Document:

EX 10.1 First Amendment Credit

EXHIBIT 10.1

FIRST AMENDMENT TO CREDIT AGREEMENT 

THIS FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of December 9, 2013 (this “Amendment”), amends the Credit Agreement dated as of August 18, 2011 among ARCH CAPITAL GROUP LTD., a Bermuda company (“Parent Borrower”), and certain Subsidiaries of the Parent Borrower party thereto (each a “Designated Subsidiary Borrower” and, together with the Parent Borrower, the “Borrowers” and, each a “Borrower”), each lender from time to time party thereto (collectively, the “Lenders” and individually, a “Lender”), JPMorgan Chase Bank, N.A. (“JPMCB”), as an L/C Administrator and Fronting Bank with respect to the Existing Letters of Credit, and Bank of America, N.A., as Administrative Agent, L/C Administrator and Fronting Bank (the “Credit Agreement”).  Terms defined in the Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used herein as defined therein.
WHEREAS, the parties hereto have entered into the Credit Agreement, which provides for the Lenders to extend certain credit facilities to the Borrowers from time to time; and
WHEREAS, the parties hereto desire to amend the Credit Agreement in certain respects as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties hereto agree as follows:
1.     AMENDMENTS.  Subject to Section 2 hereof, the Credit Agreement shall be amended, effective as of the date hereof, as follows:
1.1    Amendment to Definitions.  
(a) Section 1.01 is hereby amended to add the following definitions in proper alphabetical order:
“ACUS” means Arch Capital Group (U.S.) Inc., a Delaware corporation.
“ACUS Guaranty” means the guaranty executed by ACUS guaranteeing the Obligations of the Parent Borrower hereunder.
“Parent Guaranty” means the guaranty executed by the Parent Borrower of the Obligations of ACUS as a Borrower hereunder.
(b)    The definition of “Credit Documents” is amended by inserting the following at the end thereof:
“the Parent Guaranty, the ACUS Guaranty and each Designated Subsidiary Borrower Request and Assumption Agreement”

1.2    Section 2.01(b) of the Credit Agreement is amended by amending and restating clause (i) in its entirety to read as follows:
“(i) each Tranche B Lender severally agrees to make loans in Dollars, Euros or Sterling (each such loan a “Loan”) to the Parent Borrower and ACUS from time to time, on any Business Day, from time to time during the Availability Period  in an amount equal to such Tranche B Lender’s Applicable Percentage of the requested Loan”
1.3    Section 2.02 of the Credit Agreement is amended as follows:
(a)    The first sentence of Section 2.02(a) is amended in its entirety to read as follows:
“Each Borrowing, each conversion of Loans from one Type to the other, and each continuation of Eurocurrency Rate Loans shall be made upon the Parent Borrower’s or ACUS’s irrevocable notice to the Administrative Agent, which may be given by telephone”
(b)    Section 2.02 is further amended by replacing the words “Parent Borrower” each time they appear (other than in the first sentence of Section 2.02(a)) with the words “the applicable Borrower”.
1.4    Section 2.04 of the Credit Agreement is amended by amending to read in its entirety as follows:
“2.04    Prepayments; Cash Collateralization.
(a)    The Parent Borrower or ACUS, as applicable, may, upon notice to the Administrative Agent, at any time or from time to time voluntarily prepay Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Administrative Agent not later than 11:00 a.m. (A) three Business Days prior to any date of prepayment of Eurocurrency Rate Loans denominated in Dollars, (B) four Business Days (or five, in the case of prepayment of Loans denominated in Special Notice Currencies) prior to any date of prepayment of Eurocurrency Rate Loans denominated in Alternative Currencies, and (C) on the date of prepayment of Base Rate Loans; (ii) any prepayment of Eurocurrency Rate Loans denominated in Dollars shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof; (iii) any prepayment of Eurocurrency Rate Loans denominated in Alternative Currencies shall be in a minimum principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof; and (iv) any prepayment of Base Rate Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding.  Each such notice shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid and, if Eurocurrency Rate Loans are to be prepaid, the Interest Period(s) of such Loans.  The Administrative Agent will promptly notify each Tranche B Lender of its receipt of each such notice, and of the amount of such Tranche B Lender’s Applicable Percentage of such prepayment.  The Parent Borrower or ACUS, as applicable, shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.  Any prepayment of a Eurocurrency Rate Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05.  

