Exhibit 10.1

 

EXECUTION COPY

 

 

 

FOUR-YEAR

UNSECURED REVOLVING CREDIT AND LETTER OF CREDIT FACILITY AGREEMENT

 

dated as of

 

March 9, 2012

 

among

 

VALIDUS HOLDINGS, LTD.,

 

VALIDUS REINSURANCE, LTD.,

 

VALIDUS RE AMERICAS, LTD.,

 

PACRE, LTD.,

 

VARIOUS DESIGNATED SUBSIDIARY ACCOUNT PARTIES,

 

The Lenders Party Hereto,

 

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent,

 

DEUTSCHE BANK SECURITIES INC.,

as Syndication Agent

 

and

 

LLOYDS SECURITIES INC. and SUNTRUST BANK,

as Co-Documentation Agents

 

 

 

J.P. MORGAN SECURITIES LLC, DEUTSCHE BANK SECURITIES INC.,
LLOYDS SECURITIES INC. and SUNTRUST ROBINSON HUMPHREY, INC.,
as Joint Lead Arrangers and Joint Bookrunners

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE I

 

 

 

 

Definitions

1

 

 

 

SECTION 1.01.

Defined Terms

1

SECTION 1.02.

Classification of Loans and Borrowings

22

SECTION 1.03.

Terms Generally

22

SECTION 1.04.

Accounting Terms; GAAP

23

 

 

 

ARTICLE II

 

 

 

 

Letters of Credit; Loans

23

 

 

 

SECTION 2.01.

Several Letters of Credit

23

SECTION 2.02.

Fronted Letters of Credit

25

SECTION 2.03.

Conditions to the Issuance of all Letters of Credit

27

SECTION 2.04.

Letter of Credit Requests

29

SECTION 2.05.

Agreement to Repay Letter of Credit Drawings

29

SECTION 2.06.

Increased Costs

30

SECTION 2.07.

Letter of Credit Expiration and Extensions

31

SECTION 2.08.

Changes to Stated Amount

31

SECTION 2.09.

Termination and Reduction of Commitments

32

SECTION 2.10.

Mandatory Prepayment; Cash Collateralization

32

SECTION 2.11.

Fees

33

SECTION 2.12.

Taxes

34

SECTION 2.13.

Payments Generally; Pro Rata Treatment; Sharing of Set-offs

36

SECTION 2.14.

Mitigation Obligations; Replacement of Lenders

37

SECTION 2.15.

Designated Subsidiary Account Parties

38

SECTION 2.16.

Loans

38

SECTION 2.17.

Loans and Borrowings

39

SECTION 2.18.

Requests for Borrowings

39

SECTION 2.19.

Funding of Borrowings

40

SECTION 2.20.

Interest Elections

40

SECTION 2.21.

Repayment of Loans; Evidence of Debt

41

SECTION 2.22.

Voluntary Prepayment of Loans

42

SECTION 2.23.

Interest

42

SECTION 2.24.

Alternate Rate of Interest

43

SECTION 2.25.

Break Funding Payments

44

SECTION 2.26.

Defaulting Lenders

44

SECTION 2.27.

Additional Commitments

44

 

 

 

ARTICLE III

 

 

 

 

Representations and Warranties

46

 

 

 

SECTION 3.01.

Corporate Status

46

SECTION 3.02.

Corporate Power and Authority

46

 

i

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SECTION 3.03.

No Contravention of Agreements or Organizational Documents

46

SECTION 3.04.

Litigation and Environmental Matters

46

SECTION 3.05.

Use of Proceeds; Use of Letters of Credit; Margin Regulations

47

SECTION 3.06.

Approvals

47

SECTION 3.07.

Investment Company Act

47

SECTION 3.08.

True and Complete Disclosure; Projections and Assumptions

47

SECTION 3.09.

Financial Condition

47

SECTION 3.10.

Tax Returns and Payments

48

SECTION 3.11.

Compliance with ERISA

48

SECTION 3.12.

Subsidiaries

49

SECTION 3.13.

Capitalization

49

SECTION 3.14.

Indebtedness

49

SECTION 3.15.

Compliance with Statutes and Agreements

49

SECTION 3.16.

Insurance Licenses

49

SECTION 3.17.

Insurance Business

50

SECTION 3.18.

Properties; Liens; and Insurance

50

SECTION 3.19.

Solvency

50

 

 

 

ARTICLE IV

 

 

 

 

Conditions

50

 

 

 

SECTION 4.01.

Effective Date

50

SECTION 4.02.

Each Credit Event

52

 

 

 

ARTICLE V

 

 

 

 

Affirmative Covenants

53

 

 

 

SECTION 5.01.

Information Covenants

53

SECTION 5.02.

Books, Records and Inspections

56

SECTION 5.03.

Insurance

57

SECTION 5.04.

Payment of Taxes and other Obligations

57

SECTION 5.05.

Maintenance of Existence; Conduct of Business

57

SECTION 5.06.

Compliance with Statutes, etc.

57

SECTION 5.07.

ERISA

58

SECTION 5.08.

Maintenance of Property

58

SECTION 5.09.

Maintenance of Licenses and Permits

58

SECTION 5.10.

Further Assurances

59

 

 

 

ARTICLE VI

 

 

 

 

Negative Covenants

59

 

 

 

SECTION 6.01.

Changes in Business or Organizational Documents

59

SECTION 6.02.

Consolidations, Mergers and Sales of Assets

59

SECTION 6.03.

Liens

60

SECTION 6.04.

Indebtedness

63

SECTION 6.05.

[Intentionally Omitted]

63

SECTION 6.06.

Issuance of Stock

63

SECTION 6.07.

Dissolution

63

 

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SECTION 6.08.

Restricted Payments

63

SECTION 6.09.

Transactions with Affiliates

64

SECTION 6.10.

Maximum Leverage Ratio

64

SECTION 6.11.

Minimum Consolidated Net Worth

64

SECTION 6.12.

Limitation on Certain Restrictions on Subsidiaries

64

SECTION 6.13.

Private Act

65

SECTION 6.14.

Claims Paying Ratings

65

SECTION 6.15.

End of Fiscal Years; Fiscal Quarters

65

 

 

 

ARTICLE VII

 

 

 

Events of Default

66

 

 

 

SECTION 7.01.

Payments

66

SECTION 7.02.

Representations, etc.

66

SECTION 7.03.

Covenants

66

SECTION 7.04.

Default under other Agreements

66

SECTION 7.05.

Bankruptcy, etc.

67

SECTION 7.06.

ERISA

67

SECTION 7.07.

Judgments

67

SECTION 7.08.

Insurance Licenses

67

SECTION 7.09.

Change of Control

67

SECTION 7.10.

Company Guaranty

67

 

 

 

ARTICLE VIII

 

 

 

 

The Agents

68

 

 

 

SECTION 8.01.

Appointment

68

SECTION 8.02.

Agents in their Individual Capacities

68

SECTION 8.03.

Exculpatory Provisions

68

SECTION 8.04.

Reliance

69

SECTION 8.05.

Delegation of Duties

69

SECTION 8.06.

Resignation

69

SECTION 8.07.

Non-Reliance

69

SECTION 8.08.

Syndication Agent, Co-Documentation Agents and Joint Lead Arrangers and Joint
Bookrunners

70

 

 

 

ARTICLE IX

 

 

 

 

Company Guaranty

70

 

 

 

SECTION 9.01.

The Company Guaranty

70

SECTION 9.02.

Bankruptcy

70

SECTION 9.03.

Nature of Liability

70

SECTION 9.04.

Independent Obligation

71

SECTION 9.05.

Authorization

71

SECTION 9.06.

Reliance

72

SECTION 9.07.

Subordination

72

SECTION 9.08.

Waiver

72

SECTION 9.09.

Maximum Liability

73

 

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ARTICLE X

 

 

 

 

Miscellaneous

73

 

 

 

SECTION 10.01.

Notices

73

SECTION 10.02.

Waivers; Amendments

74

SECTION 10.03.

Expenses; Indemnity; Damage Waiver

75

SECTION 10.04.

Successors and Assigns

76

SECTION 10.05.

Survival

79

SECTION 10.06.

Counterparts; Integration; Effectiveness

79

SECTION 10.07.

Severability

80

SECTION 10.08.

Right of Setoff

80

SECTION 10.09.

Governing Law; Jurisdiction; Consent to Service of Process

80

SECTION 10.10.

Waiver of Jury Trial

81

SECTION 10.11.

Headings

81

SECTION 10.12.

Confidentiality

81

SECTION 10.13.

Interest Rate Limitation

82

SECTION 10.14.

USA Patriot Act

82

SECTION 10.15.

No Advisory or Fiduciary Responsibility

82

SECTION 10.16.

Termination of Existing Credit Facility

82

 

iv

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SCHEDULES:

 

Commitment Schedule

Schedule 2.15  —  Designated Subsidiary Account Parties

Schedule 3.12  —  Subsidiaries

Schedule 3.13  —  Capitalization

Schedule 3.14  —  Existing Indebtedness

Schedule 6.03  —  Existing Liens

Schedule 6.09  —  Existing Affiliate Transactions

Schedule 6.12  —  Existing Intercompany Agreements and Arrangements

 

EXHIBITS:

 

Exhibit A  —  Form of Assignment and Assumption

Exhibit B  —  Form of Borrowing Request

Exhibit C  —  Form of DSAP Assumption Agreement

Exhibit D  —  Form of Note

Exhibit E  —  Form of Interest Election Request

Exhibit F  —  Form of Letter of Credit Request

Exhibit G  —  Form of Officer’s Certificate

Exhibit H  —  Additional Commitment Agreement

 

v

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FOUR-YEAR UNSECURED REVOLVING CREDIT AND LETTER OF CREDIT FACILITY AGREEMENT
dated as of March 9, 2012 among VALIDUS HOLDINGS, LTD., a holding company
organized under the laws of Bermuda (the “Company”), VALIDUS REINSURANCE, LTD.,
a reinsurance company organized under the laws of Bermuda and a wholly-owned
subsidiary of the Company (“Validus Re”), VALIDUS RE AMERICAS, LTD., a
reinsurance company organized under the laws of Bermuda and a wholly-owned
subsidiary of the Company (“Validus Americas”), PACRE, LTD., a reinsurance
company organized under the laws of Bermuda (“Pac Re”), the other Designated
Subsidiary Account Parties (as hereinafter defined) from time to time party
hereto, the lenders from time to time party hereto (each, a “Lender” and,
collectively, the “Lenders”), JPMORGAN CHASE BANK, N.A., as Administrative
Agent, DEUTSCHE BANK SECURITIES INC., as Syndication Agent and LLOYDS SECURITIES
INC. and SUNTRUST BANK, as Co-Documentation Agents.  Unless otherwise defined
herein, all capitalized terms used herein and defined in Section 1.01 are used
herein as so defined.

 

The parties hereto hereby agree as follows:

 

ARTICLE I

 

Definitions

 

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

 

“ABR”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate
determined by reference to the Alternate Base Rate.

 

“Account Parties” means the Company and each Designated Subsidiary Account
Party.

 

“Acquired Indebtedness” means Indebtedness of the Company or a Subsidiary
acquired pursuant to an acquisition not prohibited under this Agreement (or
Indebtedness assumed at the time of such acquisition of an asset securing such
Indebtedness); provided that such Indebtedness was not incurred in connection
with, or in anticipation or contemplation of, such acquisition.

 

“Additional Commitment” means, for each Additional Commitment Lender, any
commitment provided by such Additional Commitment Lender pursuant to
Section 2.27, in such amount as agreed to by such Additional Commitment Lender
in the respective Additional Commitment Agreement; provided that on the
Additional Commitment Date upon which an Additional Commitment of any Additional
Commitment Lender becomes effective, such Additional Commitment of such
Additional Commitment Lender shall (x) in the case of an existing Lender, be
added to (and thereafter become a part of) the existing Commitment of such
existing Lender for all purposes of this Agreement as contemplated by
Section 2.27 and (y) in the case of a new Lender, be converted to a Commitment
and become a Commitment for all purposes of this Agreement as contemplated by
Section 2.27.

 

“Additional Commitment Agreement” means an Additional Commitment Agreement
substantially in the form of Exhibit H (appropriately completed) or such other
form reasonably acceptable to the Administrative Agent.

 

“Additional Commitment Date” means each date upon which an Additional Commitment
under an Additional Commitment Agreement becomes effective as provided in
Section 2.27.

 

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--------------------------------------------------------------------------------

 

“Additional Commitment Lender” has the meaning provided in Section 2.27(b).

 

“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.

 

“Administrative Agent” means JPMorgan Chase Bank, N.A. (and each person
appointed as a successor thereto pursuant to Article VIII), in its capacity as
administrative agent for the Lenders hereunder.

 

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

 

“Affiliate” means, with respect to a specified 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.

 

“Agents” means, collectively, the Administrative Agent, the Syndication Agent,
the Co-Documentation Agents and the Issuing Agent.

 

“Agreement” means this Four-Year Unsecured Revolving Credit and Letter of Credit
Facility Agreement, as modified, supplemented, amended, restated (including any
amendment and restatement hereof), extended or renewed from time to time.

 

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1% and (c) the Adjusted LIBO Rate for a
one month Interest Period on such day (or if such day is not a Business Day, the
immediately preceding Business Day) plus 1%, provided that, for the avoidance of
doubt, the Adjusted LIBO Rate for any day shall be based on the rate appearing
on Reuters Screen LIBOR01 Page (or on any successor or substitute page of such
page) at approximately 11:00 a.m. London time on such day.  Any change in the
Alternate Base Rate due to a change in the Prime Rate, the Federal Funds
Effective Rate or the Adjusted LIBO Rate shall be effective from and including
the effective date of such change in the Prime Rate, the Federal Funds Effective
Rate or the Adjusted LIBO Rate, respectively.

 

“Applicable Insurance Regulatory Authority” means, when used with respect to any
Regulated Insurance Company, (x) the insurance department or similar
administrative authority or agency located in each state or jurisdiction
(foreign or domestic) in which such Regulated Insurance Company is domiciled or
(y) to the extent asserting regulatory jurisdiction over such Regulated
Insurance Company, the insurance department, authority or agency in each state
or jurisdiction (foreign or domestic) in which such Regulated Insurance Company
is licensed, and shall include any Federal or national insurance regulatory
department, authority or agency that may be created and that asserts insurance
regulatory jurisdiction over such Regulated Insurance Company.

 

“Applicable Percentage” means, with respect to any Lender, the percentage of the
Total Commitment represented by such Lender’s Commitment. If the Commitments
have terminated or expired, the Applicable Percentages shall be determined based
upon the Commitments most recently in effect, giving effect to any assignments.

 

“Applicable Rate” means, on any date, with respect to the Commitment Fee, the
Eurodollar Loans, the ABR Loans or the Letter of Credit Fee, as the case may be,
the applicable rate per

 

2

--------------------------------------------------------------------------------

 

annum set forth below under the caption “Commitment Fee Rate”, “Eurodollar
Spread”, “ABR Spread” or “Letter of Credit Fee”, as the case may be, based upon
the Index Ratings by Moody’s and S&P, respectively, applicable on such date:

 

Category

 

Index Ratings

 

Commitment
Fee Rate

 

Eurodollar
Spread

 

ABR
Spread

 

Letter of Credit
Fee

 

 

 

 

 

 

 

 

 

 

 

 

 

Category 1

 

A-/A3 or better

 

0.15

%

1.25

%

0.25

%

1.25

%

Category 2

 

BBB+/Baa1

 

0.20

%

1.50

%

0.50

%

1.50

%

Category 3

 

BBB/Baa2

 

0.25

%

1.625

%

0.625

%

1.625

%

Category 4

 

BBB-/Baa3

 

0.35

%

1.75

%

0.75

%

1.75

%

Category 5

 

BB+/Ba1 or lower

 

0.50

%

2.00

%

1.00

%

2.00

%

 

For purposes of the foregoing, (i) if both Moody’s and S&P shall not have in
effect an Index Rating (other than due to a Cessation Event as defined below),
then such rating agency shall be deemed to have established a rating in Category
5; (ii) if the Index Ratings established or deemed to have been established by
Moody’s and S&P shall fall within different Categories, the Applicable Rate
shall be based on the higher of the two ratings unless one of the two ratings is
two or more Categories lower than the other, in which case the Applicable Rate
shall be determined by reference to the Category next above that of the lower of
the two ratings; (iii) if only one of Moody’s and S&P shall have in effect an
Index Rating due to a Cessation Event, then the Applicable Rate shall be
determined by reference to the Category otherwise applicable to such Index
Rating, (iv) if only one of Moody’s and S&P shall have in effect an Index Rating
for any reason other than a Cessation Event, then the Applicable Rate shall be
determined by reference to the Category next below the Category otherwise
applicable to such Index Rating; and (v) if the Index Ratings established or
deemed to have been established by Moody’s and S&P shall be changed (other than
as a result of a change in the rating system of Moody’s or S&P), such change
shall be effective as of the date on which it is first announced by the
applicable rating agency, irrespective of when notice of such change shall have
been furnished by the Company to the Administrative Agent and the Lenders
pursuant to Section 5.01 or otherwise.  Each change in the Applicable Rate shall
apply during the period commencing on the effective date of such change and
ending on the date immediately preceding the effective date of the next such
change.  If the rating system of Moody’s or S&P shall change, or if either such
rating agency shall cease to be in the business of rating corporate debt
obligations or issuers (such cessation, a “Cessation Event”), the Company and
the Lenders shall negotiate in good faith to amend this definition to reflect
such changed rating system or the unavailability of ratings from such rating
agency and, pending the effectiveness of any such amendment, the Applicable Rate
shall be determined by reference to the Index Rating most recently in effect
prior to such change or cessation.

 

“Approved Fund” has the meaning provided in Section 10.04(b).

 

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 10.04), and accepted by the Administrative Agent, in the form of
Exhibit A or any other form approved by the Administrative Agent.

 

“Authorized Officer” means, as to any Person, the Chief Executive Officer, the
President, the Chief Operating Officer, any Vice President, the Secretary, or
the Chief Financial Officer or Finance Director of such Person or any other
officer of such Person duly authorized by such Person to act on behalf of such
Person hereunder.

 

“Bankruptcy Code” has the meaning provided in Section 7.05.

 

3

--------------------------------------------------------------------------------

 

“Bankruptcy Event” means, with respect to any Person, such Person becomes the
subject of a bankruptcy or insolvency proceeding, or has had a receiver,
conservator, trustee, administrator, custodian, assignee for the benefit of
creditors or similar Person charged with the reorganization or liquidation of
its business appointed for it, or, in the good faith determination of the
Administrative Agent, has taken any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any such proceeding or appointment,
provided that a Bankruptcy Event shall not result solely by virtue of any
ownership interest, or the acquisition of any ownership interest, in such Person
by a Governmental Authority or instrumentality thereof, provided, further, that
such ownership interest does not result in or provide such Person with immunity
from the jurisdiction of courts within the United States or from the enforcement
of judgments or writs of attachment on its assets or permit such Person (or such
Governmental Authority or instrumentality) to reject, repudiate, disavow or
disaffirm any contracts or agreements made by such Person.

 

“Bermuda Companies Law” means the Companies Act 1981 of Bermuda and other
relevant Bermuda law.

 

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

 

“Borrowing” means Loans of the same Type made, converted or continued on the
same date and, in the case of Eurodollar Loans, as to which a single Interest
Period is in effect.

 

“Borrowing Request” means a request by the Company for a Borrowing in accordance
with Section 2.18.

 

“Business Day” means (i) for all purposes other than as covered by clause
(ii) below, any day excluding Saturday, Sunday and any day which shall be in the
City of New York a legal holiday or a day on which banking institutions are
authorized by law or other governmental actions to close, and (ii) with respect
to all notices and determinations in connection with, and payments of principal
and interest on, Eurodollar Loans, any day which is a Business Day described in
clause (i) and which is also a day for trading by and between banks in the
London interbank market.

 

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

 

“Capital Markets Product” means, as to any Person, any security, commodity,
derivative transaction or other financial or similar product purchased, sold or
entered into by such Person for the purpose of a third-party undertaking or
assuming one or more risks otherwise assumed by such Person or entered into by
such Person for the purpose of managing one or more risks otherwise assumed by
such Person or other agreements or arrangements entered into by such Person
designed to transfer credit risk from one party to another, including (i) any
structured insurance product, catastrophe bond, rate swap transaction, swap
option, basis swap, forward rate transaction, commodity swap, commodity option,
commodity hedge, equity or equity index swap, equity or equity index option,
bond option, interest rate option or hedge, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or swap transaction,
credit protection transaction, credit swap, credit default swap (including
single default, single-name, basket and first-to-default swaps), credit default
option, equity default swap, total return swap, credit-linked notes, credit
spread transaction, repurchase transaction, reverse repurchase transaction,

 

4

--------------------------------------------------------------------------------

 

buy/sellback transaction, securities lending transaction, weather index
transaction, emissions allowance transaction, or forward purchase or sale of a
security, commodity or other financial instrument or interest (including any
option with respect to any of these transactions), (ii) any transaction which is
a type of transaction that is similar to any transaction referred to in
clause (i) above that is currently, or in the future becomes, recurrently
entered into in the financial markets, (iii) any combination of the transactions
referred to in clauses (i) and (ii) above and (iv) any master agreement relating
to any of the transactions referred to in clauses (i), (ii) or (iii) above.

 

“Cash Equivalents” means, as to any Person, (i) securities issued or directly
and fully guaranteed or insured by the United States or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of not more than one
year from the date of acquisition, (ii) time deposits and certificates of
deposit of any commercial bank having, or which is the principal banking
subsidiary of a bank holding company organized under the laws of the United
States, any State thereof, the District of Columbia or any foreign jurisdiction
having, capital, surplus and undivided profits aggregating in excess of
$200,000,000, with maturities of not more than one year from the date of
acquisition by such Person, (iii) repurchase obligations with a term of not more
than 90 days for underlying securities of the types described in
clause (i) above entered into with any bank meeting the qualifications specified
in clause (ii) above, (iv) commercial paper rated at least A-1 or the equivalent
thereof by S&P or P-1 or the equivalent thereof by Moody’s and in each case
maturing not more than one year after the date of acquisition by such Person,
and (v) investments in “money market funds” within the meaning of Rule 2a-7 of
the Investment Company Act of 1940, as amended, substantially all of whose
assets are comprised of securities of the types described in clauses (i) through
(iv) above.

 

“Change in Law” means the occurrence, after the date of this Agreement (or with
respect to any Lender, if later, the date on which such Lender becomes a
Lender), of any of the following: (a) the adoption or taking effect of any law,
rule, regulation or treaty, (b) any change in any law, rule, regulation or
treaty or in the administration, interpretation or application thereof by any
Governmental Authority, or (c) the making or issuance of any request, rules,
guideline, requirement or directive (whether or not having the force of law) by
any Governmental Authority; provided however, that notwithstanding anything
herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer
Protection Act and all requests, rules, guidelines, requirements and directives
thereunder, issued in connection therewith or in implementation thereof, and
(ii) all requests, rules, guidelines, requirements and 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, issued or implemented.

 

“Change of Control” means (a) Validus Re or any other Account Party (other than
Pac Re) ceasing to be a Wholly-Owned Subsidiary of the Company, (b) the
acquisition of ownership, directly or indirectly, beneficially or of record, by
any Person or group (within the meaning of the Securities Exchange Act of 1934,
as amended, and the rules of the SEC thereunder as in effect on the date hereof)
(other than any corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership of stock
in the Company) of Equity Interests representing more than 50% of either the
aggregate ordinary voting power or the aggregate equity value represented by the
issued and outstanding Equity Interests in the Company, or (c) the occupation of
a majority of the seats (other than vacant seats) on the board of directors of
the Company by Persons who were neither (i) nominated by the board of directors
of the Company nor (ii) appointed by directors so nominated.

 

“Charges” has the meaning provided in Section 10.13.

 

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

 

“Collateral” has the meaning provided in the Four-Year Secured Letter of Credit
Facility.

 

“Collateral Account” has the meaning provided in Section 2.10.

 

“Commitment” means, with respect to each Lender, at any time, the amount set
forth opposite such Lender’s name on the Commitment Schedule, as the same may be
reduced or increased pursuant to Sections 2.09, 2.14, 2.27 or 10.04.  As of the
Effective Date, the aggregate Commitments of all Lenders hereunder is
$400,000,000.

 

“Commitment Expiration Date” means March 9, 2016.

 

“Commitment Fee” has the meaning provided in Section 2.11(a).

 

“Commitment Schedule” means the Schedule attached hereto identified as such.

 

“Company” means Validus Holdings, Ltd., a holding company organized under the
laws of Bermuda.

 

“Company Guaranty” means the guaranty of the Company provided in Article IX.

 

“Conditional Termination Notice” has the meaning provided in Section 2.09(c).

 

“Connection Income Taxes” means Other Connection Taxes that are imposed on or
measured by net income (however denominated) or that are franchise Taxes.

 

“Consolidated Indebtedness” “ means, as of any date of determination, all
Indebtedness (other than (a) Indebtedness described in clause (h) of the
definition thereof that does not constitute bonds, debentures, notes or similar
instruments that are generally recourse with respect to the Company and its
Subsidiaries, (b) obligations (contingent or otherwise) in respect of undrawn
letters of credit, (c) Indebtedness described in clause (c) of the definition
thereof and (d) Indebtedness that is non-recourse with respect to the Company
and its Subsidiaries) of the Company and its Subsidiaries.  For the avoidance of
doubt, “Consolidated Indebtedness” shall not include contingent obligations of
the Company or any Subsidiary as an account party or applicant in respect of any
Guarantee unless such Guarantee supports an obligation that constitutes
Indebtedness.

 

“Consolidated Net Worth” means, as of any date of determination, the Net Worth
of the Company and its Subsidiaries determined on a consolidated basis in
accordance with GAAP after appropriate deduction for any minority interests in
Subsidiaries including for the avoidance of doubt the aggregate principal amount
of all outstanding preferred (including without limitation trust preferred) or
preference securities or Hybrid Capital of the Company and its Subsidiaries,
provided that the aggregate outstanding amount of such preferred or preference
securities or Hybrid Capital of the Company and its Subsidiaries shall only be
included in Consolidated Net Worth to the extent such amount would be included
in a determination of the consolidated net worth of the Company and its
Subsidiaries under the applicable procedures and guidelines of S&P as of the
date hereof.

 

“Consolidated Total Capital” means, as of any date of determination, the sum of
(i) Consolidated Indebtedness and (ii) Consolidated Net Worth at such time.

 

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“Control” means, with respect to any Person, the possession, directly or
indirectly, of the power (i) to vote 10% or more of the voting power of the
securities having ordinary voting power for the election of directors of such
Person or (ii) 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.

 

“Co-Documentation Agent” means each of Lloyds Securities Inc. and SunTrust Bank
in its capacity as co-documentation agent for the credit facility evidenced by
this Agreement.

 

“Credit Documents” means this Agreement and each Limited Fronting Lender
Agreement.

 

“Credit Event” means the making of any Loan or the issuance of any Letter of
Credit (or any increase of the Stated Amount thereof).

 

“Credit Exposure” means, with respect to any Lender at any time, the sum of the
outstanding principal amount of such Lender’s Loans and the Dollar amount of its
Applicable Percentage of the Letter of Credit Outstandings at such time.

 

“Credit Party” means the Administrative Agent, the Issuing Agent, any LC Issuer
or any other Lender.

 

“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.

 

“Defaulting Lender” means any Lender that (a) has failed, within two
(2) Business Days of the date required to be funded or paid, to (i) fund any
portion of its Loans, (ii) fund any portion of its participations in Letters of
Credit or (iii) pay over to any Credit Party any other amount required to be
paid by it hereunder, unless, in the case of clause (i) above, such Lender
notifies the Administrative Agent in writing that such failure is the result of
such Lender’s good faith determination that a condition precedent to funding
(specifically identified and including the particular default, if any) has not
been satisfied, (b) has notified the Company or any Credit Party in writing, or
has made a public statement to the effect, that it does not intend or expect to
comply with any of its funding obligations under this Agreement (unless such
writing or public statement indicates that such position is based on such
Lender’s good faith determination that a condition precedent (specifically
identified and including the particular default, if any) to funding a loan under
this Agreement cannot be satisfied) or generally under other agreements in which
it commits to extend credit, (c) has failed, within three (3) Business Days
after request by a Credit Party, acting in good faith, to provide a
certification in writing from an authorized officer of such Lender that it will
comply with its obligations (and is financially able to meet such obligations)
to fund prospective Loans and participations in then outstanding Letters of
Credit under this Agreement, provided that such Lender shall cease to be a
Defaulting Lender pursuant to this clause (c) upon such Credit Party’s receipt
of such certification in form and substance satisfactory to it and the
Administrative Agent, or (d) has become the subject of a Bankruptcy Event.

 

“Designated Subsidiary Account Party” means Validus Re, Validus Americas, Pac Re
and each Wholly-Owned Subsidiary of the Company set forth on Schedule 2.15 and
each Wholly-Owned Subsidiary of the Company which is designated as a Designated
Subsidiary Account Party in accordance with Section 2.15.

 

“Dispositions” has the meaning provided in Section 6.02.

 

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“Dividends” has the meaning provided in Section 6.08.

 

“Dollars” or “$” refers to lawful money of the United States of America.

 

“DSAP Assumption Agreement” means an assumption agreement in the form of
Exhibit C or such other form reasonably acceptable to the Administrative Agent.

 

“DTC” means the Depository Trust Company.

 

“Effective Date” has the meaning provided in Section 4.01.

 

“Eligible Person” means and includes any commercial bank, insurance company,
finance company, financial institution, fund that invests in loans or any other
“accredited investor” (as defined in Regulation D of the Securities Act of 1933,
as amended), but in any event excluding the Company and its Subsidiaries.

 

“Eligible Securities” has the meaning provided in Section 1.01 of the Four-Year
Secured Letter of Credit Facility Agreement.

 

“Environmental Law” means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, release or threatened release of any Hazardous Material or to health
and safety matters.

 

“Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Company or any Subsidiary directly or
indirectly resulting from or based upon (a) its violation of any Environmental
Law, (b) its generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) its exposure to any Hazardous
Materials, (d) its release or threatened release of any Hazardous Materials into
the environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing, but in each of (a) through (e) excluding liabilities arising out of
Capital Markets Products and insurance and reinsurance contracts, agreements and
arrangements in each case entered into in the ordinary course of business and
not for speculative purposes.

 

“Equity Interests” means, with respect to any Person, shares of capital stock of
(or other ownership or profit interests in) such Person, warrants, options or
other rights for the purchase or other acquisition from such Person of shares of
capital stock of (or other ownership or profit interests in) such Person,
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 other acquisition from such Person of such shares
(or such other interests), and 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 authorized or otherwise existing on any date of
determination; provided that “Equity Interests” shall not include Indebtedness
for borrowed money which is convertible into Equity Interests.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time and the regulations promulgated and rulings issued thereunder.
Section references to ERISA are to ERISA, as in effect at the date of this
Agreement and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.

 

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“ERISA Affiliate” means any corporation or trade or business which is a member
of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Company or any of its Subsidiaries or is
under common control (within the meaning of Section 414(c) of the Code) with the
Company or any of its Subsidiaries.

 

“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Adjusted LIBO Rate.

 

“Event of Default” has the meaning provided in Article VII.

 

“Excluded Taxes” means, with respect to the Administrative Agent, the Issuing
Agent, any Lender, or any other recipient of any payment to be made by or on
account of any obligation of any Account Party hereunder, (a) income or
franchise Taxes imposed on (or measured by) its net income or net profits
(however denominated) by any jurisdiction in or under the laws of which such
recipient is organized or in which its principal office is located or, in the
case of any Lender, in which its applicable lending office is located, or in
which it conducts a trade or business or has a permanent establishment or is
otherwise subject to such Taxes or Other Connection Taxes, (b) any branch
profits Taxes imposed by the United States of America or any similar Tax imposed
by any other jurisdiction in which the recipient is located, (c) in the case of
a Foreign Lender (other than an assignee pursuant to a request by such Account
Party under Section 2.14(b)), any withholding Tax that is imposed by the United
States of America or Bermuda on amounts payable to such Foreign Lender at the
time such Foreign Lender becomes a party to this Agreement (or designates a new
lending office) or is attributable to such Foreign Lender’s failure to comply
with Section 2.12(e), except to the extent that such Foreign Lender (or its
assignor, if any) was entitled, at the time of designation of a new lending
office (or assignment), to receive additional amounts from such Account Party
with respect to such withholding Tax pursuant to Section 2.12(a) and (d) any
U.S. Federal withholding Taxes imposed under FATCA.

