**Exhibit10.1**

 

**AMENDMENTNO. 5 TO AMENDED AND RESTATED CREDIT AGREEMENT**

 

This Amendment (this “Amendment”) is enteredinto as of November 10, 2003, by and among The Navigators Group, Inc., aDelaware corporation (the “Borrower”), Bank One, NA (formerly known asThe First National Bank of Chicago), individually and as Administrative Agent(“Agent”), Barclays Bank plc, as Syndication Agent, LaSalle Bank N.A.,individually and as Senior Managing Agent, Credit Suisse First Boston, asManaging Agent, and Brown Brothers Harriman & Co., as Co-Agent.

 

**RECITALS**

 

A.            The Borrower, theAgent and the Lenders are party to that certain Amended and Restated CreditAgreement dated as of December 21, 1998, as amended by AmendmentNo. 1 to Amended and Restated Credit Agreement dated as of March 28,2000, Amendment No. 2 to Amended and Restated Credit Agreement dated as ofSeptember 20, 2000, Amendment No. 3 to Amended and Restated CreditAgreement dated as of December 31, 2001 and Amendment No. 4 toAmended and Restated Credit Agreement dated as of October 18, 2002 (as soamended, the “Credit Agreement”). Unless otherwise specified herein, capitalized terms used in thisamendment shall have the meanings ascribed to them by the Credit Agreement.

 

B.            The Borrower, theAgent and the undersigned Lenders wish to amend the Credit Agreement on theterms and conditions set forth below.

 

NOW, THEREFORE, in consideration of the mutualexecution hereof and other good and valuable consideration, the parties heretoagree as follows:

 

1.             Amendment toCredit Agreement.  Upon the“Effective Date” (as defined below), the Credit Agreement shall be amended asfollows:

 

(a)           Thedefinition of “Aggregate Revolving Credit Commitment” in Article I of theCredit Agreement is hereby amended to state in its entirety as follows:

 

“AggregateRevolving Credit Commitment” means the aggregate of the Revolving CreditCommitments of all the Lenders, as reduced from time to time pursuant to theterms hereof.  The Aggregate RevolvingCredit Commitment as of the date of the Fifth Amendment hereto is $80,000,000.

 

(b)           Thedefinition of “Applicable Commitment Fee Rate” is hereby amended to state inits entirety as follows:

 

“Applicable Commitment Fee Rate” means, atany time, the percentage per annum at which commitment fees are accruing on theunused portion of the Aggregate Revolving Credit Commitment.

 

(c)           Thedefinition of “Letter of Credit Commitment” in Article I of the CreditAgreement is hereby amended to state in its entirety as follows:

 

“Letter of Credit Commitment” means theaggregate Letter of Credit Participation Amounts of all the Lenders, as reducedfrom time to time pursuant

 

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to the terms hereof.  The Letterof Credit Commitment as of the date of the Fifth Amendment hereto is$80,000,000.  The Letter of CreditCommitment shall at all times equal the Aggregate Revolving Credit Commitment.

 

(d)           Thedefinition of “Letter of Credit Termination Date” in Article I of theCredit Agreement is hereby amended to state in its entirety as follows:

 

“Letter ofCredit Termination Date” means November 10, 2005 or any later date as maybe specified as the Letter of Credit Termination Date in accordance with Section 3.10or any earlier date on which the Letter of Credit Commitment is reduced to zeroor otherwise terminated pursuant to the terms hereof.

 

(e)           Thedefinition of Required Lenders in Article I of the Credit Agreement shallbe amended to state in its entirety as follows:

 

“RequiredLenders” means Lenders in the aggregate having at least 66-2/3% of theAggregate Revolving Credit Commitment or, if the Aggregate Revolving CreditCommitment has been terminated, the aggregate unpaid principal amount of theoutstanding Revolving Credit Loans plusthe aggregate amount of the outstanding Letter of Credit Obligations.

 

(f)            Thedefinition of “Revolving Credit Termination Date” in Article I of theCredit Agreement is hereby amended to state in its entirety as follows:

 

“RevolvingCredit Termination Date” means November 10, 2005 or any later date as maybe specified as the Revolving Credit Termination Date in accordance with Section 3.10or any earlier date on which the Aggregate Revolving Credit Commitment isreduced to zero or otherwise terminated pursuant to the terms hereof.

 

(g)           Thedefinitions of “Year 2000 Issuer” and “Year 2000 Program” in Article I ofthe Credit Agreement are hereby deleted.

 

(h)           Thedefinition of “pro-rata” in Article I of the Credit Agreement is amendedto state in its entirety as follows:

 

“pro-rata”means, when used with respect to a Lender, and any described aggregate or totalamount, an amount equal to such Lender’s pro-rata share or portion, based onits percentage of the Aggregate Revolving Credit Commitment.  Each Lenders pro-rata share of the Letter ofCredit Commitment shall be the same as its pro-rata share of the AggregateRevolving Credit Commitment.

