Exhibit 10.1
FUNDS AT LLOYD’S LETTER OF CREDIT AGREEMENT
AMONG
THE NAVIGATORS GROUP, INC.,
as Borrower,
THE LENDERS NAMED HEREIN,
and
ING BANK N.V., LONDON BRANCH,
as Administrative Agent and Letter of Credit Agent
DATED AS OF
March 28, 2011
ING BANK, N.V., LONDON BRANCH,
as Lead Arranger

 

 

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TABLE OF CONTENTS

              Page  
 
       
ARTICLE I DEFINITIONS
    1  
 
       
ARTICLE II THE LETTER OF CREDIT FACILITY
    18  
 
       
2.1 Issuance of Letters of Credit
    18  
2.2 Conversion Principles
    19  
2.3 Reductions in Aggregate Commitment
    19  
2.4 Reimbursement Obligations
    20  
2.5 Procedure for Issuance
    21  
2.6 Nature of the Agent and Lenders’ Obligations
    22  
2.7 Notification of Issuance Requests
    24  
2.8 Fees
    24  
2.9 Collateralization Events
    25  
2.10 Collateral Account
    26  
 
       
ARTICLE III YIELD PROTECTION; TAXES
    27  
 
       
3.1 Yield Protection
    27  
3.2 Changes in Capital Adequacy Regulations
    28  
3.3 Taxes
    28  
3.4 Lender Statements; Survival of Indemnity
    31  
 
       
ARTICLE IV CONDITIONS PRECEDENT
    31  
 
       
4.1 The Lenders Obligation to Issue
    31  
4.2 Each Letter of Credit
    33  
 
       
ARTICLE V REPRESENTATIONS AND WARRANTIES
    34  
 
       
5.1 Existence and Standing
    34  
5.2 Authorization and Validity
    34  
5.3 No Conflict; Government Consent
    34  
5.4 Financial Statements
    35  
5.5 Statutory Financial Statements
    35  
5.6 Material Adverse Change
    35  
5.7 Taxes
    35  
5.8 Litigation and Contingent Obligations
    36  
5.9 Subsidiaries
    36  

 

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TABLE OF CONTENTS
(continued)

              Page  
 
       
5.10 ERISA
    36  
5.11 Defaults
    36  
5.12 Accuracy of Information
    36  
5.13 Regulation U
    36  
5.14 Material Agreements
    36  
5.15 Compliance With Laws
    37  
5.16 Ownership of Properties
    37  
5.17 Plan Assets; Prohibited Transactions
    37  
5.18 Environmental Matters
    37  
5.19 Investment Company Act
    37  
5.20 Solvency
    37  
5.21 Insurance Licenses
    38  
5.22 Partnerships
    38  
5.23 Lines of Business
    38  
5.24 Reinsurance Practices
    38  
5.25 Security
    38  
5.26 Disclosure
    38  
 
       
ARTICLE VI COVENANTS
    39  
 
       
6.1 Financial Reporting
    39  
6.2 Purpose
    43  
6.3 Notice of Default
    43  
6.4 Conduct of Business
    43  
6.5 Taxes
    43  
6.6 Insurance
    43  
6.7 Compliance with Laws
    44  
6.8 Maintenance of Properties
    44  
6.9 Inspection; Maintenance of Books and Records
    44  
6.10 Dividends and Stock Repurchases
    44  
6.11 Indebtedness
    44  
6.12 Merger
    45  

 

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TABLE OF CONTENTS
(continued)

              Page  
 
       
6.13 Sale of Assets
    45  
6.14 Investments and Acquisitions
    45  
6.15 Contingent Obligations
    46  
6.16 Liens
    47  
6.17 Affiliates
    47  
6.18 Amendments to Agreements
    47  
6.19 Change in Fiscal Year
    48  
6.20 Inconsistent Agreements
    48  
6.21 Reinsurance
    48  
6.22 Stock of Subsidiaries
    48  
6.23 Financial Covenants
    49  
6.24 Additional Pledge
    49  
6.25 Primary FAL
    49  
 
       
ARTICLE VII DEFAULTS
    50  
 
       
ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
    52  
 
       
8.1 Acceleration
    52  
8.2 Amendments
    53  
8.3 Preservation of Rights
    54  
8.4 Application of Funds
    54  
 
       
ARTICLE IX GENERAL PROVISIONS
    55  
 
       
9.1 Survival of Representations
    55  
9.2 Governmental Regulation
    55  
9.3 Headings
    55  
9.4 Entire Agreement
    55  
9.5 Numbers of Documents
    55  
9.6 Several Obligations; Benefits of this Agreement
    55  
9.7 Expenses; Indemnification
    56  
9.8 Accounting
    56  
9.9 Severability of Provisions
    56  
9.10 Nonliability of Lenders
    56  

 

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TABLE OF CONTENTS
(continued)

              Page  
 
       
9.11 Confidentiality
    57  
9.12 Nonreliance
    57  
9.13 Disclosure
    57  
9.14 USA Patriot Act Notification
    57  
9.15 Existing Credit Agreement
    57  
 
       
ARTICLE X THE AGENT
    58  
 
       
10.1 Appointment; Nature of Relationship
    58  
10.2 Powers
    58  
10.3 General Immunity
    58  
10.4 No Responsibility for Recitals, etc
    59  
10.5 Action on Instructions of Lenders
    59  
10.6 Employment of Administrative Agent and Counsel
    59  
10.7 Reliance on Documents; Counsel
    59  
10.8 Administrative Agent’s Reimbursement and Indemnification
    60  
10.9 Notice of Default
    60  
10.10 Rights as a Lender
    60  
10.11 Lender Credit Decision
    60  
10.12 Successor Administrative Agent
    61  
10.13 Administrative Agents’ Fees
    61  
10.14 Delegation to Affiliates
    61  
10.15 Security Trustee
    62  
 
       
ARTICLE XI SETOFF; RATABLE PAYMENTS
    62  
 
       
11.1 Setoff
    62  
11.2 Ratable Payments
    62  
 
       
ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
    63  
 
       
12.1 Successors and Assigns
    63  
12.2 Participations
    63  
12.3 Assignments
    64  
12.4 Dissemination of Information
    65  
12.5 Tax Treatment
    65  

 

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TABLE OF CONTENTS
(continued)

              Page  
 
       
 
       
ARTICLE XIII NOTICES
    65  
 
       
13.1 Notices
    65  
13.2 Change of Address
    65  
 
       
ARTICLE XIV COUNTERPARTS
    66  
 
       
ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
    66  
 
       
15.1 CHOICE OF LAW
    66  
15.2 CONSENT TO JURISDICTION
    66  
15.3 WAIVER OF JURY TRIAL
    66  

         
SCHEDULES
       
 
       
Pricing Schedule
       
Schedule 1
  —   Commitments
Schedule 1.1
  —   Cash Collateral Investments
Schedule 5.9
  —   Subsidiaries
Schedule 5.22
  —   Partnerships
Schedule 5.23
  —   Existing Lines of Business
Schedule 6.16
  —   Liens
Schedule 6.21
  —   Reinsurance Guidelines
 
       
EXHIBITS
       
 
       
Exhibit A
      Compliance Certificate
Exhibit B
      Assignment Agreement
Exhibit C
      Reimbursement Agreement Excerpt
Exhibit D
      Borrowing Base Certificate
Exhibit E
      Security Agreement
Exhibit F
      Fixed Charge
Exhibit G
      Letter of Credit
Exhibit H
      Lloyd’s Comfort Letter

 

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FUNDS AT LLOYD’S LETTER OF CREDIT AGREEMENT
This Funds at Lloyd’s Letter of Credit Agreement, dated as of March 28, 2011, is
among THE NAVIGATORS GROUP, INC., a Delaware corporation, the Lenders and ING
BANK, N.V., London Branch, individually and as Administrative Agent and Lead
Arranger.
R E C I T A L S:
A. The Borrower has requested that the Lenders provide a letter of credit
facility, and the Lenders are willing to do so on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Lenders and the
Administrative Agent hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
“Account Bank” means (i) with respect to funds in the United Kingdom, ING Bank,
N.V., London Branch and (b) with respect to funds in the United States, any
“bank” within the meaning of Section 9-102(a)(8) of the UCC at which any deposit
account constituting a Collateral Account is held, which shall be reasonably
acceptable to the Administrative Agent.
“Acquisition” means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which the Borrower or any
of its Subsidiaries (a) acquires any on-going business or all or substantially
all of the assets of any firm, corporation or limited liability company, or
division thereof, whether through purchase of assets, merger, amalgamation or
otherwise or (b) directly or indirectly acquires (in one transaction or as the
most recent transaction in a series of transactions) at least a majority (in
number of votes) of the securities of a corporation which have ordinary voting
power for the election of directors (other than securities having such power
only by reason of the happening of a contingency) or a majority (by percentage
or voting power) of the outstanding ownership interests of a partnership or
limited liability company.
“Adjusted Fair Market Value” means with respect to any Cash Collateral
Investment held in a Collateral Account an amount equal to the product of the
Fair Market Value of such Cash Collateral Investment and the applicable
percentage with respect to such Cash Collateral Investment as set forth on
Schedule 1.1.
“Administrative Agent” means ING Bank, N.V. London Branch, in its capacity as
Administrative Agent pursuant to Article X and not in its individual capacity as
a Lender or as Letter of Credit Agent and any successor Administrative Agent
appointed pursuant to Article X.

 

 

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“Affiliate” of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.
“Aggregate Commitment” means the aggregate commitment of all of the Lenders, as
reduced or increased from time to time pursuant to the terms hereof. The
Aggregate Commitment as of the date hereof is $165,000,000.
“Agreement” means this Funds at Lloyd’s Letter of Credit Agreement, as it may be
amended, modified or restated and in effect from time to time.
“Agreement Accounting Principles” means generally accepted accounting principles
as in effect from time to time, applied in a manner consistent with those used
in preparing the financial statements referred to in Section 5.4; provided,
however, that for purposes of all computations required to be made with respect
to compliance by the Borrower with Section 6.23, such term shall mean generally
accepted accounting principles as in effect on the Closing Date, applied in a
manner consistent with those used in preparing the financial statements referred
to in Section 5.4.
“A.M. Best Rating” means, as to any insurance company, its financial strength
rating assigned by The A.M. Best Company, Inc.
“Annual Statement” means the annual statutory financial statement of any
Insurance Subsidiary required to be filed with the insurance commissioner (or
similar authority) of its jurisdiction of incorporation, which statement shall
be in the form required by such Insurance Subsidiary’s jurisdiction of
incorporation or, if no specific form is so required, in the form of financial
statements permitted by such insurance commissioner (or such similar authority)
to be used for filing annual statutory financial statements and shall contain
the type of information permitted by such insurance commissioner (or such
similar authority) to be disclosed therein, together with all exhibits or
schedules filed therewith.
“Applicable Letter of Credit Fee Rate” means, at any time, the per annum rate at
which letter of credit fees are accruing on the Letters of Credit at such time
as set forth below:

                                              A- or below                      
Financial                       Strength       A+     A     Rating of      
Financial     Financial     Navigators or       Strength     Strength     no
Financial   Applicable Letter   Rating of     Rating of     Strength   of Credit
Fee Rate   Navigators     Navigators     Rating  
Primary FAL ≥ 25%
    1.15 %     1.35 %     1.60 %
but less than 50%
                       
Primary FAL ≥ 50%
    0.95 %     1.15 %     1.40 %

 

2

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The Primary FAL level on any date shall be based on the most recently delivered
Compliance Certificate delivered pursuant to Section 6.1(g). The Financial
Strength Rating on any day shall be based on Navigator’s then-current A.M. Best
Rating and S&P Rating; provided that if the A.M. Best Rating and the S&P Rating
are not the same, the better Rating shall apply except that if the Ratings
differ by more than one level than the level above the lower Rating shall apply.
The Rating in effect on any date for the purposes of this Schedule is that in
effect at the close of business on such date. If at any time Navigators has only
an A.M. Best Rating or a S&P Rating, the Letter of Credit Fee Rate shall be
determined based on the current A.M. Best Rating or S&P Rating, as the case may
be. The Applicable Letter of Credit Fee Rate as of the date of Closing is 1.35%.
Notwithstanding the foregoing, (i) in the event the Borrower has posted
Collateral (other than Collateral which has been posted pursuant to Section 2.9,
the Applicable Letter of Credit Fee Rate shall be (x) with respect to an amount
of the outstanding Letters of Credit supported by Cash Collateral Investments,
0.50%, and (y) with respect to the remaining amount of outstanding Letters of
Credit, the rate then in effect pursuant to the table above, (ii) in the event
the Borrower has posted Collateral pursuant to Sections 2.9(c), (d), (e) or (f),
the Applicable Letter of Credit Fee Rate shall be (x) with respect to an amount
of the outstanding Letters of Credit supported by Cash Collateral Investments,
0.70%, and (y) with respect to the remaining amount of outstanding Letters of
Credit, the rate then in effect pursuant to the table above, and (iii) in the
event that an Event of Default has occurred and is continuing, the Applicable
Letter of Credit Fee shall be the Default Rate.
“Applicable Percentage” means with respect to any Lender at any time, the
percentage (carried out to the ninth decimal place) of the Aggregate Commitments
represented by such Lender’s Commitment at such time. If the commitment of each
Lender to issue Letters of Credit have been terminated pursuant to Section 8.1
or if the Aggregate Commitments have expired, then the Applicable Percentage of
each Lender shall be determined based on the percentage such Lender’s Letter of
Credit Obligations are of all Letter of Credit Obligations. The initial
Applicable Percentage of each Lender is set forth opposite the name of such
Lender on Schedule 1 or in the Assignment and Assumption pursuant to which such
Lender becomes a party hereto, as applicable. The Applicable Percentage “of” a
particular amount may also refer to the value obtained by multiplying the
Applicable Percentage times such amount.
“Applicable Unused Fee Rate” means 0.375%.
“Approved Reinsurer” means a reinsurer which satisfies the criteria set forth in
the Reinsurance Guidelines for entering into reinsurance or retrocession
agreements with the Borrower.
“Arranger” means ING Bank N.V., London Branch and its successors.
“Article” means an article of this Agreement unless another document is
specifically referenced.

 

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“Asset Disposition” means any sale, transfer or other disposition of any asset
of the Borrower or any Subsidiary in a single transaction or in a series of
related transactions (other than the sale of Investments (other than stock in
Subsidiaries) in the ordinary course).
“Authorized Officer” means any of the president, chief financial officer or
treasurer of the Borrower, acting singly.
“Bankruptcy Code” means Title 11, United States Code, sections 1 et seq., as the
same may be amended from time to time and any successor thereto or replacement
therefor which may be hereafter enacted.
“Borrower” means The Navigators Group, Inc., a Delaware corporation and its
successors and assigns.
“Borrowing Base” means on any date of determination, an amount equal to the sum
of the Adjusted Fair Market Value of all Cash Collateral Investments.
“Borrowing Base Certificate” means a certificate substantially in the form of
Exhibit D with such changes therein as the Administrative Agent may reasonably
request from time to time.
“Business Day” means a day (other than a Saturday or Sunday) on which banks
generally are open in New York and London for the conduct of substantially all
of their commercial lending activities.
“Capitalized Lease” of a Person means any lease of Property by such Person as
lessee which would be capitalized on a balance sheet of such Person prepared in
accordance with Agreement Accounting Principles.
“Capitalized Lease Obligations” of a Person means the amount of the obligations
of such Person under Capitalized Leases which would be shown as a liability on a
balance sheet of such Person prepared in accordance with Agreement Accounting
Principles.
“Cash Collateral Investments” means (a) short-term obligations of, or fully
guaranteed by, the United States of America, (b) commercial paper rated A-1 or
better by S&P or P1 or better by Moody’s, (c) cash and (d) certificates of
deposit issued by and time deposits with commercial banks organized in a country
which is a member of the Organization of Economic Co-operation and Development
having a rating of AA- or better from S&P or Aa3 or better from Moody’s;
provided in each case that (i) the same provides for payment of both principal
and interest (and not principal alone or interest alone) and is not subject to
any contingency regarding the payment of principal or interest and has a
maturity of not more than two years and (ii) such investments are denominated in
Dollars or Pounds.
“Cash Equivalent Investments” means (a) short-term obligations of, or fully
guaranteed by, the United States of America, b) commercial paper rated A-1 or
better by S&P or P1 or better by Moody’s, (c) demand deposit accounts maintained
in the ordinary course of business and (d) certificates of deposit issued by and
time deposits with commercial banks (whether domestic or foreign) having capital
and surplus in excess of $500,000,000; provided in each case that the same
provides for payment of both principal and interest (and not principal alone or
interest alone) and is not subject to any contingency regarding the payment of
principal or interest.

 

4

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“Change” is defined in Section 3.2.
“Change in Control” means (a) the acquisition by any Person, or two or more
Persons acting in concert of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of (i) 20% or more of the outstanding shares of voting
stock of the Borrower or (ii), if less, a percentage of such stock, greater than
the percentage owned by members of the Terence Deeks Family, or (b) the members
of the Terence Deeks Family shall cease to own, in the aggregate, free and clear
of all Liens and other encumbrances, at least 10% of the outstanding shares of
voting stock of the Borrower on a fully diluted basis.
“Closing Date” means March 28, 2011.
“Code” means the Internal Revenue Code of 1986, as amended or otherwise modified
from time to time, and the Treasury Regulations promulgated thereunder.
“Collateral” means any property or asset in which the Borrower has granted a
security interest to the Administrative Agent or the Security Trustee for the
benefit of the Secured Parties.
“Collateral Account” means each of (a) the UK Collateral Account, (b) account
number 6255582 titled “ Navigators Group — Securities” and account number
6255590 titled “ Navigators Group — Cash”, in each cash held at Brown Brothers &
Harriman & Co. and (c) any other “demand deposit account” or “securities
account” (as such terms are defined in the UCC) maintained by the Administrative
Agent or any Financial Intermediary which is subject to a Control Agreement into
which Cash Collateral Investments are deposited from time to time pursuant to
the terms of this Agreement. Each Collateral Account and the related Cash
Collateral Investments shall be subject to documentation satisfactory to the
Administrative Agent and the taking of all steps required to give the
Administrative Agent a perfected security interest in the Cash Collateral
Investments. Once opened a Collateral Account can only be closed with the
consent of the Administrative Agent.
“Collateralization Event” means the occurrence of any of (a) an Event of Default
or (b) any of the events set forth in Sections 2.9(c) through (f).
“Collateral Excess” is defined in Section 2.10.
“Collateral Shortfall” is defined in Section 2.10.
“Collateral Value” means, on any date, an amount equal to the sum of the
Adjusted Fair Market Value of all Cash Collateral Investments in all Collateral
Accounts.
“Commitment” means, for each Lender, the amount set forth on Schedule 1 or as
set forth in any Notice of Assignment relating to any assignment that has become
effective pursuant to Section 12.3(b), as such amount may be modified from time
to time pursuant to the terms hereof.

 

5

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“Condemnation” is defined in Section 7.8.
“Consolidated” or “consolidated”, when used in connection with any calculation,
means a calculation to be determined on a consolidated basis for the Borrower
and its Consolidated Subsidiaries in accordance with Agreement Accounting
Principles.
“Consolidated Net Income” means, for any period, the net income (or loss) of the
Borrower and its Consolidated Subsidiaries calculated on a consolidated basis
for such period, all as determined in accordance with Agreement Accounting
Principles.
“Consolidated Net Worth” means, for any period, the sum of the consolidated
stockholders’ equity of the Borrower and its Consolidated Subsidiaries
calculated on a consolidated basis for such period, all as determined in
accordance with Agreement Accounting Principles (excluding the effect of any
unrealized gain or loss reported under Statement of Financial Accounting
Standards No. 115.
“Consolidated Person” means, for the taxable year of reference, each Person
which is a member of the affiliated group of the Borrower if Consolidated
returns are or shall be filed for such affiliated group for federal income tax
purposes or any combined or unitary group of which the Borrower is a member for
state income tax purposes.
“Consolidated Subsidiaries” means all Subsidiaries of the Borrower which should
be included in the Borrower’s consolidated financial statements, all as
determined in accordance with Agreement Accounting Principles.
“Consolidated Tangible Net Worth means Consolidated Net Worth minus Consolidated
Total Intangible Assets.
“Consolidated Total Assets” means, at any time, the total assets of the Borrower
and its Consolidated Subsidiaries calculated on a consolidated basis as of such
time, all as determined in accordance with Agreement Accounting Principles.
“Consolidated Total Intangible Assets” means, at any time, the total intangible
assets of the Borrower and its Consolidated Subsidiaries calculated on a
consolidated basis as of such time including, but not limited to, goodwill,
patents, trademarks, tradenames, copyrights and franchises and excluding
deferred policy acquisition costs.
“Contingent Obligation” of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay contract or the obligations of any such Person as general
partner of a partnership with respect to the liabilities of the partnership. The
term “Contingent Obligation” shall not include (a) the obligations of any
Insurance Subsidiary arising under any insurance policy or reinsurance agreement
entered into in the ordinary course of business or (b) operating leases.

 

6

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“Control Agreement” means any agreement (in form and substance acceptable to the
Administrative Agent) among the Borrower, the applicable Financial Institution
and the Administrative Agent with respect to any “deposit account” or
“securities account” (as such terms are defined in the UCC) of the Borrower
pursuant to which the Administrative Agent has “control” (as such term is
defined in the UCC).
“Controlled Group” means all members of a controlled group of corporations or
other business entities and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any of
its Subsidiaries, are treated as a single employer under Section 414 of the
Code.
“Conversion Differential” is defined in Section 2.9(b).
“Conversion Rate” means the spot rate of exchange between Dollars and Pounds as
determined by the Administrative Agent on the Reuters WRLD Page as of the time
of determination on such date. In the event that such rate does not appear on
any Reuters WRLD Page, the exchange rate shall be determined by reference to
such other publicly available service for displaying exchange rates as may be
agreed upon by the Administrative Agent and the Borrower, or, in the absence of
such an agreement, such exchange rate shall instead be the arithmetic average of
the spot rates of exchange of the Administrative Agent in London at or about
such time between Dollars and Pounds for delivery two Business Days later;
provided that if at the time of any such determination, for any reason, no such
spot rate is being quoted, the Administrative Agent may use any reasonable
method it deems appropriate to determine such rate and such determination shall
be presumed correct absent manifest error
“Corporate Members” means MUL and NCUL.
“Default” means an event described in Article VII.
“Defaulting Lender” means any Lender that (i) has not funded such Lender’s
Applicable Percentage of the amount of any draw under a Letter of Credit within
three (3) Business Days after the date due therefor in accordance with
Section 2.4(b), (ii) has notified the Borrower or the Administrative Agent that
it does not intend to comply with its obligations under Section 2.4(b) or
(iii) is the subject of a bankruptcy, insolvency or similar receivership
proceeding.
“Default Rate” means as of any day (a) with respect to fees payable under
Section 2.8, an amount equal to the Applicable Letter of Credit Rate or the
Applicable Unused Fee Rate, as the case may be, plus 2%, (b) with respect to
Reimbursement Obligations and all other Obligations, an amount equal to the
Eurodollar Rate plus 2%.
“Department” is defined in Section 5.5.
“Dollars” and the sign “$” mean lawful money of the United States of America.
“Drawing Request” is defined in Section 2.4(a).

 

7

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“Environmental Laws” means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions relating to (a) the
protection of the environment, (b) the effect of the environment on human
health, (c) emissions, discharges or releases of pollutants, contaminants,
hazardous substances or wastes into surface water, ground water or land or
(d) the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, hazardous
substances or wastes or the clean-up or other remediation thereof.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time and any rule or regulation issued thereunder.
“Eurodollar Rate” means the applicable British Bankers’ Association LIBOR rate
for deposits in U.S. dollars having a maturity of a one month period, as
reported by any generally recognized financial information service as of
11:00 A.M. (London time) two Business Days prior to the first day of such
applicable period; provided that if no such British Bankers’ Association LIBOR
rate is available to the Administrative Agent, the Eurodollar Rate shall instead
be the rate determined by the Administrative Agent to be the rate at which ING
Bank N.V., London Branch or one of its Affiliate banks offers to place deposits
in U.S. dollars with first class banks in the London interbank market, in the
approximate amount of the related Letter of Credit and having a maturity of one
month.
“Excluded Taxes” means, in the case of each Lender or applicable Lending
Installation, the Administrative Agent or any other recipient of any payment to
be made by or on account of any obligation of a Borrower hereunder, (a) income,
franchise or similar taxes imposed on (or measured by) its overall net income by
(i) the United States of America, or (ii) the jurisdiction (or any political
subdivision thereof) under the laws of which such Lender or the Administrative
Agent or other recipient is incorporated or organized, or (iii) the jurisdiction
(or any political subdivision thereof) in which the Administrative Agent’s or
such Lender’s or such other recipient’s principal executive office or, in the
case of any Lender, in which such Lender’s applicable Lending Installation, is
located, or, in the case of a jurisdiction (or any political subdivision
thereof) that imposes taxes on the basis of management or control or other
concept or principle of residence, the jurisdiction (or any political
subdivision thereof) in which such Lender or the Administrative Agent or other
recipient is so resident, (b) taxes imposed by reason of any present or former
connection between such recipient and the jurisdiction (or any political
subdivision thereof) imposing such taxes, other than solely as a result of the
execution and delivery of this Agreement or the performance of any action
provided for hereunder, (c) any branch profits taxes imposed by the United
States of America, (d) any backup withholding tax imposed by the United States
of America or any similar taxes imposed by any other jurisdiction (other than
backup withholding tax imposed on the Administrative Agent in such capacity),
(e) in the case of a Non-U.S. Lender, any U.S. Federal withholding taxes
(i) resulting from any law in effect on the date such Non-U.S. Lender becomes a
party to this Agreement (or designates a new Lending Installation), except to
the extent that such Non-U.S. Lender was entitled, at the time of designation of
a new Lending Installation, to receive additional amounts from such Borrower
with respect to such withholding tax pursuant to Section 3.3(a), or
(ii) attributable to such Non-U.S. Lender’s failure to comply with
Section 3.3(d) (including as a result of any inaccurate or incomplete
documentation), and (f) any taxes imposed on any “withholdable payment” payable
to a Non-U.S. Lender as a result of its failure to comply with the applicable
requirements of FATCA.