 

“Existing Administrative Agent” means the Administrative Agent, as defined in
the Existing Credit Facility.

 

“Existing Credit Facility” means that certain Three-Year Unsecured Letter of
Credit Facility Agreement dated as of March 12, 2010 among the Company, Validus
Re, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative
Agent, as amended, restated, supplemented or otherwise modified prior to the
Effective Date.

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with) and any current or future
regulations or official interpretations thereof.

 

“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 on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if necessary, to
the next 1/100 of 1%) of the quotations for such day for such transactions
received by the Administrative Agent from three Federal funds brokers of
recognized standing selected by it.

 

“Financial Officer” means the chief financial officer, principal accounting
officer, treasurer or controller of the Company.

 

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“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than (i) Bermuda, or (ii) the United States of America, any
State thereof or the District of Columbia; provided, however, that with respect
to an Account Party that is organized under the laws of the United States of
America, any State thereof or the District of Columbia, a Lender that is
organized under the laws of Bermuda shall be considered a Foreign Lender.

 

“Foreign Pension Plan” means any plan, fund (including any superannuation fund)
or other similar program established or maintained outside the United States of
America by the Company or any one or more of its Subsidiaries primarily for the
benefit of employees of the Company or such Subsidiaries residing outside the
United States of America, which plan, fund or other similar program provides, or
results in, retirement income, a deferral of income in contemplation of
retirement or payments to be made upon termination of employment, and which plan
is not subject to ERISA or the Code.

 

“Four-Year Secured Letter of Credit Facility” means the four-year senior secured
letter of credit facility among the Company, Validus Reinsurance, Ltd., Validus
Re Americas, Ltd., various Designated Subsidiary Account Parties, JPMorgan Chase
Bank, N.A., as administrative agent and issuing agent, and one or more lenders
entered into on March 9, 2012, including the related collateral and security
documents and other instruments and agreements executed in connection therewith,
and amendments, renewals, replacements, refinancings and restatements to any of
the foregoing (provided that the principal amount thereof shall not exceed
$525,000,000 or, if increased in accordance with its terms, $700,000,000, plus
reasonable refinancing costs, fees and expenses).

 

“Fronted Letter of Credit” has the meaning provided in Section 2.02(a).

 

“Fronted Unpaid Drawing” has the meaning provided in clause (y) of
Section 2.05(a).

 

“Fronting Arrangement” means an agreement or other arrangement by a Regulated
Insurance Company pursuant to which an insurer or insurers agree to issue
insurance policies at the request or on behalf of such Regulated Insurance
Company and such Regulated Insurance Company assumes the obligations in respect
thereof pursuant a Reinsurance Agreement or otherwise.

 

“Fronting Lender” means any Lender (or any Affiliate thereof) which is requested
by an Account Party, and which agrees in writing, to issue Fronted Letters of
Credit hereunder pursuant to Section 2.02.

 

“Fronting Participant” has the meaning provided in Section 2.02(b).

 

“GAAP” means generally accepted accounting principles in the United States of
America.

 

“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.

 

“Guarantee” of or by any Person (the “guarantor”) means any obligation
guaranteeing or intended to guarantee any Indebtedness, leases, dividends or
other obligations (“primary obligations”) of any other Person (the “primary
obligor”) in any manner, whether directly or indirectly, including any
obligation of such Person, whether or not contingent, (a) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (b) to advance or supply funds (i) for the

 

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purchase or payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (c) to purchase or lease property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (d) otherwise to assure or hold harmless the owner of
such primary obligation against loss in respect thereof; provided, however, that
the term Guarantee shall not include (x) endorsements of instruments for deposit
or collection in the ordinary course of business and (y) obligations of any
Regulated Insurance Company under Insurance Contracts, Reinsurance Agreements,
Fronting Arrangements or Retrocession Agreements (including any Liens with
respect thereto).  The amount of any Guarantee shall be deemed to be an amount
equal to the stated or determinable amount of the primary obligation in respect
of which such Guarantee is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.

 

“Guaranteed Creditors” means and includes each of the Administrative Agent, the
Lenders and each LC Issuer.

 

“Guaranteed Obligations” means all reimbursement obligations and Unpaid Drawings
with respect to Letters of Credit and all other obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code or other applicable similar laws, would become due), liabilities
and indebtedness owing by each Designated Subsidiary Account Party to the
Guaranteed Creditors under this Agreement (including indemnities, fees and
interest thereon (including, in each case, any interest accruing after the
commencement of any bankruptcy, insolvency, receivership or similar proceeding
at the rate provided for in the respective documentation, whether or not such
interest is allowed in any such proceeding)), whether now existing or hereafter
incurred under, arising out of or in connection with this Agreement and the due
performance and compliance by each Designated Subsidiary Account Party with all
of the terms, conditions and agreements contained in this Agreement applicable
to such Designated Subsidiary Account Party.

 

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

 

“Hybrid Capital” means any security that affords equity benefit to the issuer
thereof (under the procedures and guidelines of the S&P) by having ongoing
payment requirements that are more flexible than interest payments associated
with conventional indebtedness for borrowed money and by being contractually
subordinated to such indebtedness.  For the avoidance of doubt, the Company’s
Junior Subordinated Deferrable Debentures constitute Hybrid Capital.

 

“Indebtedness” of any Person means, without duplication, (a) all obligations of
such Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, (c) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (d) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
ordinary course trade accounts payable deferred compensation and any purchase
price adjustment, earnout, contingent payment or deferred payment of a similar
nature incurred in connection with an acquisition), (e) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the Indebtedness secured thereby has
been assumed, provided that the amount of Indebtedness of such Person shall be
the lesser of (i) the fair market value of such property at such date of
determination (determined

 

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in good faith by the Company) and (ii) the amount of such Indebtedness of such
other Person, (f) all Guarantees by such Person of Indebtedness of others,
(g) all Capital Lease Obligations of such Person, (h) all obligations (or to the
extent netting is permitted under the applicable agreement governing such
Capital Markets Products and such netting is limited with respect to the
counterparty or counterparties of such agreement, all net termination
obligations) of such Person under transactions in Capital Markets Products and
(i) all reimbursement obligations of such Person in respect of letters of
credit, letters of guaranty, bankers’ acceptances and similar credit
transactions; provided that, Indebtedness shall not include any preferred
(including without limitation trust preferred) or preference securities or
Hybrid Capital, in each case issued by the Company, to the extent such preferred
or preference securities or Hybrid Capital would be treated as equity issued by
the Company under the applicable procedures and guidelines of S&P as of the date
hereof.  The Indebtedness of any Person shall include the Indebtedness of any
other entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of such
Person’s ownership interest in or other relationship with such entity, except to
the extent the terms of such Indebtedness provide that such Person is not liable
therefor. For the avoidance of doubt, Indebtedness shall not include (v) current
trade payables (including current payables under insurance contracts and current
reinsurance payables) and accrued expenses, in each case arising in the ordinary
course of business, (w) obligations and Guarantees of Regulated Insurance
Companies with respect to Policies, (x) obligations and Guarantees with respect
to products underwritten by Regulated Insurance Companies in the ordinary course
of business, including insurance and reinsurance policies, annuities,
performance and surety bonds, assumptions of liabilities and any related
contingent obligations and (y) Reinsurance Agreements and Fronting Arrangements
and Guarantees thereof entered into by any Regulated Insurance Company in the
ordinary course of business.

 

“Indemnified Taxes” means Taxes, other than Excluded Taxes and Other Taxes,
imposed on or with respect to any payment made by or on account of any
obligation of any Account Party under this Agreement.

 

“Indemnitee” has the meaning provided in Section 10.03(b).

 

“Index Rating” means (i) with respect to S&P, the Company’s Counterparty Credit
Rating and (ii) with respect to Moody’s, the Company’s Long-term Issuer Rating.

 

“Information” has the meaning provided in Section 10.12.

 

“Insurance Business” means one or more aspects of the business of selling,
issuing or underwriting insurance or reinsurance and other businesses reasonably
related thereto.

 

“Insurance Contract” means any insurance contract or policy issued by a
Regulated Insurance Company but shall not include any Reinsurance Agreement,
Fronting Arrangement or Retrocession Agreement.

 

“Insurance Licenses” means the material licenses (including licenses or
certificates of authority from Applicable Insurance Regulatory Authorities),
permits or authorizations to transact insurance and reinsurance business held by
any Regulated Insurance Company.

 

“Interest Election Request” has the meaning provided in Section 2.20(b).

 

“Interest Payment Date” means (a) with respect to any ABR Loan, the last day of
each March, June, September and December and (b) with respect to any Eurodollar
Loan, the last day of the Interest Period applicable to the Borrowing of which
such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest
Period of more than three months’ duration, each day that would have been an

 

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Interest Payment Date had successive Interest Periods of three months duration
been applicable to such Borrowing.

 

“Interest Period” means, with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
(or, if available to each Lender affected, nine or twelve months) thereafter, as
the Company may elect; 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, in the case of a Eurodollar Borrowing only,
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 and
(ii) any Interest Period pertaining to a Eurodollar Borrowing 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. For purposes hereof, the date of a Borrowing initially shall be
the date on which such Borrowing is made and, in the case of a Eurodollar
Borrowing, thereafter shall be the effective date of the most recent conversion
or continuation of such Borrowing.

 

“IPC” means Validus Amalgamation Subsidiary, Ltd., a company organized under the
laws of Bermuda and successor by amalgamation to IPC Holdings, Ltd.

 

“IPC Facility” means the letters of credit master agreement between IPCRe
Limited and Citibank N.A., providing for letters of credit and any
modifications, amendments, restatements, waivers, extensions, renewals,
replacements or refinancings thereof; provided that any such modifications,
amendments, waivers, extensions, renewals, replacements or refinancings be on
terms which, when taken together as a whole, are not adverse in any material
respect to the interests of the Lenders, as compared to those contained in the
IPC Facility as of the date hereof.

 

“IPCRe Limited” means IPCRe Limited, a company organized under the laws of
Bermuda.

 

“Issuing Agent” means JPMorgan Chase Bank, N.A. in its capacity as Issuing Agent
with respect to Several Letters of Credit pursuant to Section 2.01.

 

“Joint Lead Arrangers and Joint Bookrunners” means, collectively, J.P. Morgan
Securities LLC, Deutsche Bank Securities Inc., Lloyds Securities Inc. and
SunTrust Robinson Humphrey, Inc.

 

“Junior Subordinated Deferrable Debentures” mean the Company’s Junior
Subordinated Deferrable Interest Debentures due 2036 issued under the Junior
Subordinated Indenture dated as of June 15, 2006 between the Company and
JPMorgan Chase Bank, National Association, as Trustee, as the same has been and
may be amended from time to time, and any substantially similarly structured
security issued by the Company or any of its Subsidiaries, including for the
avoidance of doubt the Company’s Junior Subordinated Deferrable Interest
Debentures due 2037 issued under the Junior Subordinated Indenture dated
June 21, 2007 between the Company and Wilmington Trust Company, as Trustee, as
the same may be amended from time to time.

 

“LC Issuer” means each of the Issuing Agent and each Fronting Lender.

 

“Legal Requirements” means all applicable laws, rules and regulations and
interpretations thereof made by any governmental body or regulatory authority
(including any Applicable Insurance Regulatory Authority) having jurisdiction
over the Company or a Subsidiary.

 

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“Lenders” has the meaning provided in the first paragraph of this Agreement.  As
the context requires, “Lenders” shall include each Limited Fronting Lender.

 

“Letter of Credit Fee” has the meaning provided in Section 2.11(c).

 

“Letter of Credit Outstandings” means, at any time, the sum of (i) the aggregate
Stated Amount of all outstanding Several Letters of Credit, (ii) the aggregate
Stated Amount of all outstanding Fronted Letters of Credit and (iii) the
aggregate amount of all Unpaid Drawings in respect of all Letters of Credit at
such time.

 

“Letter of Credit Request” has the meaning provided in Section 2.04(a).

 

“Letter of Credit Supportable Obligations” means the obligations of the Account
Parties or any of their subsidiaries which are permitted to exist pursuant to
the terms of this Agreement in connection with the Insurance Business of such
Account Parties and their subsidiaries.

 

“Letters of Credit” means the Several Letters of Credit and the Fronted Letters
of Credit.

 

“Leverage Ratio” means the ratio of (i) Consolidated Indebtedness to
(ii) Consolidated Total Capital.

 

“LIBO Rate” means with respect to any Eurodollar Borrowing for any Interest
Period, the rate appearing on Reuters Screen LIBOR01 Page (or on any successor
or substitute page or pages of such Service, or any successor to or substitute
for such Service, providing rate quotations comparable to those currently
provided on such page or pages of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to Dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for Dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the “LIBO Rate” with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate at which
deposits of $5,000,000, and for a maturity comparable to such Interest Period,
are offered by the Administrative Agent.

 

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of
such asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.

 

“Limited Fronting Lender” means any Lender, to the extent that such Person
agrees (in its sole and absolute discretion) to be an issuer with respect to any
Non-NAIC Approved Bank’s Applicable Percentage of Several Letters of Credit
outstanding and/or issued during the period that such Non-NAIC Approved Bank is
a Non-NAIC Approved Bank, all pursuant to a Limited Fronting Lender Agreement.

 

“Limited Fronting Lender Agreement” has the meaning provided in Section 2.01(e).

 

“Lloyd’s LC Facility” means that certain amended and restated letter of credit
facility agreement, dated as of November 18, 2011, between the Company and
Talbot Holdings Ltd. and Lloyds TSB Bank plc and ING Bank N.V., London Branch
providing for the issuance of letters of credit in

 

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support of obligations of Talbot Holdings Ltd. under its 2012 and 2013
underwriting years’ letter of credit facility procurement agreements and capital
stock arrangements with Talbot 2002 Underwriting Capital Ltd. 2002 in an
aggregate principal amount of up to $25,000,000 at any time outstanding (the
“FAL Facility Agreement”) and any modifications, amendments, restatements,
waivers, extensions, renewals, replacements or refinancings thereof; provided
that any such modifications, amendments, waivers, extensions, renewals,
replacements or refinancings be on terms which, when taken together as a whole,
are not adverse in any material respect to the interests of the Lenders, as
compared to those contained in the FAL Facility Agreement.

 

“Loan” has the meaning provided in Section 2.16(a).

 

“Loan Exposure” means, at any time, the aggregate principal amount of all Loans
then outstanding.

 

“Margin Stock” has the meaning provided in Regulation U.

 

“Material Adverse Effect” means any material adverse condition or any material
adverse change in or affecting (x) the business, operations, assets, liabilities
or financial condition of the Company and its Subsidiaries, taken as a whole, or
(y) the rights and remedies of the Lenders or the ability of the Company and
each other Account Party, taken as a whole, to perform their respective
obligations to the Lenders under this Agreement.

 

“Maximum Rate” has the meaning provided in Section 10.13.

 

“Minimum Consolidated Net Worth Amount” means, at any time, an amount which
initially shall be equal to $2,600,000,000, and which amount shall be increased
as follows: (i) immediately following the last day of each fiscal quarter
(commencing with the fiscal quarter ended March 31, 2012) by an amount (if
positive) equal to 50% of the Net Income for such fiscal quarter and (ii) by 50%
of the aggregate increases in the consolidated shareholders’ equity of the
Company during such fiscal quarter by reason of the issuance and sale of common
Equity Interests of the Company, including upon any conversion of debt
securities of the Company into such Equity Interests.

 

“Moody’s” means Moody’s Investors Service, Inc.

 

“Multiemployer Plan” means any multiemployer plan as defined in
Section 4001(a)(3) of ERISA, which is maintained or contributed to by (or to
which there is an obligation to contribute of) the Company, any of its
Subsidiaries or any ERISA Affiliate, and each such plan for the five year period
immediately following the latest date on which the Company, such Subsidiary or
such ERISA Affiliate contributed to or had an obligation to contribute to such
plan.

 

“NAIC” means the National Association of Insurance Commissioners and any
successor thereto.

 

“NAIC Approved Bank” means (a) any bank listed on the most current list of banks
approved by the Securities Valuation Office of the NAIC (the “NAIC Bank List”)
or (b) any Lender as to which its confirming bank is a bank listed on the NAIC
Bank List.

 

“Net Income” shall mean, for any period, an amount equal to the net income of
the Company and its Subsidiaries (determined on a consolidated basis in
accordance with GAAP) for such period.

 

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“Net Worth” means, as to any Person, the sum of its capital stock (including its
preferred stock), capital in excess of par or stated value of shares of its
capital stock (including its preferred stock), retained earnings and any other
account which, in accordance with GAAP, constitutes stockholders equity, but
excluding (i) any treasury stock and (ii) the amount of the effects of Financial
Accounting Statement No. 115 (which amount is shown on the Company’s
December 31, 2011 balance sheet under the caption “Accumulated other
comprehensive income” and which, after adoption of Financial Accounting
Statements Nos. 157 and 159 will be measured as the difference between
investments carried at estimated fair value and investments carried at amortized
cost).

 

“Non-NAIC Approved Bank” means, at any time, any Lender that is not an NAIC
Approved Bank.

 

“Notice of Non-Extension” has the meaning provided in Section 2.07.

 

“Other Connection Taxes” means, with respect to the Administrative Agent, the
Issuing Agent or any Lender, Taxes imposed as a result of a present or former
connection between such Person and the jurisdiction imposing such Tax (other
than connections arising from such Person 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 this Agreement, or sold or assigned any Loan or an interest in
any obligation of any Account Party under this Agreement).

 

“Other Taxes” means any and all present or future stamp or documentary taxes or
any other similar excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or performance under, this Agreement other than any taxes to the extent
resulting from a voluntary change in the identity of the Administrative Agent,
the Issuing Agent or any Lender or assignee thereof.

 

“Pac Re” means PaCRe, Ltd., a Class 4 insurer registered under the Bermuda
Insurance Act 1978, as amended.  As of the Effective Date, the Company owns 100%
of the outstanding voting Equity Interests in PaCRe, Ltd.

 

“Pac Re Facility” means a secured credit facility to be entered into after the
Effective Date by and among Pac Re, JPMorgan Chase Bank, N.A. and/or one or more
other lenders and agents, including the related collateral and security
documents and other instruments and agreements executed in connection therewith,
and amendments, renewals, replacements, refinancings and restatements to any of
the foregoing (provided that the principal amount thereof shall not exceed
$10,000,000, plus reasonable refinancing costs, fees and expenses).

 

“Parent” means, with respect to any Lender, any Person as to which such Lender
is, directly or indirectly, a subsidiary.

 

“Participant” has the meaning provided in Section 10.04(c).

 

“Participant Register” has the meaning provided in Section 10.04(c).

 

“Participating Issuer” means, from time to time with respect to each Several
Letter of Credit, each Non-NAIC Approved Bank for whose Applicable Percentage a
Limited Fronting Lender has agreed to be liable as an issuer.

 

“Patriot Act” has the meaning provided in Section 10.14.

 

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“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA and any successor entity performing similar functions.

 

“Permitted Subsidiary Indebtedness” means:

 

(a)           Indebtedness of any Subsidiary of the Company under this Agreement
or existing on the date hereof and listed on Schedule 3.14 and extensions,
renewals and replacements of any such Indebtedness, provided that such
extending, renewal or replacement Indebtedness (i) shall not be Indebtedness of
an obligor that was not an obligor with respect to the Indebtedness being
extended, renewed or replaced, (ii) shall not be in a principal amount that
exceeds the principal amount of the Indebtedness being extended, renewed or
replaced (plus any accrued but unpaid interest and redemption premium payable by
the terms of such Indebtedness thereon and reasonable refinancing or renewal
fees, costs and expenses), (iii) shall not have an earlier maturity date or
shorter weighted average life than the Indebtedness being extended, renewed or
replaced and (iv) shall be subordinated to the Indebtedness incurred hereunder
on terms (if any) at least as favorable to the Lenders as the Indebtedness being
extended, renewed or replaced;

 

(b)           Indebtedness of any Subsidiary of the Company incurred in the
ordinary course of business in connection with any Capital Markets Product that
are not entered into for speculative purposes;

 

(c)           Indebtedness owed by Subsidiaries of the Company to the Company or
any of its Subsidiaries;

 

(d)           Indebtedness of any Subsidiary of the Company incurred to finance
the acquisition, construction or improvement of any fixed or capital assets,
including Capital Lease Obligations and any Indebtedness assumed by any
Subsidiary of the Company in connection with the acquisition of any such assets
or secured by a Lien on any such assets prior to the acquisition thereof,
provided that (i) such Indebtedness is incurred prior to or within 90 days after
such acquisition or the completion of such construction or improvement and
(ii) the aggregate principal amount of Indebtedness permitted by this
clause (d) shall not exceed $10,000,000 at any time outstanding;

 

(e)           Indebtedness of any Subsidiary of the Company in respect of
letters of credit issued to reinsurance cedents, or to lessors of real property
in lieu of security deposits in connection with leases of any Subsidiary of the
Company, in each case in the ordinary course of business;

 

(f)            Indebtedness of any Subsidiary of the Company incurred in the
ordinary course of business in connection with workers’ compensation claims,
self-insurance obligations, unemployment insurance or other forms of
governmental insurance or benefits and pursuant to letters of credit or other
security arrangements entered into in connection with such insurance or benefit;
and

 

(g)           Indebtedness of any Designated Subsidiary Account Parties under
the Four-Year Secured Letter of Credit Facility;

 

(h)           Indebtedness representing installment insurance premiums owing by
the Company or any Subsidiary in the ordinary course of business in respect of
the liability insurance, casualty insurance or business interruption insurance
maintained by the Company or any Subsidiary, in each case in respect of their
properties and assets (but excluding, for the avoidance of doubt, any insurance
or reinsurance provided or obtained by the Company or any Subsidiary in
connection with performing its Insurance Business or managing risk in respect
thereof);

 

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(i)            Acquired Indebtedness of Subsidiaries in an aggregate principal
amount not exceeding $250,000,000 at any time outstanding; and

 

(j)            without duplication, additional Indebtedness of Subsidiaries of
the Company not otherwise permitted under clauses (a) through (i) of this
definition which, when added to the aggregate amount of all Liens (other than
with respect to Indebtedness incurred pursuant to this clause (j)) incurred by
the Company pursuant to Section 6.03(w), shall not exceed at any time
outstanding 10% of Consolidated Net Worth at the time of incurrence of any new
Indebtedness under this clause (j); provided that immediately after giving
effect (including pro forma effect) to the incurrence of any Indebtedness
pursuant to this clause (j), no Event of Default shall have occurred and be
continuing.

 

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

 

“Plan” means any pension plan as defined in Section 3(2) of ERISA and subject to
Title IV of ERISA, which is maintained or contributed to by (or to which there
is an obligation to contribute of) the Company or any of its Subsidiaries or any
of their ERISA Affiliates, and each such plan for the five year period
immediately following the latest date on which the Company, any of its
Subsidiaries or any of their ERISA Affiliates maintained, contributed to or had
an obligation to contribute to such plan.

 

“Policies” means all insurance policies, annuity contracts, guaranteed interest
contracts and funding agreements (including riders to any such policies or
contracts, certificates issued with respect to group life insurance or annuity
contracts and any contracts issued in connection with retirement plans or
arrangements) and assumption certificates issued or to be issued (or filed
pending current review by applicable Governmental Authorities) by any Regulated
Insurance Company and any coinsurance agreements entered into or to be entered
into by any Regulated Insurance Company.

 

“Preferred Securities” means any preferred Equity Interests (or capital stock)
of any Person that has preferential rights with respect to dividends or
redemptions or upon liquidation or dissolution of such Person over shares of
common Equity Interests (or capital stock) of any other class of such Person.

 

“Prime Rate” means the rate of interest per annum publicly announced from time
to time by JPMorgan Chase Bank, N.A., as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.

 

“Private Act” means separate legislation enacted in Bermuda with the intention
that such legislation apply specifically to any Account Party, in whole or in
part.

 

“Protected Cell Company” means a Subsidiary that has created segregated accounts
pursuant to the provisions of the Segregated Account Companies Act 2000 of
Bermuda.

 

“Register” has the meaning provided in Section 10.04(b).

 

“Regulated Insurance Company” means any Subsidiary of the Company, whether now
owned or hereafter acquired, that is authorized or admitted to carry on or
transact Insurance Business in any jurisdiction (foreign or domestic) and is
regulated by any Applicable Insurance Regulatory Authority.

 

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“Regulation D” means Regulation D of the Board as from time to time in effect
and any successor to all or a portion thereof establishing reserve requirements.

 

“Regulation T” means Regulation T of the Board as from time to time in effect
and any successor to all or a portion thereof establishing margin requirements.

 

“Regulation U” means Regulation U of the Board as from time to time in effect
and any successor to all or a portion thereof establishing margin requirements.

 

“Regulation X” means Regulation X of the Board as from time to time in effect
and any successor to all or a portion thereof establishing margin requirements.

 

“Reinsurance Agreement” means any agreement, contract, treaty, certificate or
other arrangement whereby any Regulated Insurance Company agrees to transfer,
cede or retrocede to another insurer or reinsurer all or part of the liability
assumed or assets held by such Regulated Insurance Company under a policy or
policies of insurance issued by such Regulated Insurance Company or under a
reinsurance agreement assumed by such Regulated Insurance Company.

 

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

 

“Replaced Lender” has the meaning provided in Section 2.14(b).

 

“Replacement Lender” has the meaning provided in Section 2.14(b).

 

“Required Lenders” means at any time Lenders having more than 50% of the
aggregate amount of the Commitments; provided that if the Total Commitment has
been terminated, then the Required Lenders means Lenders whose aggregate Credit
Exposures exceed 50% of the Loan Exposure and the aggregate amount of Letter of
Credit Outstandings at such time; provided, further, that, so long as a Lender
is a Defaulting Lender, the Commitments and the Credit Exposures of such Lender
shall not be included in determining whether the Required Lenders have taken or
may take any action hereunder (including any consent to any amendment or waiver
pursuant to Section 10.02); provided that any waiver, amendment or modification
requiring the consent of all Lenders or each affected Lender which affects such
Defaulting Lender differently than other affected Lenders shall require the
consent of such Defaulting Lender.

 

“Restricted Margin Stock” means Margin Stock owned by the Company or any of its
Subsidiaries the value of which (determined as required under clause 2(i) of the
definition of “Indirectly Secured” set forth in Regulation U) represents not
more than 33% of the aggregate value (determined as required under clause
(2)(i) of the definition of “Indirectly Secured” set forth in Regulation U), on
a consolidated basis, of the property and assets of the Company and its
Subsidiaries (excluding any Margin Stock) that is subject to the provisions of
Sections 6.02 and 6.03.

 

“Retrocession Agreement” means any agreement, contract, treaty or other
arrangement whereby one or more insurers or reinsurers, as retrocessionaires,
assume liabilities of reinsurers under a Reinsurance Agreement or other
retrocessionaires under another Retrocession Agreement.

 

“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial
Services LLC business.

 

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“SAP” means, with respect to any Regulated Insurance Company, the statutory
accounting principles and accounting procedures and practices prescribed or
permitted by the Applicable Insurance Regulatory Authority of the state or
jurisdiction in which such Regulated Insurance Company is domiciled; it being
understood and agreed that determinations in accordance with SAP for purposes of
Article VII, including defined terms as used therein, are subject (to the extent
provided therein) to Section 1.04.

 

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

 

“Service of Process Agent” means CT Corporation Systems, 111 Eighth Avenue, New
York, New York 10011.

 

“Several Letter of Credit” has the meaning provided in Section 2.01(a).

 

“Several Unpaid Drawing” has the meaning provided in clause (x) of
Section 2.05(a).

 

“Significant Insurance Subsidiary” means a Regulated Insurance Company which is
also a Significant Subsidiary.

 

“Significant Subsidiary” means (a) Validus Re, (b) Talbot Holdings Ltd. and
(c) each other Subsidiary of the Company that either (i) as of the end of the
most recently completed fiscal year of the Company for which audited financial
statements are available, has assets that exceed 10% of the total consolidated
assets of the Company and all of its Subsidiaries as of the last day of such
period or (ii) for the most recently completed fiscal year of the Company for
which audited financial statements are available, has revenues that exceed 10%
of the consolidated revenue of the Company and all of its Subsidiaries for such
period; provided that, if at any time the aggregate amount of the total
consolidated assets of the Company and all of its Subsidiaries or the
consolidated revenue of the Company and all of its Subsidiaries attributable to
Subsidiaries that are not Significant Subsidiaries exceeds fifteen percent (15%)
of the total consolidated assets of the Company and all of its Subsidiaries as
of the end of any such fiscal year or fifteen percent (15%) of the consolidated
revenue of the Company and all of its Subsidiaries for any such fiscal quarter,
the Company (or, in the event the Company has failed to do so within ten days,
the Administrative Agent) shall designate sufficient Subsidiaries as
“Significant Subsidiaries” to eliminate such excess, and such designated
Subsidiaries shall for all purposes of this Agreement constitute Significant
Subsidiaries.

 

“Solvent” means, with respect to any Person on a particular date, that on such
date (a) the amount of the “present fair saleable value” of each of the business
and assets of such Person will, as of such date, exceed the amount of all
“liabilities of such Person, contingent or otherwise”, as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present fair
saleable value of each of the business and assets of such Person is greater than
the amount that will be required to be paid on or in respect of the probable
“liability” on the existing debts and other “liabilities contingent or
otherwise” of such Person, (c) the assets of such Person do not constitute
unreasonably small capital for such Person to carry out its business as now
conducted and as proposed to be conducted including the capital needs of such
Person, taking into account the particular capital requirements of the business
conducted by such Person and projected capital requirements and capital
availability thereof, (d) such Person does not intend to incur debts beyond
their ability to pay such debts as they mature (taking into account the timing
and amounts of cash to be received by such Person, and of amounts to be payable
on or in respect of debt of such Person) and (e) such Person does not believe
that final judgments against such Person in actions for money damages presently
pending will be rendered at a time when, or in an amount such that, they will be
unable to satisfy any such judgments promptly in accordance with their terms
(taking into account the maximum

 

20

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reasonable amount of such judgments in any such actions and the earliest
reasonable time at which such judgments might be rendered) and such Person
believes that its cash flow, after taking into account all other anticipated
uses of the cash of such Person (including the payments on or in respect of debt
referred to in paragraph (d) of this definition), will at all times be
sufficient to pay all such judgments promptly in accordance with their terms.
For purposes of this definition, (i) “debt” means liability on a “claim”, and
(ii) “claim” means any (A) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or
(B) right to an equitable remedy for breach of performance if such breach gives
rise to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.

 

“Stated Amount” means at, any time, the maximum amount available to be drawn
under any Letter of Credit (regardless of whether any conditions for drawing
could then be met).

 

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject for
Eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of the Board).  Such reserve percentages shall include those
imposed pursuant to such Regulation D.  Eurodollar Loans shall be deemed to
constitute Eurocurrency funding and to be subject to such reserve requirements
without benefit of or credit for proration, exemptions or offsets that may be
available from time to time to any Lender under such Regulation D or any
comparable regulation.  The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.

 

“Statutory Statements” means, with respect to any Regulated Insurance Company
for any fiscal year, the annual or quarterly financial statements of such
Regulated Insurance Company as required to be filed with the Insurance
Regulatory Authority of its jurisdiction of domicile and in accordance with the
laws of such jurisdiction, together with all exhibits, schedules, certificates
and actuarial opinions required to be filed or delivered therewith.

 

“Subsidiary” means any subsidiary of the Company.

 

“subsidiary” means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other entity
the accounts of which would be consolidated with those of the parent in the
parent’s consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other
entity of which securities or other ownership interests representing more than
50% of the equity or ordinary voting power or, in the case of a partnership,
more than 50% of the general partnership interests are, as of such date, owned,
controlled or held by the parent or one or more subsidiaries of the parent or by
the parent and one or more subsidiaries of the parent.