 

(i)            Article Iof the Credit Agreement is hereby amended by the addition of the followingdefinition in proper alphabetical order:

 

“Lloyd’sLetters of Credit” is defined in Section 3.1.

 

(j)            Sections 2.1(a)and (b) of the Credit Agreement are hereby amended to state in theirentirety as follows:

 

“(a)         From and including thedate hereof to but excluding the Revolving Credit Termination Date, each Lenderseverally (and not jointly) agrees, on the terms and

 

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conditions setforth in this Agreement, to make Revolving Credit Loans to the Borrower fromtime to time in amounts not to exceed in the aggregate at any one timeoutstanding the amount of its pro-rata share of the Aggregate Revolving CreditCommitment existing at such time minus the Letter of Credit Obligationsoutstanding at such time.  Subject tothe terms of this Agreement, the Borrower may borrow, repay and reborrowRevolving Credit Advances at any time prior to the Revolving Credit TerminationDate; provided, however, that the proceeds of Revolving Credit Advances mayonly be applied to reimburse amounts paid by the Issuer under Letters ofCredit.  The Revolving CreditCommitments shall expire on the Revolving Credit Termination Date.

 

(b)           The Borrower herebyagrees that, if at any time as a result of reductions in the AggregateRevolving Credit Commitment pursuant to Section 2.4(b) orotherwise, the aggregate balance of the Revolving Credit Loans plus theoutstanding Letter of Credit Obligations exceeds the Aggregate Revolving CreditCommitment, the Borrower shall repay immediately the lesser of (i) such thenamount of Revolving Credit Loans as may be necessary to eliminate such excess and(ii) the then outstanding amount of Revolving Credit Loans.”

 

(k)           Section 2.4of the Credit Agreement is hereby amended to state in its entirety as follows:

 

“2.4         Commitment Fee;Reductions in Aggregate Revolving Credit Commitment.  (a) The Borrower agrees to pay to the Agentfor the account of each Lender a commitment fee on its Revolving CreditCommitment less the sum of (i) its Revolving Credit Loans plus (ii) itspro-rata share of the Letter of Credit Obligations at a per annum rate equal tothe Applicable Commitment Fee Rate from the Closing Date to and including theRevolving Credit Termination Date, payable on each Payment Date hereafter andon the Revolving Credit Termination Date. All accrued commitment fees shall be payable on the effective date ofany termination of the obligations of the Lenders to make Revolving CreditLoans hereunder.

 

(b)           The Borrower maypermanently reduce the Aggregate Revolving Credit Commitment in whole, or inpart ratably among the Lenders in integral multiples of $5,000,000 upon atleast five (5) Business Days’ written notice to the Agent, which notice shallspecify the amount of any such reduction; provided, however, that the amount ofthe Aggregate Revolving Credit Commitment may not be reduced below theaggregate principal amount of the outstanding Revolving Credit Loans plus theoutstanding Letter of Credit Obligations and provided further that theAggregate Revolving Credit Commitment shall at all times equal the Letter ofCredit Commitment.”

 

(l)            Section 2.5 of the Credit Agreement ishereby deleted and intentionally left blank.

 

(m)          Theheading to Section 2.7 is hereby changed to MandatoryPrepayments.

 

(n)           Section 2.7(a)of the Credit Agreement is hereby deleted and intentionally left blank.

 

(o)           Section 2.7(b)is hereby amended to state in its entirety as follows:

 

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“(b)         Mandatory prepayments of Revolving Loans shallbe required in the amounts and at the times set forth below:

 

(i)            concurrently with the receipt thereof bythe Borrower or any Subsidiary, 75% of the aggregate Net Available Proceeds inexcess of $1,000,000 realized upon all Asset Dispositions in any Fiscal Year;and

 

(ii)           concurrently with the receipt thereof by theBorrower or any Subsidiary, 75% of the Net Available Proceeds in excess of$1,000,000 realized upon the issuance or sale by the Borrower or suchSubsidiary of any equity or debt securities (other than an issuance or sale ofcommon stock of a Subsidiary to the Borrower);

 

provided that,if the outstanding Revolving Loans at the time of a mandatory prepayment areless than the mandatory prepayment, the prepayment shall be limited to theoutstanding amount of such Revolving Loans.”

 

(p)           Sections 2.7(c),(d) and (e) of the Credit Agreement are hereby deleted andintentionally left blank.

 

(q)           Section 2.8 of the Credit Agreement ishereby amended to state in its entirety as follows:

 

“2.8.        RevolvingCredit Advances.  EachRevolving Credit Advance shall be made as an Alternate Base Rate Advance pursuantto Section 3.4(b).  Notlater than noon (Chicago time) on each Borrowing Date, each Lender shall makeavailable its Revolving Credit Loan or Loans in funds immediately available inChicago to the Agent at its address specified pursuant to Article XIV.”

