Document:

Exhibit
10.1

 

[CONFORMED AS EXECUTED]

 

FIRST AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT

 

FIRST
AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”),
dated as of April 18, 2006, among ARCH CAPITAL GROUP LTD. (the “Parent
Borrower”), ARCH CAPITAL GROUP (U.S.) INC. (“Intermediate Holdings”),
various designated subsidiary borrowers party to the Credit Agreement referred
to below (“Designated Subsidiary Borrowers”), various lenders party to
such Credit Agreement (“Lenders”), Bank of America, N.A., as syndication
agent (in such capacity, the “Syndication Agent”), THE BANK OF NEW YORK,
as collateral agent (in such capacity, the “Collateral Agent”) and
JPMORGAN CHASE BANK, N.A. (formerly known as JPMorgan Chase Bank), as
administrative agent (in such capacity, the “Administrative Agent”). All
capitalized terms used herein and not otherwise defined shall have the
respective meanings provided such terms in the Credit Agreement referred to
below.

 

W I  T  N  E  S  S  E
T  H:

 

WHEREAS,
the Parent Borrower, Intermediate Holdings, the Designated Subsidiary
Borrowers, the Lenders and the Administrative Agent are parties to an Amended
and Restated Credit Agreement, dated as of November 29, 2005 (as amended,
restated, modified and/or supplemented from time to time to, but not including,
the date hereof, the “Credit Agreement”);

 

WHEREAS,
the Parent Borrower, Intermediate Holdings and the Designated Subsidiary
Borrowers have requested certain amendments to the Credit Agreement as more
fully described below; and

 

WHEREAS,
subject to the terms and conditions of this Amendment, the parties hereto wish
to amend the Credit Agreement as herein provided;

 

NOW,
THEREFORE, it is agreed:

 

I.              Amendments to Credit Agreement.

 

1.             Article I of the Credit Agreement is hereby amended
by deleting the definition of “Advance Rates” appearing therein in its
entirety and inserting the following new definition of “Advance Rates”
in lieu thereof:

 

“‘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:

 

 

	
  Cash and Eligible Securities:

  	
   

  	
  Advance Rate:

  
	
   

  	
   

  	
   

  
	
  Cash:

  

  U.S. Dollars.

  	
   

  	
  

  100%

  
	
   

  	
   

  	
   

  
	
  Time Deposits, CDs and Money Market Deposits:

   

  Time deposits, certificates of deposit and money
  market deposits of any commercial bank incorporated in the United States with
  a rating of at least (i) AA- from Standard & Poor’s Ratings Services
  (“S&P”) and (ii) Aa3 from Moody’s Investors Service, Inc. (“Moody’s”) and
  maturing within two years from the date of determination.

  	
   

  	
  90%

  
	
   

  	
   

  	
   

  
	
  U.S. Government Securities:

   

  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).

  	
   

  	
  With maturities of (x) two years or less from the
  date of determination, 95%, (y) more than two years to ten years from the
  date of determination, 90% and (z) more than ten years from the date of
  determination, 85%

  
	
   

  	
   

  	
   

  
	
  Investment Grade Municipal Bonds Level I:

   

  Municipal bonds rated at least (i) AAA from S&P
  and (ii) Aaa from Moody’s and maturing within ten years from the date of
  determination.

  	
   

  	
  

  90%

  
	
   

  	
   

  	
   

  
	
  Investment Grade Municipal Bonds Level II:

   

  Municipal bonds rated at least (i) BBB+ from S&P
  and (ii) Baa1 from Moody’s and maturing within ten years from the date of
  determination or at least (i) BBB+ from S&P or (ii) Baa1 from Moody’s if
  such bond is rated by either S&P or Moody’s, but not both.

  	
   

  	
  

  85%

  
	
   

  	
   

  	
   

  
	
  Investment Grade Nonconvertible Corporate Bonds
  Level I:

  

  Nonconvertible corporate bonds rated at least (i) AA- from S&P and (ii)
  Aa3 from Moody’s, and which are traded publicly.

  	
   

  	
  

  

  With maturities of (x) two years or less from the date of determination, 90%
  and (y) more than two years to ten years from the date of determination,
  85%

  
	
   

  	
   

  	
   

  
	
  Investment Grade Nonconvertible Corporate Bonds
  Level II:

   

  Nonconvertible corporate bonds rated at least (i)
  BBB+ from S&P and (ii) Baa1 from Moody’s which are traded publicly, or
  rated at least Baa1 from Moody’s, or at least BBB+ from S&P, if such bond
  is rated by either S&P or Moody’s, but not both.

