<PAGE>

                                                                    EXHIBIT 10.5

                                                                  EXECUTION COPY

================================================================================

              FIVE-YEAR SECURED LETTER OF CREDIT FACILITY AGREEMENT

                                   dated as of

                                 March 12, 2007

                                      among

                             VALIDUS HOLDINGS, LTD.,

                           VALIDUS REINSURANCE, LTD.,

                 VARIOUS DESIGNATED SUBSIDIARY ACCOUNT PARTIES,

                            The Lenders Party Hereto,

                   JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,

              as Sole Administrative Agent and Sole Issuing Agent,

                        DEUTSCHE BANK AG NEW YORK BRANCH,
                           as Sole Syndication Agent,

                                       and

                          ING BANK N.V., LONDON BRANCH,
                                     CALYON,
                              THE BANK OF NEW YORK

                                       and

                      WACHOVIA BANK, NATIONAL ASSOCIATION,

                             as Documentation Agents

================================================================================

                          J.P. MORGAN SECURITIES INC.,
                                       and
                         DEUTSCHE BANK SECURITIES INC.,
                  as Joint Lead Arrangers and Joint Bookrunners

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
                                    ARTICLE I
                                   Definitions

SECTION 1.01.  Defined Terms.............................................     1
SECTION 1.02.  Terms Generally...........................................    21
SECTION 1.03.  Accounting Terms; GAAP....................................    21

                                   ARTICLE II
                                Letters of Credit

SECTION 2.01.  Several Letters of Credit.................................    21
SECTION 2.02.  Fronted Letters of Credit.................................    22
SECTION 2.03.  Conditions to the Issuance of all Letters of Credit.......    25
SECTION 2.04.  Letter of Credit Requests.................................    26
SECTION 2.05.  Agreement to Repay Letter of Credit Drawings..............    27
SECTION 2.06.  Increased Costs...........................................    28
SECTION 2.07.  Letter of Credit Expiration and Extensions................    28
SECTION 2.08.  Changes to Stated Amount..................................    29
SECTION 2.09.  Termination and Reduction of Commitments..................    29
SECTION 2.10.  Prepayment; Additional Borrowing Base Requirements........    30
SECTION 2.11.  Fees......................................................    31
SECTION 2.12.  Taxes.....................................................    32
SECTION 2.13.  Payments Generally; Pro Rata Treatment; Sharing of
               Set-offs..................................................    33
SECTION 2.14.  Mitigation Obligations; Replacement of Lenders............    34
SECTION 2.15.  Designated Subsidiary Account Parties.....................    36
SECTION 2.16.  Additional Commitments....................................    36

                                   ARTICLE III
                         Representations and Warranties

SECTION 3.01.  Corporate Status..........................................    41
SECTION 3.02.  Corporate Power and Authority.............................    41
SECTION 3.03.  No Contravention of Agreements or Organizational
               Documents.................................................    41
SECTION 3.04.  Litigation and Environmental Matters......................    42
SECTION 3.05.  Use of Letters of Credit..................................    42
SECTION 3.06.  Approvals.................................................    42
SECTION 3.07.  Investment Company Act....................................    42
SECTION 3.08.  True and Complete Disclosure; Projections and
               Assumptions...............................................    42
SECTION 3.09.  Financial Condition.......................................    43
SECTION 3.10.  Tax Returns and Payments..................................    43
SECTION 3.11.  Compliance with ERISA.....................................    43
SECTION 3.12.  Subsidiaries..............................................    44
SECTION 3.13.  Capitalization............................................    44
</TABLE>


                                       i

<PAGE>

<TABLE>
<S>                                                                         <C>
SECTION 3.14.  Indebtedness..............................................    44
SECTION 3.15.  Compliance with Statutes and Agreements...................    44
SECTION 3.16.  Insurance Licenses........................................    45
SECTION 3.17.  Insurance Business........................................    45
SECTION 3.18.  Security Documents........................................    45
SECTION 3.19.  Properties; Liens; and Insurance..........................    46
SECTION 3.20.  Solvency..................................................    46
SECTION 3.21.  Certain Insurance Regulations, Orders, Consents, Etc......    46

                                   ARTICLE IV
                                   Conditions

SECTION 4.01.  Effective Date............................................    46
SECTION 4.02.  Each Credit Event.........................................    49

                                    ARTICLE V
                              Affirmative Covenants

SECTION 5.01.  Information Covenants.....................................    49
SECTION 5.02.  Books, Records and Inspections............................    52
SECTION 5.03.  Insurance.................................................    53
SECTION 5.04.  Payment of Taxes and other Obligations....................    53
SECTION 5.05.  Maintenance of Existence; Conduct of Business.............    53
SECTION 5.06.  Compliance with Statutes, etc.............................    53
SECTION 5.07.  ERISA.....................................................    54
SECTION 5.08.  Maintenance of Property...................................    55
SECTION 5.09.  Maintenance of Licenses and Permits.......................    55
SECTION 5.10.  Borrowing Base Requirement................................    55
SECTION 5.11.  Collateral; Further Assurances............................    55

                                   ARTICLE VI
                               Negative Covenants

SECTION 6.01.  Changes in Business or Organizational Documents...........    55
SECTION 6.02.  Consolidations, Mergers and Sales of Assets...............    56
SECTION 6.03.  Liens.....................................................    56
SECTION 6.04.  Indebtedness..............................................    59
SECTION 6.05.  Sale and Lease-Back Transactions..........................    59
SECTION 6.06.  Issuance of Stock.........................................    60
SECTION 6.07.  Dissolution...............................................    60
SECTION 6.08.  Restricted Payments.......................................    60
SECTION 6.09.  Transactions with Affiliates..............................    60
SECTION 6.10.  Maximum Leverage Ratio....................................    61
SECTION 6.11.  Minimum Consolidated Net Worth............................    61
SECTION 6.12.  Limitation on Certain Restrictions on Subsidiaries........    61
SECTION 6.13.  Private Act...............................................    61
SECTION 6.14.  Claims Paying Ratings.....................................    62
</TABLE>


                                       ii

<PAGE>

<TABLE>
<S>                                                                         <C>
SECTION 6.15.  End of Fiscal Years; Fiscal Quarters......................    62
SECTION 6.16.  Investments, Loans, Advances and Guarantees...............    62

                                   ARTICLE VII
                                Events of Default

SECTION 7.01.  Payments..................................................    62
SECTION 7.02.  Representations, etc......................................    63
SECTION 7.03.  Covenants.................................................    63
SECTION 7.04.  Default under other Agreements............................    63
SECTION 7.05.  Bankruptcy, etc...........................................    63
SECTION 7.06.  ERISA.....................................................    64
SECTION 7.07.  Judgments.................................................    64
SECTION 7.08.  Insurance Licenses........................................    64
SECTION 7.09.  Change of Control.........................................    64
SECTION 7.10.  Security Documents........................................    64
SECTION 7.11.  Company Guaranty..........................................    65

                                  ARTICLE VIII
                                   The Agents

SECTION 8.01.  Appointment...............................................    66
SECTION 8.02.  Agents in their Individual Capacities.....................    66
SECTION 8.03.  Exculpatory Provisions....................................    66
SECTION 8.04.  Reliance..................................................    66
SECTION 8.05.  Delegation of Duties......................................    67
SECTION 8.06.  Resignation...............................................    67
SECTION 8.07.  Non-Reliance..............................................    67
SECTION 8.08.  Syndication Agent, Documentation Agents and Joint Lead
               Arrangers and Joint Bookrunners...........................    67

                                   ARTICLE IX
                                Company Guaranty

SECTION 9.01.  The Company Guaranty......................................    68
SECTION 9.02.  Bankruptcy................................................    68
SECTION 9.03.  Nature of Liability.......................................    68
SECTION 9.04.  Independent Obligation....................................    69
SECTION 9.05.  Authorization.............................................    69
SECTION 9.06.  Reliance..................................................    70
SECTION 9.07.  Subordination.............................................    70
SECTION 9.08.  Waiver....................................................    70

                                    ARTICLE X
                                  Miscellaneous

SECTION 10.01. Notices...................................................    71
SECTION 10.02. Waivers; Amendments.......................................    72
</TABLE>


                                      iii

<PAGE>

<TABLE>
<S>                                                                         <C>
SECTION 10.03. Expenses; Indemnity; Damage Waiver........................    73
SECTION 10.04. Successors and Assigns....................................    74
SECTION 10.05. Survival..................................................    77
SECTION 10.06. Counterparts; Integration; Effectiveness..................    78
SECTION 10.07. Severability..............................................    78
SECTION 10.08. Right of Setoff...........................................    78
SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of
               Process...................................................    78
SECTION 10.10. Waiver of Jury Trial......................................    79
SECTION 10.11. Headings..................................................    80
SECTION 10.12. Confidentiality...........................................    80
SECTION 10.13. Interest Rate Limitation..................................    80
SECTION 10.14. USA Patriot Act...........................................    81
SECTION 10.15. Termination of Existing LC Facility.......................    81
</TABLE>


                                       iv

<PAGE>

SCHEDULES:

Commitment Schedule
Schedule 1.01 -- Permitted Investors
Schedule 2.15 -- Designated Subsidiary Account Parties
Schedule 2.17 -- Existing Secured Fronted Letters of Credit
Schedule 2.18 -- Existing Secured Several Letters of Credit
Schedule 3.12 -- Subsidiaries
Schedule 3.13 -- Capitalization
Schedule 3.14 -- Existing Indebtedness
Schedule 3.16 -- Insurance Licenses
Schedule 6.03 -- Existing Liens
Schedule 6.09 -- Existing Affiliate Transactions
Schedule 6.12 -- Existing Intercompany Agreements and Arrangements
Schedule 6.16 -- Existing Investments

EXHIBITS:

Exhibit A -- Form of Assignment and Assumption
Exhibit B -- Form of Borrowing Base Certificate
Exhibit C -- Form of DSAP Assumption Agreement
Exhibit D -- Form of Security Agreement
Exhibit E -- Form of Additional Commitment Agreement
Exhibit F -- Form of Officer's Certificate
Exhibit G -- Form of Letter of Credit Request
Exhibit H-1 -- Opinion of Account Parties' Special New York Counsel
Exhibit H-2 -- Opinion of Account Parties' Special Bermuda Counsel
Exhibit I -- Account Control Agreement
Exhibit J -- Additional LC Documentation


                                       v
<PAGE>

          FIVE-YEAR SECURED LETTER OF CREDIT FACILITY AGREEMENT dated as of
March 12, 2007 among VALIDUS HOLDINGS, LTD., a holding company organized under
the laws of Bermuda (the "Company"), VALIDUS REINSURANCE, LTD., an insurance and
reinsurance company organized under the laws of Bermuda and a wholly-owned
subsidiary of the Company ("Validus Re"), the other Designated Subsidiary
Account Parties (as hereinafter defined) from time to time party hereto, the
lenders from time to time party hereto (each, a "Lender" and, collectively, the
"Lenders"), JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, as Administrative Agent
and Issuing Agent, Deutsche Bank AG New York Branch, as Syndication Agent, and
ING Bank N.V., London Branch, Calyon, The Bank of New York and Wachovia Bank,
National Association, as Documentation Agents. Unless otherwise defined herein,
all capitalized terms used herein and defined in Section 1.01 are used herein as
so defined.

          The parties hereto hereby agree as follows:

                                    ARTICLE I

                                   Definitions

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

          "Account Control Agreement" means the account control agreement,
attached as Exhibit I hereto, dated as of the date of this Agreement, among the
Custodian, the Collateral Agent and the Grantors (as defined in the Security
Agreement) from time to time party thereto, as amended, restated, modified
and/or supplemented and as in effect from time to time.

          "Account Parties" means the Company and each Designated Subsidiary
Account Party.

          "Additional Commitment" means, for each Additional Commitment Lender,
any commitment provided by such Additional Commitment Lender pursuant to Section
2.16, in such amount as agreed to by such Additional Commitment Lender in the
respective Additional Commitment Agreement; provided that on the Additional
Commitment Date upon which an Additional Commitment of any Additional Commitment
Lender becomes effective, such Additional Commitment of such Additional
Commitment Lender shall (x) in the case of an existing Lender, be added to (and
thereafter become a part of) the existing Commitment of such existing Lender for
all purposes of this Agreement as contemplated by Section 2.16 and (y) in the
case of a new Lender, be converted to a Commitment and become a Commitment for
all purposes of this Agreement as contemplated by Section 2.16.

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

          "Additional Commitment Date" means each date upon which an Additional
Commitment under an Additional Commitment Agreement becomes effective as
provided in Section 2.16.

<PAGE>

          "Additional Commitment Lender" has the meaning provided in Section
2.16(b).

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

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

          "Advance Rate" means, for any category of Cash or obligation or
investment specified below in the column entitled "Cash and Eligible Securities"
(other than Cash, the "Eligible Securities"), the percentage set forth opposite
such category of Cash or Eligible Securities below in the column entitled
"Advance Rate" and, in each case, subject to the original term to maturity
criteria set forth therein:

<TABLE>
<CAPTION>
           Cash and Eligible Securities:                     Advance Rate:
           -----------------------------                     -------------
<S>                                                   <C>
Cash:                                                 100%.

U.S. Dollars, including time deposits, certificates
of deposit and money market deposits held at
JPMorgan Chase Bank, National Association or that
are subject to a first priority security interest
of the Collateral Agent.

U.S. Government Securities:                           With maturities of (x) two
                                                      years or less from the
Securities issued or directly and fully guaranteed    date of acquisition, 95%,
or insured by the United States or any agency or      (y) three to ten years
instrumentality thereof (provided that the full       from the date of
faith and credit of the United States is pledged in   acquisition, 90% and (z)
support thereof), including assets issued by the      more than 10 years from
Federal National Mortgage Association, the Federal    the date of acquisition,
Home Loan Mortgage Corporation, Federal Home Loan     85%.
Bank or the Government National Mortgage
Association.

Investment Grade Municipal Bonds:                     85%.

Municipal Bonds rated at least (i) A by S&P and
(ii) A2 by Moody's and maturing within five years
from the date of acquisition.

Investment Grade Non-Convertible U.S. Corporate       With maturities of (x) two
Bonds Level I:                                        years or less from the
                                                      date of acquisition, 90%
Non-convertible corporate bonds issued by any         and (y) three to ten years
entity organized in the United States which are       from the date of
"publicly traded" on a nationally recognized          acquisition, 85%.
exchange, eligible to be settled by DTC and rated
at least (i) AA- by S&P and (ii) Aa3 by Moody's.

Investment Grade Non-Convertible U.S. Corporate       With maturities of (x) two
Bonds Level II:                                       years or less from the
                                                      date of acquisition, 85%
Non-convertible corporate bonds issued by any         and (y) three to ten years
entity organized in the United States which are       from the date of
"publicly traded" on a nationally recognized          acquisition, 80%.
exchange, eligible to be settled by DTC and rated
at least (i) A- by S&P and (ii) A3 by Moody's, but
no higher than (x) A+ from S&P and (y) A1 from
Moody's.
</TABLE>


                                       2

<PAGE>

<TABLE>
<CAPTION>
           Cash and Eligible Securities:                     Advance Rate:
           -----------------------------                     -------------
<S>                                                   <C>
Commercial Paper:                                     90%.

Commercial paper issued by any entity organized in
the United States rated at least (i) A-1 or the
equivalent thereof by S&P and (ii) P-1 or the
equivalent thereof by Moody's and maturing not more
than one year after the date of acquisition.

Other Securities:                                     0.0%.

All other investments, obligations or securities.
</TABLE>

          Notwithstanding the foregoing, (A) the value of Eligible Securities at
any time shall be determined based on the Borrowing Base Report (as defined in
the Security Agreement) then most recently prepared by the Collateral Agent and
(B) if any single corporate issuer (including the Affiliates thereof but, for
the avoidance of doubt, excluding any Eligible Securities categorized in the
table above under the heading "U.S. Government Securities" or "Investment Grade
Municipal Bonds") represents more than 10% of the aggregate value of all Cash
and Eligible Securities of the aggregate amount of all Borrowing Bases, the
excess over 10% shall be excluded (with such exclusion being allocated in equal
parts to each Borrowing Base at such time).

          "Affiliate" means, with respect to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

          "Agents" means, collectively, the Administrative Agent, the
Syndication Agent, the Issuing Agent and the Collateral Agent.

          "Agreement" means this Five-Year Secured Letter of Credit Facility
Agreement, as modified, supplemented, amended, restated (including any amendment
and restatement hereof), extended or renewed from time to time.

          "Alternate Base Rate" means, for any day, a rate per annum equal to
the greater of (a) the Prime Rate in effect on such day and (b) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective from and including the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.

          "Applicable Commitment Fee Rate" means 0.08% per annum.

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


                                       3

<PAGE>

agency that may be created and that asserts insurance regulatory jurisdiction
over such Regulated Insurance Company.

          "Applicable Letter of Credit Fee Rate" means 0.25% per annum.

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

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

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

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

          "Bankruptcy Code" has the meaning provided in Section 7.05.