 

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“Exhibit” refers to an exhibit to this Agreement, unless another document is
specifically referenced.
“Existing Credit Agreement” means the Fifth Amended and Restated Credit
Agreement, dated as of April 1, 2010, among the Borrower, certain financial
institutions, including the Lenders and JPMorgan Chase Bank, N.A., as
Administrative Agent, as amended through the Closing Date.
“Existing Credit Agreement Lien” has the meaning assigned thereto in the
Security Agreement.
“Existing Lines of Business” is defined in Section 5.23.
“Expiry Notice” means written notice from the Letter of Credit Agent to the
beneficiary of any Letter of Credit stating that such Letter of Credit shall
expire four (4) years from the date of such notice.
“Facility Documents” means this Agreement, the Security Documents, the Control
Agreements, the Reimbursement Agreements and the other documents and agreements
contemplated hereby and executed by the Borrower in favor of the Administrative
Agent or any Lender.
“Fair Market Value” means (a) with respect to any Cash Collateral Investments
described in clauses (a) or (b) of the definition thereof, the closing price for
such security on Bloomberg, Inc. or, if Bloomberg, Inc. is not available,
another quotation service reasonably acceptable to the Administrative Agent, and
(b) with respect to any Cash Collateral Investments described in clauses (c) or
(d) of the definition thereof, the amounts thereof. Fair Market Value of
non-Dollar denominated Cash Collateral Investments shall be determined in
accordance with Section 2.2(d).
“FATCA” means Sections 1471 through 1474 of the Code and any official
governmental interpretations thereof.
“Fee Letter” is defined in Section 9.4.
“Financial Institution” means the Securities Intermediary or Account Bank, as
applicable, with respect to any Collateral Account.
“Fiscal Quarter” means one of the four three-month accounting periods comprising
a Fiscal Year.
“Fiscal Year” means the twelve-month accounting period commencing on January 1
and ending December 31 of each year.
“Fixed Charge” means (a) a Deed of Charge substantially in the form of Exhibit F
with such changes therein as may be agreed to by the Administrative Agent and
the Borrower and (b) any other debenture, deed or charge or other document which
the Administrative Agent and the Borrower may enter into with respect to
Collateral located in the United Kingdom.

 

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“Governmental Authority” means any government (foreign or domestic) or any state
or other political subdivision thereof or any governmental body, agency,
authority, department or commission (including without limitation any taxing
authority or political subdivision) or any instrumentality or officer thereof
(including without limitation any court or tribunal and any board of insurance,
insurance department or insurance commissioner) exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any corporation, partnership or other entity directly or
indirectly owned or controlled by or subject to the control of any of the
foregoing.
“Honor Date” is defined in Section 2.4(a).
“Indebtedness” of a Person means such Person’s (a) obligations for borrowed
money, (b) obligations representing the deferred purchase price of Property or
services (other than accounts payable arising in the ordinary course of such
Person’s business payable on terms customary in the trade), (c) obligations,
whether or not assumed, secured by Liens or payable out of the proceeds or
production from Property now or hereafter owned or acquired by such Person,
(d) obligations which are evidenced by notes, acceptances, or other instruments,
(e) obligations of such Person to purchase securities or other Property arising
out of or in connection with the sale of the same or substantially similar
securities or Property, (f) Capitalized Lease Obligations, (g) Contingent
Obligations, (h) actual and contingent reimbursement obligations in respect of
letters of credit, (i) any other obligation for borrowed money or other
financial accommodation which in accordance with Agreement Accounting Principles
would be shown as a liability on the consolidated balance sheet of such Person,
(j) any liability under any financing lease or so-called “synthetic lease”
transaction entered into by such Person and (k) any obligation arising with
respect to any other transaction which is the functional equivalent of or takes
the place of borrowing but which does not constitute a liability on the
consolidated balance sheet of such Person.
“Insurance Subsidiary” means each of Navigators, NSIC and any other United
States domestic Subsidiary acquired or formed after the Closing Date which is an
insurer or is authorized to act as an insurer. For the avoidance of doubt,
Navigators Management Company, Inc. is not an Insurance Subsidiary.
“Investment” of a Person means (a) any loan, advance (other than commission,
travel and similar advances to officers and employees made in the ordinary
course of business), extension of credit (other than accounts receivable arising
in the ordinary course of business on terms customary in the trade) or
contribution of capital by such Person, (b) stocks, bonds, mutual funds,
partnership interests, membership interests, notes, debentures or other
securities owned by such Person, (c) any deposit accounts and certificate of
deposit owned by such Person and (d) structured notes, derivative financial
instruments and other similar instruments or contracts owned by such Person.
“Issuance Request” is defined in Section 2.5.
“Issue Date” means a date on which a Letter of Credit is issued hereunder.

 

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“Lenders” means the lending institutions listed on the signature pages of this
Agreement and their respective successors and assigns.
“Lending Installation” means, with respect to a Lender or the Administrative
Agent, the office, branch, subsidiary or affiliate of such Lender or the
Administrative Agent listed on the signature pages hereof or on a Schedule or
otherwise selected by such Lender or the Administrative Agent.
“Letter of Credit” means a letter of credit issued pursuant to Article II. Each
Letter of Credit shall be substantially in the form of Exhibit G.
“Letter of Credit Agent” means ING Bank N.V. located at 60 London Wall, London
EC2M 5TQ, as Letter of Credit Agent for the Lenders, together with any
replacement Letter of Credit Agent arising under Article X.
“Letter of Credit Advance Date” is defined in Section 2.4(a).
“Letter of Credit Availability Termination Date” means December 31, 2011 or any
earlier date on which the Aggregate Commitment is reduced to zero or otherwise
terminated pursuant to the terms hereof.
“Letter of Credit Fee” is defined in Section 2.8(b).
“Letter of Credit Obligations” means, at the time of determination thereof, the
sum of (a) the Reimbursement Obligations then outstanding and (b) the aggregate
then undrawn face amount of the then outstanding Letters of Credit.
“Leverage Ratio” means, at any time, the ratio of (a) the consolidated
Indebtedness of the Borrower and its Consolidated Subsidiaries (excluding any
letter of credit obligations incurred by the Borrower and its Consolidated
Subsidiaries in the ordinary course of business prior to any drawing under such
a letter of credit but including any letter of credit obligations after any
drawing) at such time to (b) the sum of (i) the consolidated Indebtedness of the
Borrower and its Consolidated Subsidiaries (excluding any letter of credit
obligations incurred by the Borrower and its Consolidated Subsidiaries in the
ordinary course of business) plus (ii) Consolidated Net Worth at such time.
“License” means any license, certificate of authority, permit or other
authorization which is required to be obtained from any Governmental Authority
in connection with the operation, ownership or transaction of insurance
business.
“Lien” means any security interest, lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).
“Lloyd’s” means The Society and Council of Lloyd’s.

 

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“Lloyd’s Approved Bank” means any bank approved by Lloyd’s to provide Funds at
Lloyd’s letters of credit.
“Lloyd’s Comfort Letter” means a document substantially in the form of
Exhibit H.
“Lloyd’s Substitution Letter” means that certain letter from Lloyd’s, dated on
or about the Closing Date, regarding the substitution of letters of credit
issued under the Existing Credit Agreement with Letters of Credit to be issued
under this Agreement.
“Loss Reserves” means, with respect to any Insurance Subsidiary at any time, the
sum of (a) all losses, including incurred losses of such Insurance Subsidiary at
such time shown on page 3, line 1 of the Annual Statement of such Insurance
Subsidiary plus (b) all loss adjustment expenses of such Insurance Subsidiary at
such time shown on page 3, line 3 of the Annual Statement of such Insurance
Subsidiary, as determined in accordance with SAP.
“Managing Agent” means Navigators Underwriting Agency Limited, a company
organized under the laws of England and Wales.
“Margin Stock” has the meaning assigned to that term under Regulation U.
“Material Adverse Effect” means a material adverse effect on (a) the business,
Property, condition (financial or otherwise) or results of operations of any of
(i) the Borrower or (ii) the Subsidiaries taken as a whole, (b) the ability of
the Borrower to perform its obligations under the Facility Documents, or (c) the
validity or enforceability of any of the Facility Documents or the rights or
remedies of the Administrative Agent or the Lenders thereunder.
“Moody’s” means Moody’s Investors Service, Inc. or any successor thereto.
“MUL” means Millennium Underwriting Limited, which entity is a corporate name
with limited liability at Lloyd’s of London.
“Multiemployer Plan” means a Plan maintained pursuant to a collective bargaining
agreement or any other arrangement to which the Borrower or any member of the
Controlled Group is a party to which more than one employer is obligated to make
contributions.
“NAIC” means the National Association of Insurance Commissioners or any
successor thereto, or in lieu thereof, any other association, agency or other
organization performing advisory, coordination or other like functions among
insurance departments, insurance commissioners and similar Governmental
Authorities of the various states of the United States toward the promotion of
uniformity in the practices of such Governmental Authorities.
“Navigators” means Navigators Insurance Company, a New York corporation.
“NCUL” means Navigators Corporate Underwriters Limited, which entity is a
corporate name with limited liability at Lloyd’s of London.

 

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“Net Available Proceeds” means (a) with respect to any Asset Disposition, the
sum of cash or readily marketable cash equivalents received (including by way of
a cash generating sale or discounting of a note or account receivable)
therefrom, whether at the time of such disposition or subsequent thereto, or
(b) with respect to any sale or issuance of any debt or equity securities of the
Borrower or any Subsidiary, cash or readily marketable cash equivalents received
therefrom, whether at the time of such disposition or subsequent thereto, net,
in either case, of all legal, title and recording tax expenses, commissions and
other fees and all costs and expenses incurred and, in the case of an Asset
Disposition, net of all payments made by the Borrower or any of its Subsidiaries
on any Indebtedness which is secured by such assets pursuant to a permitted Lien
upon or with respect to such assets or which must, by the terms of such Lien, in
order to obtain a necessary consent to such Asset Disposition, or by applicable
law, be repaid out of the proceeds from such Asset Disposition.
“NFS Deficiency” is defined in Section 2.9(e).
“Non-U.S. Lender” is defined in Section 3.3(d).
“Notice of Assignment” is defined in Section 12.3(b).
“NSIC” means Navigators Specialty Insurance Company, a New York corporation.
“Obligations” means the Letter of Credit Obligations and all other liabilities
(if any), whether actual or contingent, of the Borrower with respect to Letters
of Credit, all accrued and unpaid fees and all expenses, reimbursements,
indemnities and other obligations of the Borrower to the Lenders or to any
Lender, the Administrative Agent or any indemnified party hereunder arising
under any of the Facility Documents.
“Other Taxes” is defined in Section 3.3(b).
“Participants” is defined in Section 12.2(a).
“Payment Date” means the first day of each April, July, October and January.
“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.
“Person” means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, limited liability company, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
“Plan” means an employee pension benefit plan which is covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the Code
as to which the Borrower or any member of the Controlled Group may have any
liability.
“Pounds” and the sign “£” mean lawful money of the United Kingdom.
“Primary FAL” means funds at Lloyd’s in the form of (i) cash and/or investment
assets held directly at Lloyd’s and/or (ii) collateralised letters of credit
(other than Letters of Credit issued under this Agreement), which will be
immediately available to cover losses in the Supported Syndicate and which will
be utilised ahead of the Letters of Credit issued hereunder in the event that
the Lloyd’s is required to draw on the funds at Lloyd’s of the Supported
Syndicate.

 

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“Property” of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased or
operated by such Person.
“Purchasers” is defined in Section 12.3(a).
“RDS” means realistic disaster scenarios as such term is used by Lloyd’s and in
respect of which, pursuant to Lloyd’s rules, the Managing Agent is obligated to
prepare and submit to Lloyd’s a report.
“Regulation D” means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and shall include any successor
thereto or other regulation or official interpretation of said Board of
Governors relating to reserve requirements applicable to member banks of the
Federal Reserve System.
“Regulation T” means Regulation T of the Board of Governors of the Federal
Reserve System as from time to time in effect and shall include any successor
thereto or other regulation or official interpretation of such Board of
Governors relating to the extension of credit by securities brokers and dealers
for the purpose of purchasing or carrying margin stocks applicable to such
Persons.
“Regulation U” means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and shall include any successor
thereto or other regulation or official interpretation of said Board of
Governors relating to the extension of credit by banks for the purpose of
purchasing or carrying margin stocks applicable to member banks of the Federal
Reserve System.
“Regulation X” means Regulation X of the Board of Governors of the Federal
Reserve Systems from time to time in effect and shall include any successor
thereto or other regulation or official interpretation of said Board of
Governors relating to the extension of credit by the specified lenders for the
purpose of purchasing or carrying margin stocks applicable to such Persons.
“Reimbursement Agreement” means a letter of credit application and reimbursement
agreement in such form as the Letter of Credit Agent may from time to time
employ in the ordinary course of business.
“Reimbursement Obligations” means, at any time, the aggregate (without
duplication) of the Obligations of the Borrower to the Lenders and/or the
Administrative Agent in respect of all unreimbursed payments or disbursements
made by the Lenders and/or the Administrative Agent under or in respect of draws
made under the Letters of Credit.
“Reinsurance Guidelines” is defined in Section 6.21(c).
“Release” is defined in the Comprehensive Environmental Response, Compensation
and Liability Act, as amended, 42 U.S.C. 39601 et seq.

 

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“Reportable Event” means a reportable event as defined in Section 4043 of ERISA
and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event; provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
“Required Amount” means the aggregate amount required to be deposited and held
in Collateral Accounts pursuant to Sections 2.9 and 8.1 hereof.
“Required Lenders” means Lenders in the aggregate having at least 662/3% of the
Aggregate Commitment or, if the Aggregate Commitment has been terminated, the
aggregate amount of the outstanding Letter of Credit Obligations; provided,
however, the Commitment or outstanding Letter of Credit Obligations of any
Defaulting Lender shall be deemed to be zero.
“S&P” means Standard and Poor’s Ratings Services, a division of The McGraw Hill
Companies, Inc. or any successor thereto.
“S&P Rating” means, as to any insurance company, its financial strength rating
assigned by S&P.
“SAP” means, with respect to any Insurance Subsidiary, the statutory accounting
practices prescribed or permitted by the insurance commissioner (or other
similar authority) in the jurisdiction of such Person for the preparation of
annual statements and other financial reports by insurance companies of the same
type as such Person in effect from time to time, applied in a manner consistent
with those used in preparing the Statutory Financial Statements referred to in
Section 5.5.
“Schedule” refers to a specific schedule to this Agreement, unless another
document is specifically referenced.
“SEC Reports” means the reports filed by the Borrower with the Securities and
Exchange Commission on Form 8-K, Form 10-Q or Form 10-K.
“Section” means a numbered section of this Agreement, unless another document is
specifically referenced.
“Secured Parties” means the Administrative Agent, the Letter of Credit Agent,
the Security Trustee under each Fixed Charge and the Lenders.
“Security Agreement” means (a) a security agreement substantially in the form of
Exhibit E with such changes therein as may be agreed to by the Administrative
Agent and the Borrower and (b) any other security agreement or other document
which may be entered into by the Administrative Agent and the Borrower with
respect to the Collateral located in the United States.
“Security Documents” means each Security Agreement, each Control Agreement and
each Fixed Charge.

 

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“Security Trustee” means ING Bank N.V., London Branch, as security trustee for
the Secured Parties and appointed under the Fixed Charges together with any
successor appointed pursuant to the terms thereof.
“Securities Intermediary” means any “securities intermediary” within the meaning
of Section 8.102(a)(14) of the UCC at which any securities account constituting
a Collateral Account is held, which shall be (a) located in the United States
and (b) reasonably acceptable to the Administrative Agent.
“Significant Insurance Subsidiary” means a Significant Subsidiary which is an
Insurance Subsidiary. For the avoidance of doubt, Navigators Management Company,
Inc. shall not be a Significant Subsidiary.
“Significant Subsidiary” means, at any time, a direct United States domestic
Subsidiary of the Borrower the assets of which are greater than or equal to five
percent (5%) of the Consolidated Total Assets of the Borrower and its
Consolidated Subsidiaries.
“Single Employer Plan” means a Plan maintained by the Borrower or any member of
the Controlled Group for employees of the Borrower or any member of the
Controlled Group.
“Statutory Financial Statements” is defined in Section 5.5.
“Statutory Net Income” means, with respect to any Insurance Subsidiary for any
computation period, the net income earned by such Insurance Subsidiary during
such period, as determined in accordance with SAP (“Underwriting and Investment
Exhibit, Statement of Income” statement, Page 4, Line 20 of the Annual
Statement).
“Statutory Surplus” means, with respect to any Insurance Subsidiary at any time,
the statutory capital and surplus of such Insurance Subsidiary at such time, as
determined in accordance with SAP (“Liabilities, Surplus and Other Funds”
statement, page 3, line 35 of the Annual Statement).
“Subsidiary” of a Person means (a) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries or
(b) any partnership, association, joint venture, limited liability company or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a “Subsidiary”
shall mean a Subsidiary of the Borrower.
“Substantial Portion” means, with respect to the Property of the Borrower and
its Consolidated Subsidiaries, Property which (a) represents more than 10% of
the Consolidated Total Assets of the Borrower and its Consolidated Subsidiaries,
as would be shown in the consolidated financial statements of the Borrower and
its Consolidated Subsidiaries as at the end of the quarter next preceding the
date on which such determination is made or (b) is responsible for more than 10%
of the consolidated net sales or of the Consolidated Net Income of the Borrower
and its Consolidated Subsidiaries for the 12-month period ending as of the end
of the quarter next preceding the date of determination.

 

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“Supported Syndicate” means Lloyd’s Syndicate 1221 underwriting insurance
business at Lloyd’s through the Managing Agent..
“Taxes” means any and all present or future taxes, duties, levies, imposts,
deductions, charges or withholdings and any and all liabilities with respect to
the foregoing, but excluding Excluded Taxes.
“Terence Deeks Family” means, collectively, Terence N. Deeks; his spouse; any
natural person who is a lineal descendant of Terence N. Deeks; the spouse,
children, or grandchildren of any such natural person; any trust of which any of
the foregoing is or are the sole beneficiary or beneficiaries; or the estate,
executor, administrator, or legal guardian of any of the foregoing.
“Termination Event” means, with respect to a Plan which is subject to Title IV
of ERISA, (a) a Reportable Event, (b) the withdrawal of the Borrower or any
other member of the Controlled Group from such Plan during a plan year in which
the Borrower or any other member of the Controlled Group was a “substantial
employer” as defined in Section 4001(a)(2) of ERISA or was deemed such under
Section 4068(f) of ERISA, (c) the termination of such Plan, the filing of a
notice of intent to terminate such Plan or the treatment of an amendment of such
Plan as a termination under Section 4041 of ERISA, (d) the institution by the
PBGC of proceedings to terminate such Plan or (e) any event or condition which
might constitute grounds under Section 4042 of ERISA for the termination of, or
appointment of a trustee to administer, such Plan.
“Transferee” is defined in Section 12.4.
“UCC” means the Uniform Commercial Code as in effect in the State of New York or
the State of Delaware, as applicable, from time to time.
“UK Collateral Account” means account no. 262537 and each other account held at
ING Bank N.V., London Branch, and subject to a Fixed Charge.
“Unfunded Liabilities” means the amount (if any) by which the present value of
all vested and unvested accrued benefits under all Single Employer Plans exceeds
the fair market value of all such Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plans using PBGC
actuarial assumptions for single employer plan terminations.
“Unmatured Default” means an event which but for the lapse of time or the giving
of notice, or both, would constitute a Default.
“Unreimbursed Amount” is defined in Section 2.4(a).
“Wholly-Owned Subsidiary” of a Person means (a) any Subsidiary all (or, in the
case of Navigators N.V., all but one) of the outstanding voting securities of
which shall at the time be owned or controlled, directly or indirectly, by such
Person or one or more Wholly-Owned Subsidiaries of such Person, or by such
Person and one or more Wholly-Owned Subsidiaries of such Person, or (b) any
partnership, limited liability company, association, joint venture or similar
business organization 100% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled.

 

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The foregoing definitions shall be equally applicable to both the singular and
plural forms of the defined terms.
ARTICLE II
THE LETTER OF CREDIT FACILITY
2.1 Issuance of Letters of Credit. (a) From and after the date hereof to but
excluding the Letter of Credit Availability Termination Date, each Lender
severally agrees, upon the terms and conditions set forth in this Agreement, to
issue at the request and for the account of the Borrower, such Lender’s
Applicable Percentage of, one or more Letters of Credit for the account of the
Borrower to support the obligations of Wholly-Owned Subsidiaries of the Borrower
with respect to the Supported Syndicate; provided, however, that no Lender shall
be under any obligation to issue, and the Letter of Credit Agent shall not
issue, any Letter of Credit if: (i) any order, judgment or decree of any
governmental authority or other regulatory body with jurisdiction over any
Lender shall purport by its terms to enjoin or restrain any Lender from issuing
such Letter of Credit, or any law or governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law) from any
governmental authority or other regulatory body with jurisdiction over any
Lender prohibit, or request that any Lender refrain from, the issuance of
Letters of Credit in particular or shall impose upon any Lender with respect to
any Letter of Credit any restriction or reserve or capital requirement (for
which such Lender is not otherwise compensated) or any unreimbursed loss, cost
or expense which was not applicable, in effect and known to such Lender as of
the date of this Agreement and which such Lender in good faith deems material to
it, (ii) one or more of the conditions to such issuance contained in Section 4.2
is not then satisfied; (iii) after giving effect to such issuance, any Lender’s
aggregate outstanding amount of the Letter of Credit Obligations would exceed
such Lender’s Commitment; (iv) after giving effect to such issuance, the
aggregate outstanding amount of the Letter of Credit Obligations would exceed
the Aggregate Commitment; or (v) there is a Defaulting Lender. Letters of Credit
shall be denominated, at the Borrower’s option, in either Dollars or Pounds.
(b) In no event shall: (i) the aggregate amount of the Letter of Credit
Obligations at any time exceed the Aggregate Commitment or (ii) the expiration
date of any Letter of Credit or the date for payment of any draft presented
thereunder and accepted by the Lender, be later than the earlier of
(A) December 31, 2015 or (B) four (4) years after the date of the related Expiry
Notice. The Letter of Credit Agent shall not issue a Letter of Credit except
with Lloyd’s as the beneficiary thereof. The Letter of Credit Agent shall not
permit the renewal or extension of any Letter of Credit at any time (A) during
the continuation of a Default or Unmatured Default or (B) after the Letter of
Credit Availability Termination Date.

 

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(c) The Letter of Credit Agent (i) shall issue an Expiry Notice on the Letter of
Credit Availability Termination Date and (ii) may, and upon the request of the
Required Lenders shall, issue an Expiry Notice when a Default has occurred and
is continuing; provided, however, that upon the occurrence of an Unmatured
Default pursuant to Sections 7.6 and 7.7, the Letter of Credit Agent shall
immediately issue an Expiry Notice.
(d) At the request of the Borrower, Letters of Credit may be issued with any
Wholly-Owned Subsidiary of the Borrower as a co-applicant, so long as the
Borrower is also a co-applicant under the applicable Reimbursement Agreement.
The fact that such Subsidiary is an applicant shall not affect the obligations
of the Borrower with respect to such Letters of Credit hereunder or under any
Facility Document in any way. Any Reimbursement Agreement for a Letter of Credit
with respect to which such Subsidiary is a co-applicant shall include language
substantially similar to that set forth in Exhibit C or otherwise acceptable to
the Letter of Credit Agent.
(e) Each Lender’s obligation to pay its Applicable Percentage of all draws under
the Letters of Credit, absent gross negligence or willful misconduct by Letter
of Credit Agent in honoring any such draw, shall be absolute, unconditional and
irrevocable and in each case shall be made without counterclaim or set-off by
such Lender.
2.2 Conversion Principles. Determination of the Dollar amount of any Letter of
Credit, Obligation or Cash Collateral Investment denominated in a currency other
than Dollars shall be made as follows:
(a) For purposes of usage and availability under Section 2.1, when a Letter of
Credit is issued in Pounds, such Pounds will be converted to Dollars by the
Administrative Agent upon issuance, upon the proposed issuance of any other
Letter of Credit and at the end of each calendar quarter and at any time
thereafter as requested by the Administrative Agent or any Lender at the
Conversion Rate as of such date of determination.
(b) For purposes of determining interest and fees on Letter of Credit
Obligations and other Obligations, any such Obligations which are denominated in
Pounds will be converted to Dollars and such determination shall be made by the
Administrative Agent based upon the Conversion Rate as of such date of
determination.
(c) For purposes of determining the Collateral Value as of any date, Fair Market
Value on any date, Cash Collateral Investments and Letter of Credit Obligations
denominated in Pounds will be converted to Dollars at the Conversion Rate as of
the date of determination (and in the event of a disagreement as to such Fair
Market Value between the Borrower and the Administrative Agent, the
determination of the Administrative Agent shall control).
2.3 Reductions in Aggregate Commitment. (a) The Borrower may permanently reduce
the Aggregate Commitment in whole, or in part ratably among the Lenders in
integral multiples of $5,000,000, upon at least five (5) Business Days’ written
notice to the Administrative Agent, which notice shall specify the amount of
such reduction; provided, however, that the amount of the Aggregate Commitment
may not be reduced below the aggregate amount of the outstanding Letter of
Credit Obligations.

 

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2.4 Reimbursement Obligations. (a) Upon receipt from the beneficiary of any
Letter of Credit or any notice of a drawing under such Letter of Credit (a
“Drawing Request”), the Letter of Credit Agent shall notify the Administrative
Agent and the Borrower of the receipt of such Drawing Request and of the date
the Letter of Credit Agent will honor such request (each such date, an “Honor
Date”). Not later than 10:00 a.m. (London time) on such Honor Date or the
following Business Day in the event that the Borrower shall not have received at
least twenty-four hours notice of such Honor Date, the Borrower shall provide
the Letter of Credit Agent the amount of the Drawing Request in the currency in
which the applicable Letter of Credit was issued. Any notice given by the Letter
of Credit Agent or the Administrative Agent pursuant to this Section 2.4(a) may
be given by telephone if immediately confirmed in writing; provided that the
lack of such an immediate confirmation shall not affect the conclusiveness or
binding effect of such notice.
(b) (i) With respect to any Drawing Request, if funds are not received by the
Letter of Credit Agent from the Borrower prior to 11:00 a.m. (London time) on
the Honor Date or the following Business Day in the event that the Borrower
shall not have received at least twenty-four hours notice of such Honor Date in
the amount and currency of such Drawing Request, the Administrative Agent shall
promptly notify each Lender of such Drawing Request, the amount of the
unreimbursed drawing (the “Unreimbursed Amount”) and such Lender’s Applicable
Percentage of such Unreimbursed Amount. Each Lender shall make funds available
in the applicable currency to the Letter of Credit Agent in an amount equal to
its Applicable Percentage of the Unreimbursed Amount not later than 1:00 p.m.
(London time) on the Business Day specified in such notice by the Administrative
Agent (the “Letter of Credit Advance Date”). To the extent that funds are
received by the Letter of Credit Agent from the Lenders prior to 2:00 p.m.
(London time) on the Letter of Credit Advance Date, the Letter of Credit Agent
shall promptly make such funds available to the beneficiary of such Letter of
Credit on such date. To the extent that the Letter of Credit Agent has not
delivered funds to any beneficiary of a Letter of Credit on behalf of a Lender
on the Letter of Credit Advance Date, if funds are received by the Letter of
Credit Agent from such Lender: (i) after 2:00 p.m. (London time) on the Letter
of Credit Advance Date, the Letter of Credit Agent shall make such funds
available to such beneficiary on the next Business Day; (ii) prior to 2:00 p.m.
(London time) on any Business Day after the Letter of Credit Advance Date, the
Letter of Credit Agent shall make those funds available to such beneficiary on
such Business Day; and (iii) after 2:00 p.m. (London time) on any Business Day
after the Letter of Credit Advance Date, the Letter of Credit Agent shall make
those funds available to such beneficiary on the next Business Day following
such Business Day.
(ii) Notwithstanding any provisions to the contrary in any Reimbursement
Agreement, the Borrower agrees to pay the Letter of Credit Agent for the benefit
of the Lenders no later than the time specified in this Agreement.
(iii) With respect to any Unreimbursed Amount, the Borrower shall have a
Reimbursement Obligation in the amount of the Unreimbursed Amount from the
Lenders to the extent that they have provided funds with respect to such Letter
of Credit pursuant to Section 2.4(b)(i). Reimbursement Obligations shall be due
and payable on demand (together with interest) and shall bear interest at the
Default Rate. Any payment by a Borrower in respect of such Reimbursement
Obligation shall be made to the Administrative Agent and upon receipt applied by
the Administrative Agent in accordance with Section 2.4(c).