 

“Super-Majority Lenders” means at any time Lenders having at least 75% of the
aggregate amount of the Commitments; provided that if the Total Commitment has
been terminated, then the Super-Majority Lenders means Lenders whose aggregate
Credit Exposures equal or exceed 75% of the Loan Exposure and the aggregate
amount of Letter of Credit Outstandings at such time.

 

“Syndication Agent” means Deutsche Bank Securities Inc., in its capacity as
syndication agent for the credit facility evidenced by this Agreement.

 

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“Talbot Facility” means the $60,000,000 three-year revolving credit facility
agreement, dated as of March 12, 2010, between the Company and Talbot Holdings
Ltd. and Lloyds TSB Bank plc, as amended, restated, supplemented or otherwise
modified prior to the Effective Date.

 

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

 

“Total Commitment” means, at any time, the sum of the Commitments of each of the
Lenders at such time.

 

“Transaction” means the execution, delivery and performance by each Account
Party of this Agreement, the borrowing of Loans by the Company and the use of
proceeds thereof and the issuance of Letters of Credit for the account of any
Account Party, in each case, on and after the Effective Date.

 

“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.

 

“Unpaid Drawings” means the Several Unpaid Drawings and the Fronted Unpaid
Drawings.

 

“Unrestricted Margin Stock” means any Margin Stock owned by the Company or any
of its Subsidiaries which is not Restricted Margin Stock.

 

“Validus Americas” means Validus Re Americas, Ltd., a company organized under
the Laws of Bermuda.

 

“Validus Re” means Validus Reinsurance, Ltd., a company organized under the Laws
of Bermuda.

 

“Wholly-Owned Subsidiary” of any Person means any subsidiary of such Person to
the extent all of the capital stock or other ownership interests in such
subsidiary, other than directors’ or nominees’ qualifying shares, is owned
directly or indirectly by such Person.

 

SECTION 1.02.    Classification of Loans and Borrowings.  For purposes of this
Agreement, Loans may be classified and referred to by Type (e.g., a “Eurodollar
Loan” or an “ABR Loan”). Borrowings also may be classified and referred to by
Type (e.g., a “Eurodollar Borrowing” or an “ABR Borrowing”).

 

SECTION 1.03.    Terms Generally.  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”.  The word “law” shall be construed as referring to all statutes, rules,
regulations, codes and other laws (including official rulings and
interpretations thereunder having the force of law or with which affected
Persons customarily comply), and all judgments, orders and decrees, of all
Governmental Authorities.  Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, restated, supplemented or otherwise modified
(subject to any restrictions on such

 

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amendments, restatements, supplements or modifications set forth herein),
(b) any definition of or reference to any statute, rule or regulation shall be
construed as referring thereto as from time to time amended, supplemented or
otherwise modified (including by succession of comparable successor laws),
(c) any reference herein to any Person shall be construed to include such
Person’s successors and assigns (subject to any restrictions on assignment set
forth herein) and, in the case of any Governmental Authority, any other
Governmental Authority that shall have succeeded to any or all functions
thereof, (d) 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, (e) 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 and (f) 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.

 

SECTION 1.04.    Accounting Terms; GAAP.  Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP or SAP, as the case may be, as in effect from time to time;
provided that, if the Company notifies the Administrative Agent 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 SAP or in the application
thereof on the operation of such provision (or if the Administrative Agent
notifies the Company that the Required Lenders request an amendment to any
provision hereof for such purpose), regardless of whether any such notice is
given before or after such change in GAAP or SAP or in the application thereof,
then such provision shall be interpreted on the basis of GAAP or SAP 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 with Section 10.02.  Notwithstanding any other provision contained
herein, all terms of an accounting or financial nature used herein to calculate
compliance with Sections 6.10 and 6.11 shall be construed, and all computations
of amounts and ratios referred to herein shall be made (i) without giving effect
to any election under Accounting Standards Codification 825-10-25 (or any other
Accounting Standards Codification or Financial Accounting Standard having a
similar result or effect) to value any Consolidated Indebtedness or other
liabilities of the Company or any Subsidiary at “fair value”, as defined therein
and (ii) without giving effect to any treatment of Indebtedness in respect of
convertible debt instruments under Accounting Standards Codification 470-20 (or
any other Accounting Standards Codification or Financial Accounting Standard
having a similar result or effect) to value any such Consolidated Indebtedness
in a reduced or bifurcated manner as described therein, and such Indebtedness
shall at all times be valued at the full stated principal amount thereof.

 

ARTICLE II

 

Letters of Credit; Loans

 

SECTION 2.01.    Several Letters of Credit.  (a) Subject to and upon the terms
and conditions set forth herein, each Account Party may request the Issuing
Agent, at any time and from time to time on or after the Effective Date and
prior to the Commitment Expiration Date, to issue, on behalf of each Lender, for
the account of such Account Party and in support of, on a standby basis, Letter
of Credit Supportable Obligations of such Account Party to any other Person, and
subject to and upon the terms and conditions herein set forth, the Issuing Agent
agrees to issue at any time and from time to time on or after the Effective Date
and prior to the Commitment Expiration Date one or more irrevocable standby
letters of credit denominated in Dollars and in such form as may be approved by
the Issuing Agent which approval shall not be unreasonably withheld or delayed
(each such letter of credit, a “Several Letter of Credit” and, collectively, the
“Several Letters of Credit”).  Subject to the terms and conditions hereof and
any other instruments and documents contemplated hereby, it is the intent of the
parties hereto that all Letters of Credit shall be clean and irrevocable and
otherwise in a form sufficient for the beneficiary

 

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cedent to take credit on its financial statements for reinsurance recoverables
under applicable rules, laws and regulations.

 

(b)           Each Several Letter of Credit will be issued by the Issuing Agent
on behalf of the Lenders and each Lender will participate in each Several Letter
of Credit pro rata in accordance with its Applicable Percentage (subject to the
provisions in this Agreement regarding Limited Fronting Lenders).  The
obligations of each Lender under and in respect of each Several Letter of Credit
are several, and the failure by any Lender to perform its obligations hereunder
or under any Letter of Credit shall not affect the obligations of the respective
Account Party toward any other party hereto nor shall any other such party be
liable for the failure by such Lender to perform its obligations hereunder or
under any Several Letter of Credit.

 

(c)           Each Several Letter of Credit shall be executed and delivered by
the Issuing Agent in the name and on behalf of, and as attorney-in-fact for,
each Lender and the Issuing Agent shall act under each Several Letter of Credit,
and each Several Letter of Credit shall expressly provide that the Issuing Agent
shall act, as the agent of each Lender, to (a) receive drafts, other demands for
payment and other documents presented by the beneficiary under such Several
Letter of Credit, (b) determine whether such drafts, demands and documents are
in compliance with the terms and conditions of such Letter of Credit and
(c) notify such Lender and such Account Party that a valid drawing has been made
and the date that the related Several Unpaid Drawing is to be made; provided
that the Issuing Agent shall have no obligation or liability for any Several
Unpaid Drawing under such Letter of Credit, and each Several Letter of Credit
shall expressly so provide.  Each Lender hereby irrevocably appoints and
designates the Issuing Agent as its attorney-in-fact, acting through any duly
authorized officer of the Issuing Agent, to execute and deliver in the name and
on behalf of such Lender each Several Letter of Credit to be issued by such
Lender hereunder. Promptly upon the request of the Issuing Agent, each Lender
will furnish to the Issuing Agent such powers of attorney or other evidence as
any beneficiary of any Several Letter of Credit may reasonably request in order
to demonstrate that the Issuing Agent has the power to act as attorney-in-fact
for such Lender to execute and deliver such Several Letter of Credit.

 

(d)           Each Lender represents and warrants that each Several Letter of
Credit constitutes a legal, valid and binding obligation of such Lender
enforceable in accordance with its terms, provided that the enforceability
thereof is subject to general principles of equity and to bankruptcy, insolvency
and similar laws affecting the enforcement of creditors’ rights generally.

 

(e)           In the event that any Lender agrees (in its sole and absolute
discretion) to act as a Limited Fronting Lender for any Non-NAIC Approved Bank
upon such terms and conditions as such parties may agree (including fees payable
by such Non-NAIC Approved Bank and/or the Company to such Limited Fronting
Lender) (such agreement, a “Limited Fronting Lender Agreement”), the following
provisions shall apply (in addition to any other provisions hereof relating to
Limited Fronting Lenders):

 

(i)            upon the issuance of any Several Letter of Credit pursuant
hereto, with respect to any Non-NAIC Approved Bank as a Participating Issuer
under such Several Letter of Credit, each applicable Limited Fronting Lender, in
reliance upon the agreements of such Non-NAIC Approved Bank as a Participating
Issuer set forth in this Section, agrees (A) to issue through the Issuing Agent,
in addition to its own obligations as a Lender under such Several Letter of
Credit, severally such Several Letter of Credit in an amount equal to such
Non-NAIC Approved Bank’s Applicable Percentage of the stated amount of such
Several Letter of Credit (or the portion thereof for which such Limited Fronting
Lender has agreed to be a Limited Fronting Lender), and (B) to amend or extend
each Several Letter of Credit previously issued by it as a Limited Fronting
Lender for such Participating Issuer; and

 

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(ii)           with respect to any Several Letter of Credit issued by a Limited
Fronting Lender pursuant to clause (i) above for a Participating Issuer, such
Participating L/C Issuer agrees to purchase participations (as provided in
Section 2.01(f)) in the obligations of such Limited Fronting Lender under such
Several Letter of Credit attributable to such Participating Issuer for which
such Limited Fronting Lender has agreed to act as a Limited Fronting Lender
hereunder.

 

Notwithstanding anything herein to the contrary, no Lender shall have any
obligation to agree to act hereunder as a Limited Fronting Lender for any other
Person unless such Lender has entered into a Limited Fronting Lender Agreement
in its sole and absolute discretion.

 

(f)            In the event any Participating Issuer purchases a participation
in the Letter(s) of Credit of its Limited Fronting Lender pursuant to
Section 2.01(e), then, without any further action on the part of any party, such
Limited Fronting Lender grants to such Participating Issuer, and such
Participating Issuer hereby acquires from such Limited Fronting Lender, a
participation in such Limited Fronting Lender’s Applicable Percentage of the
relevant Letters of Credit attributable to such Participating Issuer for which
such Limited Fronting Lender has agreed to act as a Limited Fronting Lender
hereunder.  Each Participating Issuer purchasing a participation hereunder
acknowledges and agrees that its obligation to acquire such participations in
respect of Letters of Credit is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including any amendment or extension of
any Letter of Credit or the occurrence and continuance of a Default or reduction
or termination of the Commitments.  In consideration and in furtherance of the
foregoing, such Participating Issuer hereby absolutely and unconditionally
agrees to pay to the Administrative Agent, for account of the applicable Limited
Fronting Lender an amount equal to the amount of each payment made by such
Limited Fronting Lender in respect of the portion of such Letter of Credit in
which such Participating Issuer holds a participation, promptly upon the request
of such Limited Fronting Lender at any time from the time such payment is made
until such payment is reimbursed by the Company or at any time after any
reimbursement payment is required to be refunded to the Company for any reason
or at any time as may be set forth in the Limited Fronting Lender Agreement
between such Limited Fronting Lender and such Participating Issuer.  Such
payment by such Participating Issuer shall be made for account of the applicable
Limited Fronting Lender without any offset, abatement, withholding or reduction
whatsoever.  To the extent that any Participating Issuer has made payments
pursuant to this paragraph to reimburse a Limited Fronting Lender in respect of
any participation interests purchased hereunder in respect of any Letter of
Credit, promptly following receipt by the Administrative Agent of any payment
from the Company or any other Account Party pursuant to Section 2.05 in respect
of such Letter of Credit, the Administrative Agent shall distribute such payment
to such Limited Fronting Lender and such Participating Issuer, in each case as
their interests may appear.  Any payment made by a Participating Issuer in
respect of its participation pursuant to this paragraph to reimburse the
applicable Limited Fronting Lender for any payment made in any respect of any
drawing under a Letter of Credit shall not relieve the Company or any other
Account Party of its obligation to reimburse the amount of such drawing pursuant
to the terms of this Agreement.

 

SECTION 2.02.    Fronted Letters of Credit.  (a) Subject to and upon the terms
and conditions set forth herein, each Account Party may request that any
Fronting Lender at any time and from time to time on or after the Effective Date
and prior to the Commitment Expiration Date issue for its own account a letter
of credit denominated in Dollars for the account of such Account Party and in
support of, on a standby basis, Letter of Credit Supportable Obligations of such
Account Party to any other Person, and subject to and upon the terms and
conditions herein set forth, each Fronting Lender agrees to issue at any time
and from time to time on or after the Effective Date and prior to the Commitment
Expiration Date one or more irrevocable standby letters of credit in such form
as may be approved by such Fronting Lender, which approval shall not be
unreasonably withheld or delayed (each such letter of credit, a “Fronted Letter
of Credit” and, collectively, the “Fronted Letters of Credit”).  Subject to the
terms and conditions hereof and any other instruments and documents contemplated

 

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hereby, it is the intent of the parties hereto that all Letters of Credit shall
be clean and irrevocable and otherwise in a form sufficient for the beneficiary
cedent to take credit on its financial statements for reinsurance recoverables
under applicable rules, laws and regulations.

 

(b)           Immediately upon the issuance by any Fronting Lender of any
Fronted Letter of Credit, such Fronting Lender shall be deemed to have sold and
transferred to each Lender other than such Fronting Lender (each such Lender, in
its capacity under this Section 2.02(b), a “Fronting Participant”), and each
such Fronting Participant shall be deemed irrevocably and unconditionally to
have purchased and received from such Fronting Lender, without recourse or
warranty, an undivided interest and participation, to the extent of such
Fronting Participant’s Applicable Percentage, in such Fronted Letter of Credit,
each drawing made thereunder and the obligations of each Account Party under
this Agreement with respect thereto, and any security therefor or guaranty
pertaining thereto. Upon any change in the Commitments or Applicable Percentages
of the Lenders pursuant to this Agreement (including pursuant to Section 2.27),
it is hereby agreed that, with respect to all outstanding Fronted Letters of
Credit and Fronted Unpaid Drawings, there shall be an automatic adjustment to
the participations pursuant to this Section 2.02 to reflect the new Applicable
Percentages of the assignor and assignee Lender or of all Lenders with
Commitments, as the case may be.

 

(c)           In the event that any Fronting Lender makes any payment under any
Fronted Letter of Credit and the respective Account Party shall not have
reimbursed such amount in full to such Fronting Lender pursuant to Section 2.05,
such Fronting Lender shall promptly notify the Administrative Agent, which shall
promptly notify each Fronting Participant, of such failure, and each Fronting
Participant shall promptly and unconditionally pay to such Fronting Lender the
amount of such Fronting Participant’s Applicable Percentage of such unreimbursed
payment in Dollars and in immediately available funds.  If, prior to 11:00 a.m.
(New York time) on any Business Day, the Administrative Agent so notifies any
Fronting Participant required to fund a payment under a Fronted Letter of
Credit, such Fronting Participant shall make available to such Fronting Lender
in Dollars and in immediately available funds such Fronting Participant’s
Applicable Percentage of the amount of such payment on such Business Day (or, if
notice is given after 11:00 a.m. (New York time) on any Business Day, on the
next Business Day).  If and to the extent such Fronting Participant shall not
have so made its Applicable Percentage of the amount of such payment available
to such Fronting Lender, such Fronting Participant agrees to pay to such
Fronting Lender, forthwith on demand, such amount, together with interest
thereon, for each day from such date to but excluding the date such amount is
paid to such Fronting Lender at the overnight Federal Funds Effective Rate.  The
failure of any Fronting Participant to make available to such Fronting Lender
its Applicable Percentage of any payment under any Fronted Letter of Credit
shall not relieve any other Fronting Participant of its obligation hereunder to
make available to such Fronting Lender its Applicable Percentage of any payment
on the date required, as specified above, but no Fronting Participant shall be
responsible for the failure of any other Fronting Participant to make available
to such Fronting Lender such other Fronting Participant’s Applicable Percentage
of any such payment.

 

(d)           Whenever any Fronting Lender receives any payment by any Account
Party as to which it has also received payments from the Fronting Participants
pursuant to paragraph (c) above, such Fronting Lender shall forward such payment
to the Administrative Agent, which in turn shall distribute to each Fronting
Participant which has paid its Applicable Percentage thereof, in Dollars and in
immediately available funds, an amount equal to such Fronting Participant’s
share (based upon the amount funded by such Fronting Participant to the
aggregate amount funded by all Fronting Participants and retained by the
Fronting Lender) of the principal amount of such payment and interest thereon
accruing after the purchase of the respective participations.

 

(e)           The obligations of the Fronting Participants to make payments to
each Fronting Lender with respect to Fronted Letters of Credit issued by it
shall be irrevocable and not subject to any

 

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qualification or exception whatsoever and shall be made in accordance with the
terms and conditions of this Agreement under all circumstances, including any of
the following circumstances:

 

(i)            any lack of validity or enforceability of this Agreement or any
amendment, supplement or modification hereof;

 

(ii)           the existence of any claim, setoff, defense or other right which
the Fronting Participant or any of its Affiliates may have at any time against a
beneficiary named in a Fronted Letter of Credit, any transferee of any Fronted
Letter of Credit (or any Person for whom any such transferee may be acting), the
Administrative Agent, any Fronting Lender, any Fronting Participant, any Lender,
or any other Person, whether in connection with this Agreement, any Fronted
Letter of Credit, the transactions contemplated herein or any unrelated
transactions (including any underlying transaction between any Account Party or
any of its Affiliates and the beneficiary named in any such Fronted Letter of
Credit);

 

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

 

(iv)          the surrender or impairment of any security for the performance or
observance of any of the terms of this Agreement;

 

(v)           the occurrence of any Default or Event of Default; or

 

(vi)          any matter or event set forth in Section 2.05(b).

 

(f)            Upon the request of any Fronting Participant, each Fronting
Lender shall furnish to such Fronting Participant copies of any Fronted Letter
of Credit issued by it and such other documentation as may reasonably be
requested by such Fronting Participant.

 

SECTION 2.03.    Conditions to the Issuance of all Letters of Credit. 
(a) Notwithstanding anything to the contrary set forth in this Article II, no LC
Issuer shall be under any obligation to issue any Letter of Credit if at the
time of such issuance:

 

(i)            any order, judgment or decree of any Governmental Authority or
arbitrator shall purport by its terms to enjoin or restrain such LC Issuer from
issuing such Letter of Credit or any requirement of law applicable to such LC
Issuer or any Lender or any request or directive (whether or not having the
force of law) from any Governmental Authority with jurisdiction over such LC
Issuer or any Lender shall prohibit, or request that such LC Issuer or any
Lenders refrain from, the issuance of letters of credit generally or the
applicable type of letter of credit or shall impose upon such LC Issuer or any
Lender with respect to the applicable type of letter of credit any restriction
or reserve, capital or liquidity requirement (for which such LC Issuer or such
Lender is not otherwise compensated) not in effect on the Effective Date, or any
unreimbursed loss, cost or expense which was not applicable, in effect or known
to such LC Issuer, as of the Effective Date;

 

(ii)           the conditions precedent set forth in Section 4.02 are not
satisfied at that time; or

 

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(iii)          such LC Issuer shall have received notice from any Account Party
or the Required Lenders prior to the issuance of such Letter of Credit of the
type described in clause (iv) of Section 2.03(b).

 

(b)           Notwithstanding anything to the contrary set forth in this
Article II,

 

(i)            no Letter of Credit shall be issued at any time when the
aggregate Credit Exposures of all Lenders taken together exceed (or would after
giving effect to such issuance exceed) the Total Commitment at such time;

 

(ii)           no Letter of Credit shall be issued at the request of, or for the
account of, Pac Re if (x) the Letter of Credit Outstandings in respect of all
Letters of Credit issued or otherwise outstanding at the request of, or for the
account of Pac Re exceeds (or would after giving effect to such issuance exceed)
$100,000,000 or (y) the Company owns less than 5% of the outstanding voting
Equity Interests in Pac Re;

 

(iii)          no Fronted Letter of Credit shall be issued by a Fronting Lender
at any time if the Letter of Credit Outstandings in respect of all Fronted
Letters of Credit issued by such Fronting Lender exceed (or would after giving
effect to such issuance exceed) the maximum aggregate Stated Amount of all
Fronted Letters of Credit that such Fronting Lender has agreed to issue in a
separate agreement with the Company, if any;

 

(iv)          each Letter of Credit shall have an expiry date occurring not
later than one year after such Letter of Credit’s date of issuance, provided
that, subject to Section 2.07, each such Letter of Credit may by its terms
automatically renew annually for additional one-year periods unless the
respective LC Issuer notifies the beneficiary thereof, in accordance with the
terms of such Letter of Credit, that such Letter of Credit will not be renewed;

 

(v)           no LC Issuer will issue any Letter of Credit after it has received
written notice from any Account Party or the Required Lenders stating that a
Default or an Event of Default exists until such time as the Issuing Agent shall
have received a written notice of (x) rescission of such notice from the party
or parties originally delivering the same or (y) a waiver of such Default or
Event of Default by the Required Lenders (or such other number or percentage of
the Lenders as shall be necessary under the circumstances as provided in
Section 10.02); and

 

(vi)          the Issuing Agent shall not issue any Several Letter of Credit in
respect of which there is a Limited Fronting Lender if the applicable
Participating Issuer is a Defaulting Lender unless such Limited Fronting Lender
has entered into arrangements satisfactory to it with the Company and/or such
Defaulting Lender to eliminate such Limited Fronting Lender’s risk with respect
to such Defaulting Lender in respect of each Several Letter of Credit hereunder
in respect of which such Limited Fronting Lender acts as issuer for such
Defaulting Lender’s Applicable Percentage of such Several Letter of Credit.

 

(c)           Subject to and on the terms and conditions set forth herein, each
LC Issuer is hereby authorized by each Account Party and the Lenders to arrange
for the issuance of any Letter of Credit pursuant to Section 2.01(a) or
2.02(a) and the amendment of any Letter of Credit pursuant to Section 2.08
and/or 10.02 by:

 

(i)            completing the commencement date and the expiry date of such
Letter of Credit;

 

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(ii)           (in the case of an amendment increasing or reducing the amount
thereof) amending such Letter of Credit in such manner as such LC Issuer and the
respective beneficiary may agree;

 

(iii)          in the case of Several Letters of Credit, completing such Letter
of Credit with the participation of each Lender as allocated pursuant to the
terms hereof (including the provisions hereof in respect of Limited Fronting
Lenders); and

 

(iv)          in the case of Several Letters of Credit, executing such Letter of
Credit on behalf of each Lender and following such execution delivering such
Letter of Credit to the beneficiary of such Letter of Credit.

 

SECTION 2.04.    Letter of Credit Requests.  (a) Whenever an Account Party
desires that a Letter of Credit be issued for its account, such Account Party
shall give the Administrative Agent and the respective LC Issuer written or
electronic notice (including by way of facsimile, e-mail or other electronic
transmission) thereof prior to 12:00 Noon (New York time) at least (x) three
Business Days in respect of Fronted Letters of Credit and (y) five Business Days
in respect of Several Letters of Credit, in each case, prior to the proposed
date of issuance (which shall be a Business Day), which notice shall be in the
form of Exhibit F or such other form reasonably acceptable to the Administrative
Agent (each, a “Letter of Credit Request”). Each Letter of Credit Request shall
include any other documents as the respective LC Issuer customarily and
generally requires in connection therewith.

 

(b)           The making of each Letter of Credit Request shall be deemed to be
a representation and warranty by the respective Account Party and the Company
that such Letter of Credit may be issued in accordance with, and it will not
violate the requirements applicable to such Account Party and/or such Letter of
Credit of, Section 2.01 or 2.02, as the case may be, and Section 2.03.

 

(c)           Upon its issuance of, or amendment to, any Letter of Credit, the
respective LC Issuer shall promptly notify the respective Account Party and each
Lender of such issuance or amendment, which notice shall include a summary
description of the Letter of Credit actually issued and any amendments thereto.

 

(d)           The Stated Amount of each Letter of Credit upon issuance shall be
not less than $25,000.

 

SECTION 2.05.    Agreement to Repay Letter of Credit Drawings.  (a) (i) Each
Account Party severally agrees to reimburse (x) each Lender, by making payment
to the Administrative Agent in immediately available funds, for any payment or
disbursement made by such Lender under any Several Letter of Credit issued for
its account (each such amount so paid or disbursed until reimbursed, a “Several
Unpaid Drawing”) and (y) the respective Fronting Lender directly for any payment
or disbursement made by such Fronting Lender under any Fronted Letter of Credit
issued for its account (each such amount so paid or disbursed until reimbursed,
a “Fronted Unpaid Drawing”), and (ii) furthermore, the Company jointly and
severally agrees to reimburse all Several Unpaid Drawings and Fronted Unpaid
Drawings in respect of all Letters of Credit issued hereunder for the account of
or at the request of the Company or any Designated Subsidiary Account Party, in
each case, with interest on the amount so paid or disbursed by such Lender, to
the extent not reimbursed prior to 1:00 p.m. (New York time) on the date of such
payment or disbursement, from and including the date paid or disbursed to but
not including the date such Lender is reimbursed therefor at a rate per annum
which shall be the Alternate Base Rate as in effect from time to time (plus an
additional 2% per annum, payable on demand, if not reimbursed by the third
Business Day after the date on which the respective Account Party (or the
Company) receives notice from the respective LC Issuer of such payment or
disbursement).

 

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(b)           Each Account Party’s obligation under this Section 2.05 to
reimburse each Lender with respect to Unpaid Drawings of such Account Party
(including, in each case, interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which such Account Party may have or have had against such
Lender, or any LC Issuer, including any defense based upon the failure of any
drawing under a Letter of Credit to conform to the terms of the Letter of Credit
or any non-application or misapplication by the beneficiary of the proceeds of
such drawing; provided, however, that no Account Party shall be obligated to
reimburse any Lender for any wrongful payment made by such Lender under a Letter
of Credit as a result of acts or omissions constituting willful misconduct or
gross negligence on the part of such Lender (as determined by a court of
competent jurisdiction in a final and non-appealable judgment).

 

(c)           In determining whether to pay under any Letter of Credit, no LC
Issuer shall have any obligation relative to the other Lenders other than to
confirm that any documents required to be delivered under such Letter of Credit
appear to have been delivered and that they appear to substantially comply on
their face with the requirements of such Letter of Credit.  Any action taken or
omitted to be taken by any LC Issuer under or in connection with any Letter of
Credit, if taken or omitted in the absence of such LC Issuer’s gross negligence
or willful misconduct (as determined by a court of competent jurisdiction in a
final and non-appealable judgment), shall not create for such LC Issuer any
resulting liability to any Account Party or any of its Affiliates or any Lender.

 

(d)           Notwithstanding that a Letter of Credit issued or outstanding
hereunder is in support of any obligations of, or is for the account of, a
Designated Subsidiary Account Party, the Company shall be obligated to reimburse
each Lender or the relevant Fronting Lender, as applicable, hereunder for any
Several Unpaid Drawing and any Fronted Unpaid Drawing in respect of all Letters
of Credit issued hereunder for the account of or at the request of the Company
or any Designated Subsidiary Account Party, in each case, with interest on the
amount so paid or disbursed by such Lender and/or such Fronting Lender as
described in Section 2.05(a) above.  The Company hereby acknowledges that the
issuance of Letters of Credit for the account of any Designated Subsidiary
Account Party inures to the benefit of the Company, and that the Company’s
business derives substantial benefits from the businesses of such Designated
Subsidiary Account Parties.

 

SECTION 2.06.    Increased Costs.  If a Change in Law shall (i) impose, modify
or make applicable any reserve, deposit, capital adequacy, liquidity or similar
requirement against letters of credit issued by or participated in, assets of,
deposits with or for the account of, or credit extended by, such Lender (except
any such reserve requirement reflected in the Adjusted LIBO Rate), or (ii)
impose on such Lender or the London interbank market any other conditions
directly or indirectly affecting this Agreement, any Letter of Credit or Loans
made by such Lender, or (iii) subject the Administrative Agent, any LC Issuer or
any Lender to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described
in clauses (b) through (d) of the definition of Excluded Taxes, (C) Connection
Income Taxes, and (D) Other Taxes) on its loans, loan principal, letters of
credit, commitments, or other obligations, or its deposits, reserves, other
liabilities or capital attributable thereto; and the result of any of the
foregoing is to (A) increase the cost to the Administrative Agent, such LC
Issuer or such Lender of (1) issuing, maintaining or participating in any Letter
of Credit or (2) making or maintaining any Loan (or of maintaining its
obligation to make any such Loan), (B) reduce the amount of any sum received or
receivable by the Administrative Agent, such LC Issuer or such Lender hereunder
(whether of principal, interest or otherwise) or (C) reduce the rate of return
on its capital with respect to Letters of Credit and/or the Loans to a level
below that which the Administrative Agent, such LC Issuer or such Lender would
have achieved but for such Change in Law (and taking into consideration the
Administrative Agent’s, such LC Issuer’s or such Lender’s policies with respect
to capital adequacy and liquidity (or those of its holding company), as
generally applied), then, upon written demand to the applicable Account Party by
the Administrative Agent, such LC Issuer or such Lender (with a copy to the
Administrative Agent), such

 

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Account Party shall pay to the Administrative Agent (on behalf of such LC Issuer
or such Lender), such LC Issuer or such Lender such additional amount or amounts
as will compensate the Administrative Agent, such LC Issuer or such Lender for
such increased cost or reduction.  A certificate submitted to the applicable
Account Party by such Lender (with a copy to the Administrative Agent), setting
forth (i) the basis, in reasonable detail, for the determination of such
additional amount or amounts necessary to compensate such Lender as aforesaid
and (ii) the basis, in reasonable detail, for the computation of such amount or
amounts, which shall be consistently applied shall be final and conclusive and
binding on the applicable Account Party absent manifest error, although the
failure to deliver any such certificate shall not release or diminish such
Account Party’s obligations to pay additional amounts pursuant to this Section
2.06 upon subsequent receipt of such certificate.  Notwithstanding the
foregoing, no Account Party shall be required to compensate any Lender pursuant
to this Section 2.06 for any increased costs or reductions incurred more than
180 days prior to the date that such Lender notifies such Account Party of the
applicable Change in Law; provided that if the Change in Law giving rise to such
increased costs or reductions is retroactive, then such 180-day period referred
to above shall be extended to include the period of retroactive effect thereof.

 

SECTION 2.07.    Letter of Credit Expiration and Extensions.  Each Lender
acknowledges that to the extent provided under the terms of any Letter of
Credit, the expiration date of such Letter of Credit will be automatically
extended for additional one-year periods, without written amendment, unless (a)
such extension would cause such Letter of Credit to remain outstanding on or
after the one-year anniversary of the Commitment Expiration Date or (b) at least
30 days (or such other period required under or by any Legal Requirement or
Applicable Insurance Regulatory Authority) prior to the expiration date of such
Letter of Credit, notice is given by the respective LC Issuer in accordance with
the terms of the respective Letter of Credit (a “Notice of Non-Extension”) that
the expiration date of such Letter of Credit will not be extended beyond its
current expiration date.  The respective LC Issuer will give Notices of
Non-Extension as to any or all outstanding Letters of Credit if requested to do
so by the Required Lenders pursuant to Article VII.  The respective LC Issuer
will give Notices of Non-Extension as to all outstanding Letters of Credit (i)
if the Commitment Expiration Date has occurred and (ii) on the date necessary to
prevent the extension described in the foregoing clause (b).  The respective LC
Issuer will send a copy of each Notice of Non-Extension to the respective
Account Party concurrently with delivery thereof to the respective beneficiary,
unless prohibited by law from doing so.

