on such day plus 0.50%.  Any change in the Base Rate due to a change in
the Prime Rate or the Federal Funds Effective Rate shall be effective from and
including the effective date of such change in the Prime Rate or the Federal
Funds Effective Rate, respectively.

 

“BCRH” means Blue Capital Reinsurance Holdings Ltd., a Bermuda exempted limited
liability company.

 

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks are authorized to close under the Laws of, or are in fact
closed in, Bermuda, New York City, London, England or the state where the
Lender’s Office with respect to Obligations denominated in Dollars is located.

 

“Capital Lease Obligation” means, as to any Person, the obligations of such
Person to pay rent or other amounts under any lease which is required to be
classified and accounted for as a capital lease on a balance sheet of such
Person in accordance with GAAP.  For purposes of this Agreement, the amount of
such Capital Lease Obligation shall be the capitalized amount thereof determined
in accordance with GAAP.

 

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

 

“Change of Control” means (a) any sale, lease, exchange or other transfer (in
one transaction or a series of related transactions) of all, or substantially
all, of the assets of the Company; (b) a “Change of Control” as defined in the
Parent Credit Agreement; (c) the Investment Manager ceases to manage the
investments of the Company and the Master Fund or to own 100% of the Voting
Stock of the Blue Water Master Fund Ltd.; (d) the Reinsurance Manager ceases to
manage the operational and underwriting activities of the Master Fund or the
Reinsurer; or (e) the Guarantor ceases to be, directly or indirectly, the
“beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of 100% of
the Voting Stock of the Investment Manager, the Reinsurance Manager or the
Reinsurer (other than a result of a transaction permitted by Section 8.02 of the
Parent Credit Agreement).

 

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

 

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any Governmental Authority; provided that, notwithstanding anything herein to
the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act
and all requests, rules, guidelines or directives thereunder or issued in
connection therewith and (ii) all requests, rules, guidelines or directives
promulgated by the Bank for International Settlements, the Basel Committee on
Banking Supervision (or any successor or similar authority) or the United States
or foreign regulatory authorities, in each case, pursuant to Basel III, shall in
each case be deemed to be a “Change in Law”, regardless of the date enacted,
adopted or issued.

 

“Closing Date” means the first date on which all the conditions precedent in
Section 4.01 are satisfied or waived in accordance with Section 9.02.

 

“Code” means the Internal Revenue Code of 1986.

 

“Commitment” means the Lender’s obligation make Loans, in an aggregate stated
amount at any one time outstanding not to exceed the Commitment Amount.

 

“Commitment Amount” means $20,000,000.

 

“Commitment Fee” has the meaning assigned to such term in Section 2.10(a).

 

“Commitment Termination Date” means the earlier of (a) May 12, 2016 and (b) the
date of termination of all of the Commitment Amount pursuant to Section 2.08 or
Section 7.01.

 

“Company” is defined in the Preamble.

 

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

 

“Contingent Liability” means any agreement, undertaking or arrangement by which
any Person (outside the ordinary course of business) guarantees, endorses, acts
as surety for or otherwise becomes or is contingently liable for (by direct or
indirect agreement, contingent or otherwise, to provide funds for payment by, to
supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a
creditor against loss) the Debt, obligation or other liability of any other
Person (other than by endorsements of instruments in the course of collection),
or for the payment of dividends or other distribution upon the shares of any
other Person or undertakes or agrees (contingently or otherwise) to purchase,
repurchase, or otherwise acquire or become responsible for any Debt, obligation
or liability or any security therefor, or to provide funds for the payment or
discharge thereof (whether in the form of loans, advances, stock purchases,
capital contributions or otherwise) or to maintain solvency, assets, level of
income, or other financial condition of any other Person, or to make payment or
transfer property to any other Person other than for fair value received;
provided, however, that obligations of the Insurance Subsidiaries under Primary
Policies or Reinsurance Agreements which are entered into in the ordinary course
of business (including security posted by each of the Insurance Subsidiaries in
the ordinary course of its business to secure obligations thereunder) shall not
be deemed to be Contingent Liabilities of such Insurance Subsidiary for the
purposes of this Agreement.  The amount of any Person’s obligation under any
Contingent Liability shall (subject to any limitation set forth therein) be
deemed to be the lesser of (i) the outstanding principal amount (or maximum

 

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permitted principal amount, if larger) of the Debt, obligation or other
liability guaranteed or supported thereby and (ii) the maximum stated amount so
guaranteed or supported.

 

“Debt” means, with respect to any Person, at any date, without duplication,
(a) all obligations of such Person for borrowed money or in respect of loans or
advances; (b) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments; (c) all obligations in respect of
(i) letters of credit which have been drawn but not reimbursed by the Person for
whose account such letter of credit was issued within the later of (x) three
(3) Business Days and (y) the applicable cure period and (ii) bankers’
acceptances issued for the account of such Person; (d) all Capital Lease
Obligations of such Person; (e) all Hedging Obligations of such Person; (f) to
the extent required to be included as liabilities in accordance with GAAP, all
obligations of such Person to pay the deferred purchase price of property or
services; (g) Debt of such Person secured by a Lien on property owned or being
purchased by such Person (including Debt arising under conditional sales or
other title retention agreements) whether or not such Debt is limited in
recourse; (h) any Debt of another Person secured by a Lien on any assets of such
first Person, whether or not such Debt is assumed by such first Person (it being
understood that if such Person has not assumed or otherwise become personally
liable for any such Debt, the amount of the Debt of such Person in connection
therewith shall be limited to the lesser of the face amount of such Debt and the
fair market value of all property of such Person securing such Debt); (i) any
Debt of a partnership or in which such Person is a general partner unless such
debt is nonrecourse to such Person; and (j) all Contingent Liabilities of such
Person in connection with the foregoing; provided that, notwithstanding anything
to contrary contained herein, Debt shall not include (x) unsecured current
liabilities incurred in the ordinary course of business and paid within ninety
(90) days after the due date (unless contested diligently in good faith by
appropriate proceedings and reserved against in conformity with GAAP) other than
liabilities that are for money borrowed or are evidenced by bonds, debentures,
notes or other similar instruments or (y) any obligations of such Person under
any Reinsurance Agreement or any Primary Policy.

 

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

 

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

 

“Default Rate” means an interest rate equal to (a) the applicable interest rate
plus (b) 2% per annum, to the fullest extent permitted by applicable Laws.

 

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

 

“Engagement Letter” means the Engagement Letter dated March 26, 2014 between the
Company and the Lender.

 

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“ERISA” means the Employee Retirement Income Security Act of 1974 and the
regulations promulgated and rulings issued thereunder.

 

“Event of Default” has the meaning assigned to such term in Article VII.

 

“Excluded Taxes” means, with respect to any payment made by or on account of any
obligation of the Company under any Loan Document, any of the following Taxes
imposed on or with respect to the Lender or required to be withheld or deducted
from a payment to the Lender: (a) income or franchise Taxes imposed on (or
measured by) net income by the United States, or by the jurisdiction under the
Laws of which the Lender is organized or in which its principal office is
located or in which its applicable lending office is located, (b) any branch
profits Taxes imposed by the United States or any similar Taxes imposed by a
jurisdiction described in clause (a) of this definition, (c) Taxes attributable
to the Lender’s failure to deliver to the Company such properly completed and
executed documentation as will permit payments under any Loan Document to be
made without withholding or at a reduced rate of withholding, (d) U.S. Federal
Taxes, other than income or franchise Taxes imposed on (or measured by) net
income by the United States or (e) any withholding Taxes imposed pursuant to a
law in effect on the date on which (i) such Lender (other than the Lender on the
Closing Date) becomes a party hereto (other than pursuant to an assignment
request by the Company under Section 2.17) or (ii) such Lender changes its
lending office, except in each case to the extent that (x), pursuant to
Section 2.13, amounts with respect to such Taxes were payable either to such
Lender’s assignor immediately before such Lender became a party hereto or to
such Lender immediately before it changed its lending office or (y) any such
taxes arise in connection with or as a result of a change in jurisdiction of
organization of a Loan Party.

 

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day; provided that (a) if such day is
not a Business Day, the Federal Funds Effective Rate for such day shall be such
rate on such transactions on the next preceding Business Day as so published on
the next succeeding Business Day and (b) if no such rate is so published on such
next succeeding Business Day, the Federal Funds Effective Rate for such day
shall be the average rate (rounded upwards, if necessary, to the next 1/100 of
1%) charged to Barclays Bank on such day on such transactions as determined by
the Lender.

 

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

 

“Fees” means the Commitment Fee and any other fees referred to in
Section 2.10(b) or the Engagement Letter.

 

“Foreign Benefit Plan” means any employee benefit plan, pension plan or welfare
plan not subject to ERISA which is maintained or contributed to for the benefit
of the employees of Company or any of its Subsidiaries which, under applicable
Law, (a) is required to be funded through a trust or similar funding vehicle or
(b) creates or could result in a Lien on any property of the Company or any of
its Subsidiaries.

 

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“Freely Transferable” means securities which are freely transferable and traded
in established and recognized markets and as to which there are readily
available price quotations.

 

“GAAP” means principles that are (i) consistent with the principles promulgated
or adopted by the Financial Accounting Standards Board and its predecessors, as
in effect from time to time, and (ii) consistently applied with past financial
statements of the Company adopting the same principles, provided that in each
case referred to in this definition of “GAAP” a certified public accountant
would, insofar as the use of such accounting principles is pertinent, be in a
position to deliver an unqualified opinion (other than a qualification regarding
changes in GAAP) as to financial statements in which such principles have been
properly applied.

 

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

 

“Guaranty” means the guaranty of the Guarantor set forth in Article VIII.

 

“Hedging Obligations” means, with respect to any Person, the liability of such
Person under any futures contract or options contract, interest rate swap
agreements or interest rate collar agreements and all other agreements or
arrangements (other than Retrocession Agreements) designed to protect such
Person against fluctuations in interest rates or currency exchange rates.  Debt
under a Hedging Obligation shall be the amount of such Person’s net obligation,
if any, under each hedging agreement (determined on the mark-to-market value for
such agreement based upon a readily available quotation provided by a recognized
dealer in such type of hedging agreement).

 

“Indemnified Liabilities” has the meaning assigned to such term in
Section 9.03(b).

 

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or
with respect to any payment made by or on account of any obligation of the
Company under any Loan Document and (b) to the extent not otherwise described in
clause (a), Other Taxes.

 

“Indemnitee” has the meaning assigned to such term in Section 9.03(b).

 

“Information” has the meaning assigned to such term in Section 9.12.

 

“Insurance Subsidiary” means each Subsidiary of the Company which is licensed by
any Governmental Authority to engage in the insurance business as a risk bearing
entity.

 

“Interest Election Request” means a request by the Company to convert or
continue a Loan in accordance with Section 2.04, which, when in writing, shall
be substantially in the form of Exhibit B (or such other form as the Lender may
approve).

 

“Interest Payment Date” means the last day of each Interest Period therefor and,
in the case of any Interest Period of more than three months’ duration, each day
prior to the last

 

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day of such Interest Period that occurs at three-month intervals after the first
day of such Interest Period, and the Commitment Termination Date.

 

“Interest Period” means, as to any Loan, the period commencing on the date of
such Loan and ending on the numerically corresponding day in the calendar month
that is one, two, three or six months thereafter, as specified in the applicable
Loan Request or Interest Election Request; provided that (i) if any Interest
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day, (ii) any Interest Period
that commences on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period and (iii) no Interest Period shall extend beyond
the Commitment Termination Date.  For purposes hereof, the date of a Loan
initially shall be the date on which such Loan is made and thereafter shall be
the effective date of the most recent conversion or continuation of such Loan.

 

“Interpolated Screen Rate” means the rate (rounded upwards to four decimal
places) which results from interpolating on a linear basis between:

 

(a)                             the Screen Rate for the longest period (for
which that Screen Rate is available) which is less than the relevant Interest
Period for such Loan; and

 

(b)                             the Screen Rate for the shortest period (for
which that Screen Rate is available) which exceeds the relevant Interest Period
for such Loan,

 

each as of the Specified time on the Quotation Day.

 

“Investment Manager” means Blue Capital Management Ltd., a Bermuda investment
management company.

 

“Judgment Currency” has the meaning assigned to such term in Section 9.17.

 

“Laws” means, collectively, all international, foreign, Federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority.

 

“Lender” is defined in the Preamble.

 

“Lender’s Office” means, with respect to any currency, the Lender’s address and,
as appropriate, account as set forth on Schedule 9.01 with respect to such
currency, or such other address or account with respect to such currency as the
Lender may from time to time notify to the Company.

 

“LIBOR Rate” means, in relation to any Loan:

 

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(a)                                 the Screen Rate; or

 

(b)                                 (if no Screen Rate is available for the
Interest Period) the applicable Interpolated Screen Rate for such Loan,

 

as of, in the case of clauses (a) and (b) above, the Specified Time on the
Quotation Day for a period comparable to the relevant Interest Period for such
Loan.  Each calculation by the Lender of the LIBOR Rate shall be conclusive and
binding for all purposes, absent manifest error.

 

“Lien” means, when used with respect to any Person, any interest in any real or
personal property, asset or other right held, owned or being purchased or
acquired by such Person for its own use, consumption or enjoyment which secures
payment or performance of any obligation and shall include any mortgage, lien,
pledge, encumbrance, charge, retained title of a conditional vendor or lessor,
or other security agreement, mortgage, deed of trust, chattel mortgage,
assignment, pledge, retention of title, financing or similar statement or
notice, or other encumbrance arising as a matter of law, judicial process or
otherwise.

 

“Loans” means the loans made by the Lender to the Company pursuant to this
Agreement.

 

“Loan Documents” means, (i) with respect to the Company, collectively, this
Agreement, the Engagement Letter and any other agreement or document delivered
in connection herewith and (ii) with respect to the Guarantor, collectively,
this Agreement, the Guarantor’s supplement to this Agreement and any other
agreement or document delivered in connection herewith to which the Guarantor is
a party. For the avoidance of doubt, each time “Loan Documents” is referenced in
the context of the Guarantor, such reference is only to the documents listed in
clause (ii) above.

 

“Loan Parties” means, collectively, the Company and the Guarantor.

 

“Loan Request” means a request for a Loan, which, when in writing, shall be
substantially in the form of Exhibit A (or, in the case of any such request, in
such other form as the Lender may approve).

 

“Master Fund” means Blue Capital Global Reinsurance SA-1, a segregated account
of Blue Water Master Fund Ltd.

 

“Material Adverse Effect” means, with respect to any event or occurrence of
whatever nature (including any adverse determination in any litigation,
arbitration or governmental investigation or proceeding) which results in:

 

(a)                                 a material adverse effect on the business,
properties, condition (financial or otherwise), assets, operations or income of
(i) the Company, (ii) the Master Fund, (iii) the Investment Manager, (iv) the
Reinsurance Manager, (v) the Reinsurer or (vi) the Company and its Subsidiaries,
taken as a whole;

 

(b)                                 a material adverse effect on the ability of
a Loan Party to perform any of its payment Obligations under any of the Loan
Documents to which it is a party; or

 

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(c)                                  any impairment of the validity, binding
effect or enforceability of this Agreement or any of the other Loan Documents or
any impairment of the rights, remedies or benefits available to the Lender under
any Loan Document.

 

In determining whether any individual event has a Material Adverse Effect,
notwithstanding that such event does not of itself have such effect, a Material
Adverse Effect shall be deemed to have occurred if the cumulative effect of such
event and all other then existing events results in a Material Adverse Effect. 
For the avoidance of doubt, a default under Section 6.05 and subsequent cure
thereof will not be a Material Adverse Effect.