 

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(c) At any time after Letter of Credit Agent has made a payment under any Letter
of Credit and has received from any Lender such Lender’s Letter of Credit
Advance in respect of such payment in accordance with Section 2.4(b), if the
Letter of Credit Agent or Administrative Agent receives any payment in respect
of the related Reimbursement Obligation or interest thereon (whether directly
from a Borrower or otherwise, including proceeds of Collateral applied thereto
by the Administrative Agent), the Administrative Agent will distribute to such
Lender its Applicable Percentage thereof in the same funds as those received by
the Letter of Credit Agent or the Administrative Agent, as the case may be.
(d) If any payment received by the Letter of Credit Agent or the Administrative
Agent pursuant to Section 2.4(b) (including any payment under Article XI) and
such payment or the proceeds of such setoff or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
(including pursuant to any settlement entered into by the Letter of Credit
Agent, the Administrative Agent or such Lender in its discretion) to be repaid
to a trustee, receiver or any other party, in connection with any insolvency
proceeding or otherwise, then (x) to the extent of such recovery, the obligation
or part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been made or such
setoff had not occurred, and (y) each Lender shall pay to the Letter of Credit
Agent or the Administrative Agent, as applicable, its Applicable Percentage
thereof on demand of the Letter of Credit Agent or the Administrative Agent, as
applicable, plus interest thereon from the date of such demand to the date such
amount is returned by such Lender, at a rate per annum equal to the Eurodollar
Rate from time to time in effect. The obligations of the Lenders under this
clause shall survive the payment in full of the Obligations and the termination
of this Agreement.
2.5 Procedure for Issuance. (a) Prior to the issuance of each new Letter of
Credit and as a condition of such issuance, the Borrower shall deliver to the
Letter of Credit Agent a Reimbursement Agreement signed by the Borrower,
together with such other documents or items as may be required pursuant to the
terms thereof, and the proposed form and content of such Letter of Credit shall
be reasonably satisfactory to the Letter of Credit Agent. Each Letter of Credit
shall be issued no earlier than two (2) Business Days after delivery of the
foregoing documents, which delivery may be by the Borrower to the Letter of
Credit Agent by telecopy, telex or other electronic means followed by delivery
of executed originals within five (5) days thereafter. The documents so
delivered shall be in compliance with the requirements set forth in Section
2.1(b), and shall specify therein (a) the stated amount of the Letter of Credit
requested, (b) the effective date of issuance of such requested Letter of
Credit, which shall be a Business Day, (c) whether the Letter of Credit is to be
denominated in Dollars or Pounds and (d) the aggregate amount of Letter of
Credit Obligations which are outstanding and which will be outstanding after
giving effect to the requested Letter of Credit issuance. The delivery of the
foregoing documents and information shall constitute an “Issuance Request” for
purposes of this Agreement. Subject to the terms and conditions of Section 2.1
and provided that the applicable conditions set forth in Section 4.2 hereof have
been satisfied, the Letter of Credit Agent (on behalf of the Lenders) shall, on
the requested date, issue a Letter of Credit on behalf of the Borrower in
accordance with the Letter of Credit Agent’s usual and customary business
practices. In addition, any amendment of an existing Letter of Credit shall be
deemed to be an issuance of a new Letter of Credit and shall be subject to the
requirements set forth above. The Administrative Agent shall give the Lenders
prompt written notice of the issuance of any Letter of Credit.

 

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(b) The Letter of Credit Agent is hereby authorized to execute and deliver each
Letter of Credit and each amendment to a Letter of Credit on behalf of each
Lender. The Letter of Credit Agent shall use the Applicable Percentage of each
Lender under each Letter of Credit as its “Commitment”. The Letter of Credit
Agent shall not amend any Letter of Credit to change the “Commitment” of a
Lender or add or delete a Lender liable thereunder unless such amendment is done
in connection with an assignment in accordance with Section 12.3. Each Lender
hereby irrevocably constitutes and appoints the Letter of Credit Agent its true
and lawful attorney-in-fact for and on behalf of such Lender with full power of
substitution and revocation in its own name or in the name of the Letter of
Credit Agent to issue, execute and deliver, as the case may be, each Letter of
Credit and each amendment to a Letter of Credit and to carry out the purposes of
this Agreement with respect to Letters of Credit. Upon request, each Lender
shall execute such powers of attorney or other documents as any beneficiary of
any Letter of Credit may reasonably request to evidence the authority of the
Letter of Credit Agent to execute and deliver such Letter of Credit and any
amendment or other modification thereto on behalf of the Lenders.
(c) The Letter of Credit Agent shall act on behalf of the Lenders with respect
to any Letters of Credit and the documents associated therewith, and the Letter
of Credit Agent shall have all of the benefits and immunities (A) provided to
the Administrative Agent in Article X with respect to any acts taken or
omissions suffered by the Letter of Credit Agent in connection with Letters of
Credit issued by it or proposed to be issued by it and Issuer Documents
pertaining to such Letters of Credit as fully as if the term “Administrative
Agent” as used in Article X includes the Letter of Credit Agent as with respect
to such acts or omissions, and (B) as additionally provided herein with respect
to the Letter of Credit Agent.
2.6 Nature of the Agent and Lenders’ Obligations. (a) Each Lender and the
Borrower agree that, in paying any drawing under a Letter of Credit, the Letter
of Credit Agent shall not have any responsibility to obtain any document (other
than any sight draft, certificates and documents expressly required by the
Letter of Credit) or to ascertain or inquire as to the validity or accuracy of
any such document or the authority of the Person executing or delivering any
such document. None of the Letter of Credit Agent, or any of its respective
Affiliates shall be liable to for (i) any action taken or omitted in connection
herewith at the request or with the approval of the Lenders or the Required
Lenders, as applicable; (ii) any action taken or omitted in the absence of gross
negligence or willful misconduct; or (iii) the due execution, effectiveness,
validity or enforceability of any document or instrument related to any Letter
of Credit or Issuer Document.

 

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(b) As between the Borrower and the Lenders and the Letter of Credit Agent, the
Borrower assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit by, the respective beneficiaries of the Letters of Credit;
provided, however, that the Borrower may have a claim against the Letter of
Credit Agent and the Letter of Credit Agent may be liable to the Borrower, to
the extent, but only to the extent, of any direct (as opposed to consequential
or exemplary) damages suffered by the Borrower which the Borrower proves were
caused by the willful misconduct or gross negligence in determining whether
documents presented under a Letter of Credit comply with the terms of such
Letter of Credit. In furtherance and not in limitation of the foregoing, neither
the Letter of Credit Agent nor the Lenders shall be responsible for: (i) the
form, validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the application for an
issuance of a Letter of Credit, even if it should in fact prove to be in any or
all respects invalid, insufficient, inaccurate, fraudulent or forged, (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason, (iii) the failure of the beneficiary of a
Letter of Credit to comply fully with conditions required to be satisfied by any
Person other than the Letter of Credit Agent in order to draw upon such Letter
of Credit, (iv) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, (v)
errors in the interpretation of technical terms, (vi) the misapplication by the
beneficiary of a Letter of Credit of the proceeds of any drawing under such
Letter of Credit or (vii) any consequences arising from causes beyond control of
the Letter of Credit Agent or the Lenders.
(c) In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the Letter of
Credit Agent under or in connection with the Letters of Credit or any related
certificates, if taken or omitted in good faith, shall not put the Letter of
Credit Agent or any Lender under any resulting liability to the Borrower or
relieve the Borrower of any of its obligations hereunder to the Lenders or any
such Person.
(d) The Borrower agrees to pay to the Letter of Credit Agent for the benefit of
the Lenders the amount of all Reimbursement Obligations owing in respect of any
Letter of Credit immediately when due, under all circumstances, including,
without limitation, any of the following circumstances: (w) any lack of validity
or enforceability of this Agreement or any of the other Facility Documents,
(x) the existence of any claim, set-off, defense or other right which the
Borrower or any account party may have at any time against a beneficiary named
in a Letter of Credit, any transferee of any Letter of Credit (or any Person for
whom any such transferee may be acting), any Lender or any other Person, whether
in connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transaction between the Borrower or any account party and the beneficiary named
in any Letter of Credit), (y) the validity, sufficiency or genuineness of any
document which the Letter of Credit Agent has determined in good faith complies
on its face with the terms of the applicable Letter of Credit, even if such
document should later prove to have been forged, fraudulent, invalid or
insufficient in any respect or any statement therein shall have been untrue or
inaccurate in any respect or (z) the surrender or impairment of any security for
the performance or observance of any of the terms hereof.

 

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2.7 Notification of Issuance Requests. Promptly after receipt thereof, the
Letter of Credit Agent will notify each Lender of the contents of each Issuance
Request received by it hereunder.
2.8 Fees.
(a) Unused Fee. The Borrower agrees to pay to the Administrative Agent for the
account of each Lender with respect to its Commitment an unused fee at a rate
per annum equal to the Applicable Unused Fee Rate on the daily unused portion of
such Lender’s Commitment from the Closing Date to and including the Letter of
Credit Availability Termination Date, calculated with respect to actual days
elapsed on the basis of a 360-day year and payable in Dollars on each Payment
Date hereafter and on the Letter of Credit Availability Termination Date or, if
later, upon receipt of a bill from the Administrative Agent. During the
continuance of a Default, the Required Lenders may, at their option, by notice
to the Borrower, declare that the Applicable Letter of Credit Fee Rate shall
accrue at the Default Rate; provided, that during the continuance of a Default
under Section 7.6 or 7.7, the Applicable Letter of Credit Fee Rate shall accrue
at the Default Rate without any election or action on the part of the
Administrative Agent or any Lender.
(b) Letter of Credit Fee. The Borrower agrees to pay to the Administrative Agent
for the pro-rata account of the Lenders in Dollars a Letter of Credit Fee with
respect to each Letter of Credit from and including the date of issuance thereof
until the date such Letter of Credit is fully drawn, canceled or expired, in an
amount equal to the Applicable Letter of Credit Fee Rate on the aggregate amount
from time to time available to be drawn on such Letter of Credit, calculated
with respect to actual days elapsed on the basis of a 360-day year and payable
quarterly in arrears on each Payment Date in each year and upon the expiration,
cancellation or utilization in full of such Letter of Credit. During the
continuance of a Default, the Required Lenders may, at their option, by notice
to the Borrower, declare that the Applicable Letter of Credit Fee Rate shall
accrue at the Default Rate; provided, that during the continuance of a Default
under Section 7.6 or 7.7, the Applicable Letter of Credit Fee Rate shall accrue
at the Default Rate without any election or action on the part of the
Administrative Agent or any Lender.
(c) Defaulting Lender. If at any time a Lender is a Defaulting Lender, then, to
the extent permitted by applicable law (and notwithstanding any other provision
of this Agreement), (i) any payment of Reimbursement Obligations with respect to
Letters of Credit (including through sharing of payments pursuant to
Section 10.2, but excluding any payment pursuant to Section 2.3(b)) shall, if
the Borrower so directs at the time of making such payment, be applied first to
amounts owed to Lenders other than such Defaulting Lender, as if the amount owed
to such Defaulting Lender hereunder in respect of Reimbursement Obligations were
zero, and then to amounts owed to such Defaulting Lender; (ii) such Defaulting
Lender’s Applicable Percentage of the

 

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Letter of Credit Obligations shall be excluded for purposes of calculating
facility fees pursuant to Section 2.8 in respect of each day on which such
Lender is a Defaulting Lender, and such Defaulting Lender shall not be entitled
to receive any facility fees for any such day and (iii) such Defaulting Lender’s
Applicable Percentage shall be deemed to be zero for purposes of calculating
letter of credit fees pursuant to Section 2.8 in respect of each day on which
such Lender is a Defaulting Lender, and such Defaulting Lender shall not be
entitled to receive any letter of credit fees for any such day. Any payment made
pursuant to this Section shall be taken into account for purposes of calculating
the Unused Fee and Letter of Credit Fee. The provisions of this Section 2.8(d)
do not limit, but are in addition to, any other claim or right that the
Borrower, the Administrative Agent or any other Lender may have against a
Defaulting Lender.
2.9 Collateralization Events.
(a) The Borrower agrees that, if at any time as a result of reductions in the
Aggregate Commitment pursuant to Section 2.3 or otherwise the aggregate balance
of the Letter of Credit Obligations exceeds the Aggregate Commitment, the
Borrower shall promptly, but in any event within five (5) Business Days,
collateralize the Letter of Credit Obligations by depositing into a Collateral
Account Cash Collateral Investments with a Collateral Value equal to the product
of one hundred and two percent (102%) of the amount as may be necessary to
eliminate such excess.
(b) Notwithstanding any other provisions of this Agreement, if at any time,
after giving effect to the conversion of Pounds into Dollars as set forth in
Section 2.2, the aggregate face amount of all outstanding Letters of Credit is
greater than the Aggregate Commitment (the “Conversion Differential”), then the
Borrower shall promptly, but in any event within five (5) Business Days,
collateralize the Letter of Credit Obligations by depositing into a Collateral
Account Cash Collateral Investments with a Collateral Value equal to the product
of one hundred and two percent (102%) of the Conversion Differential.
(c) If the A.M. Best Rating or the S&P Rating of Navigators falls below “A-” the
Borrower shall promptly, but in any event within five (5) Business Days,
collateralize the Letter of Credit Obligations by depositing into a Collateral
Account Cash Collateral Investments with a Collateral Value equal to the product
of one hundred and two percent (102%) of the Letter of Credit Obligations.
(d) If the forecast underwriting losses based on mid-points stated in the
Franchise Performance Management Quarterly Monitoring Returns for the Supported
Syndicate exceed 20% of capacity for any year supported by a Letter of Credit,
the Borrower shall promptly, but in any event within five (5) Business Days,
collateralize the Letter of Credit Obligations by depositing into a Collateral
Account Cash Collateral Investments with a Collateral Value equal to one hundred
and two percent (102%) of the Letter of Credit Obligations with respect to all
outstanding Letters of Credit.

 

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(e) In the event that any net unfunded solvency deficit on any open years of
account for the Supported Syndicate (as reported in the solvency statements
prepared by Lloyd’s) (a “NFS Deficiency”) is not funded directly at Lloyd’s by
depositing cash or similar assets into the Supported Syndicate’s personal
reserves, promptly, but in any event within 10 Business Days after the Borrower
has knowledge of such deficiency, the Borrower shall collateralize the Letter of
Credit Obligations by depositing, into a Collateral Account, Cash Collateral
Investments with a Collateral Value equal to the one hundred and two percent
(102%) of the NFS Deficiency after giving effect to any amount funded directly
at Lloyd’s as set forth above.
(f) In the event that an Expiry Notice is given with respect to any Letter of
Credit, the Borrower shall, within 5 Business Days after December 31 of the last
Year of Account supported by the such Letter of Credit pursuant to Section 6.2,
collateralize the Letter of Credit Obligation by depositing into a Collateral
Account Cash Collateral Investments with a Collateral Value equal to one hundred
and two percent (102%) of the such Letter of Credit.
(g) Upon the occurrence of an Event of Default, the Borrower shall promptly
deposit in a Collateral Account Cash Collateral Investments with a Collateral
Value equal to the product of one hundred and two percent (102%) of the
aggregate undrawn face amount of all outstanding Letters of Credit and all fees
and other amounts due or which may become due with respect thereto.
2.10 Collateral Account.
(a) The Borrower shall at all times maintain Cash Collateral Investments in
Collateral Accounts with a Collateral Value of not less than the Required
Amount. If at any time the Required Amount shall exceed (the amount of such
excess, the “Collateral Shortfall”) the Collateral Value for three
(3) consecutive Business Days, the Administrative Agent shall provide the
Borrower notice, by telephone or in writing, of such Collateral Shortfall and it
shall be a Default unless within three (3) Business Days of the Borrower’s
receipt of such notice, no Collateral Shortfall exists as a result of (i) a
change in the Collateral Value due to market fluctuations and/or (ii) a deposit
by the Borrower of additional Cash Collateral Investments in a Collateral
Account.
(b) Cash Collateral Investments held in a Collateral Account (other than the UK
Collateral Account) shall be invested (i) so long as no Default has occurred, at
the direction of the Borrower, provided that all such Cash Collateral
Investments must be reasonably acceptable to the Administrative Agent and
otherwise permitted by this Agreement, and (ii) following the occurrence and
continuation of a Default, at the direction of the Administrative Agent. All
income from such Cash Collateral Investments shall be retained in a Collateral
Account and added to the Collateral.
(c) So long as no Default has occurred and is continuing, if at any time the
Obligations become due and payable hereunder, the Borrower may request that
funds in a Collateral Account be applied to the amount which is due and payable,
including with respect to any Reimbursement Obligations and the Administrative
Agent shall apply such funds (in the case of the UK Collateral Account) or
consent to such release (in the case of any other Collateral Account) provided,
in each case, after giving effect to such application the Borrower is in
compliance with Section 2.10(a); provided, however, the Administrative Agent
shall have the right, upon five (5) days’ prior notice to the Borrower, to apply
all or any part of the Cash Collateral Investments held in a Collateral Account
for the amount which is due and payable unless the Borrower shall object in
writing and otherwise pay the amount due and payable within such five (5) day
period. Upon the occurrence and continuation of a Default, the Administrative
Agent may apply (without prior notice to the Borrower) all or any part of the
Cash Collateral Investments held in a Collateral Account pursuant to and in
accordance with Section 8.4.

 

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(d) So long as no Default or Unmatured Default under Section 7.2 has occurred,
at any time the Collateral Value exceeds (the amount of such excess, the
“Collateral Excess”) the Required Amount, the Borrower can request to the
release of such Collateral Excess and the Administrative Agent shall release
such funds from the UK Collateral or consent to such release with respect to any
other Collateral Account; provided, however, upon the occurrence and
continuation of a Default, the Administrative Agent shall have no obligation to
release or consent to any such release and shall have sole control over any such
Collateral Excess, including the application of such amount pursuant to and in
accordance with Section 8.4.
ARTICLE III
YIELD PROTECTION; TAXES
3.1 Yield Protection. If, on or after the Closing Date, the adoption of any law
or any governmental or quasi-governmental rule, regulation, policy, guideline or
directive (whether or not having the force of law), or any change in the
interpretation or administration thereof by any governmental or
quasi-governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender or
applicable Lending Installation with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency:
(a) subjects any Lender or any applicable Lending Installation to any Taxes, or
changes the basis of taxation of payments (other than with respect to Excluded
Taxes) to any Lender in respect of its interest in the Letters of Credit,
(b) imposes or increases or deems applicable any reserve, assessment, insurance
charge, special deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by, any Lender or any applicable
Lending Installation (other than reserves and assessments taken into account in
determining the interest rate applicable to Eurodollar Advances), or
(c) imposes any other condition the result of which is to increase the cost to
any Lender or any applicable Lending Installation of making, funding or issuing
Letters of Credit or reduces any amount receivable by any Lender or any
applicable Lending Installation in connection with any Letter of Credit, or
requires any Lender or any applicable Lending Installation to make any payment
calculated by reference to the amount of Letters of Credit issued or
participated in or interest received by it, by an amount deemed material by such
Lender,
and the result of any of the foregoing is to increase the cost to such Lender or
applicable Lending Installation of making or maintaining its Aggregate
Commitment or its interest in the Letters of Credit or to reduce the return
received by such Lender or applicable Lending Installation in connection with
such Aggregate Commitment or interest in Letters of Credit, then, within fifteen
(15) days of demand by such Lender, the Borrower shall pay such Lender such
additional amount or amounts as will compensate such Lender for such increased
cost or reduction in amount received.

 

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3.2 Changes in Capital Adequacy Regulations. If a Lender determines the amount
of capital required or expected to be maintained by such Lender, any Lending
Installation of such Lender or any corporation controlling such Lender is
increased as a result of a Change, then, within fifteen (15) days of demand by
such Lender, the Borrower shall pay such Lender the amount necessary to
compensate for any shortfall in the rate of return on the portion of such
increased capital which such Lender determines is attributable to this
Agreement, or its commitment to issue in Letters of Credit hereunder (after
taking into account such Lender’s policies as to capital adequacy). “Change”
means the occurrence, after the date of this Agreement, of any of the following:
(a) the adoption or taking effect of any law, rule, regulation or treaty,
(b) any change in any law, rule, regulation or treaty or in the administration,
interpretation, implementation or application thereof by any Governmental
Authority or (c) the making or issuance of any request, rule, guideline or
directive (whether or not having the force of law) by any Governmental
Authority; provided that notwithstanding anything herein to the contrary,
(x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all
requests, rules, guidelines or directives thereunder or issued in connection
therewith and (y) all requests, rules, guidelines or directives promulgated by
the Basel Committee on Banking Supervision Bank for International Settlements
(or any successor or similar authority) or any foreign or United States
regulatory authorities, in each case pursuant to Basel III, shall in each case
be deemed to be a “Change”, regardless of the date enacted, adopted or issued.
3.3 Taxes.
(a) All payments by the Borrower to or for the account of any Lender, the
Administrative Agent or the Security Trustee hereunder or under any
Reimbursement Agreement shall be made free and clear of and without deduction
for any and all Taxes. If the Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder to any Lender, the
Administrative Agent or the Security Trustee, (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 3.3) such
Lender, the Administrative Agent or the Security Trustee (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions, (iii) the
Borrower shall pay the full amount deducted to the relevant authority in
accordance with applicable law and (iv) the Borrower shall furnish to the
Administrative Agent the original copy of a receipt evidencing payment thereof
within thirty (30) days after such payment is made.

 

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(b) In addition, the Borrower hereby agrees to pay any present or future stamp
or documentary taxes and any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or under any other Facility
Document or from the execution or delivery of, or otherwise with respect to,
this Agreement or any other Facility Document (“Other Taxes”).
(c) Without duplication of amounts paid by such Borrower under Section 3.3(a) or
(b), the Borrower hereby agrees to indemnify the Administrative Agent and each
Lender for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed on amounts payable under this
Section 3.3) paid by the Administrative Agent or such Lender and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto; provided, however, that the Borrower shall not be required to indemnify
the Administrative Agent or the Lender, as the case may be, for any penalties,
interest or expenses arising therefrom or imposed with respect thereto to the
extent that such penalties, interest, or expenses are attributable to the
failure of the Administrative Agent or such Lender, as the case may be, to pay
over any amounts paid to the Administrative Agent or such Lender by such
Borrower (for Taxes or Other Taxes) to the relevant Governmental Authority
within twenty (20) days after receipt of such payment from such Borrower.
Payments due under this indemnification shall be made within thirty (30) days of
the date the Administrative Agent or such Lender makes demand therefor pursuant
to Section 3.4.
(d) Each Lender that is not incorporated under the laws of the United States of
America or a state thereof (each a “Non-U.S. Lender”) agrees that it will, not
less than ten (10) Business Days after the date of this Agreement, deliver to
each of the Borrower and the Administrative Agent such properly completed and
executed documentation prescribed by applicable law or reasonably requested by
the Borrower, certifying that such Lender is entitled to receive payments under
this Agreement without deduction or withholding of any United States federal
income taxes. In addition, each Lender that is not a Non-U.S. Lender will, not
less than ten (10) Business Days after the date of this Agreement, deliver to
each of the Borrower and the Administrative Agent such other documentation
prescribed by law or reasonably requested by such Borrower or the Administrative
Agent as will enable such Borrower or the Administrative agent to determine
whether or not such Lender is subject to backup withholding and information
reporting requirements. Each Lender further undertakes to deliver to each of the
Borrower and the Administrative Agent (x) renewals or additional copies of such
form (or any successor form) on or before the date that such form expires or
becomes obsolete and (y) after the occurrence of any event requiring a change in
the most recent forms so delivered by it, such additional forms or amendments
thereto as may be reasonably requested by the Borrower or the Administrative
Agent. All forms or amendments described in the preceding sentence shall certify
that such Lender is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes, unless an
event (including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form or amendment with
respect to it and such Lender advises the Borrower and the Administrative Agent
that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax.

 

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(e) Each “Non-U.S. Lender” shall deliver to each of the Borrower and the
Administrative Agent at the time or times prescribed by law (including as
prescribed as a result of any change in law or regulation, or the taking effect
of any law occurring subsequent to the date hereof) and at such time or times
reasonably requested by the Borrower or the Administrative Agent, any
documentation, accurately completed and in a manner reasonably satisfactory to
the requesting party, that may be required in order to allow the requesting
party to make a payment under this Agreement or any other Facility Document
without any deduction or withholding for or on account of any tax otherwise
required to be withheld or assessed under FATCA.
(f) For any period during which a Non-U.S. Lender has failed to provide the
Borrower with an appropriate form pursuant to paragraph (d) above (unless such
failure is due to a change in treaty, law or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
occurring subsequent to the date on which a form originally was required to be
provided), such Non-U.S. Lender shall not be entitled to indemnification under
this Section 3.3 with respect to Taxes imposed by the United States; provided
that, should a Non-U.S. Lender which is otherwise exempt from or subject to a
reduced rate of withholding tax become subject to Taxes because of its failure
to deliver a form required under paragraph (d) above, the Borrower shall take
such steps as such Non-U.S. Lender shall reasonably request to assist such
Non-U.S. Lender to recover such Taxes.
(g) If the U.S. Internal Revenue Service or any other governmental authority of
the United States or any other country or any political subdivision thereof
asserts a claim that the Administrative Agent did not properly withhold tax from
amounts paid to or for the account of any Lender (because the appropriate form
was not delivered or properly completed, because such Lender failed to notify
the Administrative Agent of a change in circumstances which rendered its
exemption from withholding ineffective, or for any other reason), such Lender
shall indemnify the Administrative Agent fully for all amounts paid, directly or
indirectly, by the Administrative Agent as tax, withholding therefor, or
otherwise, including penalties and interest, and including taxes imposed by any
jurisdiction on amounts payable to the Administrative Agent under this
subsection, together with all costs and expenses related thereto (including
attorneys fees and time charges of attorneys for the Administrative Agent, which
attorneys may be employees of the Administrative Agent). The obligations of the
Lenders under this Section 3.3(g) shall survive the payment of the Obligations
and termination of this Agreement.
(h) If the Administrative Agent or any Lender receives a refund of any Taxes or
Other Taxes as to which it has been indemnified by the Borrower, it shall pay to
the Borrower an amount equal to such refund (but only to the extent of indemnity
payments made, or additional amounts paid, by the Borrower under this
Section 3.3 with respect to Taxes or Other Taxes giving rise to such refund),
net of all reasonable out-of-pocket expenses incurred by the Administrative
Agent or the Lender, as the case may be, and without interest (other than any
interest paid by the relevant Governmental Authority with respect to such
refund), provided that the Borrower, upon the request of the Administrative
Agent or the Lender agrees to repay the amount paid over to the Borrower (plus
any penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Administrative Agent or the Lender in the event the
Administrative Agent or the Lender is required to repay such refund to such
Governmental Authority.