  	
   

  	
  

  80%

  
	
   

  	
   

  	
   

  
	
  Commercial Paper:

   

  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 determination.

  	
   

  	
  

  90%

  

 

 

	
  Cash and Eligible Securities:

  	
   

  	
  Advance Rate:

  
	
   

  	
   

  	
   

  
	
  Agency Securities:

   

  (i) Single-class mortgage participation
  certificates in book-entry form backed by single-family residential mortgage
  loans, the full and timely payment of interest at the applicable certificate
  rate and the ultimate collection of principal of which are guaranteed by the
  Federal Home Loan Mortgage Corporation (excluding REMIC or other multi-class
  pass-through certificates, collateralized mortgage obligations, pass-through
  certificates backed by adjustable rate mortgages, securities paying interest
  or principal only and similar derivative securities); (ii) single-class mortgage
  pass-through certificates in book-entry form backed by single-family
  residential mortgage loans, the full and timely payment of interest at the
  applicable certificate rate and ultimate collection of principal of which are
  guaranteed by the Federal National Mortgage Association (excluding REMIC or
  other multi-class pass-through certificates, pass-through certificates backed
  by adjustable rate mortgages, collateralized mortgage obligations, securities
  paying interest or principal only and similar derivative securities); and
  (iii) single-class fully modified pass-through certificates in
  book-entry form backed by single-family residential mortgage loans, the full
  and timely payment of principal and interest of which is guaranteed by the
  Government National Mortgage Association (excluding REMIC or other
  multi-class pass-through certificates, collateralized mortgage obligations,
  pass-through certificates backed by adjustable rate mortgages, securities
  paying interest or principal only and similar derivatives securities).

  	
   

  	
  

  

  With maturities from the date of determination of (x) two years or less from
  the date of determination, 95%, (y) more than two years and less than ten
  years from the date of determination, 90% and (z) more than ten years from
  the date of determination, 85%

  
	
   

  	
   

  	
   

  
	
  Asset-Backed Securities:

   

  Asset-backed securities rated at least (i) AAA by
  S&P and (ii) Aaa by Moody’s, provided that (x) such securities are backed
  by credit card receivables, automobile loans or utility charges (as in Rate
  Reduction Bonds) and have a remaining maturity of 10 years or less and (y)
  asset-backed securities will not constitute Eligible Securities if they are
  certificated securities that cannot be paid or delivered by book entry (and
  all asset-backed securities issued by an issuer incorporated in the United
  States of America must be capable of settlement through DTC).

  	
   

  	
  

  

  80%

  
	
   

  	
   

  	
   

  
	
  Supranational Securities

   

  Securities issued or backed by the International
  Bank for Reconstruction & Development, European Bank for Reconstruction
  & Development, Inter American Development Bank, International Monetary
  Fund, European Investment Bank, Asian Development Bank, African Development
  Bank and Nordic Development Bank as long as the credit ratings are at or
  above AAA by S&P and Aaa by Moody’s.

  	
   

  	
  With maturities of (x) two years or less from the
  date of determination, 95%, (y) more than two years to ten years from the
  date of determination, 90% and (z) more than ten years from the date of
  determination, 85%

  
	
   

  	
   

  	
   

  
	
  G7 Government Securities

   

  Securities issued or backed by the Federal Republic
  of Germany, Republic of France, Republic of Italy, United Kingdom, Austria,
  Spain, Belgium, Japan and the Netherlands. In addition, the credit ratings
  must be at or above AA- by S&P and Aa3 by Moody’s.

  	
   

  	
  With maturities of (x) two years or less from the
  date of determination, 95%, (y) more than two years to ten years from the
  date of determination, 90% and (z) more than ten years from the date of
  determination, 85%

  

 

 

	 
	
  Cash and Eligible Securities:

  	
   

  	
  Advance Rate:

  	 

	 
	
   

  	
   

  	
   

  	 

	
  Other Securities:

   

  All other cash, investments, obligations or
  securities

  	
   

  	
  0%

  
							

 

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 delivered by the Custodian to the Collateral Agent, (B) if any
single corporate issuer (or any Affiliate thereof) 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),
(C) no more than 10% of all corporate bonds constituting Eligible Securities
under Investment Grade Nonconvertible Corporate Bonds Level II shall at any
time be rated lower than A from S&P or lower than A2 from Moody’s and (D)
the weighted average rating of all corporate bonds constituting Eligible
Securities under both Investment Grade Nonconvertible Corporate Bonds Level I
and Investment Grade Nonconvertible Corporate Bonds Level II shall at all times
be rated at least (x) AA from S&P and (y) Aa2 from Moody’s.”