 

“Material Party” means each of (a) the Company, (b) any Insurance Subsidiary,
(c) the Master Fund, (d) the Investment Manager, (e) the Reinsurance Manager,
(f) the Reinsurer and (g) any Subsidiary of the Company which is not an
Insurance Subsidiary whose (i) total assets are 15% or more of the total assets
of the Company and its consolidated Subsidiaries (including such Subsidiary) in
each case as set forth on the most recent fiscal year end balance sheet of such
Subsidiary and the Company and its consolidated Subsidiaries, respectively, and
computed in accordance with GAAP, and (ii) total revenues are 15% or more of the
total revenues of the Company and its consolidated Subsidiaries (including such
Subsidiary), in each case as set forth on the most recent fiscal year-end income
statements of such Subsidiary and the Company and its consolidated Subsidiaries,
respectively, and computed in accordance with GAAP.

 

“Maximum Rate” has the meaning assigned to such term in Section 9.14.

 

“NAV” means, as of any date, the net asset value of a Person as calculated in
accordance with such Person’s Organizational Documents.

 

“Obligations” means all indebtedness, obligations and liabilities of the Company
to the Lender existing on the date of this Agreement or arising thereafter
(including interest and fees that accrue after the commencement by or against
the Company of any proceeding under Debtor Relief Laws naming such Person as the
debtor in such proceeding, regardless of whether such interest and fees are
allowed claims in such proceeding), direct or indirect, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
or incurred under this Agreement or any of the other Loan Documents.

 

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

 

“Other Connection Taxes” means, with respect to the Lender, Taxes imposed as a
result of a present or former connection between the Lender and the jurisdiction
imposing such

 

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Tax (other than connections arising from the Lender having executed, delivered,
become a party to, performed its obligations under, received payments under,
received or perfected a security interest under, engaged in any other
transaction pursuant to or enforced any Loan Document, or sold or assigned an
interest in any Loan or Loan Document).

 

“Other Taxes” means all present or future stamp, court or documentary,
intangible, recording, filing or similar Taxes that arise from any payment made
under, from the execution, delivery, performance, enforcement or registration
of, from the receipt or perfection of a security interest under, or otherwise
with respect to, any Loan Document, except any such Taxes that are Other
Connection Taxes imposed with respect to an assignment.

 

“Outstandings” means, as of any date, the aggregate outstanding principal amount
of the Loans after giving effect to any borrowings and prepayments or repayments
of Loans occurring on such date.

 

“Parent Credit Agreement” means that certain credit agreement, dated as of
April 19, 2012, among the Guarantor, various designated subsidiary borrowers
thereunder from time to time, various lending institutions party thereto from
time to time and JPMorgan Chase Bank, N.A., as administrative agent, as in
effect on May 13, 2015 and (a) without giving effect to any waiver, amendment,
supplement or other modification thereto after such date unless consented to in
writing by the Lender and (b) without regard to whether such credit agreement
remains in effect after such date.

 

“PATRIOT Act” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed
into law October 26, 2001)).

 

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

 

“Prepayment Notice” means a notice by the Company to prepay Loans, which, when
in writing, shall be substantially in the form of Exhibit C (or such other form
as the Lender may approve).

 

“Primary Policies” means any insurance or reinsurance policies issued by any
Insurance Subsidiary.

 

“Prime Rate” means the United States Prime Lending Rate as published in the New
York edition of the Wall Street Journal from time to time.  Barclays Bank shall
not be required to notify the Company of any changes to the Prime Rate.  Any
change in the Prime Rate shall take effect at the opening of business on the day
specified in the public announcement of such change.

 

“Process Agent” means National Registered Agents, Inc.

 

“Prospectus” means the prospectus of the Company dated November 30, 2012, as
supplemented and in effect on the Closing Date.

 

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“Quotation Day” means, in relation to any period for which an interest rate is
to be determined, two Business Days before the first day of that period.

 

“Regulation D” means Regulation D of the Federal Reserve Board, as in effect
from time to time and all official rulings and interpretations thereunder or
thereof.

 

“Regulation U” means Regulation U of the Federal Reserve Board, as in effect
from time to time and all official rulings and interpretations thereunder or
thereof.

 

“Regulation X” means Regulation X of the Federal Reserve Board, as in effect
from time to time and all official rulings and interpretations thereunder or
thereof.

 

“Reinsurance Agreement” means any arrangement whereby any Insurance Subsidiary,
as reinsurer, agrees to indemnify any other insurance or reinsurance company
against all or a portion of the insurance or reinsurance risks underwritten by
such insurance or reinsurance company under any insurance or reinsurance policy.

 

“Reinsurance Manager” means Blue Capital Insurance Managers Ltd., an exempted
Bermuda company licensed as an insurance agent and insurance manager.

 

“Reinsurer” means Blue Water Re Ltd., an exempted Bermuda reinsurance company.

 

“Related Parties” means, as to any Person, such Person’s Affiliates and the
partners, directors, officers, employees, agents, attorneys-in-fact, trustees,
custodians, administrators, managers, advisors and representatives of such
Person and of such Person’s Affiliates.

 

“Responsible Officer” means (a) the president, chief executive officer, chief
financial officer, chief operating officer, treasurer, controller or any
vice-president of the applicable Loan Party, (b) solely for purposes of the
delivery of incumbency certificates and certified Organizational Documents and
resolutions pursuant to Section 4.01, any vice president, secretary or assistant
secretary of the applicable Loan Party and (c) solely for purposes of requests
for Loans, interest elections, prepayment notices and notices for Commitment
terminations or reductions given pursuant to Article II, any other officer or
employee of the Company so designated from time to time by one of the foregoing
officers in a notice to the Lender (together with evidence of the authority and
capacity of each such Person to so act in form and substance satisfactory to the
Lender).

 

“Retrocession Agreements” means any agreement, treaty, certificate or other
arrangement whereby any Insurance Subsidiary cedes to another insurer all or
part of such Insurance Subsidiary’s liability under a policy or policies of
insurance insured or reinsured by such Insurance Subsidiary.

 

“SDN List” means the Specially Designated Nationals List maintained by the
Office of Foreign Assets Control of the US Department of the Treasury or any
similar list maintained by any Authority.

 

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“Screen Rate” means the London interbank offered rate administered by ICE
Benchmark Administration Limited (or any other person which takes over the
administration of that rate) for the relevant period displayed on page LIBOR01
or LIBOR02 of the Reuters Screen (or any replacement Reuters page which displays
that rate), provided, if such page or service ceases to be available, the Lender
shall specify another page or service displaying the relevant rate.

 

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

 

“Specified Parent Affirmative Covenants” means Section 7.01(d)(x),
Section 7.02(ii), Section 7.05 (with respect to the first sentence of
Section 7.05 only) and Section 7.10 of the Parent Credit Agreement, in each
case, as incorporated by reference herein pursuant to Section 6.15.

 

“Specified Time” means 11:00 am (London time).

 

“Subsidiary” of a Person means a corporation, partnership, limited liability
company, association or joint venture or other business entity of which a
majority of the of shares of securities or other interests having ordinary
voting power for the election of directors or other governing body (other than
securities or interests having such power only by reason of the happening of a
contingency) are at the time owned or the management of which is controlled,
directly, or indirectly, through one or more intermediaries, by such Person. 
Unless otherwise specified, all references herein to a “Subsidiary” or to
“Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Company. Each
of BCRH and the Company, and, each of their Subsidiaries, will in any event be
deemed to be a Subsidiary of the Guarantor.

 

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

 

“Trade Date” has the meaning assigned to such term in Section 9.04(b) (i).

 

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

 

“Voting Stock” means, with respect to any Person, such Person’s Capital Stock
having the right to vote for the election of directors of such Person under
ordinary circumstances.

 

Section 1.02                             Terms Generally.  (a) The definitions
of terms herein shall apply equally to the singular and plural forms of the
terms defined.  Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.  The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation”.  The word “will” shall be construed to have the same meaning and
effect as the word “shall”.  Unless the context requires otherwise (i) any
definition of or reference to any agreement, instrument or other document
(including any Organizational Documents) herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (ii) any reference
herein to any Person shall be

 

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construed to include such Person’s successors and assigns, (iii) the words
“herein”, “hereof” and “hereunder”, and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (iv) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, this Agreement, (v) any reference to any Law herein shall
include all statutory and regulatory provisions consolidating, amending,
replacing or interpreting such law and any reference to any Law herein shall,
unless otherwise specified, refer to such Law as amended, modified or
supplemented from time to time and (vi) the words “asset” and “property” shall
be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.

 

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

 

(c)                                  With respect to the provisions of the
Parent Credit Agreement that are incorporated by reference herein, unless the
context otherwise clearly requires, (i) each reference in such provisions to
(A) the term “the Parent Borrower” shall be deemed to be a reference to the term
“Guarantor” as defined in this Agreement and (B) the term “Credit Document”
shall be deemed to be a reference to the term “Loan Document” as defined in this
Agreement, (ii) as used in such provisions, the terms “Administrative Agent” and
“Required Lenders” shall mean “Lender” as defined in this Agreement and
“Agreement”, “Default”, “Event of Default” and “Lender” and shall have the
meanings assigned to such terms in this Agreement, (iii) each reference in such
provisions to any specific provision of the Parent Credit Agreement shall be
deemed to refer to (A) if such provision is incorporated by reference herein,
such provision as so incorporated by reference herein and (B) otherwise, the
corresponding provision of this Agreement, if any, and (iv) other than in the
case of the terms specified in clauses (i) and (ii) above, each other
capitalized term used in such provisions shall have the meaning assigned thereto
in the Parent Credit Agreement.

 

Section 1.03                             Changes in GAAP.  If the Company
notifies the Lender that the Company requests an amendment to any provision
hereof to eliminate the effect of any change occurring after the date hereof in
GAAP or in the application thereof on the operation of such provision,
regardless of whether any such notice is given before or after such change in
GAAP or in the application thereof, then such provision shall be interpreted on
the basis of GAAP as in effect and applied immediately before such change shall
have become effective until such notice shall have been withdrawn or such
provision amended in accordance herewith.

 

ARTICLE II.

 

LOANS.

 

Section 2.01                             Loan Commitment.  Subject to the terms
and conditions set forth herein, the Lender agrees to make Loans to the Company
from time to time on any Business Day during the Availability Period in an
aggregate principal amount not to exceed at any time outstanding the Commitment;
provided that, after giving effect to any Loan, the Outstandings

 

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shall not exceed the Commitment Amount.  Within the foregoing limits and subject
to the terms and conditions set forth herein, the Company may borrow, prepay and
reborrow Loans.

 

Section 2.02                             Loans.

 

(a)                                 Lending Office.  The Lender at its option
may make any Loan by causing any domestic or foreign branch or Affiliate of the
Lender to make such Loan; provided that any exercise of such option shall not
affect the obligation of the Company to repay such Loan in accordance with the
terms of this Agreement.

 

(b)                                 Minimum Amounts.  Each Loan shall be in an
aggregate amount of $1,000,000 or a larger multiple of $100,000.

 

Section 2.03                             Loan Requests.

 

(a)                                 Notice by Company.  Each Loan shall be made
upon the Company’s irrevocable notice to the Lender.  Each such notice shall be
in the form of a written Loan Request, appropriately completed and signed by a
Responsible Officer of the Company, or may be given by telephone to the Lender
(if immediately confirmed by such a written Loan Request consistent with such
telephonic notice) and must be received by the Lender not later than 10:00 a.m.
(New York City time), three Business Days prior to the date of the requested
Loan.

 

(b)                                 Content of Loan Requests.  Each Loan Request
pursuant to this Section shall specify the following information in compliance
with Section 2.02: (i) the aggregate amount of the requested Loan; (ii) the date
of such Loan (which shall be a Business Day); (iii) the Interest Period
therefor; and (iv) the location and number of the Company’s account to which
funds are to be disbursed.

 

(c)                                  Failure to Elect.  If no Interest Period is
specified with respect to any requested Loan, the Company shall be deemed to
have selected an Interest Period of one month’s duration.

 

Section 2.04                             Interest Elections.

 

(a)                                 Elections by Company for Loans.  Each Loan
initially shall have the Interest Period specified in such Loan Request. 
Thereafter, the Company may continue such Loan as Loan with the same or a
different Interest Period therefor, all as provided in this Section.  The
Company may elect different Interest Period with respect to different portions
of the affected Loan, in which case the Loans comprising each such portion shall
be considered a separate Loan; provided that there shall not be more than five
Interest Periods with respect to the Loans in effect at any time.

 

(b)                                 Notice of Elections.  Each such election
pursuant to this Section shall be made upon the Company’s irrevocable notice to
the Lender.  Each such notice shall be in the form of a written Interest
Election Request, appropriately completed and signed by a Responsible Officer of
the Company, or may be given by telephone to the Lender (if immediately
confirmed in writing by delivery of such a written Interest Election Request
consistent with such telephonic

 

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notice) and must be received by the Lender not later than the time that a Loan
Request would be required under Section 2.03 if the Company were requesting a
Loan.

 

(c)                                  Content of Interest Election Requests. 
Each Interest Election Request pursuant to this Section shall specify the
following information in compliance with Section 2.02:

 

(i)                                     the Loan to which such Interest Election
Request applies and, if different options are being elected with respect to
different portions thereof, the portions thereof to be allocated to each
resulting Loan (in which case the information to be specified pursuant to
clauses (ii) and (iii) below shall be specified for each resulting Loan);

 

(ii)                                  the effective date of the election made
pursuant to such Interest Election Request, which shall be a Business Day; and

 

(iii)                               the Interest Period therefor after giving
effect to such election.

 

(d)                                 Failure to Elect.  If the Company fails to
deliver a timely and complete Interest Election Request with respect to a Loan
prior to the end of the Interest Period therefor, then, unless such Loan is
repaid as provided herein, the Company shall be deemed to have selected that
such Loan shall automatically be continued at the end of such Interest Period as
a Loan with an Interest Period of one month.

 

Section 2.05                             Prepayments.

 

(a)                                 Optional Prepayments.  The Company may, upon
notice to the Lender, at any time and from time to time prepay any Loan in whole
or in part without premium or penalty, subject to the requirements of this
Section.

 

(b)                                 Notices.  Each such notice pursuant to this
Section shall be in the form of a written Prepayment Notice, appropriately
completed and signed by a Responsible Officer of the Company, or may be given by
telephone to the Lender and must be received by the Lender not later than
10:00 a.m. (New York City time) three Business Days before the date of
prepayment.  Each Prepayment Notice shall specify (i) the prepayment date and
(ii) the principal amount of each Loan or portion thereof to be prepaid.  Each
Prepayment Notice shall be irrevocable; provided that, if a notice of prepayment
is given in connection with a conditional notice of termination of the
Commitment as contemplated by Section 2.06, then such notice of prepayment may
be revoked if such notice of termination is revoked in accordance with
Section 2.06.

 

(c)                                  Amounts.  Each partial prepayment of any
Loan shall be in an amount that would be permitted in the case of a Loan as
provided in Section 2.02.  Prepayments shall be accompanied by accrued interest
to the extent required by Section 2.08.