 

SECTION 2.08.    Changes to Stated Amount.  At any time when any Letter of
Credit is outstanding, at the request of the respective Account Party, the
Issuing Agent will enter into an amendment increasing or reducing the Stated
Amount of such Letter of Credit, provided that (i) in no event shall the Stated
Amount of such Letter of Credit be increased (x) to an amount which would cause
the aggregate Credit Exposures of all Lenders taken together to exceed the Total
Commitment at such time, (y) with respect to a Letter of Credit issued or
otherwise outstanding at the request of, or for the account of, Pac Re, to an
amount which would cause the Letter of Credit Outstandings in respect of all
Letters of Credit issued or otherwise outstanding at the request of, or for the
account of Pac Re to exceed $100,000,000, or (z) with respect to a Fronted
Letter of Credit, without the prior written consent of the LC Issuer in respect
of such Letter of Credit to an amount which would cause the Letter of Credit
Outstandings in respect of all Fronted Letters of Credit issued by the
applicable Fronting Lender to exceed the maximum aggregate Stated Amount of all
Fronted Letters of Credit that such Fronting Lender has agreed to issue in a
separate agreement with the Company, (ii) the Stated Amount of a Letter of
Credit may not be increased at any time if the conditions precedent set forth in
Section 4.02 are not satisfied at such time, and (iii) the Stated Amount of a
Letter of Credit may not be increased at any time after the Commitment
Expiration Date.

 

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SECTION 2.09.    Termination and Reduction of Commitments.  (a) Unless
previously terminated, the Total Commitment (and the Commitment of each Lender)
shall terminate on the Commitment Expiration Date.

 

(b)           The Company may, without premium or penalty (but subject to break
funding payments required by Section 2.25), at any time terminate, or from time
to time reduce, the Total Commitment; provided that (i) each reduction of the
Total Commitment shall be in an amount that is an integral multiple of
$1,000,000 and not less than $5,000,000 and (ii) the Company shall not terminate
or reduce the Total Commitment if, after giving effect to such termination or
reduction and any concurrent prepayment of the Loans in accordance with Section
2.22, the aggregate Credit Exposures of all Lenders taken together would exceed
the Total Commitment. Each such reduction shall be applied to the Commitments of
the Lenders on a pro rata basis based on the amount of such Lenders’ respective
Commitments.

 

(c)           The Company shall notify the Administrative Agent of any election
to terminate or reduce the Total Commitment under paragraph (b) of this Section
2.09 at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof.  Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof.  Each notice delivered by the
Company pursuant to this Section shall be irrevocable; provided that a notice of
termination of Commitments may state that such notice is conditioned upon the
effectiveness of other credit facilities or other alternative financing, in
which case such notice may be revoked without penalty prior to the specified
time if such condition is not satisfied (each such notice a “Conditional
Termination Notice”). Any termination or reduction of the Total Commitment (or
the Commitments of any Lender) shall be permanent. Each reduction of the Total
Commitment shall be made ratably among the Lenders in accordance with their
respective Commitments.

 

SECTION 2.10.    Mandatory Prepayment; Cash Collateralization.  (a) If (i) as of
the Commitment Expiration Date, any Letter of Credit may for any reason remain
outstanding, (ii) at any time, the aggregate amount of all Letter of Credit
Outstandings exceeds the Total Commitment as then in effect, (iii) any Event of
Default occurs and is continuing and the Administrative Agent or the Required
Lenders, as applicable, require the Company and the other Account Parties to
deposit in an account (which account may be a securities account with the
meaning of Section 8-501 of the Uniform Commercial Code as in effect in the
State of New York) with the Administrative Agent, in the name of the
Administrative Agent and for the benefit of the Lenders (any such account, a
“Collateral Account”), amounts of cash and Cash Equivalents, to be held as
security for each Account Party’s reimbursement obligations in respect of
Letters of Credit then outstanding or (iv) an Event of Default set forth under
Section 7.05 occurs and is continuing, then the Company shall, or shall cause
one or more other Account Parties to, deposit in a Collateral Account on such
date an amount of cash or Cash Equivalents to be held as additional security for
the obligations of each of the Account Parties hereunder such that the amount of
cash and Cash Equivalents in such Collateral Account applicable to each Account
Party would equal the aggregate amount of all Letter of Credit Outstandings and
other obligations in respect of Letters of Credit attributable to such Account
Party hereunder, or in the case of clause (ii) above, the excess referred to in
such clause (ii).  If at any time the Administrative Agent determines that any
funds held in a Collateral Account pursuant to this Section 2.10(a) are subject
to any right or claim of any Person other than the Agents (on behalf of the
Lenders) or that the total amount of such funds is less than the aggregate
amount of all Letter of Credit Outstandings and other obligations of the Account
Parties hereunder, or in the case of clause (ii) above, the excess referred to
in such clause (ii), the Company shall, or shall cause one or more Account
Parties to, forthwith upon demand by the Administrative Agent, pay to the
Administrative Agent, as additional funds to be deposited and held in a
Collateral Account as aforesaid, an amount equal to the excess of (a) the
aggregate amount of all Letter of Credit Outstandings and other obligations in
respect of Letters of Credit of the Account Parties hereunder over (b) the total
amount of cash and Cash

 

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Equivalents deposited in the Collateral Account as aforesaid that the
Administrative Agent reasonably determines to be free and clear of any such
right and claim, or in the case of clause (ii) above, the excess referred to in
such clause (ii).  With respect to any payment to an account required by clause
(iii) of the first sentence of this Section 2.10(a), such payment shall (to the
extent not applied to the applicable reimbursement obligations) be returned to
the Company within three Business Days after the applicable Event of Default
shall have been cured or waived.

 

(b)           If on any date the aggregate Credit Exposures exceed the Total
Commitment as then in effect, the Company shall (i) first, prepay on such date
the principal amount of outstanding Loans in amount equal to the lesser of (x)
the amount of any such excess and (y) the principal amount of all outstanding
Loans at such time and (ii) second, cash collateralize any remaining amount of
such excess in the manner specified in clause (a) above.

 

SECTION 2.11.    Fees.  (a) Each Account Party jointly and severally agrees to
pay to the Administrative Agent for the account of each Lender a commitment fee
(the “Commitment Fee”), which shall accrue at the Applicable Rate with respect
to the Commitment Fee on the daily amount of the unutilized Commitment of such
Lender during the period from and including the Effective Date to but excluding
the Commitment Expiration Date. Accrued commitment fees shall be payable in
arrears on the last day of March, June, September and December of each year and
on the Commitment Expiration Date, commencing on the first such date to occur
after the date hereof.  All Commitment Fees shall be computed on the basis of a
year of 365 days (or 366 days in a leap year) and shall be payable for the
actual number of days elapsed (including the first day but excluding the last
day).

 

(b)           (i) The Company agrees to pay to each Agent, for its own account,
fees payable in the amounts and at the times separately agreed upon between the
Company and the applicable Agent  (ii) The Company agrees to pay to each Limited
Fronting Lender a fee in the amounts and at the times separately agreed upon
between the Company and such Limited Fronting Lender pursuant to the terms and
conditions of the applicable Limited Fronting Lender Agreement.

 

(c)           Each Account Party severally agrees to pay to the Administrative
Agent for pro rata distribution to each Lender (based on their respective
Applicable Percentages), a fee in respect of each Letter of Credit issued for
the account of such Account Party (the “Letter of Credit Fee”) computed at a
rate per annum equal to the Applicable Rate with respect to the Letter of Credit
Fee on the daily Stated Amount of such Letter of Credit. Accrued Letter of
Credit Fees shall be due and payable in arrears on the last day of March, June,
September and December of each year and upon the first day after the termination
of the Total Commitment upon which no Letters of Credit remain outstanding.  All
Letter of Credit Fees shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).

 

(d)           Each Account Party severally agrees to pay to each Fronting
Lender, for its own account, a fronting fee in respect of, and fees with respect
to the issuance, amendment, renewal or extension of, or processing of drawings
under, each Fronted Letter of Credit issued by such Fronting Lender for the
account of such Account Party, in each case in amounts and on dates as shall
have separately been agreed to by the Company and such Fronting Lender.  Each
Account Party severally agrees to pay to the Issuing Agent fees with respect to
the issuance, amendment, renewal or extension of, and processing of drawings
under, each Several Letter of Credit issued for the account of such Account
Party, in each case in amounts and on dates as shall have separately been agreed
to by the Company and the Issuing Agent.

 

(e)           All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent for distribution to the
Persons entitled thereto as set forth

 

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above.  Fees paid shall not be refundable under any circumstances.  If any fee
or other amount payable by any Account Party hereunder is not paid when due,
such overdue amount shall bear interest, after as well as before judgment, at a
rate per annum equal to the Alternate Base Rate plus 2% per annum.

 

(f)            Notwithstanding anything to the contrary in this Section 2.11,
for so long as a Lender is a Defaulting Lender, no fees hereunder shall accrue
or be payable to such Lender until such Lender ceases to be a Defaulting Lender.

 

SECTION 2.12.    Taxes.  (a) Any and all payments by or on account of any
obligation of any Account Party hereunder shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; provided that if
such Account Party shall be required to deduct any Indemnified Taxes or Other
Taxes from such payments, then (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) the Administrative
Agent, Issuing Agent or Lender (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been made, (ii) such
Account Party shall make such deductions and (iii) such Account Party shall pay
the full amount deducted to the relevant Governmental Authority in accordance
with applicable law.

 

(b)           In addition, each Account Party shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.

 

(c)           Each Account Party severally (and not jointly) agrees to indemnify
the Administrative Agent, the Issuing Agent and each Lender within 10 days after
written demand therefor, for the full amount of any Indemnified Taxes or Other
Taxes that such Account Party failed to deduct or withhold and that were paid by
the Administrative Agent, the Issuing Agent or such Lender on or with respect to
any payment by or on account of any obligation of such Account Party hereunder
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and reasonable out-of-pocket expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority.  A certificate as to
the amount of such payment or liability (with reasonable detail) delivered to
any Account Party by a Lender or by the Administrative Agent or the Issuing
Agent on its own behalf or on behalf of a Lender, shall be conclusive absent
manifest error.

 

(d)           As soon as reasonably practicable after any payment of Indemnified
Taxes or Other Taxes by any Account Party to a Governmental Authority, such
Account Party shall deliver to the Administrative Agent the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.

 

(e)           Each Lender shall, to the extent it may lawfully do so, deliver to
the Company (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law, such properly completed and executed documentation
prescribed by applicable law or reasonably requested by the Company or the
Administrative Agent (if any), or will comply with such other requirements, if
any, as is currently applicable, as will permit payments under this Agreement to
be made without withholding or at a reduced rate.  In addition, each Lender, if
reasonably requested by the Company or the Administrative Agent, shall deliver
such other documentation prescribed by applicable law or reasonably requested by
the Company or the Administrative Agent as will enable the Company or the
Administrative Agent to determine whether or not such Lender is subject to
backup withholding or information reporting requirements.

 

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(f)            If a Lender or the Administrative Agent shall determine, in its
sole discretion exercised in good faith, that it is entitled to claim or receive
a refund from a Governmental Authority in respect of Indemnified Taxes or Other
Taxes paid by any Account Party pursuant to this Section 2.12, such Lender or
the Administrative Agent, as applicable, shall promptly notify such Account
Party of the availability of such refund claim and, if the Lender or the
Administrative Agent, as applicable, determines, in its sole discretion
exercised in good faith, that making a claim for refund will not have an adverse
effect on its Taxes or business operations, shall, within 60 days after receipt
of a request by such Account Party and at the Company’s expense, make a claim to
such Governmental Authority for such refund.  If the Administrative Agent or a
Lender determines, in its sole discretion exercised in good faith, that it has
received a refund of any Taxes or Other Taxes as to which it has been
indemnified by any Account Party or with respect to which such Account Party has
paid additional amounts pursuant to this Section 2.12, it shall pay over such
refund to such Account Party (but only to the extent of indemnity payments made,
or additional amounts paid, by such Account Party under this Section 2.12 with
respect to the Taxes or Other Taxes giving rise to such refund), net of all
reasonable out-of-pocket expenses of the Administrative Agent or such Lender
incurred in obtaining such refund and without interest (other than any interest
paid by the relevant Governmental Authority with respect to such refund);
provided that such Account Party, upon the request of the Administrative Agent
or such Lender, agrees to repay the amount paid over to such Account Party (plus
any penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Administrative Agent or such Lender in the event the
Administrative Agent or such Lender is required to repay such refund to such
Governmental Authority.  This Section shall not be construed to require the
Administrative Agent or any Lender to make available its tax returns (or any
other information relating to its taxes which it deems confidential) to such
Account Party or any other Person.

 

(g)           Any Lender that is not a Lender as of the Effective Date shall not
be entitled to any greater payment under this Section 2.12 than such Lender’s
assignor could have been entitled to absent such assignment except to the extent
that the entitlement to a greater payment resulted from a Change in Law.

 

(h)           Each Lender shall severally indemnify the Administrative Agent,
within 10 days after demand therefor, for (i) any Indemnified Taxes or Other
Taxes attributable to such Lender (but only to the extent that any Account Party
has not already indemnified the Administrative Agent for such Indemnified Taxes
or Other Taxes and without limiting the obligation of the Account Parties to do
so), (ii) any Taxes attributable to such Lender’s failure to comply with the
provisions of Section 10.04(c) relating to the maintenance of a Participant
Register and (iii) any Excluded Taxes attributable to such Lender, in each case,
that are payable or paid by the Administrative Agent in connection with this
Agreement, 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 any Lender by the Administrative Agent shall
be conclusive absent manifest error.  Each Lender hereby authorizes the
Administrative Agent to set off and apply any and all amounts at any time owing
to such Lender under this Agreement or otherwise payable by the Administrative
Agent to the Lender from any other source against any amount due to the
Administrative Agent under this Section 2.12(h).

 

(i)            If a payment made to a Lender under this Agreement would be
subject to U.S. Federal withholding Tax imposed by FATCA if such Lender were to
fail to comply with the applicable reporting requirements of FATCA (including
those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such
Lender shall deliver to the Company and the Administrative Agent at the time or
times prescribed by law and at such time or times reasonably requested by the
Company or the Administrative Agent such documentation prescribed by applicable
law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such
additional documentation reasonably requested by the

 

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Company or the Administrative Agent as may be necessary for the Company and the
Administrative Agent to comply with their obligations under FATCA and to
determine that such Lender has complied with such Lender’s obligations under
FATCA or to determine the amount to deduct and withhold from such payment. 
Solely for purposes of this Section 2.12(i), “FATCA” shall include any
amendments made to FATCA after the date of this Agreement.

 

SECTION 2.13.    Payments Generally; Pro Rata Treatment; Sharing of Set-offs. 
(a) Each Account Party shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or of amounts payable under
Section 2.06 or 2.12 or otherwise, except as expressly set forth in Section
2.05) prior to 12:00 noon (or, in the case of any prepayment or repayment in
full of all outstanding Letters of Credit and/or all outstanding Loans, 2:00
p.m.), New York City time, on the date when due, in immediately available funds,
without set-off or counterclaim in Dollars. Any amounts received after such time
on any date may, in the discretion of the Administrative Agent, be deemed to
have been received on the next succeeding Business Day for purposes of
calculating interest thereon.  All such payments shall be made to the
Administrative Agent at its offices at 1111 Fannin, 8th floor, Houston, Texas
77002, except that payments pursuant to Sections 2.06, 2.12 and 10.03 shall be
made directly to the Persons entitled thereto.  The Administrative Agent shall
distribute any such payments received by it for the account of any other Person
to the appropriate recipient promptly following receipt thereof.  If any payment
hereunder shall be due on a day that is not a Business Day, the date for payment
shall be extended to the next succeeding Business Day, and, in the case of any
payment accruing interest, interest thereon shall be payable for the period of
such extension.

 

(b)           If at any time insufficient funds are received by and available to
the Administrative Agent to pay fully all amounts of principal, interest and
fees then due hereunder, such funds shall be applied (i) first, towards payment
of interest and fees then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of interest and fees then due to such
parties, and (ii) second, towards payment of principal then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
principal then due to such parties.

 

(c)           If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Unpaid Drawings, Loans or any fees payable pursuant to
Section 2.11 resulting in such Lender receiving payment of a greater proportion
of the aggregate amount of such obligations then due and owed to such Lender,
then the Lender receiving such greater proportion shall purchase (for cash at
face value) participations in such obligations of the respective Account Party
or the Company, as the case may be, owed to such Lenders to the extent necessary
so that the benefit of all such payments shall be shared by the Lenders ratably;
provided that (i) if any such participations are purchased and all or any
portion of the payment giving rise thereto is recovered, such participations
shall be rescinded and the purchase price restored to the extent of such
recovery, without interest, and (ii) the provisions of this paragraph shall not
be construed to apply to any payment made by any Account Party pursuant to and
in accordance with the express terms of this Agreement or any payment obtained
by a Lender as consideration for the assignment of or sale of a participation in
any of its Commitment or Loans to any assignee or participant, other than to any
Account Party or any Subsidiary or Affiliate thereof (as to which the provisions
of this paragraph shall apply).  Each Account Party consents to the foregoing
and agrees, to the extent it may effectively do so under applicable law, that
any Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against such Account Party rights of set-off and counterclaim with
respect to such participation as fully as if such Lender were a direct creditor
of such Account Party in the amount of such participation.

 

(d)           Unless the Administrative Agent shall have received notice from
the relevant Account Party prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders hereunder that such Account
Party will not make such payment, the Administrative Agent

 

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may assume that such Account Party has made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute to the
Lenders the amount due. In such event, if the relevant Account Party has not in
fact made such payment, then each of the Lenders severally agrees to repay to
the Administrative Agent forthwith on demand the amount so distributed to such
Lender with interest thereon, for each day from and including the date such
amount is distributed to it to but excluding the date of payment to the
Administrative Agent, at the greater of the Federal Funds Effective Rate and a
rate determined by the Administrative Agent in accordance with banking industry
rules on interbank compensation.

 

(e)           If any Lender shall fail to make any payment required to be made
by it pursuant to Section 2.13(d), then the Administrative Agent may, in its
discretion (notwithstanding any contrary provision hereof), apply any amounts
thereafter received by the Administrative Agent for the account of such Lender
to satisfy such Lender’s obligations under such Section until all such
unsatisfied obligations are fully paid.

 

SECTION 2.14.    Mitigation Obligations; Replacement of Lenders.  (a) If any
Lender, LC Issuer or the Administrative Agent requests compensation under
Section 2.06, or if each Account Party is required to pay any additional amount
to any Lender, LC Issuer or the Administrative Agent or any Governmental
Authority for the account of any Lender, LC Issuer or the Administrative Agent
pursuant to Section 2.06 or Section 2.12, then such Lender, LC Issuer or the
Administrative Agent shall use reasonable efforts to designate a different
lending office for issuing or funding its Letters of Credit hereunder or to
assign its rights and obligations hereunder to another of its offices, branches
or affiliates, if, in the judgment of such Lender, LC Issuer or the
Administrative Agent, such designation or assignment (i) would eliminate or
reduce amounts payable pursuant to Section 2.06 or 2.12, as the case may be, in
the future and (ii) would not subject such Lender, LC Issuer or the
Administrative Agent to any unreimbursed cost or expense and would not otherwise
be disadvantageous to such Lender, LC Issuer or the Administrative Agent.  Each
Account Party hereby jointly and severally agrees to pay all reasonable costs
and expenses incurred by any Lender, LC Issuer or the Administrative Agent in
connection with any such designation or assignment.

 

(b)           If any Lender shall become a Defaulting Lender or requests
compensation under Section 2.06, or if any Account Party is required to pay any
additional amount to any Lender or LC Issuer or any Governmental Authority for
the account of any Lender or LC Issuer pursuant to Section 2.06 or Section 2.12,
then, in each case, the Company, at its sole expense and effort, shall have the
right, if no Default or Event of Default then exists, to replace such Lender or
LC Issuer (the “Replaced Lender”), with one or more Person or Persons
(collectively, the “Replacement Lender”) reasonably acceptable to the
Administrative Agent at which time the Replaced Lender shall assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in Section 10.04), all its interests, rights and obligations under
this Agreement to the Replacement Lender; provided that (i) at the time of any
replacement pursuant to this Section 2.14, the Replacement Lender and the
Replaced Lender shall enter into one or more Assignment and Assumptions pursuant
to Section 10.04(b) (and with all fees payable pursuant to said Section 10.04(b)
to be paid by the Replacement Lender) pursuant to which the Replacement Lender
shall acquire all of the Commitments and outstanding Loans of the Replaced
Lender and, in connection therewith, shall pay to the Replaced Lender in respect
thereof an amount equal to the sum of (A) an amount equal to (i) all Unpaid
Drawings that have been funded by (and not reimbursed to) such Replaced Lender,
together with all then unpaid interest with respect thereto at such time and
(ii) the principal amount of, and all accrued but unpaid interest on, all
outstanding Loans of the Replaced Lender and (B) an amount equal to all accrued,
but theretofore unpaid, fees owing to the Replaced Lender pursuant to Section
2.11; (ii) all obligations of each Account Party under this Agreement owing to
the Replaced Lender (other than those specifically described in clause (i) above
in respect of which the assignment purchase price has been, or is concurrently
being, paid), including all amounts owing to the

 

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Replaced Lender under Section 2.25 as a result of the assignment of its Loans
under clause (i) above, shall be paid in full to such Replaced Lender
concurrently with such replacement; (iii) no assignment pursuant to this Section
2.14 shall be effective until all of the then outstanding Several Letters of
Credit are returned by each respective beneficiary to the Issuing Agent for
cancellation in exchange for new or amended Several Letters of Credit which give
effect to such assignment (it being understood that to the extent the respective
beneficiaries do not consent to such assignment, such assignment cannot occur);
(iv) the Company shall have received the prior written consent of the
Administrative Agent and each Fronting Lender, which consents shall not be
unreasonably withheld or delayed; (v) such assignment will result in a reduction
in such compensation or payments; and (vi) no Lender shall be required to become
a Replaced Lender if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Company to require such assignment
and delegation cease to apply.  Upon the execution of the respective Assignment
and Assumption, the payment of amounts referred to in clauses (i) and (ii) above
and the return, and cancellation and exchange of each then outstanding Several
Letter of Credit as provided above and, if so requested by the Replacement
Lender, delivery to the Replacement Lender of the appropriate promissory note or
notes executed by the Company, the Replacement Lender shall become a Lender
hereunder and the Replaced Lender shall cease to constitute a Lender hereunder,
except with respect to indemnification provisions applicable to the Replaced
Lender under this Agreement, which shall survive as to such Replaced Lender. 
For the avoidance of doubt, no Replaced Lender shall be required to execute,
sign or deliver any document or assignment in order to be replaced in accordance
with this Section 2.14.

 

SECTION 2.15.    Designated Subsidiary Account Parties.  The Company may from
time to time designate one or more Persons as an additional Designated
Subsidiary Account Party, subject to the following terms and conditions:

 

(a)           each such Person shall be a Wholly-Owned Subsidiary of the
Company;

 

(b)           each such Designated Subsidiary Account Party shall enter into an
appropriately completed DSAP Assumption Agreement on or prior to the date of
designation hereof;

 

(c)           on or prior to the date of designation, the Administrative Agent
shall have received from such Person a certificate, signed by an Authorized
Officer of such Person in the form of Exhibit G or such other form reasonably
acceptable to the Administrative Agent with appropriate insertions or deletions,
together with (x) copies of its certificate of incorporation, by-laws or other
organizational documents, (y) the resolutions of the board of directors (or
similar governing body) of such Person relating to this Agreement which shall be
reasonably satisfactory to the Administrative Agent and (z) any other “know your
customer” information reasonably requested by a Lender; and

 

(d)           on or prior to the date of designation, the Administrative Agent
shall have received an opinion, addressed to the Administrative Agent and each
of the Lenders and dated the date of designation, which opinion shall be in form
and substance reasonably satisfactory to the Administrative Agent, from counsel
to the respective Designated Subsidiary Account Party reasonably satisfactory to
the Administrative Agent, covering certain of the matters set forth in the
opinions of counsel delivered to the Administrative Agent on the Effective Date
pursuant to Section 4.01(b)(ii), as may be reasonably requested by the
Administrative Agent, and such other matters incident to the transactions
contemplated thereby as the Administrative Agent may reasonably request.

 

SECTION 2.16.    Loans.  Subject to and upon the terms and conditions herein set
forth, each Lender severally agrees, at any time and from time to time on and
after the Effective Date and prior to the Commitment Expiration Date, to make a
loan or loans (each, a “Loan” and, collectively, the “Loans”) to the Company,
which Loans (i) may be made and maintained only in Dollars; (ii) may be

 

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repaid and reborrowed in accordance with the provisions hereof; (iii) except as
hereinafter provided, may, at the option of the Company, be incurred and
maintained as, and/or converted into, ABR Loans or Eurodollar Loans, provided
that all Loans made as part of the same Borrowing shall, unless otherwise
specified herein, consist of Loans of the same Type; and (iv) shall not be made
(and shall not be required to be made) by any Lender if the making of same would
cause the aggregate Credit Exposures of all Lenders taken together (after giving
effect to the use of the proceeds thereof on the date of the incurrence thereof
to repay any amounts theretofore outstanding pursuant to this Agreement) to
exceed the Total Commitment as then in effect.

 

SECTION 2.17.    Loans and Borrowings.

 

(a)           Each Loan shall be made as part of a Borrowing consisting of Loans
made by the Lenders ratably in accordance with their respective Commitments. The
failure of any Lender to make any Loan required to be made by it shall not
relieve any other Lender of its obligations hereunder nor shall any other party
be liable for the failure by such Lender to perform its obligations hereunder.

 

(b)           Subject to Section 2.24, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Company may request in
accordance herewith. Each Lender at its option may make any Loan by causing any
domestic or foreign branch or Affiliate of such 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.

 

(c)           At the commencement of each Interest Period for any Eurodollar
Borrowing, such Borrowing shall be in an aggregate principal amount of not less
than $5,000,000. At the time that each ABR Borrowing is made, such Borrowing
shall be in an aggregate amount that is an integral multiple of $1,000,000 and
not less than $5,000,000; provided that a Borrowing may be in an aggregate
amount that is equal to the entire unused balance of the Total Commitment.
Borrowings of more than one Type may be outstanding at the same time; provided
that there shall not at any time be more than a total of ten Eurodollar
Borrowings outstanding.

 

(d)           Notwithstanding any other provision of this Agreement, the Company
shall not be entitled to request, or to elect to convert or continue, any
Borrowing if the Interest Period requested with respect thereto would end after
the Commitment Expiration Date.

 

SECTION 2.18.    Requests for Borrowings.  To request a Borrowing, the Company
shall notify the Administrative Agent of such request by telephone (a) in the
case of a Eurodollar Borrowing, not later than 12:00 noon, New York City time,
three Business Days before the date of the proposed Borrowing and (b) in the
case of an ABR Borrowing, not later than 11:00 a.m., New York City time, on the
date of the proposed Borrowing. Each such telephonic Borrowing Request shall be
irrevocable and shall be confirmed promptly by delivery or facsimile or
electronic mail to the Administrative Agent of a Borrowing Request in the form
of Exhibit B or such other form reasonably acceptable to the Administrative
Agent appropriately completed and signed by the Company. Each such telephonic
and written Borrowing Request shall specify the following information in
compliance with Section 2.17:

 

(i)            the aggregate principal amount of the requested Borrowing;

 

(ii)           the date of such Borrowing, which shall be a Business Day;

 

(iii)          whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;

 

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(iv)          in the case of a Eurodollar Borrowing, the initial Interest Period
to be applicable thereto, which shall be a period contemplated by the definition
of the term “Interest Period”; and

 

(v)           the location and number of the Company’s account to which funds
are to be disbursed.

 

If no election as to the Type of Borrowing of Loans is specified, then such
Borrowing of Loans shall be an ABR Borrowing.  If no Interest Period is
specified with respect to any requested Eurodollar Borrowing, then the Company
shall be deemed to have selected an Interest Period of one month’s duration.
Promptly following receipt of a Borrowing Request in accordance with this
Section, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender’s Loan to be made as part of the
requested Borrowing.

 

SECTION 2.19.    Funding of Borrowings.

 

(a)           Each Lender shall make each Loan on the proposed date thereof by
wire transfer of immediately available funds by 12:00 noon, New York City time,
to the account of the Administrative Agent most recently designated by it for
such purpose by notice to the Lenders.  The Administrative Agent will make such
Loans available to the Company by wire transfer of immediately available funds
not later than 1:00 p.m., New York City time, to the account of the Company
designated by it in the applicable Borrowing Request.

 

(b)           Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing (or prior to 1:00 p.m., New
York City time, on the date of such Borrowing in the case of ABR Borrowings)
that such Lender will not make available to the Administrative Agent such
Lender’s share of such Borrowing, the Administrative Agent may assume that such
Lender has made such share available on such date in accordance with paragraph
(a) of this Section and may, in reliance upon such assumption, make available to
the Company a corresponding amount. In such event, if a Lender has not in fact
made its share of the applicable Borrowing available to the Administrative
Agent, then the applicable Lender and the Company severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with interest
thereon, for each day from and including the date such amount is made available
to the Company to but excluding the date of payment to the Administrative Agent,
at (i) in the case of such Lender, the greater of the Federal Funds Effective
Rate and a rate determined by the Administrative Agent in accordance with
banking industry rules on interbank compensation or (ii) in the case of the
Company, the interest rate applicable to ABR Loans.  If such Lender pays such
amount to the Administrative Agent, then such amount shall constitute such
Lender’s Loan included in such Borrowing and the Company’s obligations to repay
the Administrative Agent in accordance with the previous sentence shall cease to
the extent such Lender has paid such amounts.

 

SECTION 2.20.    Interest Elections.

 

(a)           Each Borrowing initially shall be of the Type specified in the
applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall
have an initial Interest Period as specified in such Borrowing Request. 
Thereafter, the Company may elect to convert such Borrowing to a different Type
or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may
elect Interest Periods therefor, all as provided in this Section 2.20.  Subject
to the other provisions of this Section 2.20, the Company may elect different
options with respect to different portions of the affected Borrowing, in which
case each such portion shall be allocated ratably among the Lenders holding the
Loans comprising such Borrowing, and the Loans comprising each such portion
shall be considered a separate Borrowing.

 

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(b)           To make an election pursuant to this Section (an “Interest
Election Request”), the Company shall notify the Administrative Agent of such
election by telephone by the time that a Borrowing Request would be required
under Section 2.18 if the Company were requesting a Borrowing of the Type
resulting from such election to be made on the effective date of such election.
Each such telephonic Interest Election Request shall be irrevocable and shall be
confirmed promptly by delivery or facsimile or electronic mail to the
Administrative Agent of an Interest Election Request in the form of Exhibit E,
or such other form reasonably acceptable to the Administrative Agent, and signed
by the Company.

 

(c)           Each Interest Election Request shall specify the following
information in compliance with Section 2.17:

 

(i)            the Borrowing 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 Borrowing (in
which case the information to be specified pursuant to clauses (iii) and
(iv) below shall be specified for each resulting Borrowing);

 

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

 

(iii)          whether the resulting Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and

 

(iv)          if the resulting Borrowing is a Eurodollar Borrowing, the Interest
Period to be applicable thereto after giving effect to such election, which
shall be a period contemplated by the definition of the term Interest Period.

 

If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Company shall be deemed to have
selected an Interest Period of one month’s duration.

 

(d)           Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender’s portion of each resulting Borrowing.

 

(e)           If the Company fails to deliver a timely Interest Election Request
with respect to a Eurodollar Borrowing prior to the end of the Interest Period
applicable thereto, then, unless such Borrowing is repaid as provided herein, at
the end of such Interest Period such Borrowing shall be converted to an ABR
Borrowing.  Notwithstanding anything to the contrary contained in this
Agreement, if an Event of Default is in existence, then, so long as an Event of
Default is in existence (i) no outstanding Borrowing may be converted to or
continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.

 

SECTION 2.21.      Repayment of Loans; Evidence of Debt.

 

(a)           The Company hereby unconditionally promises to pay to the
Administrative Agent for the account of each Lender the then unpaid principal
amount of all Loans on the Commitment Expiration Date.

 

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(b)           Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Company to such Lender
resulting from each Loan made by such Lender, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.

 

(c)           The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, the Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Company to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder for the account of the Lenders and each Lender’s share thereof.

 

(d)           The entries made in the accounts maintained pursuant to paragraph
(b) or (c) of this Section shall be prima facie evidence of the existence and
amounts of the obligations recorded therein; provided that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Company to repay
the Loans in accordance with the terms of this Agreement.

