Exhibit 10.1





Exhibit 10.1




EXECUTION VERSION




FIFTH AMENDED AND RESTATED CREDIT AGREEMENT




AMONG




THE NAVIGATORS GROUP, INC.,




as Borrower,




THE LENDERS NAMED HEREIN,




JPMORGAN CHASE BANK, N.A.




as Administrative Agent,




BARCLAYS BANK PLC,




as Joint Lead Arranger and Syndication Agent,




and




ING BANK N.V, LONDON BRANCH




As Joint Lead Arranger and Documentation Agent




DATED AS OF




April 1, 2010




J.P. MORGAN SECURITIES INC.,




as Sole Bookrunner and

Joint Lead Arranger





 


 









 







TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	ARTICLE I DEFINITIONS
	 	 	1	 
	ARTICLE II THE LETTER OF CREDIT FACILITY
	 	 	16	 
	2.1 Issuance of Letters of Credit
	 	 	16	 
	2.2 Participating Interests
	 	 	18	 
	2.3 Reductions in Letter of Credit Commitment
	 	 	19	 
	2.4 Reimbursement Obligations
	 	 	19	 
	2.5 Procedure for Issuance
	 	 	21	 
	2.6 Nature of the Lenders’ Obligations
	 	 	22	 
	2.7 Notification of Issuance Requests
	 	 	23	 
	2.8 Cash Collateral for Letters of Credit
	 	 	23	 
	2.9 Fees
	 	 	23	 
	2.10 Extension of Letter of Credit Availability Termination Date
	 	 	25	 
	2.11 Optional Increase in Letter of Credit Commitment
	 	 	25	 
	2.12 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
	 	 	30	 
	ARTICLE IV CONDITIONS PRECEDENT
	 	 	30	 
	4.1 Initial Letters of Credit
	 	 	30	 
	4.2 Each Letter of Credit
	 	 	31	 
	ARTICLE V REPRESENTATIONS AND WARRANTIES
	 	 	32	 
	5.1 Existence and Standing
	 	 	32	 
	5.2 Authorization and Validity
	 	 	32	 
	5.3 No Conflict; Government Consent
	 	 	32	 
	5.4 Financial Statements
	 	 	33	 






 


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	 	 	Page	 
	 
	 	 	 	 
	5.5 Statutory Financial Statements
	 	 	33	 
	5.6 Material Adverse Change
	 	 	33	 
	5.7 Taxes
	 	 	34	 
	5.8 Litigation and Contingent Obligations
	 	 	34	 
	5.9 Subsidiaries
	 	 	34	 
	5.10 ERISA
	 	 	34	 
	5.11 Defaults
	 	 	34	 
	5.12 Accuracy of Information
	 	 	34	 
	5.13 Regulation U
	 	 	35	 
	5.14 Material Agreements
	 	 	35	 
	5.15 Compliance With Laws
	 	 	35	 
	5.16 Ownership of Properties
	 	 	35	 
	5.17 Plan Assets; Prohibited Transactions
	 	 	35	 
	5.18 Environmental Matters
	 	 	35	 
	5.19 Investment Company Act
	 	 	36	 
	5.20 Solvency
	 	 	36	 
	5.21 Insurance Licenses
	 	 	36	 
	5.22 Partnerships
	 	 	36	 
	5.23 Lines of Business
	 	 	36	 
	5.24 Reinsurance Practices
	 	 	37	 
	5.25 Security
	 	 	37	 
	5.26 Disclosure
	 	 	37	 
	ARTICLE VI COVENANTS
	 	 	37	 
	6.1 Financial Reporting
	 	 	37	 
	6.2 Purpose
	 	 	40	 
	6.3 Notice of Default
	 	 	41	 
	6.4 Conduct of Business
	 	 	41	 
	6.5 Taxes
	 	 	41	 






 


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TABLE OF CONTENTS
(continued)





	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	6.6 Insurance
	 	 	41	 
	6.7 Compliance with Laws
	 	 	42	 
	6.8 Maintenance of Properties
	 	 	42	 
	6.9 Inspection; Maintenance of Books and Records
	 	 	42	 
	6.10 Dividends and Stock Repurchases
	 	 	42	 
	6.11 Indebtedness
	 	 	42	 
	6.12 Merger
	 	 	43	 
	6.13 Sale of Assets
	 	 	43	 
	6.14 Investments and Acquisitions
	 	 	43	 
	6.15 Contingent Obligations
	 	 	44	 
	6.16 Liens
	 	 	45	 
	6.17 Affiliates
	 	 	45	 
	6.18 Amendments to Agreements
	 	 	46	 
	6.19 Change in Fiscal Year
	 	 	46	 
	6.20 Inconsistent Agreements
	 	 	46	 
	6.21 Reinsurance
	 	 	46	 
	6.22 Stock of Subsidiaries
	 	 	47	 
	6.23 Financial Covenants
	 	 	47	 
	6.24 Additional Pledge
	 	 	47	 
	ARTICLE VII DEFAULTS
	 	 	47	 
	ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
	 	 	50	 
	8.1 Acceleration
	 	 	50	 
	8.2 Amendments
	 	 	51	 
	8.3 Preservation of Rights
	 	 	52	 
	8.4 Application of Funds
	 	 	52	 
	ARTICLE IX GENERAL PROVISIONS
	 	 	53	 
	9.1 Survival of Representations
	 	 	53	 
	9.2 Governmental Regulation
	 	 	53	 






 


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TABLE OF CONTENTS
(continued)





	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	9.3 Headings
	 	 	53	 
	9.4 Entire Agreement
	 	 	53	 
	9.5 Numbers of Documents
	 	 	53	 
	9.6 Several Obligations; Benefits of this Agreement
	 	 	53	 
	9.7 Expenses; Indemnification
	 	 	54	 
	9.8 Accounting
	 	 	54	 
	9.9 Severability of Provisions
	 	 	54	 
	9.10 Nonliability of Lenders
	 	 	54	 
	9.11 Confidentiality
	 	 	55	 
	9.12 Nonreliance
	 	 	55	 
	9.13 Disclosure
	 	 	55	 
	9.14 USA Patriot Act Notification
	 	 	55	 
	ARTICLE X THE ADMINISTRATIVE AGENT
	 	 	56	 
	10.1 Appointment; Nature of Relationship
	 	 	56	 
	10.2 Powers
	 	 	56	 
	10.3 General Immunity
	 	 	56	 
	10.4 No Responsibility for Recitals, etc
	 	 	56	 
	10.5 Action on Instructions of Lenders
	 	 	57	 
	10.6 Employment of Agent and Counsel
	 	 	57	 
	10.7 Reliance on Documents; Counsel
	 	 	57	 
	10.8 Agent’s Reimbursement and Indemnification
	 	 	57	 
	10.9 Notice of Default
	 	 	58	 
	10.10 Rights as a Lender
	 	 	58	 
	10.11 Rights with Respect to Designated Lenders
	 	 	58	 
	10.12 Lender Credit Decision
	 	 	59	 
	10.13 Successor Agent
	 	 	59	 
	10.14 Agents’ Fees
	 	 	60	 
	10.15 Delegation to Affiliates
	 	 	60	 






 


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	 	 	Page	 
	 
	 	 	 	 
	10.16 Joint Lead Arranger; Syndication Agent; Documentation Agent
	 	 	60	 
	ARTICLE XI SETOFF; RATABLE PAYMENTS
	 	 	60	 
	11.1 Setoff
	 	 	60	 
	11.2 Ratable Payments
	 	 	60	 
	ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
	 	 	61	 
	12.1 Successors and Assigns
	 	 	61	 
	12.2 Participations
	 	 	61	 
	12.3 Assignments
	 	 	62	 
	12.4 Dissemination of Information
	 	 	63	 
	12.5 Tax Treatment
	 	 	63	 
	ARTICLE XIII NOTICES
	 	 	63	 
	13.1 Notices
	 	 	63	 
	13.2 Change of Address
	 	 	64	 
	ARTICLE XIV COUNTERPARTS
	 	 	64	 
	ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL
	 	 	64	 
	15.1 CHOICE OF LAW
	 	 	64	 
	15.2 CONSENT TO JURISDICTION
	 	 	64	 
	15.3 WAIVER OF JURY TRIAL
	 	 	65	 
	 