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

          "Borrowing Base" means, at any time, and in respect of each Account
Party, the aggregate amount of Cash and Eligible Securities held in the
Collateral Accounts of such Account Party under the Security Agreement at such
time multiplied in each case by the respective Advance Rates for Cash and such
Eligible Securities; provided that all Cash and Eligible Securities in respect
of any Borrowing Base shall only be included in such Borrowing Base to the
extent the same are subject to a first priority perfected security interest in
favor of the Collateral Agent pursuant to the Security Documents.

          "Borrowing Base Certificate" means a Borrowing Base Certificate
substantially in the form of Exhibit B hereto or such other form reasonably
acceptable to the Administrative Agent (it being agreed that a Borrowing Base
Certificate substantially in the form of the Borrowing Base Certificate
delivered under the Existing LC Facility on February 22, 2007 is acceptable to
the Administrative Agent).

          "Business Day" means any day excluding Saturday, Sunday and any day
which shall be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close.

          "Capital Lease Obligations" of any Person means the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be


                                       4

<PAGE>

classified and accounted for as capital leases on a balance sheet of such Person
under GAAP, and the amount of such obligations shall be the capitalized amount
thereof determined in accordance with GAAP.

          "Capital Markets Product" means, as to any Person, any security,
commodity, derivative transaction or other financial or similar product
purchased, sold or entered into by such Person for the purpose of a third-party
undertaking or assuming one or more risks otherwise assumed by such Person or
entered into by such Person for the purpose of managing one or more risks
otherwise assumed by such Person or other agreements or arrangements entered
into by such Person designed to transfer credit risk from one party to another,
including (i) any structured insurance product, catastrophe bond, rate swap
transaction, swap option, basis swap, forward rate transaction, commodity swap,
commodity option, commodity hedge, equity or equity index swap, equity or equity
index option, bond option, interest rate option or hedge, foreign exchange
transaction, cap transaction, floor transaction, collar transaction, currency
swap transaction, cross-currency rate swap transaction, currency option or swap
transaction, credit protection transaction, credit swap, credit default swap
(including single default, single-name, basket and first-to-default swaps),
credit default option, equity default swap, total return swap, credit-linked
notes, credit spread transaction, repurchase transaction, reverse repurchase
transaction, buy/sellback transaction, securities lending transaction, weather
index transaction, emissions allowance transaction, or forward purchase or sale
of a security, commodity or other financial instrument or interest (including
any option with respect to any of these transactions), (ii) any transaction
which is a type of transaction that is similar to any transaction referred to in
clause (i) above that is currently, or in the future becomes, recurrently
entered into in the financial markets, (iii) any combination of the transactions
referred to in clauses (i) and (ii) above and (iv) any master agreement relating
to any of the transactions referred to in clauses (i), (ii) or (iii) above.

          "Cash" means the category of "Cash" described in the definition of
Advance Rate.

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


                                       5

<PAGE>

          "Change in Law" means (a) the adoption or effectiveness of any law,
rule or regulation, order, guideline or request or any change therein after the
date of this Agreement, (b) any change adopted or effective in the
interpretation, administration or application of any law, rule or regulation,
order, guideline or request or any change therein by any Governmental Authority,
central bank or comparable agency after the date of this Agreement or (c)
compliance by any Lender or the Issuing Agent (or, for purposes of Section 2.06,
by any lending office of such Lender or by such Lender's or the Issuing Agent's
holding company, if any) with any request, guideline or directive (whether or
not having the force of law) of any Governmental Authority, central bank or
comparable agency made or issued after the date of this Agreement.

          "Change of Control" means (a) Validus Re or any other Account Party
ceasing to be a Wholly-Owned Subsidiary of the Company, (b) prior to an IPO, the
failure by Permitted Investors to collectively own, directly or indirectly,
beneficially and of record, Equity Interests in the Company representing at
least a majority of each of the aggregate ordinary voting power and the
aggregate equity value represented by the issued and outstanding Equity
Interests in the Company, (c) after an IPO, the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or group
(within the meaning of the Securities Exchange Act of 1934, as amended, and the
rules of the SEC thereunder as in effect on the date hereof) other than
Permitted Investors, of Equity Interests representing more than 25% of either
the aggregate ordinary voting power or the aggregate equity value represented by
the issued and outstanding Equity Interests in the Company, (d) the occupation
of a majority of the seats (other than vacant seats) on the board of directors
of the Company by Persons who were neither (i) nominated by the board of
directors of the Company or Permitted Investors nor (ii) appointed by directors
so nominated, or (e) the occurrence of a "Change of Control" (or similar event,
however denominated), as defined in any indenture, agreement in respect of
Indebtedness or other material agreement of the Company or any Subsidiary or any
certificate of designations (or other provision of the organizational documents
of the Company) relating to, or any other agreement governing the rights of the
holders of, any Equity Interests in the Company or any Subsidiary, in each case
which would give rise to liabilities or obligations of the Company or any
Subsidiary in an amount equal to or greater than $50,000,000.

          "Charges" has the meaning provided in Section 10.13.

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

          "Collateral" has the meaning provided in the Security Agreement.

          "Collateral Account" has the meaning provided in the Security
Agreement.

          "Collateral Agent" means The Bank of New York (and each person
appointed as a successor thereto pursuant to Article VIII), in its capacity as
collateral agent hereunder and under the Security Agreement and the Account
Control Agreement.

          "Commitment" means, with respect to each Lender, at any time, the
amount set forth opposite such Lender's name on the Commitment Schedule, as the
same may be reduced pursuant to Sections 2.09, 2.14 or 10.04 or increased
pursuant to Section 2.16. As of the Effective Date, the aggregate Commitments of
all Lenders hereunder is $500,000,000.


                                       6

<PAGE>

          "Commitment Expiration Date" means March 12, 2012.

          "Commitment Schedule" means the Schedule attached hereto identified as
such.

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

          "Company Guaranty" means the guaranty of the Company provided in
Article IX.

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

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

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

          "Control" means, with respect to any Person, the possession, directly
or indirectly, of the power (i) to vote 10% or more of the voting power of the
securities having ordinary voting power for the election of directors of such
Person or (ii) to direct or cause the direction of the management or policies of
a Person, whether through the ability to exercise voting power, by contract or
otherwise. "Controlling" and "Controlled" have meanings correlative thereto.

          "Credit Documents" means this Agreement and each Security Document.

          "Credit Event" means the issuance of any Letter of Credit (or any
increase of the Stated Amount thereof).

          "Custodian" means The Bank of New York, in its capacity as custodian
under the Account Control Agreement.


                                       7

<PAGE>

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

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

          "Dispositions" has the meaning provided in Section 6.02.

          "Dividends" has the meaning provided in Section 6.08.

          "Documentation Agent" means each of ING Bank N.V., London Branch,
Calyon, The Bank of New York and Wachovia Bank, National Association, in their
capacities as Documentation Agents.

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

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

          "DTC" means the Depository Trust Company.

          "Effective Date" has the meaning provided in Section 4.01.

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

          "Eligible Securities" has the meaning provided in the definition of
the term "Advance Rate".

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

          "Environmental Liability" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Company or any Subsidiary directly or
indirectly resulting from or based upon (a) its violation of any Environmental
Law, (b) its generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) its exposure to any Hazardous
Materials, (d) its release or threatened release of any Hazardous Materials into
the environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing, but in each of (a) through (e) excluding liabilities


                                       8

<PAGE>

arising out of Capital Markets Products and insurance and reinsurance contracts,
agreements and arrangements in each case entered into in the ordinary course of
business and not for speculative purposes.

          "Equity Interests" means, with respect to any Person, shares of
capital stock of (or other ownership or profit interests in) such Person,
warrants, options or other rights for the purchase or other acquisition from
such Person of shares of capital stock of (or other ownership or profit
interests in) such Person, securities convertible into or exchangeable for
shares of capital stock of (or other ownership or profit interests in) such
Person or warrants, rights or options for the purchase or other acquisition from
such Person of such shares (or such other interests), and other ownership or
profit interests in such Person (including partnership, member or trust
interests therein), whether voting or nonvoting, and whether or not such shares,
warrants, options, rights or other interests are authorized or otherwise
existing on any date of determination.

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

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

          "Event of Default" has the meaning provided in Article VII.

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


                                       9

<PAGE>

          "Existing Administrative Agent" means the Administrative Agent, as
defined in the Existing LC Facility.

          "Existing Collateral Agent" means the Collateral Agent and the
Custodian, as defined in the Existing LC Facility.

          "Existing LC Facility" means that certain Letter of Credit Facility
Agreement dated as of March 14, 2006 among the Company, Validus Re, the other
Designated Subsidiary Account Parties identified therein, the lenders party
thereto, JPMorgan Chase Bank, National Association, as Administrative Agent and
Issuing Agent thereunder, and Bank of America, N.A., The Bank of New York and
Wachovia Bank, National Association, as Documentation Agents thereunder, as the
same has been amended from time to time.

          "Existing LC Issuer" means JPMorgan Chase Bank, National Association.

          "Existing Lender" means a "Lender" under and as defined in the
Existing LC Facility.

          "Existing Secured Fronted Letters of Credit" has the meaning provided
in Section 2.17.

          "Existing Secured Several Letters of Credit" has the meaning provided
in Section 2.18.

          "Federal Funds Effective Rate" means, for any day, the weighted
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.

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

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

          "Foreign Pension Plan" means any plan, fund (including any
superannuation fund) or other similar program established or maintained outside
the United States of America by the Company or any one or more of its
Subsidiaries primarily for the benefit of employees of the Company or such
Subsidiaries residing outside the United States of America, which plan, fund or
other similar program provides, or results in, retirement income, a deferral of
income in


                                       10

<PAGE>

contemplation of retirement or payments to be made upon termination of
employment, and which plan is not subject to ERISA or the Code.

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

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

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

          "Fronting Lender" means JPMorgan Chase Bank, National Association, The
Bank of Nova Scotia and Deutsche Bank AG New York Branch (and any of their
respective Affiliates) and any other Lender (or any Affiliate thereof) which is
requested by an Account Party, and which agrees in writing, to issue Fronted
Letters of Credit hereunder pursuant to Section 2.02.

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

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

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

          "Guarantee" of or by any Person (the "guarantor") means any obligation
guaranteeing or intended to guarantee any Indebtedness, leases, dividends or
other obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including any
obligation of such Person, whether or not contingent, (a) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (b) to advance or supply funds (i) for the purchase or payment of any
such primary obligation or (ii) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (c) to purchase or lease property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary obligation
or (d) otherwise to assure or hold harmless the owner of such primary obligation
against loss in respect thereof; provided, however, that the term Guarantee
shall not include (x) endorsements of instruments for deposit or collection in
the ordinary course of business and (y) obligations of any Regulated Insurance
Company under Insurance Contracts, Reinsurance Agreements, Fronting Arrangements
or Retrocession Agreements (including any Liens with respect thereto). The
amount of any Guarantee shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
is made or, if not stated or


                                       11

<PAGE>

determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.

          "Guaranteed Creditors" means and includes each of the Administrative
Agent, the Collateral Agent, the Lenders and each LC Issuer.

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

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

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

          "Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid and treated as interest expense
under GAAP, (d) all obligations of such Person under conditional sale or other
title retention agreements relating to property acquired by such Person, (e) all
obligations of such Person in respect of the deferred purchase price of property
or services (excluding current ordinary course trade accounts payable), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, provided that the amount of Indebtedness of
such Person shall be the lesser of (i) the fair market value of such property at
such date of determination (determined in good faith by the Company) and (ii)
the amount of such Indebtedness of such other Person,


                                       12

<PAGE>

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

          "Indemnified Taxes" means Taxes other than Excluded Taxes.

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

          "Information" has the meaning provided in Section 10.12.

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

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

          "Insurance Licenses" has the meaning provided in Section 3.16.

          "IPO" means a bona fide underwritten initial public offering of voting
common Equity Interests of the Company or its parent holding company (it being
understood and agreed that the net cash proceeds of an IPO by such holding
company shall be promptly contributed to the Company) pursuant to an effective
registration statement (other than a registration statement on Form S-8 or any
substantially similar or successor form) filed with the Securities and Exchange
Commission in accordance with the Securities Act.

          "Issuing Agent" means JPMorgan Chase Bank, National Association.


                                       13

<PAGE>

          "Joint Lead Arrangers and Joint Bookrunners" means, collectively, J.P.
Morgan Securities Inc. and Deutsche Bank Securities Inc.

          "Junior Subordinated Deferrable Debentures" mean the Company's Junior
Subordinated Deferrable Interest Debentures due 2036 issued under the Junior
Subordinated Indenture dated as of June 15, 2006 between the Company and
JPMorgan Chase Bank, National Association, as Trustee, as the same has been and
may be amended from time to time, and any substantially similarly structured
security issued by the Company or any of its Subsidiaries.

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

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

          "Lenders" has the meaning provided in the first paragraph of this
Agreement.

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

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

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

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

          "Letters of Credit" means the Several Letters of Credit and the
Fronted Letters of Credit.

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

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

          "Material Adverse Effect" means any material adverse condition or any
material adverse change in or affecting (x) the business, operations, assets,
liabilities or financial condition of the Company and its Subsidiaries, taken as
a whole, or (y) the rights and remedies


                                       14

<PAGE>

of the Lenders or the ability of the Company and each other Account Party, taken
as a whole, to perform their respective obligations to the Lenders under this
Agreement or any other Credit Document.

          "Maximum Rate" has the meaning provided in Section 10.13.

          "Minimum Consolidated Net Worth Amount" shall mean, at any time, an
amount which initially shall be equal to $872,000,000, and which amount shall be
increased immediately following the last day of each fiscal quarter (commencing
with the fiscal quarter ending on March 31, 2007) by (i) an amount (if positive)
equal to 50% of the Net Income for such fiscal quarter plus (ii) 50% of the net
proceeds received from any issuance of shares of common stock of the Company
during such fiscal quarter.

          "Moody's" means Moody's Investors Service, Inc.

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

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

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

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

          "Net Worth" means, as to any Person, the sum of its capital stock
(including its preferred stock), capital in excess of par or stated value of
shares of its capital stock (including its preferred stock), retained earnings
and any other account which, in accordance with GAAP, constitutes stockholders
equity, but excluding (i) any treasury stock and (ii) the amount of the effects
of Financial Accounting Statement No. 115 (which amount is shown on the
Company's December 31, 2006 balance sheet under the caption "Accumulated other
comprehensive income" and which, after adoption of Financial Accounting
Statements Nos. 157 and 159 will be measured as the difference between
investments carried at estimated fair value and investments carried at amortized
cost).

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

          "Other Taxes" means any and all present or future stamp or documentary
taxes or any other similar excise or property taxes, charges or similar levies
arising from any payment made hereunder or under any other Credit Document or
from the execution, delivery or


                                       15

<PAGE>

enforcement of, or performance under, this Agreement or any other Credit
Document other than any taxes to the extent resulting from a voluntary change in
the identity of the Administrative Agent, the Issuing Agent or any Lender or
assignee thereof.

          "Participant" has the meaning provided in Section 10.04(c)

          "Patriot Act" has the meaning provided in Section 10.14.

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

          "Permitted Investors" means the Persons listed on Schedule 1.01 and
their respective Affiliates.

          "Permitted Subsidiary Indebtedness" means:

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

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

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

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

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


                                       16

<PAGE>

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

          (g) Indebtedness of any Designated Subsidiary Account Parties under
the Three-Year Unsecured Letter of Credit Facility; and

          (h) without duplication, additional Indebtedness of Subsidiaries of
the Company not otherwise permitted under clauses (a) through (g) of this
definition which, when added to the aggregate amount of all Liens (other than
with respect to Indebtedness incurred pursuant to this clause (h)) incurred by
the Company pursuant to Section 6.03(v), shall not exceed at any time
outstanding 5% of Consolidated Net Worth at the time of incurrence of any new
Indebtedness under this clause (h); provided that immediately after giving
effect (including pro forma effect) to the incurrence of any Indebtedness
pursuant to this clause (h), no Event of Default shall have occurred and be
continuing.

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

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

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

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

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

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

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


                                       17

<PAGE>

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

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

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

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

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

          "Required Lenders" means at any time Lenders having more than 50% of
the aggregate amount of the Commitments; provided that if the Total Commitment
has been terminated, then the Required Lenders means Lenders whose Letter of
Credit Outstandings exceed 50% of the aggregate amount of Letter of Credit
Outstandings at such time.

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

          "S&P" means Standard & Poor's Ratings Group, a division of the McGraw
Hill Corporation.

          "SAP" means, with respect to any Regulated Insurance Company, the
statutory accounting principles and accounting procedures and practices
prescribed or permitted by the Applicable Insurance Regulatory Authority of the
state or jurisdiction in which such Regulated Insurance Company is domiciled; it
being understood and agreed that determinations in accordance with SAP for
purposes of Article VII, including defined terms as used therein, are subject
(to the extent provided therein) to Section 1.03.