 

(r)            Section 3.1of the Credit Agreement is hereby amended to state in its entirety as follows:

 

“3.1         Issuance of Letters ofCredit.  (a)  From and after the date hereof to butexcluding the Letter of Credit Termination Date, the Issuer agrees, upon theterms and conditions set forth in this Agreement, to issue at the request andfor the account of the Borrower, one or more Letters of Credit for the accountof the Borrower (x) to support the obligations of NCUL and MUL with respect tospecific syndicates at the Society of Lloyd’s (the Letters of Credit issuedunder this clause (x) being called the “Lloyd’s Letters of Credit”) and (y) tosupport other obligations, provided that the aggregate face amount of alloutstanding Letters of Credit Obligations with respect to this clause (y) doesnot at any time exceed the lesser of (A) the Revolving Credit Commitment and(B) $2,000,000; provided, however, that the Issuer shall not be under anyobligation to issue, and shall not issue, any Letter of Credit if: (i) anyorder, judgment or decree of any governmental authority or other regulatorybody with jurisdiction over the Issuer shall purport by its terms to enjoin orrestrain such Issuer from issuing such Letter of Credit, or any law orgovernmental rule, regulation, policy, guideline or directive (whether or nothaving the force of law) from any governmental authority or other regulatorybody with jurisdiction over the Issuer shall prohibit, or request that theIssuer refrain from, the issuance of Letters of Credit in particular or shallimpose upon the Issuer with respect to any Letter of Credit any restriction orreserve or capital requirement (for which the Issuer

 

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is nototherwise compensated) or any unreimbursed loss, cost or expense which was notapplicable, in effect and known to the Issuer as of the date of this Agreementand which the Issuer in good faith deems material to it; (ii) one or more ofthe conditions to such issuance contained in Section 5.2 is notthen satisfied; or (iii) after giving effect to such issuance, the aggregateoutstanding amount of the Letter of Credit Obligations plus the outstandingRevolving Credit Loans would exceed the Revolving Credit Commitment.  Letters of Credit shall be denominated, atthe Borrower’s option, in either Dollars or Pounds.

 

(b)           In no event shall:  (i) the aggregate amount of the Letter ofCredit Obligations plus the outstanding Revolving Credit Loans at any timeexceed the Letter of Credit Commitment; or (ii) the expiration date of anyLetter of Credit (other than the Letters of Credit identified onSchedule 3.1 hereto) or the date for payment of any draft presentedthereunder and accepted by the Issuer, be later than (x) the date one yearafter the effective date of such Letter of Credit or (y) in the case of theLloyd’s Letters of Credit, four years after notice of expiry from the Issuer tothe Borrower and the beneficiary of the Letter of Credit; provided, that eachLetter of Credit issued with an automatic “evergreen” provision providing forrenewal absent advance notice by the Borrower or the Issuer shall beautomatically renewed unless at least 30 days prior to each anniversary of theissuance of such Letter of Credit the beneficiary thereof receives notice fromthe Issuer that such Letter of Credit shall not be renewed.  The Issuer shall be under no obligation topermit the renewal or extension of any Letter of Credit at any time (A) when aDefault or Unmatured Default has occurred and is continuing or (B) after theLetter of Credit Termination Date.  TheIssuer may (and, upon the request of the Required Lenders, shall) give noticeof termination of any Lloyd’s Letters of Credit with an expiry date based uponnotice at any time (A) when a Default has occurred and is continuing or (B)after the Letter of Credit Termination Date.

 

(c)           The Borrower agreesthat, if at any time as a result of reductions in the Letter of CreditCommitment pursuant to Section 3.3 or otherwise and after givingeffect to any repayments of Revolving Credit Loans pursuant to Section 2.1(b),the aggregate balance of the Letter of Credit Obligations exceeds the RevolvingCredit Commitment, the Borrower shall cash collateralize the Letter of CreditObligations by depositing into the Letter of Credit Cash Collateral Accountcash or Cash Collateral Investments in such amount as may be necessary toeliminate such excess.

 

(d)           The Letters of Creditidentified on Schedule 3.1 hereto which are issued and outstanding underthe Existing Credit Agreement shall, upon satisfaction of the conditions setforth in Article V hereto, automatically and without further action on thepart of the Agent, the Issuer, the Lenders or the Borrower be deemed Letters ofCredit issued under this Agreement.

 

(e)           For purposes ofdetermining usage and availability under this Section 3.1, when aLetter of Credit is issued in Pounds, such Pounds will be converted to Dollarsupon issuance, upon the proposed issuance of any other Letter of Credit and atthe end of each calendar quarter, and at any time thereafter as requested bythe Agent or any Lender (including the Issuer) and such determination shall bemade by the Agent in its sole determination based upon the spot exchange ratebetween Dollars and Pounds as quoted by the Agent’s foreign exchange desk as ofsuch date of determination. Notwithstanding

 

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any otherprovisions of this Agreement, if at any time, after giving effect to theconversion of Pounds into Dollars as set forth above, the aggregate face amountof all outstanding Letters of Credit plus the outstanding Revolving CreditLoans is greater than the Aggregate Revolving Credit Commitment (“ConversionDifferential”), then the Borrower shall prepay the Revolving Credit Loans tothe extent required so that the difference between the then effective AggregateRevolving Credit Commitment and the aggregate principal amount of alloutstanding Revolving Credit Loans is equal to or greater than the ConversionDifferential and, in the event the Conversion Differential exceeds the theneffective Aggregate Revolving Credit Commitment, then the Borrower shall cashcollateralize such Conversion Differential by depositing into the Letter ofCredit Cash Collateral Account cash or Cash Collateral Investments in an amountequal to such difference.”