 

2.             Article I of the Credit Agreement is hereby further
amended by deleting the definition of “Guaranteed Obligations” appearing
therein in its entirety and inserting the following new definition of “Guaranteed
Obligations” in lieu thereof:

 

““Guaranteed
Obligations” means (i) for purposes of Article XI, all reimbursement
obligations and Unpaid Drawings with respect to Letters of Credit issued for
the account of any Designated Subsidiary Borrower other than ARL and Arch
Europe (collectively, the “Guaranteed Parties” and each, a “Guaranteed
Party”), together with all interest on such reimbursement obligations and
Unpaid Drawings accruing before and after the filing of any insolvency
proceeding and all the other obligations (including obligations which, but for
the automatic stay under Section 362(a) of the Bankruptcy Code, would become
due) and liabilities (including, without limitation, indemnities, fees and
interest thereon) of any Guaranteed Party to any Lender, the Administrative
Agent, the Fronting Lenders and the Issuing Agent now existing or hereafter
incurred under, arising out of or in connection with, this Agreement and each
other Credit Document pursuant to which any Guaranteed Party is a party and the
due performance and compliance by any such Guaranteed Party with all the terms,
conditions and agreements contained in this Agreement and each such other
Credit Document and (ii) for purposes of Article XII, all reimbursement
obligations and Unpaid Drawings with respect to Letters of Credit issued for
the account of Arch Europe, together with all interest on such reimbursement
obligations and Unpaid Drawings accruing before and after the filing of any
insolvency proceeding and all the other obligations (including obligations
which, but for the automatic stay under Section 362(a) of the Bankruptcy Code,
would become due) and liabilities (including, without limitation, indemnities,
fees and interest thereon) of Arch Europe to any Lender, the Administrative
Agent, the Fronting Lenders and the Issuing Agent now existing or hereafter
incurred under, arising out of or in connection 

 

 

with, this Agreement and
each other Credit Document pursuant to which Arch Europe is a party and the due
performance and compliance by Arch Europe with all the terms, conditions and
agreements contained in this Agreement and each such other Credit Document.”.

 

3.             Article I of the Credit Agreement is hereby
further amended by inserting the following new definition therein in
appropriate alphabetical order:

 

“Initial
First Amendment Effective Date” has the meaning provided in the First
Amendment to the Credit Agreement, dated as of April 18, 2006.

 

4.             Article I of the Credit Agreement is hereby
further amended by inserting the following new definitions therein in
appropriate alphabetical order:

 

“Arch Europe” means Arch Insurance Company
(Europe) Limited, a private company limited by shares incorporated under the
laws of England and Wales.

 

“Subsequent
First Amendment Effective Date” has the meaning provided in the First
Amendment to the Credit Agreement, dated as of April 18, 2006.

 

“Parent
Borrower Guaranty” means the guaranty of the Parent Borrower provided in
Article XII.

 

5.             Section 2.19(b) of the Credit Agreement is hereby
amended by inserting the text “, the Parent Borrower” immediately following the
text “the Guarantor” appearing in clause (i) of said Section.

 

6.             Section 5.02 of the Credit Agreement is hereby
amended by inserting the following new clause (e) immediately following clause
(d) of said Section:

 

“(e)         In
addition to the conditions specified in paragraphs (a) through (d) inclusive of
this Section 5.02, the initial issuance of a Letter of Credit for the account
of Arch Europe is subject to the satisfaction of the following conditions:

 

(i)            the
Initial First Amendment Effective Date and the Subsequent First Amendment
Effective Date shall have occurred;

 

(ii)           the
Administrative Agent shall have received resolutions of the Parent Borrower
relating to the Parent Borrower Guaranty which shall be satisfactory to the
Administrative Agent; and

 

(iii)          the
Administrative Agent shall have received an opinion, addressed to the Administrative
Agent and each of the Lenders from Conyers, Dill & Pearman, special Bermuda
counsel to the Parent Borrower, which opinion shall cover matters relating to
the Parent Borrower Guaranty set forth in Article XII and shall be in form and
substance reasonably satisfactory to the Administrative Agent.”.

 

 

7.             Section 8.09 of the Credit Agreement is hereby
amended by (i) changing the caption thereof to read “Guaranties”, (ii) inserting
the text “(a)” immediately prior to the text “The Intermediate Holdings”
appearing in said Section and (iii) inserting the following new clause (b)
immediately following the text “; or” appearing in said Section:

 

“(b)  the Parent Borrower Guaranty shall terminate
or cease, in whole or part, to be a legally valid and binding obligation of the
Parent Borrower, if the Parent Borrower, or any Person acting for or on behalf
of the Parent Borrower, shall contest such validity or binding nature of the
Parent Borrower Guaranty, or any other Person shall assert any of the foregoing;
or”.