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Each such prepayment shall be applied to the Loans of the Tranche B Lenders in accordance with their respective Applicable Percentages.
(b)    If for any reason the Tranche B Outstandings at any time exceed the aggregate Tranche B Commitments then in effect, the Parent Borrower and/or ACUS, as applicable, shall immediately (or shall cause one or more Designated Subsidiary Borrowers to) prepay Loans and/or Cash Collateralize the Tranche B L/C Obligations in an aggregate amount equal to such excess; provided, however, that neither the Parent Borrower nor ACUS shall be required to Cash Collateralize the Tranche B L/C Obligations pursuant to this Section 2.04(b) unless after the prepayment in full of the Loans the Tranche B Outstandings exceed the aggregate Tranche B Commitments then in effect.
(c)    If the Tranche B Obligations are accelerated pursuant to Section 8.02, and until the final expiration date of all Tranche B Letters of Credit and thereafter so long as any Tranche B L/C Obligations are payable hereunder, the applicable Borrower shall immediately cash collateralize its Tranche B Letters of Credit with Cash and Cash Equivalents in an amount equal to 102% of the outstanding Tranche B L/C Obligations and shall deposit such Cash and Cash Equivalents in a special collateral account pursuant to arrangements satisfactory to the Administrative Agent at the Administrative Agent’s office in the name of the Parent Borrower, ACUS, ARC or ARL, as applicable, but under the sole dominion and control of the Administrative Agent, for the benefit of the Fronting Banks and the Tranche B Lenders.
(d)    Upon the request of the Parent Borrower or ACUS, as applicable, made within two Business Days following any Revaluation Date, the Administrative Agent will, so long as no Default then exists, release Cash Collateral to the Parent Borrower, ACUS or the applicable Designated Subsidiary Borrower, as the case may be, to the extent that such Cash Collateral is no longer required pursuant to Section 2.04(b) or (c), as applicable.
(e)    The Administrative Agent or the Applicable Issuing Party may, at any time and from time to time after the initial deposit of Cash Collateral pursuant to Section 2.04(b) or (c), request additional Cash Collateral to the extent the amount of Cash Collateral provided pursuant thereto is no longer sufficient due to exchange rate fluctuations.
1.5    Section 2.06 of the Credit Agreement is amended by amending to read in its entirety as follows:
“2.06    Repayment of Loans.  The Parent Borrower and ACUS, as applicable, shall repay to the Lenders on the Maturity Date the aggregate principal amount of Loans outstanding on such date.”
1.6    Section 2.13 of the Credit Agreement is amended by 
(i)    relettering subsections (b), (c) and (d) as (c), (d) and (e);
(ii)    inserting the following as new subsection (b) as follows:

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(b)    The Parent Borrower may at any time, upon not less than 10 Business Days’ notice to the Administrative Agent (or such shorter notice as the Administrative Agent may permit), designate any additional Subsidiary of the Parent Borrower (an “Applicant Borrower”) as a Designated Subsidiary Borrower to request Tranche B Loans or  Letters of Credit hereunder by delivering to the Administrative Agent (which shall promptly deliver counterparts thereof to each Tranche B Lender) a duly Designated Subsidiary Borrower Request and Assumption Agreement with appropriate changes to reflect whether such Applicant Borrower may request Loans or Letters of Credit).  The parties hereto acknowledge and agree that prior to any Applicant Borrower becoming entitled to utilize the Tranche B Commitment the Administrative Agent and the Tranche B  Lenders shall have received such supporting resolutions, incumbency certificates, opinions of counsel and other documents or information, in form, content and scope reasonably satisfactory to the Administrative Agent, as may be required by the Administrative Agent or the Tranche B Lenders holding more than 50% of the Tranche B Commitments in their sole discretion.  If the Administrative Agent and the Tranche B Lenders agree that an Applicant Borrower shall be entitled to request Loans or Tranche B Letters of Credit hereunder, then promptly following receipt of all such requested resolutions, incumbency certificates, opinions of counsel and other documents or information, the Administrative Agent shall send a Designated Subsidiary Borrower Notice to the Parent Borrower and the Tranche B  Lenders specifying the effective date upon which such Applicant Borrower shall constitute a Designated Subsidiary Borrower under the Tranche B Commitment, whereupon each of the Tranche B Lenders agrees to permit such Designated Subsidiary Borrower to request Loans or Tranche B Letters of Credit hereunder, as the case may be, on the terms and conditions set forth herein, and each of the parties agrees that such Designated Subsidiary Borrower otherwise shall be a Borrower for all purposes of this Agreement; provided that no request for a Credit Extension may be submitted by or on behalf of such Designated Subsidiary Borrower until the date five Business Days after such effective date (or such shorter period as may be acceptable to the Tranche B Lenders).
(iii)    amending relettered subsection (e) in its entirety to read as follows:
(e)    The Parent Borrower may from time to time, upon not less than 5 Business Days’ notice from the Parent Borrower to the Administrative Agent (or such shorter period as may be agreed by the Administrative Agent in its sole discretion), terminate a Designated Subsidiary Borrower’s status as such, provided that there are no Letters of Credit issued for the account of such Designated Subsidiary Borrower or other amounts payable by such Designated Subsidiary Borrower on account of any Letters of Credit issued for its account or Loans outstanding to such Designated Subsidiary Borrower, as of the effective date of such termination. Termination of ACUS as a Designated Subsidiary Borrower shall not release ACUS from its obligations under the ACUS Guarantee.  The Administrative Agent will promptly notify the Lenders of any such termination of a Designated Subsidiary Borrower’s status.