 

Section 2.06                             Termination or Reduction of
Commitment.  The Company may, upon notice to the Lender, terminate the unused
portion of the Commitment, or from time to time reduce the unused Commitment;
provided that (a) each such notice shall be in writing and must be received by
the Lender at least three Business Days prior to the effective date of such

 

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termination or reduction, and shall be irrevocable (provided that a notice of
termination of the Commitment may state that such notice is conditioned upon the
effectiveness of other credit facilities, in which case such notice may be
revoked by the Company (by notice to the Lender on or prior to the specified
effective date) if such condition is not satisfied), (b) any such partial
reduction shall be in an aggregate amount of $10,000,000 or a larger multiple of
$1,000,000 and (c) the Company shall not terminate or reduce the Commitment if,
after giving effect thereto and to any concurrent prepayments hereunder, the
Outstandings would exceed the Commitment Amount, Unless previously terminated,
the Commitment shall automatically terminate on the date specified in
clause (a)(i) of the definition of “Commitment Termination Date.”

 

Section 2.07                             Repayment of Loans.  The Company shall
repay to the Lender on the Commitment Termination Date the aggregate principal
amount of all Loans outstanding on such date.

 

Section 2.08                             Interest.

 

(a)                                 Interest Rates.  Subject to clause (b) of
this Section and Sections 2.15 and 2.16, each Loan shall bear interest at a rate
per annum equal to the LIBOR Rate for the Interest Period therefor plus 1.0%.

 

(b)                                 Default Interest.  If any amount payable by
the Company under this Agreement or any other Loan Document (including principal
of any Loan, interest, fees and other amount) is not paid when due, whether at
stated maturity, by acceleration or otherwise, such amount shall thereafter bear
interest at a rate per annum equal to the Default Rate.  Upon the request of the
Lender, while any Event of Default exists, the Company shall pay interest on the
principal amount of all Loans outstanding hereunder at a rate per annum equal to
the Default Rate.

 

(c)                                  Payment Dates.  Accrued interest on each
Loan shall be payable in arrears on each Interest Payment Date applicable
thereto and at such other times as may be specified herein; provided that
(i) interest accrued pursuant to clause (b) of this Section shall be payable on
demand and (ii) in the event of any repayment or prepayment of any Loan, accrued
interest on the principal amount repaid or prepaid shall be payable on the date
of such repayment or prepayment.

 

(d)                                 Interest Computation.  All interest
hereunder shall be computed on the basis of a year of 360 days, and shall be
payable for the actual number of days elapsed (including the first day but
excluding the last day).  The LIBOR Rate shall be determined by the Lender, and
such determination shall be conclusive absent manifest error.

 

Section 2.09                             Evidence of Debt; Maintenance of
Records.  The Lender shall maintain in accordance with its usual practice
records evidencing the indebtedness of the Company to the Lender resulting from
each Loan.  The entries made in the records maintained pursuant to this
Section 2.09 shall be prima facie evidence absent manifest error of the
existence and amounts of the obligations recorded therein.  Any failure of the
Lender to maintain such records or make any entry therein or any error therein
shall not in any manner affect the obligations of the Company under this
Agreement and the other Loan Documents.

 

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Section 2.10                             Fees.

 

(a)                                 Commitment Fees.  The Company agrees to pay
to the Lender a commitment fee (the “Commitment Fee”), which shall accrue at a
rate per annum equal to 0.225% per annum times the actual daily amount by which
the Commitment Amount exceeds the Outstandings, during the period from and
including the Closing Date to but excluding the Commitment Termination Date. 
Accrued Commitment Fees shall be payable in arrears on the last Business Day of
each March, June, September and December, commencing on the first such date to
occur after the date hereof, and on the Commitment Termination Date.

 

(b)                                 Fee Computation.  All fees payable under
this Section shall be computed on the basis of a year of 360 days and in each
case shall be payable for the actual number of days elapsed (including the first
day but excluding the last day).  Each determination by the Lender of a fee
hereunder shall be conclusive absent manifest error.

 

Section 2.11                             Payments Generally.

 

(a)                                 Payments by the Company.  All payments to be
made by the Company under any Loan Document shall be made without condition or
deduction for any counterclaim, defense, recoupment or setoff.  Except as
otherwise expressly provided herein, all payments by the Company shall be made
to the Lender, at the Lender’s Office in immediately available funds not later
than 11:00 a.m. (New York City time) on the date specified herein.  Without
limiting the generality of the foregoing, the Lender may require that any
payments due under this Agreement be made in the United States.  All amounts
received by the Lender after 11:00 a.m. (New York City time) shall in each case
be deemed to have been received on the next succeeding Business Day and any
applicable interest or fees shall continue to accrue.  If any payment to be made
by the Company shall fall due on a day that is not a Business Day, payment shall
be made on the next succeeding Business Day and such extension of time shall be
reflected in computing interest or fees, as the case may be; provided that, if
such next succeeding Business Day would fall after the Commitment Termination
Date, payment shall be made on the immediately preceding Business Day.

 

(b)                                 Application of Insufficient Payments. 
Subject to Section 7.02, if at any time insufficient funds are received by and
available to the Lender to pay fully all amounts of any applicable principal,
interest and fees then due hereunder, such funds shall be applied (i) first, to
pay interest and fees then due hereunder and (ii) second, to pay principal
amounts outstanding on the Loans that are then due hereunder.

 

Section 2.12                             Compensation for Losses.  Upon written
demand of the Lender from time to time, setting forth in reasonable detail the
basis for calculating such compensation, the Company shall promptly (but in any
event within ten days) after such demand compensate the Lender for and hold the
Lender harmless from any loss, cost or expense incurred by it as a result of
(a) any payment or prepayment of any Loan on a day other than the last day of
the Interest Period for such Loan (whether voluntary, mandatory, automatic, by
reason of acceleration, or otherwise); or (b) any failure by the Company (for a
reason other than the failure of the Lender to make a Loan) to prepay, borrow or
continue any Loan on the date or in the amount notified by the Company,
including, in each case, any loss or expense arising from the

 

17

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liquidation or reemployment of funds obtained by it to maintain such Loan or
from fees payable to terminate the deposits from which such funds were obtained;
provided that, for the avoidance of doubt, the Company shall not be obligated to
compensate the Lender under this Section for any loss of anticipated profits in
respect of any of the foregoing.  For purposes of calculating amounts payable by
the Company to the Lender under this Section, the Lender shall be deemed to have
funded each Loan made by it at the LIBOR Rate for such Loan by a matching
deposit or other borrowing in the London interbank eurodollar market for a
comparable amount and for a comparable period, whether or not such Loan was in
fact so funded.

 

Section 2.13                             Taxes.

 

(a)                                 Payments Free of Taxes.  Any and all
payments by or on account of any obligation of the Company under any Loan
Document shall be made free and clear of and without deduction or withholding
for any Taxes; provided that if any applicable Law (as determined in the good
faith discretion of the Lender) requires the deduction or withholding of any Tax
from any such payment by the Company, then the Company shall make such deduction
and timely pay the full amount deducted to the relevant Governmental Authority
in accordance with applicable Law and, if such Tax is an Indemnified Tax, then
the sum payable by the Company shall be increased as necessary so that after
making such deductions (including such deductions applicable to additional sums
payable under this Section) the Lender receives an amount equal to the sum it
would have received had no such deductions been made.

 

(b)                                 Payment of Other Taxes by the Company.  The
Company shall timely pay to the relevant Governmental Authority in accordance
with applicable Law, or at the option of the Lender timely reimburse the Lender
for the payment of, any Other Taxes.

 

(c)                                  Indemnification by the Company.  The
Company shall indemnify the Lender within ten days after demand therefor, for
the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or
asserted on or attributable to amounts payable under this Section) payable or
paid by the Lender and any reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes were correctly or legally imposed
or asserted by the relevant Governmental Authority.  A certificate as to the
amount of such payment or liability delivered to the Company by the Lender shall
be conclusive absent manifest error.

 

(d)                                 Evidence of Payments.  As soon as
practicable after any payment of Taxes by the Company to a Governmental
Authority pursuant to this Section, the Company shall deliver to the Lender the
original or a certified copy of a receipt issued by such Governmental Authority
evidencing such payment, a copy of the return reporting such payment or other
evidence of such payment reasonably satisfactory to the Lender.

 

(e)                                  Treatment of Certain Refunds.  If any party
determines, in its sole discretion exercised in good faith, that it has received
a refund of any Taxes as to which it has been indemnified pursuant to this
Section (including additional amounts pursuant to this Section), it shall pay to
the indemnifying party an amount equal to such refund (but only to the extent of
indemnity payments made under this Section 2.13 with respect to the Taxes giving
rise to such refund), net of all out-of-pocket expenses (including Taxes) of
such indemnified party and without interest (other than any interest paid by the
relevant Governmental Authority with

 

18

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respect to such refund).  Such indemnifying party, upon the request of such
indemnified party, shall repay to such indemnified party the amount paid over
pursuant to this clause (e) (plus any penalties, interest or other charges
imposed by the relevant Governmental Authority) in the event that such
indemnified party is required to repay such refund to such Governmental
Authority.  Notwithstanding anything in this clause (e) to the contrary, in no
event will the indemnified party be required to pay any amount to an
indemnifying party pursuant to this clause (e) the payment of which would place
the indemnified party in a less favorable net after-Tax position than the
indemnified party would have been in if the indemnification payments or
additional amounts giving rise to such refund had never been paid.  This
clause (e) shall not be construed to require any indemnified party to make
available its Tax returns (or any other information relating to its Taxes that
it deems confidential) to the indemnifying party or any other Person.

 

(f)                                   Indemnification by the Lender.  The Lender
shall indemnify the Company within 10 days after demand therefor, for any
Excluded Taxes attributable to the Lender and that are payable or paid by the
Company in connection with any Loan Document, and any reasonable expenses
arising therefrom or with respect thereto, whether or not such Taxes were
correctly or legally imposed or asserted by the relevant Governmental
Authority.  A certificate as to the amount of such payment or liability
delivered to the Lender by the Company shall be conclusive absent manifest
error.

 

Section 2.14                             Increased Costs.

 

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

 

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

 

(ii)                                  subject the Lender to any Taxes (other
than (A) Indemnified Taxes, (B) Taxes described in clauses (a) through (e) of
the definition of “Excluded Taxes” and (C) Other Connection Taxes on gross or
net income, profits or revenue (including value-added or similar Taxes)) on its
loans, loan principal, letters of credit, commitments, or other obligations, or
its deposits, reserves, other liabilities or capital attributable thereto; or

 

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

 

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

 

(b)                                 Capital Requirements.  If the Lender
determines that any Change in Law affecting the Lender, any of its applicable
lending offices or its holding company, as the case

 

19

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may be, regarding capital or liquidity requirements has or would have the effect
of reducing the rate of return on capital for the Lender or its holding company,
if any, as a consequence of this Agreement, the Commitment of the Lender or the
Loans made by the Lender, could have achieved but for such Change in Law (taking
into consideration the Lender’s or its holding company’s policies, as
applicable, with respect to capital adequacy and liquidity), then from time to
time the Company will pay to the Lender such additional amount or amounts as
will compensate the Lender or its holding company for any such reduction
suffered.

 

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

 

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

 

Section 2.15                             Inability to Determine Rates.  If prior
to the commencement of the Interest Period for any Loan:

 

(a)                                 the Lender determines (which determination
shall be conclusive absent manifest error) that adequate and reasonable means do
not exist for ascertaining the LIBOR Rate for such Interest Period; or

 

(b)                                 the Lender determines (which determination
shall be conclusive absent manifest error) that the LIBOR Rate for such Interest
Period will not adequately and fairly reflect the cost to the Lender of making
or maintaining its Loan for such Interest Period;

 

then the Lender shall give notice thereof to the Company as promptly as
practicable thereafter and, until the Lender notifies the Company that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the continuation of any Loan as, a LIBOR Loan
shall be ineffective and such Loan (unless prepaid) shall be converted to, a
Loan bearing interest at a rate per annum equal to the Base Rate and (ii) if any
Loan Request requests a LIBOR Loan, such Loan shall be made as a Loan bearing
interest at a rate per annum equal to the Base Rate.

 

Section 2.16                             Illegality.  If the Lender determines
that any Law has made it unlawful, or that any Governmental Authority has
asserted that it is unlawful, for the Lender or its applicable lending office to
make, maintain or fund Loans whose interest is determined by

 

20

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reference to the LIBOR Rate, or to determine or charge interest rates based upon
the LIBOR Rate, or any Governmental Authority has imposed material restrictions
on the authority of the Lender to purchase or sell, or to take deposits of,
Dollars in the London interbank market, then, upon notice thereof by the Lender
to the Company, any obligation of the Lender to make or continue Loans based on
the LIBOR Rate shall be suspended until the Lender notifies the Company that the
circumstances giving rise to such determination no longer exist.  Upon receipt
of such notice, the Company shall, upon demand from the Lender, prepay or, if
applicable, convert all Loans of the Lender to Loans bearing interest at a rate
per annum equal to the Base Rate (“Base Rate Loans”), either on the last day of
the Interest Period therefor, if the Lender may lawfully continue to maintain
such Loans to such day, or immediately, if the Lender may not lawfully continue
to maintain such Loans.  Upon any such prepayment or conversion, the Company
shall also pay accrued interest on the amount so prepaid or converted.  Unless
such notification shall be subsequently withdrawn, any request for a Loan (or to
continue a Loan for an additional Interest Period) shall be deemed a request for
a Base Rate Loan.

 

Section 2.17                             Mitigation Obligations; Designation of
a Different Lending Office.  If at any time (i) the Lender requires the Company
to pay additional amounts to the Lender or any Governmental Authority for the
account of the Lender pursuant to Section 2.13, (ii) the Lender requests
compensation under Section 2.14 or (iii) the Lender gives a notice pursuant to
Section 2.16, then the Lender shall, as applicable, at the request of the
Company, use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of the Lender, such designation or assignment (A) would eliminate or reduce
amounts payable pursuant to Section 2.13 or Section 2.14, as the case may be, in
the future, or eliminate the need for the notice pursuant to Section 2.16, and
(B) in each case, would not subject the Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to the Lender.  The Company
hereby agrees to pay all reasonable costs and expenses incurred by the Lender in
connection with any such designation or assignment.

 

ARTICLE III.

 

REPRESENTATIONS AND WARRANTIES

 

Each Loan Party represents and warrants to the Lender that:

 

Section 3.01                             Corporate Authority.

 

(a)                                 Incorporation; Good Standing.  The Company
(a) is a company duly organized, validly existing and in good standing under the
laws of Bermuda, (b) has all requisite corporate (or the equivalent company)
power to own its property and conduct its business as now conducted and as
presently contemplated, and (c) is in good standing as a foreign corporation (or
similar business entity) and is duly authorized to do business in each
jurisdiction where such qualification is necessary except where a failure to be
so qualified would not have a Material Adverse Effect.

 

(b)                                 Authorization.  The execution, delivery and
performance of this Agreement and the other Loan Documents and the transactions
contemplated hereby and thereby

 

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(a) are within the corporate (or the equivalent company) authority of such Loan
Party, (b) have been duly authorized by all necessary corporate (or the
equivalent company) proceedings, (c) do not and will not conflict with or result
in any breach or contravention of any provision of law, statute, rule or
regulation to which such Loan Party is subject or any judgment, order, writ,
injunction, license or permit applicable to such Loan Party and (d) do not
conflict with any provision of the Organizational Documents of, or any agreement
or other instrument binding upon, such Loan Party.