 

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3.4 Lender Statements; Survival of Indemnity. To the extent reasonably possible,
each Lender shall designate an alternate Lending Installation to reduce any
liability of the Borrower to such Lender under Sections 3.1, 3.2 and 3.3 so long
as such designation is not, in the judgment of such Lender, disadvantageous to
such Lender. Each Lender shall deliver a written statement of such Lender to the
Borrower (with a copy to the Administrative Agent) as to the amount due, if any,
under Section 3.1, 3.2 or 3.3. Such written statement shall set forth in
reasonable detail the calculations upon which such Lender determined such amount
and shall be final, conclusive and binding on the Borrower in the absence of
manifest error. The obligations of the Borrower under Section 3.1, 3.2 and 3.3
shall survive payment of the Obligations and termination of this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 The Lenders Obligation to Issue. The obligation of the Letter of Credit
Agent and each Lender to issue the initial Letter of Credit hereunder is subject
to satisfaction of the following conditions precedent:
(a) The Administrative Agent’s receipt of the following, each of which shall be
originals or facsimiles or sent by electronic mail (followed promptly by
originals) unless otherwise specified, each properly executed by an Authorized
Officer of the Borrower, each dated the Closing Date (or, in the case of
certificates of governmental officials, a recent date before the Closing Date)
and each in form and substance satisfactory to the Administrative Agent and its
counsel:
(i) Charter Documents; Good Standing Certificates. Copies of the articles or
certificate of incorporation of the Borrower, together with all amendments, and
a certificate of good standing, each certified by the appropriate governmental
officer in its jurisdiction of incorporation.
(ii) By-Laws and Resolutions. Copies, certified by the Secretary or Assistant
Secretary of the Borrower, of its by-laws and of its Board of Directors’
resolutions and of resolutions or actions of any other body authorizing the
execution of the Facility Documents to which the Borrower is a party.
(iii) Secretary’s Certificate. An incumbency certificate, executed by the
Secretary or Assistant Secretary of the Borrower, which shall identify by name
and title and bear the signature of the officers of the Borrower authorized to
sign the Facility Documents, upon which certificate the Administrative Agent and
the Lenders shall be entitled to rely until informed of any change in writing by
the Borrower.

 

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(iv) Officer’s Certificate. A certificate, signed by an Authorized Officer of
the Borrower, stating that: (A) on the Closing Date no Default or Unmatured
Default has occurred and is continuing, (B) each of the representations and
warranties set forth in Article V of this Agreement is true and correct on and
as of the Closing Date (provided, that solely for purposes of this
Section 4.1(a)(iv)(B), the representation and warranty in Section 5.6 shall be
deemed to contain a reference to “prospects” of the Borrower) and (C) the A.M.
Best Rating and the S&P Rating for Navigators.
(v) Legal Opinions. A written opinion of (A) Dewey &LeBeouf, New York counsel to
the Borrower regarding US collateral matters and (B) the opinion of Dewey
&LeBeouf, English counsel to the Borrower regarding English collateral matters,
in each case addressed to the Administrative Agent and the Lenders and in form
and substance acceptable to the Administrative Agent and its counsel.
(vi) Facility Documents. Executed originals of this Agreement and each of the
Facility Documents, which shall be in full force and effect, together with all
schedules, exhibits, certificates, stock certificates (including stock
certificates representing all of the outstanding stock of each Significant
Subsidiary other than NSIC), related stock powers, Control Agreements,
instruments, opinions and documents required to be delivered pursuant hereto and
thereto.
(vii) Lloyd’s Substitution Letter. The Lloyd’s Substitution Letter duly
executed.
(viii) Financial Statements. The financial statements described in
Section 6.1(a) and the statutory statements described in Section 6.1(c), in each
case for the fiscal year ending December 31, 2010.
(ix) RDS. A summary of the RDS calculations (including the information necessary
to calculate the covenants in Sections 6.23(e) and (f)) for the Supported
Syndicate prepared in accordance with the definitions and reporting requirements
of Lloyd’s as in effect on the Closing Date for the applicable account years to
be covered by the Letters of Credit to be issued hereunder.
(x) Primary FAL. The Lloyd’s Comfort Letter duly executed1 and a letter from the
Corporate Members of the Supported Syndicate setting forth the Primary FAL for
the Supported Syndicate, in each case for the 2011 Year of Account.
 

      1  
If the Lloyd’s Comfort Letter can not be obtained prior to closing, it will be
moved to a post-closing covenant.

 

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(xi) Compliance Certificate. A Compliance Certificate duly completed and
executed based on the December 31, 2010 financial statements and the 2011 Year
of Account.
(xii) Collateral Accounts. Evidence that the Collateral Accounts have been
opened and that the applicable Financial Institutions have received all
necessary documentation from the Borrower.
(xiii) Other. Such other documents as the Administrative Agent, any Lender or
their counsel may have reasonably requested.
(b) The A.M. Best Rating and the S&P Rating for Navigators shall be not less
than “A-”.
(c) Any fees required to be paid on or before the Closing Date shall have been
paid.
(d) Unless waived by the Administrative Agent, the Borrower shall have paid all
fees, charges and disbursements of counsel to the Administrative Agent (directly
to such counsel if requested by the Administrative Agent) to the extent invoiced
prior to or on the Closing Date, plus such additional amounts of such fees,
charges and disbursements as shall constitute its reasonable estimate of such
fees, charges and disbursements incurred or to be incurred by it through the
closing proceedings (provided that such estimate shall not thereafter preclude a
final settling of accounts between Borrower and the Administrative Agent).
Without limiting the generality of Section 10.4, for purposes of determining
compliance with the conditions specified in this Section 4.1, each Lender that
has signed this Agreement shall be deemed to have consented to, approved or
accepted or to be satisfied with, each document or other matter required
thereunder to be consented to or approved by or acceptable or satisfactory to a
Lender unless the Administrative Agent shall have received notice from such
Lender prior to the proposed Closing Date specifying its objection thereto.
4.2 Each Letter of Credit. The Letter of Credit Agent, on behalf of the Lenders,
shall not be obligated to issue any Letter of Credit, unless on the applicable
Issue Date:
(a) There exists no Default or Unmatured Default and none would result from such
issuance of such Letter of Credit.
(b) The representations and warranties contained in Article V are true and
correct as of such Issue Date except to the extent any such representation or
warranty is stated to relate solely to an earlier date, in which case such
representation or warranty shall have been true and correct on and as of such
earlier date.
(c) An Issuance Request, as applicable, shall have been properly submitted.
(d) All legal matters incident to the issuance of such Letter of Credit shall be
satisfactory to the Lenders and their counsel.

 

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(e) If a Collateralization Event has occurred, the Required Amount shall have
been deposited as required under Section 2.9 and the Administrative Agent shall
have received a Borrowing Base Certificate calculated as of the most recent
Business Day in accordance with the requirements hereof and demonstrating
compliance with Section 2.10 after giving effect to the issuance of the
requested Letter of Credit.
(f) Each Issuance Request with respect to each such Letter of Credit shall
constitute a representation and warranty by the Borrower that the conditions
contained in Section 4.2(a) and (b) have been satisfied. Any Lender may require
a duly completed compliance certificate in substantially the form of Exhibit A
hereto as a condition to issuing a Letter of Credit.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
5.1 Existence and Standing. Each of the Borrower and its Subsidiaries is duly
and properly formed, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization and, except as could not
reasonably be expected to have a Material Adverse Effect, has all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted.
5.2 Authorization and Validity. The Borrower has the corporate power and
authority and legal right to execute and deliver the Facility Documents and to
perform its obligations thereunder. The execution and delivery by the Borrower
of the Facility Documents and the performance of its obligations thereunder have
been duly authorized by proper corporate proceedings, and the Facility Documents
to which the Borrower is a party constitute legal, valid and binding obligations
of the Borrower enforceable against the Borrower in accordance with their terms,
except as enforceability may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors’ rights generally.
5.3 No Conflict; Government Consent. Neither the execution and delivery by the
Borrower of the Facility Documents, nor the consummation of the transactions
therein contemplated, nor compliance with the provisions thereof will violate
(a) any law, rule, regulation, order, writ, judgment, injunction, decree or
award binding on the Borrower or any of its Subsidiaries or (b) the Borrower’s
or any Subsidiary’s articles or certificate of incorporation, partnership
agreement, certificate of partnership, articles or certificate of organization,
by-laws, or operating or other management agreement, as the case may be, or
(c) the provisions of any indenture, instrument or agreement to which the
Borrower or any of its Subsidiaries is a party or is subject, or by which it, or
its Property, is bound, or conflict with or constitute a default thereunder, or
result in, or require, the creation or imposition of any Lien in, of or on the
Property of the Borrower or a Subsidiary pursuant to the terms of any such
indenture, instrument or agreement. No order, consent, adjudication, approval,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, or other action in respect of any governmental or public
body or authority, or any subdivision thereof, which has not been obtained by
the Borrower or any of its Subsidiaries, is required to be obtained by the
Borrower or any of its Subsidiaries in connection with the execution and
delivery of the Facility Documents, the extensions of credit under this
Agreement, the payment and performance by the Borrower of the Obligations or the
legality, validity, binding effect or enforceability of any of the Facility
Documents, except that approval of the New York Insurance Department and/or one
or more other state insurance departments would be required in order for the
Lenders to acquire control of Navigators and NSIC. Neither the Borrower nor any
Subsidiary is in default under or in violation of any foreign, federal, state or
local law, rule, regulation, order, writ, judgment, injunction, decree or award
binding upon or applicable to the Borrower or such Subsidiary, in each case the
consequences of which default or violation could reasonably be expected to have
a Material Adverse Effect.

 

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5.4 Financial Statements. (a) The consolidated balance sheets of the Borrower
and the Consolidated Subsidiaries as of December 31, 2010, the related
consolidated statements of income, consolidated statements of stockholders’
equity, and consolidated statements of cash flows of the Borrower and such
Consolidated Subsidiaries for the Fiscal Year then ended, and the accompanying
footnotes, together, with the opinion thereon, of KPMG LLP, independent
certified public accountants, copies of which have been furnished to the
Lenders, fairly present the financial condition of the Borrower and the
Consolidated Subsidiaries as at such dates and the results of the operations of
the Borrower and Consolidated Subsidiaries for the periods covered by such
statements, all in accordance with Agreement Accounting Principles consistently
applied.
(b) There are no liabilities of the Borrower or any of the Consolidated
Subsidiaries, fixed or contingent, which are material but are not reflected in
the most recent financial statements referred to above or in the notes thereto,
other than liabilities arising in the ordinary course of business since
December 31, 2010.
5.5 Statutory Financial Statements. The Annual Statement of each of the
Insurance Subsidiaries (including, without limitation, the provisions made
therein for investments and the valuation thereof, reserves, policy and contract
claims and statutory liabilities) as filed with the appropriate Governmental
Authority of its state of domicile (the “Department”) and delivered to each
Lender prior to the execution and delivery of this Agreement, as of and for the
2010 Fiscal Year (the “Statutory Financial Statements”), have been prepared in
accordance with SAP applied on a consistent basis (except as noted therein).
Each such Statutory Financial Statement was in material compliance with
applicable law when filed.
5.6 Material Adverse Change. Since December 31, 2010 there has been no change in
the business, Property, condition (financial or otherwise), prospects or results
of operations of the Borrower and its Subsidiaries which could reasonably be
expected to have a Material Adverse Effect.
5.7 Taxes. The Borrower and its Subsidiaries have filed all United States
federal tax returns and all other tax returns which are required to be filed and
have paid all taxes due pursuant to said returns or pursuant to any assessment
received by the Borrower or any of its Subsidiaries, except such taxes, if any,
as are being contested in good faith and as to which adequate reserves have been
provided in accordance with Agreement Accounting Principles and as to which no
Lien exists. No tax liens have been filed and no claims are being asserted with
respect to any such taxes. The charges, accruals and reserves on the books of
the Borrower and its Subsidiaries in respect of any taxes or other governmental
charges are adequate.

 

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5.8 Litigation and Contingent Obligations. There is no litigation, arbitration,
governmental investigation, proceeding or inquiry pending or, to the knowledge
of any of their officers, threatened against or affecting the Borrower or any of
its Subsidiaries which could reasonably be expected to have a Material Adverse
Effect or which seeks to prevent, enjoin or delay the issuance of any Letters of
Credit. Other than any liability incident to any litigation, arbitration or
proceeding which could not reasonably be expected to have a Material Adverse
Effect, the Borrower has no material contingent obligations not provided for or
disclosed in the SEC Reports or in the financial statements referred to in
Section 5.4.
5.9 Subsidiaries. Schedule 5.9 contains an accurate list of all Subsidiaries of
the Borrower as of the date of this Agreement, setting forth their respective
jurisdictions of organization and the percentage of their respective capital
stock or other ownership interests owned by the Borrower or other Subsidiaries
and indicating which Subsidiaries are Significant Subsidiaries and which
Subsidiaries are Insurance Subsidiaries. All of the issued and outstanding
shares of capital stock or other ownership interests of such Subsidiaries have
been (to the extent such concepts are relevant with respect to such ownership
interests) duly authorized and issued and are fully paid and non-assessable.
5.10 ERISA. The Unfunded Liabilities of all Single Employer Plans is $0 except
that funding of any money purchase pension plan may be delayed each Fiscal Year
until the end of the first Fiscal Quarter of the following year. Neither the
Borrower nor any other member of the Controlled Group has incurred, or is
reasonably expected to incur, any withdrawal liability to any Multiemployer
Plan. Each Plan complies in all material respects with all applicable
requirements of law and regulations, no Reportable Event has occurred with
respect to any Plan, neither the Borrower nor any other member of the Controlled
Group has withdrawn from any Plan or initiated steps to do so, and no steps have
been taken to reorganize or terminate any Plan.
5.11 Defaults. No Default or Unmatured Default has occurred and is continuing.
5.12 Accuracy of Information. No information, exhibit or report furnished by the
Borrower or any of its Subsidiaries to the Administrative Agent or to any Lender
in connection with the negotiation of, or compliance with, the Facility
Documents contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statements contained therein not
misleading.
5.13 Regulation U. Margin stock (as defined in Regulation U) constitutes less
than 25% of the value of those assets of the Borrower and its Subsidiaries which
are subject to any limitation on sale, pledge, or other restriction hereunder.
Neither the issuance of any Letters of Credit hereunder nor the use of the
proceeds thereof, will violate or be inconsistent with the provisions of
Regulation T, Regulation U or Regulation X.
5.14 Material Agreements. Neither the Borrower nor any Subsidiary is a party to
any agreement or instrument or subject to any charter or other corporate
restriction which could reasonably be expected to have a Material Adverse
Effect. Neither the Borrower nor any Subsidiary is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in (a) any agreement to which it is a party which default
could reasonably be expected to have a Material Adverse Effect or (b) any
agreement or instrument evidencing or governing Indebtedness.

 

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5.15 Compliance With Laws. The Borrower and its Subsidiaries have complied with
all applicable statutes, rules, regulations, orders and restrictions of any
domestic or foreign government or any instrumentality or agency thereof having
jurisdiction over the conduct of their respective businesses or the ownership of
their respective Property, except where the failure to comply could not
reasonably be expected to have a Material Adverse Effect.
5.16 Ownership of Properties. The Borrower and each of its Subsidiaries has good
title, free of all Liens other than those permitted by Section 6.16, to all of
the Property and assets reflected in the Borrower’s most recent consolidated
financial statements filed with the Securities and Exchange Commission as owned
by the Borrower and its Subsidiaries.
5.17 Plan Assets; Prohibited Transactions. The Borrower is not an entity deemed
to hold “plan assets” within the meaning of 29 C.F.R. § 2510.3-101 of an
employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to
Title I of ERISA or any plan (within the meaning of Section 4975 of the Code),
and neither the execution of this Agreement nor the issuance of Letters of
Credit hereunder gives rise to a prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975 of the Code.
5.18 Environmental Matters. In the ordinary course of its business, the officers
of the Borrower consider the effect of Environmental Laws on the business of the
Borrower and its Subsidiaries, in the course of which they identify and evaluate
potential risks and liabilities accruing to the Borrower due to Environmental
Laws. On the basis of this consideration, the Borrower has concluded that
Environmental Laws cannot reasonably be expected to have a Material Adverse
Effect. Neither the Borrower nor any Subsidiary has received any notice to the
effect that its operations are not in material compliance with any of the
requirements of applicable Environmental Laws or are the subject of any federal
or state investigation evaluating whether any remedial action is needed to
respond to a release of any toxic or hazardous waste or substance into the
environment, which non-compliance or remedial action could reasonably be
expected to have a Material Adverse Effect.
5.19 Investment Company Act. Neither the Borrower nor any Subsidiary is an
“investment company” or a company “controlled” by an “investment company”,
within the meaning of the Investment Company Act of 1940, as amended.
5.20 Solvency. Immediately after the consummation of the transactions to occur
on the date hereof and immediately following each issuance of a Letter of Credit
(including the Existing Letters of Credit) hereunder on the date hereof and
after giving effect to the application of the proceeds of such Letters of
Credit, (a) the fair value of the assets of the Borrower and its Subsidiaries on
a consolidated basis, at a fair valuation, will exceed the debts and
liabilities, subordinated, contingent or otherwise, of the Borrower and its
Subsidiaries on a consolidated basis, (b) the present fair saleable value of the
Property of the Borrower and its Subsidiaries on a consolidated basis will be
greater than the amount that will be required to pay the probable liability of
the Borrower and its Subsidiaries on a consolidated basis on their debts and
other liabilities, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured, (c) the Borrower and its
Subsidiaries on a consolidated basis will be able to pay their debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured and (d) the Borrower and its
Subsidiaries on a consolidated basis will not have unreasonably small capital
with which to conduct the businesses in which they are engaged as such
businesses are now conducted and are proposed to be conducted after the date
hereof.

 

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5.21 Insurance Licenses. To the extent required by applicable law, each
Insurance Subsidiary holds a License and is authorized to transact insurance
business in (i) the line or lines of insurance and (ii) the state, states or
jurisdictions it is engaged in, except to the extent that the failure to have
such a License or authority could not reasonably be expected to have a Material
Adverse Effect. No such License, the loss of which could reasonably be expected
to have a Material Adverse Effect, is the subject of a proceeding for
suspension, limitation or revocation. To the Borrower’s knowledge, there is not
a sustainable basis for such suspension, limitation or revocation, and no such
suspension, limitation or revocation has been threatened by any Governmental
Authority. The Insurance Subsidiaries do not transact any business, directly or
indirectly, requiring any license, permit, governmental approval, consent or
other authorization other than those currently obtained, except to the extent of
which could not reasonably be expected to have a Material Adverse Effect.
5.22 Partnerships. Except as disclosed in Schedule 5.22, neither the Borrower
nor any of its Subsidiaries is a partner of any partnership.
5.23 Lines of Business. Schedule 5.23 sets forth a complete statement of each
material line of business conducted as of the date hereof by the Borrower and
each of its Subsidiaries (the “Existing Lines of Business”).
5.24 Reinsurance Practices. The business of each Insurance Subsidiary is being
conducted in all material respects in accordance with the Reinsurance
Guidelines.
5.25 Security. Each Security Document is effective to create and give the
Administrative Agent, for the benefit of the Secured Parties, as security for
the repayment of the obligations secured thereby, a legal, valid, perfected and
enforceable first priority Lien upon and security interest in the Collateral in
which a security interest is granted thereby except for the Permitted Liens (as
defined in the Security Agreement) and except that approval of the New York
Insurance Department and/or one or more other state insurance departments would
be required in order for the Lenders to acquire control of Navigators or NSIC.
5.26 Disclosure. None of the (a) information, exhibits or reports furnished or
to be furnished by the Borrower or any Subsidiary to the Administrative Agent or
to any Lender in connection with the negotiation of the Facility Documents or
(b) representations or warranties of the Borrower or any Subsidiary contained in
this Agreement, the other Facility Documents or any other document, certificate
or written statement furnished to the Administrative Agent or the Lenders by or
on behalf of the Borrower or any Subsidiary for use in connection with the
transactions contemplated by this Agreement or the Facility Documents contained,
contains or will contain any untrue statement of a material fact or omitted,
omits or will omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances in which the same were made. There is no fact known to the
Borrower (other than matters of a general economic nature) that has had or could
reasonably be expected to have a Material Adverse Effect and that has not been
disclosed herein or in such other documents, certificates and statements
furnished to the Lenders for use in connection with the transactions
contemplated by this Agreement.

 

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ARTICLE VI
COVENANTS
Until the date that no Letters of Credit are outstanding and all Letter of
Credit Obligations have been indefeasibly paid in full, unless the Lenders shall
otherwise consent in writing:
6.1 Financial Reporting. The Borrower will maintain, for itself and each
Subsidiary, a system of accounting established and administered in accordance
with generally accepted accounting principles, consistently applied, and will
furnish to the Lenders:
(a) As soon as practicable and in any event within seventy (70) days after the
close of each of its Fiscal Years, an unqualified audit report certified by
independent certified public accountants acceptable to the Required Lenders,
prepared in accordance with Agreement Accounting Principles on a consolidated
and consolidating basis and setting forth in comparative form figures for the
preceding Fiscal Year for itself and its Consolidated Subsidiaries and on a
stand alone basis for the Borrower, including balance sheets as of the end of
such period and related statements of income, stockholders’ equity and cash
flows accompanied by any management letter prepared by said accountants;
provided that no annual report other than the report on Form 10-K needs to be
delivered.
(b) As soon as practicable and in any event within fifty (50) days after the
close of the first three Fiscal Quarters of each of its Fiscal Years, for itself
and its Subsidiaries, consolidated and consolidating unaudited balance sheets as
at the close of each such period and consolidated and consolidating statement of
income, stockholders’ equity and cash flows for the period from the beginning of
such Fiscal Year to the end of such quarter setting forth in each case in
comparative form figures for the corresponding period in the prior Fiscal Year,
all prepared in accordance with Agreement Accounting Principles and in
reasonable detail, and all signed by its chief financial officer.
(c) As soon as available and in any event (i) within seventy (70) days after the
close of each Fiscal Year of each Insurance Subsidiary, the Annual Statement of
such Insurance Subsidiary for such Fiscal Year as filed with the insurance
commissioner (or similar authority) in such Insurance Subsidiary’s state of
domicile, together with the signature thereof of the chief financial officer of
the Borrower stating that such Annual Statement presents the financial condition
and results of operations of such Insurance Subsidiary in accordance with SAP,
(ii) on or prior to each June 1 after the close of each Fiscal Year of each
Insurance Subsidiary, the opinion of a firm of certified public accountants
reasonably satisfactory to the Required Lenders, who shall have examined such
Annual Statement and whose opinion shall not be qualified as to the scope of
audit or as to the status of such Insurance Subsidiary as a going concern, and
(iii) within one hundred twenty (120) days after the close of each Fiscal Year
of each Insurance Subsidiary, a written review of and opinion of an accounting
or actuarial firm or internal actuary, as delivered to the Department,
reasonably satisfactory to the Required Lenders on the methodology and
assumptions used to calculate the Loss Reserves of such Insurance Subsidiary at
the end of such Fiscal Year (as shown on the Annual Statement of such Insurance
Subsidiary prepared in accordance with SAP).

 

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(d) As soon as available and in any event on or prior to each May 1 after the
close of each Fiscal Year of the Insurance Subsidiaries, the Consolidated Annual
Statement of the Insurance Subsidiaries for such Fiscal Year, prepared in
accordance with SAP and filed with the New York Insurance Department.
(e) As soon as available and in any event within fifty (50) days after the close
of each of the first three Fiscal Quarters in each Fiscal Year of each Insurance
Subsidiary, quarterly financial statements of such Insurance Subsidiary
(prepared in accordance with SAP) for such Fiscal Quarter and as filed with the
insurance commissioner (or similar authority) in such Insurance Subsidiary’s
state of domicile, together with the signature thereon of the chief financial
officer of the Borrower stating that such financial statements present the
financial condition and results of operations of such Insurance Subsidiary in
accordance with SAP.
(f) As soon as available, but in any event within one hundred twenty (120) days
after the beginning of each Fiscal Year, a copy of the plan and forecast of the
Borrower and its Subsidiaries for such Fiscal Year in the form customarily
prepared by the Borrower.
(g) Together with the financial statements required by clauses (a) and (b)
above, a compliance certificate in substantially the form of Exhibit A hereto
signed by its chief financial officer showing the calculations necessary to
determine compliance with this Agreement and stating that no Default or
Unmatured Default exists, or if any Default or Unmatured Default exists, stating
the nature and status thereof and updating Schedule 5.9.
(h) As soon as possible and in any event within ten (10) days after the Borrower
knows that any Termination Event has occurred with respect to any Plan, a
statement, signed by the chief financial officer of the Borrower, describing
said Termination Event and the action which the Borrower proposes to take with
respect thereto.
(i) As soon as possible and in any event within ten (10) days after receipt by
the Borrower, a copy of (i) any notice or claim to the effect that the Borrower
or any of its Subsidiaries is or may be liable to any Person as a result of the
release by the Borrower, any of its Subsidiaries or any other Person of any
toxic or hazardous waste or substance into the environment, and (ii) any notice
alleging any violation of any federal, state or local environmental, health or
safety law or regulation by the Borrower or any of its Subsidiaries.
(j) As soon as possible and in any event within ten (10) days after the Borrower
learns thereof, notice of the assertion or commencement of any claims, action,
suit or proceeding against or affecting the Borrower or any Subsidiary which may
reasonably be expected to have a Material Adverse Effect.