 

(s)           Section 3.3of the Credit Agreement is hereby amended to state in its entirety as follows:

 

“3.3         Reductions in Letterof Credit Commitment.  The Borrowermay permanently reduce the Letter of Credit Commitment in whole, or in partratably among the Lenders in integral multiples of $2,500,000, upon at leastfive (5) Business Days’ written notice to the Agent, which notice shallspecify the amount of such reduction; provided, however, that theamount of the Letter of Credit Commitment may not be reduced below theaggregate amount of the outstanding Letter of Credit Obligations plus theoutstanding Revolving Credit Loans and provided further that the Letter ofCredit Commitment shall at all times equal the Aggregate Revolving CreditCommitment.”

 

(t)            Section 3.4(b)of the Credit Agreement is hereby amended to state in its entirety as follows:

 

“(b)         Notwithstanding anyprovisions to the contrary in any Reimbursement Agreement, the Borrower agreesto reimburse the Issuer for amounts which the Issuer pays under such Letter ofCredit no later than the time specified in this Agreement.  If the Borrower does not pay any suchReimbursement Obligations when due at any time prior to the Revolving CreditTermination Date, the Borrower shall be deemed to have immediately requestedthat the Lenders make an Alternate Base Rate Advance under this Agreement in aprincipal amount equal to such unreimbursed Reimbursement Obligations.  The Agent shall promptly notify the Lendersof such deemed request and, without the necessity of compliance with therequirements of Sections 3.5 and 5.2, each Lender shall makeavailable to the Agent its Revolving Credit Loan in the manner prescribed forAlternate Base Rate Advances.  AllRevolving Credit Loans shall be in Dollars and, to the extent, such RevolvingCredit Loans are applied to a Reimbursement Obligation denominated in Pounds,such Revolving Credit Loans shall be in the equivalent amount of Dollars basedupon the spot rate of exchange between Dollars and Pounds as quoted by theAgent’s foreign exchange desk as of the date of determination.  The proceeds of such Revolving Credit Loansshall be paid over by the Agent to the Issuer for the account of the Borrowerin satisfaction of such unreimbursed Reimbursement Obligations, which shallthereupon be deemed satisfied by the proceeds of, and replaced by, suchAlternate Base Rate Advance.”

 

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(u)           Section 3.5(c)of the Credit Agreement is hereby amended to state in its entirety as follows:

 

“(c)  the date on which such requested Letter ofCredit is to expire, which shall be no later than four years from the date ofissuance of such Letter of Credit or in the case of a Lloyd’s Letter of Credit,four years from notice of expiry from the Issuer to the Borrower and thebeneficiary of such Letter of Credit.”

 

(v)           Section 3.9(b)of the Credit Agreement is hereby amended to state in its entirety as follows:

 

“Letter ofCredit Fronting Fee.  The Borrowerhereby agrees to pay to the Agent, for the account of the Issuer, a letter ofcredit fronting fee with respect to each Letter of Credit from and includingthe date of issuance thereof (or, with respect to the Letters of Creditidentified on Schedule 3.1, the date on which such Letters of Credit aredeemed issued under this Agreement pursuant to Section 3.1(d))until the date such Letter of Credit is fully drawn, canceled or expired, in anamount equal to the rate provided in the Fee Letter of the aggregate initialface amount of such Letter of Credit, calculated with respect to actual dayselapsed on the basis of a 360-day year and payable quarterly in arrears on eachPayment Date in each year and upon the expiration, cancellation or utilizationin full of such Letter of Credit.  Inaddition to the foregoing, the Borrower agrees to pay the Issuer any other feescustomarily charged by it in respect of the issuance, amendment, cancellation,negotiation or transfer of each Letter of Credit and each drawing madethereunder.  The letter of creditfronting fee is in addition to (and not included in) the letter of creditparticipation fee provided for in paragraph (c) below.”

 

(w)          Section 3.9(d)of the Credit Agreement is hereby deleted.