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1.7    Section 6.10 of the Credit Agreement (Financial Strength Rating) is amended by inserting the following at the end thereof:  
“; provided, further however, that this covenant shall not apply to ACUS.”
1.8    Section 7.04 of the Credit Agreement (Indebtedness) is amended to read in its entirety as follows:
“7.04    Indebtedness.  The Parent Borrower will not permit any of its Subsidiaries (other than ACUS) 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 (i) the Obligations, (ii) Indebtedness under the Long Term L/C Facilities and (iii) Permitted Subsidiary Indebtedness.”
1.9    Schedule 1.01(c) is replaced with Schedule 1.01(c) hereto.
2.     CONSENT.  The Tranche B Lenders hereby consent that ACUS shall become a Designated Subsidiary Borrower under the Tranche B Commitment.  For the avoidance of doubt, ACUS (i) shall not be entitled to request Tranche B Letters of Credit, (ii) shall not be required to execute a Security Agreement or Control Agreement or otherwise satisfy the conditions set forth in Section 4.02(e) of the Credit Agreement and (iii) shall not be entitled to request any Loan until such time as ACUS has complied with Section 4.02(f)(v) of the Credit Agreement.
3.    CONDITIONS PRECEDENT.  The Amendments to the Credit Agreement set forth in Section 1 and the consent in Section 2 shall become effective when each of the conditions precedent set forth in this Section 3 shall have been satisfied (the date of effectiveness being referred to herein as the “Amendment Effective Date”).
3.1    Receipt of Documents.  The Administrative Agent shall have received the following documents: 
(a)    this Amendment duly executed by the Borrowers, the Administrative Agent and the Required Lenders and the Tranche B Lenders; 
(b)    the Parent Guaranty duly executed by the Parent Borrower;
(c)    the ACUS Guaranty duly executed by ACUS;
(d)    a Designated Subsidiary Borrower Request and Assumption Agreement in the form attached as Exhibit A duly executed by Parent Borrower and ACUS;
(e)    an opinion, in form and substance reasonably satisfactory to the Administrative Agent, addressed to the Administrative Agent and each of the Lenders from (i) Cahill Gordon & Reindel LLP, special U.S. counsel to the Borrowers with respect to ACUS and (ii) Conyers, Dill & Pearman, special Bermuda counsel to the Parent Borrower; 
(f)    a certificate signed by the President, any Vice President, Chief Executive Officer, Chief Financial Officer, Controller or Chief Operating Officer of Parent Borrower 