 

8.             Section 10.02(b) of the Credit Agreement is hereby
amended by (i) deleting the text “or (ix)” appearing in said Section and
inserting the text “, (ix)” in lieu thereof and (ii) inserting the text “or (x)
release the Parent Borrower from the Parent Borrower Guaranty without the
consent of all Lenders” immediately prior to the semicolon appearing in said Section.

 

9.             The Credit Agreement is hereby further amended by
inserting the following new Article XII immediately following Article XI of the
Credit Agreement:

 

“ARTICLE
XII

 

Parent
Borrower Guaranty

 

Section 12.01. The 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 Parent Borrower from the proceeds of
the Loans to be incurred by Arch Europe and the issuance of the Letters of
Credit for the account of Arch Europe, the Parent Borrower hereby agrees with
the Guaranteed Creditors as follows:  the
Parent Borrower 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 Arch Europe to the Guaranteed Creditors. If any or all of the
Guaranteed Obligations of Arch Europe to the Guaranteed Creditors becomes due
and payable hereunder, the Parent Borrower unconditionally promises to pay such
indebtedness 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 Parent Borrower 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 Parent Borrower agrees that any such judgment,
decree, order, settlement or compromise shall be binding upon the Parent
Borrower, notwithstanding any revocation of this Parent Borrower Guaranty or
any other instrument evidencing any liability of Arch Europe, and the Parent
Borrower 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 12.02. Bankruptcy.  Additionally, the Parent
Borrower unconditionally and irrevocably guarantees the payment of any and all
of the Guaranteed Obligations of Arch Europe hereunder to the Guaranteed
Creditors whether or not due or payable by Arch Europe upon the occurrence of
any of the events specified in Section 8.05 with respect to Arch Europe, and
unconditionally promises to pay such indebtedness to the Guaranteed Creditors,
or order, on demand, in lawful money of the United States.

 

Section 12.03. Nature of Liability.  The liability of the Parent
Borrower hereunder is exclusive and independent of any security for or other
guaranty of the Guaranteed Obligations of Arch Europe whether executed by Parent
Borrower, any other guarantor or by any other party, and the liability of the
Parent Borrower hereunder is not affected or impaired by (a) any direction as
to application of payment by Arch Europe 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 Arch Europe, 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 Arch Europe, or (e) any action or inaction of the type described in Section
12.05. Notwithstanding anything to the contrary contained herein, any guaranty
provided under this Agreement or any other Credit Document will continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any Guaranteed Obligation is rescinded or must otherwise be returned by the
Guaranteed Creditors upon the insolvency, bankruptcy or reorganization of Arch
Europe or otherwise, all as though such payment had not been made.

 

Section 12.04. Independent Obligation.
 The obligations of the Parent Borrower under
this Article XII are independent of the obligations of any other guarantor, any
other party or Arch Europe, and a separate action or actions may be brought and
prosecuted against the Parent Borrower whether or not action is brought against
any other guarantor, any other party or Arch Europe and whether or not any
other guarantor, any other party or any Guaranteed Party be joined in any such
action or actions. The Parent Borrower waives, to the full extent permitted by
law, the benefit of any statute of limitations affecting its liability under
this Article XII or the enforcement thereof. Any payment by Arch Europe or
other circumstance which operates to toll any statute of limitations as to Arch
Europe shall operate to toll the statute of limitations as to the Parent
Borrower.

 

Section 12.05. Authorization.
 The obligations of the Parent Borrower
under this Article XII 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 there against;

 

(c)           exercise
or refrain from exercising any rights against Arch Europe or others or
otherwise act or refrain from acting;

 

(d)           release
or substitute any one or more endorsers, guarantors, Arch Europe or other
obligors;

 

(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 Arch Europe to
its creditors other than the Guaranteed Creditors;

 

(f)            apply
any sums by whomsoever paid or howsoever realized to any liability or
liabilities of Arch Europe to the Guaranteed Creditors regardless of what
liability or liabilities of Arch Europe 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 Parent Borrower from
its liabilities under this Parent Borrower Guaranty.