 

(x)            Section 3.10of the Credit Agreement is hereby amended to state in its entirety as follows:

 

“3.10       Extension of Letter ofCredit Termination Date.  TheBorrower may request an extension of the Letter of Credit Termination Date andthe Revolving Credit Termination Date by submitting a request for an extensionto the Agent (an “Extension Request”) on any Business Day that is not less than30 days prior to the then Letter of Credit Termination Date and the RevolvingCredit Termination Date.  The Letter ofCredit Termination Date and Revolving Credit Termination Date shall in allevents be the same date.  The ExtensionRequest must specify the new Letter of Credit Termination Date and RevolvingCredit Termination Date requested by the Borrower and the date as of which date(which must be at least 30 days after the Extension Request is delivered to theAgent) the Lenders (including the Issuer) must respond to the Extension Request(the “Response Date”).  The new Letterof Credit Termination Date shall not be more than two years after the Letter ofCredit Termination Date and Revolving Credit Termination Date in effect at thetime the Extension Request is received, including the Letter of CreditTermination Date and Revolving Credit Termination Date as one of the days inthe calculation of the days elapsed. Promptly upon receipt of an Extension Request, the Agent shall notifyeach Lender of the contents thereof and shall request the Issuer and eachLender to approve the Extension Request. Each Lender approving the Extension 

 

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Request shalldeliver its written consent no later than the Response Date.  If the consent of all of the Lenders intheir sole discretion is received by the Agent, the Letter of CreditTermination Date and Revolving Credit Termination Date specified in theExtension Request shall become effective on the existing Letter of CreditTermination Date and Revolving Credit Termination Date and the Agent shallpromptly notify the Borrower and each Lender (including the Issuer) of the newRevolving Credit Termination Date and Letter of Credit Termination Date.  Otherwise the Letter of Credit TerminationDate and Revolving Credit Termination Date shall be unchanged.”

 

(y)           Section 6.4(a)of the Credit Agreement is hereby amended by the deletion of the dates“December 31, 1997” and “March 16, 1998” and the substitution of thedates “December 31, 2002” and “March 12, 2003” respectively therefor.

 

(z)            Sections6.4(b) and (c) of the Credit Agreement are hereby amended by thedeletion of the date “June 30, 1998” wherever it appears and thesubstitution of the date “June 30, 2003” therefor.

 

(aa)         Section 6.5(a)of the Credit Agreement is hereby amended by the deletion of the phrase “1995,1996 and 1997 Fiscal Years” and the date “June 30, 1998” and thesubstitution of the phrase “2000, 2001 and 2002 Fiscal Years” and the date“June 30, 2003” respectively therefor.

 

(bb)         Section 6.5(b)of the Credit Agreement is hereby amended by the deletion of the date“June 30, 1998” and the substitution of the date “June 30, 2003”therefor.

 

(cc)         Section 6.6of the Credit Agreement is hereby amended by the deletion of the date“June 30, 1998” and the substitution of the date “June 30, 2003”therefor.

 

(dd)         Section 6.26of the Credit Agreement is hereby deleted and intentionally left blank.

 

(ee)         Article VIof the Credit Agreement is hereby amended by the addition of the following atthe end:

 

““6.29 Reportable Transaction. The Borrower does not intend to treat the Revolving Credit Loans andrelated transactions as being a “reportable transaction” (within the meaning ofTreasury Regulation Section 1.60111-4). In the event the Borrower determines to take any action inconsistentwith such intention, it will promptly notify the Agent thereof.  The Borrower acknowledges that one or moreof the Lenders may treat the Revolving Credit Loans as part of a transactionthat is subject to Treasury Regulation Section 1.6011-4 orSection 301.6112-1, and the Agent and such Lender or Lenders, as applicable,may file such IRS forms or maintain such lists and other records as they maydetermine is required by such Treasury Regulations.”

 

(ff)           Thefirst sentence of Section 7.2 of the Credit Agreement is herebyamended to state in its entirety as follows:

 

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“The proceeds of the Loans shall be usedsolely to reimburse drawings under Letters of Credit.”

 

(gg)         Section 7.21of the Credit Agreement is hereby deleted and intentionally left blank.

 

(hh)         Section 7.24of the Credit Agreement is hereby amended to state in its entirety as follows:

 

“7.24       Financial Covenants.

 

7.24.1      Minimum ConsolidatedTangible Net Worth.  The Borrowerwill at all times maintain Consolidated Tangible Net Worth of not less than thesum of (a) $135,000,000, plus (b) 75% of the cumulative positive ConsolidatedNet Income, if any, earned from October 1, 2003 to the date ofcalculation, plus (c) 75% of the Net Available Proceeds of any equity issuancein excess of $1,000,000 (including any capital contribution to surplus of theBorrower in respect of which no additional shares are issued) by the Borrower,if any, made on or after October 1, 2003.

 

7.24.2      Minimum Statutory Surplus.  The Borrower will cause the SignificantInsurance Subsidiaries to maintain an aggregate Statutory Surplus of not lessthan (i) $111,000,000 in each Fiscal Quarter ending on or beforeDecember 31, 2003, and (ii) at all times thereafter, the sum of (a)$111,000,000, plus (b) 50% of the cumulative positive aggregate Statutory NetIncome, if any, earned by the Significant Insurance Subsidiaries fromJanuary 1, 2004 to the date of calculation, plus (c) 75% of the NetAvailable Proceeds of any equity issuance (including any capital contributionto surplus of any Significant Insurance Subsidiary in respect of which noadditional shares are issued) by any Significant Insurance Subsidiary made onor after October 1, 2003.