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and ACUS, and attested to by the Secretary or any Assistant Secretary of such Borrower, together with (x) copies of its Organizational Documents, (y) the resolutions relating to the Credit Documents and (z) an incumbency certificate evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Credit Documents to which such Borrower is a party;  and
(g)    all other documents or materials as the Administrative Agent may reasonably request.
3.2    Compliance with Warranties, No Default, etc.  After giving effect to this Amendment, the following statements by each Borrower shall be true and correct (and each Borrower, by its execution of this Amendment, hereby represents and warrants to the Administrative Agent and each Lender that such statements are true and correct as at such times):
(a)    the representations and warranties set forth in Article V of the Credit Agreement and in each other Credit Document shall be true and correct in all material respects with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date); and
(b)    no Default or Event of Default shall have then occurred and be continuing.
4.     MISCELLANEOUS.
5.1    Continuing Effectiveness, etc.  This Amendment shall be deemed to be an amendment to the Credit Agreement, and the Credit Agreement, as amended hereby, shall remain in full force and effect and is hereby ratified, approved and confirmed in each and every respect.  After the effectiveness of this Amendment in accordance with its terms, all references to the Credit Agreement in the Credit Documents or in any other document, instrument, agreement or writing shall be deemed to refer to the Credit Agreement as amended hereby.  Each other Credit Document is hereby ratified, approved and confirmed in each and every respect by each Borrower party thereto.  
5.2    Payment of Costs and Expenses.  Parent Borrower agrees to pay on demand all reasonable and documented out-of-pocket expenses of the Administrative Agent (including the reasonable fees and out-of-pocket expenses of counsel to the Administrative Agent) in connection with the negotiation, preparation, execution and delivery of this Amendment.
5.3    Severability.  Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Amendment or affecting the validity or enforceability of such provision in any other jurisdiction.
5.4    Headings.  The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or any provisions hereof.

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5.5    Execution in Counterparts.  This Amendment may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement.  Delivery of a counterpart hereof, or a signature hereto, by facsimile or by email in .pdf or similar format shall be effective as delivery of a manually-executed original counterpart hereof.  
5.6    Governing Law.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
5.7    Successors and Assigns.  This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.
5.8    Credit Document.  This Amendment is a Credit Document.
[Signature Pages Follow]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written.
ARCH CAPITAL GROUP LTD.

By:    /s/ W. Preston Hutchings     
    Name:  W. Preston Hutchings 
    Title:  SVP & Chief Investment Officer

S-1

ARCH REINSURANCE LTD.

By:    /s/ Nicolas Papadopoulo 
    Name:  Nicolas Papadopoulo 
    Title:  President & CEO

S-2

ARCH REINSURANCE COMPANY

By:    /s/ Timothy J. Olson 
    Name:  Timothy J. Olson 
    Title:  President & CEO

S-3

ARCH INSURANCE COMPANY

By:    /s/ Thomas J. Ahern 
    Name:  Thomas J. Ahern 
    Title:  SVP & Chief Financial Officer

S-4

ARCH SPECIALTY INSURANCE COMPANY

By:    /s/ Thomas J. Ahern 
    Name:  Thomas J. Ahern 
    Title:  SVP & Chief Financial Officer

S-5

ARCH EXCESS & SURPLUS INSURANCE COMPANY

By:    /s/ Thomas J. Ahern 
    Name:  Thomas J. Ahern 
    Title:  SVP & Chief Financial Officer

S-6

ARCH INSURANCE COMPANY (EUROPE) LIMITED

By:    /s/ Jason Kittinger 
    Name:  Jason Kittinger 
    Title:  Finance Director

S-7

ARCH REINSURANCE EUROPE UNDERWRITING LIMITED

By:    /s/ Mark Nolan 
    Name:  Mark Nolan 
    Title:  CFO

S-8

ARCH CAPITAL GROUP (U.S.) INC.

By:    /s/ Thomas J. Ahern 
    Name:  Thomas J. Ahern 
    Title:  SVP & Chief Financial Officer

S-9

BANK OF AMERICA, N.A., as Administrative Agent, L/C Administrator, Fronting Bank  and a Lender

By:    /s/ Tiffany Burgess_____________________ 
    Name:  Tiffany Burgess      
    Title:    Vice President

S-10

JPMORGAN CHASE BANK, N.A., as L/C Administrator, Fronting Bank  and a Lender

By:    /s/ Richard Barracato_____________ 
    Name:  Richard Barracato 
    Title:    Vice President

S-11

BARCLAYS BANK PLC

By:    /s/ Dan Broome______________
Name:  Dan Broome 
    Title:    Director

S-12

CITIBANK, N.A.