 

(e)           Any Lender may request by written notice to the Company and the
Administrative Agent that Loans made by it be evidenced by a promissory note
(which may be executed by facsimile).  In such event, the Company shall prepare,
execute and deliver to such Lender a promissory note payable to the order of
such Lender (or, if requested by such Lender, to such Lender and its registered
assigns) and in the form of Exhibit D or such other form reasonably acceptable
to the Administrative Agent.  Thereafter, the Loans evidenced by such promissory
note and interest thereon shall at all times (including after assignment
pursuant to Section 10.04) be represented by one or more promissory notes in
such form payable to the order of the payee named therein (or, if such
promissory note is a registered note, to such payee and its registered assigns).

 

SECTION 2.22.      Voluntary Prepayment of Loans.

 

(a)           The Company shall have the right at any time and from time to time
to prepay any Borrowing in whole or in part, without premium or penalty, except
as provided in Section 2.25, subject to prior notice in accordance with
paragraph (b) of this Section.

 

(b)           The Company shall notify the Administrative Agent by telephone
(confirmed by facsimile or electronic mail) of any prepayment hereunder (i) in
the case of prepayment of a Eurodollar Borrowing, not later than 12:00 noon, New
York City time, three Business Days before the date of prepayment or (ii) in the
case of prepayment of an ABR Borrowing, not later than 12:00 noon, New York City
time, on the date of prepayment. Each such notice shall be irrevocable (unless
given in connection with a Conditional Termination Notice, as set forth in
Section 2.09, in which case, subject to Section 2.25, such notice of prepayment
may be revoked if such Conditional Termination Notice is revoked in accordance
with Section 2.09) and shall specify the prepayment date, the Borrowing or
Borrowings which are to be prepaid and the principal amount of each Borrowing or
portion thereof to be prepaid. Promptly following receipt of any such notice
relating to a Borrowing, the Administrative Agent shall advise the Lenders of
the contents thereof. Each partial prepayment of any Borrowing shall be in an
amount that would be permitted in the case of an advance of a Borrowing of the
same Type as provided in Section 2.17. Each prepayment of a Borrowing shall be
applied ratably to the Loans included in the prepaid Borrowing. Prepayments
shall be accompanied by accrued interest to the extent required by Section 2.23.

 

SECTION 2.23.      Interest.

 

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(a)           The ABR Loans shall bear interest at the Alternate Base Rate plus
the Applicable Rate with respect to ABR Loans.  The Eurodollar Loans shall bear
interest at the Adjusted LIBO Rate for the Interest Period in effect for such
Loan plus the Applicable Rate with respect to Eurodollar Loans.

 

(b)           [Intentionally Omitted.]

 

(c)           Notwithstanding the foregoing, if any principal of or interest on
any Loan or any fee or other amount payable by the Company hereunder is not paid
when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise applicable to such Loan as provided in the preceding paragraphs
of this Section 2.23 or (ii) in the case of any other amount, 2% plus the rate
applicable to ABR Loans as provided in paragraph (a) of this Section 2.23.

 

(d)           Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan and on the Commitment Expiration Date;
provided that (i) interest accrued pursuant to paragraph (c) of this
Section shall be payable on demand, (ii) in the event of any repayment or
prepayment of any Loan (other than a prepayment of an ABR Loan prior to the
Commitment Expiration Date), accrued interest on the principal amount repaid or
prepaid shall be payable on the date of such repayment or prepayment and
(iii) in the event of any conversion of any Eurodollar Loan prior to the end of
the current Interest Period therefor, accrued interest on such Loan shall be
payable on the effective date of such conversion.

 

(e)           All interest hereunder shall be computed on the basis of a year of
360 days, except that interest computed by reference to the Alternate Base Rate
at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day). The applicable Alternate Base Rate or
Adjusted LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.

 

SECTION 2.24.      Alternate Rate of Interest.  If prior to the commencement of
any Interest Period for a Eurodollar Borrowing:

 

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

 

(b)           the Administrative Agent is advised by the Required Lenders (based
on the reasonable determination of such Required Lenders) that the Adjusted LIBO
Rate for such Interest Period will not adequately and fairly reflect the cost to
such Lenders of making or maintaining their Loans included in such Borrowing for
such Interest Period;

 

then the Administrative Agent shall give notice thereof to the Company and the
Lenders by telephone (followed by written or facsimile notice) or facsimile or
in writing as promptly as practicable thereafter and, until the Administrative
Agent notifies the Company and the Lenders that the circumstances giving rise to
such notice no longer exist, (i) any Interest Election Request that requests the
conversion of any Borrowing to, or continuation of any Borrowing as, a
Eurodollar Borrowing shall be ineffective and (ii) if any Borrowing Request
requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR
Borrowing provided that if the circumstances giving rise to such notice affect
only one Type of Borrowings, then the other Type of Borrowings shall be
permitted.

 

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SECTION 2.25.      Break Funding Payments.  In the event of (a) the payment of
any principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of a mandatory prepayment under
Section 2.10 or the occurrence of an Event of Default), (b) the conversion of
any Eurodollar Loan other than on the last day of the Interest Period applicable
thereto, (c) the failure to borrow, convert, continue or prepay any Eurodollar
Loan on the date specified in any notice delivered pursuant hereto, or (d) the
assignment of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the Company pursuant to
Section 2.14, then, in any such event, the Company shall compensate each Lender
for the loss, cost and expense attributable to such event.  In the case of a
Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to
include an amount determined by such Lender to be the excess, if any, of (i) the
amount of interest which would have accrued on the principal amount of such Loan
had such event not occurred, at the Adjusted LIBO Rate that would have been
applicable to such Loan, for the period from the date of such event to the last
day of the then current Interest Period therefor (or, in the case of a failure
to borrow, convert or continue, for the period that would have been the Interest
Period for such Loan), over (ii) the amount of interest which would accrue on
such principal amount for such period at the interest rate which such Lender
would bid were it to bid, at the commencement of such period, for dollar
deposits of a comparable amount and period from other banks in the Eurodollar
market.  A certificate of any Lender setting forth in reasonable detail any
amount or amounts that such Lender is entitled to receive pursuant to this
Section shall be delivered to the Company and shall be conclusive absent
manifest error.  The Company shall pay such Lender the amount shown as due on
any such certificate within 10 days after receipt thereof.

 

SECTION 2.26.      Defaulting Lenders.  Notwithstanding any provision of this
Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the
following provisions shall apply for so long as such Lender is a Defaulting
Lender:

 

(a)           if any Letter of Credit Outstandings (excluding Letter of Credit
Outstandings in respect of any Several Letter of Credit so long as (i) neither
the Issuing Agent nor any Lender (other than the Defaulting Lender) has an
obligation or liability in respect of the Defaulting Lender’s obligation under
such Several Letter of Credit and (ii) the beneficiary under such Several Letter
of Credit or any other third party does not claim or otherwise assert in writing
(which claim or assertion is not withdrawn) that the Issuing Agent or any Lender
(other than the Defaulting Lender) has an obligation or liability in respect of
the Defaulting Lender’s obligation under such Several Letter of Credit) exist at
the time a Lender is a Defaulting Lender, the Company shall within one
(1) Business Day following notice by the Administrative Agent cash collateralize
such Defaulting Lender’s Letter of Credit Outstandings (as adjusted above) in
accordance with the procedures set forth in Section 2.10 for so long as such
Letter of Credit Outstandings are outstanding; and

 

(b)           no LC Issuer shall be required to issue, amend, extend or increase
any Letter of Credit unless it is satisfied that cash collateral will be
provided by the Company in accordance with (and to the extent required by)
Section 2.26(a).

 

If (i) a Bankruptcy Event with respect to a Parent of any Lender shall occur
following the date hereof and for so long as such event shall continue or
(ii) any LC Issuer has a good faith belief that any Lender has defaulted in
fulfilling its obligations under one or more other agreements in which such
Lender commits to extend credit, no LC Issuer shall be required to issue, amend
or increase any Letter of Credit, unless such LC Issuer shall have entered into
arrangements with the Company or such Lender, satisfactory to such LC Issuer to
defease any risk to it in respect of such Lender hereunder.

 

SECTION 2.27.      Additional Commitments.  (a) The Company shall have the
right, at any time and from time to time, after the Effective Date and prior to
the Commitment Expiration Date

 

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to request (so long as no Default or Event of Default is then in existence or
would result therefrom) on one or more occasions that one or more existing
Lenders (and/or one or more other Eligible Persons which will become Lenders as
provided pursuant to clause (v) below) provide Additional Commitments; it being
understood and agreed, however, that (i) no existing Lender shall be obligated
to provide an Additional Commitment as a result of any request by the Company,
(ii) any existing Lender may provide an Additional Commitment without the
consent of any other Lender, (iii) (A) each provision of Additional Commitments
on a given date pursuant to this Section 2.27 shall be in a minimum aggregate
amount (for all Additional Commitment Lenders (including, in the circumstances
contemplated by clause (v) below, Eligible Persons who will become Additional
Commitment Lenders) of at least $25,000,000 (or such lesser amount as is
acceptable to the Administrative Agent) and (B) the aggregate Commitments for
all Lenders hereunder shall not exceed $500,000,000, (iv) all up-front fees
payable to any Additional Commitment Lender shall be as set forth in the
relevant Additional Commitment Agreement, (v) the Company may request Additional
Commitments from Eligible Persons which are reasonably acceptable to the
Administrative Agent and each Fronting Lender, (vi) all Additional Commitments
provided on a given date pursuant to this Section 2.27 shall have the same terms
and conditions as all then existing Commitments (other than with respect to
upfront fees) and shall be added to such existing Commitments in accordance with
clause (b) of this Section 2.27 below and (vii) all actions taken by the Account
Party pursuant to this Section 2.27 shall be done in coordination with the
Administrative Agent.  No consent of any Lender (other than the Lenders
providing the Additional Commitments) shall be required for any Additional
Commitments made pursuant to this Section 2.27.

 

(b)           The effectiveness of Additional Commitments pursuant to this
Section 2.27 shall be subject to the occurrence of the following: (i) the
Company, each Designated Subsidiary Account Party, the Administrative Agent and
each existing Lender or Eligible Person, as the case may be, which agrees to
provide an Additional Commitment (each, an “Additional Commitment Lender”) shall
have executed and delivered to the Administrative Agent an Additional Commitment
Agreement substantially in the form of Exhibit H or such other form reasonably
acceptable to the Administrative Agent, subject to such modifications in form
and substance reasonably satisfactory to the Administrative Agent as may be
necessary or appropriate (with the effectiveness of such Additional Commitment
Lender’s Additional Commitment to occur upon delivery of such Additional
Commitment Agreement to the Administrative Agent, the payment of any fees
required in connection therewith and the satisfaction of the other conditions
set forth in this Section 2.27 to the reasonable satisfaction of the
Administrative Agent), (ii) all Several Letters of Credit outstanding at such
time shall have been returned by each respective beneficiary thereunder to the
respective Issuing Agent and shall either have been cancelled and/or exchanged
for new or amended Several Letters of Credit which give effect to such
Additional Commitments, and such Additional Commitment Lenders, (iii) if such
Additional Commitment Lender is not a United States person (as such term is
defined in Section 7701(a)(3) of the Code) for U.S. Federal income tax purposes
or would otherwise constitute a Foreign Lender, such Additional Commitment
Lender shall have provided to the Company the appropriate documentation
described in Section 2.12(e), (iv) the Company and each Designated Subsidiary
Account Party shall have delivered to the Administrative Agent resolutions
authorizing the incurrence of the obligations to be incurred pursuant to each
Additional Commitment, and (v) the Company and each Designated Subsidiary
Account Party shall have delivered to the Administrative Agent an opinion, in
form and substance reasonably satisfactory to the Administrative Agent, from
counsel to the Company and such Designated Subsidiary Account Party reasonably
satisfactory to the Administrative Agent and dated such date, covering certain
matters similar to those set forth in the opinions of counsel delivered to the
Lenders on the Effective Date pursuant to Section 4.01(b) and such other matters
as the Administrative Agent may reasonably request.  The Administrative Agent
shall promptly notify each Lender as to the occurrence of each Additional
Commitment Date, and (x) on each such date, the Total Commitment under, and for
all purposes of, this Agreement and each other Credit Document shall be
increased by the aggregate amount of such Additional Commitments, (y) on each
such date, the Commitment Schedule shall be deemed modified to

 

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reflect the revised Commitments of each affected Lender and (z) on each such
date, the Company shall be deemed to have repaid and reborrowed all outstanding
Loans (with such reborrowing to consist of the Types of Loans, with related
Interest Periods if applicable, specified in a notice delivered by the Company,
in accordance with the requirements of Section 2.18).  The deemed payments made
pursuant to clause (z) of the immediately preceding sentence shall be
accompanied by payment of all accrued interest on the amount prepaid and, in
respect of each Eurodollar Loan, shall be subject to indemnification by the
Company pursuant to the provisions of Section 2.25 if the deemed payment occurs
other than on the last day of the related Interest Periods.

 

ARTICLE III

 

Representations and Warranties

 

Each of the Company and each Designated Subsidiary Account Party, in each case,
on behalf of itself and its respective Subsidiaries represents and warrants to
the Lenders that:

 

SECTION 3.01.      Corporate Status.  Each of the Company and each of its
Significant Subsidiaries (i) is a duly organized and validly existing
corporation or business trust or other entity in good standing under the laws of
the jurisdiction of its organization and has the corporate or other
organizational power and authority to own its property and assets and to
transact the business in which it is engaged and presently proposes to engage,
and (ii) has been duly qualified and is authorized to do business and is in good
standing in all jurisdictions where it is required to be so qualified, except,
in the case of this clause (ii), where the failure to be so qualified,
authorized or in good standing, either individually or in the aggregate, has not
had, and would not reasonably be expected to have, a Material Adverse Effect.

 

SECTION 3.02.      Corporate Power and Authority.  Each Account Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of this Agreement and has taken all necessary corporate action to
authorize the execution, delivery and performance of this Agreement. Each
Account Party has duly executed and delivered this Agreement and this Agreement
constitutes the legal, valid and binding obligation of such Account Party
enforceable against such Account Party in accordance with its terms, except to
the extent that enforceability thereof may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws affecting creditors’ rights generally and
general principles of equity regardless of whether enforcement is sought in a
proceeding in equity or at law.

 

SECTION 3.03.      No Contravention of Agreements or Organizational Documents. 
Neither the execution, delivery and performance by any Account Party of this
Agreement nor compliance with the terms and provisions hereof, nor the
consummation of the transactions contemplated herein, (i) will contravene any
applicable provision of any law, statute, rule, regulation, order, writ,
injunction or decree of any court or governmental instrumentality, (ii) will
conflict or be inconsistent with or result in any breach of any of the terms,
covenants, conditions or provisions of, or constitute a default under, or result
in the creation or imposition of (or the obligation to create or impose) any
Lien upon any of the property or assets of the Company or any of its
Subsidiaries pursuant to the terms of, any indenture, mortgage, deed of trust,
loan agreement, credit agreement or any other material instrument to which the
Company or any of its Subsidiaries is a party or by which it or any of its
property or assets are bound or to which it may be subject or (iii) will violate
any provision of the certificate of incorporation, by-laws or other
organizational documents of the Company or any of its Subsidiaries.

 

SECTION 3.04.      Litigation and Environmental Matters.  There are no actions,
suits or proceedings pending or, to the best knowledge of the Company or any of
its Significant

 

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Subsidiaries, threatened involving the Company or any of its Subsidiaries
(including with respect to this Agreement) that, either individually or in the
aggregate, have had, or would reasonably be expected to have, a Material Adverse
Effect.  Except for any matters that, either individually or in the aggregate,
have not had, and would not reasonably be expected to have, a Material Adverse
Effect, neither the Company nor any of its Subsidiaries (i) has failed to comply
with any Environmental Law or to obtain, maintain or comply with any permit,
license or other approval required under any Environmental Law, (ii) has become
subject to any Environmental Liability, (iii) has received notice of any claim
with respect to any Environmental Liability or (iv) knows of any basis for any
Environmental Liability.

 

SECTION 3.05.      Use of Proceeds; Use of Letters of Credit; Margin
Regulations.  (a) All proceeds of the Loans shall be utilized for the general
corporate (including acquisitions) and working capital purposes of the Company
(which, for the avoidance of doubt, includes making payments and/or
reimbursements with respect to the Four-Year Secured Letter of Credit Facility
and/or Letters of Credit issued hereunder); (b) All Letters of Credit shall only
be utilized to support Letter of Credit Supportable Obligations; (c) Neither the
making of any Loan hereunder nor the use of the proceeds thereof will violate or
be inconsistent with the provisions of Regulation T, U or X and, to the extent
such use entails a violation of the provisions of Regulations T, U or X, no part
of the proceeds of any Loan will be used to purchase or carry any Margin Stock
or to extend credit for the purpose of purchasing or carrying any Margin Stock.

 

SECTION 3.06.      Approvals.  Any (a) order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any foreign or domestic governmental or public body or authority,
or any subdivision thereof, which is required to authorize or is required or
(b) third party approval, permit or license required to be obtained, in each
case in connection with (i) the Transaction or (ii) the legality, validity,
binding effect or enforceability of this Agreement, has been obtained and is in
full force and effect.

 

SECTION 3.07.      Investment Company Act.  No Account Party is an “investment
company” or a company “controlled” by an “investment company,” within the
meaning of the Investment Company Act of 1940, as amended.

 

SECTION 3.08.      True and Complete Disclosure; Projections and Assumptions. 
All factual information (taken as a whole) heretofore or contemporaneously
furnished by the Company or any of its Subsidiaries to the Administrative Agent
or any Lender (including all information contained in this Agreement) for
purposes of or in connection with this Agreement or any transaction contemplated
herein is, and all other factual information (taken as a whole with all other
such information theretofore or contemporaneously furnished) hereafter furnished
by any such Persons to the Administrative Agent or any Lender will be, true and
accurate in all material respects on the date as of which such information is
dated and not incomplete by omitting to state any material fact necessary to
make such information (taken as a whole with all other such information
theretofore or contemporaneously furnished) not materially misleading at such
time in light of the circumstances under which such information was provided;
provided that with respect to projections, the Company or the applicable
Designated Subsidiary Account Party represents only that the projections
contained in such materials are based on good faith estimates and assumptions
believed by the Company to be reasonable and attainable at the time made, it
being recognized by the Administrative Agent and the Lenders that such
projections as to future events are not to be viewed as facts and are subject to
significant uncertainties and contingencies many of which are beyond the
Company’s control and that actual results during the period or periods covered
by any such projections may materially differ from the projected results.

 

SECTION 3.09.      Financial Condition.  (a) The Company has heretofore
furnished to the Lenders its consolidated balance sheet and consolidated
statements of operations and

 

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comprehensive income (loss), shareholders’ equity and cash flows as of and for
the fiscal year ended December 31, 2011 reported on by PricewaterhouseCoopers,
independent public accountants.  Such financial statements present fairly, in
all material respects, the financial position and results of operations and cash
flows of the Company and its consolidated Subsidiaries as of such dates and for
such periods in accordance with GAAP.

 

(b)           Since December 31, 2011, nothing has occurred, either individually
or in the aggregate, which has resulted in, or would reasonably be expected to
result in, any material adverse condition or any material adverse change in or
affecting (i) the business, operations, assets, liabilities or financial
condition of the Company and its Subsidiaries, taken as a whole, or (ii) the
rights and remedies of the Lenders or the ability of the Company and each other
Account Party, taken as a whole, to perform their respective obligations to the
Lenders under this Agreement.

 

SECTION 3.10.      Tax Returns and Payments.  Except where the failure to do so
would not reasonably be expected, individually or in aggregate, to have a
Material Adverse Effect, the Company and its Subsidiaries (i) have timely filed
or caused to be timely filed with the appropriate taxing authority (taking into
account any applicable extension within which to file) all material income and
other material tax returns (including any statements, forms and reports),
domestic and foreign, required to be filed by the Company and its Subsidiaries,
and (ii) have timely paid, collected or remitted or caused to have timely paid,
collected or remitted all material taxes payable by them which have become due
and assessments which have become due, except for those contested in good faith
and adequately disclosed and for which adequate reserves have been established
in accordance with GAAP.  To the best knowledge of the Company and its
Subsidiaries, there is no action, suit, proceeding, investigation, audit or
claim now pending or proposed or threatened by any taxing authority regarding
any income taxes or any other taxes relating to the Company or any of its
Subsidiaries, which, either individually or in the aggregate, has had, or would
reasonably be expected to have, a Material Adverse Effect.  To the best
knowledge of the Company and its Subsidiaries, no tax Liens have been filed and
no claims are pending or proposed or threatened with respect to any taxes, fees
or other charges for any taxable period, except for Liens permitted under
Section 6.03 and claims which, either individually or in the aggregate, have not
had, and would not reasonably be expected to have, a Material Adverse Effect.

 

SECTION 3.11.      Compliance with ERISA.  (a) Except as, either individually or
in the aggregate, has not had, and would not reasonably be expected to have, a
Material Adverse Effect, the Company and its Subsidiaries and their ERISA
Affiliates (i) have fulfilled their respective obligations under the minimum
funding standards of ERISA and the Code with respect to each Plan and are in
compliance with the applicable provisions of ERISA and the Code, and (ii) have
not incurred any liability to the PBGC or any Plan or Multiemployer Plan (other
than to make contributions in the ordinary course of business).

 

(b)           Except as, either individually or in the aggregate, has not had,
and would not reasonably be expected to have, a Material Adverse Effect,
(i) each Foreign Pension Plan has been maintained in compliance with its terms
and with the requirements of any and all applicable laws, statutes, rules,
regulations and orders and has been maintained, where required, in good standing
with applicable regulatory authorities, (ii) all contributions required to be
made with respect to a Foreign Pension Plan have been timely made, (iii) neither
the Company nor any of its Subsidiaries has incurred any obligation in
connection with the termination of, or withdrawal from, any Foreign Pension Plan
and (iv) the present value of the accrued benefit liabilities (whether or not
vested) under each Foreign Pension Plan that is required to be funded,
determined as of the end of the Company’s most recently ended fiscal year on the
basis of actuarial assumptions, each of which is reasonable, did not exceed the
current value of the assets of such Foreign Pension Plan allocable to such
benefit liabilities.

 

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SECTION 3.12.           Subsidiaries.  (a) Set forth on Schedule 3.12 is a
complete and correct list of all of the Subsidiaries of the Company as of the
Effective Date, together with, for each such Subsidiary, (i) the jurisdiction of
organization of such Subsidiary, (ii) each Person holding direct ownership
interests in such Subsidiary, (iii) the percentage ownership of such Subsidiary
represented by such ownership interests and (iv) specifying if such Subsidiary
is a Significant Subsidiary.  Except as disclosed on Schedule 3.12, as of the
Effective Date, each of the Company and its Subsidiaries owns, free and clear of
Liens, and has the unencumbered right to vote, all outstanding ownership
interests in each Person shown to be held by it on Schedule 3.12.

 

(b)                                 As of the Effective Date, there are no
restrictions on the Company or any of its Significant Subsidiaries which
prohibit or otherwise restrict the transfer of cash or other assets from any
Subsidiary of the Company to the Company, other than (i) prohibitions or
restrictions existing under or by reason of this Agreement, (ii) prohibitions or
restrictions existing under or by reason of Legal Requirements,
(iii) prohibitions and restrictions permitted by Section 6.12 and (iv) other
prohibitions or restrictions which, either individually or in the aggregate,
have not had, and would not reasonably be expected to have, a Material Adverse
Effect.

 

SECTION 3.13.           Capitalization.  As of the Effective Date, the
authorized capital stock of the Company consists of 571,428,571.4 shares, par
value $0.175 per share.  As of the Effective Date, none of the Company’s
Significant Subsidiaries has outstanding any securities convertible into or
exchangeable for its capital stock or outstanding any rights to subscribe for or
to purchase, or any options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, its capital stock except for options, warrants and
grants outstanding in the aggregate amounts set forth on Schedule 3.13.

 

SECTION 3.14.           Indebtedness.  The Company and its Significant
Subsidiaries do not have any Indebtedness for borrowed money on the Effective
Date other than the Indebtedness listed on Schedule 3.14 or set forth on the
balance sheet referred to in Section 3.09(a).

 

SECTION 3.15.           Compliance with Statutes and Agreements.  (a) The
Company and each of its Significant Subsidiaries is in compliance with all
applicable statutes, regulations, rules and orders of, and all applicable
restrictions imposed by, and has filed or otherwise provided all material
reports, data, registrations, filings, applications and other information
required to be filed with or otherwise provided to, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property (including compliance with all applicable Environmental Laws),
except where (i) the failure to comply or file or otherwise provide, either
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect or (ii) such statutes, regulations,
rules and orders are being contested in good faith by appropriate proceedings
diligently conducted.  All required regulatory approvals are in full force and
effect on the date hereof, except where the failure of such approvals to be in
full force and effect, either individually or in the aggregate, has not had, and
would not reasonably be expected to have, a Material Adverse Effect.

 

(b)                                 The Company and each of its Significant
Subsidiaries is in compliance with all indentures, agreements and other
instruments binding upon it or its property, except where the failure to do so,
either individually or in the aggregate, has not had, and would not reasonably
be expected to have, a Material Adverse Effect.

 

SECTION 3.16.           Insurance Licenses.  There is (i) no Insurance License
that is the subject of a proceeding for suspension, revocation or limitation or
any similar proceedings, (ii) no sustainable basis for such a suspension,
revocation or limitation, and (iii) no such suspension, revocation or limitation
threatened by any Applicable Insurance Regulatory Authority, that, in each
instance under

 

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(i), (ii) and (iii) above and either individually or in the aggregate, has had,
or would reasonably be expected to have, a Material Adverse Effect.

 

SECTION 3.17.           Insurance Business.  All insurance policies issued by
any Significant Insurance Subsidiary are, to the extent required under
applicable law, on forms approved by the insurance regulatory authorities of the
jurisdiction where issued or have been filed with and not objected to by such
authorities within the period provided for objection, except for those forms
with respect to which a failure to obtain such approval or make such a filing
without it being objected to, either individually or in the aggregate, has not
had, and would not reasonably be expected to have, a Material Adverse Effect.

 

SECTION 3.18.           Properties; Liens; and Insurance.  (a) The Company and
its Significant Subsidiaries have good title to, or valid leasehold interests
in, all real and personal property material to the businesses of the Company and
its Significant Subsidiaries, taken as a whole.  There exists no Lien (including
any Lien arising out of any attachment, judgment or execution) of any kind, on,
in or with respect to any of the property of the Company or any of its
Significant Subsidiaries, in each case except as expressly permitted by Section
6.03.

 

(b)                                 The Company and its Significant Subsidiaries
own, or are licensed to use, all trademarks, trade names, copyrights, patents
and other intellectual property material to the businesses of the Company and
its Significant Subsidiaries, taken as a whole, and the use thereof by the
Company or such Significant Subsidiary does not infringe upon the rights of any
other Person, except for any such infringements that, either individually or in
the aggregate, have not had, and would not reasonably be expected to have, a
Material Adverse Effect.

 

(c)                                  As of the Effective Date, all premiums in
respect of each material insurance policy maintained by the Company and its
Significant Subsidiaries have been paid.  The Company and each Designated
Subsidiary Account Party believes that the insurance maintained by or on behalf
of the Company and its Significant Subsidiaries is in at least such amounts and
against at least such risks as are usually insured against in the same general
area by companies of established repute engaged in the same or similar
businesses.

 

SECTION 3.19.           Solvency.  On the Effective Date and upon the occurrence
of each Credit Event, both before and after giving effect thereto, (i) each
Account Party, taken individually, (ii) the Company and its Subsidiaries, taken
as a whole and (iii) each Account Party and its respective subsidiaries, taken
as a whole, are, in each case, Solvent.

 

ARTICLE IV

 

Conditions

 

SECTION 4.01.           Effective Date.  The obligations of the Lenders to make
Loans and each LC Issuer to issue Letters of Credit shall not become effective
until the date (the “Effective Date”) on which each of the following conditions
is satisfied (or waived in accordance with Section 10.02):

 

(a)                                 On or prior to the Effective Date, (i) each
of the Company, each Designated Subsidiary Account Party listed on Schedule
2.15, the Administrative Agent and each of the Lenders shall have signed a copy
hereof (whether the same or different copies) and shall have delivered the same
to the Administrative Agent in accordance with Section 10.01(a) or, in the case
of the Lenders, shall have given to the Administrative Agent telephonic
(confirmed in writing), written or facsimile transmission notice

 

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(actually received) in accordance with Section 10.01(a) that the same has been
signed and mailed to the Administrative Agent; and (ii) there shall have been
delivered to the Administrative Agent for the account of each Lender that has
requested the same pursuant to Section 2.21(e) the appropriate promissory note
or promissory notes, executed by the Company, in each case, in the amount,
maturity and as otherwise provided herein.

 

(b)                                 On the Effective Date, the Administrative
Agent shall have received (i) an opinion, in form and substance reasonably
satisfactory to the Administrative Agent, addressed to the Administrative Agent
and each of the Lenders and dated the Effective Date, from Skadden, Arps, Slate,
Meagher & Flom LLP, special New York counsel to the Account Parties and (ii) an
opinion, in form and substance reasonably satisfactory to the Administrative
Agent, addressed to the Administrative Agent and each of the Lenders and dated
the Effective Date, from Appleby, special Bermuda counsel to the Account
Parties.

 

(c)                                  (i) On the Effective Date, the
Administrative Agent shall have received, from each Account Party, a
certificate, dated the Effective Date, signed by an Authorized Officer of such
Account Party, and attested to by the Secretary or any Assistant Secretary of
such Account Party, in the form of Exhibit G hereto with appropriate insertions
and deletions, together with (x) copies of its certificate of incorporation,
by-laws or other organizational documents and (y) the resolutions of the board
of directors of such Account Party relating to this Agreement which shall be
satisfactory to the Administrative Agent; (ii) On or prior to the Effective
Date, all corporate and legal proceedings and all instruments and agreements in
connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to the Administrative Agent, and
the Administrative Agent shall have received all information and copies of all
certificates, documents and papers, including certificates of existence or good
standing certificates, as applicable, and any other records of corporate
proceedings and governmental approvals, if any, which the Administrative Agent
reasonably may have requested in connection therewith, such documents and papers
where appropriate to be certified by proper corporate or governmental
authorities.

 

(d)                                 Since December 31, 2011, nothing shall have
occurred or become known to the Administrative Agent or the Required Lenders
which, either individually or in the aggregate, has had, or would reasonably be
expected to have, a Material Adverse Effect.

 

(e)                                  On the Effective Date, no actions, suits or
proceedings by any entity (private or governmental) shall be pending against the
Company or any of its Significant Subsidiaries (i) with respect to this
Agreement or the Transaction or (ii) which, either individually or in the
aggregate, has had, or would reasonably be expected to have, a Material Adverse
Effect.

 

(f)                                   On the Effective Date, all governmental
and third party approvals, permits and licenses required to be obtained in
connection with the Transaction on or prior to the Effective Date shall have
been obtained and remain in full force and effect.

 

(g)                                  On the Effective Date, the Company and its
Significant Subsidiaries shall have no outstanding preferred stock or Hybrid
Capital or Indebtedness for borrowed money except preferred stock or Hybrid
Capital or Indebtedness set forth on Schedule 3.14 or set forth on the balance
sheet referred to in Section 3.09(a).

 

(h)                                 On the Effective Date, there shall exist no
Default or Event of Default, and all representations and warranties made by each
Account Party contained herein shall be true and correct in all material
respects (it being understood and agreed that any representation or warranty
which by its

 

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terms is made as of a specified date shall be required to be true and correct in
all material respects only as of such specified date).

 

(i)                                     On the Effective Date, each Significant
Insurance Subsidiary (other than Talbot Insurance (Bermuda), Ltd., an unrated
Subsidiary that exclusively writes related party business within the group
comprising the Company and its Subsidiaries) shall have an A.M. Best financial
strength rating of at least “A-”.

 

(j)                                    On the Effective Date, the Company shall
have paid the Administrative Agent and the Lenders all fees, reasonable
out-of-pocket expenses (including legal fees and expenses of the Administrative
Agent) and other compensation, in each case, to the extent invoiced and due and
payable on or prior to the Effective Date.