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

          "Security Agreement" means the Pledge and Security Agreement
substantially in the form attached as Exhibit D hereto, as the same may be
amended, restated, modified and/or supplemented and as in effect from time to
time.

          "Security Documents" means (i) the Security Agreement, (ii) the
Account Control Agreement, (iii) each other security agreement executed and
delivered pursuant to Section 5.11,


                                       18

<PAGE>

and (iv) each other document, agreement, certificate and or financing statement,
executed, delivered, made or filed pursuant to the terms of the documents
specified in foregoing clauses (i), (ii) and (iii).

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

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

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

          "Solvent" means, with respect to any Person on a particular date, that
on such date (a) the amount of the "present fair saleable value" of each of the
business and assets of such Person will, as of such date, exceed the amount of
all "liabilities of such Person, contingent or otherwise", as of such date, as
such quoted terms are determined in accordance with applicable federal and state
laws governing determinations of the insolvency of debtors, (b) the present fair
saleable value of each of the business and assets of such Person is greater than
the amount that will be required to be paid on or in respect of the probable
"liability" on the existing debts and other "liabilities contingent or
otherwise" of such Person, (c) the assets of such Person do not constitute
unreasonably small capital for such Person to carry out its business as now
conducted and as proposed to be conducted including the capital needs of such
Person, taking into account the particular capital requirements of the business
conducted by such Person and projected capital requirements and capital
availability thereof, (d) such Person does not intend to incur debts beyond
their ability to pay such debts as they mature (taking into account the timing
and amounts of cash to be received by such Person, and of amounts to be payable
on or in respect of debt of such Person) and (e) such Person does not believe
that final judgments against such Person in actions for money damages presently
pending will be rendered at a time when, or in an amount such that, they will be
unable to satisfy any such judgments promptly in accordance with their terms
(taking into account the maximum reasonable amount of such judgments in any such
actions and the earliest reasonable time at which such judgments might be
rendered) and such Person believes that its cash flow, after taking into account
all other anticipated uses of the cash of such Person (including the payments on
or in respect of debt referred to in paragraph (d) of this definition), will at
all times be sufficient to pay all such judgments promptly in accordance with
their terms. For purposes of this definition, (i) "debt" means liability on a
"claim", and (ii) "claim" means any (A) right to payment, whether or not such a
right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured
or (B) right to an equitable remedy for breach of performance if such breach
gives rise to a right to payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured or unmatured,
disputed, undisputed, secured or unsecured.

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

          "Statutory Statements" means, with respect to any Regulated Insurance
Company for any fiscal year, the annual or quarterly financial statements of
such Regulated Insurance


                                       19

<PAGE>

Company as required to be filed with the Insurance Regulatory Authority of its
jurisdiction of domicile and in accordance with the laws of such jurisdiction,
together with all exhibits, schedules, certificates and actuarial opinions
required to be filed or delivered therewith.

          "Subsidiary" means any subsidiary of the Company.

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

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

          "Syndication Agent" means Deutsche Bank AG New York Branch, in its
capacity as Syndication Agent.

          "Taxes" means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.

          "Three-Year Unsecured Letter of Credit Facility" means the
$200,000,000 three-year unsecured letter of credit facility among the Company,
JPMorgan Chase Bank, National Association, as administrative agent, and one or
more lenders to be entered into on the date hereof, including the related
instruments and agreements executed in connection therewith, and amendments,
renewals, replacements, refinancings and restatements to any of the foregoing
(provided that the principal amount thereof shall not exceed $200,000,000 plus
reasonable refinancing costs).

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

          "Transaction" means the execution, delivery and performance by each
Account Party of this Agreement, the issuance of Letters of Credit for the
account of any Account Party and the granting of Liens pursuant to the Security
Documents, in each case, on and after the Effective Date.

          "UCC" has the meaning provided in the Security Agreement.

          "Unpaid Drawings" means the Several Unpaid Drawings and the Fronted
Unpaid Drawings.


                                       20
<PAGE>

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

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

          SECTION 1.02. Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.

          SECTION 1.03. Accounting Terms; GAAP. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP or SAP, as the case may be, as in effect from
time to time; provided that, if the Company notifies the Administrative Agent
that the Company requests an amendment to any provision hereof to eliminate the
effect of any change occurring after the date hereof in GAAP or SAP or in the
application thereof on the operation of such provision (or if the Administrative
Agent notifies the Company that the Required Lenders request an amendment to any
provision hereof for such purpose), regardless of whether any such notice is
given before or after such change in GAAP or SAP or in the application thereof,
then such provision shall be interpreted on the basis of GAAP or SAP as in
effect and applied immediately before such change shall have become effective
until such notice shall have been withdrawn or such provision amended in
accordance with Section 10.02.

                                   ARTICLE II

                                Letters of Credit

          SECTION 2.01. Several Letters of Credit. (a) Subject to and upon the
terms and conditions set forth herein, each Account Party may request the
Issuing Agent, at any time and from time to time on or after the Effective Date
and prior to the Commitment Expiration Date, to issue, on behalf of each Lender,
for the account of such Account Party and in support of, on a standby basis,
Letter of Credit Supportable Obligations of such Account Party to any other


                                       21

<PAGE>

Person, and subject to and upon the terms and conditions herein set forth, the
Issuing Agent agrees to issue at any time and from time to time on or after the
Effective Date and prior to the Commitment Expiration Date one or more
irrevocable standby letters of credit denominated in Dollars and in such form as
may be approved by the Issuing Agent which approval shall not be unreasonably
withheld or delayed (each such letter of credit, a "Several Letter of Credit"
and, collectively, the "Several Letters of Credit"). Subject to the terms and
conditions hereof and any other instruments and documents contemplated hereby,
it is the intent of the parties hereto that all Letters of Credit shall be clean
and irrevocable and otherwise in a form sufficient for the beneficiary cedent to
take credit on its financial statements for reinsurance recoverables under
applicable rules, laws and regulations.

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

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

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

          SECTION 2.02. Fronted Letters of Credit. (a) Subject to and upon the
terms and conditions set forth herein, each Account Party may request that any
Fronting Lender at any time and from time to time on or after the Effective Date
and prior to the Commitment


                                       22

<PAGE>

Expiration Date issue for its own account a letter of credit denominated in
Dollars for the account of such Account Party and in support of, on a standby
basis, Letter of Credit Supportable Obligations of such Account Party to any
other Person, and subject to and upon the terms and conditions herein set forth,
each Fronting Lender agrees to issue at any time and from time to time on or
after the Effective Date and prior to the Commitment Expiration Date one or more
irrevocable standby letters of credit in such form as may be approved by such
Fronting Lender, which approval shall not be unreasonably withheld or delayed
(each such letter of credit, a "Fronted Letter of Credit" and, collectively, the
"Fronted Letters of Credit"). Subject to the terms and conditions hereof and any
other instruments and documents contemplated hereby, it is the intent of the
parties hereto that all Letters of Credit shall be clean and irrevocable and
otherwise in a form sufficient for the beneficiary cedent to take credit on its
financial statements for reinsurance recoverables under applicable rules, laws
and regulations.

          (b) Immediately upon the issuance by any Fronting Lender of any
Fronted Letter of Credit, such Fronting Lender shall be deemed to have sold and
transferred to each Lender other than such Fronting Lender (each such Lender, in
its capacity under this Section 2.02(b), a "Fronting Participant"), and each
such Fronting Participant shall be deemed irrevocably and unconditionally to
have purchased and received from such Fronting Lender, without recourse or
warranty, an undivided interest and participation, to the extent of such
Fronting Participant's Applicable Percentage, in such Fronted Letter of Credit,
each drawing made thereunder and the obligations of each Account Party under
this Agreement with respect thereto, and any security therefor or guaranty
pertaining thereto. Upon any change in the Commitments or Applicable Percentages
of the Lenders pursuant to this Agreement (including pursuant to Section 2.16),
it is hereby agreed that, with respect to all outstanding Fronted Letters of
Credit and Fronted Unpaid Drawings, there shall be an automatic adjustment to
the participations pursuant to this Section 2.02 to reflect the new Applicable
Percentages of the assignor and assignee Lender or of all Lenders with
Commitments, as the case may be.

          (c) In the event that any Fronting Lender makes any payment under any
Fronted Letter of Credit and the respective Account Party shall not have
reimbursed such amount in full to such Fronting Lender pursuant to Section 2.05,
such Fronting Lender shall promptly notify the Administrative Agent, which shall
promptly notify each Fronting Participant, of such failure, and each Fronting
Participant shall promptly and unconditionally pay to such Fronting Lender the
amount of such Fronting Participant's Applicable Percentage of such unreimbursed
payment in Dollars and in immediately available funds. If, prior to 11:00 a.m.
(New York time) on any Business Day, the Administrative Agent so notifies any
Fronting Participant required to fund a payment under a Fronted Letter of
Credit, such Fronting Participant shall make available to such Fronting Lender
in Dollars and in immediately available funds such Fronting Participant's
Applicable Percentage of the amount of such payment on such Business Day (or, if
notice is given after 11:00 a.m. (New York time) on any Business Day, on the
next Business Day). If and to the extent such Fronting Participant shall not
have so made its Applicable Percentage of the amount of such payment available
to such Fronting Lender, such Fronting Participant agrees to pay to such
Fronting Lender, forthwith on demand, such amount, together with interest
thereon, for each day from such date to but excluding the date such amount is
paid to such Fronting Lender at the overnight Federal Funds Effective Rate. The
failure of any Fronting Participant to make available to such Fronting Lender
its Applicable Percentage of any payment under any Fronted Letter of Credit
shall not relieve any other Fronting Participant of its


                                       23

<PAGE>

obligation hereunder to make available to such Fronting Lender its Applicable
Percentage of any payment on the date required, as specified above, but no
Fronting Participant shall be responsible for the failure of any other Fronting
Participant to make available to such Fronting Lender such other Fronting
Participant's Applicable Percentage of any such payment.

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

          (e) The obligations of the Fronting Participants to make payments to
each Fronting Lender with respect to Fronted Letters of Credit issued by it
shall be irrevocable and not subject to any qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of this
Agreement under all circumstances, including any of the following circumstances:

               (i) any lack of validity or enforceability of this Agreement or
          any of the other Credit Documents or any amendment, supplement or
          modification to any of the foregoing;

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

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

               (iv) the surrender or impairment of any security for the
          performance or observance of any of the terms of any of the Credit
          Documents;

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

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


                                       24

<PAGE>

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

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

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

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

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

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

          (i) no Letter of Credit shall be issued at any time when the Letter of
     Credit Outstandings exceed (or would after giving effect to such issuance
     exceed) the Total Commitment at such time;

          (ii) no Letter of Credit shall be issued for the account of any
     Account Party at any time when the Letter of Credit Outstandings
     attributable to such Account Party exceed (or would after giving effect to
     such issuance exceed) the Borrowing Base of such Account Party at such
     time;

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

          (iv) each Letter of Credit shall have an expiry date occurring not
     later than one year after such Letter of Credit's date of issuance,
     provided that, subject to Section 2.07, each such Letter of Credit may by
     its terms automatically renew annually for additional


                                       25

<PAGE>

     one-year periods unless the respective LC Issuer notifies the beneficiary
     thereof, in accordance with the terms of such Letter of Credit, that such
     Letter of Credit will not be renewed; and

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

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

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

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

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

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

          SECTION 2.04. Letter of Credit Requests. (a) Whenever an Account Party
desires that a Letter of Credit be issued for its account, such Account Party
shall give the Administrative Agent and the respective LC Issuer written or
electronic notice (including by way of facsimile, e-mail or other electronic
transmission) thereof prior to 12:00 Noon (New York time) at least (x) three
Business Days in respect of Fronted Letters of Credit and (y) five Business Days
in respect of Several Letters of Credit, in each case, prior to the proposed
date of issuance (which shall be a Business Day), which notice shall be in the
form of Exhibit G or such other form reasonably acceptable to the Administrative
Agent (each, a "Letter of Credit Request"). Each Letter of Credit Request shall
include any other documents as the respective LC Issuer customarily and
generally requires in connection therewith, provided that in the case where
JPMorgan Chase Bank, National Association, The Bank of Nova Scotia, Deutsche
Bank AG New York Branch or any of their respective affiliates is the LC Issuer,
such additional documentation shall be limited to those set forth in Exhibit J
hereto (or such other documents as may be reasonably acceptable to both the
Company and the applicable LC Issuer).

          (b) The making of each Letter of Credit Request shall be deemed to be
a representation and warranty by the respective Account Party and the Company
that such Letter


                                       26

<PAGE>

of Credit may be issued in accordance with, and it will not violate the
requirements applicable to such Account Party and/or such Letter of Credit of,
Section 2.01 or 2.02, as the case may be, and Section 2.03.

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

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

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

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

          (c) In determining whether to pay under any Letter of Credit, no LC
Issuer shall have any obligation relative to the other Lenders other than to
confirm that any documents required to be delivered under such Letter of Credit
appear to have been delivered and that they appear to substantially comply on
their face with the requirements of such Letter of Credit. Any action taken or
omitted to be taken by any LC Issuer under or in connection with any Letter of
Credit, if taken or omitted in the absence of such LC Issuer's gross negligence
or willful misconduct (as determined by a court of competent jurisdiction in a
final and non-appealable


                                       27

<PAGE>

judgment), shall not create for such LC Issuer any resulting liability to any
Account Party or any of its Affiliates or any Lender.

          SECTION 2.06. Increased Costs. If a Change in Law shall either (i)
impose, modify or make applicable any reserve, deposit, capital adequacy or
similar requirement against letters of credit issued by or participated in by
such Lender, or (ii) impose on such Lender any other conditions directly or
indirectly affecting this Agreement or any Letter of Credit; and the result of
any of the foregoing is to (A) increase the cost to such Lender of issuing,
maintaining or participating in any Letter of Credit, (B) reduce the amount of
any sum received or receivable by such Lender hereunder or (C) reduce the rate
of return on its capital with respect to Letters of Credit to a level below that
which such Lender would have achieved but for such Change in Law (and taking
into consideration such Lender's policies with respect to capital adequacy (or
those of its holding company), as generally applied), then, upon written demand
to the applicable Account Party by such Lender (with a copy to the
Administrative Agent), such Account Party shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such increased
cost or reduction. The preceding sentence shall not apply to increased costs
with respect to taxes imposed on or measured by the net income or net profits of
a Lender pursuant to the laws of the jurisdiction in or under the laws of which
it is organized or the jurisdiction in which the principal office or applicable
lending office of such Lender is located or in which it conducts a trade or
business or has a permanent establishment, or has a present or former connection
with such jurisdiction, or any subdivision thereof or therein or with respect to
Taxes to the extent that a Lender received additional amounts (or otherwise was
indemnified) for such Taxes pursuant to Section 2.12 (or would have received
additional amounts pursuant to Section 2.12(e) but for a failure to comply with
Section 2.12(e)). A certificate submitted to the applicable Account Party by
such Lender (with a copy to the Administrative Agent), setting forth (i) the
basis, in reasonable detail, for the determination of such additional amount or
amounts necessary to compensate such Lender as aforesaid and (ii) the basis, in
reasonable detail, for the computation of such amount or amounts, which shall be
consistently applied shall be final and conclusive and binding on the applicable
Account Party absent manifest error, although the failure to deliver any such
certificate shall not release or diminish such Account Party's obligations to
pay additional amounts pursuant to this Section 2.06 upon subsequent receipt of
such certificate. Notwithstanding the foregoing, no Account Party shall be
required to compensate any Lender pursuant to this Section 2.06 for any
increased costs or reductions incurred more than 180 days prior to the date that
such Lender notifies such Account Party of the applicable Change in Law;
provided that if the Change in Law giving rise to such increased costs or
reductions is retroactive, then such 180-day period referred to above shall be
extended to include the period of retroactive effect thereof.

          SECTION 2.07. Letter of Credit Expiration and Extensions. Each Lender
acknowledges that to the extent provided under the terms of any Letter of
Credit, the expiration date of such Letter of Credit will be automatically
extended for additional one-year periods, without written amendment, unless (a)
at least 30 days (or such other period required under or by any Legal
Requirement or Applicable Insurance Regulatory Authority) prior to the
expiration date of such Letter of Credit or (b) such extension would cause such
Letter of Credit to remain outstanding on or after the one-year anniversary of
the Commitment Expiration Date, notice is given by the respective LC Issuer in
accordance with the terms of the respective Letter of Credit (a "Notice of
Non-Extension") that the expiration date of such Letter of Credit will not be


                                       28

<PAGE>

extended beyond its current expiration date. The respective LC Issuer will give
Notices of Non-Extension as to any or all outstanding Letters of Credit if
requested to do so by the Required Lenders pursuant to Article VII. The
respective LC Issuer will give Notices of Non-Extension as to all outstanding
Letters of Credit (i) if the Commitment Expiration Date has occurred and (ii) on
the date necessary to prevent the extension described in the foregoing clause
(b). The respective LC Issuer will send a copy of each Notice of Non-Extension
to the respective Account Party concurrently with delivery thereof to the
respective beneficiary, unless prohibited by law from doing so.