By:    ______________________________________    Name: 
    Title:

S-13

ING BANK N.V., LONDON BRANCH

By:    /s/ M. E. R. Sharman_________________ 
    Name:  M. E. R. Sharman 
    Title:    Director
By:    /s/ N. J. Marchant____________________ 
    Name:  N. J. Marchant 
    Title:    Director

S-14

LLOYDS TSB BANK PLC

By:    /s/ Stephen Giacolone_________________ 
    Name:  Stephen Giacolone 
    Title:    Assistant Vice President—G011

By:    /s/ Dennis McClellan__________________ 
    Name:  Dennis McClellan 
    Title:    Assistant Vice President—M040

S-15

THE BANK OF NEW YORK MELLON 

By:    /s/ Michael Pensari____________________ 
    Name:  Michael Pensari 
    Title:    Managing Director

S-16

U.S. BANK NATIONAL ASSOCIATION

By:    /s/ Evan Glass______________________ 
    Name:  Evan Glass 
    Title:    Vice President

S-17

WELLS FARGO BANK, NATIONAL ASSOCIATION

By:    /s/ Kimberly Shaffer____________________ 
    Name:  Kimberly Shaffer 
    Title:    Managing Director

S-18

SCHEDULE 1.01(c)
FACILITY-WIDE LIABILITY PERCENTAGE
Tranche A 

ARL             $251m        50%
ARC            $ 32m        6%
AIC            $ 0.30m    0%
Arch Europe        $ 15m        3%
AREUL        $0m        0%

Tranche B 

ACGL            $100m        33%
ACUS            $100m        67%
ARC            $0m        0%
ARL            $0m            0%

S-1EX 10.2 Guaranty by ACGL

EXHIBIT 10.2

GUARANTY
THIS GUARANTY (the “Guaranty”) is made by ARCH CAPITAL GROUP LTD. (the “Guarantor”), in favor of the Guaranteed Parties (as hereinafter defined).  Capitalized terms used herein without definition shall have the meanings given to them in the Credit Agreement referred to below.
RECITALS
A.    The Guarantor and various of its Subsidiaries and Arch Capital Group (U.S.) Inc.(the “Guaranteed Borrower), certain financial institutions (the “Lenders”), each lender from time to time party thereto (collectively, the “Lenders” and individually, a “Lender”), JPMorgan Chase Bank, N.A. (“JPMCB”), as an L/C Administrator and Fronting Bank with respect to the Existing Letters of Credit, and Bank of America, N.A., as Administrative Agent, L/C Administrator and Fronting Bank  are parties to a Credit Agreement dated as of August 18, 2011 (the “Credit Agreement”) as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Credit Agreement”.  
B.    The Guaranteed Borrower is a Subsidiary of the Guarantor, and the Guarantor will benefit from the extension of credit to the Guaranteed Borrower under the Credit Agreement, which benefits are hereby acknowledged, and accordingly desires to execute and deliver this Guaranty.      
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, to induce the Lenders, the Administrative Agent, the Fronting Banks and the L/C Administrator (collectively, the “Guaranteed Parties”) to make Loans to the Guaranteed Borrower under the Credit Agreement and in recognition of the direct benefits to be received by the Guarantor from the proceeds of the Loans the Guarantor hereby agrees as follows:
1.Guaranty.  The Guarantor hereby unconditionally, absolutely and irrevocably guarantees, as a primary obligor and not merely as surety, the full and punctual payment when due (whether at stated maturity, upon acceleration or otherwise) of all Obligations of the Guaranteed Borrower to the Guaranteed Parties under the Credit  Documents (the “Guaranteed Obligations”).  This Guaranty is a guaranty of payment and not of collection.  Upon failure by the Guaranteed Borrower to pay punctually any of its Guaranteed Obligations when due and payable (whether at stated maturity, upon acceleration or otherwise), the Guarantor agrees to pay forthwith on demand from the Administrative Agent the amount then due and not so paid at the place and in the manner specified in the Credit Agreement.
2.    Guaranty Unconditional.  The obligations of the Guarantor under this Guaranty shall be unconditional, absolute and irrevocable and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by:

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EXHIBIT 10.2

(a)    any extension, renewal, settlement, compromise, waiver or release (including with respect to any Collateral) in respect of any obligation of any other obligor under any of the Credit  Documents, by operation of law or otherwise;
(b)    any modification or amendment of or supplement to any of the Credit  Documents;
(c)    any release, non-perfection or invalidity of any direct or indirect security for any obligation of any other obligor under any of the Credit  Documents;
(d)    any change in the corporate existence, structure or ownership of any obligor, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting any other obligor or its assets or any resulting release or discharge of any obligation of any other obligor contained in any of the Credit  Documents;
(e)    the existence of any claim, set-off or other rights which any obligor may have at any time against any other obligor, the Administrative Agent, the L/C Administrator, any Fronting Bank, any Lender or any other corporation or person, whether in connection with any of the Credit  Documents or any unrelated transactions, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim;
(f)    any invalidity or unenforceability relating to or against any other obligor for any reason of any of the Credit  Documents, or any provision of applicable law or regulation purporting to prohibit the payment by any other obligor of principal, interest or any other amount payable under any of the Credit  Documents;
(g)    any law, regulation or order of any jurisdiction, or any other event, affecting any term of any obligation of the Guaranteed Parties’ rights with respect thereto; or
(h)    any other act or omission to act or delay of any kind by any obligor, the Administrative Agent, the L/C Administrator, any Fronting Bank, any Lender or any other corporation or person or any other circumstance whatsoever (other than the defense of payment or performance) which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of or defense to the Guarantor’s obligations under this Guaranty.
3.    Discharge Only upon Payment in Full; Reinstatement in Certain Circumstances.  The Guarantor’s obligations under this Guaranty shall remain in full force and effect until the Commitments under the Credit Agreement shall have expired or been terminated, no Letters of Credit shall be outstanding and all Obligations payable by the Guaranteed Borrower under the Credit  Documents shall have been paid in full in cash.  If at any time any payment of the principal of or interest on any Loan or any Obligation due and payable by the Guaranteed Borrower under the Credit  Documents is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Guaranteed Borrower or otherwise, the Guarantor’s obligations under this Guaranty with respect to such payment shall be reinstated as though such payment had been due but not made at the time of such reinstatement.

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EXHIBIT 10.2

4.    Waiver by the Guarantor.  The Guarantor expressly waives all setoffs and counterclaims and all presentments, demands for payment or performance, notices of nonpayment or nonperformance, protests, notices of protest, notices of dishonor and all other notices or demands of any kind or nature whatsoever with respect to the Guaranteed Obligations, and all notices of acceptance of this Guaranty or of the existence, creation or incurrence of new or additional Guaranteed Obligations, as well as any requirement that at any time any action be taken by any corporation or person against any other obligor or any other corporation or person.  The Guarantor warrants and agrees that each waiver set forth in this Section 4 is made with full knowledge of its significance and consequences, and such waivers shall be effective to the maximum extent permitted by law.  
5.    Subrogation.  The Guarantor hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against the Guaranteed Borrower that arise from the existence, payment, performance or enforcement of the Guarantor’s obligations under or in respect of this Guaranty, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Lender, any Fronting Bank, the L/C Administrator or the Administrative Agent against any other Credit Party or any other insider guarantor or any Collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from any other Credit Party or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until (a) the Guarantor shall have paid in full in cash all Guaranteed Obligations payable to the Guaranteed Parties under this Guaranty (and all reasonable out‐of‐pocket expenses incurred by any of the Guaranteed Parties (including the reasonable fees, charges and disbursements of any counsel for the Guaranteed Parties)), in connection with the enforcement or protection of its rights under this Guaranty and (b) the Commitments under the Credit Agreement shall have expired or been terminated, no Letters of Credit shall be outstanding and all Obligations payable by the Guaranteed Borrowers under the Credit  Documents shall have been paid in full in cash.  If any amount shall be paid to the Guarantor in violation of the immediately preceding sentence at any time prior to the date all Commitments under the Credit Agreement shall have terminated, no Letters of Credit shall be outstanding and all Obligations payable by the Guaranteed Borrowers under the Credit  Documents shall have been paid in full in cash, such amount shall be received and held in trust for the benefit of the Lenders, shall be segregated from other property and funds of the Guarantor and shall forthwith be paid or delivered to the Administrative Agent in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to all amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Credit  Documents, or to be held as collateral for any amounts payable under this Guaranty thereafter arising.  If (i) the Guarantor shall have paid in full in cash all Guaranteed Obligations payable to the Guaranteed Parties under this Guaranty (and all reasonable out‐of‐pocket expenses incurred by any of the Guaranteed Parties (including the reasonable fees, charges and disbursements of any counsel for the Guaranteed Parties)), in connection with the enforcement or protection of its rights under this Guaranty and (ii) the Commitments under the Credit Agreement shall have expired or been terminated, no Letters of Credit shall be outstanding and all Obligations payable by the 