	 	 	 	 
	SCHEDULES
	 	 	 	 
	 
	 	 	 	 
	Pricing Schedule
	 	 	 	 
	Schedule 1 - Commitments
	 	 	 	 
	Schedule 1.1 - Cash Collateral Investments
	 	 	 	 
	Schedule 2.1 - Existing Letters of Credit
	 	 	 	 
	Schedule 5.9 - Subsidiaries
	 	 	 	 
	Schedule 5.22 - Partnerships
	 	 	 	 
	Schedule 5.23 - Existing Lines of Business
	 	 	 	 
	Schedule 6.16 - Liens
	 	 	 	 
	Schedule 6.21 - Reinsurance Guidelines
	 	 	 	 






 


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TABLE OF CONTENTS
(continued)





	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	EXHIBITS
	 	 	 	 
	 
	 	 	 	 
	Exhibit A Compliance Certificate
	 	 	 	 
	Exhibit B Assignment Agreement
	 	 	 	 
	Exhibit C Reimbursement Agreement Excerpt
	 	 	 	 
	Exhibit D Increase Request
	 	 	 	 







 


- vi -









 







FIFTH AMENDED AND RESTATED CREDIT AGREEMENT




This Fifth Amended and Restated Credit Agreement, dated as of April 1, 2010, is among THE
NAVIGATORS GROUP, INC., a Delaware corporation, the Lenders and JPMORGAN CHASE BANK, N.A.,
individually and as Administrative Agent, Barclays Bank PLC, as Joint Lead Arranger and Syndication
Agent, and ING Bank N.V., London Branch, as Joint Lead Arranger and Documentation Agent.



R E C I T A L S:




A. The Borrower, JPMorgan Chase Bank, N.A., as agent and certain financial institutions have
entered into that certain Fourth Amended and Restated Credit Agreement, dated as of April 3, 2009
(as heretofore amended, the “Existing Credit Agreement”), pursuant to which the lenders
party thereto agreed to make financial accommodations to the Borrower under a letter of credit
facility.



B. The Borrower has requested that the Existing Credit Agreement be amended and restated in
order to make changes to the Existing Credit Agreement.



C. The Borrower, the Agent and the Lenders desire to amend and restate the Existing Credit
Agreement to, among other things, accomplish such amendments.



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 Agent hereby agree to amend and restate the
Existing Credit Agreement as follows:



ARTICLE I




DEFINITIONS





As used in this Agreement:



“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.



“Additional Lender” is defined in Section 2.11.


 


 









 





“Adjusted Fair Market Value” means with respect to any Cash Collateral Investment, 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.



“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.



“Agent” means JPMorgan Chase Bank in its capacity as administrative agent pursuant to
Article X and not in its individual capacity as a Lender and any successor Agent appointed
pursuant to Article X.



“Agreement” means this Fifth Amended and Restated 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.



“Alternate Base Rate” means, for any day, a rate of interest per annum equal to the highest of
(a) the Prime Rate in effect for such day, (b) the Federal Funds Effective Rate on such day plus
1/2% per annum or (c) the Eurodollar Rate that would be applicable for a one month loan equal to
the amount of the applicable Letter of Credit (or after a Default, all outstanding Letters of
Credit) beginning on such day (or if such day is not a Business Day, the immediately preceding
Business Day) plus 1%.



“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.


 


- 2 -









 





“Applicable Letter of Credit Participation Fee Rate” means, at any time, the percentage per
annum at which letter of credit participation fees are accruing on the Letters of Credit at such
time as set forth in the Pricing Schedule.



“Applicable Margin” means the percentage rate per annum which is applicable at such time as
set forth in the Pricing Schedule.



“Applicable Unused Fee Rate” means, at any time, the percentage per annum at which unused fees
are accruing on the unused portion of the Letter of Credit Commitment at such time as set forth in
the Pricing Schedule.



“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 J.P. Morgan Securities Inc. and its successors.



“Article” means an article of this Agreement unless another document is specifically
referenced.



“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.



“Borrower’s Moody’s Rating” means, at any time, the rating issued by Moody’s with respect to
the Borrower’s senior unsecured long-term debt securities without third-party credit enhancement.



“Borrower’s S&P Rating” means, at any time, the rating issued by S&P with respect to the
Borrower’s senior unsecured long-term debt securities without third-party credit enhancement.



“Business Day” means a day (other than a Saturday or Sunday) on which banks generally are open
in New York for the conduct of substantially all of their commercial lending activities.


 


- 3 -









 





“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
(whether domestic or foreign) having capital and surplus in excess of $1,000,000,000 and a rating
of A-1 or better; 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 and has a maturity of not more than six
months.



“Cash Collateral Security Agreement” means (i) that certain Second Amended and Restated Pledge
Agreement, dated as April 3, 2009, and (ii) any security agreement in form and substance
satisfactory to the Agent executed by the Borrower in favor of the Agent, on behalf of itself and
the Lenders, pursuant to this Agreement, pledging to the Agent a security interest in a Collateral
Account and all Cash Collateral Investments delivered to the Agent pursuant to the terms hereof, as
the same may be amended, supplemented or otherwise modified from time to time.



“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.




“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.


 


- 4 -









 






“Closing Date” means April 1, 2010.



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



“Collateral” means any property or asset in which the Borrower has granted a security interest
to the Agent for the benefit of the Secured Parties.



“Collateral Account” means each of (a) 2748001563 and (b) any other “demand deposit account”,
“securities account” or “custodial account” (as such terms are defined in the UCC) maintained by
the Agent or its Affiliate as to which the Agent has “control” (as such term is defined in the UCC)
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 Agent and the taking of all steps required to give the
Agent a perfected security interest in the Cash Collateral Investments.




“Collateral Excess” is defined in Section 2.12.




“Collateral Shortfall” is defined in Section 2.12.



“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.




“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 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,
however, for the purposes of Section 6.23(c), 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.


 


- 5 -









 





“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 the excess of (a) Consolidated Total Tangible Assets
over (b) Consolidated Total Liabilities, excluding, however, for the
purposes of Section 6.23(a), the effect of any unrealized gain or loss reported under
Statement of Financial Accounting Standards No. 115.



“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.



“Consolidated Total Liabilities” means, at any time, the total liabilities 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 Tangible Assets” means, at any time, Consolidated Total Assets
minus Consolidated Total Intangible Assets.



“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.



“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 2.1(f).



“Default” means an event described in Article VII.


 


- 6 -









 





“Defaulting Lender” means any Lender that (i) has not reimbursed the Issuer for such Lender’s
pro-rata share of the amount of a payment made by the Issuer under a Letter of Credit within three
(3) Business Days after the date due therefor in accordance with Section 2.4(c), (ii) has
notified the Borrower or the Agent that it does not intend to comply with its obligations under
Section 2.4(c) or (iii) is the subject of a bankruptcy, insolvency or similar receivership
proceeding.




“Department” is defined in Section 5.5.




“Designated Lender” means a Defaulting Lender or a Downgraded Lender.




“Dollars” and the sign “$” mean lawful money of the United States of America.



“Downgraded Lender” means any Lender that (a) has a rating below BBB- from S&P, below Baa3
from Moody’s or below BBB- from Fitch, Inc. or (b) is a Subsidiary of a Person that is the subject
of a bankruptcy, insolvency or similar proceeding.



“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 Agent, the Eurodollar Rate shall instead be the rate determined by the
Agent to be the rate at which JPMorgan Chase Bank 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 and the
Agent, taxes imposed on its overall net income and franchise taxes imposed on it, by (a) the
jurisdiction under the laws of which such Lender or the Agent is incorporated or organized or (b)
the jurisdiction in which the Agent’s or such Lender’s principal executive office or such Lender’s
applicable Lending Installation is located.


 


- 7 -









 





“Exhibit” refers to an exhibit to this Agreement, unless another document is specifically
referenced.




“Existing Credit Agreement” is defined in the Recitals hereto.




“Existing Lines of Business” is defined in Section 5.23.



“Expiry Notice” means, with respect to a Lloyd’s Letter of Credit, written notice from the
Issuer to the beneficiary of any such Lloyd’s Letter of Credit stating that such Lloyd’s Letter of
Credit shall expire four (4) years from the date of such notice.




“Extension Request” is defined in Section 2.10.