          SECTION 2.08. Changes to Stated Amount. At any time when any Letter of
Credit is outstanding, at the request of the respective Account Party, the
Issuing Agent will enter into an amendment increasing or reducing the Stated
Amount of such Letter of Credit, provided that (i) in no event shall the Stated
Amount of such Letter of Credit be increased to an amount which would cause (x)
the Letter of Credit Outstandings to exceed the Total Commitment at such time,
(y) the Letter of Credit Outstandings attributable to such Account Party to
exceed the Borrowing Base of such Account Party at such time or (z) with respect
to a Fronted Letter of Credit, the Letter of Credit Outstandings in respect of
all Fronted Letters of Credit issued by the applicable Fronting Lender to exceed
the maximum aggregate Stated Amount of all Fronted Letters of Credit that such
Fronting Lender has agreed to issue in a separate agreement with the Company,
(ii) the Stated Amount of a Letter of Credit may not be increased at any time if
the conditions precedent set forth in Section 4.02 are not satisfied at such
time, and (iii) the Stated Amount of a Letter of Credit may not be increased at
any time after the Commitment Expiration Date.

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

          (b) The Company may at any time terminate, or from time to time
reduce, the Total Commitment; provided that (i) each reduction of the Total
Commitment shall be in an amount that is an integral multiple of $1,000,000 and
not less than $5,000,000 and (ii) the Company shall not terminate or reduce the
Total Commitment if, after giving effect to such termination or reduction, the
Letter of Credit Outstandings would exceed the Total Commitment. Each such
reduction shall be applied to the Commitments of the Lenders on a pro rata basis
based on the amount of such Lenders' respective Commitments.

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


                                       29

<PAGE>

reduction of the Total Commitment shall be made ratably among the Lenders in
accordance with their respective Commitments.

          SECTION 2.10. Prepayment; Additional Borrowing Base Requirements. (a)
If (i) as of the Commitment Expiration Date, any Letter of Credit may for any
reason remain outstanding, (ii) at any time, the aggregate amount of all Letter
of Credit Outstandings exceeds the Total Commitment as then in effect, (iii) any
Event of Default occurs and is continuing and the Administrative Agent or the
Required Lenders, as applicable, require the Company and the other Account
Parties to pay to the Collateral Account additional amounts of cash and Cash
Equivalents, to be held as security for each Account Party's reimbursement
obligations in respect of Letters of Credit then outstanding or (iv) an Event of
Default set forth under Section 7.05 occurs and is continuing, then the Company
shall, or shall cause one or more other Account Parties to, pay or deliver to
the Administrative Agent on such date an amount of cash or Cash Equivalents to
be deposited in the Collateral Account applicable to each Account Party and to
be held as additional security for the obligations of each of the Account
Parties hereunder such that the amount of cash and Cash Equivalents in the
Collateral Account applicable to each Account Party would equal the aggregate
amount of all Letter of Credit Outstandings and other obligations attributable
to such Account Party hereunder. If at any time the Administrative Agent
determines that any funds held in the Collateral Account pursuant to this
Section 2.10(a) are subject to any right or claim of any Person other than the
Agents (on behalf of the Lenders) or that the total amount of such funds is less
than the aggregate amount of all Letter of Credit Outstandings and other
obligations of the Account Parties hereunder, the Company shall, or shall cause
one or more Account Parties to, forthwith upon demand by the Administrative
Agent, pay to the Administrative Agent, as additional funds to be deposited and
held in the Collateral Account as aforesaid, an amount equal to the excess of
(a) the aggregate amount of all Letter of Credit Outstandings and other
obligations of the Account Parties hereunder over (b) the total amount of cash
and Cash Equivalents deposited in the Collateral Account that the Administrative
Agent reasonably determines to be free and clear of any such right and claim.
With respect to any payment to the Collateral Account required by clause (iii)
of the first sentence of this Section 2.10(a), such payment shall (to the extent
not applied to the applicable reimbursement obligations) be returned to the
Company within three Business Days after the applicable Event of Default shall
have been cured or waived.

          (b) If on any date the Letter of Credit Outstandings attributable to
any Account Party exceed the Borrowing Base of such Account Party at such time,
such Account Party agrees to (i) in the case of the Company, within two Business
Days of the date on which the Company receives notice from the Administrative
Agent that the Letter of Credit Outstandings attributable to the Company exceed
the Company's Borrowing Base, pay or deliver to the Collateral Agent an amount
of cash or Eligible Securities (valued for this purpose based on the respective
Advance Rate applicable thereto) in an aggregate amount equal to such excess,
with any such cash or Eligible Securities to be held as additional security for
all obligations of the Company hereunder in the Collateral Account applicable to
the Company and (ii) in the case of any other Account Party, within two Business
Days of the date on which the Company or such Account Party receives notice from
the Administrative Agent that the Letter of Credit Outstandings attributable to
such Account Party exceed such Account Party's Borrowing Base, pay or deliver to
the Collateral Agent an amount of cash or Eligible Securities (valued for this
purpose based on the respective Advance Rate applicable thereto) in an aggregate
amount equal


                                       30

<PAGE>

to such excess, with any such cash or Eligible Securities to be held as
additional security for all obligations of such Account Party hereunder in the
Collateral Account applicable to such Account Party, which amounts shall be
returned within three Business Days after such excess is cured.

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

          (b) The Company agrees to pay to each Agent, for its own account, fees
payable in the amounts and at the times separately agreed upon between the
Company and the applicable Agent.

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

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

          (e) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent for distribution to the
Persons entitled thereto as set forth above. Fees paid shall not be refundable
under any circumstances. If any fee or other amount payable by any Account Party
hereunder is not paid when due, such overdue amount shall bear interest, after
as well as before judgment, at a rate per annum equal to the Alternate Base Rate
plus 2% per annum. All interest hereunder shall be computed on the basis of a
year of


                                       31

<PAGE>

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

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

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

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

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

          (e) Each Lender shall, to the extent it may lawfully do so, deliver to
the Company (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law, such properly completed and executed documentation
prescribed by applicable law or reasonably requested by the Company (if any), or
will comply with such other requirements, if any, as is currently applicable, as
will permit payments under this Agreement to be made without withholding or at a
reduced rate.


                                       32

<PAGE>

          (f) If the Administrative Agent or a Lender determines, in its sole
discretion, that it has received a refund of any Taxes or Other Taxes as to
which it has been indemnified by any Account Party or with respect to which such
Account Party has paid additional amounts pursuant to this Section 2.12, it
shall pay over such refund to such Account Party (but only to the extent of
indemnity payments made, or additional amounts paid, by such Account Party under
this Section 2.12 with respect to the Taxes or Other Taxes giving rise to such
refund), net of all reasonable out-of-pocket expenses of the Administrative
Agent or such Lender incurred in obtaining such refund and without interest
(other than any interest paid by the relevant Governmental Authority with
respect to such refund); provided that such Account Party, upon the request of
the Administrative Agent or such Lender, agrees to repay the amount paid over to
such Account Party (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) to the Administrative Agent or such Lender in
the event the Administrative Agent or such Lender is required to repay such
refund to such Governmental Authority. This Section shall not be construed to
require the Administrative Agent or any Lender to make available its tax returns
(or any other information relating to its taxes which it deems confidential) to
such Account Party or any other Person.

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

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

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


                                       33

<PAGE>

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

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

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

          SECTION 2.14. Mitigation Obligations; Replacement of Lenders. (a) If
any Lender requests compensation under Section 2.06, or if each Account Party is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.06 or Section
2.12, then such Lender shall use reasonable efforts to designate a different
lending office for issuing or funding its Letters of Credit hereunder or to
assign its rights and obligations hereunder to another of its offices, branches
or affiliates, if, in the judgment of such Lender, such designation or
assignment (i) would eliminate or reduce


                                       34

<PAGE>

amounts payable pursuant to Section 2.06 or 2.12, as the case may be, in the
future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. Each Account
Party hereby jointly and severally agrees to pay all reasonable costs and
expenses incurred by any Lender in connection with any such designation or
assignment.

          (b) If any Lender requests compensation under Section 2.06, or if each
Account Party is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.06 or
Section 2.12, then, in each case, the Company, at its sole expense and effort,
shall have the right, if no Default or Event of Default then exists, to replace
such Lender (the "Replaced Lender"), with one or more Person or Persons
(collectively, the "Replacement Lender") reasonably acceptable to the
Administrative Agent at which time the Replaced Lender shall assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in Section 10.04), all its interests, rights and obligations under
this Agreement to the Replacement Lender; provided that (i) at the time of any
replacement pursuant to this Section 2.14, the Replacement Lender and the
Replaced Lender shall enter into one or more Assignment and Assumptions pursuant
to Section 10.04(b) (and with all fees payable pursuant to said Section 10.04(b)
to be paid by the Replacement Lender) pursuant to which the Replacement Lender
shall acquire all of the Commitments of the Replaced Lender and, in connection
therewith, shall pay to the Replaced Lender in respect thereof an amount equal
to the sum of (A) an amount equal to all Unpaid Drawings that have been funded
by (and not reimbursed to) such Replaced Lender, together with all then unpaid
interest with respect thereto at such time and (B) an amount equal to all
accrued, but theretofore unpaid, fees owing to the Replaced Lender pursuant to
Section 2.11; (ii) all obligations of each Account Party under the Credit
Documents owing to the Replaced Lender (other than those specifically described
in clause (i) above in respect of which the assignment purchase price has been,
or is concurrently being, paid), shall be paid in full to such Replaced Lender
concurrently with such replacement; (iii) no assignment pursuant to this Section
2.14 shall be effective until all of the then outstanding Several Letters of
Credit are returned by each respective beneficiary to the Issuing Agent for
cancellation in exchange for new or amended Several Letters of Credit which give
effect to such assignment (it being understood that to the extent the respective
beneficiaries do not consent to such assignment, such assignment cannot occur);
(iv) the Company shall have received the prior written consent of the
Administrative Agent and each Fronting Lender, which consents shall not be
unreasonably withheld or delayed; (v) such assignment will result in a reduction
in such compensation or payments; and (vi) no Lender shall be required to become
a Replaced Lender if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Company to require such assignment
and delegation cease to apply. Upon the execution of the respective Assignment
and Assumption, the payment of amounts referred to in clauses (i) and (ii) above
and the return, and cancellation and exchange of each then outstanding Several
Letter of Credit as provided above, the Replacement Lender shall become a Lender
hereunder and the Replaced Lender shall cease to constitute a Lender hereunder,
except with respect to indemnification provisions applicable to the Replaced
Lender under this Agreement, which shall survive as to such Replaced Lender. For
the avoidance of doubt, no Replaced Lender shall be required to execute, sign or
deliver any document or assignment in order to be replaced in accordance with
this Section 2.14.


                                       35

<PAGE>

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

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

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

          (c) on or prior to the date of designation, the Administrative Agent
shall have received from such Person a certificate, signed by an Authorized
Officer of such Person in the form of Exhibit F or such other form reasonably
acceptable to the Administrative Agent with appropriate insertions or deletions,
together with (x) copies of its certificate of incorporation, by-laws or other
organizational documents and (y) the resolutions of the board of directors (or
similar governing body) of such Person relating to the Credit Documents which
shall be reasonably satisfactory to the Administrative Agent;

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

          (e) in the case of any Designated Subsidiary Account Party which is a
Regulated Insurance Company, the Administrative Agent and its counsel shall be
reasonably satisfied with all applicable laws and/or regulations of each
jurisdiction having legal or regulatory jurisdiction over such Designated
Subsidiary Account Party as such laws and/or regulations relate to the
enforceability, perfection or priority of the Liens created or purported to be
created under the Security Documents as between the Secured Creditors and any
Applicable Insurance Regulatory Agency or the policy holders with respect to
such Regulated Insurance Company.

          SECTION 2.16. Additional Commitments. (a) The Company shall have the
right, at any time and from time to time, after the Effective Date and prior to
the Commitment Expiration Date to request (so long as no Default or Event of
Default is then in existence or would result therefrom) on one or more occasions
that one or more existing Lenders (and/or one or more other Eligible Persons
which will become Lenders as provided pursuant to clause (vi) below) provide
Additional Commitments; it being understood and agreed, however, that (i) no
existing Lender shall be obligated to provide an Additional Commitment as a
result of any request by the Company, (ii) until such time, if any, as (x) such
existing Lender has agreed in its sole discretion to provide an Additional
Commitment and executed and delivered to the Administrative Agent an Additional
Commitment Agreement in respect thereof as provided in


                                       36

<PAGE>

Section 2.16(b) and (y) such other conditions set forth in Section 2.16(b) shall
have been satisfied, such existing Lender shall not be obligated to issue, or
participate in, Letters of Credit, in excess of the amounts provided for herein,
immediately before giving effect to such Additional Commitments provided by such
existing Lender pursuant to this Section 2.16, (iii) any existing Lender may
provide an Additional Commitment without the consent of any other Lender, (iv)
(A) each provision of Additional Commitments on a given date pursuant to this
Section 2.16 shall be in a minimum aggregate amount (for all Additional
Commitment Lenders (including, in the circumstances contemplated by clause (vi)
below, Eligible Persons who will become Additional Commitment Lenders) of at
least $25,000,000 and (B) the aggregate amount of Additional Commitments
provided pursuant to this Section 2.16 shall not exceed $200,000,000, (v) all
up-front fees payable to any Additional Commitment Lender shall be as set forth
in the relevant Additional Commitment Agreement, (vi) if, on or after the tenth
Business Day following the request by the Company of the then existing Lenders
to provide Additional Commitments pursuant to this Section 2.16 on the terms to
be applicable thereto, the Company has not received Additional Commitments in an
aggregate amount equal to that amount of the Additional Commitments which the
Company desires to obtain pursuant to such request (as set forth in the request
provided by the Company to the Administrative Agent as provided above), then the
Company may request Additional Commitments from Eligible Persons which are
reasonably acceptable to the Administrative Agent and each Fronting Lender in an
aggregate amount equal to such deficiency on terms which are no more favorable
to such Eligible Person in any respect than the terms offered to the existing
Lenders, (vii) all Additional Commitments provided on a given date pursuant to
this Section 2.16 shall have the same terms and conditions as all then existing
Commitments and shall be added to such existing Commitments in accordance with
clause (b) of this Section 2.16 below and (viii) all actions taken by the
Account Party pursuant to this Section 2.16 shall be done in coordination with
the Administrative Agent.

          (b) At the time of any provision of Additional Commitments pursuant to
this Section 2.16, (i) the Company, each Designated Subsidiary Account Party,
the Administrative Agent and each existing Lender or Eligible Person, as the
case may be, which agrees to provide an Additional Commitment (each, an
"Additional Commitment Lender") shall execute and deliver to the Administrative
Agent an Additional Commitment Agreement substantially in the form of Exhibit E
or such other form reasonably acceptable to the Administrative Agent, subject to
such modifications in form and substance reasonably satisfactory to the
Administrative Agent as may be necessary or appropriate (with the effectiveness
of such Additional Commitment Lender's Additional Commitment to occur upon
delivery of such Additional Commitment Agreement to the Administrative Agent,
the payment of any fees required in connection therewith and the satisfaction of
the other conditions set forth in this Section 2.16 to the reasonable
satisfaction of the Administrative Agent), (ii) all Several Letters of Credit
outstanding at such time shall have been returned by each respective beneficiary
thereunder to the respective Issuing Agent and shall either have been cancelled
and/or exchanged for new or amended Letters of Credit which give effect to such
Additional Commitments, and such Additional Commitment Lenders, (iii) if such
Additional Commitment Lender is not a United States person (as such term is
defined in Section 7701(a)(3) of the Code) for U.S. Federal income tax purposes
or would otherwise constitute a Foreign Lender, such Additional Commitment
Lender shall provide to the Company the appropriate documentation described in
Section 2.12(e), (iv) the Company and each Designated Subsidiary Account Party
shall deliver to the Administrative Agent resolutions


                                       37

<PAGE>

authorizing the incurrence of the obligations to be incurred pursuant to each
Additional Commitment, together with evidence of good standing of the Company
and each Designated Subsidiary Account Party and (v) the Company and each
Designated Subsidiary Account Party shall deliver to the Administrative Agent an
opinion, in form and substance reasonably satisfactory to the Administrative
Agent, from counsel to the Company and such Designated Subsidiary Account Party
reasonably satisfactory to the Administrative Agent and dated such date,
covering certain matters similar to those set forth in the opinions of counsel
delivered to the Lenders on the Effective Date pursuant to Section 4.01(b) and
such other matters as the Administrative Agent may reasonably request. The
Administrative Agent shall promptly notify each Lender as to the occurrence of
each Additional Commitment Date, and (x) on each such date, the Total Commitment
under, and for all purposes of, this Agreement and each other Credit Document
shall be increased by the aggregate amount of such Additional Commitments and
(y) on each such date, the Commitment Schedule shall be deemed modified to
reflect the revised Commitments of each affected Lender.