 

(c)                                  Enforceability.  The execution and delivery
of this Agreement and the other Loan Documents will result in valid and legally
binding obligations of such Loan Party enforceable against it in accordance with
the respective terms and provisions hereof and thereof, except as enforceability
is limited by bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting generally the enforcement of creditors’ rights or by
the application of equitable principles relating to enforceability (regardless
of whether considered in a proceeding in equity or at law) including, (i) the
possible unavailability of specific performance injunctive relief or any
equitable remedy and (ii) concepts of materiality, reasonableness, good faith
and fair dealings; provided that each Loan Party assumes for the purposes of
this Section 3.01(c) that this Agreement and the other Loan Documents have been
validly executed and delivered by each of the parties thereto other than such
Loan Party.

 

Section 3.02                             Governmental Approvals.  The execution,
delivery and performance by such Loan Party of this Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby do not require
the approval or consent of, or filing with, any governmental agency or authority
other than those already obtained.

 

Section 3.03                             Financial Statements.

 

(a)                                 Fiscal Year.  Each of the Company and the
Master Fund have a fiscal (or financial) year which is the twelve months ending
on December 31 of each calendar year.

 

(b)                                 Financial Statements.  There has been
furnished to the Lender (i) (x) a consolidated balance sheet of Montpelier Re
Holdings, Ltd. and its Subsidiaries as at the Balance Sheet Date, and a
consolidated statement of income of Montpelier Re Holdings, Ltd. and its
Subsidiaries for the fiscal year ended December 31, 2013, and (y) a statement of
assets and liabilities of each of the Company and the Master Fund as at the
Balance Sheet Date and a statement of operations of each of the Company and the
Master Fund for the fiscal year then ended and (ii) a consolidated balance sheet
and consolidated statement of income of the Montpelier Re Holdings, Ltd. and its
Subsidiaries as at and for the three months ended March 31, 2014.  Such
financial statements have been prepared in accordance with GAAP (subject, in the
case of the March 31, 2014 statements, to the absence of footnotes and year-end
adjustments) and fairly present the financial condition of Montpelier Re
Holdings, Ltd. and its Subsidiaries, the Company or the Master Fund, as the case
may be, as at the close of business on the date thereof and the results of
operations for the period then ended.  There are no Contingent Liabilities of
Montpelier Re Holdings, Ltd. or any of its Subsidiaries as of such date
involving material amounts, known to the officers of the Company, which were not
disclosed in such balance sheet or the notes related thereto.  There are no
Contingent Liabilities of the Company or the Master Fund, as the case may be, as
of such date involving material amounts, known to the

 

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officers of the Company, which were not disclosed in such balance sheet or the
notes related thereto.

 

Section 3.04                             No Material Adverse Changes, etc. 
Since the Balance Sheet Date there has been no event or occurrence which has had
a Material Adverse Effect.

 

Section 3.05                             Franchises, Patents, Copyrights, etc. 
The Company possesses all franchises, patents, copyrights, trademarks, trade
names, licenses and permits, and rights in respect of the foregoing, adequate
for the conduct of its business substantially as now conducted without known
conflict with any rights of others.

 

Section 3.06                             Litigation.  Except as set forth in
Schedule 3.06 hereto, there are no actions, suits, proceedings or investigations
of any kind pending or threatened against the Company or any of its Subsidiaries
or the Master Fund before any Governmental Authority, (a) that, if adversely
determined, would be expected to, either in any case or in the aggregate,
(i) have a Material Adverse Effect or (ii)(A) materially impair the right of the
Company and its Subsidiaries or the Master Fund to carry on business
substantially as now conducted by them, or (B) except for any such actions,
suits or proceedings related to claims under Primary Policies or Reinsurance
Agreements arising in the ordinary course of business, result in any substantial
liability not adequately covered by insurance, or for which adequate reserves
are not maintained on the consolidated balance sheet of the Company and its
Subsidiaries or the Master Fund, as the case may be, or (b) which question the
validity of this Agreement.

 

Section 3.07                             No Materially Adverse Contracts, etc. 
Neither the Company nor any of its Subsidiaries is subject to any Organizational
Document or other legal restriction, or any judgment, decree, order, law,
statute, rule or regulation that has or, to the knowledge of the Responsible
Officers of the Company, is expected in the future to have a Material Adverse
Effect.  Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement that has or is expected, in the judgment of the
Responsible Officers of the Company, to have any Material Adverse Effect.

 

Section 3.08                             Compliance with Other Instruments,
Laws, etc.  Neither the Company nor any of its Subsidiaries is in violation of
any provision of its Organizational Documents, or any agreement or instrument to
which it may be subject or by which it or any of its properties may be bound or
any decree, order, judgment, statute, license, rule or regulation, in any of the
foregoing cases in a manner that could result in the imposition of substantial
penalties or have a Material Adverse Effect.

 

Section 3.09                             Tax Status.  The Company and its
Subsidiaries (a) have made or filed all federal, state and foreign income and
all other tax returns, reports and declarations required by any jurisdiction to
which any of them is subject, except those which the failure to file would not
have a Material Adverse Effect, (b) have paid all taxes and other governmental
assessments and charges shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and by appropriate
proceedings or those which the failure to pay would not have a Material Adverse
Effect and (c) have set aside on their books provisions reasonably adequate for
the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply.  There are no unpaid taxes in any

 

23

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material amount claimed to be due by the taxing authority of any jurisdiction,
and none of the Responsible Officers of the Company know of any basis for any
such claim.

 

Section 3.10                             No Event of Default.  No Default has
occurred and is continuing.

 

Section 3.11                             Investment Company Acts.

 

(a)                                 Neither the Company nor any of its
Subsidiaries is an “investment company”, or an “affiliated company” or a
“principal underwriter” of an “investment company”, as such terms are defined in
the Investment Company Act of 1940.

 

(b)                                 The Company is not engaged in the
“investment business” as defined in The Investment Business Act 2003 of Bermuda
or the Investment Advisors Act of 1940.  Neither the Company nor the Master Fund
is subject to the Investment Funds Act 2006 of Bermuda.

 

(c)                                  The Company does not maintain a place of
business (for purposes of section 4(6) of the Investment Business Act 2003) in
Bermuda.

 

Section 3.12                             Use of Proceeds.

 

(a)                                 General.  The proceeds of the Loans shall be
used only for working capital requirements of the Company.

 

(b)                                 Regulations U and X.  No portion of any Loan
to be obtained shall be used, for the purpose of purchasing or carrying any
“margin security” or “margin stock” as such terms are used in Regulations U and
X.

 

Section 3.13                             Subsidiaries, etc.  As of the Closing
Date the Company does not have any Subsidiaries.

 

Section 3.14                             Disclosure.  No report, financial
statement or other written information furnished by or on behalf of such Loan
Party to the Lender in connection with the transactions contemplated hereby and
the negotiation of this Agreement or delivered hereunder or under any other Loan
Document (in each case, as modified or supplemented by other information so
furnished) contains any material misstatement of fact or omits to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.  There is no fact
known to the Company or any of its Subsidiaries as of the date hereof which has
a Material Adverse Effect, or which is reasonably likely in the future to have a
Material Adverse Effect, exclusive of effects resulting from changes in general
economic conditions, legal standards or regulatory conditions.

 

Section 3.15                             Foreign Assets Control
Regulations, Etc.  None of the requesting or borrowing of any Loan or the use of
the proceeds of any thereof will violate the Trading With the Enemy Act (50
U.S.C. Section 1 et seq.) (the “Trading With the Enemy Act”) or any of the
foreign assets control regulations of any Authority, including, the United
States Treasury Department (31 CFR, Subtitle B, Chapter V) (the “Foreign Assets
Control Regulations”) or any enabling legislation or executive order relating
thereto (which for the avoidance of doubt shall include, but shall not be
limited to (a) Executive Order 13224 of September 21, 2001 Blocking

 

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Property and Prohibiting Transactions With Persons Who Commit, Threaten to
Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001) (the “Executive Order”)
and (b) the PATRIOT Act).  The Company and each of its Subsidiaries is in
compliance in all material respects with the Trading With the Enemy Act, the
Foreign Assets Control Regulations, the Executive Order and the PATRIOT Act. 
Furthermore, neither the Company nor any of its Subsidiaries or, to the
knowledge of the Company, any director, officer of the Company or any of its
Subsidiaries (in the case of any such director or officer, acting in their
capacity as such) is a Person that (A) is subject to any U.S. sanctions
administered by OFAC, (B) is or will become a “blocked person” as described in
the Executive Order, the Trading With the Enemy Act, the Foreign Assets Control
Regulations or any SDN List or (C) engages or will engage in any dealings or
transactions, or be otherwise associated, with any such “blocked person”, (D) is
or is owned or controlled by Persons that are the target of any sanctions
administered or enforced by any Authority, (E) is or is owned or controlled by
Persons that are located, organized or resident in a country which is the
subject of sanctions by any Authority or (F) is a governmental agency, authority
or body or state-owned enterprise of any country which is the subject of
sanctions by any Authority.

 

Section 3.16                             Investment Guidelines.  Each of the
Company and the Master Fund is in compliance with their respective Investment
Guidelines as set forth in the Prospectus, as supplemented from time to time
(including any investment requirements, investment restrictions, asset coverage
requirements and concentrations limits).

 

Section 3.17                             Representations as to Foreign
Jurisdiction Matters.

 

(a)                                 The Company is subject to civil and
commercial Laws with respect to its obligations under this Agreement and the
other Loan Documents to which it is a party, and the execution, delivery and
performance by the Company of the Loan Documents constitute and will constitute
private and commercial acts and not public or governmental acts.  Neither the
Company nor any of its property has any immunity from jurisdiction of any court
or from any legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution, execution or otherwise) under the
laws of Bermuda in respect of its obligations under the Loan Documents.

 

(b)                                 The Loan Documents are in proper legal form
under the Laws of Bermuda for the enforcement thereof against the Company under
the Laws of Bermuda, and to ensure the legality, validity, enforceability or
admissibility in evidence of the Loan Documents.  It is not necessary to ensure
the legality, validity, enforceability, priority or admissibility in evidence of
the Loan Documents that the Loan Documents be filed, registered or recorded
with, or executed or notarized before, any court or other authority in the
jurisdiction in which the Company is organized and existing or that any
registration charge or stamp or similar tax be paid on or in respect of the Loan
Documents or any other document, except for (i) any such filing, registration,
recording, execution or notarization that has been made and is in full force and
effect, or is not required to be made until the Loan Documents are sought to be
enforced and (ii) any charge or tax that has been timely paid by or on behalf of
the Company.

 

(c)                                  As of the Closing Date, there is no tax,
levy, impost, duty, fee, assessment or other governmental charge, or any
deduction or withholding, imposed by any Governmental

 

25

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Authority in or of Bermuda either (i) on or by virtue of the execution or
delivery of the Loan Documents or (ii) on any payment to be made by the Company
pursuant to the Loan Documents.

 

(d)                                 The execution, delivery and performance by
the Company of the Loan Documents are, under applicable foreign exchange control
regulations of Bermuda, not subject to any notification or authorization except
(i) such as have been made or obtained or (ii) such as cannot be made or
obtained until a later date (provided that any notification or authorization
described in clause (ii) shall be made or obtained as soon as is reasonably
practicable).

 

Section 3.18                             ERISA.  Neither the Company nor any of
its Subsidiaries is subject to ERISA or maintains any Foreign Benefit Plan.

 

Section 3.19                             Anti-Money Laundering and
Anti-Terrorism Finance Laws.  The Company is in compliance, in all material
respects, with all applicable anti-money laundering laws and anti-terrorism
finance laws including the Bank Secrecy Act and the PATRIOT Act (the
“Anti-Terrorism Laws”).

 

Section 3.20                             Anti-Corruption Laws.  No part of the
proceeds of the Loans shall be used, directly or indirectly: (a) to offer or
give anything of value to any official or employee of any foreign government
department or agency or instrumentality or government-owned entity, to any
foreign political party or party official or political candidate or to any
official or employee of a public international organization, or to anyone else
acting in an official capacity (collectively, “Foreign Official”), in order to
obtain, retain or direct business by (i) influencing any act or decision of such
Foreign Official in his official capacity, (ii) inducing such Foreign Official
to do or omit to do any act in violation of the lawful duty of such Foreign
Official, (iii) securing any improper advantage or (iv) inducing such Foreign
Official to use his influence with a foreign government or instrumentality to
affect or influence any act or decision of such government or instrumentality;
(b) to cause the Lender to violate the U.S. Foreign Corrupt Practices Act of
1977 or the UK Bribery Act 2010; or (c) to cause the Lender to violate any other
anti-corruption law applicable to the Lender (all laws referred to in clauses
(b) and (c) being “Anti-Corruption Laws”).

 

Section 3.21                             Incorporation of Parent Credit
Agreement.  Sections 6.01, 6.04, 6.07, 6.09, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15,
6.16 and 6.18 of the Parent Credit are incorporated by reference herein as if
fully set forth in this Agreement.

 

ARTICLE IV.

 

CONDITIONS

 

Section 4.01                             Closing Date.  The obligation of the
Lender to make Loans hereunder is subject to the satisfaction (or waiver in
accordance with Section 9.02) of the following conditions:

 

(i)                                     Executed Counterparts of this
Agreement.  The Lender shall have executed this Agreement and received a
counterpart of this Agreement signed by each Loan Party (or written evidence
satisfactory to the Lender of a signed signature page to this Agreement that
each Loan Party has signed a counterpart of this Agreement).

 

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(ii)                                  Certificates.  The Lender shall have
received such customary certificates of resolutions or other action, incumbency
certificates and/or other certificates of Responsible Officers of each Loan
Party as the Lender may require evidencing the identity, authority and capacity
of each Responsible Officer thereof authorized to act as a Responsible Officer
in connection with the Loan Documents;

 

(iii)                               Corporate Documents.  The Lender shall have
received such other documents and certificates (including Organizational
Documents and good standing certificates) as the Lender may reasonably request
relating to the organization, existence and good standing of each Loan Party and
any other legal matters relating each Loan Party, the Loan Documents or the
transactions contemplated thereby.

 

(iv)                              Opinion of Counsel to Company.  The Lender
shall have received an opinion of Cravath, Swaine & Moore LLP, New York counsel
to the Company, addressed to the Lender and dated the Closing Date, in form and
substance reasonably satisfactory to the Lender (and each Loan Party hereby
instructs such counsel to deliver such opinion to the Lender).

 

(v)                                 Opinion of Bermuda Counsel to Company.  The
Lender shall have received an opinion of Appleby (Bermuda) Limited, Bermuda
counsel to the Loan Parties, addressed to the Lender and dated the Closing Date,
in form and substance reasonably satisfactory to the Lender (and each Loan Party
hereby instructs such counsel to deliver such opinion to the Lender).

 

(vi)                              Fees and Expenses.  The Company shall have
paid all fees, costs and expenses (including legal fees and expenses) agreed to
be paid by it to the Lender (including in the Engagement Letter) in connection
herewith to the extent due (and, in the case of expenses (including legal fees
and expenses), to the extent that statements for such expenses shall have been
delivered to the Company prior to the Closing Date).

 

(vii)                           KYC Information.  Each Loan Party shall have
provided to the Lender the documentation and other information requested by the
Lender in connection with applicable “know your customer” and
anti-money-laundering rules and regulations, including the PATRIOT Act.

 

(viii)                        Officer’s Certificate.  The Lender shall have
received a certificate, dated the Closing Date and signed by a Responsible
Officer of the Guarantor, confirming satisfaction of the conditions set forth in
this Section and compliance with the conditions set forth in clauses (ii) and
(iii) of the first sentence of Section 4.02.

 

(ix)                              Compliance Certificate.  The Lender shall have
received a duly completed Compliance Certificate as of the last day of the
fiscal quarter of the Guarantor ended March 31, 2014, signed by chief executive
officer, chief financial officer, treasurer or controller of the Guarantor.