“Facility Documents” means this Agreement, the Security Documents, the Reimbursement
Agreements and the other documents and agreements contemplated hereby and executed by the Borrower
in favor of the 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 Agent, and (b) with respect to any Cash Collateral Investments described in
clauses (c) or (d) of the definition thereof, the amounts thereof.



“Federal Funds Effective Rate” means, for any day, a fluctuating interest rate per annum equal
to the weighted average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as published for such day
(or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day,
the average of the quotations on such day on such transactions received by the Agent from three
Federal funds brokers of recognized standing selected by the Agent in its sole discretion.




“Fee Letter” is defined in Section 9.4.



“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.



“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



 


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any corporation, partnership or other entity directly or indirectly owned or controlled by or
subject to the control of any of the foregoing.



“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 domestic Subsidiary
acquired or formed after the Closing Date which is engaged in, or is authorized to engage in, the
insurance business.



“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.




“Issuer” means JPMorgan Chase Bank and any of its Affiliates.



“JPMorgan Chase Bank” means JPMorgan Chase Bank, N.A., in its individual capacity or any
successor thereto.



“Lenders” means the lending institutions listed on the signature pages of this Agreement and
their respective successors and assigns.


 


- 9 -









 





“Lending Installation” means, with respect to a Lender or the Agent, the office, branch,
subsidiary or affiliate of such Lender or the Agent listed on the signature pages hereof or on a
Schedule or otherwise selected by such Lender or the Agent.




“Letter of Credit” means a letter of credit issued pursuant to Article II.



“Letter of Credit Availability Termination Date” means March 31, 2011 or any later date as may
be specified as the Letter of Credit Availability Termination Date in accordance with Section
2.10 or any earlier date on which the Letter of Credit Commitment is reduced to zero or
otherwise terminated pursuant to the terms hereof.



“Letter of Credit Commitment” means the aggregate Letter of Credit Participation Amounts of
all of the Lenders, as reduced or increased from time to time pursuant to the terms hereof. The
Letter of Credit Commitment as of the date hereof is $140,000,000.



“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.



“Letter of Credit Participation Amount” means, for each Lender, the maximum face amount of
Letters of Credit in which such Lender participates not exceeding 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.



“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 Letters of Credit” is defined in Section 2.1.


 


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“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.




“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 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.



“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.


 


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“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 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.



“Pledge Agreement” means that certain Second Amended and Restated Stock Pledge Agreement,
dated as of April 3, 2009, between the Borrower and the Agent, as the same may be amended,
supplemented or otherwise modified from time to time.




“Pounds” and the sign “£” mean lawful money of the United Kingdom.




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



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



“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.


 


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“pro-rata” means, when used with respect to a Lender and any described aggregate or total
amount, an amount equal to such Lender’s pro-rata share or portion based on its percentage of the
Letter of Credit Commitment.




“Purchasers” is defined in Section 12.3(a).



“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 Issuer 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, the Issuer and/or the Agent in respect of all
unreimbursed payments or disbursements made by the Lenders, the Issuer and/or the 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.



“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



 


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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 2.1(d), 2.1(f), 2.8, 2.12(a) and
8.1 hereof.



“Required
Lenders” means Lenders in the aggregate having at least
662/3% of the Letter of Credit
Commitment or, if the Letter of Credit Commitment has been terminated, the aggregate amount of the
outstanding Letter of Credit Obligations; provided, however, the Letter of Credit
Commitment or pro-rata share of any outstanding Letter of Credit Obligations of any Defaulting
Lender shall be deemed to be zero (and the Letter of Credit Commitment or pro-rata shares of any
outstanding Letter of Credit Obligations of the other Lenders shall be correspondingly increased).




“Response Date” is defined in Section 2.10.




“Risk-Based Capital Guidelines” is defined in Section 3.2.



“S&P” means Standard and Poor’s Ratings Services, a division of The McGraw Hill Companies,
Inc. or any successor thereto.



“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.



“Section” means a numbered section of this Agreement, unless another document is specifically
referenced.




“Secured Parties” means the Agent, the Issuer and the Lenders.




“Security Documents” means the Pledge Agreement and each Cash Collateral Security Agreement.



“Significant Insurance Subsidiary” means a Significant Subsidiary which is an Insurance
Subsidiary.


 


- 14 -









 





“Significant Subsidiary” means, at any time, a direct 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.



“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.


 


- 15 -









 





“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 from time to
time.



“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.



“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.



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, the Issuer agrees, upon the terms
and conditions set forth in this Agreement, to issue at the request and for the account of the
Borrower, one or more Letters of Credit for the account of the Borrower (x) to support the
obligations of Wholly-Owned Subsidiaries of the Borrower with respect to specific


 


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syndicates at the Society of Lloyd’s (the Letters of Credit issued under this clause (x)
being called the “Lloyd’s Letters of Credit”) and (y) to support other obligations,
provided that the aggregate face amount of all outstanding Letter of Credit Obligations with
respect to this clause (y) does not at any time exceed the lesser of (A) the Letter of Credit
Commitment and (B) $10,000,000; provided, however, that the Issuer shall not be
under any obligation to issue, and 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
the Issuer shall purport by its terms to enjoin or restrain such Issuer 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 the Issuer shall prohibit, or request that the Issuer refrain from, the
issuance of Letters of Credit in particular or shall impose upon the Issuer with respect to any
Letter of Credit any restriction or reserve or capital requirement (for which the Issuer is not
otherwise compensated) or any unreimbursed loss, cost or expense which was not applicable, in
effect and known to the Issuer as of the date of this Agreement and which the Issuer 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 or (iii) after giving effect to such issuance, the
aggregate outstanding amount of the Letter of Credit Obligations would exceed the Letter of
Credit Commitment. For purposes of clause (iii) of the immediately preceding sentence,
at any time there is a Defaulting Lender, the Letter of Credit Commitment shall be automatically
reduced by an amount equal to the remainder of (A) such Defaulting Lender’s pro-rata share of
the Letter of Credit Commitment minus (B) such Defaulting Lender’s pro-rata share of the Letter
of Credit Obligations then outstanding; provided, however, the Letter of Credit
Commitment shall be restored if either (i) such Defaulting Lender provides cash collateral to
the Agent for the account of such Defaulting Lender pursuant to Section 10.11 in the
amount of such Defaulting Lender’s pro-rata share of the Letter of Credit Commitment or (ii) the
Borrower has entered into satisfactory arrangements with the Issuer to eliminate the Issuer’s
risk with respect to such Defaulting Lender, it being agreed that such satisfactory arrangements
may include collateral or the charging of a fee and the Lenders agree that any such collateral
or fee shall belong solely to the Issuer and shall not be subject to the sharing provisions of
this Agreement. 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 Letter of Credit Commitment or (ii) the expiration date of any Letter of
Credit (other than the Letters of Credit identified on Schedule 2.1 hereto) or the date for
payment of any draft presented thereunder and accepted by the Issuer, be later than (x) the
date one (1) year after the effective date of such Letter of Credit or (y) in the case of
the Lloyd’s Letters of Credit, four (4) years after the date of the related Expiry Notice.
The Issuer 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.




(c) The Issuer (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


 


- 17 -









 






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 Issuer shall immediately issue an Expiry
Notice.




(d) The Borrower agrees that, if at any time as a result of reductions in the Letter of
Credit Commitment pursuant to Section 2.3 or otherwise the aggregate balance of the
Letter of Credit Obligations exceeds the Letter of Credit Commitment, the Borrower shall
cash 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 three percent (103%) of the amount as may be necessary to eliminate such excess.




(e) The Letters of Credit identified on Schedule 2.1 hereto (the “Existing
Letters of Credit”) which are issued and outstanding under the Existing Credit Agreement
shall, upon satisfaction of the conditions set forth in Article IV hereto,
automatically and without further action on the part of the Agent, the Issuer, the Lenders
or the Borrower be deemed Letters of Credit issued under this Agreement.