 

(k)                                 On the Effective Date, the Administrative
Agent shall have received a letter from the Service of Process Agent, presently
located at 111 Eighth Avenue, New York, New York, 10011, indicating its consent
to its appointment by the Company and each Designated Subsidiary Account Party
as their agent to receive service of process as specified in this Agreement is
in full force and effect and applies to this Agreement in all respects.

 

(l)                                     On or prior to the Effective Date, the
Administrative Agent shall have received evidence satisfactory to it that Talbot
Facility shall have been terminated and cancelled and all indebtedness
thereunder shall have been fully repaid.

 

The Administrative Agent shall notify the Company and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.

 

SECTION 4.02.           Each Credit Event.  The obligation of each Lender to
make each Loan and each LC Issuer to issue each Letter of Credit or to increase
the Stated Amount thereof is subject, at the time of, and after giving effect
to, each such Credit Event, to the satisfaction of the following conditions:

 

(a)                                 The Effective Date shall have occurred;

 

(b)                                 (i) There shall exist no Default or Event of
Default and (ii) all representations and warranties (excluding those set forth
in Section 3.09(b)) contained herein shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on the date of such Credit Event (it being understood and agreed that
any representation or warranty which by its terms is made as of a specified date
shall be required to be true and correct in all material respects only as of
such specified date);

 

(c)                                  The Administrative Agent shall have
received (i) a Borrowing Request meeting the requirements of Section 2.18 with
respect to each incurrence of Loans and/or (ii) a Letter of Credit Request
meeting the requirements of Section 2.04; and

 

(d)                                 To the extent such Credit Event relates to
the issuance of a Letter of Credit, all of the applicable conditions set forth
in Section 2.03(a) and (b) shall have been satisfied.

 

Each occurrence of a Credit Event shall be deemed to constitute a representation
and warranty by the applicable Account Party and the Company on the date thereof
as to the matters specified in paragraphs (a) and (b) of this Section 4.02.

 

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ARTICLE V

 

Affirmative Covenants

 

Until the Total Commitment (and the Commitment of each Lender) and each Letter
of Credit has expired or been terminated and all Unpaid Drawings, the principal
of and interest on each Loan, and all fees payable hereunder shall have been
paid in full, each of the Company and each Designated Subsidiary Account Party
covenants and agrees with the Lenders that:

 

SECTION 5.01.           Information Covenants.  The Company will furnish to the
Administrative Agent (for distribution to the Lenders):

 

(a)                                 Annual Financial Statements.

 

(i)                                     As soon as available and in any event
within 90 days after the close of each fiscal year of the Company, the
consolidated balance sheet of the Company and its Subsidiaries as at the end of
such fiscal year and the related consolidated statements of income, changes in
shareholders’ equity and cash flows of the Company and its Subsidiaries for such
fiscal year, setting forth in comparative form the consolidated figures for the
previous fiscal year, all in reasonable detail and accompanied by a report
thereon of PricewaterhouseCoopers LLP or another independent registered public
accounting firm of recognized national standing selected by the Company (without
a “going concern” or like qualification and without any qualification or
exception as to the scope of such audit), which report shall state that such
consolidated financial statements present fairly in all material respects the
consolidated financial position of the Company and its Subsidiaries as at the
dates indicated and their consolidated results of operations and cash flows for
the periods indicated in conformity with GAAP and that the audit by such
accountants in connection with such consolidated financial statements has been
made in accordance with generally accepted auditing standards.  The Company
shall be deemed to have delivered the same to the Administrative Agent if the
Company files the same with the SEC via EDGAR and notifies the Administrative
Agent of such filing.

 

(ii)                                  As soon as available and in any event
within 90 days after the close of each fiscal year of Validus Re, the unaudited
consolidated balance sheet of Validus Re and its Subsidiaries as at the end of
such fiscal year and the related unaudited consolidated statements of income,
changes in shareholders’ equity and cash flows of Validus Re and its
Subsidiaries for such fiscal year, setting forth in comparative form the
consolidated figures for the previous fiscal year, all in reasonable detail and
certified by the chief financial officer of Validus Re as presenting fairly in
all material respects, in accordance with GAAP, the information contained
therein, subject to changes resulting from normal year-end audit adjustments and
the absence of full footnote disclosure.  The Company shall be deemed to have
delivered the same to the Administrative Agent if the Company files the same
with the SEC via EDGAR and notifies the Administrative Agent of such filing.

 

(iii)                               As soon as available and in any event within
90 days after the close of each fiscal year of Validus Americas, the unaudited
consolidated balance sheet of Validus Americas and its Subsidiaries as at the
end of such fiscal year and the related unaudited consolidated statements of
income, changes in shareholders’ equity and cash flows of Validus Americas and
its Subsidiaries for such fiscal year, setting forth in comparative form the
consolidated figures for the previous fiscal year, all in reasonable detail and
certified by the chief financial officer of Validus Americas as presenting
fairly in all material respects, in accordance with GAAP, the information
contained therein, subject to changes resulting from normal year-end audit
adjustments and the absence of

 

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full footnote disclosure.  The Company shall be deemed to have delivered the
same to the Administrative Agent if the Company files the same with the SEC via
EDGAR and notifies the Administrative Agent of such filing.

 

(b)                                 Quarterly Financial Statements.

 

(i)                                     As soon as available and in any event
within 60 days after the close of each of the first three quarterly accounting
periods in each fiscal year of the Company, unaudited consolidated balance
sheets of the Company and its Subsidiaries as at the end of such period and the
related unaudited consolidated statements of income, changes in shareholders’
equity and cash flows of the Company and its Subsidiaries for such period and
(in the case of the second and third quarterly periods) for the period from the
beginning of the current fiscal year to the end of such quarterly period,
setting forth in each case in comparative form the consolidated figures for the
corresponding periods of the previous fiscal year, all in reasonable detail and
certified by the chief financial officer of the Company as presenting fairly in
all material respects, in accordance with GAAP, the information contained
therein, subject to changes resulting from normal year-end audit adjustments and
the absence of full footnote disclosure.  The Company shall be deemed to have
delivered the same to the Administrative Agent if the Company files the same
with the SEC via EDGAR and notifies the Administrative Agent of such filing.

 

(ii)                                  As soon as available and in any event
within 60 days after the close of each of the first three quarterly accounting
periods in each fiscal year of Validus Re, unaudited consolidated balance sheets
of Validus Re and its Subsidiaries as at the end of such period and the related
unaudited consolidated statements of income, changes in shareholders’ equity and
cash flows of Validus Re and its Subsidiaries for such period and (in the case
of the second and third quarterly periods) for the period from the beginning of
the current fiscal year to the end of such quarterly period, setting forth in
each case in comparative form the consolidated figures for the corresponding
periods of the previous fiscal year, all in reasonable detail and certified by
the chief financial officer of Validus Re as presenting fairly in all material
respects, in accordance with GAAP, the information contained therein, subject to
changes resulting from normal year-end audit adjustments and the absence of full
footnote disclosure.  The Company shall be deemed to have delivered the same to
the Administrative Agent if the Company files the same with the SEC via EDGAR
and notifies the Administrative Agent of such filing.

 

(iii)                               As soon as available and in any event within
60 days after the close of each of the first three quarterly accounting periods
in each fiscal year of Validus Americas, unaudited consolidated balance sheets
of Validus Americas and its Subsidiaries as at the end of such period and the
related unaudited consolidated statements of income, changes in shareholders’
equity and cash flows of Validus Americas and its Subsidiaries for such period
and (in the case of the second and third quarterly periods) for the period from
the beginning of the current fiscal year to the end of such quarterly period,
setting forth in each case in comparative form the consolidated figures for the
corresponding periods of the previous fiscal year, all in reasonable detail and
certified by the chief financial officer of Validus Americas as presenting
fairly in all material respects, in accordance with GAAP, the information
contained therein, subject to changes resulting from normal year-end audit
adjustments and the absence of full footnote disclosure.  The Company shall be
deemed to have delivered the same to the Administrative Agent if the Company
files the same with the SEC via EDGAR and notifies the Administrative Agent of
such filing.

 

(c)                                  Officer’s Certificates.  At the time of the
delivery of the financial statements provided for in Sections 5.01(a) and
5.01(b), a certificate of a Financial Officer of the Company (i) certifying that
no Default or Event of Default has occurred or, if any Default or Event of
Default has

 

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occurred, specifying the nature and extent thereof and any action taken or
proposed to be taken with respect thereto, (ii) setting forth reasonably
detailed calculations demonstrating compliance with the provisions of
Sections 6.10 and 6.11, as at the end of such fiscal year or quarter, as the
case may be, (iii) certifying that the Regulated Insurance Companies have
maintained adequate reserves and (iv) stating whether any change in GAAP or in
the application thereof has occurred since December 31, 2011 and, if any such
change has occurred, specifying the effect of such change on the financial
statements accompanying such certificate; it being agreed that a certificate in
a form substantially similar to the Covenant Compliance Calculations delivered
by the Company under the Existing Credit Facility on January 27, 2012 with
respect to the fiscal period ended December 31, 2011 is acceptable to the
Administrative Agent for purposes hereof.

 

(d)                                 Accounting Firm Certificate.  At the time of
the delivery of the financial statements provided for in Section 5.01(a)(i)
above, a certificate of the accounting firm that reported on such financial
statements stating whether they obtained knowledge during the course of their
examination of such financial statements of any Default (which certificate may
be limited to the extent required by general accounting rules or guidelines or
the guidelines of the applicable accounting firm, to the extent generally
applicable).

 

(e)                                  Notice of Default or Litigation. 
(x) Promptly after an Authorized Officer becomes aware of the occurrence of any
Default and/or any event or condition constituting, or which would reasonably be
expected to have, a Material Adverse Effect, a certificate of an Authorized
Officer of the Company setting forth the details thereof and the actions which
the Company is taking or proposes to take with respect thereto and (y) promptly
after the Company knows of the commencement thereof, notice of any litigation,
dispute or proceeding involving a claim against the Company and/or any
Subsidiary which claim has had, or would reasonably be expected to have, a
Material Adverse Effect.

 

(f)                                   Other Statements and Reports.  Promptly
upon the mailing thereof to the security holders of the Company generally,
copies of all financial statements, reports, proxy statements and other
documents so mailed, in each case setting forth any information that is material
to the Company and its Subsidiaries, taken as whole, as reasonably determined by
the board of directors of the Company, a duly authorized committee thereof or an
Authorized Officer of the Company; provided that the Company will not be
required to provide any information relating to any business transaction that
has not otherwise been publicly disclosed to the extent that the Company
determines that disclosure of such information to the Lenders would either
violate the terms of any confidentiality agreement, arrangement or understanding
with a third party or otherwise jeopardize the success of such business
transaction.

 

(g)                                  SEC Filings.  Promptly upon the filing
thereof, copies of (or, to the extent same is publicly available via the SEC’s
“EDGAR” filing system, written or electronic notification of the filing of) all
publicly available registration statements (other than the exhibits thereto and
any registration statements on Form S-8 or its equivalent) and annual or
quarterly reports which the Company shall have filed with the SEC or any
national securities exchange.

 

(h)                                 Insurance Reports and Filings.

 

(i)                                     Promptly after the filing thereof, a
copy of each annual Statutory Statement filed by each Significant Insurance
Subsidiary to the extent required by the Applicable Insurance Regulatory
Authority.

 

(ii)                                  Promptly following the delivery or
receipt, as the case may be, by any Significant Insurance Subsidiary or any of
their respective Subsidiaries, copies of (a) each registration, filing or
submission made by or on behalf of any Regulated

 

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Insurance Company with any Applicable Insurance Regulatory Authority, except for
policy form or rate filings, (b) each examination and/or audit report submitted
to any Regulated Insurance Company by any Applicable Insurance Regulatory
Authority, (c) all information which the Lenders may from time to time request
with respect to the nature or status of any deficiencies or violations reflected
in any examination report or other similar report, and (d) each report, order,
direction, instruction, approval, authorization, license or other notice which
the Company or any Regulated Insurance Company may at any time receive from any
Applicable Insurance Regulatory Authority, in each of (a) through (d), that is
material to the Company and its Subsidiaries, taken as a whole, as reasonably
determined by the board of directors of the Company, a duly authorized committee
thereof or an Authorized Officer of the Company.

 

(iii)                               Promptly after filed with the Applicable
Insurance Regulatory Authority after the end of each fiscal year of the Company,
a report by an independent qualified actuary reviewing the adequacy of loss and
loss adjustment expense reserves as at the end of the last fiscal year of the
Company and its Subsidiaries on a consolidated basis, determined in accordance
with SAP; provided that the delivery of each such report shall be subject to the
consent of the applicable independent actuarial consulting firm, which the
Company shall use commercially reasonable efforts to obtain.

 

(iv)                              Promptly following notification thereof from a
Governmental Authority, notification of the suspension, limitation, termination
or non-renewal of, or the taking of any other materially adverse action in
respect of, any material Insurance License.

 

(i)                                     Ratings Information.  (i) Promptly
after A.M. Best Company, Inc. shall have announced a downgrade in the financial
strength rating of Validus Re, written notice of such rating change. 
(ii) Promptly after Moody’s or S&P shall have announced a change in the Index
Rating established or deemed to have been established, written notice of such
rating change.

 

(j)                                    Other Information.  With reasonable
promptness, such other information or existing documents (financial or
otherwise) as the Administrative Agent or any Lender may reasonably request from
time to time (including, without limitation, information specifying Insurance
Licenses and other information related thereto).

 

(k)                                 Delivery of Information.  Each Account Party
and each Lender hereby acknowledges and agrees that notwithstanding anything to
the contrary contained in Section 10.12 of this Agreement, the Administrative
Agent and/or the Company may make available to the Lenders materials and/or
information provided by or on behalf of any Account Party under this Agreement
by posting such materials and/or information on IntraLinks or another similar
electronic system reasonably acceptable to the Administrative Agent and the
Company.

 

SECTION 5.02.           Books, Records and Inspections.  The Company will
(i) keep, and will cause each of its Subsidiaries to keep, proper books of
record and account in which full, true and correct entries in conformity with
GAAP or SAP, as applicable, shall be made of all material financial dealings and
material transactions in relation to its business and activities; and (ii)
subject to binding contractual confidentiality obligations of the Company or its
Subsidiaries to third parties and to Section 10.12, permit, and will cause each
of its Subsidiaries to permit, representatives of the Administrative Agent and
the Syndication Agent or, during the continuation of an Event of Default, any
Lender (at such Agent or Lender’s expense prior to the occurrence of an Event of
Default and at the Company’s expense (to the extent invoiced and reasonable)
after an Event of Default has occurred and is continuing) to visit and inspect
any of their respective properties, to examine their respective books and

 

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records and to discuss their respective affairs, finances and accounts with
their respective officers, employees and independent public accountants, in each
case at such reasonable times (which shall be, unless an Event of Default has
occurred and is continuing, during business hours, upon reasonable prior notice
to the Administrative Agent, which notice shall be promptly conveyed to the
Company) and as often as may reasonably be desired; provided that, unless a
Default or Event of Default has occurred and is continuing, such visits and
inspections shall not occur more than once in any calendar year.  The Company
agrees to cooperate and assist in such visits and inspections.  With respect to
any such discussions with the Company’s independent public accountants, the
Company shall be granted the opportunity to participate therein.

 

SECTION 5.03.           Insurance.  The Company will maintain, and will cause
each of its Subsidiaries to maintain (either in the name of the Company or in
the Subsidiary’s own name) with financially sound and reputable insurance
companies, insurance on their property in at least such amounts and against at
least such risks as are usually insured against in the same general area by
companies of established repute engaged in the same or similar businesses.

 

SECTION 5.04.           Payment of Taxes and other Obligations.  The Company
will pay and discharge, and will cause each of its Subsidiaries to pay and
discharge, (i) all material income taxes and all other material taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it and (ii) all other
material lawful claims, in each case, on a timely basis prior to the date on
which penalties attach thereto; provided that neither the Company nor any
Subsidiary of the Company shall be required to pay any such tax, assessment,
charge, levy or claim (i) for which a failure to pay has not had, and would not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect and (ii) which is being contested in good faith and by
proper proceedings if it has maintained adequate reserves with respect thereto
in accordance with GAAP.

 

SECTION 5.05.           Maintenance of Existence; Conduct of Business.  The
Company shall maintain, and shall cause each of its Significant Subsidiaries to
maintain, its existence and the rights, licenses, permits, privileges,
franchises, patents, copyrights, trademarks and trade names material to the
conduct of its business, provided that the Company shall not be required to
maintain the existence of any of its Significant Subsidiaries or any such
rights, licenses, permits, privileges, franchises, patents, copyrights,
trademarks and trade names (a) if the Company shall determine in good faith that
the preservation thereof is no longer desirable in the conduct of the business
of the Company and its Significant Subsidiaries, taken as a whole or (b) in
connection with a Disposition or other transaction permitted by Section 6.02. 
The Company will qualify and remain qualified, and cause each of its Significant
Subsidiaries to qualify and remain qualified, as a foreign corporation in each
jurisdiction where the Company or such Significant Subsidiary, as the case may
be, is required to be qualified, except in those jurisdictions in which the
failure to receive or retain such qualifications, either individually or in the
aggregate, has not had, and would not reasonably be expected to have, a Material
Adverse Effect.

 

SECTION 5.06.           Compliance with Statutes, etc.  The Company will, and
will cause each Significant Subsidiary to, comply in all material respects with
all applicable statutes, regulations and orders of, and all applicable
restrictions imposed by, all governmental bodies, domestic or foreign, in
respect of the conduct of its business and the ownership of its property
(including applicable statutes, regulations, orders and restrictions relating to
environmental standards and controls) other than those (i) the non-compliance
with which, either individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect and (ii) that are
being contested in good faith by appropriate proceedings diligently conducted.

 

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SECTION 5.07.           ERISA.  Promptly after the occurrence of any of the
events or conditions specified below with respect to any Plan or Multiemployer
Plan or Foreign Pension Plan, the Company will furnish to each Lender a
certificate of an Authorized Officer of the Company setting forth details
respecting such event or condition and the action if any, that the Company, the
applicable Subsidiary or the applicable ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed with or
given to the PBGC or an applicable foreign governmental agency by the Company,
such Subsidiary or such ERISA Affiliate with respect to such event or
condition):

 

(i)                                     any reportable event, as defined in
subsections (c)(1), (2), (5) and (6), and subsection (d)(2) of Section 4043 of
ERISA and the regulations issued thereunder, with respect to a Plan;

 

(ii)                                  the filing under Section 4041(c) of ERISA
of a notice of intent to terminate any Plan under a distress termination or the
distress termination of any Plan;

 

(iii)                               the institution by the PBGC of proceedings
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Company, any of its
Subsidiaries or any of its ERISA Affiliates of a notice from a Multiemployer
Plan that such action has been taken by the PBGC with respect to such
Multiemployer Plan which would reasonably be expected to result in a liability
to the Company or any of its Subsidiaries in excess of $15,000,000;

 

(iv)                              the receipt by the Company, any of its
Subsidiaries or any of its ERISA Affiliates of notice from a Multiemployer Plan
that the Company, any of its Subsidiaries or any of its ERISA Affiliates has
incurred withdrawal liability under Section 4201 of ERISA in excess of
$15,000,000 or that such Multiemployer Plan is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA whereby a deficiency or additional
assessment is levied or threatened to be levied in excess of $15,000,000 against
the Company, any of its Subsidiaries or any of its ERISA Affiliates;

 

(v)                                 the institution of a proceeding by a
fiduciary of any Plan or Multiemployer Plan against the Company, any of its
Subsidiaries or any of its ERISA Affiliates to enforce Section 515 or
4219(c)(5) of ERISA asserting liability in excess of $15,000,000, which
proceeding is not dismissed within 30 days; and

 

(vi)                              that any contribution in excess of $15,000,000
required to be made with respect to a Foreign Pension Plan has not been timely
made, or that the Company or any Subsidiary of the Company may incur any
liability in excess of $15,000,000 pursuant to any Foreign Pension Plan (other
than to make contributions in the ordinary course of business).

 

SECTION 5.08.           Maintenance of Property.  The Company shall, and will
cause each of its Significant Subsidiaries to, maintain all of their properties
and assets necessary in the operation of its business in good condition, repair
and working order, ordinary wear and tear excepted, except where failure to
maintain the same, either individually or in the aggregate, has not had, and
would not reasonably be expected to have, a Material Adverse Effect.

 

SECTION 5.09.           Maintenance of Licenses and Permits.  The Company will,
and will cause each of its Significant Subsidiaries to, maintain all permits,
licenses and consents as may be

 

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required for the conduct of its business by any state, federal or local
government agency or instrumentality, except where failure to maintain the same,
either individually or in the aggregate, has not had, and would not reasonably
be expected to have, a Material Adverse Effect.

 

SECTION 5.10.           Further Assurances.  Each Account Party shall promptly
and duly execute and deliver to the Administrative Agent such documents and
assurances and take such further action as the Administrative Agent may from
time to time reasonably request in order to carry out more effectively the
intent and purpose of this Agreement and to establish, protect and perfect the
rights and remedies created or intended to be created in favor of the
Administrative Agent or the Lenders pursuant to this Agreement.

 

ARTICLE VI

 

Negative Covenants

 

Until the Total Commitment (and the Commitment of each Lender) and each Letter
of Credit has expired or terminated and all Unpaid Drawings, the principal of
and interest on each Loan and all fees payable hereunder have been paid in full,
each of the Company and each Designated Subsidiary Account Party covenants and
agrees with the Lenders that:

 

SECTION 6.01.           Changes in Business.  The Company will not, and will not
permit any of its Subsidiaries to, engage (directly or indirectly) in any
business other than (a) businesses in which they are engaged (or proposed to be
engaged) as of the Effective Date and reasonable extensions thereof, (b) other
specialty insurance and structured risk insurance and reinsurance product lines,
and (c) any other businesses that are complementary or reasonably related
thereto and the conduct of business incidental thereto.

 

SECTION 6.02.           Consolidations, Mergers and Sales of Assets.  The
Company will not, and will not permit any of its Subsidiaries to, consolidate or
merge with or into any other Person, or permit any other Person to merge into or
consolidate with it; provided that (i) the Company may merge, consolidate or
amalgamate with another Person, if (x) the Company is the entity surviving such
merger and (y) immediately after giving effect to such merger, no Default or
Event of Default shall have occurred and be continuing, (ii) any Subsidiary may
merge, consolidate or amalgamate with or into another Person, if (x) such
Subsidiary survives (or, in the case of an amalgamation, continues immediately
following) such merger, consolidation or amalgamation and (y) immediately after
giving effect to such merger, consolidation or amalgamation, no Default or Event
of Default shall have occurred and be continuing, (iii) Wholly-Owned
Subsidiaries of the Company may merge with one another provided that if one of
such Subsidiaries is a Designated Subsidiary Account Party and the other is not,
then the Designated Subsidiary Account Party must be the surviving entity of
such merger and (iv) a Subsidiary (other than a Designated Subsidiary Account
Party) of the Company may merge or consolidate with any other Person if
immediately after giving effect to such merger no Default or Event of Default
shall have occurred and be continuing.  In addition, the Company will not, nor
will it permit any of its Subsidiaries to, sell, convey, assign, lease, abandon
or otherwise transfer or dispose of, voluntarily or involuntarily, any of its
properties or assets, tangible or intangible (each, a “Disposition”) (other than
Unrestricted Margin Stock), except (a) (1) such dispositions by the Company or
any of its Subsidiaries of any of their respective properties or assets to the
Company or any Subsidiary of the Company and (2) such dispositions by IPC or any
of its Subsidiaries of any of their respective properties or assets to IPC or
any of its other Subsidiaries; (b) subject to Section 5.05, the dissolution,
liquidation or winding up of any Subsidiary other than a Designated Subsidiary
Account Party; provided that Pac Re may dissolve, liquidate or wind up so long
as the Company expressly assumes any obligations of Pac Re outstanding under
this Agreement; (c) Dispositions of used, worn out, obsolete or surplus property
of the Company or any

 

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Subsidiary in the ordinary course of business and the assignment, cancellation,
abandonment or other disposition of intellectual property that is, in the
reasonable judgment of the Company, no longer economically practicable to
maintain or useful in the conduct of the business of the Company and the
Subsidiaries, taken as a whole; (d) licenses (as licensor) of intellectual
property so long as such licenses do not materially interfere with the business
of the Company or any of its Subsidiaries, taken as a whole; (e) Dispositions of
cash, cash equivalents and investment securities (including pursuant to any
securities lending arrangements permitted by clause (u) of Section 6.03 and
including in connection with the posting of collateral (or the realization
thereof) under the Four-Year Secured Letter of Credit Facility, the IPC
Facility, the Pac Re Facility, the Lloyd’s LC Facility or any other secured
Indebtedness permitted hereunder); (f) releases, surrenders or waivers of
contracts, torts or other claims of any kind as a result of the settlement of
any litigation or threatened litigation; (g) the granting or existence of Liens
permitted under this Agreement; (h) licenses, sublicenses, leases or subleases
of property so long as such licenses, sublicenses, leases or subleases do not
materially interfere with the business of the Company and its Subsidiaries,
taken as a whole; (i) Dividends permitted under Section 6.08, (j) ceding of
insurance or reinsurance in the ordinary course of business; (k) other
Dispositions of assets with a fair market value (as reasonably determined by the
board of directors or senior management of the Company) which in the aggregate
do not exceed 10% of the lesser of the book or fair market value of the property
and assets of the Company determined on a consolidated basis as of the last day
of the previous fiscal year of the Company; provided that immediately after
giving effect (including pro forma effect) to any Disposition made pursuant to
this clause (k), no Event of Default under Section 7.03 relating solely to a
breach of Section 6.10 or 6.11 shall have occurred and be continuing; (l)
dispositions of property as a result of a casualty event involving such property
or any disposition of real property to a Governmental Authority as a result of a
condemnation of such real property; (m) sales or other Dispositions of non-core
assets acquired in an acquisition permitted under this agreement; provided that
such sales shall be consummated within 360 days of such acquisition; and (n) any
Disposition of property or series of related Dispositions of or in respect of
which the fair market value of such property and the consideration payable to
the Company or any of its Subsidiaries is equal to or less than $100,000.

 

SECTION 6.03.           Liens.  Neither the Company nor any of its Subsidiaries
will permit, create, assume, incur or suffer to exist any Lien on any asset
tangible or intangible (other than Unrestricted Margin Stock) now owned or
hereafter acquired by it, except:

 

(a)                                 Liens existing on the Effective Date and
listed on Schedule 6.03 hereto;

 

(b)                                 Liens securing repurchase agreements
constituting a borrowing of funds by the Company or any Subsidiary in the
ordinary course of business for liquidity purposes and in no event for a period
exceeding 90 days in each case;

 

(c)                                  Liens arising pursuant to purchase money
mortgages, capital leases or security interests securing Indebtedness
representing the purchase price (or financing of the purchase price within
270 days after the respective purchase) of assets acquired by the Company or any
of its Subsidiaries;

 

(d)                                 Liens on any asset of any Person existing at
the time such Person is merged, amalgamated or consolidated with or into, or
otherwise acquired by, the Company or any of its Subsidiaries or at the time of
acquisition of such asset by the Company or any of its Subsidiaries and not
created in contemplation of such event;

 

(e)                                  Liens securing obligations owed by the
Company to any of its Subsidiaries or owed by any Subsidiary of the Company to
the Company or any other Subsidiary of the Company, in each case solely to the
extent that such Liens are required by an Applicable Insurance Regulatory
Authority for such Person to maintain such obligations;

 

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(f)                                   Liens securing insurance or reinsurance
obligations of Subsidiaries of the Company owed by any Subsidiary to the Company
or any other Subsidiary of the Company, in each case solely to the extent that
such Liens are required or requested by rating agencies, regulatory agencies,
clients or brokers for such Person to maintain such insurance and reinsurance
obligations;

 

(g)                                  Liens on investments and cash balances of
any Regulated Insurance Company securing obligations of such Regulated Insurance
Company in respect of trust or similar arrangements formed, letters of credit
issued or funds withheld balances established, in each case, in the ordinary
course of business for the benefit of policyholders or cedents to secure
insurance or reinsurance recoverables owed to them by such Regulated Insurance
Company;

 

(h)                                 inchoate Liens for taxes, assessments or
governmental charges or levies not yet due or Liens for taxes, assessments or
governmental charges or levies being contested in good faith and by appropriate
proceedings for which adequate reserves have been established in accordance with
GAAP;

 

(i)                                     Liens in respect of property or assets
of the Company or any of its Subsidiaries imposed by law, which were incurred in
the ordinary course of business and do not secure Indebtedness for borrowed
money, such as carriers’, warehousemen’s, materialmen’s and mechanics’ liens and
other similar Liens arising in the ordinary course of business;

 

(j)                                    Licenses, sublicenses, leases, or
subleases granted to other Persons not materially interfering with the conduct
of the business of the Company or any of its Subsidiaries;

 

(k)                                 easements, rights-of-way, restrictions,
encroachments and other similar charges or encumbrances, and minor title
deficiencies, in each case not securing Indebtedness and not materially
interfering with the conduct of the business of the Company or any of its
Subsidiaries;

 

(l)                                     Liens arising out of the existence of
judgments or awards not constituting an Event of Default under Section 7.07;

 

(m)                             Liens (other than Liens imposed under ERISA)
incurred in the ordinary course of business in connection with workers
compensation claims, unemployment insurance and social security benefits and
Liens securing the performance of bids, reinsurance obligations, tenders, leases
and contracts in the ordinary course of business, statutory obligations, surety
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business and consistent with past practice (exclusive of
obligations in respect of payment for borrowed money);

 

(n)                                 bankers’ Liens, rights of setoff and other
similar Liens existing solely with respect to cash and cash equivalents on
deposit in one or more accounts maintained by the Company or any of its
Subsidiaries, in each case granted in the ordinary course of business in favor
of the bank or banks with which such accounts are maintained;

 

(o)                                 Liens arising out of the refinancing,
replacement, extension, renewal or refunding of any Indebtedness secured by any
Lien permitted by any of the clauses of this Section 6.03, provided that such
Indebtedness is not increased (other than with respect to unpaid accrued
interest and premium thereon, any committed or undrawn amounts and underwriting
discounts, fees, commissions and expenses, associated with such Indebtedness)
and is not secured by any additional assets;

 

(p)                                 (i) Liens created pursuant to the Four-Year
Secured Letter of Credit Facility (including the security documents thereunder),
(ii) Liens created pursuant to the Pac Re Facility

 

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(including the security documents thereunder) and (iii) Liens created to cash
collateralize a Defaulting Lender’s Letter of Credit Outstandings pursuant to
Section 2.26 hereof;

 

(q)                                 Liens in respect of property or assets of
any Subsidiary of the Company securing Indebtedness of the type described in
clause (e) of the definition of “Permitted Subsidiary Indebtedness” or securing
the Lloyd’s LC Facility;

 

(r)                                    Liens in respect of property or assets of
any Subsidiary of the Company securing Indebtedness of the type described in
clause (h) of the definition of “Permitted Subsidiary Indebtedness”; provided
that (i) the aggregate amount of such Liens (measured, as to each such Lien
permitted under this clause (r), as the greater of the amount secured by such
Lien and the fair market value at such time of the assets subject to such Lien)
shall not, when added to the aggregate amount of all Liens (measured as set
forth in this clause (r) above) incurred pursuant to Section 6.03(w) and the
aggregate amount of outstanding unsecured Indebtedness of Subsidiaries incurred
pursuant to clause (j) of the definition of “Permitted Subsidiary Indebtedness”,
exceed at any time 10% of Consolidated Net Worth at the time of incurrence of
any new Liens under this clause (r) and (ii) immediately after giving effect to
the incurrence of any Lien pursuant to this Section 6.03(r), no Event of Default
shall have occurred and be continuing;

 

(s)                                   Liens on assets received by or of the
Company or its Subsidiaries and held in trust in respect of, or deposited or
segregated to secure, liabilities assumed in the course of the reinsurance
business or under any Insurance Contracts, Reinsurance Agreements, Fronting
Arrangements or other indemnity arrangements entered in the ordinary course of
business;

 

(t)                                    Liens not securing indebtedness for
borrowed money on cash and securities arising in the ordinary course of business
in connection with the structured risk insurance and reinsurance product lines
of the Company and its Subsidiaries;

 

(u)                                 Liens arising in connection with securities
lending arrangements                                            entered into by
the Company or any of its Subsidiaries with financial
institutions                      in the ordinary course of business so long as
any securities subject to any such securities lending arrangement do not
constitute Collateral;

 

(v)                                 Liens on insurance policies and the proceeds
thereof securing Indebtedness permitted by clause (h) of the definition of
“Permitted Subsidiary Indebtedness”;

 

(w)                               without duplication of the Liens described in
clauses (a) through (v) above and clauses (x) through (dd) below, additional
Liens securing obligations of the Company; provided that (i) the aggregate
amount of such Liens (measured, as to each such Lien permitted under this clause
(w), as the greater of the amount secured by such Lien and the fair market value
at such time of the assets subject to such Lien) shall not, when added to the
aggregate amount of all Liens (measured as set forth in this clause (w) above)
incurred pursuant to Section 6.03(r) and the aggregate amount of outstanding
unsecured Indebtedness of Subsidiaries incurred pursuant to clause (j) of the
definition of “Permitted Subsidiary Indebtedness”, exceed at any time 10% of
Consolidated Net Worth at the time of incurrence of any new Liens under this
clause (w) and (ii) immediately after giving effect to the incurrence of any
Lien pursuant to this Section 6.03(w), no Event of Default shall have occurred
and be continuing;

 

(x)                                 Liens on assets arising in connection with
the sale or transfer of such assets in a transaction permitted under Section
6.02 and customary rights and restrictions contained in agreements relating to
such sale or transfer pending the completion thereof;

 

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(y)                                 Liens arising in the case of any joint
venture, any put and call arrangements related to its Equity Interests set forth
in its organizational documents or any related joint venture or similar
agreement;

 

(z)                                  Liens in respect of any interest or title
of a lessor under any lease or sublease entered into by the Company or any
Subsidiary in the ordinary course of its business and other statutory and common
law landlords’ liens under leases;

 

(aa)                          Liens arising in connection with any interest or
title of a licensor under any license or sublicense entered into by the Company
or any Subsidiary as a licensee or sublicensee (A) existing on the date hereof
or (B) in the ordinary course of its business;

 

(bb)                          Liens on earned money deposits of cash or cash
equivalents made in connection with any proposed acquisition or other investment
not prohibited hereunder;

 

(cc)                            Liens in the nature of the right of setoff in
favor of counterparties to contractual agreements with the Account Parties in
the ordinary course of business; and

 

(dd)                          Liens on cash and securities in an aggregate
principal amount not in excess of $500,000,000 securing obligations under
Capital Markets Products in the ordinary course of business.