 

(x)                                 Process Agent Letter.  A letter from the
Process Agent setting forth its consent to serve as process agent for each Loan
Party for purposes of the Loan Documents.

 

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The Lender shall notify the Loan Parties of the Closing Date, and such notice
shall be conclusive and binding.

 

Section 4.02                             Conditions to All Loans.  The
obligation of the Lender to make any Loan is additionally subject to the
satisfaction of the following conditions:

 

(i)                                     the Lender shall have received a
Borrowing Request in accordance with the requirements hereof;

 

(ii)                                  the representations and warranties of each
Loan Party set forth in this Agreement and in any other Loan Document to which
such Loan Party is a party shall be true and correct in all material respects
(or, in the case of any such representation or warranty already qualified by
materiality, in all respects) on and as of the date of such Loan (or, in the
case of any such representation or warranty expressly stated to have been made
as of a specific date, as of such specific date);

 

(iii)                               no Default shall have occurred and be
continuing or would result from such Loan or from the application of proceeds
thereof;

 

(iv)                              following such issuance, the Outstandings
shall not exceed the Commitment Amount;  and

 

(v)                                 following such issuance, the Outstandings
shall not exceed 20% of the NAV of the Company.

 

Each request for a Loan by the Company hereunder and each Loan shall be deemed
to constitute a representation and warranty by the Loan Parties on and as of the
date of the applicable Loan as to the matters specified in clauses (ii) and
(iii) above in this Section.

 

ARTICLE V.

 

AFFIRMATIVE COVENANTS

 

Until the Commitment has expired or been terminated and all Obligations have
been paid in full, each Loan Party covenants and agrees with the Lender that:

 

Section 5.01                             Punctual Payment.  The Company will
duly and punctually pay or cause to be paid principal, interest, Fees and all
other amounts provided for in this Agreement and the other Loan Documents, all
in accordance with the terms of this Agreement and such other Loan Documents.

 

Section 5.02                             Maintenance of Office.  Each Loan Party
will maintain its principal office at (a) in the case of the Company, Montpelier
House, 94 Pitts Bay Road, Hamilton, Bermuda HM HX and (b) in the case of each
other Loan Party, at the address specified for such Loan Party in its accession
agreement or, in each case, at such other place as the applicable Loan Party
shall designate upon written notice to the Lender, where notices, presentations
and demands to or upon such Loan Party in respect of the Loan Documents may be
given or made.

 

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Section 5.03                             Records and Accounts.  The Company will
(a) keep, and cause each of its Subsidiaries to keep, true and accurate records
and books of account in which full, true and correct entries will be made in
accordance with GAAP, (b) maintain adequate accounts and reserves for all taxes
(including income taxes), depreciation, depletion, obsolescence and amortization
of its properties and the properties of its Subsidiaries, contingencies, and
other reserves, and (c) engage PricewaterhouseCoopers Ltd. or other independent
certified public accountants reasonably satisfactory to the Lender as the
independent certified public accountants of the Company and its Subsidiaries and
will not permit more than thirty (30) days to elapse between the cessation of
such firm’s (or any successor firm’s) engagement as the independent certified
public accountants of the Company and its Subsidiaries and the appointment in
such capacity of a successor firm as shall be reasonably satisfactory to the
Lender.

 

Section 5.04                             Financial Statements, Certificates and
Information.  The Company will deliver to the Lender:

 

(a)                                 not later than one hundred and twenty (120)
days after the end of each fiscal year of the Company and the Master Fund, the
statement of assets and liabilities of each of the Company and the Master Fund
as at the end of such year, and the related statement of operations for such
year, each setting forth in comparative form the figures for the previous fiscal
year and all such statements to be in reasonable detail, prepared in accordance
with GAAP, and certified, without qualification;

 

(b)                                 not later than sixty (60) days after the end
of each semiannual fiscal period of the Company and the Master Fund, copies of
the unaudited statement of assets and liabilities of each of the Company and the
Master Fund as at the end of such semiannual fiscal period and the related
statement of operations for such semiannual fiscal period, all in reasonable
detail and prepared in accordance with GAAP, together with a certification by
the principal financial or accounting officer of the Company that the
information contained in such financial statements fairly presents the financial
position of each of the Company and the Master Fund on the date thereof (subject
to year-end adjustments);

 

(c)                                  Within thirty (30) days of receipt of any
audit committee report prepared by the Company’s accountants, if there are any
reportable events resulting in any discussion in the sections of such report
entitled “Errors or Irregularities”, “Illegal Acts” or “Misstatements Due to
Fraud”, the Company will provide copies of such sections to the Lender;

 

(d)                                 simultaneously with the delivery of the
financial statements referred to in subsections (a) and (b) above, a Compliance
Certificate;

 

(e)                                  five days after the date filed with the
relevant Governmental Authority for each of its fiscal years, but in any event
within 125 days after the end of each fiscal year of any Insurance Subsidiary, a
copy of the annual financial statements required to be filed with the Minister
of Finance of Bermuda or such other appropriate Governmental Authority of the
jurisdiction of domicile of any Insurance Subsidiary;

 

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(f)                                   contemporaneously with the filing or
mailing thereof, copies of all material of a financial nature filed with the
London Stock Exchange or sent to the stockholders of the Company; and

 

(g)                                  from time to time such other financial data
and information as the Lender may reasonably request.

 

Documents required to be delivered pursuant to Section 5.04(a), (b) or (e) (to
the extent any such documents are included in materials otherwise filed with the
London Stock Exchange) may be delivered electronically and if so delivered,
shall be deemed to have been delivered on the date (i) on which such materials
are publicly available as posted on the National Storage Mechanism of the London
Stock Exchange; or (ii) on which such documents are posted on the Company’s
behalf on an Internet or intranet website, if any, to which the Lender has
access (whether a commercial or third-party website); provided that: (A) upon
written request by the Lender, the Company shall deliver paper copies of such
documents to the Lender until a written request to cease delivering paper copies
is given by the Lender and (B) the Company shall notify the Lender (by facsimile
or electronic mail) of the posting of any such documents and provide to Lender
by electronic mail electronic versions (i.e., soft copies) of such documents.

 

Section 5.05                             Notices.

 

(a)                                 Defaults.  As soon as practicable after a
Responsible Officer of a Loan Party knows of the existence of any Default, such
Loan Party will notify the Lender, in writing, of the occurrence of such
Default, together with a reasonably detailed description thereof, and the
actions the Company proposes to take with respect thereto.

 

(b)                                 Notice of Litigation and Judgments.  The
Company will, and will cause each of its Subsidiaries to, give notice to the
Lender in writing within thirty (30) days of becoming aware of any litigation or
proceedings threatened in writing or any pending litigation and proceedings
affecting the Company or any of its Subsidiaries or the Master Fund or to which
the Company or any of its Subsidiaries or the Master Fund is or becomes a party
involving an uninsured claim against the Company or any of its Subsidiaries or
the Master Fund that could reasonably be expected to have a Material Adverse
Effect and stating the nature and status of such litigation or proceedings.  The
Company will give notice to the Lender, in writing, in form and detail
satisfactory to the Lender, within ten (10) days of any final judgment not
covered by insurance, against the Company or any of its Subsidiaries or the
Master Fund in an amount in excess of $25,000,000.

 

Section 5.06                             Legal Existence; Maintenance of
Properties.  The Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its legal existence, rights and
franchises and those of its Subsidiaries.  It (i) will cause all of its
properties and those of its Subsidiaries used or useful in the conduct of its
business or the business of its Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment,
(ii) will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and

 

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advantageously conducted at all times, and (iii) will continue to engage
primarily in the businesses now conducted by them and in related businesses;
provided that nothing in this Section 5.06 shall prevent the Company from
discontinuing the operation of any Subsidiary or the operation and maintenance
of any of its properties or any of those of its Subsidiaries if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its or their business and that do not in the aggregate have a Material Adverse
Effect.

 

Section 5.07                             Taxes.  The Company will, and will
cause each of its Subsidiaries to, duly pay and discharge, or cause to be paid
and discharged, before the same shall become overdue, all taxes, assessments and
other governmental charges imposed upon it and its real estate, sales and
activities, or any part thereof, or upon the income or profits therefrom, other
than where failure to pay such taxes would not result in a Material Adverse
Effect; provided, that any such tax, assessment, charge, levy or claim need not
be paid if the validity or amount thereof shall currently be contested in good
faith by appropriate proceedings and if the Company or such Subsidiary shall
have set aside on its books adequate reserves with respect thereto.

 

Section 5.08                             Inspection of Properties and
Books, etc.  The Company will permit representatives and independent contractors
of the Lender to visit and inspect any of its properties, to examine its
corporate, financial and operating records, and make copies thereof or abstracts
therefrom, and to discuss its affairs, finances and accounts with its directors,
officers, and independent public accountants, all at such reasonable times
during normal business hours and as often as may be reasonably desired, upon
reasonable advance notice to the Company at the Lender’s expense; provided,
however, that when an Event of Default exists the Lender (or any of its
representatives or independent contractors) may do any of the foregoing at the
expense of the Company at any time during normal business hours upon reasonable
advance notice.

 

Section 5.09                             Compliance with Laws, Contracts,
Licenses, and Permits.  The Company will, and will cause each of its
Subsidiaries to, comply with (a) the applicable Laws wherever its business is
conducted, including all environmental Laws, except where failure to do so would
not have a Material Adverse Effect, (b) the provisions of its Organizational
Documents, (c) all agreements and instruments by which it or any of its
properties may be bound, except where failure to do so would not have a Material
Adverse Effect, and (d) all applicable decrees, orders, and judgments, except
where failure to do so would not have a Material Adverse Effect.  If any
authorization, consent, approval, permit or license from any officer, agency or
instrumentality of any competent government shall become necessary or required
in order that the Company fulfill any of its obligations hereunder or any of the
other Loan Documents to which the Company is a party, the Company will
immediately take or cause to be taken all reasonable steps within the power of
the Company to obtain such authorization, consent, approval, permit or license
and furnish the Lender with evidence thereof.

 

Section 5.10                             Use of Proceeds.  The Company will
obtain Loans solely for the purposes set forth in Section 3.12(a).

 

Section 5.11                             Further Assurances.  Such Loan Party
will, and will cause each of its Subsidiaries to, cooperate with the Lender and
execute such further instruments and documents, furnish such other information
and existing documents (financial or otherwise) and

 

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take all such further action as the Lender shall reasonably request to carry out
to its satisfaction the transactions contemplated by this Agreement and the
other Loan Documents.

 

Section 5.12                             Incorporation of Parent Credit
Agreement.  Sections 7.01 through 7.11 (other than Section 7.01(h) and
Section 7.01(i)) of the Parent Credit Agreement are hereby incorporated by
reference herein as if fully set forth in this Agreement.

 

ARTICLE VI.

 

NEGATIVE COVENANTS

 

Until the Commitment has expired or been terminated, all Obligations have been
paid in full, the Company (and solely with respect to Sections 6.09 and 6.15
below, the Guarantor) covenants and agrees with the Lender that:

 

Section 6.01                             Business Activities.  The Company will
not engage directly or indirectly (whether through Subsidiaries or otherwise),
as its primary business, in any type of business other than the type of
activities set forth in its Prospectus.  The Company will not engage directly or
indirectly (whether through Subsidiaries or otherwise), as its primary business,
in any type of business other than the insurance and reinsurance and related
businesses.

 

Section 6.02                             Fiscal Year.  The Company will not, and
will not permit any of its Subsidiaries to, change the date of the end of its
fiscal or financial year from that set forth in Section 3.03(a).

 

Section 6.03                             Transactions with Affiliates.  The
Company will not, and will not permit any of its Subsidiaries to, engage in any
transaction with any Affiliate (other than for services as employees, officers
and directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
such Affiliate or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any such Affiliate has a substantial
interest or is an officer, director, trustee or partner, on terms more favorable
to such Person than would have been obtainable on an arm’s-length basis in the
ordinary course of business, provided that (x) transactions between the Company
and the Investment Manager, the Master Fund and the Reinsurer as set forth in
the Prospectus shall be excluded from the restrictions set forth in this
Section 6.03 and (y) transactions between the Guarantor or any of its
Subsidiaries with the Guarantor or any Subsidiary of the Guarantor shall be
excluded from the restrictions set forth in this Section 6.03.

 

Section 6.04                             Disposition of Assets.  The Company
will not, and will not permit the Master Fund, to, sell, transfer, convey or
lease all or substantially all of its assets or sell or assign with or without
recourse any receivables, other than any sale, transfer, conveyance or lease in
the ordinary course of business.

 

Section 6.05                             Mergers, Consolidations and Sales.  The
Company will not, and will not permit any of its Subsidiaries which is a
Material Party to, merge or consolidate except that, provided in each case no
Default has occurred and is continuing or would result therefrom, (a) BCRH and
any wholly-owned Subsidiary of BCRH may merge with BCRH or any wholly-

 

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owned Subsidiary of BCRH, as applicable, and (b) the Company and any
wholly-owned Subsidiary of the Company may merge with the Company or any
wholly-owned Subsidiary of the Company, as applicable.

 

Section 6.06                             Debt.

 

(a)                                 The Company will not create, assume, incur,
guarantee or otherwise permit any Debt (other than the Debt under the Loan
Documents) without the prior written consent of the Lender.

 

(b)                                 The Guarantor will not permit the Master
Fund to create, assume, incur, guarantee or otherwise permit any Debt in excess
of 10% of the NAV of the Master Fund at the time of the incurrence of such Debt.

 

Section 6.07                             Liens.  The Company will not, and will
not permit any of its wholly-owned Subsidiaries to, create, assume, incur,
guarantee or otherwise permit any Debt secured by any Lien upon any shares of
Capital Stock of any of its wholly-owned Subsidiaries (whether such shares of
Capital Stock are now owned or hereafter acquired).

 

Section 6.08                             Sanctions.

 

(a)                                 No portion of any Loan will be used,
directly or indirectly, for the purposes of: (i) any transaction by or for the
benefit of any Person which is listed on an SDN List, or is owned or controlled,
directly or indirectly, by any person listed on an SDN List; (ii) any country
which is the subject of sanctions by any Authority; (iii) funding any activities
or business of or with any Person, or in any country or territory, that, at the
time of such funding, is, or whose government is, the subject of sanctions by
any Authority; or (iv) engaging in any transaction or any other manner that
would result in a violation by any Person of sanctions by any Authority.

 

(b)                                 Neither the Company, nor any of its
Subsidiaries, will engage in any conduct which might reasonably be expected to
cause it to become a subject of sanctions by any Authority.

 

Section 6.09                             Financial Covenants.

 

(a)                                 Parent Leverage Ratio.  Section 8.09 of the
Parent Credit Agreement is hereby incorporated by reference herein as if fully
set forth in this Agreement.

 

(b)                                 Parent Consolidated Tangible Net Worth. 
Section 8.10 of the Parent Credit Agreement is hereby incorporated by reference
herein as if fully set forth in this Agreement.

 

Section 6.10                             Restricted Payments.  If a Default or
Event of Default exists, the Company will not (a) declare or make any dividend
payment or other distribution of assets, properties, cash, rights, obligations
or equity securities on account of any of its Capital Stock or (b) purchase,
redeem or otherwise acquire for value any of its Capital Stock or any warrants,
rights or options to acquire with respect thereto, whether now or hereafter
outstanding.

 

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Section 6.11                             Investment Guidelines.  The Company
will at all times comply with the investment guidelines set forth in the
Prospectus.  The Company will not consent to any change in the investment
guidelines of the Master Fund as set forth in the Prospectus as of the Closing
Date.