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EXHIBIT 10.2

Guaranteed Borrowers under the Credit  Documents shall have been paid in full in cash, the Guaranteed Parties will, at the Guarantor’s request and expense, execute and deliver to the Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to the Guarantor of an interest in the obligations resulting from such payment made by the Guarantor pursuant to this Guaranty.
6.    Stay of Acceleration.  If acceleration of the time for payment of any amount payable by the Guaranteed Borrower under any of the Credit  Documents is stayed upon the insolvency, bankruptcy or reorganization of the Guaranteed Borrower, all such Obligations otherwise subject to acceleration under the terms of the Credit Agreement shall nonetheless be payable by the Guarantor under this Guaranty forthwith on demand by the Administrative Agent.
7.    Continuing Guaranty; Assignments.  This Guaranty is a continuing guaranty and shall (a) be binding upon the Guarantor, its successors and assigns and (b) inure to the benefit of and be enforceable by the Lenders, the Issuers and the Administrative Agent and their successors, transferees and assigns.  Without limiting the generality of clause (b) of the immediately preceding sentence, any Lender and any Fronting Bank may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, in each case as and to the extent provided in Section 9.06(b) or 10.06, as the case may be, of the Credit Agreement.
8.    Payments; Application; Set-Off.
(a)    All payments made by the Guarantor hereunder will be made in Dollars to the Administrative Agent, without set-off, counterclaim or other defense and, in accordance with the Credit Agreement, the Guarantor hereby agreeing to comply with and be bound by the provisions of the Credit Agreement in respect of all payments made by it hereunder.
(b)    All payments made hereunder shall be applied in accordance with the provisions of the Credit Agreement.
(c)    If an Event of Default shall have occurred and be continuing, each Guaranteed Party and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Guaranteed Party or any such Affiliate to or for the credit or the account of the Guarantor against any and all of the obligations of the Guarantor now or hereafter existing under this Guaranty or any other Credit  Document to such Guaranteed Party, irrespective of whether or not such Guaranteed Party shall have made any demand under this Guaranty or any other Credit  Document and although such obligations of the Guarantor may be contingent or unmatured or are owed to a branch or office of such Guaranteed Party different from the branch or office holding such deposit or obligated on such indebtedness.  The rights of each Guaranteed Party and their respective Affiliates under this subsection are in addition to other rights and remedies (including other rights of set-off) that such Guaranteed Parties or their respective Affiliates may have.  Each Guaranteed Party agrees to 

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EXHIBIT 10.2

notify the Guarantor and the Administrative Agent promptly after any such set-off and application; provided that the failure to give such notice shall not affect the validity of such set-off and application.
9.    No Waiver.  The rights and remedies of the Guaranteed Parties expressly set forth in this Guaranty and the other Credit  Documents are cumulative and in addition to, and not exclusive of, all other rights and remedies available at law, in equity or otherwise.  No failure or delay on the part of any Guaranteed Party in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege or be construed to be a waiver of any Default or Event of Default.  No course of dealing between the Guarantor and the Guaranteed Parties or their agents or employees shall be effective to amend, modify or discharge any provision of this Guaranty or any other Credit  Document or to constitute a waiver of any Default or Event of Default.  No notice to or demand upon the Guarantor in any case shall entitle the Guarantor to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of any Guaranteed Party to exercise any right or remedy or take any other or further action in any circumstances without notice or demand.
10.    Enforcement.  The Guaranteed Parties agree that this Guaranty may be enforced only by the Administrative Agent, acting upon the instructions or with the consent of the Required Lenders as provided for in the Credit Agreement, and that no Guaranteed Party shall have any right individually to enforce or seek to enforce this Guaranty or to realize upon any Collateral or other security given to secure the payment and performance of the Guarantor’s obligations hereunder.  The obligations of the Guarantor hereunder are independent of the Guaranteed Obligations, and a separate action or actions may be brought against the Guarantor whether or not action is brought against any other Credit Party and whether or not any other Credit Party is joined in any such action.
11.    Amendments, Waivers, etc.  No amendment, modification, waiver, discharge or termination of, or consent to any departure by the Guarantor from, any provision of this Guaranty, shall be effective unless in a writing signed by the Administrative Agent and such of the Lenders as may be required under the provisions of the Credit Agreement to concur in the action then being taken, and then the same shall be effective only in the specific instance and for the specific purpose for which given.
12.    Addition, Release of Guarantors.  The Guarantor agrees that its obligations hereunder shall not be discharged, limited or otherwise affected by reason of the Administrative Agent’s actions in releasing any other guarantor, in each case without the necessity of giving notice to or obtaining the consent of the Guarantor.
13.    Successors and Assigns; Assignment.  This Guaranty shall (i) be binding upon and enforceable against the Guarantor and its successors and assigns (provided, however, that the Guarantor may not sell, assign or transfer any of its rights, interests, duties or obligations hereunder without the prior written consent of the Administrative Agent, except as provided in 