 

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(k) Promptly upon the furnishing thereof to the shareholders of the Borrower,
copies of all financial statements, reports and proxy statements so furnished;
provided that no annual report other than the report on Form 10-K needs to be
delivered.
(l) Promptly upon the filing thereof, copies of all registration statements and
annual, quarterly, monthly or other regular reports which the Borrower or any of
its Subsidiaries files with the Securities and Exchange Commission.
(m) Promptly and in any event within ten (10) days after learning thereof,
notification of (i) any tax assessment, demand, notice of proposed deficiency or
notice of deficiency received by the Borrower or any Consolidated Person or
(ii) the filing of any tax Lien or commencement of any judicial proceeding by or
against any such Consolidated Person, if any such assessment, demand, notice,
Lien or judicial proceeding relates to tax liabilities in excess of $2,500,000.
(n) Promptly, and in any event within five (5) days after (i) learning thereof,
notification of any changes after the date hereof in the Borrower’s S&P Rating
or Borrower’s Moody’s Rating or in the A.M. Best Rating in respect of any
Insurance Subsidiary and (ii) receipt thereof, copies of any ratings analysis by
A.M. Best & Co. relating to any Insurance Subsidiary.
(o) Copies of any actuarial certificates prepared with respect to any Insurance
Subsidiary, promptly after the receipt thereof, and not later than ninety
(90) days after each Fiscal Year, an actuarial opinion with respect to each
Insurance Subsidiary in form and substance reasonably satisfactory to the
Administrative Agent and the Required Lenders from an accounting or actuarial
firm or internal actuary, as delivered to the Department, reasonably
satisfactory to the Administrative Agent and the Required Lenders.
(p) Promptly upon the filing thereof, copies of all filings and annual,
quarterly, monthly or other regular reports which the Borrower or any of its
Subsidiaries files with the NAIC or any insurance commission or department or
analogous Governmental Authority (including, without limitation, any filing made
by the Borrower or any Subsidiary pursuant to any insurance holding company act
or related rules or regulations), but excluding routine or non-material filings
with the NAIC, any insurance commissioner or department or analogous
Governmental Authority.
(q) In addition to the requirements of clause (c)(iii) above, as promptly as
reasonably practicable following the request of the Required Lenders, a report
prepared by an accounting or actuarial firm or internal actuary, as delivered to
the Department, reviewing the adequacy of Loss Reserves of each Insurance
Subsidiary, which firm shall be provided access to or copies of all reserve
analyses and valuations relating to the insurance business of each Insurance
Subsidiary in the possession of or available to the Borrower or its
Subsidiaries; provided, that, in the event that the written review required to
be provided to the Lenders in respect of any Fiscal Year pursuant to clause
(c)(iv) above is provided by an independent actuarial consulting firm reasonably
satisfactory to the Administrative Agent, or a written review of an independent
actuarial consulting firm reasonably satisfactory to the Administrative Agent
satisfying the requirements set forth in clause (c)(iv) is otherwise delivered
to the Lenders at any time other than pursuant to such clause, then the Required
Lenders may not request a report pursuant to this clause (q) until one year
after the delivery date of such report unless, at the time of such request, a
Default is in existence.

 

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(r) If a Collateralization Event has occurred, (i) as soon as available, but in
any event within 10 days after the end of each calendar month of each fiscal
year (x) a report listing the Cash Collateral Investments and (y) a Borrowing
Base Certificate executed by a Authorized Officer. For purposes of such report
and of completing the Borrowing Base Certificate required under this
Section 6.1(r), Cash Collateral Investments shall be valued based on the Fair
Market Value as at the last Business Day of the calendar month for which such
report or Borrowing Base Certificate is being delivered and (ii) promptly, at
the request of the Administrative Agent, a Borrowing Base Certificate for any
given Business Day executed by a Authorized Officer.
(s) As soon as possible and in any event within five (5) days of delivery to
Lloyds, the Franchise Performance Management Quarterly Monitoring Reports for
the Supported Syndicate.
(t) As soon as possible and in any event within five (5) days of receipt from
Lloyds, copies of the annual solvency statements prepared by Lloyd’s for the
Supported Syndicate.
(u) As soon as possible and in any event within five (5) days of delivery to
Lloyds, the Syndicate Business Forecast of the Supported Syndicate which for the
avoidance of doubt shall included full RDS details and a syndicate reinsurance
summary.
(v) As soon as possible and in any event within thirty (30) days of receipt from
Lloyds, a summary of any material change in Lloyd’s RDS definitions or reporting
requirements as well as the impact that such changes may have on the
calculations provided pursuant to Section 4.1(a)(ix) and compliance with the
covenant set forth in Section 6.23(e),.
(w) As soon as possible and in any event within five (5) days of deliver of the
same to Lloyd’s or any other insurance regulator or governmental authority, all
other ad hoc or exceptional financial reports provided by the Supported
Syndicate or the Borrower.

 

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6.2 Purpose. Letters of Credit will be issued to provide Funds at Lloyd’s to
support underwriting capacity provided by the Corporate Members to the Supported
Syndicate for the 2011 and 2012 underwriting years of account (and prior open
years).
6.3 Notice of Default. The Borrower will, promptly after becoming aware of the
occurrence of any of the following, give notice in writing to the Lenders of the
occurrence of (a) any Default or Unmatured Default, (b) the existence of an NSF
Deficiency, (c) of any other event or development, financial or otherwise which
could reasonably be expected to have a Material Adverse Effect, (d) the receipt
of any notice from any Governmental Authority or Lloyd’s of the expiration
without renewal, revocation or suspension of, or the institution of any
proceedings to revoke or suspend, any License now or hereafter held by any
Insurance Subsidiary which is required to conduct insurance business in
compliance with all applicable laws and regulations and the expiration,
revocation or suspension of which could reasonably be expected to have a
Material Adverse Effect, (e) the receipt of any notice from any Governmental
Authority or Lloyd’s of the institution of any disciplinary proceedings against
or in respect of any Insurance Subsidiary, or the issuance of any order, the
taking of any action or any request for an extraordinary audit for cause by any
Governmental Authority which, if adversely determined, could reasonably be
expected to have a Material Adverse Effect, (f) any material judicial or
administrative order limiting or controlling the business of any Subsidiary (and
not the industry in which such Subsidiary is engaged generally) which has been
issued or adopted or (g) the commencement of any litigation which could
reasonably be expected to result in a Material Adverse Effect.
6.4 Conduct of Business. The Borrower will, and will cause each Subsidiary to,
(a) carry on and conduct its business only in the Existing Lines of Business or
in other lines of the insurance business or in activities reasonably incidental
to the insurance business, (b) do all things necessary to remain duly
incorporated or organized, validly existing and (to the extent such concept
applies to such entity) in good standing in its jurisdiction of incorporation
and its jurisdiction of incorporation or organization, as the case may be, and
maintain all requisite authority to conduct its business in each other
jurisdiction in which such qualification is required and (c) do all things
necessary to renew, extend and continue in effect all Licenses material to its
business which may at any time and from time to time be necessary for any
Insurance Subsidiary to operate its business in compliance with all applicable
laws and regulations. No Insurance Subsidiary shall change its state of domicile
or incorporation without the prior written consent of the Required Lenders.
6.5 Taxes. The Borrower will, and will cause each Subsidiary to, timely file
United States federal and applicable foreign, state and local tax returns
required by applicable law complete and correct in all material respects and pay
when due all material taxes, assessments and governmental charges and levies
upon it or its income, profits or Property, except those which are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves have been set aside in accordance with Agreement Accounting
Principles and SAP, as applicable.
6.6 Insurance. The Borrower will, and will cause each Subsidiary to, maintain
with financially sound and reputable insurance companies insurance on all their
Property in such amounts and covering such risks as is consistent with sound
business practice, and the Borrower will furnish to the Administrative Agent and
any Lender upon request full information as to the insurance carried.

 

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6.7 Compliance with Laws. The Borrower will, and will cause each Subsidiary to,
comply with all laws, rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it may be subject, including, without limitation, all
Environmental Laws, the noncompliance with which could reasonably be expected to
have a Material Adverse Effect.
6.8 Maintenance of Properties. The Borrower will, and will cause each Subsidiary
to, do all things necessary to maintain, preserve, protect and keep its Property
in good repair, working order and condition, and make all necessary and proper
repairs, renewals and replacements so that its business carried on in connection
therewith may be properly conducted at all times in all material respects.
6.9 Inspection; Maintenance of Books and Records. The Borrower will, and will
cause each Subsidiary to, permit the Administrative Agent and the Lenders, by
their respective representatives and agents, to inspect any of the Property,
books and financial records of the Borrower and each Subsidiary, to examine and
make copies of the books of accounts and other financial records of the Borrower
and each Subsidiary, and to discuss the affairs, finances and accounts of the
Borrower and each Subsidiary with, and to be advised as to the same by, their
respective officers at such reasonable times and intervals, during normal
business hours and upon reasonable prior notice to the Borrower, as the
Administrative Agent or any Lender may designate. The Borrower will keep or
cause to be kept, and cause each Subsidiary to keep or cause to be kept,
appropriate records and books of account in which complete entries are to be
made reflecting its and their business and financial transactions, such entries
to be made in accordance with Agreement Accounting Principles and SAP, as
applicable, consistently applied.
6.10 Dividends and Stock Repurchases. The Borrower will not, nor will it permit
any Subsidiary to, declare or pay any dividends or make any distributions on its
capital stock (other than dividends payable in its own capital stock) or redeem,
repurchase or otherwise acquire or retire any of its capital stock or any
options or other rights in respect thereof at any time outstanding, except that
(a) any Subsidiary may declare and pay dividends or make distributions to the
Borrower or to a Wholly-Owned Subsidiary of the Borrower and (b) the Borrower
may repurchase capital stock and may pay dividends provided after giving effect
thereto (i) Borrower would be in pro forma compliance with the terms of this
Agreement and (ii) no Default shall have occurred.
6.11 Indebtedness. The Borrower will not, nor will it permit any Subsidiary to,
create, incur or suffer to exist any Indebtedness, except:
(a) the Obligations;
(b) up to $125,000,000 Indebtedness of the Borrower issued pursuant to a senior
indenture between the Borrower and JPMorgan Chase Bank, N.A., as trustee, dated
April 17, 2006;
(c) guaranties permitted under Section 6.15;

 

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(d) capital leases in amounts not in excess of $2,500,000 at any time
outstanding;
(e) other Indebtedness, in addition to the Indebtedness listed above, in an
aggregate amount not at any time exceeding $50,000,000; provided that such other
Indebtedness shall (a) have a maturity date after the Letter of Credit
Availability Termination Date and (b) be pari passu or subordinated to the
Obligations; and
(f) other Indebtedness, in addition to the Indebtedness listed above, in an
aggregate amount not at any time exceeding $10,000,000.
6.12 Merger. The Borrower will not, nor will it permit any Subsidiary to, merge
or consolidate with or into any Person, except that (a) a Subsidiary may merge
into the Borrower or any Wholly-Owned Subsidiary and (b) the Borrower may merge
with or consolidate with any Person, provided that (i) the Borrower is the
surviving entity, (ii) no Default or Unmatured Default has occurred or will
occur as a result of such merger or consolidation and (iii) the Administrative
Agent has received a certificate from the Borrower showing that the Borrower
would be in pro forma compliance with the terms of this Agreement after giving
effect to such merger or consolidation.
6.13 Sale of Assets. The Borrower will not, nor will it permit any Subsidiary
to, lease, sell, transfer or otherwise dispose of its Property, to any other
Person except:
(a) sales of inventory in the ordinary course of business; and
(b) leases, sales, transfers or other dispositions of its Property that,
together with all other Property of the Borrower and its Subsidiaries previously
leased, sold or disposed of (other than inventory or Investments (other than
Investments in Subsidiaries) sold in the ordinary course of business) as
permitted by this Section 6.13 since the Closing Date, do not constitute a
Substantial Portion of the Property of the Borrower and its Subsidiaries.
6.14 Investments and Acquisitions. The Borrower will not, nor will it permit any
Subsidiary to, make or suffer to exist any Investment (including, without
limitation, loans and advances to, and other Investments in, Subsidiaries), or
commitments therefor, or to create any Subsidiary or to become or remain a
partner in any partnership or joint venture, or to make any Acquisitions,
except:
(a) Cash Equivalent Investments;
(b) Investments in debt securities rated A- or better by S&P, A3 or better by
Moody’s or NAIC-1 or better by the NAIC;
(c) existing Investments in Subsidiaries and other Investments in existence on
the Closing Date;
(d) Investments in debt securities rated less than A- by S&P, A3 by Moody’s or
NAIC-1 by the NAIC but BBB- or better by S&P, Baa3 or better by Moody’s or
NAIC-2 or better by the NAIC; provided, that all such Investments under this
clause (d) do not exceed, in the aggregate at any one time outstanding, ten
percent (10%) of the combined Investments of the Borrower and its Subsidiaries;
provided, further, that if any such Investment ceases to meet such ratings
requirements, then such Investment shall be permitted hereby for a period of one
hundred and eighty (180) days after the date on which such ratings requirement
is no longer satisfied;

 

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(e) Investments in debt securities not satisfying any of the standards,
including the percentage limitations, set forth in clauses (b) or (d) above in
an aggregate amount not exceeding 5% of Consolidated Net Worth of the Borrower
and its Consolidated Subsidiaries;
(f) Investments by the Borrower (not including Investments in Subsidiaries) in
equity securities in an aggregate amount not to exceed 20% of the Consolidated
Net Worth of the Borrower and its Consolidated Subsidiaries; provided that no
single Investment in equity securities shall be in an amount in excess of 5% of
the Consolidated Net Worth of the Borrower and its Consolidated Subsidiaries;
(g) other Investments after the Closing Date in an aggregate amount not to
exceed 5% of Consolidated Net Worth of the Borrower and its Consolidated
Subsidiaries;
(h) Acquisitions in an aggregate amount not to exceed 5% of Consolidated Net
Worth of the Borrower and its Consolidated Subsidiaries in any Fiscal Year; and
(i) Investments by Navigators in Wholly-Owned Subsidiaries of Navigators
(including new Wholly-Owned Subsidiaries of Navigators);
provided that the Borrower will not, and will not permit any Subsidiary to, make
any Investments not in conformity with its then applicable investment
guidelines.
6.15 Contingent Obligations. The Borrower will not, nor will it permit any
Subsidiary to, make or suffer to exist any Contingent Obligation (including,
without limitation, any Contingent Obligation with respect to the obligations of
a Subsidiary), except (a) by endorsement of instruments for deposit or
collection in the ordinary course of business, (b) Contingent Obligations in
respect of Letters of Credit and (c) obligations with respect to letters of
credit not issued pursuant to this Agreement with MUL or NCUL as applicant so
long as none of the Borrower or its Subsidiaries is a co-applicant with respect
thereto or otherwise guaranties such obligations; provided, however, that the
Borrower or any of its Wholly-Owned Subsidiaries may guarantee (i) the
obligations of any Person that is its or its Subsidiary’s employee so long as
the aggregate amount of all such guaranteed obligations, taken together with the
aggregate amount of any and all loans to such Persons by the Borrower in
accordance with Section 6.14 outstanding at any time do not in the aggregate
exceed $500,000 and (ii) the obligations of any Wholly-Owned Subsidiary under
office space leases for space used by such Wholly-Owned Subsidiary.

 

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6.16 Liens. The Borrower will not, nor will it permit any Subsidiary to, create,
incur, or suffer to exist any Lien in, of or on the Property of the Borrower or
any of its Subsidiaries, except:
(a) Liens for taxes, assessments or governmental charges or levies on its
Property if the same shall not at the time be delinquent or thereafter can be
paid without penalty, or are being contested in good faith and by appropriate
proceedings and for which adequate reserves in accordance with Agreement
Accounting Principles shall have been set aside on its books;
(b) Liens imposed by law, such as carriers’, warehousemen’s and mechanics’ Liens
and other similar Liens arising in the ordinary course of business which secure
the payment of obligations not more than sixty (60) days past due or which are
being contested in good faith by appropriate proceedings and for which adequate
reserves shall have been set aside on its books;
(c) Liens arising out of pledges or deposits under worker’s compensation laws,
unemployment insurance, old age pensions, or other social security or retirement
benefits, or similar legislation;
(d) Utility easements, building restrictions and such other encumbrances or
charges against real property as are of a nature generally existing with respect
to properties of a similar character and which do not in any material way affect
the marketability of the same or interfere with the use thereof in the business
of the Borrower or its Subsidiaries;
(e) Liens existing on the Closing Date and described in Schedule 6.16 hereto;
(f) Liens in favor of the Administrative Agent, for the benefit of the Secured
Parties, granted pursuant to the Security Documents;
(g) Deposits of cash or securities with or on behalf of state insurance
departments reflected in the Insurance Subsidiaries’ Statutory Financial
Statements;
(h) Deposits of cash or securities by the Borrower with Lloyd’s;
(i) Liens on assets subject to capital leases permitted under Section 6.11(d);
and
(j) Liens, in addition to the Liens listed above, securing Indebtedness in an
aggregate amount at any time not exceeding $10,000,000.
6.17 Affiliates. The Borrower will not, and will not permit any Subsidiary to,
enter into any transaction (including, without limitation, the purchase or sale
of any Property or service) with, or make any payment or transfer to (other than
dividends and stock repurchases permitted under Section 6.10), any Affiliate
except in the ordinary course of business and pursuant to the reasonable
requirements of the Borrower’s or such Subsidiary’s business and upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary than the
Borrower or such Subsidiary would obtain in a comparable arms-length
transaction.
6.18 Amendments to Agreements. The Borrower will not, and will not permit any
Subsidiary to, amend, waive, modify or terminate any of its constituent
documents in any manner that could be expected to have a negative effect in any
material respect on the Secured Parties.

 

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6.19 Change in Fiscal Year. The Borrower shall not, nor shall it permit any
Subsidiary to, change its Fiscal Year to end on any date other than December 31
of each year.
6.20 Inconsistent Agreements. The Borrower shall not, nor shall it permit any
Subsidiary to, enter into any indenture, agreement, instrument or other
arrangement which, (a) directly or indirectly prohibits or restrains, or has the
effect of prohibiting or restraining, or imposes materially adverse conditions
upon, the incurrence of the Obligations, the granting of Liens to secure the
Obligations, the amending of the Facility Documents or the ability of any
Subsidiary to (i) pay dividends or make other distributions on its capital
stock, (ii) make loans or advances to the Borrower or (iii) repay loans or
advances from the Borrower or (b) contains any provision which would be violated
or breached by the issuance of Letters of Credit or by the performance by the
Borrower or any Subsidiary of any of its Obligations under any Facility
Document.
6.21 Reinsurance. (a) The Borrower shall cause each Insurance Subsidiary to
maintain reinsurance protection with respect to each individual insurance policy
written by such Insurance Subsidiary which reinsurance protection, in the event
of a loss, limits the net loss of such Insurance Subsidiary under such insurance
policy to 2.5% or less of the Statutory Surplus of such Insurance Subsidiary.
For purposes of this Section 6.21(a), the term “net loss” shall mean the loss
and loss adjustment expenses incurred by the Insurance Subsidiary under an
insurance policy net of any amounts recoverable or recovered from reinsurers
with respect to such loss and loss adjustment expenses without regard to any
reinstatement premiums paid or payable to such reinsurer.
(b) The Borrower shall not cause or permit an Insurance Subsidiary to enter into
or maintain, as a cedent, reinsurance agreements or retrocession agreements with
any Person other than an Approved Reinsurer; provided, however, that the
foregoing shall not require an Insurance Subsidiary to terminate a reinsurance
agreement or retrocession agreement if such Person ceases to be an Approved
Reinsurer due to a downgrade by The A.M. Best Company, Inc. or S&P and such
reinsurance or retrocession agreement cannot be replaced on commercially
reasonable terms.
(c) The Borrower shall not cause or permit an Insurance Subsidiary to enter into
or maintain, as a cedent, reinsurance agreements or retrocession agreements with
any Person which do not comply with the guidelines for reinsurance by Insurance
Subsidiaries set forth on Schedule 6.21 hereto, as amended with the consent of
the Lenders (the “Reinsurance Guidelines”); provided, however, that the
foregoing shall not require an Insurance Subsidiary to terminate a reinsurance
agreement or retrocession agreement if such Person ceases to be an Approved
Reinsurer due to a downgrade by The A.M. Best Company, Inc. or S&P and such
reinsurance or retrocession agreement cannot be replaced on commercially
reasonable terms.
6.22 Stock of Subsidiaries. The Borrower shall not sell or otherwise dispose of
(including the granting of any security interest in) any shares of capital stock
of any Subsidiary other than pursuant to the Security Agreement, or permit any
Subsidiary to issue additional shares of its capital stock, except the minimum
number of directors’ qualifying shares required by applicable law.

 

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6.23 Financial Covenants.
(a) Minimum Consolidated Tangible Net Worth. The Borrower will at all times
maintain Consolidated Tangible Net Worth of not less than $672,000,000.
(b) Minimum Statutory Surplus. The Borrower will at all times cause Navigators
Insurance Subsidiaries to maintain an aggregate Statutory Surplus of not less
than $549,000,000.
(c) Leverage Ratio. The Borrower will not permit the Leverage Ratio to exceed
0.30 to 1.0 at any time.
(d) Minimum Risk-Based Capital. The Borrower will at all times cause each
Significant Insurance Subsidiary to maintain a ratio of (a) Total Adjusted
Capital (as defined in the Risk-Based Capital Act or in the rules and procedures
prescribed from time to time by the NAIC with respect thereto) to (b) the
Company Action Level RBC (as defined in the Risk-Based Capital Act or in the
rules and procedures prescribed from time to time by the NAIC with respect
thereto) of at least 150%.
(e) Primary FAL. The aggregate amount of Funds at Lloyd’s provided by the
Corporate Members of the Supported Syndicate shall not be less than the highest
of (i) 25% of the total Funds at Lloyd’s required to be provided to the
Supported Syndicate and (ii) 90% of the aggregate of the three highest net RDS
scenarios for any Year of Account.
(f) RDS. The net loss on the Supported Syndicate from any Lloyd’s prescribed RDS
shall not at any time exceed 20% of the total Supported Syndicate capacity for
any Year of Account.
6.24 Additional Pledge. Effective upon any Person becoming a Significant
Subsidiary, the parent thereof shall pledge the stock or other equity interests
thereof to the Administrative Agent for the benefit of the Secured Parties
pursuant to documentation reasonably acceptable to the Administrative Agent
provided that no pledge of the stock of NSIC shall be required so long as NSIC
is not a direct Subsidiary of the Borrower.
6.25 Primary FAL. (a) Subject to the duties of Lloyd’s as trustee of all such
Funds at Lloyd’s and to any conditions and requirements prescribed under the
Membership Byelaw which are applicable, the Borrower will cause the Corporate
Members and the Managing Agent to use their best efforts to cause the Primary
FAL of the Supported Syndicate to be applied to its obligations and only after
such Primary FAL has been exhausted, to draw under the Letters of Credit.
(b) No later than December 1, 2011, the Borrower shall use its reasonable
efforts to obtain the Lloyd’s Comfort Letter for the 2012 Year of Account.

 

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ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events shall constitute a
Default:
7.1 Any representation or warranty made or deemed made by or on behalf of the
Borrower or any of its Subsidiaries to the Lenders or the Administrative Agent
under or in connection with this Agreement, any other Facility Document, any
Letter of Credit or any certificate or information delivered in connection with
this Agreement or any other Facility Document shall be false in any material
respect on the date as of which made or deemed made.
7.2 Nonpayment of (a) any principal of any Reimbursement Obligation when due, or
(b) any interest upon any commitment or other fee or obligations under any of
the Facility Documents within five (5) days after written notice from the
Administrative Agent or any Lender.
7.3 The breach by the Borrower of any of the terms or provisions of
Sections 2.8, 6.2, 6.3, Sections 6.10 through 6.13, Sections 6.15 through 6.20
or Sections 6.22 through 6.23.
7.4 The breach by the Borrower (other than a breach which constitutes a Default
under Sections 7.1, 7.2 or 7.3) of any of the terms or provisions of this
Agreement which is not remedied within thirty (30) days (or in the case of
Section 6.14, ten (10) days) after the Borrower has knowledge thereof or written
notice from the Administrative Agent or any Lender.
7.5 Failure of the Borrower or any of its Subsidiaries to pay any Indebtedness
aggregating in excess of $2,500,000 when due; or the default by the Borrower or
any of its Subsidiaries in the performance of any term, provision or condition
contained in any agreement under which any such Indebtedness was created or is
governed, or the occurrence of any other event or existence of any other
condition, the effect of any of which is to cause, or to permit the holder or
holders of such Indebtedness to cause, such Indebtedness to become due prior to
its stated maturity; or any such Indebtedness of the Borrower or any of its
Subsidiaries shall be declared to be due and payable or required to be prepaid
(other than by a regularly scheduled payment) prior to the stated maturity
thereof.
7.6 The Borrower or any of its Subsidiaries shall (a) have an order for relief
entered with respect to it under the Federal bankruptcy laws as now or hereafter
in effect, (b) make an assignment for the benefit of creditors, (c) apply for,
seek, consent to, or acquiesce in, the appointment of a receiver, custodian,
trustee, examiner, liquidator or similar official for it or any Substantial
Portion of its Property, (d) institute any proceeding seeking an order for
relief under the Federal bankruptcy laws as now or hereafter in effect or
seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
winding up, liquidation, reorganization, arrangement, adjustment or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed against it,
(e) take any corporate action to authorize or effect any of the foregoing
actions set forth in this Section 7.6, (f) fail to contest in good faith any
appointment or proceeding described in Section 7.7 or (g) become unable to pay,
not pay, or admit in writing its inability to pay, its debts generally as they
become due.