 

Section 12.06. Reliance.
 It is not necessary for the Guaranteed
Creditors to inquire into the capacity or powers of Arch Europe 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 12.07. Subordination.
 Any indebtedness of Arch Europe now or
hereafter owing to the Parent Borrower is hereby subordinated to Guaranteed
Obligations of Arch Europe owing to the Guaranteed Creditors; and if the
Administrative Agent so requests at a time when an Event of Default exists, Arch
Europe shall not make, or be 

 

 

permitted to
make, any payment to the Parent Borrower in respect of such indebtedness owed
to the Parent Borrower, but without affecting or impairing in any manner the
liability of the Parent Borrower under the other provisions of this Parent
Borrower Guaranty. Prior to the transfer by the Parent Borrower of any note or
negotiable instrument evidencing any of the indebtedness of Arch Europe to the
Parent Borrower, the Parent Borrower 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 Parent Borrower 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 Parent
Borrower 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 12.08. Waiver.         (a)
 The Parent Borrower waives any right
(except as shall be required by applicable statute and cannot be waived) to
require any Guaranteed Creditor to (i) proceed against Arch Europe, any other
guarantor or any other party, (ii) proceed against or exhaust any security held
from Arch Europe, any other guarantor or any other party or (iii) pursue any
other remedy in any Guaranteed Creditor’s power whatsoever. The Parent Borrower
waives any defense based on or arising out of any defense of Arch Europe, 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 Arch
Europe, 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 Arch Europe 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 nonjudicial 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 Arch Europe or any other
party, or any security, without affecting or impairing in any way the liability
of the Parent Borrower hereunder except to the extent the Guaranteed
Obligations have been paid. The Parent Borrower 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 Parent Borrower against Arch Europe or any other
party or any security.

 

(b)           The
Parent Borrower waives all presentments, demands for performance, protests and
notices, including, without limitation, notices of nonperformance, notices of
protest, notices of dishonor, notices of acceptance of this Parent Borrower
Guaranty, and notices of the existence, creation or incurring of new or
additional Guaranteed Obligations. The Parent Borrower assumes all
responsibility for being and keeping itself informed of Arch Europe’s financial
condition and assets, and of all other circumstances bearing upon the risk of
nonpayment of the Guaranteed Obligations and the nature, scope and extent of
the risks which the Parent Borrower assumes and incurs hereunder, and agrees
that the Guaranteed Creditors shall have no duty to advise the Parent Borrower
of information known to them regarding such circumstances or risks.

 

 

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

 

Section 12.09. Payments.
 All payments made by the Parent Borrower
hereunder will be made without setoff, counterclaim or other defense and on the
same basis as payments are made by Arch Europe under Section 2.16 of the Credit
Agreement.”.

 

10.           Schedule
1.01 to the Credit Agreement is hereby amended by deleting said Schedule in its
entirety and inserting in lieu thereof a new Schedule 1.01 in the form of
Schedule 1.01 attached hereto.

 

II.            Miscellaneous Provisions.

 

1.             In order to induce the Lenders to enter into this
Amendment, the Parent Borrower, Intermediate Holdings and the Designated
Subsidiary Borrowers each hereby represents and warrants that:

 

(a)           no Default or Event of Default exists as
of the Initial First Amendment Effective Date, immediately after giving effect
thereto;

 

(b)           no Default or Event of Default exists as
of the Subsequent First Amendment Effective Date, immediately after giving
effect thereto;

 

(c)           all of the representations and warranties
contained in the Credit Agreement and the other Credit Documents are true and
correct in all material respects on the Initial First Amendment Effective Date
immediately after giving effect thereto, with the same effect as though such representations
and warranties had been made on and as of the Initial First Amendment Effective
Date immediately after giving effect thereto (it being understood that any
representation or warranty made as of a specific date shall be true and correct
in all material respects as of such specific date); and

 

(d)           all of the representations and warranties
contained in the Credit Agreement and the other Credit Documents are true and
correct in all material respects on the Subsequent First Amendment Effective
Date immediately after giving effect thereto, with the same effect as though
such representations and warranties had been made on and as of the Subsequent
First Amendment Effective Date immediately after giving effect thereto (it
being understood that any representation or warranty made as of a specific date
shall be true and correct in all material respects as of such specific date).

 

2.             This Amendment is limited as specified and shall
not constitute a modification, acceptance or waiver of any other provision of
the Credit Agreement or any other Credit Document.

 

3.             This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same 

 

 

instrument. A complete set of counterparts shall be lodged with the Parent
Borrower, the Administrative Agent and the Collateral Agent.

 

4.             THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW
OF THE STATE OF NEW YORK (WITHOUT GIVING REGARD TO ANY CONFLICTS OF LAWS
PROVISIONS THEREOF).