 

Section 6.12                             Material Agreements.  The Guarantor
will not permit any of the Company, the Master Fund, the Investment Manager, the
Reinsurance Manager or the Reinsurer, to amend any of the agreements listed on
Schedule 6.12 in any manner materially adverse, or that could reasonably be
expected to be materially adverse, to the Lender without the prior written
consent of the Lender.

 

Section 6.13                             Subsidiaries.  The Company will not
form or maintain any Subsidiary or enter into any partnership, joint venture or
similar arrangement.

 

Section 6.14                             Anti-Money Laundering and
Anti-Terrorism Finance Laws; Foreign Corrupt Practices Act.  The Company shall
not, and shall not permit any Subsidiary to, (a) engage in or conspire to engage
in any transaction that evades or avoids, or has the purpose of evading or
avoiding, or otherwise violates any Anti-Terrorism Law or Anti-Corruption Law,
(b) cause or permit any of the funds that are used to repay the Obligations to
be derived from any unlawful activity with the result that the Lender or any
Loan Party would be in violation of any applicable Law or (c) use any part of
the proceeds of the Loans, directly or indirectly, for any conduct that would
cause the representations and warranties in Sections 3.19 and 3.20 to be untrue
as if made on the date any such conduct occurs.

 

Section 6.15                             Incorporation of Parent Credit
Agreement.  Sections 8.01 through 8.08, 8.11 and 8.12 of the Parent Credit
Agreement are hereby incorporated by reference herein as if fully set forth in
this Agreement.

 

ARTICLE VII.

 

EVENTS OF DEFAULT; ACCELERATION

 

Section 7.01                             Events of Default and Acceleration. 
The occurrence and continuance of any of the following shall constitute an event
of default (each an “Event of Default”):

 

(a)                                 the Company shall fail to pay any principal
of any Loan when and as the same shall become due and payable, whether at the
due date thereof or at a date fixed for prepayment thereof or otherwise;

 

(b)                                 the Company shall fail to pay any interest
on any Loan or any Fee or any other amount (other than an amount referred to in
clause (a) of this Section) payable under this Agreement or under any other Loan
Document, when and as the same shall become due and payable, and such failure
shall continue unremedied for a period of three or more Business Days;

 

(c)                                  any representation, warranty, certification
or statement of fact made or deemed made by or on behalf of a Loan Party herein,
in any Loan Document or in any document

 

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delivered in connection herewith or therewith shall be incorrect or misleading
in any material respect when made or deemed made;

 

(d)                                 default in the performance of any of the
agreements or covenants of the Loan Parties set forth in Section 5.05, the first
sentence and clause (iii) of the second sentence of 5.06, 5.10, 6.01, 6.04,
6.05, 6.06, 6.07, 6.08, 6.09, 6.10, 6.11 6.12 6.14 or 6.15 or in any Specified
Parent Affirmative Covenant after the date upon which any applicable grace or
cure periods that are expressly herein provided shall have elapsed;

 

(e)                                  default in the performance of any of the
agreements or covenants of the Loan Parties under this Agreement or any other
Loan Document (other than those specified in Section 7.01(a), (b), (c) or
(d) above) and continuance of such default for a period of 30 days after the
date upon which (x) any Responsible Officer of a Loan Party had actual knowledge
of such default or (y) any applicable grace or cure periods that are expressly
herein provided shall have elapsed;

 

(f)                                   a Material Party shall be enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting any material part of its
business and such order shall continue in effect for more than thirty (30) days;

 

(g)                                  a Material Party admits in writing that it
is generally unable to pay debts as they mature or become due;

 

(h)                                 a Material Party makes a general assignment
for the benefit of creditors;

 

(i)                                     the commencement of a proceeding by or
against a Material Party under any Debtor Relief Law seeking to adjudicate a
Material Party as bankrupt or insolvent, or seeking the liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of a
Material Party or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator, debtor in possession, examiner or other similar official for a
Material Party, any substantial part of a Material Party’s property, with or
without consent of such Material Party, for any purpose whatsoever and, in the
case of any such proceeding instituted against a Material Party (but not
instituted by it), either such proceeding shall remain unstayed and undismissed
for a period of sixty (60) days; or any of the following actions sought in such
proceeding shall occur: the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official for, a
Material Party, or for any substantial part of its property;

 

(j)                                    the taking of any action by a regulatory
authority to obtain control of a Material Party or a substantial part of its
assets (which shall not have been vacated, discharged or stayed or bonded
pending appeal within sixty (60) days from the entry thereof);

 

(k)                                 the Company shall (or its shareholders shall
elect to) discontinue operations or liquidate;

 

(l)                                     a Change of Control shall occur; or

 

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(m)                             there shall occur any (i) Event of Default under
and as defined in the Parent Credit Agreement, (ii) default in the payment when
due (subject to any applicable grace period), whether by acceleration or
otherwise, of any other Debt of the Company and/or any other Material Party if
the aggregate amount of Debt of the Company and/or any other Material Party
which is accelerated or due and payable, or which (subject to any applicable
grace period) may be accelerated or otherwise become due and payable, by reason
of such default or defaults is $25,000,000 or more, (iii) default in the
performance or observance of any obligation or condition with respect to any
such other Debt of, or guaranteed by, a Material Party if the effect of such
default or defaults is to accelerate the maturity (subject to any applicable
grace period) of any such Debt of $25,000,000 or more in the aggregate or to
permit the holder or holders of such indebtedness of $25,000,000 or more in the
aggregate, or any trustee or agent for such holders, to cause such Debt to
become due and payable prior to its expressed maturity, or (iv) a final judgment
or judgments which exceed an aggregate of $25,000,000 (excluding any portion
thereof which is covered by insurance so long as the insurer is reasonably
likely to be able to pay and is not denying coverage in writing) shall be
rendered against a Material Party and shall not have been discharged or vacated
or had execution thereof stayed pending appeal within 60 days after entry or
filing of such judgment(s).

 

If an Event of Default shall occur and be continuing, then, and in every such
event (other than an event with respect to any Loan Party described in
clause (g), (h) or (i) of this Section), and at any time thereafter during the
continuance of such event, the Lender may take any or all of the following
actions, at the same or different times:

 

(i)                                     terminate the Commitment, and thereupon
the Commitment shall terminate immediately;

 

(ii)                                  declare the Loans then outstanding to be
due and payable in whole (or in part, in which case any principal not so
declared to be due and payable may thereafter be declared to be due and
payable), and thereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and all fees and other
Obligations of the Company accrued hereunder, shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Company; and

 

(iii)                               exercise all rights and remedies available
to it under the Loan Documents and/or applicable Law;

 

provided that, in case of any event with respect to any Loan Party described in
clause (g), (h) or (i) of this Section, the Commitment shall automatically
terminate and the principal of the Loans then outstanding, together with accrued
interest thereon and all fees and other Obligations accrued hereunder, shall
automatically become due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Company.

 

Section 7.02                             Application of Payments.  After the
exercise of remedies provided for in Section 7.01, any amounts received on
account of the Obligations shall be applied by the Lender as it elects in its
sole discretion.

 

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ARTICLE VIII.

 

GUARANTY.

 

Section 8.01                             Guaranty of the Obligations.  Subject
to the provisions of Section 8.02, the Guarantor hereby irrevocably and
unconditionally guarantees to the Lender the due and punctual payment in full of
all Obligations, when the same shall become due, whether at stated maturity, by
required prepayment, declaration, acceleration, demand or otherwise (including
amounts that would become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)) (collectively, the
“Guaranteed Obligations”).

 

Section 8.02                             Payment by Guarantor.  The Guarantor
hereby agrees, in furtherance of the foregoing and not in limitation of any
other right which the Lender may have at law or in equity against the Guarantor
by virtue hereof, that upon the failure of the Company to pay any of the
Guaranteed Obligations when and as the same shall become due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or otherwise
(including amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)), the
Guarantor shall upon demand pay, or cause to be paid, in Dollars, to the Lender,
an amount equal to the sum of the unpaid principal amount of all Guaranteed
Obligations then due as aforesaid, accrued and unpaid interest on such
Guaranteed Obligations (including interest which, but for the Company’s becoming
the subject of a case under the Bankruptcy Code, would have accrued on such
Guaranteed Obligations, whether or not a claim is allowed against the Company
for such interest in the related bankruptcy case) and all other Guaranteed
Obligations then owed to Lender.

 

Section 8.03                             Liability of Guarantors Absolute.  The
Guarantor agrees that its obligations hereunder are irrevocable, absolute,
independent and unconditional and shall not be affected by any circumstance
which constitutes a legal or equitable discharge of a guarantor or surety other
than payment in full of the Guaranteed Obligations.  In furtherance of the
foregoing and without limiting the generality thereof, the Guarantor agrees as
follows:

 

(a)                                 this Guaranty is a guaranty of payment when
due and not of collectability.  This Guaranty is a primary obligation of the
Guarantor and not merely a contract of surety;

 

(b)                                 the obligations of the Guarantor hereunder
are independent of the obligations of the Company and the obligations of any
other guarantor of the obligations of the Company, and a separate action or
actions may be brought and prosecuted against the Guarantor whether or not any
action is brought against the Company or any of such other guarantors and
whether or not the Company is joined in any such action or actions;

 

(c)                                  payment by the Guarantor of a portion, but
not all, of the Guaranteed Obligations shall in no way limit, affect, modify or
abridge the Guarantor’s liability for any portion of the Guaranteed Obligations
which has not been paid.  Without limiting the generality of the foregoing, if
the Lender is awarded a judgment in any suit brought to enforce the Guarantor’s
covenant to pay a portion of the Guaranteed Obligations, such judgment shall not
be

 

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deemed to release the Guarantor from its covenant to pay the portion of the
Guaranteed Obligations that is not the subject of such suit;

 

(d)                                 the Lender, upon such terms as it deems
appropriate, without notice or demand and without affecting the validity or
enforceability hereof or giving rise to any reduction, limitation, impairment,
discharge or termination of the Guarantor’s liability hereunder, from time to
time may (i) renew, extend, accelerate, increase the rate of interest on, or
otherwise change the time, place, manner or terms of payment of the Guaranteed
Obligations; (ii) settle, compromise, release or discharge, or accept or refuse
any offer of performance with respect to, or substitutions for, the Guaranteed
Obligations or any agreement relating thereto and/or subordinate the payment of
the same to the payment of any other obligations; (iii) request and accept other
guaranties of the Guaranteed Obligations and take and hold security for the
payment hereof or the Guaranteed Obligations; (iv) release, surrender, exchange,
substitute, compromise, settle, rescind, waive, alter, subordinate or modify,
with or without consideration, any security for payment of the Guaranteed
Obligations, any other guaranties of the Guaranteed Obligations, or any other
obligation of any Person with respect to the Guaranteed Obligations; (v) enforce
and apply any security now or hereafter held by or for the benefit of the Lender
in respect hereof or the Guaranteed Obligations and direct the order or manner
of sale thereof, or exercise any other right or remedy that the Lender may have
against any such security, in each case as the Lender in its discretion may
determine consistent herewith and any applicable security agreement, including
foreclosure on any such security pursuant to one or more judicial or
non-judicial sales, whether or not every aspect of any such sale is commercially
reasonable, and even though such action operates to impair or extinguish any
right of reimbursement or subrogation or other right or remedy of the Guarantor
against the Company or any security for the Guaranteed Obligations; and
(vi) exercise any other rights available to it under the Loan Documents; and

 

(e)                                  this Guaranty and the obligations of
Guarantor hereunder shall be valid and enforceable and shall not be subject to
any reduction, limitation, impairment, discharge or termination for any reason
(other than payment in full of the Guaranteed Obligations), including the
occurrence of any of the following, whether or not the Guarantor shall have had
notice or knowledge of any of them:  (i) any failure or omission to assert or
enforce or agreement or election not to assert or enforce, or the stay or
enjoining, by order of court, by operation of law or otherwise, of the exercise
or enforcement of, any claim or demand or any right, power or remedy (whether
arising under the Loan Documents, at law, in equity or otherwise) with respect
to the Guaranteed Obligations or any agreement relating thereto, or with respect
to any other guaranty of or security for the payment of the Guaranteed
Obligations; (ii) any rescission, waiver, amendment or modification of, or any
consent to departure from, any of the terms or provisions (including provisions
relating to events of default) hereof, any of the other Loan Documents or any
agreement or instrument executed pursuant thereto, or of any other guaranty or
security for the Guaranteed Obligations, in each case whether or not in
accordance with the terms hereof or such Loan Document or any agreement relating
to such other guaranty or security; (iii) the Guaranteed Obligations, or any
agreement relating thereto, at any time being found to be illegal, invalid or
unenforceable in any respect; (iv) the application of payments received from any
source (other than payments received pursuant to the other Loan Documents or
from the proceeds of any security for the Guaranteed Obligations, except to the
extent such security also serves as collateral for indebtedness other than the
Guaranteed Obligations) to the payment of indebtedness other than the Guaranteed
Obligations, even though the Lender might have elected

 

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to apply such payment to any part or all of the Guaranteed Obligations; (v) the
Lender’s consent to the change, reorganization or termination of the corporate
structure or existence of the Guarantor, the Company or any of their respective
Subsidiaries and to any corresponding restructuring of the Guaranteed
Obligations; (vi) any failure to perfect or continue perfection of a security
interest in any collateral which secures any of the Guaranteed Obligations;
(vii) any defenses, set-offs or counterclaims which the Company may allege or
assert against the Lender in respect of the Guaranteed Obligations, including
failure of consideration, breach of warranty, payment, statute of frauds,
statute of limitations, accord and satisfaction and usury; and (viii) any other
act or thing or omission, or delay to do any other act or thing, which may or
might in any manner or to any extent vary the risk of the Guarantor as an
obligor in respect of the Guaranteed Obligations.

 

Section 8.04                             Waivers by Guarantor.  The Guarantor
hereby waives:  (a) any right to require the Lender, as a condition of payment
or performance by the Guarantor, to (i) proceed against the Company, any other
guarantor of the Guaranteed Obligations or any other Person, (ii) proceed
against or exhaust any security held from the Company, any such other guarantor
or any other Person, (iii) proceed against or have resort to any balance of any
deposit account or credit on the books of the Lender in favor of the Company or
any other Person, or (iv) pursue any other remedy in the power of the Lender
whatsoever; (b) any defense arising by reason of the incapacity, lack of
authority or any disability or other defense of the Company including any
defense based on or arising out of the lack of validity or the unenforceability
of the Guaranteed Obligations or any agreement or instrument relating thereto or
by reason of the cessation of the liability of the Company from any cause other
than payment in full of the Guaranteed Obligations; (c) any defense based upon
any statute or rule of law which provides that the obligation of a surety must
be neither larger in amount nor in other respects more burdensome than that of
the principal; (d) any defense based upon the Lender’s errors or omissions in
the administration of the Guaranteed Obligations, except behavior which amounts
to bad faith; (e) (i) any principles or provisions of law, statutory or
otherwise, which are or might be in conflict with the terms hereof and any legal
or equitable discharge of the Guarantor’s obligations hereunder, (ii) the
benefit of any statute of limitations affecting the Guarantor’s liability
hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments
and counterclaims, and (iv) promptness, diligence and any requirement that the
Lender protect, secure, perfect or insure any security interest or lien or any
property subject thereto; (f) notices, demands, presentments, protests, notices
of protest, notices of dishonor and notices of any action or inaction, including
acceptance hereof, notices of default hereunder or under any agreement or
instrument related hereto, notices of any renewal, extension or modification of
the Guaranteed Obligations or any agreement related thereto, notices of any
extension of credit to the Company and notices of any of the matters referred to
in Section 8.03 and any right to consent to any thereof; and (g) any defenses or
benefits that may be derived from or afforded by law which limit the liability
of or exonerate guarantors or sureties, or which may conflict with the terms
hereof.