          SECTION 2.17. Existing Secured Fronted Letters of Credit. It is hereby
agreed and acknowledged that (a) all letters of credit described on Schedule
2.17 (the "Existing Secured Fronted Letters of Credit") which were issued under
the Existing LC Facility and which remain outstanding on the Effective Date
shall be deemed issued under this Agreement as a "Fronted Letter of Credit" on
the Effective Date, (b) all references to the Existing LC Facility or any other
Credit Document (as defined in the Existing LC Facility) contained in such
Existing Secured Fronted Letters of Credit or the related documentation shall be
deemed to be references to this Agreement or the applicable Credit Documents (as
defined herein), as the case may be, and (c) the Existing LC Issuer shall be
deemed to be an LC Issuer hereunder for all purposes to the extent relating to
such Existing Secured Fronted Letters of Credit. For the avoidance of doubt, on
and after the Effective Date, all fees and rates payable or accruing on or in
respect of outstanding Existing Secured Fronted Letters of Credit shall be at
the rates set forth in this Agreement and not at the rates set forth in the
Existing LC Facility.

          SECTION 2.18. Existing Secured Several Letters of Credit.

          (a) It is hereby agreed and acknowledged that (i) all letters of
credit described on Schedule 2.18 that are not Existing Secured Fronted Letters
of Credit (the "Existing Secured Several Letters of Credit") which were issued
under the Existing LC Facility and which remain outstanding on the Effective
Date shall be deemed issued under this Agreement as a "Several Letter of Credit"
on the Effective Date, (ii) all references to the Existing LC Facility or any
other Credit Document (as defined in the Existing LC Facility) contained in such
Existing Secured Several Letters of Credit or the related documentation shall be
deemed to be references to this Agreement or the applicable Credit Documents (as
defined herein), as the case may be, and (iii) the Existing LC Issuer shall be
deemed to be an LC Issuer hereunder for all purposes to the extent relating to
such Existing Secured Several Letters of Credit. As soon as possible following
the Effective Date, each Existing Secured Several Letter of Credit shall be
amended to replace each Existing Lender with each Lender party to this Agreement
at the time of such amendment in accordance with each such Lender's Applicable
Percentage. Until an Existing Secured Several Letter of Credit has been amended
in accordance with this Section 2.18, each Existing Lender shall be deemed to
have sold and transferred to each Lender, and each such Lender shall be deemed
irrevocably and unconditionally to have purchased and received from such
Existing


                                       38

<PAGE>

Lender, without recourse or warranty, an undivided interest and participation,
to the extent of such Lender's Applicable Percentage, in such Existing Secured
Several Letter of Credit, each substitute Existing Secured Several Letter of
Credit, each drawing made thereunder, the obligations of the respective Account
Party under this Agreement with respect thereto and any security therefore or
guaranty pertaining thereto. Upon any change in the Commitments or Applicable
Percentages of the Lenders pursuant to this Agreement, it is hereby agreed that,
with respect to all outstanding Existing Secured Several Letters of Credit and
Unpaid Drawings with respect thereto, there shall be an automatic adjustment to
the participations pursuant to this Section 2.18 to reflect the new Applicable
Percentages from such change or changes, as the case may be. For the avoidance
of doubt, on and after the Effective Date, all fees and rates payable or
accruing on or in respect of outstanding Existing Secured Several Letters of
Credit shall be at the rates set forth in this Agreement and not at the rates
set forth in the Existing LC Facility.

          (b) In determining whether to pay under any Existing Secured Several
Letter of Credit, no Existing Lender shall have any obligation relative to the
Lenders other than to confirm that any documents required to be delivered under
such Existing Secured Several Letter of Credit have been delivered and that they
appear to substantially comply on their face with the requirements of such
Existing Secured Several Letter of Credit, which obligation, it is understood,
is being performed by the Issuing Agent, and upon whom each Existing Lender
shall be entitled to rely. Any action taken or omitted to be taken by the
Issuing Agent or any Existing Lender under or in connection with any Existing
Secured Several Letter of Credit issued by it shall not create for the Issuing
Agent or such Existing Lender any resulting liability to any Account Party, any
Lender or any other Person unless such action is taken or omitted to be taken
with gross negligence or willful misconduct on the part of the Issuing Agent or
such Existing Lender, as the case may be (as determined by a court of competent
jurisdiction).

          (c) In the event that any Existing Lender makes any payment under any
Existing Secured Several Letter of Credit issued by it and the respective
Account Party shall not have reimbursed such amount in full as provided in
Section 2.05, upon notification of such failure by such Existing Lender to the
Administrative Agent, the Administrative Agent shall promptly notify each Lender
of such failure, and each such Lender shall promptly and unconditionally pay to
the Administrative Agent for the account of such Existing Lender, the amount of
such Lender's Applicable Percentage of such payment in Dollars and in
immediately available funds. If the Administrative Agent so notifies any Lender
required to fund a payment under an Existing Secured Several Letter of Credit
prior to 11:00 a.m. (New York time) on any Business Day, such Lender shall make
available to the Administrative Agent at the its office referenced in Section
2.13(a) for the account of the respective Existing Lender such Lender's
Applicable Percentage of the amount of such payment on such Business Day in
immediately available funds (and, to the extent such notice is given after 11:00
a.m. (New York time) on any Business Day, such Lender shall make such payment on
the immediately following Business Day). If and to the extent such Lender shall
not have so made its Applicable Percentage of the amount of such payment
available to the Administrative Agent for the account of the respective Existing
Lender, such Lender agrees to pay to the Administrative Agent for the account of
such Existing Lender, forthwith on demand such amount, together with interest
thereon, for each day from such date until the date such amount is paid to the
Administrative Agent for the account of the Existing Lender at the overnight
Federal Funds Effective Rate. The failure of any Lender to make available to the
Administrative Agent for the account of the respective Existing Lender its


                                       39

<PAGE>

Applicable Percentage of any payment under any Existing Secured Several Letter
of Credit issued by it shall not relieve any other Lender of its obligation
hereunder to make available to the Administrative Agent for the account of such
Existing Lender its Applicable Percentage of any payment under any such Existing
Secured Several Letter of Credit on the date required, as specified above, but
no Lender shall be responsible for the failure of any other Lender to make
available to the Administrative Agent for the account of such Existing Lender
such other Lender's Applicable Percentage of any such payment.

          (d) Whenever the Administrative Agent receives a payment of a
reimbursement obligation for the account of any Existing Lender, the
Administrative Agent shall promptly pay to each Lender which has paid its
Applicable Percentage thereof in immediately available funds, an amount equal to
such Lender's Applicable Percentage of the principal amount thereof and interest
thereon accruing after the purchase of the respective participations.

          (e) The obligations of the Lenders to make payments to the
Administrative Agent for the account of the respective Existing Lender with
respect to Existing Secured Several Letters of Credit issued by it shall be
irrevocable and not subject to counterclaim, set-off or other defense or any
other qualification or exception whatsoever and shall be made in accordance with
the terms and conditions of this Agreement under all circumstances, including,
without limitation, any of the following circumstances:

          (i) any lack of validity or enforceability of this Agreement or any of
     the other Credit Documents;

          (ii) the existence of any claim, set-off, defense or other right which
     the Company or any of its Subsidiaries may have at any time against a
     beneficiary named in an Existing Secured Several Letter of Credit, any
     transferee of any Existing Secured Several Letter of Credit (or any Person
     for whom any such transferee may be acting), the Administrative Agent, any
     Existing Lender, or other Person, whether in connection with this
     Agreement, any Existing Secured Several Letter of Credit, the transactions
     contemplated herein or any unrelated transactions (including any underlying
     transaction between the Company or any of its Subsidiaries and the
     beneficiary named in any such Existing Secured Several Letter of Credit);

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

          (iv) the surrender or impairment of any security for the performance
     or observance of any of the terms of any of the Credit Documents; or

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

          (f) For the avoidance of doubt, this Section 2.18 is intended to
provide a mechanic whereby the Existing Secured Several Letters of Credit are
replaced with Several Letters of Credit under this Agreement and, other than the
payment of standard amendment fees and commissions to the Issuing Agent, not to
create any additional liability or obligation on any


                                       40
<PAGE>

Account Party above the liabilities and obligations that would have existed had
such replacement been accomplished in a manner set forth in Section 2.17.

                                   ARTICLE III

                         Representations and Warranties

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

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

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

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


                                       41

<PAGE>

          SECTION 3.04. Litigation and Environmental Matters. There are no
actions, suits or proceedings pending or, to the best knowledge of the Company
or any of its Subsidiaries, threatened involving the Company or any of its
Subsidiaries (including with respect to this Agreement or any other Credit
Document) that, either individually or in the aggregate, have had, or would
reasonably be expected to have, a Material Adverse Effect. Except for any
matters that, either individually or in the aggregate, have not had, and would
not reasonably be expected to have, a Material Adverse Effect, neither the
Company nor any of its Subsidiaries (i) has failed to comply with any
Environmental Law or to obtain, maintain or comply with any permit, license or
other approval required under any Environmental Law, (ii) has become subject to
any Environmental Liability, (iii) has received notice of any claim with respect
to any Environmental Liability or (iv) knows of any basis for any Environmental
Liability.

          SECTION 3.05. Use of Letters of Credit. All Letters of Credit shall
only be utilized to support Letter of Credit Supportable Obligations.

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

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

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


                                       42

<PAGE>

          SECTION 3.09. Financial Condition. (a) The Company has heretofore
furnished to the Lenders its consolidated balance sheet and consolidated
statements of operations and comprehensive income, (loss), shareholders' equity
and cash flows as of and for the fiscal year ended December 31, 2006 reported on
by PricewaterhouseCoopers, independent public accountants. Such financial
statements present fairly, in all material respects, the financial position and
results of operations and cash flows of the Borrower and its consolidated
Subsidiaries as of such dates and for such periods in accordance with GAAP.

          (b) Since December 31, 2006, nothing has occurred, either individually
or in the aggregate, which has resulted in, or would reasonably be expected to
result in, any material adverse condition or any material adverse change in or
affecting (i) the business, operations, assets, liabilities or financial
condition of the Company and its Subsidiaries, taken as a whole, or (ii) the
rights and remedies of the Lenders or the ability of the Company and each other
Account Party, taken as a whole, to perform their respective obligations to the
Lenders under this Agreement or any other Credit Document.

          SECTION 3.10. Tax Returns and Payments. Except where the failure to do
so would not reasonably be expected, individually or in aggregate, to have a
Material Adverse Effect, the Company and its Subsidiaries (i) have timely filed
or caused to be timely filed with the appropriate taxing authority (taking into
account any applicable extension within which to file) all material income and
other material tax returns (including any statements, forms and reports),
domestic and foreign, required to be filed by the Company and its Subsidiaries,
and (ii) have timely paid, collected or remitted or caused to have timely paid,
collected or remitted all material taxes payable by them which have become due
and assessments which have become due, except for those contested in good faith
and adequately disclosed and for which adequate reserves have been established
in accordance with GAAP. To the best knowledge of the Company and its
Subsidiaries, there is no action, suit, proceeding, investigation, audit or
claim now pending or proposed or threatened by any authority regarding any
income taxes or any other taxes relating to the Company or any of its
Subsidiaries, which, either individually or in the aggregate, has had, or would
reasonably be expected to have, a Material Adverse Effect. As of the Effective
Date, neither the Company nor any of its Subsidiaries has entered into an
agreement or waiver or been requested to enter into an agreement or waiver
extending any statute of limitations relating to the payment or collection of
taxes of the Company or any of its Subsidiaries. To the best knowledge of the
Company and its Subsidiaries, no tax Liens have been filed and no claims are
pending or proposed or threatened with respect to any taxes, fees or other
charges for any taxable period, except for Liens permitted under Section 6.03
and claims which, either individually or in the aggregate, have not had, and
would not reasonably be expected to have, a Material Adverse Effect.

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


                                       43

<PAGE>

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

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

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

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

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

          SECTION 3.15. Compliance with Statutes and Agreements. (a) The Company
and each of its Subsidiaries is in compliance with all applicable statutes,
regulations, rules and orders of, and all applicable restrictions imposed by,
and has filed or otherwise


                                       44

<PAGE>

provided all material reports, data, registrations, filings, applications and
other information required to be filed with or otherwise provided to, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (including compliance with all
applicable Environmental Laws), except where the failure to comply or file or
otherwise provide, either individually or in the aggregate, has not had, and
would not reasonably be expected to have, a Material Adverse Effect. All
required regulatory approvals are in full force and effect on the date hereof,
except where the failure of such approvals to be in full force and effect,
either individually or in the aggregate, has not had, and would not reasonably
be expected to have, a Material Adverse Effect.

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

          SECTION 3.16. Insurance Licenses. Schedule 3.16 lists with respect to
each Regulated Insurance Company, as of the Effective Date, all of the
jurisdictions in which such Regulated Insurance Company holds material licenses
(including licenses or certificates of authority from Applicable Insurance
Regulatory Authorities), permits or authorizations to transact insurance and
reinsurance business (collectively, the "Insurance Licenses"), and indicates the
type or types of insurance in which each such Regulated Insurance Company is
permitted to be engaged with respect to each Insurance License therein listed.
There is (i) no such Insurance License that is the subject of a proceeding for
suspension, revocation or limitation or any similar proceedings, (ii) no
sustainable basis for such a suspension, revocation or limitation, and (iii) no
such suspension, revocation or limitation threatened by any Applicable Insurance
Regulatory Authority, that, in each instance under (i), (ii) and (iii) above and
either individually or in the aggregate, has had, or would reasonably be
expected to have, a Material Adverse Effect. As of the Effective Date, no
Regulated Insurance Company transacts any insurance business, directly or
indirectly, in any jurisdiction other than those listed on Schedule 3.16, where
such business requires any Insurance License of an Applicable Insurance
Regulatory Authority or such jurisdiction, except as has not had, and would not
reasonably be expected to have, a Material Adverse Effect.

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

          SECTION 3.18. Security Documents. The Security Documents create, as
security for the obligations hereunder of the Company and each Designated
Subsidiary Account Party, valid and enforceable security interests in and Liens
on all of the Collateral, superior to and prior to the rights of all third
persons and subject to no other Liens. No filings or recordings are required in
order to ensure the enforceability, perfection or priority of the security
interests


                                       45

<PAGE>

created under the Security Documents, except for filings or recordings which
shall have been previously made.

          SECTION 3.19. Properties; Liens; and Insurance. (a) The Company and
its Subsidiaries have good title to, or valid leasehold interests in, all real
and personal property material to the businesses of the Company and its
Subsidiaries, taken as a whole. There exists no Lien (including any Lien arising
out of any attachment, judgment or execution) of any kind, on, in or with
respect to any of the property of the Company or any of its Subsidiaries, in
each case except as expressly permitted by Section 6.03.

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

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

          SECTION 3.20. Solvency. On the Effective Date and upon the occurrence
of each Credit Event, both before and after giving effect thereto, (i) each
Account Party, taken individually, (ii) the Company and its Subsidiaries, taken
as a whole and (iii) each Account Party and its respective subsidiaries, taken
as a whole, are, in each case, Solvent.

          SECTION 3.21. Certain Insurance Regulations, Orders, Consents, Etc.
Without limiting the generality of Sections 3.03, 3.06, 3.15 or any other
provision contained in this Agreement, immediately after giving effect to the
pledging of any asset under any Security Document, each Credit Event (and the
satisfaction of all Borrowing Base requirements in connection therewith) and
each Collateral Transfer (as defined in the Security Agreement), each Account
Party will be in compliance in all material respects with the applicable
provisions of any insurance law, statute, rule, regulation or order of any
governmental agency, public body or authority, or any subdivision thereof,
regulating the activities of such Account Party with respect to any limitations
on Liens granted on any Collateral (as defined in the Security Agreement) by
such Account Party to the Collateral Agent (or purported to be granted pursuant
to any Security Document).

                                   ARTICLE IV

                                   Conditions

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


                                       46

<PAGE>

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

          (b) On the Effective Date, the Administrative Agent shall have
received (i) an opinion, in form and substance reasonably satisfactory to the
Administrative Agent, addressed to the Administrative Agent and each of the
Lenders and dated the Effective Date, from Cahill Gordon & Reindel LLP, special
New York counsel to the Account Parties, which opinion shall cover the matters
contained in Exhibit H-1 hereto and (ii) an opinion, in form and substance
reasonably satisfactory to the Administrative Agent, addressed to the
Administrative Agent and each of the Lenders and dated the Effective Date, from
Conyers, Dill and Pearman, special Bermuda counsel to the Account Parties, which
opinion shall cover the matters covered in Exhibit H-2 hereto and without
duplication.

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

          (d) Since December 31, 2006, nothing shall have occurred or become
known to the Administrative Agent or the Required Lenders which, either
individually or in the aggregate, has had, or would reasonably be expected to
have, a Material Adverse Effect.

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


                                       47

<PAGE>

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

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

          (h) On the Effective Date, there shall exist no Default or Event of
Default, and all representations and warranties made by each Account Party
contained herein or in any other Credit Document to which it is a party shall be
true and correct in all material respects (it being understood and agreed that
any representation or warranty which by its terms is made as of a specified date
shall be required to be true and correct in all material respects only as of
such specified date).