(f) For purposes of determining usage and availability under this Section 2.1,
when a Letter of Credit is issued in Pounds, such Pounds will be converted to Dollars 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 Agent or any Lender
(including the Issuer) and such determination shall be made by the Agent in its sole
determination based upon the spot exchange rate between Dollars and Pounds as quoted by the
Agent as of such date of determination. Notwithstanding any other provisions of this
Agreement, if at any time, after giving effect to the conversion of Pounds into Dollars as
set forth above, the aggregate face amount of all outstanding Letters of Credit is greater
than the Letter of Credit Commitment (“Conversion Differential”), then the Borrower
shall cash collateralize such Conversion Differential by depositing into a Collateral
Account Cash Collateral Investments with a Collateral Value equal to the product of one
hundred and three percent (103%) of the Conversion Differential.




(g) 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 Agent.




2.2 Participating Interests. Immediately upon the issuance by the Issuer of a
Letter of Credit in accordance with Section 2.5 (and with respect to the Letters of
Credit identified on Schedule 2.1 hereto, upon satisfaction of the conditions set forth
in Article IV hereof), each Lender shall be deemed to have irrevocably and
unconditionally purchased and


 


- 18 -









 






received from the Issuer, without recourse, representation or warranty, an undivided
participation interest equal to its pro-rata share of the Letter of Credit Commitment (including
as may be adjusted pursuant to Section 2.1(a)) of the face amount of such Letter of
Credit and each draw paid by the Issuer thereunder; provided, however, that
during any period in which there is a Defaulting Lender, for purposes of computing the amount of
the obligation of each non-Defaulting Lender to acquire, refinance or fund participations in
Letters of Credit pursuant to this Section 2.2, the pro-rata share of each
non-Defaulting Lender shall be computed without including such Defaulting Lender’s share of the
Letter of Credit Commitment; provided, further, that once such Defaulting Lender
shall cease to be a Defaulting Lender or has provided cash collateral to the Agent pursuant to
Section 10.11, the pro-rata share of each Lender shall be recalculated including all
Lenders’ share of the Letter of Credit Commitment. Notwithstanding the foregoing, under no
circumstances shall any Lender be deemed to have purchased a participation interest in excess of
such Lender’s commitment amount. Each Lender’s obligation to pay its proportionate share of all
draws under the Letters of Credit, absent gross negligence or willful misconduct by the Issuer
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.




2.3 Reductions in Letter of Credit Commitment. (a) The Borrower may permanently
reduce the Letter of Credit 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
Agent, which notice shall specify the amount of such reduction; provided,
however, that the amount of the Letter of Credit Commitment may not be reduced below the
aggregate amount of the outstanding Letter of Credit Obligations.




(b) At any time a Lender is a Designated Lender, the Borrower may terminate in full the
commitment of such Designated Lender by giving notice to such Designated Lender and the
Agent; provided that (i) at the time of such termination, no Default or Unmatured
Default exists (or the Required Lenders consent to such termination) and (ii) concurrently
with such termination, (A) the Letter of Credit Commitment shall be reduced by the
commitment amount of such Designated Lender (it being understood that the Borrower may not
terminate the commitment of a Designated Lender if, after giving effect to such termination,
the Letter of Credit Obligations would exceed the reduced Letter of Credit Commitment), (B)
the Borrower shall pay all amounts owed to such Designated Lender hereunder and (C) the
Agent shall return to such Lender any cash collateral held for the account of such Lender
pursuant to Section 2.9(d). The termination of the commitment of a Defaulting
Lender pursuant to this Section 2.3 shall not be deemed to be a waiver of any right
that (x) the Borrower, the Agent, the Issuer or any other Lender may have against such
Defaulting Lender or (y) such Defaulting Lender may have against the Borrower based on the
estimate described in clause (B) of the preceding sentence.




2.4 Reimbursement Obligations. (a) The Borrower agrees to pay to the Issuer of a
Letter of Credit (i) on each date that any amount is drawn under each Letter of Credit (or, if
any draw is paid by the Issuer after 3:00 p.m. (New York time) on such date, on
the next



 


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succeeding Business Day) a sum (and interest on such sum as provided in clause
(ii) below) equal to the amount so drawn plus all other charges and expenses with respect
thereto specified in Section 2.9 or in the applicable Reimbursement Agreement and (ii)
interest on any and all amounts remaining unpaid under this Section 2.4 until payment in
full at the rate per annum, computed for actual days elapsed based on a 365 or 366 day year, as
applicable, equal to (A) the Alternate Base Rate plus the Applicable Margin for such day for the
first two days following the due date of any Reimbursement Obligations and (B) the Alternate
Base Rate plus the Applicable Margin for such day plus 2% per annum thereafter. The Borrower
agrees to pay to the Issuer 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 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 and the beneficiary
named in any Letter of Credit), (y) the validity, sufficiency or genuineness of any document
which the Issuer 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.




(b) Notwithstanding any provisions to the contrary in any Reimbursement Agreement, the
Borrower agrees to reimburse the Issuer for amounts which the Issuer pays under such Letter
of Credit no later than the time specified in this Agreement. If the Borrower does not pay
any such Reimbursement Obligations when due at any time prior the Letter of Credit
Termination Date, such Reimbursement Obligations, if in Pounds, shall be deemed to have been
converted into the equivalent amount of Dollars on the date due based upon the spot rate of
exchange between Dollars and Pounds as determined by the 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 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 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 Agent may use any reasonable method it deems appropriate to determine such rate
and such determination shall be presumed correct absent manifest error.




(c) If the Issuer makes a payment on account of any Letter of Credit and is not
concurrently reimbursed therefor by the Borrower, then as promptly as practical during
normal banking hours on the date of its receipt of such notice or, if not practicable on


 


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such date, not later than noon (New York time) on the Business Day immediately
succeeding such date of notification, each Lender shall deliver to the Agent for the account
of the Issuer, in immediately available funds, the purchase price for such Lender’s interest
in such unreimbursed Reimbursement Obligations, which shall be an amount equal to such
Lender’s pro-rata share of such payment. Each Lender shall, upon demand by the Issuer, pay
the Issuer interest on such Lender’s pro-rata share of such draw from the date of payment by
the Issuer on account of such Letter of Credit until the date of delivery of such funds to
the Issuer by such Lender at a rate per annum, computed for actual days elapsed based on a
360-day year, equal to the Federal Funds Effective Rate on the amount of the unreimbursed
Reimbursement Obligations, if in Dollars, or the equivalent amount of Dollars calculated in
the manner provided in paragraph (b), if in Pounds, for such period;
provided, that such payments shall be made by the Lenders only in the event and to
the extent that the Issuer is not reimbursed in full by the Borrower for interest on the
amount of any draw on the Letters of Credit.




(d) At any time after the Issuer has made a payment on account of any Letter of Credit
and has received from any other Lender such Lender’s pro-rata share of such payment, such
Issuer shall, forthwith upon its receipt of any reimbursement (in whole or in part) by the
Borrower for such payment, or of any other amount from the Borrower or any other Person in
respect of such payment (including, without limitation, any payment of interest or penalty
fees and any payment under any collateral account agreement of the Borrower or any Facility
Document but excluding any transfer of funds from any other Lender pursuant to
Section 2.4(c)), transfer to such other Lender such other Lender’s ratable share of
such reimbursement or other amount; provided, that interest shall accrue for the
benefit of such Lender from the time such Issuer has made a payment on account of any Letter
of Credit; provided, further, that in the event that the receipt by the
Issuer of such reimbursement or other amount is found to have been a transfer in fraud of
creditors or a preferential payment under the United States Bankruptcy Code or is otherwise
required to be returned, such Lender shall promptly return to the Issuer any portion thereof
previously transferred by the Issuer to such Lender, but without interest to the extent that
interest is not payable by the Issuer in connection therewith.




(e) All payments in respect of Reimbursement Obligations shall be in Dollars.




2.5 Procedure for Issuance. Prior to the issuance of each new Letter of Credit and
as a condition of such issuance, the Borrower shall deliver to the Issuer (with a copy to the
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 Issuer. 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 Issuer 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


 


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a Business Day, (c) the date on which such requested Letter of Credit is to expire, which
shall be no later than one (1) year from the date of issuance of such Letter of Credit or in the
case of a Lloyd’s Letter of Credit, four years from the date of the related Expiry Notice, (d)
whether the Letter of Credit is to be denominated in Dollars or Pounds and (e) 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 Issuer
shall, on the requested date, issue a Letter of Credit on behalf of the Borrower in accordance
with the Issuer’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 Issuer shall give the Agent prompt written
notice of the issuance of any Letter of Credit.