 

5.             (a)           Section 1 and Section 3 of Article I of this
Amendment shall become effective on the date (the “Initial First Amendment
Effective Date”) when each of the Parent Borrower, Intermediate Holdings,
the Designated Subsidiary Borrowers, the Required Lenders, the Administrative
Agent, the Syndication Agent, the Collateral Agent, the Custodian and any additional
Lender required to constitute the Majority Tranche 1 Lenders shall have signed
a counterpart hereof (whether the same or different counterparts) and shall
have delivered (including by way of facsimile or other electronic transmission)
the same to White & Case LLP, 1155 Avenue of the Americas, New York, NY
10036 Attention:  May Yip (facsimile
number: 212-354-8113 / e-mail address: myip@whitecase.com).

 

(b)           Section 2 and Sections 4 through 10, inclusive, of
Article I of this Amendment shall become effective on the date (the “Subsequent First Amendment Effective Date”)
when each of the following conditions have been satisfied:

 

(i)            each of the Parent Borrower, Intermediate
Holdings, the Designated Subsidiary Borrowers, the Administrative Agent, the
Syndication Agent, the Collateral Agent, the Custodian and each Lender shall
have signed a counterpart hereof (whether the same or different counter parts)
and shall have delivered (including by way of facsimile or other electronic
transmission) the same to White & Case LLP, 1155 Avenue of the Americas,
New York, NY 10036 Attention:  May Yip
(facsimile number: 212-354-8113 / e-mail address: myip@whitecase.com); and

 

(ii)           Arch Europe shall be designated as an
additional Designated Subsidiary Borrower in accordance with Section 2.20 of
the Credit Agreement and all terms and conditions required pursuant to said Section
shall have been satisfied on or prior to the Subsequent First Amendment
Effective Date.

 

6.             From and after the Initial First Amendment
Effective Date, all references in the Credit Agreement and each of the other
Credit Documents to the Credit Agreement shall be deemed to be references to
the Credit Agreement as modified hereby on the Initial First Amendment
Effective Date. From and after the Subsequent First Amendment Effective Date,
all references in the Credit Agreement and each of the other Credit Documents
to the Credit Agreement shall be deemed to be references to the Credit
Agreement as modified hereby on the Subsequent First Amendment Effective Date.

 

*          *          *

 

 

IN
WITNESS WHEREOF, the parties hereto have caused their duly authorized officers
to execute and deliver this Amendment as of the date first above written.

 

 

	
   

  	
  ARCH CAPITAL GROUP LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Vollaro

  	
   

  
	
   

  	
   

  	
  Title: Executive Vice President &

  
	
   

  	
   

  	
   

  	
  Chief Finance Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ARCH CAPITAL GROUP (U.S.) INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ramin Taraz

  	
   

  
	
   

  	
   

  	
  Title: Controller

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ARCH REINSURANCE LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicolas Papadopoulo

  	
   

  
	
   

  	
   

  	
  Title: President & Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ARCH REINSURANCE COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Barry E. Golub

  	
   

  
	
   

  	
   

  	
  Title: Treasurer & Controller

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ARCH INSURANCE COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ramin Taraz

  	
   

  
	
   

  	
   

  	
  Title: Controller

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WESTERN DIVERSIFIED CASUALTY

  INSURANCE COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ramin Taraz

  	
   

  
	
   

  	
   

  	
  Title: Controller

  
								

 

 

	
   

  	
  ARCH SPECIALTY INSURANCE COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ramin Taraz

  	
   

  
	
   

  	
   

  	
  Title: Controller

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ARCH EXCESS & SURPLUS INSURANCE

  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ramin Taraz

  	
   

  
	
   

  	
   

  	
  Title: Controller

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ARCH INSURANCE COMPANY (EUROPE)

  LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul Robotham

  	
   

  
	
   

  	
   

  	
  Title: Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE BANK, N.A.,

  
	
   

  	
  Individually,
  and as Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Heather Lindstrom

  	
   

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
  THE
  BANK OF NEW YORK,

  
	
   

  	
  Individually, as
  Custodian and as Collateral

  Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lizanne T. Eberle

  	
   

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
  THE BANK OF AMERICA, N.A.,

  
	
   

  	
  Individually
  and as Syndication Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tim Cassidy

  	
   

  
	
   

  	
   

  	
  Title: Vice President 

  
									

 

 