          (i) On the Effective Date, each Regulated Insurance Company that is
material to the Company and its Subsidiaries, taken as a whole, shall have an
A.M. Best financial strength rating of at least "A-".

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

          (k) On or prior to the Effective Date, the Administrative Agent shall
have received (i) duly authorized and executed counterparts to the Security
Agreement and the Security Agreement shall be in full force and effect and (ii)
duly authorized and executed counterparts to the Account Control Agreement and
the Account Control Agreement shall be in full force and effect.

          (l) On or prior to the Effective Date, the Administrative Agent shall
have received all documents and instruments, including UCC financing statements
where applicable, required by law in each applicable jurisdiction or reasonably
requested by the Administrative Agent to be filed, registered or recorded to
create and perfect the Liens intended to be created under the Security
Agreement.

          (m) On or prior to the Effective Date, the Administrative Agent shall
have received results of a recent search of the UCC (or equivalent) filings made
with respect to each Account Party in the jurisdictions contemplated in clause
(l) above (including Washington, D.C., and Bermuda) and in such other
jurisdictions in which Collateral is located on the Effective Date which may be
reasonably requested by the Administrative Agent, and copies of the financing
statements (or similar documents) disclosed by such search and evidence
reasonably satisfactory to the Administrative Agent that the Liens indicated by
such financing statements (or similar documents) are permitted by the Security
Agreement or have been released.

          (n) On the Effective Date, the Administrative Agent shall have
received a letter from the Service of Process Agent, presently located at 111
Eighth Avenue, New York,


                                       48

<PAGE>

New York, 10011, indicating its consent to its appointment by the Company and
each Designated Subsidiary Account Party as their agent to receive service of
process as specified in this Agreement is in full force and effect and applies
to this Agreement in all respects.

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

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

          (a) The Effective Date shall have occurred;

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

          (c) The Administrative Agent shall have received a Letter of Credit
Request meeting the requirements of Section 2.04; and

          (d) All of the applicable conditions set forth in Section 2.03(a) and
(b) shall have been satisfied.

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

                                    ARTICLE V

                              Affirmative Covenants

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

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

          (a) Annual Financial Statements. As soon as available and in any event
within 90 days after the close of each fiscal year of the Company, the
consolidated balance sheet of the Company and its Subsidiaries as at the end of
such fiscal year and the related consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its Subsidiaries for such
fiscal year, setting forth in comparative form the consolidated figures for the
previous fiscal year, all in reasonable detail and accompanied by a report
thereon of


                                       49

<PAGE>

PricewaterhouseCoopers or another independent registered public accounting firm
of recognized national standing selected by the Company (without a "going
concern" or like qualification and without any qualification or exception as to
the scope of such audit), which report shall state that such consolidated
financial statements present fairly in all material respects the consolidated
financial position of the Company and its Subsidiaries as at the dates indicated
and their consolidated results of operations and cash flows for the periods
indicated in conformity with GAAP and that the audit by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards. The Company shall be
deemed to have delivered the same to the Administrative Agent if the Company
files the same with the SEC via EDGAR and notifies the Administrative Agent of
such filing.

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

          (c) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Sections 5.01(a) and 5.01(b), a certificate
of a Financial Officer of the Company (i) certifying that no Default or Event of
Default has occurred or, if any Default or Event of Default has occurred,
specifying the nature and extent thereof and any action taken or proposed to be
taken with respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with the provisions of Sections 6.10 and 6.11, as at
the end of such fiscal year or quarter, as the case may be, (iii) certifying
that the Regulated Insurance Companies have maintained adequate reserves and
(iv) stating whether any change in GAAP or in the application thereof has
occurred since December 31, 2006 and, if any such change has occurred,
specifying the effect of such change on the financial statements accompanying
such certificate; it being agreed that a certificate in a form substantially
similar to the Covenant Compliance Calculations delivered by the Company under
the Existing LC Facility on November 10, 2006 with respect to the fiscal period
ended September 30, 2006 is acceptable to the Administrative Agent for purposes
hereof.

          (d) Accounting Firm Certificate. At the time of the delivery of the
financial statements provided for in Section 5.01(a) above, a certificate of the
accounting firm that reported on such financial statements stating whether they
obtained knowledge during the course of their examination of such financial
statements of any Default (which certificate may be


                                       50

<PAGE>

limited to the extent required by general accounting rules or guidelines or the
guidelines of the applicable accounting firm, to the extent generally
applicable).

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

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

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

          (h) Insurance Reports and Filings.

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

               (ii) Promptly following the delivery or receipt, as the case may
          be, by any Regulated Insurance Company or any of their respective
          Subsidiaries, copies of (a) each registration, filing or submission
          made by or on behalf of any Regulated Insurance Company with any
          Applicable Insurance Regulatory Authority, except for policy form or
          rate filings, (b) each examination and/or audit report submitted to
          any Regulated Insurance Company by any Applicable Insurance Regulatory
          Authority, (c) all information which the Lenders may from time to time
          request with respect to the nature or status of any deficiencies or
          violations reflected in any examination report or other similar
          report, and (d) each report, order, direction, instruction, approval,
          authorization, license or other notice which the Company or any
          Regulated Insurance Company may at any time receive from any
          Applicable Insurance Regulatory Authority, in each of (a)


                                       51

<PAGE>

          through (d), that is material to the Company and its Subsidiaries,
          taken as a whole, as reasonably determined by the board of directors
          of the Company, a duly authorized committee thereof or an Authorized
          Officer of the Company.

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

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

          (i) Borrowing Base Certificate. No later than the tenth Business Day
of each month, a Borrowing Base Certificate from each Account Party as of the
last day of the immediately preceding month, executed by an Authorized Officer
of such Account Party.

          (j) Ratings Information. Promptly after A.M. Best Company, Inc. shall
have announced a downgrade in the financial strength rating of Validus Re,
written notice of such rating change.

          (k) Other Information. With reasonable promptness, such other
information or existing documents (financial or otherwise) as the Administrative
Agent or any Lender may reasonably request from time to time.

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

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


                                       52

<PAGE>

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

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

          SECTION 5.04. Payment of Taxes and other Obligations. The Company will
pay and discharge, and will cause each of its Subsidiaries to pay and discharge,
(i) all material income taxes and all other material taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it and (ii) all other material lawful claims,
in each case, on a timely basis prior to the date on which penalties attach
thereto; provided that neither the Company nor any Subsidiary of the Company
shall be required to pay any such tax, assessment, charge, levy or claim which
is being contested in good faith and by proper proceedings if it has maintained
adequate reserves with respect thereto in accordance with GAAP.

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

          SECTION 5.06. Compliance with Statutes, etc. The Company will, and
will cause each Subsidiary to, comply with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of


                                       53

<PAGE>

the conduct of its business and the ownership of its property (including
applicable statutes, regulations, orders and restrictions relating to
environmental standards and controls) other than those the non-compliance with
which, either individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect.

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

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

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

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

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

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

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


                                       54

<PAGE>

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

          SECTION 5.09. Maintenance of Licenses and Permits. The Company will,
and will cause each of its Subsidiaries to, maintain all permits, licenses and
consents as may be required for the conduct of its business by any state,
federal or local government agency or instrumentality, except where failure to
maintain the same, either individually or in the aggregate, has not had, and
would not reasonably be expected to have, a Material Adverse Effect.

          SECTION 5.10. Borrowing Base Requirement. Subject to Section 2.10,
each Account Party shall at all times cause its respective Borrowing Base to
equal or exceed the Letter of Credit Outstandings attributable to such Account
Party at such time.

          SECTION 5.11. Collateral; Further Assurances. Each Account Party shall
promptly and duly execute and deliver to the Administrative Agent and/or the
Collateral Agent such documents and assurances and take such further action as
the Administrative Agent may from time to time reasonably request in order to
carry out more effectively the intent and purpose of the Credit Documents and to
establish, protect and perfect the rights and remedies created or intended to be
created in favor of the Collateral Agent, the Administrative Agent or the
Lenders pursuant to the Credit Documents.

                                   ARTICLE VI

                               Negative Covenants

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

          SECTION 6.01. Changes in Business or Organizational Documents. The
Company will not, and will not permit any of its Subsidiaries to, engage
(directly or indirectly) in any business other than (a) businesses in which they
are engaged (or proposed to be engaged) as of the Effective Date and reasonable
extensions thereof, (b) other specialty insurance and structured risk insurance
and reinsurance product lines, and (c) any other businesses that are
complementary or reasonably related thereto and the conduct of business
incidental thereto. Prior to the consummation of the IPO, the Company will not
permit any provision relating to the nomination, election or appointment of
members of the Company's board of directors (or comparable governing body)
contained in the certificate of incorporation, by-laws or other organizational
documents of the Company or any shareholder agreement or similar agreement or
arrangement among the holders of Equity Interests in the Company to be amended
in a manner materially adverse to the Lenders.


                                       55

<PAGE>

          SECTION 6.02. Consolidations, Mergers and Sales of Assets. The Company
will not, and will not permit any of its Subsidiaries to, consolidate or merge
with or into any other Person, or permit any other Person to merge into or
consolidate with it; provided that, in each case subject to compliance with
Section 6.16, (i) the Company may merge with another Person, if (x) the Company
is the entity surviving such merger and (y) immediately after giving effect to
such merger, no Default or Event of Default shall have occurred and be
continuing, (ii) any Subsidiary may merge with another Person, if (x) such
Subsidiary is the entity surviving such merger and (y) immediately after giving
effect to such merger, no Default or Event of Default shall have occurred and be
continuing, (iii) Wholly-Owned Subsidiaries of the Company may merge with one
another provided that if one of such Subsidiaries is a Designated Subsidiary
Account Party and the other is not, then the Designated Subsidiary Account Party
must be the surviving entity of such merger and (iv) a Subsidiary (other than a
Designated Subsidiary Account Party) of the Company may merge or consolidate
with any other Person if immediately after giving effect to such merger no
Default or Event of Default shall have occurred and be continuing. In addition,
the Company will not, nor will it permit any of its Subsidiaries to, sell,
convey, assign, lease, abandon or otherwise transfer or dispose of, voluntarily
or involuntarily, any of its properties or assets, tangible or intangible (each,
a "Disposition"), except (a) such dispositions by the Company or any of its
Subsidiaries of any of their respective properties or assets to the Company or
any Wholly-Owned Subsidiary of the Company, (b) subject to Section 5.05, the
dissolution or winding up of any Subsidiary other than a Designated Subsidiary
Account Party, (c) Dispositions of used, worn out, obsolete or surplus property
of the Company or any Subsidiary in the ordinary course of business; (d)
licenses (as licensor) of intellectual property so long as such licenses do not
materially interfere with the business of the Company or any of its
Subsidiaries; (e) Dispositions of cash, cash equivalents and investment
securities (including pursuant to any securities lending arrangements permitted
by clause (u) of Section 6.03), (f) releases, surrenders or waivers of
contracts, torts or other claims of any kind as a result of the settlement of
any litigation or threatened litigation; (g) the granting or existence of Liens
permitted under this Agreement; (h) leases or subleases of real property so long
as such leases or subleases do not materially interfere with the business of the
Company or any of its Subsidiaries, (i) Dividends permitted under Section 6.08,
(j) ceding of insurance or reinsurance in the ordinary course of business and
(k) other Dispositions of assets with a fair market value (as reasonably
determined by the board of directors or senior management of the Company) which
in the aggregate do not exceed 10% of the lesser of the book or fair market
value of the property and assets of the Company determined on a consolidated
basis as of the last day of the previous fiscal year of the Company; provided
that immediately after giving effect (including pro forma effect) to any
Disposition made pursuant to this clause (k), no Event of Default shall have
occurred and be continuing and (l) Dispositions of investments made pursuant to
Section 6.16(g); provided that, for the avoidance of doubt, Dispositions of
Collateral shall only be made to the extent permitted under Section 4.04 of the
Security Agreement and this Section 6.02(l) shall not serve as a waiver or
modification of the requirements under Section 2.10(b).

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

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


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<PAGE>

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

          (c) Liens arising pursuant to purchase money mortgages, capital leases
or security interests securing Indebtedness representing the purchase price (or
financing of the purchase price within 90 days after the respective purchase) of
assets acquired by the Company or any of its Subsidiaries;

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

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

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

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

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

          (i) Liens in respect of property or assets of the Company or any of
its Subsidiaries imposed by law, which were incurred in the ordinary course of
business and do not secure Indebtedness for borrowed money, such as carriers',
warehousemen's, materialmen's and mechanics' liens and other similar Liens
arising in the ordinary course of business, and (x) which do not in the
aggregate materially detract from the value of the Company's or such
Subsidiary's property or assets or materially impair the use thereof in the
operation of the business of the Company or such Subsidiary or (y) which are
being contested in good faith by appropriate proceedings, which proceedings have
the effect of preventing the forfeiture or sale of the property or assets
subject to any such Lien;

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


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<PAGE>

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

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

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

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

          (o) Liens arising out of the refinancing, extension, renewal or
refunding of any Indebtedness secured by any Lien permitted by any of the
clauses of this Section 6.03, provided that such Indebtedness is not increased
and is not secured by any additional assets;

          (p) Liens created pursuant to the Credit Documents;

          (q) Liens in respect of property or assets of any Subsidiary of the
Company securing Indebtedness of the type described in clause (e) of the
definition of "Permitted Subsidiary Indebtedness";

          (r) Liens in respect of property or assets of any Subsidiary of the
Company securing Indebtedness of the type described in clause (h) of the
definition of "Permitted Subsidiary Indebtedness"; provided that (i) the
aggregate amount of such Liens (measured, as to each such Lien permitted under
this clause (r), as the greater of the amount secured by such Lien and the fair
market value at such time of the assets subject to such Lien) shall not, when
added to the aggregate amount of all Liens (measured as set forth in this clause
(r) above) incurred pursuant to Section 6.03(v) and the aggregate amount of
outstanding unsecured Indebtedness of Subsidiaries incurred pursuant to clause
(h) of the definition of "Permitted Subsidiary Indebtedness", exceed at any time
5% of Consolidated Net Worth at the time of incurrence of any new Liens under
this clause (r) and (ii) immediately after giving effect to the incurrence of
any Lien pursuant to this Section 6.03(r), no Event of Default shall have
occurred and be continuing;

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


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<PAGE>

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

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

          (v) without duplication of the Liens described in clauses (a) through
(u) above, additional Liens securing obligations of the Company; provided that
(i) the aggregate amount of such Liens (measured, as to each such Lien permitted
under this clause (v), as the greater of the amount secured by such Lien and the
fair market value at such time of the assets subject to such Lien) shall not,
when added to the aggregate amount of all Liens (measured as set forth in this
clause (v) above) incurred pursuant to Section 6.03(r) and the aggregate amount
of outstanding unsecured Indebtedness of Subsidiaries incurred pursuant to
clause (h) of the definition of "Permitted Subsidiary Indebtedness", exceed at
any time 5% of Consolidated Net Worth at the time of incurrence of any new Liens
under this clause (v) and (ii) immediately after giving effect to the incurrence
of any Lien pursuant to this Section 6.03(v), no Event of Default shall have
occurred and be continuing.

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

          (b) The Company will not permit any of its Subsidiaries to create,
incur, assume or permit to exist any Indebtedness, or agree, become or remain
liable (contingent or otherwise) to do any of the foregoing, except for
Permitted Subsidiary Indebtedness.

          SECTION 6.05. Sale and Lease-Back Transactions. The Company will not,
and will not permit any Subsidiary to, enter into any arrangement, directly or
indirectly, whereby it shall sell or transfer any property, real or personal,
used or useful in its business, whether now owned or hereafter acquired, and
thereafter rent or lease such property or other property that it intends to use
for substantially the same purpose or purposes as the property sold or
transferred, except for any such sale of any fixed or capital assets by the
Company or any Subsidiary that is made for cash consideration in an amount not
less than the fair value of such fixed or capital asset and is consummated
within 90 days after the Company or such Subsidiary acquires or completes the
construction of such fixed or capital asset, provided that, if such sale and
leaseback results in a Capital Lease Obligation, such Capital Lease Obligation
is permitted by Section 6.04 and any Lien made the subject of such Capital Lease
Obligation is permitted by Section 6.03; provided, that this Section 6.05 shall
not prohibit Capital Markets Products entered into in the ordinary course of
business and not for speculative purposes.