2.6 Nature of the Lenders’ Obligations. (a) As between the Borrower and the
Lenders, 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 Issuer and the Issuer 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 Issuer’s 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, the Lenders shall not 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 Issuer 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 Issuer.




(b) In furtherance and extension and not in limitation of the specific provisions
hereinabove set forth, any action taken or omitted by the Issuer under or in connection with
the Letters of Credit or any related certificates, if taken or omitted in good faith, shall
not put the Agent or any Lender under any resulting liability to the Borrower or relieve the
Borrower of any of its obligations hereunder to the Issuer or any such Person.


 


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2.7 Notification of Issuance Requests. Promptly after receipt thereof, the Agent
will notify each Lender of the contents of each Issuance Request received by it hereunder.




2.8 Cash Collateral for Letters of Credit. On the Letter of Credit Availability
Termination Date, the Borrower shall pledge and deliver to the Agent, for the benefit of the
Secured Parties, Cash Collateral Investments in a Collateral Account with a Collateral Value
equal to the product of one hundred and three percent (103%) of the amount equal to the
following percentage of the Letter of Credit Obligations outstanding from time to time during
the following periods:



	 	 	 	 	 
	 	 	Percentage of Letter of Credit	 
	Period	 	Obligations Collateralized	 
	 
	 	 	 	 
	Letter of Credit Availability Termination Date to but not
including the date nine (9) months after the Letter of Credit
Availability Termination Date
	 	 	50	%
	 
	 	 	 	 
	the date nine (9) months after the Letter of Credit Availability
Termination Date, or an earlier date at the Borrower’s option, and at all
times thereafter
	 	 	100	%







2.9 Fees.




(a) Unused Fee. The Borrower agrees to pay to the Agent for the account of
each Lender with respect to its Letter of Credit Participation Amount an unused fee at a
rate per annum equal to the Applicable Unused Fee Rate on the daily unused portion of such
Lender’s Letter of Credit Participation Amount 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 on each Payment Date hereafter and on the
Letter of Credit Availability Termination Date or, if later, upon receipt of a bill from the
Agent. Accrued and unpaid unused fees under the Existing Credit Agreement shall be paid on
the Closing Date or, if later, upon receipt of a bill from the Agent.




(b) Letter of Credit Fronting Fee. The Borrower hereby agrees to pay to the
Agent, for the account of the Issuer, a letter of credit fronting fee with respect to each
Letter of Credit from and including the date of issuance thereof (or, with respect to the
Letters of Credit identified on Schedule 2.1, the date on which such Letters of
Credit are deemed issued under this Agreement pursuant to Section 2.1(d)) until the
date such Letter of Credit is fully drawn, canceled or expired, in an amount equal to the
rate provided in the Fee Letter of the aggregate initial face amount of 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. In addition to the foregoing,
the Borrower
agrees to pay the Issuer any other fees customarily charged by it in respect of the



 


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issuance, amendment, cancellation, negotiation or transfer of each Letter of Credit and each
drawing made thereunder. The letter of credit fronting fee is in addition to (and not
included in) the letter of credit participation fee provided for in paragraph (c)
below. Accrued and unpaid fronting fees under the Existing Credit Agreement shall be paid
on the Closing Date or, if later, upon receipt of a bill from the Agent.




(c) Letter of Credit Participation Fee. The Borrower agrees to pay to the
Agent for the pro-rata account of the Lenders (including the Issuer) a letter of credit
participation 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 Participation 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 Participation Fee Rate shall be increased by 2% per annum;
provided, that during the continuance of a Default under Section 7.6 or
7.7, the Applicable Letter of Credit Participation Fee Rate shall be increased by
two percent (2%) without any election or action on the part of the Agent or any Lender.
Accrued and unpaid Letter of Credit Participation Fees under the Existing Credit Agreement
shall be paid on the Closing Date or, if later, upon receipt of a bill from the Agent.




(d) 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 pro-rata share of the Letter of Credit Obligations shall be excluded for
purposes of calculating facility fees pursuant to Section 2.9 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
pro-rata share shall be deemed to be zero for purposes of calculating letter of credit fees
pursuant to Section 2.9 in respect of each day on which such Lender is a Defaulting
Lender (and the pro-rata shares of the other Lenders shall be correspondingly increased for
such purposes), and such Defaulting Lender shall not be entitled to receive any letter of
credit fees for any such day. In addition, if any Lender is a Defaulting Lender at the time
any payment is to be made by the Lenders to the Issuer pursuant to Section 2.4(c)
and such Defaulting Lender fails to make its pro-rata share of such payment, then, solely
for purposes of determining the amount of the payment to be made by each Lender to the
Issuer (and without limiting the liability of such Defaulting
Lender for its failure to make such payment), the pro-rata shares of the other Lenders



 


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shall be correspondingly increased so that, subject to the following proviso, the Issuer
receives the full amount of the payments to which it is entitled from the Lenders;
provided that under no circumstances shall any Lender be obligated to make a payment
to the Issuer pursuant to this sentence that would cause the aggregate principal amount of
such Lender’s pro-rata share (without giving effect to any adjustment pursuant to the
foregoing provisions of this sentence) of all Letter of Credit Obligations to exceed such
Lender’s commitment amount (or, if the Letter of Credit Commitment has terminated, such
Lender’s commitment amount at the time of such termination, adjusted for any assignments by
or to such Lender). Any payment made pursuant to this Section shall be taken into account
for purposes of calculating the Unused Fee and Letter of Credit Participation Fee. The
provisions of this Section 2.9(d) do not limit, but are in addition to, any other
claim or right that the Borrower, the Agent, the Issuer or any other Lender may have against
a Defaulting Lender.




2.10 Extension of Letter of Credit Availability Termination Date. The Borrower may
request an extension of the Letter of Credit Availability Termination Date by submitting a
request for an extension to the Agent (an “Extension Request”) on any Business Day that
is not less than 30 days prior to the then Letter of Credit Availability Termination Date. The
Extension Request must specify the new Letter of Credit Availability 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 the Agent) the Lenders (including the Issuer) must respond to
the Extension Request (the “Response Date”). The new Letter of Credit Availability
Termination Date shall not be more than two years after the Letter of Credit Availability
Termination Date in effect at the time the Extension Request is received, including the Letter
of Credit Availability Termination Date as one of the days in the calculation of the days
elapsed. Promptly upon receipt of an Extension Request, the Agent shall notify each Lender of
the contents thereof and shall request the Issuer and each Lender to approve the Extension
Request. Each Lender approving the Extension Request shall deliver its written consent no later
than the Response Date. If the consent of all of the Lenders in their sole discretion is
received by the Agent, the Letter of Credit Availability Termination Date specified in the
Extension Request shall become effective on the existing Letter of Credit Availability
Termination Date and the Agent shall promptly notify the Borrower and each Lender (including the
Issuer) of the new Letter of Credit Availability Termination Date. Otherwise the Letter of
Credit Availability Termination Date shall be unchanged.




2.11 Optional Increase in Letter of Credit Commitment. The Borrower may, from time
to time, by means of a letter delivered to the Agent substantially in the form of Exhibit
D, request that the Letter of Credit Commitment be increased by an aggregate amount (for all
such increases) not exceeding $25,000,000 by (a) increasing the Letter of Credit Participation
Amount of one or more Lenders that have agreed to such increase (in their sole discretion)
and/or (b) adding one or more commercial banks or other Persons as a party hereto (each an
“Additional Lender”) with a Letter of Credit Participation Amount in an amount agreed to
by any such Additional Lender; provided that (i) any increase in the
Letter of Credit Commitment shall be in an aggregate amount of $1,000,000 or a higher
integral multiple of


 


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$1,000,000, (ii) no Additional Lender shall be added as a party hereto
without the written consent of the Agent and the Issuer (which consents shall not be
unreasonably withheld) or if a Default or an Unmatured Default exists and (iii) the Borrower may
not request an increase in the Letter of Credit Commitment unless the Borrower has delivered to
the Agent (with a copy for each Lender) a certificate stating that the representations and
warranties contained in Article V are correct on and as of the date of such certificate as
though made on and as of such date and that no Default or Unmatured Default exists on such date.
Any increase in the Letter of Credit Commitment pursuant to this Section 2.11 shall be
effective three (3) Business Days after the date on which the Agent has received and accepted
the applicable increase letter in the form of Annex 1 to Exhibit D (in the case
of an increase in the Letter of Credit Participation Amount of an existing Lender) or assumption
letter in the form of Annex 2 to Exhibit D (in the case of the addition of a
commercial bank or other Person as a new Lender). The Agent shall promptly notify the Borrower
and the Lenders of any increase in the Letter of Credit Commitment pursuant to this
Section 2.11 and of the Letter of Credit Participation Amount and pro-rata share of each
Lender after giving effect thereto. To the extent that any increase pursuant to this
Section 2.11 is not expressly authorized pursuant to resolutions or consents delivered
pursuant to Section 4.1(b), the Borrower shall, prior to the effectiveness of such
increase, deliver to the Agent a certificate signed by an authorized officer of the Borrower
certifying and attaching the resolutions or consents that have been adopted to approve or
consent to such increase.