 

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7.7 Without the application, approval or consent of the Borrower or any of its
Subsidiaries, a receiver, trustee, examiner, liquidator or similar official
shall be appointed for the Borrower or any of its Subsidiaries or any
Substantial Portion of its Property, or a proceeding described in Section 7.6(d)
shall be instituted against the Borrower or any of its Subsidiaries and such
appointment continues undischarged or such proceeding continues undismissed or
unstayed for a period of thirty (30) consecutive days.
7.8 Any court, government or governmental agency shall condemn, seize or
otherwise appropriate, or take custody or control of (each a “Condemnation”),
all or any portion of the Property of the Borrower and its Subsidiaries which,
when taken together with all other Property of the Borrower and its Subsidiaries
so condemned, seized, appropriated, or taken custody or control of, during the
twelve-month period ending with the month in which any such Condemnation occurs,
constitutes a Substantial Portion.
7.9 The Borrower or any of its Subsidiaries shall fail within thirty (30) days
to pay, bond or otherwise discharge one or more (a) final, nonappealable
judgments or orders for the payment of money in excess of $2,500,000 (or the
equivalent thereof in currencies other than U.S. Dollars) in the aggregate, or
(b) final, nonappealable nonmonetary judgments or orders which, individually or
in the aggregate, could reasonably be expected to have a Material Adverse
Effect, which judgment(s), in any such case, is/are not stayed on appeal or
otherwise being appropriately contested in good faith.
7.10 Any Reportable Event shall occur in connection with any Plan.
7.11 The Borrower or any other member of the Controlled Group shall have been
notified by the sponsor of a Multiemployer Plan that it has incurred withdrawal
liability to such Multiemployer Plan in an amount which, when aggregated with
all other amounts required to be paid to Multiemployer Plans by the Borrower or
any other member of the Controlled Group as withdrawal liability (determined as
of the date of such notification), exceeds $2,500,000.
7.12 The Borrower or any other member of the Controlled Group shall have been
notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is
in reorganization or is being terminated, within the meaning of Title IV of
ERISA, if as a result of such reorganization or termination the aggregate annual
contributions of the Borrower and the other members of the Controlled Group
(taken as a whole) to all Multiemployer Plans which are then in reorganization
or being terminated have been or will be increased over the amounts contributed
to such Multiemployer Plans for the respective plan years of each such
Multiemployer Plan immediately preceding the plan year in which the
reorganization or termination occurs by an amount exceeding $2,500,000.
7.13 The Borrower or any of its Subsidiaries shall (a) be the subject to any
proceeding or investigation pertaining to the release by the Borrower, any of
its Subsidiaries or any other Person of any toxic or hazardous waste or
substance into the environment, or (b) violate any Environmental Law, which, in
the case of an event described in clause (a) or (b), could reasonably be
expected to have a Material Adverse Effect.

 

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7.14 Any Change in Control shall occur.
7.15 The occurrence of any “default”, as defined in any Facility Document (other
than this Agreement) or the breach of any of the terms or provisions of any
Facility Document (other than this Agreement), which default or breach continues
beyond any period of grace therein provided.
7.16 There shall occur a change in the business, Property, condition (financial
or otherwise) or results of operations of the Borrower and its Subsidiaries
which has a Material Adverse Effect.
7.17 The Borrower or any of its Subsidiaries incurs or becomes subject to action
or threatened action of any Governmental Authority, including, without
limitation, a fine, penalty, cease and desist order or revocation, suspension or
limitation of a License, the effect of which could reasonably be expected to
have a Material Adverse Effect.
7.18 Any Security Document shall for any reason fail to create a valid and
perfected, first priority security interest in any collateral purported to be
covered thereby, except as permitted by the terms of such Security Document, or
any Facility Document, once executed, shall fail to remain in full force or
effect or any action shall be taken to discontinue or to assert the invalidity
or unenforceability of any Facility Document.
7.19 Lloyd’s shall draw under a Letter of Credit except as permitted by the
terms of the Lloyd’s Comfort Letter or Lloyd’s shall advise that it will not
abide by the terms of the Lloyd’s Comfort Letter.
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1 Acceleration. If any Default described in Section 7.6 or 7.7 occurs with
respect to the Borrower, the obligations of the Letter of Credit Agent and the
Lenders to issue Letters of Credit hereunder shall automatically terminate and
the Obligations shall immediately become due and payable without any election or
action on the part of the Letter of Credit Agent, the Administrative Agent or
any Lender. If any other Default occurs, the Required Lenders (or the
Administrative Agent with the consent of the Required Lenders) may terminate or
suspend the obligations of the Letter of Credit Agent and the Lenders to issue
Letters of Credit hereunder, or declare the Obligations to be due and payable,
or both, whereupon the Obligations shall become immediately due and payable,
without presentment, demand, protest or notice of any kind, all of which the
Borrower hereby expressly waives. In addition to the foregoing, following the
occurrence and during the continuance of a Default, so long as any Letter of
Credit has not been fully drawn and has not been canceled or expired by its
terms, upon demand by the Administrative Agent (which demand shall be made upon
the request of the Required Lenders), the Borrower shall deposit Collateral as
required by Section 2.9(g).

 

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If, within thirty (30) days after acceleration of the maturity of the
Obligations or termination of the obligations of the Letter of Credit Agent and
the Lenders to issue Letters of Credit hereunder as a result of any Default
(other than any Default as described in Section 7.6 or 7.7 with respect to the
Borrower) and before any judgment or decree for the payment of the Obligations
due shall have been obtained or entered, the Required Lenders (in their sole
discretion) may direct the Administrative Agent to rescind and annul such
acceleration and/or termination.
8.2 Amendments. Subject to the provisions of this Article VIII, the Required
Lenders (or the Administrative Agent with the consent of the Required Lenders)
and the Borrower may enter into agreements supplemental hereto for the purpose
of adding or modifying any provisions to the Facility Documents or changing in
any manner the rights of the Lenders or the Borrower hereunder or waiving any
Default hereunder; provided, however, that no such supplemental agreement shall,
without the consent of each Lender:
(a) Extend the final maturity of any Obligations or forgive all or any portion
of the Reimbursement Obligations, or reduce the rate or extend the time of
payment of interest or fees (including without limitation letter of credit fees)
hereunder;
(b) Reduce the percentage specified in the definition of Required Lenders;
(c) Reduce the amount of or extend the date for payment of Reimbursement
Obligations under Section 2.4, or increase the amount of the Commitment of any
Lender hereunder;
(d) Extend the Letter of Credit Availability Termination Date; permit any Letter
of Credit to have an expiry date beyond four years after the Expiry Notice is
issued;
(e) Permit any amendment of Section 8.4;
(f) Release any guarantor of any Obligations or, except as provided in the
Security Agreement, release any of the collateral for the Obligations or
decrease the amount of collateral required under Sections 2.9 or 8.1;
(g) Permit any assignment by the Borrower of its Obligations or its rights
hereunder; or
(h) Permit any amendment of the Reinsurance Guidelines;
provided, further, that no such supplemental agreement shall, without the
consent of each Lender, amend this Section 8.2. No amendment of any provision of
this Agreement relating to the Administrative Agent or the Letter of Credit
Agent shall be effective without the written consent of the Administrative Agent
or the Letter of Credit Agent, as applicable. The Administrative Agent may waive
payment of the fee required under Section 12.3(b) without obtaining the consent
of any other party to this Agreement. Notwithstanding anything to the contrary
herein, no Defaulting Lender shall have any right to approve or disapprove any
amendment, waiver or consent hereunder, except that the commitment of such
Lender may not be increased or extended without the consent of such Lender.

 

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8.3 Preservation of Rights. No delay or omission of the Lenders, the Letter of
Credit Agent or the Administrative Agent to exercise any right under the
Facility Documents shall impair such right or be construed to be a waiver of any
Default or an acquiescence therein, and the issuance of a Letter of Credit
notwithstanding the existence of a Default or the inability of the Borrower to
satisfy the conditions precedent to such Letter of Credit shall not constitute
any waiver or acquiescence. Any single or partial exercise of any such right
shall not preclude other or further exercise thereof or the exercise of any
other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Facility Documents whatsoever shall be valid
unless in writing signed by the Lenders required pursuant to Section 8.2, and
then only to the extent in such writing specifically set forth. All remedies
contained in the Facility Documents or by law afforded shall be cumulative and
all shall be available to the Administrative Agent and the Lenders until the
Obligations have been paid in full.
8.4 Application of Funds. After the occurrence of a Default, any amounts
received on account of the Obligations (including proceeds of Collateral) shall
be applied by the Administrative Agent in the following order:
First, to payment of that portion of the Obligations constituting fees,
indemnities, expenses and other amounts (including fees, charges and
disbursements of counsel to the Administrative Agent and amounts payable under
Article III) payable to the Administrative Agent and the Letter of Credit Agent
in its capacity as such;
Second, to payment of that portion of the Obligations constituting fees,
indemnities and other amounts (other than Reimbursement Obligations, interest
and Letter of Credit fees) payable to the Lenders (including fees, charges and
disbursements of counsel to the respective Lenders (including, without
duplication, fees and time charges for attorneys who may be employees of any
Lender) and amounts payable under Article III), ratably among them in proportion
to the respective amounts described in this clause Second payable to them;
Third, to payment of that portion of the Obligations constituting accrued and
unpaid Letter of Credit fees and interest on the Reimbursement Obligations and
other Obligations, ratably among the Lenders in proportion to the respective
amounts described in this clause Third payable to them;
Fourth, to payment of that portion of the Obligations constituting unpaid
Reimbursement Obligations, ratably among the Lenders in proportion to the
respective amounts described in this clause Fourth held by them;
Fifth, to the Administrative Agent for the account of the Lenders to be held as
Collateral for that portion of Letter of Credit Obligations comprised of the
aggregate undrawn amount of Letters of Credit; and
Last, the balance, if any, after all of the Obligations have been indefeasibly
paid in full and the Aggregate Commitment has been terminated, to the Borrower
or as otherwise required by Law.
Amounts held as Collateral for the aggregate undrawn amount of Letters of Credit
pursuant to clause Fifth above shall be applied to satisfy drawings under such
Letters of Credit as they occur. If any Collateral remains after all Letters of
Credit have either been fully drawn or expired, such remaining amount shall be
applied to the other Obligations, if any, in the order set forth above.

 

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ARTICLE IX
GENERAL PROVISIONS
9.1 Survival of Representations. All representations and warranties of the
Borrower contained in this Agreement or in any Facility Document shall survive
the issuance of the Letters of Credit herein contemplated.
9.2 Governmental Regulation. Anything contained in this Agreement to the
contrary notwithstanding, no Lender shall be obligated to extend credit to the
Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
9.3 Headings. Section headings in the Facility Documents are for convenience of
reference only, and shall not govern the interpretation of any of the provisions
of the Facility Documents.
9.4 Entire Agreement. The Facility Documents embody the entire agreement and
understanding among the Borrower, the Administrative Agent, and the Lenders and
supersede all prior agreements and understandings among the Borrower, the
Administrative Agent, and the Lenders relating to the subject matter thereof
other than the mandate letter dated March 7, 2011 in favor of ING Bank N.V.,
London Branch (the “Fee Letter”).
9.5 Numbers of Documents. All statements, notices, closing documents, and
requests hereunder shall be furnished to the Administrative Agent with
sufficient counterparts so that the Administrative Agent may furnish one to each
of the Lenders.
9.6 Several Obligations; Benefits of this Agreement. The respective obligations
of the Lenders hereunder are several and not joint and no Lender shall be the
partner or Administrative Agent of any other (except to the extent to which the
Administrative Agent is authorized to act as such). The failure of any Lender to
perform any of its obligations hereunder shall not relieve any other Lender from
any of its obligations hereunder. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the parties to this
Agreement and their respective successors and assigns, provided, however, that
the parties hereto expressly agree that the Arranger shall enjoy the benefits of
the provisions of Sections 9.7, 9.11 and 10.12 to the extent specifically set
forth therein and shall have the right to enforce such provisions on its own
behalf and in its own name to the same extent as if it were a party to this
Agreement.

 

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9.7 Expenses; Indemnification. (a) The Borrower shall reimburse the
Administrative Agent, the Security Trustee and the Arranger for any costs,
internal charges and out-of-pocket expenses (including reasonable attorneys’
fees and time charges of attorneys for the Administrative Agent) paid or
incurred by the Administrative Agent, the Security Trustee or the Arranger in
connection with the preparation, negotiation, execution, delivery, syndication,
review, amendment, modification, and administration of the Facility Documents.
The Borrower also agrees to reimburse the Administrative Agent, the Security
Trustee, the Arranger and the Lenders for any costs, internal charges and
out-of-pocket expenses (including reasonable attorneys’ fees and time charges of
attorneys for the Administrative Agent, the Arranger and the Lenders), paid or
incurred by the Administrative Agent, the Security Trustee, the Arranger or any
Lender in connection with the investigation, collection and enforcement of the
Facility Documents.
(b) The Borrower hereby further agrees to indemnify the Administrative Agent,
the Security Trustee, the Arranger, each Lender, each Affiliate of a Lender, and
the directors, officers, partners and employees of any of the foregoing against
all losses, claims, damages, penalties, judgments, liabilities and expenses
(including, without limitation, all expenses of litigation or preparation
therefor whether or not the Administrative Agent, the Security Trustee, the
Arranger or any Lender is a party thereto) which any of them may pay or incur
arising out of or relating to this Agreement, the other Facility Documents, the
transactions contemplated hereby or the direct or indirect application or
proposed application of the proceeds of any Letter of Credit hereunder except to
the extent that they have resulted from the gross negligence or willful
misconduct of the party seeking indemnification. The obligations of the Borrower
under this Section 9.7 shall survive the termination of this Agreement.
9.8 Accounting. Except as provided to the contrary herein, all accounting terms
used herein shall be interpreted and all accounting determinations hereunder
shall be made in accordance with Agreement Accounting Principles. In the event
the pages, columns, lines or sections of the Annual Statement referenced herein
are changed or renumbered, all such references shall be deemed references to
such page, column, line or section as so renumbered or changed.
9.9 Severability of Provisions. Any provision in any Facility Document that is
held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as
to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Facility Documents are declared to be severable.
9.10 Nonliability of Lenders. The relationship between the Borrower on the one
hand and the Lenders and the Administrative Agent on the other hand shall be
solely that of borrower and lender. Neither the Administrative Agent, the
Arranger nor any Lender shall have any fiduciary responsibilities to the
Borrower. Neither the Administrative Agent, the Arranger nor any Lender
undertakes any responsibility to the Borrower to review or inform the Borrower
of any matter in connection with any phase of the Borrower’s business or
operations. The Borrower agrees that neither the Administrative Agent, the
Arranger nor any Lender shall have liability to the Borrower (whether sounding
in tort, contract or otherwise) for losses suffered by the Borrower in
connection with, arising out of, or in any way related to, the transactions
contemplated and the relationship established by the Facility Documents, or any
act, omission or event occurring in connection therewith, unless it is
determined in a final non-appealable judgment by a court of competent
jurisdiction that such losses resulted from the gross negligence or willful
misconduct of the party from which recovery is sought. Neither the
Administrative Agent, the Arranger nor any Lender shall have any liability with
respect to, and the Borrower hereby waives, releases and agrees not to sue for,
any special, indirect, punitive or consequential damages suffered by the
Borrower in connection with, arising out of, or in any way related to the
Facility Documents or the transactions contemplated thereby.

 

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9.11 Confidentiality. Each Lender agrees to hold any confidential information
which it may receive from the Borrower pursuant to this Agreement in confidence,
except for disclosure (a) to its Affiliates and to other Lenders and their
respective Affiliates, (b) to legal counsel, accountants, and other professional
advisors to such Lender or to a Transferee, (c) to regulatory officials, (d) to
any Person as requested pursuant to or as required by law, regulation, or legal
process, (e) to any Person in connection with any legal proceeding to which such
Lender is a party, (f) to such Lender’s direct or indirect contractual
counterparties in swap agreements or to legal counsel, accountants and other
professional advisors to such counterparties and (g) permitted by Section 12.4;
provided, that any recipient of such disclosure shall be advised by such Lender
of the confidentiality requirements herein set forth.
9.12 Nonreliance. Each Lender hereby represents that it is not relying on or
looking to any margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) for the repayment of the Obligations
provided for herein.
9.13 Disclosure. The Borrower and each Lender hereby (a) acknowledge and agree
that ING Bank N.V., London Branch and/or its Affiliates from time to time may
hold other investments in, make other loans to or have other relationships with
the Borrower, and (b) waive any liability of ING Bank N.V., London Branch or
such Affiliate to the Borrower or any Lender, respectively, arising out of or
resulting from such investments, loans or relationships other than liabilities
arising out of the gross negligence or willful misconduct of ING Bank N.V.,
London Branch or its Affiliates.
9.14 USA Patriot Act Notification. Each Lender hereby notifies the Borrower that
pursuant to the requirements of the USA Act (Title III of Pub. L. 107-56 (signed
into law on October 26, 2001)) (the “Act”), it is required to obtain, verify and
record information that identifies the Borrower, which information includes the
name and address of the Borrower and other information that will allow such
Lender to identify the Borrower in accordance with the Act. The Borrower agrees
to cooperate with each Lender and provide true, accurate and complete
information to such Lender in response to any such request.
9.15 Existing Credit Agreement. The Borrower and the Lenders acknowledge
(a) that the Existing Credit Agreement will remain outstanding until such time
as the “Lloyd’s Letters of Credit” (as such term is defined in the Existing
Credit Agreement) have been released or cancelled by Lloyd’s, as beneficiary,
(b) that if the “Lloyd’s Letters of Credit” have not been released or cancelled
by close of business March 31, 2011, that the Borrower shall be required to post
collateral pursuant to the terms of the Existing Credit Agreement and (c) that
the stock of Navigators will remain pledged to secure the obligations under the
Existing Credit Agreement. Each Lender, by execution hereof (i) agrees that the
continued existence of the Existing Credit Agreement and collateralization of
any obligations thereunder (including the Existing Credit Agreement Lien) as
provided therein shall not constitute an Event of Default hereunder unless the
Existing Credit Agreement has not terminated and all amounts due thereunder have
not been paid on the date which is two Business Days after all “Lloyd’s Letters
of Credit” issued thereunder are released or cancelled by Lloyd’s, as
beneficiary and (ii) waives any “Event of Default” arising under the Existing
Credit Agreement and the Pledge Agreement (as defined in the Existing Credit
Agreement) as a result of the execution and performance of this Agreement, the
incurrence of “Indebtedness” (as such term is defined in the Existing Credit
Agreement) hereunder and the pledge of the stock of Navigators or any other
Collateral to secure the Obligations.

 

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ARTICLE X
THE AGENT
10.1 Appointment; Nature of Relationship. ING Bank N.V., London Branch is hereby
appointed by each of the Lenders as Administrative Agent (herein referred to as
the “Administrative Agent”) hereunder and under each other Facility Document,
and each of the Lenders irrevocably authorizes the Administrative Agent to act
as the Administrative Agent of such Lender with the rights and duties expressly
set forth herein and in the other Facility Documents. The Administrative Agent
agrees to act as such Administrative Agent upon the express conditions contained
in this Article X. Notwithstanding the use of the defined term “Administrative
Agent,” it is expressly understood and agreed that the Administrative Agent
shall not have any fiduciary responsibilities to any Lender by reason of this
Agreement or any other Facility Document and that the Administrative Agent is
merely acting as the Administrative Agent of the Lenders with only those duties
as are expressly set forth in this Agreement and the other Facility Documents.
In its capacity as the Lenders’ Administrative Agent, the Administrative Agent
(a) does not hereby assume any fiduciary duties to any of the Lenders, (b) is a
“representative” of the Lenders within the meaning of Section 9-105 of the
Uniform Commercial Code and (c) is acting as an independent contractor, the
rights and duties of which are limited to those expressly set forth in this
Agreement and the other Facility Documents. Each of the Lenders hereby agrees to
assert no claim against the Administrative Agent on any agency theory or any
other theory of liability for breach of fiduciary duty, all of which claims each
Lender hereby waives.
10.2 Powers. The Administrative Agent shall have and may exercise such powers
under the Facility Documents as are specifically delegated to the Administrative
Agent by the terms of each thereof, together with such powers as are reasonably
incidental thereto. The Administrative Agent shall have no implied duties to the
Lenders, or any obligation to the Lenders to take any action thereunder except
any action specifically provided by the Facility Documents to be taken by the
Administrative Agent.
10.3 General Immunity. Neither the Administrative Agent nor any of its
directors, officers, agents or employees shall be liable to the Borrower, the
Lenders or any Lender for any action taken or omitted to be taken by it or them
hereunder or under any other Facility Document or in connection herewith or
therewith except to the extent such action or inaction is determined in a final
non-appealable judgment by a court of competent jurisdiction to have arisen from
the gross negligence or willful misconduct of such Person.

 

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10.4 No Responsibility for Recitals, etc. Neither the Administrative Agent nor
any of its directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into, or verify: (a) any statement, warranty
or representation made in connection with any Facility Document or any borrowing
hereunder, (b) the performance or observance of any of the covenants or
agreements of any obligor under any Facility Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender, (c) the satisfaction of any condition specified in Article IV, except
receipt of items required to be delivered solely to the Administrative Agent,
(d) the existence or possible existence of any Default or Unmatured Default,
(e) the validity, enforceability, effectiveness, sufficiency or genuineness of
any Facility Document or any other instrument or writing furnished in connection
therewith, (f) the value, sufficiency, creation, perfection or priority of any
Lien in any collateral security or (g) the financial condition of the Borrower
or any guarantor of any of the Obligations or of any of the Borrower’s or any
such guarantor’s respective Subsidiaries. The Administrative Agent shall have no
duty to disclose to the Lenders information that is not required to be furnished
by the Borrower to the Administrative Agent at such time, but is voluntarily
furnished by the Borrower to the Administrative Agent (either in its capacity as
Administrative Agent or in its individual capacity).
10.5 Action on Instructions of Lenders. The Administrative Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder and
under any other Facility Document in accordance with written instructions signed
by the Required Lenders, and such instructions and any action taken or failure
to act pursuant thereto shall be binding on all of the Lenders. The Lenders
hereby acknowledge that the Administrative Agent shall be under no duty to take
any discretionary action permitted to be taken by it pursuant to the provisions
of this Agreement or any other Facility Document unless it shall be requested in
writing to do so by the Required Lenders. The Administrative Agent shall be
fully justified in failing or refusing to take any action hereunder and under
any other Facility Document unless it shall first be indemnified to its
satisfaction by the Lenders pro-rata against any and all liability, cost and
expense that it may incur by reason of taking or continuing to take any such
action.
10.6 Employment of Administrative Agent and Counsel. The Administrative Agent
may execute any of its duties as Administrative Agent hereunder and under any
other Facility Document by or through employees, agents, and attorneys-in-fact
and shall not be answerable to the Lenders, except as to money or securities
received by it or its authorized agents, for the default or misconduct of any
such agents or attorneys-in-fact selected by it with reasonable care. The
Administrative Agent shall be entitled to advice of counsel concerning the
contractual arrangement between the Administrative Agent and the Lenders and all
matters pertaining to the Administrative Agent’s duties hereunder and under any
other Facility Document.
10.7 Reliance on Documents; Counsel. The Administrative Agent shall be entitled
to rely upon any notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Administrative Agent,
which counsel may be employees of the Administrative Agent.

 

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10.8 Administrative Agent’s Reimbursement and Indemnification. The Lenders agree
to reimburse and indemnify the Administrative Agent ratably in proportion to
their Commitment (or, if the Aggregate Commitment has been terminated, in
proportion to its Commitment immediately prior to such termination) (a) for any
amounts not reimbursed by the Borrower for which the Administrative Agent is
entitled to reimbursement by the Borrower under the Facility Documents, (b) for
any other expenses incurred by the Administrative Agent on behalf of the
Lenders, in connection with the preparation, execution, delivery, administration
and enforcement of the Facility Documents (including, without limitation, for
any expenses incurred by the Administrative Agent in connection with any dispute
between the Administrative Agent and any Lender or between two or more of the
Lenders) and (c) for any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind and
nature whatsoever which may be imposed on, incurred by or asserted against the
Administrative Agent in any way relating to or arising out of the Facility
Documents or any other document delivered in connection therewith or the
transactions contemplated thereby (including, without limitation, for any such
amounts incurred by or asserted against the Administrative Agent in connection
with any dispute between the Administrative Agent and any Lender or between two
or more of the Lenders), or the enforcement of any of the terms of the Facility
Documents or of any such other documents; provided that (i) no Lender shall be
liable for any of the foregoing to the extent any of the foregoing is found in a
final non-appealable judgment by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of the Administrative
Agent and (ii) any indemnification required pursuant to Section 3.5(g) shall,
notwithstanding the provisions of this Section 10.8, be paid by the relevant
Lender in accordance with the provisions thereof. The obligations of the Lenders
under this Section 10.8 shall survive payment of the Obligations and termination
of this Agreement.
10.9 Notice of Default. The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Unmatured Default
hereunder unless the Administrative Agent has received written notice from a
Lender or the Borrower referring to this Agreement describing such Default or
Unmatured Default and stating that such notice is a “notice of default”. In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall give prompt notice thereof to the Lenders.
10.10 Rights as a Lender. In the event the Administrative Agent is a Lender, the
Administrative Agent shall have the same rights and powers hereunder and under
any other Facility Document with respect to its Commitment, and any Letters of
Credit in which it has an interest as any Lender and may exercise the same as
though it were not the Administrative Agent, and the term “Lender” or “Lenders”
shall, at any time when the Administrative Agent is a Lender, unless the context
otherwise indicates, include the Administrative Agent in its individual
capacity. The Administrative Agent and its Affiliates may accept deposits from,
lend money to, and generally engage in any kind of trust, debt, equity or other
transaction, in addition to those contemplated by this Agreement or any other
Facility Document, with the Borrower or any of its Subsidiaries in which the
Borrower or such Subsidiary is not restricted hereby from engaging with any
other Person. The Administrative Agent, in its individual capacity, is not
obligated to remain a Lender.
10.11 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Agent, the Arranger
or any other Lender and based on the financial statements prepared by the
Borrower and such other documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement and the
other Facility Documents. Each Lender also acknowledges that it will,
independently and without reliance upon the Administrative Agent, the Arranger
or any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement and the other Facility Documents.

 

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10.12 Successor Administrative Agent. The Administrative Agent may resign at any
time by giving written notice thereof to the Lenders and the Borrower, such
resignation to be effective upon the appointment of a successor Administrative
Agent or, if no successor Administrative Agent has been appointed, forty-five
days after the retiring Administrative Agent gives notice of its intention to
resign. The Administrative Agent may be removed at any time with or without
cause by written notice received by the Administrative Agent from the Required
Lenders, such removal to be effective on the date specified by the Required
Lenders. Upon any such resignation or removal, the Required Lenders shall have
the right to appoint, on behalf of the Borrower and the Lenders, a successor
Administrative Agent. If no successor Administrative Agent shall have been so
appointed by the Required Lenders within thirty days after the resigning
Administrative Agent’s giving notice of its intention to resign, then the
resigning Administrative Agent may appoint, on behalf of the Borrower and the
Lenders, a successor Administrative Agent. Notwithstanding the previous
sentence, the Administrative Agent may at any time without the consent of the
Borrower or any Lender, appoint any of its Affiliates which is a commercial bank
as a successor Administrative Agent hereunder. If the Administrative Agent has
resigned or been removed and no successor Administrative Agent has been
appointed, the Lenders may perform all the duties of the Administrative Agent
hereunder and the Borrower shall make all payments in respect of the Obligations
to the applicable Lender and for all other purposes shall deal directly with the
Lenders. No successor Administrative Agent shall be deemed to be appointed
hereunder until such successor Administrative Agent has accepted the
appointment. Any such successor Administrative Agent shall be a commercial bank
having capital and retained earnings of at least $100,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the resigning or removed Administrative Agent. Upon the effectiveness of the
resignation or removal of the Administrative Agent, the resigning or removed
Administrative Agent shall be discharged from its duties and obligations
hereunder and under the Facility Documents. After the effectiveness of the
resignation or removal of an Administrative Agent, the provisions of this
Article X shall continue in effect for the benefit of such Administrative Agent
in respect of any actions taken or omitted to be taken by it while it was acting
as the Administrative Agent hereunder and under the other Facility Documents.
The resignation or removal of the Administrative Agent shall also constitute a
resignation or removal of the Letter of Credit Agent unless the Letter of Credit
Agent agrees otherwise.
10.13 Administrative Agents’ Fees. The Borrower agrees to pay to the
Administrative Agent, for its own account, the fees agreed to by the Borrower
and the Administrative Agent pursuant to the Fee Letter.
10.14 Delegation to Affiliates. The Borrower and the Lenders agree that the
Administrative Agent may delegate any of its duties under this Agreement to any
of its Affiliates. Any such Affiliate (and such Affiliate’s directors, officers,
agents and employees) which performs duties in connection with this Agreement
shall be entitled to the same benefits of the indemnification, waiver and other
protective provisions to which the Administrative Agent is entitled under
Articles IX and X.