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<PAGE>

          SECTION 6.06. Issuance of Stock. The Company will not, and will not
permit any of its Subsidiaries to, directly or indirectly issue, sell, assign,
pledge, or otherwise encumber or dispose of any shares of its preferred or
preference equity securities or options to acquire preferred or preference
equity securities, except the issuance of preferred (including trust preferred)
or preference equity securities or Hybrid Capital, so long as (i) (x) no part of
such preferred or preference equity securities or Hybrid Capital is mandatorily
redeemable (whether on a scheduled basis or as a result of the occurrence of any
event or circumstance) prior to the date occurring six months after the
Commitment Expiration Date or (y) all such preferred or preference equity
securities or Hybrid Capital or options therefor are issued to and held by the
Company and its Wholly-Owned Subsidiaries and (ii) such preferred or preference
equity securities or Hybrid Capital do not contain any financial performance
related covenants or incurrence covenants which restrict the operations of the
issuer thereof; provided that such preferred or preference securities or Hybrid
Capital may contain financial performance related covenants or incurrence
covenants which are no more restrictive (taken as a whole) than the terms,
provisions and covenants contained herein (taken as a whole). For the avoidance
of doubt, this Section 6.06 does not relate to ordinary or common equity or
options relating thereto.

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

          SECTION 6.08. Restricted Payments. The Company will not declare or pay
any dividends, purchase, redeem, retire, defease or otherwise acquire for value
any of its Equity Interests now or hereafter outstanding, return any capital to
its stockholders, partners or members (or the equivalent Persons thereof) as
such, make any distribution of assets, Equity Interests, obligations or
securities to its stockholders, partners or members (or the equivalent Persons
thereof) as such, or permit any of its Subsidiaries to purchase, redeem, retire,
defease or otherwise acquire for value any Equity Interests in the Company or to
sell any Equity Interests therein (each of the foregoing a "Dividend" and,
collectively, "Dividends") provided that this Section 6.08 shall not prohibit
Dividends so long as before and after giving effect (including pro forma effect)
thereto, no Default or Event of Default shall have occurred and be continuing.

          SECTION 6.09. Transactions with Affiliates. Neither the Company nor
any of its Subsidiaries shall enter into or be a party to, a transaction with
any Affiliate of the Company or such Subsidiary (which Affiliate is not the
Company or a Subsidiary), except (i) transactions with Affiliates on terms no
less favorable to the Company or such Subsidiary than those that could have been
obtained in a comparable transaction on an arm's length basis from an unrelated
Person, as reasonably determined by the board of directors of the Company or a
duly authorized committee thereof, (ii) Dividends not prohibited by Section
6.08, (iii) fees and compensation paid to and indemnities provided on behalf of
officers and directors of the Company or any of its Subsidiaries as reasonably
determined in good faith by the board of directors, the audit committee or
senior management of the Company, (iv) the issuance of common stock of the
Company and (v) the transactions and payments set forth on Schedule 6.09 and
amendments thereto that are not materially adverse to the Lenders, as reasonably
determined by the board of directors of the Company, a duly authorized committee
thereof or an Authorized Officer of the Company.


                                       60
<PAGE>

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

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

          SECTION 6.12. Limitation on Certain Restrictions on Subsidiaries. The
Company will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Company or any of its
Subsidiaries, or pay any Indebtedness owed to the Company or any of its
Subsidiaries, (b) make loans or advances to the Company or any of its
Subsidiaries or (c) transfer any of its properties or assets to the Company or
any of its Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (i) applicable Legal Requirements, including any
Applicable Insurance Regulatory Authority, (ii) this Agreement and the other
Credit Documents, (iii) customary provisions restricting subletting or
assignment of any lease governing any leasehold interest of the Company or any
of its Subsidiaries, (iv) customary provisions restricting assignment of any
licensing agreement (in which the Company or any of its Subsidiaries is the
licensee) or other contract (including leases) entered into by the Company or
any of its Subsidiaries in the ordinary course of business, (v) restrictions on
the transfer of any asset pending the close of the sale of such asset, (vi)
restrictions on the transfer of any asset as a result of a Lien permitted by
Section 6.03, (vii) agreements entered into by a Regulated Insurance Company
with an Applicable Insurance Regulatory Authority or ratings agency in the
ordinary course of business, (viii) customary provisions in partnership
agreements, limited liability company organizational governance documents, joint
venture agreements and other similar agreements entered into in the ordinary
course of business that restrict the transfer of ownership interests in such
partnership, limited liability company, joint venture or similar Person, (ix)
restrictions on cash or other deposits or net worth imposed by customers under
contracts (including Insurance Contracts, Fronting Arrangements and Reinsurance
Agreements) entered into in the ordinary course of business, pursuant to an
agreement or instrument relating to any Permitted Subsidiary Indebtedness of the
type described in clause (d) of the definition thereof if the encumbrances and
restrictions contained in any such agreement or instrument taken as a whole are
not materially less favorable to the Lenders than the encumbrances and
restrictions contained in this Agreement, (x) any encumbrances or restrictions
imposed by any amendments or refinancings of the contracts, instruments or
obligations referred to in clause (ix) above provided that such amendments or
refinancings are no more materially restrictive with respect to such
encumbrances and restrictions than those prior to such amendment or refinancing,
(xi) restrictions placed in accordance with the Segregated Account Companies Act
2000 of Bermuda on the transfer of any asset held, carried or deposited in a
segregated account of a Protected Cell Company, (xii) after the execution and
delivery thereof, restrictions contained in the Three-Year Unsecured Letter of
Credit Facility and (xiii) agreements and arrangements set forth on Schedule
6.12.

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


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<PAGE>

          SECTION 6.14. Claims Paying Ratings. The Company shall ensure that
Validus Re and each other Regulated Insurance Company that is material to the
Company and its Subsidiaries, taken as a whole, has in effect, at all times, a
current financial strength rating of no less than "B++" from A.M. Best Company,
Inc. (or its successor).

          SECTION 6.15. End of Fiscal Years; Fiscal Quarters. The Company will
cause (i) each of its, and each of its Subsidiaries', fiscal years to end on
December 31 of each year and (ii) each of its, and each of its Subsidiaries',
fiscal quarters to end on dates which are consistent with a fiscal year end as
described above.

          SECTION 6.16. Investments, Loans, Advances and Guarantees. The Company
will not, and will not permit any of its Subsidiaries to, purchase, hold or
acquire (including pursuant to any merger with any Person that was not a wholly
owned Subsidiary prior to such merger) any capital stock, evidences of
indebtedness or other securities (including any option, warrant or other right
to acquire any of the foregoing) of, make or permit to exist any loans or
advances to, Guarantee any obligations of, or make or permit to exist any
investment or any other interest in, any other Person, or purchase or otherwise
acquire (in one transaction or a series of transactions) any assets of any other
Person constituting a business unit, except for:

          (a) Cash Equivalents and Eligible Securities;

          (b) investments existing on the date hereof and set forth on Schedule
6.16;

          (c) investments by the Company or its Subsidiaries in the capital
stock of its direct or indirect subsidiaries;

          (d) loans or advances made by the Company to any Subsidiary and made
by any Subsidiary to the Company or any other Subsidiary;

          (e) Guarantees constituting Indebtedness permitted by Section 6.04;

          (f) intercompany Indebtedness permitted under Section 6.04; and

          (g) investments that are not permitted by any other clause of this
Section 6.16 and that, in the aggregate, do not exceed 25% of Consolidated Net
Worth at the time of the making of any new investment under this clause (g),
provided that immediately after giving pro forma effect to any such investment,
no Default shall have occurred and be continuing.

                                  ARTICLE VII

                                Events of Default

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

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


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<PAGE>

due of any fees or any other amounts payable hereunder or pursuant to any other
Credit Documents; or

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

          SECTION 7.03. Covenants. Any Account Party shall (a) default in the
due performance or observance by it of any term, covenant or agreement contained
in Section 5.01(e), 5.01(h)(iv), 5.02(ii), 5.05 (but only with respect to the
first sentence thereof), 5.10 or Article VI, or (b) default in the due
performance or observance by it of any term, covenant or agreement (other than
those referred to in Section 7.01 or clause (a) of this Section 7.03) contained
in this Agreement and such default shall continue unremedied for a period of 30
days after written notice to the Company from the Administrative Agent or the
Required Lenders; or

          SECTION 7.04. Default under other Agreements. (a) The Company, any
Designated Subsidiary Account Party, any Regulated Insurance Company or any
material subsidiary of Validus Re shall (i) default in any payment with respect
to Indebtedness (other than any Indebtedness hereunder but including, after the
execution and delivery thereof, Indebtedness under the Three-Year Unsecured
Letter of Credit Facility) in excess of $50,000,000 individually or in the
aggregate, for the Company and its Subsidiaries or (ii) default in the
observance or performance of any agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist, the effect
of which default or other event or condition is to cause, or to permit the
holder or holders of such Indebtedness (or a trustee or agent on behalf of such
holder or holders) to cause (with or without the giving of notice, the lapse of
time or both), any such Indebtedness to become due prior to its stated maturity;
(b) an "Event of Default", as defined under the Three-Year Unsecured Letter of
Credit Facility, shall have occurred and be continuing; or (c) Indebtedness of
one or more of the Persons listed in clause (a) above in excess of $50,000,000
shall be declared to be due and payable or required to be prepaid, other than by
a regularly scheduled required prepayment or as a mandatory prepayment (unless
such required prepayment or mandatory prepayment results from a default
thereunder or an event of the type that constitutes an Event of Default), prior
to the stated maturity thereof; or

          SECTION 7.05. Bankruptcy, etc. The Company, any Designated Subsidiary
Account Party, any Regulated Insurance Company or any material subsidiary of
Validus Re shall commence a voluntary case concerning itself under Title 11 of
the United States Code entitled "Bankruptcy," as now or hereafter in effect, or
any successor thereto (the "Bankruptcy Code"); or an involuntary case is
commenced against any such Person and the petition is not dismissed within 60
days, after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or substantially all
of the property of any such Person or any such Person commences (including by
way of applying for or consenting to the appointment of, or the taking of
possession by, a rehabilitator, receiver, custodian, trustee, conservator or
liquidator (collectively, a "conservator") of itself or all or any substantial
portion of its property) any other proceeding under any reorganization,
arrangement, adjustment of debt,


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<PAGE>

relief of debtors, dissolution, insolvency, liquidation, rehabilitation,
supervision, conservatorship or similar law of any jurisdiction or the Bermuda
Companies Law whether now or hereafter in effect relating to any such Person; or
any such proceeding is commenced against any such Person and such proceeding is
not dismissed within 60 days; or any such Person is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or any such Person suffers any appointment of any
conservator or the like for it or any substantial part of its property which
continues undischarged or unstayed for a period of 60 days; or any such Person
makes a general assignment for the benefit of creditors; or any corporate action
is taken by any such Person for the purpose of effecting any of the foregoing;
or

          SECTION 7.06. ERISA. (i) An event or condition specified in Section
5.07 shall occur or exist with respect to any Plan or Multiemployer Plan or
Foreign Pension Plan, (ii) the Company, any of its Subsidiaries or any of its
ERISA Affiliates shall fail to pay when due any amount which they shall have
become liable to pay to the PBGC or to a Plan or a Multiemployer Plan under
Title IV of ERISA, or (iii) a condition shall exist by reason of which the PBGC
would be entitled to obtain a decree adjudicating that any Plan must be
terminated, and as a result of such event, failure or condition, together with
all such other events, failures or conditions, the Company, any of its
Subsidiaries or any of its ERISA Affiliates shall be reasonably likely to incur
a liability to a Plan, a Multiemployer Plan, a Foreign Pension Plan or PBGC (or
any combination of the foregoing) in an aggregate amount of $50,000,000 or more;
or

          SECTION 7.07. Judgments. One or more judgments or decrees shall be
entered against the Company, any Designated Subsidiary Account Party, any
Regulated Insurance Company or any material subsidiary of Validus Re involving a
liability, net of undisputed insurance and reinsurance, of $50,000,000 or more
in the case of any one such judgment or decree or in the aggregate for all such
judgments and decrees for such Persons and any such judgments or decrees shall
not have been vacated, discharged, satisfied, stayed or bonded pending appeal
within 60 days from the entry thereof; or

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

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

          SECTION 7.10. Security Documents. Any Security Document shall cease to
be in full force and effect, or shall cease to give the Collateral Agent the
Liens, rights, powers and privileges purported to be created thereby (including
a first priority security interest in, and Lien on, all of the Collateral
subject thereto, in favor of the Collateral Agent, superior to and prior to the
rights of all third Persons and subject to no other Liens), except to the extent
resulting from the Collateral Agent's failure to maintain possession of
Collateral delivered to it by the Company and its Subsidiaries; or any Account
Party or any other pledgor thereunder shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed or
observed pursuant to any Security Document; or any Person acting by or on


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<PAGE>

behalf of the Company or any of its Subsidiaries shall deny or disaffirm in
writing the enforceability of any Security Document; or

          SECTION 7.11. Company Guaranty. The Company Guaranty or any provision
thereof shall cease to be in full force or effect, or any Person acting by or on
behalf of the Company shall deny or disaffirm in writing the Company's
obligations under the Company Guaranty, or the Company shall default in the due
performance or observance of any term, covenant or agreement on its part to be
performed or observed pursuant to the Company Guaranty;

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


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                                  ARTICLE VIII

                                   The Agents

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

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

          SECTION 8.03. Exculpatory Provisions. Each Agent shall not have any
duties or obligations except those expressly set forth herein. Without limiting
the generality of the foregoing, (a) no Agent shall be subject to any fiduciary
or other implied duties, regardless of whether a Default has occurred and is
continuing, (b) no Agent shall have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and powers
expressly contemplated hereby that such Agent is required to exercise in writing
as directed by the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section
10.02), and (c) except as expressly set forth herein, no Agent shall have any
duty to disclose, and shall not be liable for the failure to disclose, any
information relating to the Company or any of its Subsidiaries that is
communicated to or obtained by the bank serving as such Agent or any of its
Affiliates in any capacity. No Agent shall be liable for any action taken or not
taken by it with the consent or at the request of the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 10.02) or in the absence of its own gross
negligence or willful misconduct. No Agent shall be deemed to have knowledge of
any Default unless and until written notice thereof is given to such Agent by
the Company or the applicable Account Party or a Lender, and no Agent shall be
responsible for or have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with this Agreement, (ii)
the contents of any certificate, report or other document delivered hereunder or
in connection herewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein, (iv) the
validity, enforceability, effectiveness or genuineness of this Agreement or any
other agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article IV or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to such Agent.

          SECTION 8.04. Reliance. Each Agent shall be entitled to rely upon, and
shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing believed
by it to be genuine and to have been signed or sent by the proper Person. Each
Agent also may rely upon any statement made to it orally or by telephone and
believed by it to be made by the proper Person, and shall not incur any
liability for relying thereon. Each Agent may consult with legal counsel (who
may be counsel for the


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Company), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.

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

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

          SECTION 8.07. Non-Reliance. Each Lender acknowledges that it has,
independently and without reliance upon any Agent or any other Lender and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon any Agent or
any other Lender and based on such documents and information as it shall from
time to time deem appropriate, continue to make its own decisions in taking or
not taking action under or based upon this Agreement, any related agreement or
any document furnished hereunder or thereunder.

          SECTION 8.08. Syndication Agent, Documentation Agents and Joint Lead
Arrangers and Joint Bookrunners. Notwithstanding any other provision of this
Agreement or any provision of any other Credit Document, each of the Syndication
Agent, Documentation Agents and the Joint Lead Arrangers and Joint Bookrunners
is named as such for recognition purposes only, and in its capacity as such
shall have no powers, duties, responsibilities or liabilities with


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respect to this Agreement or the other Credit Documents or the transactions
contemplated hereby and thereby, except as expressly contemplated hereby.
Without limitation of the foregoing, the Syndication Agent, Documentation Agents
and the Joint Lead Arrangers and Joint Bookrunners shall not, solely by reason
of this Agreement or any other Credit Documents, have any fiduciary relationship
with any Lender or any other Person.

                                   ARTICLE IX

                                Company Guaranty

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

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

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


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

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

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

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

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

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

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


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<PAGE>

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

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

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

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

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

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

          SECTION 9.08. Waiver. (a) The Company waives any right (except as
shall be required by applicable statute and cannot be waived) to require any
Guaranteed Creditor to (i) proceed against any Designated Subsidiary Account
Party, any other guarantor or any other party, (ii) proceed against or exhaust
any security held from any Designated Subsidiary Account Party, any other
guarantor or any other party or (iii) pursue any other remedy in any Guaranteed
Creditor's power whatsoever. The Company waives any defense based on or arising
out of any


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defense of any Designated Subsidiary Account Party, any other guarantor or any
other party, other than payment in full of the Guaranteed Obligations, based on
or arising out of the disability of any Designated Subsidiary Account Party, any
other guarantor or any other party, or the unenforceability of the Guaranteed
Obligations or any part thereof from any cause, or the cessation from any cause
of the liability of any Designated Subsidiary Account Party other than payment
in full of the Guaranteed Obligations. The Guaranteed Creditors may, at their
election, foreclose on any security held by the Administrative Agent or any
other Guaranteed Creditor by one or more judicial or non-judicial sales, whether
or not every aspect of any such sale is commercially reasonable (to the extent
such sale is permitted by applicable law), or exercise any other right or remedy
the Guaranteed Creditors may have against any Designated Subsidiary Account
Party or any other party, or any security, without affecting or impairing in any
way the liability of the Company hereunder except to the extent the Guaranteed
Obligations have been paid. The Company waives any defense arising out of any
such election by the Guaranteed Creditors, even though such election operates to
impair or extinguish any right of reimbursement or subrogation or other right or
remedy of the Company against any Designated Subsidiary Account Party or any
other party or any security.