2.12 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 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 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 Agent and otherwise
permitted by this Agreement, and (ii) following the occurrence and continuation of a
Default, at the direction of the 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 direct the application
of all or any part of the Cash Collateral Investments held in a Collateral Account for
the amount which is due and payable, including with respect to any Reimbursement


 


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Obligations; provided, however, the 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 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.




(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 receive or otherwise direct
the application of such Collateral Excess and the Agent shall release any Lien it has with
respect to such Collateral Excess; provided, however, upon the occurrence
and continuation of a Default, the Agent 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



 


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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 Letter of Credit 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 Letter of Credit 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.




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
participate in Letters of Credit hereunder (after taking into account such Lender’s policies as to
capital adequacy). “Change” means (a) any change after the Closing Date in the Risk-Based
Capital Guidelines or (b) any adoption of or change in any other law, governmental or
quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or
not having the force of law) after the Closing Date which affects the amount of capital required or
expected to be maintained by any Lender or any Lending Installation or any corporation controlling
any Lender. “Risk-Based Capital Guidelines” means (i) the risk-based capital guidelines in effect
in the United States on the Closing Date, including transition rules and (ii) the corresponding
capital regulations promulgated by regulatory authorities outside the United States implementing
the November 2005 updated report of the Basel Committee on Banking Regulation and Supervisory
Practices Entitled “International Convergence of Capital Measurements and Capital Standards: A
Revised Framework,” including transition rules, and any amendments to such regulations adopted
prior to the Closing Date.




3.3 Taxes. (a) All payments by the Borrower to or for the account of any Lender or
the Agent 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 or the Agent, (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 or the
Agent (as the case may be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay
the full amount deducted to the relevant authority in accordance with applicable law and (iv) the
Borrower shall furnish to the Agent the original copy of a receipt evidencing payment thereof
within thirty (30) days after such payment is made.




(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



 


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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) The Borrower hereby agrees to indemnify the 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 Agent or such Lender
and any liability (including penalties, interest and expenses) arising therefrom or with
respect thereto. Payments due under this indemnification shall be made within thirty (30)
days of the date the 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
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. Each Non-U.S. Lender further undertakes to deliver to each of the Borrower
and the 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 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 Agent that it is not capable of receiving
payments without any deduction or withholding of United States federal income tax.




(e) 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.


 


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(f) Any Lender that is entitled to an exemption from or reduction of withholding tax
with respect to payments under this Agreement or any other Facility Document pursuant to the
law of any relevant jurisdiction or any treaty shall deliver to the Borrower (with a copy to
the Agent), at the time or times prescribed by applicable law, such properly completed and
executed documentation prescribed by applicable law as will permit such payments to be made
without withholding or at a reduced rate.




(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 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 Agent of a change in circumstances which rendered its exemption
from withholding ineffective, or for any other reason), such Lender shall indemnify the
Agent fully for all amounts paid, directly or indirectly, by the Agent as tax, withholding
therefor, or otherwise, including penalties and interest, and including taxes imposed by any
jurisdiction on amounts payable to the Agent under this subsection, together with all costs
and expenses related thereto (including attorneys fees and time charges of attorneys for the
Agent, which attorneys may be employees of the Agent). The obligations of the Lenders under
this Section 3.3(g) shall survive the payment of the Obligations and termination of
this Agreement.




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 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 Initial Letters of Credit. The Issuer shall not issue any Letter of Credit
hereunder unless and until all loans and other amounts due and owing (including fees accrued
with respect thereto) under the Existing Credit Agreement have been paid in full and the
Borrower has furnished the following to the Agent with sufficient copies for the Lenders and the
other conditions set forth below have been satisfied:




(a) Charter Documents; Good Standing Certificates. Copies of the articles or
certificate of incorporation of the Borrower, together with all amendments, and a



 


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certificate of good standing, each certified by the appropriate governmental officer in its
jurisdiction of incorporation.




(b) 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.




(c) 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 Agent and the Lenders shall be entitled to rely until
informed of any change in writing by the Borrower.




(d) Officer’s Certificate. A certificate, signed by an Authorized Officer of
the Borrower, stating that: (i) on the Closing Date no Default or Unmatured Default has
occurred and is continuing and (ii) 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.




(e) Legal Opinions. A written opinion of Bruce J. Byrnes, Senior Vice
President, General Counsel and Chief Compliance Officer of the Borrower and its
Subsidiaries, addressed to the Agent and the Lenders in form and substance acceptable to the
Agent and its counsel.




(f) 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,
instruments, opinions and documents required to be delivered pursuant hereto and thereto.




(g) Existing Letters of Credit. The Existing Letters of Credit shall not
exceed the Letter of Credit Commitment.




(h) Other. Such other documents as the Agent, any Lender or their counsel may
have reasonably requested.




4.2 Each Letter of Credit. The Issuer 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



 


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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.



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



 


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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.




5.4 Financial Statements. (a) The consolidated balance sheets of the Borrower and
the Consolidated Subsidiaries as of December 31, 2009, 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, 2009.




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 2009 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, 2009 there has been no change in
the business, Property, condition (financial or otherwise) or results of operations of



 


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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.




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 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 Agent or to any Lender in connection with the



 


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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.




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



 


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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.




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”).



 


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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. The Pledge Agreement is effective to create and give the 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 capital stock pledged thereby.




5.26 Disclosure. None of the (a) information, exhibits or reports furnished or to
be furnished by the Borrower or any Subsidiary to the 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 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.



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.


 


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(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).




(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.


 


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(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.




(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



 


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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 Agent and the Required Lenders from an accounting
or actuarial firm or internal actuary, as delivered to the Department, reasonably
satisfactory to the 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 Agent, or a written review of an independent actuarial consulting firm
reasonably satisfactory to the 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.




(r) Such other information as the Agent or any Lender may from time to time reasonably
request.




The Borrower may provide information required under Sections 6.1(a), (b), (k),
and (l) by posting such information on EDGAR and giving notice to the Agent of such
posting.




6.2 Purpose. The Letters of Credit shall be available to support obligations of
Wholly-Owned Subsidiaries of the Borrower with respect to specific syndicates at the
Society of Lloyd’s and to support other obligations, provided that the aggregate face
amount of all outstanding Letter of Credit Obligations with respect to such other obligations
does not at any time exceed the lesser of (a) the Letter of Credit Commitment and (b)
$10,000,000.



 


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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) of any other event or development, financial or
otherwise which could reasonably be expected to have a Material Adverse Effect, (c) the receipt
of any notice from any Governmental Authority 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, (d) the receipt of any
notice from any Governmental Authority 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,
(e) 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 (f) 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 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 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 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 in an aggregate amount not to exceed
$75,000,000 from the date hereof to but excluding the Letter of Credit Availability Termination
Date; provided, however, that the Borrower may not repurchase any capital stock
or pay any dividends unless 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;


 


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(c) guaranties permitted under Section 6.15;




(d) capital leases in amounts not in excess of $2,500,000 at any time outstanding; and




(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.




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
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;


 


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(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;




(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



 


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exceed $500,000 and (ii) the obligations of any Wholly-Owned Subsidiary under
office space leases for space used by such Wholly-Owned Subsidiary.




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 Agent, for the benefit of the Secured Parties, granted
pursuant to the Pledge Agreement or pursuant to the Cash Collateral Security Agreement;




(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 of London; and




(i) Liens on assets subject to capital leases permitted under Section 6.11(d).