SIGNATURE
PAGE TO THE FIRST AMENDMENT TO CREDIT AGREEMENT, DATED AS OF APRIL 18, 2006,
AMONG ARCH CAPITAL GROUP LTD., ARCH CAPITAL GROUP (U.S.) INC., THE
VARIOUS DESIGNATED SUBSIDIARY BORROWERS PARTY TO THE CREDIT AGREEMENT, THE
VARIOUS LENDERS PARTY TO THE CREDIT AGREEMENT AND JPMORGAN CHASE BANK, N.A., AS
ADMINISTRATIVE AGENT

 

	
   

  	
  BARCLAYS
  BANK PLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  D. L. Potter

  	
   

  
	
   

  	
   

  	
  Title:
  Authorized Signatory

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CALYON
  NEW YORK BRANCH

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Sebastian Rocco

  	
   

  
	
   

  	
   

  	
  Title:
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Charles Kornberger

  	
   

  
	
   

  	
   

  	
  Title:
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CHANG
  HWA COMMERCIAL BANK, LTD.,

  
	
   

  	
  NEW YORK BRANCH

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jim C. Y. Chen

  	
   

  
	
   

  	
   

  	
  Title:
  Vice President & General Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CITIBANK,
  N.A.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Michael A. Taylor

  	
   

  
	
   

  	
   

  	
  Title:
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HSBC
  BANK USA, N.A.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Kenneth J. Johnson

  	
   

  
	
   

  	
   

  	
  Title:
  Senior Vice President

  
										

 

 

	
   

  	
  ING
  BANK N.V., LONDON BRANCH

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  M. Sharman

  	
   

  
	
   

  	
   

  	
  Title:
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  P. Galpin

  	
   

  
	
   

  	
   

  	
  Title:
  Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LLOYDS
  TSB BANK PLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  James M. Rudd

  	
   

  
	
   

  	
   

  	
  Title:
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Candi Obrentz

  	
   

  
	
   

  	
   

  	
  Title:
  Assistant Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ROYAL
  BANK OF SCOTLAND PLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  George Urban

  	
   

  
	
   

  	
   

  	
  Title:
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  U.S.
  BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Ziad W. Amra

  	
   

  
	
   

  	
   

  	
  Title:
  Assistant Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WACHOVIA
  BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Grainne M. Pergolini

  	
   

  
	
   

  	
   

  	
  Title:
  Vice PresidentExhibit 10.2

 

[CONFORMED AS EXECUTED]

 

DSB
ASSUMPTION AGREEMENT

 

DSB ASSUMPTION AGREEMENT (the “Agreement”) dated as of
April 18, 2006, by Arch Insurance Company (Europe) Limited, a private company
limited by shares incorporated under the laws of England and Wales (the “Applicable
Borrower”). Unless otherwise defined herein, capitalized terms used herein and
defined in the Credit Agreement referred to below are used herein as so
defined.

 

W  I  T  N  E  S
S  E  T  H :

 

WHEREAS, Arch Capital Group Ltd. (the “Parent Borrower”),
Arch Capital Group (U.S.) Inc., various Designated Subsidiary Borrowers from
time to time party thereto, the Lenders from time to time party thereto, and
JPMorgan Chase Bank, N.A., as Administrative Agent, have entered into a Amended
and Restated Credit Agreement dated as of November 29, 2005 (as amended,
restated, supplemented or modified from time to time through the date hereof,
the “Credit Agreement”);

 

WHEREAS, pursuant to Section 2.20 of the Credit
Agreement, the Parent Borrower may designate one or more Persons as a
Designated Subsidiary Borrower from time to time; and

 

WHEREAS, the Parent Borrower desires to designate the
Applicable Borrower as a Designated Subsidiary Borrower for purposes of the
Credit Agreement;

 

WHEREAS, the Applicable Borrower desires to execute
and deliver this Agreement in order to become a party to the Credit Agreement
as a Designated Subsidiary Borrower and a party to the Security Agreement and
the Account Control Agreement, respectively, as a Grantor;

 

NOW, THEREFORE, IT IS AGREED:

 

1.                                       Assumption. By executing and delivering this Agreement, the
Applicable Borrower hereby becomes a party to (i) the Credit Agreement as a “Designated
Subsidiary Borrower” thereunder, and hereby expressly assumes all obligations
and liabilities applicable to it as a “Designated Subsidiary Borrower”
thereunder, (ii) the Security Agreement, as a “Grantor” thereunder, and hereby
expressly assumes all obligations and liabilities applicable to it as a “Grantor”
thereunder and (iii) the Account Control Agreement, as a “Grantor” thereunder,
and hereby expressly assumes all obligations and liabilities applicable to it
as a “Grantor” thereunder.