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

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

                                   ARTICLE X

                                  Miscellaneous

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

          (i) if to the Company, (x) to it at Validus Holdings, Ltd., 19
     Par-La-Ville Road, Hamilton HM11 Bermuda, Attention: Chief Financial
     Officer (Facsimile: (441) 278-9090) and (y) with a copy (in the case of a
     notice of a Default) to Cahill Gordon & Reindell LLP, 80 Pine St., New
     York, New York 10005 Attention: Michael A. Becker, Esq. (Facsimile: (212)
     269-5420);


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<PAGE>

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

          (iii) if to the Administrative Agent, to JPMorgan Chase Bank, National
     Association, Loan and Agency Services Group, 1111 Fannin Street, Houston,
     Texas 77002, Attention of Marion Murray (Facsimile No. (713) 750-2228;
     e-mail: marion.murray@jpmchase.com), with a copy to JPMorgan Chase Bank,
     National Association, 270 Park Avenue, 22nd Floor, New York 10017,
     Attention of Erin O'Rourke (Facsimile No. (212) 270-1511; e-mail:
     erin.orourke@jpmorgan.com); and

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

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

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

          SECTION 10.02. Waivers; Amendments. (a) No failure or delay by the
Administrative Agent or any Lender in exercising any right or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
the exercise of any other right or power. The rights and remedies of the
Administrative Agent and the Lenders hereunder are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of this Agreement or consent to any departure by any Account Party
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section 10.02, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
Without limiting the generality of the foregoing, the issuance of any Letter of
Credit shall not be construed as a waiver of any Default, regardless of whether
the Administrative Agent or any Lender may have had notice or knowledge of such
Default at the time. In the case of any waiver, each Account Party, the
Administrative Agent and the Lenders shall be restored to their former positions
and rights hereunder and any Default or Event of Default so waived shall be
deemed to be cured and not continuing. No such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon.

          (b) Neither this Agreement, any other Credit Document nor any
provision hereof or thereof may be waived, amended or modified except pursuant
to an agreement or


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agreements in writing entered into by each Account Party and the Required
Lenders or by each Account Party and the Administrative Agent with the consent
of the Required Lenders; provided that no such agreement shall (i) increase the
Commitment of any Lender without the written consent of such Lender, (ii) reduce
the amount of any amount due pursuant to any Letter of Credit or Unpaid Drawing
or reduce any interest or fees payable hereunder, without the written consent of
each Lender affected thereby, (iii) postpone the scheduled date for
reimbursement of any Unpaid Drawing, or any interest thereon, or any fees
payable hereunder, or reduce the amount of, waive or excuse any such payment, or
postpone the scheduled date of expiration of the Commitments or any Letter of
Credit, without the written consent of each Lender affected thereby, (iv) change
Section 2.13(b) or (c) in a manner that would alter the pro rata sharing of
payments required thereby or change any of the provisions of this Section 10.02
or the definition of "Required Lenders" or any other provision hereof specifying
the number or percentage of Lenders required to waive, amend or modify any
rights hereunder or make any determination or grant any consent hereunder,
without the written consent of each Lender, (v) release all or a substantial
portion of the Collateral (except as expressly provided in the Credit Documents)
under all the Security Documents, change in any material respect the definition
of "Advance Rate" or "Borrowing Base", change in any material respect any
provision of Section 2.10 or 2.16(b)(ii) or release the Company from the Company
Guaranty (or change the Company Guaranty in a manner that is materially adverse
to the Lenders), without the written consent of each Lender or (vi) change any
provision of Article II without the written consent of each LC Issuer affected
thereby; and provided, further, that no such agreement shall amend, modify or
otherwise affect the rights or duties of any Agent or any LC Issuer hereunder
without the prior written consent of such Agent or such LC Issuer, as the case
may be. Notwithstanding the foregoing or any other provision of this Agreement,
any provision of this Agreement may be amended by an agreement in writing
entered into by the Company, the Super-Majority Lenders and the Administrative
Agent (and, if its rights or obligations are affected thereby, each LC Issuer
and the Issuing Agent) if (x) by the terms of such agreement the Commitment of
each Lender not consenting to the amendment provided for therein shall
terminate, and any Several Letters of Credit then outstanding shall either be
terminated, amended or returned and reissued, in each case to give effect to
such termination (it being understood that the Company may cause the Commitment
of any such non-consenting Lender to be assigned to one or more new Lenders in
accordance with Section 10.04; provided that no action shall be required to be
taken by such non-consenting Lender (including the execution of any Assignment
and Assumption Agreement)) and (y) at the time such amendment becomes effective,
each Lender not consenting thereto receives payment in full of all amounts owing
to it or accrued for its account under this Agreement.

          SECTION 10.03. Expenses; Indemnity; Damage Waiver. (a) Each Account
Party jointly and severally agrees to pay (i) all out-of-pocket expenses
incurred by the Agents, the Joint Lead Arrangers and Joint Bookrunners and their
Affiliates, including the reasonable fees, charges and disbursements of counsel,
in connection with the syndication of the credit facility provided for herein,
the preparation and administration of this Agreement or any amendments,
modifications or waivers of the provisions hereof (whether or not the
transactions contemplated hereby or thereby shall be consummated) or protection
of its rights hereunder or thereunder, and (ii) all out-of-pocket expenses
incurred by any Agent, any Joint Lead Arranger and Joint Bookrunner or any
Lender, including the reasonable fees, charges and disbursements of one primary
counsel and all applicable foreign counsel thereto, in connection with the


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enforcement of its rights in connection with this Agreement or the other Credit
Documents, including its rights under this Section, or in connection with the
Letters of Credit issued hereunder, including all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such
Letters of Credit.

          (b) Each Account Party jointly and severally agrees to indemnify the
Agents, the Joint Lead Arrangers and Joint Bookrunners and each Lender, and each
Related Party of any of the foregoing Persons (each such Person being called an
"Indemnitee") against, and hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses, including the fees,
charges and disbursements of any counsel for any Indemnitee, incurred by or
asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of this Agreement or any agreement or
instrument contemplated hereby, the performance by the parties hereto of their
respective obligations hereunder or any other transactions contemplated hereby,
(ii) any Letter of Credit or the use of the proceeds therefrom, (iii) any actual
or alleged presence or release of Hazardous Materials on or from any property
owned or operated by the Company or any of its Subsidiaries, or any
Environmental Liability related in any way to the Company or any of its
Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation
or proceeding relating to any of the foregoing, whether based on contract, tort
or any other theory and regardless of whether any Indemnitee is a party thereto
or whether such claim, litigation, investigation or proceeding is brought by the
Company or any of its Subsidiaries or a third party; provided that such
indemnity shall not, as to any Indemnitee or any Related Party of such
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and non-appealable judgment to have resulted from the
gross negligence or willful misconduct of such Indemnitee or any Related Party
of such Indemnitee.

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

          (d) To the extent permitted by applicable law, no Account Party shall
assert, and each Account Party hereby waives, any claim against any Indemnitee,
on any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection
with, or as a result of, this Agreement or any agreement or instrument
contemplated hereby, any Letter of Credit or the use of the proceeds thereof.

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

          SECTION 10.04. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby except that (i) no
Account Party may assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent


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

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

               (A) the Company, provided that no consent of the Company shall be
          required for an assignment to a Lender, an Affiliate of a Lender, an
          Approved Fund or, if an Event of Default has occurred and is
          continuing, any other assignee; and

               (B) the Administrative Agent and each LC Issuer.

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

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

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

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

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

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


                                       75

<PAGE>

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

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

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

          (iii) Subject to acceptance and recording thereof pursuant to
     paragraph (b)(iv) of this Section, from and after the effective date
     specified in each Assignment and Assumption the assignee thereunder shall
     be a party hereto and, to the extent of the interest assigned by such
     Assignment and Assumption, have the rights and obligations of a Lender
     under this Agreement (provided that any liability of any Account Party to
     such assignee under Section 2.06 or 2.12 shall be limited to the amount, if
     any, that would have been payable thereunder by such Account Party in the
     absence of such assignment, except to the extent any such amounts are
     attributable to a Change in Law), and the assigning Lender thereunder
     shall, to the extent of the interest assigned by such Assignment and
     Assumption, be released from its obligations under this Agreement (and, in
     the case of an Assignment and Assumption covering all of the assigning
     Lender's rights and obligations under this Agreement, such Lender shall
     cease to be a party hereto but shall continue to be entitled to the
     benefits of Sections 2.06, 2.12 and 10.03). Any assignment or transfer by a
     Lender of rights or obligations under this Agreement that does not comply
     with this Section 10.04 shall be treated for purposes of this Agreement as
     a sale by such Lender of a participation in such rights and obligations in
     accordance with paragraph (c) of this Section.

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

          (v) Upon its receipt of a duly completed Assignment and Assumption
     executed by an assigning Lender and an assignee, the assignee's completed
     Administrative Questionnaire (unless the assignee shall already be a Lender
     hereunder), the processing and recordation fee referred to in paragraph (b)
     of this Section and any


                                       76

<PAGE>

     written consent to such assignment required by paragraph (b) of this
     Section, the Administrative Agent shall accept such Assignment and
     Assumption and record the information contained therein in the Register. No
     assignment shall be effective for purposes of this Agreement unless it has
     been recorded in the Register as provided in this paragraph.

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

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

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

          SECTION 10.05. Survival. All covenants, agreements, representations
and warranties made by any Account Party herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this


                                       77

<PAGE>

Agreement and the issuance of any Letters of Credit regardless of any
investigation made by any such other party or on its behalf and notwithstanding
that the Administrative Agent or any Lender may have had notice or knowledge of
any Default or incorrect representation or warranty at the time any credit is
extended hereunder, and shall continue in full force and effect as long as any
Letter of Credit is outstanding, any fee or any other amount payable under this
Agreement is outstanding and unpaid and so long as the Total Commitment (and the
Commitment of each Lender) has not expired or terminated. The provisions of
Sections 2.06, 2.12 and 10.03 and Article VIII shall survive and remain in full
force and effect regardless of the consummation of the transactions contemplated
hereby, the expiration or termination of the Total Commitment (and the
Commitment of each Lender) or the termination of this Agreement or any provision
hereof.

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

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

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

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


                                       78

<PAGE>

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

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

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

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

          SECTION 10.10. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE


                                       79

<PAGE>

BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.

          SECTION 10.11. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

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

          SECTION 10.13. Interest Rate Limitation. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to any
Unpaid Drawings, together with all fees, charges and other amounts which are
treated as interest on such amount or pursuant to any Letter of Credit under
applicable law (collectively the "Charges"), shall exceed the maximum lawful
rate (the "Maximum Rate") which may be contracted for, charged, taken,


                                       80

<PAGE>

received or reserved by the Lender issuing or holding participation in such
Letter of Credit in accordance with applicable law, the rate of interest payable
in respect of such Letter of Credit hereunder, together with all Charges payable
in respect thereof, shall be limited to the Maximum Rate and, to the extent
lawful, the interest and Charges that would have been payable in respect of such
Letter of Credit but were not payable as a result of the operation of this
Section shall be cumulated and the interest and Charges payable to such Lender
in respect of other Letters of Credit or periods shall be increased (but not
above the Maximum Rate therefor) until such cumulated amount, together with
interest thereon at the Federal Funds Effective Rate to the date of repayment,
shall have been received by such Lender.

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

          SECTION 10.15. Termination of Existing LC Facility. JPMorgan Chase
Bank, National Association, in its capacity as Existing Administrative Agent,
and Bank of New York, in its capacity as Existing Collateral Agent, hereby
agree, acknowledge and confirm that upon the effectiveness of this Agreement on
the Effective Date and payment in full of any and all principal, interest, fees
and other amounts owing under or in connection with the Existing LC Facility (as
specified by the Existing Administrative Agent to the Company on or prior to the
Effective Date), all liabilities, obligations and indebtedness owing by the
Company and the Account Parties under the Existing LC Facility and the Credit
Documents as defined therein shall be automatically released, discharged and
satisfied in full, all of the Liens and security interests held by the Existing
Collateral Agent for the benefit of the Secured Creditors (as defined in the
Security Agreement referenced in the Existing LC Facility) in any property of
the Company or its Subsidiaries pursuant to the Credit Documents (as defined in
the Existing LC Facility) shall be automatically released and terminated and the
Existing LC Facility, the other Credit Documents as defined therein and all
related instruments, agreements and other documents shall be automatically
terminated (provided that any contingent and/or indemnity obligations under the
Existing LC Facility and such Credit Documents which expressly survive
termination thereof shall continue to remain in effect in accordance therewith).

                            [Signature Pages Follow]


                                       81
<PAGE>

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

Address:                                VALIDUS HOLDINGS, LTD.

19 Par-La-Ville Road,
Hamilton, HM11 Bermuda                  By:
Telephone: (441) 278-9000                   ------------------------------------
Facsimile: (441) 278-9090               Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

Address:                                VALIDUS REINSURANCE, LTD.

19 Par-La-Ville Road,
Hamilton, HM11 Bermuda                  By:
Telephone: (441) 278-9000                   ------------------------------------
Facsimile: (441) 278-9090               Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

     Signature Page to Five-Year Secured Letter of Credit Facility Agreement
              Validus Holdings, Ltd. and Validus Reinsurance, Ltd.

<PAGE>

                                        JPMORGAN CHASE BANK, NATIONAL
                                        ASSOCIATION,
                                        INDIVIDUALLY, AS ADMINISTRATIVE AGENT
                                        AND AS ISSUING AGENT,


                                        By:
                                            ------------------------------------
                                        Name: [                                ]
                                               --------------------------------
                                        Title: [                               ]
                                                -------------------------------


                                        JPMORGAN CHASE BANK, NATIONAL
                                        ASSOCIATION,
                                        AS EXISTING ADMINISTRATIVE AGENT AND AS
                                        EXISTING LC ISSUER,


                                        By:
                                            ------------------------------------
                                        Name: [                                ]
                                               --------------------------------
                                        Title: [                               ]
                                                -------------------------------


                                        DEUTSCHE BANK AG NEW YORK BRANCH,
                                        INDIVIDUALLY, AND AS SYNDICATION AGENT,


                                        By:
                                            ------------------------------------
                                        Name: [                                ]
                                               --------------------------------
                                        Title: [                               ]
                                                -------------------------------


                                        ING BANK N.V., LONDON BRANCH,
                                        [INDIVIDUALLY AND] AS DOCUMENTATION
                                        AGENT,


                                        ----------------------------------------
                                        Name: [                                ]
                                               --------------------------------
                                        Title: [                               ]
                                                -------------------------------


                                        CALYON,
                                        [INDIVIDUALLY AND] AS
                                        DOCUMENTATION AGENT,


                                        By:
                                            ------------------------------------
                                        Name: [                                ]
                                               --------------------------------
                                        Title: [                               ]
                                                -------------------------------

     Signature Page to Five-Year Secured Letter of Credit Facility Agreement
              Validus Holdings, Ltd. and Validus Reinsurance, Ltd.

<PAGE>

                                        THE BANK OF NEW YORK,
                                        [INDIVIDUALLY AND] AS DOCUMENTATION
                                        AGENT AND EXISTING COLLATERAL AGENT,


                                        By:
                                            ------------------------------------
                                        Name: [                                ]
                                               --------------------------------
                                        Title: [                               ]
                                                -------------------------------


                                        WACHOVIA BANK, NATIONAL ASSOCIATION,
                                        [INDIVIDUALLY AND] AS
                                        DOCUMENTATION AGENT,


                                        By:
                                            ------------------------------------
                                        Name: [                                ]
                                               --------------------------------
                                        Title: [                               ]
                                                -------------------------------

     Signature Page to Five-Year Secured Letter of Credit Facility Agreement
              Validus Holdings, Ltd. and Validus Reinsurance, Ltd.

<PAGE>

                               COMMITMENT SCHEDULE

<TABLE>
<CAPTION>
                  LENDER                      COMMITMENT
                  ------                    --------------
<S>                                         <C>
JPMorgan Chase Bank, National Association   $57,142,857.15
Deutsche Bank AG New York Branch            $57,142,857.15
The Bank of New York                        $50,000,000.00
Calyon                                      $50,000,000.00
ING Bank N.V., London Branch                $50,000,000.00
Wachovia Bank, National Association         $50,000,000.00
ABN AMRO Bank N.V.                          $35,714,285.71
The Bank of Nova Scotia                     $35,714,285.71
Comerica Bank                               $35,714,285.71
UBS AG, Stamford Branch                     $35,714,285.71
BNP Paribas                                 $25,000,000.00
HSBC Bank USA, National Association         $17,857,142.86
                                            --------------
TOTAL                                       $ 500,000,0000
                                            ==============
</TABLE>