 

SECTION 6.04.           Indebtedness.  (a) The Company will not create, incur,
assume or permit to exist any Indebtedness, or become or remain liable
(contingent or otherwise) to do any of the foregoing, except for the
Indebtedness under this Agreement or the Four-Year Secured Letter of Credit
Facility and other Indebtedness which is either pari passu with, or subordinated
in right of payment to, such Indebtedness (it being understood that unsecured
Indebtedness is not subordinate to secured Indebtedness solely because it is
unsecured, and Indebtedness that is not guaranteed by a particular Person is not
deemed to be subordinate to Indebtedness that is so guaranteed solely because it
is not so guaranteed).

 

(b)                                 The Company will not permit any of its
Subsidiaries to create, incur, assume or permit to exist any Indebtedness, or
become or remain liable (contingent or otherwise) to do any of the foregoing,
except for Permitted Subsidiary Indebtedness, the Lloyd’s LC Facility and the
Pac Re Facility.

 

SECTION 6.05.           [Intentionally Omitted].

 

SECTION 6.06.           Issuance of Stock.  The Company will not permit any of
its Subsidiaries to directly or indirectly issue, sell, assign, pledge, or
otherwise encumber or dispose of any shares of their preferred or preference
equity securities or options to acquire preferred or preference equity
securities, except the issuance of preferred or preference equity securities, so
long as no part of such preferred or preference equity securities is mandatorily
redeemable (whether on a scheduled basis or as a result of the occurrence of any
event or circumstance) prior to the first anniversary of the Commitment
Expiration Date.  For the avoidance of doubt, this Section 6.06 does not relate
to the issuance or sale of ordinary or common equity or options relating
thereto.

 

SECTION 6.07.           Dissolution.  The Company shall not suffer or permit
dissolution or liquidation either in whole or in part, except through corporate
reorganization to the extent permitted by Section 6.02.

 

SECTION 6.08.           Restricted Payments.  The Company will not declare or
pay any dividends, purchase, redeem, retire, defease or otherwise acquire for
value any of its Equity Interests now

 

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or hereafter outstanding, return any capital to its stockholders, partners or
members (or the equivalent Persons thereof) as such, make any distribution of
assets, Equity Interests, obligations or securities to its stockholders,
partners or members (or the equivalent Persons thereof) as such, or permit any
of its Subsidiaries to purchase, redeem, retire, defease or otherwise acquire
for value any Equity Interests in the Company or to sell any Equity Interests
therein (each of the foregoing a “Dividend” and, collectively, “Dividends”)
provided that this Section 6.08 shall not prohibit Dividends so long as before
and after giving effect (including pro forma effect) thereto, no Default or
Event of Default shall have occurred and be continuing.  Notwithstanding the
foregoing, the Company may declare and pay cash dividends or distributions in
respect of (i) any trust preferred security, deferrable interest subordinated
debt security, mandatory convertible debt or other hybrid security (including
Hybrid Capital) that, at the time of issuance thereof or at any time prior to
the initial dividend or distribution thereunder, was accorded equity treatment
by S&P and/or (ii) any Preferred Security, if, at the time of and after giving
pro forma effect to such dividend or distribution, no Event of Default under
Sections 7.01, 7.04(a)(i) or 7.05 shall have occurred and be continuing.

 

SECTION 6.09.           Transactions with Affiliates.  Neither the Company nor
any of its Subsidiaries shall enter into or be a party to, a transaction with
any Affiliate of the Company or such Subsidiary (which Affiliate is not the
Company or a Subsidiary), except (i) transactions with Affiliates on terms (x)
no less favorable to the Company or such Subsidiary than those that could have
been obtained in a comparable transaction on an arm’s length basis from an
unrelated Person, as reasonably determined by the board of directors of the
Company or a duly authorized committee thereof or (y) approved by a majority of
the disinterested members of the board of directors of the Company, (ii)
Dividends not prohibited by Section 6.08, (iii) fees and compensation paid to
and indemnities provided on behalf of officers and directors of the Company or
any of its Subsidiaries as reasonably determined in good faith by the board of
directors, the audit committee or senior management of the Company, (iv) the
issuance of common stock of the Company, (v) loans and advances to officers and
directors made in the ordinary course of business, (vi) transactions among the
Account Parties and their wholly-owned Subsidiaries, (vii) transactions
permitted by Sections 6.02 and 6.04, (viii) transactions and payments pursuant
to agreements and arrangements disclosed in, or listed as an exhibit to, the
Company’s annual report on Form 10-K filed with the SEC on February 17, 2012 or
any subsequent other filing with the SEC through the Effective Date or any such
agreement or arrangement as thereafter amended, extended or replaced on terms
that are, in the aggregate, no less favorable to the Company and its
Subsidiaries than the terms of such agreement on the Effective Date, as the case
may be, and (ix) the transactions and payments set forth on Schedule 6.09 and
amendments thereto that are not materially adverse to the Lenders, as reasonably
determined by the board of directors of the Company, a duly authorized committee
thereof or an Authorized Officer of the Company.

 

SECTION 6.10.           Maximum Leverage Ratio.  The Company will not permit the
Leverage Ratio at any time to be greater than 0.35:1.00.

 

SECTION 6.11.           Minimum Consolidated Net Worth.  The Company will not
permit Consolidated Net Worth at any time to be less than the Minimum
Consolidated Net Worth Amount in effect at such time.

 

SECTION 6.12.           Limitation on Certain Restrictions on Subsidiaries.  The
Company will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Company or any of its
Subsidiaries, or pay any Indebtedness owed to the Company or any of its
Subsidiaries, (b) make loans or advances to the Company or any of its
Subsidiaries or (c) transfer any of its properties or assets to the Company or
any of its Subsidiaries, except

 

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for such encumbrances or restrictions existing under or by reason of
(i) applicable Legal Requirements, including any Applicable Insurance Regulatory
Authority, (ii) this Agreement, (iii) customary provisions restricting
subletting or assignment of any lease governing any leasehold interest of the
Company or any of its Subsidiaries, (iv) customary provisions restricting
assignment of any licensing agreement (in which the Company or any of its
Subsidiaries is the licensee) or other contract (including leases) entered into
by the Company or any of its Subsidiaries in the ordinary course of business,
(v) restrictions on the transfer of any asset pending the close of the sale of
such asset, (vi) restrictions on the transfer of any asset as a result of a Lien
permitted by Section 6.03, (vii) agreements entered into by a Regulated
Insurance Company with an Applicable Insurance Regulatory Authority or ratings
agency in the ordinary course of business, (viii) customary provisions in
partnership agreements, limited liability company organizational governance
documents, joint venture agreements and other similar agreements entered into in
the ordinary course of business that restrict the transfer of ownership
interests in such partnership, limited liability company, joint venture or
similar Person, (ix) restrictions on cash or other deposits or net worth imposed
by customers under contracts (including Insurance Contracts, Fronting
Arrangements and Reinsurance Agreements) entered into in the ordinary course of
business, pursuant to an agreement or instrument relating to any Permitted
Subsidiary Indebtedness of the type described in clause (d) of the definition
thereof if the encumbrances and restrictions contained in any such agreement or
instrument taken as a whole are not materially less favorable to the Lenders
than the encumbrances and restrictions contained in this Agreement, (x) any
encumbrances or restrictions imposed by any amendments or refinancings of the
contracts, instruments or obligations referred to in clause (ix) above or
clauses (xii) through (xvi) below, provided that such amendments or refinancings
are no more materially restrictive with respect to such encumbrances and
restrictions than those prior to such amendment or refinancing,
(xi) restrictions placed in accordance with the Segregated Account Companies Act
2000 of Bermuda on the transfer of any asset held, carried or deposited in a
segregated account of a Protected Cell Company, (xii) restrictions contained in
the Four-Year Secured Letter of Credit Facility and the other “Credit Documents”
referred to (and defined) therein, (xiii) agreements and arrangements set forth
on Schedule 6.12, (xiv) any instrument governing Acquired Indebtedness, of the
Person so acquired, (xv) an agreement or instrument relating to any Permitted
Subsidiary Indebtedness so long as the encumbrances and restrictions in such
agreement or instrument are customary for such Indebtedness and are no more
restrictive, taken as a whole, than the comparable encumbrances and restrictions
set forth in the Credit Documents as determined in the good faith judgment of
the board of directors of the Company and (xvi) encumbrances or restrictions
existing under the Lloyd’s LC Facility, the Pac Re Facility or the IPC Facility
or under any other Indebtedness permitted under Section 6.04 so long as such
encumbrances and restrictions are customary for such Indebtedness and are no
more restrictive, taken as a whole, than the comparable encumbrances and
restrictions set forth in this Agreement as determined in the good faith
judgment of the board of directors of the Company.

 

SECTION 6.13.           Private Act.  No Account Party will become subject to a
Private Act.

 

SECTION 6.14.           Claims Paying Ratings.  The Company shall not permit the
financial strength rating of Validus Re and each other Regulated Insurance
Company that is material to the Company and its Subsidiaries, taken as a whole,
to be less than “B++” from A.M. Best Company, Inc. (or its successor).

 

SECTION 6.15.           End of Fiscal Years; Fiscal Quarters.  Neither the
Company nor any of its Subsidiaries will change (i) its fiscal year end from
being on December 31 of each year or (ii) its fiscal quarters to end on dates
which are inconsistent with a fiscal year end as described above.

 

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ARTICLE VII

 

Events of Default

 

If any of the following events (“Events of Default”) shall occur:

 

SECTION 7.01.           Payments.  Any Account Party shall (a) default in the
payment when due of any principal on any Loan or any Unpaid Drawing,
(b) default, and such default shall continue for three or more Business Days, in
the payment when due of any interest on any Loan or any Unpaid Drawing,
(c) default, and such default shall continue for five or more Business Days, in
the payment when due of any fees or any other amounts payable hereunder; or

 

SECTION 7.02.           Representations, etc.  Any representation, warranty or
statement made (or deemed made) by any Account Party herein or in any
certificate or statement delivered or required to be delivered pursuant hereto
shall prove to be untrue in any material respect on the date as of which made or
deemed made; or

 

SECTION 7.03.           Covenants.  Any Account Party shall (a) default in the
due performance or observance by it of any term, covenant or agreement contained
in Section 5.01(e), 5.01(h)(iv), 5.02(ii), 5.05 (but only with respect to the
first sentence thereof) or Article VI, or (b) default in the due performance or
observance by it of any term, covenant or agreement (other than those referred
to in Section 7.01 or clause (a) of this Section 7.03) contained in this
Agreement and such default shall continue unremedied for a period of 30 days
after written notice to the Company from the Administrative Agent or the
Required Lenders; or

 

SECTION 7.04.           Default under other Agreements.  (a) The Company, any
Designated Subsidiary Account Party, any Regulated Insurance Company or any
Significant Subsidiary shall (i) default in any payment with respect to
Indebtedness (other than any Indebtedness hereunder but including Indebtedness
under the Four-Year Secured Letter of Credit Facility) in excess of $100,000,000
individually or in the aggregate, for the Company and its Subsidiaries or
(ii) default in the observance or performance of any agreement or condition
relating to any such Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition (other
than any such default, event or condition arising solely out of the violation by
the Company or any of its Subsidiaries of any covenant or agreement in any way
restricting the Company, or any such Subsidiary’s, right or ability to sell,
pledge or otherwise dispose of Unrestricted Margin Stock) is to cause, or to
permit (after the expiration of any applicable grace period provided in the
applicable agreement or instrument under which such Indebtedness was created)
the holder or holders of such Indebtedness (or a trustee or agent on behalf of
such holder or holders) to cause (with or without the giving of notice, the
lapse of time or both), any such Indebtedness to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled
maturity; (b) an “Event of Default”, as defined under the Four-Year Secured
Letter of Credit Facility, shall have occurred and be continuing; or (c)
Indebtedness of one or more of the Persons listed in clause (a) above in excess
of $100,000,000 shall be declared to be due and payable or required to be
prepaid (other than (x) by a regularly scheduled required prepayment or as a
mandatory prepayment (unless such required prepayment or mandatory prepayment
results from a default thereunder or an event of the type that constitutes an
Event of Default) or (y) to the extent solely as a result of the violation by
the Company or any of its Subsidiaries of any covenant or agreement in any way
restricting the Company, or any such Subsidiary’s, right or ability to sell,
pledge or otherwise dispose of Unrestricted Margin Stock), prior to the
scheduled maturity thereof; or

 

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SECTION 7.05.           Bankruptcy, etc.  The Company, any Designated Subsidiary
Account Party, any Regulated Insurance Company or any Significant Subsidiary
shall commence a voluntary case concerning itself under Title 11 of the United
States Code entitled “Bankruptcy,” as now or hereafter in effect, or any
successor thereto (the “Bankruptcy Code”); or an involuntary case is commenced
against any such Person and the petition is not dismissed within 60 days, after
commencement of the case; or a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or substantially all of the property of
any such Person or any such Person commences (including by way of applying for
or consenting to the appointment of, or the taking of possession by, a
rehabilitator, receiver, custodian, trustee, conservator, administrator or
liquidator or other similar official in any jurisdiction (collectively, a
“conservator”) of itself or all or any substantial portion of its property) any
other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency, administration, liquidation,
rehabilitation, supervision, conservatorship or similar law of any jurisdiction
or the Bermuda Companies Law whether now or hereafter in effect relating to any
such Person; or any such proceeding is commenced against any such Person and
such proceeding is not dismissed within 60 days; or any such Person is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or any such Person suffers any
appointment of any conservator or the like for it or any substantial part of its
property which continues undischarged or unstayed for a period of 60 days; or
any such Person makes a general assignment for the benefit of creditors; or any
corporate action is taken by any such Person for the purpose of effecting any of
the foregoing; or

 

SECTION 7.06.           ERISA.  An event or condition specified in Section 5.07
shall occur or exist with respect to any Plan or Multiemployer Plan or Foreign
Pension Plan that, individually or in the aggregate, results in or could
reasonably be expected to result in a liability to the Company, its Subsidiaries
or any ERISA Affiliate in an amount that has had, or would reasonably be
expected to have, a Material Adverse Effect; or

 

SECTION 7.07.           Judgments.  One or more judgments or decrees shall be
entered against the Company, any Designated Subsidiary Account Party, any
Regulated Insurance Company or any Significant Subsidiary involving a liability,
net of undisputed insurance and reinsurance, of $100,000,000 or more in the case
of any one such judgment or decree or in the aggregate for all such judgments
and decrees for such Persons and any such judgments or decrees shall not have
been vacated, discharged, satisfied, stayed or bonded pending appeal within
60 days from the entry thereof; or

 

SECTION 7.08.           Insurance Licenses.  Any one or more Insurance Licenses
of the Company or any of its Subsidiaries shall be suspended, limited or
terminated or shall not be renewed, or any other action shall be taken by any
Governmental Authority, and such suspension, limitation, termination,
non-renewal or action, either individually or in the aggregate, has had, or
would reasonably be expected to have, a Material Adverse Effect; or

 

SECTION 7.09.           Change of Control.  A Change of Control shall occur; or

 

SECTION 7.10.           Company Guaranty.  The Company Guaranty or any provision
thereof shall cease to be in full force or effect, or any Person acting by or on
behalf of the Company shall deny or disaffirm in writing the Company’s
obligations under the Company Guaranty, or the Company shall default in the due
performance or observance of any term, covenant or agreement on its part to be
performed or observed pursuant to the Company Guaranty;

 

then, and in any such event, and at any time thereafter, if an Event of Default
shall then be continuing, the Administrative Agent may, or upon the written
request of the Required Lenders shall, by written notice to the Company, take
any or all of the following actions, without prejudice to the rights of the

 

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Administrative Agent or any Lender to enforce its claims against any Account
Party, except as otherwise specifically provided for in this Agreement (provided
that if an Event of Default specified in Section 7.05 shall occur with respect
to any Account Party, the result which would occur upon the giving of written
notice by the Administrative Agent as specified in clauses (i) through (iii)
below shall occur automatically without the giving of any such notice): 
(i) declare the Total Commitment terminated, whereupon the Commitment of each
Lender shall forthwith terminate immediately; (ii) declare the principal of and
any accrued interest and fees in respect of all obligations owing hereunder to
be, whereupon the same shall become, forthwith due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by each Account Party; (iii) terminate any Letter of Credit which
may be terminated in accordance with its terms and/or (iv) direct each Account
Party to cause to be deposited in the Collateral Account maintained by the
Administrative Agent such amounts of cash and Cash Equivalents, to be held as
security for such Account Party’s obligations hereunder then outstanding as
contemplated by Section 2.10, equal to the aggregate amount of Letter of Credit
Outstandings and other obligations attributable to such Account Party
hereunder.  In addition, upon the occurrence and during the continuation of an
Event of Default, each Account Party hereby appoints the Administrative Agent as
the attorney-in-fact of such Account Party, with full power of substitution, and
in the name of such Account Party, to disburse and directly apply the proceeds
of its Collateral Accounts to the satisfaction of any of such Account Party’s
obligations hereunder, as so contemplated.  The power-of-attorney granted hereby
is a power coupled with an interest and is irrevocable.  Unless directed to do
so by the Required Lenders in accordance with the terms of this Agreement, the
Administrative Agent shall have no obligation to undertake any of the foregoing
actions, and, if it takes any such action it shall have no liability to any
Account Party to continue the same or for the sufficiency or adequacy thereof.
At the request of the Administrative Agent, each Account Party shall ratify all
actions taken by the Administrative Agent hereunder.

 

ARTICLE VIII

 

The Agents

 

SECTION 8.01.           Appointment.  Each of the Lenders hereby irrevocably
appoints each Agent as its agent and authorizes such Agent to take such actions
on its behalf and to exercise such powers as are delegated to such Agent by the
terms hereof, together with such actions and powers as are reasonably incidental
thereto.

 

SECTION 8.02.           Agents in their Individual Capacities.  Each bank
serving as an Agent hereunder shall have the same rights and powers in its
capacity as a Lender as any other Lender and may exercise the same as though it
were not an Agent, and such bank and its Affiliates may accept deposits from,
lend money to and generally engage in any kind of business with the Company or
any of its Subsidiaries or other Affiliate thereof as if it were not an Agent
hereunder.

 

SECTION 8.03.           Exculpatory Provisions.  Each Agent shall not have any
duties or obligations except those expressly set forth herein.  Without limiting
the generality of the foregoing, (a) no Agent shall be subject to any fiduciary
or other implied duties, regardless of whether a Default has occurred and is
continuing, (b) no Agent shall have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and powers
expressly contemplated hereby that such Agent is required to exercise in writing
as directed by the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in
Section 10.02), and (c) except as expressly set forth herein, no Agent shall
have any duty to disclose, and shall not be liable for the failure to disclose,
any information relating to the Company or any of its Subsidiaries that is
communicated to or obtained by the bank serving as such Agent or any of its
Affiliates in any capacity.  No Agent shall be liable for any action taken or
not taken by it with the consent or at the request of the

 

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Required Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 10.02) or in the
absence of its own gross negligence or willful misconduct.  No Agent shall be
deemed to have knowledge of any Default unless and until written notice thereof
is given to such Agent by the Company or the applicable Account Party or a
Lender, and no Agent shall be responsible for or have any duty to ascertain or
inquire into (i) any statement, warranty or representation made in or in
connection with this Agreement, (ii) the contents of any certificate, report or
other document delivered hereunder or in connection herewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein, (iv) the validity, enforceability, effectiveness or
genuineness of this Agreement or any other agreement, instrument or document, or
(v) the satisfaction of any condition set forth in Article IV or elsewhere
herein, other than to confirm receipt of items expressly required to be
delivered to such Agent.

 

SECTION 8.04.    Reliance.  Each Agent shall be entitled to rely upon, and shall
not incur any liability for relying upon, any notice, request, certificate,
consent, statement, instrument, document or other writing believed by it to be
genuine and to have been signed or sent by the proper Person.  Each Agent also
may rely upon any statement made to it orally or by telephone and believed by it
to be made by the proper Person, and shall not incur any liability for relying
thereon.  Each Agent may consult with legal counsel (who may be counsel for the
Company), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.

 

SECTION 8.05.    Delegation of Duties.  Each Agent may perform any and all its
duties and exercise its rights and powers by or through any one or more
sub-agents appointed by such Agent.  Each Agent and any such sub-agent may
perform any and all of its duties and exercise its rights and powers through
their respective Related Parties.  The exculpatory provisions of the preceding
paragraphs shall apply to any such sub-agent and to the Related Parties of the
applicable Agent and any such sub-agent, and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as Agent.

 

SECTION 8.06.    Resignation.  Subject to the appointment and acceptance of an
applicable successor Agent as provided in this paragraph, each Agent may resign
at any time by notifying the Lenders and the Company.  Upon any such
resignation, the Required Lenders shall have the right to appoint a successor
administrative agent with the consent of the Company (not to be unreasonably
withheld or delayed), provided that no such consent shall be required at any
time when a Default or Event of Default exists.  If no successor shall have been
so appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Agent gives notice of its resignation, then
the retiring Agent may, on behalf of the Lenders, appoint a successor Agent
which shall be a bank with an office in New York, New York, or an Affiliate of
any such bank.  Upon the acceptance of its appointment as an Agent hereunder by
a successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder.  The fees
payable by the Account Parties to a successor Agent shall be the same as those
payable to its predecessor unless otherwise agreed between the Company and such
successor.  After an Agent’s resignation hereunder, the provisions of this
Article and Section 10.03 shall continue in effect for the benefit of such
retiring Agent, its sub-agents and their respective Related Parties in respect
of any actions taken or omitted to be taken by any of them while it was acting
as an Agent.

 

SECTION 8.07.    Non-Reliance.  Each Lender acknowledges that it has,
independently and without reliance upon any Agent or any other Lender and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement.  Each Lender also
acknowledges that it will, independently and without reliance upon any Agent or
any other Lender and based on such documents and information as it shall from
time to time

 

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deem appropriate, continue to make its own decisions in taking or not taking
action under or based upon this Agreement, any related agreement or any document
furnished hereunder or thereunder.

 

SECTION 8.08.    Syndication Agent, Co-Documentation Agents and Joint Lead
Arrangers and Joint Bookrunners.  Notwithstanding any other provision of this
Agreement, each of the Syndication Agent, the Co-Documentation Agents and the
Joint Lead Arrangers and Joint Bookrunners is named as such for recognition
purposes only, and in its capacity as such shall have no powers, duties,
responsibilities or liabilities with respect to this Agreement or the
transactions contemplated hereby, except as expressly contemplated hereby.
Without limitation of the foregoing, the Syndication Agent, the Co-Documentation
Agents and the Joint Lead Arrangers and Joint Bookrunners shall not, solely by
reason of this Agreement, have any fiduciary relationship with any Lender or any
other Person.

 

ARTICLE IX

 

Company Guaranty

 

SECTION 9.01.    The Company Guaranty.  In order to induce the Lenders to enter
into this Agreement and to extend credit hereunder and in recognition of the
direct benefits to be received by the Company from the issuance of the Letters
of Credit, the Company hereby agrees with the Lenders as follows: the Company
hereby unconditionally and irrevocably guarantees, as primary obligor and not
merely as surety, the full and prompt payment when due, whether upon maturity,
acceleration or otherwise, of any and all of the Guaranteed Obligations of each
Designated Subsidiary Account Party to the Guaranteed Creditors.  If any or all
of the Guaranteed Obligations of any Designated Subsidiary Account Party to the
Guaranteed Creditors becomes due and payable hereunder, the Company
unconditionally promises to pay such Guaranteed Obligations to the Guaranteed
Creditors, or order, on demand, together with any and all expenses which may be
incurred by the Guaranteed Creditors in collecting any of the Guaranteed
Obligations.  This Company Guaranty is a guaranty of payment and not of
collection.  If a claim is ever made upon any Guaranteed Creditor for repayment
or recovery of any amount or amounts received in payment or on account of any of
the Guaranteed Obligations and any of the aforesaid payees repays all or part of
said amount by reason of (i) any judgment, decree or order of any court or
administrative body having jurisdiction over such payee or any of its property
or (ii) any settlement or compromise of any such claim effected by such payee
with any such claimant, then and in such event the Company agrees that any such
judgment, decree, order, settlement or compromise shall be binding upon the
Company, notwithstanding any revocation of this Company Guaranty or any other
instrument evidencing any liability of each Designated Subsidiary Account Party,
and the Company shall be and remain liable to the aforesaid payees hereunder for
the amount so repaid or recovered to the same extent as if such amount had never
originally been received by any such payee.

 

SECTION 9.02.    Bankruptcy.  Additionally, the Company unconditionally and
irrevocably guarantees the payment of any and all of the Guaranteed Obligations
of each Designated Subsidiary Account Party hereunder to the Guaranteed
Creditors whether or not due or payable by each Designated Subsidiary Account
Party upon the occurrence of any of the events specified in Section 7.05 with
respect to such Designated Subsidiary Account Party, and unconditionally
promises to pay such indebtedness to the Guaranteed Creditors, or order, on
demand, in lawful money of the United States.

 

SECTION 9.03.    Nature of Liability.  The liability of the Company hereunder is
exclusive and independent of any other guaranty of the Guaranteed Obligations of
each Designated Subsidiary Account Party whether executed by the Company, any
other guarantor or by any other party, and the liability of the Company
hereunder is not affected or impaired by (a) any direction as to application of
payment by each Designated Subsidiary Account Party or by any other party (other
than a direction by the Guaranteed Creditor receiving such payment), or (b) any
other continuing or other

 

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guaranty, undertaking or maximum liability of a guarantor or of any other party
as to the Guaranteed Obligations of each Designated Subsidiary Account Party, or
(c) any payment on or in reduction of any such other guaranty or undertaking, or
(d) any dissolution, termination or increase, decrease or change in personnel by
each Designated Subsidiary Account Party, or (e) any payment made to the
Guaranteed Creditors on the Guaranteed Obligations which any such Guaranteed
Creditor repays to each Designated Subsidiary Account Party pursuant to court
order in any bankruptcy, reorganization, arrangement, moratorium or other debtor
relief proceeding, and the Company waives any right to the deferral or
modification of its obligations hereunder by reason of any such proceeding or
(f) any action or inaction of the type described in Section 9.05.

 

SECTION 9.04.    Independent Obligation.  The obligations of the Company under
this Article IX are independent of the obligations of any other guarantor, any
other party or each Designated Subsidiary Account Party, and a separate action
or actions may be brought and prosecuted against the Company whether or not
action is brought against any other guarantor, any other party or each
Designated Subsidiary Account Party and whether or not any other guarantor, any
other party or each Designated Subsidiary Account Party be joined in any such
action or actions.  The Company waives, to the full extent permitted by law, the
benefit of any statute of limitations affecting its liability under this
Article IX or the enforcement thereof.  Any payment by a Designated Subsidiary
Account Party or other circumstance which operates to toll any statute of
limitations as to a Designated Subsidiary Account Party shall operate to toll
the statute of limitations as to the Company.

 

SECTION 9.05.    Authorization.  The obligations of the Company under this
Article IX shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by any action taken by any Guaranteed Creditor to:

 

(a)           change the manner, place or terms of payment of, and/or change or
extend the time of payment of, renew, increase, accelerate or alter, any of the
Guaranteed Obligations (including any increase or decrease in the rate of
interest thereon), any security therefor, or any liability incurred directly or
indirectly in respect thereof, and the guaranty herein made shall apply to the
Guaranteed Obligations as so changed, extended, renewed or altered;

 

(b)           take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, impair, surrender, realize upon or
otherwise deal with in any manner and in any order any property by whomsoever at
any time pledged or mortgaged to secure, or howsoever securing, the Guaranteed
Obligations or any liabilities (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and/or any offset
thereagainst, except to the extent the Guaranteed Obligations have been paid;

 

(c)           exercise or refrain from exercising any rights against any
Designated Subsidiary Account Party or others or otherwise act or refrain from
acting;

 

(d)           release or substitute any one or more endorsers, guarantors, any
Designated Subsidiary Account Party or other obligor;

 

(e)           settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and may subordinate the
payment of all or any part thereof to the payment of any liability (whether due
or not) of any Designated Subsidiary Account Party to its creditors other than
the Guaranteed Creditors;

 

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(f)            apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of any Designated Subsidiary Account Party to the
Guaranteed Creditors regardless of what liability or liabilities of any
Designated Subsidiary Account Party remain unpaid;

 

(g)           consent to or waive any breach of, or any act, omission or default
under, this Agreement or any of the instruments or agreements referred to herein
or therein, or otherwise amend, modify or supplement this Agreement or any of
such other instruments or agreements; and/or

 

(h)           take any other action which would, under otherwise applicable
principles of common law, give rise to a legal or equitable discharge of the
Company from its liabilities under this Company Guaranty.

 

SECTION 9.06.    Reliance.  It is not necessary for the Guaranteed Creditors to
inquire into the capacity or powers of any Designated Subsidiary Account Party
or the officers, directors, partners or agents acting or purporting to act on
their behalf, and any Guaranteed Obligations made or created in reliance upon
the professed exercise of such powers shall be guaranteed hereunder.