 

2.                                       Representations, Warranties and
Agreements.  (a)
In order to induce the Lenders to issue Letters of Credit (or increase the
Stated Amount thereof) as provided in the Credit Agreement, the Applicable
Borrower hereby makes the following representations and warranties to, and
agreements with, the Lenders, all of which shall survive the execution and delivery
of this Agreement and the issuance of Letters of Credit for the account of the
Applicable Borrower:

 

 

(i)  The execution, delivery and performance by
the Applicable Borrower of this Agreement and the other Credit Documents (i)
are within the Applicable Borrower’s corporate powers, (ii) have been duly
authorized by all necessary corporate or other action, (iii) require no action
by or in respect of, or filing with, any governmental body, agency or official,
(iv) do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of incorporation or by-laws
or other organizational documents of the Applicable Borrower or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
the Applicable Borrower or any of its Subsidiaries, and (v) do not result in
the creation or imposition of any Lien on any asset of the Applicable Borrower
or any of its Subsidiaries (other than Liens in favor of the Administrative
Agent and the Lenders).

 

(ii)  This Agreement and each other Credit Document
constitutes valid and binding obligations of the Applicable Borrower
enforceable in accordance with their terms, provided that the
enforceability hereof and thereof is subject in each case to general principles
of equity and to bankruptcy, insolvency and similar laws affecting the
enforcement of creditors’ rights generally.

 

(iii) All factual
information (taken as a whole) heretofore or contemporaneously furnished by the
Applicable Borrower or any of its Subsidiaries to the Administrative Agent or
any Lender in writing (including, without limitation, 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 in writing
to the Administrative Agent 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 and all filings by the Parent Borrower or the Applicable Borrower, if
any, with the Securities and Exchange Commission) not misleading at such time
in light of the circumstances under which such information was provided; provided
that, with respect to projections the Applicable Borrower represents only that
the projections contained in such materials are based on good faith estimates
and assumptions believed by the Applicable Borrower to be reasonable and
attainable at the time made, it being recognized by 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
Applicable Borrower’s control and that actual results during the period or
periods covered by any such projections may differ from the projected results.

 

(iv) The
Applicable Borrower is not subject to any bankruptcy or insolvency proceeding
of the type referred to in Section 8.05 of the Credit Agreement.

 

(b) The Applicable Borrower hereby makes and
undertakes, as the case may be, each representation and warranty as (i) a
Borrower pursuant to Article IV of the Credit Agreement, (ii) a Grantor
pursuant to Section 3 of the Security Agreement and (iii) a Grantor pursuant to
Section 8 of the Account Control Agreement, in each case as of the date hereof 

 

2

 

(except to the extent any
such representation or warranty relates solely to an earlier date in which case
such representation and warranty is made as of such earlier date).

 

2.                                       Collateral Accounts; Financing Statements. By executing and delivering this
Agreement, the Applicable Borrower hereby agrees to:

 

(i)                                     establish and maintain with the Custodian
(as defined in the Security Agreement) or an Affiliate thereof, a Deposit
Account (as defined in the Security Agreement) and a Securities Account (as
defined in the Security Agreement), each of which shall at all times be subject
to the Account Control Agreement;

 

(ii)                                  authorize the Collateral Agent (as
defined in the Security Agreement) to file such financing statements, in form
and substance acceptable to the Collateral Agent, as the Collateral Agent may
deem necessary or desirable in the opinion of the Collateral Agent to establish
and maintain a valid, enforceable, first priority perfected security interest
in the Collateral (as defined in the Security Agreement) owned by such
Applicable Borrower; and

 

2.                                       Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.

 

3.                                       GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.

 

3

 

IN WITNESS WHEREOF, the undersigned has caused this
Agreement to be duly executed and delivered as of the date first above written.

 

	
   

  	
  ARCH
  INSURANCE COMPANY (EUROPE)

  LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  Paul Robotham

  	
   

  
	
   

  	
   

  	
  Title:
  Chief Financial Officer

  
	
   

  	
   

  
	
  ACKNOWLEDGED:

  	
   

  
	
   

  	
   

  
	
  ARCH CAPITAL GROUP LTD.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
  /s/ John Vollaro

  	
   

  	
   

  
	
   

  	
  Title: Executive Vice President &

  	
   

  
	
   

  	
   

  	
  Chief Financial Officer

  	
   

  
	
   

  	
   

  
	
  JPMORGAN CHASE BANK, N.A.,

  	
   

  
	
  as Administrative Agent

  	
   

  
	
   

  	
   

  
	
  By

  	
  /s/
  Helen L. Newcomb

  	
   

  	
   

  
	
   

  	
  Title:
  Managing Director

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