 

Section 8.05                             Guarantor’s Rights of Subrogation,
Contribution, Etc.  Until the Guaranteed Obligations shall have been
indefeasibly paid in full, the Guarantor hereby waives any claim, right or
remedy, direct or indirect, that the Guarantor now has or may hereafter have
against the Company or any other Guarantor or any of its assets in connection
with this Guaranty or the performance by the Guarantor of its obligations
hereunder, in each case whether such claim, right or remedy arises in equity,
under contract, by statute, under common law or

 

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otherwise and including (a) any right of subrogation, reimbursement or
indemnification that the Guarantor now has or may hereafter have against the
Company with respect to the Guaranteed Obligations, (b) any right to enforce, or
to participate in, any claim, right or remedy that the Lender now has or may
hereafter have against the Company, and (c) any benefit of, and any right to
participate in, any collateral or security now or hereafter held by the Lender. 
In addition, until the Guaranteed Obligations shall have been indefeasibly paid
in full, the Guarantor shall withhold exercise of any right of contribution the
Guarantor may have against any other guarantor (including any other Guarantor)
of the Guaranteed Obligations, including any such right of contribution as
contemplated by Section 8.02.  Each Guarantor further agrees that, to the extent
the waiver or agreement to withhold the exercise of its rights of subrogation,
reimbursement, indemnification and contribution as set forth herein is found by
a court of competent jurisdiction to be void or voidable for any reason, any
rights of subrogation, reimbursement or indemnification the Guarantor may have
against the Company or against any collateral or security, and any rights of
contribution the Guarantor may have against any such other guarantor, shall be
junior and subordinate to any rights the Lender may have against the Company, to
all right, title and interest the Lender may have in any such collateral or
security, and to any right the Lender may have against such other guarantor.  If
any amount shall be paid to the Guarantor on account of any such subrogation,
reimbursement, indemnification or contribution rights at any time when all
Guaranteed Obligations shall not have been finally and indefeasibly paid in
full, such amount shall be held in trust for the Lender and shall forthwith be
paid over to the Lender to be credited and applied against the Guaranteed
Obligations, whether matured or unmatured, in accordance with the terms hereof.

 

Section 8.06                             Subordination of Other Obligations. 
Any Indebtedness of the Company now or hereafter held by the Guarantor is hereby
subordinated in right of payment to the Guaranteed Obligations, and any such
Indebtedness collected or received by the Guarantor after an Event of Default
has occurred and is continuing shall be held in trust for the Lender and shall
forthwith be paid over to the Lender to be credited and applied against the
Guaranteed Obligations but without affecting, impairing or limiting in any
manner the liability of the Guarantor under any other provision hereof.

 

Section 8.07                             Continuing Guaranty.  This Guaranty is
a continuing guaranty and shall remain in effect until all of the Guaranteed
Obligations shall have been paid in full.  The Guarantor hereby irrevocably
waives any right to revoke this Guaranty as to future transactions giving rise
to any Guaranteed Obligations.

 

Section 8.08                             Authority of Guarantors or the
Company.  It is not necessary for the Lender to inquire into the capacity or
powers of the Guarantor or the Company or the officers, directors or any agents
acting or purporting to act on behalf of any of them.

 

Section 8.09                             Financial Condition of the Company. 
Any Loan may be made to the Company or continued from time to time without
notice to or authorization from the Guarantor regardless of the financial or
other condition of the Company at the time of any such grant or continuation. 
The Lender shall have no obligation to disclose or discuss with the Guarantor
its assessment, or the Guarantor’s assessment, of the financial condition of the
Company.  The Guarantor has adequate means to obtain information from the
Company on a continuing basis concerning the financial condition of the Company
and its ability to perform its

 

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obligations under the Loan Documents, and the Guarantor assumes the
responsibility for being and keeping informed of the financial condition of the
Company and of all circumstances bearing upon the risk of nonpayment of the
Guaranteed Obligations.  The Guarantor hereby waives and relinquishes any duty
on the part of the Lender to disclose any matter, fact or thing relating to the
business, operations or conditions of the Company now known or hereafter known
by the Lender.

 

Section 8.10                             Bankruptcy, Etc.

 

(a)                                 So long as any Guaranteed Obligations remain
outstanding, the Guarantor shall not, without the prior written consent of the,
commence or join with any other Person in commencing any bankruptcy,
reorganization or insolvency case or proceeding of or against the Company.  The
obligations of the Guarantor hereunder shall not be reduced, limited, impaired,
discharged, deferred, suspended or terminated by any case or proceeding,
voluntary or involuntary, involving the bankruptcy, insolvency, receivership,
reorganization, liquidation or arrangement of the Company or by any defense
which the Company may have by reason of the order, decree or decision of any
court or administrative body resulting from any such proceeding.

 

(b)                                 The Guarantor acknowledges and agrees that
any interest on any portion of the Guaranteed Obligations which accrues after
the commencement of any case or proceeding referred to in clause (a) above (or,
if interest on any portion of the Guaranteed Obligations ceases to accrue by
operation of law by reason of the commencement of such case or proceeding, such
interest as would have accrued on such portion of the Guaranteed Obligations if
such case or proceeding had not been commenced) shall be included in the
Guaranteed Obligations because it is the intention of the Guarantors and the
Lender that the Guaranteed Obligations which are guaranteed by the Guarantor
pursuant hereto should be determined without regard to any rule of law or order
which may relieve the Company of any portion of such Guaranteed Obligations. 
The Guarantor shall permit any trustee in bankruptcy, receiver, debtor in
possession, assignee for the benefit of creditors or similar Person to pay the
Lender, or allow the claim of the Lender in respect of, any such interest
accruing after the date on which such case or proceeding is commenced.

 

(c)                                  In the event that all or any portion of the
Guaranteed Obligations are paid by the Company, the obligations of the Guarantor
hereunder shall continue and remain in full force and effect or be reinstated,
as the case may be, in the event that all or any part of such payment(s) are
rescinded or recovered directly or indirectly from the Lender as a preference,
fraudulent transfer or otherwise, and any such payments which are so rescinded
or recovered shall constitute Guaranteed Obligations for all purposes hereunder.

 

ARTICLE IX.

 

MISCELLANEOUS

 

Section 9.01                             Notices.

 

(a)                                 Notices Generally.  Unless otherwise
expressly provided herein, all notices and other communications provided for
herein shall be in writing and shall be delivered

 

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by hand or overnight courier service or mailed by certified or registered mail
to the applicable party hereto, and all notices and other communications
expressly permitted hereunder to be given by telephone shall be made to the
applicable telephone number, as provided in Schedule 9.01.  Notices and other
communications sent by hand or overnight courier service, or mailed by certified
or registered mail, shall be deemed to have been given when received.  Notices
and other communications delivered through Electronic Media (defined below) to
the extent permitted under clause (b) shall be deemed received upon the sender’s
receipt of an acknowledgement from the intended recipient (such as by the
“return receipt requested” function, as available, return e-mail or other
written acknowledgement);  provided that, if such Instruction (defined below) is
not sent during the normal business hours of the recipient, such Instruction
shall be deemed to have been sent at the opening of business on the next
Business Day for the recipient

 

(b)                                 Electronic Communications.  Notices and
other communications to the Lender hereunder may be delivered or furnished by
e-mail, facsimile or other electronic communications (including Internet or
intranet websites) pursuant to procedures approved by the Lender (“Electronic
Media”).  In connection therewith, the Company (i) authorizes the Lender to act
on any instruction, notice or communication (“Instruction”) it receives by
Electronic Media and which appears to the Lender to originate from a Responsible
Officer, (ii)  acknowledges that the Lender is not obliged to act on any
Instruction it receives by Electronic Media if it has any reason to believe that
the Instruction is not authorized or has been incorrectly transmitted, or if it
considers that clarification or verification is required or desirable, and
(iii) acknowledges and accepts that Electronic Media may not be secure and that
third parties may gain access to the information contained therein as a result
of the parties utilizing such media.  Any Instruction forwarded by Electronic
Media shall be irrevocable and shall be confirmed by mailing the original
documents on the day of issue and by adding the mention ‘CONFIRMATION’ to avoid
any confusion; provided that failure to receive such mailed confirmation shall
not invalidate any of the operations carried out pursuant to an Instruction. 
The use of Electronic Media as a means of communications will remain operational
for an undetermined period and may be revoked at any time by notice from the
Lender to the Company.

 

(c)                                  Change of Address, etc.  Either Loan Party
or the Lender may change its address, facsimile number, telephone number or
electronic mail address for notices and other communications hereunder by notice
to the other parties hereto.

 

(d)                                 Reliance by Lender and Indemnification.  The
Lender shall be entitled to rely and act upon any notices (including telephonic
notices and Instructions given by Electronic Media) purportedly given by or on
behalf of the Company even if (i) such notices were not made in a manner
specified herein, were incomplete or were not preceded or followed by any other
form of notice specified herein or (ii) the terms thereof, as understood by the
recipient, varied from any confirmation thereof.  The Company shall indemnify
the Lender and its Related Parties for all losses, costs, expenses and
liabilities resulting from (x) the reliance of such Person on each notice or
Instruction purportedly given by or on behalf of the Company and any action
taken thereon and (y) in respect of any interception, delay, corruption,
non-receipt by either party or its agents, or receipt by persons other than the
intended addressee, of complete and legible electronic messages or their
attachments.  All telephonic notices to and telephonic

 

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communications with the Lender may be recorded by the Lender, and each of the
parties hereby consents to such recording.

 

Section 9.02                             Waivers; Amendments.

 

(a)                                 No Waiver; Remedies Cumulative;
Enforcement.  No failure or delay by the Lender in exercising any right, remedy,
power or privilege hereunder or under any other Loan Document shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
remedy, power or privilege, or any abandonment or discontinuance of steps to
enforce such a right remedy, power or privilege, preclude any other or further
exercise thereof or the exercise of any other right remedy, power or privilege. 
The rights, remedies, powers and privileges of the Lender hereunder and under
the Loan Documents are cumulative and are not exclusive of any rights, remedies,
powers or privileges that any such Person would otherwise have.

 

(b)                                 Amendments, Etc.  Except as otherwise
expressly set forth in this Agreement, no amendment or waiver of any provision
of this Agreement or any other Loan Document, and no consent to any departure by
any Loan Party therefrom, shall be effective unless in writing executed by the
Company and the Lenders holding more than 50% of the Commitments and Loans then
outstanding hereunder, and each such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.

 

Section 9.03                             Expenses; Indemnity; Etc.

 

(a)                                 Costs and Expenses.  The Company agrees to
pay or reimburse (i) all reasonable out-of-pocket costs and expenses incurred by
the Lender in connection with the preparation, negotiation, execution, delivery
and administration of this Agreement and the other Loan Documents, or any
amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions contemplated hereby or thereby shall be
consummated), including the reasonable fees, charges and disbursements of
counsel and (ii) all reasonable out-of-pocket costs and expenses incurred by the
Lender (including the reasonable fees, charges and disbursements of counsel for
the Lender) in connection with the enforcement or protection of any rights and
remedies under this Agreement and the other Loan Documents, including all such
costs and expenses incurred during any legal proceeding, including any
proceeding under any Debtor Relief Law, and including in connection with any
workout, restructuring or negotiations in respect of the Loans and the Loan
Documents.

 

(b)                                 Indemnification by Company.  The Company
shall indemnify the Lender (and any sub-agent thereof) and each Related Party of
the Lender (each such Person being called an “Indemnitee”) against, and hold
each Indemnitee harmless from, any and all liabilities, obligations, losses,
damages, penalties, claims, demands, actions, judgments, suits, costs (including
settlement costs), disbursements and out-of-pocket fees and expenses (including
the reasonable fees, charges and disbursements of any counsel for any
Indemnitee) of any kind or nature whatsoever which may at any time be imposed
on, incurred by or asserted or awarded against any Indemnitee in any way
relating to or arising out of or in connection with or by reason of (i) any
actual or prospective claim, litigation, investigation or proceeding in any way
relating to, arising out of, in connection with or by reason of any of the
following, whether based on

 

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contract, tort or any other theory (including any investigation of, preparation
for, or defense of any pending or threatened claim, litigation or proceeding):
(x) the execution, delivery, enforcement, performance or administration of any
Loan Document or any other document delivered in connection with the
transactions contemplated thereby or the consummation of the transactions
contemplated thereby or (y) any Commitment, any Loan or the use or proposed use
thereof or of the proceeds thereof; provided that such indemnity shall not, as
to any Indemnitee, be available to the extent that such liabilities,
obligations, losses, damages, penalties, claims, demands, actions, judgments,
suits, costs, fees and expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee; collectively, the
“Indemnified Liabilities”), in all cases, whether or not caused by or arising,
in whole or in part, out of the negligence of such Indemnitee and regardless of
whether such Indemnitee is a party thereto, and whether or not any such claim,
litigation, investigation or proceeding is brought by the Company, its equity
holders, its affiliates, its creditors or any other Person.

 

(c)                                  Waiver of Consequential Damages, Etc.  To
the fullest extent permitted by applicable Law, the Company shall not assert,
and hereby waives, any claim against any Indemnitee, on any theory of liability,
for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in connection with, or as a result of, any
Loan Document or any other document contemplated thereby, the transactions
contemplated thereby, any Commitment or any Loan, the use thereof or of the
proceeds thereof or such Indemnitee’s activities in connection therewith
(whether before or after the Closing Date).  No Indemnitee shall be liable for
any damages arising from the use by unintended recipients of any information or
other materials obtained through any information transmission systems in
connection with the Loan Documents or the transactions contemplated thereby
unless determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the gross negligence or willful
misconduct of such Indemnitee.

 

(d)                                 Payments.  All amounts due under this
Section shall be payable promptly after demand therefor by the relevant Person
entitled thereto.

 

Section 9.04                             Successors and Assigns.

 

(a)                                 Successors and Assigns.  The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns permitted hereby, except that
neither Loan Party may assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of the Lender.  The
Lender may at any time assign to one or more assignees all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment; provided that the consent of the Company shall be required for any
assignment (such consent not to be unreasonably withheld or delayed and which
consent is hereby given for assignments to any Affiliate of a Lender) unless any
Event of Default has occurred and is continuing at the time of such assignment;
provided that the Company shall be deemed to have consented to any such
assignment unless it shall object thereto by written notice to the Lender within
five Business Days after having received notice thereof.

 

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(b)                                 Certain Pledges.  The Lender may at any time
pledge or assign a security interest in all or any portion of its rights under
this Agreement to secure obligations of the Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank or any central bank
having jurisdiction over the Lender; provided that no such pledge or assignment
shall release the Lender from any of its obligations hereunder or substitute any
such pledgee or assignee for the Lender as a party hereto.

 

Section 9.05                             Survival.  All covenants, agreements,
representations and warranties made by the Loan Parties herein and in any Loan
Document or other documents delivered in connection herewith or therewith or
pursuant hereto or thereto shall be considered to have been relied upon by the
other parties hereto and shall survive the execution and delivery hereof and
thereof and the making of the Loans hereunder, regardless of any investigation
made by any such other party or on its behalf and notwithstanding that the
Lender may have had notice or knowledge of any Default at the time of any Loan,
and shall continue in full force and effect as long as any Obligation hereunder
shall remain unpaid or unsatisfied or any Loan shall remain outstanding.  The
provisions of Sections 2.12, 2.13, 2.14, 9.03, and 9.15 shall survive and remain
in full force and effect regardless of the consummation of the transactions
contemplated hereby, the payment in full of the Obligations, the expiration or
termination of the Commitment or the termination of this Agreement or any
provision hereof.