 

SECTION 9.07.    Subordination.  Any indebtedness of any Designated Subsidiary
Account Party now or hereafter owing to the Company is hereby subordinated to
the Guaranteed Obligations of each Designated Subsidiary Account Party owing to
the Guaranteed Creditors; and if the Administrative Agent so requests at a time
when an Event of Default exists, no Designated Subsidiary Account Party shall
make, or be permitted to make, any payment to the Company in respect of such
indebtedness owed to the Company, but without affecting or impairing in any
manner the liability of the Company under the other provisions of this Company
Guaranty.  Prior to the transfer by the Company of any note or negotiable
instrument evidencing any of the indebtedness of any Designated Subsidiary
Account Party to the Company, the Company shall mark such note or negotiable
instrument with a legend that the same is subject to this subordination. Without
limiting the generality of the foregoing, the Company hereby agrees with the
Guaranteed Creditors that it will not exercise any right of subrogation which it
may at any time otherwise have as a result of this Company Guaranty (whether
contractual, under Section 509 of the Bankruptcy Code or otherwise) until all
Guaranteed Obligations have been irrevocably paid in full in cash.

 

SECTION 9.08.    Waiver.  (a) The Company waives any right (except as shall be
required by applicable statute and cannot be waived) to require any Guaranteed
Creditor to (i) proceed against any Designated Subsidiary Account Party, any
other guarantor or any other party, (ii) proceed against or exhaust any security
held from any Designated Subsidiary Account Party, any other guarantor or any
other party or (iii) pursue any other remedy in any Guaranteed Creditor’s power
whatsoever.  The Company waives any defense based on or arising out of any
defense of any Designated Subsidiary Account Party, any other guarantor or any
other party, other than payment in full of the Guaranteed Obligations, based on
or arising out of the disability of any Designated Subsidiary Account Party, any
other guarantor or any other party, or the unenforceability of the Guaranteed
Obligations or any part thereof from any cause, or the cessation from any cause
of the liability of any Designated Subsidiary Account Party other than payment
in full of the Guaranteed Obligations.  The Guaranteed Creditors may exercise
any right or remedy the Guaranteed Creditors may have against any Designated
Subsidiary Account Party or any other party, or any security, without affecting
or impairing in any way the liability of the Company hereunder except to the
extent the Guaranteed Obligations have been paid.  The Company waives any
defense arising out of any such election by the Guaranteed Creditors, even
though such election operates to impair or extinguish any right of reimbursement
or subrogation or other right or remedy of the Company against any Designated
Subsidiary Account Party or any other party or any security.

 

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(b)           The Company waives all presentments, demands for performance,
protests and notices, including notices of non-performance, notices of protest,
notices of dishonor, notices of acceptance of this Company Guaranty, and notices
of the existence, creation or incurring of new or additional Guaranteed
Obligations.  The Company assumes all responsibility for being and keeping
itself informed of each Designated Subsidiary Account Party’s financial
condition and assets, and of all other circumstances bearing upon the risk of
non-payment of the Guaranteed Obligations and the nature, scope and extent of
the risks which the Company assumes and incurs hereunder, and agrees that the
Guaranteed Creditors shall have no duty to advise the Company of information
known to them regarding such circumstances or risks.

 

(c)           The Company warrants and agrees that each of the waivers set forth
above in this Section 9.08 is made with full knowledge of its significance and
consequences, and such waivers shall be effective to the maximum extent
permitted by law.

 

SECTION 9.09.    Maximum Liability.  The provisions of this Company Guaranty are
severable, and in any action or proceeding involving any state corporate law, or
any state, federal or foreign bankruptcy, insolvency, reorganization or other
law affecting the rights of creditors generally, if the obligations of the
Company under this Company Guaranty would otherwise be held or determined to be
avoidable, invalid or unenforceable on account of the amount of the liability
under this Company Guaranty or otherwise, then, notwithstanding any other
provision of this Company Guaranty to the contrary, the amount and scope of such
liability shall, without any further action by the Company or the Guaranteed
Creditors, be automatically limited and reduced to the highest amount that is
valid and enforceable as determined in such action or proceeding (such highest
amount determined hereunder being the “Maximum Liability”.  This Section with
respect to the Maximum Liability is intended solely to preserve the rights of
the Guaranteed Creditors to the maximum extent not subject to avoidance under
applicable law, and neither the Company nor any Designated Subsidiary Account
Party nor any other Person shall have any right or claim under this Section with
respect to the Maximum Liability, except to the extent necessary so that the
obligations of the Company hereunder shall not be rendered voidable under
applicable law.  The Company agrees that the Guaranteed Obligations may at any
time and from time to time exceed the Maximum Liability without impairing this
Company Guaranty or affecting the rights and remedies of the Guaranteed
Creditors hereunder, provided that, nothing in this sentence shall be construed
to increase the Company’s obligations hereunder beyond the Maximum Liability.

 

ARTICLE X

 

Miscellaneous

 

SECTION 10.01.      Notices.  (a) Except in the case of notices and other
communications expressly permitted to be given by telephone or electronically
(and subject to paragraph (b) below), all notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
facsimile, as follows:

 

(i)            if to the Company, Validus Re, Validus Americas and Pac Re (x) to
it at Validus Holdings, Ltd., 29 Richmond Road, Pembroke HM08 Bermuda,
Attention: Chief Financial Officer (Facsimile: (441) 278-9090) and (y) with a
copy (in the case of a notice of a Default) to Skadden, Arps, Slate, Meagher &
Flom LLP, Four Times Square, New York, New York 10036 Attention: Steven Messina
(Facsimile: (917) 777-3509);

 

(ii)           if to a Designated Subsidiary Account Party, at the address
specified opposite its signature below;

 

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(iii)          if to the Administrative Agent, to JPMorgan Chase Bank, N.A.,
Loan and Agency Services Group, 1111 Fannin Street, Houston, Texas 77002,
Attention of Christina Masroor (Facsimile No. (713) 750-2223; e-mail:
Christina.m.masroor@jpmorgan.com), with a copy to JPMorgan Chase Bank, N.A., 277
Park Avenue, 11th Floor, New York, New York 10172, Attention of Brijendra Grewal
(Facsimile No. (917) 456-3256; e-mail: brijendra.s.grewal@jpmorgan.com); and

 

(iv)          if to any other Lender, to it at its address (or facsimile number)
set forth in its Administrative Questionnaire.

 

(b)           Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by the Administrative Agent; provided that the foregoing shall not
apply to notices pursuant to (x) Article II unless otherwise agreed by the
Administrative Agent and the applicable Lender or (y) Section 5.01(e)(x).  The
Administrative Agent or the Company may, in its discretion, agree to accept
notices and other communications to it hereunder by electronic communications
pursuant to procedures approved by it; provided that approval of such procedures
may be limited to particular notices or communications.

 

(c)           Any party hereto may change its address or facsimile number for
notices and other communications hereunder by notice to the other parties
hereto.  All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt.

 

SECTION 10.02. Waivers; Amendments.  (a) No failure or delay by the
Administrative Agent or any Lender in exercising any right or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
the exercise of any other right or power.  The rights and remedies of the
Administrative Agent and the Lenders hereunder are cumulative and are not
exclusive of any rights or remedies that they would otherwise have.  No waiver
of any provision of this Agreement or consent to any departure by any Account
Party therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section 10.02, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.  Without limiting the generality of the foregoing, neither the
issuance of any Letter of Credit nor the making of any Loan shall be construed
as a waiver of any Default, regardless of whether the Administrative Agent or
any Lender may have had notice or knowledge of such Default at the time.  In the
case of any waiver, each Account Party, the Administrative Agent and the Lenders
shall be restored to their former positions and rights hereunder and any Default
or Event of Default so waived shall be deemed to be cured and not continuing. 
No such waiver shall extend to any subsequent or other Default or Event of
Default or impair any right consequent thereon.

 

(b)           Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by each Account Party and the Required Lenders or by each Account
Party and the Administrative Agent with the consent of the Required Lenders;
provided that no such agreement shall (i) increase the Commitment or the Loan
Exposure of any Lender without the written consent of such Lender, (ii) reduce
the amount of any amount due pursuant to any Letter of Credit or Unpaid Drawing
or any Loan or reduce any interest or fees payable hereunder, without the
written consent of each Lender affected thereby, (iii) postpone the scheduled
date for reimbursement of any Unpaid Drawing or payment of any Loan, or any
interest thereon, or any fees payable hereunder, or reduce the amount of, waive
or excuse any such payment, or postpone the scheduled date of expiration of the
Commitments or any Letter of Credit, without the written consent of each Lender
affected thereby, (iv) change Section 2.13(b) or (c) in a manner that would
alter

 

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the pro rata sharing of payments required thereby or change any of the
provisions of this Section 10.02 or the definition of “Required Lenders” or any
other provision hereof specifying the number or percentage of Lenders required
to waive, amend or modify any rights hereunder or make any determination or
grant any consent hereunder, without the written consent of each Lender,
(v) release the Company from the Company Guaranty (or change the Company
Guaranty in a manner that is materially adverse to the Lenders), without the
written consent of each Lender or (vi) change any provision of Article II
specifically relating to Letters of Credit without the written consent of each
LC Issuer affected thereby; and provided, further, that no such agreement shall
amend, modify or otherwise affect the rights or duties of any Agent or any LC
Issuer hereunder without the prior written consent of such Agent or such LC
Issuer, as the case may be.  Notwithstanding the foregoing or any other
provision of this Agreement, any provision of this Agreement may be amended or
waived by an agreement in writing entered into by the Company, the
Super-Majority Lenders and the Administrative Agent (and, if its rights or
obligations are affected thereby, each LC Issuer and the Issuing Agent) if (x)
by the terms of such agreement the Commitment of each Lender not consenting to
the amendment or waiver provided for therein shall terminate, and any Several
Letters of Credit then outstanding shall either be terminated, amended or
returned and reissued, in each case to give effect to such termination (it being
understood that the Company may cause the Commitment of any such non-consenting
Lender to be assigned to one or more new Lenders in accordance with Section
10.04; provided that no action shall be required to be taken by such
non-consenting Lender (including the execution of any Assignment and Assumption
Agreement)) and (y) at the time such amendment or waiver becomes effective, each
Lender not consenting thereto receives payment in full of all amounts owing to
it or accrued for its account under this Agreement.

 

SECTION 10.03. Expenses; Indemnity; Damage Waiver.  (a) Each Account Party
jointly and severally agrees to pay (i) all reasonable and documented
out-of-pocket expenses incurred by the Agents, the Joint Lead Arrangers and
Joint Bookrunners and their Affiliates, including the reasonable fees, charges
and disbursements of one primary counsel and all applicable foreign counsel, in
each case, of the Administrative Agent and one additional counsel for all
Lenders other than the Administrative Agent and additional counsel in light of
actual or potential conflicts of interest or the availability of different
claims or defenses, and in each case to the extent invoiced, in connection with
the syndication of the credit facility provided for herein, the preparation and
administration of this Agreement or any amendments, modifications or waivers of
the provisions hereof (whether or not the transactions contemplated hereby or
thereby shall be consummated) or protection of its rights hereunder or
thereunder, (ii) all out-of-pocket expenses of the Issuing Agent and each
Fronting Lender in connection with the issuance, amendment, renewal or extension
of any Letter of Credit hereunder, and (iii) all reasonable and documented
out-of-pocket expenses incurred by any Agent, any Joint Lead Arranger and Joint
Bookrunner or any Lender, including the reasonable fees, charges and
disbursements of one primary counsel and all applicable foreign counsel, in each
case, of the Administrative Agent and one additional counsel for all Lenders
other than the Administrative Agent and additional counsel in light of actual or
potential conflicts of interest or the availability of different claims or
defenses, and in each case to the extent invoiced, in connection with the
enforcement of its rights in connection with this Agreement, including its
rights under this Section, or in connection with the Loans made and Letters of
Credit issued hereunder, including all such out-of-pocket expenses incurred
during any workout, restructuring or negotiations in respect of such Loans and
Letters of Credit.

 

(b)           Each Account Party jointly and severally agrees to indemnify the
Agents, the Joint Lead Arrangers and Joint Bookrunners and each Lender, and each
Related Party of any of the foregoing Persons (each such Person being called an
“Indemnitee”) against, and hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses, including the fees,
charges and disbursements of any counsel for such Indemnitee, incurred by or
asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of this Agreement or any agreement or
instrument contemplated hereby, the performance by the parties hereto of

 

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their respective obligations hereunder or any other transactions contemplated
hereby, (ii) any Letter of Credit, any Loan or the use of the proceeds
therefrom, (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by the Company or any of its
Subsidiaries, or any Environmental Liability related in any way to the Company
or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether such Indemnitee is
a party thereto or whether such claim, litigation, investigation or proceeding
is brought by the Company or any of its Subsidiaries or a third party; provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and non-appealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee or any Related Party of such Indemnitee.

 

(c)           To the extent that any Account Party fails to pay any amount
required to be paid by it to an Agent, under paragraph (a) or (b) of this
Section, each Lender severally agrees to pay to such Agent such Lender’s
Applicable Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
provided that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against such Agent, in its capacity as such.

 

(d)           To the extent permitted by applicable law, no Account Party shall
assert, and each Account Party 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, this Agreement or any agreement or instrument
contemplated hereby, any Letter of Credit, any Loan or the use of the proceeds
thereof.

 

(e)           All amounts due under this Section shall be payable promptly after
written demand therefor.

 

SECTION 10.04. Successors and Assigns.  (a) The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby except that (i) no Account
Party may assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by such Account Party without such consent shall be null
and void) and (ii) no Lender may assign or otherwise transfer its rights or
obligations hereunder except in accordance with this Section.  Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby, Participants (to the extent provided in paragraph (c) of this
Section) and, to the extent expressly contemplated hereby, the Related Parties
of each of the Agents and the Lenders) any legal or equitable right, remedy or
claim under or by reason of this Agreement.

 

(b)           (i) Subject to the conditions set forth in paragraph (b)(ii)
below, any Lender may assign to one or more Persons all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to such Lender) with the prior
written consent (such consent not to be unreasonably withheld) of:

 

(A) the Company (provided that the Company shall be deemed to have consented to
any such assignment unless it shall object thereto by written notice to the
Administrative Agent within ten (10) Business Days after having received notice
thereof), provided, further, that no consent of the Company shall be required
for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if
an Event of Default has occurred and is continuing, any other assignee; and

 

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(B) the Administrative Agent and each LC Issuer.

 

(ii)           Assignments shall be subject to the following additional
conditions:

 

(A) except in the case of an assignment to a Lender or an Affiliate of a Lender
or an assignment of the entire remaining amount of the assigning Lender’s
Commitment, the amount of the Commitment of the assigning Lender subject to each
such assignment (determined as of the date the Assignment and Assumption with
respect to such assignment is delivered to the Administrative Agent) shall not
be less than $5,000,000 unless each of the Company and the Administrative Agent
otherwise consent, provided that no such consent of the Company shall be
required if an Event of Default has occurred and is continuing;

 

(B) each partial assignment shall be made as an assignment of a proportionate
part of all the assigning Lender’s rights and obligations under this Agreement;

 

(C) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500;

 

(D) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire;

 

(E) the assignee shall be an NAIC Approved Bank that is not a parent, subsidiary
or Affiliate of any Account Party or any beneficiary under any Letter of Credit;
and

 

(F) if any Several Letters of Credit are then outstanding, no such assignment
shall be effective until all such outstanding Several Letters of Credit are
either amended or returned and reissued, in each case to give effect to such
assignment.

 

For the purposes of this Section 10.04(b), the term “Approved Fund” has the
following meaning:

 

“Approved Fund” means any Person (other than a natural person) that is engaged
in making, purchasing, holding or investing in bank loans and similar extensions
of credit in the ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an
Affiliate of an entity that administers or manages a Lender.

 

(iii)          Subject to acceptance and recording thereof pursuant to paragraph
(b)(iv) of this Section, from and after the effective date specified in each
Assignment and Assumption the assignee thereunder shall be a party hereto and,
to the extent of the interest assigned by such Assignment and Assumption, have
the rights and obligations of a Lender under this Agreement (provided that any
liability of any Account Party to such assignee under Section 2.06, 2.12 or 2.25
shall be limited to the amount, if any, that would have been payable thereunder
by such Account Party in the absence of such assignment, except to the extent
any such amounts are attributable to a Change in Law), and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections 2.06,
2.12, 2.25 and 10.03). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not

 

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comply with this Section 10.04 shall be treated for purposes of this Agreement
as a sale by such Lender of a participation in such rights and obligations in
accordance with paragraph (c) of this Section.

 

(iv)          The Administrative Agent, acting for this purpose as an agent of
the Account Parties, shall maintain at one of its offices a copy of each
Assignment and Assumption delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Commitment of, and principal
amount of the Loans owing to, each Lender pursuant to the terms hereof from time
to time (the “Register”).  The entries in the Register shall be conclusive
absent manifest error, and the Account Parties, the Administrative Agent and the
Lenders shall treat each Person whose name is recorded in the Register pursuant
to the terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary.  The Register shall be available for
inspection by the Account Parties, and any Lender, at any reasonable time and
from time to time upon reasonable prior notice.

 

(v)           Upon its receipt of a duly completed Assignment and Assumption
executed by an assigning Lender and an assignee, the assignee’s completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by paragraph
(b) of this Section, the Administrative Agent shall accept such Assignment and
Assumption and record the information contained therein in the Register.  No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.

 

(c)           (i) Any Lender may, without the consent of any Account Party or
the Administrative Agent, sell participations to one or more banks or other
entities (a “Participant”) in all or a portion of such Lender’s rights and
obligations under this Agreement (including all or a portion of its Commitment
and Unpaid Drawings  and the Loans owing to it); provided that (A) such Lender’s
obligations under this Agreement shall remain unchanged, (B) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (C) the Account Parties, the Administrative Agent and the
other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement.  Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any provision
of this Agreement; provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver described in the first proviso to
Section 10.02(b) that affects such Participant.  Subject to paragraph (c)(ii) of
this Section, each Account Party agrees that each Participant shall be entitled
to the benefits of Sections 2.06, 2.12 and 2.25 to the same extent as if it were
a Lender and had acquired its interest by assignment pursuant to paragraph (b)
of this Section.  To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 10.08 as though it were a Lender, provided
such Participant agrees to be subject to Section 2.13(c) as though it were a
Lender.

 

(ii)           A Participant shall not be entitled to receive any greater
payment under Section 2.06 or 2.12 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Company’s prior written consent and the entitlement to greater payment results
solely from a Change in Law.  A Participant that would be a Foreign Lender if it
were a Lender shall not be entitled to the benefits of Section 2.12 unless the
Company is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Account Parties, to comply with
Section 2.12(e) as though it were a Lender.  Each Lender that sells a

 

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participation shall, acting solely for this purpose as a non-fiduciary agent of
the Account Parties, maintain a register on which it enters the name and address
of each Participant and the principal amounts (and stated interest) of each
Participant’s interest in the Letters of Credit, Loans or other obligations
under this Agreement (the “Participant Register”); provided that no Lender shall
have any obligation to disclose all or any portion of the Participant Register
(including the identity of any Participant or any information relating to a
Participant’s interest in any Commitments, Unpaid Drawings, Loans or its other
obligations under this Agreement) to any Person except to the extent that such
disclosure is necessary to establish that such Commitment, Unpaid Drawing, Loan
or other obligation is in registered form under Section 5f.103-1(c) of the
United States Treasury Regulations.  The entries in the Participant Register
shall be conclusive absent manifest error, and such Lender shall treat each
Person whose name is recorded in the Participant Register as the owner of such
participation for all purposes of this Agreement notwithstanding any notice to
the contrary.  For the avoidance of doubt, the Administrative Agent (in its
capacity as Administrative Agent) shall have no responsibility for maintaining a
Participant Register.

 

(d)           Any 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
such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; provided that no such pledge or assignment of
a security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party hereto.

 

SECTION 10.05. Survival.  All covenants, agreements, representations and
warranties made by any Account Party herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the issuance of any
Letters of Credit and the making of any Loan regardless of any investigation
made by any such other party or on its behalf and notwithstanding that the
Administrative Agent or any Lender may have had notice or knowledge of any
Default or incorrect representation or warranty at the time any credit is
extended hereunder, and shall continue in full force and effect as long as any
Letter of Credit or the principal of or any accrued interest on any Loan is
outstanding, any fee or any other amount payable under this Agreement is
outstanding and unpaid and so long as the Total Commitment (and the Commitment
of each Lender) has not expired or terminated.  The provisions of Sections 2.06,
2.12, 2.25 and 10.03 and Article VIII shall survive and remain in full force and
effect regardless of the consummation of the transactions contemplated hereby,
the repayment of the Loans, the expiration or termination of the Total
Commitment (and the Commitment of each Lender) or the termination of this
Agreement or any provision hereof.

 

SECTION 10.06. Counterparts; Integration; Effectiveness.  This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract.  This Agreement and any
separate letter agreements with respect to fees payable to the Administrative
Agent constitute the entire contract among the parties relating to the subject
matter hereof and supersede any and all previous agreements and understandings,
oral or written, relating to the subject matter hereof.  Except as provided in
Section 4.01, this Agreement shall become effective when it shall have been
executed by the Administrative Agent and when the Administrative Agent shall
have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Delivery of an executed counterpart of a signature page
of this Agreement by facsimile or other electronic imaging means (e.g. “PDF”)
shall be effective as delivery of a manually executed counterpart of this
Agreement.

 

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SECTION 10.07.           Severability.  Any provision of this Agreement held to
be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.

 

SECTION 10.08.           Right of Setoff.  If an Event of Default shall have
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of any
Account Party against any of and all the obligations of such Account Party now
or hereafter existing under this Agreement held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement and
although such obligations may be unmatured.  The rights of each Lender under
this Section are in addition to other rights and remedies (including other
rights of setoff) which such Lender may have.

 

SECTION 10.09.           Governing Law; Jurisdiction; Consent to Service of
Process.  (a) This Agreement shall be construed in accordance with and governed
by the law of the State of New York.

 

(b)                                 Each party hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the non-exclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, or for recognition or enforcement
of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court.  Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.  Nothing in this Agreement shall affect any right that the
Administrative Agent or any Lender may otherwise have to bring any action or
proceeding relating to this Agreement against any Account Party or its
properties in the courts of any jurisdiction.

 

(c)                                  Each party hereto hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement in
any court referred to in paragraph (b) of this Section.  Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.

 

(d)                                 Each party to this Agreement irrevocably
consents to service of process in connection with disputes arising out of this
Agreement in the manner provided for notices in Section 10.01.  Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

 

(e)                                  Each Account Party hereby irrevocably
designates, appoints and empowers the Service of Process Agent, with offices on
the date hereof at 111 Eighth Avenue, New York, New York 10011, as its designee,
appointee and agent to receive, accept and acknowledge for and on its behalf,
and in respect of its property, service of any and all legal process, summons,
notices and documents which may be served in any such action or proceeding.  If
for any reason such designee, appointee and agent shall cease to be available to
act as such, each Account Party agrees to designate a new designee,

 

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appointee and agent in New York City on the terms and for the purposes of this
provision reasonably satisfactory to the Administrative Agent under this
Agreement.

 

SECTION 10.10.           Waiver of Jury Trial.  EACH PARTY HERETO HEREBY 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 THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY 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 BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

SECTION 10.11.           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 10.12.           Confidentiality.  Each of the Agents and the Lenders
agrees to maintain the confidentiality of the Information (as defined below),
except that Information may be disclosed (a) to its and its Affiliates’
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that (i) 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 the terms of this Agreement and (ii) that the applicable Agent or Lender
shall be responsible for any breach of this Section 10.12 by any of its and its
Affiliates’ directors, officers, employees and agents, including accountants,
legal counsel and other advisors), (b) to the extent requested by any regulatory
authority or self-regulatory body, (c) to the extent required by applicable laws
or regulations or by any subpoena or similar legal process, (d) to any other
party to this Agreement, (e) in connection with the exercise of any remedies
hereunder or any suit, action or proceeding relating to this Agreement or the
enforcement of rights hereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (i) any assignee
of or Participant in, or any prospective assignee of or Participant in, any of
its rights or obligations under this Agreement or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
any Account Party and its obligations, (g) with the consent of the Company or
(h) to the extent such Information (i) becomes publicly available other than as
a result of a breach of this Section or (ii) becomes available to any Agent or
any Lender on a non-confidential basis from a source other than the Company
that, to the applicable Agent’s or Lender’s knowledge, is not subject to a
confidentiality undertaking with respect to the applicable Information.  For the
purposes of this Section, “Information” means all information now or hereafter
received from any Account Party relating to the Company, any Subsidiary of the
Company or their respective businesses, other than any such information that is
available to any Agent or any Lender on a non-confidential basis prior to
disclosure by any Account Party.  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 or, in the case of any
Lender, such Lender has treated such Information in a manner consistent with
banking industry standards for the treatment of confidential information.  The
provisions of this Section 10.12 shall survive the termination of the Total
Commitment (and the Commitment of each Lender) and repayment of the Loans and
the other obligations arising hereunder but such survival shall only be for a
period of two (2) years following the Commitment Expiration Date.

 

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SECTION 10.13.           Interest Rate Limitation.  Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to any
Unpaid Drawings or any Loan, together with all fees, charges and other amounts
which are treated as interest on such amount or pursuant to any Letter of Credit
or any Loan under applicable law (collectively the “Charges”), shall exceed the
maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged,
taken, received or reserved by the Lender issuing or holding participation in
such Letter of Credit or such Loan in accordance with applicable law, the rate
of interest payable in respect of such Letter of Credit or such Loan hereunder,
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 in respect of such Letter of Credit or such Loan but were not
payable as a result of the operation of this Section shall be cumulated and the
interest and Charges payable to such Lender in respect of other Letters of
Credit or other Loans 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 to the date of repayment, shall have been
received by such Lender.

 

SECTION 10.14.           USA Patriot Act.  Each Lender hereby notifies the
Company and each other Account Party that pursuant to the requirements of the
USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001))
(the “Patriot Act”), it is required to obtain, verify and record information
that identifies each Account Party, which information includes the name and
address of each Account Party and other information that will allow such Lender
to identify each Account Party in accordance with the Patriot Act.

 

SECTION 10.15.           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), each
Account Party acknowledges and agrees that: (i) (A) the arranging and other
services regarding this Agreement provided by the Lenders are arm’s-length
commercial transactions between such Account Party and its Affiliates, on the
one hand, and the Lenders and their Affiliates, on the other hand, (B) such
Account Party has consulted its own legal, accounting, regulatory and tax
advisors to the extent it has deemed appropriate, and (C) such Account Party is
capable of evaluating, and understands and accepts, the terms, risks and
conditions of the transactions contemplated hereby; (ii) (A) each of the Lenders
and their Affiliates is and 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 such Account Party or
any of its Affiliates, or any other Person and (B) no Lender or any of its
Affiliates has any obligation to such Account Party or any of its Affiliates
with respect to the transactions contemplated hereby except, in the case of a
Lender, those obligations expressly set forth herein; and (iii) each of the
Lenders and their respective Affiliates may be engaged in a broad range of
transactions that involve interests that differ from those of such Account Party
and its Affiliates, and no Lender or any of its Affiliates has any obligation to
disclose any of such interests to such Account Party or its Affiliates.  To the
fullest extent permitted by law, each Account Party hereby waives and releases
any claims that it may have against each of the Lenders and their Affiliates
with respect to any breach or alleged breach of agency or fiduciary duty in
connection with any aspect of any transaction contemplated hereby.

 

SECTION 10.16.           Termination of Existing Credit Facility.  JPMorgan
Chase Bank, N.A., in its capacity as Existing Administrative Agent, hereby
agrees, acknowledges and confirms that upon the effectiveness of this Agreement
on the Effective Date and payment in full of any and all principal, interest,
fees and other amounts owing under or in connection with the Existing Credit
Facility (as specified by the Existing Administrative Agent to the Company on or
prior to the Effective Date), all liabilities, obligations and indebtedness
owing by the Company and the Account Parties under the Existing Credit Facility
shall be automatically released, discharged and satisfied in full and all
related instruments, agreements and other documents shall be automatically
terminated (provided that any

 

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contingent and/or indemnity obligations under the Existing Credit Facility which
expressly survive termination thereof shall continue to remain in effect in
accordance therewith).

 

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.

 

Address:

VALIDUS HOLDINGS, LTD.

 

 

 

29 Richmond Road

 

 

Pembroke, HM08 Bermuda

By:

/s/ Joseph E. (Jeff) Consolino

Telephone: (441) 278-9000

Name:

Joseph E. (Jeff) Consolino

Facsimile: (441) 278-9090

Title:

President and Chief Financial Officer

 

 

Address:

VALIDUS REINSURANCE, LTD.

 

 

29 Richmond Road

 

Pembroke, HM08 Bermuda

By:

/s/ Jeff Sangster

Telephone: (441) 278-9000

Name:

Jeff Sangster

Facsimile: (441) 278-9090

Title:

Chief Financial Officer

 

 

Address:

VALIDUS RE AMERICAS, LTD.

 

 

29 Richmond Road

 

Pembroke, HM08 Bermuda

By:

/s/ Jeff Sangster

Telephone: (441) 278-9000

Name:

Jeff Sangster

Facsimile: (441) 278-9090

Title:

Chief Financial Officer

 

 

Address:

PACRE, LTD.

 

 

29 Richmond Road

 

Pembroke, HM08 Bermuda

By:

/s/ Joseph E. (Jeff) Consolino

Telephone: (441) 278-9000

Name:

Joseph E. (Jeff) Consolino

Facsimile: (441) 278-9090

Title:

President and Chief Executive Officer

 

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JPMORGAN CHASE BANK, N.A., individually as a Lender, as Administrative Agent and
as Issuing Agent

 

 

 

By

/s/ Brijendra Grewal

 

Name:

Brijendra Grewal

 

Title:

Vice President

 

 

 

 

 

JPMORGAN CHASE BANK, N.A., as Existing Administrative Agent

 

 

 

By

/s/ Brijendra Grewal

 

Name:

Brijendra Grewal

 

Title:

Vice President

 

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DEUTSCHE BANK SECURITIES INC., as Syndication Agent

 

 

 

By

/s/ John S. McGill

 

Name:

John S. McGill

 

Title:

Director

 

 

 

By

/s/ Virginia Cosenza

 

Name:

Virginia Cosenza

 

Title:

Vice President

 

 

 

 

 

DEUTSCHE BANK AG NEW YORK BRANCH, as a Lender

 

 

 

By

/s/ John S. McGill

 

Name:

John S. McGill

 

Title:

Director

 

 

 

By

/s/ Virginia Cosenza

 

Name:

Virginia Cosenza

 

Title:

Vice President

 

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LLOYDS SECURITIES INC., as a Co-Documentation Agent

 

 

 

 

By

/s/ R. Herder

 

Name:

R. Herder

 

Title:

Managing Director

 

 

 

 

 

 

 

LLOYDS TSB BANK plc, as a Lender

 

 

 

     

By

/s/ Jalia R Franklin

 

Name:

Jalia R Franklin

 

Title:

Vice President — F014

 

 

 

 

By

/s/ Dennis McClellan

 

Name:

Dennis McClellan

 

Title:

Assistant Vice President — M040

 

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SUNTRUST BANK, individually as a Lender and as a
Co-Documentation Agent

 

 

 

 

By

/s/ Douglas O’Bryan

 

Name:

Douglas O’Bryan

 

Title:

Director

 

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BARCLAYS BANK PLC, as a Lender

 

 

 

 

By

/s/ Karla Maloof

 

Name:

Karla Maloof

 

Title:

Head of Insurance North America

 

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HSBC BANK USA, NATIONAL ASSOCIATION, as a Lender

 

 

 

 

By

/s/ Lawrence Karp

 

Name:

Lawrence Karp

 

Title:

Managing Director

 

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ING BANK N.V., LONDON BRANCH, as a Lender

 

 

 

 

By

/s/ M E R Sharman

 

Name:

M E R Sharman

 

Title:

Managing Director

 

 

 

 

By

/s/ N J Marchant

 

Name:

N J Marchant

 

Title:

Director

 

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THE BANK OF NEW YORK MELLON, as a Lender

 

 

 

 

By

/s/ Michael Pensari

 

Name:

Michael Pensari

 

Title:

Managing Director

 

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COMERICA BANK, as a Lender

 

 

 

 

By

/s/ CHATPHET SAIPETCH

 

Name:

CHATPHET SAIPETCH

 

Title:

Vice President

 

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THE BANK OF NOVA SCOTIA, as a Lender

 

 

 

 

By

/s/ Thane Rattew

 

Name:

Thane Rattew

 

Title:

Managing Director

 

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