 

7.24.3      Leverage Ratio.  The Borrower will not permit the LeverageRatio to exceed 0.20 to 1.0 at any time.

 

7.24.4      Minimum Risk-Based Capital.  The Borrower will cause each SignificantInsurance Subsidiary to maintain a ratio of (a) Total Adjusted Capital (asdefined in the Risk-Based Capital Act or in the rules and procedures prescribedfrom time to time by the NAIC with respect thereto) to (b) the Company ActionLevel RBC (as defined in the Risk-Based Capital Act or in the rules andprocedures prescribed from time to time by the NAIC with respect thereto) of atleast 150%.”

 

(ii)           Section 8.20of the Credit Agreement is hereby deleted and intentionally left blank.

 

(jj)           Section 10.4 of the Credit Agreement ishereby amended to state in its entirety as follows:

 

“10.4       EntireAgreement.  The FacilityDocuments embody the entire agreement and understanding among the Borrower, theAgent, the Co-Agent and the Lenders and supersede all prior agreements andunderstandings among the Borrower, the Agent, the Co-Agent and the Lendersrelating to the subject matter thereof other than the fee letter

 

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datedSeptember 24, 2003 in favor of Bank One, NA, and Banc One Capital Markets,Inc. (the “Fee Letter”).

 

(kk)         Section 10.11of the Credit Agreement is hereby amended by the addition of the following atthe end:

 

“Notwithstanding anything herein to the contrary,confidential information shall not include, and each party hereto (and eachemployee, representative or other agent of any party hereto) may disclose toany and all Persons, without limitation of any kind, the U.S. federal incometax treatment and U.S. federal income tax structure of the transactioncontemplated hereby and all materials of any kind (including opinions or othertax analyses) that are or have been provided to such party relating to such taxtreatment or tax structure and it is hereby confirmed that each party heretohas been authorized to make such disclosures since the commencement ofdiscussion regarding the transactions contemplated hereby.”

 

(ll)           Section 11.8of the Credit Agreement is hereby amended to state in its entirety as follows:

 

“11.8       Agent’s Reimbursementand Indemnification.  The Lendersagree to reimburse and indemnify the Agent ratably in proportion to theirrespective Revolving Credit Commitments (or, if the Aggregate Revolving CreditCommitments have been terminated, in proportion to their Revolving CreditCommitments immediately prior to such termination) (a) for any amounts notreimbursed by the Borrower for which the Agent is entitled to reimbursement bythe Borrower under the Facility Documents, (b) for any other expenses incurredby the 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 Agent inconnection with any dispute between the Agent and any Lender or between two ormore of the Lenders) and (c) for any liabilities, obligations, losses, damages,penalties, actions, judgments, suits, costs, expenses or disbursements of anykind and nature whatsoever which may be imposed on, incurred by or assertedagainst the Agent in any way relating to or arising out of the FacilityDocuments or any other document delivered in connection therewith or thetransactions contemplated thereby (including, without limitation, for any suchamounts incurred by or asserted against the Agent in connection with anydispute between the Agent and any Lender or between two or more of theLenders), or the enforcement of any of the terms of the Facility Documents orof any such other documents; provided that (i) no Lender shall be liable forany of the foregoing to the extent any of the foregoing is found in a finalnon-appealable judgment by a court of competent jurisdiction to have resultedfrom the gross negligence or willful misconduct of the Agent and (ii) anyindemnification required pursuant to Section 4.5(g) shall,notwithstanding the provisions of this Section 11.8, be paid by therelevant Lender in accordance with the provisions thereof.  The obligations of the Lenders under this Section 11.8shall survive payment of the Obligations and termination of this Agreement.”

 

(mm)       Section 11.15of the Credit Agreement is hereby amended to state in its entirety as follows:

 

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“11.15 Syndication Agent.  The Syndication Agent, Senior ManagingAgent, Managing Agent and Co-Agent shall have no right, power, obligation,liability, responsibility or duty under this Agreement other than thoseapplicable to all Lenders as such. Without limiting the foregoing, the Syndication Agent, Senior ManagingAgent, Managing Agent and Co-Agent shall not have or be deemed to have afiduciary relationship with any Lender. Each Lender hereby makes the same acknowledgements with respect to theSyndication Agent, Senior Managing Agent, Managing Agent and Co-Agent as itmakes to the Agent in Section 11.10.”

 

(nn)         ThePricing Schedule shall be deleted in its entirety, and the PricingSchedule attached hereto and made apart hereof shall be substituted inits place.

 

(oo)         Schedule 1to the Credit Agreement shall be deleted in its entirety, and Schedule 1attached hereto and made a part hereof shall be substituted in its place.