 

Section 9.06                             Counterparts; Integration;
Effectiveness; Electronic Execution.

 

(a)                                 Counterparts; Integration; Effectiveness. 
This Agreement may be executed in counterparts (and by different parties hereto
in different counterparts), each of which shall constitute an original, but all
of which when taken together shall constitute a single contract.  This Agreement
and the other Loan Documents, and any separate letter agreements with respect to
fees and expenses payable to the Lender, constitute the entire contract among
the parties relating to the subject matter hereof and supersede any and all
previous agreements and understandings, oral or written, relating to the subject
matter hereof.  Except as provided in Section 4.01, this Agreement shall become
effective when it shall have been executed by the Lender and when the Lender
shall have received a counterpart hereof that bears the signature of the
Guarantor and the Company.  Delivery of an executed counterpart of a signature
page of this Agreement by facsimile or in electronic (i.e., “pdf” or “tif”)
format shall be effective as delivery of a manually executed counterpart of this
Agreement.

 

(b)                                 Electronic Execution of Assignments and
Certain Other Documents.  The words “execution”, “signed”, “signature”, and
words of like import in any amendment or other modification hereof (including
waivers and consents) shall be deemed to include electronic signatures or the
keeping of records in electronic form, each of which shall be of the same legal
effect, validity or enforceability as a manually executed signature or the use
of a paper-based recordkeeping system, as the case may be, to the extent and as
provided for in any applicable Law, including the Federal Electronic Signatures
in Global and National Commerce Act, the New York State Electronic Signatures
and Records Act, or any other similar state Laws based on the Uniform Electronic
Transactions Act.

 

Section 9.07                             Severability.  If any provision of this
Agreement or the other Loan Documents is held to be illegal, invalid or
unenforceable, (a) the legality, validity and

 

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enforceability of the remaining provisions of this Agreement and the other Loan
Documents shall not be affected or impaired thereby and (b) the parties shall
endeavor in good faith negotiations to replace the illegal, invalid or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the illegal, invalid or unenforceable
provisions.  The invalidity of a provision in a particular jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.

 

Section 9.08                             Right of Setoff.  If an Event of
Default shall have occurred and be continuing, the Lender, and each of its
Affiliates is hereby authorized at any time and from time to time, to the
fullest extent permitted by applicable Law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final, in whatever
currency) at any time held, and other obligations (in whatever currency) at any
time owing, by the Lender or any such Affiliate, to or for the credit or the
account of the Company or the Guarantor against any and all of the obligations
of the Company or the Guarantor now or hereafter existing under this Agreement
or any other Loan Document to the Lender or their respective Affiliates,
irrespective of whether or not the Lender or Affiliate shall have made any
demand under this Agreement or any other Loan Document and although such
obligations of the Company or the Guarantor may be contingent or unmatured or
are owed to a branch, office or Affiliate of the Lender different from the
branch, office or Affiliate holding such deposit or obligated on such
indebtedness.  The rights of the Lender, the Lender and their respective
Affiliates under this Section are in addition to other rights and remedies
(including other rights of setoff) that the Lender or its Affiliates may have. 
The Lender agrees to notify the Company or the Guarantor promptly after any such
setoff and application; provided that the failure to give such notice shall not
affect the validity of such setoff and application.

 

Section 9.09                             Governing Law; Jurisdiction; Etc.

 

(a)                                 Governing Law.  This Agreement and the other
Loan Documents and any claims, controversy, dispute or cause of action (whether
in contract or tort or otherwise) based upon, arising out of or relating to this
Agreement or any other Loan Document (except, as to any other Loan Document, as
expressly set forth therein) and the transactions contemplated hereby and
thereby shall be governed by, and construed in accordance with, the Law of the
State of New York.

 

(b)                                 Jurisdiction.  Each Loan Party irrevocably
and unconditionally agrees that it will not commence any action, litigation or
proceeding of any kind or description, whether in law or equity, whether in
contract or tort or otherwise, against the Lender or any Related Party of the
Lender, in any way relating to this Agreement or any other Loan Document or the
transactions relating hereto or thereto, in a forum other than the courts of the
State of New York sitting in New York County, and of the United States District
Court of the Southern District of New York and any appellate court from any
thereof, and each of the parties hereto irrevocably and unconditionally submits
to the exclusive jurisdiction of such courts and agrees that all claims in
respect of any such action, litigation or proceeding may be heard and determined
in such New York State court or, to the fullest extent permitted by applicable
Law, in such Federal court.  Each of the parties hereto agrees that a final
judgment in any such action, litigation or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by Law.  Nothing in this Agreement or in any other Loan Document
shall

 

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affect any right that the Lender may otherwise have to bring any action or
proceeding relating to this Agreement or any other Loan Document against any
Loan Party or its respective properties in the courts of any jurisdiction.

 

(c)                                  Waiver of Venue.  Each Loan Party
irrevocably and unconditionally waives, to the fullest extent permitted by
applicable Law, any objection that it may now or hereafter have to the laying of
venue of any action or proceeding arising out of or relating to this Agreement
or any other Loan Document in any court referred to in clause (b) of this
Section.  Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by applicable Law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.

 

(d)                                 SERVICE OF PROCESS.  EACH LOAN PARTY HAS
APPOINTED NATIONAL REGISTERED AGENTS (THE “PROCESS AGENT”), WITH AN OFFICE ON
THE DATE HEREOF AT 111 EIGHTH AVENUE, NEW YORK, NEW YORK 10011, UNITED STATES
(OR SUCH OTHER PROCESS AGENT AS REASONABLY ACCEPTABLE TO THE LENDER), AS ITS
AGENT TO RECEIVE ON ITS BEHALF SERVICE OF THE SUMMONS AND COMPLAINTS AND ANY
OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING, PROVIDED
THAT A COPY OF SUCH PROCESS SHALL ALSO BE MAILED IN THE MANNER PROVIDED IN
SECTION 9.01.  SUCH SERVICE MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH
PROCESS TO THE APPLICABLE LOAN PARTY IN CARE OF THE PROCESS AGENT AT THE PROCESS
AGENT’S ABOVE ADDRESS. EACH LOAN PARTY HAS IRREVOCABLY AUTHORIZED AND DIRECTED
THE PROCESS AGENT TO RECEIVE SUCH SERVICE ON ITS BEHALF.  EACH PARTY HERETO
IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN
SECTION 9.01.  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY
HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

 

Section 9.10                             WAIVER OF JURY TRIAL.  EACH PARTY
HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.

 

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Section 9.11                             Headings.  Article and Section headings
and the Table of Contents used herein are for convenience of reference only, are
not part of this Agreement and shall not affect the construction of, or be taken
into consideration in interpreting, this Agreement.

 

Section 9.12                             Confidentiality.  The Lender agrees to
maintain the confidentiality of the Information, except that Information may be
disclosed (a) to its Related Parties (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 in accordance
with customary practices); (b) to the extent required or requested by any
regulatory authority purporting to have jurisdiction over or to which an
agreement exists between it or its Related Parties (including any
self-regulatory authority, such as the National Association of Insurance
Commissioners); (c) to the extent required by applicable Laws or regulations or
by any subpoena or similar legal process; (d) in connection with the exercise of
any remedies hereunder or under any other Loan Document or any action or
proceeding relating to this Agreement or any other Loan Document or the
enforcement of rights hereunder or thereunder;  (e) subject to an agreement
containing provisions substantially the same (or at least as restrictive) as
those of this Section (or as may otherwise be reasonably acceptable to the
Company), to (i) any assignee of or participant in, or any prospective assignee
of or participant in, any of its rights and obligations under this Agreement, or
(ii) any actual or prospective party (or its Related Parties) to any swap,
derivative other transaction under which payments are to be made by reference to
the Company and its obligations, this Agreement or payments hereunder; (f) on a
confidential basis to (i) any rating agency in connection with rating the
Company or its Subsidiaries or the credit facility hereunder or (ii) the CUSIP
Service Bureau or any similar agency in connection with the issuance and
monitoring of CUSIP numbers with respect to the credit facility hereunder;
(g) with the consent of the Company; or (h) to the extent that such Information
(x) becomes publicly available other than as a result of a breach of this
Section, or (y) becomes available to the Lender or any of its Affiliates on a
nonconfidential basis from a source other than a Loan Party.  For purposes of
this Section, “Information” means all information received from a Loan Party or
any of its Subsidiaries relating to a Loan Party or any of its Subsidiaries or
any of their respective businesses, other than any such information that is
available to the Lender on a nonconfidential basis prior to disclosure by a Loan
Party or any of its Subsidiaries; provided that, in the case of information
received from a Loan Party or any of its Subsidiaries after the date hereof,
such information is clearly identified at the time of delivery as confidential. 
Any Person required to maintain the confidentiality of Information as provided
in this Section shall be considered to have complied with its obligation to do
so if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

 

Section 9.13                             PATRIOT Act.  The Lender is subject to
the PATRIOT Act and hereby notifies each Loan Party that pursuant to the
requirements of the PATRIOT Act, it is required to obtain, verify and record
information that identifies each Loan Party, which information includes the name
and address of each Loan Party and other information that will allow the Lender
to identify each Loan Party in accordance with the PATRIOT Act.  Each Loan Party
shall, promptly following a request by the Lender, provide all documentation and
other information that the Lender requests in order to comply with its ongoing
obligations under applicable “know your customer” and anti-money-laundering
rules and regulations, including the PATRIOT Act.

 

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Section 9.14                             Interest Rate Limitation. 
Notwithstanding anything herein to the contrary, if at any time the interest
rate applicable under any Loan Document, together with all fees, charges and
other amounts which are treated as interest under such Loan Document under
applicable Law (collectively, “charges”), shall exceed the maximum lawful rate
(the “Maximum Rate”) which may be contracted for, charged, taken, received or
reserved by the Lender in accordance with applicable Law, the rate of interest
payable pursuant to such Loan Document, together with all charges payable in
respect thereof, shall be limited to the Maximum Rate and, to the extent lawful,
the interest and charges that would have been payable pursuant to such Loan
Document but were not payable as a result of the operation of this Section shall
be cumulated and the interest and charges payable to the Lender in respect of
other Loan Documents or periods shall be increased (but not above the Maximum
Rate therefor) until such cumulated amount, together with interest thereon at
the Federal Funds Effective Rate for each day to the date of repayment, shall
have been received by the Lender.

 

Section 9.15                             Payments Set Aside.  To the extent that
any payment by or on behalf of the ant Loan Party is made to the Lender or the
Lender exercises its right of setoff, and such payment or the proceeds of such
setoff or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by the Lender in its discretion) to be repaid to a
trustee, receiver or any other party, in connection with any proceeding under
any Debtor Relief Law or otherwise, then to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such setoff had not occurred.

 

Section 9.16                             No Advisory or Fiduciary
Responsibility.  In connection with all aspects of each transaction contemplated
hereby (including in connection with any amendment, waiver or other modification
hereof or of any other Loan Document), each Loan Party acknowledges and agrees,
and acknowledges its Affiliates’ understanding, that: (a) (i) no fiduciary,
advisory or agency relationship between any Loan Party and its Subsidiaries and
the Lender is intended to be or has been created in respect of the transactions
contemplated hereby or by the other Loan Documents, irrespective of whether the
Lender has advised or is advising any Loan Party or any Subsidiary thereof on
other matters, (ii) the services regarding this Agreement provided by the Lender
are arm’s-length commercial transactions between the Loan Parties and their
respective Affiliates, on the one hand, and the Lender, on the other hand,
(iii) the Loan Parties have consulted its own legal, accounting, regulatory and
tax advisors to the extent that it has deemed appropriate and (iv) each Loan
Party is capable of evaluating, and understands and accepts, the terms, risks
and conditions of the transactions contemplated hereby and by the other Loan
Documents; and (b) (i) the Lender has been acting solely as a principal and,
except as expressly agreed in writing by the relevant parties, has not been, is
not, and will not be acting as an advisor, agent or fiduciary for either Loan
Party or any of their respective Affiliates, or any other Person; (ii) the
Lender has no obligation to any Loan Party or any of their respective Affiliates
with respect to the transactions contemplated hereby except those obligations
expressly set forth herein and in the other Loan Documents; and (iii) the Lender
and its Affiliates may be engaged, for its own accounts or the accounts of
customers, in a broad range of transactions that involve interests that differ
from those of Loan Parties or any of their respective Affiliates, and the Lender
has no obligation to disclose any of such interests to an Loan Party or any of
their respective Affiliates.  To the fullest extent permitted by Law, each Loan
Party hereby waives and

 

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releases any claims that it may have against the Lender, with respect to any
breach or alleged breach of agency or fiduciary duty in connection with any
aspect of any transaction contemplated hereby.

 

Section 9.17                             Judgment Currency.  If, for the
purposes of obtaining judgment in any court, it is necessary to convert a sum
due hereunder or any other Loan Document in one currency into another currency,
the rate of exchange used shall be that at which in accordance with normal
banking procedures the Lender could purchase the first currency with such other
currency on the Business Day preceding that on which final judgment is given. 
The obligation of each Loan Party in respect of any such sum due from it to the
Lender hereunder or under the other Loan Documents shall, notwithstanding any
judgment in a currency (the “Judgment Currency”) other than that in which such
sum is denominated in accordance with the applicable provisions of this
Agreement (the “Agreement Currency”), be discharged only to the extent that on
the Business Day following receipt by the Lender of any sum adjudged to be so
due in the Judgment Currency, the Lender may in accordance with normal banking
procedures purchase the Agreement Currency with the Judgment Currency.  If the
amount of the Agreement Currency so purchased is less than the sum originally
due to the Lender from the applicable Loan Party in the Agreement Currency, such
Loan Party agrees, as a separate obligation and notwithstanding any such
judgment, to indemnify the Lender against such loss.  If the amount of the
Agreement Currency so purchased is greater than the sum originally due to the
Lender in such currency, the Lender agrees to return the amount of any excess to
the applicable Loan Party (or to any other Person who may be entitled thereto
under applicable law).

 

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SCHEDULE 3.06

 

Litigation

 

None.

 

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SCHEDULE 6.12

 

Material Contracts

 

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SCHEDULE 9.01

 

INFORMATION FOR NOTICES

 

I.  Company:

 

Endurance Specialty Holdings Ltd.
100 Pitts Bay Road
Pembroke, Bermuda HM 08
Fax No.:  (441) 278-0401
Telephone No.:  (441) 278-0440

 

II.  Barclays Bank PLC

 

Credit Contact: Karla Maloof

 

Wire Instructions:

 

Barclays Bank PLC

 

New York

 

SWIFT Address:       

BARC US 33

Account No.:            

280238433

UID No.:                   

312842

Beneficiary:              

Barclays Bank PLC Wholesale, London

 

Swift Address: BARCGB5G

Reference:                

Loan Ops re:  Blue Capital Global Reinsurance Fund Limited

 

III.  Lender:

 

Barclays Bank PLC
1 Churchill Place
Canary Wharf
London E14 5HP

 

Tel: +44 (0) 20 7116 1000
E-mail: 442033201066@tls.ldsprod.com, EMEABilateralLoans@barclayscapital.com
Team E-mail: BOT@barclays.com

 

Schedule 9.01-1

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