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




 


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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 reasonably be expected to have a negative effect on the Secured Parties.




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, 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 retrocesssion agreements with any Person
which do not comply with the guidelines for reinsurance by Insurance


 


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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 Pledge 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.




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 $607,500,000.




(b) Minimum Statutory Surplus. The Borrower will cause the Significant
Insurance Subsidiaries to maintain an aggregate Statutory Surplus of not less than
$516,500,000.




(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 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%.




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
Agent for the benefit of the Secured Parties pursuant to documentation reasonably acceptable to
the 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.



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 Agent under or in connection with



 


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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 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 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.




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


 


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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.




7.14 Any Change in Control shall occur.


 


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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 Security 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 Security Document.



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 Issuer 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 Agent or any Lender.
If any other Default occurs, the Required Lenders (or the Agent with the consent of the Required
Lenders) may terminate or suspend the obligations of the Issuer 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 Agent (which demand shall be made upon the request of the Required Lenders),
the Borrower shall deposit, in a Collateral Account, Cash Collateral
Investments with a Collateral Value equal to the product of one hundred and three percent
(103%) 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.




If, within thirty (30) days after acceleration of the maturity of the Obligations or
termination of the obligations of 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


 


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have been obtained or entered, the Required Lenders (in their sole discretion) may
direct the 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 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 or
commitment and facility reductions required under Section 2.4 or 2.10, or
increase the amount of the Letter of Credit Participation Amount 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 notice, in the case of Lloyd’s Letters
of Credit, or one year after its effective date in the case of other Letters of Credit;
except as permitted in Section 2.5, permit the amendment or extension of any Letter
of Credit; or, except as otherwise set forth in Section 2.1(b), permit the renewal
of any Letter of Credit;




(e) Permit any amendment of Sections 2.4(d) or 8.4;




(f) Release any guarantor of any Obligations or, except as provided in the Pledge
Agreement, release any of the collateral for the Obligations or decrease the amount of
collateral required under Sections 2.1(d), 2.1(f), 2.8,
2.12(a) 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 Agent shall be effective without the written consent of the Agent.
The 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


 


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consent hereunder, except that the commitment of such Lender may not be increased or extended
without the consent of such Lender.




8.3 Preservation of Rights. No delay or omission of the Lenders or the 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 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 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 Agent and
amounts payable under Article III) payable to the 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 and the Issuer (including fees, charges and disbursements of counsel to the
respective Lenders and the Issuer (including, without duplication, fees and time charges for
attorneys who may be employees of any Lender or the Issuer) 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 and the Issuer 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 and the Issuer in proportion to the respective
amounts described in this clause Fourth held by them;




Fifth, to the Agent for the account of the Issuer 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 Letter of Credit Commitment has been terminated, to the Borrower or as otherwise
required by Law.


 


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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.



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 Agent, and the Lenders and supersede all prior agreements
and understandings among the Borrower, the Agent, and the Lenders relating to the subject matter
thereof other than the fee letter dated March 11, 2010 in favor of JPMorgan Chase Bank and J.P.
Morgan Securities Inc. (the “Fee Letter”).




9.5 Numbers of Documents. All statements, notices, closing documents, and requests
hereunder shall be furnished to the Agent with sufficient counterparts so that the 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 agent of
any other (except to the extent to which the 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 10.13 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 Agent and the
Arranger for any costs, internal charges and out-of-pocket expenses (including reasonable
attorneys’ fees and time charges of attorneys for the Agent) paid or incurred by the Agent 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 Agent, 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 Agent, the Arranger and the Lenders), paid or incurred by the Agent, 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 Agent, 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 Agent, 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 Agent on the other hand shall be solely that of borrower and
lender. Neither the Agent, the Arranger nor any Lender shall have any fiduciary
responsibilities to the Borrower. Neither the 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 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


 


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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 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.




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 JPMorgan Chase Bank 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 JPMorgan Chase Bank 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 JPMorgan Chase Bank 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 Continued Effectiveness of Security Documents. The Borrower acknowledges and
agrees that each of the Security Documents continues in full force and



 


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effect after the date
hereof and that, after the effectiveness hereof, references therein to the “Credit Agreement”
mean this Agreement.



ARTICLE X




THE ADMINISTRATIVE AGENT





10.1 Appointment; Nature of Relationship. JPMorgan Chase Bank is hereby appointed
by each of the Lenders as Administrative Agent (herein referred to as the “Agent”)
hereunder and under each other Facility Document, and each of the Lenders irrevocably authorizes
the 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 Agent agrees to act as such
Administrative Agent upon the express conditions contained in this Article X.
Notwithstanding the use of the defined term “Agent,” it is expressly understood and agreed that
the Agent shall not have any fiduciary responsibilities to any Lender by reason of this
Agreement or any other Facility Document and that the 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 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 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 Agent shall have and may exercise such powers under the Facility
Documents as are specifically delegated to the Agent by the terms of each thereof, together with
such powers as are reasonably incidental thereto. The 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 Agent.




10.3 General Immunity. Neither the 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.




10.4 No Responsibility for Recitals, etc. Neither the Agent nor any of its
directors, officers, agents or employees shall be responsible for or have any duty to ascertain,
inquire into, or verify: (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



 


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satisfaction of any condition specified in Article IV, except receipt of items required
to be delivered solely to the 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
Agent shall have no duty to disclose to the Lenders information that is not required to be
furnished by the Borrower to the Agent at such time, but is voluntarily furnished by the
Borrower to the Agent (either in its capacity as Agent or in its individual capacity).




10.5 Action on Instructions of Lenders. The 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 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 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 Agent and Counsel. The Agent may execute any of its duties as
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 Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and the Lenders and all matters
pertaining to the Agent’s duties hereunder and under any other Facility Document.




10.7 Reliance on Documents; Counsel. The 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 Agent, which
counsel may be employees of the Agent.




10.8 Agent’s Reimbursement and Indemnification. The Lenders agree to reimburse and
indemnify the Agent ratably in proportion to their Letter of Credit Participation Amount (or, if
the Letter of Credit Commitments has been terminated, in proportion to its Letter of Credit
Participation Amount immediately prior to such termination) (a) for any amounts not reimbursed
by the Borrower for which the Agent is entitled to reimbursement by the Borrower under the
Facility Documents, (b) for any other expenses incurred by the Agent on behalf of the Lenders,
in connection with the preparation,



 


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execution, delivery, administration and enforcement of the
Facility Documents (including, without limitation, for any expenses incurred by the Agent in
connection with any dispute between the 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 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 Agent in connection with any dispute between the 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 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 Agent shall not be deemed to have knowledge or notice
of the occurrence of any Default or Unmatured Default hereunder unless the 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 Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders.




10.10 Rights as a Lender. In the event the Agent is a Lender, the Agent shall have
the same rights and powers hereunder and under any other Facility Document with respect to its
Letter of Credit Participation Amount, 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 Agent, and the term “Lender” or
“Lenders” shall, at any time when the Agent is a Lender, unless the context otherwise indicates,
include the Agent in its individual capacity. The 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 Agent, in its individual capacity,
is not obligated to remain a Lender.




10.11 Rights with Respect to Designated Lenders. If any Lender is a Designated
Lender, then the Issuer may, by notice to such Designated Lender and the Agent, require such
Designated Lender to (a) deliver to the Agent, for the account of the Issuer, cash collateral in
an amount equal to the product of one hundred and three percent (103%) of the remainder of (i)
such Designated Lender’s pro-rata share of the Letter of Credit Commitment minus (ii) the
principal amount of such Designated Lender’s pro-rata share of the Letter of Credit Obligations
then outstanding (the “Reserve Amount”) or (b) and solely with respect to a Designated
Lender that is not a Defaulting Lender, make other arrangements reasonably


 


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satisfactory to the
Issuer to assure that such Designated Lender will reimburse the Issuer for its pro-rata share of
any payment made by the Issuer under any Letter of Credit. Any such cash collateral (i) shall
be held by the Agent pursuant to arrangements reasonably satisfactory to such Designated Lender,
the Issuer and the Agent and (ii) if at any time such Designated Lender becomes obligated to pay
any amount to the Issuer pursuant to Section 2.4, shall be applied (to the extent
required) by the Agent to pay such amount. Upon the expiration, termination or reduction in
amount of any applicable Letter of Credit, the Agent shall release (subject to Section
2.9(d) in the case of a Defaulting Lender) to such Designated Lender (or such other Person
as may be entitled thereto) any cash collateral held by the Agent in excess of the Reserve
Amount. If any Designated Lender fails to provide cash collateral or make other arrangements as
required by the first sentence of this Section 10.11, then the Agent shall retain as
cash collateral all amounts otherwise payable to such Designated Lender under this Agreement
until the Agent has retained an amount equal to the Reserve Amount.