 

2.             Representationsand Warranties of the Borrower.  TheBorrower represents and warrants that:

 

(a)           Theexecution, delivery and performance by the Borrower of this Amendment have beenduly authorized by all necessary corporate action and that this Amendment is alegal, valid and binding obligation of the Borrower enforceable against theBorrower in accordance with its terms, except as the enforcement thereof may besubject to the effect of any applicable bankruptcy, insolvency, reorganization,moratorium or similar law affecting creditors’ rights generally;

 

(b)           Eachof the representations and warranties contained in the Credit Agreement is trueand correct in all material respects on and as of the date hereof as if made onthe date hereof, except to the extent any such representation or warranty isstated to relate solely to an earlier date, in which case such representationor warranty shall have been true and correct on and as of such earlier date;

 

(c)           Aftergiving effect to this Amendment, no Default or Unmatured Default has occurredand is continuing.

 

3.             Effective Date.  Section 1 of this Amendmentshall not become effective unless and until the Borrower has furnished thefollowing to the Agent with sufficient copies for the Lenders and the otherconditions set forth below have been satisfied.

 

(a)           Amendment.  A copy of this Amendment, executed by theBorrower, the Agent and the Lenders.

 

(b)           GoodStanding Certificate.  A certificateof good standing for the Borrower, certified by the appropriate governmentalofficer in its jurisdiction of incorporation.

 

(c)           Officer’sCertificate  A certificate of theSecretary or an Assistant Secretary of the Borrower of its certificate ofincorporation, bylaws and its Board of Directors’ resolutions authorizing theexecution and delivery of this Amendment.

 

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(d)           AmendmentFee.  Receipt by the Agent for thebenefit of the Lenders of any amendment fee in the amount provided for underthe Fee Letter, which fee shall be deemed fully earned and non-refundable onthe date hereof (the “Amendment Fee”).

 

(e)           Other.  Such other documents as the Agent, anyLender or their counsel may have reasonably requested.

 

As an additional condition to theeffectiveness of this Amendment, the outstanding Revolving Credit Loans shallhave been paid in full.

 

The date on which the foregoing conditionshave been satisfied is the “Effective Date.”

 

4.             Reference to andEffect Upon the Credit Agreement.

 

(a)           Exceptas specifically amended above, the Credit Agreement and the other LoanDocuments shall remain in full force and effect and are hereby ratified andconfirmed.

 

(b)           Theexecution, delivery and effectiveness of this Amendment shall not operate as awaiver of any right, power or remedy of the Agent or any Lender under theCredit Agreement or any Loan Document, nor constitute a waiver of any provisionof the Credit Agreement or any Loan Document, except as specifically set forthherein.  Upon the effectiveness of thisAmendment, each reference in the Credit Agreement to “this Agreement,”“hereunder,” “hereof,” “herein” or words of similar import shall mean and be areference to the Credit Agreement as amended hereby.

 

5.             Costs and Expenses.

 

(a)           TheBorrower hereby affirms its obligation under Section 10.7 of theCredit Agreement to reimburse the Agent for all reasonable costs, internalcharges and out-of-pocket expenses paid or incurred by the Agent in connectionwith the preparation, negotiation, execution and delivery of this Amendment,including but not limited to the reasonable attorneys’ fees and time charges ofattorneys for the Agent with respect thereto.

 

(b)           TheBorrower hereby agrees that on the Effective Date, the Borrower shall pay theAgent for the account of the Arranger, the Agent and the Lenders the AmendmentFee, which Amendment Fee shall be deemed fully earned and non-refundable on thedate hereof.

 

6.             GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY ANDCONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAWSPROVISIONS) OF THE STATE OF ILLINOIS BUT GIVING EFFECT TO FEDERAL LAWSAPPLICABLE TO NATIONAL BANKS.

 

7.             Headings.  Section headings in this Amendment areincluded herein for convenience of reference only and shall not constitute apart of this Amendment for any other purposes.

 

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8.             Counterparts.  This Amendment may be executed in any numberof counterparts, each of which when so executed shall be deemed an original butall such counterparts shall constitute one and the same instrument.

 

[signature pages follow]

 

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IN WITNESS WHEREOF, the parties have executed this Amendment as of thedate and year first above written.

 
|   |   | THE NAVIGATORS GROUP, INC.                                                                                           |
|--------|--------|----------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                 |
|   |   |                                                                                                                 |
|   |   | By:                                                                                                                  |   |
|   |   |                                                                                                                 |
|   |   | Its:                                                                                                                 |   |
|   |   |                                                                                                                 |
|   |   |                                                                                                                 |
|   |   | BANK ONE, NA (formerly known as The First  National Bank of Chicago), as Lead Arranger, and  as Administrative Agent |
|   |   |                                                                                                                 |
|   |   |                                                                                                                 |
|   |   | By:                                                                                                                  |   |
|   |   |                                                                                                                 |
|   |   | Its:                                                                                                                 |   |
|   |   |                                                                                                                 |
|   |   |                                                                                                                 |
|   |   | BARCLAYS BANK plc, as a Lender and  Syndication Agent                                                                |
|   |   |                                                                                                                 |
|   |   |                                                                                                                 |
|   |   | By:                                                                                                                  |   |   |
|   |   |                                                                                                                 |
|   |   | Its:                                                                                                                 |   |
|   |   |                                                                                                                 |
|   |   |                                                                                                                 |
|   |   | LASALLE BANK NATIONAL ASSOCIATION,  as a Lender and Senior Managing Agent                                            |
|   |   |                                                                                                                 |
|   |   |                                                                                                                 |
|   |   | By:                                                                                                                  |   |
|   |   |                                                                                                                 |
|   |   | Its:                                                                                                                 |   |
|        |        |                                                                                                                      |  |  |  |  |