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EXHIBIT 10.2

Section 10.07 of the Credit Agreement) and (ii) inure to the benefit of and be enforceable by each Guaranteed Party and its successors and assigns.
14.    Governing Law; Consent to Jurisdiction; Appointment of Process Agent; Attorney-in-Fact; Waiver of Jury Trial.  The parties hereto agree that the provisions of Sections 10.14 and 10.15 of the Credit Agreement are incorporated here in, mutatis mutandis, as if fully set forth herein.
15.    Notices.  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 or other electronic transmission as follows: (a) if to the Guarantor, at its address for notices set forth in the Credit Agreement, and (b) if to any Guaranteed Party, at its address for notices set forth in the Credit Agreement; in each case, as such addresses may be changed from time to time pursuant to the Credit Agreement, and with copies to such other Persons as may be specified under the provisions of the Credit Agreement.  Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by facsimile or other electronic transmission shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient).  Notices delivered through electronic communications to the extent provided in the Credit Agreement shall be effective as provided therein.
16.    Severability.  To the extent any provision of this Guaranty is prohibited by or invalid under the applicable law of any jurisdiction, such provision shall be ineffective only to the extent of such prohibition or invalidity and only in such jurisdiction, without prohibiting or invalidating such provision in any other jurisdiction or the remaining provisions of this Guaranty in any jurisdiction.
17.    Limitation.  Notwithstanding any other provision of this Guaranty to the contrary, in the event that any action is brought seeking to invalidate the Guarantor’s obligations under this Guaranty under any fraudulent conveyance or fraudulent transfer theory, the Guarantor shall be liable under this Guaranty only for an amount equal to the maximum amount of liability that could have been incurred under applicable law by the Guarantor under any guarantee of the Guaranteed Obligations (or any portion thereof) at the time of the execution and delivery of this Guaranty (or, if such date is determined not to be the appropriate date for determining the enforceability of the Guarantor’s obligations under this Guaranty for fraudulent conveyance or transfer purposes, on the date determined to be so appropriate) without rendering such a hypothetical guarantee voidable under applicable law relating to fraudulent conveyance or fraudulent transfer (the “Maximum Guaranteed Obligations”) and not for any greater amount, as if the stated amount of the Guaranteed Obligations had instead been the Maximum Guaranteed Obligations.
18.    Construction.  The headings of the various sections and subsections of this Guaranty have been inserted for convenience only and shall not in any way affect the meaning or 

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EXHIBIT 10.2

construction of any of the provisions hereof.  Unless the context otherwise requires, words in the singular include the plural and words in the plural include the singular.
19.    Counterparts; Effectiveness.  This Guaranty may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.  This Guaranty shall become effective upon the execution and delivery by the Guarantor of a counterpart hereof.  Delivery of a counterpart hereof, or a signature hereto, by facsimile or by email in .pdf or similar format shall be effective as delivery of a manually-executed original counterpart hereof.  
20.    Currency Indemnification.  The parties hereto agree that the provisions of Section 10.20 of the Credit Agreement are incorporated here in, mutatis mutandis, as if fully set forth herein.     
21.    Credit  Document.  This Guaranty is a Credit Document.
                 [Signature Pages Follow]

7

IN WITNESS WHEREOF, the parties have caused this Guaranty to be executed under seal by their duly authorized officers as of the date first above written. 

ARCH CAPITAL GROUP LTD.

By: /s/ W. Preston Hutchings
Name: W. Preston Hutchings
Title:  SVP & Chief Financial Officer

ACCEPTED AND AGREED TO:

BANK OF AMERICA, N.A., 
AS ADMINISTRATIVE AGENT

BY: /S/ TIFFANY BURGESS
NAME:  TIFFANY BURGESS
TITLE:  VICE PRESIDENT

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