10.12 Lender Credit Decision. Each Lender acknowledges that it has, independently
and without reliance upon the 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 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.




10.13 Successor Agent. The 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 Agent or, if no successor Agent has been appointed, forty-five days after the
retiring Agent gives notice of its intention to resign. The Agent may be removed at any time
with or without cause by written notice received by the 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 Agent. If no successor Agent shall have been so appointed
by the Required Lenders within thirty days after the resigning Agent’s giving notice of its
intention to resign, then the resigning Agent may appoint, on behalf of the Borrower and the
Lenders, a successor Agent. Notwithstanding the previous sentence, the 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 Agent
hereunder. If the Agent has resigned or been removed and no successor Agent has been
appointed, the Lenders may perform all the duties of the 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 Agent shall be deemed to be
appointed hereunder until such successor Agent has accepted the appointment. Any such successor
Agent shall be a commercial bank having capital and retained earnings of at least $100,000,000.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the



 


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rights, powers, privileges and
duties of the resigning or removed Agent. Upon the effectiveness of the resignation or removal
of the Agent, the resigning or removed 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 Agent, the provisions of this Article X shall continue in effect for the
benefit of such Agent in respect of any actions taken or omitted to be taken by it while it was
acting as the Agent hereunder and under the other Facility Documents. In the event that there
is a successor to the Agent by merger, or the Agent assigns its duties and obligations to an
Affiliate pursuant to this Section 10.13, then the term “Prime Rate” as used in this
Agreement shall mean the prime rate, base rate or other analogous rate of the new Agent.




10.14 Agents’ Fees. The Borrower agrees to pay to the Agent, for its own account,
the fees agreed to by the Borrower and the Agent pursuant to the Fee Letter.




10.15 Delegation to Affiliates. The Borrower and the Lenders agree that the 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 Agent is entitled under Articles IX
and X.




10.16 Joint Lead Arranger; Syndication Agent; Documentation Agent. The Joint Lead
Arrangers (other than the Arranger), the Syndication Agent and the Documentation Agent shall
have no right, power, obligation, liability, responsibility or duty under this Agreement other
than those applicable to all Lenders as such. Without limiting the foregoing, the Joint Lead
Arrangers (other than the Arranger), the Syndication Agent and the Documentation Agent shall not
have or be deemed to have a fiduciary relationship with any Lender. Each Lender hereby makes
the same acknowledgements with respect to the Joint Lead Arrangers (other than the Arranger),
the Syndication Agent and the Documentation Agent as it makes to the Agent in
Section 10.10.



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



 


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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 Letter of Credit Participation Amounts. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments shall be made.



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 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 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 Agent may treat the Person
which participated in any Letter of Credit as the owner thereof 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 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 Letter of Credit
Participation Amount 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



 


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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 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.




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. 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 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 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 Letter of Credit Participation Amount (calculated
as at the date of such assignment).




(b) Effect; Effective Date. Upon (a) delivery to the 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), and (b) payment of a $3,500 fee to the Agent by the assigning
Lender or the Purchaser for processing such assignment, such assignment shall become
effective on the effective date


 


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specified in such Notice of Assignment. 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
Agent shall be required to release the transferor Lender with respect to the percentage of
the Letter of Credit Commitment and the participation interests in Letters of Credit
assigned to such Purchaser.




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 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 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 Agent under Article II shall not be effective until
received.


 


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13.2 Change of Address. The Borrower, the 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 Agent and the Lenders and each party has notified the Agent by facsimile transmission or
telephone that it has taken such action.



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 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 AGENT OR ANY LENDER OR ANY AFFILIATE OF THE
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.


 


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15.3 WAIVER OF JURY TRIAL. THE BORROWER, THE 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 and the 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:
	 	SVP & 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	 	 






Credit Agreement



 


S-1 









 





	 	 	 	 	 	 	 	 	 
	 	 	JPMORGAN CHASE BANK, N.A.,

Individually and as Administrative Agent
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Thomas Kiepura	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Print Name:
	 	Thomas Kiepura	 	 
	 

	 	 	 	Title:
	 	Vice President	 	 






	 	 	 	 	 	 	 
	 

	 	Address:
	 	10 South Dearborn, Floor 9
	 	 
	 

	 	 	 	IL1-0364	 	 
	 

	 	 	 	Chicago, Illinois 60603	 	 
	 
	 	 	 	 	 	 
	 	 	Telephone: (312) 325-3195	 	 
	 	 	Fax: (312) 325-3190	 	 






Credit Agreement



 


S-2 









 





	 	 	 	 	 
	 	BARCLAYS BANK PLC

 	 
	 	By:  	/s/ Jonathan Bush
 	 
	 	 	Print Name:  	Jonathan Bush 	 
	 	 	Title:  	Director 	 



Credit Agreement




 


S-3 









 





	 	 	 	 	 
	 	ING BANK N.V., LONDON BRANCH

 	 
	 	By:  	/s/ N. J. Marchant
 	 
	 	 	Print Name:  	N. J. Marchant 	 
	 	 	Title:  	Director 	 
	 	 	 
	 	By:  	/s/ M. E. R. Sharman
 	 
	 	 	Print Name:  	M. E. R. Sharman 	 
	 	 	Title:  	Managing Director 	 



Credit Agreement




 


S-4 









 





	 	 	 	 	 
	 	THE NORTHERN TRUST COMPANY

 	 
	 	By:  	/s/ Michael Kingsley
 	 
	 	 	Print Name:  	Michael Kingsley 	 
	 	 	Title:  	Senior Vice President 	 



Credit Agreement



 


S-5 









 






	 	 	 	 	 
	 	BROWN BROTHERS HARRIMAN & CO.

 	 
	 	By:  	/s/ Ann L. Hobart
 	 
	 	 	Print Name:  	Ann L. Hobart 	 
	 	 	Title:  	Senior Vice President 	 



Credit Agreement




 


S-6 









 







PRICING SCHEDULE




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Applicable Fee Rate	 	Level I Status	 	 	Level II Status	 	 	Level III Status	 	 	Level IV Status	 
	Applicable Unused
Fee Rate
	 	 	0.30	%	 	 	0.375	%	 	 	0.500	%	 	 	0.625	%
	Letter of Credit
Participation Fee
	 	 	1.50	%	 	 	1.75	%	 	 	2.00	%	 	 	2.50	%
	Applicable Margin
	 	 	0.50	%	 	 	0.75	%	 	 	1.00	%	 	 	1.50	%






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



“Level I Status” exists at any date if, on such date, the Borrower’s S&P Rating is BBB+ or
better or the Borrower’s Moody’s Rating is Baa1 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 Borrower’s S&P Rating is BBB or better or the Borrower’s Moody’s Rating
is Baa2 or better.



“Level III Status” exists at any date if, on such date, (i) the Borrower has not qualified for
Level I Status or Level II Status and (ii) the Borrower’s S&P Rating is BBB- or better or the
Borrower’s Moody’s Rating is Baa3 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 III Status.



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



The Applicable Margin and Applicable Fee Rate shall be determined in accordance with the
foregoing table based on the Borrower’s Status as determined from its then-current Borrower’s S&P
Rating and Borrower’s Moody’s Rating; provided that if the Borrower’s S&P Rating and the Borrower’s
Moody’s Rating are not on the same Level, 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 the Borrower has only a Borrower’s S&P Rating or a Borrower’s Moody’s
Rating, the Borrower’s Status shall be determined from its then current Borrower’s S&P Rating or
Borrower’s Moody’s Rating, as the case may be. If at any time the Borrower has neither a
Borrower’s S&P Rating nor a Borrower’s Moody’s Rating, Level IV Status shall exist.