 

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10.15 Security Trustee. The Security Trustee shall act on behalf of the Lenders
with respect to any Fixed Charge and the documents associated therewith, and
Security Trustee shall have all of the benefits and immunities (A) provided to
the Administrative Agent in this Article X with respect to any acts taken or
omissions suffered by the Security Trustee in connection with it capacity as
Security Trustee as fully as if the term “Administrative Agent” as used in this
Article X includes the Security Trustee as with respect to such acts or
omissions, and (B) as additionally provided herein with respect to Security
Trustee. The Lenders agree to execute such documents as the Security Trustee may
reasonably request to give effect to any assignment pursuant to Section 12.3 or
to enable any Assignee to have the benefits of the lien granted under the Fixed
Charge.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1 Setoff. In addition to, and without limitation of, any rights of the
Lenders under applicable law, if the Borrower becomes insolvent, however
evidenced, or any Default occurs, any and all deposits (including all account
balances, whether provisional or final and whether or not collected or
available) and any other Indebtedness at any time held or owing by any Lender to
or for the credit or account of the Borrower may be offset and applied toward
the payment of the Obligations owing to such Lender, whether or not the
Obligations, or any part hereof, shall then be due.
11.2 Ratable Payments. If any Lender, whether by setoff or otherwise, has
payment made to it upon its Reimbursement Obligations (other than payments
received pursuant to Section 3.1, 3.2 or 3.3) in a greater proportion than that
received by any other Lender, such Lender agrees, promptly upon demand, to
purchase a participation interests in Letters of Credit, as the case may be,
held by the other Lenders so that after such purchase each Lender will hold its
ratable proportion of such participation interests in Letters of Credit. If any
Lender, whether in connection with setoff or amounts which might be subject to
setoff or otherwise, receives collateral or other protection for its Obligations
or such amounts which may be subject to setoff, such Lender agrees, promptly
upon demand, to take such action necessary such that all Lenders share in the
benefits of such collateral ratably in proportion to their Commitments. In case
any such payment is disturbed by legal process, or otherwise, appropriate
further adjustments shall be made.

 

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ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1 Successors and Assigns. The terms and provisions of the Facility Documents
shall be binding upon and inure to the benefit of the Administrative Agent, the
Borrower and the Lenders and their respective successors and assigns, except
that (a) the Borrower shall not have the right to assign its rights or
obligations under the Facility Documents and (b) any assignment by any Lender
must be made in compliance with Section 12.3. Notwithstanding clause (b) of the
foregoing sentence, any Lender may at any time, without the consent of the
Borrower or the Administrative Agent, assign all or any portion of its rights
under this Agreement to a Federal Reserve Bank; provided, however, that no such
assignment to a Federal Reserve Bank shall release the transferor Lender from
its obligations hereunder. The Administrative Agent may treat the Person which
issued any Letter of Credit as the Person who has the Commitment hereunder for
all purposes hereof unless and until such Person complies with Section 12.3 in
the case of an assignment thereof or, in the case of any other transfer, a
written notice of the transfer is filed with the Administrative Agent. Any
assignee or transferee of the rights to any Letter of Credit agrees by
acceptance of such transfer or assignment to be bound by all the terms and
provisions of the Facility Documents. Any request, authority or consent of any
Person, who at the time of making such request or giving such authority or
consent is the owner of the rights to any Letter of Credit, shall be conclusive
and binding on any subsequent holder, transferee or assignee of the rights to
such Letter of Credit, as the case may be.
12.2 Participations.
(a) Permitted Participants; Effect. Any Lender may, in the ordinary course of
its business and in accordance with applicable law, at any time sell to one or
more banks or other entities (“Participants”) participating interests in any
Commitment of such Lender, any interest of such Lender in any Letters of Credit
or any other interest of such Lender under the Facility Documents. In the event
of any such sale by a Lender of participating interests to a Participant, such
Lender’s obligations under the Facility Documents shall remain unchanged, such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, such Lender shall remain the owner of its
interest in any Letters of Credit issued to it in evidence thereof for all
purposes under the Facility Documents, all amounts payable by the Borrower under
this Agreement shall be determined as if such Lender had not sold such
participating interests, and the Borrower and the Administrative Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under the Facility Documents.
(b) Voting Rights. Each Lender shall retain the sole right to approve, without
the consent of any Participant, any amendment, modification or waiver of any
provision of the Facility Documents, except to the extent such amendment,
modification or waiver would require the unanimous consent of the Lenders as
described in Section 8.2.
(c) Benefit of Setoff. The Borrower agrees that each Participant shall be deemed
to have the right of setoff provided in Section 11.1 in respect of its
participating interest in amounts owing under the Facility Documents to the same
extent as if the amount of its participating interest were owing directly to it
as a Lender under the Facility Documents, provided that each Lender shall retain
the right of setoff provided in Section 11.1 with respect to the amount of
participating interests sold to each Participant. The Lenders agree to share
with each Participant, and each Participant, by exercising the right of setoff
provided in Section 11.1, agrees to share with each Lender, any amount received
pursuant to the exercise of its right of setoff, such amounts to be shared in
accordance with Section 11.2 as if each Participant were a Lender.

 

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12.3 Assignments.
(a) Permitted Assignments. Any Lender may, in the ordinary course of its
business and in accordance with applicable law, at any time assign to one or
more banks or other entities (“Purchasers”) all or any part of its rights and
obligations under the Facility Documents provided such Purchasers are Lloyd’s
Approved Banks. Such assignment shall be substantially in the form of Exhibit B
or in such other form as may be agreed to by the parties thereto. The consent of
the Borrower and the Administrative Agent shall be required prior to an
assignment becoming effective with respect to a Purchaser which is not a Lender
or an Affiliate thereof; provided, however, that if a Default has occurred and
is continuing, the consent of the Borrower shall not be required; provided,
further, that the Borrower shall be deemed to have consented to any such
assignment unless it shall object thereto by written notice to the
Administrative Agent within five (5) Business Days after having received notice
thereto. Such consent shall not be unreasonably withheld or delayed. Each such
assignment shall (unless it is to a Lender or an Affiliate thereof or the
Administrative Agent otherwise consents) be in an amount not less than the
lesser of (a) $5,000,000 or (b) the remaining amount of the assigning Lender’s
Commitment (calculated as at the date of such assignment).
(b) Effect; Effective Date. A Lender shall notify the Administrative Agent in
the event it wishes to transfer any of its Commitment. Upon receipt of such
notice, the Administrative Agent shall verify that the beneficiaries of the
outstanding Letters of Credit will accept an amendment to or replacement of the
outstanding Letters of Credit to reflect such assignment and the change in the
“Commitments” as reflected in such outstanding Letters of Credit (a “Transfer
Amendment”). The Administrative Agent shall advise the Lender whether such
Transfer Amendment is acceptable (the “Advisement Date”) and the Lender shall
advise the Administrative Agent of the proposed assignment date (which date
shall be not less than ten (10) Business Days after the Advisement Date). Upon
(i) delivery to the Administrative Agent and the Borrower of a notice of
assignment, substantially in the form attached as Exhibit I to Exhibit B (a
“Notice of Assignment”), together with any consents required by Section 12.3(b),
(ii) payment of a $3,500 fee to the Administrative Agent by the assigning Lender
or the Purchaser for processing such assignment, the Administrative Agent shall
prepare the necessary Transfer Amendments and coordinate with the beneficiaries
a date to effectuate such Transfer Amendment. Upon acceptance of the Transfer
Amendment by the beneficiaries, such assignment shall become effective. The
Notice of Assignment shall contain a representation by the Purchaser to the
effect that none of the consideration used to make the purchase of the
participation interests in the Letters of Credit under the applicable assignment
agreement are “plan assets” as defined under ERISA and that the rights and
interests of the Purchaser in and under the Facility Documents will not be “plan
assets” under ERISA. On and after the effective date of such assignment, such
Purchaser shall for all purposes be a Lender party to this Agreement and any
other Facility Document executed by or on behalf of the Lenders and shall have
all the rights and obligations of a Lender under the Facility Documents, to the
same extent as if it were an original party hereto, and no further consent or
action by the Borrower, the Lenders or the Administrative Agent shall be
required to release the transferor Lender with respect to the percentage of the
Aggregate Commitment and the participation interests in Letters of Credit
assigned to such Purchaser.

 

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12.4 Dissemination of Information. The Borrower authorizes each Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Facility Documents by operation of law (each a “Transferee”) and
any prospective Transferee any and all information in such Lender’s possession
concerning the creditworthiness of the Borrower and its Subsidiaries; provided
that each Transferee and prospective Transferee agrees to be bound by Section
9.11 of this Agreement.
12.5 Tax Treatment. If any interest in any Facility Document is transferred to
any Transferee which is organized under the laws of any jurisdiction other than
the United States or any State thereof, the transferor Lender shall cause such
Transferee, concurrently with the effectiveness of such transfer, to comply with
the provisions of Section 3.5(d).
ARTICLE XIII
NOTICES
13.1 Notices. All notices, requests and other communications to any party
hereunder shall be in writing (including electronic transmission, facsimile
transmission or similar writing) and shall be given to such party: (a) in the
case of the Borrower or the Administrative Agent, at its address or facsimile
number set forth on the signature pages hereof, (b) in the case of any Lender,
at its address or facsimile number set forth below its signature hereto or
(c) in the case of any party, at such other address or facsimile number as such
party may hereafter specify for the purpose by notice to the Administrative
Agent and the Borrower in accordance with the provisions of this Section 13.1.
Each such notice, request or other communication shall be effective (i) if given
by facsimile transmission, when transmitted to the facsimile number specified in
this Section and confirmation of receipt is received, (ii) if given by mail,
seventy-two (72) hours after such communication is deposited in the mails with
first class postage prepaid, addressed as aforesaid, or (iii) if given by any
other means, when delivered (or, in the case of electronic transmission,
received) at the address specified in this Section; provided that notices to the
Administrative Agent under Article II shall not be effective until received.
13.2 Change of Address. The Borrower, the Administrative Agent and any Lender
may each change the address for service of notice upon it by a notice in writing
to the other parties hereto.
ARTICLE XIV
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one agreement, and any of the parties hereto may
execute this Agreement by signing any such counterpart. This Agreement shall be
effective when it has been executed by the Borrower, the Administrative Agent
and the Lenders and each party has notified the Administrative Agent by
facsimile transmission or telephone that it has taken such action.

 

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ARTICLE XV
CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
15.1 CHOICE OF LAW. THE FACILITY DOCUMENTS (OTHER THAN THOSE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARDS TO THE
CONFLICT OF LAW PROVISIONS THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE
NEW YORK GENERAL OBLIGATIONS LAW, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE
TO NATIONAL BANKS.
15.2 CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT SITTING
IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
ANY FACILITY DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE
AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT
OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE
RIGHT OF THE ADMINISTRATIVE AGENT, THE LETTER OF CREDIT AGENT OR ANY LENDER TO
BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.
ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE ADMINISTRATIVE AGENT, THE
LETTER OF CREDIT AGENT OR ANY LENDER OR ANY AFFILIATE OF THE ADMINISTRATIVE
AGENT, THE LETTER OF CREDIT AGENT OR ANY LENDER INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
ANY FACILITY DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.
15.3 WAIVER OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT, THE LETTER OF
CREDIT AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH ANY FACILITY DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
[signature pages follow]

 

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IN WITNESS WHEREOF, the Borrower, the Lenders, the Letter of Credit Agent and
the Administrative Agent have executed this Agreement as of the date first above
written.

                      THE NAVIGATORS GROUP, INC.    
 
               
 
  By:       /s/ Francis W. McDonnell                        Print
Name:   Francis W. McDonnell    
 
         
 
   
 
  Title:       CFO                   
 
               
 
  Address:   Reckson Executive Park
6 International Drive
Rye Brook, New York 10573    
 
               
 
  Attn:       Francis W. McDonnell         Telephone: (914) 933-6270        
Fax: (914) 933-6033         Email: FMcDonnell@navg.com    

 

S-1

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                  ING BANK N.V., LONDON BRANCH,         individually, as
Administrative Agent and         Letter of Credit Agent    
 
           
 
  By:   /s/ M.E.R. Sharman     
 
     
 
Name:   M.E.R. Sharman    
 
      Title:   Managing Director    
 
           
 
  By:   /s/ P.N.A. Galpin     
 
     
 
Name:   P.N.A. Galpin    
 
      Title:   Director    

         
 
  Address:   ING Bank N.V., London Branch
60 London Wall
London EC2M 5TQ
United Kingdom
 
       
 
  Attention:   Mariëtte Groen
 
            Telephone: +44 (0)20 7767 5920     Fax: +44 (0)20 7767 7507    
Email: mariette.groen@uk.ing.com

 

S-2

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                  JPMORGAN CHASE BANK, N.A.,    
 
           
 
  By:   /s/ Thomas Kiepura    
 
     
 
Name:   Thomas Kiepura    
 
      Title:   Vice President    

         
 
  Address:   10 S. Dearborn, 9th floor
Suite IL1-0364
Chicago, IL 60603
 
       
 
  Attention:   Thomas Kiepura
 
            Telephone: (312) 325-3195     Fax: (312) 794-7684     Email:
Thomas.a.kiepura@jpmorgan.com

 

S-3

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                  BARCLAYS BANK PLC    
 
           
 
  By:   /s/ J. Atkinson    
 
     
 
Name:   J. Atkinson    
 
      Title:   Associate Director    

         
 
  Address:   Level 11, 1 Churchill Place
Canary Wharf
London E14 5HP
United Kingdom
 
       
 
  Attention:   Jonathon Bush
 
            Telephone: +44 (0) 20 7116 8651     Fax: +44 20 7116 7636     Email:
jonathan.bush@barclays.com

 

S-4

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SCHEDULE 1
COMMITMENTS

          Lender   Letter of Credit Facility  
 
       
ING Bank N.V., London Branch
  $ 75,000,000  
 
       
JPMorgan Chase Bank N.A.
  $ 50,000,000  
 
       
Barclays Bank PLC
  $ 40,000,000  
 
       
TOTAL:
  $ 165,000,000  

 

Schedule 1

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SCHEDULE 1.1

CASH COLLATERAL INVESTMENTS AND APPLICABLE ADVANCE RATES

          Collateral Description   Advance Rate  
US Dollars held with ING:
    90 %
Pounds held with ING:
    100 %
Cash held with a Financial Institution (subject to a Control Agreement):
    85 %
US Dollar and/or Pound Time Deposits, CDs and Money Market Deposits:
    85 %
 
       
Time deposits, certificates of deposit and money market deposits of any OECD
incorporated bank with a rating of at least (i) AA- from S&P and (ii) Aa3 from
Moody’s and maturing within two years from the date of determination
       
US Government Securities:
    80 %
 
       
Securities issued or directly and fully guaranteed or insured by the United
States Government or any agency or instrumentality thereof (provided that the
full faith and credit of the United States is pledged in support thereof), with
maturities of:
    75 %
less than five years from the date of determination
       
more than five years from the date of determination
       
Commercial paper rated A-1 by S&P or P1 or better by Moody’s
    85 %

 

 

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

 

EXHIBIT A
COMPLIANCE CERTIFICATE

To:  
The Lenders parties to the
Letter of Credit Agreement Described Below

This Compliance Certificate is furnished pursuant to that certain Funds at
Lloyd’s Letter of Credit Agreement, dated as of March 28, 2011 (as amended,
modified, renewed or extended from time to time, the “Agreement”), among The
Navigators Group, Inc. (the “Borrower”), the lenders party thereto, and ING Bank
N.V., London Branch, as Administrative Agent and Letter of Credit Agent. Unless
otherwise defined herein, capitalized terms used in this Compliance Certificate
have the meanings ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected                      of the Borrower;
2. I have reviewed the terms of the Agreement and I have made, or have caused to
be made under my supervision, a detailed review of the transactions and
conditions of the Borrower and its Subsidiaries during the accounting period
covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I have no
knowledge of, the existence of any condition or event which constitutes a
Default or Unmatured Default during or at the time of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below; and
4. Schedule I attached hereto sets forth financial data and computations
evidencing the Borrower’s compliance with certain covenants of the Agreement,
all of which data and computations are true, complete and correct.
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which the Borrower has taken, is taking, or proposes to
take with respect to each such condition or event:
 
 
 

 

 

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

 

The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Certificate
in support hereof, are made and delivered this            day of
               ,           .

         
 
       
 
 
 
Name:    
 
  Title:    

 

A-2

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SCHEDULE I TO COMPLIANCE CERTIFICATE
Compliance as of                     ,                 with
Provisions of Sections 6.14 and 6.23 of
the Agreement
Section 6.14 — Investments and Acquisitions

         
1. Clause (d)
       
 
       
(a) Required:
       
 
       
(i) Combined Investments of the Borrower and its Subsidiaries on the date of
determination:
  $                       
 
       
(ii) 10% of (a)(i):
  $                       
 
       
(b) Actual:
       
 
       
Investments in debt securities rated less than A- by S&P, A3 by Moody’s or
NAIC-1 by the NAIC but rated BBB- or better by S&P, Baa3 or better by Moody’s or
NAIC-2 or better by the NAIC on the date of determination (or downgraded from
such ratings within the last 180 days):
  $                       
 
       
2. Clause (e)
       
 
       
(a) Required:
  $                       
 
       
(i) Consolidated Net Worth of Borrower and its Consolidated Subsidiaries on the
date of determination:
  $                       
 
       
(ii) 5% of (a)(i)
  $                       
 
       
(b) Actual:
  $                       

 

A-3

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Aggregate Investment in Investments not satisfying standards set forth in clause
(b) or (d):
       
 
       
3. Clause (f)
       
 
       
(a) Aggregate Investments in equity securities:
       
 
       
(i) Required:
       
 
       
(A) Consolidated Net Worth of the Borrower and its Consolidated Subsidiaries on
the date of determination:
  $                       
 
       
(B) 20% of (a)(i)(A):
  $                       
 
       
(ii) Actual:
       
 
       
Aggregate Investments by the Borrower in equity securities on the date of
determination:
  $                       
 
       
(b) Individual Investments:
       
 
       
(i) Required:
       
 
       
(A) Consolidated Net Worth of the Borrower and its Consolidated Subsidiaries on
the date of determination:
  $                       
 
       
(B) 5% of (b)(i)(A):
  $                       
 
       
(ii) Actual:
       
 
       
Largest single equity securities investment by the Borrower and its Subsidiaries
on the date of determination:
  $                       
 
       
4. Clause (g)
       
 
       
(a) Required:
       
 
       
(i) Consolidated Net Worth of the Borrower and its Consolidated Subsidiaries on
the date of determination:
  $                       
 
       
(ii) 5% of (a)(i):
       
 
       
(b) Actual:
       
 
       
Other Investments on date of determination:
  $                       

 

A-4

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5. Clause (h)
       
 
       
(a) Required:
       
 
       
(i) Consolidated Net Worth of the Borrower and its Consolidated Subsidiaries on
the date of determination:
  $                       
 
       
(ii) 5% of (a)(i):
       
 
       
(b) Actual:
       
 
       
Amount of Acquisitions from beginning of Fiscal Year through date of
determination:
  $                       

 

A-5

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Section 6.23(a) — Minimum Consolidated Tangible Net Worth

         
Period: Fiscal Quarter ended                     ,           
       
 
       
1. Required: $672,000,000
  $    
 
       
2. Actual:
       
 
       
Consolidated Tangible Net Worth (excluding the effect of unrealized gain or loss
under SFAS 115):
  $                       

Section 6.23(b) — Minimum Statutory Surplus of Navigators

         
Period: Fiscal Quarter ended                     ,           
       
 
       
1. Required: $549,500,000
  $    
 
       
2. Actual:
       
 
       
Statutory Surplus of Navigators:
  $                       

Section 6.23(c) — Leverage Ratio

         
1. Required:
    0.30:1.0  
 
     
 
       
2. Actual:
       
 
       
(a) Consolidated Indebtedness of the Borrower and its Consolidated Subsidiaries
(excluding letter of credit obligations incurred in the ordinary course of
business) on date of determination:
  $                       
 
       
(b) Consolidated Net Worth on date of determination:
  $                       
 
       
(c) (a) plus (b):
  $                       
 
       
(d) Ratio of (a) to (c):
    :1.0  
 
     

 

A-6

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Section 6.23(d) — Minimum Risk-Based Capital1

         
1. Required:
    150 %
 
     
 
       
2. Actual:
       
 
       
(a) Total Adjusted Capital on date of determination:
  $                       
 
       
(b) Company Action Level RBC on date of determination:
  $                       
 
       
(c) Ratio of (a) to (b) (expressed as a percentage):
                         %

Section 6.23(e) — Primary FAL for Year of Account 201[]

         
1. Required to be provided by Corporate Members:
    Greater of
25% or 90%
of the three
highest net
RDS
scenarios  
 
       
2. Actual:
       
 
       
(a) Total FAL required by Lloyd’s on date of determination:
  $                       
 
       
(b) Amount of Primary FAL provided by Corporate Members on the date of
determination:
       
 
       
(1) Undistributed profits for closed years
  $                       
 
       
(2) Open year surplus/deficiency
  $                       
 
       
(3) Cash/assets at Lloyd’s
  $                       
 
       
(4) Sum of (b)(1) plus (b)(2) plus (b)(3)
  $                       
 
       
(c) Ratio of (a) to (b)(4) (expressed as a percentage):
                         %
 
       
(d) Aggregate of three highest net RDS scenarios for any year of account:
  $                       
 
       
(e) 90% of (d)
  $                       

 

      1  
To be completed for each Significant Insurance Subsidiary.

 

A-7

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Section 6.23(f) RDS for Year of Account 201[]

         
Required: Maximum Net Loss from prescribed RDS permitted:
    20 %
 
     
 
       
Actual (Highest RDS scenario expressed as a percentage of the total Supported
Syndicate capacity for such Year of Account):
       
 
       
(a) Total Lloyd’s prescribed Net Losses from RDS:
  $                       
 
       
(b) Actual Loses:
  $                       
 
       
(c) Ratio of (a) to (b) (expressed as a percentage):
                         %

 

A-8

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EXHIBIT B
ASSIGNMENT AGREEMENT
This Assignment Agreement (this “Assignment Agreement”) between
                     (the “Assignor”) and                      (the “Assignee”)
is dated as of                     . The parties hereto agree as follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit Agreement (which,
as it may be amended, modified, renewed or extended from time to time is herein
called the “Credit Agreement”) described in Item 1 of Schedule 1 attached hereto
(“Schedule 1”). Capitalized terms used herein and not otherwise defined herein
shall have the meanings attributed to them in the Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to the
Assignee, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor’s rights and obligations under the Credit
Agreement such that after giving effect to such assignment the Assignee shall
have purchased pursuant to this Assignment Agreement the percentage interest
specified in Item 3 of Schedule 1 of all outstanding rights and obligations
under the Credit Agreement relating to the loans listed in Item 3 of Schedule 1
and the other Facility Documents.
3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the
“Effective Date”) shall be the later of the date specified in Item 5 of
Schedule 1 or the date the Administrative Agent advises that the beneficiaries
of Letters of Credit have accepted the amendments or replacements of the Letters
of Credit to reflect such assignment and a Notice of Assignment substantially in
the form of Exhibit I attached hereto has been delivered to the Administrative
Agent. Such Notice of Assignment must include any consents required to be
delivered to the Administrative Agent by Section 12.3(a) of the Credit
Agreement. In no event will the Effective Date occur if the payments required to
be made by the Assignee to the Assignor on the Effective Date under Sections 4
and 5 hereof are not made on the proposed Effective Date or if any other
condition precedent agreed to by the Assignor and the Assignee has not been
satisfied. The Assignor will notify the Assignee of the proposed Effective Date
not later than the Business Day prior to the proposed Effective Date. As of the
Effective Date, (i) the Assignee shall have the rights and obligations of a
Lender under the Facility Documents with respect to the rights and obligations
assigned to the Assignee hereunder and (ii) the Assignor shall relinquish its
rights and be released from its corresponding obligations under the Facility
Documents with respect to the rights and obligations assigned to the Assignee
hereunder.
4. PAYMENT OBLIGATIONS. On and after the Effective Date, the Assignee shall be
entitled to receive from the Administrative Agent all payments of principal,
interest and fees with respect to the interest assigned hereby. The Assignee
shall advance funds directly to the Administrative Agent with respect to all
reimbursement payments made on or after the Effective Date with respect to the
interest assigned hereby. In the event that either party hereto receives any
payment to which the other party hereto is entitled under this Assignment
Agreement, then the party receiving such amount shall promptly remit it to the
other party hereto.