 

S-1

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|   | CREDIT SUISSE FIRST BOSTON, acting through  its Cayman Islands Branch, as a Lender and  Managing Agent |
|--------|--------------------------------------------------------------------------------------------------------|
|   |                                                                                                   |
|   | By:                                                                                                    |   |
|   |                                                                                                   |
|   | Its:                                                                                                   |   |
|   |                                                                                                   |
|   | By:                                                                                                    |   |
|   |                                                                                                   |
|   | Its:                                                                                                   |   |
|   |                                                                                                   |
|   | BROWN BROTHERS HARRIMAN & CO., as a   Lender and Co-Agent                                          |
|   |                                                                                                   |
|   |                                                                                                   |
|   | By:                                                                                                    |   |
|   |                                                                                                   |
|   | Its:                                                                                                   |   |

 

S-2

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**PRICINGSCHEDULE**

 
| **Applicable  Margin** |   | **Level I Status** |   | **Level II Status** |   | **Level III  Status** |   | **Level IV Status** |   |
|------------------------|--------|--------------------|--------|---------------------|--------|-----------------------|--------|---------------------|--------|
| *Eurodollar  Rate*     |   | *1.00*             | *%*    | *1.125*             | *%*    | *1.25*                | *%*    | *1.50*              | *%*    |

 

 
| **Applicable  Fee  Rate**             |   | **Level I Status** |     | **Level II Status** |     | **Level III  Status** |     | **Level IV Status** |     |
|---------------------------------------|--------|--------------------|----------|---------------------|----------|-----------------------|----------|---------------------|----------|
| *Commitment  Fee*                     |   | *0.125*            | *%*      | *0.15*              | *%*      | *0.25*                | *%*      | *0.30*              | *%*      |
|                                  |   |               | * * |                | * * |                  | * * |                | * * |
| *Letter  of Credit Participation Fee* |   | *1.00*             | *%*      | *1.125*             | *%*      | *1.25*                | *%*      | *1.50*              | *%*      |

 

For the purposes of this Schedule, the following termshave the following meanings, subject to the final paragraph of this Schedule:

 

“Level I Status” exists at any date if, on such date,the S&P Rating is A+ or better.

 

“Level II Status” exists at any date if, on such date,(i) the Borrower has not qualified for Level I Status and (ii) the S&PRating is A or better.

 

“Level III Status” exists at any date if, on suchdate, (i) the Borrower has not qualified for Level I Status or Level II Statusand (ii) the S&P Rating is A- or better.

 

“Level IV Status” exists at any date if, on such date,the Borrower has not qualified for Level I Status, Level II Status or Level IIIStatus.

 

“S&P Rating” means, at any time, the FinancialStrength rating issued by Standard and Poor’s Rating Services, a division ofThe McGraw Hill Companies, Inc., and then in effect for the Borrower or, if theBorrower does not have a Financial Strength rating, for each of Navigators andthe other Significant Insurance Subsidiaries.

 

“Status” means Level I Status, Level II Status, LevelIII Status or Level IV Status.

 

The Applicable Margin and [Applicable Fee Rate] shallbe determined in accordance with the foregoing table based on the Borrower’sStatus as determined from its then-current S&P Ratings.  The financial strength rating in effect onany date for the purposes of this Schedule is that in effect at the closeof business on such date.  If at anytime the Borrower (or Navigators and the other Significant Insurance Companies)has no S&P Rating, Level IV Status shall exist.

 

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SCHEDULE 1

 

COMMITMENTS

 
| **Lender**                         |   | **Revolving Credit Commitment** |          |
|------------------------------------|--------|---------------------------------|---------------|
|                               |   |                            |          |
| Bank  One, NA                      |   | $                               | 20,000,000.00 |   |
|                               |   |                            |          |
| Barclays  Bank PLC                 |   | $                               | 20,000,000.00 |   |
|                               |   |                            |          |
| LaSalle  Bank, NA                  |   | $                               | 17,500,000.00 |   |
|                               |   |                            |          |
| Credit  Suisse First Boston        |   | $                               | 12,500,000.00 |   |
|                               |   |                            |          |
| Brown  Brothers Harriman & Co. |   | $                               | 10,000,000.00 |   |
|                               |   |                            |          |
| TOTAL:                             |   | $                               | 80,000,000.00 |   |

 

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