 

 

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

 

5. FEES PAYABLE BY THE ASSIGNEE. The Assignee agrees to pay the $3,500
processing fee required to be paid to the Administrative Agent in connection
with this Assignment Agreement.
6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR’S LIABILITY. The
Assignor represents and warrants that it is the legal and beneficial owner of
the interest being assigned by it hereunder and that such interest is free and
clear of any adverse claim created by the Assignor. It is understood and agreed
that the assignment and assumption hereunder are made without recourse to the
Assignor and that the Assignor makes no other representation or warranty of any
kind to the Assignee. Neither the Assignor nor any of its officers, directors,
employees, agents or attorneys shall be responsible for (i) the due execution,
legality, validity, enforceability, genuineness, sufficiency or collectability
of any Facility Document, including without limitation, documents granting the
Assignor and the other Lenders a security interest in assets of the Borrower or
any guarantor, (ii) any representation, warranty or statement made in any
Facility Document or in connection with any of the Facility Documents, (iii) the
financial condition or creditworthiness of the Borrower or any guarantor,
(iv) the performance of or compliance with any of the terms or provisions of any
of the Facility Documents, (v) inspecting any of the Property, books or records
of the Borrower, (vi) the validity, enforceability, perfection, priority,
condition, value or sufficiency of any collateral securing or purporting to
secure the Reimbursement Obligations or (vii) any mistake, error of judgment, or
action taken or omitted to be taken in connection with the Letters of Credit or
the Facility Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that it has
received a copy of the Credit Agreement, together with copies of the financial
statements requested by the Assignee and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment Agreement, (ii) agrees that it will, independently and with
reliance upon the Administrative Agent, the Assignor or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Facility Documents, (iii) appoints and authorizes the Administrative
Agent to take such action as agent on its behalf and to exercise such powers
under the Facility Documents as are delegated to the Administrative Agent by the
terms thereof, together with such powers as are reasonably incidental thereto,
(iv) agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Facility Documents are required to be
performed by it as a Lender, (v) agrees that its payment instructions and notice
instructions are as set forth in the attachment to Schedule 1, (vi) confirms
that none of the funds, monies, assets or other consideration being used to make
the purchase and assumption hereunder are “plan assets” as defined under ERISA
and that its rights, benefits and interests in and under the Facility Documents
will not be “plan assets” under ERISA, [and (vii) attaches the forms prescribed
by the Internal Revenue Service of the United States certifying that the
Assignee is entitled to receive payments under the Facility Documents without
deduction or withholding of any United States federal income taxes].
8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor harmless
against any and all losses, costs and expenses (including, without limitation,
reasonable attorneys’ fees) and liabilities incurred by the Assignor in
connection with or arising in any manner from the Assignee’s non-performance of
the obligations assumed under this Assignment Agreement.

 

B-2

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9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall have the
right pursuant to Section 12.3(a) of the Credit Agreement to assign the rights
which are assigned to the Assignee hereunder to any entity or person, provided
that (i) any such subsequent assignment does not violate any of the terms and
conditions of the Facility Documents or any law, rule, regulation, order, writ,
judgment, injunction or decree and that any consent required under the terms of
the Facility Documents has been obtained and (ii) unless the prior written
consent of the Assignor is obtained, the Assignee is not hereby released from
its obligations to the Assignor hereunder, if any remain unsatisfied, including,
without limitation, its obligations under Sections 4, 5 and 8 hereof.
10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the Letter of Credit
Commitment occurs between the date of this Assignment Agreement and the
Effective Date, the percentage interest specified in Item 3 of Schedule 1 shall
remain the same, but the dollar amount purchased shall be recalculated based on
the reduced Letter of Credit Commitment, as the case may be.
11. ENTIRE AGREEMENT. This Assignment Agreement and the attached Notice of
Assignment embody the entire agreement and understanding between the parties
hereto and supersede all prior agreements and understandings between the parties
hereto relating to the subject matter hereof.
12. GOVERNING LAW. This Assignment Agreement shall be governed by the internal
law, and not the law of conflicts, of the State of New York, without regards to
the conflict of law provisions thereof other than Sections 5-1401 and 5-1402 of
the New York General Obligations Laws, but giving effect to Federal laws
applicable to national banks.
13. NOTICES. Notices shall be given under this Assignment Agreement in the
manner set forth in the Credit Agreement. For the purpose hereof, the addresses
of the parties hereto (until notice of a change is delivered) shall be the
address set forth in the attachment to Schedule 1.
[signature page follows]

 

B-3

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IN WITNESS WHEREOF, the parties hereto have executed this Assignment Agreement
by their duly authorized officers as of the date first above written.

            [NAME OF ASSIGNOR]
      By:           Title: 
 
      Address: 
 

 

 
      [NAME OF ASSIGNEE]
      By:           Title: 
 
      Address: 
 

 

 
 

 

B-4

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SCHEDULE 1
TO ASSIGNMENT AGREEMENT

1.  
Description and Date of Credit Agreement:
     
That certain Funds at Lloyd’s Letter of Credit Agreement, dated as of March 28,
2011, among the Navigators Group, Inc., the financial institutions named
therein, and ING Bank N.V., London Branch, as Administrative Agent and Letter of
Credit Agent.
  2.  
Date of Assignment Agreement:                     
  3.  
Amounts (As of Date of Item 2 above):

                            Letter of Credit               Facility  
 
  (a)   Aggregate and Letter of Credit Commitment (total outstanding Letter of
Credit Obligations)* under Credit Agreement   $                      
 
             
 
  (b)   Assignee’s Percentage of Facility purchased under the Assignment
Agreement (taken to five decimal places);                        %
 
             
 
  (c)   Amount of Assigned Share in Facility purchased under the Assignment
Agreement:   $                      
 
              4.   Total of Letter of Credit Participation Amount (outstanding
Letter of Credit Obligations)* purchased hereunder:      
 
              5.   Proposed Effective Date:                         

      *  
If the Letter of Credit Commitment has been terminated, insert total outstanding
Letter of Credit Obligations in place of Letter of Credit Commitment or Letter
of Credit Participation Amount, as the case may be.

 

B-5

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                  Accepted and Agreed:            
 
                [NAME OF ASSIGNOR]   [NAME OF ASSIGNEE]    
 
               
By:
      By:        
 
 
 
Title:      
 
Title:    
 
 
 
     
 
   

 

B-6

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ATTACHMENT TO SCHEDULE 1 to ASSIGNMENT AGREEMENT
ADMINISTRATIVE INFORMATION SHEET
Attach Assignor’s Administrative Information Sheet, which must
include notice addresses for the Assignor and the Assignee
(Sample form shown below)
ASSIGNOR INFORMATION
Contact:

                 
Name:
      Telephone No.:        
Fax No.:
 
 
     
 
   
 
 
 
           

Payment Information:

         
Name & ABA # of Destination Bank:
       
 
 
 
   
 
 
 
   

         
Account Name & Number for Wire Transfer:
       
 
 
 
   
 
 
 
   

         
Other Instructions:
       
 
 
 
         

         
Address for Notices for Assignee:
       
 
 
 
   
 
 
 
   
 
 
 
   

ASSIGNEE INFORMATION
Credit Contact:

                 
Name:
      Telephone No.:        
Fax No.:
 
 
     
 
   
 
 
 
           

 

B-7

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Key Operations Contacts:

         
Booking Installation:
  Booking Installation:    
 
Name:
 
 
Name:    
 
Telephone No.:
 
 
Telephone No.:    
 
Fax No.:
 
 
Fax No.:    
 
 
 
   

Payment Information:

         
Name & ABA # of Destination Bank:
       
 
 
 
   
 
 
 
   

         
Account Name & Number for Wire Transfer:
       
 
 
 
   
 
 
 
   

         
Other Instructions:
       
 
 
 
         

         
Address for Notices for Assignor:
       
 
 
 
   
 
 
 
   
 
 
 
   

 

B-8

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EXHIBIT I
TO ASSIGNMENT AGREEMENT
NOTICE
OF ASSIGNMENT
                    , __

     
To:
  The Navigators Group, Inc.
 
   
 
  ING Bank N.V., London Branch, as Administrative Agent and Letter of Credit
Agent
 
   
From:
  [NAME OF ASSIGNOR] (the “Assignor”)
 
  [NAME OF ASSIGNEE] (the “Assignee”)

1. We refer to that certain Credit Agreement (the “Credit Agreement”) described
in Item 1 of Schedule 1 attached hereto (“Schedule 1”). Capitalized terms used
herein and not otherwise defined herein shall have the meanings attributed to
them in the Credit Agreement.
2. This Notice of Assignment (the “Notice of Assignment”) is given and delivered
to [the Borrower and] the Administrative Agent pursuant to Section 12.3(b) of
the Credit Agreement.
3. The Assignor and the Assignee have entered into an Assignment Agreement,
dated as of                     ,  _____  (the “Assignment Agreement”), pursuant
to which, among other things, the Assignor has sold, assigned, delegated and
transferred to the Assignee, and the Assignee has purchased, accepted and
assumed from the Assignor the percentage interest specified in Item 3 of
Schedule 1 of all outstandings, rights and obligations under the Credit
Agreement relating to the facilities listed in Item 3 of Schedule 1. The
Effective Date of the Assignment Agreement shall be the later of the date
specified in Item 5 of Schedule 1 or two Business Days (or such shorter period
as agreed to by the Administrative Agent) after this Notice of Assignment and
any consents and fees required by Sections 12.3(a) and 12.3(b) of the Credit
Agreement have been delivered to the Administrative Agent; provided that the
Effective Date shall not occur if any condition precedent agreed to by the
Assignor and the Assignee has not been satisfied.
4. The Assignor and the Assignee hereby give to the Borrower and the
Administrative Agent notice of the assignment and delegation referred to herein.
The Assignor will confer with the Administrative Agent before the date specified
in Item 5 of Schedule 1 to determine if the Assignment Agreement will become
effective on such date pursuant to Section 3 hereof, and will confer with the
Administrative Agent to determine the Effective Date pursuant to Section 3
hereof if it occurs thereafter. The Assignor shall notify the Administrative
Agent if the Assignment Agreement does not become effective on any proposed
Effective Date as a result of the failure to satisfy the conditions precedent
agreed to by the Assignor and the Assignee. At the request of the Administrative
Agent, the Assignor will give the Administrative Agent written confirmation of
the satisfaction of the conditions precedent.

 

B-9

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5. The Assignor or the Assignee shall pay to the Administrative Agent on or
before the Effective Date the processing fee of $3,500 required by
Section 12.3(b) of the Credit Agreement.
6. The Assignee advises the Administrative Agent that notice and payment
instructions are set forth in the attachment to Schedule 1.
7. The Assignee hereby represents and warrants that none of the funds, monies,
assets or other consideration being used to make the purchase pursuant to the
Assignment Agreement are “plan assets” as defined under ERISA and that its
rights, benefits, and interests in and under the Facility Documents will not be
“plan assets” under ERISA.
8. The Assignee authorizes each of the Administrative Agent and the Letter of
Credit Agent to act as its agent under the Facility Documents in accordance with
the terms thereof. The Assignee acknowledges that the Administrative Agent has
no duty to supply information with respect to the Borrower or the Facility
Documents to the Assignee until the Assignee becomes a party to the Credit
Agreement.
9. Pursuant to Clause 16 (Security Trustee provisions) of the deed of charge
dated on or about 28 March 2011 and made between (amongst others) (1) the
Borrower as chargor and ING Bank, N.V. in its capacity as security trustee (the
“Deed of Charge”), the Assignee confirms its agreement to (a) irrevocably
appoint the Security Trustee (as that term is defined in the Credit Agreement)
as trustee under the Security Documents (as that term is defined in the Deed of
Charge) in its capacity as a Secured Party (as that term is defined in the Deed
of Charge) and (b) to be bound by the terms of the Deed of Charge as if it had
been a Secured Party from the date of the Deed of Charge. By countersigning this
Assignment Agreement, the Security Trustee hereby accepts the appointment by the
Assignee as its trustee under the Deed of Charge and this paragraph shall be
governed by, and construed in accordance with, English law and shall take effect
and be binding on all parties notwithstanding that neither the Assignee nor the
Security Trustee have, as a matter of English law, executed this Assignment
Agreement as a deed.

                  [NAME OF ASSIGNOR]   [NAME OF ASSIGNEE]    
 
               
By:
      By:        
 
 
 
Title:      
 
Title:    
 
 
 
     
 
   

 

B-10

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                  ACKNOWLEDGED AND CONSENTED TO BY ING Bank N.V., London Branch,
as Administrative Agent, Letter of Credit Agent and Security Trustee  
ACKNOWLEDGED AND CONSENTED TO BY THE NAVIGATORS GROUP, INC.    
 
               
By:
      By:        
 
 
 
Title:      
 
Title:    
 
 
 
     
 
   

[Attach photocopy of Schedule 1 to Assignment Agreement]

 

B-11

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EXHIBIT C
REIMBURSEMENT AGREEMENT EXCERPT
This Letter of Credit is issued under, and is subject to the terms and
conditions of, that certain Funds at Lloyd’s Letter of Credit Agreement, dated
as of March 28, 2011, as amended, among The Navigators Group, Inc., a Delaware
corporation, certain financial institutions and ING Bank N.V., London Branch, as
Administrative Agent and Letter of Credit Agent (the “Credit Agreement”). In the
event of a conflict between the terms and conditions of this letter of credit
application and those of the Credit Agreement, the terms and conditions of the
Credit Agreement shall govern.

 

C-1

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EXHIBIT D
FORM OF BORROWING BASE CERTIFICATE

     
To:
  ING, N.V. London Branch,
 
  as Administrative Agent
 
  60 London Wall
 
  London EC2M 5TQ
 
  United Kingdom
 
   
Re:
  The Navigators Group, Inc.

Ladies and Gentlemen:
Please refer to that certain Funds at Lloyd’s Letter of Credit Agreement, dated
as of March 28, 2011 (as amended, modified, renewed or extended from time to
time, the “Agreement”), among The Navigators Group, Inc. (the “Borrower”), the
lenders party thereto, and ING Bank N.V., London Branch, as Administrative Agent
and Letter of Credit Agent.. This Certificate, together with supporting
calculations attached hereto set forth in reasonable detail, is delivered to you
pursuant to the terms of the Credit Agreement. Capitalized terms used but not
otherwise defined herein shall have the same meanings herein as in the Credit
Agreement.
We hereby certify and warrant to the Administrative Agent, Letter of Credit
Agent and the Lenders that at the close of business on                     ,
 _____  (the “Borrowing Base Calculation Date”), the Borrowing Base for the
undersigned was $                     and the outstanding Letters of Credit
Obligations was $                    
We hereby further certify and warrant to the Administrative Agent, the Letter of
Credit Agent and the Lenders that the information and computations contained
herein are true and correct in all material respects as of the Borrowing Base
Calculation Date.
IN WITNESS WHEREOF, the Borrower has caused this Certificate to be executed and
delivered by an authorized office this  _____  day of                     ,
 _____.

            THE NAVIGATORS GROUP, INC.
      By:           Title:             

 

 

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SCHEDULE I TO BORROWING BASE CERTIFICATE
DATED AS OF:                     
[FORM TO BE AGREED UPON BY ADMINISTRATIVE AGENT AND NAVIGATORS]

 

D-2

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EXHIBIT E
FORM OF SECURITY AGREEMENT
[OMMITTED]

 

 

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EXHIBIT F
FORM OF FIXED CHARGE
[OMITTED]

 

 

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EXHIBIT G
FORM OF LETTER OF CREDIT

     
To:
   
The Society and Council of Lloyd’s,
   
c/o The Manager, Market Services,
   
Fidentia House
   
Walter Burke Way
   
Chatham,
   
Kent ME4 4RN
  Date:

Dear Sirs,
Irrevocable Standby Letter of Credit No. xxxxxxxxxxxx
Re: xxxxxxxxxxxxx (the ‘Applicant’)
This Clean Irrevocable Standby Letter of Credit (the ‘Credit’) is issued by the
banks whose names are set out in Schedule 1 hereto (the ‘Issuing Lenders’, and
each an ‘Issuing Lender’) in favour of the Society of Lloyd’s (‘Lloyd’s’) on the
following terms:

1.  
Subject to the terms hereof, the Issuing Lenders shall make payments within two
business days of demand on ING Bank N.V., London Branch (the ‘Agent’) in
accordance with paragraph 4 below.

2.  
Upon a demand being made by Lloyd’s pursuant to paragraph 4 below each Issuing
Lender shall pay that proportion of the amount demanded which is equal to the
proportion which its Commitment set out in Schedule 1 hereto bears to the
aggregate Commitments of all the Issuing Lenders set out in Schedule 1 hereto
provided that the obligations of the Issuing Lenders under this Credit shall be
several and no Issuing Lender shall be required to pay an amount exceeding its
Commitment set out in Schedule 1 hereto and the Issuing Lenders shall not be
obliged to make payments hereunder in aggregate exceeding a maximum amount of
xxxxx (figures and words). Any payment by an Issuing Lender hereunder shall be
made in US Dollars to Lloyd’s account specified in the demand made by Lloyd’s
pursuant to paragraph 4 below.

3.  
This Credit is effective from xxxxxxxxxxx (the ‘Commencement Date’) and will
expire on the Final Expiration Date. This Credit shall remain in force until we
give you not less than four years notice in writing terminating the same on the
fourth anniversary of the Commencement Date or on any date subsequent thereto as
specified in such notice (the ‘Final Expiration Date’), our notice to be sent by
registered mail for the attention of the Manager, Market Services, at the above
address.

 

 

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4.  
Subject to paragraph 3 above, the Issuing Lenders shall pay to Lloyd’s under
this Credit upon presentation of a demand by Lloyd’s on the Agent, ING Bank
N.V., 60 London Wall, London, EC2M 5TQ, marked ‘For the attention of Documentary
Credits/Agency Department’ substantially in the form set out in Schedule 2
hereto the amount specified therein (which amount shall not, when aggregated
with all the other amounts paid by the Issuing Lenders to Lloyd’s under this
Credit, exceed the maximum amount referred to in paragraph 2 above).

5.  
The Agent has signed this Credit as agent for disclosed principals and
accordingly shall be under no obligation to Lloyd’s hereunder other than in its
capacity as an Issuing Bank.

6.  
All charges are for the Applicants account.

7.  
Subject to any contrary indication herein, this Credit is subject to the
International Standby Practices- ISP98 (1998 Publication International Chamber
of Commerce Publication No. 590).

8.  
This Credit shall be governed by and interpreted in accordance with English Law
and the Issuing Lenders hereby irrevocably submit to the jurisdiction of the
High Court of Justice in England.

9.  
Each of the Issuing Lenders engages with Lloyd’s that demands made under and in
compliance with the terms and conditions of this Credit shall be duly honoured
on presentation.

Yours faithfully
ING Bank N.V., London Branch, as Agent:
for and on behalf of
ING Bank N.V., London Branch
xxxxxxxxxxxxxxxx
For and on behalf of
ING Bank N.V., London Branch

     
Name:
  Name:
Title: Authorised signatory
  Title: Authorised signatory

 

G-2

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Attaching to and forming an integral part of Irrevocable Standby Letter of
Credit No. xxxxxxxxxx dated xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx.
Schedule 1
Issuing Lenders Commitments

     
Name and address of Issuing Lender
  Commitment (USD)
 
   
Total Value
  USD

 

G-3

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Attaching to and forming an integral part of Irrevocable Standby Letter of
Credit No. xxxxxxxxxxx dated xxxxxxxxxxxx.
Schedule 2
Form of Demand
[on Lloyd’s letterhead]
Dear Sir/Madam,
The Society of Lloyd’s
Trustee of
Letter of credit No. xxxxxxxxxxxx dated xxxxxxxxxxxxx
With reference to the above, we enclose for your attention a Bill of Exchange,
together with the respective Letter of Credit. Payment should be made by way of
CHAPS. The account details are as follows:

     
National Westminster Bank Plc
  Sort Code 60.00.01
City of London Office
  Account 13637444
P.O. Box 12258
   
1 Princes Street
   
London EC2R 8AP
   

          Please quote Member Code:

Yours faithfully

For Manager
Market Services
      By:           Name:           Title:        

 

G-4

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Attaching to and forming an integral part of Irrevocable Standby Letter of
Credit No. xxxxxxxxxxx dated xxxxxxxxxxxxxxxxxxxxxxx.
Schedule 2
Page 2

     
Your ref:
   
Our ref:
  MEM/ / / /C911f
Extn:
   

BILL OF EXCHANGE
The Society of Lloyd’s
Trustee of
Letter of Credit No xxxxxxxxxxxxxx dated xxxxxxxxxxxxxxxxx.
Please pay in accordance with the terms of the Letter of Credit to our order the
amount of USD______
For and on behalf of
Authorised Signatory
Market Services

To:  
ING Bank N.V.,
London Branch,
as the Agent

 

G-5

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EXHIBIT H
FORM OF LLOYD’S COMFORT LETTER
Your reference
Our reference MS/Mem Ser/NM/053617S&053575B
                    , 2011
ADDRESSED TO ACCOUNT PARTY
AND ADMINISTRATIVE AGENT
RE: Navigators Group Inc. and ING Bank N.V., London Branch
I understand that Navigators Corporate Underwriters Ltd and Millennium
Underwriting Ltd (the “Corporate Members”) is about to procure the provision to
Lloyd’s of acceptable assets to form its Funds at Lloyd’s. The acceptable assets
are listed in the First Schedule to this letter. You have asked whether, in the
event of monies having to be applied out of the Corporate Members’ Funds at
Lloyd’s, the Funds at Lloyd’s of the Corporate Members’ may be drawn down in
pre-determined order and proportions as set out in the Second Schedule to this
letter.
As you are aware, the Funds at Lloyd’s are held by Lloyd’s in its capacity as
trustee under the terms of the Deposit Trust Deed (substantially in the form DTD
(CM) Gen 10) and the Security and Trust Deed (substantially in the form STD
(CM) Gen 10) and interavailable (I/A) deed held been the members (STD (I/A-CM)
(GEN) (10)) entered into by the corporate members’. Any decision to draw down on
any Funds at Lloyd’s involves an exercise of discretion in the light of the
circumstances prevailing at the relevant time, and thus no binding undertaking
can be given now.
However, I can confirm that at the time of considering the drawdown of the
Corporate Members’ Funds at Lloyd’s, Lloyd’s would take into account the request
order of drawdown set out in this letter and the Second Schedule to it.
For the avoidance of doubt, Lloyd’s shall not be responsible to you or any other
person for any losses incurred by you or such other person as a consequence of
acting in reliance upon this letter.
For and on behalf of
The Society and Council of Lloyd’s
Authorized Signatory

     
Telephone
  01634 3492940 
Fax
  01634 392366 
Email
  neil.marsh@lloyds.com

 

 

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The First Schedule
Funds at Lloyd’s
(with respect to Name of Account Party)

          FAL provider   Amount
 
       
Syndicated letter of credit (agent bank: ING Bank N.V., London Branch) —
DTGBLG404602
  GBP 1,500,000.00
 
       
Syndicated letter of credit (agent bank: ING Bank N.V., London Branch) —
DTGBLG404603
  GBP 5,689,000.00
 
       
Syndicated letter of credit (agent bank: ING Bank N.V., London Branch) —
DTGBLG404604
  GBP 17,500,000.00
 
       
Syndicated letter of credit (agent bank: ING Bank N.V., London Branch) —
DTGBLG404605
  GBP 32,383,000.00
 
       
Syndicated letter of credit (agent bank: ING Bank N.V., London Branch) —
DTGBLG404606
  GBP 12,624,000.00
 
       
Syndicated letter of credit (agent bank: ING Bank N.V., London Branch) —
DTGBLG404607
  GBP 12,804,000.00
 
   
 
       
Total Syndicated letter of credit
  GBP 82,500,000.00
 
       
Funds held in Syndicate 1221 (Undistributed closed years profits and open years
surplus/deficiency)
  GBP 41,106,618.00
 
       
Cash (Millennium Underwriting Ltd “MUL” — Personal Reserve Fund)
  GBP 699,372.87
 
       
Cash (Navigators Corporate Underwriters Ltd “NCUL” — Personal Reserve Fund)
  GBP 483,727.92
 
       
Cash (NCUL — General Deposit)
  GBP 38,780.78

 

H-2

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The Second Schedule
Order of drawdown of Funds at Lloyd’s
(with respect Name of Account Party)

(a)  
first, the GBP38,780.78 value in cash (NCUL General deposit) as at December 31,
2010 until exhausted;

(b)  
second, the GBP483,727.92 value in cash (NCUL Personal Reserve Fund) as at
December 31, 2010 until exhausted;

(c)  
third, the GBP699,372.87 value in cash (MUL Personal Reserve Fund) as at
December 31, 2010 until exhausted;

(d)  
fourth, the GBP41,106,618 value in cash and securities (Funds held in Syndicate
1221) as at December 31, 2010 until exhausted;

(e)  
fifth, the syndicated letter of credit (agent bank: ING Bank N.V., London
Branch) in the maximum aggregate amount of GBP82,500,000.00

 

H-3

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Schedule 5.9
Subsidiaries

                          % ownership by the             State of   Borrower or
a Subsidiary   Insurance   Significant Subsidiary   Incorporation   as otherwise
indicated   Company   Subsidiary
 
               
Navigators Insurance Company
  New York   100%    Yes   Yes
Navigators Specialty Insurance Company
  New York   100% Navigators Insurance Co.   Yes    
Navigators Management Company, Inc.
  New York   100%         
Navigators Corporate Underwriters Ltd.
  U.K.   100% Navigators Holdings (UK) Ltd.        
Navigators Management (UK) Ltd.
  U.K.   100% Navigators Holdings (UK) Ltd.        
Navigators Holdings (UK) Ltd.
  U.K.   100%         
Navigators Underwriting Agency Ltd.
  U.K.   100% Navigators Holdings (UK) Ltd.        
Millennium Underwriting Ltd.
  U.K.   100% Navigators Underwriting Agency Ltd.        
Navigators Underwriting Ltd.
  U.K.   100% Navigators Underwriting Agency Ltd.        
Navigators NV
  Belgium   100% Navigators Underwriting Agency Ltd.        
NUAL AB
  Sweden   100% Navigators Underwriting Agency Ltd.        
Navigators A/S
  Denmark   100% Navigators Holdings (UK) Ltd.        

Schedule 5.9

 

 

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Schedule 5.22
Partnerships
None
Schedule 5.22

 

 

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Schedule 5.23
Lines of Business
The Borrower and its Subsidiaries are active in the following lines of business:
Accident
Health
Reinsurance
Property
Commercial Multi Peril
Ocean Marine
Inland Marine
Other Liability
Commercial Auto Liability
Auto Physical Damage
Aircraft
Surety
Multiple Peril Crop
Schedule 5.23

 

 

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Schedule 6.16
Liens
UCC-1 in favor of Dell Financial Services L.P. filed in the Division of
Corporations of the Delaware Secretary of State on 9/18/01 (and continued on
8/25/06) under File No. 1118020 covering leased equipment.
Schedule 6.16

 

 

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Schedule 6.21
Reinsurance Guidelines

•  
Minimum A.M. Best rating of “A-” and

•  
Policyholders’ surplus of (i) US $250 million or (ii) US $200 and part of a
group with combined statutory surplus of $350 million

•  
Or, if not rated by A.M. Best, an equivalent rating from a major rating agency
along with the following:

  •  
Shareholder’s funds must be in excess of US $250 million

For purpose of this Credit Agreement, the following applies, net of any
collateral from the reinsurers:

1.  
Reinsurers constituting the lessor of $10,000,000 or 25% of the credit risk on
any reinsurance program can be outside of the above guidelines.

2.  
Any reinsurer, falling within the Reinsurance Guidelines, rated A- or below
cannot exceed an aggregate exposure across all programs of 66 2/3% of the
Consolidated Surplus of the Insurance Subsidiaries.

Schedule 6.21